If you’ve got it, you get it

“Once you’ve got a few dollars, they multiply like mice.” – quote from an old movie, source forgotten.

This seems to be true, but why? Some possible reasons:

Passive returns. Investments such as real estate can produce about seven percent a year, which compounds. This is good, although not as great as the 10 percent of the stock market over the past 50 years, or the 13 percent of the S&P 500 since the global financial crisis, or 20 percent that Warren Buffett has managed over his career.

Law of increasing returns. The incremental cost of replicating a high value but cheap-to-make product such as a software program or book is small.

Learning. The more we do something, the better and more efficient we can become at it. This learning also spreads to adjoining areas that have similarities to the initial process. The iPod was a step along the way to the iPhone.

Network effect. The greater the number of people who are using a new type of product, the more successful it becomes, because this growth improves the infrastructure and reinforces the standard. Electric vehicles are enjoying this kick-along.

Social proof. As your profile rises, the word spreads, and so your reputation grows. Amazon built a name for low cost and reliability of supply.

Jigsaw effect. The closer we get to finishing a project or mastering a complex skill, the simpler the job becomes. Resources become focused on the remaining pieces of the puzzle. As well, the nearly-done product is easier to see.

Life can seem unfair until we get a few mice. There’s not much to each of the little tikes, but they do reproduce.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s