WHY LONG TERM IS HARD AND MOSTLY UNATTAINABLE BY THE MAJORITY
By Ubukombe Hallellua Pacifique CONTRIBUTOR (Opinions expressed by YOH contributors are their own.)
This is for every #entrepreneur and anyone else who desires to achieve success.
If you like it share it with your peers who’re like-minded (A client has paid me to post it publicly after I did sent him my analysis on Long term strategy of his company)
Most of you reading this have heard of the marshmallow test, the famous study where kids who had the willpower to forgo eatin one marshmallow right away in exchange for two marshmallows 10 minutes later went on to do better in life.
Guess what’s fascinating about this research?
The marshmallow test study is interpreted as proof that those who look ahead make better decisions than those who focus on the short run.
However most importantly part of the study is often overlooked.
You may wonder what is overlooked.
Kids who held out for the second marshmallow didn’t just sit there patiently. Have you met a kid before? They can’t do that.
They were able to wait 10 minutes because they distracted themselves. They sang a song, or played with their shoes, or told the researchers a story.
One kid hid under a desk. Another did jumping jacks.
The only reason they made it to the long run is because they effectively managed the short run, in this case by diverting their attention from something that was otherwise too tempting to resist.
I think you’ll see, is the key to long-term thinking.
Every great idea can be taken too far. Take the notion that investors should ignore the short run.
I argued with my friend last week that venture capital, like all successful forms of investing, is a long-term game.
For example if a company only has enough cash in the bank to cover six months of operations, the short term is absolutely imperative.
You have to watch monthly, weekly, even daily expenses like a hawk, questioning everything.
But value is ultimately created in the long run. That’s where scale takes off and compounding works its magic – over years and decades, not months and weeks.
I always tell my friends this: “In order to succeed you need to survive first of all.”
That’s how long term’s attained.
The key is recognizing that the long run is just a collection of short runs, and capturing long-term growth means managing the short run effectively enough to ensure you can stick around for a long time.
Great companies have run away for short run to ensure long term.
Agree?
In his early days as CEO of MICROSOFT, Bill Gates said: “I came up with this incredibly conservative approach that I wanted to have enough $$ in the bank to pay a year’s worth of payroll even if we didn’t get any payments coming in. I’ve been almost true to that the whole time.”
Microsoft could focus on the next 10 years not in spite of, but specifically because it managed its short-term finances so conservatively.
A recession or a huge mistake wouldn’t be a fatal blow, and wouldn’t require selling strategic assets just to stay alive.
Getting it?
GOOGLE and APPLE… are similar. They hold 100’s of billions of $ in cash that earn virtually no return.
But by doing so they’ve the flexibility & endurance to earn much higher long-term returns on other assets, without the risk of having to fire sell strategic assets in a pinch.
The only reason the long term works is because the short term is so protected.
There’s a graveyard of investors and companies who were fully invested in the honorable name of long-term thinking but learned the hard way that the-short-run attitude has its costs as well.
Economist Tyler Cowen recently wrote on Bloomberg an article entitled “Maybe Companies Aren’t Too Focused on the Short Term”
Find link below of his interesting article :
Something interesting he mentioned that caught my attention.
“Plenty of companies have made big mistakes from thinking too big and too long-term; for instance, a lot of mergers were based on notions of long-run synergies that never materialized. In reality, short-term improvements are often the best way to get to a good long-run plan.”
Long-term thinking is often viewed as what’s left over when you ignore the short term. But it’s not.
It’s what’s left over when you’ve nursed the short term so well that the rewards compound into something great – after a long time.
Let me know what you think of long term.
UBUKOMBE HALLELLUA PACIFIQUE is a Voracious Reader, Entrepreneur/Investor, Business Scientist, Writer, Renaissance Speaker & Student of Life. He can be contacted at the following email: [email protected]
Ubukombe hail from Kigali, Rwanda
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