6 ms·

There is something fundamentally wrong with our system that "growth" is used as the main metric for assessing business success. It's growth for the sake of grow

by mjfern 10y ago

There is something fundamentally wrong with our system that "growth" is used as the main metric for assessing business success. It's growth for the sake of growth (and more $), and not deploying business to solve hard customer problems and to make the world a little bit better.

iamdave 10y ago
growth for the sake of growth Working at a small shop now, and seeing this same behavior, it's a little frightening. In our case, and from my perspective coming from a couple of startups more recently, and large enterprises prior to that: terrifyingly frustrating for a number of reasons. I'm in a great spot to make suggestions from my accumulated past, but the team and management seem terrified to make the jump and have nestled themselves nicely in the niche of "let's just do what's easy for now" while still telling themselves they want to grow grow grow, but I don't think management is quite aware of what this growth is going to mean internally for our ability to solve problems with the toolsets we have (both for support and project management).
- fluxquanta 10y ago
  Wow, are you me? Every morning we have a company wide meeting where capturing more market share is a recurring theme. And immediately after that meeting yesterday in a developers only meeting, an inordinately large amount of time was spent on discussing how we can introduce new features yet still accommodate those of our customers who don't have internet access. Because, as you know, if you want to capture more market share with software in 2016, you want to focus on people who don't have internet.
  - freehunter 10y ago
    That was a theme at a place I used to work a few years ago, but it was internally. How can we accommodate employees who don't have Internet access at home. Mainly focused on truck drivers who live a hundred miles away from their distribution center and park their truck at home at night, with the question being "how can they log their miles". So we needed a VPN that could support dial-up, and a trucker logging tool that supported dial-up, but also the helpdesk support tools needed to be able to be used on dial-up so the helpdesk could walk them through any issues interactively. But we didn't want to spend any money supporting it, so we kept a Windows 3.1 server running so we could run the Novell system that truckers used to log into the dial-up VPN with. We finally put Internet access in all of the warehouses and told the truckers they had to end their night at the warehouse and log their hours there. Several drivers quit because it was too much of a burden to drive that far every day. But then we finally got to upgrade the software to support showing customers where the trucks were at and how long it would take to get to their locations. It would be awesome if technological progress was more evenly distributed across the population.
    - fluxquanta 10y ago
      My argument in the meeting was that our company has over 15,000 clients who are businesses themselves, and maybe 100 of them don't have internet access. Most of these clients intentionally keep their computers disconnected because "the internet causes viruses". I understand that any good company wants to provide quality service to all of their existing customers, but dedicating resources and devising workarounds for that small percentage of disconnected customers (to the detriment of the thousands of others) while our mission statement is to "capture market share" seems counter intuitive to me.
      - freehunter 10y ago
        I was agreeing with you and trying to provide a complimentary example :) It's hard to grow when you're hindered by the long forgotten past.
        fluxquanta 10y ago
        Yeah, sorry, I didn't mean to come off as confrontational in my response. Just venting frustration to the aether.
zanny 10y ago
Even at that, it isn't just about making a profit, it is about making more profit (or often just revenue) each quarter. Your business could be operating at a 40% profit margin that but be called a failure and run against on the stock market when that doesn't become a 41% margin next quarter.
- forgetsusername 10y ago
  Pure exaggeration. This is not complicated. You buy with the expectations of future profits X. If the stocks fails to meet those expectations, you reallocate your capital by selling to someone else who is happy with <X. There is nothing nefarious about it. Nobody is a failure. The system isn't broken. This is the free market.
  - gmacdon89 10y ago
    +1
  - tarsinge 10y ago
    The point is that the free market may not be good for long term R&D because a lot of buyers/sellers are speculators with expectations not aligned with long term company viability.
    - forgetsusername 10y ago
      >The point is that the free market may not be good for long term R&D How is the long-term R&D of Apple affected by a bunch of shareholders exchanging ownership with new shareholders?
cloudjacker 10y ago
hm, there is a valid criticism to be had but "wrong" isn't the word I would use. there isn't anything wrong with Apple's stock selling off violently, as much as there was anything wrong with people bidding the shares up so high under the idea of selling it to someone else at a higher price. there are plenty of companies that are content with steady or even cyclical growth/earnings. in many other countries were local stock markets are not popular venues for speculation and capital formation, it is quite respected to have steady earnings without a drive to quarterly growth. that being said, many places that are low growth envy the high growth areas, especially how it has been achieved in the US markets.
- JoBrad 10y ago
  The high growth of the stock market has largely diverged from the rest of the US so that it hardly reflects the "real world" in any way.
darkclarity 10y ago
That's a big reason why private businesses are better than public ones. There's no need to push for unsustainable growth at the behest of busybody investors.
- forgetsusername 10y ago
  Busybody investors? They own the company!
  - Thriptic 10y ago
