The Compounding Effect: How To Ensure Your Tiny Efforts Lead To Massive Success18 min read

The compounding effect is not something new or alien. 

It is all around us. It is what has brought each and every one of us to this point.

The compounding effect is a principle that highlights that little by little something big is realised.

It is what “motivational speakers” always refer to when asking you to invest. 

I know they often sound ludicrous, but what they describe is indeed real.

For instance, they could inform you that you could actually become a multi-millionaire in the next 2 years if you’re willing to start a poultry business with just 2 eggs.

Don’t laugh. Let me explain:

How The Compounding Effect Works [a Simple Explanation]

Imagine you’re in a universe where all hens lay 12 eggs. And, birds don’t die. And you were given two eggs – one male and the other female.

These eggs hatch and grow to maturity. The female gets fertilised and lays 12 eggs – 6 male, and 6 female. When the birds grow to maturity and each female lays 12 eggs, you should have 84 new birds, giving you a total of 98 birds.

If half of the 98 (that is, 49) laid 12 eggs each again, then you would have 588 eggs/birds added to the poultry, giving you a total of 686 birds.

Keep in mind, a bird needs just 18 weeks (about 5 months) to start laying eggs. And those eggs take about 21 days (about 1 month) to hatch. So, all these 686 birds can come into existence within ((54) + (13)) = 23 months (or about 2 years).

If you sold each of the 686 birds for 30 thousand naira only, that would be 20.5 million naira, from just 2 eggs within 2 years of investing.

Isn’t that amazing?

Now, let’s take it further by extrapolating the next 10 years:

Table 1: Growth of Birds (Over 10 Years) – in an imaginary universe

By year 10, the total number of birds will be over 22 quadrillion, and the amount of money you’d make will be over 683 quintillion naira.

Those numbers are just ridiculous: For reference, the number of seconds that has passed since the Big Bang which (is said to have) happened about 13.8 billion years ago is just about 436 quadrillion. While there are about 1.2 quintillion atoms in a grain of salt, and the number of grains of sand on every beach on Earth is about 7.5 quintillion.

Of course, this chicken scenario is improbable in the real world due to several factors (some of which we’d discuss as we proceed), but nevertheless compounding is often the secret behind most mind-blowing successes we see.

One could argue that, there is no success that wasn’t birthed by compounding: From your ability to read and write, to the invention of aeroplanes and computers. 

It was all little by little, then all of a sudden.

Think about it:

You started with mastering 24 letters of the alphabet.

Then you found yourself reading simple 2 to 3-letter words.

Soon you could read very long words like “Telecommunication” and “Systemization”.

And all of a sudden you start understanding entire passages, books, concepts, and ideas simply from starting with learning how to read your ABC to Z.

Before we had aeroplanes, we first had to figure out how birds could fly – their anatomy and flight mechanics. Then we started creating basic wing designs and studying air resistance. Before finally, being able to bring them together to have the first controllable powered aircraft.

Computers, same thing: First we had to develop basic mechanical calculation tools. Then creating logic circuits and early programming concepts. And finally building sophisticated electronic computers that could process complex instructions.

As Albert Einstein (supposedly) said: 

“Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”

When Little Is Not Little

I want to show you something weird: Observe what happens when we plot our numbers from the chicken experiment into graphs.

Observe:

Figure 1: Graph of Total Birds against Years (0.5 to 3.5) 

You can see the graph is exponential in nature: It appears there was no significant growth from year 0.5 to year 2 as the number of birds struggled to go from 2 to a few hundreds of birds. And just after year 2.5, we see a sharp spike, as it moved from 4.8k to 235k birds.

Figure 2: Graph of Total Birds against Years (3.5 to 7)

Similarly here. When you consider the growth that happened between year 3.5 to year 7 (going from 235k to almost 200 billion), it feels like there was just stagnation all along. Despite there being a significant growth from hundreds of thousands to tens of millions, and later several billions.

