The power of compounding and how it applies to a better life

“What if you didn’t define wealth by money, success or satisfaction, but simply by the number of great people in your life?”

A question put forth by Peter Attia, M.D. in his podcast “How to live a longer, higher quality life” on the excellent investment blog “The Investor’s field guide” by Patrick O’Shaughnessy. The conversation goes on to link the simple yet powerful investing concept of compounding with living a better quality of life. Read on for the highlights of a wide-ranging conversation.

So you want to live a long life?

“Never try to solve a complicated problem without explicitly stating your objective, your strategy and your tactics”

Advise Peter got from his mentor early in his career, which he applies to his current area of research, that of maximising human longevity. Hence, he added the concept of healthspan to the existing idea of lifespan

The Calm Investor | Invest like the best
Source: eatingacademy.com

Lifespan, is easy to explain. In the above chart, x-axis is time, so Lifespan is how long you live. y-axis is a measure of the quality of life. How well are you able to function and operate in a relatively pain-free manner, i.e. Healthspan.

The function starts at 1 (maximum health in the early part of our life). As we move through life, the curve monotonically decreases (meaning it never reverses it’s downward direction). The average human, lives to between 75 and 80, that’s when the curve crosses the x-axis. At 40, it takes its first noticeable dip. Starting at 40, without doing anything about it, we lose 1% muscle mass every year. This decline is highly associated with decline in healthspan. By 70, we’re halfway down the y-axis. So we spend 70 years declining to about half of our capacity, and 5-10 years rapidly declining to zero. How can we make that better?

The objective, for all of us, should therefore be to shift that curve up and to the right. To live longer, sure, but to want more healthspan. To alter the shape of that curve so it’s not a stretch of that exact curve, but to reduce the rate at which it declines.

The core concept of investing (and life)

Peter lists three elements that form the trifecta of a good and happy life.

  • Mind, as cognition, measured by three features, executive function, processing speed and short-term memory
  • Body, as the ability to carry out functional movement, and freedom from pain
  • Spirit, as a sense of purpose and social support

Any “life philosophy” will need to consider all three to be fulfilling. But how does one understand what works.

Warren Buffett made his first billion at the age of 65. Today, at 86, he’s worth $76 Billion. Aside from shrewd investing decisions, we know this illustrates the power of compounding. Look again at the Lifespan / Healthspan chart above and you realise it’s nothing but the upside-down version of how wealth compounds.

Peter did some research on growth models of tumours. He found “a cancer spends more than 80% of its life undetectable”. The same applies to a variety of other processes in our body that add up cumulatively over time.

“Health is the most important biological manifestation of compounding”

And just like an on-going habit of taking on debt and neglecting investments does not reflect on our net worth in the short run, eating the additional serving of dessert doesn’t show any ill effects the next morning. The beauty of compounding is not very intuitive to us, because it is so non-linear.

Pushing that curve up and to the right is all about simple daily decisions.

Understanding what works

The scientific experimental method would require for a 100,000 babies, all born today to be placed into n different groups. Each group to be exposed to a different set of conditions on all the three elements above, to then decipher what impacts / bolsters our ability to live long and healthy.

Instead, we have to rely on triangulation of what factors might enable us. There are three such sources:

From the physiology of aging:

  • The holy grail or the next frontier, drugs that can impact the sensing pathways that slow growth – According to Dr. Attia, we shouldn’t be holding our breath for one of these in our lifetimes

From centenarians (those above the age of 100): 

  • Just 0.04% of the population. Turns out most centenarians don’t do anything much better or worse than the rest of us. This implies they have a set of inherent advantages
  • What they found:
    • Centenarians have genetic advantages, called hypoactive genes, that code for proteins that offer protection from most common disease conditions

From other species:

  • Life forms on the planet span across two billion years of evolution and have varying complexity. This range from yeast, to flies, to worms and finally to mammals. Finding something that works across the entire spectrum would go a long way to solving the problem of aging
  • What they found:
    • Some form of caloric restriction (CR) or dietary restriction (DR) tends to enhance longevity
    • CR tends to work best where the baseline diet is of poor quality, since the restriction tends to reduce unhealthy calories while DR has a more universal applicability towards improving overall health

The field of understanding what works best to ensure a happy, healthy life is still young, so there is a lot scientists don’t yet know. But the most common-sense recommendations they have is to minimize the intake of refined sugar

The “smoking” of our time

Back in the 1960’s, over 40% of adults were smokers. Today, that number is down to about 15%. The very idea of that number from the 1960s looks absurd to us today. Peter was asked, similarly, what might be something about our lives today that might be seen as equally absurd 60 years from now?

He said two things: The idea that all calories are created equal. Something that most of us would agree with more or less. The other more surprising comment was about the importance of muscle mass and it’s criticality to quality of life.

Paraphrasing his comment: “In 60 years, it will be universal that whether you are a man, woman, athletic or not… everybody will understands the importance of maintaining muscle mass, and that everybody is lifting weights.” 

Interestingly, this is consistent with the view of controversial author of Antifragile and The Black Swan, Nassim Taleb, who wrote about the importance of exposing the body to “tail events” through strength training to build resilience.

The alternate definition of wealth

Back to the original and unconventional question at the beginning of this post,

“What if wealth was based on the number of great people in your life?”

Peter offered an interesting perspective on thinking about answering this: “How many people would you donate a kidney to?” The answer to both questions would be the same.

If, as we work to build wealth by picking the right stocks and investing regularly, we also can keep adding to the number in the answer to the question above, maybe we’ll have lived a high quality life.

 

Listen to this excellent podcast here…

Peter Attia’s blog: eatingacademy.com

Patrick O’Shaughnessy’s site: The Investor’s field guide

 

6 thoughts on “The power of compounding and how it applies to a better life

  • March 18, 2017 at 6:09 am
    Permalink

    Hi,
    Great article.

    I read about Nagano, a place in Japan, where life expectancy has improved drastically in the last few decades. The article explained how the change happened with focus on Mind, Body and Work, as you have highlighted. So in addition to hypoactive genes, there seems to be a secret sauce which is at work and can provide a marginal increase, at least. Hope India find for its current context.

    Regards
    Sundar

  • Pingback: The best investing posts of 2017

  • April 14, 2017 at 11:57 am
    Permalink

    Thanks for sharing an amazing perspective which is beautifully explained. Loved it!

  • April 15, 2017 at 8:32 am
    Permalink

    Thanks Sunil!

  • May 10, 2017 at 2:47 pm
    Permalink

    Wonderful article! Great to read and assimilate the idea presented here! Thanks for sharing this.

What do you think?