All public companies are required to have public “earnings” calls available to all shareholders. Typically these calls will take place early in the morning after quarterly earnings numbers have been released and generally few people, relative to the total number of shareholders, listen to them.

When I listen to these calls (which is not very common) I enjoy listening to corporate managers talk about their companies and their goals, but I also like to listen to the “question time” that always comes at the end of the calls. Analysts from all of the biggest investment firms will always ask questions in the same manor. They will first thank the executives for taking their question and then ask two questions in rapid succession (it’s always two questions for some reason). The questions always relate to monetization and growth. Growth is the subject of this entry.

How can things always continue to grow? I suppose at its most basic level growth in demand for products and services is linked directly to population growth. As long as there are more and more people to serve, growth is possible. But the question is: what’s the limit? Will we always be able to expect year over year growth from all companies or eventually will those analysts be talking about something else instead of “growth”? Maybe one day they’ll start talking about “sustainability”?

Thoughts?

Growth – What’s the limit?
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  • It’s a grassy issue… I believe growing money is not greener on the other side of our global environment.

  • Well, some people would argue that “growth” is a fundamental part of the capitalist economic system; and that the whole thing breaks down if you try to stifle growth. The premise of Ricardo was that there are things not limited by scarcity, that could be increased infinitely. Marx then explained how that fundamental drive towards growth caused the business cycle. (Modern economists to some extent disagree, of course).

    In any event, each single company can always grow in the market. The only time growth is not possible is when (1) you have a monopoly, and (2) you’ve expanded the market as far as possible (worldwide). Since (hopefully) we won’t have many monopolies in the future, I imagine companies will continue to talk about growth (either of shipments, revenue, profit, market share, or whatever else).

    The growth mantra is actually a “coordination failure”, in game theory. Each individual company pursuing it’s own best interest causes all companies, collectively, to be worse off (classic example: rush hour traffic). Particularly in markets which are zero-sum games! Take the health insurance industry, for example: there is a finite, and relatively unchanging, amount of “risk” in the United States. Therefore, each insurance company can only do better at the expense (!!) of another insurance company. The industry, as a whole, cannot actually “grow”, except by establishing local monopolies and jacking up prices.

    On the other hand, I don’t think the absence of growth has anything to do with sustainability. A sustainable capitalistic economic system would have more with correctly pricing resources or natural goods, and then forcing the market to take those costs into account. Otherwise, goods are “mis-priced” and too cheap (also over-consumed, causing more damage). Ideally, it should be neutral: the cost of the natural good is the cost of replacing it (e.g. plant a tree on a plot of land), and any consumption of natural resources would be offset by replacing them (or mitigating the damage).

    It would mean, also, that a tree that can grow back in 20 years is “cheaper” than one that takes 200 years to grow back – which would change the structure of the logging market, probably making it more cost-effective to have “private forests” that are artificially created.

    That’s not politically feasible, of course. At least at the moment.