Quick math question:
What’s a 1% increase every day over 365 days?
And the quick answer?
It’s not 365%.
Let’s have some fun with The Rule of 72
The Rule of 72 is a handy way for people who invest to find out when their capital will double based on a known percentage gain.
For example, if you expect a 3% gain on your investment every year, the Rule of 72 predicts that you will double your investment capital in 24 years.
The math is simple.
Divide 72 by 3.
So if say you make a 1% improvement every day, on which day would you have made a 200% improvement compared to the day you started?
72 divide by 1.
That’s 2 months and 12 days in.
Not too long, no?
72 days from Day 72, you would have made another 200% improvement and so on.
But, what’s the actual percentage after 365 days?
Have some fun and key this formula into your calculator to find out (solve for n):
365 = ln(n)/ln(1.01)
Why 1%? Why not 10%? 20%?
A 1% improvement seems small and insignificant. “Too little to see anything happen. Better to do nothing at all.” some may say.
Small gains don’t interest most people.
If someone tells you: Put money in this fund. It’ll have a 1% gain every day for a year!
And another person tells you: Put money in my fund. It’ll have a 300% gain for one day tomorrow.
If you have RM1 in your pocket to spare in a fund (fraudulent or not), which would you pick?
If you put RM1 in the first fund, you will gain 1 cent tomorrow. But you will keep earning 1% for another 364 days.
But if you put RM1 in the second fund, you will get RM3 tomorrow. But that’s all you will get.
Since you have seen the math, you will now know which the better deal is.
Obviously in the first fund, your RM1 will become RM2 in 72 days and then become RM4 on day 114 and so on.
The only difference between the two funds: your patience.
If you can wait 365 days to collect your returns, you will gain more. But if you want your money back in 1 day, your gains are limited.
Small, consistent gains appear uninteresting at first, until of course, you are at day 365.
If you gave up on Day 2, you will only collect 1 cent more.
If you gave up on Day 10, you would collect only 11cents more.
But if you kept going, making a small gain each day for 365 days, you would have walked away with RM16 by the end of the year (by Rule of 72).
The small and insignificant gains add up and produce powerful results.
While a 10 or 20% improvement every day might require an enormous amount of willpower and effort to keep up with every single day, a 1% improvement is easy.
Anyone can make a 1% improvement every day. 1% is the path of least resistance.
How to make a 1% improvement today
Three easy steps:
- Pick a skill you want to become good at. It can be anything. Maybe you want to be a better listener. A better writer. A better photographer… anything.
- Commit the least amount of time you are willing to spend on it every day. It can be 5 minutes, 10 minutes… (or 30 seconds?).
- Decide what you will do in those 30 seconds or 1 minute or 5 minute.
- Do it. Do it when you feel like it, do it when you feel like taking a nap instead.
All the best.
Read more about marginal gains: