Compound Interest

“All the returns in life, whether in wealth, relationships, or knowledge, come from compound interest.”

— Naval

“Compound interest is the most powerful force in the universe.”

— Attributed to Albert Einstein

Constant action doesn’t just lead to linear returns. It increases rapidly over time.

Source: Fool.com

The power of compound interest is that it does not just apply to money. Your reputation has compound interest along with building skills, trust, and goodwill. Anything you do when constantly worked at over a long period of time will yield greater results for you than you could have ever imagined.

When Jamie Foxx was on the Tim Ferris podcast, he tells a story of how his grandmother made him learn to play the piano. She wanted him to really understand the music because it would help in “cross over the tracks.”

Crossing over the tracks, in the literal sense, meant that he would be able to take his music to the white part of town. In those days, cities were segregated and there was usually some physical marker to signify it. In this case, it was the railroad tracks in Terrell, TX that symbolized that barrier. His grandmother had a much bigger vision though when she meant crossing over the tracks. She did not just mean the white part of town. She envisioned that learning the piano and music would allow him to experience the world.

This paid dividends (obviously) but never more so than when he was got to meet Ray Charles as he was portraying him in the movie Ray. Because of his background in classical piano, he got to play the blues with Ray Charles and build a bond that allowed Ray to open up to him. He also got to build a bond with Quincy Jones because of his deep understanding of music along with all of the other celebrity relationships he’s built over his career.

Something he started as a youth is still paying dividends today.

You can also apply this concept to your business relationships. Delivering excellent work consistently in your given profession will compound over time. It will lead to more and more opportunities for you because others will think of you first when a particular skill set is needed. Being trustworthy consistently will also help deepen your existing relationships and make it easier to build new ones over time. In both cases, your reputation will proceed you in a positive way.

That is the power of compound interest.