"The Elephant in the Room: The Myth of Exponential Hypergrowth and 103 Bits of Advice I Wish I Had Known"

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Hatched by Glasp

Aug 10, 2023

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"The Elephant in the Room: The Myth of Exponential Hypergrowth and 103 Bits of Advice I Wish I Had Known"

In the world of business, there is a common belief that high-growth companies experience exponential hypergrowth. However, when we examine real-world data, we find that this characterization is often incorrect. Even companies like Facebook and Slack, which are often seen as viral and exponential, actually experience linear growth for a significant portion of their lifetimes.

For example, Slack, the fastest-growing enterprise software company, went from $0 to $10M ARR in their first 10 months and 0 to 10,000,000 active users in just five years. However, their own data shows that their growth followed a quadratic pattern, with initial exponential growth followed by years of linear growth. This challenges the notion that high-growth companies experience exponential growth throughout their existence.

So why do marketing-driven products grow quadratically? The answer lies in the nature of marketing campaigns. When a new campaign is launched, it may initially be ineffective as the company figures out the best design, messaging, and calls-to-action for the target audience. However, once the campaign is optimized and reaches a certain level of contribution, growth becomes roughly linear.

Marketing departments don't stop at a single campaign. They continue to add new ones, each with its own growth trajectory. This creates a "wavy quadratic" growth pattern, where multiple campaigns contribute to overall revenue growth for the company. Similarly, the growth of entire product lines often follows a quadratic pattern, with an initial slow-growth period, followed by faster expansion, reaching a natural ceiling, and possibly entering a decline phase.

While exponential growth is often associated with virality, it is important to note that not all growth is exponential. Virality occurs when each user invites an average of aa new users, who then bring in aa^2 new users, and so on. This leads to exponential growth. However, there are other factors that can drive growth, such as word-of-mouth or a hot trend in the market.

It is also worth considering that products cannot grow indefinitely. Markets are finite, and there are limits to how many customers a product can reach. As a product reaches market saturation, growth naturally declines. This can be modeled by the logistic curve, which is exponential in the early stages but flattens into linear growth as it approaches market saturation.

When we turn to revenue growth, we find that curves can become perkier. The ability to raise prices, create companion products, expand to new verticals or geographies, or enter new markets can all contribute to revenue growth. However, the shape of revenue growth is highly dependent on the product, market, and competitive landscape.

Now, let's shift our focus to the 103 bits of advice that we wish we had known. These pearls of wisdom cover a wide range of topics and offer valuable insights for personal and professional growth. Here are three actionable pieces of advice that you can apply to your own life:

  • 1. Cultivate a circle of 12 people who love you: In a world where social media metrics often dictate our self-worth, it is important to remember that quality trumps quantity. Having a small group of genuine supporters who truly care about you and your well-being is more valuable than having a large number of superficial connections.
  • 2. Don't aim for efficiency, aim for meaningful tasks: In our pursuit of productivity, we often focus on finding ways to complete tasks quickly. However, true fulfillment comes from engaging in tasks that bring us joy and fulfillment. Instead of seeking ways to streamline your to-do list, focus on finding tasks that you never want to stop doing.
  • 3. Trust in others and learn to distinguish between persistence and futility: Success often requires a delicate balance between perseverance and knowing when to let go. Surround yourself with people you trust and rely on their guidance to help you navigate the path between persistence and futility.

In conclusion, the myth of exponential hypergrowth in high-growth companies is debunked when we analyze real-world data. Quadratic growth, characterized by initial exponential growth followed by linear growth, is a more accurate representation of growth patterns. Understanding the mechanisms of growth, whether it be through marketing campaigns or product lines, allows us to better navigate the complexities of business. And as we reflect on the 103 bits of advice we wish we had known, we gain valuable insights for personal and professional growth. Remember, the key to success lies in embracing the nuances of growth, fostering meaningful relationships, prioritizing meaningful tasks, and trusting in the wisdom of others.

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