Short-term guidance doesn’t mean lack of innovation

I agree with the posit by Jamie Dimon and Warren Buffett that offering short-term guidance and the pressure to meet that guidance can stifle long-term growth, I disagree wholeheartedly with their other premise that it curtails innovation.

From their oped: “Short-term-oriented capital markets have discouraged companies with a longer-term view from going public at all, depriving the economy of innovation and opportunity,”

The first part of that sentence is true, the second part false. Pressure to meet the longer-term view does keep, has kept companies from going public.

However, they, we, have not been deprived of innovation and opportunity. Does UBER or AirBnB not exist? Do they not innovate and create opportunities? Neither is publicly traded, but both have had little problem raising funds to grow their businesses.

So, while it is true that the pressures to meet performance targets are strong for publicly traded companies (stocks), it is not true they they have insufficient access to capital.

Without touting my involvement in cryptocurrency too much, it is also true that Token Generation Events, also known as Initial Coin Offerings (ICOs) raised more money for companies last year ($5.7B) than all of Venture Capital did. The fact that many companies delay or simply shun the public markets doesn’t mean, and has not meant, that they can’t innovate or create opportunities. It’s simply that our funding vehicles have evolved as they should.