Default “no”

This was originally posted on Medium. Moving here for linking convenience.

Examples:

When Bill Gurley spoke with Kara Swisher she asked about inflated valuations. Gurley said “you have to play the game on the field.” It sounded like he didn’t want his next dollar to necessarily follow his first, but was already committed.

Marc Andreessen said that the biggest cost of an investment isn’t money or time, but opportunity. He told Tim Ferriss, “The investors in Friendster were more likely than not, unable and unwilling to invest in Facebook when it came along because they were conflicted.”

When the Apollo 13 capsule limped back to earth, engineers wanted to use more power for a faster trip (and to warm up the astronauts). Lead Flight Director Gene Kranz said ‘No.’ “Generating options was our business, and options remained as long as there was power, water, oxygen, and propellant.”

Seth Klarman said that because his fund’s stakeholders don’t have a mandate for him to hold certain assets; S&P500, REITs, AAA graded paper, etc., he has the option to say “no” to more things and wait for the right things.

“The path to superior results is to accept only the best ideas,” Seymour Schulich wrote in Get Smarter. That means saying “no” to most things.

“I am incredibly cautious about my use of the most dangerous word in one’s productivity vocabulary: ‘yes,’” Cal Newport wrote in Deep Work. Newport looks at the unit of time the way Schulich looks at the unit of money.

The default option — opt in or opt out — for organ donation influences donation rates. Ditto for automatic (the default) enrollment in retirement plans. Nudges are powerful. Richard Thaler knows this.

Patrick O’Shaughnessy said, “We like to say that stocks are guilty until proven innocent.” That sounds like a ‘no’ that could be a ‘yes.’

Generalizations:

1. Waiting appears less valuable than doing. This pressures some people to say “yes”/action.
2. It’s easier to avoid commitments than get out of commitments. Saying “no” keeps you toward the easier end of this spectrum.
3. Some things are hard to figure out. Saying “no” keeps you from being embroiled in things Charlie Munger says are too hard.
4. Some things are dangerous, it’s better to live to fight another day.
5. You can’t start ex nihilo.
6. Our automatic reactions to things are impossible to stop. A (safe) default gives us time to “think things over.”

Counterfactuals:

1. Taken too far, saying “no” means you rule out everything.
2. Sometimes a “no” will turn to “yes” with second level thinking ( “First-level thinking says, ‘I think the company’s earnings will fall; sell.’ Second-level thinking says, ‘I think the company’s earnings will fall less than people expect, and the pleasant surprise will lift the stock; buy.’” — Howard Marks)
3. Our “no” can be built on an outdated/wrong system; needing a center for an NBA team, Blackberry thought only business people needed smartphones, in blind taste tests people want a sweeter cola and we got New Coke.
4. A default “no” will work better for abstainers, less well for moderators.