[Principle #3] Giving pays compound interest
On giving being an underestimated investment opportunity
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Giving pays compound interest
Happy Tuesday! :)
In James Clear’s Atomic Habits (which I highly recommend), he introduces the idea that daily tiny gains amount to outsized near term results. Notice that I said near (one year), as opposed to long.
If you start with a dollar and get 1% better every day, you’ll finish the year with nearly $38.
Let’s talk about how this idea of compound interest applies to giving (and, by extension, networking).
Albert Einstein once described compound interest as the “eighth wonder of the world,” saying, “he who understands it, earns it; he who doesn’t, pays for it.”
When you meet someone, it’s easy to focus on yourself and we already touched on the importance of (1) forgetting about oneself and (2) expanding your inner circle.
What I’d like to introduce today is the concept that, in every interaction, one has the ability to make another person’s life 1% better.
In other words, you can view your interactions with others as risk free 1% investments.. and you’ll get ~$38 per person at the end of the year.
Let’s unpack:
“Why risk free? I have other things to do and time is money!”
You’re right, but (1) making a 1% impact to someone doesn’t take much time and (2) you’re assuming no return on your investment, whereas the true returns from giving have compound interest. Which brings us to the next question…
“I only made a 1% improvement that day, how is it that I would benefit from days 2-365 of that person’s growth, thereby yielding $38/person?!”
This is precisely where the magic happens!
Think about a time when someone helped you in any way (e.g. helped you choose a college major or career track, introduced to a job, etc.) and set you on the right path. Looking back, do you attribute more than 1% of your success to that person’s help? I can tell you that I do, and you can benefit from this as well in all of your interactions.
On a personal note, I spoke to a friend today that thanked me for making him feel better after he got a rejection from a job with a grueling interview process. He said that I completely changed his perspective on that day and he’s looking forward to helping me in some way in the future. Did I ask for help? No. Did I earn compound interest from a few minutes of helping someone? Absolutely!
“Wouldn’t I only benefit from that one person’s growth, as opposed to any such interaction?”
You benefit from the 1% improvements (and the compound interest on that 1% per bullet 2 above) for any interaction in which you help someone. That’s why every interaction matters…
Takeaways:
Lesson #1: Helping someone in a small way (which might only take you a minute of your time) has outsized returns that are often underestimated
Lesson #2: If you think about these 1% improvements as risk-free “seed” investments, you can comprise a portfolio that' is earning compound interest from giving.
Exercise:
Try to make a 1% improvement to someone’s life in the next 24 hours!
Thoughts/questions on this post or have a suggestion for the next post? Please click below to post a comment!
Learned something? I do this for free to help the world in a small way. Can you help me by spreading the word?
Aleksey, we are connected on LI! Giving is crucial. This too is worthy of a post. Giving of time, treasure and talent. Those of who are blessed are called to share. Period. When I give of my time, I usually learn from the people I am working with and get a return on that investment. If it isn't learning, it is expansion of my network. I volunteer with teens, while also parenting two teens. The lesson I want all of those teens to come away with is that it isn't "awkward" to ask for help, that most folks want to help, and that we all gain by giving. Thanks for sharing. I look forward to reading some more of your posts.