Masterspeak 2015

"Social media has speeded up our decision making but faster is not necessarily better"

University of San Diego's law and finance professor, Frank Partnoy is a thoughtful procrastinator

Published 9 years ago on Sep 04, 2015 16 minutes Read

The Spanish may have colonised San Diego in 1769 but one can still feel their influence, more so at the sylvan campus of the University of San Diego. Delightful as it may be to the eye, we are not there to dwell on the evolution of Spanish architecture but to meet Frank Partnoy whose bestselling book Wait turned our perception about inaction on its head. Far from being a poster boy for procrastination, Partnoy is as brilliant and conscientious as they come. He is also an anomaly because he left a promising career on Wall Street to pursue a career in academia. While most people in the world are proponents of acting fast, Partnoy recommends slowing down.

As we are about 10 minutes away from winding up the interview, Partnoy drives home the point while ordering an Uber cab for us. “If we order the cab now this will be the wrong time world because the app tells me 4 minutes. If I order a car now that will be disaster for both of us because I will have to pay for the waiting time and you will be rushed. So we are going to wait and delay our decision to order the cab.” 

You clearly are not an advocate of snap decisions. According to you, what lies at the heart of better decisions?

I have been trying to focus on is one narrow aspect of that, which is the ‘when’. Many scientists, political leaders, military leaders and business leaders have focused on the ‘where’, ‘what’, ‘how’, ‘when’ and ‘why’ of decisions. I want to try and bracket all that and focus on what I think is a question that has been much ignored, which is the ‘when’ of making a good decision. The conclusion that I reached — based on numerous interviews, my own research and canvassing various areas of research — was that given the crutch of technology, people often make decisions far too quickly.

Again, there are all kinds of behavioural biases that we have wired into us as human beings that lead us to make decisions too quickly. And the senior people who are most successful across institutions, I found, are those who are consistently pushing back against that phenomena. The most successful decision-makers, I found, are people comfortable with delays: those who are willing to step back and not make a decision too quickly. Leaders told me over and over again that during a time of crisis, they answer questions from panicked employees by saying, “If you want a decision now, the answer is ‘no’.”

Now, I am not advocating laziness. Sometimes, you should make a decision very quickly. I interviewed a lot of doctors and surgeons. In the context of an emergency room, you need to make a decision very quickly. But one of the things that I heard repeatedly from doctors was that we can make a better decision if we use every possible moment. So, if they have to make a decision in a minute, they understand that they have 59 seconds to process the information and think about the patient in front of them, take in as much data as they can and then make the decision. So, you only have one minute but you use and squeeze as much as you can out of that minute.

One of the metaphors that I have used for describing this aspect of decision-making is: for any decision, think about what ‘time world’ you are living in. If you are in an emergency room, it might be a minute. If you are thinking about a new strategic plan for a business, it might be a year. If you are responding to an email, it depends on the urgency of the issue. Asking, ‘What time world am I operating in?’ is the first step to good temporal decision-making. The second step I advocate in my book Wait is something that is very counterintuitive to people, which is, once you have figured out that time world — whether it is a minute or week or year — the second thing you need to do is procrastinate. Wait as long as possible within that time period.

Can you give us some examples from your life?

Absolutely. These days, I teach classes and conduct academic research. I also have a consulting practice. In all of those aspects, I find that waiting till the last possible minute produces the best possible outcomes. For example, when I teach, I could prepare for a class well in advance. If I prepare two weeks in advance, by the time the class comes along, I would have forgotten every detail that I have set forth. So, though I prepare two weeks in advance, I want to make sure that I have a period of time at the very end to prepare.

Now, I have figured out, based on 18 years of teaching experience, roughly how long it will take me to prepare for a class. So, the time world that I put myself in is often half a day or a few hours. I intentionally will not do the intensive preparation for the class until that time period.  

So, one of the things I learnt a lot from researching for Wait was the distinction between an amateur and a professional or between a novice and an expert is the ability to understand the right amount of delay — how much you can delay. A novice or an amateur will react too quickly and won’t be comfortable. We get incredibly anxious and nervous about red lining or waiting till the last possible moment. But the most successful professionals are very comfortable waiting. The question is not whether you are procrastinating, you will be procrastinating, which is not bad actually. The question is: are you putting off the right things?

Is there a way to think or categorise decisions so you could figure out what decisions you can take quickly and what decisions you can procrastinate on? Is there a scientific way of doing it or is it driven by your own priorities?

I think that there are both objective and subjective factors and, to some extent, it is driven by our priorities. You know, there are decisions that are so fast that we can’t even see them. I actually review a lot of the research in sports which I think is a great analogy for business decision making. So, if you ask why these top players are better is, the standard response is that they are better because they are faster. But what the research actually shows is that they are better because they are slower.

They get fast in order to go slow. So, for example, if you have a cricket pitch, you have a ball coming at you at 100 miles per hour you have half a second out there to swing. If I were out there I would swing too early because I haven’t perfected my stroke and I wouldn’t have the skills that professional players do. But what professional players can do is that they can take time, say it is 500 milliseconds, they can take that period of time and carve it up.

