Corporate Short-Term Thinking and the Winner-Take-All Market

Corporate short-term thinking is not a new phenomenon related to the most recent corporate scandals - it has been conspicuously present for at least the last 30 years. This paper proposes to interpret it as a side effect of our increasingly competitive economic system. A competitive market tends to create a wide difference between the payoffs for quot;winnersquot; and quot;losersquot; - what we call a quot;winner-take-allquot; system. Thus, with such high stakes on every next move, there is a strong incentive for companies and individuals to focus on just winning the next round - i.e., to think short-term regardless of the impact on the business long-term viability.The pressure for short-term results is thus not the legacy of a few greedy individuals but rather a feature of a competitive system - yet at the same time corporations need to keep in mind the long-term viability of their business if they want to survive round after round. It therefore makes sense for investors and corporate leaders to monitor the foresight horizon of a corporation and potentially act upon it. The paper thus concludes suggesting a number of rule-of-thumb indicators to help in this monitoring task