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.