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I want a financial person to explain to me why we continue to expect exponential growth of companies’ revenue year after year, and why that makes any logical se

I want a financial person to explain to me why we continue to expect exponential growth of companies’ revenue year after year, and why that makes any logical sense in a world with finite resources.

rTX5CMRXIfFG 2y ago
Population explosion = growth of consumption and we have not yet hit the finite limit but we eventually will, perhaps soon
- Tade0 2y ago
  Globally the number of children born peaked in 2013-2017. We'll start seeing it once these people come of age.
  - bloak 2y ago
    That's interesting, and good, I suppose. I knew that the birth rate had peaked but I didn't know that the absolute number of births had peaked. According to https://ourworldindata.org/grapher/number-of-births-per-year https://ourworldindata.org/grapher/number-of-births-per-year the highest number of births was 146.05 million in 2012. (But the total number of births per year fell throughout the 1990s ... mainly because of the birth rate falling in China? ... before rising to that global maximum in 2012.)
    - Tade0 2y ago
      I always describe it as a range, as estimates differ and the true peak might have happened even outside it. It's a historical milestone and I'm surprised there's so little awareness of it. There will most likely never be this many people born in a year ever and we crossed this point without much fanfare. Personally I think the predictions are overblown - as they assume that the generation "peak" will have 90% the children their parents had. Fertility rates in countries like Niger and Nigeria are already dropping at a faster rate than that and it's these places where the most people are currently born.
lenerdenator 2y ago
They'll rationalize the irrational. The thing is, if more of the value produced by labor was directed back towards labor instead of equities, you're going to see far fewer people asking "how is this sustainable?", because they're on the gravy train too, but the equities holders have now gotten so used to being the special kid in the class that they can't fathom not trying to keep labor costs as low as possible.
PhilipRoman 2y ago
It's a perfectly sustainable model (assuming you're fine with an economic crash every dozen years or so)
Smaug123 2y ago
Obviously physical limits will bind at some point; indefinite exponential growth implies at some point that each electron in the observable universe is outputting the entire current world GDP every year, which is pretty unlikely under our current understanding of physics. But it's for you to explain why the physical limits bind at the point we happen to be at right now. Why does the observed historical trend break now, rather than (say) in fifty years' time?
high_na_euv 2y ago
Inflation (so numbers grow), different companies at different stages, etc? Also not exponential growth, but just significant growth and crashes every X years
mistermann 2y ago
If you're willing to drop the "logical" constraint, I think this explains most of humanity due to us being fundamentally a story-based species: https://en.m.wikipedia.org/wiki/Illusory_truth_effect https://en.m.wikipedia.org/wiki/Illusory_truth_effect In our culture, someone bringing logic to the table is likely to get crushed by someone bringing a good story. And to make the situation even funnier: most anyone could tell you story after story about this phenomenon! It reminds me of: https://slatestarcodex.com/2014/07/30/meditations-on-moloch/ https://slatestarcodex.com/2014/07/30/meditations-on-moloch/ https://slatestarcodex.com/2015/04/21/universal-love-said-the-cactus-person/ https://slatestarcodex.com/2015/04/21/universal-love-said-th... (Ironically, this too is a story, lol...perhaps no other way existing is part of the problem?)
jasperry 2y ago
Value growth isn't tied to physical resources anymore, it's increasingly ascribed to intangible things, such as intellectual property. I'm not saying that growth is guaranteed to continue, just that economies have already been growing based on more abstract values; it's not all about food and fuel anymore.
- jassyr 2y ago
  Even so, the IP is used to make things which require resources. Disney IP is used to make toys, movies, books, etc, that all require electricity, paper, computers, employees sitting and eating, commuting into the office. Or a vaccine patent will be used to make a vaccine which requires a factory to be built and operated, the product produced, stored, shipped, used, and disposed into a landfill.
  - jasperry 2y ago
    That's true, but more and more products are moving away from dependence on the physical resources. Kids don't buy toys much anymore, they play digital video games. You can see a doctor on Zoom instead of driving to their office. I'm not saying that's better, but it's happening. The real problem I see is when people use wealth generated from intangibles to put the squeeze on physical resources, such as buying up land as an investment to drive up the price when people need a place to live.
    - fulladder 2y ago
      Maybe in the future it will be possible to live in a purely digital environment, thus solving the housing shortage.
      - mikhael28 2y ago
        lol Ready Player One springs to mind immediately.
- voisin 2y ago
  > Value growth isn't tied to physical resources anymore, it's increasingly ascribed to intangible things, such as intellectual property No this isn’t accurate. No one values IP for its own sake; it is still responsible for generating revenue and being translated into profit. The process by which this happens is still resource extraction (raw materials into chips, energy into processors, etc etc etc). And you are really only talking about tech. Every other industry has the same demand for infinite growth and can’t hide behind an IP abstraction layer.
voisin 2y ago
There is no rationality. It is a justification for “I’ll get the most I can now and push the externalities on some future fool”. It is no different from traders hunting buffalo to extinction. They got their money, consequences be damned.
