The Risk of Inaction, Part 1 *
“Who’s ever ready?” – Lando Calrissian, The Last Jedi
I watched Star Wars’ The Last Jedi at the cinema over New Year. We might do a post at some point in the future about the movie itself or perhaps the Star Wars universe in general, but understanding that this is a subject that people can get very passionate about, and also having no desire to unintentionally give away any more spoilers than I have to for anyone that hasn’t seen it yet, I’m not going comment any further on it beyond saying I did enjoy it in a happy, nostalgic kind of way and so did the people with me.
What I am interested in talking about today however is the moment in it when Lando Calrissian, one of the longest standing remaining characters in the series, asks the question “Who’s ever ready?”, to a another group of key characters.
From a plot point of view there’s layers of context to this question, but the root of what he is asking them and the audience to consider is whether there is ever a perfect time to do something you need to do, with the implication that sometimes in life you have to accept that whatever it is you going to do might have some risks attached to it, but that there are also risks associated with not doing it.
These can be expressed as the risks of inaction.
Because I am not going to talk about the movie, this means I’m also not going to explain who Lando Calrissian is either. Those of you who know Star Wars will already know, and it would be a bit of a lengthy distraction if I started to explain who he is for those of you who don’t.
But even if you can’t recognise your Jedis from your Sith, you would nevertheless be able to recognise the general context of the question, because it refers to a plot theme which is one of the staples of human storytelling: a characterful group of underdogs is facing a ruthless, larger, much more well-resourced and ostensibly impregnable opponent. The underdogs know that their best chance or, to use some business terminology, their competitive advantages, are their guile and unconventionality which they try to use against their unwieldly, more structured opponents in unexpected ways.
Critical among those advantages is also timing, and when you are out-sized and out-resourced, whether as a part of a science fiction fantasy insurgency, a real one in the in the style of Lawrence of Arabia, or in a business context where you are a start-up that is trying to bring a new product or service into a market with larger dominant competitors, then choosing when to act: that moment when you start to put what you have created out there in the world for judgement by customers and competitors, can be one of the most difficult choices you make.
Go too early, and your solution might be too full of technical problems, you might not have the market intelligence you need to launch it properly, or you just might not be able to create enough momentum to exploit your innovation before your more established competitors are able to develop an effective response or maybe even imitate what you are doing. Wait too long, and you might miss your opportunity as someone else releases something similar, you run out of resources, your competitor realizes it has a weakness and patches it, or just that the right moment in the market to capture interest in your idea, service or product is somehow lost.
The universal idea that Lando is trying to express here is whether there ever is *the* perfect moment to do something you want to do, where not only are you feeling completely good about it yourself but also all the relevant external factors that you can’t control also seem to line up in just the right way too.
There are always going to be risks associated with choosing to take one particular course of action versus any other, but there are also significant risks associated with inaction, whether that inaction is a deliberate, considered choice not to do anything, or a passive acceptance of the circumstances you find yourself in.
Let’s think about a different type of inaction that doesn’t involve spacecraft. An older relative recently asked me for advice about how she could improve the rate of return she is getting on her savings. She doesn’t have very much money, having spent a lifetime working in non-profit organisations, but she has been very diligent throughout her life about saving carefully, avoiding debt and living within her means, and in this way she could have been a model for writers like David Bach who promote the importance of being thrifty for long-term savings and prosperity.
The problem is that after retirement she was so worried about doing anything that would put these carefully-built savings at risk she has chosen to keep the vast majority in standard bank savings accounts, which although they satisfy her tendency to avoid risk and complexity have offered low interest rates. This has consequently meant that she has been steadily losing both capital and spending power in real terms based on normal inflationary increases, and over the course of several years the consequences of this are now becoming increasingly evident to her.
I thought about this problem for a few moments and instead of offering any specific recommendations I told her I thought it was more important initially to think about the underlying psychological dynamics that were preventing her taking action rather than discuss any specific new financial tactics. These included loss aversion, how she was framing her options and prioritization.
