FIELD NOTES FROM THE TRANSITION: SMALL FISH GROWING

Why the growth stage is its own structural position
By Michael T. Edgar | SelectGlobal LLC

TL;DR

Our earlier Field Notes mapped people holding a finished asset or no asset yet. The growing firm is neither. It is mid-motion: past survival, not yet institutional, adding clients, headcount, and systems every quarter. That motion is exactly what exposes it. This piece does not offer a menu of paths. It explains why the hyper-growth stage activates the structural forces differently than a mature firm faces them, why scaling is the mechanism that walks a firm into the drift it should fear, and why the AI floor is built or not built before the next tide goes out rather than after. No prescription. The decision belongs to the owner.

INTRODUCTION

The firm is working. Revenue is up year over year. The owner is hiring faster than feels comfortable, signing leases, buying systems, and turning down work for the first time. By every conventional measure this is the success story the other Field Notes personas are reaching for. The graduate aims for this trajectory; the mature owner has already survived it. The growing firm is in the middle, and the middle is the least examined position in the whole transition.

It is least examined because it looks like the safe one. It is not. The static-asset personas can hold still. A mature owner can convert to a lifestyle business, shrink the attack surface, and wait out a bad cycle on accumulated equity. A graduate holds high option value precisely because there is no asset to lose yet. The growing firm can do neither. Its entire logic is forward motion, and in a Builders vs. Diplomats world, forward motion is what carries a firm into the structural forces at the worst possible angle. [1]

The political class that built the current operating environment was not thinking about a thirty-person firm doubling its headcount in 2026. That is not a complaint. It is a mechanism description. The pressures do not pause for a firm that is mid-expansion. They compound against it faster, because growth converts a firm's flexibility into fixed commitments at the exact moment the environment is punishing fixed commitments.

This piece names why the growth stage is structurally distinct, walks the three pressures that growth specifically activates, adds the force the earlier pieces did not have to carry, and offers five questions. The decision remains the owner's.

WHY GROWTH IS A DIFFERENT POSITION

Every prior Field Note described a decision about a static asset. The growing firm faces a decision about a moving one, and a moving asset cannot be evaluated with static-asset logic.

When a firm scales, it trades optionality for capacity. Each hire, each lease, each multi-year systems contract is flexibility spent to buy throughput. In a stable environment that trade is simply how firms grow. In the current environment it is a wager that the conditions you are committing to will still be the conditions you face when the commitments come due. The mature firm already made those trades years ago and amortized them. The growing firm is making them now, in real time, into an environment whose defining feature is that it does not hold still.

That is the structural difference in one sentence. The growing firm is converting reversible decisions into irreversible ones during the precise window when reversibility is the scarcest and most valuable thing a firm can hold.

PRESSURE ONE: FIXED-COST EXPOSURE IN THE WRONG JURISDICTION

Growth means fixed costs, and fixed costs are what the fiscal-extraction leg of the transition punishes most directly. A firm adding payroll, square footage, and equipment is increasing exactly the surface area that municipal property tax, state fiscal pressure, and regulatory load attach to. [2]

The mature firm's fixed costs are sunk and known. The growing firm's are being created now, often in the high-cost metros where talent and customers cluster, which are frequently the same jurisdictions where the extraction trajectory is steepest. The firm grows into the cost base before it has the management depth to relocate any part of it. By the time the property tax bill, the comp pressure, and the regulatory drag are undeniable, the firm has anchored thirty people and a lease to the spot.

This is not an argument against growth. It is an argument for knowing which of your growth commitments are reversible and which are not, and for spending the irreversible ones in jurisdictions whose four variables (energy cost, fiscal posture, regulatory neutrality, demographic trajectory) you have actually screened rather than defaulted into. [2]

There is a second face to this pressure, and it is the one almost no growing-firm owner is warned about. The firm that is doing well is the "belle of the ball." States and cities run incentive programs aimed squarely at the firm at this exact size: past proof of concept, adding headcount, visible enough to land in an economic development pipeline. The package arrives as a courtship. Tax abatement, training grants, a discounted site, a ribbon-cutting with the governor. The growing firm has never been courted before, and the attention is easy to mistake for validation.

