We live in a world driven by short term goals and rewards, at the expense of future generations. Do we really want to continue encouraging bad management practices and behaviors?
Day to day variations vs. yield or patrimonial perspective
The fact that capital gain has taken
predominance over yield and long term revenue has affected mentalities
and changed the relationship between the stockholder and the
corporation in quite a cynical way. With a focus on next quarter's bottom line and the share value tomorrow, who sees the overall wealth creation over 5 years? Who is the guardian of a company's perspectives, reputation, liability and potential profits and wealth at say, 10, 20, 50, 100 years?
Short term money in emerging sectors
Ages ago, I learned that long term investments shouldn't be financed by
short term money. Huge capital is available in western countries waiting to be
invested: short term/volatile capital rushes to finance “hit hot” markets
-i.e. most of the time growing markets that require long term
investments to consolidate. Of course, everyone wants a share of the
same cake, that’s how bubbles build up, making these markets riskier
than they should be -see Businessweek Too Much Money-.
At the first blip, the rush is to pull back and the whole thing
collapses, throwing the baby out with the bath water. I saw this first
hand in South-East Asia in 1997, with all its implications on local people's
lives. When the IMF stepped in, conditioning its loans to a total and
immediate deregulation of what was locally perceived as a social aid -i.e. subsidies on household energy,
you got riots and unrest... Joseph Stieglitz explained this very well.
Then came the internet... a perfect opportunity to place the cash divested from Asia...
No more investments in infrastructures
The maximization of short term profit is detrimental to long
term investment and infrastructure: rare are those who invest in the US
railroad or electrical distribution network, ROI is too far away, as a
result, the power grid is in a terrible condition -and probably also a
cause of energy waste- and the prospects of a Chicago New-York high
speed train connection in 3hrs is not for tomorrow. What about the internet, could it have been created by the private sector today? Who will finance the infrastructures needed for its growth tomorrow.
Dilapidating assets and increasing liability
Last, and to put this issue in a financial perspective: our generation
happily jeopardizes at no cost the assets of future generations. No "provisions" whatsoever
are made today for the risk and cost our children will
incur tomorrow -health, environment, natural resources...-. In addition our states live off “leveraged” deficits that future generations
will have to finance…
Win/win has to be put into perspective, it's not just here and now...
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