This is all wildly simplified, but here’s my attempt to explain the simplest version of the core behavior. In general, people who own companies don’t make a salary; they make a profit. Once all expenses are paid, the leftover revenue is called profit, and goes to owner.
This ownership can be sold in whole or in part to other people with money, in order to raise more money, which can be used to invest in equipment and such. Many ventures have significant startup costs, which means they require money before they can start making money, so they seek investment.
The people who invest in ventures do so in exchange for ownership of that venture, in the form of stock. This is why we call it “capitalism.” The people with the money are in charge. Side note, but the term “capitalism” was coined as part of leftist crtitique of laissez-faire economics. It was meant disparagingly, to point out that this system actually just meant people with money are in charge, but I digress.
These owners can make some money owning the company, but no one would do this if they were stuck with that stock forever, because then they would be illiquid, i.e. they would never be able to access that money again. People want to be able to sell their stock for more than they bought it, which means the stock’s value must grow or the company’s owners will be angry and fire its CEO.
This core behavior happens at many scales. Your local property owners wants to know they can sell their property for more than they paid for it. People who invest in index funds (diversified portfolio of many stocks) don’t just want to be stuck in that index fund forever, even if they are earning dividends (i.e. profit); they want to be able to sell their index funds for more than they paid at some later time. And so on.
Were it to stop growing, no one would be able to invest in new assets without taking large losses, which would mean fewer investments, which would make it impossible to finance things. No new houses, or new factories, or new stores, etc. The whole system comes to a crashing halt.
edits: fixing and adding things
edit2: Restructure a bit. One sentence was in the wrong place.
This is all wildly simplified, but here’s my attempt to explain the simplest version of the core behavior. In general, people who own companies don’t make a salary; they make a profit. Once all expenses are paid, the leftover revenue is called profit, and goes to owner.
This ownership can be sold in whole or in part to other people with money, in order to raise more money, which can be used to invest in equipment and such. Many ventures have significant startup costs, which means they require money before they can start making money, so they seek investment.
The people who invest in ventures do so in exchange for ownership of that venture, in the form of stock. This is why we call it “capitalism.” The people with the money are in charge. Side note, but the term “capitalism” was coined as part of leftist crtitique of laissez-faire economics. It was meant disparagingly, to point out that this system actually just meant people with money are in charge, but I digress.
These owners can make some money owning the company, but no one would do this if they were stuck with that stock forever, because then they would be illiquid, i.e. they would never be able to access that money again. People want to be able to sell their stock for more than they bought it, which means the stock’s value must grow or the company’s owners will be angry and fire its CEO.
This core behavior happens at many scales. Your local property owners wants to know they can sell their property for more than they paid for it. People who invest in index funds (diversified portfolio of many stocks) don’t just want to be stuck in that index fund forever, even if they are earning dividends (i.e. profit); they want to be able to sell their index funds for more than they paid at some later time. And so on.
Were it to stop growing, no one would be able to invest in new assets without taking large losses, which would mean fewer investments, which would make it impossible to finance things. No new houses, or new factories, or new stores, etc. The whole system comes to a crashing halt.
edits: fixing and adding things
edit2: Restructure a bit. One sentence was in the wrong place.
deleted by creator
Thank you, a very good answer.