Monday, February 11, 2019

Compounding Effect in Law School

If I offered you a choice between 3 million dollars today or a penny today with double the amount each subsequent day for 31 days (ie - .01 today, .02 tomorrow, .04 next days, etc.), which would you take?  In a small experiment, over 90% of people took the lump sum.  A penny doubled every day over 31 days will net over 10 million dollars.  However, that choice doesn’t beat the 3 million lump sum until day 30.  Day 31 is when it crushes the lump sum by over 7 million dollars.  The reason is the compounding effect.

The compounding effect is a common strategy for financial planning.  Starting to save for retirement at age 20 makes a huge difference.  Darren Hardy in his book The Compounding Effect applied the theory to life beyond finances to argue all of us can make dramatic changes in our careers and how we live.  He argues the small choices we make consistently are the foundation for dramatically changing our life. 

Small choices seem trivial.  One of my favorite examples in his book relates to weight gain/loss.  He illustrates the choices of 3 hypothetical people.  1 person continues to do the same thing he has always done.  He is the constant.  1 person decreases calories by only 125 calories a day.  125 calories is the equivalent of a bowl of some cereal or a can of Dr. Pepper.  The last person increases calories by 125 calories a day.  The small decisions didn’t seem to make much difference in the first 6-12 months.  Only small variations in weight.  However, from month 12-18, the first person is losing weight and the last person is gaining significant weight.  By the end of 2 years, the first person loses 30 pounds while the last person gains 30 pounds.  There is a 60 pound difference based on 1 coke a day!

The weight example and other examples in the book illustrate the difficulty of applying the compounding effect to our lives.  Choosing to not drink a coke today will not change the scale tomorrow.  Eating 1 donut or a meal at Chik-fil-a will not change the scale tomorrow.  We don’t perceive the benefits or consequences of small choices immediately, so many people choose the more fun donut.  Over time, 125 calories can snowball from weight to other areas of life, like health problems and relationships with friends and family.  The good news is the good choices snowball as well, and we should start considering what small changes to make in law school.

Law school epitomizes the problem of no immediate positive reinforcement.  Reviewing course material today doesn’t produce a grade.  Doing practice questions each week won’t have an immediate impact.  Playing the Xbox or going out with friends provides the immediate dopamine rush without the perception of consequences. 

Small changes now can make an impact at the end of this semester and future semesters.  I want to provide numerous examples and tips for improvement.  However, just as my pastor said yesterday, if I give you 4 things to do, you will do none of them.  If I give you 1, then you may do it because you can easily integrate 1 thing into your routine.  Hardy encourages the same thing.  Start small.  Pick 1 small thing to improve learning.

My suggestion is a small review each night.  Learning literature indicates we immediately begin forgetting material.  We can improve retention with immediate review within 24 hours and periodic review throughout a semester at progressively longer intervals.  Each night, review the material from that day and the previous day.  Summarize the information into your own words and think about where it fits in the outline.  Don’t spend numerous hours on this task.  Start small and move up. 

Compounding makes theoretical sense.  However, many of us make small choices that are compounding negatively.  Choose something small today to compound in the right direction.  Remember, you will not see immediately results.  Consistency is what will produce the outcome you desire.

(Steven Foster)

https://lawprofessors.typepad.com/academic_support/2019/02/compounding-effect-in-law-school.html

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Comments

The math is a bit off. The net, after receiving the payment for the 31st day is $21,474,836.47. Remember, you are receiving each day's payment, which means that you already had received $10,737,418.11 from the previous days, prior to the day 31 payment of $10,737,418.24.

Posted by: Keira | Feb 12, 2019 8:45:49 AM

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