Growth Is A Bitch

Dan Frommer writes that Apple's decade of blistering growth has, at least temporarily, come to a halt. And you can see that in the stock:

Aapl chart

Companies are worth a multiple of their earnings and that multiple is directly related to earnings growth rates. When you are growing rapidly, you are worth more.

But living forever and growing forever have something in common. You can't do it.

I was talking to the CEO of one of our portfolio companies that has grown at close to 100% per year for the past five or six years yesterday. And we lamented about the law of large numbers. Growing at 100% a year when your top line is in the billions is a lot harder than growing at 100% a year when your top line is $25mm.

Of course, you can come up with new lines of business, new hit products, or make acquisitions to keep on the growth treadmill. But recognize that is what you are on. You can and will become a slave to it.

Startups and their rich uncle pennybags (VCs) are particular slaves to this drug. We build and finance companies that are designed to grow and grow and grow. That's how we create wealth, jobs, and impact. It's a fantastic ride that I cannot get off. But these rides do slow down and even end sometimes. And that's a bitch.

#VC & Technology

Comments (Archived):

  1. awaldstein

    Growing 100% a year at any level is an anomaly.Wondrous thing. Done it a bunch of times. Growth pains infrastructure wise at sub $30M were amazingly painful. You tried to manage it by you just held on.

    1. Richard

      Groupon – growth without income

      1. awaldstein

        Groupon without a model. Dare I say, without a clue?

        1. ShanaC


          1. awaldstein

            Take Groupon, change haircuts to wine and you have the Lot 18 crash.Hey–I respect anyone who has the chutzpah to raise the money and get something built.I just don’t like this model.

  2. jason wright

    you must have developed a fine sense of when the time is right to sell an investment.

    1. fredwilson

      sadly we don’t control the timing of an exit unless the company goes public

  3. Brad Lindenberg

    First world problems Fred πŸ™‚

    1. fredwilson


    2. jason wright

      Foxcon workers may disagree

      1. Kasi Viswanathan Agilandam

        yes. It is actually a physics problem :-)…neither first-second-or-third-world-problem.

        1. jason wright

          will the Universe stop expanding?

          1. Kasi Viswanathan Agilandam

            Is it really expanding or jitter-ring … what we have data is for only few milli-seconds compared to the age of universe.

          2. SubstrateUndertow

            More importantly !Is the universe determinately in-determinant ?;-)

          3. ShanaC

            it might not be!

      2. Matt A. Myers

        Citizens of the U.S. could require that all products created by people have the same minimum living requirements. But then Apple products would just be created at home, or rather Apple would move away – and then people would realize they weren’t really a U.S. company.

        1. jason wright

          networks and virtual currencies could do a lot to shift societies and economies in this direction. offshore makes a mockery of flag waving.

  4. William Mougayar

    There’s only 3 ways to grow: with more products, more customers, or more markets.That’s it. There is no other way. (An M&A affects one of the above points, if it works).As long as you continue doing that, you can grow almost indefinitely, except that the % become misleading. You need to look at absolute numbers then.

    1. awaldstein

      Yes…your are correct and well stated.Nope…indefinite is an abstraction actually. Carving out even 5% on a billion dollars can be a bitch and honestly, who is happy with 5%?

      1. William Mougayar

        True, and at those rates, you’re adding $50 million to the bottom line and still feeding and caring for employees. A lot of businesses can grow at 5-10% very happily year after year. The compounding effect is good.

        1. awaldstein

          yes and no again.if you are a $1B company chances are you are public and 5% growth is just not that interesting to the market generally.

    2. Kasi Viswanathan Agilandam

      Yes.On a second thought For a company like Apple it is just ‘more products’ now… because their customers (high-end) and markets are fixed …entire Globe.

      1. Aaron Klein

        Apple has yet to really penetrate China or Russia. Stay tuned.

    3. ShanaC

      the if it works is a big point to whether m/a works. Is there a difference between product and brand growth (i’m looking at you, salesforce + buddy media)

      1. William Mougayar

        yes, m&a’s can have different reasons. whatever happened to buddy media, radian6 & other co’s that SF has acquired? I think they disappear inside the SF products or take another name.

