[superqd]

Hmmm, a bit disappointed after reading their blog and site. I expected that they'd integrated some clever rules around stock trading itself in order to force, or encourage, long term thinking. I expected something along the lines of, "no shorting allowed", "stocks must be held a minimum of 6 months", etc. There was nothing like that, all they have is the rule, "come on guys, think long term".

I fail to see how this will have any meaningful effect on "long term vision", if they still allow your stock price to be dumped at the first sign of trouble, or allow people to bet against your company when some irrelevant bad news hits, or no one else sees value when you decide to deepen your spend on R&D for some long term plan. If people freak out, or think they can profit off of your lack of current obvious value, the you are still going to have short term fluctuations that you will feel pressured to address.

The problem with short term thinking isn't from companies or company leadership, they are reacting to the natural short term fluctuations in their value because of the short term thinking of investors. Shareholders are not gonna understand your vision every time you decide to engage in a long term strategic shift in priorities, so they will react when they find out, and that reaction can swiftly damage a company's value. If shareholders can still trade over short-terms, then you will still have large scale short-term fluctuations that CEOs will be forced to address, as more and more potential buyers will be influenced by the low price of a stock caused by other skittish short-term thinking investors.

The problem is with investors in stocks, not with the companies unwillingness to think long term. To make such an exchange work, you have to have clever trading rules in place to force longer term thinking.

[cactus2093]

Why is shorting not consistent with long-term thinking? You can think a company or industry will decline over a long-term horizon, just as much as you can think it will grow. It seems like the symmetry of being able to be either short or long on a company is a useful part of the market signal.

I'm also not sure "hold for 6 months" is particularly useful. A lot of people are already investing on that timeline today and it hasn't solved the problem. Also, there are enough investors on aggregate that there would still be a lot of buy/sell activity every day even with that model.

Something that might be kind of interesting is if there were a short trading window every ~5 years or something. Then nobody is trading at all for years, the company can focus completely on the long-term vision and only have to check in and worry about the public perception of the work for a short period of time every few years.

[superqd]

Apologies, shorting-bans isn't necessarily a long-term view rule, just an example of something they could do around constraints on trading, not necessarily something they should do, just I expected some kind of trading rules to fix the real problem, which in my opinion is investor pressure, not management short-sightedness.

The rules I suggested aren't necessarily good rules, just random examples. That is, to me the most powerful driver for short term thinking isn't managerial in nature, it's investor in nature. That is, it's the short term fluctuations in market value as investor reactions to events or goals that have nothing to do with the company's bottom line or long term goals, etc. But if essentially random forces are affecting the value of your company, there will exist pressure on management to respond to that pressure. So to me the real fix is some set of rules constraining investor behavior with regards to how the stock is traded, not some nebulous honor-code among CEOs. I am not sure what the rules should be, I just picked random rules out of my butt. But I think there should be some trading constraints: if you truly want to incentivize long term vision, you have to remove the short term pressures.

Like your suggestion for a trading window every 5 years. I have no idea how well that would work, but it seems reasonable, and is the sort of thing I expected for the site, but they seem not to have anything like that in mind. Which to me means that have entirely missed the mark.

[eru]

> I expected something along the lines of, "no shorting allowed", [...]

That would at least be an attempt. Though to be honest, (other people doing the) shorting is actually very good for the long term shareholder.

> The problem with short term thinking isn't from companies or company leadership, they are reacting to the natural short term fluctuations in their value because of the short term thinking of investors.

It's not that investors are short-termist. Far from it. See eg how shareholders react to Amazon or Tesla.

The problem is the principle-agent conflict: shareholders in general have a very hard time monitoring management. It is neigh impossible to tell a manager with a grand vision that will pay off in 20 years from a manager who burns capital on harebrained schemes for 20 years. Especially impossible to tell before those 20 years are up.

That's why investors are so keen on early and hard to fake signals. Returning cold hard cash to investors is one of those signals.

[smabie]

How does preventing shorting express a long-term view?

[superqd]

Apologies, shorting-bans isn't necessarily a long-term view rule, just an example of something they could do around constraints on trading, not necessarily something they should do, just I expected some kind of trading rules to fix the real problem, which in my opinion is investor pressure, not management short-sightedness.