    The problem is that a lot of "investors" actually aren't investors; they are traders or speculators. They demand immediate growth and are unwilling to allow the company to eat losses in order to invest in long term, ultimately more profitable R&D / projects.
    - forgetsusername 10y ago
      >They demand immediate growth and are unwilling to allow the company to eat losses Or...they are unwilling to allow the company to eat losses to pretend to invest in the long term, but are in reality on their way to failure (for example). Let's not act like companies, in general, have this figured out and know what's best. Lots of them fail. If you want long term growth, you're free to invest that way. But don't impose your preferences on others, or assume their method is wrong. The only way speculators, or anyone, can buy shares is by someone else deciding to sell, uncoerced.
- bluthru 10y ago
  I feel Apple would be better as a private company but it's too late at this point.
  - rtpg 10y ago
    Is there a way for a company like Apple to secretly buy back stock? I feel like at one point it would show up in the books...
tptacek 10y ago
Every time you buy a stock in the anticipation that its price will rise, or, for that matter, buy VFINX with the expectation that the total value of the S&P 500 will rise, you are putting money on a bet that companies will grow.
- reddytowns 10y ago
  Not necessarily. If a company makes a profit, then theoretically so do your shares, whether in terms of share price increase or dividends.
  - hiddencost 10y ago
    So, actually, fun fact, this is false! The stock price doesn't just reflect the amount of money the company has. The stock price reflects the "fully loaded" expected value of that stock. That means it prices in ALL expectations. If the company you buy performs exactly as expected, then you don't actually make any money because you paid the price that reflected those expectations, so whatever dividends the company issues will only compensate you for the premium you paid. So the stock has to outperform expectations before it's worth buying. The "expected value" of the company actually discounts dividends and the like, because the value of money in the future is less than the value of money today. There's an amusing side point to this, which is that a perpetual annuity actually has a finite value [1]. [1] https://en.wikipedia.org/wiki/Perpetuity https://en.wikipedia.org/wiki/Perpetuity
    - encoderer 10y ago
      I think you're mis-applying the theory here and confusing Return on Risk? No matter what you say, if I buy a stock that expects to earn dividends, and I do earn those dividends, and I've realized a 5% dividend yield, I certainly have made a profit. Now, whether I'm getting return on risk is another thing and very well the answer may be no.
      - hiddencost 10y ago
        Don't think -so- that I've made a mistake. I can eliminate risk and make the same point: Suppose you buy a perpetuity, granting $X every year. After 100 years, you'll have 100 times $X more dollars, but you will be worth exactly the same as you were worth before the perpetuity. (This assumes that the market correctly prices the perpetuity so that the expected value of purchasing it is $0). EDIT: I'm not talking about "profit" because it's not really a super useful concept here. Having a larger quantity of dollar bills after a period of time does not mean that I've got more value. Trivially, if I have $100 in 1950, and $101 in 2016, I have made a "profit" of $1 but lost a substantial amount in real terms. I should cite sources and use correct terminology. Wikipedia provides the following [0] > The dividend discount model (DDM) is a method of valuing a company's stock price based on the theory that its stock is worth the sum of all of its future dividend payments, discounted back to their present value.[1] In other words, it is used to value stocks based on the net present value of the future dividends. [0] https://en.wikipedia.org/wiki/Dividend_discount_model https://en.wikipedia.org/wiki/Dividend_discount_model
refurb 10y ago
It's growth for the sake of growth (and more $), and not deploying business to solve hard customer problems and to make the world a little bit better. Not sure I understand. How do you grow revenue unless you're producing something that someone wants, presumably because it solves a problem and makes the world better? If I were a company I'd pay a lot of money to find other ways to grow!
- robryan 10y ago
  Hard problems though might involve making a 5 or more year bet and investing billions with no guarantee of a return. Much more of a risk than bumping the iPhone specs.
- Retra 10y ago
  Yes, if you presume growth results from problem solving, then it's trivial to argue that it must. But it's also fairly trivial to show growth that results from causing problems, too. Like certain kinds of monopolistic behavior. For example, if my ISP charges my $10 more a month, they aren't necessarily solving any problems, but it's still growth for them.
rpgmaker 10y ago
> There is something fundamentally wrong with our system that "growth" is used as the main metric for assessing business success. Not only that, if there is no growth in the next few quarters Apple will be considered to be in "bad shape" which is insane when you consider the size of the company and its revenues.
tcoppi 10y ago
It isn't really lack of growth that's a problem, there are tons of companies out there that post a very consistent profit quarter after quarter that are doing just fine - negative growth, especially in a few of a company's core segments, is just as unsustainable as positive growth year over year is. If you have enough quarters of negative growth, very soon you have nothing. It is a warning sign to investors that things might not be going so well. Is one or two quarters of negative growth bad? Probably not in Apple's case, probably yes in something like AMD's case. The context matters, but there is a reason growth is used as a metric, the market is not stupid.
joshjkim 10y ago
A recent book that tries to address this (kinda annoying title): http://www.rushkoff.com/books/throwing-rocks-at-the-google-bus/ http://www.rushkoff.com/books/throwing-rocks-at-the-google-b...
vasilipupkin 10y ago
Growth is simply part of the formula that lets you arrive at valuation. It's just math. If growth goes down, so does the valuation Down voters: valuation = income / ( discount rate - growth rate )

