Jim Hlavac
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Economic Theory
| Economic Theory |
Nearly every business is always trying to grow. And for some
reason the bigger the company the more it tries to grow bigger and
faster. However, there is no inherent reason for a business to keep
growing ever larger in revenues, or employees or assets. It is perfectly
reasonable for a business to get to a certain size and then stay there. It
is an impossibility for all businesses to keep growing, especially at the
rate they are growing today. The best example of this is the food store
in a small town. There is no way it can keep growing in the face of the
demographics. If the town stays the same size, there is no way for the
food store to sell more food. It reached its natural limit. It is only big
corporations that want to keep growing, even if they have reached
their demographic limit, and then all they do to grow is wasted effort.
There is some need for new companies, or growing companies,
based on two major factors: the ever increasing wealth on the planet.
And the ever increasing number of people. Thus the rate of growth
must always be based on these factors.
The idea that companies must keep growing stems partly from the
idea that there is just so much wealth in existence and therefore we
must get the biggest piece of the pie, or we lose somehow. But
because materials are recombined in new ways a company may fail, or
cease to grow. Because of a new product by some other company,
there is no more room for growth for the old style item producer.
There are many other reasons for a company to stop growing, and there
is nothing inherently wrong with that. A stable company might still
return a solid profit year in and year out, there is no limits to profits by
ceasing to grow. Nor is there any increase in profit guaranteed just
because a company gets bigger, indeed, often growing companies have
lower profits because they are spending so much on growth that they
sacrifice profits to do it.
reason the bigger the company the more it tries to grow bigger and
faster. However, there is no inherent reason for a business to keep
growing ever larger in revenues, or employees or assets. It is perfectly
reasonable for a business to get to a certain size and then stay there. It
is an impossibility for all businesses to keep growing, especially at the
rate they are growing today. The best example of this is the food store
in a small town. There is no way it can keep growing in the face of the
demographics. If the town stays the same size, there is no way for the
food store to sell more food. It reached its natural limit. It is only big
corporations that want to keep growing, even if they have reached
their demographic limit, and then all they do to grow is wasted effort.
There is some need for new companies, or growing companies,
based on two major factors: the ever increasing wealth on the planet.
And the ever increasing number of people. Thus the rate of growth
must always be based on these factors.
The idea that companies must keep growing stems partly from the
idea that there is just so much wealth in existence and therefore we
must get the biggest piece of the pie, or we lose somehow. But
because materials are recombined in new ways a company may fail, or
cease to grow. Because of a new product by some other company,
there is no more room for growth for the old style item producer.
There are many other reasons for a company to stop growing, and there
is nothing inherently wrong with that. A stable company might still
return a solid profit year in and year out, there is no limits to profits by
ceasing to grow. Nor is there any increase in profit guaranteed just
because a company gets bigger, indeed, often growing companies have
lower profits because they are spending so much on growth that they
sacrifice profits to do it.