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Exponential Thinking & Compounding

5 mental models

Understanding how small changes compound into massive effects

Mental Models

The Power of Daily Compounding

intermediate level

intermediate

Habits are the compound interest of self-improvement. Small daily changes—improving 1% each day—seem trivial initially but create dramatic transformations over time. Compounding works both directions: tiny improvements accumulate into excellence while small deteriorations compound into disaster. The key is consistency over a long enough time horizon.

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Exponential vs. Linear Thinking

intermediate level

intermediate

We have trouble seeing things as exponentials because we mostly view the world linearly. Exponential growth is notoriously difficult to grasp conceptually because it's outside our evolutionary experience. We evolved in environments where resources grew linearly—more land meant more food in proportional amounts. Doubling patterns were rare, making our intuition poor at exponential reasoning.

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Superlinear Returns & Power Laws

intermediate level

intermediate

You can't understand the world without understanding superlinear returns. When outcomes grow faster than inputs—when doubling effort more than doubles results—you're in superlinear territory. These situations follow power law distributions where a few outliers dominate outcomes. Understanding when you're in power law versus normal distribution domains changes everything about strategy.

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Work That Compounds & Knowledge Compounding

intermediate level

intermediate

If you do work that compounds, you'll get exponential growth. Learning is an instance of this phenomenon—the more you learn about something, the easier it is to learn more. Growing an audience is another—the more fans you have, the more new fans they'll bring you. The key is choosing activities where today's effort increases tomorrow's capacity.

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Jump to Universality

intermediate level

intermediate

All knowledge growth comes from incremental improvement, but at some point one small incremental improvement causes an outsized increase in reach, creating a universal system in the relevant domain. This is a jump to universality. Out of few comes infinite—using 26 letters and memes like agreed pronunciation and grammar, we can create any word possible.

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About This Domain

Understanding how small changes compound into massive effects This collection of mental models provides frameworks for understanding and working within this domain effectively.

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