A Compound Life

This post is a bit more personal development than I would like, but am publishing it anyway.

Introduction

The first half of your life is commonly conceived of as the best half (youth, memories, earning power, freedom, etc.). But what about the second half? How can we make that better?

When you plant an oak seed, for the first 6-12 months, you see nothing. You keep watering it, hoping something will happen. After 3 years, it may start to sprout and break the earth, giving you something visible for your rewards. After 10 years or regular care, you’ll be left with a hearty tree that you can expect to last you another 25 years. How is it that we can water that tree for days, weeks, months, and years without seeing visible progress but never giving up? Why is this principle so much harder when taking care of ourselves, especially when we know the benefits of regular investment in care?

Having a long-term view of life is one of the most powerful tools you can have. A long-term perspective allows you to gauge decisions on a time scale most people never consider. The effects of some decisions take time to materialize. A vision of the end that can motivate you through the short-term pains that you must persist through before seeing the long-term gains.

How can you make the most of this? And where can this apply more broadly in our lives? I am trying to use this mindset in my own life, so what follows is some documentation to how I am thinking about the different aspects of myself.

Reinforcing Growth

Reinforcing loops are found wherever a system element has the ability to reproduce itself or to grow as a constant fraction of itself.
Thinking in Systems, Donnella Meadows

A typical example of reinforcing feedback loops is compound interest. The money you save in a bank account earns interest. Over time, that earned interest begins to earn interest as well, creating a compounding effect that reaches an impressive scale.

Most people have heard of compound interest, and how it’s one of the most powerful forces, however, few people think to apply it to anything beyond numbers/money. In Poor Charlie’s Almanack, Charlie Munger talked about using this in his life after reading Cicero. This notion is a bit counter-intuitive initially, as we accept the idea that there is a “peak” to life that usually occurs in the first half, and then slowly declines.

I want to explore how we can apply the model of compounding growth to various facets of life to live better and make sure each successive year is better than the last.

Sidebar: A few notes on compounding that are rarely discussed:

For compounding to work its magic, you cannot touch the principal. This allows your contributions to continue to grow over time, and those gains to be compounded as well. If you’re making withdrawals regularly, you will just have regular growth.

Secondly, the commonly visualized growth chart is scale-agnostic. That means over the long term, the curve looks the same no matter how much or little you start with. The graph of the curve is identical when zoomed out, only the values on the Y-axis change. This means it doesn’t matter when you start, you can still reap the benefits of compounding. Yes, people who start earlier have more time for compounding, but as we will see, if you make large, lump-sum “deposits,” you can fast-track your end-state and jump further down the curve. This means the time frame you choose matters. If you care more about lowering your total required upfront investment, smaller changes that compound over time are what you want. If you care more about the final value, your principal is what matters. Investing a lump-sum later on may be enough, forfeiting growth in the meantime.

With those in mind, we can continue.

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Building a better life

As we begin a new year, let’s start by trying to understand a common resolution: What does it mean to have next year be better than this year? What does better mean?

While better will depend on who you are, I started with the question: What would have to exist for the second half of life to be better? We can look to the different dimensions of life/holistic wellbeing:

Freedom
Health
Knowledge
Belonging
Wisdom

Each of these benefits can be attributed more closely to specific domains:

More freedom (wealth/independence)
Steady health (health & fitness)
Wisdom (emotional maturity)
Belonging (family + relationships)
Knowledge

Depending on you are, there may be more items or less, even different ones. For most of us, better probably means more enjoyable and meaningful. Better isn’t just about more, but also deeper or stronger as in the context of relationship and knowledge.

Though the goal is holistic compounding in our life, we must accept that some things like health will not get better indefinitely, but maintaining strength keeps all other curves possible. It’s easier to think of this as “How can I be healthier tomorrow as a result of my decisions today? How can I be wiser as a result of my decisions today? Or wealthier? Or more loved?” For example, you can intend on being healthier than today without getting caught up in the specifics of ageing, and make informed decisions as a result.

The general thesis for this approach is that your life gets better with each year, making the end of your life much better than the start. Does this mean you need to wait for life to get better?

The majority of mortals, Paulinus, complain bitterly of the spitefulness of Nature, because we are born for a brief span of life, because even this space that has been granted to us rushes by so speedily and so swiftly that all save a very few find life at an end just when they are getting ready to live. – on the shortness of life

The purpose of this mindset is not to sacrifice the now for tomorrow. We want to set ourselves up to be able to enjoy more of ‘now’ in the future. We only live in the present moment; we need to make sure our future moments are just as enjoyable as the one we are in now.

One helpful metaphor is to think about each of these parts of your life as bank accounts. There are activities you do that act like withdrawals from your future self, and others that will act as deposits. By setting up “recurring contributions” in the form of habits, you can take care of yourself with relative ease.

