Under Pressure
Under Pressure
Adam M. Grossman | April 5, 2020
ON APRIL 14, 1988, Captain Paul Rinn was the commanding officer of the USS Samuel B. Roberts when it struck a mine in the Persian Gulf. The resulting explosion tore a 21-foot hole in the side of the frigate. Almost immediately, the ship began taking on water and multiple fires broke out.
Naval protocol for this situation was clear: Put out the fires first, then worry about patching the hull. But after just a few minutes of firefighting, Rinn realized he would need to ignore protocol or the ship would sink before the fires were out. He immediately directed the crew to begin patching the hull with any available materials, including clothing and bed sheets. Thanks to Rinn’s judgment, the ship was saved and no lives were lost.
Some 20 years later, while flying out of New York’s LaGuardia Airport, Captain Chesley Sullenberger faced a similar situation when his plane lost power in both engines.
While a later analysis indicated that Sullenberger could have made it back to the airport, he understood the danger of attempting a landing in such a densely populated area, so he opted for a seemingly risky water landing on the Hudson River. As you probably recall, the plane landed safely and, again, no lives were lost.
The dangers of making decisions under stress are well understood, which is why Rinn and Sullenberger are both lauded as heroes. In both cases, there was no ready playbook. Instead, they combined equal doses of skill, judgment and intuition to make the miraculous possible.
What can ordinary people learn from them? I hesitate to compare financial decision-making to the life-and-death choices faced by these two men. But it’s worth exploring ways we can also combine logic and intuition to manage the financial stress that many of us feel today.
While there’s no magic bullet, I recommend starting with an awareness of what stress does to us. You’ll then be in a better position to use stress to your advantage, rather than letting it control you. Below are three aspects of stress that have a bearing on financial decision-making:
1. Information. A key characteristic of any stressful situation: Information is incomplete, inaccurate or simply unavailable. That’s absolutely the case today. The health impact of the coronavirus is still an open question. Beyond that, we don’t know what the result will be for financial markets.
Unfortunately, that doesn’t stop people from offering their own theories, opinions, anecdotes and predictions. Today, even some people with seeming expertise are employing alarmist language. On Friday, for example, the Managing Director of the International Monetary Fund called this “humanity’s darkest hour.”
How can you turn this to your advantage? Think in terms of half steps. If you’re considering actions such as reducing your portfolio’s risk level, taking more risk, rebalancing, making gifts for estate planning purposes or completing a Roth conversion, don’t jump in with both feet. Instead, take a partial step.
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