> the idea of constant growth in user base as the source of value in a company
This is a straw man. The primary source of value is the future cash flow. Since a long future is considered, growth is highly prized. I consider this a major achievement of mankind, to be able to value the future, today. Without this reasoning, financing for new businesses would cease to exist.
That's a good point. I think you're referencing a Present Value calculation? My big issue with a lot of valuation techniques is they are based on exponential growth. That strikes me as overly optimistic, leading to decisions that overlook profitable businesses that do not grow exponentially.
They're based on constant growth. I guess over a long enough time frame, constant growth is exponential, but not in the windows that an investor expects to be paid back.
Exponential growth is only expected in software because the development costs are so high and the marginal costs are so low. There's zero cost to growth, which makes it a winner-take-all market.
Exponential growth is also expected within new businesses within an established corporation. Similar to software's margins and distribution advantage, an existing corporation can often pursue new businesses with an existing infrastructure that approaches minimal additional expense beyond human salaries. The reference to "hurdle rate" is an often used term by corporate MBAs evaluating the worth of a new line of business.
This is a straw man. The primary source of value is the future cash flow. Since a long future is considered, growth is highly prized. I consider this a major achievement of mankind, to be able to value the future, today. Without this reasoning, financing for new businesses would cease to exist.