Shareholders are always going to demand more profits. There is no mechanism in a capitalist economy that reinforces the concept of having "enough."
this post was submitted on 04 Oct 2025
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My understanding is that this isn't quite how it is. Shareholders don't demand profits as much as they demand that their share value go up.
I read some time back that this is because of tax law. Dividends are taxed as income, but growth in share value is capital gains and so isn't taxed nearly as much or in the same ways. It does unfortunately make some sense, if share value repeatedly goes up and down I wouldn't want each "up" to be taxed as if you'd accumulated that much additional money. You'd have to be constantly selling shares to pay your taxes on them. But as a result, it means that when a company winds up making a profit and having a big pile of cash they need to decide what to do with, shareholders will usually prefer that the company invest that cash into making the company bigger and more valuable rather than simply giving it back to them as a dividend. So you get companies always trying to grow, because the shareholders demand it for reasons that make perfect sense to each one individually.
I'm not sure what a good solution to this is. Economics is one of those fields that seems simple on the surface but has a ton of gotchas hidden at every variable. It's a special case of game theory.
Under capitalism, companies do what their owners want them to do. The owners can choose to try to grow, to shrink, to sell, or to close.
Publicly owned companies have shareholders, and the shareholders usually want the company to grow so their investment grows. Shareholders can have other values, but anyone can become a shareholder.
Under non-capitalist systems, the government might own some or all companies. Then the companies do whatever the party in power wants. The party in power probably doesn't have time to run all the companies, so they give some level of independence. They can reign that back whenever they like.
The most common motivation in non-capitalist systems is probably greed and growing personal wealth of party leaders via corruption under that system. Luckily, the people can vote in a different party and/or protest against party corruption except in all real-world cases, where that is banned or suppressed.
Profits about all. The size of the company itself, eh. But, profits must grow infinitely apparently.
Eight, but why? Why not create a company that generates, say a $100M a year, building something thata got just a basic level of perpetual demand, and just let that ride.
Instead of either pushing it till the wheels come off,over producing until you crash the market, or trying to spread to so many roles the whole thing colapses, why not just say this company is perfect, and ifnyou want more, just spin up a new entirely separate, unrelated buisness?
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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.
Because they took the money. If you take the money, the path is inevitable
When you take on investors, you just invited in someone who looks at your company like a farmer does to their crops. They want you to grow as much as possible, but they don't actually care if you live or die - you're one of many using up resources
If your growth slows, they're going to demand more. They might demand you make cuts, they might push you to take loans and expand, they might try to sell to someone else. If your value isn't increasing faster than other possible investments, they lose imaginary money to opportunity cost
And by virtue of being an investor, they have plenty of money and want to gamble with it. A total loss probably wouldn't impact their lifestyle, they want invest in Apple at the ground floor and become a billionaire
You can start a company through loans, risk your house and build up slowly, and walk away clear. And people do.
But then they want to retire... And there's this neat trick you can do if you want to own a small business... You can make it buy itself. You can take out a loan to pay out the previous owner, say 5 years of profit, and make the business take on the loan. But now, just to break even, you've got to beat what you paid for it plus interest over the term. And both business and individuals can do this
So in short? The reason is debt. A small business can make you upper middle class, a large one could make your entire family insanely wealthy for centuries.
But once you take the money, the business has to grow, or it'll be harvested
Only workers are expected to be happy with good enough. The elite will never say the balance of thier bank account is good enough. And thus companies always need to grow bigger.
Note that even if by all practical terms a business isn't growing, then it's still growing.
Part of the whole deal is that there's an intent for the money supply to change for a roughly 2% inflation. In an oversimplified sense, the idea being that everything gets 2% more expensive, everyone gets 2% raises, and investments at least generate 2% returns.
We've basically decided that we need to trick ourselves into feeling progress by making "standing still" look like growth. So if someone had flat income year over year, they actually lost in real terms.
Assume you're saving X amount of money each month for your retirement.
Your options for storing that money is either:
- In cash which will "lessen" in value as time goes by due to inflation
- In a savings account with middling interest rate
- Or you could invest in the stock market which will typically offer better return.
Assuming you go for option 3, would you choose to invest in a company with zero growth meaning your retirement fund won't grow, or would you choose a company that is constantly growing?
Nobody would choose to invest in a company with zero growth or which doesn't return money back in the form of dividends.
You're objectively better off investing in companies that grow since those are the companies that will grow your investment.
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?
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They can. But that would make you 'lose' capitalism.
Why settle for one yatch, when you could have several mega yatchs?
I'd highly recommend watching this video, it goes through the history of capitalism and why it is the way it is now
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.
As a co-owner to a business, we grow because sometimes the funds from what we're already selling slow so we branch out in other directions to cover it. An answer for small businesses at least.
Ape brain often goes "big = good" and therefore "bigger = better". And since a bunch of other peoples ape brains have thought this before you, then now if you have a tiny business, it's very likely that your only options are to either get trampled by giants or try and become one of them, even if your ape brain doesn't think that way.
- Start business. Business very small, want business big. Big business happier than small business.
- Need money to big business, small business not enough money.
- Ask another big business for help small business
- Big business tells small business: We give you money, you get big, you owe us money back.
- small business always trying to be big business
Growth is needed so that Capitalists can make a living.
Without growths, owning companies would only pay dividents which would result in much less income.