The Dangers of Short Term Thinking


Short Term ThinkingI had a boss who never liked to do any type of research or analysis. She would either have me or another coworker do it, or she would ignore it completely and just go for the easiest solution. Here favorite phrase was, “let’s just do it [the easy way] now, and we’ll worry about cleaning things up later”! All she would focus on is avoiding any type of hard work in the short term.

It wasn’t that we didn’t have the tools to conduct rigorous analysis, but it was that she suffered from two major deficiencies. The first was an inability to think logically through a problem – many of the things which we were called upon to do were beyond her mental capacity (this was really not her fault). Since we can’t control the types of minds we have (I have no creativity whatsoever, for example), I can’t completely blame her for this (there are things that we can do to learn a skill that that doesn’t come naturally).

However, it is the second deficiency which will be the focus of this article. She was both a proponent and victim of short term thinking. She was never able to look at the big picture and do what was right for our unit and company in the long run.

 

The Dangers Of Short Term Thinking

There are a couple of areas in which the dangers of short term thinking are best illustrated.

 

The Dangers of Short Term Thinking in Our Personal Finances

If we all didn’t become victims of short term thinking within our own finances, then the credit card industry would only serve a niche market. Instead, most Americans have borrowed from their future in order to have instant gratification. We are no longer willing to save up to buy something that we want, but instead we will end up paying double or triple the price of the item over time, just to have it now!

This is true whether we are talking about buying new smartphones, iPads, laptops, clothing, cars, houses, tuition, and anything else in between.

The danger in short term thinking is shown in our inability to wait for the things which we desire. We have become a group of undisciplined people, who feel entitled to everything we want (as soon as we want it), simply because we are breathing!

We will not be able to teach our children the virtue of patience, and the idea of waiting on God will not be known to the future generation (they will just see him as a benevolent genie), if we don’t change our thinking pattern now!

 

Short Term Thinking in Business

In the example at the beginning of the article, we looked at one way that businesses suffer due to short term thinking. Managers, analysts, and others are oftentimes not willing to put in the hard work up front in order to see long term results. This causes businesses to suffer and this type of thinking will eventually catch up with them.

Another way in which businesses are hurt by short term thinking is the need to “impress” shareholders every quarter. Corporate executives are known for making decisions based on their need to have a strong showing in their quarterly earnings report.

Sometimes the best decisions for the short term success of the business will also line up with the long term goals. However, this is not always the case, and sometimes the sustainability of the business is damaged. The problem is when the short term thinking overrides the ability of the executives and other managers to consider the long term effect of their actions.

A more personal example in business can be seen in the people who choose to burn bridges. To leave a job in such a way that they would never want you back, is the epitome of short term thinking. Many people do this out of anger and/or a desire to “get revenge”. In the short run, this may not seem like a bad idea – especially if you have been treated badly (of course, God makes it clear that we are never to seek out revenge…see Romans 12:19-20). However, doing this means ignoring the fact that we may be ruining our reputation within the company or even industry, by our actions.

 

How Short Term Thinking Ruins Our Health

As some of you may know, I am trying to lose 100 lbs and pay off over $100,000 in debt. Well, I have had so many days where I ate like garbage, simply because my mind could only focus on the taste of the food. I didn’t even want to think about the long term effects on my health. I know for a fact that I am not the only one who has suffered from short term thinking when it comes to diet. Now I am paying for it with grueling workouts, and fighting off the temptations to go back to my old lifestyle.

The same goes with exercise, taking vitamins and supplements, and other forms of preventative health. Most of us suffer from the danger of short term thinking in these areas. We complain about how much it costs us to live healthily – “vitamins and supplements are too expensive”, “organic food costs more than fast food”, “I don’t have time to exercise”, “it’s too hard to cancel a gym membership“, “blah, blah, blah”.

All of those are nothing more than excuses that are supported by short term thinking. We are unwilling to pay what are seemingly large amounts of money in order to be healthy; but we then complain about obscene health care costs. The best way to cut down your overall food & health care costs, is to try and prevent any serious issues from arising. Of course, you can’t control everything, but for the things you can control, you need to change your mindset.

By considering the long run in our day-to-day thinking, we can avoid many of these pitfalls that seem to be so common in modern times.

 

Examples of Short Term Thinking In Government

I think that how our government handles spending on every level is probably the most obvious example of the dangers of short term thinking. It’s extremely difficult for elected officials to think of anything else but the short term, since they are only in office for a few years, and they are oftentimes re-elected only if they have made tremendous progress during their term.

One of the clearest (and most recent) examples of this can be seen in President Obama’s sense of urgency regarding his health care legislation. Whether you agree with his position or not, I think we all can agree that it was pushed through rather quickly. Rather than bring in the leading health care economists and other experts to address the real issue (which, by the way, is cost not coverage), he forced the bill through as quickly as possible, so that it would be in place before the election year.

I’m not picking on Obama or his administration, this happens all the time with presidents all the way down to local school boards. Since politicians know that voters will not re-elect them if things aren’t going well, they make decisions that promise to destroy the system (or at least a part of it) in the long run, but make them look good in the short run.

Our economy would be in much better shape if the most prudent long term decisions were made 10, 20, 30, and even 80 years ago!

How To Avoid Short Term Thinking

The key to avoiding this kind of thinking is actually pretty simple. There are two main steps that you will have to take. First, be sure to evaluate your situation from all angles, and be sure to consider the pros and cons of each possible choice. When the first (usually the easiest) answer pops into your head, analyze it and look for all the negative consequences of that action.

Second, you must be willing to deal with the short term pain. Most of us will discount the impact of negative consequences, the further they are out into the future. This means that if a certain action will have a terrible consequence 2 years from now, we will convince ourselves that it “won’t be that bad”. By doing this, we are able to justify taking [what seems to be] the easy way out.

The only way we can avoid falling into this trap is to be willing to accept the short term “pain” that may come from making the best overall choice. Whether it’s putting off making a purchase, having an earnings report falls short of the market’s expectations, working out, buying healthier food, prolonging a recession, or anything else that makes us cringe; we have to be willing to push through a few tough moments, so that we don’t live the rest of our life suffering and in regret!

 

Reader Questions

  1. How often do you find yourself falling into short term thinking?
  2. How do you avoid falling into this trap?
  3. Can you think of any examples where short term thinking is appropriate?

(This article was written by Khaleef Crumbley who writes about personal finance from a biblical perspective over at Faithful With A Few (the blog of KNS Financial), and is chronicling his struggle to lose 100 lbs and pay off over $100k in debt at Fat Guy, Skinny Wallet.)

photo by  Salvatore Vuono

Written by Jon the Saver

This post was written by yours truly, Jon Elder. My mission is to help you succeed in your personal finance life. Join me on the journey to financial freedom! You can subscribe through RSS FEED or EMAIL updates. You can also find me on TWITTER
and FACEBOOK
. Happy investing 🙂

Jon the Saver

This post was written by yours truly, Jon Elder. My mission is to help you succeed in your personal finance life. Join me on the journey to financial freedom! You can subscribe through RSS FEED or EMAIL updates. You can also find me on TWITTER and FACEBOOK . Happy investing 🙂

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