There is one idea that can increase your effectiveness exponentially. And that’s not a boast: it’s mathematically precise. It’s the concept of marginal gains.
Sometimes a big idea seems new, because lots of people are talking about it. But in fact, this one is a very old idea. Everyone is talking about marginal gains because this old idea has had one more recent and stunning demonstration.
What makes the idea of Marginal Gains so interesting to us, is the way it ties together a number of other big ideas.
What are Marginal Gains?
The idea behind marginal gains is simple. Instead of trying to improve something by a lot in one go, you make a lot of small improvements and hope they compound into one big improvement.
The best known recent example is the story of how Sir David Brailsford took the British cycling team’s poor performance and looked for every single opportunity to make a slight improvement in some aspect of their training, welfare, equipment or health. No single change was substantial. But, put together, the many marginal gains amounted to a massive increase in performance.
The Power of Compounding
In some areas, marginal gains are additive. If you can find ten 1 per cent gains, then the net improvement is 10 x 1%, or 10%.
This can lead to impressive results, if you persevere. At 1 per cent a day, for a year, that’s 365%. An investment of $1 would become $4.65.
But it is true compounding that has the power. When each marginal gain acts on all those that go before, then your results multiply. In this case, ten 1 per cent gains compound up to 10.5%. This isn’t much better than our earlier 10%, but give it time. At 1 per cent a day, for a year, compound interest does not yield 365%; it yields an astonishing 3,678%. Your investment of of $1 would become $37.78.
This is what compound growth of marginal gains looks like as a chart…
The History of Compound Growth
The power of compound growth was known to the Romans and almost certainly to earlier and more globally widespread civilisations. But it was documented fully in 14th Century Italy. The full mathematics were worked out by some of the giants of early modern maths: Jacob Bernouilli, John Napier, Gottfried Leibniz, and Leonhard Euler. Their work led to one of the very biggest of big ideas: the mathematical constant, e.
But this is a blog about management and business, so I shall put off my mathematical hat and move on…
Marginal Gains in Management
We’ve encountered the idea of marginal gains before in the Pocketblog. It even appears as another Big Idea. Because marginal gains is the idea that powers one of the most substantial Twentieth Century management innovations: Kaizen, or continuous improvement.
Kaizen is the simple concept of constantly finding some new improvement to make. Each is, of course, a marginal gain. But, over the course of many business cycles, the gains compound into a big increment.
We’ve written about Kaizen in an earlier article.
The Limits of Growth
Another business idea to be aware of is the assertion that economies cannot (and perhaps should not) keep growing. The compound growth chart shown above has a simple structure. The line gets steeper and steeper. It takes seventy cycles to double anything at a compound rate of 1 per cent. The next doubling takes another 70 cycles – that’s now a factor of four.
Exponential growth gets very big, very quickly. Start with one algal cell floating on the surface of a pond. Assume it doubles in a day. It may take a month for the cells to cover half the pond, but it will only take one more day for them to cover the whole pond, and suffocate everything beneath them.
Now think about economic growth consuming the world’s resources…
Growth Mindset and Marginal Gains
The idea of marginal gains is used everywhere you find a Growth Mindset. A fixed mindset assumes (at the extreme) that the talent we have is what makes us good or bad at something. But because that’s the talent we have, we’ll rise to our level of competence, and there’s no point in working harder.
The Growth Mindset takes the view that our abilities are never fixed. Hard work, study, practice, and learning from our experiences will carve our innate abilities and hone them sharper and sharper. But they will never reach perfection. By observing, learning, and practising more, we continue to grow.
And what are the increments by which we continue to grow? Marginal Gains, of course!
What is Your experience of Marginal Gains?
We’d love to hear your experiences, ideas, and questions. Please leave them in the comments below.
To learn more…
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