Flywheel effect

A flywheel effect is a self-reinforcing loop where growth in one part of a business feeds directly into another part, which in turn feeds back into the first, so each cycle makes the next one easier. The name comes from a physical flywheel, a heavy spinning wheel that takes real effort to get moving but keeps spinning with less and less added push once it's up to speed.

In investing, a flywheel usually shows up as some combination of more users, more data, or more scale feeding directly into a better product, which then attracts more users, more data, or more scale. What separates it from ordinary growth is the direction of causation, each part of the loop makes the others stronger, not just bigger. A flywheel that's genuinely spinning tends to compound an advantage that's hard for a new competitor to copy, since a rival has to replicate the whole loop, not just one piece of it, to catch up.