Why Do Businesses Fail?

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Wall Street analysts measure companies relative to the market.

  • If companies perform better than the market = WIN.
  • If companies perform lousier than the market = FAIL.

CEOs, hedge fund managers, mutual funds live and die by how their performances compare to the market's (which the S&P 500 typically tracks).

WHAT THE ^^@!%^^@ DOES THAT MEAN?

Take bananas:

  • You grew 10 bananas last year.

Did you do well?

Compare the 10 bananas that you grew last year to what the market (e.g., your compeititors) could do:

  • If the market could only only grow 5 bananas = YOU SEX-TACULAR.
  • If the market could grow 50 bananas = YOU SUCK FAIL SUCK QUIT NOW.

Why do economies keep growing?

Economies keep growing because we grow our capacities to grow more-and-more-and-more bananas each and every year.

For example, based on every $1 invested:

  • Year 1: We can grow 1 banana!
  • Year 2: We can grow 2 bananas!
  • Year 3: We can grow 5 bananas!
  • Year 4: We can grow 11 bananas!
  • Year 5: We can grow 20 bananas!
  • etc.

Improving technology, greater knowledge, and the increasing efficiency to grow those bananas, lead to peeps growing their capacities to produce more-and-more-and-more bananas.

For instance:

  • "Cletus! Come here! This web thing will let our customers order instantaneously instead of calling our shops!"
  • "CLETUS! Come here! We can keep use email newsletters to send customer notices in batches instead of calling each customer one-by-one-by-one!"
  • "CLETUS JERMAINE! Come here! We can reduce our inventory levels by practicing what Toyota calls the kanban philosophy!"

Adapt Endlessly

A constantly growing economy means (unfortunately for you, but fortunately for the greater world):

  1. You better increase how efficient you produce your wares.
  2. ...because the rest of the economy is working faster-and-faster-and-faster every year to produce more-and-more-and-more for customers.
  3. ...and if you stay idle, others will undercut your profit margins -- eventually rendering you obsolete.

For example, take Company X.

1930s America. Company X seeks no improvement to work faster:

  • 1930: Company X produces 1 banana for every $1 invested (the rest of the world produces 0.3 bananas for every $1 invested).
  • 1933: Company X produces 1 banana for every $1 invested (the rest of the world produces 1 banana for every $1 invested). UH OH
  • 1936: Company X produces 1 banana for every $1 invested (the rest of the world produces 3 bananas for every $1 invested). OH NOES
  • 1939: Company X produces 1 banana for every $1 invested (the rest of the world produces 10 bananas for every $1 invested). OH NOES!!!!!!!!!!!!!!111111111111one

Company X dies a horrible tragedy as they fail to find more efficient ways to produce their products for their customers; meanwhile, the rest of the market does, and gives their customers more bananas for their $.

[Sidenote: The best way to be (a) unemployed in X years and/or (b) take a huge hit to your salary/earnings? Keep your skills stagnant; the rest of the market -- exploiting the advances of a more efficient economy -- will surpass you.]

So, how do you stay in business + rock?

Simply this:

  1. Seek ways to perform better/smarter/faster than the rest of the world.
  2. Repeat ^1 until the end of time.

That is, keep seeking ways to grow more bananas for every $1 invested than what the world can do with that dollar.

Be more efficient than the market (i.e., work faster, produce more, use less) = WIN.

More output.

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Posted on November 23

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