Because they are so fast at the stroke, the hitting process, they can free up extra time to process information about the speed, flight, trajectory of the ball to think strategically even though they aren’t capable of thinking consciously. They can still almost magically slow down time and use those extra milliseconds to get an advantage. What these studies show is that the extra benefit is something like 50 milliseconds — that’s the difference between an amateur and a professional batsman, which is astonishing because we all have the same visual reaction time. Wherever you need to make decisions instantaneously, we need to harness our intuition right away. 

But for businesses, a quarter is a wrong time window. It is the wrong amount of time for making strategic decisions. So, pushing that out as far as possible is the right thing. When I spoke to a number of senior executives working at large corporations, I was struck by how the tone of the CEO and CFO office suites varied. In some C-suites it’s bang, bang, bang. Make decisions right now.

Enron was like this where everyone was focused on how the stock price changed in the last 10 seconds. But I also found there were a large number of companies that were very slow in the C-Suite, almost lethargic. And I was surprised by two of the examples which were Sempra and Goldman Sachs. So I was able to go into the C-suites of both companies, Goldman Sachs in New York and Sempra in San Diego. They were so slow paced. I got an hour with the CFO of each of those companies. They were both so relaxed and focused on every question and no one interrupted us. I just thought these are two incredibly well run companies that have figured out this delay issue. This is why Goldman Sachs, unlike many other banks, was able to get out of the sub-prime market in late 2006 as they were thinking about the long term. This is why Sempra, unlike Enron, survived and prospered because the executives were thinking about a 30- or 40-year time horizon. They are thinking about a pipeline. Or they are thinking about their shareholders’ time horizon. 

Most of us may be tempted to answer emails instantaneously, but a lot of senior leaders told me they try to switch their mindset to saying email is more like a day. Or they prioritise emails. Some are the type to which you need to respond right away, but most wait a day or maybe even longer than a day. 

Conventional wisdom says a stitch in time saves nine. On the contrary, in the case of a delayed response you could face impediment and you might not end up with the desired outcome. Is there a process or a way of thinking to protecting the downside of a delayed response?

There are basically two poles of decision making. There is the analytic pole of decision making and the intuitive pole of decision making. I think both are important and valuable and both can give you information about the ideal timing of a decision. The analytic pole has a cost-benefit analysis and can often give you a tremendous and useful amount of information about timing. It is particularly useful where the benefits and costs accrue over a longer period of time, like a year or more, where discount rates come into play and where the analytic process is really important and can show what you are giving up by acting too early or here is the benefit of acting earlier.

The analytic process can be incredibly valuable but the intuitive process can be really valuable too. Steven Johnson has this phrase “the slow hunch” that he uses to describe how people often arrive at really interesting and intuitive conclusions that are helpful in decision making. But they only do it over a long period of time. He cites the example of the discovery of oxygen as this thing that took a really long time. But it didn’t develop analytically but more as a gut response based on taking in a bunch of information and making a creative leap. There is no magic elixir that will make everyone make the perfect decisions. We all make bad decisions and we all make good decisions. The point is that sometimes you need to get things done now, and sometimes you need to get it done later. 

For businesses, it is important to recognise that not every company is living in the same time world. Some companies are living in a very quick time world, for example, your time world as a startup will be different from if you belong to the Tata Group. I think every company should know their time world. 

You talked about intuitive decision making? When should you rely on it and when should you not?

It is complicated. Let me give you a few guide posts. One is that if you’re an expert in a situation your gut is more likely to be effective. There are counter examples to this where experts in politics have done an abysmal job or where certain leaders have thought they were experts but were not experts.

Gary Klein has done a number of studies of firefighters. When they are in a situation where their expertise is properly brought to bear you want to go with their intuition. There is a great case study that Klein has cited of firefighters showing up at a fire and these are experienced experts. They look at the fire and they can’t figure out analytically what is wrong. But in their gut something is wrong. Normally, it is the sort of situation where they would take their hoses and rush in and try to get at the source of the fire.

But there was something about the situation that was bothering them in their gut. So they waited. They explored and they eventually figured out that there was an oil line nearby that was pumping oil into the base of the building and stoking the fire. If they had rushed in and tried to put out the fire in the traditional way all of them would have died. But having had this intuition they were able to know something was wrong and figure out how the scenario was different. So the challenge is, and this is the tough part, knowing when you are an expert and when you are not. 

One of the things that I talk about in Wait is the Einstellung effect, which means you become overconfident in your own expertise. I think the most effective decision makers are humble who never let their expertise take over. Sometimes your expertise blinds you from obvious moves. There is an example that I go through in the book of chess masters who were confronted with a situation on the chess board. They are given two different scenarios one of which has this very common solution, the second of which has still the common solution that an expert would know about but also an uncommon outside the box solution which is a better solution.

One was a five-move checkmate and one was a three-move checkmate. Obviously three is better than five. But one of the amazing things about this study was that the experts who really thought they were experts would see the five-move checkmate and would become so focused on that, that when the board was moved and the three-move checkmate became available, they could no longer see it. Their expertise blinded them to the three-move checkmate. 

