Taking Ideas Seriously is Hard
Most people don’t practice taking ideas seriously. I think it’s because most people don’t know how to. I didn’t either, until I stumbled upon an implication.
For example, what would it mean to take compounding seriously?
Ugh. I can feel your aversion. You’ve already heard so much about compounding, how it works, how it’s the eight wonder of the world, etc. etc.
But, familiarity is not the same as taking it seriously.
Say you start with $100, and every year, make 10% more. This compounds, since the extra money is a function of how much you already have. The more you have, the more you get. It’s a positive loop that keeps on increasing.
That’s the familiar interpretation. The earlier you start, the more money you’ll make.
To take this interpretation seriously would mean investing your earnings for a similar return. Reality has a surprising amount of detail, and sometimes assumptions break. You don’t make 10% — which means you need to balance your investments somehow. That makes things complicated. However, this complication is not related to compounding.
Taking compounding seriously means taking it a step further. Your net worth is just one implication. What else compounds?