It is not validation. It is a structural trap with a bow on it. The package is bait that can anchor irreversible cost into a jurisdiction the four-variable screen would never have chosen on its own. Plenty of owners see the trap clearly and bite anyway, because the timing is engineered against them: the belle phase arrives at the moment of maximum capital-allocation velocity and minimum management depth, when the firm is committing money fastest and has the least bandwidth to read the full term behind the headline.

This series has been blunt about incentives elsewhere: they are table stakes, a floor and not a ceiling, and the advisors who run site selection for a living will tell you, off the record, that packages rarely decide where a serious firm lands. What decides it is whether the project still works after the announcement. A firm that lets the incentive drive the location has optimized for the up-front check and inherited the trajectory. [3]

The discipline is to read the incentive as what it actually is: a dated, reversible instrument with a term, not a reason to move. The obligation period and the clawback schedule are the real contract. A Builder treats location the way it treats every other commitment in this environment, as a portfolio of dated bets that can be unwound when the term runs, rather than as a permanent home chosen for a one-time payment.

Boeing is the textbook case run across its full cycle. In 2001 the company moved its headquarters to Chicago on an incentive package worth more than sixty million dollars across about twenty years. [4] It held the location through the term. When the term had run, it moved the headquarters to Arlington, Virginia, in 2022, close to the federal customers and regulators its business depended on. A sitting Chicago alderman read the mechanic out loud at the time, warning that the moment the new jurisdiction's terms expired the company would leverage that expiration for the next package. [4] The incentive was never the anchor. It was an instrument with a clock on it, and Boeing treated it that way.

Then came the part that matters most for a Builder. In early 2026, Boeing moved its defense headquarters back to St. Louis, where that division had been based for two decades before it left for Washington proximity in 2017. The company's stated reason was to put its leadership back beside the roughly eighteen thousand people who actually design and build its defense aircraft, alongside a multibillion-dollar investment in the production facilities themselves. [5] Read against this series, the round trip is a Builder-versus-Diplomat arc inside one company. The move toward Washington was a move toward the Diplomat pole, proximity to appropriators and regulators and away from the floor where the work happens. The move back to St. Louis was a correction toward the Builder pole, leadership reunited with production.

Here is where the growing firm has to read the asymmetry honestly. A firm Boeing's size is anchored by eighteen thousand workers and a multibillion-dollar plant, which is exactly why it can afford to run the full loop in public and correct a location mistake years later. The thirty-person firm is the opposite. Its real advantage is agility: it is light enough to put its footprint where the work actually wants to be. That agility is the edge, and a predatory clawback term is precisely the instrument that converts the edge into an anchor. The danger for the small firm is not moving. The danger is signing away the optionality that was its advantage in the first place, in exchange for a check.

The scale-appropriate move is rarely a clean relocation, and it is rarely two full offices either, which only fractures the thin management a growing firm has. The sophisticated version separates the fiscal and legal domicile from the operational footprint. Anduril is the live case at scale: a California-headquartered defense manufacturer that did not flee its high-cost, high-regulation home state, but put its hyperscale production facility in Ohio, chosen on operational merits the company stated plainly were the decision (workforce depth near Wright-Patterson, runways for direct delivery, speed to production) rather than on the incentive that came with it. [6]

The growing firm runs the same separation at its own scale: register where the fiscal and regulatory posture is neutral, build where the four variables align, and keep the cash-flowing core where it already works. The point is not that incentives are worthless. The point is that the courtship is a pressure in its own right, and the foresight is reading the whole term rather than the headline number.