goldcd 2y ago
Exponential revenue is easy - you just need exponential inflation and it comes for free. Increased productivity is maybe the goal - but how it's measured is up for discussion. If you do it in dollars, then do you adjust for inflation? If you do, what inflation? (inflation on the price of bread or super-yachts etc). Or do you do it in value? What can you get for your work? In the 1990s a "machine in your pocket that can play any music ever recorded" would have been near-impossible/priceless. 25 years later it costs maybe a dollar a day and we can all have it. If we can always get the same stuff for an ever-decreasing amount of effort, then that could be seen as exponential growth. You could argue that you could measure growth by technological advancement. Conversely if your rent is going up 10% a year, then who cares that you're 5% more productive and making 5% more money every year. That doesn't feel like growth. Unless you're not renting and you're the landlord and then you're experiencing sweet sweet growth.
ramesh31 2y ago
>I want a financial person to explain to me why we continue to expect exponential growth of companies’ revenue year after year, and why that makes any logical sense in a world with finite resources. Because entropy. When a living organism stops its exponential cell division, we call that death. In an economy, when things cease to grow, we call it recession. When that growth is in balance with the decay, we call it a healthy economy. When it outstrips it, we call that inflation, which the monetary system is designed to fight against.
- AnimalMuppet 2y ago
  Adult living organisms don't have exponential cell division. When they do, we call that cancer.
  - ramesh31 2y ago
    >Adult living organisms don't have exponential cell division. Sure they do. Your cells are dying and being replaced constantly. Cancer is just when the instructions for said division get messed up, i.e. runaway inflation in this analogy.
    - AnimalMuppet 2y ago
      I think you missed the word "exponential". Adult living things don't have exponential cell division. If they did, they would continue to grow in size. But they don't. They have cell division at a constant rate, not an exponential rate.
      - grugagag 2y ago
        Spot On, modern economy resembles cancer too.
keiferski 2y ago
A hundred years ago, the average person had little free time, little spending money, and little to actually spend that money on, if they had any. Human attention is absolutely not a finite resource. Or at least companies haven’t come close to monetizing all of it.
- jmholla 2y ago
  I think you need to take your comparison further back. As I understand it, before the Industrial Revolution, people had plenty of free time. For instance, looking at the Middle Ages, many spent the morning tending to their fields and then the rest of the day was theirs.
  - mikhael28 2y ago
    Yeah, but they were all illiterate and politically powerless, not to mention spiritually oppressed, so what were the actual, tangible options for things they could do with ‘their day’? They didn’t even own their own land.
  - keiferski 2y ago
    Yes but my point was not about a specific time in the past, it was about how that free time wasn’t captured by the market - in ways it is now and will continue to be in the future.
HumblyTossed 2y ago
It's all just one big ponzi scheme. Albeit a legal one.
piuantiderp 2y ago
That's close but not quite. In older times, this economic profit is an accumulation of wealth, instead of having the apples just pay for the daily laborer's calories, it means, maybe they can take a few apples home to make apple sauce and that the farm owner can sell the extras in a market. You paid for the maintenance (ie. workers not starving, replacing machinery, ) and you had some left. Land is a whole other problem. The Wealth of Nations has a pretty good description of the interactions between labor, landowners, capital. The recent problems is the disconnect between money and actual food/materials/energy production. If your grandfather lived in a 100kw village with a 100 dollars circulating, and made 1 dollar, it is reasonable to think he could buy 1kW for his family. If we live in a 100kw village (because no, we should reduce energy production) with 100,000 dollars circulating and you make 500, you can buy 500w. Now do it for turkeys, or steel, or etc... Degrowth is impoverishment in most cases. Things haven't gotten much more productive, and we are more people
FredPret 2y ago
Assuming you’re asking in good faith: 1) Ephemeralization [https://en.m.wikipedia.org/wiki/Ephemeralization https://en.m.wikipedia.org/wiki/Ephemeralization] is when we arrange a given set of atoms in increasingly useful ways, letting us get the same thing done with less. A trivial example is information distribution. Another one is how we turned sand into thinking machines. Myriad more examples exist. 2) We have vastly more resources than people think. Our deepest mines are ~5km. There’s a hell of a lot of planet below that, with increasing % valuable metals. There’s enough room on the planet - you can give everyone on earth a big house with a yard and we’ll all fit into a single Canadian province, or into Texas. We can generate 100% of our power needs with solar, nuclear, and batteries. And as we get richer, there are more and more people with the time and ability to make greener choices. Our systems are proving to be flexible - look at the price of solar + battery over time; look at the deluge of funding for nuclear research. People are working on bio jet fuel. Other people are working on carbon capture tech and geo-engineering ideas for the worst case scenario. 3). We’re not stuck down here. There’s a whole universe out there. A tiny but growing % of our economy happens off-planet. A private company recently landed on the moon. SpaceX is dramatically lowering launch costs. In a few decades, we’ll be mining materials up there and manufacturing goods in space.

