estimates that had all U.S. publicly listed firms operated like their long-term counterparts, the U.S. economy would have added more than 5 million additional jobs and generated an additional $1 trillion in GDP from 2001 to 2015, gains that would have benefited the U.S. economy and Americans broadly. The numbers are overwhelming, so why aren't more companies operating this way?
One impediment to long-term thinking is the pull of near-term goals and short-term pressures. To be sure, no company can thrive in five years without surviving for five months, but sometimes this comes at the expense of long-term value creation. Investments in innovation or talent or capital projects that have the potential to reap benefits for years into the future are often discounted and take a backseat to the immediate concerns of Wall Street.
Now that the corporate community is focused on this issue, the task is to address the many real obstacles to building long-term value. Here are three concrete steps companies can take.More than half of corporate executives would rather delay a net-positive-value project than miss quarterly earnings targets by a penny, according to a. A simple way to alleviate this pressure is to stop issuing quarterly guidance for earnings-per-share.
Many companies that continue to issue this type of guidance do so under the influence of three misguided assumptions: that it improves valuation ; that it reduces volatility around earnings season ; and that it's required by law or the market .. Releasing quarter-by-quarter estimates attracts the transient investors that companies might well avoid if they're looking to cultivate long-term value.
💯 agree and what a great article
So, Buffett and Dimon's idea is to provide less information, less often to the investors of companies? That shouldn't worry investors at all.....
I’ll stick with Ben Graham’s value method, creating Billionaires for nearly 100 years 😉 MarioGabelli