Business Intelligence: Compound Effect

The Compound Effect is a concept by Darren Hardy, publisher of Success Magazine, a popular read for entrepreneurs.  He talked about this in his book which sold millions of copies. It’s a worthy read, rated 4.4 out of 5 by Goodreads.

The Compound Effect provides great insights that helps entrepreneurs ‘multiply success, one simple step at a time’. Darren describes the Compound Effect as the operating system that has been operating in our lives from our birth. “All success comes as a result of the operating system of the compound effect.”

The Compound Effect according to Darren Hardy is the principle of reaping huge rewards from a series of small smart choices. In other words, the Compound Effect says “slow and steady wins the race; that consistency in making very small and smart choices over a period of time is the only way to achieve success.”

A lot of entrepreneurs have a ‘microwave mentality’. They’re only looking for instant results. This is largely due to how society has been deceived to think there’s a quick fix to everything.

compound effect
What’s the Compound Effect of eating Fast food?

These days, there are numerous programs and advertising claiming to help people get overnight success in their finances, health, weight, relationship. These sensational claims to get rich or get fit or lose weight by just taking a pill are really not anything like shortcuts to success to say the least. Success is not doing 5,000 things a few times but doing a few things 5,000 things.

Becoming wealthy is really a slow, and boring process where commitment and discipline are the only requirement. Darren Hardy says that you already know all you need to succeed. If all you need is more information, then everyone with access to the internet will be rich.

What is truly needed is a new plan of action that you’ll have to follow daily with unwavering commitment. It’s doesn’t matter if you are smart or not. What you need to do is work harder to cover what you lack in experience, skills and intelligence.

If you’re not good at something, you need to work harder on yourself. If you are not good at marketing or sales or creating and delivering value to customers in your business, then you only need to work extremely 10 times harder to gain mastery. It’s often said that it takes 10,000 hours to achieve mastery at anything. That’s the compound effect coming into play.

Liverpool FC recent EPL 19/20 Success is a true example of The Compound Effect

Sports teams don’t just wake up one morning to win a championship. Liverpool spent decades preparing. Their recent title win is as a result of compound effect of this non-stop preparation. Remember, Compound Effect is the principle of reaping huge rewards from a series of small smart choices.

The small smart choices everyday resulted to match wins which then compounded into the title/championship win for Liverpool.

The formula for success is: small smart choices daily + consistency + time = radical difference.

It’s important to note that the changes are so subtle and unrecognizable but it works in the long run. Many people stop running, stop practicing and stop working when they don’t see a result in a few days.

Compound effect takes a very long time of consistency before you can see visible results. Let me share the example of the Magic Penny.

A Penny doubled every day for 30 days or $10k every day?

compound effect

Trust me, the $10k makes sense at face value and will appeal to most people on short notice. But see what the Compound Effect does when applied to the penny results overtime. It took 21 days to reach $10,000, surpasses $300k by Day 26 and multiplying 18 times in value by Day 30.

Here’s what the magic penny does when compared with $1 million over 30 days.

compound effect

We like great displays of massive efforts but what’s really needed to create lasting success is a strong work ethic built on grit, discipline and hard work. Nothing fails like success. Great empires collapse because of complacency.

Complacency when powered by the principle of Compound Effect works against all the success you have achieved. There’s a story of a newly opened restaurant with excellent service, sensational food, pleasant staff etc. that had great patronage. After a period of time, the restaurant became complacent and started treating customers badly, and wasn’t consistent with the clean environment, sensational food and pleasant staff it was known for.

compound effect
The Compound Effect is always at play. It wasn’t long before the business was forced to a close.

The Compound Effect is always at play. It wasn’t long before the business was forced to a close. Whatever we do consistently, we develop mastery at it. That’s why the rich get richer and the poor gets poorer.

In summary, Knowledge is not power. It’s potential energy and like a light switch, you have to turn it on. Knowledge not invested is wasted. Ideas without action leads to delusion.

The compound effect is always at play. We must delete forever from our entrepreneurial mind, that success is a quick fix. The only path to success is through a CONTINUUM of daily discipline which can be sometimes unexciting, difficult and boring. It’s our continued action that brings success.

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