I want a financial person to explain to me why we continue to expect exponential growth of companies’ revenue year after year, and why that makes any logical sense in a world with finite resources.

rTX5CMRXIfFG 2y ago

Population explosion = growth of consumption and we have not yet hit the finite limit but we eventually will, perhaps soon

Tade0 2y ago
Globally the number of children born peaked in 2013-2017. We'll start seeing it once these people come of age.
- bloak 2y ago
  That's interesting, and good, I suppose. I knew that the birth rate had peaked but I didn't know that the absolute number of births had peaked. According to https://ourworldindata.org/grapher/number-of-births-per-year https://ourworldindata.org/grapher/number-of-births-per-year the highest number of births was 146.05 million in 2012. (But the total number of births per year fell throughout the 1990s ... mainly because of the birth rate falling in China? ... before rising to that global maximum in 2012.)
  - Tade0 2y ago
    I always describe it as a range, as estimates differ and the true peak might have happened even outside it. It's a historical milestone and I'm surprised there's so little awareness of it. There will most likely never be this many people born in a year ever and we crossed this point without much fanfare. Personally I think the predictions are overblown - as they assume that the generation "peak" will have 90% the children their parents had. Fertility rates in countries like Niger and Nigeria are already dropping at a faster rate than that and it's these places where the most people are currently born.

lenerdenator 2y ago

They'll rationalize the irrational. The thing is, if more of the value produced by labor was directed back towards labor instead of equities, you're going to see far fewer people asking "how is this sustainable?", because they're on the gravy train too, but the equities holders have now gotten so used to being the special kid in the class that they can't fathom not trying to keep labor costs as low as possible.

