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submitted 3 days ago* (last edited 3 days 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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[-] DreamlandLividity@lemmy.world 5 points 3 days ago* (last edited 3 days ago)

There are many answers to this.

First, this is not a general capitalism thing. It is more the specific flavor we have. Second, it is not an absolute rule, there are companies that don't focus on growth, but it is rare amongst massive companies.

The original idea of capital investment is that when you need investment for your company (e.g. to buy better machines, expand production, etc.) you let people invest (by buying shares) and then give them a portion of the profits gained from that investment (in the form of dividends).

However, most companies have figured out that if they don't pay dividends but re-invest the money, shareholders are still happy because their shares get more valuable as the company grows and they get to grow the company, which is good for CEO paychecks and lot of other things.

There are things like economies of scale (if you produce million units of something per year, it is almost always cheaper per unit than if you produce ten per year). So if you don't grow, your competitor that does grow could sell cheaper than you and put you out of business.

And a lot more.

[-] fodor@lemmy.zip 2 points 3 days ago

I don't think you can avoid it in a capitalist system, though. The capitalists are greedy, that being the whole point of their position, so they will always want more.

[-] DreamlandLividity@lemmy.world 2 points 3 days ago

I want a lot of things that I can't have. They can want it, but the system doesn't have to allow it or can discourage it.

[-] someguy3@lemmy.world 7 points 3 days ago* (last edited 3 days ago)

Shareholders want their shares to increase in value, because that's how you earn wealth, your retirement fund grows, etc. That means the company needs to earn more profit (more precisely, profit per share). To do that you typically grow, but you can also do it by buying back stock (that increases profit per share), or by "increasing efficiency" which is usually a dead end.

[-] JumpyWombat@lemmy.ml 7 points 3 days ago

The non-toxic version of this is growth = innovation. The company may make the same money and remain the same size, but the product should constantly improve to remain competitive.

[-] mrdown@lemmy.world 5 points 3 days ago

Products get worse all the time to grow profits. You don't need to improve the product to remain competitive, you can buy innovative startups and get credits for their inventions or worse to simply killing them

Only workers are expected to be happy with good enough. The elite will never say the balance of thier bank account is good enough. And thus companies always need to grow bigger.

[-] j4k3@piefed.world 5 points 3 days ago

Inflation, but also scale of manufacturing and tooling.

I was a Buyer for a chain of bike shops. You will not buy the same stuff forever. Continuous manufacturing is also generally much more expensive. Most cheap modern goods are made through contract manufacturing. That creates the cycle of seasonal products. Even something like cars involves a tooling cycle where the same stuff cannot be made indefinitely; the tools wear out with time. The market saturates with any given design. All people do not want to drive a Toyota Corolla from 1992 in beige.

[-] sbeak@sopuli.xyz 5 points 3 days ago

More money more better…

[-] Doomsider@lemmy.world 4 points 3 days ago* (last edited 3 days ago)

Companies grow and shrink from a combination of market and internal forces. Companies sometimes need to shrink or grow. The economy and culture are constantly changing. That is why it is very hard to predict where things will go.

Your example of having a company with a set amount of employees that produce a set product happens pretty frequently. A lot of employee owned or family businesses are this way.

I think most of your post can be summed up with why do investors want more and more money. The answer is because they can. If your company owes money to investors then they will beholden to them in one form or another.

There is another worthy discussion here and it is about boards. Boards that do not contain equal representation for the employees and the public can be very destructive.

Most of the corporate abuses we have suffered come from having perverse leadership non-representative of these two most important influences.

[-] LegoBrickOnFire@lemmy.world 2 points 3 days ago

I guess it's mostly because companies that don't try to grow are eventually pushed into irrelevance by companies that do. So most companies you hear about are growth oriented.

In some sense it can be good for consumers. If you have a nice idea for consumers, it's good that you are able to reach more of them or become more efficient in doing so.

Also, to start a business you need money. You can get money from investors, but they expect either interests on the loan, or that you grow so that their share is worth more. The latter is attractive, because you don't have to pay interests that can weigh your company down. But then the value of your company is almost defined by it's potential for growth. If you then decide not to grow anymore, this will tank the value of the company, and you might be stuck with a huge pile of stinking debt.

[-] plyth@feddit.org 2 points 3 days ago

Growth is needed so that Capitalists can make a living.

Without growths, owning companies would only pay dividents which would result in much less income.

[-] Coopr8@kbin.earth 4 points 3 days ago

If the owners primarily want to make money by taking out a portion of revinue as dividends or distributions, like a family business typically does, then stable revenue is more important in some ways than reinvesting in growth.

If the ownership wants to make money by eventually selling their stake (shares or equity) in the company then growth is fundamental to the strategy.

Shareholders are always going to demand more profits. There is no mechanism in a capitalist economy that reinforces the concept of having "enough."

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[-] zxqwas@lemmy.world 4 points 3 days ago

There are plenty of small companies that don't grow. Think mom and pop shops and self employed tradesmen.

I've you get a bit bigger and you've already got the hassle of employing lots of people in multiple places you can't really balance it to be neutral, you will grow or shrink and it's a lot more pleasant to grow than shrink.

[-] myfunnyaccountname@lemmy.zip 3 points 3 days ago

Profits about all. The size of the company itself, eh. But, profits must grow infinitely apparently.

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[-] Randomgal@lemmy.ca 3 points 3 days ago

They can. But that would make you 'lose' capitalism.

Why settle for one yatch, when you could have several mega yatchs?

[-] rothaine@lemmy.zip 2 points 3 days ago

Shareholder primacy. Thank you Dodge v Ford. Thank you Friedman Doctrine.

[-] fodor@lemmy.zip 3 points 3 days ago* (last edited 3 days ago)

Exceptt that case is not nearly as clear-cut as people pretend it is. Actually a company boss has a ton of flexibility in how they run their company and spend money because nobody knows the future.

[-] rothaine@lemmy.zip 2 points 3 days ago

But their goals must align with the shareholders; they must extract maximum value. Or at least be able to explain why they think their actions would be in alignment with that goal. All other stakeholders (workers, customers, business partners, the country, the environment) can go fuck themselves if they find themselves on the opposite side of "value."

Give a corporation the choice between "continue making beaucoup bucks with this new product" vs "don't poison literally everyone for all foreseeable generations" and guess what, they'll choose money. Thanks DuPont.

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this post was submitted on 04 Oct 2025
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