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.

Links to this note

Avoiding Losers as an Investment Strategy

One way to have good returns when investing is to have a few winners and merely avoid losers. Of course, you must have some winners and a plausible way to avoid the losers which is easier said than done. In the world of investing, the winners take care of themselves because they will have an outsized gain compared to everything else.
Slow Burns Prevent Blank Page Anxiety

It’s easy to be intimidated or anxious when doing something big all at once like writing an essay. Turning a large project into a ‘slow burn’ helps remove that worry—it’s easier to do small parts over a longer amount of time across several projects than in one big effort in a short amount of time sequentially.
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.
Advantages Accrue to the Leader

Markets exhibit the Pareto principle in that most of the advantages accrue to a small number of players—mostly number one. These advantages include growing faster, network effects, recruiting the best people, expanding to new opportunities quickly and most of the 7 Powers.
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.
Thinking Better Thoughts

I remember when I first started working at Stripe I felt like the dumbest person in the room. I was amazed at how smart everyone seemed and the writing…gosh, the writing! If I wanted to be like that too, something needed to change.
Websites as a Family Heirloom

Three things lead me to believe that websites will soon become an heirloom passed down generation to generation: 1) the ubiquity of the web generally (which is still only 59% of the world’s population) 2) the scarcity of web domains 3) the value of search engine ranking.
A Cathedral for Creation a Bazaar for Growth

There are two approaches for creating something of significance, the cathedral and the bazaar. The cathedral is best for creation and the bazaar is best for growth.
Business Strategy Is an Explanation of How to Win

Business strategy should concisely answer who the most import customers are, how to attract them, and what the entire company must work towards to win that market.
Interest Enables Transactions Across Time

Interest rates are a technology that allows people to transact across time. Without the concept of interest, it’s only possible for two parties to transact with what is immediately in front of them, in that very same moment.
Zettelkasten Attracts People Overly Concerned With Their Tools and Process Rather Than Practicing

I’ve noticed that discussions on Zettelkasten forums and comment threads in HackerNews when a new Zettelkasten-like tool is shared are overly fixated on the tools and correctness of the process. Because there is an original source implementation (Niklas Luhmann), people judge the ‘purity’ of an implementation rather than focusing on the activity itself. This makes some intuitive sense, it’s hard to judge the effectiveness of a tool because note taking has compounding effects and most compounding benefits occur at the end so instead people judge in a more near-term way.
Documentation Is Automation

Completing a tasks, documenting the problem and what you did to solve it serves as a kind of automation for the future. Anyone can read it and pattern match to the situation before carrying out the sames set of tasks to fix it again. This also ends up becoming research or a spec for how to automate the task programmatically (a higher order form of automation).
Simple Dot Com Domain Names Are a Multiplier

The venerable .com TLD and a single word domain are a multiplier that improves nearly every interaction with your business. Establishing trust when someone sends a link (avoiding “this looks like spam”). Communicating your domain name to someone over the phone (try saying ‘dot S O’ to someone who can barely hear you on a land line). Interoperating with old legacy systems (some forms just don’t accept all TLDs). Signaling status to potential customers and employees (“they have the dot com they must be doing well”). Finally, it’s easier to remember off hand since you only need to recall the name not the name plus the TLD.
The First Rule of Compounding Is Never to Interrupt it Unnecessarily

Charlie Munger’s first rule of compounding is to never interrupt it unnecessarily. Because of the way compounding works over time, to prematurely interrupt it (e.g. selling your shares or stopping to contribute) will forgo the largest upside—most compounding interest benefits occur at the end.