Compounding

Imagine you take out too much cash from your account. My bank charges around 17.5% for this service, which is of course obscene. But let’s say that I really, really have to have the latest Apple Macbook and withdraw 2.000 Euros. After one year, I’d owe the bank already 2.350 Euros, and after five years this sum would have grown to roughly 4.480 Euros. This is because you pay interest on interest. (For matters of comparison, the simple interest would merely have amounted to 1750 Euros after five years.) If you don’t own a bank, then compound interest on debt is not the most pleasant thing in the world.

However, there are many other examples where compounding has equally powerful effects. Let’s say wanted to read Cervantes’s Don Quixote. The editions I know are all around 1,000 pages. As a busy person, you probably can’t set aside a few days and read the book from cover to cover but have to split it up instead. If you read 50 pages per sitting, you are done in 20 days. This sounds rather manageable, especially if you skip TV and the Internet. But now let’s say that instead of 50 pages a day, you are going to read 60. Now, you are done in about 17 days. This might not strike you as a big difference, but it will allow you to start the next book on your reading list three days earlier.

The implications may not be entirely clear, so let’s assume you’d do something more serious than reading novels, like learning a language. I know there is more involved than just learning vocabulary, so we’ll say there are two people with a similar starting position. Both aim to reach solid functional competence after one year. Yet, one of them learns four, but the other one five new words a day. It won’t take long until the latter will be far ahead. Having a greater active vocabulary at his disposal will enable him or her to understand much more. Where the other guy is still busy looking up unknown words, he or she has already moved on to the next article.


In more conceptual fields, investing half an hour more of study time will easily reap exponential benefits. What you’ve learnt in addition to your original plan  yesterday may already serve as the foundation for today’s lessons. Like the language student, you may thus grasp concepts quicker, and clearly see connections in the material that are at best muddy to your less ambitious colleague. I don’t think that ambition is necessarily good per se, because not every motive is noble. Yet, going the proverbial extra mile does pay off exponential rewards, no matter what you do.