Why do people overestimate what they can achieve in 1 year and underestimate what they can achieve in 10 years?

Welcome to the 2020s. New year, new decade, new goals, new opportunities. 

Many years ago, Bill Gates is credited with the saying “people overestimate what they can do in one year and underestimate what they can do in 10 years.” I’ve always used that as a tool to motivate me to work hard knowing that big accomplishments take time. As we end the 2010s and begin a new decade, I spent the holidays thinking about WHY this quote is so true. There are three main contributing factors that make this true. I provide some examples from a business context for each case, but the same can be applied to any goals you may have (personal, physical, spiritual, professional, etc.). 

Compounding Success

Most of us have studied functions in school or taken an economics course so we understand the value of compounding interest. But let’s break it down further.

Compounding success stems from our ability to stick with something over time. This means through the ups and downs. 

To use the investment analogy, An investment that yields 7% a year will have 100% return in 10 years due to its compounding (most people are already aware of this).

Not only does sticking with something allow you to build on it, you are also getting better at doing it. Your output will actually improve over time. Using the same investment example, imagine you start at 7% year 1, but get a bit better at investing each year and returning 8% in year 2, 9% in year 3 and so on. After 10 years you will actually have a return of 200%.

Pushing yourself just a little bit further will generate much larger returns further down the line. On a small scale, certain sacrifices may appear to have little to no impact today, but over time they compound to deliver meaningful results. 

Some business examples include:

• Stretching your sales goals by 1-2% per quarter.
• Shipping product 1 day faster per sprint
• Not waiting to fire that employee
• Booking that meeting next week not next month.

Connecting Nodes

I look at different areas in my life as nodes. Most of which can sustain themselves independent of each other. Business, sports, family, friends, all of which I spend time on weekly to improve.

For most of us, these exist on islands. Connecting our nodes creates an opportunity to deliver higher leveraged returns. If by connecting your nodes together in a way that delivers returns where the outcome is greater than the sum of each one individually, you are in an incredible position. This is an often overlooked fundamental in businesses. The caveat is that it takes a lot of time for the connections to materialize into impactful results.

Smaller businesses tend not to value the importance of time & efficiency. However, big companies almost always do - that is how they got big. Understanding how the pieces come together to accelerate one another is a business leader’s role. Many Silicon Valley tech companies (Google, etc.) are known for cross-functional teams that allow departments to share resources/tools to accelerate their collective growth. Not all nodes can be connected today, but building them up (think compounding success), especially within a bigger strategic plan can actually give you the chance to make massive strides towards your 10 year goals.

Some business examples include:

• Networking and sharing social capital
• Having cross-departmental goals
• Mergers, acquisitions and partnerships.

Long Term Vision

In my opinion, this is the biggest differentiator. Most of us live lives where the short term is somewhat stable. We know where we will be in a month from now, and often a year from now. It gives us comfort. We plan accordingly. Where things begin to get scary is when you start to think about what the world will look like much further into the future.

As a business leader, this is where you have the most opportunity. While everyone focuses on a myopic 12 month view, you need to see beyond that. 10 years ago we had mobile phones, but only a handful of companies foresaw a world where we would be interconnected through our devices the way we are today. Those companies are now the biggest on the planet. That vision can be applied to any industry. Disruption. 

Disruption takes time, it is the result of points 1 and 2 above meshed with foresight of where the world will likely be in the future. Transformative businesses need to beat the world where it is going without being too early.

Some business examples include:

• If you were to build a product for users 5-10 years younger than your typical user, what features would they want?
• What are trends in other industries that haven’t yet hit yours (decentralizing workforce, wireless communication, how space is used)?
• If you started from scratch, how would you build your product/service today?

Without relentless hard work, no worthwhile goal is achievable.

In order to truly reach the incredible milestones many of us set for ourselves, I hope that everyone is able to apply this to their master plans for 2020 and beyond. Keep grinding and never quit.

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Philip Cutler is the Founder & CEO of GradeSlam. He is an angel investor as well as the Chairman of Laurus Lifestyles and City Councillor in Westmount, QC.