Responding to my comment in the Hillary Clinton capital gains tax post that "I'm generally sympathetic to the idea that there's too much short-term focus in American business," a FutureOfCapitalism reader-participant-watchdog-community member-content co-creator wrote:
I am not sure how you how you know this or measure it. But a look at NFLX, AMZN, GOOG, and FB--just to name a few--would suggest that these companies think very long term and perhaps have an investment horizon that exceeds that of their investors!
Even INTC, which is facing very sharp changes in its markets, is very thoughtful about how it invests. It costs more than $1 billion to build a fab, a decision they do not make lightly.
I believe managers of these and quite a few other companies are incredibly good at what they do. I am not sure corporate management has ever been better. These managers are very good at considering the trade-offs between short, medium, and long-term opportunities despite a more rapid rate of change--I would assert--than any prior era.
There are a lot of really bad managers too. Maybe there are more of them than every before. I do believe that investors (meaning professional investors) know who the good and bad managers are.
It is OK for companies to fail and go away. Did Kodak do anything wrong? I would say they probably should not have even tried to diversify away from film--it turned out not to make a difference. Companies are born and companies die. The market loathes managers who keep their companies on life support just because it is a good paycheck. Those companies should be sold or liquidated.
(For some reason, progressives cannot handle the creative destruction that emerges from, pardon me, progress. It is terrible for the owner of NYC Taxi medallion if his or her government granted cartel is worth less in the age of Uber and Lyft. It is probably bad for the average taxi driver too. But for many of them, they will be able to buy their own car and go into business for themselves. So who knows? We know, definitively, the consumer is better off with more and better service.)
I believe it is time to retire the line about short-term focus in American business.
I replied: "I think the argument is that Google and Amazon are exceptions (in part because they have founder-owners with large stakes) and that the more representative companies are places like Lehman Brothers, or Bear Stearns, or HP..."
I am disappointed that I gave you examples (save NFLX and INTC) that are controlled by the CEO/owner. Companies like CHRW, PGR, JBHT, SAVE and so many others are well run and not controlled by the CEO.
I agree that there were profound incentive issues at many of the banks and investment banks. Please don't leave out Citi, perhaps the worst corporate culture anywhere.
HP is worthy of a book. I would say that company was doomed more by its corporate culture--one of entitlement--than by its leadership. Carly Fiorina was the best thing that happened to that company despite being unceremoniously kicked out.
Maybe the rewards in capitalism of a long-term focus are already sufficient (ask Warren Buffett, for example) that the government doesn't need to tilt the scale any further. Comments are welcome from any other community members who have thoughts on this one.