Tuesday, October 5, 2010
A knee jerk response to this question would leave you kicking yourself: if given a choice, would you take $3 million cash now or a penny to be doubled in value every day for 31 days? Cash in hand may feel good, but if you take the penny, on day 31 you will be able to go to the bank with $10,737,418.24. The penny won’t pull into the lead until day 30. On day 31 the tiny compounding penny more than triples the $3 million.
Reading Darren Hardy’s book, The Compound Effect, I’m seeing how small, seemingly insignificant decisions we make, over time, have the potential to be life changing. Over time is where the catch comes in. We’ve worked ourselves into a have-it-now mentality so over time sounds almost like something from the 18th century. I know I end up frustrated when my computer is not working on turbo speed, or when Droid drops calls. It’s what we’ve all gotten accustomed to and watch out if we are inconvenienced.
The compounding effect has roots in patience and stick-to-it-ness and it reaches into every area of our lives, not just our money. My friend Steve dropped 16 pounds over six months all because he simply gave up drinking soda. What if he had quit after the first week because he hadn’t seen any change? I was amazed watching a 75 year old woman compete in a half marathon. I wondered how long it had taken her to be able to run 13.1 miles. As challenging as it might have been, she obviously hadn’t given up.
Adding or subtracting on a consistent basis has a rewarding payoff. The investment is time. On the flip side, little things can also chip away at us and over time the results leave us wondering what happened. Divorce, overwhelming debt, and a mean critical spirit don’t happen over night, but over time too. The compounding effect can work for or against us. Choices about what initially seems insignificant, over time, can be life altering; for good and not so good.