Understanding How You Can Reach Your Goals Through Compounding

Understanding How You Can Reach Your Goals Through Compounding

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Quick success is something we see a lot. In the media, on Instagram and on TV, the age of successful people can seem very young. There’s a tendency to celebrate this – look how much they’ve achieved already!

Whilst it’s never as rapid as it looks from the outside, some people undoubtedly do climb quickly. They have an intensity to their character which allows them to be fearless and all in to the goal they’re pursuing. But if you aren’t built like this, there is another way to success and though it takes longer, there are tonnes of benefits. Using this alternative approach you can maintain some of the things in your life that empower you, such as your relationships and down time activities, whilst still moving towards your goal. This slower approach also comes with a much higher success rate.

A gambler can bet all in, and there’s a chance he’ll win big. But there’s also a bigger chance he’ll win nothing, be deterred by the loss and fall backwards. The smart investor instead makes smaller, regular considered investments over a period of time. Whilst for a long time, the rewards of her investments aren’t seen, at some point, the money will talk.

The bets you make in life work much the same but to really understand how they could work for you we should further unpack how they work with some visible things.

Starting with money it helps to first look at Simple Interest. Simple interest is interest applied to the original amount. So, if I make an investment of $10,000, in a bank offering a simple annual interest rate of 5%. Over four years, $10,000 x .05 x 4 = $2,000.

Original deposit + simple interest = $12,000

However, if I made that same investment of $10,000, in a bank offering a compound interest rate of 5%, I get interest on top of the growth resulting from the interest…

Year 1: $10,000 (1+.05/1)(1×4) →
Year 2: $10,000 (1+.05/1)(4) →
Year 3: $10,000 (1.21550625) →
Year 4: $12,155.06


So both ways get you growth but compounding is like growth, on top of growth which equals, more growth.

I’m going to steal a totally different, simpler and kinda mind blowing other example of this from Tony Robbins:

“If you fold a cloth napkin (1/32 of an inch thick) upon itself once, how thick is it? Obviously, it is 1/16 of an inch. Folded upon itself a second time, its thickness measures 1/8 of an inch. On the third fold it equals 1/4 of an inch. On the fourth, 1/2 of an inch and by the fifth fold the thickness equals 1 inch. Here’s my question for you: How many times would you need to fold this napkin upon itself (compound it) before its thickness would touch the moon? …Amazingly, you’d reach the moon on the thirtyninth fold.”  (Tony Robbins, from ‘Awaken The Giant Within’)

“In essence, you make your choices, and then your choices make you.”Darren Hardy

So considering this in the context of a common goal: weightloss. Say you’re a biscuit lover. If you cut out one biscuit a day, you’re cutting your daily calories by say 80kcal. Over a week, this = 560, and over a month 2,400. Great. Essentially a full day’s fast. But that’s like the dietary equivalent of simple interest. The reality is better than this because, in the absence of that biscuit, your body is using calories from elsewhere. So, not only are you reducing those cals, you’re also getting the benefits from the body working with that calorie deficit.

Are you with me?

If not, it doesn’t matter too much, as long as you’re understanding the basic rule of compounding in success, which is this: great rewards can come from making smart small choices every day over a long period of time.

Or, put more a different way; consistency pays off, just not straight away.

FACT: Coca Cola only sold 25 bottles in its first year.

In the world today, with a culture of instant sharing, the majority of people are impatient. They’re desperate to show off their success before it’s really been earnt. Looking like they’re winning becomes more important than the winning itself. But what actually comes from this beyond fleeting moments of gratification? I propose taking a slower more enjoyable route forwards and learning about yourself along the way.

“Sometimes the longest way around is the shortest way home.” – Ryan Holiday

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