Great Compounding Advice from Seth Godin

Seth Godin recently wrote a very profound, yet short post on the compounding effect:

If you live in the city and grab a coffee or a snack every afternoon for about $4, it’s a vivid example of the cost of debt…

Over ten years, if you’re funding that daily purchase with ongoing credit card debt, at $1,000 a year, it’ll cost you $24,408.40, and you might never find the means to repay the debt.

On the other hand, if that same $1,000 went into a low-cost investment fund that paid about 7% a year, you’d end up with $13,816.45 in the bank.

Seth Godin, The $37,000 latte

That’s the value of short-term vs long-term thinking.

I would go even further: you should be compounding every area of your life. Here are my tips:

  • Most careers progress linearly. Move toward a path where the rate of learning is always high.
  • As your life progresses, make sure every action you take generates more and more results. This also goes for saving money, building skills, meeting people, and managing people.
  • To make sure that happens, add another zero to whatever you define as your success metric—money, status, impact on the world, etc.
  • Take as much time as needed between your projects to find your next big thing. But when you do, make sure it’s something that will make the rest of your career look like a footnote.

The reason that investment in Seth Godin’s example increased in value is because interest compounds.

The same can be true for time and hard work. Look for ways to compound your way to success.

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