382. The short term virus
As suggested by Haldane (and others), there is an
increasing preoccupation with the fast and short term in finance and
investment, knowledge and learning, and organization and work. It happens not
only within these fields, but operates as a virus that contaminates one field from
the other.
I gave an example in the preceding blog. Fast, short
term politics drives out slow, long term knowledge to feed policy. This lures students
into shallow knowledge. And a generation later there will no longer be capacity
in policy making to absorb deep knowledge, if the use of it ever again becomes
viable and attractive.
The media are under pressure to satisfy to hunger for
the fast and shallow, they are under financial pressure to replace the
expensive, older carriers of deep knowledge by the younger, cheaper novices
carrying the faster and more shallow. Weaned on shallow media, the new world
waxes more shallow.
The virus operates especially, most spectacularly,
infamously, in the financial sector, contaminating the ‘real economy’, in imposing
the imperative of quick returns. Profits in the financial industry are increasingly
made more with financial products than with production in the real economy. The
snake fattens by biting its tail.
We see it also within firms. I have personal
experience with Shell International Oil Company. Shell was populated by two
cultures. First there was the slow culture of the engineers (often Dutch), in
exploring and surfacing oil and gas, refining oil in manufacturing, liquefying
gas, and storing, and transporting and distributing them. Then there was the
increasingly fast culture of the financiers, investors and accountants (often
British).
With a head of the firm from the accounting function
(though a Dutchman), the virus broke through. Financial wizardry and blowing
the bubbles of share value led the firm into the temptation of overvaluing its
oil reserves, by hiding the probabilities of ‘dry’ or commercially difficult to
exploit wells. The engineers protested but were overruled.
With rising remuneration, in salary and bonus, for
workers in the financial sector, there is pressure to apply them also in other
firms. This yields a widening gap in remuneration between the finance people
and the engineers, discouraging engineers to come in, or encouraging them to clamber
onto the grandstand of finance.
In organization and work the pressure towards fast,
short term returns has led to an imperative of flexibility, with short term,
maximally flexible labour, in projects rather than jobs, and, with suppliers, spot
contracts rather than more durable collaboration. This muscles out the slower
process of making investments that are ‘specific’ to the firm, in workers, in
training, education, and teams or communities within the firm, and more
durable, deep relations with suppliers, in joint development.
People are willing to invest in such firm-specific
investments, needed to produce specialties,
high quality, and innovative products, yielding higher and longer-term
profits, only if the duration of the job or relationship is long enough to
recoup the firm-specific investment. The upshot is that one should go not for
maximum but for intermediate, optimal flexibility: enough to prevent rigidity
but not so much as to discourage depth.
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