Welcome To The Age Of Building Brick By Brick

Sustainable, slow-growth businesses are the new hotness as risky, high-growth companies falter.

The stock market is absolutely annihilating companies that promise long-term growth without showing near-term results. Shopify is down 70% year to date. Rivian is down 69%. Meta — with its metaverse vision far into the future — is down 39%. The tech-heavy NASDAQ composite is down 23%. And VCs are urging startups to adopt financial discipline.

After years of the Fed’s ‘zero interest rate policy’’ — which made it impossible to earn money on cash and led us to accept longer-term payoffs — the central bank has raised rates and flipped the script. High-growth companies that burned money like tinder wood went to bed as kings and woke up as peasants. While smaller, sustainable businesses found themselves on the top of the heap.

We’re in a new world with new incentives. All in the blink of an eye.

Let me welcome you to the new age of building brick by brick, a long-overdue correction where companies that grow sustainably will thrive while those taking shortcuts will falter. Yes. there’s logic to the traditional model, where you ‘get big fast,’ often with VC money, and tell a story to Wall Street that endows you with a massive valuation and helps you build your dream. That system’s produced many great companies. But for every Amazon, there’s been plenty more potentially great businesses that self-immolated chasing unachievable numbers. Now, despite the pain, we’re heading toward a more sustainable economy, one built on rationality.

Think about how many companies took shortcuts in our recent economic history — or embarked on projects more ambitious than prudent — and paid the price for it. WeWork, a logical business established at the perfect time, lost its mind after raising tens of billions in capital and being urged by Softbank’s Masayoshi Son to get even crazier as it caromed toward the brink. Zenenfits was growing nicely until its hypergrowth pursuit caused it to take ethically dubious shortcuts around certain certification requirements. Unsound crypto projects attracted fortunes only to sputter and die, leaving retail investors holding the bag.

There’s a derogatory term in the tech world called “lifestyle business,” which some apply to healthy businesses that aren’t in hypergrowth mode. Behind this term, there’s an idea that someone who’s building slowly but steadily is trying to support a ‘nice lifestyle’ vs. working to change the world via hypergrowth. It’s nasty. Attempting to build companies at world-changing scale is part of what makes an economy great, for sure. But we lost the plot when we insulted those who built businesses and showed a profit on the balance sheet from the start.

Today, the market — led by the Fed — is pushing a reset, one that’s forcing companies to show they have the goods now, vs. sometime in the future. The shift is putting those building slowly but sustainably right in the driver’s seat. We haven’t seen this type of economy for a while, but we better get used to it. For the first time in what seems like forever, building brick by brick is the new hotness.

Alex Kantrowitz writes Big Technology, a free weekly newsletter about Big Tech and society. To get in your inbox each Thursday, you can sign up here.