The exponential growth bias

The exponential growth bias is a cognitive bias that occurs when individuals fail to accurately perceive the potential of exponential growth. This bias can lead to individuals underestimating the potential of an investment or project and can result in missed opportunities.

An example of the exponential growth bias is when an individual is presented with the opportunity to invest in a company that is projected to grow at a steady rate of 10% per year. The individual may not fully appreciate the potential of this investment over time and may choose not to invest, even though the compound growth rate of 10% per year can lead to substantial returns over a period of several years.

Another example of exponential growth bias is when an individual underestimates the potential of a new technology or innovation. They may not fully grasp the exponential nature of technological advancement and may underestimate the potential for growth and disruption in a given industry.

Paraphrased, the exponential growth bias is a cognitive bias where individuals fail to accurately perceive the potential of exponential growth. This bias can lead to individuals underestimating the potential of an investment or project and can result in missed opportunities. An example of this might be when someone fails to invest in a company that is growing at a steady rate of 10% per year or underestimates the potential of new technology or innovation.