Compound Interesting


Compound interest beats periodic gains beats random windfalls, every time.

Research shows that lottery winners tend to revert to their previous economic status, if not drop to a worse one, despite their luck. They often lack the experience or network necessary to maintain their unexpected gains, never mind grow it. Worse yet, the experience and network they do have may actively sap away at that very wealth.

Many employees can can get by on consistent paychecks. They maintain their current lifestyle but tend to get stuck. Their experience and network keep them even-keeled but also leave them treading water, resisting both hard failure and runaway success. They remain at the mercy of unpleasant surprises and rarely possess the extra resources required to seize upon opportunities.

Investments appreciate in value even as their owners sleep. They may require effort to improve or maintain but that effort leads to greater and greater gains with each addition, geometric instead of linear. It might start small and each individual contribution may look insignificant, but it adds up. This cuts both ways, for good and bad. Ask anyone with credit card debt.

This model applies to more than property, stocks, and savings accounts, though. Each page you draft of that new book can create more and more readers over time. Each fresh interaction with an old friend strengthens that bond. Applying that one self-help book makes it easier to apply the next one, and the next two, and so on and so on. However you work, whatever you work on, look for the compound interest.