The Long-term Compound Interest of Habits
If this doesn’t motivate you to stick with it for the long run, nothing will.
Hey everyone, welcome to The Unlock—where we get straight to the heart of business leadership. I’m Matt Hunter, your executive coach, and resident wordsmith coming to you from Boulder, CO.
A bit about me: I’m an exited founder with 15 years of hard-earned stripes in building and leading companies, including co-founding Turnstyle (acquired by Yelp) and serving as President & CEO of Founders Pledge, which has rallied startup founders to pledge over $10B to charity. Alongside my business ventures, I've competed as a high-level athlete in college basketball, tournament golf, and ultra-endurance events. As a coach, I bring a deep interest in psychology and communication to elevate growth and later-stage founders and CEOs, steering them toward becoming great leaders and fostering winning cultures.
If you’ve missed out on my previous posts, I’d recommend catching up with Reflections From a Recovering Maximizer, Financial Freedom Isn’t What You Think It Is, and Don’t Be Afraid of Tension. Ready to jump in? Let's go!
We’ve all heard that the key to changing your life is changing your habits.
It’s true—and I’m not here to sell you on the value of good habits. (If you need a little motivation, read Charles Duhigg’s The Power of Habit and James Clear’s Atomic Habits.) What I want to do is invite you to consider a new way of thinking about habits that can really help you stay motivated to maintain good habits in the long run.
Enter compound interest.
For those of you who aren’t familiar with compound interest, it’s a term from investing that describes the interest you earn on both the money you originally put in and the interest you've already earned on that money. It's when your money starts making money on itself, which helps it to grow faster over time. The key thing to know is that compound interest accelerates over time. Basically, your investment will grow significantly if you leave it for a long, long time. You may not notice much in the first decade, or even the second, but then things start to really escalate.
Warren Buffett wasn’t the Warren Buffett until he was well into his 60s, and you can see why in the chart above. He was just an anonymous successful guy toiling away for several decades until compound interest took over in a big way—his wealth skyrocketed and he became the GOAT of investing.
If you’ve been squirreling money away in your 401k and investment accounts since your 20s, you too will benefit greatly from compound interest.
But most of us don’t experience the benefits of compound interest because we don’t stick with things for long enough. We don’t go to the gym three times a week for 40 years straight. We don’t keep our money in boring investments for decades because there are much more exciting investment opportunities for us to explore (like crypto). We don’t study and develop expertise in one area for years until we’re masters of our craft. You get the point.
I want to take this concept of compound interest—how the benefits of our efforts multiply over the long-term—and apply it as a lens on our daily habits. When you see how the impact of your daily habits grows exponentially over time, you might gain a whole new motivation to make the good ones stick and kick the bad habits that you may have struggled with for years.
Let’s start with the basics: eating well and exercising. We all know that both of these things are good for us. Now let’s compare two humans, one who has a healthy diet and exercises regularly, and one who doesn’t. After a few months, there may not be a noticeable difference between these two folks. The person who eats well and exercises may not look or feel a whole lot healthier or more energized than the other person. If they were in similar shape to start with, you likely wouldn’t notice much difference in their physique, athleticism, or mobility.
Now imagine ten years have gone by. After a decade of maintaining these same habits around diet and exercise, you’re more likely to notice a difference between these two people. But you also might not—especially if they’re younger, in their 20’s or early 30’s. But if we stretched out this experiment by two or three decades, the difference would become incredibly obvious and dramatic. By the time these two people are in their 50’s, one would be healthy, slim, and aging well, and the other would likely be dealing with health problems, struggling with their weight, and looking older than they are. If you stretch it out even further, we’re talking massive differences in health and longevity—one set of habits adds quality years to your life, and the other takes it away.
The long-term ROI of good (and bad) habits
In the moment, and often in the short-term, we don’t see or feel the impact of adopting good habits. That’s why it’s so important to remember the compound interest of habits. If you told your 22-year-old self that the $100 you put in your 401k every pay period would become $1,000,000 by the time you retire, you’d probably be more motivated to keep contributing! It’s the same with any other good habit. To keep yourself motivated, you want to keep your eyes on the prize.
Building and maintaining good habits is hard. Everyone struggles with this in some way or another. And it’s very easy to let a good habit slide because you’re not seeing the effects in the short-term. When it comes to things like eating clean, meditating, and exercising, the effects will likely be minimal or even invisible in the short run. But maintained over a long period, these habits will reap incredible rewards—often far beyond what we imagined or hoped for at the outset.
The same is true of bad habits: Over time, their impacts multiply—which means that a bad habit maintained over a long period can destroy your life.
In my 20s, I saw friends not eating well, not exercising, drinking heavily, and doing cocaine a couple of nights a week—all things that didn’t seem like a big deal at the time. When we went to the beach and took off our shirts, we all basically looked the same. Now that we are approaching 40, the folks who maintained these poor habits are experiencing some serious health challenges. Some at 40 look the best they’ve ever looked, and others look like they’ve seen better days.
Embracing mindful indulgence
I also appreciate this concept because it permits me to enjoy the ‘one-off’ or occasional indulgences in life. This could be doing MDMA (I can say this now that I’m officially an American citizen!), or eating ice cream sundaes or cheeseburgers. It helps me relax to know that if it’s not a habit, it’s not going to have a significant effect on my life. I know that if I do MDMA a few times a year, the effects are likely negligible. I know that if I want to eat half a pie to myself once in a blue moon, I can just go ahead and do that. I know that if I want to go to Van Leeuwan’s once a quarter and eat a gigantic ice cream sundae, it’s going to be all good. Similarly, it’s OK to have a drink now and then, but 1-2 drinks a day can have serious negative long-term implications.
Now, if I was doing MDMA every weekend, that would be a serious problem. Likewise, if I were to eat an ice cream sundae every night or a pizza for lunch every day, this would also be a problem. Where you need to be keenly aware is if you are making a habit out of harmful activities like vaping, social media (YouTube is the one that gets me!), junk food, drugs, or alcohol—the things we know are bad for us, but we turn to out of comfort or familiarity. This is where you may want to do an audit of your habits. Where is this habit taking you in the long run? Is it going to help you look and feel your best and maintain your vitality into your 40s, 50s and beyond?
Now I can relax, let my hair down, and enjoy some of life’s indulgences with a guilt-free mentality because I’m not turning any of these things into long-term habits.
When we consider compound interest, the message is clear. Keep the harmful stuff out of your regular routine, and do the healthy stuff regularly for decades.
As Dr. Anna Lembke in Dopamine Nation says “We must have faith that actions today that seem to have no impact in the present moment are in fact accumulating in a positive direction, which will be revealed to us only at some unknown time in the future.”
Even if you don’t see the benefits right now, trust me, you will—and it will be worth it.
On the Radar
⚫ Epic Highlight: Have to share some US Basketball highlights. Firstly, the semi-finals with Serbia as well as the finals with France. Steph Curry exploded in both, especially the last few minutes of the finals. This is so incredible to watch this level of greatness. And Lebron was named the MVP of the Olympics at 39, now that is awesome. I also enjoyed watching Steph Curry do his thing in slo-mo to soft jazz.
⚫ Elevated Audio: A very thought-provoking podcast shared by my pal Ben Hindman where a billionaire talks about his challenges with happiness and wealth. Andrew Wilkinson’s Modern Wisdom - How to Stop Feeling Like Your Success is Never Enough.
I'll consider a habit our bi-weekly calls. MAJOR ROI and the compound interest on that is going to be bananas.