Terminal Value

The 1% Rule

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Doug Utberg

Business Growth Authority | Technology Strategy & Resourcing | Cost Optimization Expert | Business Process Architect | Financial Strategist | Founder - Terminal Value Podcast

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The topic on my mind today is something I’ve talked about my podcast number of times – It’s what they call the 1% rule.

The idea behind the 1% rule is that if you increase your level of skill in some area by 1% every day, or your overall level of skill, let’s say, by 1% every day, then after 72 days, you will be twice as good as you are right now.

This is based on the rule of 72 and the law of compounding, which is that every time that if you have a compounding process that as you start generating returns and as your principal base increases, then your overall rate of return, you end up having compounded growth. This is why if you increase 1% every day, it doesn’t take 100 days to get twice as good, it only takes 72.

What ends up happening is if you compound that over an entire year, over 365 days, the ratio ends up being something like 37.8 times as good. So if you take a skill and you get 1% better at it every day for an entire year, it will be almost 38 times as good one year from today as you are now.

A lot of people know about this phenomenon, but there’s a flip side to it that I think is really important to remember. 

Think about this – If you do not keep up your skills, abilities, creativity, physical fitness, etc. and your skill atrophies by 1% every day in 72 days will only be half as good as you are now.

If you compound that out throughout a year, it means that if you like your skill in any one area or overall or whatever atrophy by 1% every day for an entire year, then you will only be 2.5% as good as you are right now.

You will lose 97% of your effectiveness.

The critical lesson here is to make sure that keep your skills, abilities, fitness, whatever it is, you keep them strong.

It’s really easy to just kind of coast and let your skills atrophy, but if you do that, then you can see, just based on the compound integration effect, you could end up being effectively obsolete or essentially unskilled in a disturbingly short amount of time.

What this tells me to put conscious effort every single day into improving your skill set in some or multiple areas.

One way to do this is to write down ten ideas. Ten ideas for a business, a book, an article, a show, something.

Ten ideas every day.

They don’t even have to be good ideas.

What will happen is a small percentage of the ideas that you create will actually be pretty good.

If you only get a few of them to go somewhere and then you use that creativity that you’re developing to expand on those, then you can actually reshape your life multiple times over as necessary.

I’ve found that what it does is it really helps you to go down the creative rabbit hole because by exercising this creativity muscle.

Then what you can do is you can start to say: Okay, Let’s just take a topic area like a podcast.

I want to come up with ideas for podcasts.

What are some of the things I noticed when I podcast?

I have to record and frequently end up having audio and video glitches.

What are some ways that you could address those audio and video glitches?

Maybe I could set up software that has the computer record the video and audio locally and then upload it so that I can make sure to increase fidelity.

What’s something else that I can do?

What if there is some way that I could also enable live streaming on multiple platforms and also pull in the comments so they can be interactive with Live?

As far as I know, there’s no platform that does all that right now.

Who knows, maybe I just gave away the secrets to the next podcasting mega product.

That’s just an off the cuff example of a way that you can come up with three to four ideas. Remember, you even need to try to come up with good ideas, just come up with ideas and after a while you will get much better at it.

I think this is really the way that progress moves forward is that you get people who are not satisfied with the status quo and who decide that they are going to come up with ideas to make things better.

That’s one of the things that we as value obsessed leaders can and should be doing is coming up with ideas to make things better on a regular basis.

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