Law of compounding – for real life improvement

Affirmative action, compounding, Human Brain

I read – maybe 10 years back – Delivering Happiness by the CEO of Zappos – Tony Hsieh. I don’t quite remember everything in the book except that it was the journey of Zappos. However there is one statement from the book which Hsieh makes, which has remained with me since then, if you can improve even 1% everyday, imagine the improvement you will have at the end of the year – 367%. However inspite of having read it and also put it on a board where I could see it everyday, I have not improved 3670% in the last 10 years. The idea is simple I understand it but I still don’t go about achieving it.

The Japanese have a incremental improvement method called Kaizen which is about bringing about small incremental improvements continuously resulting in massive improvements over a period of time.

Both seem to be very simple concepts but we don’t end up following them. If you have been following my blog for sometime you would have noticed that as I am getting more experienced at writing things I am also questioning things about how I can be improving myself. Right now I am working on improving my reading capabilities. I have an agenda to read at least 3 books every week, consistently over the next few months, inspite of all the extended working hours we are having due to the lockdown. I want to check if I can improve my reading, which means I gather more knowledge, which then I try to put into action and therefore improve myself on a regular basis.

Yesterday however I was watching a YouTube video of Dan Sullivan of Strategic coach and he explained a very simple concept because of which I may not be achieving our goals for real life improvement. His logic is that there are no impossible goals, there are only impossible timelines. And because we give impossible timelines to ourselves, we end up messing up on achieving our goals. In case you are interested you can watch the video here.

As per him if we were to give ourselves long enough timelines, then our brain will not put barriers. The timelines he talks about doing a 10X is 25 years and breaks it down into quarters. So in 25 years there will be 100 quarters. If we were to use our compounding equation S=P*(1+r/100)^n. So if we put P=X and S=10X and “n” =100 then “r” turns out to be just 2.5% growth per quarter.

Is it feasible to improve 2.5% per quarter or less than 1% per month. Should be possible. If we were to break down our improvement points into clear bite sized goals then 1% per month should be very feasible and 10X in 10 years should also be feasible.

The reason this compounding works is because as a human being when you improve the first time, the next improvement is over the previous improvement and this cycle can continue forever. This is exactly how compounding works on your money and this how compounding works in real life as well. However our brain is conditioned to think in terms of linear activities. It is just not capable of comprehending non-linear equations like compounding and therefore whether it comes to money or self improvement our brain plays games with us.

Its one of those laws which are universal in nature and should apply to me as well. If I can improve by more than 1% every month in different areas of my life, based on the knowledge I acquire by reading the books and taking action, I should be able to grow. Let me see how this goes. Just to share the progress in the last 3weeks I have been able to complete 8 books. All non fiction books. These include Crushing It by Gary Vaynerchuk, Bold by Peter Diamandis, Attackers Advantage by Ram Charan, Triggers By Marshall Goldsmith etc. All these books are quite dense, as you will see in the picture, but I am trying to keep to my target.

Let me know if you also see Compounding in other areas of your life. I will be very interested in hearing your story.

Till next time.

Carpe Diem!!!

Unfinished Tasks – Zeigarnik Effect

Affirmative action, Human Brain

These days while we stay locked down in our homes because of Covid19, I have had a continuous feeling of tasks that have still to be done. It’s like when I get up in the morning, I remember all the transactions which were pending with my team and with our customers and vendors. Even though today is a Sunday, as soon as I got up, my mind has played out all the tasks that need to be closed and then some.

This is pretty frustrating. Already because of the lockdown, the computer/tablet never shuts down, customers, bosses, colleagues all think they can call up at any time and talk. And now on a holiday when you get up you have all these unfinished official tasks staring at you even before you get out of bed. Now these things weigh on my day making my other tasks harder to finish and not giving me a sense of accomplishment. These unfinished tasks also create a sense of overwhelm for me. I have a hyperactive mind – so these pending tasks also make me end up thinking all kinds of situations because of these pending issues.

In the beginning of May I bought a book by Jim Kwik – Limitless. I had heard about Jim from Dave Asprey in his book and podcast. Jim is supposed to be a master at quick reading. I am an avid reader myself and buy books faster than I can read them. Each time I make up my mind to not buy any more books till I have finished the earlier lot, within a matter of days I end up buying more. Earlier when you had to buy physical books you still thought a second time, because the books would take time to come. However now with Kindle you end up getting an instant download, so I now have even more UNREAD books.

