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The ChangingMinds Blog!
ChangingMinds Blog! > Blog Archive > 24-Sep-08
Wednesday 24-September-08
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.
Your comments
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.
-- Sherry
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