Bernard Hickey: Me vs the grandchildren

In a parallel system where votes are cast in the interests of future Kiwis, who governs?

Collectively, by the time you read this column, you will have made that difficult and irregular decision about who to vote for.

It's worth reflecting now on how you made that decision. Did you analyse the pros and cons in any rational sense? Did you look at the trade-offs involved and the likely outcomes of the various scenarios? Did you create a spreadsheet of the costs and benefits?

Did you come up with a number that said you'd be better off with one party or another?

Did you look at just the cashflow implications or just the balance sheet implications? How long was your forecast horizon and whose interests did you consider?

I'll assume you were all perfectly rational and informed voters who spent the time and effort doing that analysis. You may have calculated what a change of government might have meant relative to the status quo. You could have worked out what a 15 per cent capital gains tax, a 36 per cent top income tax rate and trust rate, compulsory KiwiSaver, lower (or higher) interest rates and more (or less) Government debt meant for you personally.

Politicians are fond of characterising these decisions in a way to indicate that a certain policy would increase your take-home pay by x or reduce your costs by y, or increase the value of your home or the country by z. That boils the decision down to a simple number and often assumes something quite dangerous - that the voter only cares about their own immediate income/costs.

Sadly, that's often how votes and spending and investment decisions are made - for the short term and for today's consumer.

That seems natural in a world that celebrates the individual and the now, but it's not how everyone has done it for all time.

Just imagine if those decision horizons and points of view were changed. This question cuts to the heart of how personal finances, governments, societies and companies evolve, and often whether they succeed in the long run.

For example, investment decisions in China and in many family-owned businesses are taken from the point of view of over multiple generations. Assumptions are made about investment returns and current consumption that make no sense to a consumption-focused individual today.

Decisions to invest in land or business assets or education make complete sense over decades and centuries rather than weeks or years.

Assumptions about likely investment returns - or in the jargon, discount rates - make massive differences to the projected outcomes.

If you had accounted for the multi-generational impact of your decision this weekend and assumed very low investment returns (perhaps as low as 3 per cent over the long run) for the societal "assets and liabilities" you invested in, would it have differed?

Families, companies and societies that invest in assets that offer steady returns for the very long term, but not necessarily instant gratification, often generate the best results over the very long term.

So why don't we make all our decisions that way? In New Zealand in 2014 most don't.

As you reflect on the election result, reflect on the difference had everyone taken a multi-generational and long-term investment approach.

Would your vote and the result have been different?