📈 Superlinear Returns

I'm sorry this week’s email is late. I have been engrossed in reading Paul Graham's (founder of YC) essays, most recently Superlinear Returns.

His essays are read by millions every year and re-read too. I have probably already read superlinear returns 3-4 times simply because every time you re-read a piece of text, you understand it better and can extract more information.

I don’t want to take away from his essay because it is a great read. I would encourage everyone to give it a read, but I do want to share 2 key points for anyone who wants a whistle-stop tour.

1: ‘You get out what you put in’ is not true

I think we all know or have realised at one point or another that this is a false artefact, and Paul sums it up well. The mere fact that this statement doesn’t hold true highlights that returns aren’t linear. Rather, returns are superlinear and often reward those who are ambitious or ‘push’ the boundaries, i.e., the outliers at the end of a normally distributed curve. This links back to the concept of ‘breaking into’ the 1% and consistency required to achieve aspirations.

2: Do work that compounds

Superlinear returns occur in a situation where there is exponential growth or a threshold. When put into practice, one realises that in cases of superlinear return, you will find them both co-existing. Crossing a threshold empowers you to grow exponentially in confidence, skill, and size, and exponential growth helps you cross thresholds because, well, you are growing and can ‘win’ more easily.

So how do you find yourself in a situation which has these sources of superlinear returns? The simplest one is to do work which compounds. There is direct compounding whereby if you do well in one quarter, it sets you up to do better in the next quarter and so on, but there is also learning.

Learning is a case that utilises both sources of superlinear returns. One can push the thresholds of learning and also exponentially grow as learning makes it easier to learn things over time. A good example is when I talked about skill stacking.

Hope that’s been a useful read - it felt great to have had a chance to sit down and digest content again to share it with you all! I highly recommend reading the essays if you can find the time.