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Why do they have to grow, though? Can't they just be profitable? They can just pay out dividends like coca cola, no?
by mr_mitm 3y ago
Why do they have to grow, though? Can't they just be profitable? They can just pay out dividends like coca cola, no?
- anonymousab 3y agoA not terribly uncommon belief is that continuous growth (pick your metric) is the raison d'être of all entities operating in a capitalist society, and so achieving and maintaining some high level of profitability and then staying there means that you and your company are failing to do their job. But "growth" is a moving and indulgent target. For some, increasing profits isn't the growth that matters. Rather, increasing the rate at which profits are increasing is the true metric. So even vastly increased profits can still be a form of failure that requires more actions be taken to wring more money out of the platform and its users.
- PeterisP 3y agoA stable company that pays out their profits as dividends is reasonably valued at some x*profits. A company that reinvests these profits in things which investors believe will result in growth is valued x*future_profits, which is much larger - so if the leadership of a 'growth company' would announce that they're now a 'stable company' just paying out dividends, they would destroy most of the stock value of their investors, and would be considered an absolute failure of that leadership, since everyone involved has a strong incentive to replace them with someone who can make it (at least in the eyes of public) a 'growth company' again, doubling or tripling its value for the same revenue.