New Growth, Old Growth, Bureaucratic Growth

Everybody wants to grow.

Fresh shoots on a Pieris plant. Source: Wikimedia

We want to grow personally. We want our children to grow intellectually, emotionally, and morally. We want the economy to grow. We want companies in our portfolios to grow their revenues, earnings, and dividends. And we want our investment portfolios to grow.

But how do we get there?

Everything – whether it’s plants, or people, or companies, or economies – goes through transformation to get to growth. They form patterns, they imitate successful ones, they renew these patterns in different contexts, and draw resources from other areas to support the new growth.

We see this in the forests every year. Before they drop their leaves in the fall, deciduous trees resorb the nutrients in their leaves and put them into storage. Then, in the spring, they use the minerals they’ve recycled to establish new shoots and leaves. The same thing happens in our bodies. Old cells get recycled to provide nutrients for new growth.

We see it in the economy: waves of creative destruction cycle through, disrupting old businesses and creating new ones. The data revolution has created millions of new jobs, but those people need to come from somewhere. Over the next ten years, the Bureau of Labor Statistics projects that our economy will need millions of new health aides and medical assistants and nursing aides and physical therapists, but not nearly as many secretaries or executive assistants or office clerks or bookkeeping clerks. We need more people to provide personal care; we don’t need as many folks to shuffle papers.

Source: Statistica

It happens in growing companies, where expanding areas receive more resources at the expense of stagnant divisions. But it’s not always that easy. The larger a company becomes, the more bureaucratic its operations. Bureaucracy is a natural outcome of growth. Efficient, fair dealing requires rules and forms and structure. But bureaucracies, once established, serve their own interests as well. In fact, they come to serve their own interests first. Good managers can see through the bureaucratic bloat, but this gets increasingly difficult. This is why large corporations come to depend on charismatic, visionary leadership.

Growth is critical. If we’re not growing, we’re declining. But all growth comes at a cost. When executives talk about where they’re going, it’s just as important for them to outline where they’re not. The path to the future is found, it’s built.

Douglas R. Tengdin, CFA

Charter Trust Company

“The Best Trust Company in New England”

By |2019-01-30T05:49:26+00:00January 30th, 2019|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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