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Review of “Wait: The Art and Science of Delay”

Technology has pressured us to speed up our lives. We constantly monitor our emails and reply equally fast. In our financial industry, high frequency trading now accounts for 70 per cent of U.S. stock trades. Computers and electronic trading networks have made people who work on the New York Stock Exchange trading floor irrelevant. Elsewhere, people rush to fast food restaurants, read short online news stories and predict a trend after viewing only a short video. Frank Partnoy, in his book “Wait: The Art and Science of Delay” argues that better outcomes are in store if we consciously and unconsciously delay the time in making decisions. Partnoy is a former investment banker at Morgan Stanley and is currently the Professor of Law and Finance at the University of San Diego.

Partnoy is out to explore two questions central to decision making. First, how long should we take to decide in a situation and, second, once we have a sense of the correct time period, how long to delay leading up to the moment of the decision. In the process, a key concept of decision making is discussed, the discount rate. Decision makers at the government level tend to use a high discount rate for public programs such as flood mitigation and environment. Clearly they value the future far less. Consequently, lower budget amounts are set aside for projects that would result in higher payouts in times of crisis.

In tennis, baseball and cricket, the best players are not faster than the average. Their fast physical reaction enables them to go slow. They have sufficient time to gather and process information before they hit. They are excellent in the “prepare” phase than the “see” phase. The best cricket batsmen never look hurried even when the ball is coming at them at speeds of 150-160 km/hour. How many times cricket commentators have said that a Sachin Tendulkar or a Ricky Ponting is seeing the ball the size of a soccer ball!

The role of geography in speeding trading was well documented in Michael Lewis’ “Flash Boys”. UNX’s trading platform was a huge success as it moved its computers closer to the location of the stock exchanges. However, they realized that they started losing business the faster they went. When they slowed back to 65 milliseconds from 35 milliseconds for a trade, they shot back to the top of the charts. On May 6, 2010, a “fat finger” of an employee at Waddell & Reed, a mutual fund company, triggered a trading collapse in the blue chip shares of General Electric, Proctor & Gamble and Accenture plc, among others. Such a “flash crash” caused by high frequency traders highlighted the problem of speed. The response by regulators is a circuit breaker, a mechanism to force the market to shut down temporarily or “wait”.

Which is the better approach? Jim Cramer’s lightning round of stock picks or Warren Buffett’s so-called “lethargy bordering on sloth”? Great investors procrastinate but not because they are lazy. Lack of patience and a high portfolio turnover is a definite detriment to performance.

Many consider Isaac Newton’s discovery of gravity or Thomas Edison’s lightbulb as eureka moments. But Partnoy disagrees, observing that both men were tinkerers. Much like Steve Jobs or Larry Page, they spent hours experimenting by building and taking things apart. The example of the Post-It at Minnesota Mining & Manufacturing Company (or 3M) reveals the long term nature of innovation. Employees were encouraged to spend 15 per cent of their time innovating. At one time, even Google had 20 per cent “innovation time off”. Sadly, these have taken a hit as professional managers trained to boost short term profitability replace the tinkerers.

Wait: The Art and Science of Delay” is a valuable addition to the behavioural economics, much like Daniel Kahneman’s “Thinking Fast and Slow”.

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