Slow Compounding

By editor on January 28, 2018 — 2 mins read

Jeff Bezos realized slow compounding. My little theory about company value creation: The faster you build it, that is the half-life, it will get destroyed in the same amount of time. So when you think of a lot of social businesses, that’s played out.

Does it take 8–10 years to build a really great consumer business? It’ll take 8–10 years to destroy it. We may see the tipping point at a couple of these businesses right now.

Amassing capital to me is about finding a smart, useful solution to a very hard, practical problem, and being slow and methodical.

You have to rewire your brain for that to be okay.

How do you, in year two, or year five, come back to a reunion and say, “I’m still working on the same thing.” And somebody says, “How’s it going?” You have to have to courage to say, “It’s hard. I haven’t figured it out yet, I don’t know.”

But if you figure it out and you have this moderate growth, moderate compounding, that is the key: That’s gold.

You can get so enthralled by IRRs in our business. I have friends who run other organizations, and they’re like, “We posted 92% IRR.” I’m like, “You can’t eat IRR.” What does it really mean?

Fast money returns can completely decay long term thinking and sound judgment.

I would love to compound at 15% a year. If I can do that for 50 years, that’s 250 fucking billion dollars. It’s a crazy number.

Slow and steady against hard problems.

Start by turning off your social apps, and giving your brain a break. Then you’ll be a bit more motivated to not be motivated by what everybody else fucking thinks about you.

Think about how all this stuff plays together. How does posting your fucking waffles online relate to me starting a business and accumulating capital? This is wiring your brain for super fast feedback, it’s the same brain you’re using to build a company. Don’t think they’re not the same.

You have one brain. So you’re training your brain here, whether you think it or not.

Acknowledge that these things, where you’re spending hours a day, are rewiring your psychology and physiology, in a way that now you have to use to go and figure out how to be productive in the commercial world.

There’s a reason why Steve Jobs was anti-social media.

I am proactively trying to rewire my brain chemistry to not be short term focused. (52:20)

Posted in: Long-term Greedy

Editor's Note

These are Chamath Palihapitiya's words. They are probably some of the best thoughts on VC, business, and life, but were scattered around the Internet. They live now in this archive.