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The miracle of compound interest can also apply to your career

Sarah Kessler

There’s a (likely apocryphal) quote attributed to Albert Einstein that goes like this:

“Compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesn’t…pays it.”



We’ve all heard about the power of compound interest as it applies to something like our retirement account. But there’s another place where you can use a similar concept to change your life for the better: your career.

Most career advice will tell you to do the big things first. Quit your job! Drop out of school! Dream as big as possible! The sky’s the limit!

But what if I told you that some of the most successful people in the world didn’t start that way at all?



Instead, most of them started small. They stacked little wins (and even losses) on top of each other. They treated their careers like bank accounts that could hold not just money, but also skills, experiences, and relationships.

And by collecting these things over a period of many years, they built a vast array of resources that could be combined to help them work on exponentially larger opportunities over time.

My cofounder at the first company I started, Justin, is a perfect example.

If you were to visit him today, you’d open the door to a 5,000-square-foot warehouse he rented in Brooklyn. Inside, you’d see a gigantic robotic arm with a seat attached. Maybe you would sit in the seat, put VR goggles on, and be instantly transported into a virtual world where you can move in three-dimensions.

Justin put this whole thing together himself: he got the warehouse, he bought the arm, he hired a team to put it together, and he built a content studio to make Pixar-quality 3D experiences for the ride. He wants to replace theme parks with it. It’s a huge vision.

But how did Justin end up being able to do all of this? In 2012, when we were both in college, Justin and I started a little company called Firefly. It did something boring. It was small. It was the opposite of 3D VR robot arms. The product we built allowed someone to show their browser window to a friend without requiring any downloads or installations.

Simple. Small. But useful. And from the time we started it we heard tons of comments like this:

“Why are you working on that? It seems so small?”

“This is a feature not a product”

“B2B is boring, why don’t you do something more interesting?”

But we did it anyway.

And after a year we were making about $10,000 each month in revenue. Not bad for two kids in college, right?

But still we got the same questions:

“Why not do something bigger?”

“Aren’t you ambitious?”

We kept working on it anyway. Fast forward another year and we had grown it 4x, to over $40,000 per month in revenue with still just the two of us working on it, plus a few part-time employees.

That’s when a big public company swooped in and bought us.

After that, Justin didn’t need to work on something small anymore. He could take his compounded career interest from his last company and roll it into something much bigger.

During his time at Firefly, he had become an excellent programmer and had worked on very difficult and sometimes tedious problems. At the time, he was using these skills to build a better screen sharing product. But at his new company, he used them to build the codebase that synced the robot arm and the VR headset, so that when you moved in 3D space, you would also move in physical space.

Similarly, at Firefly, he became adept at pitching our product and telling our story to potential customers. He used these skills, and his track-record successfully exiting to a public company, to help him recruit world-class 3D designers and animators, even though he had no previous entertainment industry experience.

And, perhaps most importantly, no one would give Justin money to build his vision. So he funded the entire thing himself with the proceeds from the sale of Firefly.

Okay, you might say. But how about someone I’ve heard of? How about someone with an even bigger vision? How about an Elon Musk?

Well, believe it or not, Elon didn’t start out building rockets and electric cars either.

According to the biography Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future one of Musk’s first businesses was a door-to-door Easter Egg sale in his neighborhood. It doesn’t get much smaller than that. But Musk obviously didn’t stop there. After teaching himself to program at the age of 12, he wrote a video game in BASIC called Blastair and sold it to a magazine for $500. In college, he ran what was effectively an “unlicensed speakeasy” on campus. He and his friends rented out an empty 10-bedroom house and threw large parties there every weekend. That’s how he paid his way through school.

Only after doing all of this, and probably hundreds of other things we’ve never heard of, did he roll his compounded career interest into what would eventually be his first big success: Zip2.

If even Musk had tried to launch SpaceX right when he graduated from college he would’ve failed. He didn’t have the money, he didn’t have the skills, and he didn’t have the relationships to make it all happen.

He needed compounding, and so do you.

So how can you put this idea into action today?

Well, first of all, let it be your inspiration to get out there and do something. No matter how small it is. If you’ve been putting off starting a company, or writing a book, or creating a podcast because you haven’t found something big enough yet, let this be your excuse to pick one idea and run with it. Even if that company, or that book, or that podcast doesn’t work out, it doesn’t matter. Because a career compounded means that it’s not about what you make today. It’s about what you’re going to make five years from now.

Second, let compounding be your excuse to finish whatever you’re building. If you’re working on a part-time side project, it can be incredibly easy to abandon what you’re doing in the middle of the project.

It’s not big enough, you might say to yourself. Or, It’s not the right thing.

Push that kind of thinking out of your head.

It doesn’t matter if it’s the right thing. You’re not doing it because it’s going to be huge. You’re doing it because you’re going to roll the compounded career interest from it right into the next thing, and then the next thing after that until you find the thing that is the right thing.

Finally, if you are doing something small, don’t feel bad about it. You can keep your day job and work on your own projects part-time. Have some patience. Do the work. Even if it’s small and ugly.

If you keep going without giving up, you’ll benefit from the most powerful force in the universe: compound interest.

Dan Shipper is the author of the forthcoming illustrated novella How To Make Recess Last Forever.

 

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