Loss Aversion
For most of us the psychological tendency to fear losing something that we have is far stronger than the idea of missing out on something that we don’t yet have. This is called loss aversion and it was summed up at least as far back as the 16th century in the very commonly-used expression “better the devil you know than the devil you don’t”, and more recently demonstrated scientifically by those including the famous behavioural economists Amos Tversky and Daniel Kahneman who have been credited with identifying the idea of loss aversion formally in work they did in the late 1970s.
The point about loss aversion is that we just seem to hate (or fear) to lose the things we have even at the expense sometimes of finding something better, and as a result beyond just our personal finances it’s a tendency that that keeps us all in unsatisfactory situations at work, in our relationships and in life.
We know things aren’t necessarily great, but then we don’t make the changes that deep down we know we should. The risk of inaction in this case is that we might be missing out on experiences and opportunities that are far more rewarding, than those we presently have.
Framing
A second factor is the way an issue is framed. These savings accounts advertise interest rates of 1.5% to 2% pa, so this gives us the possibility of being able to comfort ourselves by saying things like “well it’s better than nothing and at least my money is safe”. However, if we were able to frame or label these products as they really are, we might look at them differently. For example, a savings account promoting a -2% to -3% interest rate – which is what these are actually offering in real terms – might seem a lot less attractive and alternatives conversely might seem more attractive.
The same idea can be applied to other areas and other types of opportunity cost, including time. For a while I lived in an apartment building in a Middle Eastern country that was right next to a series of building sites that made disruptive noise almost relentlessly from 6am to late into the night almost every day. I rationalized this by telling myself that it was relatively inexpensive, anywhere in the city could have been just as bad, and hey, I am sure they will get past the noisy part of the construction soon.
Now I look back on this inaction as a big opportunity loss where the effect this situation had on my concentration lost me a huge amount of productivity, even to the extent of having an undesirable effect on my mental health. I never tried to price out a financial premium for these losses at the time, and even if I had I might still not have moved, but at very least the price of the apartment would have seemed much less of a bargain, and somewhere else that was just a little more comfortable and quieter definitely wouldn’t have looked so expensive.
Of course we still do need savings accounts as part of our financial mix, so please don’t think I am advocating not using these at all, but considering the real returns of financial products might help encourage us to look at options with a little bit more risk and reward to balance out the ones that are not generating very much. Or push us into finding a qualified professional to help us if we don’t feel we have the knowledge ourselves. And for those other situations help us to be really honest with ourselves about the true opportunity costs of inaction.
Prioritization
When something reaches a crisis my personal experience suggests that humans do generally take action: our cars breakdown so we finally take them to the garage; the dark patch in the living room ceiling suddenly starts to grow so we call someone in to look at our roof; our mental or physical health fails dramatically so we finally realise that we have to start to make significant changes.
But because we are all busy people with multiple competing priorities, we are generally quite poor at treating the slow-drip symptoms of things going wrong. Someone watching their savings returns fall slowly as everything else starts to get more expensive is definitely more or a slow-drip loss than a crisis. So is someone going into work in a job that they hate and which takes away all they energy they have to do anything else, but which pays just enough for them to stay there.
Yet it’s quite likely that at some point both of those slow-drip situations will become crises if they are just left to run their course.
So the next time you find yourself thinking about something you feel you really need to do, big or small, and provided it isn’t illegal or harmful, try to think about the full short and long-term risks associated with inaction and not doing it as well as the benefits of doing it. Some psychological tendencies and heuristics will inevitably appear and offer you reasons why now just isn’t a good time, but this time why not challenge these feelings a bit harder?
You will probably find that Lando is right: there almost certainly isn’t ever going to be a perfect moment, but this shouldn’t stop you from having a go either.
*When we were writing this we realised that we had a lot more to say on this topic than just one post, so we will come back to it some time and do a Part 2.