Condemning procrastination is rather a new phenomenon. During the ancient times procrastination was highly esteemed. The wisest Greek and Roman leaders and philosophers embraced procrastination wholeheartedly. They would basically sit around all day long doing nothing apart from thinking and debating. Only when they absolutely had to would they engage in any other activity.
Considering procrastination as a sin is quite a new phenomenon coming up in the 17th century. It is when the puritanical era really started to get moving. One of the main advocates was Jonathan Edwards’s, who declaimed over and scared the hell out of procrastinators:
"Those who delay doing good works flatter themselves that they shall see another day, and then another, and trust to that, until finally most of them are swallowed up in hell, to lament their folly to all eternity, in the lake that burns with fire and brimstone.”
Stock Market Investing And The Virtue of Procrastination
The reason for me to write this little post, which I intended to do a long time ago and have successfully been avoiding for quite a while, is to make the case for procrastination when it comes to stock market investing.
The most common definition of procrastination is "to put off intentionally the doing of something that needs to be done." This might be a bad idea when you have got a decaying tooth and postponing the dentist visit. Or when it comes to filling out and handing in your tax form.
Recently, behavioral finance has gained a lot of popularity in the financial community. The majority of it is research about decision making processes. It intends to guide us to understand why we as human beings doing what we do, what we should or shouldn't do, or how we should do it. But little is said about timing. About when to do something, when to get active or stay inactive.
But timing is important. Because time can provide us with a marginal rate of return. Incremental information helps us to improve our decision making process. Don't get me wrong. Often making early decisions improves the efficiency at the time of execution. No more time consuming thinking or gathering of information. Just execution. Such behavior is certainly reasonable when the goal is to improve the efficiency of machines. But when it comes to accommodating the complexities of human behavior, these reasoning can be a very poor idea.
Apart of the abovementioned marginal rate of incremental information, which allows most current issues and situations to be incorporated, two more beneficial aspects of delaying a decisions should be mentioned. First, it provides the maximum amount of time doing nothing apart from thinking, planning, observing and determining alternatives. Second, and most important, it enhances flexibility. Postponing allows the final action to take full advantage of the unique circumstances that prevail at the time action is finally required.
Therefore, I think that investors who are procrastinators really got their act together. It's not that they fail to be serious-minded about investing. But rather being aware of what can and should be done, and what can't be accomplished in investing, and hence is less relevant.
The Three Flavors of Procrastination
Literature on procrastination mentions three variants of it. The classification depends on what you do instead of working on something. You could work on:
(b) something less important, or
(c) something more important.
Type (a) procrastination is a tricky one. If it is good or evil depends on the task and action involved. Being a couch potato certainly isn't a good idea. But sitting on the coach every know and than doing nothing, or doing nothing apart from thinking, can be a good idea. Because people can recharge and/ or creative imagination can be stimulated. Especially for stock market investors type (a) procrastination can be even performance enhancing.
Type (b) procrastination is the bad. It makes people engage in activities that are at best correlated weakly with the outcome. It can be even vicious, because it often doesn’t feel like procrastinating to people who are indulging in it. They are under the impression "getting things done."
Unfortunately, they are often the wrong things. Take the money manger for example boasting about having visited several hundred companies a year. Gosh! What did this guy actually do? Drive by the headquarter and wave?
I'll argue that type (c) procrastination is good. Followers of it are active procrastinators. They consciously delay an activity, like watching ticker symbols, but therefore doing something that is more valuable. The type (c) procrastinators tend to rethink and balance their priorities and activities on a regular basis. And most importantly are they flexible.
Especially procrastinating investors who do combine (a) and (c) cleverly are a marked bunch. They have an edge over the restless, hyperactive and information overloaded fellow investors. They are working diligently on gaining knowledge on various fields, like history, culture and science, but also about the psychology of themselves and of their fellow investors.
They are happy being inactive and act only on the most pressing issues. The none pressing ones, like hitting the sell button or hitting the buy button without contemplating if the fundamental value of their holdings have changed, is postponed to the indefinite future.
Without any change of fundamental value in relation to prices paid at the stock market, they are leaving selling and buying decisions to another time. If that time never comes they are more than happy. Because it means that the task of buying and selling was in reality never that important.
|The Dude - The laziest guy the world has ever seen|
Snap Decision: The Vice of Going With Your Gut
Still not convinced about the virtue of procrastination in stock market investing? Than listen to the story told by Frank Partnoy, the author of Wait: The Art and Science of Delay. In 2005 Lehman Brothers had arranged for a decision-making class for its senior executives. Four dozen of executives were gathering in the Palace Hotel on Madison Avenue listening to leading decision researchers.
The most famous of them just wrote a book explaining the benefits of making instantaneous decisions, basically a book about those first two seconds. Lehman’s president Joe Gregory was impressed and embraced this notion of going with your gut and deciding quickly, and he had already passed copies of the book on the trading floor. The executives took the course. Then hurriedly they would march back to their headquarters and quickly proceeded to make what would later would be known as the worst snap decisions in the history of financial markets.
Prof. Partnoy is a big fan of procrastinating. He claims that, when faced with a decision we should postpone it as long as possible. It is the extra time to process that is key to making the optimal decision. Regards snap decision he notes that the wisdom in our snap decisions is faulted. True wisdom and good judgment come from understanding our limited knowledge when it comes to thinking about the future. That is why it is paramount to think profoundly about the relevant time period of our decisions. Than we should ask ourselves what the maximum amount of time is we can take within that period to observe and process information about possible outcomes.