PRESSURE TWO: THE DRIFT TRAP

The relocation question does not stop at the cost line, and this is where Pressure One feeds directly into the one that follows. A growth-stage move chased for a package changes more than the tax bill. It changes who the firm can hire, what the local workforce expects, and the character the firm carries into the next stage.

A firm that lands in a new metro inherits that metro's labor norms and regulatory rhythm, and those reshape internal process from the outside whether or not the owner chose them: the expectations a new workforce brings, the compliance cadence the local regime enforces, the management layers a different talent market assumes. A firm that uproots itself toward a check, into a place that does not fit the work or the people who do it, can hollow out the very traits that made it worth growing.

Chasing the incentive is one of the quiet ways a Builder organization begins to drift: optimizing for the appearance of a good deal while the productive core erodes underneath. Boeing's own round trip says it plainly. Moving the defense leadership away from the factory floor was the drift. Moving it back was the correction. Most firms do not get the second move.

As a firm scales, it institutionalizes. It adds process, compliance functions, middle management, and the internal machinery that coordination at size requires. Some of that is necessary. But there is a threshold past which a firm stops being a Builder organization (one that creates, executes in a decentralized way, carries skin in the game, and iterates) and starts becoming the thing the Builders vs. Diplomats framework critiques: an institution that certifies, processes, and protects itself more than it creates. [7] The Small Business Owner piece in our Field Notes series names this as the small-fish-growing trap.

This is its full treatment, because it is the growing firm that actually lives it.

The trap is not a failure of discipline. It is the default outcome of unmanaged scale. Process accretes because each individual addition is locally reasonable: one more approval step, one more compliance hire, one more layer between the work and the decision. The markers are observable if the owner looks for them: vendor decisions that used to take a day now take a week of sign-offs, a compliance function whose main output is internal reporting rather than reduced risk, a layer of management whose primary product is coordination meetings. No single step is wrong. The cumulative drift is that the firm crosses from Builder to Diplomat without ever deciding to, and arrives there having lost the four traits that made it worth scaling in the first place.

There is a sharper way to see the drift. The same structural analysis that runs through this series describes, at the scale of whole institutions, a diplomatic class that consolidates its position rhetorically (through process, credential, and the machinery of control) while the productive base routes around it and keeps building. A firm runs the identical fork in miniature as it scales. Every new layer of internal machinery is either buying real coordination the work actually needs, or it is the firm consolidating rhetorically: adding the appearance of control while the part of the firm that creates value quietly looks for ways around its own process. When a firm's best people start routing around their own company to get work done, the drift has already happened. The owner is the only one positioned to see it, because the owner is the only one who can still choose otherwise at each threshold.

The growing firm is the only persona positioned to catch this in motion, because it is the only one still in motion. The mature firm has usually already drifted or already chosen not to. The graduate has nothing to drift yet. The owner mid-scale can still decide, at each threshold, whether the next layer of institutional machinery is buying real coordination or just buying the appearance of control. Growing without drifting is the central discipline of this stage. It is not a one-time decision but a mode: testing each new process layer against the four Builder traits as it is added, and refusing the ones that buy control rather than coordination, before they ossify into the firm's permanent shape. Almost nobody names it as a discipline at all.

PRESSURE THREE: THE AI LEG, AND WHY THE TIDE MATTERS

The earlier Field Notes did not have to carry this force. The macro Builders vs. Diplomats analysis was built on three pressures: fiscal extraction, demographic inevitability, and divergence in institutional competence. The recent graduate inherited those three. So did the mature owner. But there is now a fourth structural leg, and the growing firm is the persona most exposed to it.

The fourth leg is the cost, access, and capability of artificial intelligence, and the growing firm sits at its sharpest edge. The reason is slack. A mature firm with a deep book of clients has runway to absorb a bad AI bet or a price shock and keep operating off existing relationships while it adjusts. A graduate has nothing committed yet. The growing firm is allocating its growth capital right now, at scale, against a capability target that will not hold still, and it has the least cushion of any persona to absorb being wrong.

