Is it a bird? Is it a plane? It's compounding📈

#93

Hey folks 👋

How are you, hope you’re doing well.

Welcome to Wisdom Letter #93

Today we are talking about the idea of compounding👇

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📈 Compounding - The Mental Model

Mental models are everywhere, once you start learning about them, you start seeing them all around you.

It’s certainly true for the mental model we are talking about today.

Compound interest is a concept of finance and mathematics. The mental model of compounding derives from it.

And it applies to almost every aspect of life.

Whenever you see exponential gains in anything in life, you can almost always attribute them to years of compounding.

Be it your health, wealth, relationships, or knowledge.

That’s what we dove in today.

And we have tried to make it as simple and actionable as possible, with images like this one —

The Magic of Compounding

So enjoy the article.

Here’s what it contains:

1. A simple definition of compounding

2. 5 domains where it works - and how it works there.

3. 1 little nuance of how compounding doesn’t work in finance

4. The less discussed idea of negative compounding.

So dive in, hope you enjoy it👇

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🔗 Related

1. What Are Mental Models & Why Are They Important (With A Simple Example)

2. The 5 Most Important Cognitive Biases Holding You Back

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📚 Further reading

1. The Wisdom of Atomic Habits from Wisdom Letter #75

2. Naval Ravikant on compounding in relationships

3. Warrent Buffet’s biography. Goodreads link -> The Snowball

4. Warrent Bufferts bio movie is a must watch. Trailer -> Becoming

Buffet is the personification of compounding.

He has invested in financial markets across 9 decades, there’ a lot to learn from him. Do watch the bio movie even if you don’t read the book.

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🐦 Birdwatch

Sahil Bloom @SahilBloom

Play the Long Game The greatest riches in life - personal or professional - come from compound interest. But it takes time. Lots of time. Knowledge is no different - it compounds. So lifelong learners play the long game. Let the magical power of compounding work for you.

June 6th 2021

50 Retweets371 Likes

juliette_chevalier @_juliettech

Most people overestimate what they can achieve in a year and underestimate what they can achieve in ten years. ~ Bill Gates, on the power of compounding 🚀

June 7th 2021

13 Likes

𝚅𝚊𝚛𝚞𝚗 @oxvmxo

Morgan Housel on how Time is the Best Friend of Compounding ... @dmuthuk @morganhousel

December 29th 2020

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Thank you for reading🙏

Hope you enjoyed today’s mail.

If you liked today’s post, please forward it to just 1 friend and ask them to subscribe.
If enough of our friends do that, then we will enjoy the power of compounding and will be able to reach many more like minded people.

See you next week.

Cheers,

Ayush & Aditi

PS: Things… they are a brewing…☕, more updates soon😊