At the onset of the World Cup, the clichés will bounce around various forms of media as the participating prospects wax and wane. “It’s a game of two halves” will drip from the lips of those who pretend to have some kind of insight.
Soccer City, venue for the World Cup Final
You could be forgiven in thinking that football pundits (the bland, the boring and the buffoon) and business gurus shared the same genetic code, expressed in their excessive desire to state the blindingly obvious.
For football it’s the game of the long ball versus the short ball; for business it’s the long run versus the short run. But, in a sense, it is about so much more, as the French-Algerian writer Albert Camus, who won the North African Champions League as a goalkeeper with his club, wrote:
"All I know most surely about morality and obligations, I owe to sport and learned it in the RUA [Racing Universitaire Algerios, his team].”
Even his former friend and existentialist protagonist, Jean-Paul Sartre, observed that the presence of the opposition complicated the game of football. Like football, business is not such a simple game but is one that is frequently reduced to cliché.
What connects the apparently disparate activities of banking, mining and music? Well you could say mining is concerned with the long term, whilst banking and music is about the short-term, with the last tow activities seeking instant returns from their immediate services.
But dig a little deeper and you find that they are all very old, and some would say timeless, global businesses. In music publishing the most popular tunes and songs were first written and played a long time ago. Morecombe and Wise may have sung “bring me sunshine” in the 1970s without giving any suspicion that its provenance which was of a decade earlier.
Retailing banking, despite the poor reputation it has developed since off-shoring much of its activities, is built on long-term relationships with its customers. In a fractional-reserve banking system, the state has to rescue it from trouble if the whole financial system is not to collapse, amply demonstrated by recent events.
Short-term horizons appear to be otiose for the mining industry, but the long lead times of investing in new technologies whose applications are uncertain tends to create incentives for mergers and acquisitions.
These incentives have been reinforced by the rise in global commodities prices which saw nickel move from US$4600 in 2003 a tonne to over US$55000 a tonne in 2007, whilst the price of gold hit an all-time high this week. In this environment, a company like BHP Billiton was encouraged to attempt a hostile takeover of Rio Tinto, which failed and cost the former US$462m in fees.
It was claimed that synergies for the merger would have significantly reduced costs and thus boosted the short-term share price. In other words, the idea that financial services promote the short-term at the expense of the long-term interests of a global primary industry is often not borne out in practice. A similar argument applies to hedge funds ,who now appear to conform to the cliché of being the arch-villain of financial capitalism.
They balance short and long investment positions to manage the risk of applying sum large of capital to small spreads between the buying and selling prices of assets. If they only operate on one side of these transactions they are engaging in speculation and trying to manage uncertainty rather than risk: a logically impossible task.
If we go back to economic theory we find that the long-run average cost curve is a locus of a number of short-run curves. So, in business practice and theory it is not only a game of two halves, but one of two times.
Time is also an important element in recruiting and retaining talented staff whose contribution should not be a short-term one, unless of course they are not sufficiently talented for the organisational roles they take on. The Long the Short and the Tall is a play written by Willis Hall in 1959, in which a seven-man patrol is engaged in distracting the Japanese during an exercise during the Second World War. The different psychologies of the protagonists come to the fore as they come under pressure – displaying varying degrees of dysfunctional talent, which in many ways is no different from that faced by any organisation.
Recruiting and retaining staff is a talent in itself and the first duty is not to fall into the Oscar Wilde trap. In The Picture of Dorian Gray , he wrote “It is only shallow people who do not judge by appearances”. Well if a mining firm is recruiting a senior geologist with specialist experience, it may wish to become shallow, if only momentarily, as such an individual would be retained for a long period. In recruiting a junior employee, a high-street bank would not be irrational if the candidate’s only response was to iterate “computer says no”.
Other people are always hell, as Sartre perceptively noted, but trying to make them round pegs to fit into rounds holes is not always rational and what may have been a round peg at interview may turn out to be a square peg upon employment. Pride and prejudice are not good positions to hold in you are trying the recruit and retain the best talent. It often depends on the sector you operate in and whether the economic cycle is at a stage where there are labour and skills shortages.
Football used to be a 90 minute game but the introduction of added time means that is frequently a 94 minute one. In knockout competitions extra-time is often played with the result being decided on penalties. Well, the way in which teams negotiate the length of the game may be a more important component than their talent if its goes to penalties.
Similarly focusing on one time horizon rather than a number is a game that business plays frequently with subsequent losses. Equally in recruiting and retaining talent, time is an important consideration if companies want to get the best out of their teams and stellar players. But, the bottom line is that like football the results are not always the expected ones which is what makes both games fascinating to play and watch, which a lot more rewarding than TV talent contests in which the talentless are the star players.
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