So I thought maybe Jim will talk about how to increase my reading speed and therefore I will be able to finish the books on my shelf faster. The book is really good and I learnt a lot of things, not only for speed reading but also on memory and thinking etc. I would highly recommend you reading it.

While reading the book, he mentions about the Zeigarnik effect – that uncompleted tasks create a level of tension that keeps the task at the front of our minds until its completed. This was an Aha moment. So its not only me, everyone else also has a similar situation.

I went out and Googled on the Zeigarnik effect and it seems Bluma Zeigarnik was a Russian psychologist who noticed that waiters in a restaurant always remembered which orders were pending for which person and the moment the order was fulfilled they would forget all about it. While searching on Google I also found so many people/authors who have created various courses, methods, processes for utilising the Zeigarnik effect to improve your lives.

There are detractors to this theory as well and I saw a lot of articles on Google which show that other researchers and academia say that this may not always be true.

Well not sure about the researchers, but I finally found a possible cause for my unnecessary stress levels on a holiday.

What’s your view? Do you also seem to remember all the official pending transactions even when you are on a holiday. Pls put in your comments below. If you have a better explanation than the Zeigarnik effect, then too let me know.

Till next time.

Carpe Diem!!!

Simple versus Easy

Affirmative action, compounding, Human Brain, Sales

Why am I getting into semantics. Most people use them interchangeably.

Simple however is not Easy at all.

I lead a team of sales and marketing people. And whenever we have a review and the people who are behind on target come back with various excuses for not being able to do things. Sales incidentally is a very Simple job.

You need to meet enough people to solve their problems, for which they are willing to pay. Simple statement.

However this is where things become difficult and are not EASY at all. How do you find enough people to meet who have a problem you can solve. Then starts the next item whether the person wants you to solve the problem for them. How do you ensure you are meeting enough people on a regular basis.

Most human beings believe that they will do some extraordinary effort and the problem will get solved before the deadline. Which does not happen. Magic rarely happens in nature.

In terms of the sales guys there are only 3 ways that a business can grow as Jay Abraham mentions – you sell to more people, or you sell more often to the same people or you sell a higher value to the same people. Now however if you combine the 3 ways, you can actually do wonders because of the geometry which comes into place. Again Simple but not easy. Because you need to take steps everyday, day in and day out to ensure you are doing these simple things. Which for the human being is not easy. That’s where most sales people fail.

Let’s take another example of simple versus easy.

Einstein came out with the simple equation – E=mc^2. Very simple equation where energy is equal to the product of the mass with the squared value of speed of light. However while most people – including me – can write this equation like above, we can’t understand its usage in real life. This equation however helped Einstein explain and build his whole theory of relativity. If you watched the serial Startek Enterprise on television in the 1980s, Captain Kirk and his team use to transport themselves from their ship to somewhere else using the same equation conceptually – by first converting mass into energy and then at the destination – back from energy into mass.

Another example of a very simple equation which is not easy to comprehend and for which I keep ranting in this blog.

The compounding equation – Sum=Principle Amount*(1+(rate of interest/100))^No of periods (years/days/months) – S=P*(1+R/100)^N

I myself did not realise the implications of this equation till 2013, while I had learnt it in grade 7, almost 40 years before. If you can learn to ensure that you are on the positive side of this law you will become rich even if you just keep investing small amounts at regular intervals for a long long duration of time. However if you think that someday you will be able to invest money and you will suddenly become rich, it’s a fallacy of the human mind.

On the other hand this same equation is used against you by the finance companies who give loans or credit cards. I shared in my last post some graphs of how credit card debt is one of the major causes individual bankruptcies and why people are never able to get out of education debt. I had been in this situation till about 2013 but took forceful steps to come out of it.

A lot of things in life are based on simple principles like I have shown above. However they become easy to follow only with practice/rigour/discipline. You have to keep doing the grind every day. The sales guys have to meet enough people everyday to identify if they have problems which we can solve. You have to work out everyday to ensure that your muscles don’t slack. You have to set up automatic systems which take out money from your bank account and invest them.

Left to your mind, it will always play games and make you feel that you will somehow suddenly be able to accomplish magic.

Keep at it. Carpe Diem!!!