Business advice from the TV show The Americans
One of my favourite TV shows is The Americans. Typically it has more to do with being a Cold War spy than running a small business, but in the final season there is a scene that made me literally jump up and down with glee, because it exemplifies why I wrote my forthcoming book, Company of One.
The main character, Philip, on top of being a spy, owns a travel agency (a front) with his wife Elizabeth. The business sees some revenue increases, so he takes out a bank loan to get more office space, more employees, and therefore more expenses. But then business begins to tail off slightly—possibly because this is around the time that “budget” travel starts to make its mark. So, post-growth, he is struggling to make ends meet, and even though the job is just cover that allows them to be super-spies, it is nevertheless how they generate income to support their family.
In the jump-inducing scene, Philip’s sitting at a bar with his best friend Stan, who just so happens to be an FBI agent(!), and talks about business growth:
Philip: It’s just in business, there’s always this pressure about growth, that if you’re not growing, you’re not succeeding. But why? When you think about it, what is so bad about staying the same? Not taking on more responsibilities, more headaches, more time.
Stan: I think of what my father told me—the more you want, the more you get. And that’s both good and bad.
We’re constantly fed this idea that growth equals success. And sometimes growth can lead to more profit, more stature, or more impact. Philip truly believed his travel business could be better off with growth.
The problem is, like anything in business, one rule doesn’t always apply. Sometimes growth is good. Sometimes it’s not—even when you’re a Soviet spy.
Indeed, growing a business is one, single way to do business. That’s it. Sure, it’s the most talked about, most covered by the press, and most coveted (at the moment), but it’s nevertheless a single option or path forward.
It’s important to remember that I’m not trying to convince anyone that staying small or questioning growth is the 100% right way to go either. I don’t actually want to convince anyone of anything—instead, I want to offer a different perspective for your own introspection. I want to create space in your mind for a counter argument that you don’t have to grow a business to succeed unless it makes sense and is truly what you’d want to manage and maintain after growing.
To create that possible space in your mind with a bit of data, let me highlight two studies that helped inform my thoughts in Company of One.
A study conducted by the Startup Genome Project, which analyzed more than 3,200 high-growth tech startups, found that 74 percent of those businesses failed, not because of competition or bad business plans, but because they scaled up too quickly. Growth, as a primary focus, is not only a bad business strategy, but an entirely harmful one. In failing—as defined in the study—these high-growth startups had massive layoffs, closed shop completely, or sold off their business for pennies on the dollar. Putting growth over profit as a strategy was their downfall.
When the Kauffman Foundation and Inc. magazine did a follow-up study on a list of the 5,000 fastest-growing companies five to eight years later, they found that more than two-thirds of them were out of business, had undergone massive layoffs, or had been sold below their market value, supporting the findings of the Startup Genome Project. These companies weren’t able to become self-sustaining because they spent and grew based on where they thought their revenue would hit—or they grew based on venture capital injections of funds, not on actual revenue.
In the ’80s it was favourable bank loans that injected capital in to businesses to offset the fact that there was little or no profit. Nowadays venture capital does similarly, putting money into companies in the hope that they grow enough to pay the VC back at a much higher rate than they’d see from other investments.
Paul Graham, the cofounder of Y Combinator (one of the largest and most notable VC firms for startups) explains that VCs don’t invest millions in companies because that’s what those companies might need; rather, they invest the amount that their own VC business requires to see growth in their own portfolios, coming from the few companies that actually give them a positive return. Graham notes that sudden and large investments tend to turn companies into “armies of employees who sit around having meetings.”
Which is what happens with the travel agency Philip and Elizabeth run in the final season of The Americans: there are lots of employees at lots of desks, trying to earn enough so that the company as a whole stays in business. And (minor spoiler alert!) Philip has to fire three of those employees because the company can no longer support their salary. Whereas in previous seasons, when the travel agency consisted of just Philip and Elizabeth, they needed to bring in far less customers to be profitable, and they were able to foster more meaningful and longer-term relationships with their customers.
So sure, this is a super weird comparison, because however lovable Philip’s character is, he’s still sort of a murderer who’s bad actions don’t make up for his charm. But his singular and insulated point about business growth is completely apt. Western society pressured him to grow his business once it succeeded, and he not only didn’t like the business once it grew, it also led to more stress, less profit and firings.
In the press and in real life, we need to rethink this narrative that growth is the only path forward. Because really, you can do well, stay small, and thrive as a tiny business. I know from 20 years experience that that can be true as a real alternative path.
Running a small business isn’t without its own drawbacks and issues, but it definitely has some huge pluses. For example, since I only have one salary to cover (my own), I don’t feel the stress of having to make sure I can cover employee salaries too, I don’t have the responsibility of requiring a ton of revenue to break even or make a profit, and I don’t have to do much in terms of management or administration.
Maybe it’s time to start listening to Soviet spies… at least when it comes to changing the conversation we have about business growth. We can probably skip the advice about stealing military secrets to keep the cold war going though.