Looking for the long term

September 9, 2019

What happened?

Last week, the Long-Term Stock Exchange (LTSE) raised $50 million in a Series B funding, after it was approved as the 14th listed exchange in the U.S. by the Securities and Exchange Commission in May. The goal of LTSE is to direct the incentives of publicly listed companies away from short-term goals (e.g. beating quarterly projections, shrinking R&D budgets to cut costs and boosting operating income), so that they can focus on long-term growth instead. Investors in companies that are listed at the LTSE are to provide disclosure of their investment commitment and their voting powers increase in correlation to this, meaning that company founders know the time horizon of their investors and gradually sacrifice their control. Furthermore, executive compensation should be less tied to short-term goals (e.g. a certain share price).

What does this mean?

In his General Theory, John Maynard Keynes described how the financial sphere of the economy became more and more detached from the real sphere (thus voicing a Marxist critique), because of the distinction between ownership and control of companies on stock markets. Whereas a company’s managers are responsible for its long-term survival, shareholders – those who actually own the company – are mostly interested in short-term gains on their investments. One of the results is that investors quickly sell and speculatively buy stocks in times of cyclical and short-term volatility, leading to a kind of “casino capitalism”. In order to align shareholder interests with those of the company itself and create a more sustainable form of capitalism, Keynes proposed that investors should be legally bound to their investments for a longer time.

What's next?

We have written before that the number of IPOs and publicly listed companies has been diminishing, which particularly holds true for tech companies, that foresee problems explaining their business models and performance to stockholders. Furthermore, the financial cycle has become much more important to macroeconomics and the global business cycle. Both observations show that a more long-term horizon is needed in order to create a more sustainable and equitable form of capitalism. The Rhine model of capitalism, with its stakeholder approach and focus on companies’ long-term relationships, might provide inspiration for these ideas, and thus for a new opportunity for stock exchanges to attract international capital. Especially after Brexit, Europe can position itself as a long-term trading hub, helping companies to outperform if they have a long-term horizon, and boosting its ideas to incubate its own tech sector from this perspective.

Series 'AI Metaphors'

1. The Tool
Category: Objects
Humans shape tools.

We make them part of our body while we melt their essence with our intentions. They require some finesse to use but they never fool us or trick us. Humans use tools, tools never use humans.

We are the masters determining their course, integrating them gracefully into the minutiae of our everyday lives. Immovable and unyielding, they remain reliant on our guidance, devoid of desire and intent, they remain exactly where we leave them, their functionality unchanging over time.

We retain the ultimate authority, able to discard them at will or, in today's context, simply power them down. Though they may occasionally foster irritation, largely they stand steadfast, loyal allies in our daily toils.

Thus we place our faith in tools, acknowledging that they are mere reflections of our own capabilities. In them, there is no entity to venerate or fault but ourselves, for they are but inert extensions of our own being, inanimate and steadfast, awaiting our command.
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2. The Machine
Category: Objects
Unlike a mere tool, the machine does not need the guidance of our hand, operating autonomously through its intricate network of gears and wheels. It achieves feats of motion that surpass the wildest human imaginations, harboring a power reminiscent of a cavalry of horses. Though it demands maintenance to replace broken parts and fix malfunctions, it mostly acts independently, allowing us to retreat and become mere observers to its diligent performance. We interact with it through buttons and handles, guiding its operations with minor adjustments and feedback as it works tirelessly. Embodying relentless purpose, laboring in a cycle of infinite repetition, the machine is a testament to human ingenuity manifested in metal and motion.
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About the author(s)

Pim Korsten has a background in continental philosophy and macroeconomics. At the thinktank, he primarily focuses on research, consultancy projects, and writing articles related to technology, politics, and the economy. He has a keen interest in the philosophy of history and economics, metamodernism, and cultural anthropology.

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