Warren's compounding lesson, with all sixty of his original daily figures set side by side. Republished word for word. Warren has been a licensed Real Estate Broker (PRC 0005479) since 2011 and a licensed Appraiser (PRC 0006481) since 2015; today he is a Sales Director with DMCI Homes.
What will you choose?
Ten thousand pesos per day or ten cents that doubles every day.
| Option 1:flat, every single day | Option 2:10 centavos, doubled | |
|---|---|---|
| Day 1 | P 10,000 | P 0.1 |
| Day 2 | P 10,000 | P 0.2 |
| Day 3 | P 10,000 | P 0.4 |
| Day 4 | P 10,000 | P 0.8 |
| Day 5 | P 10,000 | P 1.6 |
| Day 6 | P 10,000 | P 3.2 |
| Day 7 | P 10,000 | P 6.4 |
| Day 8 | P 10,000 | P 12.8 |
| Day 9 | P 10,000 | P 25.6 |
| Day 10 | P 10,000 | P 51.2 |
| Day 11 | P 10,000 | P 102.4 |
| Day 12 | P 10,000 | P 204.8 |
| Day 13 | P 10,000 | P 409.6 |
| Day 14 | P 10,000 | P 819.2 |
| Day 15 | P 10,000 | P 1,638.4 |
| Day 16 | P 10,000 | P 3,276.8 |
| Day 17 | P 10,000 | P 6,553.6 |
| Day 18 | P 10,000 | P 13,107.2 |
| Day 19 | P 10,000 | P 26,214.4 |
| Day 20 | P 10,000 | P 52,428.8 |
| Day 21 | P 10,000 | P 104,857.6 |
| Day 22 | P 10,000 | P 209,715.2 |
| Day 23 | P 10,000 | P 419,430.4 |
| Day 24 | P 10,000 | P 833,860.8 |
| Day 25 | P 10,000 | P 1,677,721.6 |
| Day 26 | P 10,000 | P 3,355,443.2 |
| Day 27 | P 10,000 | P 6,710,886.4 |
| Day 28 | P 10,000 | P 13,421,772.8 |
| Day 29 | P 10,000 | P 26,843,545.6 |
| Day 30 | P 10,000 | P 53,687,091.2 |
Option 2 passes Option 1 on Day 19.
Understood the power of what has been called by the some people “the eighth wonder of the world” …
Compound Interest….
Something to ponder:
Of course, all of us choose the Ten Cents that doubles every day when we see the numbers. But the question is, are we embodying the principle?
Commonly, we understand that it is wiser to choose the option two because of its compounding effect. But in real life, most people choose the option number 1.
Why? It is explained in the numbers.
Imagine Option One as Employment. Steady Paycheck. Secured. Enough to sustain for survival. Pedro chooses option one.
Imagine Option Two as Business/Investment. Start your business with no pay/ very little pay, no security, living in debt in the first few years in business. Juan chooses option two.
In the first 5 days in the life of Pedro and Juan, Pedro already accumulated 50,000php while Juan has only 3.10php in his hand.
(In the first five days, all Pedro in this world are happy. Start of the job, first paycheck after long years of studying in college is fulfilling. But Pedro became complacent in his paycheck, relying all his expenses in his 10,000php, his comfort zone.)
(On the other hand, most Juan quit in this stage because it’s painful. Yes, it is very painful if you don’t have a strong heart. Seeing your colleague Pedro who already has stable income is very convincing that maybe Pedro is right - Option one is better. This is the reason why many of wanna-be entrepreneurs go back to employment after few years)
From Day 6 to Day 18, nothing significant happens. ( But all Pedro in this world realize that their BIG dreams can never be attainable. They settle their dreams to what they can afford, in a 10,000php basis.) (But all Juan in this world didn’t gave up their dreams, because at this stage, they already had enough trial and error, they already experience the in and out of businesses.)
From Day 19 to Day 24, Juan already surpassed the income of Pedro. Juan has already built business systems and huge assets.
From Day 25 to 30, this is the massive exponential growth happens. When everything are already in place and assets are working to create more assets. This when Big material dreams happen, this is the place where tycoons are built.
Now, my question is not anymore what you will choose between Ten Thousand or Ten Cents that doubles every day.
My new question will be Do you have the Courage and Tolerance to Stay at the Option 2 until you get to the Day 25 to Day 30?
P.S.
It is called the Slight Edge philosophy. It is the small things done consistently over time that make the impact on our lives. It applies to our Business lives as well as our personal lives.
We all make choices every day. Many of these choices seem insignificant, like the ten cents.
In your Business, you may feel like you are not as far along as you would think. But if you apply the Slight Edge philosophy of doing the small steps on a consistent basis, over time you will grow exponentially.
In life, it is the same. The results of the small things you do or don’t do, good or bad, create your life.
Eating a burger and fries or pizza today won’t make you less or more healthy than eating a salad. But if you were to consistently eat those, years later you will see the compounded effects of each path. One path leads to greater health one meal at a time; the other to poor health one meal at a time.
It really is the small things that make the big differences in the long run. Don’t lose sight of it in your life or in your business.
(This story is shared during the February Cashflow and Millionaire Mind Gathering. Some people request me to blog my sharing.)
Still the same person, fifteen years on
Warren Rafal is a licensed Broker and Appraiser and a DMCI Homes Sales Director. If you are weighing up a condo, he can tell you what it is worth — not just what it costs.
