The Perils of Short-Termism — and what to do about it
My company, SmartBooks Online started as a ‘scale and exit’ play. We saw an opportunity consolidate and corporatise the bookkeeping profession. In our worldview, it’s a cottage industry ripe for consolidation. Highly fragmented, largely unregulated and inconsistent outcomes amongst service providers.
In addition to this, we were fed up with the disconnect between the accountant, bookkeeper and business owner.
We decided it was a problem worth solving.
Our initial goal was to scale it and prime it for acquisition by a “Big-4”. We make bank from our 5-year investment horizon then move onto the next thing.
It was an opportunity to utilise my corporate finance experience on my own business, for my own benefit.
The great irony of this narrative, is that I don’t particularly enjoy accounting.
This seems perplexing considering:
i) I am an accountant
ii) I founded a business that does exactly that.
Whatever happened to following your passion?
Don’t get me wrong, I’m a good Accountant (as least my mum tells me). I’ve over done 10,000 hours.
Yet, there’s an overwhelming expectation or assumption that if you’re good at something (i.e you have aptitude for it) you must enjoy it. (i.e you have a passion for your aptitude).
This is a flawed assumption. We can be great at things we don’t like and can love things that we completely suck at.
For example, I also love playing the drums. Am I good at it?
Well, ask my neighbours — I’m sure they’ll give you their blunt opinion.
After leaving my career to scale this company, my lack of enthusiasm reflected on the business performance.
How was I supposed to sell a product that I wasn’t passionate about?
After 8 months of battling with this internal dialogue, we had a revelation. You see, we thought we were selling bookkeeping services. What we are actually selling is financial literacy.
We realised the lack of basic financial literacy amongst entrepreneurs is limiting their potential to unlock value to society.
By reframing the question “What is it for?” our narrative and product pivoted — and we formed our space. This reframing helped me overcome a personal struggle. As a result, our business performance improved 10x in a matter of months.
Reflecting on our quick ‘scale and exit’ strategy, early in our venture, I realise we fell into a fatal trap.
The trap of short-termism.
Short-termism
‘Short-termism’ (noun) refers to an excessive focus on short-term results, at the expense the long-term interests.
Shorter-termism is everywhere.
You see it in politics: Politicians make decisions based on short political cycles, with one eye looking around the corner to the next election.
You see it in business: The self-proclaimed ‘thought leaders’ and ‘futurists’ that spam your Facebook and Twitter newsfeed selling self-help guides and get quick rich schemes.
You see it in society: Millennials, generalised to be the epitome of short-termism. We demand gratification now and worry about the cost later. It’s no wonder ‘buy now, pay later’ companies like AfterPay are exploding in popularity.
The problems with short-termism
We live in a world of short term thinking and it is damaging us. Many would say it is destroying us. Yet, it is a habit that persists.
Short-termism incentivises us to take shortcuts. We develop ‘hacks’ and make decisions to produce short term results without consideration of long-term consequences. It can cause us to focus on the wrong things.
Short-termism also creates unnecessary waste. Does your family home still have that working kitchen blender, purchased in the 80’s? If you mother is anything like mine, she’s not shy to remind us of how well things were built back in the ‘old days’.
Fast forward to 2017, it’s rare to find products that are built to last longer than 12 months.
Let’s not even start the climate change discussion.
The catalyst to short-termism
Unfortunately, it seems that short-termism is engrained in the human genome. From our hunter gathering Homo Sapien ancestors, some 1.8M years ago, the human predisposition was survival. When we perceive a threat or a quick reward, we act quickly to take it. For example, when our ancestors came across a fig tree bearing fat juicy fruits, they would be scoffed down before the baboons could get to them.
In the digital age, user experience and product design experts exploit this human foible of instant gratification and survival predisposition…The Lizard Brain, as described by Seth Godin.
Notifications in the form of “likes” and “hearts” send sweet shots of dopamine to our prefrontal cortex, heightening our ‘self-worth’ and social status. We get the same kick from hitting ‘buy now’ buttons on E-commerce websites.
It are these ‘short term pleasures’ that can distract us from our work, and take us off course to our long term goals — the things that really make us happy.
The solution to short-termism
One could say the obvious remedy to short-termism is long term thinking. But what does that look like day to day?
In my humble opinion, it starts with two things. Influence and Mindfulness.
Influence
We should celebrate people, organisations and leaders that epitomise long-term thinking.
In politics: Celebrate the success of long-term policies and transformational political leaders like Lee Kwan Yew.
In business: Rather than obsessing over startups celebrating ‘raising capital’ from investors (NB: I never quite understood this — no-one ever makes a song and dance when a bank loan is approved) we should recognise and celebrate ‘timeless companies’. That is, companies that have stood the test of time. Organisations like Nike, Berkshire Hathaway and Tata group. Jason Fried from Basecamp is an advocate for ‘the long term’ in enterprise, so much he launched a podcast called ‘the Distance’ — celebrating companies that have been in business for over 25 years.
Mindfulness
If long-term thinking is the opposite to short-term thinking, the radical shift from short-term thinking is being present. Practising mindfulness is a tactic that has benefits beyond anxiety and stress relief. It can help us guide actions through clear intention, rather than emotional whims or reactive patterns.
I am by no means great at this. It is a constant daily struggle to balance future focus and mindfulness. But being clear about my long-term goals and practising mindfulness has helped me build habits and routine around achieving them.
I’ve come to a stark conclusion, particularly over the last 12 months that my life’s work should not be, and will not be compromised for short-term results.
This does not mean we should be complacent. Rather, we should be persistent and consistent with our efforts to achieving our vision.
No shortcuts. No hacks.
Just do the work.
Balance that ambition and desire with patience and long-term thinking.
We’ll all be better off.
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