Big Idea #1: Small Smart Choices Is The Key
The Compound Effect is the principle of reaping huge rewards from a series of small, smart choices. Darren Hardy’s formula is: “Small, smart choices + consistency + time = Radical Difference.” To hit a home run on this concept, I want to give you one of my favorite examples from the book:
The Magic Penny Example: Two people are given the choice between either receiving $3m today or a magic penny that doubles in value every single day. Let’s say person A took the $3 million dollars because they want to enjoy spending it as soon as possible while person B opts for the penny. On the second day, person A is still on $3 million minus their spendings while person B is now on 2 cents. Skipping to day 20, person A is still living life with $3 million minus any spendings while person B only has a little over $5,000. On day 31, again person A still has $3 million minus any spending money but now person B’s penny grew to more than $10 million!
Small choices seem inconsequential at first, just like that penny. But small choices performed consistently over time will always outweigh big, windfall gains in the long term. That is, small choices don’t just “add up”. They compound and grow exponentially.
To apply the example above to our life, the $3 million is pretty much anything that falls into ‘Instant Gratification’ like eating that cake, sleeping all day, drinking a beer and so on. While the penny is the small but smart choice you do every single day like 30-minute jogs, cutting out coffees, reading for 30 minutes a day, studying business or even spending an extra 10 minutes with your partner. Regardless of what it is, the small smart choices performed consistently on a daily basis will always outweigh the result of the instant gratification in the long term.
Big Idea #2: The Compound Effect Is Always Working
The most important thing about the compound effect is that it’s always working. So if you make frequent, small, and seemingly inconsequential choices, you’ll also see a radical difference in our life that can be either negative or positive depending on the choices. To demonstrate this, let me tell you about Hardy’s Three Friends Example:
Friend A makes small good actions vs. Friend B does nothing (represents inaction) vs. Friend C who makes small bad actions. Let’s say the good action is reading a book a day, while the bad action is eating one piece of chocolate every day. In a year’s time, you probably won’t notice much of difference in the life styles of each friend. However, in 3 years time, there will be radical differences.
Remember, the Compound Effect is about exponential growth. Friend A started a small business on the side with all the inspiration and ideas gathered through reading a book a day. Friend B is mildly depressed because he compares himself to his other friends and hasn’t done anything for 3 years. And the worst case is Friend C. Friend C is now chubby, unhappy, stressed out from work and argues constantly with his wife.
From Big Idea 1, we get that each person’s result was not to do with certain major noticeable actions. Each result grew naturally from small, consistent, seemingly inconsequential actions that compounded over years. Note that it doesn’t just “add up”, it compounds and grows exponentially. That’s why you wouldn’t see any major differences even after 1 or 2 years. It was only in the 3rd year that the differences were distinct. And it’s this negligible difference at the very beginning that is the real problem: it discourages people from seeing things through to the end and on the other hand, it doesn’t discourage people from stopping their bad lifestyle choices. In both cases, it’s because they don’t see instant results. But the truth is, it’s always working, whether you can see the results or not.
The Compound Effect is always working. You can’t switch it off. Even if you don’t see results, it doesn’t mean it’s not working. Your results will be positive or negative depending on the choices you make.
It’s a binary equation: if you’re not making “good” choices, you’re making bad ones. Inaction is also considered a “bad” action. When I actually grasped the idea that The Compound Effect was always working and that every choice no matter how small, would add to the Compound Effect, I immediately cut out my bad choices. I cut out drinking soft drinks after every meal, avoided unnecessary arguments, and completely put my phone away while working.
Big Idea #3: Take 100% Responsibility For Your Results
Darren Hardy gives an example of this relationship instructor who gave a talk to a room full of husbands and wives. He posed the question
“What is your % ratio in terms of giving and expecting to receive back?”
People shouted out 50% (i.e. they give 50% and expect 50% back). Some shouted 40%, 60%. Others shouted 80%, 20% etc. The instructor walks back to the board and writes the answer “100% to 0%” and goes on to say…
“Only when you’re willing to take 100% responsibility for making the relationship work, it will work. Otherwise, a relationship left to chance will always be vulnerable to disaster”.
This goes for life as it does for relationships. Darren Hardy drills in the fact that the results you have today are because of your past actions. And until you take 100% responsibility for our current and future actions, nothing will ever change.
Now there are some events and things that happen to us which we can’t do anything about. Whether it’s a natural disaster, a car accident, sicknesses or just simply bad luck, there is nothing we could do to change the situation. But no matter what the situation is, you always have the power to choose how you respond. That is, you can’t change the situation, but you can always change how you respond to the situation.
