Tech Companies Keep Falling for the ‘Forever Fallacy. Why Smart Leaders Should Know Better


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This week, most of the big tech companies are announcing their quarterly earnings. For the most part, they’ve been unimpressive. The best thing you can say about most of them is that everyone expected things to be bad, and the companies delivered on that expectation. I suppose meeting expectations is a good thing.

Except, these are companies that have–for the most part–experienced explosive growth over the past decade. Amazon, Google’s parent company Alphabet, Microsoft, Facebook (now Meta), Apple, and Tesla have all seen their market cap exceed $1 trillion in the past year. Several of them have reached $2 trillion.

A lot of that growth happened during the pandemic, a time during which almost none of the usual rules of business applied. Consumers signed up for streaming services as a way to stay entertained while movie theaters and sports stadiums were closed. They bought more laptops than ever before, mostly for remote work and school. They signed up for businesses that served as they tried to figure out how to keep their teams connected when they weren’t together in the office anymore.

All of that led to record sales numbers. Tech companies responded by hiring more people, building factories and warehouses, and spending money as though the line would just keep going up and to the right.

Then, things got rough. As if a global pandemic wasn’t enough, next came supply chain disruptions that made it hard to get just about everything from toilet paper to semiconductors. Employees decided they’d rather quit their jobs instead of going back to the office.

Once the pandemic started to wane, people started going back outside, and to stores, and movie theaters, and baseball games. In other words, they went back to a version of normal that looked a lot more like before the pandemic. That seems like the sort of thing smart business leaders would have foreseen, but instead, most of them assumed the explosive growth during the pandemic was here to stay.

I call it the “forever fallacy.” It’s really quite simple. The forever fallacy is the belief that the circumstances that led to extraordinary growth will continue indefinitely, even when they obviously aren’t. It’s the idea that growth, no matter how irrational, will continue because the change in circumstances that caused it is permanent.

There may not be a more dangerous mistake in all of business leadership. Think about how ridiculous that argument would sound if you heard Peloton’s CEO talk about how the pandemic caused increased demand not because no one could go to the gym, but because suddenly your product had realized mass appeal. Just the law of large numbers says that eventually you reach all of the people who are likely to be your customers and you stop growing (see Netflix).

At least Netflix acknowledged as much in its letter to shareholders stating that “COVID clouded the picture by significantly increasing our growth in 2020, leading us to believe that most of our slowing growth in 2021 was due to the COVID pull forward.”

That phrase–pull forward–is just a fancy way of saying that a change that would otherwise have taken a long time happened much more quickly because of an unforeseen event, like, say, a pandemic. It means that growth that you would have seen over, say, 10 years, happened in a much shorter period of time.

Tech companies weren’t the only ones that used that phrase to explain how the world was shifting during the pandemic. There were experts, and op-eds, and articles talking about how COVID had “pulled forward” changes in the way people work, where they live, and how they shop. Those changes were here to stay, they said.

Except, they weren’t. Some of them, sure, but not most of them–especially not the ones that the tech companies were counting on.

As you might expect, a lot of those companies are now paying a very real price. Google, Microsoft, and Facebook have said they will slow or pause hiring. All three failed to meet expectations this week, with Facebook’s parent company, Meta, reporting its first ever year-over-year drop in quarterly revenue.

Netflix recently announced it’s introducing an advertising-supported tier because it lost subscribers two quarters in a row after a decade of growth. Amazon hired too many people and built too many warehouses and is now trying to unload a decent-sized chunk of both.

Peloton–well, Peloton got pretty much all of it wrong. It built too many bikes, committed $400 million to a new factory, and then ended up with warehouses full of inventory it couldn’t sell. It replaced its CEO, laid off employees, and is attempting a massive shift in strategy.

The reason is the same for every one of these companies. All of them believed that the thing that was giving them success would continue forever. As we’ve seen, that’s a fallacy.

Look, that’s probably just human nature. When things are going well, we want desperately for them to keep going well, especially when that leads to rewards like recognition and–more importantly–huge stock bonuses. We’d rather not think that the circumstances beyond our control which led to our huge success might change. If they do, things could get worse.

If your job is to talk up your company and get the stock market excited about your future growth, you’re probably more likely to fall for the forever fallacy. That’s not really your job though. Your job isn’t to assume things will always continue just as great as they are now. Your job is to be realistic about the future and position your company for whatever comes next.

The opinions expressed here by columnists are their own, not those of


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