DECISION MAKERS OR SUCCESSFUL MEN OF INACTION?
by Inderpal Bhandari, executive editor at large

Sometimes it is best for decision makers to do nothing, to put things off, to not act. I have read two articles in the recent past that emphasize this point. The first article was about Treasury Secretary Rubin. He explained the wisdom of not trying to reach a decision at every meeting. Decisions must evolve. If a decision is not reached in the natural course of events, it may signify that there is not yet enough information to make a decision. Forcing a decision under these circumstances would hurt more than help.

The second article was about David Shaw. Mr. Shaw is a very successful Wall Street quant, i.e., someone who uses quantitative methods to trade securities. A quant does not spend much time researching the fundamental state of companies or of the economy. Instead, a quant is primarily concerned with finding patterns that capture market inefficiencies. For instance, Stock A historically tracks Stock B. The quant notices that Stock A is up but Stock B is down. Knowing that Stock B will also go up, he can make money by buying Stock B now and selling it later when it goes up.

Shaw made an interesting comment. He noted that discovering a pattern such as the above does not mean that one should put in a huge order to buy Stock B. Doing something like that would attract the attention of the competition, the other traders. They would get tipped off. The market would then correct that inefficiency -- permanently. One would never be able to exploit that pattern again. Instead, Shaw suggests that it may be better to reap the benefits slowly, perhaps to buy in modest amounts, or sometimes, not to buy Stock B at all, all of which could confuse the competition and leave that inefficiency in the market.

Reading the articles about Rubin and Shaw allowed me to put some of my experiences in that perspective. I began to understand the logic in similar situations that I have come across in professional sports. There have been times when a coach knew of a weakness in an opponent but exploited it only minimally during the season. In hindsight, I can see the wisdom of keeping an ace or two up one's sleeve for a more important situation, such as the playoffs or the next round of competition.

There have also been times when it was clear that the right thing to do was to substitute one player for another but the coach did not make the change. In hindsight, I realize that there were other factors to consider. For instance, the player being replaced was a close friend of the team captain, the best player on the team. A substitution could have affected the performance of the captain, especially if he did not share the opinion of the coach. Better to wait under these circumstances until the deficiency is obvious -- even to the friend. That would be the right time to act.

And, why do I tell you all this? Data mining and the other technologies of business intelligence only increase the pressure to produce results. After all, the CFO who approved several million dollars worth of data warehousing and data mining systems is not going to be kindly disposed towards a line-of-business executive who lobbied for those systems but has not speeded up his act.

Today's decision makers must learn how to deal with that increased pressure. They must realize that advanced technology can speed up some but not all aspects of their decision-making responsibilities. They must also be able to clearly identify and articulate the differences between those aspects.

In summary, some things have not changed all that much, in spite of spectacular advances in technology. The importance of doing nothing when nothing need be done is one of those things.
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Inderpal Bhandari can be reached via http://www.virtualgold.com