Slow Compounding

In this great Youtube video, Chamath talks about a very important phenomenon for success in any field. He talks about the ability to get extraordinary returns on capital as an ability to work on hard problems in an unique way over a very long time horizon making very small but consistent progress year on year. This is not a very obvious thing. If you ask most startup founders or money managers, they would boast about doubling their revenues or their capital in two years and think that it is a good thing. Chamath talks about the concept of the half life of a business and postulates that a fast growth may mean a fast de-growth as well. As a counter example, he talks about Jeff Bezos and Amazon, who made a tiny but consistent growth, year on year, for many years.

This concept I believe has applications in not only business but many other phenomena in life, including learning, writing, health and other endeavors where compounding can give extraordinary results that are counterintuitive. It is much better to grow at a 15% rate year on year than to grow 50% for two years and then de-grow for many years. If you see most successful ventures that survive in the long run, you would see this phenomenon at work. If you observe, how people like Warren Buffett became rich, you would see this kind of phenomenon.

People have observed this in other domains as well. Check out this article by Graham Greene , where Greene proposes that you need to write 500 words every day, just 500 words, to publish 50+ books in your lifetime. Does this sound impossible? Do the math and it is indeed possible.

What is difficult in both these examples, is actually practicing the theory. First of all, it is really difficult to grow year on year, consistently for many years, if not decades. Secondly, it is difficult to face your friends, family and business acquaintances year on year and talk about the slow growth and the problems in becoming substantially big. It is difficult to manage the emotional challenges of living a life where thrill is a bad word and steady, stable, boring movement forward, is a norm. But if one is interested in growth, that is the way. So switch off your social apps and focus on the painful but ultimately very fruitful journey of long term growth.