Take advantage of compounding effects: 3 ways (+ One Hidden Superpower)
The boss wants to give you a bonus this month. You can get $10,000 today and every day for a month, or $.01 today and the amount will double every day for a month. Which one would you choose?
If you know the answer, you understand compounding and exponential growth.
It’s how a $.01 starting payment that compounds by 100% every day for a month will result in $5,368,709.12, even though you’d only have about $10,000 after 3 weeks.
In the game of compounding gains, the biggest breakthroughs happen right after it seems like nothing is happening. It’s a game of patience, persistence, and resisting the temptation to give up too soon.
The concept of compounding can go beyond financial applications, too. Authors like Darren Hardy and James Clear have written about how compounding effort relates to activities, habits and skillsets in day-to-day life.
They explain how what you do (and think) grows in proportion to itself when pursued and acted on daily. Habits and skills stack up. Over time, the unit value - one daily rep - of whatever it is you’ve been compounding is worth many times more than it was on day one, when you were just getting started.
In most areas of life, the chart won’t look as dramatic as the penny example. But the principle remains the same: steady, persistent effort grows on itself.
In habits and skill development, the concept resonates even deeper when you go think beyond the amount of improvement, and think more about the repetitions you get when you do something every day.
Example: You and a friend decide to study Italian for a year. You study for one hour per day, while they study for seven hours once a week. At the end of the year, both of you have studied 365 hours. But you’ve had 365 attempts at studying—they’ve had just 52. By the time they hit their seventh study session, you’ve already reached that point in your first week.
Another way to look at it, is that your friend went 52 consecutive weeks with six days of not studying in between. How can the brain sustain momentum when there are such consistent gaps in exposure?
Persistent, day after day attempts is what compounding effort is about.
Of course, this isn’t a perfect formula. Not everything improves at a consistent rate forever. But when you understand compounding as a mental model, you can use it to amplify what’s working, cut what’s slowing you down, and strategically strengthen the habits that matter most.
Here are three ways to take advantage of existing compounding effects.
Identify Where Compounding is Already Happening in Your Life
This week, take an open-minded, guilt-free inventory of the daily processes, routines, and habits that are compounding in your life. What’s growing in the right direction? What’s quietly working against you?
One way to do this is to think of skills in various aspects of your life. Technical work skills, relationships, parenting, cooking, friendships, personal finance, exercise - what you prioritize is up to you.
Make a two-column chart. Name one “Compounding Up” (habits you want to keep) and the other “Compounding Down” (habits you need to fix or drop).
Resist the urge to try and solve everything at once—just identify the patterns. Some habits take years to show results, others start shifting in weeks. Loading up a to-do list of areas to improve without context can lead to overwhelm, so the key here is to just observe.
The goal of this exercise is to help you identify what activities are compounding in your life.
Once you start seeing what’s already compounding, you can make better choices about where to put your energy.
Focus on Compounding What’s Important, Not Just What’s Easy
Once you’ve nailed down your list of what’s compounding in your life, zoom in on the good habits.
Is there anything that is compounding which seems good (and might actually be good on its own) but is not the right thing to focus on given your other commitments and areas of focus? Are there any seemingly good habits that take away focus from better ones?
Here’s an example for me: web design, and how it takes away from more important things.
If I get stuck writing or am unfocused, it’s really easy to tinker with the website and feel like I’m being productive. And along the way, I’ve gotten a bit better at it and learned a bunch of new tricks. But is that the compounding I need in order to hit my targets?
After doing this step, I realized that for me, too much web design was equivalent to building a bad habit of procrastination and distraction.
I know that writing and editing every day is important because it builds the writing skill, and helps me publish on schedule. I get the benefit of the process and the results. There’s no doubt that this is the most important activity (work-related) I can be doing every day. I could, in theory, work on web design every day and get exponentially better, but ultimately it doesn’t move me closer to my goals.
For the activities and habits that matter to you, zoom in to see if you are doing something every day that is seemingly positive, but is actually a net negative because it takes time and energy away from something more important.
Sometimes it’s painful to put cherished or enjoyable, but ultimately unimportant things on the bench, but it’s even painful to let that time slip by without improving on the things that matter.
This doesn’t have to be all work or learning or productivity, either. Think about activities at home, self-care routines, moments of pause. Think about communication skills with partners, children and friends. What would a daily improvement look like in the area of “reaching out to people who are important to me;” if a call or text replaced the current activity that typically follows picking up the phone? What could those relationships evolve into? I’m writing that to you, and to myself.
