…He who understands it, earns it … he who doesn’t … pays it.” – Albert Einstein
Einstein was referring to compound interest in the technical sense here; that being when interest is added to the principal of a deposit or loan, causing that interest to earn interest itself going forward. It’s called compounding interest because future interest payments are based upon the principle plus previous interests (which is different than simple interest where interest is not added onto the principle). If you’re curious to learn more, there is a wonderful wiki about interest in most of its forms that can be found here. I also wrote a post that illustrates the concept somewhat well here.
With that said, the reason I share this quote today is because as I read it this morning I realized that most of our decisions in life compound in similar ways:
The choices we make around nutrition and exercise have a compounding effect on our late-life health outcomes; the decisions we make around committing to education as children impact the prestige of the educational institutions we’re able to attend as we progress in life – which ultimately determine the sorts of jobs we’re able to get in adulthood; and as many millennials can attest, the financial choices one makes in early adulthood have a compounding effect on financial outcomes well into late adulthood.
…These things are somewhat obvious and straightforward, though (or at least they are in hindsight). Less obvious are the way choices we make at work everyday can have a compounding effect on our careers. Large choices – such as the decision to take on a big project or make a move to a new city for a new role etc. – can quickly and dramatically shape the trajectory of our lives… but smaller choices at work can also compound positively or negatively over time.
…With this in mind, as we get started this week remember to have a sense of urgency in your actions and to treat everyone with courtesy and respect. Everything you do on a day-to-day basis compounds upon itself to define your brand and shape your future opportunities. By understanding this reality (and leveraging it) you can reap the rewards. Conversely, losing sight of this law can carry with it heavy penalties in years to come.
As always, please share your thoughts in the comments section below.