I recently learned an amazing fact: During the height of the Cold War, a Russian military officer named Stanislav Petrov got an alert on his computer that the United States had launched a nuclear weapon at Moscow. Petrov was in charge of launching a nuke back at America should Russia feel threatened — and at that moment, he had every reason to do so. But rather than retaliate, he chose to do nothing. He felt that it was a false alarm.
Thankfully, his instincts were right. Had Petrov fired a nuke at America, untold numbers of people would have lost their lives. By doing nothing, he might have saved the whole human race from a terrible nuclear war.
That story got me thinking about the power of doing nothing in the face of information that makes you feel compelled to take action.
When you encounter a stressful situation, and your instincts are screaming at you to act, it can be best to practice restraint. The stakes aren’t as high for you and me as they were for Petrov during the Cold War, but it’s a lesson that nonetheless resonates in several areas of our modern lives. Here are three times it can pay to do nothing at all despite your urges to the contrary.
Do Nothing During a Stock Market Downturn
Nine years into the second-longest bull market in modern history, a stock market downturn will soon come — it always does — we just don’t know when. Ray Dalio, the famous manager of Bridgewater Investments, thinks it will happen in 2020. David Stockman, a former advisor to President Reagan, thinks a crash is right around the corner.
As we all know, it’s fruitless to try to time the market. All we can do is try to stay the course once things get ugly. But as Warren Buffet points out, this is hard: “Even if your positions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions.” Buffet is also famous for saying that he likes to buy stocks when there is “blood in the streets.”
So, how do we settle our minds, thus making it easier to do nothing when stocks are tanking (except maybe buy more cheap stocks)?
One method is to have your own personal investor policy statement, or IPS. This is a document where you write out your investment strategy — including what you’ll do during the next crash. Wealth management firm BNY Mellon recommends that clients create an IPS to “help maintain focus” during changing market conditions. But even if you don’t use a wealth manager, an IPS can be very helpful. During the next crisis, I will try to calmly refer to the part where I wrote, “I will not sell at the bottom of a financial panic.” I’m sure it will help me stay the course.
Another tactic that makes it easier to do nothing is to avoid the financial press. Peter Frawley, vice president of CoreCap Investments, advises people to turn off the TV and avoid reading mainstream financial websites when the market gets shaky, because those sources are likely to stress you out. He feels strongly that a market downturn “is not the time to listen to breaking news every five minutes.”
If you master these techniques and fight the urge to sell, history says the stock market will reward you. As personal finance writer JL Collins says in his popular investing series, “The market always, and I mean always, goes up. Not each year. Not each month. Not each week and certainly not each day. But relentlessly up.”
Do Nothing When You Want a Shiny New Toy
We’re constantly bombarded by advertising for products that promise to make us happier, healthier, and more productive. Even though I fight it, I can be just as tempted as the next person.
Lately, I’ve been eyeing the growing list of books I want to read and thinking, “I should just treat myself and buy some of these off Amazon.” But, I know that if I do nothing for long enough, I can get them from the library for free.
While not everything can be had for free, we can all take measures to curb our instinct to buy the latest and greatest toys and devices. If you’re an impulse shopper, you can try things like removing yourself from company mailing lists and instituting a rule where you wait at least 24 hours before making any big purchases. You also might consider writing down an actual ‘do not buy’ list as a means of holding yourself accountable, or freezing your credit card if you lack self-control in that area.
Another great tactic is to calculate your true hourly wage. Then you can look at every potential purchase and know exactly how many hours you’d have to spend at work to afford it. This is great at putting things in perspective — for instance, is that nice dinner out really worth an extra few hours of work?
Do Nothing When You Feel FOMO
When I login to Facebook or Instagram, I’m often met with images of my friends doing something both fun and expensive. It’s common to see birthday parties at clubs, trips to Italy, and adventures on boats. Although I try to fight it, there are times when those glamorous pictures make me feel like my life is a little boring in comparison. Then I’m afflicted with FOMO — the fear of missing out.
Instead of pining for expensive brunches and vacations, I should be asking things like, “Who’s paying for all that stuff?” and, “Would I rather have a month of groceries or a two-hour boat ride on Lake Michigan?”
Rather than feeling FOMO and immediately logging on to a travel website while getting out your credit card, it’s usually in your long-term financial interests to just do nothing. Keeping up with the Joneses is a known financial pitfall.
We’ve recently covered some great ways to combat FOMO, such as understanding your values, flipping the script by imagining what you’d miss out on if you followed the herd, and appreciating that you’re under no obligation to have all the same experiences your friends have. To that I would add that a low-cost activity with a friend, such as going on a local hike, can be a wonderful FOMO antidote.
Most people have a tendency towards what social scientists call “action bias.” This means we’re wired to think that value can only be created through action. However, action bias doesn’t always serve our best interests, and sometimes it actively undermines us. Alternatively, doing nothing can often produce powerful results.
Much like with the term idleness, “doing nothing” can be unfairly associated with laziness or thoughtlessness. I think we’d all do well to flip the script by noticing all the ways in which practicing patience and restraint can be beneficial.
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