There is a growing consensus that our economy has become hostage to short-term thinking, the demand of investors for immediate returns on their investments. The Harvard Business Review focused on this in this month’s feature: “Are Investors Bad For Business?”
“The financial sector’s influence on management has become so powerful that a recent survey of chief financial officers showed that 78% would ‘give up economic value’ and 55% would cancel a project with a positive net present value—that is, willingly harm their companies—to meet Wall Street’s targets and fulfill its desire for ‘smooth’ earnings.”
Several things are truly shocking about this. First of all, the reality of Wall Street’s coercive power to harm our productivity for short-term gains. That is not something easily acknowledged in our society. But almost equally shocking is the fact that so many CFOs own up to the irrationality of the system. And then, there is the fact that HBR would feature the problem.