Compound Interest Change

by | Oct 7, 2020 | Change, Learning |

compound interest

There is magic in compound interest. Primarily because you earn money on your capital AND the interest gained. This is one of the reasons good financial advisors encourage us to think long term. Just ask Warren Buffet.

But we can take the idea of compound interest and apply it to learning. I’ve talked about this before as the 1% daily improvement principle. I first came across it in James Clear’s Atomic Habits. But it’s worth mentioning again.

Look at the below graph and note the green line representing the 1% daily growth. Pay attention to what happens just over the halfway mark of a year.

Did you notice it? If you started learning something new today and improve 1% each day, 70 days from now you’d be twice as good as you are now. You’d be 4 times as good around 140 days from now. And then the magic starts to happen as after another 70 days (210 days from now) you’d be 8 times as good as now. After another 70 days (280 days from now) you’d be 15 times as good. And after a year, you’d be 37 times as good.

The growth is slow at the beginning. It always is. Think about the first time you did something – baked a cake, put furniture together, grew vegetables. The first time is slow, but if you keep repeating it, you learn and it gets easier. What the 1% principle helps us see is that growth is exponential as we keep learning.

This is the power of the growth mindset and of focus. And it can be applied to organisational change as well.

However, what it doesn’t illustrate is the level of effort required to make the 1% improvement each day. It is likely a similar curve, but that is for another day.

Photo by Morgan Housel

1 Comment

  1. Eleonora Turkia

    Inspiring, short and strong, quite motivating read for the day, thank you

    Reply

Submit a Comment

Your email address will not be published.