No Stupid Questions

They don't.

See local businesses that remain a single location for generations.

It is a want not a need.

There are many answers to this.

First, this is not a general capitalism thing. It is more the specific flavor we have. Second, it is not an absolute rule, there are companies that don't focus on growth, but it is rare amongst massive companies.

The original idea of capital investment is that when you need investment for your company (e.g. to buy better machines, expand production, etc.) you let people invest (by buying shares) and then give them a portion of the profits gained from that investment (in the form of dividends).

However, most companies have figured out that if they don't pay dividends but re-invest the money, shareholders are still happy because their shares get more valuable as the company grows and they get to grow the company, which is good for CEO paychecks and lot of other things.

There are things like economies of scale (if you produce million units of something per year, it is almost always cheaper per unit than if you produce ten per year). So if you don't grow, your competitor that does grow could sell cheaper than you and put you out of business.

And a lot more.

Idiots began to demand perpetual growth and other idiots began trying to make it happen. And then it became institutionalized. And then the idiots forgot they were idiots.

Idiots began to demand perpetual growth and other idiots began trying to make it happen. And then it became institutionalized. And then the idiots forgot they were idiots.

It’s all based around fractional reserve lending and interest. Banks take in deposits and lend several times the deposit amount at interest against that reserve. To pay back the bank the business sector has to grow in order to pay interest on the principal. Make sense?

The reason cited even in privately held companies is pretty much because everyone else is doing it.

Their COGS (Cost of Goods Sold) rises every year. The markup on licenses, the physical hardware, the shrinkflation from the manufacturer, and COLA (Cost of Living Adjustments) for staff all cut into the operating budget (or the profit) of the company.

Under capitalism there are hardly any checks to this, so even companies that are not seeking to grow must raise rates else they will take a loss every year.

This mostly only happens to companies with outside investors, and it’s in order to make the investors happy.

Companies owned privately by one or a handful of people who all just want the company to keep going, make a decent profit, and be sustainable, don’t always exhibit the “need for growth” behavior.

It’s usually because the investors don’t really give a shit about the company or its mission, they just want money. Often this kind of “need for growth” bullshit is just short term growth, since that’s what most investors care about. It stifles the company’s ability to plan for long term growth and make the right decisions to achieve it.

Charles Eisenstin's book "Sacred Economics" (which you can read here and that I recommend reading in full) has a nice, simple parable in chapter 6 about that.

Once upon a time, in a small village in the Outback, people used barter for all their transactions. On every market day, people walked around with chickens, eggs, hams, and breads, and engaged in prolonged negotiations among themselves to exchange what they needed. At key periods of the year, like harvests or whenever someone's barn needed big repairs after a storm, people recalled the tradition of helping each other out that they had brought from the old country. They knew that if they had a problem someday, others would aid them in return. One market day, a stranger with shiny black shoes and an elegant white hat came by and observed the whole process with a sardonic smile. When he saw one farmer running around to corral the six chickens he wanted to exchange for a big ham, he could not refrain from laughing. "Poor people," he said, "so primitive." The farmer's wife overheard him and challenged the stranger, "Do you think you can do a better job handling chickens?" "Chickens, no," responded the stranger, "But there is a much better way to eliminate all that hassle." "Oh yes, how so?" asked the woman. "See that tree there?" the stranger replied. "Well, I will go wait there for one of you to bring me one large cowhide. Then have every family visit me. I'll explain the better way." And so it happened. He took the cowhide, and cut perfect leather rounds in it, and put an elaborate and graceful little stamp on each round. Then he gave to each family 10 rounds, and explained that each represented the value of one chicken. "Now you can trade and bargain with the rounds instead of the unwieldy chickens," he explained. It made sense. Everybody was impressed with the man with the shiny shoes and inspiring hat. "Oh, by the way," he added after every family had received their 10 rounds, "in a year's time, I will come back and sit under that same tree. I want you to each bring me back 11 rounds. That 11th round is a token of appreciation for the technological improvement I just made possible in your lives." "But where will the 11th round come from?" asked the farmer with the six chickens. "You'll see," said the man with a reassuring smile. Assuming that the population and its annual production remain exactly the same during that next year, what do you think had to happen? Remember, that 11th round was never created. Therefore, bottom line, one of each 11 families will have to lose all its rounds, even if everybody managed their affairs well, in order to provide the 11th round to 10 others. So when a storm threatened the crop of one of the families, people became less generous with their time to help bring it in before disaster struck. While it was much more convenient to exchange the rounds instead of the chickens on market days, the new game also had the unintended side effect of actively discouraging the spontaneous cooperation that was traditional in the village. Instead, the new money game was generating a systemic undertow of competition among all the participants.

