The Power of Compound Interest

Treat Thompson



This is a republishing of The Steady Fella Newsletter. Every week readers use the timeless insights on passion, productivity, philosophy, and happiness from this newsletter to build towards the life they want.

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Compound interest is a powerful thing. Albert Einstein called it the eighth wonder of the world.

The beauty of it is that you gain returns on your returns. You have to sweat for the initial investment, but with time it starts working for itself.

We all think of compound interest as a miracle concept for money, but our careers, projects, health, and more can take advantage of it.

The power of compound interest

Here's an example of writer and entrepreneur Nat Eliason benefitting from compound interest:

  • He created a personal blog, with no audience, and consistently wrote about topics like marketing, philosophy, and books. That was his initial investment.
  • From his consistent output of quality articles, his blog traffic soon grew to hundreds of thousands of visitors per month. This is the first return on investment.
  • He capitalized on this new traffic by creating a paid app, using affiliate links, and collecting emails for a newsletter. This is the first compounded return.
  • He then leveraged his new revenue and a larger audience to release a course. This course more than tripled his monthly income. This is the second compounded return.
  • Today he's leveraging his much larger audience and increased revenue for his new project, "Creator Towns". It's an initiative to build small towns filled with creatives, entrepreneurs, and remote workers. This is the third compounded return.

At the start, It's hard, slow, and there's little return. But if you stay committed, the returns come easier, faster, and larger.

If you compound on something long enough you get incredible results.

Consistency and commitment

Consistency and commitment are the basic requirements for taking advantage of compound interest

1. Stay committed because the return is right around the corner

Source: Jack Butcher, Visualize Value

Almost every success story I've seen can be visualized with this graph. In the beginning, you consistently put in work and get "nothing" in return. But with patience and consistent quality output, you break through and begin reaping the benefits of compound interest.

Take a look at Apple's stock, Twitter's user growth, Ali Abdaal's Youtube metrics, and Nat Eliason's revenue. All similar shapes.

2. Stay consistent throughout your plateaus and perceived downs

Source: Ben Greenman, Greenman Writes

When you're riding the ups and downs of your journey, it may make it feel like you're making no progress. But when you look at the bigger picture, you see that those downs were actually obstacles that brought you to a higher place.

3. If you keep restarting at zero you never get the compounding benefit

Source: Jack Butcher, Visualize Value

"The first rule of compounding: Never interrupt it unnecessarily." - Charlie Munger

If you keep switching diets because you don't see changes after a week, you never give them the chance to produce results.

Nat Eliason compounded the returns of his personal brand. If he were to quit his blog and start a sports card YouTube channel, he would restart the process from ground zero.

This weeks quote

If you want to predict where you'll end up in life, all you have to do is follow the curve of tiny gains or tiny losses, and see how your daily choices will compound ten or twenty years down the line. - James Clear

This is a concept I always think about. It has the same essence as Aristotle's "We are what we repeatedly do" quote.

Our daily choices and habits have life-changing effects in the long-term. You can use this to see what your life will look like by examining those actions.

  • What would happen if I did a quality workout 6 times a week for 10 years?
  • What would happen if I drank liquor every day for 20 years?
  • What would happen if I made YouTube videos every week for 5 years?

This weeks question

Will your current daily actions take you to a life you want in 10 years?

My answer:

Compared to just over one year ago, my daily actions today will lead me to an exponentially better life than they were going to.

  • I have great eating, exercising, and sleep habits.
  • My reading habit has led to personal growth and introduced me to new ideas.
  • Writing this weekly newsletter and tweeting on Twitter has let me express a certain side of me, helped me develop my thoughts, and has the potential to become a lifestyle business.

Although I'm happy with these choices, I know there's still a lot more room for me to create an even better future.