Below we'll make some important distinctions:
- Simple and Mixed Compounding;
- Positive and Negative Compounding;
- Individual/Personal and Team/Organizational Compounding;
At the end you'll have a few questions so that you become aware and asses the Compounding principle in your life.
In financial terms compounding consists of adding the interest to the principal sum of a loan or deposit. It could be also expressed as gaining interest on interest or growth on your previous growth.
Going beyond...
Once you understand the basic principle behind Compounding you may start applying it to other areas of your life.
In my view the basic idea, the golden nugget if you will, is related to stacking or building up of P. The math formula looks like this. With a bit of imagination we can extrapolate its principle to other areas.
P = could be may things:
working out;
writing a book;
learn how to cook;
learn how to code;
learn how to draw;
learn how to sing;
anything else;
For instance take the example of learning of a foreign language .
Let's say you start today and learn 2 words in German. Is that much? Not really.
But what if over next 100 days you were to learn each day 2 more words. You would know now a total of 200 hundred words if you were to do a simple math.
But wait is that all that you got?
Probably by now you can combine the words together and form simple sentences. You start to get a feel for the German language, you would understand some of the lyrics of a song, a few lines of a movie, etc
You would also have developed a basic understanding of the German grammar rules, which you can extrapolate to other nouns, verbs and so on.
Read about Positive Negative Mixed Compounding Effects
Read about Compounding Principle in a Team or Organizational Level.
Consider Thinking and Answering the following Questions about Compounding Principle.
Hope this was of use to you. I welcome your feedback in the comments below.
