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The Compound Effect

November 16, 2010

Yesterday we covered delayed gratification. Now we’re going to look at the compound effect.

The compound effect has nothing to do with interest; interest is a result of the compound effect though. The compound effect is just the eighth wonder of the world, according to Einstein.

What’s so great about it? Well, there are several well-known examples. Lets look at everyone’s favorite.

Would you rather have $1million right now, or 1 cent today, then 2 cents tomorrow, then 4 cents the next day… etc etc, for the nedxt 30 days?

You all know the answer to this. The latter option will end in you getting $10million in your account!

So $1million now, or $10million in a month? Talk about delayed gratification!

Of course, that’s only a story, and I know no one who has ever been offered such a preposterous proposition! Heres an example closer to home.

You’re working on a big project but you don’t know if you can do it all by yourself. So you delegate a few tasks to a few of your colleagues or managers. They don’t want to do work so they will delegate to employees, who may or may not delegate to other people.

There you have a nice little hierarchy.

Now I’m sure all of you have heard of referral marketing, network marketing, etc… and they all follow the same principle. Usually. I don’t dabble in referral marketing but I can speak for network marketing.

You have a leader who goes and recruits a sales force of ten people to help promote a product. However, only 2 of them only actively promote the product, the other 8 just get lazy.

These two people, in order to promote the product, also recruits 10 people each to help promote the product. And only 2 people in each group actively promote the product.

Those four each recruit 10 to promote the product and of course only 2 people in each group actively promote the product.

You have one guy, then two, and each two has two, and each of them has two. 2-4-8, 14 people in his sales force!

All the leader needs to do is teach his two people to do what he did, and help the new people out. As he begins to recruit a few more people onto his sales force, his recruits are also recruiting, and what do we have? Well, he already has 14 people who are building his organization downwards, and they will keep duplicating his steps. Imagine if each of his two people did the 2-4-8 strategy. His organization would double!

Too good to be true? Of course it is. No one ever said it was easy to be a network marketing business owner. But with hard work, dedication, and the right system for duplication, you can get a nice income on your hands.

The compound effect is astounding. Once you know it, you merely need to teach it to others to duplicate, and two can turn into four, into eight, into sixteen… I needn’t go further!

It doesn’t apply to only network marketing. It applies to life. Teach a person something, and if they teach it to a few other people who teach it to a few other people, suddenly after 5 degrees of separation, you’ve an entire multitude of people who has learned from you!

And there’s only one thing that fuels the compound effect: knowledge. They say knowledge is power; knowledge fuels the compound effect. Once you can effectively communicate knowledge to others, you really only need to relay it to a few people, and teach them the importance of teaching, for your knowledge to get spread out quickly!

It’s great to be a teacher & mentor… being able to see how far your knowledge spreads in the span of a week… especially with the new social media things, it’s great! I like seeing how many people’s lives I touch, it’s nice for sure.

So think about the compound effect and how you could apply it to leverage your time and money, and how you could use it to change your life!

Oh, and keep in mind that the compound effect can work against you.

Rack up a few hundred thousand dollars in debt and watch the interest payments throw you into bankruptcy. Don’t let it happen.

To your abundance,
Rasheed

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