[ajzinsbwbs]

What is the long term if not the sum of the short terms?

“Short term bad long term good” is a convenient argument for management in a dispute with shareholders. It allows them to discard the objective measure of their performance in favor of speculation. Ignore the years of stagnant growth and keep paying each of us millions, says management! Our plan is a long-term one, you see.

[TeMPOraL]

Short term is greedy optimization. You get stuck in a local minimum, which may - and often is - be a very bad one, compared to other minima you could reach if you had a more long-term approach.

Short term in terms of certain private equity groups getting involved = company gets strip-mined for all its worth and its empty husk is discarded.

[ajzinsbwbs]

If this is true, why does the share price go up? Who is buying the stock after the short-term play? Is the market just dumb, and the only people who know the truth are the disgruntled-ex management who complain to the media about short-termism?

My perspective is that activist actions do incur some risk but have positive expected value in the long run. There are horror stories, but overall they create value, which is why people continue to invest in them.

I agree it’s possible to get stuck in local optima, but it’s awfully convenient for many CEOs to be in that situation. I suppose everyone who isn’t already running a trillion dollar company is in a local optima, if you think about it. It’s hard to blame shareholders for getting fed up after enough years of that and saying enough is enough, maybe you aren’t ever going to climb the mountain and should go to that local optima instead.

[idoh]

Can we step back and agree about our terminology? I'd say that short term is up to a year or so. Most PE plays I've heard about are years-long endeavors.