For this week, think about how some good habits grow in the wrong direction. What looks like productive effort might actually be stealing energy from what matters most. Identifying these distractions and redirecting effort is a key step in using compounding to your advantage.
Strengthen Your Habit Networks to Accelerate Growth
There’s a type of exponential growth called network-driven exponential growth, and it’s an essential mental model for understanding how to leverage habit systems.
In contrast to simple compounding (day over day consistency and improvements), this model can explain how individual habits work together in systems and have exponential influence on each other.
Instead of focusing only on individual habits, the task here is to zoom out and see how they work as a system.
Some of these relationships are more obvious than others.
For example:
More obvious: For a time, I had a strong habit of drinking coffee throughout the day. This affected not only my sleep quality, but how much I wanted to eat. My low sleep quality and constant hunger tanked my energy, causing me to crave more coffee, and the cycle continued. Try as I might to sleep and eat better, the leading factor in this habit system was my coffee consumption. Changing that was a catalyst to change the other individual habits.
Less obvious: One summer I found that my nutrition habits had tanked. I went from home-cooking most of my meals, to ordering take-out and hitting up QSRs most days. In turn, my energy dipped, my coffee consumption increased, sleep quality decreased, and that whole cycle started to become the new routine. Every time I entered the kitchen I was focused on eating better, and resisting the urge to order in or dine out, but it wasn’t working, because I actually had no food to cook at home.
By zooming out from meal time and looking at how other habits might affect my nutrition habit, it became clear that a new summer routine of going grocery shopping after a Sunday morning of golf was dragging down my nutrition habit. After golf, I was fatigued and hungry, which influenced how I made my grocery list. I either made a lazy list, or told myself “I’ll just get the basics today, and get more tomorrow.” Yea right.
Identifying how my early morning golf and shopping routines were linked, I could remedy the issue with a small fix: build my grocery list on Saturdays, when I’m not fatigued and when I feel motivated to take the time to build a proper list. Then, I could mosey through the grocery store on Sundays, tired and mentally spent, but still get the food I needed for the week.
So what can you do to take advantage of habit networks? Take an active and passive approach to uncovering connections.
First, the active approach. Scan your inventory of daily routines to think through the obvious, and non-obvious connections between your habits. Start to connect dots that you’ve never thought about connecting before. In most cases, you’ll resolve that “those dots don’t need to be connected.” In others, you might find some hidden connections that are influencing habits more than you thought.
Within the habit systems that you identify, can you see any individual habits that are carrying too much of the weight? Are any slowing down the entire system’s growth? Are there any that, with just one small fix, could uplift the entire system? Are there any habits that you’re trying to improve, but really need to focus on relational habits instead?
Understanding, and playing to the strengths of how your habit systems function is a strong step towards developing new routines and maintaining positive lifestyle habits.
The second way to take advantage of habit networks - the passive way - is a change in mindset.
Rather than viewing daily activities as isolated actions, start seeing them as reinforcing nodes in a larger system. Every decision, action, and routine has extended effects. The more you recognize these connections, the more leverage you have in building and maintaining the habits you want.
It’s an intangible but important process of recognizing how different aspects of life relate to each other, especially when it comes to recurring patterns of activity.
There’s not much to do in this step aside from being mindful of it and keeping an eye open towards these connections throughout the week. As more connections become visible, add them to the list you created in step 1.
So for this week, spot how some habits hold up entire systems. A small shift in the right place can unblock progress everywhere.
The Hidden Superpower: Seeing Big Results from Small Efforts is the Most Potent Motivator Around
Realizing the results of compounding efforts is the most potent motivator you will find.
The moments when after sustained efforts the results become tangible and you can enjoy the fruits of your labor - those are the moments that solidify a practice into a nearly-unbreakable habit and routine.
The knowledge that real progress (however small) is being made becomes a catalyst that removes friction when getting started, and provides the much needed motivation to stick to it and take your progress to the next level.
It’s a beautiful, self-propelling flywheel that creates a sustainable way of operating; an upward spiral of perspiration and motivation.
As a bonus this week, take a minute to reflect on positive habits that perpetuate self-sufficiently and think back to when you were first getting started. Can you envision how a small start in a different habit could grow into something powerful?
Final Thought: Find the Smallest Fix With the Biggest Impact
These are four ways I’m keeping my eye out to notice the impact of compounding effects on my day-to-day habits and routines.
I’ll be trying these to strengthen my good habits, kick some of the bad ones, and find small but impactful ways to build stronger habit networks so the individual ones reach self-sufficiency and can be upheld with less effort.
What will you try?