PhilipRoman 2y ago

It's a perfectly sustainable model (assuming you're fine with an economic crash every dozen years or so)

Smaug123 2y ago

Obviously physical limits will bind at some point; indefinite exponential growth implies at some point that each electron in the observable universe is outputting the entire current world GDP every year, which is pretty unlikely under our current understanding of physics. But it's for you to explain why the physical limits bind at the point we happen to be at right now. Why does the observed historical trend break now, rather than (say) in fifty years' time?

high_na_euv 2y ago

Inflation (so numbers grow), different companies at different stages, etc? Also not exponential growth, but just significant growth and crashes every X years

mistermann 2y ago

If you're willing to drop the "logical" constraint, I think this explains most of humanity due to us being fundamentally a story-based species: https://en.m.wikipedia.org/wiki/Illusory_truth_effect https://en.m.wikipedia.org/wiki/Illusory_truth_effect In our culture, someone bringing logic to the table is likely to get crushed by someone bringing a good story. And to make the situation even funnier: most anyone could tell you story after story about this phenomenon! It reminds me of: https://slatestarcodex.com/2014/07/30/meditations-on-moloch/ https://slatestarcodex.com/2014/07/30/meditations-on-moloch/ https://slatestarcodex.com/2015/04/21/universal-love-said-the-cactus-person/ https://slatestarcodex.com/2015/04/21/universal-love-said-th... (Ironically, this too is a story, lol...perhaps no other way existing is part of the problem?)

jasperry 2y ago

Value growth isn't tied to physical resources anymore, it's increasingly ascribed to intangible things, such as intellectual property. I'm not saying that growth is guaranteed to continue, just that economies have already been growing based on more abstract values; it's not all about food and fuel anymore.

jassyr 2y ago
Even so, the IP is used to make things which require resources. Disney IP is used to make toys, movies, books, etc, that all require electricity, paper, computers, employees sitting and eating, commuting into the office. Or a vaccine patent will be used to make a vaccine which requires a factory to be built and operated, the product produced, stored, shipped, used, and disposed into a landfill.
- jasperry 2y ago
  That's true, but more and more products are moving away from dependence on the physical resources. Kids don't buy toys much anymore, they play digital video games. You can see a doctor on Zoom instead of driving to their office. I'm not saying that's better, but it's happening. The real problem I see is when people use wealth generated from intangibles to put the squeeze on physical resources, such as buying up land as an investment to drive up the price when people need a place to live.
  - fulladder 2y ago
    Maybe in the future it will be possible to live in a purely digital environment, thus solving the housing shortage.
    - mikhael28 2y ago
      lol Ready Player One springs to mind immediately.
voisin 2y ago
> Value growth isn't tied to physical resources anymore, it's increasingly ascribed to intangible things, such as intellectual property No this isn’t accurate. No one values IP for its own sake; it is still responsible for generating revenue and being translated into profit. The process by which this happens is still resource extraction (raw materials into chips, energy into processors, etc etc etc). And you are really only talking about tech. Every other industry has the same demand for infinite growth and can’t hide behind an IP abstraction layer.

voisin 2y ago

There is no rationality. It is a justification for “I’ll get the most I can now and push the externalities on some future fool”. It is no different from traders hunting buffalo to extinction. They got their money, consequences be damned.

goldcd 2y ago

Exponential revenue is easy - you just need exponential inflation and it comes for free. Increased productivity is maybe the goal - but how it's measured is up for discussion. If you do it in dollars, then do you adjust for inflation? If you do, what inflation? (inflation on the price of bread or super-yachts etc). Or do you do it in value? What can you get for your work? In the 1990s a "machine in your pocket that can play any music ever recorded" would have been near-impossible/priceless. 25 years later it costs maybe a dollar a day and we can all have it. If we can always get the same stuff for an ever-decreasing amount of effort, then that could be seen as exponential growth. You could argue that you could measure growth by technological advancement. Conversely if your rent is going up 10% a year, then who cares that you're 5% more productive and making 5% more money every year. That doesn't feel like growth. Unless you're not renting and you're the landlord and then you're experiencing sweet sweet growth.

ramesh31 2y ago

>I want a financial person to explain to me why we continue to expect exponential growth of companies’ revenue year after year, and why that makes any logical sense in a world with finite resources. Because entropy. When a living organism stops its exponential cell division, we call that death. In an economy, when things cease to grow, we call it recession. When that growth is in balance with the decay, we call it a healthy economy. When it outstrips it, we call that inflation, which the monetary system is designed to fight against.

