The Power of Compound Interest with Self Improvement

Applying compound interest to your life to achieve exponential personal growth

Hi, I’m Zach — I’ve built my app business to about $4m in annual recurring revenue. Building a successful app business is really hard. That’s why I write a weekly newsletter about the things I’ve learned along the way. My goal is to help you grow your business and profit. If you want to learn more about the app business, I highly recommend subscribing.

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As the New Year approaches, I’ve naturally been thinking about the concept of self-improvement. I like to understand it through the lens of compound interest which is easily one of the most powerful yet basic mathematical concepts out there. Anything, when compounded over time, will lead to enormous returns. The sooner you start compounding, the exponentially larger your returns will be down the road. 

I found this example a perfect illustration of just how powerful compound interest can be. Imagine two people are saving for retirement. They earn 7% returns every year and reinvest all interest.

• Alice invests $5,000 per year beginning at age 18. At age 28, she stops. She has invested for 10 years and $50,000 total.

• Barney invests the same $5,000 but begins where Alice left off. He begins investing at age 28 and continues the annual $5,000 investment until he retires at age 58. Barney has invested for 30 years and $150,000 total.

Barney has invested 3 times as much as Alice, yet Alice’s account has a higher value.She saved for just 10 years while Barney saved for 30 years. This is compound interest: the investment return that Alice earned in her 10 early years of saving is snowballing. The effect is so drastic that Barney can’t catch up, even if he saves for an additional 20 years.

The effects of exponential growth are impossible to catch up to. The takeaway here is for the biggest gains down the road, invest as early as possible.

Evidence of Compound Interest in Careers

How can this be applied to personal growth and career success? Does compound interest even apply to careers? Obviously, people aren’t equations and it’s impossible to quantify the exact percentage you are getting “better” every year. However, there are a few things we can say for certain:

1. Most people will continue to get better at career-oriented tasks as they get older until they start deteriorating mentally with age. Most of us can expect to do that until our 60s and even 70s. (Plus, who knows what kinds of aging-related drugs will exist in the future.)

2. As you get better at your career, your ability to improve also gets better. For example, I’m now familiar with a number of programming languages. Swift, JavaScript, Node.js, Python, Objective-C, Java, etc. It is undoubtedly easier for me to learn new programming languages now than it was 5 years ago. I already have a firm understanding of the foundational principles of programming. I’ve seen the syntax from all these different languages. The rate at which I learn things also improves.

3. As your career matures, your productivity increases because of better access to financial and non-financial resources. I know how to hire people and where to find good people to do all kinds of different tasks. I have the experience of building products. I don’t make the same silly mistakes I made on my first products. I have a more informed understanding of the market, human tendencies, what looks good in a product and what doesn’t. I have more financial resources now. I also am better-connected now than I have been. I know lots of indy developers and people generating millions of dollars in revenue per year, etc. I basically have better access to nearly all of the critical resources needed for career success.

All of the above points are evidence of compound interest that I am accruing as my career continues. If my goal is to have outsized, substantially large gains and outcomes in the next decades, the main variable I should be focused on is my growth rate—how much better I am getting at career-specific skills every day.

Your Personal Growth Rate (AKA The “Interest Rate” on Your Career Skills)

Your growth rate determines the rate at which you improve. What is your current growth rate year over year today? How can you improve that growth rate right now? This is something I’ve been thinking a lot about—how much better am I getting at my career year over year? The key to being incredibly successful is improving every single year and improving as much as possible. The more I improve, the steeper and more exponential my career trajectory will be. Further, because of the laws of compound interest, the sooner I start improving my growth rate, the bigger of an impact it will have down the road. 

Feedback Loops Determine Your Growth Rate

The key to improving your growth rate is having a feedback loop. Abstractly, you form a hypothesis, test it, learn from the experiment, and repeat. Consider any skill—golfing for example. You pick up a club, swing it, and see how and where the ball travels. You get feedback. That feedback will allow you to iterate on your swing. You form a hypothesis about how to hit the ball better. You swing again and see if it helped. If it doesn’t help, you still learn how not to improve your swing. Either way, your swing improves. 

The Quality of Your Feedback Loops Matters

Thinking about the golf example again—consider the difference in your swing improvement trajectory if you work alone versus with an expert or coach. If you’re not a golf expert, you may be unaware of what you’re doing wrong. That’s where a coach or trainer who has a thorough understanding of the sport can be invaluable. Somebody who has seen hundreds of players learn the basics of golf will be able to help you improve faster. The quality of your feedback loop becomes substantially better and therefore your growth rate increases. 

