Improving Your Finances with The Slight Edge, Part 3

Today we’re looking at some key findings from the book The Slight Edge. I’ll share what the author says as well as my thoughts.

I’ve completed part 1 and part 2 of this series so you may want to read those posts if you missed them.

For today, let’s get started on some new principles…

The Power Of Time

We start with another basic concept from the book — the power of time:

Have you ever been to the Grand Canyon? Can you picture it?

Now hold that image for a moment—and think back to the last time you were out in the rain and saw a rivulet of rainwater running along the side of a road, or in your own backyard. Now consider this gigantic natural monument over here on the one hand, and that little trinkle of rainwater over her on the other, and realize this: there is only one significant difference between the two.

Time.

The rivulet is the result of water running along the ground for what, a few minutes? An hour? The Grand Canyon is the result of the same substance running along the ground in the same way, only for some six million years.

One of the amazing things about the slight edge is that it’s a very generous process. It requires only a minuscule contribution from you, and yet it offers you a gigantic return. It demands of you only a penny, and gives back a million dollars. Starting with a penny is your part of the deal. The universe around you supplies the rest of the equation.

And the force it uses to do that is time.

You don’t need millions of years to see the impact of time.

The secret of time is simply this: time is the force that magnifies those little, almost imperceptible, seemingly insignificant things you do every day into something titanic and unstoppable.

Consistently repeated daily action + time = unconquerable results.

You supply the actions; the universe will supply the time. The trick is to choose the actions that, when multiplied by this universal amplifier, will yield the result you want. To position your everyday actions so time works for you, and not against you.

Several thoughts here:

• Very similar thoughts to what is said in Make Small Progress Every Day and Atomic Habits.
• I have a note in my daily to-do list that simply says, “Get 1% better today.” I’m a HUGE believer in 1% gains added up over time having a tremendous impact. I’ve seen it in my career, in my businesses, in my health, and on and on. More on this concept in a minute — but it’s TIME that makes it work.
• Time is the key driver in investing success too. It beats the amount you invest as well as return rate (the two other drivers of investing returns) to be the single best way to maximize your investment return.
• I have seen the power of time in the market EXPLODE my net worth. Because I have been earning enough to cover all our living expenses, I have let our stock market investments sit and grow — giving them more time to compound. As a result, my net worth is almost double what it was when I retired five years ago.

I could go on, but I think you get the idea. 😉

Making Large Leaps in Life

As the book gets into chapter 6, it talks about a related idea — making great strides in something in a short period of time.

This seems to be contrary to what we just talked about, but it isn’t.

Let’s begin with some key thoughts from the author:

Quantum leaps do happen, but only as the end result of a lengthy, gradual buildup of consistently applied effort.

No success is immediate, no collapse is sudden. They are both the result of the slight edge accruing momentum over time.

Hoping for “the big break”—the breakthrough, the magic bullet—is not only futile, it’s dangerous, because it keeps you from taking the actions you need to create the results you want.

Put the slight edge philosophy together with happy habits, and before long all the other how-to’s start working in your life, too. The better eating habits, the workout schedule, the attention to smarter financial habits, and greater learning and personal development, the stronger, healthier relationships, the progressive development of a life of powerful, positive impact—all of it.

Let’s take the investing example I shared above.

I invested over three decades, a bit at a time. For much of that time, my net worth was simply flat (or maybe inching up a bit here and there).

But then the market would spike and I’d make big gains. It would drop a bit from there, but I’d keep investing little amounts every paycheck.

Then there would be another spike followed by another small slump. I kept investing.

The process would repeat over and over, each time taking my net worth to new heights in big jumps.

The learning here is that you do the small tasks over time and they add up. PLUS, you get the opportunity for the big jumps that happen now and then.

I saw similar results with my rental properties.

If you can be slow, steady, and disciplined with your money over time, it’s almost impossible not to grow your wealth.

1% Better

Next the book goes into a concept I talked about above — getting 1% better in small steps over time and how it can add up.

The author’s thoughts:

The word “cent” is short for centum, meaning one-hundredth. A penny is called a cent because it is one-hundredth, or 1 percent, of a dollar. So let’s say you add 1 percent of whatever value you want to achieve, in all these areas. By the end of a year, by adding 1 percent each day—pure addition, no compound interest—how much have you added? A total of 365 percent. In other words, times three-and-a-half.

If your little actions—your happy habits, kind words, practice or study sessions, workouts, reading times, and the rest—each represented a 1 percent improvement in that area, your level of achievement in a year’s time would be not doubled but more than tripled.

Do you think you could improve yourself—your health, your happiness, your knowledge, your skills, your diet, your relationships, whatever area of life you want to look at—just 1 percent’s worth per day? That’s so slight an edge, you might not even know quite how to measure it. But if you did that against tomorrow, and the next day, and kept it up every day for the next year?

Here’s what that looks like when it’s actually happening. The first day you’ll improve by a factor of 0.01, so little it will probably be impossible to notice. The second day, your improvement will be 0.02; the next day, 0.03. So little, still, that it’s almost invisible.

Again, this is why people quit the gym, skip their assignments, and don’t bother with thank-you notes. What good is feeling 0.03 times slimmer or 0.03 times more fit? Why bother? Yet by pursuing that course and adding just one penny a day, by the end of the year you would be more than three times as fit, three times as happy, three times as knowledgeable, three times as skilled, three times the you, in just one year.

And how do you accomplish this? By trying twice as hard, three times as hard? No. Besides, you’re already trying. We all are. It’s not a matter of trying harder.

Well, maybe a little harder: just by 1 percent.

It’s a powerful concept: small, incremental gains are multiplied when they are added up over time.

But the idea is even more powerful than what the book notes.

Here’s why:

By the end of a year, by adding 1 percent each day—pure addition, no compound interest—how much have you added?

But you do add compound interest if you get 1% better every day from where you begin that day.

And in that case, the 1% doesn’t add up to 3x better in a year. Instead it’s 37 times better!!!!

Check this out:

“If you start out with $100 at the beginning of the year and you were able to increase what you have by 1% every single day, at the end of the year, you would have $3,778.34 = $100 * (1 + 1%) ^ 365. That is 37.78x what you had at the beginning of the year. Get that 1% every single day!” — Zappos

Yes, there’s a big difference in 3x and 37x. And maybe you can’t get 1% better EVERY day.

But if you do improve more often than not, it all adds up to HUGE results.

The author wraps up this line of thinking with the following:

Great success often starts from a tiny beginning—but there has to be a beginning. You have to start somewhere. You have to do something.

If you add just 1 percent of anything—skill, knowledge effort—per day, in a year it will have more than tripled. But you have to start with the 1 percent.

Greatness is not something predetermined, predestined, carved into your fate by forces beyond your control. Greatness is always in the moment of the decisions.

What I love about this is the following:

• It applies to everything — money, health, business, etc.
• 1% gain is something everyone can strive for. It’s not like you have to have a 50% gain at each pop to make it work.
• It’s a method open to everyone with no prerequisites required. You can start wherever you are.
• The results are MASSIVE!!!!

As you can probably tell, I love, love, love this book.

Do yourself a favor: get a copy somewhere, read it all, and apply it.

You’ll thank me later. 😉

And to wrap up the series on my site, click on over to part 4.