Short Termism here for the long term?

Although it has been 9 years since the GFC, and despite efforts by world leaders, most of the world's economies are still to make any meaningful progress to restoring stability, wealth and employment.

In that time we have also had dramatic technological change resulting in the speed at which we do business and communicate increasing dramatically.

So what do these 2 things have in common and what do they mean to society?

On any analysis, the main cause of the GFC was the focus on short term gain and the disregard for long term solutions. When the borrowers whose debt was securitised and sold to investors around the world started to have difficulties in meeting their mortgage repayments, rather than working through solutions with the borrowers to enable them to work through their difficulties and still provide for some payments to be made to investors, the relevant managers/banks charged with the management of these loans decided that they would be best served by foreclosing under the mortgages. No consideration seems to have been given to the consequences of this, being the potential (and as it turned out actual) dramatic reduction in the value of the property the subject of their security flowing from the avalanche of distressed sales that followed.

Like a house of cards, property values fell and everyone was a loser. The borrowers lost their homes, the investors made losses on the mortgage backed securities, credit dried up and the world fell into economic darkness.

Had a long term solution been considered and implemented then we would not have been in the mess we found ourselves (and still find ourselves) in.

Financial markets focus on short term gains placing pressure on Boards and management to constantly better previous year's results. This short term focus drives behaviours which often leads to bad decisions such as imprudent acquisitions or shifts in business strategy and increasing unemployment (as the apparent wisdom of management is often to cut costs to improve profit rather than implement a strategy try to increase sales).

You would have thought that on reflection, given the outcome of the GFC, decision makers should have realised that the focus on the short term is not the ideal way to approach things and that long term strategies are the better way to build/grow a business in a sustainable manner but, alas, this does not seem to be the case. The extent of the losses made as a result of the GFC seems to have, if anything, increased the focus on short term gains as Boards and management try to recoup their losses as quickly as possible.

This approach seems to have become imbedded in the way businesses and society operates.

I recently attended an excellent function at which the Chairmen of two of Australia's largest banks each indicated their disappointment at the short term focus of politicians and business. In their view taking a long term view is required for true leaders to achieve the best outcomes for their business and society.

The gains in technology have significantly added to the short term focus of society. Whereas previously young people may have accepted that to get ahead required learning, effort and time, the ability to find information on anything merely by searching on Google means that there is no need to spend time researching a subject or reading a book. The marvels of the new technology allow people to communicate with anyone, anywhere pretty much in the blink of an eye or the press of a button.

The instant gratification or communication that is now available, and has been universally adopted by recent generations, means that consideration of the medium to long term is not really in the mindset of people generally.

Given the above, it seems that Short Termism is here to stay but is this really the answer to the long term problems we now face (which, in my view, arose because of short termism)? As Einstein is reputed to have said, if you keep doing the same thing but expect to get a different result, this is a sign of idiocy

[NOTE: The above are the personal views of the writer and are not necessarily the views of any organisation with which the writer is associated.]

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