Wall Street's 'Short-Termism' Has It on the Wrong Side of the Trade
Society has become more long-term oriented than it's been in decades. Wall Street must adapt or be left behind.
Wall Street was fortunate because for a long time, its institutions were more long-term oriented than society, and it profited by shortening its time horizon to adjust. Securitization. The rise of shareholder activists and corporate raiders. Increasing leverage. Decreasing regulation. The rise of hedge funds, day trading, and high frequency trading. Investment banks cashing out by going public. Treating employees like any other financial asset. Long-term, values-driven Millennials have no desire to be a part of such a world.
It's time to go the other way. Increasing long-term commitments to employees, employers, partners, and investments. Taking investment banks private. Investing in enterprises for the long term without sweating the short-term volatility. This isn't naive idealism, it's the strategy coming winners will employ.
In this light, I'm encouraged by the trend of recent tech IPOs having dictatorial control over their companies. I want Marissa Mayer running Yahoo (NASDAQ:YHOO), not Dan Loeb. In the aggregate, it's a good thing that Mark Zuckerberg of Facebook (NASDAQ:FB), Mark Pincus of Zynga (NASDAQ:ZNGA), and Andrew Mason of Groupon (NASDAQ:GRPN) don't have to answer to shareholders. Of course, if their employees don't buy into their vision, they'll leave. That's the way it should be.
A lot of existing firms won't thrive in this new world. They were way too successful the old way and will stubbornly hold onto their power, focusing on cost-cutting and squeezing employees while they hope things go back to the way things were. But there's an enormous opportunity for those visionary and patient enough to be a part of the coming landscape. This is the biggest theme in finance over the next 20 years.
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