by mjfern 10y ago

iamdave 10y ago

growth for the sake of growth Working at a small shop now, and seeing this same behavior, it's a little frightening. In our case, and from my perspective coming from a couple of startups more recently, and large enterprises prior to that: terrifyingly frustrating for a number of reasons. I'm in a great spot to make suggestions from my accumulated past, but the team and management seem terrified to make the jump and have nestled themselves nicely in the niche of "let's just do what's easy for now" while still telling themselves they want to grow grow grow, but I don't think management is quite aware of what this growth is going to mean internally for our ability to solve problems with the toolsets we have (both for support and project management).

fluxquanta 10y ago
Wow, are you me? Every morning we have a company wide meeting where capturing more market share is a recurring theme. And immediately after that meeting yesterday in a developers only meeting, an inordinately large amount of time was spent on discussing how we can introduce new features yet still accommodate those of our customers who don't have internet access. Because, as you know, if you want to capture more market share with software in 2016, you want to focus on people who don't have internet.
- freehunter 10y ago
  That was a theme at a place I used to work a few years ago, but it was internally. How can we accommodate employees who don't have Internet access at home. Mainly focused on truck drivers who live a hundred miles away from their distribution center and park their truck at home at night, with the question being "how can they log their miles". So we needed a VPN that could support dial-up, and a trucker logging tool that supported dial-up, but also the helpdesk support tools needed to be able to be used on dial-up so the helpdesk could walk them through any issues interactively. But we didn't want to spend any money supporting it, so we kept a Windows 3.1 server running so we could run the Novell system that truckers used to log into the dial-up VPN with. We finally put Internet access in all of the warehouses and told the truckers they had to end their night at the warehouse and log their hours there. Several drivers quit because it was too much of a burden to drive that far every day. But then we finally got to upgrade the software to support showing customers where the trucks were at and how long it would take to get to their locations. It would be awesome if technological progress was more evenly distributed across the population.
  - fluxquanta 10y ago
    My argument in the meeting was that our company has over 15,000 clients who are businesses themselves, and maybe 100 of them don't have internet access. Most of these clients intentionally keep their computers disconnected because "the internet causes viruses". I understand that any good company wants to provide quality service to all of their existing customers, but dedicating resources and devising workarounds for that small percentage of disconnected customers (to the detriment of the thousands of others) while our mission statement is to "capture market share" seems counter intuitive to me.
    - freehunter 10y ago
      I was agreeing with you and trying to provide a complimentary example :) It's hard to grow when you're hindered by the long forgotten past.
      - fluxquanta 10y ago
        Yeah, sorry, I didn't mean to come off as confrontational in my response. Just venting frustration to the aether.

