Willful

by Richard Robb

  Yet almost all of us at least occasionally wait until the last minute, when the penalty for failing to act becomes more severe. Postponing a task right up to the deadline is exciting: we need to feel the bite before it rises to the level of a game worth playing.

  I don’t want to suggest that procrastination is a strategy for harnessing occult powers of “good stress” that appear to the procrastinator if he waits long enough. Dull tasks are simply more attractive under time pressure, whether or not that pressure generates better results. If our true motives for postponing strike us as contrived, we tell ourselves a story. We either invent a reason that the activity had to be postponed until the last minute or shrug and diagnose ourselves with an unfortunate character trait that results in chronic delay.

  One might also rationalize procrastination by saying, “Oh well, I’m just very present oriented; I heavily discount the future.” That, too, is a delusion. A student might delay writing a paper for a week, raising the cost in some sense by 20 percent, but refuse to borrow money at an interest rate of 20 percent per week. That student is “present oriented” only with respect to a specific task—which is another way of saying that she procrastinates.

  Challenges that result from procrastination aren’t perfectly authentic. We choose to let time pressure build, but because it happens naturally, it may not strike us as entirely bogus. In the absence of true obstacles, we construct makeshift challenges and strain to give them a veneer of authenticity.

  In some cases, groups act together to reinforce a contrived sense of authenticity. In recent years, long walks for charity have become popular. Why don’t the walkers spend that time working or engaged in some more pleasant pastime? They could donate half their earnings or half the value of the extra leisure and everyone would gain. But clearly, participants enjoy linking the walk-a-thon to the cause they support. While walk-a-thons may seem artificial and useless to some, for others they instill physical struggle with meaning. This craving for authentic physical challenges that for many are absent from modern life can also explain extremes in exercise, sports, all-nighters at the office, political campaigns, military training, and prodigious work travel.

  Businesses may deliberately make experiences harder than necessary for consumers. “Why don’t they just raise the price?” the economist asks in response to long lines at popular restaurants and sporting events. The restaurant owner who could reduce lines by raising prices might instead reinforce the authenticity of the waiting line by citing a motive other than profit maximization, such as fair pricing. Whatever the owner’s motive, for the consumer, the fight is part of the product and part of its appeal.

  Players Must Stay in the Game

  Suppose you suddenly and unexpectedly receive a significant amount of money. Would you act with caution and set the whole amount aside? Or would you throw caution to the wind and splurge? Rational choice predicts that people would save most of a financial windfall and spread the benefits over their lifetime. They would raise their standard of living permanently, hence the “permanent income hypothesis.” Yet few who obtain a one-off payment spend it on an annuity that provides a constant income stream. This suggests that few people truly want to feather their nests enough to settle into steady gratification through consumption and leisure for the rest of their lives—that would deprive future years of challenge. Better to save some, spend some, and leave room to grow in the future. Spending now may look like impatience but is in a sense the opposite: excessive caution today would spoil tomorrow’s fun.14

  Similarly, many who become rich continue taking financial and business risks even when there is a chance those risks will make them poor again. If a risk pans out, they have overcome a challenge. If it doesn’t, they have created a fresh opportunity to rebuild.

  To avoid reaching the endpoint too soon, we might prolong a challenge at the expense of the formal objective. Boxers dominating a fight may fail to finish off their opponents in order to savor the win. An experiment reported in the journal Econometrica documented a more mundane example of players who sacrifice winnings to stay in the game. Experimental subjects playing computer games in a lab chose a strategy and watched their winnings increase or decrease over time. If their winnings dropped below a threshold, they became bankrupt, and their payoff would be zero. The subjects ended up selecting strategies that kept them alive in the game but lowered their expected payout. The author interprets this as evidence that a “deeply ingrained (and usually reliable) heuristic towards survival leads subjects to associate survival with optimality.” On this basis, he speculates that real-world managers conduct business too conservatively if they suffer from “survival bias.”15 Maybe. But I can imagine myself behaving like the experimental subjects, particularly since they couldn’t leave the lab early and the amount of money at stake was only a few dollars. Watching after I’d been eliminated would be boring, so I’d forgo a payout to stay in the game.

  In Life of Alexander, Plutarch describes Alexander the Great grappling with this conundrum:

  Whenever he heard Philip [II of Macedon] had taken any town of importance, or won any signal victory, instead of rejoicing at it altogether, he would tell his companions that his father would anticipate everything, and leave him and them no opportunities of performing great and illustrious actions. For being more bent upon action and glory than either upon pleasure or riches, he esteemed all that he should receive from his father as a diminution and prevention of his own future achievements; and would have chosen rather to succeed to a kingdom involved in troubles and wars, which would have afforded him frequent exercise of his courage, and a large field of honour, than to one already flourishing and settled, where his inheritance would be an inactive life, and the mere enjoyment of wealth and luxury.16

  Alexander was happy to inherit the throne—he didn’t object to unearned privilege as a matter of principle—but he was loath to inherit a kingdom so secure that it would deprive him of challenges.

