I was eating an egg this morning looking out my widow listening to someone on the Internet whine about corporate greed. I noticed the tree behind my apartment is the same height this year as it was last year because its top lines up perfectly with the building across the yard. That got me thinking about companies. Especially public listed companies.
I’ve never understood the drive these companies have to grow indefinitely simply because investors expect that. I know there is wisdom in crowds, but in this case it escapes me. What does the need for perpetual growth lead to in most cases? Short-term thinking. Living for quarterly results. Keeping the numbers up. Diluting the company’s vision (unless that vision is world dominance – yuk). The thing is, people – and that includes CEOs – behave in response to how they feel they are being measured. Measure someone on sales growth and you will see someone hell-bent to increase sales at the expense of all the other things that they are not being measured against. Not a good formula. Especially when there are no other things being measured.
Take the tree in my backyard (<- that’s not it btw). I reckon its been around for a few hundred years. It’s done fine. It’s as tall as it needs to be to ensure it gets enough sun. Wide as it need to be to ensure it is solid. And it roots run deep enough to ensure it gets enough water and doesn’t topple over. Its satisfied with that. And beautiful. Now, of course, someone could go plant a grove of Giant Sequoia trees next to it, but it knows that is highly unlikely and is willing to take that chance.
Which got me thinking about things that don’t stop growing, like cancer. It is hell-bent on growth at all cost and only measures itself on that one dimension. It never has enough. Eventually it will destroy its host. Because its drive for growth is infinite and the host is finite. Like you and me. And all the other investors who are clamoring for growth.
OK I’m starting to sound like Chance, the gardener. So I’ll stop now.