The Compound Effect: A book review by Bob Morris

Posted on: October 17th, 2012 by bobmorris

The Compound Effect: Jumpstart Your Income, Your Life, and Your Career
Darren Hardy
Vanguard Press? /A member of the Perseus Group (2010)

“The most powerful force in the universe is compound interest.” Albert Einstein

I selected the Einstein quotation to serve as the title of this review because I became convinced long ago that people and the lives they live tend to be the result of the decisions they make. In casinos and in competitive athletics, for example, individuals can be “on a roll” or in what Mihaly Csikszentmihalyi characterizes as “flow.” We can’t miss, we can’t lose, the force is with us, etc. However, that same force can also produce negative, sometimes disastrous results.

Alice Schroeder selected The Snowball as a title for her biography of Warren Buffett because, when he was a boy growing up in Omaha, he observed a large ball-like shape rolling down a hill, gaining both size and speed as it moved along. He immediately recognized its accumulative implicit power, for better or worse. Positive compound interest remains among his core principles. For millions of others, negative compound interest (e.g. on credit card debt, “upside-down” mortgages) has created very serious problems.

For me, Darren Hardy’s most important point in this book is this: All of the decisions people make (however “small” they may be) can have positive results if those decisions are guided and informed by what he calls The Compound Effect principle. Conversely, a minor cut that becomes infected and is neglected could eventually result in major surgery, perhaps even an amputation. In fact, Hardy insists – and I agree – there are no “minor” or “small” decisions if their potential implications and consequences are ignored. These are among the subjects that Hardy addresses in his book:

o   How to win–every time! The No. 1 strategy to achieve any goal and triumph over any competitor, even if they’re smarter, more talented or more experienced.

o   Eradicate bad habits that are preventing or delaying success (however defined)

o   Install and master the few key disciplines required for major breakthroughs of achievement

o   Motivate yourself to do what you really don’t want to do…but must do, to succeed.

o   Initiate the “elusive, awesome force of momentum” and then sustain it, especially during hard times

o   Adopt and then accelerate the secrets of superachievers

At the conclusion of Chapters 1-6, he provides an admonition to “Put the Compound Effect to Work for You” by following through on a “Summary of Action Steps.” I commend Hardy for his frequent, insistent, at times passionate reminders of how difficult, REALLY difficult it is to replace bad habits (e.g. purchases to accommodate instant gratification) and bad influences (especially people). I presume to add my own voice: All of his recommendations are crystal clear and easy to understand. (There isn’t a single brilliant insight among them, nor does he make any such claim.) It is also true that all of his recommendations require painful self-sacrifices as well as a steadfast, indeed tenacious commitment. He agrees with the Yoda: “Do or do not. There is no try.”

All that said, there is some “good news” worth sharing that will provide a context, a frame-of-reference for personal sacrifices, replacing bad habits and bad influences with good ones, detailed documentation of spending, fear, pain (if not terror), embarrassment, and frustration. From a source I do not recall, there is what is identified as “The Magic Penny” example of The Compound Effect. Here’s the situation: You are given a choice between $3-million in cash now or a single penny that doubles in value each day during a 31-day period. Which would you take? Hardy discusses it and other examples in Chapter 1. My point now is that there are no magic pennies, silver bullets, etc. However, there is wisdom of priceless value and much of it is in this unassuming but cordial as well as hard-hitting book. If you aren’t as determined to achieve success (however defined) as much as Darren Hardy is determined to help you do it, then ignore his advice await divine intervention.

 

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