Saturday, February 23, 2013

Compound interest applied to personal development

Just any any financial planning book you pick up will sing the praises of the wonders of compound interest.  How investing now at some seemingly small annual rate of return will have huge impact over twenty years.  We're familiar with the idea of investing now for retirement.

The same principle applies to improving one's own skills.  Make small, regular investments, and the effects will compound over time to a surprisingly large payoff.

Say you decide to learn one new word per day.

After a month: not much impact.
After a year: still not much.

But over five years, ten years, twenty years: a dedication to building your vocabulary could have a substantial impact on your personal and professional success.

Not because you are going to impress people with twenty-dollar words.

But because, as E. D. Hirsh points out in "A Wealth of Words" in the Winter 2013 edition of City Journal, your working memory has a limited amount of space. It can only hold so many words or concepts at a given time. If you have a richer vocabulary, the words that you ARE holding in memory can be more complex, more specific, and more likely to result in creative ideas. Quote from the article:

Why should vocabulary size be related to achieved intelligence and real-world competence? Though the intricate details of cognitive abilities are under constant study and refinement, it’s possible to give a rough answer. The space where we solve our problems is called “working memory.” For everyone, even geniuses, it’s a small space that can hold only a few items in suspension for only a few seconds. If one doesn’t make the right connections within that space, one has to start over again. Hence, one method for coping and problem solving is to reduce the number of items that one has to make sense of at any moment. The psychologist George A. Miller called that process “chunking.” Telephone numbers and Social Security numbers are good examples. The number (212) 374-5278, written in three chunks, is a lot easier to cope with than 2123745278.

Words are fantastically effective chunking devices. Suppose you put a single item into your working memory—say, “Pasteur.” So long as you hold in your long-term memory a lot of associations with that name, you don’t need to dredge them up and try to cram them into your working memory. The name serves as a brief proxy for whatever aspects will turn out to be needed to cope with your problem. The more readily available such proxies are for you, the better you will be at dealing with various problems. Extend this example to whole spheres of knowledge and experience, and you’ll realize that a large vocabulary is a powerful coping device that enhances one’s general cognitive ability.

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