Some analysts have been predicting a bull market while others have been predicting bear. But what we’ve actually been seeing is a period of volatile turmoil: the market has been racing up and down with a lot of fear, confusion, and uncertainty. According to a LinkedIn co-founder, this chaos could actually be a good thing.
In his recent book, Reid Hoffman — a co-founder of LinkedIn — outlined a concept called “blitzscaling,” through which companies attempt volatile, aggressive, and chaotic growth. Ideally, a blitzscaling corporation would grow as quickly as possible, though it would also make some attempts to reduce both risks and negative social impact.
Blitzscaling could very well relate to what is being seen in the current economy. FANG stocks — Facebook, Amazon, Netflix, and Google — have been an instrumental component to volatility, both repeatedly tearing down and propping up the market. These are companies that have been aggressively growing for a few years; half of them are disruptive companies that have been altering the way industries work.
In a world of blitzscaling, the economy is naturally volatile. However, the idea behind blitzscaling is a sort of fast-paced corporate evolution: a race towards a better world that drags the world into a better place, even with some minor or major disruptions. Consequently, those like Reid Hoffman might argue that it is a necessity and that ultimately these companies (and the economy) land in a better place faster.
Periods of fast-paced economic growth are often seen as a sign that an economy may be in a bubble that is about to burst. But under the philosophy of blitzscaling (which is admittedly on the micro scale, rather than the macro), a fast-paced economy can also be seen as one “running down a road very quickly” — one racing towards its destination.
And even though there could be setbacks, those setbacks may not remove all of the former progress — leading to a trend at still moves firmly upwards. This is what we’ve been seeing with the economy as well: the NASDAQ has fallen sharply, but still remains above where it started in the past year… as of now.
If tech companies — which are now having a significant impact on the economy as a whole — are to embrace the chaos of blitzscaling, the economic chaos will also follow. Blitzscaling by its very nature can lead to volatile earning reports and constantly shifting environments, which will ultimately lead to uncertainty within the market.
No one is arguing that an economy should grow as quickly as possible, but if the companies within it are doing so, it will have a profound impact. It remains to be seen whether it could be a negative one. The chaos involved in blitzscaling serves the ultimate goal of dragging a company into the future. However, a company and its employees may be able to survive this disruption: an economy may not.
Embracing chaos means that companies must often engage in high risk activities. Hoffman’s ideas have come under some criticism, because Facebook and similar companies are now facing the consequences of their actions; these high risk activities are leading to major security issues, morale issues, and revenue issues.
Nevertheless, what cannot be denied is that the economy is now volatile, and this very well may be connected to a new corporate ethos of blitzscaling. If companies are to embrace the chaos and continue to engage in high risk activities, a volatile economy may become the norm for investors — and that isn’t always a negative. While chaos does increase risk, it also increases opportunities for short-term investors.
Blitzscaling underscores the importance of understanding the economy outside of a vacuum and understanding how corporate missions, philosophies, and trends may ultimately shape the economy. Over a decade ago, trends in the real estate and housing markets crashed the economy; moving forward, we may be seeing an economy that is driven through this type of tech disruption.