  5. William Mougayar

    Yup, Growth is not the same when you compare a startup to a grownup.For a startup, it depends which growth you are talking about: Users or Revenues? Sometimes, the two get confused for success. I just wrote about it in the context of Startups: “Don’t Confuse Grown with Success”http://startupmanagement.or…

  6. Kasi Viswanathan Agilandam

    yes.That is what the law of physics also says … you cannot keep increasing your speed. Your mass starts increasing and slow down your speed …Jack Welch realized this and closed many business verticals but maintaining the growth…like releasing the payloads of a rocket.

    1. jason wright

      in biology a species survives by reproduction and mutation. the dna lives on, the individual does not.

      1. Kasi Viswanathan Agilandam

        That is true with good companies as well … there are companies which are more than 100-years…and the founders are not there anymore.Good-gene survives better.

        1. Donna Brewington White

          Good point, Kasi.

          1. Kasi Viswanathan Agilandam

            thanx Donna

    2. pointsnfigures

      He was also good at accounting. Knew where to bury the bodies before jettisoning them

    3. ShanaC

      is it viable for companies to do what jack welch did

  7. Donna Brewington White

    I have this life motto that when I stop growing I may as well die. Good thing I am not a company.Meanwhile, wracking my brain for an uncontrived way to use “Be your own bitch” as a response to this post.

    1. awaldstein

      Good thing you don’t measure yourself in percent of change!

      1. Donna Brewington White


      2. JLM

        .Growth, personal growth, is iterative if for no other reason than we have to try our water wings after we have them.I remember learning how to fly an airplane from private pilot to instrument pilot to commercial pilot.Each new step was built upon the previous step. It was all incremental.I remember some days during the instrument training — which can get a bit harried as there are so many different instrument approaches to master — when I was just terrible.So bad that my Navy Captain instructor used to tell me that he wanted to shoot me. [Two military guys talking straight to each other. Not a drop of emotion, mind you.]Then he would say — but I can absolutely teach you how and you can not just learn it, you can master it.I did.But the bad days made the foundation for the good days. I had to get knocked down to master the real issues.Growth is not a steady upward curve. It is a series of plateaus reached in a steady series of spurts which propel us upward.Once I put it all together, I could do it all seamlessly. It was particularly gratifying because of the failures.In some ways I scream out — give me shit to do that I really suck at so I can get better. The ability to challenge ourselves without knowing if we can do it is really living.JLM.

  8. William Mougayar

    Fred, why are we looking at a stock chart when the subject is Growth? We should look at a Revenue Growth chart for Apple. Yes, their “rate” of revenue growth has slowed, BUT it is still better than Google, Microsoft, Best Buy or Red Hat.In absolute terms, Apple grew their Quarterly revenues by $4.5 Billion this quarter vs. same Q in 2012. That’s a lot of Growth. Apple’s 4th Quarter has always been an anomaly because of Christmas buying ($54 B in Q4-2012), so you can’t compare Q to Q that way. On a year to year basis trailing revenues, Apple did $169 Billion of revenue in the past 12 months vs. $142 Billion the year prior, so that’s $27 BILLION in GROWTH.If this isn’t Growth, I don’t know what is.

    1. Donna Brewington White

      Also I am confused as to whether he means that growth is the bitch or the lack of it. Figured I was missing something.

      1. William Mougayar

        Each has its set of problems. But I think Fred might be implying “Rate” of Growth, which is different than Growth itself.

        1. Kasi Viswanathan Agilandam

          when he says in % … it is rate.

        2. ShanaC

          a rate changes, the bitch of stastics

      2. Tom Labus

        It’s rate of growth. It’s what drives the stock price one way or another

      3. Farhan Abbasi

        Fred means rate of growth becomes something one relies on – it becomes almost addictive, or expected, and the inevitable outcome is that it will one day end. So it’s, in other words, like a double edged sword. But growth is a bitch is more apt.

        1. Donna Brewington White

          Thanks, Farhan, @tomlabus:disqus and @wmoug:disqus. I love this community. So much smarter thanks to you.

          1. Farhan Abbasi

            Means a lot coming from you Donna

    2. CJ

      Their valuation was obscene based on obscene growth. That growth is fading so the valuation is fading with it. Stock price in this case is a more real gauge than the growth number itself. Ultimately though, the issue is that they are no longer receiving the Jobs premium. The market trusted Jobs for growth and doesn’t trust Cook as much, the stock numbers reflect that.

    3. kidmercury

      siding with william in this beef. i think the net income numbers are even more impressive than the revenue numbers.…i’m not a fan of crapple, but can’t deny the numbers.a company’s stock price is largely a reflection of politics and psychology, regardless of the underlying reality.with that said i think fred’s point about the law of big numbers is still basically true, though i don’t think apple is the best example of it.

