The Elephant in the Room: The Myth of Exponential Hypergrowth and Best Practices for Building a Remote Culture

The Elephant in the Room: The Myth of Exponential Hypergrowth and Best Practices for Building a Remote Culture

When it comes to discussing the growth of companies, there is often a misconception that growth is exponential. However, this is not entirely accurate. High-growth companies actually experience quadratic growth, not exponential growth. This means that growth, as a percentage, naturally declines with scale, even if there is nothing wrong with the company. This phenomenon is known as Growth Decay or Growth Persistence.

Benjamin Brewster once said, "In theory, theory and practice are the same. In practice, they're not." This quote highlights the difference between the theoretical concept of exponential growth and the reality of growth in the business world. While exponential growth may be the correct model for the core growth mechanism of a product, it cannot continue growing exponentially indefinitely because it eventually runs out of market.

To better understand this concept, let's consider the logistic curve, which is exponential in the early stages when it is far from its natural limit. However, as the product reaches around 25% market penetration, the curve flattens into linear growth. This is due to the tension between the exponential force of growth and the diminishing number of remaining targets, who are often more demanding. Eventually, the growth levels out at what is known as the "carrying capacity," which represents a fully-saturated market. This model is also applicable to biological viruses infecting a population.

Companies that have reached a significant scale understand the limitations of exponential growth and are willing to invest billions of dollars to increase the size of the market. This is because expanding the market is one of the few ways to create growth, aside from raising prices.

When plotting growth as market share, Elephant Curves become more visible. This concept incorporates the idea that the carrying capacity of the market can be a moving target. In the early stages, it is crucial to focus on winning market share in a specific space, creating the first Elephant Curve. However, as the product matures, more drastic measures are required, such as developing wholly new products or significant updates to address new markets.

Now, let's shift gears and discuss best practices for building a remote culture. With the rise of remote work, it is essential to establish a strong remote culture to ensure productivity and employee satisfaction. According to Job van der Voort, one of the most important aspects of building a remote culture is getting the nitty-gritty details of hiring and onboarding right.