Book #7 “The Compound Effect” by Darren Hardy
By: Gabriel Sadek
Tags: Habit Building, Clarity, Commitment, Self Development, Compounding

I read this book in April of 2018.

This book was a prolific read for reasons of timing as well as for the actual content contained within. I had just read “Rich Dad Poor Dad” by Robert Kiyosaki prior to reading this book. I needed a book to give me direction as to how I should proceed with carrying out meaningful action based on the content of that book. My good friend Rockstar, whom I mentioned in my previous book review, recommended reading this book by Darren Hardy.

This book discusses the power of taking the same small steps every single day towards a specific goal. This little action everyday compounds itself in multiple orders of magnitude overtime. He illustrates this by opening with the example of acquiring a one-time payment of $3,000,000 or one penny everyday that doubles in value for 31 days. He illustrates how on day 31 you would have accumulated $10.7 million dollars had you doubled your earnings everyday beginning with one penny.

I have seen the power of compounding through both my analysis of securities as well as throughout my life…

For example reading. Reading has certainly compounded and paid its dividends several times over since I took up the commitment. At the moment that I write this blog, I have read 51 books in the past 35 months. The knowledge that I have acquired has built upon itself and has brought me to my current circumstance.

The fundamental concepts of the compound effect is that taking small actions everyday will accumulate overtime much greater than taking massive action in the beginning but falling off course throughout the process. This concept can be exemplified in everything from diet to exercise to finances etc…

Let’s say for example you have a 500 calorie brownie everyday after lunch. Rather than committing to a massive diet change and exercise regime, just cut out that one brownie. Assuming you eat the same things everyday, all else being equal, you would have cut out 15,500 calories from your diet in 31 days. That is a sh*t ton of calories. Keep going and that is roughly 93,000 calories in 6 months, all things being equal.

Imagine for example flying from New Jersey to Australia in a plane that is traveling at 700 mph consistently the entire time. It would take approximately 14 hours to complete that 10,000 mile trip. Now imagine traveling in a jet moving at 1000mph but stoping every 30 minutes for a 30 minute break. On such an imaginary jet it would take approximately 20 hours to complete that same trip.

The central theme of the book is to ingrain small micro-habits into your regime that will accumulate overtime into massive results. Instead of starting big and falling off, start modest and stay consistent. Stay on the course and overtime it will payoff.

Hardy also talks about the power of habit and the lack of self-actualization in society.

“There’s a story about a man riding a horse, galloping quickly. It appears that he’s going somewhere very important. A man standing along the roadside shouts, “Where are you going?” The rider replies, “I don’t know. Ask the horse!” This is the story of most people’s lives; they’re riding the horse of their habits, with no idea where they’re headed. It’s time to take control of the reins, and move your life in the direction of where you really want to go.”

― Darren Hardy, The Compound Effect

This book led me to take small actionable steps in various areas of my life. I started with one book a month. I did not commit to a book a week. Just one book a month. It was something manageable for me. I also began dollar cost averaging $200/month towards my securities portfolio. I didn’t start with $1,000/month I began with something that was sustainable.

After reading this book I also decided to dedicate a small portion of my income towards what I refer to as a, “Business, Real Estate, and Securities” account. Every month I dedicate 10% of my income towards these 3 asset classes in some way shape or form. Also, everyday I just do one “thing” towards building an asset. I promised myself that I would just do at least one “thing” every single day towards building one stream of passive income. Sometimes it’s just one phone call. Or reading 30 pages of a book. Or going through one section of a course. Or reading one Investopedia article.

Doing that one thing just makes me want to do more. I end up doing much more than that one thing, and dedicating much more than that 10%. I don’t commit big. I just commit to one “thing.” That’s all. Overtime it will add up. It already has.

I will end with what I considered to be the most prolific image of the book.