The Science of Compounding: Experimenting with Real World Applications

compoundOne of the most important concepts we can teach our teenagers is how the fundamental concepts of science and math they learn in school apply to the “real world.”

As a kid, I remember that I, along with many of my peers, had little to no interest in studying or learning these hard, quantitative techniques.

It wasn’t until years later that I discovered that science and math could be fascinating. The gap? A real world application of the methods we learned in school.

One of the best examples of this is the science of compounding, and how it can be applied to many different real life scenarios.

Compounding and Money

Perhaps the standard example, and by far one of the most obvious and most important areas to which students can apply compounding is finance.

In fact, this concept is so simple that it’s one of the best ways for students to really grasp the law of compounding. Benjamin Franklin once famously left money to the state, with the instructions not to spend it for 100 and 200 years. Read the tale here.

That anecdote seems distant to many students today, however. A better example would be to encourage them to create scientific models and experiments dealing with how different rates of return can change the value of money over time. Better yet, have them visualize the effects of losing spending power from inflation if they fail to invest cash on hand!

These issues, while traditionally not dealt with at the high school levels, should be a standard part of the curriculum. With the advent of popular bestsellers like Rich Dad Poor Dad, or Money Master the Game, the newest Tony Robbins audio book, students have great examples from which they can work.

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Compounding and Scientific Progress

Another great experiment that students can work with involving compounding has to do with understanding how compounding can impact scientific progress over time.

One of the best examples of this was the Human Genome Project. About three quarters of the way through the project (in terms of timeline), the project was only 1% complete. Politicians almost canceled the work, considering it a failure.

The failure, however, was their understanding. The project was, in fact, compounding magnificently, and the scientists behind it understood that even though they had only mapped 1% of the genome, that meant that they only needed to double their results 7 times in order to finish the map.

A few years later, they finished the project successfully, and ahead of schedule. Read more about this success from genome.gov.

Regardless of which approach you take, the point is simply to discover new ways to encourage our teenagers to take advantage and fully understand this simple, yet fundamental mathematical principle.

If more people were to fully realize the impact of this phenomenon, perhaps we would be able to progress more rapidly and more effectively.