The development of currency results in loans. The practice of loaning starts the practice of charging interest. Interest requires constant growth.

Individual companies have to grow to keep up with the necessary constant growth of the economy as a whole. Any company that doesn't keep up dies.

if you look closer you'll note that it's very much related to whether a company is publicly trader or not, as soon as people are trading stocks you end up with a bunch of people who don't actually care about the company and those involved in it, they only care about making money.

a company that isn't having stocks traded around is able to focus on things other than growth, such as making sustainable revenue or being a public good (or a personal good, like a small café that barely makes any profit and just exists because the owners want to run a café).

Profits about all. The size of the company itself, eh. But, profits must grow infinitely apparently.

I hate it. It even bleeds over into performance reviews. Like you'll never get a perfect score no matter how hard you work because you always have to be improving on something. It's supposed to be the sure fire sign of "success" but all it does is create impossible goals and bring everyone down.

Yeah that's the entire problem.

"Always bigger" is delusional or cancerous.

They can. But that would make you 'lose' capitalism.

Why settle for one yatch, when you could have several mega yatchs?

In the strictest definition, they don't.

Capitalism is minimally fulfilled when a business sells something for a profit and reinvests the profit (now capital) in the business. Hence the term. It doesn't have to grow the business, make new products, or do anything beyond maintenance of its processes, be that fixing or updating machinery or training employees. A single person selling tomatoes in a market in Madagascar that fixes of their tomato table with profits is perfectly capitalist.

Expecting constant growth is not a requirement of anything.

They don't. It is a fallacy.

Probably same reason cancer always needs to grow. It's a fundamentally broken part of the system.

I'd highly recommend watching this video, it goes through the history of capitalism and why it is the way it is now

https://youtu.be/gqtrNXdlraM

Companies grow and shrink from a combination of market and internal forces. Companies sometimes need to shrink or grow. The economy and culture are constantly changing. That is why it is very hard to predict where things will go.

Your example of having a company with a set amount of employees that produce a set product happens pretty frequently. A lot of employee owned or family businesses are this way.

I think most of your post can be summed up with why do investors want more and more money. The answer is because they can. If your company owes money to investors then they will beholden to them in one form or another.

There is another worthy discussion here and it is about boards. Boards that do not contain equal representation for the employees and the public can be very destructive.

Most of the corporate abuses we have suffered come from having perverse leadership non-representative of these two most important influences.

If the owners primarily want to make money by taking out a portion of revinue as dividends or distributions, like a family business typically does, then stable revenue is more important in some ways than reinvesting in growth.

If the ownership wants to make money by eventually selling their stake (shares or equity) in the company then growth is fundamental to the strategy.

Fiduciary responsibility. If you own a company that has shareholders they can sue you for refusing money or 'leaving money on the table', iirc this was a major reason why they sold twitter to musk

Disclaimer that I'm not an economist

I believe I have heard a discussion about this before... that the "always grow bigger" model is not only not a necessity under capitalism, it wasn't even the predominant economic model in the US for a while. Post war, FDR's New Deal followed the Keynesian model, which from my understanding indirectly led to the type of regulated capitalism with a much heavier emphasis on shareholder/employee satisfaction... and also when the extremely high progressive income tax brackets happened. The always need to grow bigger idea may or may not have come from Milton Friedman of the UChicago school in the 1970s: one of the core assumptions of the Neoclassical model is that companies maximize profits.

Also this is definitely not just a US megacorp thing. Other countries have megacorps too. Case in point South Korea...

Shareholders want their shares to increase in value, because that's how you earn wealth, your retirement fund grows, etc. That means the company needs to earn more profit (more precisely, profit per share). To do that you typically grow, but you can also do it by buying back stock (that increases profit per share), or by "increasing efficiency" which is usually a dead end.

Shareholders are always going to demand more profits. There is no mechanism in a capitalist economy that reinforces the concept of having "enough."

Depends, but to meet demand seems reasonable?
Imagine you invent something splendid and life-changing. You have your company with a 100 employees but you can't satisfy the market so you expand.
Like with the safety match.