My mind on my money, money on my mind. If you owe me ten dollars, you ain’t giving me nine. –Jay-Z
With an estimated net worth of $76 billion (that’s growing steadily), Warren Buffett is unquestionably one of the most successful investors in history.
Over his 52-year stint as CEO of Berkshire Hathaway, Buffett has earned nearly a two million percent return on his investors’ money. To put that into perspective, if you invested $10,000 into Berkshire Hathaway in 1965, that investment would be worth $88 million today.
Most of us look at numbers of that size and assume they could come only from lottery winnings. However, Buffett took a different approach: Playing the long game with the seemingly simple technique of compound interest.
In finance, compound interest simply means that instead of taking out any earnings you make from interest, you leave it invested, effectively earning interest on interest.
Yet this technique doesn’t need to be limited to just your investments.
Gary Keller and Jay Papasan, authors of The One Thing, explain how focusing on compounding your skills can bring the same level of returns to all areas of your life:
Where I’d had huge success, I had narrowed my concentration to one thing, and where my success varied, my focus had too. Success is sequential, not simultaneous.
Compound interest is such a powerful yet neglected idea, that Albert Einstein famously called it “the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
Buffett bought his first stock at 11, but has earned 99 percent of his wealth since his 50th birthday. In the same way, you can start learning a new skill or building a new business today, and see massive, life-changing results down the road.
It’s not as sexy an answer as a lot of the advice out there, but when you think about it, it’s actually more empowering. The work you put in today, no matter how small, can bring monumental change as long as you stick with it.
For example, it’s rare to see a cyclist under the age of 28 win a huge race like the Tour de France, because it takes them years to build the strength, stamina, and mental fortitude needed to win.
But every time they get on their bike, they’re compounding the work they put in the day before and getting one step closer to their big goal.
More Info: www.inc.com