We all know how compound interest works, right?
But for this article, let’s simplify it:
Compound interest makes your starting amount bigger, so you get even more interest in the future.
Guess what? Effort can compound in the same way. If you focus on efforts that raise your baseline, your future potential increases.
And if you’re stuck in the hamster wheel, this is a great way to start getting unstuck.
How This Started For Me
Coming from the tech industry, I had a rule: If I was doing something for the second time, it was time to automate it.
That was easy with technology.
Then I started running teams and organizations and found that most business processes could be optimized or eliminated. Doing so made things run smoother and made everyone’s jobs better.
So I went on a learning binge about getting rid of low-value tasks and processes. I borrowed and tweaked other people’s models until I ended up with this:
Initially, I was just happy to have less low-value work. It meant I got to focus on important stuff.
In Stepped Alex Hormozi
Then one day, I was listening to Alex Hormozi. He said something like, “The reason people don’t succeed is they focus on unleveraged opportunities.”
At that time, I was teaching some of my employees about compounding interest and how money grows over time. Suddenly it hit me: interest isn’t the only thing that compounds.
Effort also compounds—if you invest it wisely.
I discovered that some activities elevate my baseline. By “elevate my baseline,” I mean things like:
- Giving me a new vantage point from which to view the world.
- Connecting me with new people, resources, or ideas that help me think bigger.
- Freeing my mind and my time to work on high-value stuff.
- Increasing my influence with a more relevant or larger audience.
But first, I had to learn to invest my effort into activities that made me better off than I was before I started them.
How I Approached It
For me, Stage 1 was pruning aggressively.
I cut efforts that didn’t compound: repetitive tasks, busy work, distractions, saying “yes” to everything.
Stage 2 was getting control of my time.
I blocked off chunks of the day for high-value, compounding work, such as:
- Empowering and encouraging department heads and leaders.
- High-yield time mentoring individual team members.
- Enhancing our messaging.
- Permanently solving important, nagging problems that were holding us back.
- Identifying and serving a very small number of strategic must-wins.
- Writing this newsletter and engaging with people who respond.
But I still felt the pull of busy work.
So, I blocked off a daily, 90-minute window for unavoidable, tactical, administrative things. You know, “running the company.”
Time-boxing busy work changed my life.
In Stage 3, I realized that important work was bumping up against other important work. I needed slack time to switch from one thing to the next. So I scheduled it. I use that time to clear my head, go for a walk, prepare a healthful meal, go to the gym, take a power nap, daydream, capture ideas, etc.
That was easy.
But soon, I could see that there was more potential. I had optimized my time, but I needed to optimize my mind.
That’s when I entered Stage 4: working on sleep, diet, exercise, and other health pursuits so that my mind can hit home runs on my highest-compounding efforts.
For example, this morning I had a 6-ounce lean steak and a large carrot for breakfast. Then I went for a 10-minute walk to invigorate my mind and mull some ideas over. When I came back, I was ready to write this article.
But that still wasn’t enough. I could feel room for more.
I realized that figuring out what to focus on each morning was ineffective. So stage 5 was adding “planning for tomorrow,” as my final task for each workday. That’s when I figure out what epic stuff I’ll do the next day and clear the runway for optimal liftoff.
The result of that entire journey is that I produce way more value on my way to producing even more value.
A Few Notes About Compounding
If this is resonating, here are some related ideas that might help.
Imagine a task that takes 30 minutes daily, with occasional errors and average quality.
You spend 5 hours figuring out how to automate or outsource it.
The payback period on those 5 hours is 10 days, followed by gravy forever. Here are the obvious benefits:
- You’ll reclaim 30 minutes x 5 days x 52 weeks = 13 days per year.
- The task will always get done right.
- You’ll have one fewer thing to think about or stress about.
- If you ever need to modify the task, you modify the automation once and you’re done.
But in the macro, the benefit is even bigger: a new baseline. You can use that extra time and focus to contemplate big stuff, not just to find new ways to be busy. And thinking about bigger things leads to even bigger opportunities to raise your baseline.
Leveraging Talent Better
Say you decide to invest 10% of your time into coaching, mentoring, and building camaraderie with your 5 team members. After 3 months, they perform, on average, 10% better.
Now your company is 10% better. Not only is performance better, but with their increased ability and commitment, they’re more likely to see bigger opportunities to innovate, solve problems, and create value.
Elevating your people might be the ultimate source of Return On Effort.
Dealing With Guilt Because You’re Less Busy
The more I focused on compounding, the less busy I was. Instead of feeling amazing, I felt guilty. My knee-jerk reaction was to fill my time with more busy work.
Not a good idea.
So here are some things that helped me escape that trap.
- I read a quote, supposedly from Bill Gates: “Busy is the new stupid.”
- I calculated that Warren Buffet is worth about 100,000 times more than I am. Is it because he’s 100,000 times busier? Nope.
- I trained myself to cringe whenever I heard someone say, “I worked hard all week and didn’t get anything important done.”
It took some time. And I admit that sometimes I just want to do some non-thinking work just to feel like I did something tangible. But for the most part, I value doing things that elevate me, my co-workers, the company, and our customer community.
Helping Your Best People Compound
This year, my direct reports each have 3 strategic initiatives, one of which is their “must-win”. All of the initiatives represent massive compounding opportunities.
I asked them to list everything that might get in their way and agreed to help them say “no” to them. Nobody will remember what we said “no” to once we’ve put business-altering wins on the board.