Interacting with the 8th Wonder of the World

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

– Albert Einsten

As I read up more on finance to prepare for my adulting journey, the most important concept I keep coming across is compounding. Regardless of the currency you’re buying or crypto you think is going to moon, compounding can both help and hinder your financial progress.

For those who would like to just try it out for yourself, I set up a webapp to run some visualizations for yourself. Try it out! Otherwise, let’s look at some examples!

Would you rather have: A cent that doubles everyday for a month or a million right now?

If you have already heard about this, patronise me and choose the million (please). You’d be surprised to know that you’ll be richer than Mr. Penny Pincher for the next 26 days (he only has 600k on day 26). It’s only on the 27th that he inches you out at 1.34M. The best part? At the end of 30 days, he has amassed $10,737,420. That’s 10x more than what you ended up with.

Take heart that with enough time, those who put in the effort to improve can ultimately gain the edge above those who are satisfied with what they have.

Getting 1% better a day: Does it really make a difference?

It’s easy to believe that great change requires monumental effort. The kind of effort that culminates into 3 day sleepless marathon should reap great rewards right? But most of the time, such change is never sustainable. We can’t put up that kind of effort in the long run without burning out, getting injured or simply breaking down.

So what if instead of sprints of herculean effort, we instead strive for continuous miniscule progress? The kind that is not discernible in the day to day? What if we just decided to improve by 1% each day for a year? Here’s some interesting visualizations:

For one, you won’t see much progress when you start. It’s the kind of effort that makes you feel bad that nothing has really changed, even after 2 weeks of consistent work. The kind that’ll make you give up because it doesn’t seem to reap any benefits.

But here’s the catch: if we just trust the process and keep on trudging through, you’d be surprised at the final progress:

The green part is the 1% progress compounded over the year. And by the end of the year, you’d be nearly 37 times better than you were on Day 1. No sleepless nights or self doubt (self-doubt’s still gonna be there sorry) required.

Here’s to trusting the process!