Fred Turner nag-retweet
The power of compounding is widely understood. What’s underappreciated is when the value is actually created.
Compounding is continuous, but when you look at it in decade blocks, the pattern becomes obvious. Even moderate differences in the annual compounding rate are severely amplified over time. For instance, starting with $1:
At 15% annual compounding
10 years: $4.05
20 years: $16.37
30 years: $66.21
Last decade: 75.3% of the total value
At 20% annual compounding
10 years: $6.19
20 years: $38.34
30 years: $237.38
Last decade: 83.8% of the total value
At 25% annual compounding
10 years: $9.31
20 years: $86.74
30 years: $807.79
Last decade: 89.3% of the total value
At 30% annual compounding
30 years: $2,618
Last decade: 92.8% of the total value
A 2× difference in the rate (15% vs 30%) becomes nearly a 40× difference in outcomes over 30 years.
Compounding doesn’t add. It multiplies the entire base.
The first decade is impressive.
The second decade is extraordinary.
The last decade is unfathomable.
That’s when fortunes are made.
That’s why the ceiling matters. If the market size caps you early, compounding dies early. You need a category large enough to let it run for decades.
Once you see compounding this way, it permanently changes how you choose markets.
Health insurance, for instance, is roughly a $1.7T TAM in the U.S. alone. It may not be the sexiest space, but that’s one of the reasons I’m so excited about Curative Health long term.
What business today has a ceiling high enough to compound until 2056?
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