On protection from the wall street disease

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Here is a philosophical question: do we prioritize astronomical short-term benefits that are unsustainable? Or do we prioritize long-term sustainability in return for limited benefits in the short-term?

In his book, “The Problem with Interest,” economist Tarek El-Diwany gives the analogy of agricultural land. That land can produce, let’s say, 10 tons of a crop forever, making the land sustainably arable far into the future. Alternatively, the land can be overburdened to produce 100 tons, but will lose its fertility in 10 years. If all agriculture is conducted the former way, there will be enough land and food production for this and future generations. But if it follows the latter, down the road there will be no agricultural land, and future generations will pay.

I call this latter philosophy the “Wall Street Disease,” in reference to Wall Street which is infamous for putting profits before anything else.

Here is an example from my professional experience. One of the software companies I built was performing very well operationally. Features were being consistently delivered, the quality of the software was excellent, the team was working well together, team members were motivated and fulfilled, and our cost structure was very good. We had established processes and frameworks to achieve these results consistently and continuously. Suddenly, the CEO wants a delivery that would normally take three months in just one month. He exercised unsurmountable pressure to make this happen. The result? The team started cutting corners by neglecting important parts of the established process. They worked overtime and weekends to meet the target. The output was produced in the end, but not without cost. A significant amount of technical debt (a term used in the software industry to describe inherent problems in the technology built that would cause problems down the road), a faulty sub-par quality to what we were used to, and a stressed, overworked and demotivated team worried this will be norm moving forward. The land had been overworked. The crop was produced, but the company was severely damaged.

Plenty of businesses are inflicted with this “Wall Street Disease”. Shareholders and executives focus exclusively on the immediate desired outcome with no consideration to the long-term or the big-picture. Even when these short-term outcomes are achieved, it is not without cost. There may be pressure to achieve aggressive sales targets, so deceptive marketing may be employed. Even if the targets are achieved, the brand is hurt in the long run. There may be pressure to increase production, and in the process a blind eye is turned away from safety protocols. Even if production targets are accomplished, there could be risk on human life. There may be pressure to cut costs, and a percentage of the staff is laid off. The costs are saved, but morale and culture are stained for the foreseeable future. The examples are endless.

Change requires a paradigm shift. In his book “Built to Last,” Jim Collins demystifies the myth that companies exist to “maximize shareholder value.” On the contrary, the most successful companies are the visionaries that serve a higher purpose and possess a core ideology. Making money is simply an outcome of that. He quotes Don Petersen, former CEO of Ford “putting profits after people and products was magical at Ford.” This is the same position of Simon Sinek, in his book “Start with Why.” He emphasizes companies need to start with “why” (the purpose) and making money becomes a consequence of that purpose. This sense of purpose forces boards to look beyond profits, and account for the multi-faceted nature of business. It forces them to consider the commonly overlooked impacts of their decisions and think them carefully through before making them. Having purpose is perhaps the primary vaccine companies need against the “Wall Street Disease.”

Back to the original question, I would take permanent limited benefits over temporary high benefits, any day of the week, any time of the day. I cannot fathom any other way a business can be conducted.

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