The Magic Penny

My good friend, Darren Hardy is publisher of Success Magazine and best-selling author of the Compound Effect.  This commentary post is the first of many I want you to comment and share with your colleagues and friends.

Darren writes: “If you were given a choice between taking $3 million in cash this very instant and a single penny that doubles in value every day for 31 days, which would you choose?

If you’ve heard this before, you know the penny gambit is the choice you should make—you know it’s the course that will lead to greater wealth. Yet why is it so hard to believe choosing the penny will result in more money in the end? Because it takes so much longer to see the payoff.

Let’s take a closer look.

Let’s say you take the cold hard cash and your friend goes the penny route. On Day Five, your friend has sixteen cents. You, however, have $3 million. On Day Ten, it’s $5.12 versus your big bucks. How do you think your friend is feeling about her decision? You’re spending your millions, enjoying the heck out of it, and loving your choice.

After 20 full days, with only 11 days left, Penny Lane has only $5,243. How is she feeling about herself at this point? For all her sacrifice and positive behavior, she has barely more than $5,000.

You, however, have $3 million. Then the invisible magic of The Compound Effect starts to become visible. The same small mathematical growth improvement each day makes the compounded penny worth $10,737,418.24 on Day Thirty-one, more than three times your $3 million.

In this example we see why consistency over time is so important. On Day Twenty-nine, you’ve got your $3 million; Penny Lane has around $2.7 million. It isn’t until Day Thirty of this 31-day race that she pulls ahead, with $5.3 million.

And it isn’t until the very last day of this monthlong ultramarathon that your friend blows you out of the water; she ends up with $10,737,418.24 to your $3 million.

Very few things are as impressive as the “magic” of compounding pennies. Amazingly, this “force” is equally powerful in every area of your life.”

Alex’s Commentary:

Most of my students put unreasonable time-constraints on their goals.  Even though most productivity and goal-setting experts teach the SMART method:

  • S – Specific (or Significant).
  • M – Measurable (or Meaningful).
  • A – Attainable (or Action-Oriented).
  • R – Relevant (or Rewarding).
  • T – Time-bound (or Trackable).

The “T” typically is the problem.  In my experience, “time-bound” goals are a recipe for disaster. Most entrepreneurs I know set unrealistic time-lines that result with bitter disappointment stemming from the nature of the goal.

Success as an entrepreneur is determined by managed uncertainty with delayed gratification.  Impatient entrepreneurs don’t allow the compound effect to take effect. They’re like eucalyptus trees that quickly grow to over 200 feet and come tumbling down when facing stormy winds because of their shallow root systems.

Patient entrepreneurs know the power of the compound effect and are more like bamboo with deep roots and withstand the strongest wind from hurricanes.

Albert Einstein once said, “The strongest force in the Universe is the principle of compounding.”  So if you’re a strategic entrepreneur who wants the compound effect to work in your favor, then be patient and bold so you too can take advantage of the Magic Penny phenomenon Darren Hardy describes in his best-selling book, The Compound Effect.

Your comments and Facebook share will be most appreciated.

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