Compounding is when your interest earns interest. It’s the growth on your previous growth. It applies to so much more than just your investments and credit cards.
I think about compounding as it applies to knowledge, relationships, business, writing, experience and playing Settlers of Catan. I try really hard to not live each day as if it were my last. I make incremental investments in the things that are important to me in the long-term.
Compound interest is the eighth wonder of the world. He who understands it earns it … he who doesn’t … pays it. — Albert Einstein
Imagine a small, 3-inch snowball rolling across the snow. The small snowball picks up snow slowly (interest) with each roll. The snowball grows to 2x, 3x, 4x… The newly collected snow (interest) allows the snowball to pick up even more snow as it moves across the snow.
Now, imagine this snowball is your knowledge of a particular subject or your relationship with a close friend or your blog’s audience. Make small investments in these areas and watch your growth compound.
Read 500 pages like this every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it. — Warren Buffett
“Friendships are what count.” — I think he’s referring to compounding.