One of my favorite stories to tell is the story of Mrs Njuguna, my second Landlady. I moved into Mrs Njuguna’s Apartment building just after I secured my first well paying job. I was about 23, and she was in her early 60’s, yet still exuberant. We struck a rapport on our first meeting, and remained friendly through out my stay there.
Mrs Njuguna was Widowed, with one child, a Son, who was just about my age, and had decided his life path was to become a Secular Musician. Suffice to say, given Mrs Njuguna was a staunchly born again Christian, they didn’t quite see eye to eye.
Maybe she saw in me what she wished for in her Son, hence her affinity.
Mrs Njuguna would pray for me every time I went to her office to deliver my rent. She preferred cash payments. Every visit would last up to 2 hours because she never tired of giving me life advice, laden with bible references and her life stories. I’ll be lying if I don’t tell you that I didn’t look forward to these visits. I was 23, and 2 hours with a 60 year old born again Woman wasn’t my idea of a good time.
One day, after paying my rent, she handed me back a Kshs 1,000 note. She told me to put it in a savings account, and start adding 1,000 bob every month to that account. She told me I could increase the monthly contribution every year as my income grew. She assured me if I did this, I would be richer than her by the time I was her age.
Recently, a certain young Man, about 10 years younger than me, told me an anecdote that had him quite distraught. He works night shifts, and is paid daily per completed task. He’s been seeing a lady friend who likes to have a good time, with or without him. She’s beautiful, beguiling, fun, intelligent, the whole package, except for the occasional excess on matters debauchery. He admits he can’t afford her, but it’s not his head doing the thinking at the moment.
The story goes that she went out clubbing, and in the course of the night, as this Man was busy earning his wage, she got into a drunken pickle with the Police. The gentlemen in blue offered not to host her & her friends at their cells if they could procure Kshs 10,000. She didn’t have it, so she called my friend to the rescue, just as he was finishing his shift. This amount happened to be his earnings for the night.
What do you think he did? What would you do?
For some reason, the story of Mrs Njuguna came to mind has he narrated his ordeal. If he had deposited this 10K into a savings account, and topped it up with 1,000 each month, modestly increasing the contributions yearly as his income increased, he would have at least Kshs 1M by the time he was my age, with about 40% of this coming from coumpounding interest earned. From my vantage position, this 10K wasn’t just money earned in one night, it was potential seed for 1M when he would be my age.
We all know the famous Parable of the talents in Matthew 25:14-30. This parable has a quintessential Darwinian ending which Jesus captions when he says, “For whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them”.
In the book Outliers, by Malcolm Gladwel, he controversially hypothesises that success is a function of advantages that work together to make it possible for some to attain success and some not to. Bill gates as an example had early access to a Main frame computer at his elite school, and supportive wealthy parents. This, Malcolm asserts, gave him a better shot at success than someone else who may have had similar intelligence and ambitions but lived in different circumstances.
I frequently hike through forests and mountains, and always get fascinated by the sheer height and girth of trees that have been in existence for decades, even centuries. I have watched many a wilderness documentary, where all manner of creatures that enjoy certain advantages such as size, strength, skill etc are able to outpace others for access to crucial survival resources such as prey, pasture, water and sun. As a result, they end up getting even more advantages, be it health, larger packs, size, and so on and so on. Darwin explains this phenomenon well in what he calls the Natural Law of Selection.
Look around you. Rich countries keep getting richer while poor countries get poorer. Star performers get better opportunities to get even better, and as a result the gap between them and average or poor performers grows wider and wider.
The Law of Compounding takes no prisoners. If I have 1M today, I have access to opportunities to grow that 1M into 2M, that someone with 1K doesn’t have. Even if he grows to 2K, at 2M the gap between us will have grown wider, and the opportinies available to me even more, and the cycle continues.
I didn’t follow my Landlady’s advise. I still keep the deposit slip for that first Kes 1,000, as a painful reminder of this Law. My friend sent the 10K to his girlfriend, re-inforcing what risks becoming a toxic relationship that drains his potential financial fortunes.
What are you doing to align your life with the Law of Compounding?
