Leah asks:
Why do so many companies make decisions based primarily on short term economics and not long-term health of the company? Is it just the stock market, or is there more going on than that?
I am sure that people really do know the answer to this one in terms of how systems and laws and so on have changed to favor short-term over long-term… and I do know that a lot of that has to do with how bonuses and CEO compensation has radically increased over time, meaning short term gambles pay off a ton more than they used to. So some of it is the stock market, but some of it is also how compensation and tax structures have changed. This is really outside of my knowledge area though– my knowledge basically comes from skimming paper abstracts of general interest journals and working papers.
My short answer is that even though companies are supposed to be risk neutral, and are supposed to be trying for immortality, they are run by people. And people are short-sighted. If the rewards are for the short term and not for the long term, then that’s the direction they’ll go.