Pete Huang


Compounding habits

Here’s what you find when you search “compounding” on Google:

Compounding is the process in which an asset’s earnings, from either capital gains or interest, are reinvested to generate additional earnings over time. This growth, calculated using exponential functions, occurs because the investment will generate earnings from both its initial principal and the accumulated earnings from preceding periods. Compounding, therefore, differs from linear growth, where only the principal earns interest each period.

Investopedia

Here’s what you find when you search “compounding habits” on Google:

While he didn’t state it explicitly, he understood that every surf session would have a compounding effect. It took more than 15 sessions before I stood up on a wave. Eventually, I worked my way down from the Costco Wavestorm to riding a 6-foot shortboard and found myself surfing at a skill level that seemed impossible when I started.

Srinivas Rao on Medium

Short daily meditations added up to 63 hours in one calendar year. An average of five bike rides a week added up to 5,589 miles last year. A love of hiking combined with running when I couldn’t bike added up to 412 miles on my feet.

Holly Scherer

If you do 10 push-ups every day, and do it consistently even if you don’t feel like doing it, for the next 365 days, what would your body look like? You probably will have grown some muscles.

Ke Li Yew

The way they’re worded, none of these are really compounding!

What they’re describing is linear growth: every iteration of a particular activity adds a roughly fixed amount of growth. In fact, the pushup example is even less than linear because of newbie gains.

These are, of course, still powerful - any growth is better than no growth at all.

But I’d be interested to see a list of habits that actually compound.

Consistency-based compounding

The first type of compounding habit produces more net personal growth the longer you do them. This means that building these habits earlier in life results in dramatically larger results than if you were to build them just a few years or a decade later.

Note that these habits may return linear progress within the habit itself, but that the net total personal growth is geometric since the habitual nature has secondary effects on other parts of your life. The fact that it is a consistent habit is often more important than the progress within that activity. I’ll call these consistency-based compounding (think x-axis is time, y-axis is value).

This means that some of the examples I found above simply need some reframing - here’s a list of those and others:

Exercising every day builds the physical platform for all other aspects of your life.

Reading fiction every day builds your empathy.

Journaling and performing other reflective activities every day builds your communication skills and style, and it matures your understanding of your emotions and core principles.

Making lists of work to-do’s builds organizational muscles for all areas of your life.

Volunteering and attending periodic meetings for a community or cause on a consistent basis builds your sense of connection to community and to higher purposes.

Iteration-based compounding

The second type of compounding habit produces more net personal growth with each iteration of that activity. So instead of how long you’ve done these activities, it is about how much you’ve done them.

These are effectively asset-building activities that benefit from iteration-based compounding (think x-axis is number of times performed, y-axis is value):

Reading nonfiction is building a compounding knowledge base, where each new piece of information can produce insight and themes across all previously collected pieces.

Meeting new people is building a compounding network, where each new person can deliver value to all other people in your network.

Investing time in learning a particular industry or monetizable skill is building a compounding moat of expertise, where each iteration places you farther and farther ahead of the average person in that field.

Creating and promoting public-facing content (blog posts, articles, podcasts, newsletters, designs, code) is building a potentially monetizable business or employment opportunity for yourself that compounds in reach with new addition.

Goals for creating a new personal baseline and achieving greater heights

I believe that mixing consistency-based compounding and iteration-based compounding results in the most effective sets of goals.

Consistency-based compounding is about creating a new baseline for yourself. Doing a certain set of things every day, every week, etc. is about deeply embedding these actions into your life such that you consider them as defaults (vs. as active choices) and that you reap the benefits of consistency without too much mental overload.

Iteration-based compounding is about stretching yourself to new heights to accomplish more. You are actively creating in these activities.

Here are some goals I set for myself in 2019:

  • Meet 100 people in tech and startups (iteration-based)
  • Go to the gym for yoga or weightlifting 300 times (consistency-based)
  • Write at least 2 blog posts every month (both iteration- and consistency-based, depending on the type of content)
  • Read 30 books (iteration-based since I read mostly nonfiction)
  • Start every workday by writing down both (1) things I have to do (consistency-based for organization) and (2) other projects that would accelerate the company’s growth (consistency-based for injecting intensity into work)