The Key Areas of Life

Let’s look at each of these areas in sequence and ask:

What are the typical curves/changes over a lifetime?
What would a compounding curve look like (always the same)
What has to change to hit that curve?

1. Health

Borrowing an idea I heard from Dr. Peter Attia, my goal is to maximize my healthspan. While lifespan deals with how long I am living, healthspan focuses on how long I am healthy. I want to remain able to participate in everyday life as long as I am living.

I see a few components in this:

Strength: my ability to move with power (this doesn’t have to mean heavy things, but maybe just lifting your grandchild when you’re older)
Fitness: overall stamina/endurance; can I enjoy an activity for an extended period?
Mobility: your ability to move in space. As my instructor says,” Nobody gives you an operating manual for your meat suit on how to use it properly.” As such, we have many postural problems that compound into old age and hamper us.
Wellbeing: not including mental health, which I will cover a bit in emotional maturity, this would include things like diet and sleep.

Without some intention, we fall into a comfortable, default state that neglects most of these things. As Peter’s healthspan diagram illustrates, by default, we start to decline early in life if we don’t pay attention to what’s essential. There are simple things we can do to begin to raise the curve, such as regular exercise (balancing strength, fitness, and mobility), a healthy diet, and proper sleeping habits. It’s as simple as paying attention to these things to start to make a positive impact. This doesn’t have to mean working out everyday or going on a highly restrictive diet; you need to enjoy life and find a lifestyle that sticks.

If you recall one of the core tenets of compound interest, Don’t touch the principal, this is important for health. If you think of your health like a bank, with every unhealthy activity acting as a withdrawal, you need to do your best to avoid these things that will erode your principal. If you make a bad decision one day, that’s fine. It’s rarely going to make a difference in the grand scheme of things, it’s more important to get back to contributing to your health bank.

I figured I would include my own routines within each category to provide some specifics.

I swim 3x a week as part of a Masters swimming team. This is my primary form of exercise, and I have been doing it since 2014.
I attend mobility classes once to twice a week.
I try to do strength training once to twice a week. I think about strength training 3x a week, if that counts for anything.
For my diet, I loosely adhere to hitting macros. I have tried tracking them, but I am not interested enough to keep it up. I try to over-index on protein where I can, limit sugar and sweets, and eat a lot overall given the amount I exercise. I avoid pop and alcohol, drinking mostly water, coffee, and bubble tea.
Sleep as much as you need. Think of it as part of a balanced diet: find what works for you.

I am more of a pragmatist than a purist, whatever is convenient and mostly healthy is what I try to stick with. Life is for enjoying, so don’t be overly strict with your routine. But, as my mom likes to say, health is one of those things you can’t get back when it’s gone.

2. Finance

If we look at why money is essential for most people, the objective is freedom. Freedom from worrying about it. People want to be able to make decisions without having money be too much of a factor. As such, my goal is to maximize my freedom within reason.

There have been books written about this topic so I won’t go too deep into investing or growing wealth, but just provide a personal perspective. One thing that most people don’t consider is the second tenet of compounding, compounding is scale-agnostic. This means it’s possible to jump ahead along the curve if you get sidetracked for awhile.

The power of time is misleading

The classic example is you should save $100/month when you’re 20, and by the time you’re 40, you’ll have about $50,870 if it compounds at 6%. Now, what if instead you take that $100/month and invest it in your education. You learn some new skills that allow you to get a higher paying job. Now you’re 28, and you missed the first 8 years of contributing, but you’re able to contribute $250/month. You will have surpassed the person who started saving earlier, with a savings of about $60,000 in 12 years. Yes, you will have contributed more (the classic example allows you to hit 50K with only $24k of contributions), but you are now able to grow wealth on a steeper curve. It’s okay to start late. Lump-sum investments can actually catch you up along the curve, so long as you keep up regular contributions.

Note: these numbers may vary based on how you are calculating interest and contributions timing. Consider them illustrative.

My financial stack is relatively simple, and I don’t change it often.

From a savings perspective, I regularly save of approximately 30% of my after-tax income for long-term savings (TFSA/RRSP) as well as my emergency fund.
I contribute about 10-20% to short-term savings dubbed both Fun Money and Vacation Spending.
The remainder is spent on life–fun money gets dipped into regularly, so there isn’t much of a growing balance.
My investments are almost solely in ETFs, though I do some random equity investing with a small amount of money I can afford to/expect to lose.
Everything is automated.

That’s it. Only thinking about doing things instead of actually doing them has paid off a bit, as I have been tempted by things like crypto, angel investing, etc., but never gotten around to participating. Laziness helps me succeed because I have the basics down.

