The question, why are people trapped in short-term thinking, is a very good one to pay attention to as this article will be delving into understanding the cause and the effect of the act. Short-termism is giving priority to immediate profit, quickly executed projects and short-term results, over long term results and far-seeing action. According to Wikipedia, it is attributed to certain cognitive biases.
As a major concept or way of life of today, it is now embedded in our everyday lives because of the fast-paced nature of modern civilization. Hence, we expect everything to be simple and straightforward.
It has then metamorphosed into a kind of way of thinking which has, unfortunately, spawned a crisis of trust and a general fatigue in our organizations, our relationships, and our communities, not to mention our entire society. Quite a lot of things might have contributed to the formation of a fitting answer to the question, why are people trapped in short-term thinking?
Examples are the fast pace of modern life, the fast growth of technology, the popularity of the fast concept, and other ways to get things done quickly. So, as people’s lives become increasingly hectic, they tend to value efficiency and convenience more than ever before.
This has no doubt led to a preference for short and to-the-point communication as well as quick and easy methods for completing tasks and obtaining information.
Reason Why We Are Trapped in Short-Term Thinking
New technologies
This is possibly the number one reason for why people are trapped in short-term thinking. Technology has come to do a lot of things which man used to do for them. Hence, it shortens the thinking span of man and also reduces the exercise and tenacity of his physical energy as well as mental energy.
Market Volatility
The pressure to stay ahead of competitors compels businesses to show immediate results, encouraging a focus on short-term gains.
Corporate America short-termism often occurs due to pressure in financial markets. Thus, organizations are not prepared to grow and adapt to future changes in the economy which can make companies focused on long-termism rebound faster and have stable earnings. Hence, while the volatility of the market can cause companies to adopt short-termism, it can also lead them to doom.
Pressure
According to different studies, business leaders are under a lot of pressure from board members and investors to meet short-term quarterly goals. This pressure incentivizes business leaders to focus on short-term goals instead of long-term successes.
Increased Role of Institutional Investors
Shareholders and investors cause short-termism when they become overly focused on short-term profits and shareholder value. In recent years, some companies have opted to provide annual assessments to long-term investors.
Reduced Transaction Costs and Trading
Companies that provide quarterly earnings guidance to shareholders are susceptible to short-termism because they are trying to appease a board of directors with constant growth.
ROI/Profit
One of the primary triggers for short termism is the relentless pressure from shareholders for immediate returns on their investments. In a competitive market, stakeholders want to see swift ROI (Return On Investment), which often prompts companies to adopt short-term strategies.
What Are the Effects of the Short-Term Thinking on the Society?
Lack of Meaningful Connections
Short-term thinking leads to a meaningless society where there is no depth and critical thought, and we are not investing in what matters, such as relationships, community, and personal growth. When individuals are used to getting information in short, readily consumable formats, they lose the ability to interact with complicated concepts or think critically about significant topics, creating a sense of superficiality and alienation.
Those who prioritize speed and convenience miss out on the deeper relationships and experiences that come from engaging with others and the world. This can lead to a sense of isolation and a lack of meaningful connections, which can damage individuals and society.
Economic Growth
Short-termism is all about quick financial returns. Companies focused on long-termism enjoy revenue growth, higher earnings, and a higher level of economic profit. Short-termism companies grow at a slower rate than long-termism companies.
Lower Quality
In a bid to cut costs, a company may compromise product or service quality, negatively impacting its market position in the long run.
Communication
One of the most obvious manifestations of the “short-term thinking” culture is in the way people communicate with each other. Instead of long and detailed emails or phone calls, people now tend to send short messages or use emojis to express their thoughts and feelings. Social media platforms like Twitter and Instagram have also become more popular, as they allow users to share information in a concise and easily digestible format.
Sustainability Issue
Taking action against climate action now is likely going to cost significantly less than working on it in the future. Short-termism doesn’t incentivize immediate action on sustainability, which can make people and companies more vulnerable in the future. Sustainability actually leads to long-term economic benefits as it strengthens the brand’s reputation and infrastructure.
Struggling Mental Issues
In the same way, we often put short-term pleasures and instant gratification ahead of long-term goals and a deeper sense of purpose in our personal lives. People are more concerned with accumulating wealth, status, and material possessions than pursuing their passions and making a meaningful contribution to society. This short-term view of life has led to a rise in mental health issues as people struggle to find fulfillment and meaning in their daily lives.
Reduction in Job Creation
Companies focused on the short-term likely aren’t hiring new employees or investing in the ones it has. McKinsey found that companies could create five million jobs if they engaged in long-termism.
Hurts Corporate Managers
Placing pressure on short-term goals puts undue pressure on corporate managers. This can lead to employee burnout and high turnover. Some companies will fire corporate managers for poor performance, which makes the workplace atmosphere suffer. In turn, the company must pay more to deal with hiring and firing workers—not to mention the costs of losing a good reputation, knowledge, and hard workers.
