Note to readers today:  This post was published at the very lowest point of the Covid Crash in 2020. It is designed to be bombastic and provocative, and at that, I think it succeeds.  – Sean

Can you feel it?


If you do not look it in the eye, it cannot GET YOU

Let me tell you about FEAR:

In my mis-spent youth I got a psychology degree (for which I still owe the government twenty thousand dollars – student debt forgiveness stimulus please). FEAR leads to fight or flight response. The purpose of FEAR is to motivate you to act.

Insufficiently afraid and you will not act. Too AFRAID, and you will freeze.

Let me tell you about AROUSAL:

Speaks for itself, really.

Ironically, peak fear can also coincide with ABJECT TERROR that leads to us RUNNING FOR THE HILLS instead of FREEZING. It’s not easy to distinguish between these outcomes. I would speculate that if you are Overly Aroused and are subconsciously propelled to act, you will flee. If you don’t act, you will freeze. The perceived immediacy of the threat is probably the discriminating factor – do you need to RUN AWAY BEFORE IT GETS YOU or can you HIDE and HOPE THE BAD MAN DOES NOT FIND YOU.

FEAR is an extremely powerful motivator. It has the power to subconsciously and unwillingly compel us to do things we are rationally aware are not wise. Let us accept for the purpose of this post that we care about three states of FEAR:

  • Insufficiently Aroused
  • Optimally Aroused
  • Overly Aroused

Insufficiently Aroused

Moving from Insufficiently Aroused to Optimally Aroused is not hard. What’s really fun is when you are INSUFFICIENTLY AROUSED and NEED TO GET MORE AROUSED IN A HURRY. (I’ve used the word aroused enough by now you probably forgot you were waiting for a penis joke)

One way to become Aroused is to YELL AT PEOPLE A LOT. Increasing the absolute arousal of your environment narrows the gap between how aroused you are and how much more intimidating an external threat is.

I don’t know why I put a picture of Christian Bale from The Big Short here.

It’s not conducive to good thinking and I don’t advocate yelling at people. But it’s good for Arousal.

Speaking of Arousal. Did you ever hear about THE MAN WHO PUNCHED THE SHARK?  He had no choice.

There is a SHARK on the page just below us.  It is FRIGHTENING.  Scroll quickly, because the good advice starts after that.

From the movie Great White, although it could have just been called: FEAR

Overly Aroused

Moving from Overly Aroused back down to Optimum Arousal is many, many times more difficult. FEAR is, for the purposes of our talk, the result of a stressor that feeds a subconscious biofeedback mechanism. Many skilled psychologists are capable of inducing actual panic attacks in Overly Aroused clients. Simply amplify the stress and watch the subject’s breathing become more rapid and shallow. More shallow breathing leads to a shortage of oxygen and escalating fear at the lack of oxygenation, which in turn leads to more fear and before you know it YOU ARE HAVING A PANIC ATTACK.

The greatest irony of the biofeedback mechanism is that stress itself induces elevated heart rate and shortage of breath which together provide tangible proof that THERE IS SOMETHING TO WORRY ABOUT. Fear feeds on itself. You might not be feeling anxious (men duck the Anxiety Label faster than politicians dodge the draft) but the mechanism is the same. There are many ways to treat acute Over-Arousal and they all involve reprogramming or otherwise short-circuiting the biofeedback mechanism.

Among the most reliable is exercise. The body is a machine and as demand for oxygen increases the heart will beat faster. Sustain a high heart rate long enough and the body will need to rest, leading to a lower heart rate and lower anxiety. This is an extremely reliable approach. It is not magic – it is a law of physics.  Another effective mechanism is a simple breathing exercise – stop all activity, close your eyes, breathe in for a 5 count, hold for 5, out for 5. Do this fifty times.

Systematic desensitisation is a reliable approach for avoiding becoming Overly Aroused in the first place. At its best this is employed by skilled therapists to treat phobias, and many phobias are today curable through this specialised treatment. I personally have witnessed a recorded three hour therapy session where a snake phobia client is cured with the use of a live snake.

The downside is there are no PLEASE HELP ME MY RETIREMENT IS BEING BUTCHERED IN FRONT OF ME therapists out there. I will instead give a hypothetical example of a systematic desensitisation-style approach from martial arts training.

Systematic Desensitisation In Real Life

Conflict does not come naturally, and most people find it intimidating and uncomfortable. It is, like FEAR itself, a highly aversive stimulus (something we will take action to avoid). The easiest way to think about how to approach conflict is to think about training somebody for conflict. Martial arts training is a good example.

The instructor needs to teach their charge to become comfortable with a) hitting somebody and b) being struck in turn, both of which are unnatural acts.  Third, there are a lot of threatening body-language cues that we are not aware of but subconsciously are very powerful motivators of behaviour. Standing face to face with someone inside their personal space is a good example.

To overcome this the instructor will teach a student, for example, some pattern of punches. After the student finishes punching pads that the instructor holds, the instructor will make some THREATENING RESPONSE, such as walking forward and bumping into the student (even in training, this can be more intimidating than it sounds). The student will be taught to step left or right to avoid the instructor.

