P90x (Read 6261 times)

Scout7


CPT Curmudgeon

    Then the question becomes, in a complex situation, what is the best course of action given the constraints?  Do we go for a short-term gain, or do take a long-term approach that will give the company a better position in 20 years?

     

    This is an issue that our society is currently struggling with.  In the US, we have made short-term gains the goal, not long-term sustainable growth.  We did this by focusing on stock prices, particularly short term, daily stock price fluctuations.  When a CEO is being forced into making decisions that will maximize short-term gains, he sacrifices long-term growth.  He knows that he will make hard decisions that will piss people off.  But what group does he piss off, and which one does he appease?  That decision will be based on his own perceptions and values, what he considers important to him.  Will he get punished for not opting for the short-term gains?  Probably so.

     

    We are not often able to take long-term views, and all too often we approach a problem from a linear perspective, rather than looking at something as a whole.  We break complex issues up into their component parts, but lose much of what made the system what it was.


    i sacrificed the gift

      This has to do more with the agency problem than with the interests of the corporation, though.

       

       

      Most often officers have their contracts written such that they are recompensed for meeting short-term goals (and how else would they, given that the average shelf life of an exec is so short now)

      Robot House Recovery Drink Protocol:
      Under 70 Degrees: Samuel Smith's Oatmeal Stout
      Over 70 Degrees: Dougfish Head 60 Minute IPA


      A Dance with Monkeys

        Is the Interplanetery Commerce Administration an evil company? If it existed, that is.


        Closed for repairs

          But stock value is based on long run.  The value of a stock is the net present value of it's expected future dividend stream in perpetuity.

           

          Not exactly true, one reason being plenty of stocks don't have dividends.  And with the advent of indexing and ETFs, many of the old models for valuing stocks are not nearly as relevant. 

           

          Part of a stock's value is based on the long run, but that was more true 50, 40, even 15 years ago than it is today.  Today a stock's price is much more impacted by the short run.  Which leads to short run decisions that, while maximizing current profits, are perhaps not in the long term best interest of either the corporation or society, to Jeff's point.  This has contributed to the unprecedented market moves we have seen over the last 12-15 years.   

           


          Closed for repairs

            Then the question becomes, in a complex situation, what is the best course of action given the constraints?  Do we go for a short-term gain, or do take a long-term approach that will give the company a better position in 20 years?

             

            This is an issue that our society is currently struggling with.  In the US, we have made short-term gains the goal, not long-term sustainable growth.  We did this by focusing on stock prices, particularly short term, daily stock price fluctuations.  When a CEO is being forced into making decisions that will maximize short-term gains, he sacrifices long-term growth.  He knows that he will make hard decisions that will piss people off.  But what group does he piss off, and which one does he appease?  That decision will be based on his own perceptions and values, what he considers important to him.  Will he get punished for not opting for the short-term gains?  Probably so.

             

            We are not often able to take long-term views, and all too often we approach a problem from a linear perspective, rather than looking at something as a whole.  We break complex issues up into their component parts, but lose much of what made the system what it was.

             

            Agree with all of this.  This is the world we have been evolving into for quite some time.  I suppose it can't be categorized as right or wrong, but part of the world in which we live.  This same mentality carries over into everyday normal life.  Many (most?) of us focus on the short term at the expense of the long term in nour poersonal lives, even though we know better.

             

              "If you have the fire, run..." -John Climacus

                weeps

                 even here on RA, the long run has been reduced to less than 3 hours.


                Imminent Catastrophe

                   

                  Maybe there's legal precedent here, but I don't agree with this.  I think it would be a balance between short term and long term profitability.   Otherwise there would be no long term. 

                   Too bad the banks weren't thinking long-term in the last few years.

                  "Able to function despite imminent catastrophe"

                   "To obtain the air that angels breathe you must come to Tahoe"--Mark Twain

                  "The most common question from potential entrants is 'I do not know if I can do this' to which I usually answer, 'that's the whole point'.--Paul Charteris, Tarawera Ultramarathon RD.

                   

                  √ Tahoe Rim Trail 100M 20/21 July 2013

                  Boston Marathon 21 April 2014

                  Tahoe Rim Trail 100M 19/20 July 2014


                  i sacrificed the gift

                     

                    Not exactly true, one reason being plenty of stocks don't have dividends.  And with the advent of indexing and ETFs, many of the old models for valuing stocks are not nearly as relevant. 

                     

                    Part of a stock's value is based on the long run, but that was more true 50, 40, even 15 years ago than it is today.  Today a stock's price is much more impacted by the short run.  Which leads to short run decisions that, while maximizing current profits, are perhaps not in the long term best interest of either the corporation or society, to Jeff's point.  This has contributed to the unprecedented market moves we have seen over the last 12-15 years.   

                     

                     

                     

                    What kind of short run activity can effect a stock price and how?

                     

                    Why would the market react positively to knowledge of an event or activity that is dangerous in the long term?

                    Robot House Recovery Drink Protocol:
                    Under 70 Degrees: Samuel Smith's Oatmeal Stout
                    Over 70 Degrees: Dougfish Head 60 Minute IPA
                    Scout7


                    CPT Curmudgeon

                       

                       

                       

                      What kind of short run activity can effect a stock price and how?

                       

                      Why would the market react positively to knowledge of an event or activity that is dangerous in the long term?

                       

                       

                      Because they don't know the action is dangerous in the long run.  Or they ignore the dangers and assume the risk.  Which is really what the stock market is all about anyway.

