The Elephant in the room: The myth of exponential hypergrowth

The Elephant in the room: The myth of exponential hypergrowth

In the world of business and technology, there is a common misconception about the growth trajectory of high-growth companies. Many people believe that these companies experience exponential growth, constantly skyrocketing to new heights. However, the reality is quite different. High-growth companies actually follow a quadratic growth pattern, not an exponential one.

It is well-known that growth, as a percentage, naturally declines with scale. This phenomenon, known as Growth Decay or Growth Persistence, is a law of nature that applies to all companies, regardless of their success. In theory, theory and practice are the same. In practice, they're not. Benjamin Brewster's quote perfectly encapsulates this idea.

The difference between "word-of-mouth" and "viral" products further emphasizes the myth of exponential growth. Viral products are unusable unless you invite others to become users. This enforces exponential growth. On the other hand, word-of-mouth products encourage sharing but do not rely on exponential growth. Even if a product's core growth mechanism is exponential, it cannot continue growing exponentially because it eventually runs out of market.

To better understand this concept, we can look at the logistic curve. In the early days, when a product is far away from its natural limit, the growth curve appears exponential. However, as the product reaches around 25% market penetration, the curve flattens into linear growth. This is due to a tension between the exponential force of growth and the fewer and more demanding remaining targets. Eventually, the curve levels out at the "carrying capacity," which is the fully-saturated market. This model is applicable not only to business growth but also to biological viruses infecting a population.

This is why at-scale companies are willing to spend billions of dollars to increase the size of the market. Expanding the market is one of the few ways to create growth other than raising prices. Elephant Curves, which plot growth as market share, highlight the fact that the carrying capacity of the underlying market can be a moving target. Early on, companies should focus on winning market share in one 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.

One of the key takeaways from this understanding of growth is the importance of word-of-mouth-driven growth. It is much more effective than marketing-driven growth in terms of cost per customer and the fact that it grows automatically as the company grows. Therefore, it is worth investing time in figuring out how to build word-of-mouth into the product itself, rather than relying solely on marketing efforts. As John Wanamaker famously said, "Half my advertising is wasted. I just don't know which half."

Moving beyond the myth of exponential hypergrowth, we come to the concept of "Tell People What You Want." This idea resonates with many individuals, as it highlights the importance of clearly communicating your desires and goals to others. If you don't ask, no one knows what you want. It is crucial not to assume that people know what you want. Instead, take the initiative and ask for what you truly desire.

By letting people know what you want, you open yourself up to opportunities. Others can make you aware of potential avenues for growth or help you achieve your goals. Soliciting people's opinions on how to grow also shows that you are willing to take feedback, which can lead to valuable advice and insights.

Opportunity rarely falls into your lap. It may be present, but sometimes you have to actively seek it out. By making your goals known, you give others the chance to help you achieve them. No one can read your mind, and it is essential to remember that your mentors and sponsors may not always have you at the top of their minds. They may not even know what you want unless you reach out and ask. Therefore, it is crucial to put yourself out there and ask for what you want, even if it feels difficult or risky.

However, it is not enough to simply ask. Being specific about your desires and clearly defining how others can provide help is equally important. This clarity makes it easier for others to understand your needs and offer assistance. When making a request, consider the desire, the why, the timing, and the invitation. What is it that you want, why do you want it, why is now the right time, and what can the person you're asking do to help you achieve your goal?

Those who ask are more likely to receive what they want because their requests are naturally top of mind. By signaling your openness, telling people what you want, and giving them permission to help you, you reduce the friction to having your requests met. Yes, it may feel risky to put yourself out there, but as the saying goes, "Nothing ventured, nothing gained."

In conclusion, the myth of exponential hypergrowth is debunked by the reality of quadratic growth. Understanding the natural decline of growth with scale and the importance of word-of-mouth-driven growth can help businesses navigate their growth trajectories more effectively. Additionally, the power of telling people what you want and asking for assistance cannot be overstated. Three actionable pieces of advice to take away from this article are:

1. Focus on building word-of-mouth into your product to drive growth naturally.
2. Clearly communicate your desires and goals to others, as no one can read your mind.
3. Be specific about your requests and make it easy for others to help you by defining how they can provide assistance.

By incorporating these insights into your approach to growth and communication, you can increase your chances of achieving your goals and finding success in the business world. Remember, growth is not always exponential, but it can still be significant and meaningful.