Usefulness of knowledge

The way that the usefulness of knowledge accumulates is very similar to to that of compound interest in the sense that when you are a child, you learn so much information, and none of it seems to enable you to produce value for society and make money. You have to learn basic skills like reading, writing, and arithmetic. What you don’t realize at that age is that you are building a bedrock upon which all your other capabilities will be built once you’re older. It is these foundational skills that allow you to learn more profitable skills later on in life, like computer programming, mechanical engineering, sales, etc.

Likewise, when one begins investing continuously into an account that compounds a few percentage points per year, the vast majority of the growth of the account comes from one’s own contributions, and a very small amount of the growth comes from the accumulated interest. However, as one continuously invests over decades, eventually the value of the account reaches critical mass. At this point, the interest earnings start to catch up to one’s own individual contributions, and eventually they surpass them. So the usefulness of knowledge and investing have that in common: they both take a very long time to pay off, but when they do, they pay off in a meaningful way, and they do so continuously.

It is hard to trust that one’s knowledge investments are going to pay off in a few decades, as humans don’t generally think on decades-long timescales, so only a few people are able to reap the benefits of the compounding of the usefulness of knowledge: those with strict parents that force them to continuously engage in their education, and those who are very perceptive and can understand the value of learning.

At the end of the podcast, I draw parallels between a useful knowledge base and an interconnected web of nodes. Each piece of knowledge is a node. It is the number of nodes and the number of connections between these nodes that are valuable. The compounding comes into play due to the fact that if you already have a large nodal network with n nodes, and you add another node (piece of knowledge) to the network, you can potentially get n new connections from adding only a single node. So basically you have a bunch of other knowledge by which to contextualize the new knowledge. Therefore, knowledge is not useful in a vacuum, but only in relation to other knowledge.