Corporate Short-Term Thinking and Its Impact on Industries

“Don’t eat seed corn.” This sentiment resonates with farmers. It’s straightforward: they hold back some of their harvest for next year’s planting to ensure sustainability. It’s a simple concept, really—a lesson in common sense that seems to escape many in Corporate America.

Farmers understand that selling every bit of their crop for immediate cash can lead to dire consequences. If they don’t keep some seeds, there won’t be anything to plant later. This principle of forward-thinking is lost in the boardrooms where short-term profits dominate discussions. Unfortunately, this mindset often leaves future consequences for someone else to handle.

In fact, a culture has emerged where big bonuses and golden parachutes are awarded for actions that resemble vandalism of sorts—profits extracted at the expense of long-term viability. Companies that profit in this way tend to leave behind a trail of unemployment and failing industries, while someone else bears the burden of compensating for these losses.

This approach to business often involves slashing costs aggressively, moving work overseas, and sidelining those best qualified to make informed decisions. Customer service takes a nosedive, innovation stalls, and quality degrades. The products we once trusted barely resemble what they used to be.

A term has surfaced among private equity and corporate strategists: “revenue mining.” This involves cleverly concealing the actual costs behind cross-selling, price hikes, and complex contracts—tactics that can keep existing customers in the fold, at least for a time. But as service declines and product quality diminishes, customer loyalty erodes, and businesses ultimately find it harder to attract new customers.

I’ve experienced this firsthand. My pest control, alarm monitoring, and HVAC services have all fallen prey to this short-sighted strategy. Calling a local service often leads to an overseas call center, and dealing with convoluted phone systems becomes a chore. Contracts start to become pricier, and the quality of service diminishes. I often hear, “Things are very different now,” when the new technology finally arrives. As I weigh my options, I’m tempted to switch to local services that respect me as a customer rather than as prey.

In essence, they consumed their seed corn. They enjoyed an initial windfall from me before redirecting me to their competition—permanently.

At least my dentist runs a small private practice. Still, even dental care isn’t immune. The pressure from private equity on dental practices can be overwhelming, driving unnecessary procedures just to meet revenue goals—a trend highlighted in a recent USA TODAY investigation.

Dental Express, part of a larger chain backed by private equity, pressured dentists like Griesmer to meet aggressive revenue targets or face expulsion from the network. This kind of pressure can lead to searching for dental issues that aren’t even there.

Throughout my career, I’ve noted a troubling pattern—private equity tends to buy businesses with loyal customer bases only to erode their principles. Sure, there are cases where private equity invests wisely and enhances businesses. But those examples seem increasingly rare.

More frequently, private equity firms treat their acquisitions like mines, extracting what they can in dividends while burying the companies under mountains of debt. The funds used for these acquisitions often come from loans, which go unpaid.

The cycle is clear: dig until there’s nothing left, leaving a barren landscape behind.

As one observer aptly noted, there are three types of private equity businesses. Some invest in growth, some revitalize failing ones, and others strip successful companies of their assets while plunging them into debt—a practice with detrimental long-term effects.

This approach isn’t limited to small businesses; it infiltrates the very backbone of American industry. For instance, Carlos Tavares, the former CEO of Stellantis—a parent company of brands like Chrysler and Jeep—received a staggering $39 million bonus for making decisions that focused on short-term gains while damaging future potential and sales integrity. He cashed in while leaving dealers struggling with abundance.

And then there’s Boeing, whose aggressive $43 billion stock buyback strategy resulted in, as they say, a short-term bump, but ultimately jeopardized serious investment in products. They had to raise an additional $15 billion to cover the gaps, leading to delays in launching new aircraft models.

United Airlines recently grounded several planes, claiming they weren’t aware of the malfunctions in their fleet despite having outsourced significant technology operations to foreign contractors. While cost savings may have been realized, the repercussions were significant—leaving them vulnerable to failures that directly harmed service.

Defending capitalism involves distancing ourselves from practices that strip businesses of their value. Yes, capitalism fosters wealth, but when that wealth comes at the expense of quality, longevity, and human resources, it no longer resembles capitalism. Instead, it morphs into a predatory takedown.

We need to recognize this issue and ensure that we’re treating our businesses—and customers—better than just a means to an end.