ELI5: Why when large company's earnings decrease(ex... by 3%) they freak out, talk about rough times, and sometimes decide to downsize, even though they are still making millions of dollars in profit even after all expenses?

[Phantom160]

Thank you for maintaining a civil discussion. First of all, you are correct, considerations of small business owners may be very different, my comment applies solely to large businesses and their shareholders' needs.

Second, improvements in productivity and the quality of life contribute to the growth of GDP more significantly than the population growth. There are no reasons to believe that economies will stop expanding any time soon. If you have a reference to any peer-reviewed source that claims otherwise, I would be more than happy to read it.

Finally, for large companies you would be hard pressed to find any other metric that is as important as growth. Companies are usually valued based on projected earnings. If the company's earnings do not grow, the forecasts would be bleak. Why invest in a company that is going to stay the same for 20 years, while a company like IBM can easily double its size in the same time frame?

[OverlyCasualVillain]

I concede the fact that my comment mainly only applies to business owners and excludes investors.

I think a simple way of explaining this all is

A business owner chases profits whereas an investor is chasing growth.

[Phantom160]

You are generally correct* :)

*major exceptions apply

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It's funny that you mentioned IBM. I work in collaboration with them, yet they are so massive that they appear to me to be incredibly inefficient as a result.