compounding

The Network effect – for your personal growth

B2B, compounding, Networking, relationships

If you search Wikipedia the network effect is how the value of the good or services increases with the number of participants. Companies which operate on this kind of a phenomenon grow in value exponentially. Think Amazon. The more the participants on the market place that they have created, the more the customers whose needs will get fulfilled and they will buy more, more often. This is positive feedback loop with more consumers on the marketplace, more the people who will want to sell on the Amazon Marketplace. The growth of these kind of companies is exponential.

In case of B2B having connections with people and keeping relationships alive is a big positive. While social media helps getting connected to people, it does not help build relationships. So while I may have a 1000+ connections on Linkedin, my relationships would be very limited.

You build relationships by giving first. By doing that you invoke the reciprocity principle espoused by Robert Cialdini in his book Influence. What is however even more important, is to keep the relationships alive. People keep moving. They changes places, they change jobs. When they do that, they get connected to more people. To emphasise the value of your individual network, Joe Polish runs Genius Network which is a network where super successful entrepreneurs network and master mind.

The more people you know, the more people who fall into your network. I have had introductions to people because of my relationships that I cultivated over years. Those connects in turn helped us get even bigger, because now there were more people who got connected to us and invited us to work with them. Such people who can connect you to such major influencers can change the trajectory of your business completely. The more pf these kind of people you form relationships, the more influencers you get connected to indirectly.It was typical to the definition of the Network Effect I spoke about earlier. This kind of exponential growth is compounding over a period of time.

You have to however be patient. “Rome was not built in a Day” applies to building relationships as well. Also not everyone you “give first” will reciprocate and you don’t know the timeline when they will reciprocate, if they ever will. But you keep doing this work on a consistent basis because when the critical mass is reached, there’s a sudden explosion in the kind of business you can grow.

Till next time then.

Carpe Diem!!!

Just take the first step – to your financial independence

Automation, compounding, Fear, Financial Independence, Human Brain

Before I actually started on my financial freedom journey, I had been a lot of times to banks to see what were the options for saving, but the interest rates were so low that I thought I would need huge sums of money to hit my goals. Since I didn’t have that kind of money, I just gave up.

I also visited a lot of mutual fund presentations where they spoke about depositing money and how it could grow over a period of time. To cut the long story short, whenever I saw the amount of money needed and the time it would possibly take to get there, my brain would show resistance and I would not invest anything.

If I had invested a little more during those early years when I was just getting started in life, the magic of compounding would have played its role and even that small amount would have become gigantic in the last 25 years. I have mentioned earlier in my posts how my accidental discovery of a statement of a minor Rs2000 (about USD70) which I had invested in 1995 and forgotten, had become more than Rs100000/-(USD2000 approx) that I got shaken out of may slumber.

Our brain gives us a lot of resistance (fear) at anything new. It will throw up a lot of arguments as to how you will manage with $50 less every month. And then life just passes. Before you realise it you are nearing 50 and then it seems as if there’s no future.

But if you just take that first step of automating the process of investment so that even if only $50 goes out of your account every month and you don’t bother about it…..in a few years the magic of compounding will take over and you will be well on your journey towards financial freedom. You will also realise that you don’t even notice the reduction of the $50/- every month after sometime because our brain adapts to the new lifestyle.

If you have hit 50 and you think you are late in this journey, you are wrong. You can make the magic of compounding and the concept of Hemachandra Fibonacci numbers work in conjunction. This way what you have lost in terms of time in the compounding equation can be brought in by the additional principal that you keep investing every month. Most mutual funds have the concept of increasing the contribution in your Systematic Investment Plans . So if in the first two years you have invested $500 each, in the third year invest $1000, then in the fourth year invest $2000 and the fifth $5000. Just keep adding the previous two years and increase your investments.

Its all about taking the first step to convince your brain that it can be done. After that its just the process. But its the brain which will put up all the resistance and you need to reassure it, that there’s no danger by taking the first step. Once it realises there’s no danger then you can keep moving without a problem. So just take the first step and get started on your journey for financial independence.

Till next time then.

Carpe Diem!!!

Rethinking your goals….small consistent steps

compounding, ego, Energy, Goals, Human Brain

In my post of 10th Sept this year I had written about how big goals actually get me scared and I don’t move forward. I would rather think in terms of small incremental but consistent goals, keeping myself focussed on taking one step at a time. I had also written about the research and data from Steven Kotler’s book “The Art of Impossible…” where he has shown evidence that a 4% incremental is something that the brain does not show resistance to.

Exactly a month later, I will talk about a book by the famous author Seth Godin- Linchpin. While he’s not only talking about the resistance that the brain offers on very large goals, he is indicating in the same direction. His take is more broader that if you take on massive goals because you have to silence the critics or because you want to change people’s minds, chances are that you won’t be able to hit it.

After you have accepted the huge goal, your brain will throw up all the reasons, why you should not and cannot achieve the goal. And because our brain has pre-dominantly negative bias on things, it will provide you with evidence of all the negative things that can happen, how all the people will laugh at you ,if you decide to go in for the massive goal and don’t achieve it.

Since the brain does not want to put in the hard work , to conserve its energy, it will put up all the resistance and if you decide to give up, it will be the happiest.

I have faced this many times in my career, because my bosses wanted to “shore-up” their numbers and my ego was bloated, I would take a very high target, then not be able to achieve and then feel miserable. But I now realise the challenges which my brain throws up and am trying to become wiser. Ego is something which can be manipulated easily and I have become more and more conscious of it as I have grown older.

So now I try to look for shorter term, smaller targets to hit. Achieve those and then move forward. As Steven mentions, if you can keep at a consistent increment of just around 4%, for the long term, you will actually be able to achieve massively because the law of compounding will come into play

On the other hand if you are a BIG THINKER and DOER, Good for You. Then you should be actually looking out for doing some dramatic things.

Till next time then.

Carpe Diem!!!

Living abundantly

Abundance, compounding, dreams, Financial Independence, Human Brain, mindset

I keep talking about getting financial freedom or financial independence and how you utilise the magic of compounding to help you get financially free. However compounding is a very very long term game.

While you should be investing, it does not mean that you stop living your life Today. It does not mean scrimping through life. I was telling one of my relatives today, on this same philosphy, that you should learn to live abundantly . What is the point of having money which you save all through your life, but you yourself never enjoy it.

If you’re scrimping to save everything, so that you have something in the future that you will enjoy, then by the time you reach the age when you think you can enjoy, you will be too old to enjoy.

That’s why I mention, that you need to save also for your dreams and tick of the things on your bucket list while you are saving money. I have a huge bucket list of my own, which keeps growing. So while there’s some amount you are investing for the long term, you also need to have a fund to achieve various dreams that you have. And when you hit that target you need to actually go out and do that activity to achieve your dream.

At the moment because of the Covid restrictions, we cannot travel out of India, I am right now active every weekend exploring different countries on YouTube and listing out what I will do when restrictions get removed. Not sure in what shape and form travel will be allowed but I am still putting things on my bucket list.

Now your dreams could be making a boat, or weaving a carpet or going on a hike, take your time to do these activities. Because when you achieve your dreams, it helps improve the performance of your brain. If the brain performs better you actually achieve more and you get more abundance overall. You trick your brain by living abundantly and therefore get more abundance. Its a mindset issue. I am not taking about taking loans and living out of your means. However I am definitely asking you to invest money for your short term dreams, mid-term aspirations and long term goals, instead of only long term goals.

Till next time then.

Carpe Diem!!!