Uneven Distribution of Growth. Presentation at University of Helsinki.

Uneven Distribution of Growth. Mechanisms and
Implications.
Henri Blomster (blomster.henri@gmail.com)
Presentation at University of Helsinki 3rd March, 2017

Science
• PhD Sistonen lab
• Post doc Varjosalo lab
• Publications
• Awards
• GCP
About my background, science

Business
• Aalto School of Business, Finance student
• Advisory Board at Ocuspecto
• Analyst at SalkunRakentaja
• Board member at Salkkumedia
• Awards
About my background, business

Telling the brief basics of
Inbound Marketing
About my background, Inbound Certified

Free analysis tools investing
Everybody starts by looking
for information on the web

Adds are
skipped
32,5%
17,6%
When looking
for information
one goes for organic
results

This is how customers
end up on your home
page in the first place

Growth of SalkunRakentaja
Over 67 % year-over-year growth in number of sessions
December 80 000 sessions
This inbound approach and use of social media has worked
well for our site, SalkunRakentaja

Book reviews, investment books
Just another example

32,5%
It is known that the
first organic search
result gets most
of the clicks.

The idea is to provide
something useful for
free

And then monetise
this trafic or collect
Leads through use of
”Call-to-action”-buttons

Company
Bank
SalkunRakentaja has
a role to play in how
financing mechanisms
are shifting
Traditionally small
companies loan money
through their existing
contacts and banks.

Company
Bank
Crowdfunding platform
Company Company Company
Now crowdfunding
is becoming increasingly
important

Company
Bank
Crowdfunding platform
Company Company Company
SalkunRakentaja helps
companies to gain
visibility among private
investors.

Obvious
Science + Business
There is the obvious way
of combining different
backgrounds

Obvious
In my case this could be
writing an investemnt
analysis (busines part)
about a gene technology
company (science part)
This figure shows an
example of this

Less obvious: power of combination
The less obvious way of
combining.
Networks science has had
a big impact on cell
biology (among others)…
But is less well known
in the area of economics
(at least in Finland)

Dialogue and teamwork
• Why do you think this way?
• Start meeting by writing opinion down on paper
Just some examples, that
it is well known that
combination of old pieces
in new ways are the basis
for innovation.

Valve
Just some examples, that
it is well known that
combination of old pieces
in new ways are the basis
for innovation.

Bank
Bank
Maxos blog: A Google executive on a panel at a conference said to a Citibank executive,
“If we took over your operations, we could run it with one tenth the people you are using.”
In general terms novel
combination can be rather
powerful.

Pankki
As result banks are afraid
from competition coming
from the side.

Most banks are not
originally digital. So they
lack the Apex structure.
Apex structure allows
continuous innovation and
integration.
This was just to show
general potential of novel
combintation

6525
26360
0
5000
10000
15000
20000
25000
30000
1 2
The impact of all
publications of a
67-year-old
Nobelist
(economics)
The impact of a single
publication on
network structure
The impact of Network
Theory on science has
been huge. There are
several ways to measure
this. This is just one. The
impact of a single networks
publication is greater than
the lifetime work of a
Nobelist in economics

This is that publication.
It shows that networks
have an power law
distribution.

Less obvious: power of combination
I look for this kind of
distribution among S&P500
and publish this on Seeking
Aplha. These get chosen as
Editors Picks.

The distribution of revenue growth within S&P500 is exponential
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397
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451
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487
Total Growth Percentage of S&P 500 constituents
revenue 2013-2014
This is the finding. Some
companies grow very much
more than others.

The distribution of revenue growth within S&P500 is exponential
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487
Total Growth Percentage of S&P 500 constituents
revenue 2013-2014
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0
1000
2000
3000
4000
5000
6000
7000
8000
9000
1
19
37
55
73
91
109
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145
163
181
199
217
235
253
271
289
307
325
343
361
379
397
415
433
451
469
Total Growth Percentage of S&P 500
constituents revenue 2007-2014
When you add time this
shape becomes stronger
This means that although there are
one time events, new growth is not
random, but selective towards old
growth.

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0
1000
2000
3000
4000
5000
6000
7000
8000
9000
1
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37
55
73
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109
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217
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307
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361
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451
469
Average growth does not describe the
growth characteristics of this population
of companies.
0
20
40
60
80
100
120
140
160
180
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19
37
55
73
91
109
127
145
163
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487
Body weight of 500 persons
Average body weight describes this population
of persons rather well.
Averages, like GDP growth are of
course important, but still poor
descriptors of economy.

