Compounding


Legend has it that chess was invented in ancient India. A king was so delighted by the new game that he offered the inventor a single request. The old man gestured at a chess board and asked for 1 grain of rice on the first square, 2 grains on the second, 4 on the third, and so on for all 64 squares.

 

The king graciously agreed. As grains were placed, the court slowly realized the magnitude of the gift. By the 20th square, there would be 1 million grains. By the 40th, 1 billion. And by the end, there would be enough rice to blanket India.

 

This “exponential growth bias” causes people to underestimate the effects of compounding.

 

In your life, the following actions can compound into huge benefits:

 

On the flip side, these actions can compound into huge costs:

 

If you work on something a little bit every day, you end up with something that is massive.

-Kenneth Goldsmith

 

On a global level, technology is also compounding. Futurist Ray Kurzweil predicts computers will achieve human-level intelligence by 2029. And by 2045, humanity will reach the Singularity: “we will multiply our effective intelligence a billion-fold by merging with the intelligence we have created.” 

 

A billion hours ago, modern Homo sapiens emerged. A billion minutes ago, Christianity began. A billion seconds ago, the IBM personal computer was released. A billion Google searches ago…was this morning.

-Hal Varian

 

The Drake equation is a formula that estimates the probability of extraterrestrial life in the galaxy. Conservatively, there should be thousands of intelligent civilizations. But some researchers think runaway technology leads to self-annihilation.

 

Humanity’s troubles are due substantially to the fact that we are a dysfunctional species. Dysfunctional. And why? Because we have Paleolithic emotions. We have medieval institutions. And on top of all that we’ve developed God-like technology. And that's a dangerous mix.

-E.O. Wilson


References


Wheat and chessboard problem. (2021, March 5). Wikipedia. https://en.wikipedia.org/wiki/Wheat_and_chessboard_problem

 

Stango V, Zinman J. (2020, September 19). Behavioral biases are temporally stable. SSRN. https://ssrn.com/abstract=3695593

 

Reedy C. (2017, October 5). Kurzweil claims that the Singularity will happen by 2045. Futurism. https://futurism.com/kurzweil-claims-that-the-singularity-will-happen-by-2045

 

Cai X et al. (2020, December 17). A statistical estimation of the occurrence of extraterrestrial intelligence in the Milky Way galaxy. arXiv. https://arxiv.org/abs/2012.07902


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