Gate's Law

People are bad at understanding exponential growth. They over estimate short term results and under estimate long term results.

Full quote:

Most people overestimate what they can achieve in a year and underestimate what they can achieve in ten years.

Links to this note

• Most Compounding Interest Benefits Occur at the End

  Due to the nature of compounding interests growing exponentially over time, the immediate benefits of such an effect are small compared to the benefits at the end. This can make it hard to see how certain actions and behaviors lead to compounding because it can take a long time. It makes intuitive sense for things like money (people understand to contribute to a 401k for example), but requires more faith for actions like reading a lot. This explains why a lot of good advice is unlikely to be followed and example of Gate’s Law.

• People Are Bad at Long-Term Thinking

  People are generally bad at thinking and making decisions about long-term consequences. Gate’s Law observes that people overestimate the short term and underestimate the long term. People are motivated by loss aversion which leads to status quo preserving behavior and biases people towards keeping things the same.

• 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.

• Civilization Is Composed of Fast Layers and Slow Layers to Absorb Shocks

  Resilient systems that can absorb shocks (short peaks of rapid change) have multiple layers that move at different speeds. For example, technology is a fast moving layer—it changes very quickly. In contrast, culture is a slower moving layer which, over the course of time, is nudged along over a longer time period.

• Power Law

  An exponential plot where the 80% of Y comes from 20% of X.