Tennis stars throw sets when they are down in order to save energy. Teams in
tournaments know that where they finish in early rounds determines who they
face later on. The truth is that fans often watch sportsmen deliberately
underperforming.
Hence the disgust over four badminton teams “not using one’s best efforts to
win” at the Olympics is doltish and inconsistent. And the issue extends well
beyond sport. If the Chinese, South Korean and Indonesian teams were
companies, for example, they would be applauded for eschewing short-term
gains to deliver longer-term results. Last week, the Kay Review found that
“short-termism is an underlying problem in UK equity markets”.
Confusion
But shareholders, like spectators, are also prone to inconsistency and confusion.
Chief executives are often judged on quarterly performance. Investors
generally lack patience. Facebook, say, is being sold off in part because of
the heavy capital expenditure necessary to build a sustainable business –
its capex-to-sales ratio last quarter was 35 per cent. Mark Zuckerberg could
easily slash that to boost short-term profits.
A problem with this argument, however, is that long-termism is not always what
it is cracked up to be either. The infinite time horizons of sovereign
wealth funds can lead to investments that distort markets in which mere
mortals operate. Qatar Holding, for example, is making a right mess of the
merger between Glencore and Xstrata, and does not seem to care that it has
lost its dishdasha on investments in the likes of Barclays and Credit Suisse.
The Badminton World Federation should not have disqualified players for
wanting to win gold. Investors have to be more balanced in their assessment
of what victory means.
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