Lesson 12b: Relationship Between Growth, ROI & Price

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Hey, morning. Beautiful day outside here. Got some pinks and blues, purples, sunrise coming up, South Carolina.

Pretty awesome. Today we're talking about an interesting relationship between price, growth, and ROI. It's an interesting idea.

I haven't heard anyone talk about this ever in my career. So you heard it here first or second or, you know, I can't see everything all the time. So maybe somebody somewhere have talked about this, but I haven't seen it.

So beats me. All right. Let's talk about growth rates.

So growth rates can be negative, flat, positive, really positive, or straight up and down. What's the prevalence of this? Well, pretty much anybody in the world can get a negative growth rate. It's just like, you don't do anything.

You make bad decisions. You build poor quality products and you treat your customers like garbage and you go down the drain. So, you know, intro market where you can't be competitive.

Yada, yada. The list goes on. So that's pretty prevalent.

And you throw a stick, hit somebody that can screw something up. All right. What about flat growth? Well, a lot of people can do that sort of just steady as she goes.

No major changes. Don't take any risks. Don't do any investment.

Just sort of running as she goes. And that's your kind of your cash cow business, if you will, sometimes usually personally owned. And I built it up.

I got to a level. Cool with it. Got some strong customers.

Don't really want to work that hard. No growth. But, you know, spits off some cash, maybe.

If it's not spitting off cash and you're unprofitable, well, then you don't really have zero growth. You're going down. OK, next one is some growth.

Now, that's a little harder because at every point in time, you not only have to do this stuff that keeps you like the cash cow keeps you going, you got to do extra stuff. And that extra stuff is what gives you a return. You got to have smarter strategy.

You got to have better talent. You've got to invest in product more or service more. You've got to create novel things.

You got to treat your customer better. You got to do faster ship times. Right.

Like things like this price competitively. And so this is a very competitive space. This is where a lot of business people operate in that like lower growth, a lot of prevalence of that.

And for investors, obviously, they're not looking for that sort of negative growth, flat growth. They're not looking for because why am I going to put money into something and then get no return on it? Like I could just put it into a T-bill or like a savings account and get more than that with no risk. So even a little bit of growth, you still have to beat the risk free rate, which on a 10 year T-bill right now in February 2026 is about four point two percent.

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So you've got to beat four percent growth. Otherwise, like what are you even doing? You're doing a bunch of work to just like you could have just put your money in the bank. And now with stretch out there from strategy, who's giving you eleven point two five percent every year on your money, your hurdle rate for this low growth, you have to beat eleven point two five percent.

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Otherwise, why am I going to give you money that's riskier than just a guaranteed rate over here? So the bar is getting higher for high performance. Now, let's talk about great growth, something like this, right? These are like north rule of 40 companies. Rule of 40 is recurring revenue growth percentage plus EBITDA margin percentage.

So basically you're growing top line revenue and sales by 20 percent, but you're also keeping that in profit of 20 percent. 20 plus 20 is 40. So that's sort of the baseline of where like great growth is.

And we see companies upwards of 50, 60, up to 90, 70 sometimes that sort of upper quartile performance. And then you've got companies like Palantir at scale doing this up here at like rule hundred and twenty performance, which means their revenue growth is like this and they're keeping a bunch of it, which means they run a highly efficient operation. And so as you get into that upper, as you go from like great growth above rule of 40 to upper quartile to like 120 rule of 40, you're like the only game in town on the planet.

So scaling. So here's what it is, right? It's like none, little bit, a lot of bit. And so they talk about hill climbing, that's hill climbing.

And then there's mountain climbing. And then really what we're experts in is is scaling sheer rock face. That situation that only a few like high performance individuals in the planet without a rope can scale sheer rock face.

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And it requires something altogether different. For more on that, see our entire video series. It's only taken three decades of our life working three jobs at once, doing three things at once, 20 hour days for 30 years.

So, you know, no biggie. But yeah, now we figured out how to get like tiny little like finger holds and like, like pressure points and kick ourselves up. So anyways, it's difficult to do.

Very few can do it. You've got to be different, be better, have stronger core values, go into a customer base that no one else is acting on, adopt a frontier technology that no one else is adopting, apply implementation techniques that no else is implementing. And at first, they don't even understand you.

They make fun of you. They're like, this thing is worthless. Like, why would I ever even pay you attention? And then they're like, oh, snap, this thing works.

And this is over long time horizons. And then finally, they're like, damn, we need to copy these people because like, it's insane. And it's already too late by that point.

It's too late. You've already lost the game. Like they ran away with it while you were too busy doing this whole thing, and this whole thing, and this whole thing.

Meanwhile, they figured out all the techniques, rope climbing, handholds, finger holds, like opposite pressure points, and they're lifting themselves up. And they're like miles ahead of you. And so you're just like, uh, what do I do? And so at that point, then you got to go to them.

