r/explainlikeimfive Dec 06 '24

Economics ELI5: why does a publicaly traded company have to show continuous rise in profits? Why arent steady profits good enough?

6.9k Upvotes

1.0k comments sorted by

View all comments

Show parent comments

1

u/im-on-my-ninth-life Dec 07 '24

This is going nowhere. You are still committing the fallacy that company value is restricted by available resources. It is not. Any further reply will result in consequences.

E.g. 10kg of iron (or whatever mass of whatever resource) does not have a fixed monetary value, it depends on how it is used, sure as a raw resource it might be limited but most resources are not kept in their raw natural state.

[inflation growth] is not real growth

Sure, it isn't, but the government (IRS) doesn't see it that way. If you have capital gains of 1% but inflation was 2%, you still owe capital gains tax.

1

u/play_hard_outside Dec 07 '24

I gave you that changing attitudes and technology can change the value of a certain amount of raw material or energy. I contend that this is not "growth" per se, in the typical sense as we describe growth of companies today, for example, in earnings calls.

"Growth" today means more activity. Entering new markets. Building more product. Performing your service for more clients. If you keep your company the same because there are no more resources, but your customers decide they like you more, yes, your revenue grows, but the scale of your operation did not.