How we change what others think, feel, believe and do
The ChangingMinds Blog!
Short-term thinking, long-term thinking and economic impact
One thing that distinguishes humans from other species is our ability to think about the more distant future. We have developed special pre-frontal lobes in our brains that help us with this, yet the current financial crises seem to indicate these parts of the brain may be under-used.
Lehman Brothers gave away billions in bonuses only last Christmas and yet the 150-year-old company is now in tatters. It founders must be spinning in their graves. In the UK, Lloyds TSB bank, so recently accused of being boring, has come to the rescue of ailing HBOS.
There's a lot to do with thinking and decision-making here. And greed, of course. When compensation is set up to reward short-term decisions then that is all you will get, which seems pretty much what Lehman's and other institutions seem to have done. Business is about the sustained creation of value, yet the financial markets seem regularly to lose sight of this, resulting in company valuations that have little correlation with future earnings.
There's also a longer-term impact on global economics. An imbalanced system leads to global instability and consequent suffering.
One of the key goals of governing boards and business leaders is to take the long view in steering their organisations towards sustainable and sustained survival and growth. This includes managing the internal motivation systems in alignment with this objectives. It also should include ensuring the company motivation systems provide a sustained balance of direction between short- and long-term success.
I agree and I would add that it also would help to look at the big picture
once in a while. When we are focused only on how something impacts us (and only
us) and only in the immediate future we are likely to fail at whatever business
we are in. Unfortunately, if you look at our media and popular culture, it is
all about short snippets of information thrown at us at high speed. Our
consciousness just reflects the mass consciousness around us.
The only way to keep global economics stability is to act wisely.
Sometimes government is reckless on making decisions without considering its
effect. If you?re among the so-called intellectuals who thought that U.S.
Secretary Henry Paulson plans to buy up all of those devalued mortgages that are
flapping in the wind by using the second half of the recent $700 billion
financial rescue program, think again. Instead, that mortgage juice is going to
be spent on consumer credit. Payday cash loans should be considered in this
group and should be eligible to receive help as well, but that\'s not likely.
Paulson says that he wants the American people to have easier access to such
traditional forms of consumer credit as car loans, student loans, and credit
cards. These forms of consumer credit have become more costly because of
"illiquidity? in the consumer credit division. ?This is creating a heavy burden
on the American people and reducing the number of jobs in our economy,? he says,
admitting that his previous version of the rescue plan was a mistake. Of course,
all of us are hoping that Paulson will probably save us the ?heavy burden? many
of us are already under. Imaging if America had a President who was willing to
admit his mistakes. Maybe America would be prepared to pick up any pieces and
move forward. Even better, maybe certain problems could have been avoided in the
first place. Now, I am quite impress that government officials are making a wise
move by planning to use some of the bailout money to restore confidence in
private investors to bring them back to the market. With a strengthened economy
and with investors in the world market, hopefully it will be followed by more
stable jobs. With a more stable job market, less people will depend upon payday
cash when a slight fumble occurs. Although the industry will remain to
accommodate our needs during unexpected events, it is not designed for long-term
And the big