By Lloyd Graff
Today’s Machining World Archives January 2009 Volume 05 Issue 03
“The only thing we have to fear is fear itself.” This sentence, uttered by President Franklin Roosevelt in his ﬁrst inauguration speech in 1933, is probably the most memorable phrase said by an American president. It is in vogue today because of the rampant fear of national and personal economic collapse. I have often thought about the Roosevelt quote but seldom used it myself because I doubted its truth and usefulness. I saw it as an oratorical contrivance used by a clever president to reassure a country passing through economic depression to World War II.
“People are social beings who care about what their peers believe.”
The people listening on the radio to FDR in 1933 had a lot to fear — poverty, homelessness, hunger, families breaking apart. Read John Steinbeck to get a sense of the despair in the country in the 1930s.
For me, the Roosevelt statement connects not so much on unemployment statistics and Dow Jones gyrations. My biggest personal fears have always been about my health and my family.
My experience with my own heart failure and hospitalization have in an odd way made me less fearful. When I was having a heart attack and awaiting heart surgery I was less fearful than I had been when I was living through years of angina symptoms I had wanted to ignore, but couldn’t. When the worst of my fears was being realized I felt both conﬁ dent and powerless.From the vantage point of a business owner, fear seems to be as much about the prospect of making bad decisions as feeling impotent to change the course of the ship.
Andy Grove, one of the three founders of Intel Corporation, wrote a book in which he extolled fear, entitled Only the Para-noid Survive. Grove’s thesis was that business managers need to be constantly fearful that the competition will sneak up on their company or that technological change will overwhelm the firm. He felt that worry channeled into thoughtful action was the catalyst for his success at Intel.
We have seen another twist on the Roosevelt dictum this year as negative stock pickers, the “Bears,” have fomented fear in stock and bond markets across the planet to make billions of dollars on short selling and put options. The cynical Bears have attempted and often succeeded in jump starting runs on companies like AIG, Citibank and Lehman Brothers, causing incredible ﬁnancial damage that did not have to happen. The access to ﬁnancial gibberish on the cable TV networks amplified the panic in the market enabling the Bears to make a fortune.The Bears are now having fun with GM and Ford with the help of senators representing southern states with big transplant auto plants. Behavioral psychologists have long studied herd behavior. People are social beings who care about what their peers believe. The behavior of crowds has spawned a cottage industry of market “technicians” who quantify the buying and selling patterns of investors, trying to discern some predictable patterns. I have always regarded “technical chart analysis” as Wall Street voodoo, but in its broad sweeps it does record the sheep mentality that spawns market euphoria and market despondency.
The great investors like Bernard Baruch and Warren Buffet understood fear and made fortunes taking advantage of markets’ overreactions. To them “all we have to fear is fear itself” was part of the constant search for a “buy” signal. Great investors and business people understand fear, including their own, but can step outside themselves and crowds to see where opportunity lies. The contrarian opinion will usually be right “eventually,” but most business people lack the patience or a big enough bank account to sweat out long periods of personal and market despair.