“Play iterated games. All the returns in life, whether in wealth, relationships, or knowledge, come from compound interest.”
“Compound interest is the eighth wonder of the world. He who understands it, earns it…He who doesn’t…pays it.” – Albert Einstein
What is an Iterated Game
An iterated game is a concept in game theory in which a player plays a similar game numerous times. The repetition of this game allows a strategy to be formed. A player pays attention to all choices made, all effects on his choices, and how to manipulate his choices for his benefit.
Why We Should Play Iterated Games
When Naval advises us to play iterated games, he is essentially emphasizing pattern recognition. Our decisions are usually habitual, but that means we lack conscious awareness. Compounding information to create a strategy is a result of intentional observation.
Applying This To Your Life
Begin to recognize cause-and-effect relationships, make hypotheses, and experiment until patterns are found and you can repeat success. Then, you can take that knowledge and use it to make better choices.
Life is just an accumulation of choices. The more good choices you make over time, the better your outcome will be.