Play iterated games. All the returns in life, whether in wealth, relationships, or knowledge, come from compound interest.
-Naval Ravikant
When I started importing bulk amounts of scooter products, I found out that I would need a freight forwarding agent. They take care of all the paperwork from the factory, seller, buyer, and shipping partners, making sure everything is documented properly and liaise with the shipping agents, ports, and wharfs to ensure my goods get from whatever country they're in to me.
The first time I did this, I was a nervous wreck. There were huge sums of money and piles of paperwork involved. I forwarded packing material declarations and letters of authority to my business partner, asking for help. His response was, "I’ve never really done logistic stuff - can you figure this one out?"
Eventually i figured it out, and I was damn proud of myself too. As more and more shipments came in, I got better at optimising my processes, and I now had the confidence to know I could figure out whatever weird little error might slip through the cracks and potentially hold things up.
Seven years later, I use the exact same forwarding agent I did from my first shipment. Except now, there’s no stress. There are a handful of very low-effort emails (mostly just forwards), and then, like magic, a container full of product appears at my doorstep just weeks later. What used to be stressful, tedious, and time-consuming is now a couple clicks.
I could have shopped around for better prices or hit them up for a discount by now. I just don't think the savings would compare to the compound interest stored in the relationship.
My knowledge of the process and long-term, easy-to-work-with professional relationship makes what used to be a terrifying and complex ordeal an absolute breeze, that continues to get more efficient and easier each time.
While this is a more abstract example i wanted to try articulate compound interest in the relationship and knowledge categories. These can be harder to measure than compound interest in a financial sense since there is no clear balance sheet to run the numbers.
Every time i run the importing process i am running it with the knowledge of having done it many times before, I use the knowledge of 22 prior experiences to implement the 23rd execution and so on.
Every time I use the same agent I strengthen the relationship, reducing the amount of questions needed and increasing the trust each time.
Navalism is best read in the following order:
Seek Wealth, Ignore Status Games, Don't Sell Time, Give At Scale, Long Term Games, Internet Advantage, Compound Interest .. to be continued.