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Lessons Learned Case #6

To go for it, or to procrastinate: It all boils down to trusting your instinct

Author/contributor: Art Murray

Applicable to: Decision making; Finance

Ratings/reviews:

Story: Billionaire Richard Branson is known for his “Screw it, let’s do it” attitude. Notable successes include Virgin Records and Virgin Atlantic. Notable flops using the same approach include Virgin Cola and Virgin Bride.

In his book The Virgin Way, Branson relates how he’s learned to temper his snap judgment with what he calls “orchestrated procrastination.” Here the words become, “Screw it, let’s think some more about it.” He tells the story about a deal The Virgin Group subsidiary Virgin Money was considering entering into with financial giant Goldman Sachs. It involved collateralized debt obligations, a.k.a., “subprime mortgages,” hedged by slight-of-hand financial instruments called credit default swaps. He writes:

“Some of our Virgin Money people wanted to jump on the deal but, never having previously heard of the commodity in which they wanted us to invest a sizable sum of money, I urged that we drag our feet for a while. Sometimes ignorance can be bliss. The more we looked at the deal the more questions arose, so in the end we decided we’d say ‘thanks but no thanks’ to the Goldman people who by this stage were becoming quite agitated about our foot dragging.”

As everyone knows, not too long after Virgin passed on this wonderful “opportunity” the US housing market crashed and subprime debt began to unravel, with Goldman Sachs being fined $550 million for ‘having misled investors in a subprime mortgage product just as the US housing market was starting to collapse.’

Branson recalls how on this particular occasion, “our orchestrated procrastination saved us a lot of money — and probably a chunk of our good reputation as well!”

Setting (situational context):
  • Date and time: circa 2005
  • People and their roles: Virgin Money (Virgin Group Chairman Sir Richard Branson)
  • Place: Unknown
Problem (symptoms/observations, why it’s a problem and the impact if not solved): Opportunities come and go quickly, hence the pressure to make snap decisions. Delays can mean missed opportunities, but can also mean avoiding disasters. The problem is knowing when to act quickly and when to deliberately procrastinate in order to obtain new and better information.

Goal (challenge): Having the courage to trust your instincts and avoid what appears to be a very lucrative deal.

Root cause (of the problem/challenge and how it was determined): Something new and unproven, in this case a new type of financial instrument, was taken as a warning sign to proceed with caution. As it turns out, there were huge risks underneath the surface, brought about by deception in advertising as well as slight-of-hand accounting tricks.

Solution (action taken and how it came about): Resisting the urge to act quickly, even though that has proven to be successful in the past, and instead deliberately procrastinating.

Outcome (the end result and its impact): What appeared to be a "bright shiny object" turned out to be a disaster. By procrastinating and deliberately delaying entering into an apparently lucrative deal, a huge financial loss and damaged reputation were avoided.

Analysis (what worked and why, what didn’t work and why):

Cautions/warnings: Taking quick action may have worked in the past. But when something just doesn't feel right, it's better to take your time.

Lesson (moral of the story, guidelines, rules, recommendations): Sometimes "dragging your feet" can actually be the best course of action to take. The trick is trusting your instincts in order to know when you need to act quickly and when it's best to take your time."

Full narrative:

Source data/documents: "The Virgin Way: Everything I know About Leadership," Richard Branson, Penguin Portfolio, 2014, p. 329-331.

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