Compounding Crazy

Zoom out. As Patrick Collison said when describing his admiration for Jeff Bezos to Ezra Klein:There’s something quite deep about the notion of using time horizons as a competitive advantage, in that you’re simply willing to wait longer than other people and you have an organization that is thusly oriented.

Building blocks let more new companies build faster and leaner.

This is demonstrably true, using DPUs or actual numbers, but according to Urban, there are three reasons we can’t grok the impact of exponential progress:

If the Fed jacks up interest rates, growth assets could tank short-term. Ham-fisted crypto regulation is a legitimate concern. Markets never go straight up. Even though global equities and the Nasdaq have compounded at a roughly 10.5% CAGR and ended up and to the right, there were a lot of bumps along the way. Please don’t mortgage your house and Y... See more

First, there are the timing risks.

Things could totally fall apart. But if history is a guide, we’ll wake up a decade from now to a market full of much higher numbers than we can reasonably wrap our minds around today. Some of the new market cap will come from today’s public companies, some will come from today’s private unicorns, some will come from existing startups that aren’t ye... See more

Then, there are macro and tail risks.

The Law of Accelerating Returns states that the rate of change of progress accelerates because humans can use the technology at their disposal to progress faster than previous generations could without the technology.

For one, the faster a new company is built, the faster other companies can benefit from it. New primitives create new opportunities for innovation. Kind of obvious.Less explored is the fact that if a new company needs fewer employees, because it can outsource whole functions to APIs and software, there are more talented employees freed up to go sta... See more

Our own experience makes us stubborn old men about the future. We have lived through past growth rates. We’ve never lived through future growth. Therefore, it’s a lot easier for us to intuit what the future will be like by extrapolating linearly based on what we’ve actually experienced. Yes, things will be different, we all know that, but they’ll b... See more