It is noteworthy that two of the companies that have made the greatest impact over the last ten years, and continue to do so, have explicitly rejected the common approach of focusing on the short-term over the long-term.
They have both done this in spite of the fact that, when becoming public companies, the pressure from Wall Street is precisely to focus on the short-term. Many companies give in to this, and thus fail to become great. Google and Amazon stated from the start that they would resist this temptation and continue to think long-term, in spite of the pressure. This is a good lesson that is applicable to all areas of life, and is essential to effectiveness: take the long-term view, even when it is challenging.
Here’s what Google had to say in its founding IPO letter:
Our goal is to develop services that significantly improve the lives of as many people as possible. In pursuing this goal, we may do things that we believe have a positive impact on the world, even if the near term financial returns are not obvious. For example, we make our services as widely available as we can by supporting over 90 languages and by providing most services for free. Advertising is our principal source of revenue, and the ads we provide are relevant and useful rather than intrusive and annoying. We strive to provide users with great commercial information.
We are proud of the products we have built, and we hope that those we create in the future will have an even greater positive impact on the world.
As a private company, we have concentrated on the long term, and this has served us well. As a public company, we will do the same. In our opinion, outside pressures too often tempt companies to sacrifice long term opportunities to meet quarterly market expectations. Sometimes this pressure has caused companies to manipulate financial results in order to “make their quarter.” In Warren Buffett’s words, “We won’t ‘smooth’ quarterly or annual results: If earnings figures are lumpy when they reach headquarters, they will be lumpy when they reach you.”
If opportunities arise that might cause us to sacrifice short term results but are in the best long term interest of our shareholders, we will take those opportunities. We will have the fortitude to do this. We would request that our shareholders take the long term view.
And here’s what Jeff Bezos had to say in Amazon’s 1997 founding IPO letter (to get to it, just scroll down beneath the 2010 letter):
It’s All About the Long Term
We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital.
Our decisions have consistently reflected this focus. We first measure ourselves in terms of the metrics most indicative of our market leadership: customer and revenue growth, the degree to which our customers continue to purchase from us on a repeat basis, and the strength of our brand. We have invested and will continue to invest aggressively to expand and leverage our customer base, brand, and infrastructure as we move to establish an enduring franchise.
Because of our emphasis on the long term, we may make decisions and weigh tradeoffs differently than some companies.
Accordingly, we want to share with you our fundamental management and decision-making approach so that you, our shareholders, may confirm that it is consistent with your investment philosophy…
Among the many lessons from these, here’s one of the key ones: The path to effectiveness is often unconventional. The conventional approach is often the easy, risk-free, uninspiring path of low impact. It often seems safer, but actually isn’t. Organizations that make a difference are those that, in the words of Mavericks at Work: Why the Most Original Minds in Business Win, “stand for a truly distinctive set of ideas about where [their] industry should be going.”