  Outcomes Must Be Uncertain

  A challenge can’t be genuine if success is guaranteed—you’ve got to wrestle with elements that can’t be foreseen or controlled. The successes we remember are close calls that work out in the end. (I hesitate to call these the “best,” since that implies comparison and ranking, which are not part of the for-itself realm.) I grappled with just such a challenge when the United Kingdom voted to drop out of the European Union in June 2016.

  I had an ominous feeling in the lead-up to the Brexit referendum, although I can’t say I expected the Leave camp to win. Anyone who claims to have seen it coming is kidding themselves. The vote in favor of withdrawing from the European Union was, objectively, shocking. Our hedge fund had a lot riding on the vote, more than we would have liked. A Brexit shock could plunge markets into chaos, right when we were counting on investors to follow through on commitments to supply capital. If investors responded by freezing up, we would be unable to pay for the deals to which the funds had committed.

  Three transactions were scheduled to settle between June 30 and July 5—an unusual concentration. We had agreed with two banks in Italy and one in Germany to invest a total of €550 million in structured deals that would transfer risk to our funds and boost the banks’ capital ratios. The settlements centered around June 30 because the banks needed to reflect these investments on their quarterly financial statements.

  The money in our funds doesn’t slosh around waiting for us to put it to work. Rather, we call the capital from investors bit by bit when we’re ready. Even if they’ve made a legally binding commitment, we won’t force them to do something they don’t want to do. We bite our tongues and say: “Okay, we want you to be comfortable.” We do not push too hard, nor do we argue: “We are counting on this money. The banks are counting on it. If you back out, you’re jeopardizing our business and our future.” That kind of pressure isn’t what our investors signed on for.

  On the evening of the vote, June 23, I tried to reassure myself that the capital calls wo
uldn’t present a problem, since all signs pointed toward victory for Remain. Exit polls were favorable and the British pound had rallied sharply. Nigel Farage, a leader of the Leave campaign, even conceded defeat. Still, I couldn’t sleep. And around 1:00 a.m. in London, the results started to point to a win for Leave.

  The morning after the vote, I jogged around Hyde Park and Kensington Gardens. Normally, I find jogging excruciating and count down the minutes until the torture will end. That day, I didn’t even notice. My pain was crowded out by the looming horror.

  In finance, as in many other fields, you sometimes make promises you might not be able to keep. If you rely on others, they might let you down, forcing you to relay your disappointment down the line. You can apply pressure. You can take evasive action. But eventually, if you run out of tricks, there’s nothing left to do but apologize to those who were depending on you.

  Apologies won’t prevent a blow to your reputation, however. If we failed to settle one trade with a bank, that bank’s board of directors would never commit to us again. Word would spread to other banks. In this case, we could try to blame the shock of Brexit, but the stain on our reputation would still be long-lasting.

  Later, but still quite early that Friday morning, my business partners and I met in a semi-secret interior room in our London office for a grown-up conversation. If investors backed out, where could we find more money on such short notice? If we couldn’t find it, which bank should we stiff? Of the three banks that were counting on us, which would be hurt the most? Could we scale down any of the transactions without obtaining new regulatory approvals? Which banks could have picked another investor and thus would feel especially wronged if we couldn’t fulfill our commitment? Where did we have personal relationships strong enough to sustain a failure of this magnitude? If we delayed settlement, would it be better to notify the bank in advance, or to fail and ask for forgiveness after? If we delayed for a few days, would the bank still be able to account for the deal as if it had settled by the end of the quarter?

  Together, my partners and I had been through the 1997–1998 Asian crisis, the Lehman crisis, and plenty of idiosyncratic crises in between. We knew ourselves and we knew each other. We were able to settle on a plan that juggled all the variables, then got to work. After confirming that a few investors wanted to drop out, we decided whom to ask for more money and just what to say to them. At the same time, we explored the consequences of asking for an extension on one of the three transactions.

  Our plan worked. We persuaded one defecting investor to reverse course and another large investor to make up the remaining shortfall. (Some investors will help out in a pinch—but better not have too many pinches.) All three bank trades settled on time without a euro to spare. We’d had a little bad luck, then enough good luck to squeak by. We knew that obstacles are not always overcome and crises don’t always end happily. We felt gratitude for the investors who came through, relief that disaster had been averted, and satisfaction with the camaraderie of working together and with the investors and banks that relied on us.

  I cannot understand these feelings or our Brexit adventure more generally in terms of purposeful choice. Even though I accept that anxiety and that familiar cold sweat are unavoidable when working at a hedge fund, as at many other businesses, I would never have chosen this trial if it were presented to me on a menu of options. Yet now that it’s all over, I recognize that I was fully immersed in the action, and that it was more satisfying than anything else I might have been doing at that time.

  The seriousness of our Brexit predicament was intrinsic to the excitement of overcoming it. But while facing high-stakes scenarios can make work feel meaningful, it can’t be the only way to create that feeling—if it were, we’d all be emergency room doctors or firefighters. Work, then, must provide a sense of meaning in other ways.

