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Though unpopular in many circles, Karl Marx wrote passionately about the inherent contradictions of capitalism. While his arguments were complex, some of the pillars can be simplified to suggest that these contradictions are created by capitalism’s constant need to grow.

In different economic circles- much more popular than the Marxist circle — growth is synonymous with what’s good and right. In fact, you’ll find that most companies have “growth” as a key pillar of strategy. Nations themselves are thought of as “doing it right” when their GDP is growing while are considered “failed” if their GDP shrinks.

This philosophy of growth is at play in the world of technology. Despite the rhetoric of disruption and self-styled “Davids” defeating incumbent “Goliaths,” the technology industry favors “bigness.” From the “natural monopoly” argument used to justify concentration in telephony and communications (an argument not without merit) to arguments about the need for standardized Operating Systems (an argument brought to bear for years by Microsoft), the economic impetus for concentration and bigness drives the decision-making of many of technology’s stalwarts.

There is more to the economic logic of growth as well. As companies win and develop particular markets, they run out of ways to garner profit; “efficient” markets should by definition not offer high margins. So once they build a market, knock out competitors, and create a customer-base, that particular market gets “routinized” and the company seeks to find new vistas to expand into, new worlds to conquer. So it encroaches on yet another area to find growth.

Economics aside, there is the cultural aspect of growth as well. For centuries, the notion that growth is good has been seared into the consciousness of industrialized humankind. Few company owners or CEOs suggest that they can simply be happy staying the same size, serving the same customers, and simply getting joy out of “doing the work.”

So it is with tech. Channeling Gordon Gekko, in tech, “growth is good.”

Growth, however, can be challenging. Here, the obvious is worth repeating. Growth requires devising a methodology to duplicate what was done before and simultaneously to add to it. In business, this comes in a few ways:

1. Getting more out of existing customers

2. Adding new customers

3. Finding entirely new lines of business to develop and doing 1 and 2

For the technology giants, these tasks are not trivial, especially number 2- adding more customers. Here’s the rub: the Market Capitalization of a company (for most this is refracted through the price of a share) is predicated on a simple idea: that the aggregate future discounted cash flow is what a company is currently worth. Put simply, a stock price is determined not by past attainment but by prognosticated results from the future.

Couple this with the notion of “disruption” often bandied about in the technology world- If disruption is indeed as commonplace as it is claimed by technology entrepreneurs, marketers, and investors, then how can they simultaneously be so confident about the future earnings of technology companies? The whole point of the disruption-talk is that incumbents are likely to lose their perch to new, agile, risk-taking companies. If this is the case, how can companies be thought to have a guaranteed lock on future profits?

When caught by this reference to the inherent contradiction in simultaneously suggesting disruption is commonplace and in the same breath, valuing Big Tech companies above $1 Trillion, CEOs and technology plutocrats refer to the idea of capturing new markets if for some reason their hold on a particular market erodes.

Once again, the reference here is to either add new customers or to develop new businesses.

This is where life gets tricky.

New customers can indeed be the taproot of growth but what happens in a saturated market? In early February, Facebook announced that 2B people use its “WhatsApp” messaging feature. Amazon announced that 150 M “Prime” accounts. 90% of searches made via Desktop computer are done via Google. These are some simplistic examples of market domination. The issue is this: Once you get enter such stratospheric heights, the ability to grow further is restricted by the number of people on Earth (in theory) and the number of people or entities who have access to or ability to buy your product or service (in reality.) Laws of business can be disrupted but the laws of mathematics are inviolate.

Well if there are no more people to do business with then perhaps you can open new lines of business with the current customer base? First you can sell them books, then clothes, then groceries, and so on. Perhaps, but what happens to your company when you do that?

For most companies, diverting from the core proves dangerous. The passion, knowledge, and deep roots one sets in one business or industry may not translate into another. The advantages that accrued due to experience and the creation of an optimized ecosystem in one area do not naturally translate to another. As such, the movement into new markets can have a dilutive or water-logging effect on a company, often with great losses attached. The culture of focus that characterizes successful companies can dissipate in the lateral translation as well.

Sure, every now and again miracles happen. In technology, there is no better example of this than what happened with Apple- from near death to utter dominance in two decades. Indeed who knows what the future holds for the company and how it will manage growth going forward.

Big Tech is going to face a reckoning. With the coupled dynamics of business and the law of large numbers and the increasing — and righteous- pressure for environmental stewardship and economic equality, Big Tech will have to retool itself, find sustenance in something other than economic growth, and consider a social and moral mission to be its prime mover.

Romi Mahajan in an Author, Marketer, Investor, and Activist

Originally published in Medium


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