5 ms·

TLDR: product is so good that it saturates market so much that there no room to 'grow'. Company tried different line of products with little no success, and...

by deelly 3y ago

TLDR: product is so good that it saturates market so much that there no room to 'grow'. Company tried different line of products with little no success, and... become bankrupt. Moral of the story: why the fuck every company should grow forever?

constantcrying 3y ago
>why the fuck every company should grow forever? Debt, specifically interest on that debt. Either you need significant profitability or you need growth to manage that debt.
Zak 3y ago
I've been seeing this theme a lot lately. Making something people want, charging them money for it, and earning a steady profit for a long time should be seen as a successful business. It seems increasingly rare for that to be the goal; instead, it's some form of demonstrating the potential for endless growth to pump up the stock price and enrich the current shareholders. We used to call the latter a Ponzi scheme and put people in prison for it.
- constantcrying 3y ago
  >Making something people want, charging them money for it, and earning a steady profit for a long time should be seen as a successful business. Yes. But it can only be counted as a success if your profits allow you to reduce your debt. Manufacturing goods can be quite capital intensive, which is why companies often have to take on debt to make things. >pump up the stock price and enrich the current shareholders. The problem here is that doing anything else as a publicly traded company is illegal. But also consider that shareholders loose everything they invested if the stock price goes to zero. >We used to call the latter a Ponzi scheme and put people in prison for it. That is not a Ponzi scheme.
  - jwestbury 3y ago
    > The problem here is that doing anything else as a publicly traded company is illegal. Sort of? It's more complicated than "get highest share price possible as quickly as possible." Plenty of companies out there are focussed on long-term, stable growth.
    - constantcrying 3y ago
      They have to act in the interest of the shareholders. Certainly it is more complex than just the stock price. But certainly no shareholder sees an increase in stock price, everything else aside, as against his interest.
    - supportlocal4h 3y ago
      It's perfectly legal to not grow at all.
      - constantcrying 3y ago
        Absolutely. But refusing clear growth opportunities is an easy way to upset shareholders.
        supportlocal4h 3y ago
        That's a completely different topic. I'm tired of hearing people spout about a legal obligation to grow. If you mean "it will hurt somebody's feelings" don't say "it's illegal". Those words do not mean the same thing. If a company earned a $1 dividend for the last five years and the stock price is $10, what is wrong with paying out $1 dividend again next year and having the stock price stay at $10? If a stockholder wants a bigger payout they can sell their share and invest the $10 in some other stock and take their chances. Personally, I think a $10 share that pays out $1 and is still worth $10 is incredible. It doesn't bother me at all that neither the price nor the dividend has grown. It doesn't bother me that the square meters of manufacturing floor space hasn't grown. I don't mind that the number of employees hasn't grown. It's ok that the number of SKUs has stayed the same.
  - deleted 3y ago
    [deleted]
  - supportlocal4h 3y ago
    >>pump up the stock price and enrich the current shareholders. >The problem here is that doing anything else as a publicly traded company is illegal. No, it is not. You aren't breaking the law just because your stock price didn't go up.
    - constantcrying 3y ago
