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The Stanford marshmallow experiment is a famous study on delayed gratification. Conducted in the 1960s and 1970s, psychologists brought a child, aged between four and six, into a small room. In front of them was a single marshmallow. They could either eat that marshmallow straight away, or wait fifteen minutes and then eat two marshmallows. Most tried to wait, and most failed.
The human difficulty with delayed gratification, and the lure of short-termism, lies underneath many of our modern woes.
In business, patient capital has been replaced by ‘hot money.’
Twentieth century capitalism saw companies owned by the same people for a long time. These owners saw their purpose as building lasting organisations to provide goods and services, which in turn required a strong and resilient workforce.
From the Ford Motor Company to British Petroleum, stable companies invested in research, development and their employees. ‘A job for life’ was a phrase sincerely meant, not used ironically as it is nowadays.
The average time someone held a share of stock in 1960 was eight years and four months. By 2013, that number was just four months. This means that the people who own companies – society’s unit of employment and production – largely care only about the short term and not the long term. Company profits that once were once reinvested are now paid out immediately instead in dividends and share buybacks.
This ‘jam today’ capital-market culture helps to explain why so many normal people feel let down by capitalism. If investors are just looking for a quick buck, why hire more staff, let alone train them up? Why bother investing in new methods or technology? And why consider a firm’s social responsibilities to people, communities or the environment? This is not a capitalism failing us, this is us failing capitalism.
The same short-termism is eroding trust in political institutions. In Britain, civil servants were told not to prepare plans for Brexit until after the referendum. Irrespective of whether you think Brexit is a good or a bad idea, everyone would surely agree that failing to think through such an enormous eventuality is foolish at best and a dereliction of duty at worst.
In America, the office once inhabited by Lincoln and Franklin Delano Roosevelt is now occupied by a reality television star who promised to supercharge the economy, resurrect deceased industries, end the opioid crisis, cut taxes, and answer the immigration question all at once. He promised that “I alone can fix it” and he promised he would do it in months.
The economy. Immigration. Issues of war and peace. These are all big challenges, worthy of discussion, and likely their solutions will require sacrifice. True leadership will require politicians elevating these issues and being honest about the trade-offs involved, even if that means their poll numbers falling.
Looking at other social trends though, our appetite for short-term gratification seems insatiable, outpacing our capacity for sustained application. In modern dating, Tinder, Bumble, and Grindr allow users to find ‘matches’ in seconds, replacing the longer-term effort required by the now outdated mode of meeting someone in real life, asking them on a date, and then going on it.
In news, Twitter is the chosen drug of political junkies: goodbye to well-researched analysis which takes time to write and digest; hello to hot-takes, irrespective or veracity or accuracy.
Bucking the trend towards ever shorter short-termism will be tricky, but there are some signs of promise.
In the business world, it is notable that the success stories of the twenty-first century so far, namely the tech giants, mainly have founder-CEOs who maintain majority stakes and insist on long-term planning.
In media, long-form journalism and podcasting are growing in popularity, and even Twitter (whose speed of consumption is its defining characteristic) has increased the length of posts from 140 characters to 280.
In politics, the longest-surviving premier in the G8 is Angela Merkel. Hopefully aspiring future leaders will take note and observe that long-term thinking and political longevity can go together.
Until then, I’m off to sell some shares, swipe left on Tinder, then tweet about it.
Benjamin Clayton is a Fellow at Harvard’s Kennedy School of Government. He was previously Chief of Staff at the British Government’s National Infrastructure Commission