zanny 10y ago

Even at that, it isn't just about making a profit, it is about making more profit (or often just revenue) each quarter. Your business could be operating at a 40% profit margin that but be called a failure and run against on the stock market when that doesn't become a 41% margin next quarter.

forgetsusername 10y ago
Pure exaggeration. This is not complicated. You buy with the expectations of future profits X. If the stocks fails to meet those expectations, you reallocate your capital by selling to someone else who is happy with <X. There is nothing nefarious about it. Nobody is a failure. The system isn't broken. This is the free market.
- gmacdon89 10y ago
  +1
- tarsinge 10y ago
  The point is that the free market may not be good for long term R&D because a lot of buyers/sellers are speculators with expectations not aligned with long term company viability.
  - forgetsusername 10y ago
    >The point is that the free market may not be good for long term R&D How is the long-term R&D of Apple affected by a bunch of shareholders exchanging ownership with new shareholders?

cloudjacker 10y ago

hm, there is a valid criticism to be had but "wrong" isn't the word I would use. there isn't anything wrong with Apple's stock selling off violently, as much as there was anything wrong with people bidding the shares up so high under the idea of selling it to someone else at a higher price. there are plenty of companies that are content with steady or even cyclical growth/earnings. in many other countries were local stock markets are not popular venues for speculation and capital formation, it is quite respected to have steady earnings without a drive to quarterly growth. that being said, many places that are low growth envy the high growth areas, especially how it has been achieved in the US markets.

JoBrad 10y ago
The high growth of the stock market has largely diverged from the rest of the US so that it hardly reflects the "real world" in any way.

darkclarity 10y ago

That's a big reason why private businesses are better than public ones. There's no need to push for unsustainable growth at the behest of busybody investors.

forgetsusername 10y ago
Busybody investors? They own the company!
- Thriptic 10y ago
  The problem is that a lot of "investors" actually aren't investors; they are traders or speculators. They demand immediate growth and are unwilling to allow the company to eat losses in order to invest in long term, ultimately more profitable R&D / projects.
  - forgetsusername 10y ago
    >They demand immediate growth and are unwilling to allow the company to eat losses Or...they are unwilling to allow the company to eat losses to pretend to invest in the long term, but are in reality on their way to failure (for example). Let's not act like companies, in general, have this figured out and know what's best. Lots of them fail. If you want long term growth, you're free to invest that way. But don't impose your preferences on others, or assume their method is wrong. The only way speculators, or anyone, can buy shares is by someone else deciding to sell, uncoerced.
bluthru 10y ago
I feel Apple would be better as a private company but it's too late at this point.
- rtpg 10y ago
  Is there a way for a company like Apple to secretly buy back stock? I feel like at one point it would show up in the books...

tptacek 10y ago

Every time you buy a stock in the anticipation that its price will rise, or, for that matter, buy VFINX with the expectation that the total value of the S&P 500 will rise, you are putting money on a bet that companies will grow.

