A Time To Act 2

Delaying a decision may simply involve holding out for a better offer. For example, when the directors of a company reject a take-over bid, claiming (as they always do) that it significantly undervalues the company.

It would be wrong to take the first offer that is made, if there is a reasonable chance of holding out for more. But on the other hand, if you wait too long for a higher offer, you may lose out.

In a post entitled Logic Need Not Apply, Microsoft employee John Evdemon comments on the refusal of Yahoo directors to accept a take-over bid from Microsoft. Is this simple greed, he asks, or are the Yahoo directors allowing their emotions to rule their heads? In asking this question, John is not just influenced by his current affiliation with Microsoft, but also with a startup company he was involved with previously, whose directors turned down a high offer and were subsequently forced to accept a much lower offer.

According to the New York Post (via Computerworld, Feb 15th 2008), there is a split in the Yahoo board, with some directors advocating acceptance. There is a threat of shareholder lawsuits if the directors could be proved to have acted emotionally, rather than in the best interests of shareholders. But how could this ever be proved?

A Time To Act

After several months in which alternative solutions to the Northern Rock crisis were explored, the UK government has finally decided to take the Northern Rock "bank" into temporary public ownership. [BBC News, February 17th, 2008]

The delay provides easy ammunition for political opponents.

"After months of dither and delay we have ended up with this catastrophic decision," said George Osborne ( Conservative shadow chancellor).

Liberal Democrat treasury spokesman Vince Cable said that the right decision had been taken, though "belatedly", and that the government should have walked away from the prospect of a private takeover some time ago.

For their part, government ministers argue that it was necessary to explore other options, and provide the private sector a reasonable chance to offer an acceptable solution, before taking this step. Among other things, the thoroughness of this exploration would provide some defence against any likely legal challenge by Northern Rock shareholders.

As I have previously pointed out on this blog (decision-making, time), timing is an important aspect of decision-making. In this case, it is possible to debate not only whether the decision was the correct one, but also whether the decision could or should have been made earlier - or even later.

According to our model of decision-making (based loosely on Lacan), there are three phases in a decision.

1. The instant of seeing - the moment it was recognized that Northern Rock was in trouble
2. The time for understanding - a period of reflection, negotiation, allowing time for collaborative solutions to emerge
3. The moment of concluding - the point at which all the available options are understood, and a choice must be made.

All of these are uncertain. When exactly was the instant of seeing - when the first rumours of trouble reached the Bank of England, or when the customers started queuing outside the branches to withdraw their savings? How long is it reasonable to wait for a solution to appear? At what point must analysis and negotiation be cut short? Might we have found a better solution if we had spent longer searching?

It is easy to rival politicians to claim that the Government (or any other decision-maker) got the timing wrong, and to make wild and imprecise claims about their own super-human decision-making prowess: "Oh, we'd have acted straightaway" (whatever that means). We live in a culture that values speed and instant response, and is impatient of slow deliberation.

I don't actually know whether this particular decision was taken at the best possible time, and I guess you probably don't know that either. Just look out for statements about how quickly or slowly a given decision ought to be made, and see how these statements are underpinned not by reasoning but by instinct. Which means that if other people act faster or slower than you think they should, this doesn't necessarily mean they are stupid, it may simply mean they have different instincts.

Decisions and Timing

One of the key aspects of decision-making is timing - judging when to commit yourself to something. Two contrasting styles/cultures can be identified

• Delay / Hesitation / Procrastination
• Haste / Impatience

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Delay / Hesitation / Procrastination

It is always possible to find a reason (excuse) for deferring a decision.

• More information needed
• More options could be developed
• More stakeholders consulted

Some individuals / organizations take ages to reach a decision.

• Committees and subcommittees
• Referrals and due diligence

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Haste / Impatience

Because it is always possible to find a reason for delay, some people / organizations are inclined to dismiss such reasons, or are reluctant to take them seriously.
Some people / organizations are impatient with anything that inhibits action.

• JFDI - "just xxx do it!"

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Lacan's Theory of Logical Time

Lacan offers an interesting analysis of hesitation. Logical time is divided into three "moments".

1. the instant of seeing
2. the time for understanding
3. the moment of concluding

Lacan illustrates this with a story of three prisoners. The prison governor shows them three green discs and two red ones. Then he puts a green disc on each prisoner's back. Each can see the disc on the other two prisoners' backs. The first one to deduce the colour of the disc on his own back will be granted his freedom.

The correct deduction appears to depend on the hesitation of the group. "If I had a red disk, then each of the other prisoners would not hesitate to deduce immediately that he was green. Since neither has done so, I must also have a green disk."

Delay, doubt, hesitation, procrastination, the ability to make nothing happen (ungeschehenmachen) - these characteristic features of decision-making are grounded by Lacan in the phenomenology of obsessional neurosis.

For a detailed discussion, see John Forrester, The Seductions of Psychoanalysis: Freud, Lacan and Derrida (Cambridge 1990), Chapter 8. The prisoner story can be found on p178 ff.


Related Post: Time to Act (Feb 2008)

Mastering Time from Richard Veryard

Market Timing 2

I have referred on this blog before (Market Timing 1) to the importance of time/timing in making decisions. In Lacan's theory of Logical Time, there is "a moment to conclude". Lacan is one of the few thinkers who appreciates the need to explain why decisions and actions take place at a particular point in time - helping us understand, among other things, how decision-makers are affected by haste and hesitation.

Now marketing guru Seth Godin has a post on his blog on the importance of timing in marketing. He points out that the effect of a message depends on the state of the recipient when the message arrives.

"All marketing analyses that ignore time are wrong. There's a big difference between a message that arrives when I'm full and when I'm unfull. And there is a big difference between a first impression and tenth one. Even if I can't remember the first nine."

What happens when people have to make a decision on a particular day - for example an election? Some people make up their mind at the last minute. Perhaps it is not rational to commit to a candidate too early, since any candidate may say something unwise, and damaging revelations may emerge at any time before polling day. (A Republican candidate dropped out five weeks ago when inappropriate emails came to light [source: BBC News]. And after yesterday's mid-term election in the USA, the balance of power in the Senate depends on the outcome of the vote in Virginia, where the Republican incumbent was well ahead until he was caught on video uttering a racial slur [source: BBC News].)

But this is not a good example of Lacan's logical time, because an election is held according to an external schedule. What is more interesting in elections is the timing of a campaign. Seth is absolutely right to point to the importance of groundwork, but no amount of groundwork can prevent your candidate from peaking too soon.

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Market Timing

Here is an interesting interplay between economic factors and social factors - which can be explained using systems thinking.

Sometimes, stock market values can undergo a “market correction” – finding a new price level. The adjustment mechanism can be regarded as "feedback loops with very long delays" - as we described in a previous post on Company Value.

The timing of these market corrections (as well as decision-making generally) can be explained in terms of Lacan's theory of Logical Time. In trading stocks, the most profitable time to make a decision is just before everyone else does. (This is the reason why contrarian investing - doing the opposite of everyone else - sometimes works.)

Stock price movements often have their own momentum – they continue to rise or fall, beyond reasonable correction – an undervalued company now becomes overvalued, and vice versa. This results in overshoot and oscillation.

There is a stock market saying: "Never try to catch a falling knife". When you see a stock price falling to unreasonably low levels, it may be tempting to buy and profit from a quick recovery. The trouble is that falling stocks have often got a lot further to fall.

[Update] See also Market Timing 2.

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