Wednesday, May 14, 2014

The Compound Effect

I've been a fan of Success magazine for several years. In fact, it's the only magazine to which I have subscribed continuously and read regularly for more than 5 years. It's published by Darren Hardy, a self-made multi-millionaire, and he definitely knows what he's talking about when it comes to being successful.

Darren begins the book with some advice that I think is very appropriate in today's world. Get rid of the "I'm going to win the lottery" mentality. Being successful is not something that happens overnight. It's hard work, sometimes boring, sometimes frightening. Furthermore, we find that many of the people who win the lottery wind up broke in a few years. The reason? They don't have a wealth mentality. That's another story, and one I'll address in a future post.

For now, I just want to present the reason for the title of Darren's book. If you were offered a choice between receiving $100,000 a day for 31 days or a penny on day one, two pennies on day two, and double the preceding days amount each day until a total of 31 days had passed, which would you take?

I'm sure many of you know the response you should take, because you've seen the compound interest example before. But for people who don't know this, the choice is obvious--they would take the $100,000 a day offer, because by the end of the month, they would have received $3,100,000! However, if you took the initial penny offer, by the end of 31 days, you would have received $10,737,418.25!

Translated into self-improvement, this means that very small actions, taken over time, have a cumulative effect that can be profound. For example, if you're trying to lose weight, if you can only burn 100 calories more per day than you consume, by the end of 35 days, you will lose a pound. Hardly enough to matter, is it? But if you continue doing this for a year, by the end of the year you will have lost 10 pounds. In fact, the reverse action is how people put on weight without it being obvious. Spread gaining 10 pounds over a year, and you don't notice it until it your clothes suddenly don't fit!

Let me give you a project example. Not long ago I suggested that the manager of a software group practice management by walking around (MBWA). This means that he should take 30 minutes each morning to walk around and speak to the members of his team and casually engage in conversation with them about their work. He took my advice, and within a month, his daily walks had made a huge difference in his group. His people were suddenly showing enthusiasm for their work, quality was up, and he was more aware of the workload they were carrying and more willing to reduce his demands on them to be more reasonable. A small change in behavior, a small time invested, but a really large return.

I highly recommend that you read Darren's book and apply it to your life and the development of your management skills. It's an easy read, but you will need to do some exercises to really benefit from it. After all, you don't lose weight just by reading a book on weight loss. :) Cheers.