This is where the shape of the wave matters more than its arrival. The common picture of AI is a single step change: the wave hits, displaces, and settles into a new normal. The truer picture is a tide. The water goes out (a new model arrives, capability jumps, the old way looks obsolete), then it comes back in (substitution stalls, the compute crunch bites, prices spike, human judgment reasserts where the model could not actually replace it), then it goes out again with the next generation, then back in. Out, in, out, in. The firms that get hurt are the ones that built their growth on the assumption that the first wave was the last one.

For a growing firm that has wired its expansion onto rented frontier capability, every tide-out hits the unit economics mid-expansion, when there is the least room to absorb it. Compute capacity is rationed and repriced on the supply side, and access to frontier models can be conditioned or severed on the policy side. [8] Neither of those is a forecast. Both have already happened. A firm scaling on top of a capability it does not control has built its growth on someone else's tide chart.

The hedge is structural, not tactical, and it has two halves. The first is a baseline AI capability that runs on owned ground, with the frontier called only when a specific job justifies the exposure. Open-weight mid-tier models now sit within striking range of the frontier on knowledge work and orchestration (the analytical, repeatable core of what a firm runs on), at a fraction of the operating cost, and the gap there is measured in months rather than generations. That holds for the reasoning-and-coordination layer, not for real-time physical line control, where the gap is wider and the frontier still matters. [9] A baseline that good is enough to keep operating through a tide-out. But a baseline is not the whole floor, and a growing firm that mistakes the server for the floor has only bought half of one.

The second half is the position the intelligence has to route through, and for a growing firm that half is being built, not inherited. The mature operator owns a position decades deep: years of process-tolerance data, a settled compliance posture, relationships that took a long time to earn. The growing firm does not have that yet. It is accumulating it right now, with every client it signs, every process it documents, every piece of the compliance architecture it stands up as it scales. That is the distinction of this persona.

The owned position is in formation, not in the vault. Which means the foresight is not protecting a chokepoint that already exists and refusing to let it decay. It is recognizing, mid-motion, that the proprietary process data, the client relationships, and the compliance posture the firm is building right now are the position a model will have to route through later, and building them deliberately as an owned asset rather than letting them accrete by accident. A benchmark can tell the owner whether the rails are good enough; only the owner's judgment can tell whether the capability actually fits the work the firm does, and that judgment is itself part of the position.

The floor is sized to the firm. The global operator builds one version, the solo creative builds another, and the growing firm builds the one that fits a firm mid-expansion: enough owned baseline to hold through a tide-out, and a deliberately built owned position rather than an accidental one. The firm that owns its floor keeps its footing when the water withdraws. The firm renting at frontier prices rides each wave at full cost. The firm with no floor at all gets pulled out with the water. The line between them is not how much the owner can spend. It is whether the owner saw the tide for what it is and built for the whole cycle rather than the first wave. [10]

FIVE QUESTIONS WORTH ANSWERING HONESTLY

1. Which of the commitments you are making this year to grow are reversible, and which are you anchoring into a jurisdiction whose fiscal trajectory you have not actually screened? If a state or city is courting you with a package, have you read the obligation and clawback term as the real contract, or are you reading the headline number?
   
   
2. At the last three thresholds where you added process, compliance, or a management layer, were you buying real coordination or buying the appearance of control?
   
   
3. If you mapped your firm against the four Builder traits today versus two years ago, which traits are stronger and which have quietly eroded as you scaled?
   
   
4. How much of your firm's growth runs on top of an AI capability you rent rather than control, and what happens to your unit economics the next time access is rationed or repriced? And separately: the process data, client relationships, and compliance posture you are building as you scale, are you building them deliberately as an owned position, or letting them accrete by accident?
   
   
5. If the next AI tide goes out the way the last one did, does your firm hold its footing on an owned floor, or does it get pulled out with the water?

You are not holding still. That is the position, and the exposure. The structures are real. The decision is yours. Prepare accordingly.

