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submitted 2 days ago* (last edited 1 day ago) by gigachad@piefed.social to c/nostupidquestions@lemmy.world

Edit: This question attracted way more interest than I hoped for! I will need some time to go through the comments in the next days, thanks for your efforts everyone. One thing I could grasp from the answers already - it seems to be complicated. There is no one fits all answer.

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.

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[-] nuko147@lemmy.world 4 points 12 hours ago

Extremely oversimplified:

-for Public Companies: CEO and executives are obliged to pursue maximum profit (either short-term or long-term) for the shareholders, thus the company must grow. - - For shareholders its Cost of capital (basically shareholders want bigger returns than the investment they made) and Opportunity Cost (lose money because you don't move your investment to a company that is more profitable or gonna be more profitable)

-for private companies: Competition (grow or die from your competitor), efficiency (reducing cost), exit (sell it big and retire), psychological reasons (better safe than sorry), etc..

There are many family business or small companies that function as you describe, but they get replaced and driven out of business in a matter of years or decades (with exceptions). But being stable in an growing economy is very hard and risky. And Capitalism by definition must grow or it gets in crisis.

[-] Electricd@lemmybefree.net 3 points 12 hours ago* (last edited 12 hours ago)

If you have competitors, they will develop and have better products / service than you

There’s always room for improvement, and improving requires resources

[-] olafurp@lemmy.world 4 points 13 hours ago* (last edited 13 hours ago)

Not all companies need to grow. Some do perfectly fine by just maintaining their current output like a owner operated single person plumbing company.

Another example can be Walmart, they don't need to grow but investors prefer growth so it becomes a focus.

There are some companies that need absolutely to grow to survive. This is seen a lot in tech where in order for the business model to make sense they would need some big quantity of users.

Let's say you got seeded 10M and managed to get to a minimal product with 10k users that get you $2 in revenue monthly but your cost are around 50k monthly. It means you're making a loss but with 100k users you'd make a profit. To get to 100k you need more investment but to justify that investment being sound you need show growth.

So in general if being bigger gets you economies of scale then making a loss early is fine as long as you can get the investor money you need to survive. So to survive as a business you need to grow.

Those are two ends of a spectrum and everything in between exists as well. So quick answer would be "Companies don't always need to grow but some really do because their business model only works at a different scale".

[-] Smoogs@lemmy.world 2 points 13 hours ago* (last edited 13 hours ago)

Because the moment they go public the stock market demands they constantly have an improvement basis to keep their stock holders in a state of security to keep invested. So like get this: there’s a company that makes medical machines to keep people alive. A founder retired and the stock market dipped to half the price. Which only lasts less than a month and it recovers. Of course anyone who’s leading teams would then panic and get flustered

…like this is a company that should have its target about human life. And all the stock holders are worried about is the suit. Like it’s not even an improvement of a product. Improvements are all bullshit announcement for Wall Street.

That is..until crypto collapses it all.

Tax the rich and fix this shit.

[-] glitchdx@lemmy.world 6 points 18 hours ago
[-] KindnessIsPunk@lemmy.ca 3 points 18 hours ago* (last edited 18 hours ago)

This, citizens united and credit scores is where it all started to go wrong

[-] quick_snail@feddit.nl 10 points 23 hours ago

Nonprofit companies don't have this problem. It's an issue with capitalism.

[-] greywolf0x1@lemmy.ml 3 points 22 hours ago
[-] scarabic@lemmy.world 15 points 1 day ago

Because they take investment.

Privately held companies can sit around earning the exact same amount of profit forever.

But if you are publicly traded on the stock market, people are walking up and injecting money into your business. They expect a return for that investment. And that means that the part of your business they’ve bought has to be worth more in the future in order for them to sell it for more than they bought it.

Therefore: growth. Owning 1% of a $100k business isn’t with as much as owning 1% of a $200k business. So if you own 1%, you want it to go from $100k to $200k.

