Source: Farnam Street
James Clear’s book Atomic Habits: An Easy & Proven Way to Build Good Habits & Break Bad Ones explores an interesting subject, on the compounding nature of the long game. While everyone is looking for big gains—the proverbial get rich quick scheme—there is a space that’s not getting much attention.
Those who understand compound interest can make it work for them and those that don’t understand it spend much of life trying to get out from its shackles. When we think of compounding we typically think of finance and positive returns, as in “good compounding.” But compounding just reinforces what’s already happening — good or bad. There is no judgment. And compounding works outside of finance. So while we can compound money positively and negatively, we can compound ourselves as well.
The neutrality of compounding is what makes it interesting — as we can get it work for us. If we can replace a negatively compounding habit or mental discipline with one that’s neutral or positive, we instantly get better. And if we can accelerate positive compounding, we can really see the results.
Tiny, nearly imperceptible changes can make a huge difference when you factor in time. As the graph above demonstrates, the difference in tiny changes is astonishing.
Clear writes:
Here’s how the math works out: if you can get 1 percent better each day for one year, you’ll end up thirty-seven times better by the time you’re done. Conversely, if you get 1 percent worse each day for one year, you’ll decline nearly down…
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