The Power of Fear
If you really want someone to act on something you have to invoke emotion. You have to give them a sense of urgency. If you can invoke emotion you substantially increase the odds that a person will react. Â And there are few emotions more powerful than fear. Â If you can scare someone you can get them to do just about anything. Â We see this a lot in the financial business, in politics and in many facets of life. Â There are literally businesses and people who have built their entire reputation on scaring the living day lights out of other people. Â I won’t name names, but I generally find these views to be consistent with a misguided approach or general misunderstandings of the monetary system and financial world.
Don’t get me wrong. Â I am not some complacent optimist wandering through the world with blinders on. Â I like to think of myself as a measured optimist. Â I generally believe that, as a species, we are constantly progressing. Â You don’t wake up in the morning and say “I want to be worse than I was yesterday”. Â No, the odds are you wake up in the morning wanting to learn, to become better, to become stronger, to live longer. Â It’s inherent in us. Â We need to push forward. Â We need to make progress. Â We are an inherently optimistic species.
Fear is the emotion that some invoke to keep others down. Â It’s a classic case of pulling yourself up by keeping others down. Â Don’t fall for this tactic. Â Don’t let someone else scare you into inaction because it’s to their benefit for you to remain scared. Â As I said above, this doesn’t mean you have to be complacent, but a bit of measured optimism goes a long way. Â Living your life in perpetual fear is a sure way to underperform those around you. Â Not to mention, it’s betting against an inherent and incredibly powerful human necessity to make progress….In my opinion, that’s one of the worst macro bets a person can make.
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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16 Comments
There is using fear for exploitative purposes, and there is justified fear
I find the global financial system and situation truly scary – and climate change even more so.
I do agree with you on the importance of optimism – and it is a quality I admire in you. It is also the reason that I do believe the human species (at least some part of it) will ultimately find a way forward.
Agreed: Fear is part of our genetic make-up, it got us where we are today. A fearless early hominid would only have been fodder for carnivores and by now, extinct. To ignore fear is foolish, it’s how you deal with it that really matters.
“fearless” entrepreneurs may be amazingly successful for a while but the lack of suitable fear mechanisms typically brings about their downfall.
Ignore fear signals at your peril but don’t become a slave to them either. Fear is part of our genetic make-up, it got us where we are today. A fearless early hominid would only have been fodder for carnivores and by now, extinct. To ignore fear is foolish, it’s how you deal with it that really matters.
We will not have to live in fear of the Fed……. less than a month to go!
It’s easy for someone like you to be optimistic all the time. But what about for all those people who are unemployed or barely getting by?
I live paycheck to paycheck, and barely.
I still wake up every day trying to facilitate personal progress. If I didn’t, why would I get out of bed? I think Cullen’s right. I think the undying optimism that is a part of the human condition is where the saying “Hope springs eternal” derives from.
Sorry to nitpick but is there a better word than progress? To me, progress has too linear of a connotation and implies there is some predetermined end.
Thanks Cullen. The fear mongers have throughout history have convinced many people to agree to things that are even against their own best interests.
BUT THE STATE WILL SOON BE OUT OF MONEY
Progressive smart is fine but there is also progressive dumb which is stupid.
In the early 90s, I read a book by John Bogle on mutual funds, wherein he made the case for index funds, low costs, and a buy and hold strategy. Part of his argument involved the “efficient markets hypothesis” (EMH). That strategy served me well. By luck (mostly laziness) I missed most of the tech bubble crash because of a change of jobs and a 401k in (safe) limbo for about half the plunge. 2008 was scarey, but I held steady, and my investments recovered. But the debt ceiling fight last summer was crazy. I finally decided I couldn’t tolerate that level of stupidity anymore, so I finally let fear get the better of me and I pulled all my funds out and put them in (what I think are) safer investments. Capital preservation is what I’m all about now. I’ve noticed that even John Bogle these days seems confounded by the market, poor corporate governance, and the financial services sector seeming stranglehold on our economy. I wonder if he still believes the EMH. I don’t think I do any longer. Not that I think that timing the market is wise… it’s just that I see a whole lot of stupid out there, and it makes me worry. More and more I think it’s a rigged game, and the little guy has very little chance (LIBOR rigging, bid rigging, no fraud charges for the big players, Anthony Mozilo and John Corzine not in jail, “Citizen’s United” ruling, etc. etc. etc.). So yes, I let fear drive me from the market. But to me it seems rational! … Seeing a few people who appear to have rigged the system go to jail would help me feel more confident again!
I’m sure you would jump back in if the market took a nosedive to 10 year lows, wouldn’t you?
Great post, Cullen. In the investment world, we are constantly in a pendulum between greed and fear…
While on the topic of fear, have you checked this latest TED video:
http://www.ted.com/talks/john_maeda_how_art_technology_and_design_inform_creative_leaders.html
It’s not about fear per se, but he makes fun of it in the video…
HYPERINFLATION IN … FIVE… FOUR… THREE …
I didn’t name names! I really didn’t!
Oh man, with posts like this, you’re scaring me!
Was it good for Japan that Emperor Hirohito show fear of the United States Atomic Bomb?
“On August 6, 1945, the United States dropped an atomic bomb on the city of Hiroshima. Late in the evening of August 8, 1945, in accordance with the Yalta agreements, but in violation of the Soviet–Japanese Neutrality Pact, the Soviet Union declared war on the Empire of Japan, and soon after midnight on August 9, 1945, the Soviet Union invaded the Imperial Japanese puppet state of Manchukuo. Later that day, the United States dropped another atomic bomb, this time on the city of Nagasaki. The combined shock of these events caused Emperor Hirohito to intervene and order the Big Six to accept the terms for ending the war that the Allies had set down in the Potsdam Declaration.”
Fear is Subjected regardless of fact. It’s Human natures realization that we are FINITE beings. Outside of rational objectivity, the subjective reality with regard to self sustenance will always prevail.
jm2cw
Certainly fearful is no way to go through life but it is smart to have trepidation in areas you dont understand or are unfamiliar.
As has become clear the last few years, most of us have been fed lines of complete BS regarding our financial system over the years, so its now completely rational to distrust many of those within that sector until we see some sort of real reforms. (Im referring to you Mr Dimon and Mr Blankfein)
Life is very uncertain and very unfair, but people can work together to add some degree of security to each others lives. People do not have to be unfair even though mother nature is.
Its the premeditated predatory behavior of some humans versus others that CAN be tempered with vigilance and a firm resolve to not accept certain types of behavior within a civilized society.