For me, I used to come up with reasons like “I don’t have enough money” to justify why I wasn’t where I wanted to be yet. I kind of knew this was an excuse but at the same time, I didn’t want to admit it. A lot of personal development books talk about taking full responsibility for your life, but it wasn’t until I read Darren Hardy’s relationship example that it really hit me again. Instead of looking for reasons why something isn’t going my way, I just tell myself “Alright cool, life’s crap. So what can I do about it?” That’s the great thing about The Compound Effect. It doesn’t teach us anything new, it just re-convinces us of things we have to be reminded of.
Big Idea #4: Stop Sleepwalking Through Life
“You make your choice then the choices make you – Darren Hardy”
You see, life consists of a series of gazillion choices we make on a daily basis. The challenge isn’t that we’ve been intentionally making bad choices. This would be very easy to fix since it’s clear as night and day and we can just choose to stop it. Our biggest challenge is that we’ve been sleepwalking through our choices. Each action is so small, you won’t realize that it’s taking effect on you. Also because it’s so small, we don’t even notice we’re making them until it’s too late.
For example, I remember when I wanted to start saving. I even told myself that I’d spend in “emergencies”. But by the end of every month, I was horrified to look at my bank statements. I didn’t really keep count on what I spent on. All I know is I probably spent more than I wanted. This is because each purchase I made was so small and inconsequential to me on their own. I only notice my spending habits by the end of each month – when it’s too late.
But the extreme case of sleep walking through life is when we turn 30 or 40 and find that we ask ourselves: “What have I done with my life?”, “What happened to travelling the world?” “How did I become like this?”. It’s when you can’t really see the exact moment or event where you’ve gone wrong. Because there wasn’t. There wasn’t one big defining moment where you’ve gone wrong. Because if there was, you would’ve known and stopped it. The problem is you’ve just been sleep walking through all your small choices that seemed inconsequential on their own. Just like in my spending example. I didn’t spend money on any big one off purchases because I’m not that irresponsible. It’s the small purchases that seem inconsequential that caused me to ‘sleep walk’ through my spending habits.
Big Idea #5: Will Power vs. A Strong Why
Here’s a fact. Most people have goals and dreams that they want to achieve. I mean, it doesn’t even have to be big, it can be a small goal like losing 5 kilos before Summer. However, the reason why most of us give up so easily is not that we don’t have enough will power. Most of the time, it’s because we don’t have a strong ‘why’. We don’t have a strong purpose!
To explain this key concept, Hardy gives one of the best examples I’ve heard, The Plank Example.
Scenario 1: If there is a 20m long plank on the ground and I asked you to walk from one end to the other for $1,000. Would you do it? I hope the answer is yes because it’s probably the easiest way to make $1,000 in 10 seconds.
Scenario 2: Now, if I place the same 20m plank from Scenario 1 and place it on two tall buildings (such that it connects on each end) and ask you to walk across it now for the same $1,000. Would you do it? I’m going to assume that the answer is no because one little mistake and you’ll be falling from a very tall building. It simply is not worth it and no will power would convince you.
Scenario 3: Similar to scenario 2, but this time I give you no money. Yep, I won’t even give you any money if you walked across. However, this time your child or parent or partner or pretty much someone you really love and care for is on the other end of the building and the building is burning. And if you don’t go across to save them, they will die in front of you (very extreme example, I know). This time would you do it? The answer I hope is yes! You just have to.
Again, this is not because you have an increase in will power, it is because you’re tapping into your ‘Why’ power. Darren Hardy explains that if we want to take advantage of The Compound Effect and really have success with it, we must tap into our ‘Why’ Because when our will power runs out, it’s our ‘why’ that will keep us going. For me, my why changes now and then depending on what gets me pumped up. When I see my parents working hard, my why is to retire them. When I watch my doggies play by themselves, my why changes to creating a lifestyle where I can hang with them whenever I want. When I used to see old work mates from my corporate days, my why for becoming successful was to have something to show for quitting and choosing the entrepreneur path.
Big Idea #6: The Power Of The “Big Mo”
The Compound Effect depends on consistency. This is where the power of momentum comes in. The Power of Big Mo. We have to exert the most energy at the start when we’re trying to kick ourselves into momentum. But once we’re there, it only becomes easier as we’re riding the momentum wave. It’s just like how a space rocket uses most of its fuel during the first few minutes of launch. It needs momentum to kick itself into space, but once it’s there, it just rides its momentum and doesn’t require much more fuel. Or how a snowball rolling down a snowy mountain requires being pushed at first but once it’s big enough and kicks into momentum, you can’t even stop it. Or why some people who at first may struggle to go gym all of sudden become ‘gym junkies’ that you can’t even stop from going gym anymore. They all have momentum.
