One thing i don’t understand is why a company always needs growth.
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
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.
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.