Submitted 10 hours ago by gigachad@piefed.social to nostupidquestions@lemmy.world
Under capitalism, it seems companies always need to grow bigger. Why can’t they just say, okay, we have 100 employees and produce a nice product for a specific market and that’s fine?
Or is this only a US megacorp thing where they need to grow to satisfy their shareholders?
Let’s ignore that most of the times the small companies get bought by the large ones.
Growth=good is also a sentiment for whole markets.
In a market where new customers start buying the products every day (growth market), e.g. the smartphone market 20 years ago, you can generally just come up with new products and someone will buy them, if they’re good.
On the other hand, in a market where customers only replace their old devices as needed (market saturation), e.g. basically the smartphone market of today, things are much more tight for companies. They have to primarily be more cost-efficient than their competitors in order to survive.
I’d highly recommend watching this video, it goes through the history of capitalism and why it is the way it is now
Under capitalism, companies do what their owners want them to do. The owners can choose to try to grow, to shrink, to sell, or to close.
Publicly owned companies have shareholders, and the shareholders usually want the company to grow so their investment grows. Shareholders can have other values, but anyone can become a shareholder.
Under non-capitalist systems, the government might own some or all companies. Then the companies do whatever the party in power wants. The party in power probably doesn't have time to run all the companies, so they give some level of independence. They can reign that back whenever they like.
The most common motivation in non-capitalist systems is probably greed and growing personal wealth of party leaders via corruption under that system. Luckily, the people can vote in a different party and/or protest against party corruption except in all real-world cases, where that is banned or suppressed.
Note that even if by all practical terms a business isn’t growing, then it’s still growing.
Part of the whole deal is that there’s an intent for the money supply to change for a roughly 2% inflation. In an oversimplified sense, the idea self be that everything gets 2% more expensive, everyone gets 2% raises, and investments at least generate 2% returns.
We’ve basically decided that we need to trick ourselves into feeling progress by making “standing still” look like growth. So if someone had flat income year over year, they actually lost in real terms.
As a co-owner to a business, we grow because sometimes the funds from what we're already selling slow so we branch out in other directions to cover it. An answer for small businesses at least.
Ape brain usually goes “big = good” and therefore “bigger = better”. And since a bunch of other peoples ape brains have thought this before you, then now if you have a tiny business, it’s very likely that your only options are to either get trampled by giants or try and become one of them.
Assume you’re saving X amount of money each month for your retirement.
Your options for storing that money is either:
Assuming you go for option 3, would you choose to invest in a company with zero growth meaning your retirement fund won’t grow, or would you choose a company that is constantly growing?
Nobody would choose to invest in a company with zero growth or which doesn’t return money back in the form of dividends.
You’re objectively better off investing in companies that grow since those are the companies that will grow your investment.
theneverfox@pawb.social 8 hours ago
Because they took the money. If you take the money, the path is inevitable
When you take on investors, you just invited in someone who looks at your company like a farmer does to their crops. They want you to grow as much as possible, but they don’t actually care if you live or die - you’re one of many using up resources
If your growth slows, they’re going to demand more. They might demand you make cuts, they might push you to take loans and expand, they might try to sell to someone else. If your value isn’t increasing faster than other possible investments, they lose imaginary money to opportunity cost
And by virtue of being an investor, they have plenty of money and want to gamble with it. A total loss probably wouldn’t impact their lifestyle, they want invest in Apple at the ground floor and become a billionaire
You can start a company through loans, risk your house and build up slowly, and walk away clear. And people do.
But then they want to retire… And there’s this neat trick you can do if you want to own a small business… You can make it buy itself. You can take out a loan to pay out the previous owner, say 5 years of profit, and make the business take on the loan. But now, just to break even, you’ve got to beat what you paid for it plus interest over the term. And both business and individuals can do this
So in short? The reason is debt. A small business can make you upper middle class, a large one could make your entire family insanely wealthy for centuries.
But once you take the money, the business has to grow, or it’ll be harvested