                       

                      For example, the market was reacting pretty positively to the selling of various bundled assets that later turned out to be rather bad investment ideas.  Look at how many people invest in various Ponzi schemes.

                        Doesn't intelligence demand both good short-term thinking and good long-term thinking? Why are these being put into opposition? I can have a long term training plan, but in order to execute it, I need to run correctly tomorrow. I am sorely afraid that once again we have fallen into a false dichotomy.

                         

                        Seems to me that the banks made stupid short-term decisions because they had a bad picture of the long-term consequences of those decisions. It's not like those decisions were good in the short term and bad in the long-term. They were bad in both.

                         

                        Seems to me that people are perfectly willing to plan for the long-term, it's just that because of the pace of change of contemporary life, the long-term is complicated as hell, so it's easier to screw up than the short-term. We end up having made a mistake, and hindsight says: "Hey buddy, you shoulda planned for the long-term," when really that's what people were doing all along, they were just doing it badly or with incomplete information. 


                        Closed for repairs

                           

                          What kind of short run activity can effect a stock price and how?

                           

                          Why would the market react positively to knowledge of an event or activity that is dangerous in the long term?

                           

                          Look at the "manias" in the last 10-15 years.  Internet stocks, oil, real estate, now gold.  You have people buying the commodity or selling the commodity based on price movement (making money on the spread) rather than on the fundamentals of the market.  You can't tell me there are fundamentals behind oil moving from $30 to $150 back to $40 and now $80 all in a few years.  Along with the commodity comes the stocks linked to it - the dot-coms, the builders, the big oils, the miners.  They can move up and down regardless of the health of the individual business but based on the price of the commodity.  Again, this is compounded by the use of indexing and ETFs.  

                           

                          The market will react positively to knowledge of an event or activity that is dangerous in the long term if it thinks there is short term money to be made as a result of the action.  The first thing that comes to mind is the market's reaction during this period of nearly 0% interest rates and government stimulus.  (Very) dangerous in the long run bit there's moneyt to be made in the short run.     

                           

                          MrH


                            Speaking of food, Michael Pollan is on The Daily Show, it repeats 1 and 7 Eastern. I think he's talking about Space Food Sticks.

                             

                            I saw it last night. I don't think it's worth going out of your way to watch. 

                            The process is the goal.

                            Men heap together the mistakes of their lives, and create a monster they call Destiny.

                            Scout7


                            CPT Curmudgeon

                              Doesn't intelligence demand both good short-term thinking and good long-term thinking? Why are these being put into opposition? I can have a long term training plan, but in order to execute it, I need to run correctly tomorrow. I am sorely afraid that once again we have fallen into a false dichotomy.

                               

                              Seems to me that the banks made stupid short-term decisions because they had a bad picture of the long-term consequences of those decisions. It's not like those decisions were good in the short term and bad in the long-term. They were bad in both.

                               

                              Seems to me that people are perfectly willing to plan for the long-term, it's just that because of the pace of change of contemporary life, the long-term is complicated as hell, so it's easier to screw up than the short-term. We end up having made a mistake, and hindsight says: "Hey buddy, you shoulda planned for the long-term," when really that's what people were doing all along, they were just doing it badly or with incomplete information. 

                               

                              Yes, I agree we need to balance short and long-term.

                               

                              The issue I was highlighting was when we actively ignore the long-term and focus solely on the short-term.  It is this shift in focus that has gotten us in trouble, in the past and more recently.

                               

                              Indeed, planning for the long-term is difficult, even more so because of the way most people approach that planning.  We tend to take something, break it up into its subordinate parts, and analyze each of those parts.  Unfortunately, in breaking it up, we lose some of the emergent properties that complex systems develop.  The example here is an elephant.  We can't learn all about an elephant by chopping it into pieces and examining those pieces outside of the context of the whole.

                               

                              It is quite difficult to try to map out all the different levers and points of influence in a system, which is really what we're talking about here.  To bring it back to my original point, people make decisions as best they can with the knowledge and perceptions and goals that they have.  That doesn't make them evil, and it doesn't make the companies they work in evil.  Short-sighted, misaligned with our own personal goals and perceptions, but not necessarily evil.


                              Closed for repairs

                                Doesn't intelligence demand both good short-term thinking and good long-term thinking? Why are these being put into opposition? I can have a long term training plan, but in order to execute it, I need to run correctly tomorrow. I am sorely afraid that once again we have fallen into a false dichotomy.

                                 

                                Seems to me that the banks made stupid short-term decisions because they had a bad picture of the long-term consequences of those decisions. It's not like those decisions were good in the short term and bad in the long-term. They were bad in both.

                                 

                                Seems to me that people are perfectly willing to plan for the long-term, it's just that because of the pace of change of contemporary life, the long-term is complicated as hell, so it's easier to screw up than the short-term. We end up having made a mistake, and hindsight says: "Hey buddy, you shoulda planned for the long-term," when really that's what people were doing all along, they were just doing it badly or with incomplete information. 

                                 

                                Well this gets back to your evil corporaations.  If it were you or me or a family-run business that was meant to be passed down to generations, this is exactly how it would work.  But in corporations, much like our political systems, people are short-timers and are willing to forego the long run for the short run.  They won't be there in the long run to see the consequences of the short term action anyway.  You, on the other hand, will be the one who lives with the consequences of your training plan, no one else.