“The most powerful force in the universe is compound interest.”, Albert Einstein was quoted saying. He referred to it as the 8th wonder of the world and one of the greatest “miracles” known to men.
So, what’s so special about it, anyway?
Well, compound interest makes money grow faster because interest is calculated on the accumulated interest over time as well as on the original principal amount. Compounding creates a snowball effect, as the original investments plus the income earned from those investments grow together.
Let’s assume that you have $1000 and you invest it at a 10% annual rate of return. After 1 year you will have earned $100. The 2nd year, you will have earned 10% on $1100 which will bring in $110. The 3rd year you will have earned 10% on $1210 which will bring in $121 and so on…
After 10 years at the same rate of return, it will balloon to $2594
After 30 years to: $17,449
And After 50 years it will become a whopping: $117,391
Let me say it again: Your $1000 investment will grow over the course of 50 years to $117,391!!!
Now, let’s see how the same principal applies to knowledge:
If compound interest is the result of interest on interest, then compound Knowledge is the result of knowledge on knowledge. Therefore, with the power of this compound effect, we can expect our knowledge and skill-building to amplify at an exponential rate.
Consider the following example:
If two people read the same thing, the person with the larger knowledge base will learn more. Another way of looking at it: If you read a book you already read a few years ago, you will learn more the 2nd time around. This is because you connect the ideas to a larger knowledge base that you accumulated since the 1st time you read it.
It works the exact same way as compounded interest works on money; The more you learn the more you build vertical layers of new knowledge upon previous learned knowledge. The knowledge curve becomes steeper as time goes on and the accumulation of knowledge balloons.
Simply put, pick any subject that you are passionate about…If you will continuously learn about it by reading books, watching videos, and listening to experts, you will accumulate so much knowledge on the subject that you will inevitably become an expert yourself and be able to monetize your knowledge and enjoy your work at the same time!
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