Figure 3: Graph of Total Birds against Years (7 to 10)

The pattern repeats when you focus on the growth from year 7 to year 10. Despite hitting an incredible milestone in year 7 (about 200 billion), when you think of the growth that happened between just year 9 and 10 (going from hundreds of trillions to tens of quadrillions), all other growth feels insignificant. 

Yet, none of these small things are really insignificant. It’s all a matter of perspective.

Figure 4: Graph of Total Birds against Years (0.5 to 10)

When you zoom all the way out, it feels like nothing happened, until year 9.5. Yet, we know several spikes or exponential growths occurred on the way (from 0.5 to 3.5, from 3.5 to 7, and from 7 to 10).

What does this teach?

It shows that the result of compounding is mostly evident at the tail end. But, there are also so many noteworthy milestones along the way.

Drawing from this, you could deduce that results or successes are not always just an event or moment, but accumulation of many equally important events or moments.

“Big successes are the accumulation of smaller successes”.

To better understand, I need you to pause, and hold your breath. But count how many seconds you last.

Do it now.

I barely noticed anything 20 seconds in. I only started feeling the urge to breathe around 49 seconds. By  80 I was struggling to keep at it. And by 90 I had to catch my breath before I died.

If you plot the graph of “the need-to-breath” against “time”, it will look strikingly similar to the exponential graphs we have above:

The point is, every breath matters. Every breath is success. And every little success counts.

And, more importantly, perspective matters. If you keep comparing yourself to others, then it will seem like you’re not succeeding (like things are flat-lining). And, this is what often makes people quit in search of some secret, while, in fact, what they have is already extraordinary, but, perhaps, infant.

Gratitude is simply about recalibrating your perspective to see the successes in your life.

How To Apply Compound Effect

Applying the compounding effect is all about mastering the art of capturing and building upon your investments – be it time, money, effort, knowledge, etcetera. 

Things To Do (To Compound)

Just like pouring fluid into a leaky bucket, or breathing with a perforated lung compounding isn’t just about adding; it’s about creating systems that capture, retain, and multiply your investments.

Most people leak potential constantly:

• They solve the same problem repeatedly, instead of using templates, dedicated tools and machines, or leveraging automation. (This is why I love templates, like Canva and CapCut templates, as well as repositories like GitHub code repositories).
• They fail to document insights and solutions. As a result, they forget or have to explain over and over again. This is why I encourage people to blog (rather than just letting insights vanish after 24hrs of sharing on their Stories or Statuses).
• They fail to build upon previous work. This is why I encourage people to do research, get a mentor, or simply stick to the thing that worked while improving it (rather than always trying to reinvent the wheel). It’s also the principle Network effects rely on – when you can get a new connection to bring in more connections, then the growth becomes exponential (1 brings 2. 2 brings 4. 4 brings 8. 8 bring 16. 16 brings 32. Ad infinitum).
• They fail to reinvest their proceeds. This is why business people don’t eat all their gains, and farmers don’t eat all the grains. They learn to keep investing into and expanding their assets so results can also grow.

Etcetera.

Things To Invest Into (To Compound)

Compounding also works better when extra results don’t always require additional investment. For instance:

• When you teach, mentor, or collaborate, you extend your impact far beyond your immediate reach, capacity, and in some cases, lifetime.
• When you capture your thoughts, your processes, your learnings in video, audio, or text, you are able to give your insights to an unlimited number of people without having to do it all over again.
• When you build a system that works – be it an ad campaign with a highly converting sales funnel, strategically positioned store with an experienced salesperson, or a vegetable garden with a good irrigation system – you free yourself from the need to always be present to make things happen.
• When you invest the gains of an investment, you increase your future gains. (just like our chicken illustration) 

Etcetera.

***

Identifying Compounding Opportunities

To help you identify compounding opportunities, consider asking yourself these:

• What am I repeatedly doing?
  • Can this be automated? What tools exist that can handle it?
  • Can this be delegated? Who could I teach this, or hire?
  • Can this be systematized? How can I create a repeatable process?
  • Can this be documented for future reference? What insights can I extract and preserve?
• What do I invest into
  • Do I desire more of the results I am seeing?
  • Will putting in more effort be worth it?
  • (If you’re already making gains) how much of the gain can be consistently reinvested?

