Compounding Is Unintuitive Because the Initial Curve Feels Flat

I’ve always wondered why the nature of compounding and any exponential relationship feels unintuitive. That is until I read this quote from Paul Graham’s essay How to do great work.

The trouble with exponential growth is that the curve feels flat in the beginning. It isn’t; it’s still a wonderful exponential curve. But we can’t grasp that intuitively, so we underrate exponential growth in its early stages.

We tend to understand immediate relationships easily, but when it comes to exponential growth over time, the outsized gain occurs at the end. That’s simple to visualize (draw and upward facing curve) but hard to know when you’re on it.

It will feel closer to flat or linear when you are at the head of the curve over short time windows. Even more difficult, results are not always easily as observable. For example, how would you know you are thinking better thoughts?

The point is, you might need to slog through some things for awhile to begin seeing the result of exponential growth that was already happening.

See also:

  • People Don’t Expect Much from Simple Ideas

    People tend to think impressive results must come from impressively complicated means and effort. We underestimate the power of simple ideas and overestimate complications.

  • High Growth Companies Grow Quadratically

    Most runaway successes we hear about often have some mythology of the moment the founding team unlocked exponential growth. Examples include Slack, Facebook, and HubSpot. The only problem is, most of these growth stories are not actually exponential but closer to “an initial period of quadratic growth followed by linear growth”.