A drop a day

A popular quote, attributed to several people goes “People overestimate what they can do in a year, and underestimate what they can do in a decade.”

The essence of this quote is our brain’s inability to understand compound interest. The difference between simple and compound interest is the degree of waste. With simple interest, an investment merely doubles in 10 years when subject to a simple interest of 10%. With monthly compounding, the same investment produces multiplies to more than 16 times.

World class performance isn’t a big splash all of a sudden. What we see is the wave that is produced by the drops that are compounded every day.

Simple vs. Compound interest.png

 

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