By Eric Cantor, Vice Chairman and Managing Director, Moelis & Company –
Open up a newspaper and flip to the national political stories and chances are pretty good the story will include a discussion of the gridlock in Washington. Go to the business section and chances are you will find stories about activists pushing for companies to buy-back stock or issue larger dividends.
While seemingly unrelated, much of what is happening in politics and business can be attributed to the rise of short-termism. When political or business leaders lack faith in the ability of policy or a company to generate long-term value, they turn their sights towards short-term gain.
In politics this most often takes the form of shunning compromise or incremental progress and instead playing to the most vocal elements of one’s political coalition. On the right you see it with issues like immigration and on the left it was just on full display as Hillary Clinton backslid in her support for trade.
A short-term focus means we miss the chance to get economic and fiscal policies in place that can bolster long-term growth. It means businesses fail to make the investments to create the products to drive future profits. And it means American global leadership recedes, creating dangerous vacuums that others compete to fill.
So what can be done to combat short-termism? We need leaders capable of stepping forward and explaining to voters or investors their vision for the future and how the decisions they are making today are necessary to make that vision a reality.
It was not that long ago when a business or political leader who wanted to do just that would go to a few key news outlets and opinion leaders, make their case and help define the debate. The rise of social media and an increasingly fragmented traditional media has meant that both in business and politics there are thousands of outlets and opinion leaders all with their own unique audience.
The rise of social media and alternatives to traditional media are ultimately good things. But leaders, especially those who came up through the ranks in the old system, have to adjust. Adjusting doesn’t just mean using new means of communication to talk to the people who agree with you. Adjusting means figuring out how the people you hope to convince are getting their information and then using that platform to make your case.
At the end of the day it is not going to be changes to the rules of the political process or of corporate governance and investment that deliver us from the ills of short-termism, it will be leaders with the willingness and ability to sell us on their long-term vision.