NOTE ON PROBABILITY WEIGHTS

The current SelectGlobal scenario lock places sustained regional fracture and geographic divergence as the most likely path for the United States through 2030, with a clean institutional transition the second most likely. Two holding-pattern scenarios trail. The directional trend across the spring has been fracture rising and the holding patterns compressing. The full scenario lattice and quarter-by-quarter weight tracking are maintained in the SelectGlobal Atlas series and reviewed on a rolling trigger basis. The point is not the specific percentages. The point is the uncertainty window: decisions made now must survive a resolution period that may not close cleanly for years. Strong convictions, loosely held. [11]

ENDNOTES

[1] Builders vs. Diplomats: Part 2 - Defining the Builder Class. SelectGlobal LLC. April 2026. https://www.selectglobal.net/select-global-llc-blog/builders-vs-diplomats-part-2-defining-the-builder-class The Productive Middle and the four-trait Builder test. The growing firm is the live case of a Builder organization at the threshold where scale begins to test the four traits.

[2] Builders vs. Diplomats: Part 5 - Decisions Make the World. SelectGlobal LLC. May 2026. https://www.selectglobal.net/select-global-llc-blog/builders-vs-diplomats-part-5-decisions-make-the-world The four-variable geographic screen: energy cost, fiscal posture, regulatory neutrality, demographic trajectory.

[3] Incentives as table stakes rather than decision drivers, and the fulfillment gap (the project must work after the announcement): "Three Mistakes That Will Define the Next Industrial Cycle," SelectGlobal LLC, April 2026 (Mistake Two). https://www.selectglobal.net/select-global-llc-blog/three-mistakes-that-will-define-the-next-industrial-cycle

The dual-footprint hedge at corporate scale (keep the cash-flowing base, capture the available incentive, route strategic capital where the four variables align) is developed in the companion piece, Field Notes from the Transition: The Small Business Owner, SelectGlobal LLC, May 2026 (Path 1, the AbbVie dual announcement). https://www.selectglobal.net/select-global-llc-blog/builders-vs-diplomats-fnft-small-business

[4] Boeing 2001 Chicago relocation and 2022 Arlington move. Chicago, Cook County, and Illinois awarded Boeing more than sixty million dollars in tax and other incentives over roughly twenty years to relocate its headquarters from Seattle to Chicago in 2001; the package had run its term by the time of the 2022 move to Arlington, Virginia. Sources: CNBC, "Boeing to move headquarters from Chicago to Virginia," May 5, 2022; Chicago Sun-Times, May 5, 2022 (Ald. Brendan Reilly characterizing the move as leveraging the incentive expiration and warning the next jurisdiction to expect the same). Public accounts of the exact expiration year conflict (the Illinois governor's office cited 2017; Ald. Reilly cited end of 2021 for the tax-increment-financing agreement). The piece states only that the term had run, which all sources support; it does not assert a specific expiration date.

[5] Boeing defense headquarters return to St. Louis, announced February 18, 2026. Boeing named its St. Louis-area (Berkeley, Missouri) campus the headquarters of Boeing Defense, Space and Security, returning the division to Missouri after nearly a decade in Arlington, Virginia; the division had been headquartered in greater St. Louis from 1997 to 2017. Boeing's stated rationale was leadership proximity to the more than 18,000 regional employees who design and produce its defense aircraft, alongside a continuing multiyear, multibillion-dollar investment in advanced combat-aircraft production facilities in St. Louis. Sources: Boeing newsroom, "Boeing Defense, Space and Security headquarters returns to St. Louis," February 18, 2026; Defense One, KSDK, February 18-19, 2026. The piece uses Boeing's own workforce-proximity rationale and the structural factory-floor reading; it does not adopt the news-cycle framing tying the move to federal incentives or a change in Virginia's governorship.

