Short-Termism Is Hurting Companies And Costing Lives

Careers Short-Termism Is Hurting Companies And Costing Lives Mark Murphy Senior Contributor Opinions expressed by Forbes Contributors are their own. I use science to transform leaders, managers and executives. Following New! Follow this author to stay notified about their latest stories.

Got it! Sep 12, 2022, 07:38am EDT | New! Click on the conversation bubble to join the conversation Got it! Share to Facebook Share to Twitter Share to Linkedin Short-Termism getty If you were told that your company could bring in more revenue, generate greater earnings, and create more jobs, you’d be intrigued, right? And if you learned that the worldwide incidence of liver cirrhosis and cancer could be drastically reduced while ultimately decreasing healthcare costs, you’d probably be similarly enticed. Well, you’d be interested in all those outcomes until short-termism kicked in. In its simplest form, short-termism means prioritizing short-term results to the detriment of long-term interests.

For a business, short-termism could be reducing research and development expenses to increase this quarter’s profits. Or avoiding a positive Net Present Value project if it meant falling short of the current quarter’s consensus earnings. That last example isn’t hypothetical; in one study , a majority of financial executives admitted they would absolutely avoid those projects.

Evidence abounds that short-termism is bad for business and the economy. FCLTGlobal , a not-for-profit organization that encourages long-term behaviors in business and investment, has found that long-term-oriented investors deliver superior performance, and long-term-oriented companies outperform in terms of revenue, earnings, and job creation. A McKinsey & Company study found that the revenue of firms with a long-term mindset cumulatively grew on average 47% more than other firms, and their earnings grew 36% more.

There is a danger, however, in sharing these business examples. It’s easy to blame business short-termism on our financial system, with its emphasis on quarterly earnings, stock prices, etc. But the truth is that short-termism is a bias deeply rooted within humans generally.

I recently chatted with Nobel Prize winner Dr. Michael Houghton , a virologist in the Faculty of Medicine and Dentistry and director of the Li Ka Shing Applied Virology Institute at the University of Alberta. Dr.

Houghton won the Nobel Prize for his discovery of the hepatitis C (HCV) virus, and he shared, “While we’ve made a lot of progress in containing the hepatitis C pandemic, unfortunately, because of opioid use around the world, the number of hepatitis C cases is actually growing in some countries. ” MORE FOR YOU Empathy Is The Most Important Leadership Skill According To Research Why U. S.

Talent Shortages Are At A 10-Year High You Probably Need More Friends—Here’s How To Make Them The World Health Organization reports that globally, an estimated 58 million people have chronic hepatitis C virus infection, with about 1. 5 million new infections occurring per year. And in 2019, approximately 290,000 people died from hepatitis C, largely from cirrhosis and liver cancer (among the most severe outcomes of chronic hepatitis C infection).

It should also be noted that hepatitis C is the most common reason for liver transplantation in the United States. Now, as Dr. Houghton shared, here’s the real kicker: “Several companies have antiviral cocktails that are highly curative, very well tolerated, and you only need to swallow a pill for two to three months to get cured.

” While the Li Ka Shing Applied Virology Institute is working on a hepatitis C vaccine, presently, there already exists a cure. Why on earth aren’t we testing and treating the 58 million people currently infected? This is where short-termism reenters the story. “The existing cures are under patent protection and cost at least $20,000 per patient,” Dr.

Houghton told me. One doesn’t need to be an expert in pharmacoeconomics to start doing a bit of math. The cost of a cure wouldn’t come cheap, nor would an initiative to test at-risk populations.

But the cost savings are significant. Liver cancer, cirrhosis, liver transplants, and all the rest, are incredibly expensive to treat, and that’s without factoring in the cost of lost days of work and productivity, other human costs, etc. One study analyzing hepatitis C virus in Medicaid enrollees found that the total cumulative treatment costs would be fully offset within about six years, and within three years after that, the recurrent annual avoidance of healthcare costs will have delivered an estimated $12 billion in total cumulative savings to Medicaid.

The US Congressional Budget Office publishes Options for Reducing the Deficit, essentially outlining cost savings approaches for the US government. For example, if the government reduced federal funding for arts and humanities programs, like the Smithsonian Institution, the Corporation for Public Broadcasting, the National Endowment for the Humanities, the National Endowment for the Arts, the United States Holocaust Memorial Museum, etc. the government would save almost $6 billion over ten years.

Eliminating Subsidies for Certain Meals in the National School Lunch, School Breakfast, and Child and Adult Care Food Programs would save $9 billion over ten years. Or, as noted before, we could cure hepatitis C and save lives, without harming the arts or food-insecure Americans, while still reaping $12 billion in financial rewards. Again, why isn’t this happening? Short-termism is insidious, but we can fight against it.

Rather than focusing on the immediate costs, we could instead talk about the US realizing $12 billion (or whatever) in savings. If a hepatitis C test and treatment program were framed as reducing the deficit by billions of dollars, it might generate more support. Alternatively, we could think about the most at-risk populations.

For example, as Dr. Houghton shared with me, “We know that baby boomers are at high risk for hepatitis C, as are people who’ve received a blood product. ” Treating hepatitis C as an abstract concept will likely be far less powerful and motivating than fostering a dose of anxiety amongst the most at-risk populations (who, ironically, have a good share of political power).

And, of course, all of these arguments could be applied to increase funding for the development of a hepatitis C vaccine. Similar rules apply for combatting short-termism in businesses. For example, allying with investors who share a longer-term focus is a great place to start.

While there are plenty of short-term investors out there, there are also heavyweight institutional investors with a long-term focus. Blackrock, for example, helped to create FCLTGlobal, the long-term advocacy not-for-profit mentioned earlier. The bottom line here is that short-termism infects us, whether we’re CEOs, CFOs, health experts, or frontline workers.

It’s bad for business, and it’s really bad for humanity’s health and well-being. Dr. Houghton put it succinctly when he told me, “We can remove the ticking time bomb going on in our livers, but we’ve got to test and treat our communities at a faster rate.

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