AnimalMuppet 2y ago
Adult living organisms don't have exponential cell division. When they do, we call that cancer.
- ramesh31 2y ago
  >Adult living organisms don't have exponential cell division. Sure they do. Your cells are dying and being replaced constantly. Cancer is just when the instructions for said division get messed up, i.e. runaway inflation in this analogy.
  - AnimalMuppet 2y ago
    I think you missed the word "exponential". Adult living things don't have exponential cell division. If they did, they would continue to grow in size. But they don't. They have cell division at a constant rate, not an exponential rate.
    - grugagag 2y ago
      Spot On, modern economy resembles cancer too.

keiferski 2y ago

A hundred years ago, the average person had little free time, little spending money, and little to actually spend that money on, if they had any. Human attention is absolutely not a finite resource. Or at least companies haven’t come close to monetizing all of it.

jmholla 2y ago
I think you need to take your comparison further back. As I understand it, before the Industrial Revolution, people had plenty of free time. For instance, looking at the Middle Ages, many spent the morning tending to their fields and then the rest of the day was theirs.
- mikhael28 2y ago
  Yeah, but they were all illiterate and politically powerless, not to mention spiritually oppressed, so what were the actual, tangible options for things they could do with ‘their day’? They didn’t even own their own land.
- keiferski 2y ago
  Yes but my point was not about a specific time in the past, it was about how that free time wasn’t captured by the market - in ways it is now and will continue to be in the future.

HumblyTossed 2y ago

It's all just one big ponzi scheme. Albeit a legal one.

piuantiderp 2y ago

That's close but not quite. In older times, this economic profit is an accumulation of wealth, instead of having the apples just pay for the daily laborer's calories, it means, maybe they can take a few apples home to make apple sauce and that the farm owner can sell the extras in a market. You paid for the maintenance (ie. workers not starving, replacing machinery, ) and you had some left. Land is a whole other problem. The Wealth of Nations has a pretty good description of the interactions between labor, landowners, capital. The recent problems is the disconnect between money and actual food/materials/energy production. If your grandfather lived in a 100kw village with a 100 dollars circulating, and made 1 dollar, it is reasonable to think he could buy 1kW for his family. If we live in a 100kw village (because no, we should reduce energy production) with 100,000 dollars circulating and you make 500, you can buy 500w. Now do it for turkeys, or steel, or etc... Degrowth is impoverishment in most cases. Things haven't gotten much more productive, and we are more people

FredPret 2y ago

Assuming you’re asking in good faith: 1) Ephemeralization [https://en.m.wikipedia.org/wiki/Ephemeralization https://en.m.wikipedia.org/wiki/Ephemeralization] is when we arrange a given set of atoms in increasingly useful ways, letting us get the same thing done with less. A trivial example is information distribution. Another one is how we turned sand into thinking machines. Myriad more examples exist. 2) We have vastly more resources than people think. Our deepest mines are ~5km. There’s a hell of a lot of planet below that, with increasing % valuable metals. There’s enough room on the planet - you can give everyone on earth a big house with a yard and we’ll all fit into a single Canadian province, or into Texas. We can generate 100% of our power needs with solar, nuclear, and batteries. And as we get richer, there are more and more people with the time and ability to make greener choices. Our systems are proving to be flexible - look at the price of solar + battery over time; look at the deluge of funding for nuclear research. People are working on bio jet fuel. Other people are working on carbon capture tech and geo-engineering ideas for the worst case scenario. 3). We’re not stuck down here. There’s a whole universe out there. A tiny but growing % of our economy happens off-planet. A private company recently landed on the moon. SpaceX is dramatically lowering launch costs. In a few decades, we’ll be mining materials up there and manufacturing goods in space.