      >No, it is not. You aren't breaking the law just because your stock price didn't go up. But if your goal is to get the stock price down, it gets dangerous quick.
  - Zak 3y ago
    The fiduciary duty to promote shareholder value often gets exaggerated in conversations like these. Board members enriching themselves at the expense of shareholders or trying to turn a for-profit company into a nonprofit are clear violations. Using a business strategy that's arguably not the most profitable one possible is not, nor is prioritizing the long-term success of the company over short-term payouts to current shareholders.
    - constantcrying 3y ago
      Yes. It certainly is not as easy as the stock price and there is a broad spectrum of things which can be in the interest of shareholders, which do not relate to an immediate increase in stock price.
  - ajmurmann 3y ago
    > The problem here is that doing anything else as a publicly traded company is illegal. But also consider that shareholders loose everything they invested if the stock price goes to zero. Not sure if it is illegal or not, but it certainly isn't viable. Who would invest in a company that explicitly doesn't want to grow? Dividends could be an alternative, but due to how taxation works they are unattractive. They get taxed at a higher rate and I cannot control when they get paid. With investment returns from selling, I can control when I sell and pay taxes and can also turn the tax rate into the much lower long-term capital gains.
robertlagrant 3y ago
> why the fuck every company should grow forever? They don't have to. They don't have to list on the stock market. They don't have to take investment money. They don't have to do anything. A company is everything from IBM to a local plumber. They don't all follow the same rules, at all.
- ajmurmann 3y ago
  And this is why many people don't want VC money. if I had a company that brings in a million $ annually and I work 20 hours/week when and where I want, it would be a dream come true. I'd rather have this than start the next Meta or Google. However, for a VC or any professional investor that scenario would be a complete failure.
  - robertlagrant 3y ago
    It wouldn't be for a professional investor if you paid dividends. VCs yes of course - they are part of the journey of growing a up front capital intensive company rapidly. They aren't generally long haul investors because if they were their money would all be tied up after a while.
mensetmanusman 3y ago
We need exponential growth until the entire earth's crust is converted into widgets.
philshem 3y ago
“Growth for the sake of growth is the 'ideology’ of the cancer cell.” -Edward Abbey
- constantcrying 3y ago
  Companies do not grow for the sake of growth. Many would outright go bankrupt if they stopped growing, as debt grows continually while they do not.
  - Ekaros 3y ago
    Then they have taken too much debt. And deserve to fail. A well run company only takes debt when return on investing it is larger than the interest and paying it back. Thus being able to use leverage for profits on net. On other hand modern finance system with many public company is often short term idiotic one where debt is used to pay out to investors... Exactly like PE does...
    - constantcrying 3y ago
      >Then they have taken too much debt. And deserve to fail. Many companies can not exist without taking on debt. Manufacturing can be extremely capital intensive and if every company had to wait for the profits of its previous product to finance its next product almost nothing would be made. >A well run company only takes debt when return on investing it is larger than the interest and paying it back. This is an unknown quantity. And it also growth as debt is taking on for the sake of increasing revenue. Taking on debt without expecting an increase in revenue from investing that money is insane for a company.

