By Nwaodu Lawrence Chukwuemeka
MON, JULY 17 2017-theG&BJournal–There is no higher God in Silicon Valley than growth. No sacrifice too big for its craving altar. As long as you keep your curve exponential, all your sins will be forgotten at the exit.
It’s through this exponential lens that eating the world becomes not just a motto for software at large, but a mission for every aspiring unicorn and their business model. “Going viral” suddenly takes on a shockingly honest and surprisingly literal meaning.
The goal of the virus is to spread as fast as it can and corrupt as many other cells as possible. How on earth did such a debauched zest become the highest calling for a whole generation of entrepreneurs?
Through systemic incentives, that’s how. And no incentive is currently stronger than that of THE POTENTIAL.
It used to be that successful, upcoming companies would show a prudent mix of present-day profits and future prospects, but such a mix is now considered old-fashioned and best forgotten. Now it’s all potential, all the time.
This trend didn’t start yesterday. We can’t blame the current crop for soil spoiled five harvests ago. No, this singular focus on potential, forsaking all present-day considerations, was cultivated by some of our current giants.
It’s companies like Sales force that have shown just how long you can live on potential alone. Just how large and sprawling you can become without ever bothering to show much if any profits. There’s a decade and more proof that growing like a virus, gobbling up other businesses to cling to the exponential, is how you can be “successful”.
There’s always more potential. Always another idea or domain that can be devoured. But this is also the straight path to devolution and its distortions. Bright ideas boiled free of all that is good and left dry as bones.
Have you tried Angry Birds lately? It’s a swamp of dark patterns. All extractive logic meant to trick you into another in-app payment. It’s the perfect example of what happens when product managers have to squeeze ever-more-growth out of ever-less-fertile lands to hit their targets year after year.
It’s straight out of the split-pea soup parable. What if we removed just three peas? Nobody can tell. The factory can save a few million. The executives who pushed that idea can get their yearly bonus. No harm, no foul? But nothing ever stops at the quarterly win. There are four quarters to a year. Forty to a decade. Every one of them has to produce, exceed, and beat EXPECTATIONS.
Because the core assumption is that growth is always good, growth is always unlimited, and if you’re not growing you’re dying. Swim or sink, no wading.
It’s the banality of moral decline. No one person sits down and imagines that Angry Birds of 2009 becomes the Angry Birds of 2017. A fun, novel game turned into a trashy slot machine. Nobody is proud of work like that. But it happens. One pea at a time. Until the split-pea soup has no more peas.
We cannot expect otherwise. It takes superhuman strength to resist the compound expectations of quarterly growth targets linked to an exponential moon shot. The list of comic-book heroes capable of such a task is so short that we’ve already deified the few, like Steve Jobs, who held the line. (And who knows where he would have gone given another decade or two?)
Remember “Don’t be evil”? Google’s iconoclastic corporate slogan that slowly but surely accumulated so many caveats and exceptions that it needed as much legalese as a terms of service agreement. Principles are no match for the long-term corrosion of market realities and expectations. The levies will break, the good intentions will flood.
But back to the incentives. It’s not just those infused by venture capital timelines and return requirements, but also the likes of tax incentives favouring capital gains over income.
What sucker wants to earn $10 million/year at a 52.5% tax rate when you can get away with hundreds of millions in one take at just 15%? Nobody, that’s who.
It’s hard to argue that boards, founders, and their financiers aren’t just doing exactly what the incentives are coaxing them to do.
Which is why growth is now everything and residual value is nothing. In fact, the latter can be outright harmful to the former. When you’re being priced on the hopes and dreams of potential, reality can be a dangerous and undesired competitor. Best just to appeal to the exponential curve and let the imagination roam free. An epic capital gains score awaits!
Given how pervasive this worship of potential and growth has become, it wasn’t surprising that when we pruned the product portfolio at 37signalsa few years back, and left only basecamp, the reaction was mostly one of incredulity, or even anger. Either we were cutting businesses that were devoid of financial merit, or they had merit, and we were thus per definition crazy to let them die. Crazy to turn down growth. To summarize the ethos of the comments sections back then: If something is creating revenue, it’s your solemn duty to keep milking and pumping until it’s done! Extract every cent, then move on to the next mining effort.
The fancy word for that is fiduciary duty. To grow as fast as inhumanely possible is not just a goal, but a responsibility. A moral obligation to THE MARKET. And the theory goes, the market is all of us*. So you’re actually serving your community. All that is bad is good again once you change the tint of your glasses. If you sense something rotten, you just need a new prescription. Now you’ll see as clear as fog that this is ACTUALLY ABOUT ETHICS IN BUSINESS.
The true puppeteer behind this homogenization of startup aspirations is diversification theory. Decisions are not driven by what’s good for a single company, its employees, and its customers. No, it’s what’s good for the basket.
These baskets are known as venture capital funds. That’s the pipeline through which virtually all recent tech companies that have reached the public markets were sent. It’s a gladiatorial arena with the explicit goal that if enough businesses in the basket aren’t failing, the fund isn’t trying hard enough! Not dreaming big enough! Be more outrageous! Be more crazy!
It’s a hyper-evolutionary process that rewards the most extractive, most addictive, most viral strain from the cohort. The key measurement is ENGAGEMENT. Who cares about the virtue of the endeavor, as long as your product is maximally addictive.
We would be continuing this discourse in the next article. For further details call on me for in-depth discussions, business advisory services and training – send a message via WhatsApp or SMS.
Nwaodu Lawrence Chukwuemeka (Ideas Exchange Consulting).| email@example.com (07066375847).