And they're now your savior. So you're paying them in order to get like, their scraps. Do you see how this stuff works? Like, you, you gotta, you gotta be out in front or you're dead last.

And the pace at which emerging technologies is being developed, adopted, implemented is like nothing this species has ever seen before. It makes exponential growth look like a laughingstock. We're talking about straight up and down growth, scaling sheer rock face, not hill climbing.

Hill climbing was like two decades ago when it was like, hey, check out this interesting enterprise software thing. And web apps like Salesforce, we can just update software without shipping them a CD. And then we get recurring revenue because people pay every month.

Now there's like 30,000 SaaS companies. So like, yeah, um, you got to think a lot different or else like you're, you're done. You're just done.

That's why all these investment firms and like, that's why enterprise SaaS firms can't exit. It's why these, uh, PE firms can't raise another round of capital because they're just doing the same. Oh shit.

Stop. Stop it. I got to be direct.

Just stop. Just like stop. Okay.

So how does that map with price and ROI? Okay. Here's why. If you want something like this and you want it to take a year, you have a price.

Let's call that price X. Back to math 101. Uh, never get away from it in this world. Okay.

So let's just call that unit X, right? Whatever that price point is. A hundred bucks, thousand bucks, million bucks. Doesn't really matter.

Okay. Now let's say you want to compress that time in half. What took you a year to do, you now want to get that same return in six months.

So what happens is you compress that is you're compressing it. And so by its very nature, that growth rate has to go up, instead of here you're compressing it. So it's like, imagine just a physics based system, right? You're like putting a wedge underneath there and it's just pushing it up.

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And so the more you compress it, the more pressure and energy builds and the higher that growth rate goes. So how does it, so how does that return that growth rate? How does that map to price? Well, if this is price unit X and you want to cut it in half, you assume you want to pay the same price. Well, no, because the providers who do that, aren't going to charge you the same price because this is way harder than this.

There's very few people and there's very few strategies. And there's very few tactics that will get you from here to here from a year to six months. And smart people who've been around the block, been in the business, been in your industry, can figure that out.

And they're using AI and they're using AI to get that down here. So it's kind of a known thing. And we got to have our crap together, S-H-I-T.

We got to have our crap together, got to have our product together, got to have our ops together. We got to have our like communication style, our iteration cadence together in order to achieve that and execute and implement and achieve that goal. Right? So we're talking about an exponential price increase.

Let's just for simplicity, say it's two to the second power. So you want to have your time, you double your price. If your price was X, multiply it times two.

Your price point's now 2X. That's to get you here. Now, if you want to collapse it again, another half, which means you've cut your time by three fourths and the time remaining is only one fourth, you're at another exponential.

So we're going to double that again, two to the second power. Right? So your price point isn't 2X, it's 4X. What if you want to do it again down to a third? Now you're like three to the second power.

And let's just say that that's given the same amount of talent, capabilities, tactics, strategies that are known, that are known how to do it. Other people have done it. You have some kind of playbook assumes that if it's not known, the number of people and talent in the world that's able to do this, and then do it again, and then do it again.

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The number of people goes from 8 billion to like a million to like a thousand to like one. There's one human on this planet, if any, that can do that, that knows how to do that, which means you're in a super exponential. That price point for you, for your company, for your industry to double your growth rate in a shorter amount of time and half the time, there's like one or two dudes or ladies on the planet that can do that.

So your price point is like 10X, 100X. Once again, if you ask me a trillion dollar question, do not be surprised if I charge you a hundred million dollars, which is a 1% of 1% of, you know what I mean? Like you're still getting 99.99% of the value out of that puppy. So why would you beat someone up on price when they're the only person in the world that can do that for you? You better be very careful how you treat that one person because if you don't get them, guess what? Someone else gets them.

And then you're in real trouble because now you don't get the talent, but also your competitor just took your lunch and your business. And that's the point. So for you, you need to get that capability from here to here, to here, from here, from here, to here, to here, to here, to here.

You need to figure out how the hell you're doing that for yourself and delivering that to the market. And there's a very few people on this planet that can do that. Guaranteed.

I've met, I don't know who I've met. So that's the intention today. Super intense, but it really matters because a single idea, a single decision, and the tactics are totally different.

You can't just run ads. You can't just post on social media to go from here to here. You're talking about something that is architecturally so unique that has never been attempted by humanity.

So for more on that, see our video on Thinking Differently Creatively Like an Artist. All right. That's it for today.

Beautiful sunrise. Enjoy that for a second. Yeah.

Nature knows how to grow rapidly. Big bang, big bang, big bang, big bang, expansion theory. I don't know.

Look to nature. Maybe there's something there. Peace.