According to Forbes, investors missed Nvidia’s massive growth because they’re trapped in linear thinking models that can’t grasp exponential math. Nvidia’s data center revenue exploded from just $600 million in 2017 to a staggering $41.1 billion last quarter, representing 56% year-over-year growth. This happened while the company was still supply-constrained and serving only a handful of major customers. The article uses the A4 paper folding analogy – where folding paper 50 times would reach the moon – to illustrate how exponential processes defy intuition through sudden scale changes. This cognitive bias explains why many dismissed Nvidia’s trajectory as incremental rather than recognizing it as foundational AI infrastructure growing exponentially.
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The Problem With Straight Lines
Here’s the thing about exponential growth – it’s genuinely counterintuitive. Our brains are wired for linear patterns because that’s how most of life works. You work an hour, you get paid for an hour. You drive twice as fast, you get there in half the time. But technology doesn’t play by those rules.
Think about it this way: if you’re folding that A4 paper and after 10 folds it’s only about as thick as your hand, your linear brain says “this isn’t going anywhere.” But the math says otherwise. And that’s exactly what happened with Nvidia. Investors saw a great chip company growing steadily, not the infrastructure platform that would power an entire AI revolution.
But What About The Bubble Talk?
Now, here’s where it gets tricky. The same exponential thinking that helps you spot opportunities can also blind you to risks. Remember the dot-com bubble? People weren’t wrong about the internet transforming everything – they were just early about the timeline and indiscriminate about which companies would survive.
So when investors call AI a bubble today, are they making the same linear thinking mistake? Or are they correctly identifying unsustainable hype? Honestly, it’s probably both. Exponential growth can’t continue forever – every S-curve eventually flattens. The question is when, and whether current valuations already reflect that future growth.
The Real Risk Isn’t What You Own
Look, the most dangerous thing about linear thinking isn’t missing one stock like Nvidia. It’s systematically underestimating every transformative technology that comes along. We did it with mobile phones in the 90s, we did it with cloud computing, and we’re probably doing it right now with other emerging technologies.
Basically, if your mental model can’t handle the idea that something could 10x in a few years, you’ll never invest in those opportunities. But if you swing too far the other way and assume everything will grow exponentially forever, you’ll get crushed when reality hits. Finding that balance is the real challenge – and it starts by recognizing that our brains aren’t naturally equipped for this kind of math.