      1. Richard

        PEG ratio

        1. pointsnfigures

          Depends on the cost to generate the extra dollar of revenue. Apple needs to innovate for new growth. That’s hard but they have been successful with it.

    4. Richard

      If you are like me, your MacBook Pro is 4 years old and due for a replacement. When the new MacBook Pro comes out, you can expect a nice bump in the top and bottom line. Does the MacBook even have a competitor?

      1. JLM

        .What is very interesting about your comment is the combination of brand and product loyalty with no mention of cost. This is the mark of a particularly loyal customer.JLM.

        1. William Mougayar

          #brand rules.

        2. Richard

          Bargain <- macbook pro. At $1500 and a 4 year life span, that’s $1.25 day. There is no one in a US highschool today who couldn’t save this much per day and buy himself or herself one at graduation.

          1. JLM

            .Now you have hit for the circuit — brand, product and price.If you get a MacBook Pro tattoo, Apple will give you a free one?And why the Hell not? You are a brand evangelist. Rightfully so.Well played.JLM.

        3. LE

          You need to separate loyalty to a brand because it’s a brand (and it’s imprinted in your head for some reason) and loyalty because someone makes a really good well thought out product with features and design that lasts and avoids tons of aggravation.Any product with brand loyalty typically contains “in your mind” (what I call the “party in your head”) and “good product” in varying degrees. The mix is different depending on the product.Let’s take some examples (where I will not assign arbitrary % because I’d just be guessing):- Your red car: primarily in your mind but from a practical standpoint, in the current day and age, not a really good product compared to the alternatives.- Your plumbing fixtures (I can’t remember the name) in your mind but also a damn good product and really good responsive customer support (your example of how they replaced it for you).- Apple: In my mind but also a really good product, well made, good support etc. If someone can’t tell the difference in usability, fit and finish comparing an Apple laptop to an Acer you will have a hard time understanding this entire subject.- Porsche: In my mind but also a really good product. (Primarily in my mind I will admit just like your red car. Wouldn’t want to commute 2 hours a day in one in rush hour traffic.)- NYC: In the mind but also a really good product.- Coach: Primarily in the mind but also a really good product.- Fancy Watches as advertised in the WSJ print: Primarily in the mind but also a really good product.- Gulfstream Jet: Primarily a really good product but also in the mind “when we hire you you will be able to fly on our G550”- A Shampoo: Primarily in the mind no real difference between different shampoos.- British Monarchy: In the mind. Not saying has no benefits but it’s a total party in the brain with that one. The brits have been brainwashed into thinking it matters.- High end hair salon: In the mind as well as a good product (where the product is how they treat you as a customer). Same hair cut at the mall not as valuable.- Women’s breasts: In the mind for sure.- Men’s junk: Product that counts.- Yankees: Good product but also really in the mind. I don’t care about sports and even I think it’s a great brand and seeing the logo gives me a positive feeling. The Phillies on the other hand … (we could start with the fact that the logo sucks then move on to the uniforms etc.)On and on. So we have a mixture here. Obviously the idea would be to hit it out of the park on both “party” and “product” if possible. Where product would include things other than the physical product (like support and interaction with the company similar to JLM and his plumbing fixture).

          1. JLM

            .You have given this a lot of thought and it shows. Well played.Do not overlook the connection between a Big Red Car and women’s breasts. They are both very real and complementary of each other. As it should be.JLM.

          2. LE

            Only women’s complement I ever got on the car is from a woman who saw me getting sushi and told me her husband wants one. All the others (and they are quite frequent) come from guys. All of them.I’m convinced that if I ever had to sell life insurance I could do many deals just by handing out business cards when some guy comes up to me to say something. It would be well worth it to buy even a nicer car and just drive around all day.My point is that girls completely ignore the car and have no clue. Guys are drawn to it and start conversations. I don’t look important so I know it’s the car.Some kid pulled up to me the other day in a crappy kids car. He yelled out the window “nice car”. I said to my wife “that kid is going to work hard because isn’t satisfied with his crappy kids car”. Now with the spoiled kids around here that is not the case. They already have nice cars and everything is given to them. They have much less to aspire to. (My god the boys don’t even have to hide playboy anymore under the bed from mom.)

