PLAY LONG-TERM GAMES WITH LONG-TERM PEOPLE
Compound interest is a very powerful concept. Compound interest applies to more than just compounding capital. Compounding capital is just the beginning.
Compounding in business relationships is very important. Look at some of the top roles in society, like why someone is a CEO of a public company or managing billions of dollars. It’s because people trust them. They are trusted because the relationships they’ve built and the work they’ve done has compounded. They’ve stuck with the business and shown themselves (in a visible and accountable way) to be high integrity people.
Compound interest also happens in your reputation. If you have a sterling reputation and you keep building it for decades upon decades, people will notice. Your reputation will literally end up being thousands or tens of thousands of times more valuable than somebody else who was very talented but is not keeping the compound interest in reputation going.
This is also true when you’re working with individual people. If you’ve worked with somebody for five or ten years and you still enjoy working with them, obviously you trust them, and the little foibles are gone. All the normal negotiations in business relationships can work very simply because you trust each other—you know it will work out.
For example, there’s another Angel in Silicon Valley named Elad Gil who I like to do deals with.
I love working with Elad because I know when the deal is being done, he will bend over backward to give me extra. He will always round off in my favor if there’s an extra dollar being delivered here or there. If there’s some cost to pay, he will pay it out of his own pocket, and he won’t even mention it to me. Because he goes so far out of his way to treat me so well, I send him every deal I have—I try to include him in everything. Then, I go out of my way to try and pay for him. Compounding in those relationships is very valuable. [10]
Intentions don’t matter. Actions do. That’s why being ethical is hard.
When you find the right thing to do, when you find the right people to work with, invest deeply. Sticking with it for decades is really how you make the big returns in your relationships and in your money. So, compound interest is very important. [10]
99% of effort is wasted.
Obviously, nothing is ever completely wasted because it’s all a learning moment. You can learn from anything. But for example, when you go back to school, 99 percent of the term papers you did, books you read, exercises you did, things you learned, they don’t really apply. You might have read geography and history you never reuse. You might have studied a language you don’t speak anymore. You might have studied a branch of mathematics you completely forgot.
Of course, these are learning experiences. You did learn. You learned the value of hard work; you might have learned something that went deep into your psyche and became a piece of what you’re doing now. But at least when it comes to the goal-oriented life, only about 1 percent of the efforts you made paid off.
Another example is all the people you dated until you met your husband or wife. It was wasted time in the goal sense. Not wasted in the exponential sense, not wasted in the learning sense, but definitely wasted in the goal sense.
The reason I say this is not to make some glib comment about how 99 percent of your life is wasted and only 1 percent is useful. I say this because you should be very thoughtful and realize in most things (relationships, work, even in learning) what you’re trying to do is find the thing you can go all-in on to earn compound interest.
When you’re dating, the instant you know this relationship is not going to be the one that leads to marriage, you should probably move on. When you’re studying something, like a geography or history class, and you realize you are never going to use the information, drop the class. It’s a waste of time. It’s a waste of your brain energy.
I’m not saying don’t do the 99 percent, because it’s very hard to identify what the 1 percent is. What I’m saying is: when you find the 1 percent of your discipline which will not be wasted, which you’ll be able to invest in for the rest of your life and has meaning to you—go all-in and forget about the rest. [10]
