The Illusion of the Irrelevance of the Long Term

In the early 80′s a riddle did the rounds which had everyone stumped for a few days until the solution followed shortly afterwards. Considering this was before you could forward something to a group in Outlook, ideas used to propagate themselves very quickly in those days. The riddle went like this:

3 MEN GO INTO A MOTEL. THE MAN BEHIND THE DESK SAID THE ROOM IS $30,
SO EACH MAN PAID $10 AND WENT TO THE ROOM. A WHILE LATER THE MAN BEHIND THE DESK REALIZED THE ROOM WAS ONLY $25, SO HE SENT THE BELLBOY TO THE 3 GUYS’ ROOM WITH $5. ON THE WAY, THE BELLBOY COULDN’T FIGURE OUT HOW TO SPLIT $5 EVENLY BETWEEN 3 MEN, SO HE GAVE EACH MAN A $1 AND KEPT THE OTHER $2 FOR HIMSELF. THIS MEANT THAT THE 3 MEN EACH PAID $9 FOR THE ROOM, WHICH IS A TOTAL OF $ 27. ADD THE $2 THAT THE BELLBOY KEPT = $29. WHERE IS THE OTHER DOLLAR?

The answer – which I must confess eluded me for ages – is that there is no $30. Each man pays $9 for the room which equals $27, plus the $2 equals $29. Simple. But the illusion is a powerful one.

In the same way, the powerful illusion is that every decision we make is important and that we never get the chance – like a share trader who makes dozens of trades a day, or the poker player who plays dozens of hands an evening – to get to the medium term. But we do.

No poker player gets to play any exact hand more than once. But you still make the decision that is right according to the Long Term every time, and that way you make a profit. No trader gets to invest in the exact same share with the exact same future prospects for the exact same price twice. But by investing with the best long term expectation in a series of inherently independent situations you give yourself the best chance of making the best Long Term return.

I understand that some decisions feel so big that we’ll never ever reach any kind of long term and so the best policy seems to be to play it safe. Putting your children through school; setting up your own business; buying your own home; getting married; going back into training; getting divorced; being completely honest with your team… the list is endless. And that’s the point.

While we look at the present and the future from one position at the point of making a decision… it all looks very different in the rear view mirror. Eventually the numinous truth of the illusion catches up with us and we realise that each monumental mountain was really only a molehill – only one of many problems that we had to overcome; just part of a continuum which eventually became a Long Run.

And those of us who explored the opportunities and took the risks in a calculated way will, eventually, have received what we expected (or Expected) and deserved. And those of us who eschewed them and feigned satisfaction with the safer option experience a pain much greater than the pain of setback or Short Term failure… in the Long Run they experience the agony of regret.

And the most amazing thing about it all? The most amazing thing is that we know this. That’s why when we have to make a difficult decision we feel torn… we feel torn between the person we are now and the person we know deep down that we’ll become in time. And that is the struggle that takes place inside us all whenever we make a decision. Long Term vs Short Term: the us we are tonight and the us we’ll be tomorrow.

Inventors, Innovators and Timeframe of Judgement

Orville and Wilbur Wright are generally credited with having manned the first powered flight. They probably did but to credit them with having single handedly invented flight is not terribly fair to the other people at the time who did much to advance the general level of knowledge . The Wright Brothers have their place in history but, like everyone, they stood on the shoulders of giants.

One of the people who was struggling to achieve that first flight was a gentleman called Langley. Unlike the Wright brothers, Langley was regarded as a serious scientist of his day. The Wright brothers were bicycle mechanics. Langley’s research into powered flight was funded by the US State Department. The Wright brothers funded themselves using the proceeds of their bicycle workshop. Langley’s engine was far superior to the Wright Brothers’ in terms of its power to weight ratio. If you were a contemporaneous observer, you might well conclude that Langley was the more likely to achieve the goal. But he didn’t. In fact he gave up before the Wright Brothers even succeeded. Why?

Because Langley was a serious scientist. Every time he had a successful or unsuccessful experiment he had to publish the results in a paper for all to see. And he was scrutinised and judged. On this short term  results. And it was painful for him.

The Wright Brothers, however, made their own progress in their own time working from out of their workshop just as Steve Jobs and Larry Page and Sergey Brin and William Hewlett and David Packard worked out of their garages. They even turned down funding from Carnegie in order to preserve this independence so that they were judged NOT on their Short Term setbacks but their Long Term results. And what a result it was.

Accountability to shareholders and individual risk aversion results in businesses who hear the messages of excellence but aren’t really prepared to replicate the conditions that incubated and nurtured it. Deciding on a long term goal is essential but more essential is accepting – collectively as a team – exactly what short term failures are going to be permitted in order to achieve it.

Just as someone who goes into a casino accepts that this £50 is going to be lost. All the desire in the world to achieve the Long Term goal won’t make it happen if the individual or the team or the department or the company are not prepared to lose some of what they have in order to gain what they desire.

For most of us in most organizations Failure is NOT an Option. This is good. Long Term failure should not be encouraged or even accepted. But the Long Term is out goal. It’s our objective. It’s a criteria and metric for success. It’s what we want. It’s our motivation.

And if our Long Term goal is demanding enough and stretching enough. If it is going to write history and shape the future… if that is not an option…

Then Short Term failure is a necessity.

Posted 04:05pm by Caspar and filed in Innovation, Risk