Short Term Investing Focus

Posted on February 17, 2010  Comments (4)

Buffett’s New CEO Shows Analysts, Hedge-Fund Managers to Door

Buffett’s Berkshire Hathaway Inc. completed the buyout yesterday after winning the approval of Burlington Northern investors. The deal, valued at $100 a share, allows Rose to hand out returns of nearly 300 percent, plus dividends, to investors who bought stock the day he was named CEO in 2000. The problem, he said, is that shareholders with that length of commitment are dwindling in number and influence.

“When I started as CEO 10 years ago, the typical investor had a time frame of three to five to seven years,” Rose said in an interview. “Year-by-year, that’s gotten shorter.”

The increased focus on short-term results, fueled by real- time media and quarterly analyst calls, can be a distraction for a railroad executive who needs to buy locomotives that run for 20 years and put down tracks that last for 40, Rose said. Burlington Northern said last month it would commit $2.4 billion this year to capital projects, including track, signal systems and locomotives, about $240 million less than in 2009.

“The money I spend this year really won’t pay off for three, four, five or seven years down the road,” said Rose, 50. “There’s the advent of the hedge fund which has changed the time horizon of what satisfies the institutional investor.”

“The speed of the news today I think has harmed, quite frankly, investors looking at long-term assets,” Rose told reporters in a news conference this week. A long-term perspective is “one thing that our country has kind of lost sight of, not just for the railroad equity investor but for a lot of investors.”

Decades ago Dr. Deming said short term focus was one of the seven deadly diseases of western management. Unfortunately we have made very little progress on the deadly diseases. The failed, health care system with it’s focus on a few special interests fighting to keep the broken system that does great harm to society but benefits the special interests is another a disease that has definitely gotten much worse.

Related: Think Long Term Act Dailyposts related to Warren BuffettGoodbye Quarterly TargetsA Great Day for Georgia-Pacific

4 Responses to “Short Term Investing Focus”

  1. Liz
    February 21st, 2010 @ 2:04 pm

    It's the special interests that keeps us from making progress for most things. It's not just apparent with our healthcase but it's apparent our education, jobs and tax system.

  2. Warren Buffett’s 2010 Letter to Shareholders at Curious Cat Investing and Economics Blog
    February 27th, 2011 @ 2:15 pm

    […] running their businesses: They are not subjected to meetings at headquarters nor financing worries nor Wall Street harassment. They simply get a letter from me every two years and call me when they wish. … From a […]

  3. The Market Discounts Proven Company Leadership Far Too Quickly » Curious Cat Management Blog
    January 28th, 2013 @ 6:16 pm

    Developing a strong executive leadership culture is not a short term effort. It isn’t based on one person. It almost never deteriorates quickly. Yet markets continually overact to minor blips on the long term success of companies…

  4. Deadly Disease of Management: Emphasis on Short-term Profits « The W. Edwards Deming Institute Blog
    January 9th, 2017 @ 2:10 pm

    […] running their businesses: They are not subjected to meetings at headquarters nor financing worries nor Wall Street harassment. They simply get a letter from me every two years and call me when they […]

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