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Delay Can Pay

Justin Pettit, coauthor of Merge Ahead: Mastering the Five Enduring Trends of Artful M&A, introduces a new perspective on decision making from Wait: The Art and Science of Delay, by Frank Partnoy.

Despite conventional thinking about the benefits of being first and fastest, most of us react too quickly, according to Frank Partnoy, a professor at the University of San Diego. In Partnoy’s new book, Wait: The Art and Science of Delay, a Gladwell-esque compendium that taps research in fields including medicine, finance, psychology, and law, he proposes a contrarian perspective on decision making that suggests that slowing down your response time can yield better results.

In the excerpt that follows, Partnoy applies this maxim to investment decisions. But the book uses case studies of “delay specialists” in realms as varied as stand-up comedy and warfare, extending the implications of postponing responses in order to improve outcomes in every part of our business and personal lives. Procrastinators everywhere will rejoice.

— Justin Pettit


An excerpt from Chapter 11 of Wait: The Art and Science of Delay


Jim Cramer’s Mad Money attracts several hundred thousand viewers nightly during the coveted 6:00 PM Eastern Standard Time slot. During the show, Cramer shouts, gestures frantically, presses buttons that trigger dramatic sound effects, and tosses props, including plastic bulls and bears, as he recommends the purchase and sale of various publicly traded stocks. On a given night, Cramer might feature a “lightning round” of stock picks, a book promotion (often one of his own), some bobblehead dolls (often of himself), or a monkey named Ka-ching. Mad Money has been on the air since 2005 and has been a huge commercial success for the cable network CNBC.

Cramer’s nightly theatrics reverberate in the stock market the next morning. When Cramer recommends a stock, on average it opens for trading the next day 2.4 percent higher than the rest of the market. His average stock recommendation generates an instantaneous gain of $77.1 million. A lot of people are listening to Jim Cramer, and their demand causes prices to go up. If we knew in advance which stocks Cramer was going to recommend, we could make a fortune.

However, we don’t know what Cramer will say in advance, and even if we did, it would be illegal for us to buy based on that knowledge. Instead, the people who follow Cramer’s recommendations buy stock the next day at a higher price. They pay extra, reflecting the optimism Cramer generates among herds of investors about these companies.

According to a detailed analysis published in October 2010, viewers who bought the stocks Cramer recommended the previous night lost money relative to the market overall. Even people who held those stocks for as long as fifty days lost an average of nearly 10 percent relative to the market. For those stocks with the highest overnight returns after Cramer’s recommendations, the fifty-day performance was even worse: negative 29.54 percent for the top quintile. In other words, according to this study, if you watch Mad Money and follow Jim Cramer’s top recommendations, you will lose almost one-third of your money in less than two months. Not very many people can afford to follow that kind of advice.

The study also found that an investment in the stocks Cramer recommended significantly underperformed the market over the longer term. Even if you had insider access to Cramer’s recommendation and engaged in illegal insider trading, buying the stocks before Cramer recommended them, you still would not outperform the market in the long run. Jim Cramer has some interesting and useful things to say about investing in general. But he’d almost certainly be better at picking stocks if he did so less frequently and at a slower speed. The show Mad Money is entertaining, but its recommendations won’t make you rich.

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This Reviewer

  1. Justin Pettit is vice president, strategic advisory, with IHS Consulting, and a former partner of Booz & Company, specializing in corporate finance and shareholder value. He is the coauthor, with Gerald Adolph, of Merge Ahead: Mastering the Five Enduring Trends of Artful M&A (McGraw-Hill, 2009) and author of Strategic Corporate Finance: Applications in Valuation and Capital Structure (Wiley, 2007).

This Excerpt

  1. Wait: The Art and Science of Delay (Public Affairs, 2012) by Frank Partnoy
  2. Frank Partnoy is the George E. Barrett Professor of Law and Finance and co-director of the Center for Corporate and Securities Law at the University of San Diego School of Law. A leading expert on the complexities of modern finance and financial market regulation, he is the author of several books, including F.I.A.S.C.O.: Blood in the Water on Wall Street (W.W Norton, 1997), Infectious Greed: How Deceit and Risk Corrupted the Financial Markets (Times Books, 2003), and The Match King: Ivar Kreuger, The Financial Genius Behind a Century of Wall Street Scandals (Public Affairs, 2009).


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