 Hair doesn't know how to grow (or much of anything else)
Hair itself does not grow. It is produced within one’s hair follicles. The follicles don’t “sense” when hair has reached a certain length, and stop growing. What’s actually responsible for our hair not growing to tremendous lengths is that hair becomes brittle, and breaks off near its ends. When one’s hair reaches a length where it’s breaking off at the same rate as the follicles are producing it, the length stays the same (and usually appears frizzy, which many people find unattractive).
If one take measures to prevent hair end breakage, such as applying moisturizing hair conditioner, one’s hair will increase in length. If one does things that increase this breakage, such as exposing one’s hair to swimming pool chlorine, or grooming it roughly, it will decrease in length. Long, heavy hair also tugs more at the interface (usually called the “matrix”) between one’s follicles and the newly formed hair, which not only slows the rate at which the follicles create new hair, but can permanently damage or destroy follicles. Women and young people usually have healthier follicles and stronger hair, so are able to grow their hair longer than men and older people. Genetic factors also contribute to the maximum length one’s hair can reach.
When one’s hair is cut very short, its rate of growth is initially high, until it approaches its maximum length. Neither the hair nor the follicles “know” to do this – each just follows the mechanics of its respective cells.  | 
