At Marcellus, we are big believers in the power of compounding (of not just money) as well as big fans of Morgan Housel. So when the concept meets the author, we have to feature it. Housel is at his story telling best to drive home a simple yet powerful but not necessarily intuitive point – the power of compounding of ideas. He begins with a reference to perhaps one of the best podcasts around – David Senra’s Founders podcast where he told a story about Steve Jobs:
“Steve was in his 20s and he goes and meets [Polaroid founder] Edwin Land. And Steve says, “Visiting Edwin Land was like visiting a shrine … he is my hero.”
And Jeff Bezos took a lot of ideas from Sam Walton. Both Steve and Jeff took a lot of ideas from Sony.
You always find these people where you’re like, “Oh, I thought this was a Steve Jobs idea.” No, no. It’s an [Sony founder] Akio Morita idea, or an Edwin Land idea.
Watch the presentations that Steve Jobs gives where he says, “We’re building at the intersection of technology and liberal arts.” Edwin Land said those exact words!
You’re never going to find anybody who gets to the top of the profession without studying the people that came before them and learning from them and admiring them.
…Small ideas mixing and compounding into big ones – that’s what really drives the world.”
Whilst we do believe in approaching problems with first principles, the concept of building on the ideas of legends is equally powerful in generating breakthroughs.
“If you look at the end result of a long period of compounding, it’s astounding. But all it took to get it done was little bits of incremental growth strung together for a long time.
All progress is like that.
Technological progress is easy to underestimate because it’s so counterintuitive to see how, for example, the philosophies of a guy who invented Polaroid film would go on to inspire the iPhone. Or how an 18th-century physicist would write a notebook that would set the foundations for a modern electrical system.
If you view progress as being driven by the genius of individuals, of course it’s hard to imagine a future where things are dramatically better, because no individual is orders of magnitudes smarter than average.
But when you view it as one person coming up with a small idea, another person copying that idea and tweaking it a little, another taking that insight and manipulating it a bit, another yet taking that product and combining it with something else – incremental, tiny bits, little ideas mixing, joining, blending, mutating, and compounding together – it’s suddenly much more conceivable.”
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Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
