this post was submitted on 17 Nov 2025
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me_irl
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One thing i don't understand is why a company always needs growth. Why not just do what they do, solve a problem for the people or companies they serve, and be happy with that. Growth will come, and plateau when it reaches a natural level of saturation. Why keep trying to expand, sell more, increase profit and eventually collapse?
Because growth is required for shareholders to keep funding the company. Shareholders don't care whether a companies product is "finished", they need growth. This is the case for public companies anyways, a lot of smaller private companies also try to grow, but they try to do so within reasonable limits, because they aren't pressured by investors. As long as the company stays afloat, the growth rate doesn't matter
If the company needs shareholders to fund it though, it is not economically viable in the first place. It is being artificially supported by the capital that they add to it
It's a bit more complicated than that. One way the shareholders support the company is that the company will hold sone percentage of its shares, which have a value as determined by the stock market. Amongst other things, the company can use those as colateral for loans which they may use to expand the company. The idea being that expansion will make the shares worth more, and increase income, so making the loans easier to pay off. Shareholders support the value of the shares by not selling them cheaply, This benefits the shareholders and the company, and if they think the company is doing well, they'll tend to trade the shares at a higher price. If they think the company isn't doing well, fir instance it's not increasing its valuation, they'll tend to trade at a lower price, further reducing the valuation, and making it harder for the company to raise funds through loans or share sales.
Basically the whole thing is held up by the common delusion that the share price is related to the performance of the company. It's actually only related because everyone agrees it is.
ok. so nobody should ever get loans then?
because that's what shareholding is. a loan.
Nah.. i don't see shareholding as a loan. Loans cost a set percentage rate. Shareholding costs parts of the company worth. Loans are imo totally legitimate. Shareholding on the other hand, is selling off the company to people who don't care if it survives or not. As long as they jump ship before it shows signs of sinking
It's the Ford vs dodge case that dictated this, instead of investing back into the company or its employees, they were required to provide as much profit to shareholders as they could
https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
because the shareholders want returns on their investments. if you own stock, you want the value of the stock to go up. that requires more profits.
it's not really an issue for private companies. a lot of private companies/small business don't grow as long as they provide adequate cash flow to their owners.
it's a public company issue.
Stocks can also return dividends and the value of a stock is not purely growth or even profit-based.
those companies are typically not in a growth stage. they are established.
Yes. My point was that many publicly traded companies /stocks aren't growth focused.
Why do we have them then?
because public companies allow for a much larger access to capital and scale of operations.
private companies can't grow at the same rate as public companies because they are limited to private investors.
public companies anyone can buy the stock. if you want to grow big and fast, you have to go public.
This is the point though.. Our world today has an issue, because it has become dependent on fast and unstoppable growth. Companies don't have to grow fast and big, and they shouldn't.
Promises of growth mean the firm is eligible for more lending at a lower interest rate. Growth implies lower risk of default and higher ROI down the line. So people will risk more money with a lower immediate expectation when they assume the investment will pay off big in the future.
This higher rate is lending can create a self-fulfilling prophecy. If you can borrow cheaper than your competition, you can expand your enterprise faster and move more units sooner. You can consolidate market share and transition towards monopoly status sooner. And that means you can raise your prices with impunity.
Even if you can't deliver, it's good to promise growth and then fake it until you make it, in order to access all that cheap borrowed money asap
To me it sounds like companies outgrow themselves in the pursuit of growth
That's how you end up with the Corporate Dinosaurs. Overlarge corporate conglomerates with C-levels who have fully lost the plot of what the business is intended to do, with vulture capitalists circling overhead to strip them down for parts as soon as they stumble.
It doesn't, but if it's publicly-owned, shareholders will want a return on their investment, which requires growth, and that creates the pressure to continuously grow.
Because Samsung thinks refrigerators & laundry machines must have tablets & wifi. After that they MUST KEEP GROWING and attach Tesla cars with unopenable doors to their refrigerators & laundry machines. And subscription-based functionality for every basic function.
Growth = shareholder get big dividends and bigger share prices.
Sure, but then the company is not viable without the support of external capital. From my point of view, investors artificially expand the capacity of companies, to the point where they no longer are viable
It's 100% greed, they don't care if the company is viable in 6 months as they cash out and move on before the share prices take a hit. The next ~~investor~~ gambler dose the same or gets stuck with the losses
It sounds like having public companies is the issue then.
We should burn them all down.