In this video, I share my personal thoughts on Growth and why this topic is so important. Watch now!
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We have been talking recently about growth. And I have been thinking about how much I feel comfortable sharing on YouTube with you. And I have decided we are going to go all the way. In this video, I am going to tell you what I really think about growth.
In my previous videos, I gave you five key characteristics of growth.
- Growth exists
- Growth continues forever
- Growth is exponential
- Growth rates decrease over time
- Growth occurs with constant acceleration
I want to spend some time talking about the first one: Growth exists. We have already talked about what this means. It means you can look at economic activity and find this phenomenon we describe as growth. That seems very simplistic, so I want to explain why I call it out specifically as a key characteristic.
When I say, “Growth exists,” I am really saying that growth is a definable phenomenon that you can study, just like any other scholarly area. This is important, because if you can study something, you can learn about it, and ultimately use it for your benefit. This is very different than how a lot of people think about growth today. They think it is something that randomly happens in markets. I am saying that it is something you can learn about and use in your business.
An example I like to use is gravity. Newton defined gravity roughly 300 years ago. Before then, gravity was something that just happened. People took it for granted. As soon as gravity was defined as a phenomenon, we could use it in all sorts of practical applications. It is the basis of physics for all the machinery we use today. So just like gravity, growth is also a phenomenon we can define.
I want to stop and think for a second. What really is growth? If you think about growth on a theoretical level, growth is the expansion of a system. You have some organized system that generates higher productivity, whether that is through increasing in size or just becoming more effective.
When you think about growth as an abstract concept, growth is all around us. You see growth in nature. You see it in plants and ecosystems. You see growth in our own bodies. You even see growth in non-living structures like crystals. I want to suggest that growth is a natural phenomenon that happens in all systems, and it is the same phenomenon you see happening in the business world.
This is a really radical idea. If you look at the way we teach knowledge today, it is very segmented. We have university campuses, and every area of study is a separate school in a separate building. So you have physics in one building, biology in another building, and business in another building. And everyone is studying different things. If what I am saying about growth is true, this would be the unifying concept that cuts across all disciplines. Let me explain why I think this is the case.
The reason no one has studied growth in this way is that it is hard to measure. Take the human body. If you wanted to study growth in the human body, how would you measure that? You could measure height. But height would not be good enough, because you could have two people with the same height and very different weights. You could measure weight. But weight alone would not tell you the whole story. You could have two people who weighed the same but had very different intelligence. If you compared two identical twins, and one was a couch potato, and the other was a brain surgeon, just measuring their weight is not really describing their growth. I hope you can see that when you study growth, measuring growth has always been difficult.
But business has come up with the ultimate way to measure growth: money. Money is the ultimate measuring stick, because you can look at someone (their weight, their height, their intelligence) and roll it all into a dollar value that expresses the impact they have on society.
But money alone is not enough. We all know you can have two businesses that are worth the same amount of money, but one can be growing while the other is shrinking. What you really need to know to study growth is productivity. Productivity is the value created during a period compared against the assets used to create that value. Or simply income over assets. This is the best description of the impact of a system.
What is even more powerful, is that accounting provides the ultimate tools to define productivity: Financial statements. When you think about the two parts of the productivity ratio, it is essentially your two financial statements: the income statement and the balance sheet. Accounting is the profession that has the tools to understand productivity and ultimately growth.
So the reason no one has really studied growth as a concept, is because we have not really had the tools to measure growth. Science does not have the tools to analyze growth, business has the tools. And you have to realize that we live in a historic moment in time. Something exists today, that has never happened before in the history of humanity. And as of today, we have over 50 years of solid economic data. For the first time, we have accumulated enough data to study the phenomenon of growth. And it is the same phenomenon that happens in all systems. Do you understand what I am saying? Accountants, the financial statements you hold in your hands are the keys to understanding the universe, and you do not even realize it.
Leave a comment down below letting me know what you think!
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Neither Zach De Gregorio or Wolves and Finance Inc. shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.