Making a decision is like making an investment. One considers alternatives, one judges timing and consequences, and places the order. Time passes, results happen, the decision proves to have been profitable or not, and there is no such thing as reneging. One could hedge – which is a separate decision, a separate investment – but not cancel. The order has been placed.
In business, we are taught, it is a virtue to be decisive. Which is to say, it is important to place the order. The environment, however, is sometimes such that making an investment – long or short – is ill advised. When volatility is high, when swings are unpredictable – in other words, when consequences of decisions are difficult to assess – the virtue of deciding, of investing, placing orders, is not the same virtue as it may be in a more stable environment.
And yet, not making a decision is itself a decision. Being neither long nor short but standing by is itself a position with consequences. There is an opportunity cost to inaction, as there is a real cost to bad decisions. (The difference between opportunity cost and actual cost is at most one of immediacy, but the cost exists either way.) On the other hand, the decision to not act, or a position of inaction, may prove to be profitable and an inspired stroke.
Really, it’s enough to drive one mad. Being in business during volatile times is an education without equal. Immersed in entrepreneurship – and all business executives, whether they realize it or not, are entrepreneurs these days, and on some level even the most mature companies are startups – immersed as many of us have been in decision-making during a volatile time, one comes to consider the described aspects with more than usual scrutiny.
The conclusion, as these thoughts occur – and once again, as these thoughts occur in a treacherous economy, an unpredictable market, and sectors perpetually in flux – is that while decision-making can never truly be postponed, one would be well served to minimize the term and weight of decisions. One should be able and prepared to change course on a dime. Stated differently, and in terms analogous to finance and investing, to be consistent with the theme thus far, this is a time to reduce leverage and shorten durations. This is a time for liquidity, and the word is not to be taken strictly in its literal sense.