reddytowns 10y ago
Not necessarily. If a company makes a profit, then theoretically so do your shares, whether in terms of share price increase or dividends.
- hiddencost 10y ago
  So, actually, fun fact, this is false! The stock price doesn't just reflect the amount of money the company has. The stock price reflects the "fully loaded" expected value of that stock. That means it prices in ALL expectations. If the company you buy performs exactly as expected, then you don't actually make any money because you paid the price that reflected those expectations, so whatever dividends the company issues will only compensate you for the premium you paid. So the stock has to outperform expectations before it's worth buying. The "expected value" of the company actually discounts dividends and the like, because the value of money in the future is less than the value of money today. There's an amusing side point to this, which is that a perpetual annuity actually has a finite value [1]. [1] https://en.wikipedia.org/wiki/Perpetuity https://en.wikipedia.org/wiki/Perpetuity
  - encoderer 10y ago
    I think you're mis-applying the theory here and confusing Return on Risk? No matter what you say, if I buy a stock that expects to earn dividends, and I do earn those dividends, and I've realized a 5% dividend yield, I certainly have made a profit. Now, whether I'm getting return on risk is another thing and very well the answer may be no.
    - hiddencost 10y ago
      Don't think -so- that I've made a mistake. I can eliminate risk and make the same point: Suppose you buy a perpetuity, granting $X every year. After 100 years, you'll have 100 times $X more dollars, but you will be worth exactly the same as you were worth before the perpetuity. (This assumes that the market correctly prices the perpetuity so that the expected value of purchasing it is $0). EDIT: I'm not talking about "profit" because it's not really a super useful concept here. Having a larger quantity of dollar bills after a period of time does not mean that I've got more value. Trivially, if I have $100 in 1950, and $101 in 2016, I have made a "profit" of $1 but lost a substantial amount in real terms. I should cite sources and use correct terminology. Wikipedia provides the following [0] > The dividend discount model (DDM) is a method of valuing a company's stock price based on the theory that its stock is worth the sum of all of its future dividend payments, discounted back to their present value.[1] In other words, it is used to value stocks based on the net present value of the future dividends. [0] https://en.wikipedia.org/wiki/Dividend_discount_model https://en.wikipedia.org/wiki/Dividend_discount_model

refurb 10y ago

It's growth for the sake of growth (and more $), and not deploying business to solve hard customer problems and to make the world a little bit better. Not sure I understand. How do you grow revenue unless you're producing something that someone wants, presumably because it solves a problem and makes the world better? If I were a company I'd pay a lot of money to find other ways to grow!

robryan 10y ago
Hard problems though might involve making a 5 or more year bet and investing billions with no guarantee of a return. Much more of a risk than bumping the iPhone specs.
Retra 10y ago
Yes, if you presume growth results from problem solving, then it's trivial to argue that it must. But it's also fairly trivial to show growth that results from causing problems, too. Like certain kinds of monopolistic behavior. For example, if my ISP charges my $10 more a month, they aren't necessarily solving any problems, but it's still growth for them.

rpgmaker 10y ago

> There is something fundamentally wrong with our system that "growth" is used as the main metric for assessing business success. Not only that, if there is no growth in the next few quarters Apple will be considered to be in "bad shape" which is insane when you consider the size of the company and its revenues.

tcoppi 10y ago

It isn't really lack of growth that's a problem, there are tons of companies out there that post a very consistent profit quarter after quarter that are doing just fine - negative growth, especially in a few of a company's core segments, is just as unsustainable as positive growth year over year is. If you have enough quarters of negative growth, very soon you have nothing. It is a warning sign to investors that things might not be going so well. Is one or two quarters of negative growth bad? Probably not in Apple's case, probably yes in something like AMD's case. The context matters, but there is a reason growth is used as a metric, the market is not stupid.

joshjkim 10y ago

A recent book that tries to address this (kinda annoying title): http://www.rushkoff.com/books/throwing-rocks-at-the-google-bus/ http://www.rushkoff.com/books/throwing-rocks-at-the-google-b...

vasilipupkin 10y ago

Growth is simply part of the formula that lets you arrive at valuation. It's just math. If growth goes down, so does the valuation Down voters: valuation = income / ( discount rate - growth rate )