Here’s the thing, when momentum kicks in whatever you’re trying to achieve, you will realize that everything becomes 100 times easier and faster. And here’s the thing. nothing kills momentum quicker and with more certainty than a lack of consistency. So no matter what, you should prioritize consistency over big one-off gains. For example, do one push up every day if you have to instead of doing 100 push ups after 100 days all in one go. This doesn’t build momentum. Also, avoid falling into the trap of saying “Oh I’ll just do it tomorrow if I missed it today”. Do whatever it takes to do it every single day. If it’s too difficult to keep up, make the habit even easier for yourself. Do half a push up if you have to!
Once I was re-convinced about the power of momentum from The Compound Effect, I made sure I had daily momentum. Now as soon as I wake up, I make sure I get in at least one session of focused work (a Deep Work Session) to give myself momentum. It’s like having a head start to my day. The worst thing for me is when I wake up late and feel like my day is already over. This kills my daily momentum. That’s why I do whatever it takes to wake up early (usually at 5 am) to do one Deep Work session to start off my day. I find that when I start off my day with a kick of momentum, doing productive work for the rest of the day is so much easier.
Big Idea #7: The Power Of Influence
The last big idea I want to talk about is influence. Everyone in some way is affected by external forces and these forces will either help us achieve our goals or drag us down. More specifically, Darren Hardy says there are three kinds of influences that we have to watch out for.
Influence #1: Information we feed our brains. Garbage In, Garbage Out. Darren Hardy advises us to stop watching the news. Most of the time news or media reports on problems and negative situations. It’s with anything in general. Consuming too much of negative information will only make us become more cautious and scared. I definitely am not a news person. More so because I don’t really have time for it. I usually get my news from friends if it’s worth knowing. On the other hand, I’d definitely recommend reading books. If we can eliminate the negative stuff from entering our mind and feeding it with success strategies, inspiration and success stories, we will inevitably become a more empowering person.
Influence #2: Associations. Everyone is influenced by their peers, work mates, family and so on. In fact, Jim Rohn taught that we become the combined average of the five people we spend the most time with. This includes the average of their incomes and the average of their life styles. Jim Rohn would say that he could tell the quality of our health, attitude, and income by looking at the people around us. In other words, watch who you hang out with. For me, I’ve actually been quite lucky with my friends so there isn’t anyone I needed consciously spend less time with. On top of that, to add to my circle of influence, I learn from different mentors, some in real life and others from their online material or through many books.
Influence #3: Environment. This includes everything that surrounds you. Creating a positive environment includes clearing out all the clutter in your life. Not just the physical clutter, but also the psychic clutter. Anything around you that isn’t working and takes your focus away. For example, you know your relationship isn’t currently working. Or you don’t like your current job. Or you have beef with someone at work. You should do whatever it takes to lessen or eliminate this type of clutter as it makes focussing on your goal a lot harder. For me, I keep this in mind and usually whenever a problem presents itself, I either resolve it quickly or decide to not give it too much attention. Because problems also need energy to be kept alive. I just concentrate on my work and usually small problems just fall away.
Overall I love this book. It’s an easy read and is very actionable. It was written for the average Joe who just wants to improve their work, relationships or their overall health. As you know, I believe in taking action over anything. Hence this book was right up my alley. There’s no magic bullet. Only good old actions and habits. It’s a must read for anyone wanting to reach their next level of achievement.
Your Compound Effect Action Plan
As always, to really drill in these key concepts and actually have The Compound Effect positively affect your life, here’s an easy action plan you can do right away:
- Write down your #1 goal for this year(e.g. getting that beach body, getting that promotion, writing a book)
- Articulate your “why”.Why is this goal a must for you? Why now? (not next year, not the year after, not once you have more money, not once you have more time, not once you’re more accomplished). Remember to read your ‘why’ out to yourself every morning to give you purpose during your day.
- Create 3 habits around your goal. What are 3 habits you could form right now so that if you did them every single day until the end of the year, you would get to your goal? For example, if you want that beach body, maybe you’d do 15 min of running every day. If you want to get that promotion, write down an action plan and do a small thing from it every week. If you want to write a book, start writing one crappy page every single day.
Shout out to martinthinks.com for doing this written summary
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