The most impactful lesson I learned in seventh grade happened during an indoor activity period. The teacher told us a story that went something like this. A wealthy landowner/farmer owed one of his peasant workers $100,000 for extra work he had done for the farmer. The poor worker gave the landowner a proposition. He said, “you can pay me the $100,000 you owe me today, or you can place a grain of wheat on the first square of a chessboard today. Then tomorrow put two grains of wheat on the second square. The following day put four grains of wheat on the third square and continue to double the number of grains of wheat on each subsequent square every day until all sixty-four squares of the chess board have been appropriately filled with grain. At the end of the 64 days, my compensation will be all the grain on the chess board.”
The teacher asked us seventh grade students, if we were the landowner, how would we choose to pay the peasant worker? What do you think? Be careful, if you make the wrong choice it could cost you all you have and more!
For those of you who like math, the equation is 264-1 which equals 18,446,744,073,709,551,615. That’s 18 quintillion. According to one source, that amount of grain is two thousand times the annual world production of wheat.
This story taught me a powerful lesson about compounding. Because compounding often starts small, I think it’s easy for us to underestimate its impact. We most often think about compounding in terms of investment return. Certainly, time and a solid rate of return can transform a moderate amount of money into a significant sum. For example, $10,000 invested for 40 years earning an annual rate of 8% will become more than $217,000.
However, compounding can also happen in other areas of our lives. Here are three areas in which compounding could have a profound impact:
- Friendship – Years of close faithful friendships often add enrichment to your life.
- Wise choices – Stacking wise decision upon wise decision can lead to a remarkable result.
- Generosity – Regularly giving of ourselves and resources can transform us and others.
I encourage you to harness the power of compounding for your benefit and those around you. Where has compounding had profound impact on your life?