How to Harness the Surprising Power of Compound Interest in Everyday Life
[This post was very much inspired by The Almanack of Naval Ravikant by Eric Jorgenson]
I love the idea of compounding interest.
The notion that small contributions, made regularly over time, can grow exponentially.
This concept is straightforward in financial terms, but I recently encountered how this same idea can be applied to all other elements of daily life.
Earning “compound interest” in everyday life
Some tasks you’ve done once have continuing rewards later in life. For example:
- Learning how to read and write when you were a kid continues to pay off today
- Playing a sport as a kid often makes it easier to continue that sport or similar ones as an adult
- Education (e.g. your university major, courses you took) can lay the foundation for a many-years-long career
- Learning logic-based problem solving can inform writing and programming skills
- Certain friends from high school or university continue to be positive support systems in your life today
The list goes on. There are a set of tasks, skills, or relationships you can invest in that lead to continuous rewards down the line.
Not all activities generate compound interest
Some activities will not give you these benefits.
Think of hours spent on social media. That documentary you watched last weekend. The nap you took.
The benefits these things give you in the future (if any) are small, momentary, and likely unimportant in the grand scheme of your life.
Direct and indirect gains
That doesn’t mean this time is truly “wasted.”
We learn from all experiences, in some sense, even if those learnings have a small impact on the future.
These “learnings” are indirect gains — you learned from the true crime doc you watched, maybe shared it with a friend or colleague, which has some value. It just won’t act as an accelerant. It won’t move you forward faster in life.
Only 1% of the activities in your life will directly contribute to long-term outcomes.
Those are the things you want to focus your time and energy on.
The choices that matter
Some of the most important decisions you will make in life that directly contribute to your future are:
- Where you choose to live
- The career you choose
- Your romantic partner
Think of it this way:
All of the dates you went on before you met your partner were indirect gains. You learned things and adjusted your tactics to get you closer to meeting your partner, but, that time spent dating didn’t directly contribute to deepening that all-important relationship.
It’s difficult to identify that 1% of tasks, skills, hobbies, or relationships that will lead to exponential rewards.
But once you find one of them, then you’ve won in a major way.
Next, ensure you maximize the time you spend investing in it.
That’s the key to building a successful, happy life.
