Not All Growth Is Created Equal⁠↗

There is a sickness, a striving, that pollutes the purity of what building a business should be. Because growth attracts headlines and seduces investors, companies over-optimize on growth metrics in their early years. In the end, it ruins them.

Instead, startups will do “annualized recurring revenue” and use it to describe monthly contracts multiplied by 12. They will not account for churn. They will not mention that many of these contracts are free trials that will not convert. They are so desperate for quick growth that they will be mildly intellectually dishonest. It is yassified growth. Unremarkable underneath, but through technical manipulation, looks good for a quick snapshot.

fast growth is somewhat overrated as a concept. What matters is the quality of that growth.

“To truly understand business strategy, you have to accept that it is, by nature, bullshit. Of course, the practice of guiding a business, making choices with trade-offs, and responding to unexpected crises is real. But the academic study of business strategy is something closer to divination…So, why are they bullshit? Simple. The value of a forecasting method is in its ability to be right, not sound right. Despite decades of study and the relentless efforts of the good people over at the Harvard Business School, we have yet to discover any strategy that is universally predictive.”

One consistent theme for The Leverage is that qualitative evaluation is underrated. Businesses are complex organisms with thousands of variables determining their success, and any approach wholly reliant on metrics is too reductive. It’s why I write so frequently on taste, stories, and strategies. The fuzzier the concept is, the more challenging it is to evaluate the future, the more alpha is available. If you can figure out a business with a calculator, so can anyone else.