Sustainability is one of those fashionable words, that is often use in a somehow vague concept, void of real meaning. It is usually connoted with a vaguely good intended environmental concern, with little real economic or political meaning. I truly believe this is about to change.
One of the main critics that is being appointed to the US financial system (that is basically now on the verge of something close to a collapse) is it’s short sightness. The major argument is that over the last few years, the investors have been more concerned with the immediate annual (and quarter) results of a company, than with its capacity to achieve its objectives steadily, year after year. That a big revenue in a year would be more important than a substantially lower income, achieved on a more (lets start using the word) sustainable way. This is natural – if a company would show any sign that it would not perform accordingly with our expectancy of a high income, we could shift our investment to another one that would. More importantly, we could scavenge a company of its resources to ensure that annual high income, and then shift our money accordingly to a similar one – and we could do this year after year.
The point is, on a given moment (and it seems this is it), the company’s urgency to ensure the annual figures would implode. That the companies would no longer be able to ensure those high demanded dividend and share price gains, because they had eroded their investment capability, by shifting money from sustainable long-term revenue construction to immediate results and stakeholders profits. This, with the shareholders complacency, shown through huge bonuses and prizes to top management, and regulatory agencies and companies ‘amen’.
I truly believe this is really about to change. At least for the next years, I believe we will all be able to learn from our mistakes on this issue, and build a capitalism that is a lot purer – we all have learnt in college that every share price incorporates not only immediate gains, but also the expectancy of futures gains, through ‘sustainable’ management practices. We have forgotten about that, blinded by the light of huge profits right on the next quarter. But I think we will learn the lesson, that for long-term gains on a limited resources economy (like any), we should put investment on creating real assets first, in order to gain economic sustainability.
One of the main critics that is being appointed to the US financial system (that is basically now on the verge of something close to a collapse) is it’s short sightness. The major argument is that over the last few years, the investors have been more concerned with the immediate annual (and quarter) results of a company, than with its capacity to achieve its objectives steadily, year after year. That a big revenue in a year would be more important than a substantially lower income, achieved on a more (lets start using the word) sustainable way. This is natural – if a company would show any sign that it would not perform accordingly with our expectancy of a high income, we could shift our investment to another one that would. More importantly, we could scavenge a company of its resources to ensure that annual high income, and then shift our money accordingly to a similar one – and we could do this year after year.
The point is, on a given moment (and it seems this is it), the company’s urgency to ensure the annual figures would implode. That the companies would no longer be able to ensure those high demanded dividend and share price gains, because they had eroded their investment capability, by shifting money from sustainable long-term revenue construction to immediate results and stakeholders profits. This, with the shareholders complacency, shown through huge bonuses and prizes to top management, and regulatory agencies and companies ‘amen’.
I truly believe this is really about to change. At least for the next years, I believe we will all be able to learn from our mistakes on this issue, and build a capitalism that is a lot purer – we all have learnt in college that every share price incorporates not only immediate gains, but also the expectancy of futures gains, through ‘sustainable’ management practices. We have forgotten about that, blinded by the light of huge profits right on the next quarter. But I think we will learn the lesson, that for long-term gains on a limited resources economy (like any), we should put investment on creating real assets first, in order to gain economic sustainability.
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