The Power of Compounding

 

Hello everyone, today I want to talk about the Magic of Compounding. I was introduced to this concept when I read the Atomic Habits. Compounding basically means that a small change done over a regular period of time would result in huge changes. Now, you would ask how, so do a simple maths, Let's say you improve every day by 1% for 365 days in a year. Then you improve by 36 Times (Approx.)

Compound interest is the eighth wonder of the world, He who understands it earns it. He who doesn't pay it.

Now, let us start with a few examples.

1. Warren Buffet

Warren Buffet started investing at the age of 10 and has been invest for more than 75 years. Now, the real reason for his success is the compounding effect. He has spent on 400-500 investments so far in his life but most of his revenue has come from the max of 5 investments. Now, some people would say that it was his luck. Now, again even though it was luck but the odds of luck are more when you do more.

Warren Buffet is an outlier as he has been able to work for such a long time and has survived various hard times.

2. Bill Gates

Now you would ask why Bill Gates in this list. It is because Bill Gates had been able to dedicate 10000 hours to coding way before he started Microsoft as he was able to get a computer to code in his school days which is again a big deal because at that time. And then he dedicated his life on coding and the result can be seen with his success.

             

If we research we would find that most of the successful people had worked really hard and that is the reason for their success. Also, if you look at businesses a lot of businesses start and a lot of them vanish as well but those who can stay in the long run have to be consistent and keep changing and adapting themselves to stay in this dynamic world.

Compounding can be seen everywhere in our life ranging from our habits, fitness, work, finance, etc. Everything we do in our life has a domino effect, if we are consistent in our studies then we get better opportunities and if we tap those opportunities then we get better opportunities and this effect goes on. So, all we need to do is keep going and experiencing new things. Opportunities will be always there but the mindset has to sync with the opportunities then only we can tap the opportunities and be able to stay at the tail of the curve for a long time.