The above names might sound like a firm of top American lawyers, but in fact they are all eponymous “laws” that are worth thinking about when we are trying to make decisions. The term law is I think too strong, I prefer to say rule or perhaps even just guideline. Labelling aside the key point is they all address the time element of decision making, albeit in slightly different ways. They can act as three correctives or at least reasons to pause for thought when deciding upon things.

Firstly, Roy Amara (1925 – 2007) on technology,

“We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run” 

Amara was a scientist and headed The Institute for the Future, a think tank spin off from the Rand Corporation. He neatly explains how new technology often arrives with a fanfare of excitement and then the long and very difficult work to implement it at scale tends to drop out of view, but in time the technology impacts the marketplace and grows in significance and importance. This is sometimes illustrated by the famous Gartner Hype curve. It is a useful lesson for investors that being first is not always a guarantee of success and that implementation is as important as invention or innovation.

Named after the writer and renowned thinker G.K. Chesterton (1874 – 1936) “Chesterton’s fence” is the principle that reforms should not be made until the reasoning behind the existing state of affairs is understood. In his book of collected essays, The Thing (1929) Chesterton described it as thus.

There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, “I don’t see the use of this; let us clear it away.” To which the more intelligent type of reformer will do well to answer: “If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.”

This is very valuable advice, as we are often all too eager to discard old ideas, methods, and rules of thumb in our endless desire to be first and new with everything. We risk the Law of Unintended Consequences if we destroy such “fences” without careful consideration and thought. Much better to follow Newton’s oft quoted observation to stand on the shoulders of giants to see that bit further forward.

“If you don’t have to decide about something, then don’t decide.”

I particularly like this so called Falkland’s Law, there is however a problem, I can find no definitive source for this quote (some have suggested it might be Admiral Lucius Cary, 2nd Viscount Falkland, who was a British naval commander during the 17th century.), but no matter. So again, somewhat like Chesterton it can be best to leave things well alone. This advice is also valuable as it alludes to the fact that much of decision making is about timing, and that with more time there is opportunity to perhaps gain more useful information. This has echoes in options trading (both financial and real options), and we like to keep our options open until we really do have to decide. Of course, doing so incurs a cost (premia in formal contracts) and is an important consideration as well.

Messrs Amara, Chesterton & Falkland do not solve any particular issues for us, but their observations may help us stumble forward in the murky future of what to do next.