How Would You React

Have you heard about drownproofing? It’s a training exercise used by Navy SEALS.

Your feet are tied together.
Your hands are tied behind your back.
Then you’re pushed into a swimming pool.

Yikes.

So what happens when you’re tied up and pushed into deep water? The natural reaction is reaction. You thrash around trying to keep your head above water.

Counterintuitively, the way to survive the drowning is not reacting.

You calmly sink to the bottom of the pool, push your feet off the floor to float to the surface for some air, and then sink back to the bottom. Repeat.

Drownproofing isn’t a physical test. There’s not much physical about it. It’s an emotional test. How do you handle a life-threatening situation?

Most people aren’t calm and cool in the face of danger.

After all, humans have been programmed to react to threats. The person who reacts to the rustling in the nearby bush survives. The person who doesn’t gets eaten by the leopard.

So, the genes that favored reacting get passed down. They’ve survived natural selection over hundreds of thousands of years. Unfortunately, can’t do much about it.

You see these reactions all the time in the stock market too.

Like the investor who sees a stock going up and reacts by buying it, and then watches the stock go down and reacts by selling it. Chasing returns. Frequent trading. The recipe for below average returns.

So, can you train yourself to not react?

Yeah, don’t run for the bus. When you see your bus or train up ahead stopping to pick up passengers it’s tempting to run for it. After all, you’re gonna miss it!

But if you resist that urge to react you’re learning to control your emotions. To be in control of yourself.

Try it.

Which reminds me when I was working at a small cybersecurity company. The critical servers that ran the company were in a closet.

One day the building’s power went out.

The backup power came on instantly, and so all those servers kept running, but everyone was panicking.

The cofounder runs by my desk, gesturing for me to get up. “Chris, get excited!” And I’m sitting there thinking, “Why?”

About 10 minutes later the building’s power came back on.

I’m embarrassed to admit it’s taken me 20 years to realize something. That I don’t thrive on chaos and drama. (Yes, it’s been a challenge parenting.)

In The 48 Laws of Power Robert Greene writes:

“An emotional response is the single greatest barrier to power, a mistake that will cost you a lot more than any temporary satisfaction you may gain by expressing your feelings. Emotions cloud reason, and if you cannot see the situation clearly, you cannot prepare for and respond to it with any degree of control.”

He’s not saying don’t have emotions. He’s saying when you ignore your heart and gut it helps you be a more rational person, and in turn better investor.

Because investing doesn’t typically fail people, people fail at investing.

Remember, we’ve been through two world wars, numerous other wars, booms, busts, low debt, high debt, depressions, recessions, disease epidemics, financial crises, low inflation, high inflation, natural disasters, oil shocks, terrorist attacks, and so on.

Investors have lost more money reacting to those events than if they had calmly and cooly sat on their hands doing nothing. If they just withstood the threats to their net worth.

The Stoic philosopher Epictetus said it best. “It’s not what happens to you, but how you react that matters.”

And not reacting is sometimes the best reaction.

When living.
When investing.
And when tied up and pushed into a pool.