Short-Term Thinking Is Poisoning American Business

Short-Term Thinking Is Poisoning American Business

December 21, 2019

In this article, the New York Times calls out the disastrous long-term consequences of a growing short-term orientation among American public companies. They cite examples like Boeing’s corner-cutting on the Max 737, Wells Fargo’s fraudulent customer accounts and Johnson & Johnson’s opioid scandal. The cause, they posit, is a trend among investors – and in particular speculators. "It is the clarion call of speculators, who fully expect to get out before any of their own things can get broken." Institutional investors, too, it says, have an eye to "exit-seeking, anticipating to acquire, make a profit and sell within 5 to 10 years.

In 2019, the SEC began to address these issues and have put out a number of proposals. As long-term investors, we are heartened to see attention being paid to this growing problem. 

The article quotes Milton Friedman, an American economist and statistician best known for his strong belief in free-market capitalism, as once lamenting that business leaders are often 'incredibly shortsighted and muddle-headed in matters that are outside their businesses but affect the possible survival of business in general.” The Times and we believe Friedman was right. For businesses to survive, we must take the long-view.

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The statements and opinions are those of the author as of the date of this report. All information is historical and not indicative of future results and subject to change.