          3. JLM

            .Not to be too crude but an old convertible is a babe magnet. I am unfortunately a bit out of the babe magnet chalk stripe.When I used to have two 1966 convertibles, two other couples used to join us to go out and eat some wonderful cheeseburgers.The girls took one car and the boys took the other. We used to troll the Drag and Sixth Street in Austin.We used to compete on the number of offers, whistles and come ons. The girls used to win typically though the competition was close.JLM.

          4. Matt A. Myers

            Is there room to disrupt Apple is what I wonder. They already use the cheapest labour available.

          5. LE

            “Is there room to disrupt Apple”Apple is not in a “sit on your laurels” type business which is good. Businesses that can’t sit on their laurels (movie production, Fred Wilson, Apple etc.) automatically have to push their labor every month or they will become irrelevant. Businesses that can be disrupted are those that become fat and lazy because they can. In a sense things are to easy for them. They have a lock and that permeates the labor force. People start to phone it in because they can.Of course this is like anything else a matter of degree but an example might be Microsoft having a lock on a particular market and being so profitable that they become fat and lazy and miss opportunities.Another example of a “sit on your laurels” type situation might be (of all things) can easily see someone coming along and grabbing that deal flow because of the attitude and lack of transparency in how that is run.

        4. Elia Freedman

          Which is exactly why Apple makes so much money.

      2. Andrew Kennedy

        mobile tablets

        1. Richard

          Doing some x platform dev with a nexus 7

      3. ShanaC

        maybe – my boyfriend keeps getting curious about the surface

    5. Aaron Klein

      Because ultimately, it’s the rate of revenue growth that drives valuation.But I think this illustrates a bigger problem with Wall Street and its analyst corps: they have zero tolerance for the plateaus many businesses hit before resuming their upward trajectory.Innovation’s boss isn’t the quarterly cycle. And Wall Street has a unique inability to understand what game we’re playing and which inning we’re in.

      1. William Mougayar

        Agreed. The multiples premiums change, depending your rate of growth and growth rate.

        1. Aaron Klein

          And as much as I don’t think arguing with the market has much value, there is something about Wall Street’s quarterly cycle that is causing it to miss real value even when it’s in front of their face.

    6. Aaron Klein

      To underscore the point I made earlier, look at this chart from the Frommer piece.Businesses β€” I think especially technology businesses β€” go through plateaus where growth rates slow and then pick up again. Wall Street knows not what it punishes, IMHO.

      1. William Mougayar

        yes. they will optimize their growth with the product mix.

      2. Dave W Baldwin

        Thanks for sharing. I guess I’ll need to post a simple English thing up above. Your point and this chart speak for itself.

      3. ShanaC


        1. Aaron Klein

          More products, more markets, more customers…TV and iWatch are certainly possibilities to hit that rate of growth.

    7. fredwilson

      i posted the stock chart because the whole point of the post is that valuation (stock price) is a function of growth rates more than raw numbersand $27bn/$142bn is sub 20% growth. that’s not what the street has come to expect form AAPL

      1. Kasi Viswanathan Agilandam

        You are late … the show is over fred πŸ™‚

        1. fredwilson

          a day late and a dollar short

      2. William Mougayar

        I think if the headline was “Rate of Growth is a bitch” it might have changed the nature of the discussion. Ogilvy once said your headline is 80% of your content (in advertising speak)

        1. fredwilson

          for those that don’t read the post, you are correct

  9. JimHirshfield

    “rich uncle pennybags” – that’s a first. Where’d that come from?

    1. CJ


      1. JimHirshfield

        Yeah, just never heard @fredwilson refer to himself and his colleagues as such. I’ve never met a VC that fits this profile (“look at me, I have bags of cash, a fancy outfit of yesteryear, and a handlebar mustache) πŸ˜‰

        1. pointsnfigures

          What’s old is new. The original sharing economy was sharecropping

        2. CJ

          That outfit is now the height of hipster fashion!

          1. JimHirshfield


          2. ShanaC

            especially the mustache

    2. fredwilson

      it just popped into my head as i was writing yesterday. i have never used it before. i want to be more creative with my writing. take more risks. have more fun.

      1. JimHirshfield

        I like that. Keepin’ it fresh.

  10. Tom Labus

    It will be interesting to see if they go the acquisition route or stay with new products.One thing, AAPL has a huge amount of cash to make any move they want. But sometimes even cash can’t help you find the right route.,Can anyone there make the “leap of faith” moves that Jobs was so good at for them.

