Morgan Housel is one of our favourite finance writers here at Equity Mates. When he publishes, it is generally worth your time. In this article he make the case that it is not just financial returns that compound, but progress compounds in similar ways.
The question is: Did George Wheelwright know that he would influence Edwin Land, who would then influence Steve Jobs, who would then design a phone that 2.5 billion people would use?
Did Michael Faraday, who died in 1867, know that his ideas would directly influence the light bulb, which effectively led to the creation of everything from the modern power grid to nightlife?
Did Ben Graham know that his 1950s finance class would lead to 45,000 trekking to Omaha every year to hear his student speak?
Of course not. It’s so hard to know what an idea, or an invention, or a philosophy, will influence, and what a person who’s influenced by it will go on to create.
Ideas and inventions compound over generations. Incremental change may unlock something completely unexpected and lead to the next big breakthrough. And for Housel, that is a reason to be optimistic.
He believes that so much pessimism is driven by the individualism that dominates our thinking today.
If you view progress as being driven by the genius of individuals, of course it’s hard to imagine a future where things are dramatically better, because no individual is orders of magnitudes smarter than average.
But the beauty of technological innovation and social progress is that it hasn’t been driven by individuals in isolation. Much like incremental returns over a lifetime can create incredible wealth, incremental progress over generations creates incredible change. That, for Morgan Housel, is a reason for optimism.
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