What was amazing about this study was that the scientist asked the chess masters if they were looking at the entire boards while they were looking for these various moves. They said, “of course, we are” and he asked if they were looking at this part of the board to which they replied, “Of course, we are but looking at this part of the board.” But he had a camera where he tested where their eyes were looking. They were not looking at the part of the board that had the three-move mate. They thought that they were. They believed that their expertise was making them see the whole board. But their expertise was blinding them. So again there are no easy answers here. But the basic idea is that if you are truly an expert then your intuition is incredibly powerful. This is what we think of as being wisdom. 

But isn’t intuition driven by your own experiences and your past successes and all of that?

Yes. We develop hunches based on the kind of experiences we have had. But even young children have hunches and have intuitions based on very limited sets of experiences. Are they right? Sometimes they are. Even my dog has intuition. Roxy, who is nine months old, knows that if I go to a certain drawer I am going to take out a treat. And she knows that generally when I take out a treat I am going to tell her to go to bed. So if I go over to that drawer she runs straight to her bed. Now is that always right? I might be going to a different drawer to pick something else. One of the things that really distinguishes us from animals is our ability to think about the future, and think about it for a while.

This is what distinguishes us. In developing our intuition, this is a crucial skill — thinking about future consequences. Again going back to Klein, he has developed a very interesting tactic called the pre-mortem which is really useful in developing intuition. Imagine that a major financial institution has failed. How did that happen? What could have caused it to happen? Let us analyse the death before the fact. The idea of that sort of forward looking thinking is to try to improve your intuition. 

When is gut thinking bad? 

There is a lot of decision-making research that suggests that we are very good at thin slicing [making very quick decisions with minimal amounts of information/refers to the ability of our unconscious to find patterns in situations and behaviour based on very narrow slices of experience]. But we are better when we thick slice as the gut is particularly terrible when judging race, judging gender or judging attractiveness. 

There is a study about doctors who were part of a test because doctors in the US systematically under-treat black patients. A series of doctors were shown photos of the patients and told that they had a cardiac condition and they were asked to prescribe a thrombolytic drug, an anti-clotting drug that would help for the strokes and for the heart condition. Everything else about the patient was the same, but one group of doctors was given a photo of a black man and the other group was given a photo of a white man. They treated them differently.

One of the amazing things about this study was researchers said, “Some doctors might have figured out that we are testing race. So, let’s ask them if they knew what we were up to.” One fourth of the doctors knew and assumed that the study was designed to test whether they have racial bias in their treatment. So, the researchers separately looked at the results for that one-fourth who knew that race was an issue. They treated the white and black patients the same. That is amazing. Once people knew race was an issue, race was no longer an issue. Once you are aware that you have these snap biases you can work to try and remove them to perfect or at least improve your intuition. 

There is another study on hiring of businesses in Israel where it is customary to put a photo on the resume when you are applying. People often think is that more attractive people get better jobs and make more money and are more likely to be CEOs. One of the amazing things we found from this study was that the more attractive women had a tougher time getting jobs.

So, they separated out two groups. They had one group where the screening of resumes was done by employees internally. In the second group, the screening of resumes was done by an outside group that had no stake in the outcome. What they found was that internally the attractive candidates would be screened out because predominantly women doing this screening didn’t want any attractive women coming in. But when the outside screening agency screened them, being attractive didn’t matter or, it might have mattered in a positive way, not a negative way. This is another example of how we intuitively snap react. 

Does social media create its own pressure in terms of snap reacting? How do you deal with it? When do you delay and when do you address it right away?

Clearly it does. Social media is constantly creating pressures for snap reacting. There was a Supreme Court case where the initial tweeting about the case got the result completely wrong. People retweeted this, so the story initially for the first few minutes was the opposite. People make all kinds of terrible mistakes sending out angry texts or emails. It is almost like we have turbocharged our ability to damage ourselves with our emotional reactions. We often go into this fight or flight kind of emotional reaction mode and social media plays on that. 

It is a double-edged sword because it is incredibly valuable to have all this information available but the fact that it is available continuously is a temptation. It is like putting dessert in front of you every minute. There is a famous test called the Marshmallow test that psychologist Walter Mischel, a professor at Stanford University, did with four-year old children where he offered them the choice of eating one marshmallow now or if they could wait for about 15 minutes they could get a second marshmallow.

The experiment was interesting not only because it was hilarious to watch four-year olds torture themselves to wait for a second marshmallow but also because years later, Mischel fortuitously encountered some of the subjects of his study who were able to delay gratification and found that they had higher test scores, were wealthier, had happier marriages, had lower body mass indices, were less likely to be addicted to drugs or alcohol and were generally happier. 

One of the things that social media does is pressure us to eat that marshmallow right now, it gives us marshmallow continuously all the time all day long. Some of us can resist and wait 15 minutes. But many of us have a hard time. I think it is quite undeniable that social media has speeded up our decision making and it has made us faster, but faster is not necessarily better. There is this adage that the first mouse gets the cheese. But sometimes if there is a vicious feral cat there, the first mouse gets eaten and the second mouse gets the cheese. So, sometimes you don’t want to be the first mouse, you want to be the second mouse.