    1. SubstrateUndertow

      Apple’s innovation-culture is built on simplifying-interface-abstractions for the rest of us.We’re in the midst of a major phase transition into organically-interdependent and highly abstracted new social structures.Against that backdrop, disruption that pivots on “Simplifying-Interface-Abstractions” may yet hold a lot of blue-sky opportunities for companies like Apple?Steve’s best product, if successful, was Apple’s cultural DNA?

  11. Cam MacRae

    I think the real bitch is that nearly everyone anchors to the (apparently) exponential segment of a sigmoidal curve.

    1. Kasi Viswanathan Agilandam

      Like the same way everyone want to be in their teen :-)…

      1. Cam MacRae

        Drats, Kasi. Now I’ll never be a teen model! :`(

  12. Kasi Viswanathan Agilandam

    I think there is a confusion with % growth vs absolute wealth…let me try.Suppose i have 20K (20mm if i am VC) and where do you think i should put my money on…A company growing from 25mm to 75mm next yearA company growing from 250mm to 300mm next year.Both made 50mm but my money has tripled to 60k in the first one and has gone to some 25K in the second.

    1. LE

      “Suppose i have 20K (20mm if i am VC) and where do you think i should put my money on…”You should try starting a small business out of your house that you can operate in your spare time.

      1. Kasi Viswanathan Agilandam

        Thanx LE for reading my mind… I gonna do it…resigning from the current position as so called ‘Director’ and starting and promoting myself to MD and CEO in my home town…gonna give back something where I was born and got early education.

  13. Farhan Abbasi


    1. Kasi Viswanathan Agilandam

      we need more fun comments like this in AVC … most are too serious and always serious.

      1. Farhan Abbasi

        I’m serious too

      2. Tom Labus

        I agree

      3. Farhan Abbasi

        Thanks for the shout Kasi, last comment was me being sarcastic obviously πŸ™‚

      4. fredwilson


  14. JLM

    .If you are going to use the stock price as a measure of growth then you have to use the entire continuum of valuation parameters — P/E ratio and market P/E ratio being easy and confusing ones that come to mind.In an outcry market price discovery mechanism — shit is worth what someone else tells you it is worth even if the underlying fundamentals are stronger than an acre of garlic.That is called a buying opportunity.In the private company marketplace the quality of growth is more carefully evaluated because one does not have the rubber pacifier of some else’s idea of value to suck upon.If you are growing at any rate north of 25% these days, you are way outperforming the rest of the world.Do not take counsel of your fears and wait for the blind to become sighted.JLM.

  15. Richard

    China <- Growth

    1. kidmercury

      yup — for android

    2. William Mougayar

      New Royal Baby <– Growth

    3. ShanaC

      i thought china was flattening/imploding economically

  16. William Mougayar

    Growth is Growth: It’s not a Debate, and it’s not a Bitch.http://startupmanagement.or…(sorry if I’m in a pimping mode today; it goes with the title of this post)

    1. Kasi Viswanathan Agilandam

      Growth is growth and no debate on that and it’s not a Bitch and no question about that…but…YOY growth is a bitch.

      1. William Mougayar

        Maintaing the rate of growth is difficult. Maintaining growth is easier.

  17. falicon

    Oh to have these problems…

  18. Joe Marchese

    Growth is essential to sustain any organization. Without it, the elements needed for growth find places where they are better treated (β€œCapital goes where it’s wanted, and stays where it’s well treated.” — the late Walter Wriston). Unless all the stakeholders participate in the success of the enterprise, they leave… and there goes your business.

    1. LE

      “Growth is essential to sustain any organization.”Cash cows also sustain businesses. The idea of having a business is to earn money so you can make a living and support yourself.In any case to grow is also to take risks and those risks can bring down the organization. Not to mention the toll that wanting to grow takes on the entrepreneur.Any young person simply reading AVC and/or HN and/or Suster and/or Steve Blank is completely missing the ways that the majority of business owners who make a decent living earn money in the business world.Noting also that the aforementioned individuals fully acknowledge the risk involved in the new ventures they invest in. And would most certainly never quit their day job (investing) to take the same risk as an entrepreneur. (Blank, Suster and PG are ex entrepreneurs although I don’t really include PG in the same league as Suster and Blank (who I worked with in the 90’s)).

