Furthest Right

Short-Term Versus Long-Term Goals

From a post about running tobacco companies a surprising insight:

Mac Baren is a family-owned business, rather than one with shareholders anticipating quarterly returns. “When you have to perform every quarter,” says Per, “sometimes the decisions you make are not the best for the future, because you need to show immediate profits. We don’t have that pressure. So if we have an idea we think will be good for our future, then we do it without thinking about what will happen to this quarter.”

Short-term goals emphasize short-term thinking, namely how to prop up profits right now, which is the enemy of quality. Quality rewards a long slow set-up so that you can produce something which rewards its use, where short-term thinking emphasizes making something cheaper, more disposable, and higher margin, meaning making short-cuts so that costs drop so that profits are higher on these cheaper products.

Most of the evils attributed to corporations arise from shareholders wanting higher value right now and careerists who want to boost their numbers, then bail out for gentler waters. To the shareholder or careerist, the company simply exists to return the most value in the short term.

Shareholders may be the worst because they intend from the beginning not to hold the asset, but to keep it until its value raises, then sell it. This rewards using the company to blast short-term profits, then selling before the crash, during which point they will have purchased the stock of competitors.

Time and again, when we look for evils, despite almost everyone blaming “corporations” or “politicians,” the answer is that the evil lies within us and our inability to see quality, duration, and durability as concerns, instead favoring cash in our grubby little talking monkey paws.

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