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On Restrained Growth

#start-ups #venture #business

The economic marketplace (as a fitness landscape ) is becoming increasingly punishing in outcomes as a result of the decrease in “time-to-live” of information asymmetries. A consequence of such extreme influences is an eventual small concentration of highly fit competitors with large territorial radii (i.e. monopolies – those who captured the asymmetric payout).

Two observations of this modern environment: first, it selects organizations capable of reaching similar high fitness (i.e. “escape-velocity”) usually through a survival strategy of intensive growth. Secondly, venture capital has emerged as a tool to support this adaption: companies who raise venture money are conferred a selection advantage (relative to non-venture-backed competitors) because their primary survival strategy (intensive growth) is enabled.

However, intensive growth is a fragile fitness strategy. It bears increased risk by over-investing an entity’s survival in the existing landscape. Should the landscape alter itself to disadvantage scale operations, those executing the intensive-growth-to-survive strategy could be hamstrung. One modern symptom suggesting an impending alteration is the revelation of the “embedded growth obligations” of public institutions ( E. Weinstein ). That the late laggards of the adoption curve have begun taking on this growth fascination may signal, in canary like fashion, a decrease in returns from the hyper growth strategy on the horizon. In such event, current companies may seek to be contrarian in action.

In speculation I wonder if a potential counter strategy to survive transition from growth advantaged landscape to a new landscape with unexplored properties might be something on the order of what Jason Fried calls a “calm company”.

Returns do not matter if one does not survive (W. Buffet - paraphrased).

Kind thanks to Kanwar Sahdra for his reading in advance.