Thoughts on Growing, Part 1

February 10, 2006 on 5:29 pm | In Updates by Josh Jones |

 

There are two kinds of people running companies.

There are entrepreneurs and there are MBAs. (And when I say “MBA”, I don’t necessarily mean a person with an actual Master in Business Administration.. I just mean anybody who isn’t an “entrepreneur”. By defining things this way, nobody will be able to argue with all the horrible generalizations I’m going to make!)

There are also two types of companies… those that are growing exponentially and those that aren’t. 

There’s nothing an entrepreneur loves more than exponential growth. It’s pretty much why they start companies.. when you start at zero, any growth is “exponential”! Hell, percentage-wise, your rate is infinity! 

On the other hand, nothing scares an entrepreneur more than doing the same old thing day in and day out.

However, on the other other hand (we’re back to our original hand), exponential growth is the scariest thing in the world to an MBA. MBAs (my definition of them) love nothing more than taking a stable company and cutting costs, refining processes, and improving quality untill they squeeze every possible cent of profit from the proverbial lemon.

An entrepreneur on the other other other hand can’t stand piddling about with shoe-string budgets and incremental improvements. They’ve got an empire to build! And if you want to go along for the ride, you better strap yourself in tight and put on your flame-proof helmet… because there’s a decent chance you’re going to crash and burn.

You see, it’s very very hard to truly achieve exponential growth. It’s not so hard to achieve growth, fast growth, or even mega-stupendous growth… but exponential growth is quite a thing indeed.

Let me give you an example. In the last month since we quadrupled disk space allotments, our usage has been growing 200GB a day. The month before we were growing more like 70GB a day. That’s totally, like, triple. Needless to say, we’ve been scrambling to keep up. Now it could be that that’s it, we’ve just changed growth rates and we’ll still be doing 200GB a day come Christmas. However, if it turns out to even be just linear growth, by next month we’ll be growing at 330GB a day, and by the end of the year it’ll be something like 1.6 terabytes a day.

Which seems pretty crazy right now, but I bet by then we’d be ready for it.

Now, if it actually turns out to be exponential there’s no way we could keep up! I’d contend the human brain can’t even comprehend true exponential growth, let alone plan for it. If this current growth was actually exponential, by the end of the year we’d be adding TWENTY PETABYTES a DAY… 100,000 times more than what we’re doing now. Which is clearly crazy. Or is it?

 

It is. Trust me.. this is no exponential growth. But it’s sooooo alluring to believe it is. So seducing is the power of the exponent! But heed me, young Starbuck, and don’t give in. It is that seduction that has proved the undoing of so many many a start-up!

You see, the only way you can keep up with exponential growth is by spending, as the french say, a butt-load of bucks. And the surest way to go out of business is to spend a butt-load of bucks preparing for growth that never arrives.

But on the other other other other hand, there is no bigger business tragedy than missing out on exponential growth the few times it actually is happening, just because somebody didn’t have the cojones to spend the money necessary to keep it going.

So, who is the best person to run a company? An “entrepreneur” or an “MBA”? I’d say what you really need is both. Either as equal partners who understand when it’s the other person’s turn to shine, or perhaps if you’re really lucky, as just one person with two brains. Either way, there are times in a company’s life when you need a wild, spendy, risk-taker at the helms, and there are times when you need that conservative, tight-wad, prude.

 

The ironic thing is, the time you usually need the prude is early in a company’s life. Even if you’ve got mad venture capital (and who doesn’t?), the younger your company is the less ability you have to survive an over-enthusiastic entrepreneur-type planning for exponential growth that never materializes. But… companies are generally founded by entrepreneurs! Oh, the sweet irony!

Do you know when Starbucks was founded? If my memory serves me correct, I first saw them popping up everywhere around, I dunno, 1992? Let’s go check.. oh nope, 1992 is actually when they went public with 165 stores (currently they have 5,715).. Starbucks was founded in 1972.

What were those idiots doing for 20 years? If they’d only gotten off their keister a little earlier there’d now be three Starbucks for every man, woman, child, and dog on earth! Think of the possibilities! Think of the average city block! Think of the ?????! Think of the profits!

The thing is, they most likely were growing exponentially that whole time.. it’s just for a long time at the beginning of an exponential growth curve, things look pretty linear. Which is good. I wasn’t alive, but I bet for the first 20 years they were building up cash, trying out lots of different coffee-type things, and learning exactly what their customers dug and didn’t dig. Then, when the time came, they could fund their hyper expansion with the profits they were already earning (plus the always-nice IPO dough).

So who was running Starbucks through all this? It looks like three dudes. I haven’t met them, but, assuming there’s a 50/50 chance of any person being an “entrepreneur” or an “MBA”, there was a 75% chance of having at least one of each!

(BTW, we have four head honchos. I guess that gives us an 87.5% chance. Eat that, Starbucks!)

Stay tuned next week for Part 2 (of 2?) …