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Corona Panic (Part II)

Part I here.

Lots of things now seem obvious in hindsight. It’s so easy to kick yourself. Just remember that the problem with looking back at history is that you know how the story unfolds, and it’s impossible to un-remember what you know today when thinking about the past. The reason things seem obvious in hindsight is because the world changed in the last week. And you can’t blame your week-ago self for not knowing how it would change.

Uncertainty shrinks your field of vision at the worst time. When the world changes in a 24-hour period it becomes hard to think more than 24 hours ahead. The year ahead is impossible to envision when assumptions you had at breakfastime were destroyed by dinnertime. The irony is that long-term thinking is most powerful when everything is falling apart. The majority of long-term results are determined by decisions made during a minority of times, and right now is one of those times. It’s a tragic moment to become short-sighted.

It’s hard to know how you’ll respond to risk. If you asked investors two months ago what they’d think of a 25% market decline, most would say, “Ooo, bargains. I’d love that!” But it’s easier to say it then than to do it now because two months ago you couldn’t contextualize things like your family’s health in jeopardy, or the potential that this could hurt your job security. Quoting Warren Buffett during a bull market is easier than being brave in the face of real-time worry.

Relative values are hard to deal with. The stock market today is still higher than it was in December 2018. It’s higher than it was in late 2017, when smart people were flabbergasted at how high it was. But no one can say, “You should therefore still feel rich today.” That’s not how the world works, whether it’s rational or not. People judge their wellbeing relative to others around them, and relative to how they themselves have done in the past.

It’s OK to admit that we’ll get through this and that this is a big deal. Those are not mutually exclusive. It’s tempting to want to put yourself in one of two camps: pure panic, or pure optimism. The grey area feels uncommitted, which is hard to distinguish from unaware. But it’s probably the most reasonable position. A barbell personality of optimistic on one side and paranoid on the other is helpful in a world where long-term growth punctuated by moments of panic is the norm.

It’s also OK to admit that things will likely get worse but there’s also almost zero expectation of good news. So good news, when it comes, will feel sensational. This is true for both market prices and (more important) people’s overall optimism.

Backup plans, safety nets, flexibility, and room for error was just as important two months ago as it is today. It’s just more obvious today. Try to remember that when this is over.

“History doesn’t crawl; it leaps” says Nassim Taleb. That’s why it’s easy to underestimate how much the world can change during the 99%+ of the time it’s crawling along.

Now is a good time to start a diary. It doesn’t have to be long. But there’s a good chance you’ll tell your grandkids about these days. Also remember that it’s hard to un-remember what you know about the past when looking back on it, so it’s good to document your thoughts in real time before they’re distorted by the changes of what’s to come – whatever they may be.


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