  Why Do We Work?

  Is work really a burden and retirement the reward at the end, the sooner the better? Plenty of evidence suggests that we’re not as eager to give up work as we might imagine or pretend. Consider the current global bull market in protectionism. Could this be a widespread failure to grasp David Ricardo’s two-hundred-year-old story of the wine maker from Portugal and the cloth maker from England, in which both countries benefit from trading? Of course, English vintners and Portuguese weavers may not benefit, but the gains from trade should be large enough to compensate the losers so that everyone ends up better off.17

  The Ricardo solution would not satisfy U.S. workers left behind by the loss of manufacturing jobs. These workers are clamoring not for redistribution, but for the return of their jobs.

  Worker dissatisfaction with new service jobs or no jobs at all doesn’t fit entirely within a rational choice explanation, even if workers are assumed to value pride and challenges alongside material satisfaction. To see why, suppose unemployed factory workers receive a government subsidy equal to their former pay. If the workers are rational and still unhappy with this state of affairs, they should volunteer to work at another job for no pay—that would get them back to their previous hours and wages, which they presumably prefer. But it’s unlikely that they’d choose to volunteer at factories.

  For-itself theory suggests a simple explanation for unemployed workers who persist in wanting their jobs back despite government retraining programs in the service industry or subsidies to compensate for lost wages. They want to work as they did in the past, overcoming challenges on the factory floor and providing for their families. They want to take pride in making things that society deems important. The jobs were more than means to an end—they constituted part of the workers’ identities.

  Under this interpretation, arguments against free trade are rationalizations. Accusations like “job stealing” help the fiction stick. Workers happily justify trade barriers, and one more lecture on comparative advantage is unlikely to succeed when all the previous ones have failed. As Frank Knight asked, “Why do economists make themselves absurd or pathetic by ‘teaching’ the public things they would see without teaching if they were willing, and being unwilling, certainly will not be taught?”18

  The for-itself idea of action over time as a dynamic, uneven process can also help us understand labor supply in ways that the purposeful model alone cannot. For example, according to purposeful choice, a temporary wage increase induces people to substitute work for time off: leisure becomes more expensive, so people consume less of it. But a permanent wage hike leads to a “wealth effect” that partly crowds out the “substitution effect.” Workers are drawn to supply more labor because the wage is higher, but less labor because the high wage makes them richer. In this view, at a sufficiently high wage, workers respond to further raises by supplying less labor. When this happens, economists say that the labor supply is “bending backward.” Yet while the U.S. factory workweek has shortened by one-third since 1900, as the purposeful model predicts, long hours are still typical in certain fields with high permanent wages like investment banking and medicine. Why? According to for-itself theory, the number of hours worked by the highest earners in these fields has remained relatively unchanged over time because a higher wage generally corresponds to more engaging work.

  What about when wages go down? During recessions, more workers in the United States and other OECD countries withdraw from the labor force than rational choice predicts. This holds true even after taking into account the effect of unemployment benefits.19 But if the jobs available at lower wages are less engaging, it’s not surprising that some workers on the margin retreat from the labor force while looking for jobs that appeal to them.

  Redefining the Good Economy

  Putting aside how the economy does work, how should it work? Recognizing the spiritual importance of work can help us rethink what a good economy is, how it should serve its citizens, and what policies might foster its realization. In purposeful choice, which dominates policy decisions relating to economic matters, an economy is judged to be satisfactory if it produce
s abundant goods, provides ample leisure, and distributes those goods and leisure without too much inequality.

  This model for the good economy sounds about right until taken to its logical conclusion. If the point of work is to afford consumption and leisure, then the very best economy would be one in which no one had to work at all, where computers and robots provided everything anyone could want. In 1930, Keynes famously forecasted that by 2030 advances in technology would mostly take over the work necessary to satisfy absolute needs such as food and shelter; consequently the workday would be cut to three hours. Keynes did acknowledge that work served a second function, allowing high achievers to feel superior to others, but figured that within a hundred years people would find less grubby ways to establish status.20

  Although Keynes’s prediction is unlikely to come true by 2030 (eighty-five years in, one of his grandnephews admitted to working fifteen hours per day, “from breakfast till [he] went to bed at night”), his estimate that real incomes would rise by a factor of eight over a hundred years appears to be on track for the most developed countries.21 But not everyone’s absolute needs have been satiated, and new needs, like mobile phones and organic food, have emerged. Additionally, people still crave the forms of competition particular to work.

  From the for-itself perspective, a world in which technology provided all our material needs would be not a paradise but a dystopia. A good economy delivers jobs that involve challenges as well as opportunities for self-discovery and problem-solving. My objective is not a brainwashing campaign. I neither expect nor desire my employees to announce on Monday mornings: “TGIM! Now I can return to my job and struggle with challenges alongside my colleagues.” Rather, I’m arguing that every job has qualities that we can measure—the wage, benefits, hours, workplace safety, and so on—as well as a non-quantifiable quality. That quality is for-itself.