Never Underestimate the Power of Compounding Interest

"Compounding interest is the most powerful force in the world." - Warren Buffet

8+8+8+8 is 32, I did that in my head

8x8x8x8 is 4098.

The first example is what happens when you put money in a savings account, not accounting for inflationary or deflationary pressures.

The second example is what happens when you invest money in an index fund, assuming an 8% return on investment every year (which is an average, if not below average, rate of return).

Compound interest is one of the most powerful forces we will ever encounter in this life. And what’s more, we have the power to use it to our advantage.

When someone says, “in this industry, relationships are very important.” What they really mean is, “compound interest is very important in this industry.” If you are part of a certain industry, and invest in meeting people and maintaining relationships, these relationships will pay off in strange and lucrative ways years down the road.

Your reputation is another way to build compound interest. If you are known for being a man or woman of integrity, perhaps someone who drives a hard bargain, perhaps someone who knows how to get the job done, but always does so with integrity, then that reputation will follow you.

People in your current industry will be more willing to do business with you, or better yet, will want to do business because they know you are on the team.

If you change industries, people will be more willing to give you a chance to break into this new industry, based on word of mouth reviews and references of managers you have worked under in the past.

Your health is yet another way to build compound interest. If you eat well, exercise regularly, have sex on a consistent basis with a loving and healthy partner, you will have the vitality and energy build a life you desire and enjoy new experiences, perhaps long after some of your peers are confined to barcaloungers.

Perhaps the most important instance of compounding interest is that of your most significant relationship. Your partner. Whoever you choose to be your partner is going to be your breakfast, lunch and dinner company. They are going to be your vacation buddy. They are going to be your therapist, your chef, your masseuse, your lover, your parent, your advisor and your rock.

I think the problem with relationships these days is people don’t think this way anymore, and I think there are several reasons for this. First, the illusion of choice. Especially for women in their young 20s and especially for men who have held out into their 30s, there is an illusion of choice.

With the advent of dating apps and social media, there seems to be no shortage of extremely attractive women, and exceptionally competent and wealthy men. But there is still the problem of compatibility.

While the accessibility of sexually available partners has definately gone up, I would argue the amount of people who are truly compatible with you for the long term has remained consistent. And I’d argue this for a few reasons.

Even if you’re a man who’s aging like fine wine, and even though there will always be another gorgeous group of 23 year olds graduating from college, most will remain in the mindset of a 23 year old. They like what 23 year olds like, i.e. partying, drama, games, boys, brunch, fill in the blank.

If that’s what you want, have at it. But do you really think one of these women, as attractive and fun as they may be, will be able to be all the things I mentioned above? (A therapist, a travel buddy, a lover, etc.)

No, because they still have so much living to do to be able to be an equal and effective partner. And there’s nothing wrong with that. But it means you’re back to square one. If you want an equal, emotionally available, mature, partner, you’re going to have to look at your own age group, or perhaps a little younger.

Which brings me back to my original point. Your partner is your most important investment, and if you both choose correctly, and continue to choose each other every day, you will enjoy benefits not enjoyed by at least half the population.

You will most likely have dual income. You have a partner in crime, in love, and in life. You have someone to watch your back and help you bring the groceries in. You’ll have a husband who will cut the grass and a wife who will put together a fine looking charcuterie board.

If you made a good investment, they will be there for you through thick and thin. If you didn’t, you may lose half the shit you have managed to accumulate over the course of your life, along with the time and money it will take to be divorced.

My point in saying all this is that compounding interest, while one of the most influential sources of power in our world, can also work against you.

Remember my reputation example? That can work in the other direction too. If you have a reputation for screwing people over, people will talk. No one will do business with you anymore.

And if you spend five years with someone, and then they break up with you, or you with them, then you have to start all over again, hopefully with the lessons you accumulated along the way.

The last instance of compounding interest I’ll mention is actually the most important. I know I said your partner is the most important, but this one is even more important.

Be careful what you think. Because your thoughts compound and create narratives. And these narratives compound and create identities. And identities compound in a nation state and create memes. And memes compound around the world and create zeitgeists. And zeitgeists influence entire epochs of time. There are Dark Ages and there are Renaissances. And it all starts with you.

So the next time you have a negative thought, try to find the silver lining. The next time you find yourself beating yourself up, pretend you’re talking to a friend. Would you ever talk to a good friend the way you are talking to yourself? The next time you are fearful, ask yourself if you have any evidence for your fear. Because fearful negative thoughts are the most toxic things in the world. It’s like praying for something that you don’t want to have happen.

If you think “I’m not good enough” once, it likely won’t matter. But that’s one of the wonders and tragedies about our universe. Energy can’t be created or destroyed, and an object in motion will stay in motion unless altered by an outside force. Thoughts are energy. And they obey the same laws as everything else.

So choose to love today. Choose to be kind today. Choose to have fun, and treat others with respect. Choose reason, purpose, and self esteem. And watch as your world changes around you, and the world changes in response to the effect you have on others.

And watch as your choices compound over the course of 1000 years, to create a better life for someone you will never meet.