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Wall Street's 'Short-Termism' Has It on the Wrong Side of the Trade

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Society has become more long-term oriented than it's been in decades. Wall Street must adapt or be left behind.

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What's out of place in 2012? "Sex, drugs, and rock and roll," the ultimate short-term behavior. "Turn on, tune in, drop out." Agent orange and landmines. Photo galleries like this. Microwave dinners.

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.

Twitter: @conorsen
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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