The Long-Term Fallout from Short-Term Thinking
The central, animating precept of capitalist market theory, a religious tenet of world finance and a holy belief of the automobile industry, is the notion -- patently absurd if we are to be honest -- that every fiscal quarter ought to better the one before it. It’s a hopeful sentiment in a “Every day in every way I am getting richer and richer” kind of thinking and a nice tune to carry inside your head if you are a heavy manufacturer. Except nothing in the vast archive of human experience supports the notion that a state of perpetual profitable growth is in any way realistic, attainable or desirable.
There’s a reason continual growth is so elusive-- it’s an evolutionary non-starter. Everything must come to an end. Nor is it clear that even in a world where endlessly mounting corporate prosperity was possible, that it would be so great. In my line of work I know I get to meet enough rich assholes as it is.
More importantly, failure is a part of the life cycle. There’s nothing wrong with fallow quarters and years, if they’re fallow for the right reason and they don’t remain that way too long. Innovation takes time. And history has shown us, necessity breeds invention better than prosperity. Some of the greatest designs in automotive history appeared when their creators had their backs to the wall (see Henry Ford, c.1903-1908), whether as start-ups or established enterprises with all their marbles on the table (see Ford Motor Company, c.2007-present).
Yet, the impossible dream of eternal earnings ecstasy has a strangle-hold grip on our publicly traded carmakers and the bonus-minded executives who run them. The so-called “need” to mint more money fast, to keep share prices buoyant and fluffy, leads carmakers to behave strangely. They find perverse encouragements to distort, stunt and mangle their brands, losing sight of their true better natures. Their better natures stop being their natures.
The need to deliver growth or the appearance of it leads to full-time short-term thinking. Starting, for we must start somewhere, with the arrival in 2002 of the brand-busting, cachet-destroying Porsche SUV. Underscoring the depth of the vulgarity of the world’s people, the Cayenne arrived to a rapturous reception, joining Range Rover, Mercedes, BMW and (later) Audi and America’s former Big Three, in the tidal wave of high-end gasoline-gargling barges which flooded the wealthy capitols of the world.
The genre shows little sign of flagging yet, so the wave continues (Porsche just announced a second SUV line, the Macan), but it may yet implode with SUVs coming soon from unlikely European brands like Maserati, Bentley and, horror of horrors, Jaguar. One can always hope, at least. Ill-advised, unheard of and uncalled for but it’s the only way these luxury brands can think of to increase demand. The pity is that all the money, energy and focus spent making brand-extending battle cruisers won’t be deployed by thinking of ways to make the former full-time sports carmakers’ real cars, that is, their sports cars, better and more attainable. The new 911’s great, but how much better could it be? How about that breakthrough ultra lightweight, production, 2200-lb. 911 which Porsche ought to be straining its imagination and resources to build?
While Porsche has chosen to dilute itself in favor of cash infusion, count the American automobile industry’s de facto decision 20 years ago to abandon the design and manufacture of conventional passenger cars in favor of selling more trucks and SUVs as an even greater example of the destructive lure of fast money, which is often the godfather of short-term thinking. Lineups heavy on trucks and SUVs, which cost less to develop and brought higher unit profits, proved extraordinarily lucrative for the American industry, but only for a while. Then fashion changed. Asian competition grew, big trucks were out and the Detroiters had plenty of ‘em. Unprepared for economic downturn and a shift to small cars, they found themselves well on the road to bankruptcy (GM, Chrysler) and crushing debt (Ford) before gas prices soared to speed them to their destinations.
Now that they’re coming back, continued growth is an understandable ideal and a worthy goal, though the maintenance of the corporate nest egg with a focus on sustainable practices and trueness to mission seems a fair target, too. And there are surely more laudable ambitions than forever seeking to make more money than before by forever selling people more stuff they don't really need or want. Why must sales grow always? How many SUVs, digital cameras, telephones or pieces of home exercise equipment are enough? Planned obsolescence is on the rise. Can we skip a generation of iPhone? Can we keep a car ten years? Are we permitted to be satiated? Can we ever stop shopping?
Of course not.
But surely there must be some amount of profit that is enough profit, some amount of money that is enough money. Even those who insist upon a constantly expanding stream of bounty and are prepared to play dirty to get it find life doesn't always work the way they want. The playing field isn't level: things go up, things go down, few things last. Previous success? Fairness? They count for naught. Your ship may come in, but soon enough it could turn around and head back out. You can’t always expect to be growing.
Looking honestly at my own bottom line, for instance, I have to concede that I'm down 17% over the same quarter last year. Being self-employed, I fully expect to hear from me about my disgraceful performance at my next annual shareholders meeting. I hope I don’t have to let myself go.