If you aren’t taking outside money, none of this is a problem. Unless the owners just want a raise, which most people generally do over time. If nothing else, inflation is constantly eroding the value of money so you need to grow a little just to stand still. Most people don’t want to make do with less and less over time.

[-] MajorasTerribleFate@lemmy.zip 5 points 1 day ago

Re: inflation, growth in pure gross/intake has to increase to match the currency devaluation, and that can mostly be done by adjusting your prices in line with inflation. Employee count, market shares etc. can all hold steady, all else being equal.

[-] boonhet@sopuli.xyz 3 points 1 day ago

This is also the issue with private investment companies.

When the EA deal was announced, people said more or less "this is proof that private isn't any better than public". Well that's sort of true - there's no guarantee that private is any better, but it CAN be, depends on who owns it. In the case of EA games, it was bought as an investment by a bunch of greedy investors, of course it's going to be as bad as, if not worse than, a public corp.

[-] thatKamGuy@sh.itjust.works 2 points 13 hours ago

It’s literally sad that the only hope for EA to become less scummy as a privately held company, than it was as a publicly traded company, is for the Saudi Arabian regime to proactively use them to win over gamers through the digital equivalent of ‘sports-washing’.

It’s depressing to think that we are at a point where EA could be considered the lesser evil in comparison.

[-] elbiter@lemmy.world 10 points 1 day ago

Because greed

[-] SethTaylor@lemmy.world 6 points 22 hours ago* (last edited 22 hours ago)

What I was taught literally in fifth grade was this: "A company is successful when its profit is zero." Meaning, everyone has been paid and the company has lost nothing.

The way I was taught it was by the teacher asking the class and all of us getting it wrong with answers like "A company is successful when it makes a million dollars" and such.

I will never forget it.

[-] RememberTheApollo_@lemmy.world 25 points 1 day ago

Because they run out of “create” and they’re slaves to the quarterly report.

A new company that makes/sells a widget that is desirable will grow naturally from the demand for the product. It has to get bigger to manage the demand. They go public to get more money to grow more quickly. Those public investors expect a return on their stock investment purchase.

Now competitors show up. Competition is bad for our big startup (despite being a supposed tenant of the free market that allowed our company to grow quickly in the first place) that is now a major power in the widget industry. You can only make the widget so many ways, can’t really improve it, and the market is becoming saturated. So what happens next? WidgetCo’s stock is flat! Investors are mad! The CEO is in trouble! Now we do acquisitions and enshittification. Buy the competitors and adjacent product makers. Now there’s “growth” again even though nothing new is made, in fact the product gets worse and nobody gets hired as they want attrition to get rid of redundant employees. The hope is that the widget is so engrained in society that it can’t be done without. Now do unbundling. Subscriptions. Sunsetting. Modify the product so that new versions must be bought due to batteries or servers no longer supporting previous versions. If you can’t make new things, make the customer buy new versions of the same old things.

Gotta keep pushing that quarterly report line up to keep the investors happy and the CEO bonuses coming.

[-] MolochAlter@lemmy.world 39 points 1 day ago

It's not "companies", it'spublicly traded companies.

And the answer is quite simple really: the moment you become publicly traded your stock becomes your product, and everything else becomes a means to deliver better stock prices to your investors.

Not all companies are publicly traded, I patronise privately held companies wherever possible because as a client I'm still at the core of their business strategy, and I'm wary of the alternative.

At the end of the day, bad strategies result in bad products and services. Vote with your wallet, it's very possible.

[-] sigezayaq@startrek.website 16 points 1 day ago

I work for a privately owned company and we're absolutely expected to grow. Being privately owned doesn't change that.

[-] MolochAlter@lemmy.world 2 points 1 day ago* (last edited 1 day ago)

Growth and constant growth are not the same.

Obviously growing a business is positive in some circumstances, the point is that growth for growth's sake becomes the name of the game once you go public, whereas when privately held the company can decide whether it makes sense to grow in that moment or focus on other goals in the short term to benefit a long term strategy.

