If something compounds—if a little growth serves as the fuel for future growth—a small starting base can lead to results so extraordinary they seem to defy logic. It can be so logic-defying that you underestimate what’s possible, where growth comes from, and what it can lead to. - Morgan Housel
It was surprising to me when I read the cause of Ice ages in Morgan Housel’s amazing book The Psychology of Money. After decades of assumptions scientists basically came down to this conclusion:
“It is not necessarily the amount of snow that causes ice sheets but the fact that snow, however little, lasts.”
As year after year the sun became moderately cooler, summers became slightly less warmer, the ice sheets persisted and compounded every winter year after year after year until they became so strong that the strongest of summers took thousands of years to melt it down.
Morgan uses this as a brilliant analogy to understand compounding in money. James Clear in his book Atomic Habits (which is a must read for every soul IMO) talks at length about how small habits can compound into life-defining changes that might seem unheard of at the start. And of course bad habits compound too.
The room I didn’t clean gathered some dust over the last three days and the very nature of dust is such that it attracts more dust quicker compared to that of a clean tile surface. The next three days it will exponentially cause more dust to accumulate as dust itself is a dust magnet. Imagine the effort I will have to waste to clean them at the end of the week rather than now.
There is a lot of truth in showing up to work, motivation be damned. As James Clear puts it in Atomic Habits
If you start with $100, then a 50 percent gain will take you to $150. But you only need a 33 percent loss to take you back to $100. In other words, avoiding a 33 percent loss is just as valuable as achieving a 50 percent gain.
We generally don’t think of compounding in this way. Its a concept not just for money in stocks or loans but also in the lesser tangible aspects of life. If you wanna get better at anything, be regular through thick and thin and let compounding show its magic.