#MoneyMysteries #GrowthGoalsGoneWild 📈
Alright, folks, let’s dive into this puzzling conundrum together. 🤔 Why do companies constantly feel the pressure to outdo themselves year after year in the money-making department? Isn’t that like trying to top your best joke at a party – eventually, you’re just going to flop? 🤷♂️
So, here’s the scoop: In 2024, MoneyCo hits the jackpot with 5 billion dollars in profits. Cue the confetti! 🎉 But then, in 2025, they only manage to match that same number. Wah wahhh. 🎬 Why the sad trombone sound? Well, here’s where things get spicy.
There’s this little thing called “growth expectations,” where shareholders and investors want to see their money trees sprout even more cash leaves each year. 🌳💸 But here’s the reality check – there’s only so much room at the money-printing press. Eventually, you hit a ceiling where demand for your product or services maxes out. 🛑
So, is it truly possible to keep scaling up indefinitely? Or are we just chasing a unicorn that doesn’t exist? 🦄 Let’s put on our Sherlock Holmes hats and figure this mystery out, shall we? 🕵️♀️💼
What do you think? Cast your vote below, and let’s crack this case wide open! 🔍🔐 #DetectiveModeOn
🔍 Do you think companies can keep growing profits forever?
🔎 Yes
🔎 No
Noone has to make more money. But to attract investors you better look like you will make more money in the future, bdcauae thats what an investor cares about, future profit, not todays. And investors invest in whoever has the higest future profit.
As long as the population and technological capacity for production grows there is room for demand to grow.
People also don’t need things to last forever to be beneficial for them, their plan does not need to work for infinity, it just needs to be productive for a while to be positive for them and their investors.
Most big companies have ups and downs and that is expected even if the goal is growth.
I think you are just imagining things being designed to be sustainable forever, but the world is far more volatile than that for a huge number of reasons both natural snd anthropogenic, so things are designed to grow when they can as they can.
Short answer: to keep the stockholders happy
Over short term I think it would be fine. But accounting for inflation over long term say 10 years. If your revenue is still the same that means the company is earning less effectively.
Companies have a fiduciary responsibility to shareholders to make profit or growth. They can have losses for a period of time if it can be explained in the best intrest for the company. Combine that with inflation and their revenue must continue to increase to exceed their expenses and plan for future earnings, or at least plan for future earnings while taking losses thatare justifiable. Negligent spending or intentional waste during a time of loss could be contrued as embezzlement or fraud.
If they are a for profit business and this does not happen depending on the circumstances they could face fines, be fired or even jail time if neglience or mishandleing of fund is established
Yea, thats what our capitalist system wants, companies with the mentality of cancer, which ultimately makes for lots of issues, but the idea is that you take the money and run and leave the issues for other people to deal with who cant just buy their way out
A few things.
1) a massive company with absolutely no growth prospects would be expected to pump out dividends while its price tracked inflation. Its dividends should be growing with inflation too.
2) most companies are not paying out 100% of generates revenue after cost as dividends. They are investing some of it (or all of it, or borrowing to invest more than all of it) into growth. A company that kept your profits from last year plus borrowed and invested ti expand then didn’t expand is not going to please its owners or encourage future owners to pay more for the company.
Not many companies are in stage 1. Arguably more should be – not because they can’t find some side business to try to grow in, but because if there’s no real link to the side business they might be better off returning the profits to the owners and letting them invest it in separate businesses.
They don’t always make more money each year.
Publicly traded companies issue quarterly and yearly guidance and are expected to have results pretty close to that guidance.
Home improvement stocks are a good example of companies lowering expectations during recessions or construction slowdowns.
But of course if the company isn’t expecting increased revenue, they usually reward stockholders with dividends. Infinite growth may not be possible but infinite profits usually are.
Look up a stock like Att. It’s been a dog for years but still issues a dividend every quarter.
You’re close to understanding how capitalism is unsustainable.
Companies have shareholders. Those shareholders invest in the company with some expectations regarding future earnings. Those expectations are the biggest factor for the price of the stock.
If a company is growing quickly it will have a higher price to earnings (PE) ratio. Slow growing or declining companies will have a low PE.
Companies don’t “have to” make more money each year but if they do, shareholders will be more rewarded.
If you’re investing would you rather invest in a constant 5 billion dollars yearly company or a rising company that made 5 billion last year
Companies attract investments via growth, a company not growing is less attractive to potential investors, and investors are a major way companies acquired assets to grow and expand with its somewhat cyclical. If an investment group puts 100million into a company there’s a reason for it, stable returns, potential growth, industry is less volatile to economic changes. If those criteria aren’t being met they will take their money elsewhere.
Usually, the minimum goal is usually 3% to keep up with historical inflation, that’s why when evaluating companies overtime it’s important to adjust for inflation for accurate comparisons. When Company A made 5B in 2024 and 5B in 2025, they made less in 2025 when adjusted for inflation.
Infinite growth being possible kind of depends on the market, the company operates in, scale of operations, and your target customer base. Your right people only have so much purchasing power, so there is essentially a market cap for any product, that’s where product diversity and growth comes in, and the important of investors to source capital to perform those activities.
By no means is this comprehensive there’s all kinds of other stuff and mitigating factors for evaluating a companies yearly performance beyond income and revenues, economic health, relative performance in the market sector, growth and reinvestment phases, internal stability and leadership changes etc.
TLDR extremely simplified.
Consistent Growth = More Investments = More capital to do business with
unexplainable stagnation or dip in performance = Less Appealing to investors = potentially less capital to do business with means less growth.
Stock price is partly based on sales. Do you want your stock price to rise? Upper limit? Ask Amazon.