[-] fodor@lemmy.zip 6 points 1 day ago

That is a myth. The law is actually far more complicated, at least in the U.S., and presumably elsewhere too.

[-] cdf12345@lemmy.zip 9 points 1 day ago

Please elaborate because everything written above is correct. Companies must maximize value.

The leading statement of the law's view on corporate social responsibility goes back to Dodge v. Ford Motor Co, a 1919 decision that held that "a business corporation is organized and carried on primarily for the profit of the stockholders." That case — in which Henry Ford was challenged by shareholders when he tried to reduce car prices at their expense — also established that "it is not within the lawful powers of a board of directors to shape and conduct the affairs of a corporation for the merely incidental benefit of shareholders and for the primary purpose of benefiting others."

[-] kossa@feddit.org 13 points 1 day ago

One aspect I haven't read about: competitive pressure and economics of scale.

So, imagine two carpenters: they both produce one chair a day. They sell it and can sustain their families with that. Now the one carpenter works a little overtime and uses sharper tools: he's able to produce two chairs a day. He still needs only to sustain his family, so he could sell the chairs at 50% discount. But he goes for 75% of its original price. Still cheaper, he has more.

Everybody wants to buy those chairs now: they're the same, but one is way cheaper. The other carpenter loses business, he can't sustain his family anymore, because he needs to sell one chair a day at least. To keep up, his business needs to grow now.

[-] frustrated@lemmy.world 3 points 1 day ago

If you have a company in a small town and everything is paid for and the size of the town isnt growing or changing, you actually do not need to grow. There is a company in Leadville, Colorado called "Melanzana". They make technical hoodies - they're pretty good. They actively shrank their business by closing their online storefront to reduce demand and reduce the burden of keeping up with that demand.

HOWEVER, if you have a business that is plugged into a larger marketplace and you have investors or have growing rents, etc. your investors expect a return on their investment and your growing costs need to be addressed so the only option is to grow to keep up.

Super interesting topic when you contextualize within a closed, limited, physical space. And by "super interesting" I mean dystopian.

[-] melsaskca@lemmy.ca 8 points 1 day ago

Shareholder demand? Greed? Probably a lot of both.

[-] hperrin@lemmy.ca 46 points 1 day ago* (last edited 1 day ago)

This mostly only happens to companies with outside investors, and it’s in order to make the investors happy.

Companies owned privately by one or a handful of people who all just want the company to keep going, make a decent profit, and be sustainable, don’t always exhibit the “need for growth” behavior.

It’s usually because the investors don’t really give a shit about the company or its mission, they just want money. Often this kind of “need for growth” bullshit is just short term growth, since that’s what most investors care about. It stifles the company’s ability to plan for long term growth and make the right decisions to achieve it.

[-] dontsayaword@piefed.social 9 points 1 day ago

This includes all publically traded companies

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[-] jaggedrobotpubes@lemmy.world 108 points 2 days ago

Yeah that's the entire problem.

"Always bigger" is delusional or cancerous.

[-] Darkcoffee@sh.itjust.works 32 points 2 days ago

Change the "or" to a "and", and you got it.

[-] kiagam@lemmy.world 15 points 1 day ago

I didn't see a single top level comment be the devil's advocate so I will give it a try.

Humanity moves forward. Standards are always shifting. New technologies and needs are created everyday and people want to raise their standard of living to accommodate for new things. Also, global population has been growing since we stabilized food production in the 1800's.

If companies don't grow at least with population, that means tomorrow we will have less than today. If companies don't also grow with raising standards of living, that means someone stays poor. If companies don't also grow to match the complexities of producing new technology, that means we stopped in time technologically.

In a competitive system such as capitalism, you don't wait for more competitors to show up and fill this new ever-growing demand; you take that demand for yourself. So everyone seeks growth.

When a society does not grow (i.e. japan) for too long, capitalism doesn't break down immediately, but you clearly see it stagnates. Japan's population is not stable and their economy is facing major problems.

