Compounding rewards duration far more than rate — the dominant variable is how long you leave it alone.
What changed for me after reading it: I stopped optimising the rate and started protecting the duration. Almost every real disaster is an interruption, not an underperformance.
Links
Typed edges. Anything below the line was authored on the other note and derived here.
extends →Play long-term games with long-term people — compounding of money, trust, and knowledge only works if you don't reset the board.Naval argues for long games from trust and reputation. Housel supplies the arithmetic underneath: the exponent is the term that matters, so any reset of the board is enormously expensive.
← requiresA small chance of ruin is not a small risk — once you are out of the sequence, the expected value you would have collected goes with you.
The most useful cross-book link here. Housel says duration is the dominant variable; ergodicity is the formal reason why, and why any absorbing barrier invalidates the whole calculation.
← requiresMargin of safety exists so that survival never depends on your forecast being right.Compounding needs an uninterrupted runway. Room for error is what buys the years, so it is upstream of every return figure.