This model deserves (and has) its own entire industry, because it is so powerful.

Think about this model with this in mind: "Systems that gain from themselves."

Compounding and exponential growth models are particularly relevant for financial decisions,
but the same kind of model can be applied when trying to build new habits, cultivate better
relationships, or create value for customers.

Compounding and exponential growth happens when the growth rate is determined by some basis, and that
basis is in turn affected by the growth.

In other words:

```
for i in infinity:
  New Basis = Basis + Investment + ((Basis + Investment) * Interest Factor)
  Basis = New Basis
```

This is a very rough understanding of the idea, but you can quickly see that the interest factor
_compounds_ (combines) with the basis to increase that _same basis._

So, the more you grow, the faster you grow. The faster you grow, the more you grow.

(Note: "Basis" may also be called "principal" in this rough model of thinking.)

Related concepts include network effects, levers, and collaboration models.


Jonathan Cutrell

Compounding and exponential growth