The Power of Compound Interest

Author: Liana Bertsch

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”  ― Albert Einstein

Most individuals have a sense of the path that they want to be on, and the path that they try to avoid. It is however, hard to stay on the right path given that we tend try to take the occasional shortcut in life. Taking shortcuts will most likely produce poor outcomes in the long term, however even knowing that, we continue to take shortcuts in our work and our every day activities.  It is simply human nature to assume that shortcuts will save time and effort, even though those shortcuts have long lasting impacts on the work we perform which can result in poor quality or even safety concerns. So, the task for each individual is to choose the track that we want to be on and avoid the track that takes us in the wrong direction, even if it seems that it might produce quicker results.

How can we build better habits for our every day activities both at work and at home?

It is easy to do good work and not to think about taking shortcuts when we are motivated, however after a certain amount of time the motivation and the initial spark of inspiration tends to go away. Discipline and determination ultimately sustain our abilities to pursue our goals as that initial spark burns out. As Thomas Edison’s famous quote said, “success is 1% motivation and 99% perspiration”. Therefore to achieve something great, we need to display true persistence, determination, and discipline.

How do we build new habits strategically, that will last long time? How do we teach ourselves to start performing in ways that are not exactly the most exciting or enjoyable?  These questions are critical to the mentality of success.

The compounding interest concept can be used not only in finance, but also in our daily routines to improve our habits. The idea of “Biting off more than we can chew” is destined to lead to failure and disappointment. Instead, we should embrace the tiny gains approach whereby you make a 1% improvement each day in order to accumulate significant success over time. If we can convey ourselves as being disciplined and avoid taking shortcuts, then we can also lead and motivate the people around us to change their habits and encourage them to not take any shortcuts that could harm the long-term quality of services and level of safety.