THE POWER OF COMPOUND EFFECT

 

My Humble Pranams to All..!! Did u know that Einstein calls this compound effect as 8th wonder of the world...? Yes, Compounding is so powerful that people who understand this will use and benefit from it and those who do not understand will pay for it and if this concept is clearly understood this then we can  achieve in life greater results just by taking small measures everyday. This concept is not only applied to achieve wealth but also helpful to attain good health and relationships. There was a king who played chess and he started to like the game so much that he decided to call the inventor of the chess and give him a gift. He met the inventor of the game and told to ask whatever he needs as a present for inventing this game. The inventor said to give a grain of rice from the first square from the chess board and then double it on for every forthcoming square in the chessboard. The king got irritated as he asked for so little and instead told him to ask gold or diamonds. But the chess inventor said to provide the same thing that he has requested for. So, king assumes that the chess inventor had no intentions of becoming rich and orders his soldiers to provide him with the rice that he has requested for. As days pass by, the king and all his soldiers realizes that the chess inventor had wisely requested for such a present as no one in this world can provide him with so much rice as because for  1st box he will get 1 rice and box 2 he will get 2 rice and box3 he will get 4 rice and box 4 will get 8 rice and on 5th box he will get 16 rice and so on 64th box he will be getting 18,446,744,073,709,551,615 grains of rice and the weight of this will be equivalent to 461 billion metric tons and the same rice will cost about  300 trillion US dollar which is same as this entire world's wealth. So, this means that the chess inventor had understood clearly the power of compound effect and he didn’t just request for some rice but instead for the world total wealth. This compound effect can also be called as snow ball effect or domino effect. This effect means that as the time grows the money also grows rapidly. If suppose someone proposed you an offer to take 5 crores today or take 1 rupee which will be doubled everyday for 30 days and in this case which one would you choose? Lets consider that you had prefer the first option of having 5 crores rupees in day 1 and your friend chooses 2nd option and so your friend will have 1 rupee for day 1 and day 2 he will have 2 rupees and on day 3 he will have 4 rupees and so on and we tend to usually assume in this stage that it will not be a big growth but on day 18 itself he will have 1,31,072 rupees and this is also know as Tipping point and on day 30 it will be around 54 crores and so for us its around 48 crore loss but for our friend its profit of 48 crore and that’s the power of compound interest. This compounding will take time and give us benefits and all we need to have is patience. If we consider the net growth of Warren Buffet in last few years only, he had made an incredible growth. That is after dripping point only his growth has been rapid. Warren Buffet is the 3rd wealthiest man and after 50 years of age only he had created his huge wealth.  This is the power of compounding and normally all people will lose interest in the beginning stage itself especially before the dripping point as because we don't have that much patience. Many people begin to exercise for maximum one week and after that since we don't see much changes we tend to give up. And same goes with the habit of reading books even before we create the compounding effect, we tend to lose patience and we give up most of the times and so we won’t see any results. We can apply this effect in all aspects in life. We should understand that there is nothing like overnight success but mostly when someone gets successful, we tend to think they have become successful overnight but behind this they might have worked for years. Even Lionel Messi said that it took 17 years and 114 days to become an overnight success. To get benefited from this we must remember that we must start small and be consistent for a period of time and after few years we will be able to see results and then do everything intentionally so that by this way we can achieve compound interest benefits. All this above ideas has mainly been inherited from the book named “The compound effect” by ‘Daren Hardy.’

                                                                                                                                      -Sowmya Raghavan