How can we apply compounding to our daily life?
Here is a story 👇👇
Charles M. Schwab had made his fortune with Bethlehem Steel Corporation, the largest shipbuilder and second-largest steel producer in America at the time.
In 1918, Bethlehem Steel Corporation’s President Eugene Grace stated at a special stockholders meeting that the company’s plants were turning out a record amount of steel.
Bethlehem Steel’s revenues for the year have reached $400 million ($6.5 billion in today’s dollars). We estimate gross business will run close to $500 million in 1919 as the company works through orders amounting to $650 million.”
You wouldn’t expect that Charles Schwab would be looking to improve his operations even more, but like other intelligent fanatics he was dogged in his pursuit for improvement. Thomas Edison famously called Schwab a “master hustler.”
In that same year Ivy Lee, a publicity expert, contacted Charles Schwab and said:
I can increase your efficiency and sales – if you would only allow me to spend fifteen minutes with each of your executives.”
Naturally, Charles Schwab was interested and asked, “What will that cost me?”
Ivy Lee might have been the father of corporate public relations, but he understood the power of having skin in the game. “Nothing,” Ivy said, “unless it works. In three months, you can send me a check for whatever you think it is worth to you. Fair enough?”
Of course Schwab thought that it was fair enough. Ivy Lee spent fifteen minutes with each Bethlehem Steel executive. In those short meetings Lee exacted only a promise from each executive to accomplish over the next three months:
At the end of each work day, write down the six most important things you need to accomplish tomorrow.
Do not write down more than six tasks.
Prioritize those six items in order of their true importance.
When you arrive each morning, concentrate only on the first task. Work until the first task is finished and scratch it off when it’s finished.
Just work your way right down the list. At the end of the day, move any unfinished items to a new list of six tasks for the following day.
Repeat this process every working day.
At the end of the three-month period, Bethlehem Steel’s efficiency had increased to such an extent that Mr. Schwab sent Ivy Lee a check for $35,000.
Years later, Mary Kay Ash read Ivy Lee’s story. She applied the six most important things list religiously and inspired everyone throughout her cosmetic organization to do the same.
Ash credited the list for much of her firm’s success. The list helped everyone execute.
The little, daily decisions compound over time and are the difference between success and failure.
When little, daily decisions aren’t executed, 👇 happens
The culture of dogged incremental improvement left Bethlehem Steel when Charles M. Schwab and his executives were gone.
After World War II, U.S. steel industry faced little foreign competition and resisted modernization. Foreign firms adopted modern techniques such as continuous casting, and Ken Iverson’s Nucor had developed other techniques that reduced the cost of steel production significantly lower than the Big Steel companies.
By then, Bethlehem Steel’s leaders and employees had long forgotten of the list of 6 most important things.
Management cared only about themselves.
As Ken Iverson stated in his book Plain Talk: Lessons From a Business Maverick,
Bethlehem Steel’s CEO and chairman Curtis H. Barnett received a 37% raise despite a $309 million loss in 1996. Management had for years been divorced from ownership allowing mediocrity to pervade. Short-term profits were the main focus.
Bethlehem Steel executives bought themselves a beautiful golf course with corporate funds. There was some grumbling from the ranks, so they built a second course for middle managers, and eventually a third course for employees. Imagine building three golf courses just to remind everyone where they fall in the corporate hierarchy! What does that that say about a company’s values and corporate culture?”
It says that Bethlehem Steel’s values and corporate culture had radically changed since Charles M. Schwab’s tenure. Bethlehem Steel did lose its way and eventually filed for bankruptcy in 2003.
Be relentless in executing on small daily tasks & decisions EVERYDAY.
Writing a list of 5 or 6 daily tasks or decisions works.
- Write them down on paper
- Type them up
- Say them out loud or
- Project them in your mind.
Do what works for you.
Just don’t stop.
Make it a habit.
Doing so unlocks the power of compounding over the long term.
“Haba na haba, hujaza kibaba”
[Little by little, the pot gets filled] - Swahili proverb
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Digging hard into the mechanics of business, investing & leadership (like the above).
Updates on building my business.
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