Compound words are for the most parts just regular words. This is actually an example of a well known word which has a (slightly) different meaning than the individual words.

Same as many English compound words, e.g. grandparents, airport…

It is not just a quirk in the German language as you can see, although it probably originates from there. While it is possible to construct words, most used compound words are well agreed on (same as in English) and not as made up, as you make it seem.