The impact of short-term thinking

The impact of short-term thinking

Patrick Guntensperger, Consultant, Jakarta

Sanctimonious commentators on the causes of and remedies for
poverty have been known to offer sage advice that includes, among
other pearls of wisdom, the recommendation that the poor should
buy their staples in bulk rather than in the more expensive
single-unit portions. Buy rice by the twenty-five kilo bag rather
than one or two servings at a time, they saythe difference in
cost over a year is enormous.

Anyone who has had any direct experience of true poverty is
painfully aware of just how fatuous that advice is. When your
children are hungry and you only have the cost of a single meal,
budgeting your food expenses over the next year is one idea that
doesn't exactly leap to mind. True poverty is the grinding
existence of day-to-day, hand-to-mouth survival. It is not
characterized by the rational cost/benefit analysis of bulk
purchasing.

Nevertheless, there exist some grounds for applying that sort
of advice to one's thinking in an effort to alleviate poverty
here in Indonesia. While it isn't useful to suggest to the nearly
starving, desperately poor that they employ long-term thinking in
their personal financial strategy, there is some truth to the
observation that extremely short-term thinking in the slightly
more fortunate segments of Indonesian society is impeding the
improvement of their situation. Associated with the triple threat
of collusion, corruption and nepotism, that refusal to look
beyond the immediate horizon is a problem that needs to be
addressed in order to accomplish Indonesia's economic recovery.

Short-term thinking is the mind-set that induces merchants to
overcharge a new customer for substandard products in order to
make a quick, unreasonable profit at the cost of losing that
customer's business forever. Short-term thinking is the kind of
thinking that leads an ojek driver to gouge a new resident in a
neighborhood while disregarding the fact that the new resident
will need an ojek twice a day for the rest of the time he lives
in the area and will never again use the one who charged him five
times the going rate. For the sake of a few thousand immediate
rupiah, hundreds of thousands, maybe millions of rupiah are never
seen as they disappear into the black hole of lost profit. That
kind of short-term thinking costs money in a very real sense.

Disregarding, for the purpose of this article, the moral
aspects of price gouging, misrepresentation of the quality of
goods, and the simple failure to deliver as promised, the long-
term effects of these practices are the stagnation and possible
failure of a small business. The pragmatic justifications for
honesty and integrity in business dealings are evident to anyone
who looks beyond the immediate gratification provided by
pocketing an unearned chunk of someone elses money. The more
successful small business operators are acutely aware of this.
And they are more successful because they put that awareness into
practice in their business dealings.

While some businesses may be able to survive on one-time
customers and impulse purchases, it is the steady return of
clients combined with word-of-mouth recommendations that create
true business success. Even a taxi driver, who deals with first-
time clients almost exclusively, can recognize the enormous boon
to his income that is represented by a regular, repeat customer.
Unless a customer was treated fairly and received decent
(preferably exceptional) service, he wont make any effort to
direct his business to a particular provider.

It is a fact of human nature that people dont like to be lied
to, taken advantage of and stolen from. It is another fact of
human nature that people prefer to do business with someone they
like and, preferably, trust. Put those two simple observations
together and you have the rudiments of a logical justification
for honesty in business dealings. If a small business has a truly
negative reputation it will not survive. A business without a
reputation for integrity or superior service or good prices or
something to set itself apart from the rest will simply languish;
at best it will carry on from day to day, providing a bare living
for the operator.

On the other hand, a small business that becomes known for its
honesty in its commercial transactions or its reliability of
service or its high quality product will thrive. In the short
term it is certainly more expensive to provide a product or
service that is competitively priced but superior in quality.
Slightly longer-term thinking is what is needed, however.

Fortunately for those who would give this concept a try, the
standards they would have to live up to in order stand out in the
crowd are not onerously high. The unfortunate reality is that in
Indonesia, just as collusion, corruption and nepotism are
standard practice, shoddy service, and dishonest business
practices are not only tolerated but are admired and actively
emulated by those who want to make a quick score. One would only
have to adhere to the basics of business ethics to develop an
enviable reputation for honesty and then to attract clientele as
a result of that reputation.

Looking beyond the obvious benefits to the individual of the
implementation of a higher standard of business ethics, there are
societal and cultural dividends to be earned by the effort. The
prevalence of high ethical standards and the competition to
provide quality in exchange for a fair price will create a
climate for investment in a country that is desperately in need
of foreign capital. As it stands, the climate is one of
competition for a quick payoff with no real thought given to
fairness, customer satisfaction or the development of repeat
business. Until that climate is changed, and is perceived to have
changed, there is little hope for long-term improvement in
Indonesia's economic woes.