According to a report by "Reference News" on September 21, U.S. President Trump publicly called for ending the quarterly earnings reporting system for companies and replacing it with semi-annual reports.

He stated that U.S. companies should no longer be forced to report on a quarterly basis, but instead release performance updates every six months to save costs and allow managers to focus on properly running the company.

He also cited China, saying: "Have you ever heard of such a thing? China manages companies with a vision of 50 to 100 years, while we operate companies on a quarterly basis, which is not good!"

In fact, as early as 2018, he had proposed similar ideas, and at that time, Buffett and Jamie Dimon, CEO of JPMorgan, also jointly called for abolishing quarterly financial guidance, emphasizing that short-termism is harmful to enterprise development with no benefits.

Musk has also criticized Wall Street's mindset of focusing only on quarterly numbers, believing that companies are not alive for investors to stir up emotions, but should return to the essence of technology and strategy.

It can be said that this time, Trump was unusually not acting recklessly, and truly wanted to do something meaningful.

Musk and Buffett

The U.S. quarterly earnings reporting system indeed has systemic problems.

It claims to protect investors and enhance transparency, but in reality, it has evolved into a frequent whip that binds corporate development.

Managers often sacrifice R&D and cut long-term investments to meet the expectations of Wall Street analysts just to present a good quarterly performance.

If profits fall slightly, stock prices drop sharply, CEOs lose their jobs, and investment institutions flee.

In this institutional environment, executives care most about whether the company will be strong in ten years, but rather whether they can beat expectations next quarter.

This structure has given rise to a lot of earnings management and financial tricks: by recognizing revenue in advance, deferring cost recognition, repurchasing shares to boost earnings per share, etc., making the financial statements look just right.

The capital market knows this well but is willing to accept it because it is a conspiracy: companies gain valuation, analysts get commissions, and institutions gain trading spreads.

As for whether companies can grow stronger or have real technological innovation capabilities, it becomes irrelevant.

Trump

Changing the quarterly report to a semi-annual one may seem like a small difference of three months, but it is actually a deep transformation of the capital logic.

Once the frequency of financial reporting decreases, the decision-making rhythm of management will shift from submitting a report every three months to a systematic evaluation every six months.

This will give more time to invest in new products, technological research and development, and strategic adjustments, without worrying about a 0.3% drop in gross profit this quarter.

Analysts will no longer be able to use high-frequency data to manipulate corporate expectations, and the market will pay more attention to long-term directions.

This is a heavy blow to speculative capital, but it is beneficial for long-term investors.

However, the reality is harsh: the U.S. financial system is deeply tied to the quarterly reporting mechanism, and related software, rating models, incentive systems, evaluation mechanisms, and public opinion rhythms all revolve around this cycle.

The resistance to reform is not technical, but many people make money from this system.

American flag and Chinese flag

That is why Trump is very envious of China.

His statement about managing companies with a 50 to 100-year perspective is not empty talk.

Chinese companies have formed a completely different operating logic compared to the West in terms of strategic endurance, long-termism, and national coordination.

For example, Huawei can persist for ten years to build its own chip chain despite blockades.

BYD has been laying out electric vehicles for over a decade, finally reaching a global boom period.

Even though SMIC is restricted by equipment and IP, it can gradually break through technological blockades through extreme manufacturing.

These companies can endure not because their profit data is beautiful, but because their business perspective has never been on a quarterly basis, but on a 10-year or even 30-year cycle.

But in the U.S., even if a CEO does well, if there is a quarterly earnings disaster, the stock price will plummet, and the executive will be replaced along with it.

Trump now seems to have realized one point: the enemy of the United States is not China's chips, tanks, or steel, but its own institutional myopia, strategic anxiety, and capital bondage. If the U.S. cannot learn the strategic endurance of China, it will eventually be dragged down by internal consumption within its system.

Original: https://www.toutiao.com/article/7552792550373999147/

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