TIP182: THE COMPOUND EFFECT BY DARREN HARDY

W/ PRESTON & STIG

17 March 2018

The Compound Effect is a book written by New York Times Best Selling author, Darren Hardy. Hardy is the former editor at Success Magazine and is an expert and understanding peak business performance.

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IN THIS EPISODE, YOU’LL LEARN:

  • How and why you should be the world’s biggest believer in consistency.
  • Why you should claim 100% ownership of everything that happens to you.
  • 5 step checklist to get momentum behind compounding success.
  • Why success is something you attract by the person you become.

TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Preston Pysh 0:02
Hey, how’s everyone doing out there?

On today’s show, we cover a really great book written by a New York Times bestselling author Darren Hardy. The name of the book is “The Compound Effect.”

We’re covering this book because Darren Hardy was the former editor at Success Magazine. He has an enormous amount of experience interviewing billionaires and highly accomplished individuals. His notes and his comments on this book are really profound, especially if you’re the type of person who’s always trying to improve and add more success into your life.

Also, his book is one of the top selling business and success books on Amazon. This was the case for an extended period of time. Without further delay, let’s go ahead and get started.

Intro 0:44
You are listening to The Investor’s Podcast where we study the financial markets and read the books that influenced self-made billionaires the most. We keep you informed and prepared for the unexpected.

Preston Pysh 1:04
Alright, how’s everyone doing out there? Like we said, In the introduction, we’re going to be covering the book “The Compound Effect” by Darren Hardy. I personally really liked this book. In fact, I might go as far as saying that this would be like a top 10 or top 15 book for me.

I’m curious, Stig, if you had the same opinion on this. Did you like this as much as I liked it or did you think it was average?

Stig Brodersen 1:29
Well, I like the book in terms of the universal rules that he outlines. It’s so clear that he’s a great motivational speaker. Whenever he explains something, it’s never this is how you get wealthier. It’s always not 10 times. It’s not 100 times. It’s 1000 times richer than before.

If you like that, I know I probably come off as a lot more skeptical than I want to, I think you need to know that before you are potentially reading the book.

However, as I said before, like all the principles that he outlines for having successful life, I think that’s pure gold. His mindset is just such an abundance of good advice and a good way of living your life. I definitely agree with you on that one.

Preston Pysh 2:14
What I also liked about it is he’s saying how you can achieve success and use this compounding effect in order to achieve success, but he doesn’t say what success is. Je leaves that up to the person who’s reading it to define what it is that they’re trying to achieve.

I think a lot of people immediately turn to think that it means financial success, but that doesn’t necessarily mean what he’s getting at here is a person who would read this, this is going to help them achieve whatever it is that they’re going after whatever that goal might be.

I’d also say this would be one of those books that I think would be really important for a person to read multiple times. This would be something that you should probably pull out every six months or every year and probably read this.

It’s not a long book. It’s around 150 or 160 pages, but it’s just straight to the point. It tells you what you need to focus on in order to keep not going away and achieve what you want.

What we’re going to do for the book is we’re going to go chapter by chapter and just kind of give you the highlights of what we read here. The very first chapter defines what the compound effect in action is.

He starts off the book by stating this, “Ever heard the story of the tortoise and the hare? Ladies and gentlemen, I am the tortoise. Give me enough time and I will beat virtually anybody, anytime, in any competition. Why? Not because I’m the best or the smartest or the fastest. I’ll win because of the positive habits I’ve developed and because of the consistency I use in applying those habits. I am the world’s biggest believer in consistency.” That’s how he starts the book.

Having read a lot of different books on these billionaires that we study, these success habits and stuff, I can honestly say this is one of the critical variables. This is one of the things that keeps coming up over and over again is developing good habits and then doing them consistently. Also, optimizing those habits. That’s how he starts off the book.

He says, “In short, the compound effect is the principle of reaping huge rewards from a series of small, almost miniscule smart choices day in and day out.”

Stig Brodersen 4:30
He provides this great example with these three friends: Larry, Scott and Brad. In this example, they just have very similar characteristics.

Let’s assume that Larry keeps doing what he has always done. Now, Scott makes those small positive changes that Preston talked about before. He would be reading 10 pages in a book about self development. He will be counting 125 calories per day by simply replacing soda with water. Then he will also be walking an extra 1000 steps.

Then you have Brad. He’s the opposite of Scott here. He makes a few poor choices. For example, he’ll be buying a new big screen TV, eating more dessert. Just say adding one drink more per week by going to a new bar. Not anything big, just small, consistent bad changes in his habit. He also did the math for us.

He said, “After month 10, there was no perceivable difference. By month 20, there are some differences. But by month 31, the differences quickly become quite stark.”

Scott, the guy with good habits, loses 33.5 pounds. He gets a promotion, a raise, and his marriage is thriving.

Rhen Brad, on the other hand, with the bad habits, he puts on 3.5 pounds, which is 37 pounds more than Scott. He starts feeling sluggish, less confident about himself, probably also becoming less productive and work, more withdrawn from his marriage, and basically being too both on happiness both at work and at home.

I really like this example in the book. He actually provides the detailed math of how he came up with this. But I think it tells you something about the consistency of having habits.

Also because when we are thinking about changing in our life, we think about big changes like a divorce or winning a lottery, but that’s not your life. Your life is all you have. It’s all the small changes you do on a daily basis, either to your advantage or disadvantage. This book is all about using those universal rules to your advantage.

Preston Pysh 6:46
One of the things that I liked and this kind of piggyback on the Charles Duhigg theme of keystone habits is that this compounding impact and this ripple effect, that if you change one thing, it’ll ripple off into other areas of your life… That’s kind of what Stig was describing there with the story.

In Charles Duhigg’s book, he talked about how if a person tries to become healthier, how that actually rippled into all these other areas. They had all these other better habits because of that one habit. He doesn’t describe it that way in the book but he kind of hints at that by this section that he calls ripple effects of your habits.

So that’s how he defines this compounding effect. It’s these small little things that you do day in and day out, that are just slightly tweaking your habits, and that in the long run, it produces these massive rewards and interest, if you will, on the behavior.

In chapter two, this chapter is titled choices. What he says is, “Every decision, no matter how slight alters the trajectory of your life, whether or not you go to college, whom to marry, to have the last drink before you drive, to indulge in gossip or stay silent, to make one more perspective call or to call it a day, or to say I love you or not, every choice has an impact in your life. The result of all of those choices is what you have today.”

What I really like about this idea is he also gets at the fact and I’m sure people have heard this before that not making any choice is a choice as well. If you decide to do nothing, and just sit on your hands, that in fact is a choice. That’s going to also drive what path you’re going down.

After stating that, he says, “Your biggest challenge isn’t that you’ve initially been making bad choices. That’d be really easy to fix. Your biggest challenge is that you’ve been sleepwalking through your choices. A majority of the choices that people make, they have no idea they’re making on a daily basis.”

They’re just habits and just almost like a programmed response. I think there was a part in here where he quoted some Harvard… I don’t know if it was in the second chapter.

But he quotes a Harvard PhD who did some analysis. It was something like 95% of the choices that a person makes throughout the day are just completely habit-based. They’re doing them just out of a total habit, like you’re driving to work… You’re just making decisions. You’re making choices that are completely subconscious for the most part. You’re just putting on your turn signal.

You open the refrigerator at this time when you walk down the steps. All of these things are just naturally happening because of their habits and that’s where he’s saying, “You have to figure out what those things are and start taking control of those habits.”

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