Whether growth is organic or fabricated is a related, but different, topic

I work in a mid size company that is a leader in the niche market that we do. However we need to innovate and acquire other small companies and expand because we do have competitors. So the world around us is telling us to innovate or lose the market.

[-] nosuchanon@lemmy.world 5 points 1 day ago

There has to be some growth because inflation eats at the value of your capital every year.

[-] dirigibles@lemmy.world 5 points 1 day ago

I see a great deal of economic rationale being thrown around and usually I love a good discussion on economics, but I believe we are overthinking the question. I would argue any group of people getting together with some shared narrative is going to want to procure more resources for themselves. This can be a family, a tribe, a friend group, a company, a nation, etc. It's just how we are.

[-] hansolo@lemmy.today 59 points 2 days ago

In the strictest definition, they don't.

Capitalism is minimally fulfilled when a business sells something for a profit and reinvests the profit (now capital) in the business. Hence the term. It doesn't have to grow the business, make new products, or do anything beyond maintenance of its processes, be that fixing or updating machinery or training employees. A single person selling tomatoes in a market in Madagascar that fixes of their tomato table with profits is perfectly capitalist.

Expecting constant growth is not a requirement of anything.

[-] einkorn@feddit.org 25 points 2 days ago

A farmer selling their produce is not necessarily a capitalist. A farmer toiling on their own field sells the fruit of their own labor, so to speak. One step up are what Marx calls "Little Masters": They own and work their means of production, but sometimes have employees such as farmhands or apprentices (Think companies where the owner still works in the workshop). Actual capitalists are detached from the production process: They no longer work, but simply own the so-called means of production and exploit others by buying their labor force for less than their produced result is worth.

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[-] jbrains@sh.itjust.works 14 points 1 day ago

Idiots began to demand perpetual growth and other idiots began trying to make it happen. And then it became institutionalized. And then the idiots forgot they were idiots.

[-] Mr_Dr_Oink@lemmy.world 5 points 1 day ago

I guess because otherwise you have something more akin to communism.

Which is a big scary monster and the biggest economies in the world would rather suppress a system the levels the playing field and helps everyone than give up their dollary-doos.

I think about this from time to time.

Its like, hey we make a product and it costs this much to make and we make this much profit, so that should be it. Thats how much this product makes. Dunzo. Next muffin. But it never works that way, once they have found the sweet spot where the product is useful and works well whilst also selling for a price that pays for production development and wages then it becomes about cutting costs to increase profits and that takes the form of using cheaper materials, paying lower wages, firing staff, incorporating planned obsolescence so people need to buy more. All in the name of profits and bonuses.

Its disgusting, it damages society, the environment and warps peoples minds so that people like donald trump exist and i hate it.

[-] HobbitFoot@thelemmy.club 9 points 1 day ago

Valuation of companies is partially dependent on growth. A company that is projected to grow is worth more than a similarly sized company because it is expected that future growth will make the company earn more in the future, which makes the company worth more now.

[-] Strider@lemmy.world 5 points 1 day ago

Because we decided to play this fucking game. Not growing is stagnation, which is wrong of course.

So we keep on hoarding more money for smaller groups.

[-] irelephant@lemmy.dbzer0.com 3 points 1 day ago

Growth stocks are worth more than mature stocks, because people are more likely to invest if they think they'll make money back.

[-] gary@piefed.world 21 points 2 days ago

I hate it. It even bleeds over into performance reviews. Like you'll never get a perfect score no matter how hard you work because you always have to be improving on something. It's supposed to be the sure fire sign of "success" but all it does is create impossible goals and bring everyone down.

[-] Swedneck@discuss.tchncs.de 16 points 2 days ago

if you look closer you'll note that it's very much related to whether a company is publicly trader or not, as soon as people are trading stocks you end up with a bunch of people who don't actually care about the company and those involved in it, they only care about making money.

a company that isn't having stocks traded around is able to focus on things other than growth, such as making sustainable revenue or being a public good (or a personal good, like a small café that barely makes any profit and just exists because the owners want to run a café).

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this post was submitted on 04 Oct 2025
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