      1. Joe Marchese

        You’ve touched one of the reasons to start a business: making a living. And you’re right, that may be the most common. A second reason is to make an impact. Even if you’re special enough to get the market’s attention, you won’t make an impact without some scale… perhaps not the biggest, but big enough for the big guys to know you’re in the game. And the third reason to start a business is to build a legacy. I don’t mean your name in lights (though some crave that). I mean an organization that endures for generations beyond your own contribution. In fact, if you achieve that, you’ll hit all three incentives to start a business.

  19. pointsnfigures

    Use for your stock research! You might have seen the move in $AAPL coming. It’s a startup that has some amazing data and unique ways to drill into stocks. Ycharts is a Chicago startup.At least with a highly successful startup, you can look back at the road and feel some pride. The road ahead is a bitch. But, those conundrums will create new opportunities and strategy. If not, sell it to someone else or enjoy the cash cow while it lasts.I am seeing the law of large numbers work a different way. When I first got involved with the, we were losing 800-1000 WW2 vets per day. Now it’s 600.

    1. kidmercury

      ycharts is awesome. also have to give their SEO team props they know how to play the game.

  20. deancollins

    nah this is all pump and dump. What is happening on Nasdaq/NYSE bares little resemblance to real economics but playthings of the rich and infamous.

    1. Tom Labus

      It’s a leading indicator

      1. deancollins

        Bullshit. Apple was everyones darling until the masses turned, Google is currently everyones darling but will get dumped in the new year.Public markets are awash with sentiment with little bearing on reality, the smart ceo’s/cfo’s just say “who cares” and continues doing on what they were doing letting the hedge funds and IB’s play their little games without distracting them from their goals.

        1. pointsnfigures

          Want to know what the Fed is going to do before it acts? Watch $CME. A stock by the way that had a moonshot and corresponding fall from grace.

        2. kidmercury

          after google gets dumped amazon will probably be next in line

    2. kidmercury


  21. Chris Chaten

    The lesson from the past decade is that Apple (and, to some extent, Google) have shattered ‘old economy’ assumptions about how large is too large to grow. It cuts short a public company CEOs claims about being too large to grow at X% / yr with annual revenues $15B when Apple is growing faster at 10x the scale.

  22. Conrad Ross Schulman

    A big fan of this post, really enjoy the tone and swagger

    1. fredwilson

      channeling my inner jayz

  23. Paul Sanwald

    in the immortal words of my old boxing coach, roosevelt farrell: “you’re bleeding, but that’s what happens when you get hit. fighters bleed. you gonna get in the ring, you’re gonna get hit. might as well get used to it.”

  24. Sean Hull

    Well said Fred! And you introduced me to a new slang “pennybags”. LOL

    1. fredwilson

      life as in monopoly…

      1. Sean Hull


  25. Joseph Scott

    Companies are worth a multiple of their earnings and that multiple is directly related to earnings growth rates. When you are growing rapidly, you are worth more.Unless we are talking about stock price, in which case logic, revenues, profits, and ratios are often thrown out the door.

  26. Naman Kumar

    Haha, spoken like a true junkie!

    1. fredwilson

      looking for my next fix right now

  27. Nick Ambrose

    Very very true. When I was at ixia, I had the privilege of being there for the first $1M year. The next quarter was the first $1M quarter, followed directly by a $1M month and a $1M week … we literally couldn’t see out the windows, we were going so fast.Then skip forward 3 years and revenue had peaked around $120-130M and in the end was only able to grow through acquisitions ultimately

    1. JLM

      .This is perfectly logical and predictable.This is also why the basic planning discipline of attempting to discern the size of any market is so damn important.Many folks have abandoned old fashioned business planning in favor of focusing on the product.Because of this the “fully developed” opportunity is not a surprise when it is struck.There is nothing wrong with a $100MM revenue company with appropriate margins.A truly smart schemer would sell it when sales hit $90MM thereby leaving the impression of unfettered growth and a bit of meat on the bone for the next chap.The notion of when to sell is an art.JLM.

      1. Nick Ambrose

        Sure, it’s not necessarily inherently bad or good. Building a company from $2M that floats for $650M is a pretty good achievement from any perspective.However, it seems to be human nature to demand continual growth (and also continual acceleration really also I guess), anything less seems to be judged as “failure” of some kind it seems.

        1. JLM

          .Human nature brought us slavery. Just do what is right for you personally.JLM.

          1. Nick Ambrose

            Indeed, I quit over 10 years ago and lucked into a very lucrative contracting position πŸ™‚

          2. Kasi Viswanathan Agilandam

            great comment in an economic comment thread.

