5 Ways to Think Long-Term in a Short-Term Market
Last month, a coalition of 200 CEOs from the nation's leading companies came together to sound the alarm about a growing threat to the U.S. economy. The cause of their concern wasn't global trade wars, labor shortages or mega-mergers. It was short-term thinking.
In an op-ed for the Wall Street Journal titled "Short-Termism is Harming the Economy," the Oracle of Omaha, Warren Buffett, and Jamie Dimon, the chairman and CEO of JPMorgan Chase, warn that the U.S. market's addiction to quarterly goals is leading to "an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability."
While concerns about the impact of short-term thinking in business are nothing new (the drumbeat has been building since at least 1934, when the SEC began requiring that public companies file quarterly reports), the demand for greater long-term thinking has become an increasingly urgent call to action. In the past few weeks alone, similar appeals have appeared in Fortune, Fast Company and Harvard Business Review. They've even inspired business cartoons.
Quick laughs aside, how can today's leaders kick their short-term habits in favor of the long view? It's a question we've been asking at The Legacy Lab since 2012, when we first started studying the traits that distinguish long-term thinkers -- leaders that we call modern legacy builders -- from their short-term peers. Counterintuitively, we discovered that the best short-term strategy is a long-term one. This is because leaders guided by long-term ambitions make faster, better short-term decisions than their nearsighted competitors.
Below are five key principles in action -- drawn from our new book, Legacy in the Making: Building a Long-Term Brand to Stand Out in a Short-Term World -- that you can use to break free of the short-term feedback loop and begin building an enduring modern legacy of your own:
1. Take leadership personally.
While short-term thinkers buy in to systems and processes with the goal of following market trends, we discovered that modern legacy builders invest in individuals seeking to make a meaningful contribution. Often, this begins with investing in their own long-term personal ambitions. For example, the Tribeca Film Festival was created in response to the terrorist attacks of Sept. 11, 2001, when the brand's founders were looking for a way to revive their neighborhood. Nearly two decades later, they're still leveraging their personal passion in film to breathe new life into the area.
Personal takeaway: Follow your long-term personal ambitions, and think in terms of what you can contribute before you think about what you can extract.
2. Behave your beliefs.
Short-term thinkers picture their brands from the outside in, believing that attitude -- what they say and how they posture -- matters most. In contrast, the modern legacy builders we spoke to work from the inside out, allowing a few core beliefs to guide countless unique behaviors. Such is the case at The Ritz-Carlton Hotel Company, where employees (or "ladies and gentlemen") gather at the beginning of each shift to discuss goals and share "wow stories" -- exceptional examples of customer service demonstrating the brand's beliefs in action.
Behavioral takeaway: Ensure your brand's beliefs endure and thrive by empowering your colleagues to embrace and express those beliefs rather than simply recite the words.
3. Let outsiders in.
Seeking category dominance and sales superiority, short-term thinkers hoard information and try to tell customers what to do. Modern legacy builders do the opposite -- growing their social influence by inviting customers to help tell their story and letting sales follow saliency. At the It Gets Better Project, the nonprofit dedicated to empowering isolated LGBTQ+ youth, this means inspiring tens of thousands of supporters to spread the brand's uplifting message by sharing their own personal videos.
Influential takeaway: Rather than trying to control what your customers do, look for ways to build your enduring social influence by enrolling your customers as coauthors of your brand.
4. Invent your own game.
Short-term thinkers maintain the status quo by mastering rules (e.g., business is about making profits) and taking conventional wisdom for granted (e.g., there are no profits in altruism). Modern legacy builders break rules and reconcile paradoxes (e.g., business can make money and be a force for good) in order to forge extraordinary and lasting change.
For example, to draw new fans to horse racing's original "must-see" event, the 150-year-old Belmont Stakes has recently been innovating on the conventions of the category by drawing inspiration, ideas and technology from other categories like entertainment, gambling and pop culture at large. The result is a storied brand that continues to evolve in unconventional directions.
Unconventional takeaway: Seek to define your category, don't let it define you.
5. Never stop making your legacy.
Too many short-term thinkers either grow stale by repeating the past or lose their identity by renouncing it. To cultivate enduring significance, modern legacy builders find ways to perpetually bring the past forward. We love the example of Taylor Guitars, where the founders chose one of their own -- a master craftsman in his 30s -- to succeed them after they retire. The choice allows them to collaborate and share knowledge in real time, before they retire, and ensures that their passion for building innovative guitars that people love to play will transcend generations.
Perpetual takeaway: Instill your short-term decisions with long-term thinking by making today's decisions in service of tomorrow.
A final word of warning: Sticking to these five principles won't be easy, although it will be rewarding. In the words of Buffett and Dimon, leaders who can wean themselves off short-termism "will strengthen the U.S. economy, benefit America's workers, shareholders and investors, and leave a generational legacy we can be proud of."