Albert Einstein joked that the most powerful law in the universe is the law of compounding. Every time the law of compounding is talked about someone quotes Einstein, because he is the only person who has said anything new about the law of compounding. So far.
In all the history of the world there has been this boring old thing, compounding, that makes people rich. Compounding is boring, because it's passive and invisible and accumulative. Compounding is boring, because it is hard to visualise; you can go to the butcher and ask him for half a kilogram of compounding, can you? And compounding is boring, because most people don't really intuitively expect it to work: it's as if I said to you, "Concentrate on a candle flame for five minutes a day and as a result you will enjoy great health" - maybe it will do something, but it seems a little weird that such a simple thing will produce such a great result.
But compounding is not necessary a value-added thing. There are, in fact, two kinds of compounding! One imitates the other. There is free compounding, which is when money works for you AND for other people. There there is toxic compounding, when money works only for you.
Regardless of active or passive investment, the quality of the compounding depends on the overall system out of which the interest is being derived. You might be earning in terest in two different banks, and the source and fruits of each bank will be toxic or free, depending on the bank.
The trouble is, we are terrible at telling which kind of compounding is good and which is not. The law of compounding is divorced from the start and the end - compounding is really the middle of a process whose beginnings and conclusions are invisible. So learning how to invest in free compounding is learning, in fact, how to invest in value and cost, rather than investing merely on price. It involves understanding that there are kinds of interest which are good and kinds that are not. It involves discernment and wisdom.
Regarding discernment, Lord Buddha said to test everything out as good in three ways: if it is good in the start, good in the middle, and good in the end, then it is good indeed. Regarding wisdom, Lord Jesus said to judge people and institutions by their fruits; He said that people are like grapevines, you can tell by what they are grafted onto, where they have their roots, what kind of people they will be. So Jesus is telling us to observe the values (the roots at the start) and material conditions (the fruits at the end) of a person or institution.
Armed with these great teacher's wisdom, it becomes instantly clear that free compounding is not the product of mysterious invisible processes at all. Free compounding comes from added value: and the results of free compounding are lives improved, hearts lightened, people amused and pleased, institutions flourishing and stable, and societies peaceful and quiet.
Toxic compounding, on the other hand, is abstract, hidden, occult and mysterious. You get a quarterly report that you do not and can not read from companies you do not understand. You have no idea where your money came from or where it is going, and you do not understand whose life it is helping.
Free compounding is the genius spirit of great societies. It shows in fruits and roots: the fruits are prosperity and the roots are good character and civic harmony. Institutions and people that practice free compounding are obvious and open.
Toxic compounding in the chaos of modernity. It shows in abstraction, facelessness, and impersonality. But most importantly, it either does not add value, or it does not even bother to explain where it adds value. That is the key thing.
If you get rich from toxic compounding, what do you think your reward will be? Contrarywise, if you get rich from free compounding, how can you avoid seeing the reward right before you eyes? The distinction is vital - that is, life-giving - because the great tradition of the West defines the act of usury (money-lending) as a sin - that is, a grave-error, destructive to life.
Why do you think usury is a sin? Usury is a sin, because humanity did not have the discernment to tell the difference between free compounding and toxic compounding. Toxic compounding is the error, and it is to those brave soulds who use free compounding to add value that true wealth belongs.
With the distinction between free and toxic compounding, the error that is called "usury" is identified and correctable now. You can release all feelings of doubt and guilt about using compounding and really use it to both get and make free. Isn't that good news about the law of compound interest?