    2. fredwilson

      i’ve seen that movie so many times i know the ending by heart

      1. Nick Ambrose

        Yeah, it was a good run-up for sure while the growth was happeningBut yeah pretty predictable results.

  28. Dave W Baldwin

    Coming in at around 100 comments. You can %, P/E, SpendStockPile, and so on, but it comes down to Apple had the growth spike as they introduced the “unbelievable” product and charged a premium price for it. So at this point, they do have the stockpile (most here believe they gave dividend to take heat off their working conditions) and can keep moving forward.BUT, they have to have that next “unbelievable” product. People can buy at big discount 1 or 2 generations backward and get an iPhone. Samsung is pushing hard with Android. We have arrived where the laughing at Google is lowering in decible as folks realize the long plan Google is doing to be in multiple product category.So in the realm of Apple, they have to do that next cool thing that can withstand the competition and so forth. Maybe the appropriate question is, who will double next, Apple or Google?

    1. JLM

      .This kind of thinking is essential to consider all the possibilities. In any analysis, one should take a look at the most optimistic and pessimistic views of things particularly when they pretend to analyze the same data.In the intelligence business this is routinely done and the truth is either on the Occam’s Razor bleeding edge or right in the middle.JLM.

      1. Emil Sotirov

        The idea that growth might not be “natural” is a paradigm changer… although we can have growth and decline of companies within a macro context of zero growth.

      2. Dave W Baldwin

        I appreciate Emil Sotirov placing that link. More from the standpoint so many think growth is just supposed to happen.We can make growth that is useful to the broader population happen when we become more realistic about joining the talents of man and machine. Getting there will require a well communicating visionary that can bring the many together (we just don’t have that at this moment).I’m not being pessimistic, for I think the Third Revolution is more attached to cognitive understanding of the multiple directions happening simultaneously. In doing that, we can think in multiple Manhattan Projects taking place where one doesn’t have to become better per demise of another.



      1. Emil Sotirov

        And then… the question would be – whose wealth is that to begin with –… – the revolutions might not be all tech and science.

      2. Kasi Viswanathan Agilandam

        wow … that is too much into the future … but I like it very much.

  29. baba12

    “Startups and their rich uncle pennybags (VCs) are particular slaves to this drug. We build and finance companies that are designed to grow and grow and grow. That’s how we create wealth, jobs, and impact”. That has been the mantra for capitalism and may have worked well for the last 500 years and has created a huge impact in expediting climate change.But I would like to tell Mr.Wilson(Fred) that the way companies are measured for growth is not sustainable vis-a-vis climate change.I would state that he could use his bully pulpit to tout changes to the Generally accepted accounting principles to reflect the impact of climate change on the growth of a company. It is not sustainable to continue to discount the costs of climate change for these companies. Mr.Wilson has the capacity to influence changes with regards to how growth is measured.

    1. JLM

      .I know from whence you are coming but the notion that accountants would actually breath rarified outside air is not bloody likely.GAAP is for air conditioning and nothing else.JLM.

    2. LE

      “Mr.Wilson has the capacity to influence”Wow as always someone knows they have arrived when someone starts to tell them how to spend both their money and their time.I hope for Fred’s sake he has no dissonance when people attempt to tell him why he can’t be happy just being Fred. I was lucky that when I went through high school and college my mantra was “I’m not running a popularity contest”.Baba – Why don’t you take your time and write to a bunch of people who are like Fred and tell them to do what you are suggesting Fred do? He’s not the only one with a bully pulpit. Actual letters with a stamp. Maybe a Fedx envelope at $10 or whatever. Or put up a website or something more than suggesting that Fred could be “doing more” for something that you believe in.

  30. Tracey Jackson

    I think the stock reads your blog. It’s sayin “Who you callin a bitch?”

    1. JLM

      .Hmmm, that’s funny. I thought it was saying: “Make me a sandwich, bitch.”Well played.JLM.

    2. fredwilson


  31. jpball

    I am reminded of how an early mentor Reid Dennis described this phenomenon to me. Imagine running while holding a pole upright in your arms. Each year of growth correspondingly increases the length/height of the pole, forcing you to tilt the pole farther forward to keep it balanced.We were growing at 100% per year and racing toward an IPO. Reid’s words made clear the challenge of being able to lean that pole far enough forward while running fast enough to prevent the pole for falling to the ground.