Compounding is fundamentally about respecting your own potential and efforts. It’s refusing to let your efforts and investments dissolve into the ether. 

Compounding is about ensuring every positive outcome becomes a building block, for more positive outcomes. It’s like planting an Oak tree.

Dark Truth About Compounding

Sometimes compounding destroys success.

Yes, compounding and success often occur together, but so does compounding and destruction.

Compounding is just an effect, and you need to get things just right or risk ruin.

If you keep pumping a ball on, then it pops.

If you keep heating the water, you end up with steam.

Even if you inverse things, compounding can still be a problem. 

If you keep cooling you end up with ice.

If you keep sucking the air from a balloon, well, that’s not fun.

Sometimes, compounding needs moderation to be beneficial. And to moderate, you need to have a clear purpose.

If you’re not clear on your purpose (of compounding positively or negatively), chances are you would skew to one end and wreak havoc (even with the best of intentions).

To help you get this, let’s consider some scenarios:

• Employees: If you had no employees, you might be overwhelmed with work and lose money. With the right number of employees, you get to do more work, save time, and feel less-stressed. However, if there are too many employees you may struggle to manage and pay them, hence causing stress and loss of money. So we have less money and high stress – optimal – less money and high stress.
• Weapons: In a completely unarmed society, anyone can cajole and harm anyone, making it unstable. In a partially armed society, only the armed can cajole and harm others (ideally it is the Police). However, in a fully armed society, again anyone can cajole and harm anyone. So we have: Vulnerability – balance (from control) – vulnerability.
• Predators: A world of only sheep has internal harmony, but overpopulation can easily lead to scarcity of food. When you mix sheep and lions, it creates balance and sustenance through violence. However, in a world of only lions, there is peace as they do not eat each other, but then again, what would they eat? So we have: Peace (starvation/overpopulation) – balance (violence) – peace (starvation/famine).
• Pixels: Looking at a picture, when you zoom out too much you can’t see anything. When you zoom just right, you see the full picture. And, when you zoom in too much and you can’t see anything again. So we have: Blank – full picture – blank.

• Help: If you are so kind that you help a kid do their assignment, then they don’t learn. If you are kind enough to teach, but allow them to practice and maybe fail, they learn. But if you don’t offer any form of assistance, they also don’t learn. So we have: Uncontrolled kindness (ignorance) – assistance (learning) – no help (ignorance).
• Information: No information and you’re uninformed. Sufficient information and you can function. Too much information and you’re overwhelmed. So we have: Inability (ignorance) – action (awareness) – inability (overwhelm).
• Time: Not born, or dying the day you were born and there is no meaning to what you experienced. When you live with sufficient but limited time, everything becomes exceedingly meaningful. Live forever and there is no meaning to anything you experience. So we have: No meaning (no time) – meaning (sufficient time) – no meaning (too much time).

Etcetera.

Just like breathing in and out, sometimes the answer is not more compounding, but moderation.

How do you do this?

Recalibrate: How To Compound To Success

You might already know that oak trees depend on animals like squirrels to spread and bury their seeds far and wide.

And while it’s easy to think the squirrels with their brains and mobility control this relationship, the reality is that the oak tree does.

And it does so in a rather manipulative and brutal way.

Here the thing: Oak trees want to spread their seeds far from themselves, to prevent new saplings from growing in their shadow. That is their clear purpose and intent.

So they produce Acorns – which are essentially nutrient containers with tiny embryos near the tip.

As intended, squirrels, being squirrels, find these acorns delicious and often come for them. Most times, they eat the acorns whole, seeds and all. But sometimes, in an attempt to save food for winter, they (in a process called “caching”) bury acorns underground in different locations (pretty much how dogs bury bones).

Usually, the squirrels go back and dig up these stored acorns. But just like us, they sometimes forget where they buried them, or they die before retrieving them. This gives those buried acorns a chance to grow into new oak trees, far from the parent plant (as planned).

