A few weeks back, I wrote an introductory guide to the principle of compound interest, which one Albert Einstein referred to as “the most powerful force in the universe.”
Today, I’ll be showing you how that same incredibly powerful principle extends to other, non finance-related areas of our lives – and how you can harness it to be more effective in achieving whatever it is you want to achieve.
Let’s start with the example of little Jonny. Jonny is obsessed with the idea of being a rock star, bless him, so out he goes and gets himself a battered old guitar. Then he starts to practice. And not just any time he fancies, but every single day, day in, day out. He does this for a whole year, or 365 days.
Now, if he makes just a 1% improvement day on day, where will he be at the end of that year? Well, the maths is simple: (1.01)365 = 37.783: after one year, our Jonny is almost 38 times as good as when he started! And that, gentlemen, is compounding in action.
Of course, it goes the other way, too, with equally dramatic results. Were we to lose 1% of our skill level day on day over the same period, for instance – (0.99)365 – our skill level at the end of the year would be just 0.0255 of our starting level. Ouch!
What this example makes patently clear is that tiny gains (or losses) build up to significant results over longer time periods. And when we realize this, we realize that achievement is not an overnight phenomenon, but far more likely a cumulative outcome. You don’t become a chess champion from one week to the next any more than you can build an impressive physique, establish a successful business, or indeed achieve in any domain from one day to the next.
This is a hard truth that top achievers in all sorts of domains have appreciated – and exploited. Take business, for example. You may well have heard of Kaizen, for instance. Kaizen is a Japanese philosophy of continuous improvement that has been embraced by big business all over the world, notably car giant Toyota. The philosophy relies on consistent, incremental improvement, and has been successfully adopted across many areas because of its recognition that consistency and time are what win through in the long run.
The aggregation of marginal gains
If one single 1% improvement is, as we have seen, so significant when exposed to the compounding of time, how more effective would the effect be if we could aggregate a whole series of seemingly insignificant, 1% improvements to achieve elite performance? This, in a nutshell, is what the aggregation of marginal gains is all about, and it has been applied with astounding success.
The term seems to have been coined by Dave Brailsford, the head of British cycling. As this article in the Harvard Business Review sets out, when Brailsford took over in 2002, the British cycling team had won only one gold medal in its 76-year history. And yet, by the 2008 Beijing Olympics, it was available to take 70% of all the available gold medals.
Brailsford puts this down to his aggregation of marginal gains. Who would bother to think about the shape of athletes’ pillows, or the way in which they washed their hands? Well Brailsford did, and these marginal improvements multiplied and compounded to eventually yield elite performance.
So what do we take away from all of this? Well, first, that any achievement relies on two components, consistency and time – and that these two factors most often outweigh the seeming significance of the effort. For instance, it would be far better to practice a skill 10 minutes a day, every day, than it would to put in a couple of hours here and there.
Second, the aggregation of marginal gains can take your performance to the next level. If you’re looking to really optimize your effort, seemingly trivial actions or habits, when consistently applied, are what separates the good from the great.
Really think about that as you look at your goals for the coming year. Where can you find that extra 1%? Because actually, it’s a lot more important than you think.
Cambridge graduate. Writer and thinker. Life enthusiast.