OPINION by Keith Ambachtsheer: The Case for Long-Termism
None of this would matter if the financial interests of agents
and principals in these three contexts were always perfectly
aligned. But that is not necessarily the case.
The Case for Long-Termism
The Oxford Dictionary of English defines deductive logic as “using knowledge about things that are generally true in order to think about particular situations and problems.” Can we use this “from general to particular” thought process to make the case that long-termism is fundamental to the creation of societal wealth and well-being? I think we can.Without long-termism, we would still be living in the same subsistence societies our forebears did, continually on the edge of starvation.We would be facing the same life-or-death decisions between consuming what is produced now and saving part of it in the form of seeds, implements, and shelter for tomorrow. Necessity required these societies to take a very short-term view of things to survive. This strong bias for today at the expense of tomorrow means that, in financial terms, our forebears implicitly used very high discount rates when making saving / investment decisions for tomorrow.