    1. fredwilson

      great metaphor

  32. Pete Griffiths

    If we can’t reconcile ourselves to the limits to growth, sadness is indeed inevitable.

  33. ShanaC

    I’ve always wanted to be 5’10, nature didn’t allow that to happenevery product has a growth lifecycle. Doesn’t mean you stop being useful

  34. Mesh Lakhani

    Besides brand loyalty, Apple is an expert at supply side economics, hence their high profit margins. The past few quarters, proft margins is what moves the stock. Though growth of iphone falls into emerging market expansion, i wonder if volume will offset lower profit margins as they push into those markets. (ie China Mobile).



    1. fredwilson

      or how you did yesterday




    We’ve been pumping trillions into the US economy without *good* results. Yes, stocks are up on low volume but the country is still falling apart. Detroit has 78,000 vacant buildings (you read that right) deteriorating as we speak..AAPL is doing REALLY good considering how bad things are. We still have ~60% of the population not working. But, since I like to stay positive (unless I’m giving Gadeteer a hard time) I must say that there are lots of *rested* people ready to do some work!

  37. James Ferguson @kWIQly

    Here’s a thought.If you assume an efficient capital market and an opportunity cost of capital with zero risk (say T. bills) returning at z , and growth at y where y-z = x (is positive) or a risk premium. You will soon notice that future revenues in terms of Net Present Value are infinite (The only way of evaluating a perpetuity relative to current value rationally)But a company has finite market value so either this is not a perpetuity (Fred’s point and a little obvious – just like a chain letter ! ) or – chance of future growth diminishes at a compound rate at least as high as the rate that current growth exceeds opportunity cost. (Money machines do not survive)The point is that the value of the market cap is not what it is trading at on the margins (most likely and most likely seller transact), but includes the cost of acquiring all shares (the least saleable).As long as someone believes that Apple can be infinite it can maintain an over-inflated value relative to an achievable projection – naturally these are the suckers that find nobody to which to write their chain letter – they end up losing.As ever the market rewards the informative and the informed and hurts the people who dont understand.If this comment meant nothing you will be well advised to buy indexes and let someone else carry diversification risk, unless you know something nobody else knows or you act on something few people know when you should not !Given that observation VCs should make money if they are a) better informed or b) investment market efficiency is weak. Since b) is true, by and large VC makes money. Since a) is generally untrue (most VCs follow) most VCs lose money.Ergo the real money is made by finding the good VC that nobody has found yet – this rules out all the winners – whose funds are probably too cheap !So while Fred can afford to tend bar we are privileged but all good things come to an end !

    1. fredwilson

      Life is a bitch and then you die

      1. James Ferguson @kWIQly

        Fred – excellent TL; DR – made me smile

  38. Richard

    Fred, The itunes economy continues to grow at 25% a year. There are 500 million accounts. The interesting thing is that App revenue is reported at 30% of gross, total economic value of course adds 70% more. Moreover, spending per user is holding up pretty well $40 year, only a 50% decline vs earliest adopters. No doubt that the nexus 7 rocks, but the iTunes is a powerful brand.

  39. kidmercury

    — become a hedge fund or invest in more financialized products (david einhorn’s idea applies here)– buy detroit and other collapsing cities and re-build them with apple technology built into the infrastructure (this is better for a data company though, not a hardware company, as well as one with greater political will)– start investing more in data companies, acquire them and create spin-offs so they remain relevant

  40. fredwilson

    purchase our entire portfolio πŸ™‚

  41. JLM

    .Detroit, as a privately financed and crime free gated city-state, could be a huge win.It is inevitable that someone is going to take a stab at making a city as an outgrowth of “planning units” which now encompass everything but law enforcement and a judicial system. Some have their own law enforcement already.Look at the original Las Colinas development — a new city but they hit the wall. Look at Reston when it was owned by Gulf and sold to Mobil.Apple or Microsoft could buy Detroit and remake it in their own image if only the current owners were smart enough to sell. it is a disaster of epic proportions just now.JLM.

  42. Dan Epstein

    Re: first point…Also, wouldn’t surprise me to see more supply chain integration (i.e. starting to make things Apple currently pays people to)

  43. JLM

    .Cash is figured in when using an “enterprise value” approach. Not trying to sell that notion.JLM.

  44. ShanaC

    too cold and not enough community

  45. JLM

    .Stop being silly. It has one of the largest Muslim communities in the US.It has the automobile industry.JLM.