´´ Procrastination: The Hidden Value of Delaying

Monday, February 22, 2016

Procrastination: The Hidden Value of Delaying

People following a puritanical ideology would like to see procrastination right at the top of the seven deadly sins. But wrongly so. In some professional activities and personal affairs it should be consciously embraced. Especially in stock market investing. Consciously procrastinating, and combining the different forms, strikes me as a clever and intelligent behavior, not only when it comes to value investing. 

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.
But when it comes to stock market investing there are numerous situations where one should procrastinate. Because in any decision making process moderate procrastination is often a wise course of action. Excess is never a virtue, whether it involves hyperactivity or procrastination. Nevertheless, in investing putting off a decision often is wise. 

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.

In many tasks procrastination is a hindrance. But only in those where the outcome is controllable. Stock market investing is not such an endavor. There is no correlation between trading activity and outcome. Quite to the contrary. Over and over again research has shown that activity diminishes long- term results.

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.


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