Is Calculating ROI Over 53 Years Possible and Fair?

Hi Everyone,

Today I've got an email with the title that catched my eye: "X software brings 612% ROI" The email detailed the impressive results of a study conducted by Forrester Consulting, which evaluated the total economic impact and ROI of a certain platform.

When I read more, I saw that this 612% impressive ROI is counted for 53 year period. I started to wonder. Is it possible and more even, fair to try to estimate ROI for such a long time ahead?

And while I guess we all do what we can to attract readers(I'm also trying to catch your attention Dear Reader) :) I felt a little bit tricked, like:

"-We brought 612% ROI!!"

"-In a 53 years period"

Problems with long-term ROI

Firstly, let's talk about feasibility. Calculating ROI over 53 years is certainly possible(or rather mathematically doable), but it comes with a host of challenges.

1. The time value of money is a crucial factor. Over long periods, the value of money changes due to inflation, interest rates, and shifts in purchasing power. I remember times when dollar to z?oty(polish currency) was less than 3 z?, or 4,5 z?, now it's 4 z?.
2. Gathering reliable financial data over five decades can prove to be an impossible task and it's usually predictions, which can or cannot come true.
3. The financial environment over such an extended period adds layers of complexity. Technological advancements, regulatory changes, and shifts in consumer behavior all impact long-term ROI calculations.

Fairness and Accuracy

Now, let's address the fairness and accuracy of these calculations.

1. Market conditions fluctuate due to economic cycles, recessions, booms, and disruptions. We all remember global financial crisises and shifts caused by them, also in technological areas.
2. Industries evolve. What is profitable today might become obsolete tomorrow. Predicting the impact of new technologies over 53 years is challenging. 20 years ago we all used Windows 2000 or Vista(ouch) and were impressed by Nokia phones.
3. Leadership changes, strategic pivots, and operational shifts affect business performance. Maintaining a consistent business strategy over such a long period is rare. Maybe it happens in Japanese family owned hundreds years old companies.
4. Geopolitical events, environmental changes, and societal shifts impact long-term ROI. I honestly believed the end of history proposed by Fukuyama is going to happen. Instead we see war after war, climate changes and big migration changes on the globe.

Understanding the Short-term Impact

Given the 53-year ROI of 612%, one might wonder about the possible ROI percentages through the first 3 or 5 years. While the exact figures can vary based on specific circumstances, achieving high short-term ROI percentages is plausible if the factors contributing to long-term success are consistent from the start.

For instance, the study mentioned significant savings and efficiency improvements, such as:

• 50% reduction in time to market for business products
• 75% savings in data loading time
• 75% reduction in IT support workload

These operational efficiencies can lead to substantial short-term returns, potentially making the first few years highly lucrative for investors and stakeholders.

Conclusion

While it is possible/doable to calculate ROI for 53 years, the fairness and accuracy of such calculations are questionable due to the numerous uncertainties and changing factors over such an extended period.

Penny for your thoughts! If you liked it give it a like, share, comment. This gives me power to write. :)