500 Words — Day Thirty Six: Chasing Growth

I have never been a huge fan of growing at all costs. While growth is an important aspect of a business or an economy, growth and the metrics are simply one measure of a success. Often times, growth will have a short-term orientation to it and needs to be balanced out with longer term concepts. The most important long term concept being survival. However, survival can lose it’s importance once you reach a certain level of success. And growth, perhaps, becomes even more tempting as you start to realize the fruits that come out of high growth environments.

Growth and sustainable growth are two different things. One recognizes the gravity of reality while the other tends to ignore it in the pursuit of maximizing expansion. But it’s really hard to get a good handle on what exactly is sustainable. When there is so much pressure to grow faster and faster (especially given the lower yield, higher inflation environment), it is easy to lose track of what numbers make reasonable sense and what numbers grant an economy or a company enough flexibility that they can course correct if the underlying environment changes. And not surprising, the underlying environment fluctuates a lot. It is also hard to restrain oneself given the inherent survivorship bias that arises out of success. We as humans tend to credit ourselves more than we actually deserve and tend to credit good luck as lot less than it deserves credit for. An economy or company may have lucked into favorable conditions that encouraged high growth and it would be unreasonable to always expect things to remain easy or to get easier as there is always the risk that the trend reverses.

But what about when it seems that growth is inevitable? When you have so much data to indicate that success is the only expected state and environmental conditions will be softened if that success comes into doubt? Then you risk losing that survivor instinct, the focus on the long term. Because if the long term is certainly good, what is there to worry about? But then you start to decouple growth from the thing that drove it in the first place. Growth is driven through investment and spending rather than development and production. Investment and spending should be used to encourage development and production, but are often used to do a little bit of that while then focusing on marketing to get more investment and spending.

With such a decoupling, the growth is detached from reality and more and more reliant on future investment and spending. Eventually when the conditions change in a way that can’t be softened, the problem with chasing growth is that companies and economies overcommit to something that can’t be maintained. If everyone is in that mindset and that mindset flips towards survival as it pushes itself into the short term, everyone will cut their losses to try and survive. The ones that cut the least will be those who were long term minded in the first place. The ones that thrive were those entities that didn’t focus on growth at all costs, but the development and production that could provide enough life to survive in absence of it.