Steve the Owl's Blog

I have read from both Brian Tracy and Jeff Olson about the need for small changes in order to improve our lives in big way. One of the examples is the story called “The Choice.” Long story short, when given the choice between a million dollars in cash, or a penny that will double every day for a month, take the penny. Anyway, this got me thinking about the nature of improvement.

Big Leaps or Small Steps

I read a statistic that shocked me recently. It said that 15% of all Americans are actually using the lottery as their retirement plan. As someone who owns a (small but growing) share in a Roth IRA, this is something that is very shocking to me. However, I think that this is because of this notion that we have to get the “one big score.” One of the greatest TV shows ever made, The Honeymooners, focused on one man’s search for his big score. (Spoiler alert: in all 39 episodes, it never happens.) Why is this such a prevalent idea? I think that it’s because something like hitting it big is just so dramatic that what success usually looks like doesn’t really work on a movie or television screen.

What Small Change Looks Like

However, there is an interesting dynamic. With the power of compound interest, each incremental improvement is slightly bigger than the last. For example, if someone improves by only three-tenths of one percent a year, every day for one year, that is an improvement of 198.4%, meaning that someone has nearly tripled in productivity. Taking one day off every week, this is still an improvement of 154.6%, and taking weekends off leads to an improvement of 117.9%, still more than doubling within one year’s time.

Why does this happen? Let’s take the first two numbers. If we start at $10,000, for the simple purpose of round numbers, and we build by 0.3% in one day, we have made $30, making our total $10,030. What would the yield be on day two at the same rate? If you guessed $30 again, you would be wrong. Why is that? What are we adding the 0.3% to? We are adding to the $10,030, not $10,000, so that means that the second day, we would earn a yield of $30.09. It is a small change, but it is still a nine-cent difference. However, let’s look at the next day. It the yield going to be $30.09 again? No, it’s not. This time, because the principal is $10,060.09, the yield is $30.18, leaving you with $10,090.27. It doesn’t take a mathematical genius to see where this going.

Using our three examples for one year (every day, taking one day off a week, taking weekends off), this is what happens on the last day:

Every Day (365th day): $29,753.61 at the beginning of the day, $89.26 yield, $29,842.87 at the end of the day

One Day Off (312th Day): $25,385.76 at the beginning of the day, $76.16 yield, $25,461.92 at the end of the day

Weekends Off (260th Day): $21,724.09 at the beginning of the day, $65.18 yield, $21,789.27 at the end of the day

No matter how you slice it, the fact that the yield keeps growing by a tiny amount means that there is a big change by the end. I think that we can all agree that even $65.18, the lowest of the three yields, is a lot more than $30. So, how do you build a little bit each day? Try reading positive uplifting books that tell you how to build your business or find success. It doesn’t matter the field: I think that every single one of us can find an improvement of three out of one thousand in a day. If you can do that, you can do it again.

How are you going to find your small step each day?

Tags: big results, Brian Tracy, compound interest, Jeff Olson, small changes, The Slight Edge

This entry was posted on Tuesday, November 9th, 2010 at 3:14 pm and is filed under Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.