[6] Anduril Industries Arsenal-1 facility, Pickaway County, Ohio, announced January 16, 2025. The California-headquartered (Costa Mesa) autonomous-systems and weapons manufacturer selected Columbus-area Ohio for its first hyperscale production facility (roughly five million square feet, nearly one billion dollars in investment, more than 4,000 jobs at full scale), while retaining its California headquarters. Site-selection rationale stated by the company emphasized operational merits (workforce depth near Wright-Patterson Air Force Base, Rickenbacker International Airport runways for direct delivery, an existing building enabling speed to production); the chief strategy officer stated the decision was made "on the merits of the state of Ohio," with state incentives present but not the driver. Sources: Anduril newsroom, January 16, 2025; Defense News and Breaking Defense, January 2025; Business Facilities, 2025. Establishes the domicile-versus-footprint separation: production placed where the operational variables align without fleeing the high-cost home jurisdiction, and not chosen on the incentive.

[7] Builders vs. Diplomats: Part 2, Sections II through VI; small-fish-growing trap named in Field Notes from the Transition: The Small Business Owner, SelectGlobal LLC, May 2026 (Path 2 counterfactual and endnote 6). https://www.selectglobal.net/select-global-llc-blog/builders-vs-diplomats-fnft-small-business This piece is the canonical treatment of the drift trap that the Small Business Owner piece named in passing. The four Builder traits: creation over credentialing, decentralized execution, skin-in-the-game accountability, experimental iteration. All four must be present simultaneously for institutional Builder status.

[8] AI compute scarcity as supply physics: "We're Using So Much AI That Computing Firepower Is Running Out," Wall Street Journal, April 14, 2026 (frontier providers rationing usage during peak hours rather than raising prices as demand outpaced infrastructure; reported token-usage caps during peak load at a leading lab). Frontier access as conditionable on the policy side: in February 2026, reporting indicated the administration was exploring whether Defense Production Act Title I authority could be used to compel a frontier lab to prioritize defense contracts, set against a January Department of War (DoW) directive requiring all DoW AI contracts to incorporate standard "any lawful use" language within 180 days, in collision with the lab's contractual guardrails. Sources: Wall Street Journal, April 14, 2026; Lawfare and contemporaneous reporting, February 2026. Both the supply-side rationing and the policy-side conditioning had already occurred at the time of writing; neither is a forecast.

[9] Open-weight mid-tier capability state: capable open-weight models (roughly 20B-70B parameter class) now sit within striking range of frontier proprietary systems on knowledge-work and orchestration tasks at materially lower inference cost, with the gap on that work measured in months rather than generations. The claim is scoped to the analytical and repeatable core, not to real-time physical line control, where the frontier gap is wider. Framing is deliberately qualitative: public leaderboards move, and headline figures go stale the moment a new model ships. (The qualitative claim is the publish-safe form; no hard month-count is asserted, and no secondary aggregator is cited. If a future revision wants a specific figure, verify against contamination-resistant primary leaderboards at that time.)

[10] The sovereign-floor and tidal-wave framing is developed at structural altitude in the SelectGlobal Atlas Feature "The Tide Goes Out: Why the AI Market Splits by Foresight, Not Wealth," SelectGlobal LLC, June 2026, live at https://www.selectglobal.net/select-global-llc-blog/the-tide-goes-out. This Field Note applies that framework at firm scale, where the hedge protects unit economics against a cost shock. Companion: Field Notes from the Transition: The Creative, SelectGlobal LLC, forthcoming, which applies the same hedge logic to individual creative leverage, where the hedge protects a captured upside.

[11] SelectGlobal scenario modeling, current lock. Scenario set: clean institutional transition, regional fracture, and two holding-pattern paths (procedural extension; muddle-through bifurcation). Weights are tracked on a rolling trigger basis and maintained in the SelectGlobal Atlas series. Directional read at this writing: fracture the most likely path, clean transition second. Public weight set as published in the live Atlas; behind-the-meter scenario modeling carries a separate working lock. Strong convictions, loosely held.