The Analogy of Compound Interest

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Christopher G. Fox

People often use the analogy of compound interest to illustrate the impact of incremental improvements. If you improve by just 1% every day, just think of where you’d be in a year.

By the same token, what if you improved by just 2%? No need to be so unambitious after all…

Then again, it’s important to remember it’s just an analogy. It’s not math. It’s not realistic.

Imagine how this would work when learning a new language. If you only knew 100 words and planned to learn 1% more each day, you’d be learning 30 a day and then more in your last month. Reasonable enough. But at 2% more a day, you’d be learning some 2,000 words a day by the end of the year.

Now think about personal productivity. If you worked 1 hour a day at the start of a year and improved that by 1% each day, you’d be working more than a 24-hour a day within 10 months.

Or if you started off lifting 100 pounds daily, you’d be well on your way to 2 tons daily by the end of the year. Wouldn’t you?

Well, no.

Exponential growth eventually bumps into resource constraints. Always.

But I still keep the analogy in mind. When I tweak a habit, learn something, refine my process, hone my intentions, I still like to tell myself “that’s my 2% for today.”