by deelly 3y ago

constantcrying 3y ago

>why the fuck every company should grow forever? Debt, specifically interest on that debt. Either you need significant profitability or you need growth to manage that debt.

Zak 3y ago

I've been seeing this theme a lot lately. Making something people want, charging them money for it, and earning a steady profit for a long time should be seen as a successful business. It seems increasingly rare for that to be the goal; instead, it's some form of demonstrating the potential for endless growth to pump up the stock price and enrich the current shareholders. We used to call the latter a Ponzi scheme and put people in prison for it.

constantcrying 3y ago
>Making something people want, charging them money for it, and earning a steady profit for a long time should be seen as a successful business. Yes. But it can only be counted as a success if your profits allow you to reduce your debt. Manufacturing goods can be quite capital intensive, which is why companies often have to take on debt to make things. >pump up the stock price and enrich the current shareholders. The problem here is that doing anything else as a publicly traded company is illegal. But also consider that shareholders loose everything they invested if the stock price goes to zero. >We used to call the latter a Ponzi scheme and put people in prison for it. That is not a Ponzi scheme.
- jwestbury 3y ago
  > The problem here is that doing anything else as a publicly traded company is illegal. Sort of? It's more complicated than "get highest share price possible as quickly as possible." Plenty of companies out there are focussed on long-term, stable growth.
  - constantcrying 3y ago
    They have to act in the interest of the shareholders. Certainly it is more complex than just the stock price. But certainly no shareholder sees an increase in stock price, everything else aside, as against his interest.
  - supportlocal4h 3y ago
    It's perfectly legal to not grow at all.
    - constantcrying 3y ago
      Absolutely. But refusing clear growth opportunities is an easy way to upset shareholders.
      - supportlocal4h 3y ago
        That's a completely different topic. I'm tired of hearing people spout about a legal obligation to grow. If you mean "it will hurt somebody's feelings" don't say "it's illegal". Those words do not mean the same thing. If a company earned a $1 dividend for the last five years and the stock price is $10, what is wrong with paying out $1 dividend again next year and having the stock price stay at $10? If a stockholder wants a bigger payout they can sell their share and invest the $10 in some other stock and take their chances. Personally, I think a $10 share that pays out $1 and is still worth $10 is incredible. It doesn't bother me at all that neither the price nor the dividend has grown. It doesn't bother me that the square meters of manufacturing floor space hasn't grown. I don't mind that the number of employees hasn't grown. It's ok that the number of SKUs has stayed the same.
- deleted 3y ago
  [deleted]
- supportlocal4h 3y ago
  >>pump up the stock price and enrich the current shareholders. >The problem here is that doing anything else as a publicly traded company is illegal. No, it is not. You aren't breaking the law just because your stock price didn't go up.
  - constantcrying 3y ago
    >No, it is not. You aren't breaking the law just because your stock price didn't go up. But if your goal is to get the stock price down, it gets dangerous quick.
- Zak 3y ago
  The fiduciary duty to promote shareholder value often gets exaggerated in conversations like these. Board members enriching themselves at the expense of shareholders or trying to turn a for-profit company into a nonprofit are clear violations. Using a business strategy that's arguably not the most profitable one possible is not, nor is prioritizing the long-term success of the company over short-term payouts to current shareholders.
  - constantcrying 3y ago
    Yes. It certainly is not as easy as the stock price and there is a broad spectrum of things which can be in the interest of shareholders, which do not relate to an immediate increase in stock price.
- ajmurmann 3y ago
  > The problem here is that doing anything else as a publicly traded company is illegal. But also consider that shareholders loose everything they invested if the stock price goes to zero. Not sure if it is illegal or not, but it certainly isn't viable. Who would invest in a company that explicitly doesn't want to grow? Dividends could be an alternative, but due to how taxation works they are unattractive. They get taxed at a higher rate and I cannot control when they get paid. With investment returns from selling, I can control when I sell and pay taxes and can also turn the tax rate into the much lower long-term capital gains.

robertlagrant 3y ago

> why the fuck every company should grow forever? They don't have to. They don't have to list on the stock market. They don't have to take investment money. They don't have to do anything. A company is everything from IBM to a local plumber. They don't all follow the same rules, at all.

ajmurmann 3y ago
And this is why many people don't want VC money. if I had a company that brings in a million $ annually and I work 20 hours/week when and where I want, it would be a dream come true. I'd rather have this than start the next Meta or Google. However, for a VC or any professional investor that scenario would be a complete failure.
- robertlagrant 3y ago
  It wouldn't be for a professional investor if you paid dividends. VCs yes of course - they are part of the journey of growing a up front capital intensive company rapidly. They aren't generally long haul investors because if they were their money would all be tied up after a while.

mensetmanusman 3y ago

We need exponential growth until the entire earth's crust is converted into widgets.

philshem 3y ago

“Growth for the sake of growth is the 'ideology’ of the cancer cell.” -Edward Abbey

constantcrying 3y ago
Companies do not grow for the sake of growth. Many would outright go bankrupt if they stopped growing, as debt grows continually while they do not.
- Ekaros 3y ago
  Then they have taken too much debt. And deserve to fail. A well run company only takes debt when return on investing it is larger than the interest and paying it back. Thus being able to use leverage for profits on net. On other hand modern finance system with many public company is often short term idiotic one where debt is used to pay out to investors... Exactly like PE does...
  - constantcrying 3y ago
    >Then they have taken too much debt. And deserve to fail. Many companies can not exist without taking on debt. Manufacturing can be extremely capital intensive and if every company had to wait for the profits of its previous product to finance its next product almost nothing would be made. >A well run company only takes debt when return on investing it is larger than the interest and paying it back. This is an unknown quantity. And it also growth as debt is taking on for the sake of increasing revenue. Taking on debt without expecting an increase in revenue from investing that money is insane for a company.