What the instructor does next is most interesting. The pace of the exercise will increase to the point where the novice student’s brain physically cannot keep up with processing of the patterns and movement (again, it’s much harder than it sounds). Bad instructors will use the threatening gestures to bully or intimidate the student, escalating the fear and uncertainty instead of promoting proactive processing of the situation. Good instructors will lift the tempo until the student is right at their limit (maybe even a little beyond) and then slow down very slightly to the point where the student is able to process the correct responses and avoid the situation. The student thus learns subconsciously to firstly process (interpret and process the threatening gesture) and then respond (decide to take action and then actually move). In this way the student learns both to engage with and then resolve a threat.

Following a period of practice, a good instructor will increase the tempo. The pace will become faster and the fear and threat (walking into the student) will progressively escalate (walking into them and shoving them, for example). Again the exercise will continue until the student is at their limit, and then slack off just enough to allow them the mental space to process and respond to the situation and build a sense of threat-response-reward in their brain that eventually becomes subconscious.  There are many names for this type of process, but even a total beginner will make remarkable progress in an hour or less using this type of method.

Because the student has been taught how to process and avoid the threatening situation, their anxiety levels stay low and they are able to work their way through the problem. When the training intensifies and the fear/threat levels creep up, the fear is channeled productively:

HOLY SHIT I NEED TO MOVE FASTER AND GET OUT OF THE WAY.  The fear does not degenerate into a negative biofeedback loop, the student does not have the time to ruminate on it, and there is a perceived exit from every situation which the student becomes confident is attainable.

An alternative approach

I explain the above so that you can get a visceral grasp of the thought processes that are involved in being trained to deal with threats. Many people understand this intuitively, but when you say “come up with a plan for how to respond to threats” this is pretty abstract advice and not helpful.

Another way to look at responses to threatening situations is Martin Seligman’s Learned Optimism.  Seligman is one of the greatest psychologists of last century and I read his book (and most of the research papers that underpinned it) in uni.  At the recommendation of a friend I’ve recently been rereading it. I will give you a little snapshot. This is the core of Seligman’s theory, paraphrased:

First, there is some threat against which you believe you are helpless. Second, you look for the threat’s cause, and, if you are a pessimist, the cause you arrive at is permanent, pervasive, and personal.

Permanent (depth of problem):   Stocks are going down and its gonna take 10 years for them to come back (“my problems are permanent”)

Pervasive (breadth of problem):  Investments all lose money and there is no safe way to make money investing (“I am helpless in a wide range of scenarios”)

Personal:  I am a bad investor and i can never do any better than this (“the problems are specifically my fault”)

If this is your attitude you are going to be pretty rooted when it comes to market upsets.  But pessimism is curable. Buy the book.  Martin E. Seligman. Learned Optimism. Knopf Doubleday Publishing Group.

An alternative way to look at fearful situations is by applying the basic approach of cognitive psychology, a philosophical descendant of Seligman. This approach is functionally a scientific fact at this point and, like Seligman’s work, extremely well validated. I quote:

First, learn to recognize the automatic thoughts flitting through your consciousness at the times you feel worst.

  • Stocks are going down and its gonna take 10 years for them to come back

Second, learn to dispute the automatic thoughts by marshalling contrary evidence.

  • Actually, most downturns last 1-3 years. Burning the dead wood strengthens business discipline, capital allocation, and thus enhances future performance.

Third, learn to make different explanations, called reattributions, and use them to dispute your automatic thoughts.

  • My retirement is ruined –> My companies are going to be a lot more robust after this upset. Strong competitive positions will get stronger.

Fourth, learn how to distract yourself from depressing thoughts.

  • I am sitting on Twitter pressing F5 watching coronavirus spread when I should really be out kicking the dog or playing with the kids or both.

Fifth, learn to recognize and question the depression-sowing assumptions governing so much of what you do:

  • Maybe I am setting myself up for failure by telling myself stocks are going down for The Big One?



The lessons are simple.

  • Regulate your heart rate – go for a run or get on the bike. You will be fine. Make decisions while you run (exercise enhances analysis and decision-making both during and afterwards, plus contains arousal afterwards)
  • Rewrite the negative narratives that you are telling yourself
  • Find a proactive strategy to think productively and avoid taking counterproductive thoughts or actions
  • Control your caffeine intake. The symptoms of too much caffeine can contribute to biofeedback
  • Channel the fear productively, either as an asset to be used (buying in spite of fear) or an enemy to be defeated (holding steady despite fear)

Refuse to want to fear and you start acquiring a constancy of character that makes it impossible for another to do you wrong. Threats have no effect unless you FEAR.  (source)

The great irony is that controlling your fear doesn’t get you any closer to making actual good decisions – but that’s your job, not mine.  Food for thought.

P.S. – if you read this far and are wondering why I spent the last few weeks talking about FEAR, or why half of the words in this post are capitalised, there is a method to the madness. But that is a story for another time.  Remind me in a month.

I have no relationship whatsoever with Seligman. This is a disclosure and not a recommendation.

Comments: 1

  1. […] a very worthwhile musing on the market reaction to the coronavirus crisis. I recommend reading FEAR, which is the first piece I’ve seen that outlines that panic reactions come in two types: […]

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