Developing an Exponential Growth Mindset
Incremental growth is focused on making something better while exponential growth is focused on finding something unique with lasting value.
Exponential mindset is finding growth that will have a lasting impact. It doesn't necessarily have to be about business, it can also apply to personal ambitions.
Exponential is focused on 10X the results of incremental
“The incremental mindset focuses on making something better, while the exponential mindset is makes [sic] something different. Incremental is satisfied with 10 percent. Exponential is out for 10X.” — Harvard Business Review
Below is a line graph that shows a growing business that uses exponential based growth strategy vs an incremental based growth strategy.
In the chart above the incremental path is straight, with few surprises and forecastable growth. The exponential path on the other hand is curved, hiding surprises around blind corners. The only reason to choose the exponential path is for the results past the growing phase.
The exponential growth mindset is not for the faint hearted. It will mean more ups and downs both emotionally and financially. The reward though is 10x that of incremental growth.
There are some very successful people who will argue that incremental growth should never be chosen. The reason is that the results you get from incremental growth eventually will not surpass the expenses. Along the path it may seem to be a comfortable strategy but eventually a ‘black swan’ type of event will wipe out your narrow profits.
Nassim Nicholas Taleb categorizes this as existing in a fragile environment. The growth pattern looks straight and predictable under a set time frame with known variables but never takes into account the unknown. The unknown is what will eventually wipe the growth out. Therefore it is better to aim for 10x growth than the predictable 1x growth. The rewards from the 10x growth will more likely offset the inevitable ‘black swan’ events.
It’s best to be exposed to unlimited upside with limited downside
Also known as asymmetric opportunity, having unlimited upside with limited downside is the single biggest reason to switch to exponential growth. The downside is what you invest, the upside is unlimited if it truly is exponential. Incremental will not contain unlimited growth. Making something better that already exists will at best give you the same profits as what already exists plus a little extra but most likely will result in a lost given enough time.
Taleb defines this as Fundamental Asymmetry in the book Antifragile: Things That Gain from Disorder
Fundamental Asymmetry (also Seneca’s Asymmetry): When someone has more upside than downside in a certain situation, he is antifragile and tends to gain from (a) volatility, (b) randomness, © errors, (d) uncertainty, (e) stressors, (f) time. And the reverse.
Use timeless techniques instead of Neomania type techniques
Timeless techniques have been around for at least 20 years and are proven to be reliable. The opposite are the Neomania type that are the newest version of something that already exists. Usually reserved for the newest technology; in software development its always the newest programming language when something like C or Java do the same exact.
Neomania is the obsession with what is new. It rarely is an improvement, but rather a novelty. There is some irony in this article because exponential growth is based on creating something new but the difference is neomanic people are chasing the new that will not add lasting value.
Tried and true techniques, like timeless marketing techniques, will be better than something untested by time.
Control principles instead of controlling people
Incremental mindset is similar to a line of dominoes that all must be in perfect alignment to work. The exponential mindset is more similar to a chain reaction that depends on parallel interactions instead. This pingpong ball experiment video illustrates the idea.
Trying to micromanage and control people is key to incremental growth. Exponential growth is more concerned with relations, or principles that drive the relations.
Exponential growth is not the same as fast growth
Sometimes exponential growth is explained as a synonym for fast growth. In today’s news exponential growth is often used to explain covid-19 in terms of understanding that it spreads quickly. The difference is that exponential growth is proportional to another variable, fast growth is not. The variable in covid’s case is population. As the infected population size grows, the exponential growth intensifies proportionally.
Do not be afraid to fail
“Only those who dare to fail greatly can ever achieve greatly.” Robert F. Kennedy
The co-founder of Netflix, Marc Randolph, often tells entrepreneurs that there is no such thing as a good idea.
“There’s no such thing as a good idea,” Randolph said. “There’s only one way to know whether it’s a good idea or a bad idea and that is to actually try it.”
He encourages people to think less and act more.
“All successful entrepreneurs think less and act more,” said Randolph. “When an idea pops into their head, they spend almost no time thinking about how good this idea is — their mind immediately shifts to what’s a quick, cheap and easy way I can try it.”
Examples of exponential growth in the everyday
Exponential growth can be seen all around you if you know where to look. Take for instance compound interest. Your initial deposit will see growth acceleration over a long enough time period because of interest compounding on the initial deposit; interest on interest.
The graph below shows that the growth increases over passing time despite the rate of return.
Of course a higher rate of return will accelerate the growth quicker but the law holds true no matter if its a 2% return or 12% given enough time.
In business you simply need to look at any successful tech company to see exponential growth business ideas.
Successful companies that focused on exponential growth
Steps for generating exponential growth ideas
- Find problems to solve
- Use first principles to come up with creative solutions
- Test those solutions
- Focus on what will add lasting value