It’s Wall Street. My company did really well during the pandemic due to our covid testing; once the pandemic ended, Wall Street analysts predicted we’d repeat that PLUS 10%, which is not freakin possible without that testing volume, so our shareholders are pissed that there’s not another global pandemic.
Depends on the age of the company and the industry. A startup definitely wants to be growing rapidly, increasing revenue year over year.
A mature company is fine with not growing revenue in real terms, but still needs to grow revenue 2-10% per year to keep pace with inflation. If inflation is 5% per year and MoneyCo makes $5b every year then the company is actually shrinking 5% per year.
You live in a debt based system, once you get your head wrapped around that abomination, you will understand a bit more. They have to make more to service their debt and pay the shareholders. Same reason the governments needs to increase currency to service debt. Look into it, but have a good stiff drink first…..
Stonks must go up
They don’t have to, it’s just preferable. Companies are 100% able to stay the same size or even decline.
Would you prefer to make the same salary next year or would you like a raise? The latter, right?
Its due to shareholder interest.
If the company makes 100 million a year and there are a million shares then each one earns you $100 a year. Assuming a 10% return is the target then you could expect something consistently doing that to sell for around $1000 per share. Some pension fund can sit on that forever quite happily.
But if income is rising, well that’s a different ball game entirely. Let’s say next year the company earns 200 million, well then in addition to earning you $200 per share, each of your shares are now valued at that new level which is $2000 a go. If you bought a thousand of them, you can now sell them and walk away with your 20% return from the income PLUS a 100% return from the share sales. That’s massive in just one year.
Shareholders playing that game might do everything they can to pump up the apparent value RIGHT NOW just before their sale, depleting stocks, staff cuts for short term savings (and long term problems) or pressuring big sales to land just before the accounting deadline instead of just after etc.
Now obviously it isn’t realistic or mathmatically viable for all companies to meet these expectations and certainly not consistently, but the share holders don’t care one bit. They are very happy to buy cheap and sell high over and over and once they’ve sold up the company can go bust for all they care. They just want to play the system and maximise their own income and aren’t interested in the longer term picture as that’s someone else’s problem and no matter what happens they personally are better off if they have loads of cash.
One of the simplest answers is giving raises to employees. They will expect a respectful raise each year and that money has to come from somewhere
This is exactly why inflation is necessary in late stage capitalism
Wall Street wants it that way.
Look up the growth imperative and growthmanship. We didn’t have a GDP measure until the 1930s.
Stonks
Same thing as that people want a wage increase every year
They have to make more the same reason you as a person do, inflation. If a company gives no or shot raises each year they lose their best, that money given to employees is an expense, every company worth its salt does this to retain talent. Also let’s say, like a lot of companies, they outsource accounting and legal, those firms are doing the same and in turn bill more for services, so said company is again, paying more for expenses. Now to your point of always on the up and up, this is primarily a push for public companies as they must bend the knee to investors (owners). If stock prices get fucked it’s not harder to get loans from banks and expand and make the company better. It’s a circle of shit
Stockholder dividends and C-suite bonuses.
Lots of good companies have gone away chasing comp increases and new growth for Wall Street, instead of tending to their core business.
From my experience overhearing business owners on the links, or at a bar, or other casual settings, it’s kind of a who has the biggest d___ contest. It’s for bragging rights.
Because a company’s #1 purpose is to make money. If you make less next year, it was a failure. But make more, and it was a successful year.
It’s the concept of seeing in the long term., it’s always day one !! Every day a new Challenge and a new goal!! and this is the case for the objectives of the year quarter and so on!
Would you be happy not getting raises any year? If not, why would a company be happy not making any more money. And chances are no one tht works for the company is getting a raise if they company isn’t making more money.
Most successful companies didn’t get to be successful by not caring about making money.
It’s the concept of seeing in the long term., it’s always day one !! Every day a new Challenge and a new goal!! and this is the case for the objectives of the year quarter and so on!
Investors have shareholders, who have invested in companies based on profit projections on future earnings
If a corporation underperforms based on their growth projections, the stock prices go down
The wealth of corporate CEO’s is largely in the form of stocks, not cash. They keep it in stocks and never cash it out — taking loans against trier stock assets instead of ever cashing it out — so that they don’t have to pay taxes on it.
If a company’s stock prices go down, that decreases the net worth of wealthy individuals.
This being America, which is politically controlled by the wealthy, stock prices going down is unacceptable. So we will go to war even instead of allow the number to go down, in order to keep our ultra-wealthy ultra-comfortable.
The better question would be, why can’t we have a sustainable economy? Why does everything have to be infinite growth?
The better question would be, why can’t we have a sustainable economy? Why does everything have to be infinite growth?
It is fundamentally unsustainable, yes.
You can reverse the trend by investing in companies which aren’t growing.
The cool thing about capitalism is that it’s not a pie you slice up and when you have more profit you have a bigger slice and someone gets a smaller slice. What actually happens is that when new things come into the market the pie itself gets larger.
Infinite growth within a finite ecosystem. What could go wrong?
Yes it’s impossible, but you can suck out a lot of blood before someone or something dies. We’re just not *quite* there yet.
Stockholders demand it
1 word, inflation. Unless that year there is a crisis (like covid or stock market crash), if not, staying the same is pretty bad since the company had the potential and equipment to make that happen as proven on the previous year. No improvements needed, just status quo would get you that amount. Companies usually want improvements, its in almost every workers KPI.
If you make the exact same, you lost money.
The whole capitalist economy is entirely based on perpetual growth, which is why it is absolutely not sustainable.
Welcome to the inherent contradictions of capitalism. Requiring infinite growth for success on a planet with finite resources is indeed impossible.