It might be important to note how
averages are used.

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0
1000
2000
3000
4000
5000
6000
7000
8000
9000
1
19
37
55
73
91
109
127
145
163
181
199
217
235
253
271
289
307
325
343
361
379
397
415
433
451
469
Hit #1 Facebook
Hit #3 Salesforce.com
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0
200
400
600
800
1000
1200
1400
1
18
35
52
69
86
103
120
137
154
171
188
205
222
239
256
273
290
307
324
341
358
375
392
409
426
443
460
2007-2014 top 5 and down 5 companies out
Hit #5 Priceline
Hit #10 Google
The effect of exponential like
distribution is that there is a huge
difference in the amount on how
much individual companies grow
over time.

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0
1000
2000
3000
4000
5000
6000
7000
8000
9000
1
19
37
55
73
91
109
127
145
163
181
199
217
235
253
271
289
307
325
343
361
379
397
415
433
451
469
Hit #1 Facebook
Hit #3 Salesforce.com
-200
0
200
400
600
800
1000
1200
1400
1
18
35
52
69
86
103
120
137
154
171
188
205
222
239
256
273
290
307
324
341
358
375
392
409
426
443
460
Hit #5 Priceline
Hit #10 Google
-200
0
200
400
600
800
1000
1200
1400
1
18
35
52
69
86
103
120
137
154
171
188
205
222
239
256
273
290
307
324
341
358
375
392
409
426
443
460
Berkshire Hathaway
Wal-Mart
10 fold differences; 8000, 800, 80…

0
5
10
15
20
25
30
35
40
Q2/2015 Q3/2015 Q4/2015 Q1/2016
Amazon Revenue
Concentration on quarterly results
and short time frames gives an
impression of high uncertainty of
future growth.

0
5
10
15
20
25
30
35
Q1/2010 Q1/2011 Q1/2012 Q1/2013 Q1/2014 Q1/2015 Q1/2016
Amazon Revenue
Howewer, when analyzed properly,
seasonal effects disappear. In the
long run the growth of some
companies is actually stunningly
steady.

This is in contrast to how we see
growth companies through the
CAPM-model:
Some growth companies have
growth drivers that allow them to
grow through economic crises.
This is the actual growth of
company, not share price.

0
1000
2000
3000
4000
5000
6000
7000
2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010
Cargotec Metso Facebook Netflix Priceline
The effect of major Financial Crisis.
Lehman Brothers falls in September 2008.
Cyclic Exponential
Let us repeat that from another
angle. All growth companies
do not have a cyclical nature.

Growth of company Market price
Time
That was the behaviour of the
actual business. Bacause of CAPM,
we should see how this actual
growth is reflected in share price.

Effect of economic downturn
This is the result. In last economic crises
real cyclic companies lost much more in
value, than companies that grew trough
the crisis.

Effect of economic upturn
Another way to look at the same thing.
Conclusion: Cyclic does not equal to
Growth.

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0
1000
2000
3000
4000
5000
6000
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451
469
This part should be concentrated upon
to understand growth
1) Founder led companies
2) Digital product
3) Jumping the S-curve
4) Culture shaping companies
5) Data driven companies
6) APEX-competitors
7) Networks
8) Digital Platform
9) Big challenges
10) Social media
Presenting some growth drivers.

Hotellin käyttäjät
Hotellit
Booking.com
Asiakkaat varaavat mieluiten
hotellinsa alustaa käyttäen, koska
alustalla on useita hotelleja.
Hotellit käyttävät mielellään
alustaa, koska alustalta löytyy
paljon asiakkaita.
Digital platform
Winner takes it all
Digital platform
Explaining how the winner-takes-
it-all effect is formed within digital
platforms.

APEX competitors
Winner takes it all
Explaining the importance of
APEX competitors

Growth of networks
Winner takes it all
Explaining the mathematical
model for network growth.

PhD Finance
Summary: obvious combination

PhD Finance
Summary: novel combination

PhD Finance
Communication
Communication is important

Communication
Advisory Board at Ocuspecto
Analyst at SalkunRakentaja
Board member at Salkkumedia

Uneven Distribution of Growth. Presentation at University of Helsinki.

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