MT Learning Curve: Long-termism

Businesses have learned their lesson since the recession: we're all in it for the long run now...

by MT Staff

What is it?
One sure way to get heads nodding around the conference table is to state your commitment to long-termism - the idea that business should not get too caught up in the here and now, and instead think profound thoughts about the far-off future. Long-termism means striving perhaps a bit less hard to meet next month's sales target and redeploying that energy towards bigger, more ambitious goals. Long-termism also involves thinking about the sustainability of your business in every sense: not just in terms of the environment but also revenue streams, product lines, IP and so on.

Where did it come from?
Farmers have always known about the long term. Planting (and rotating) crops that will be harvested years from now is what successful agriculture has always been about. In the modern industrial age, new businesses came and went, but those that lasted - GE, Ford, IBM - were committed to what analysts might now call 'long-term value creation', and which the rest of us would call 'staying in business and, with any luck, growing'. As shareholders became less long-termist and trading grew more frenetic, many businesses have understandably struggled to maintain such a long-term outlook.

Where is it going?
The pessimists will tell you the game is up for long termism. Shareholders don't care any more. They are not 'owners' in any meaningful sense. They want strong quarterly numbers, healthy dividends and a rising share price. Others argue that the tide is turning. More and more CEOs and investors (especially insurance companies) are waking up to the need for long-term sustainability and performance. The future is both mean and green. Time will tell (that's the point, really). But then, as Keynes helpfully pointed out, in the long run we are all dead.

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