5 ms·
It's not cultural at all -- it's economics. Businesses are valued based on discounted cash flows (DCF). If you're profitable and not growing, your cash flows
by beambot 5y ago
It's not cultural at all -- it's economics.
Businesses are valued based on discounted cash flows (DCF). If you're profitable and not growing, your cash flows are very stable & easy to evaluate -- you get a low P/E or P/E/G ratio. But if you're growing quickly with sane unit economics, most of the DCF value is in future years... which then results in much higher multiples relative to today's revenues & earnings.
- da39a3ee 5y agoSo is there anything to be done about this? It seems from this thread that the conclusion is that companies cannot avoid constantly seeking growth, and yet that growth ultimately destroys internal social mechanics / culture.
- prox 5y agoIt can only not avoid it because that’s how the deck is stacked. Different rulesets would give different outcomes. Just because we are riding one certain economic theory, does not mean its the only way of value creation.
- Terretta 5y agoSo? Who needs that? Not the company, unless selling stock to raise cash. Not the employees, if paid in cash instead of funny money. Nobody needs that. It's cultural.
- lotsofpulp 5y agoPolitician wins election by promising lower taxes by assuming greater investment returns hence requiring less money to be set aside for defined benefit pensions. People see other people’s wealth growing quicker because their investments grew more, increasing demand for higher growth investments. Population growth inherently leads to economic growth assuming a sufficiently stable society and access to resources. All of these create an environment where people expect certain ROI and make plans according to those ROI.