The Technium

Corporate Long-term-ism


[Translations: Japanese]

IBM ran a four-full-page ad in the New York Times and Wall Street Journal recently on their 100th birthday. The ad is a remarkable assessment of the virtues of long-term-ism. A few excerpts (bold is mine):

Nearly all the companies our grandparents admired have disappeared. Of the top 25 industrial corporations in the United States in 1900, only two remained on that list at the start of the 1960s. And of the top 25 companies on the Fortune 500 in 1961, only six remain there today….

A century of corporate life has taught us this truth: To make an enduring impact over the long term, you have to manage for the long term. This seems about the simplest lesson we could share, yet putting it into practice is a lifetime’s work. Long-term thinking affects almost every aspect of how you lead. And it turns out to be anything but safe, steady and conservative. Its rewards are powerful, but to achieve them, long-term thinking compels you to confront some fundamental questions: How does an organization outlive its founder?

How do leaders manage for the long term in a world driven by short-term thinking? Fifty years ago, the average share owner held their investment in most companies for about eight years; today that’s down to six months. Markets move at an ever-faster pace, increasingly driven by speculators. In the past 15 years, CEO turnover has increased by approximately 50%. Short-termism is winning. Or is it?

Moving to the future can also include reinventing what you have–as we repeatedly have done with our mainframe business. Despite repeated pronouncements of its imminent demise, we’ve increased installed mainframe capacity 1,000% over the past 13 years.

IBM

Long-termism is officially the job of government. Ideally government represents the interests of future generations to this current generation. A government is suppose to invest in projects whose payoff will come later and continue to pay off for generations — like roads, waterworks, libraries, and education. The government is also concerned with other issues as well — like equality and security — but those could be addressed by other agents if they had to be. We have longed assume that corporations were incapable of taking the long view, and that only government cared about generational tasks.

But something weird has happened. There is a strong anti-government attitude at loose in the world (not just in the US) that believes that government can only screw things up. And at the same time, a belief that corporations are the prime engines of all that is socially good.

The philosophy in the ad is just a corporate advertisement, which may be total BS hype, but I find it significant that what IBM is saying is not being said by the US government. We just closed down one of the few long-term projects the US had going — the space shuttle — and the US government seems to be searching for any other long-term grand project they can find in order to defund it.

If the government is not acting responsibly over the long-term I don’t think corporate long-term-ism is sustainable. But I hope that if long-term-ism could become more popular, more accepted, seen as more significant among business, that it might send a message to those in government who only listen to business. As IBM said, “To make an enduring impact over the long term, you have to manage for the long term.”




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