The importance of being idle

“Lethargy, bordering on sloth, continues to be our style.” Warren Buffett’s investment principles are easy to grasp. Buy into companies whose core business you understand, whose long-term prospects appear sound, and whose management is owner-orientated. Then leave well alone.

You could argue that it’s easy for Mr Buffett to preach the gospel of inaction. Berkshire Hathaway has long held the enviable position of being able to remain optimistic about a company’s long-term prospects even when, for years at a time, the signs all point the other way. His core idea — that success lies in acting decisively, then doing nothing for a very long time — is seemingly too difficult for the majority of businesses to grasp. They simply don’t have the ability to be ‘long-term greedy’ — or believe that they don’t.

Why is this? For one thing, modern business culture has an obsession with speed. Agile, lean, disruption, productivity — word-cloud the contents of any major business publication and the overarching narrative is clear: the world is moving dangerously fast. Aggravating this, today’s informal, open-plan workspaces create cultures where appearing to be very busy indeed is a proxy for personal worth. (“No corner office? Please can I have four iPhones, then?”) Then there’s the fact that, for executives and consultants alike, sitting back and waiting for things to pan out can be a difficult basis on which to extract cash.

A new year often brings with it a renewed appetite to get things done. And, of course, action can be good — but only if businesses properly manage their expectations about its likely effect.

It seems to us that all ideas have a maturity point. We might define this as the point when an idea can reasonably be expected to deliver an exponential return on the capital deployed in its execution. For new product launches, this could be weeks, months or longer, depending on R&D and go-to-market costs. For brand-building communications such as TV advertising, the maturity point should almost always be measured in years (moving the needle on brand perceptions is a notoriously slow business). For investments in people, returns might be measured over entire careers.

The maturity point isn’t necessarily the point at which a positive ROI is forecast. Rather, it’s the moment at which the intrinsic value of an idea realises its maximum potential — that is to say, when the return on capital justifies the prioritisation of that initiative over the many others that might have taken its place. It’s arguably the most important piece of information in any investment decision.

Yet it’s remarkable how important discussions about the potential maturity point of an idea are often manipulated, mismanaged, ignored, or swept under the carpet in the general rush to get stuff done. (How many times have you witnessed presentations where timescales have been artificially brought forward, or financial forecasts massaged, in order to demonstrate an apparent quick win?)

A business which champions total honesty about its ideas is far more likely to end up doing fewer things, better, and achieve a bigger longer-term payback. Yet a 2016 HBR article suggested that employees in an overwhelming majority of companies don’t feel able to communicate their opinions openly and honestly, through fear of negative consequences or a belief that doing so is futile. This type of culture makes open and honest debate about the relative merits of different ideas all but impossible. It primes people to act in fight or flight mode, a state in which short-term politics often dictate which ideas survive and thrive.

Too many potentially transformative ideas are abandoned before they reach maturity, simply because the right conversations aren’t had upfront. And people who support this counter-productive behaviour in their own workplaces are, consciously or otherwise, attempting to mortgage the future of their businesses for their own prosperity.

‘Lethargy, bordering on sloth’ is undoubtedly great investment advice for those rare businesses that are willing to take the hard road, nurturing their best ideas to maturity, no matter how long it takes. For the rest of us, it presents a huge leadership challenge — and, well, that’s what new year’s resolutions are made for, isn’t it?

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