Consilient Observer

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January 27, 2022

Underestimating the Red Queen

January 27, 2022

Underestimating the Red Queen

Consilient Observer

Underestimating the Red Queen

January 27, 2022

Measuring Growth and Maintenance Investments

Organisms allocate energy between growth and maintenance and repair. They stop growing when maintenance requires all of the energy. Substitute capital for energy and companies appear to follow a similar trajectory.
This is important because you can anticipate a company’s growth only if you understand how much capital it spends on growth versus maintenance.
Estimating maintenance spending offers insight into how fast a company has to run just to stay in place.
Most executives and investors likely underestimate maintenance spending. Steps toward better understanding include a proper assessment of maintenance capital expenditures and a separation of selling, general, and administrative expenses into investment and maintenance components.

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Underestimating the Red Queen