What shareholders want

Of course one can’t speak for all things desired by all shareholders in most cases, as that is generally a very large and often diverse group.  It’s a little like describing “what women want” – you can’t speak for all of them, and you’re pretty much guaranteed to offend at least some of them.  I have a problem, though, with shareholders always driving corporations to increase profits. Yes, this is the goal of an investment, but at some point (for most products) your market will become saturated. You can realize continued sales through attrition or product upgrades and improvements, but are not often likely to see the rapid expansion and growth experienced early in the lifecycle. It would seem to me that, to provide the best product and experience, and to maintain both the brand and a (hopefully loyal) customer base, the organization would at this point focus on optimization, cost reduction, increased efficiency, and improvement, as well as possibly alternative use cases for the product. However, it seems instead that the shareholder pushes for diversification in the product line – pushing the business to grow by expanding to areas and products with which it does not have an intimate, innate familiarity. To be fair, I can appreciate some of their reasoning for this; one need look no further than the disease resistance and outbreak survival mechanisms in genetics to see that diversity has a tendency to promote longevity. This brings to mind an interesting point in its own right – it’s perhaps not so much “survival of the fittest” in genetics, but rather a convergence towards entropy.

All this said, I can’t completely refute the idea that “if you’re not growing, you’re dying” which also seems to be a popular and accurate mantra in business. I only wish I could put a business in a controlled bottle with no inflation and see if it still held.