Procrastination: A Virtue Not Only in Stock Market Investing
But also in fields other than investing procrastination can be advantageous. Design serves an excellent example of positive procrastination. Generally engineers demand to be given the precise specification to a product so that they can then deliver to the design specs in a timely manner. They get furious when the designers hesitate and delay. But why do designers delay? Certainly not to upset the engineers. It is because getting the specs right is the most difficult part. Independently of how well they are prepared, studied and stated, by the time the product is actually being shipped the specs are outdated.
Therefore, the best way to go in design is to procrastinate. Or putting a more positive twist to it "just in time delivery". It increases the likelihood that no matter what actually happens, the system will adapt. That it is more flexible. It is illusionary to expect the specifications will ever be perfect. Because planning never produces the exact answer for the exact conditions that will finally prevail. People will constantly change their behavior because they have no choice when unexpected events occur. And especially as a stock market investor, we should be aware of two things about unexpected events: They will always occur. And when they occur they will be unexpected. Thus, never be surprised by being surprised by events in the future.
In personal affairs too, procrastination can be adventurous. Take marrying in Las Vegas in haste for example. Quite soon most of the people that got married in Las Vegas feel miserable about it and regret it badly. The way to go should have been getting engaged before. In financial terms getting engaged before marrying is like a lease with a call option attached to it. Marrying in Las Vegas, on the other hand, is an outright purchase.
Compare it to living in a house that you are leasing. What could be better to get a good feel for a premise that you might wish to buy at a later stage. Obviously engagement is a higher level of commitment than dating. But it is more valuable too, because it is a commitment to explore the idea of marriage. If more people would look at engagement from this perspective the divorce rate in the western hemisphere would not be so high. And boy would a great many of them save a lot of money.
Interesting too is the arena of professional sports. To the surprise of many it is seeded with procrastinators. Take a professional tennis player. He has about 500 milliseconds to return a serve. A tennis court is 78 feet baseline-to-baseline, and professional tennis serves come in at well over 100 miles per hour.
Most of us would assume that a professional tennis player is better than an amateur because he is so fast. But wrongly so. Studies of super fast athletes have shown that they are better because they are slow. They have the ability to perfect their stroke and response. They are able to free- up as much time as possible between the actual service of the ball and the last possible millisecond when they have to return it.
Creativity: Value Investing And The Art of Procrastinating
When you think that value investing is as much of an art form than it is science than creativity comes into play. Creativity needs time and space to grow. Although investors can engage in activities systematically and actively that are related to creativity. But, it is almost impossible to systematize the creative process itself. Because creativity is fundamentally about knowledge.
Nearly all creative ideas involve novel configuration of old insights. Basically, people finding new applications for existing knowledge. In addition, creative processes rarely involve steady and measurable progress (sounds familiar dear fellow investors?). Instead, being creative involves trying lots of different things. Struggling down several dead ends before finding the right solution.
The creative process also often entails the necessity to spend numerous hours learning about completely new areas of knowledge, or to have heated conversations with a colleague in order to see things from a different perspective and come up with a new idea. Therefore, until the breakthrough finally arrives, a lot of creative activity often looks suspiciously like nothing more than slobbing out.
Procrastinators are often big thinkers, and putting off work and engaging in another activity often has been the engine of invention and human progress. Because people who are assigned to a task that seems too hard to do procrastinate. This often leads them to invent a better way doing things. Just go back in time, and look through the history of invention and innovation. If you took away every invention that was made by someone who was expected to be doing something else, I reckon there wouldn’t be a lot left.
Final Plea in The Defence of Procrastination
Epiphany stories sound great, but they are generally not true. Not in investing, not in science, not in art and not in engineering. Warren Buffett didn't become one of the richest man with one bold bet. Isaac Newton didn't have an apple fall on his head. Thomas Edison didn’t suddenly discover the light bulb. Tim Berners-Lee didn’t suddenly invent the World Wide Web.
If we want to be able to resolve long- term problems, it is indispensable to create new frameworks where individuals or a group are given long periods of time without pressure. It is necessary that they can engage a problem in a think tank like way. It is high time that we pressed our decision- making framework out of the 24-hour news cycle into a longer-term time frame of maybe a decade or even more.
After having read this post it should slowly dawn you that many procrastinating investors are having their act together. Most of the time they are pitied, looked down upon, or oftentimes, openly scorned by their fellow investor. Such a view is wrong.
In such an environment of excitement and adrenaline how could one not succumb to the do something syndrome. Procrastinating investors, on the other end, seem to be brain dead. They are the frivolous, irresponsible segment in the investment community, seemingly out of step with the rest of an overachieving, hyperactive and result-oriented investing world.
People can say what they like, but I opt for procrastination when it comes to stock market investing. And to those investors struggling with ever-increasing demands on performance on dwindling time, I would offer the following advice: ''Never do today what you can put off till tomorrow.'' (William Brighty Rands)
Jonathan Malesic - America Wants You to Feel Ashamed About Procrastinating. Don't. - (New Republic)
Procrastination Is a Virtue - (Big Think)
Art Markman - To Get More Creative, Become Less Productive - (Harvard Business Review)
Megan Gambino - Why Procrastination is Good for You - (Smithsonian.com)
Good and Bad Procrastination - (Paul Graham)
Don Norman - Why Procrastination Is Good - (Linkedin)
Donne Torr - Why and How Procrastination Can Be Good for Your Job - (Hootsuite)
The Art of Procrastination
Pages: 1 2 3