Imagine you had two golfers with absolutely no experience watching or playing—Larry and Ted. Larry practices hitting golf balls 4 hours per day for 6 months but never works with a coach, never watches YouTube videos, and never gets any help other than what he organically thinks of on his own. Ted takes a 1 hour lesson with a coach every week and practices 2 hours per week on his own for 6 months. Who do you think would be a better golfer? It would probably be close! That highlights how absurdly important it is to have high quality feedback loops.

Shortening the time in between your feedback loops is the equivalent of making your personal growth compound at a faster cadence—monthly instead of annually or weekly instead of monthly. The difference in an aspiring golfer who takes daily lessons versus one who took weekly lessons would likewise be enormous over the long run because of the quality and cadence of the feedback loop.

Entrepreneurs are Mental Athletes

The muscles I train are my logic and creativity. My career is dependent on my ability to perform mentally. Now, consider the amount of effort that goes into training a professional athlete like Lebron James. He has a coach who likely played basketball professionally for decades, trainers who have studied muscle growth and peak physical performance, and doctors who are at the top of their fields. Further, his team of experts collaborates. The doctors talk to the coaches, and the trainers work with the nutritionists, etc. This further strengthens the quality of his feedback loops. James is surrounded with people who are trying to cultivate the greatest basketball player of all time. Analyze James’ growth through the lens of compound interest and suddenly everything makes sense. His skill level is what you will have after decades of self-improvement with a world-class team of experts.  

My Feedback Loops

As a mental athlete where everything I do is the product of my decision-making, technical aptitude, and business acumen, nothing could be a better, higher ROI investment than in a team focused on improving me.

One of my highest quality feedback loops is journaling. I journal very frequently, almost daily. I journal in a Google Doc (I can type faster than I can write (speed matters!)) and record my unfiltered thoughts. Nobody will ever read them. I’m honest and genuine. I can be arrogant, shy, timid, bold, or however I feel. Most importantly, I’m critically evaluating my own actions and decisions. I’m able to logically lay out the case for my decisions and evaluate their efficacy. Something about laying out your thought process through writing accentuates fallacies. Similarly, through writing I’m able to extract a strand of thought and unpack it fully. You’d find it impossible to code an entire app or solve a difficult math problem in your head, but with a pencil and paper or a computer and Xcode, suddenly deeply complex problems become solvable. Why not do that with your own thoughts and reflections? That is what journaling enables me to do—to holistically assess my decisions and actions.

Journaling has also allowed me to tighten my own feedback loop. Some people might self-reflect weekly or monthly or only during a traumatic event. Think about it—when was the last time you sat down for an hour or two and thought about the trajectory of your life? When was the last time you brainstormed better ways to achieve your goals? When was the last time you sat down and identified problematic habits and methodically worked on fixing them? With journaling, I’m logically evaluating myself and spot-checking my decision-making multiple times per week for hours at a time.

My Team of Experts

I’m turning 25 in a few months. Recently, I’ve started building out my team of experts. I started working with an executive coach who is helping me become a better CEO. I’m working with a therapist to groom my mental health and help me sleep better. I’m working with a personal trainer to stay in peak physical shape. I’ve worked with a nutritionist to improve my eating habits. I’m seeking out a meditation tutor to help me be more mindful and intentional. I’m trying to find a product mentor who can help me be more thoughtful with product decisions. Twitter is putting me in touch with dozens of brilliant people as well.**

I have my parents and family who I can talk to about big decisions. I can lay out my thought process and get feedback on whether my thinking is logical or not. I have my friends who might be specialized in some other sorts of fields like programming or writing who can likewise assess my abilities, give me feedback, and help me improve. Finally, I have this blog! I can write about ideas I find powerful and see what other people think about them. 

This team of experts is increasing the rate of my personal growth—and that growth compounds. That growth will empower me to be more productive and accomplish more in 2021 than I did in 2020. Throw another year of this team helping me and 2022 will inevitably be an even better year than 2021. The trend line will continue, and I will exponentially become a more effective person. That’s because my resources and leverage will continue to increase. A better 2021 means I should have more money to invest in an even better personal growth team. Thus, my growth rate should continue to improve even further.

When you compare me to someone who has an absolutely equal amount of mental horsepower—and I started seriously investing in improving my mental acuity in 2020 and they started in 2025—who will win? All things equal where one person invested heavily in self-improvement and the other didn’t—there’s no question who would win. So as 2020 comes to a close and 2021 begins, I challenge you to start genuinely investing in yourself. Starting today versus in 5 years could have a drastically different outcome on the trajectory of your life.

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Also, I realize that a lot of what I wrote about is a function of money. If everybody could have 6 hours of golf lessons per day, everybody would be an amazing golfer! That misses the point of what I’m saying, though. Feedback loops can take all kinds of shapes and forms. YouTube, books, blog posts, Twitter—feedback loops can be found everywhere. Also, people tend to be generous with their time if they find a hungry and productive student. There are ways to build powerful feedback loops without breaking the bank.