3. Wisdom aka Emotional Maturity

This is an interesting one for me and probably my worst category. When I think about why this category is essential, is it’s perhaps the most intangible skillset for merely surviving. Life is hard for many people, and without grit and resilience, you might not make it through to the other side. How do we find meaning and happiness?

I am actually having a hard time writing about this, as it’s not an area I am very good at. I might define this section as a wrapper for mental health and strength. The best way to test and learn in this domain is through turmoil. I believe (without being tested) that without crisis, you can still learn from those ahead of you. Can you accept that life happens, and it’s up to you to accept it? Only you control how you respond to things.

The three ways I see to learn more about life is:

Exposure (see it in others)
Education (read about it)
Experience (first hand)

My own regimen is quite weak and nascent. I have tried reading some books, but this is my worst area. I am trying to attend therapy this year, something I keep saying, but I haven’t done yet. I’m also trying to “accept” things that happen. It’s not my default mode, meaning I require a constant reminder.

4. Belonging & Relationships

“I noticed this year paid some fairly hefty dividends in ‘relationship compounding interest.’ That is: Where investments in personal and professional relationships begin to snowball. I take note of this because it wasn’t until I was about thirty that many of my decision making process flipped from self-destructive to additive. So it feels good to pick my head up every now and then and go: Damn, I’m surrounded by solid people. But it can take time to reach these inflections. Which is all to say: If you’re working on culling or rebuilding your support base, keep at it, even if the longterm value can sometimes be difficult to believe in.” – Craig Mod

I don’t plan to make a case for why relationships are important, this seems self-evident. I understand that we are social animals, and whether we are introverted or extroverted, time spent with others is an integral part of our wellbeing. I plan to invest in relationships by focusing on deeper relationships rather than more relationships.

I have a theory, though I may have read it somewhere, that relationships will decay over time unless you hit a threshold strength. I find with my oldest or closest friends, we can not spend time in person for years and still maintain a strong connection. It’s a bit like spaced repetition. If you are forming a new relationship, you need to invest in strengthening it to a specific point if your goal is for it to last. You can do this through repetition or depth.

Repetition is the most natural and obvious way to develop a relationship. I have seen a few anecdotes about using depth and struggle as a way to strengthen relationships quickly. To me, this approach represents a “lump sum” type investment into a relationship.

1. Eating Salt

“As the proverb says, men cannot know each other until they have eaten salt together.”- Aristotle

I believe facing a struggle with someone is one of the fastest ways to strengthen your relationship. It’s also probably one of the fastest ways to destroy it. It’s easy to only go through good times with someone and feel like you’re growing, but that relationship can only be tested in times of stress. I’ve suspected that going on The Amazing Race as a first date would be an incredible way to either develop a life-long relationship in a short period of time (due to the amount of trust-building required) or immediately crumble and weed out an ill-fated match.

2. Going Deep

Another approach is to spend long periods of time with someone.

David Perell talks about how the best conversations happen after the first couple of hours of time together have passed. Not cumulatively, but sequentially. This is a major distinction. There is an exponential curve to increase relationship depth in a single session: 30 minutes here and there is not great vs a single 3-4h deep dive. If you’re looking to quickly develop trust and depth in a relationship, try having a longer hangout.

I only have a few good friends, so I might be considered bad at this. I have concentrated my investments in my partner, a few close friends (some from growing up and some more recent), and then tried to get close to a couple of people in my ancillary activities (swimming, work). As a plan, I may try diversifying friendships a bit over the coming years.

5. Knowledge

One of my favourite parts of living is learning new things. Keeping your mind sharp allows you to enjoy more and hopefully just enjoy the process of learning new things. It’s Important to maintain cognitive abilities to be able to work, enjoy life, see and spend time with family.

I find a lot of your commitment learning is your mindset: both through curiosity and a growth mindset. Do not seek knowledge as an end to itself. Knowledge decays. Education also allows you to enjoy more of life, it’s an enjoyable activity and gives you new perspectives on each passing moment.

This aspect of a compound life feels the most self-explanatory. I invest a lot of my own time and money into my own progression through books and courses. Will I use most of these things? Probably not. But as you’ve likely heard a hundred times, learning is in the journey, not the destination.

Starting Young vs. Starting Old

It’s never too late to start improving. This type of thinking is defeatist and lacks nuance. We each have our own baseline that we are starting from. Our goal is not to be perfect, only to be better than we are today.

Warren Buffet likes to say, “the best time to plant a tree was yesterday. The second best day is today”. I think this applies to how we think about the future.

I would caution against the trap of taking on more risk as a means of catching up. This applies across domains. Building health and strength take time; don’t overdo it because you feel behind.

The benefits of a compound life are not just more enjoyment each day, but hopefully, it gets easier to make a contribution too. How are you applying compounding in your life?