Compound Interest is for People Too

Save $20,000 when you’re 24 and let it compound for 40 years. At 4%/yr interest you have $96,000 and at 6% interest you have $205,000. Compound interest is a beautiful thing.

Compound Interest - you want 6% not 4%

People work the same way

The quality of people you surround yourself with is the biggest determining factor for how good you will be at whatever it is you want to be. Surround yourself with entrepreneurs, engineers, artists, or parents who are just slightly better and the impact will compound over time.

Are you compounding your life’s purpose with 4% interest people? With 6% interest people? Is there an opportunity to compound at 20% interest, if even only for a few years?

I’ve seen it happen around me for the last 20 years. People that I started in the same place with, and had the same potential as, are now either far ahead or far behind — whether it be in the military, entrepreneurship, civil service, academia, or family life. Almost universally, the people who are far ahead, optimized to be around the best people.

Note: This is not just for careers. If you want to be a better parent, spouse, or friend then surrounding yourself with people who are better spouses, parents, and friends will compound in the same way.

9 thoughts on “Compound Interest is for People Too

  1. I think that the quality of people that you can surround yourself can compound at a much quicker pace–even faster than 20%–especially when you are just starting out.

    I think it is not just about surrounding yourself with the best people, it is about improving yourself as well so the “best people” will want to be in your social circle as well. Network + Be likable + Find ways to add value = Win!

  2. Hi Avichal,

    Its a great post….and many seem to agree with it…including me. But I have a few questions for you. If you had friend who were…let’s say…. not better than you, wouldn’t you want to make their life better by being a positive influence in their life? Maybe, they befriended you because they look up to you in someway!
    I feel life is not all mathematics. There might be logic but there are emotions and feelings involved. One cannot afford to be all selfish🙂

  3. Great post, Avichal.

    This reminds me of a very insightful post by Eric Sink who argued for a case of investing in oneself to get better over a period of time.

    He used calculus to explain his equation of C = G + LT.

    C is the cluefulness. G is whether one is Gifted or not. And, LT is Learning over a period of time.

    If one was to do dC/dT( a differential of cluefulness over a period of time) then all one gets is dL/dT. Given, constants like Giftedness evaluate to zero, the only way to increase one’s cluefulness/intelligence/smarts was to invest in constant learning.

    You read his post here – http://www.ericsink.com/Career_Calculus.html

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