While this works, it sadly means very few oak seeds make it.

So the oak trees, after years of evolution, developed a clever strategy called “masting.”

What this means is that approximately every five years (though the timing varies), they produce an enormous overabundance of acorns – tens of times more than in normal years.

The acorns produced are so numerous that they far exceed what the local squirrel population and other predators could possibly eat or bury.

The squirrels, excited by this unexpected bounty, frantically bury as many acorns as they can, while of course feasting.

And, as expected, many of these caches end up forgotten – exactly what the oak tree wants.

But if producing so many seeds worked, why not just keep this up every year? 

(Why not just keep compounding?)

The answer lies in population dynamics: if oak trees consistently produced high numbers of acorns, the squirrels would simply grow in population to match this abundant food supply – possibly worsening the odds of future oaks ever sprouting.

Instead, the oak tree moderates by maintaining mostly low-yield years, keeping squirrel populations small. 

Then, just when the squirrels are about to die off, it produces an abundant yield that the small population of squirrels cannot consume but would be forced to store, hoping to eat in the future – only to forget or die…as expected.

This way, the oak purposefully moderates its compounding to give it success – spread seeds and grow new oaks.

***

The point is, sometimes you need to slow down to go faster.

Learning when to go all out, and when to consolidate is what helps you grow your success without allowing that success to become the architect of your own failure.

This can come to play in diverse areas of your life. For example:

Learning:

• Try to learn everything at once – you’ll face overwhelm and failure.
• Learn nothing – you’ll face stagnation and failure.
• Master one thing at a time, then consolidate – you’ll achieve sustainable growth.
• [Not reading zero books, not 100 books at once, but one chapter you can truly absorb and reflect on daily.]

Finances:

• Do nothing – no growth.
• Do everything – you’ll suffer burnout, mistakes, and possibly failure.
• Focus on one key initiative, cement your gains, then expand – you’ll experience compounding progress.
• [Not ignoring your finances, not obsessing over every penny, but regular small investments followed by periods of assessment.]

Exercise:

• Too little leads to poor physical health.
• Too much leads to injury and burnout.
• The right amount, with proper recovery periods, brings fitness.
• [Not zero exercise, not six hours daily, but maybe 30 minutes you can maintain with recovery days built in.]

Relationships:

• Stay completely isolated – you’ll face loneliness.
• Try to be everyone’s close friend – you’ll end up with shallow connections.
• Nurture a balanced network, and deepen existing bonds before expanding – you’ll build a strong community.
• [Not rejecting all invitations and advancements, not going to all the parties or trying to please everyone, but strategically choosing connections that align with your values and goals, without being rigid or overly selective.]

This is how you harness the power of compounding while avoiding the extremes that lead back to zero. 

Conclusion: Compounding is more helpful when you can also balance and consolidate.

In university, my friends and I came to the realisation that staying in our lodge or rooms meant we would not really study – due to distractions, and too much comfort.

So, we agreed to go to night classes.

Now, because we wanted to do well in the exams, we often started attending these night classes just a few weeks into the semester.

Over the course of that semester, we find that we basically cover everything.

So that when the exams start getting close, we just focus on revising and summarising all we’ve learned.

And then, on the night of the paper, we would pull an all-nighter.

This worked quite well.

But then, one day I had a crazy experience.

After having read all night, and just heading into the exam hall with no sleep, I found myself staring at the paper blank.

I knew I knew the answers. I’d studied them thoroughly. But my sleep-deprived brain simply couldn’t access the information.

It was then I learned the hard way that being sleep-deprived actually harms your performance.

From that day, even after pulling all-nighters, I make sure I get 2 to 3 hours of sleep before the exams.

That became our winning formula (because my friends also adopted it).

So also in life, to succeed, you don’t just have to consistently work hard and invest in something you find purposeful. Sometimes you need to slow down – because compounding is more helpful when you can also balance and consolidate.

balance and consolidate.