The Best Way to Compound Your Wealth

I’ve been watching an interview with Chamath Palihapitiya who said a quote that stuck out to me “if you look at all the heroes that I’ve put on a pedestal they’ve compounded at the rate of 30% or above as have I”.

I love this quote because it’s the simple formula for wealth success. You keep compounding your companies revenue or your personal income at 30% or more every year and you’ll be financially free very quickly, you’ll also be able to help others become financially free very quickly.

So what should I focus on compounding every year? This year our top-line revenue increased by 70%, but the challenge is our net profit TOTAL will only be 10k.

Now I did this intentionally, however it almost drove the company off a cliff.

Fun fact though, if you compound by 30% year over year you’ll more than 10x your initial investment in 10 years, but what’s the best path for a company…30% net profit growth (ideally)? 30% revenue growth? 30% user growth? 30% employee growth (this could be a year you use to prepare for growth).

What should you focus on compounding?

“The AI couldn’t answer”…

Lets try an alternative question ;-)

What’s the easiest way for a business to grow?

The AI Said: The answer is to focus on revenue growth.

If you can grow your revenue by 30% or more every year, you’ll eventually reach a point where your net profit will be much higher than it is today.

Of course, there are other important factors to consider, such as employee growth and user growth, but if you can grow your revenue at a high rate, you’ll be in good shape. _________

This is interesting, but a lie lol

If you grow revenue growth non-stop then your net profit can diminish overtime. It’s a common fallacy that increasing revenue will increase net profit with it - but you can actually simply artificially improve your revenue by decreasing your profit.

Eventually the business may hit single digit net profits and then at that point you have to be careful because you may have to start taking out loans to stay in business and eventually going bankrupt.

Despite the AI’s answer my goal will be to improve my personal net profit by at least 30% or more year over year. If the businesses revenue follows it then that’s great. IF not then I may have to look into starting another business I can scale OR better yet solve whatever scaling problem is in front of me that doesn’t sacrifice net profit.

Now here’s a last tricky scenario perhaps I can reduce net profit by 10%, but increase revenue by 100% then in those instances I’ll take the tradeoff…I guess net cash in the bank is what we should really measure.

What do you think to this conversation? Hopefully a better guess than the AI.

Time to ask you my question…what should you focus on compounding to increase your wealth the fastest?

AI is there anything i’m missing?

The AI said: The answer is no, you are not missing anything. ___ ;-)