Nicolai Tangen is the CEO of Norges Bank Investment Management, Norway's $1.4 trillion sovereign wealth fund.
The more experience you gain the more you respect what you are up against.
“Tom and Jerry” was a cartoon series created by William Hanna and Joseph Barbera for MGM. It featured a rivalry between a cat named Tom and a mouse named Jerry. Tom is always chasing Jerry. Tom is clever and is always coming up with elaborate schemes to catch Jerry, but they always backfire and end up hurting Tom instead.
The cartoon originally ran from 1940 to 1957. A total of 114 Tom and Jerry theatrical shorts had been created. A single Tom and Jerry short cartoon cost between $50,000 to $75,000 to produce in the 1940s, equivalent to $750,000 to $1.1 million today adjusted for inflation. Each short could earn $500,000 or more at the box office, so they were very profitable. When MGM discontinued the series in 1957, Cumulatively, they grossed over $500 million at the worldwide box office, equivalent to $4.5 billion today adjusted for inflation.
The interplay between a cat and mouse is easily understandable. Who wouldn’t fear a creature 20x your size that wants to eat you? When you are at the bottom of the food chain fear is an asset. Fear is survival.
Toxoplasma gondii is a parasite that can infect almost all warm-blooded animals, but it has some interesting effects in mice. The parasite reproduces in the intestines of cats, and mice can become infected if they ingest anything contaminated with cat feces. The parasite then forms cysts in the mouse’s tissues, especially the brain and muscles. Once infected, the mouse’s behavior changes in ways that benefit the parasite.
For example, infected mice lose their innate fear of cat odor and even become attracted to it. This makes the mice easier prey for cats, so the parasite can complete its reproductive cycle. The parasite also makes female mice more promiscuous. This results in higher mating frequency and more offspring, creating more opportunities for the parasite to spread into the population.
Toxoplasma gondii is an example of a parasite manipulating its host for its own benefit. The parasite accomplishes its mission by killing the fear in the mouse.
Fear protects us from commonsensical physical harm, but in most other ways fear hurts us.
Fear can stop of us from doing heroic things.
Shavarsh Karapetyan was born in 1953 in Armenia. He was a champion swimmer. From 1972 to 1975 he earned eight gold medals and set numerous world records in finswimming, an underwater sport where athletes compete using fins (flippers) for propulsion. Shavarsh was good at two things: holding his breath and thrusting forward underwater with his powerful legs.
In 1976, Karapetyan was cut from the Soviet National team without explanation. His dream to compete in the 1980 Olympics was shattered. When he received the news he needed to work off his anger. He grabbed his brother, coach, and hoisted a 45-pound bag of sand on his back and started on a 13 mile run around Yerevan Lake.
While running he heard a loud noise, “it was so loud, as if a bomb went off.” Karapetyan looked up and saw a bus in the distance which had veered off the road and plunged straight into the lake. Karapetyan sprinted to the scene. When he arrived two minutes later, he dove into the water and down to the bus 15 feet below the surface.
The water was dark with silt, and he could barely see a foot in front of him. When he reached the bus, he broke one of the windows with his legs and began pulling passengers out of the drowned bus and bringing them to the surface. Shavarsh Karapetyan dove until rescue workers begged him to stop. 40 times he dove down to the bus. He mistakenly grabbed a seat cushion during one of his dives.
“I had nightmares about that cushion for a long time,” Karapetyan said. “I could have saved someone else’s life.”
In the end, he pulled 37 people out of the lake, 20 of whom survived. Nine others escaped on their own through the broken window.
Savarsh Karapetyan would sustain major injuries including blood poisoning and pneumonia. The incident permanently damaged his respiratory system. It would be 3 weeks until he could walk again. His swimming career was over. But he was a national hero.
In 1985, nine years after the incident, Karapetyan happened to be walking near Yerevan’s Sports Arena when a fire broke out in the building. His instincts kicked in – he rushed into the burning building to help people get out. He got burned and injured in the process.
Some people are meant to be heroes. Fear didn’t stop him.
Fear stops us from having hard conversations.
In 1983, Daryl Davis, a black man, was playing piano at an all-white lounge in Frederick, Maryland. A man came up to Davis and invited him to his table to chat. He admired Davis’s playing style because it reminded him of Jerry Lee Lewis.
The man said, “You know, this is the first time I’ve ever had a drink with a black man.” Davis asked why. One of the man’s friends said, “Tell him! Tell him!” Finally, the man said, “I’m a member of the Ku Klux Klan.” He showed Davis his Klan membership card. But he also gave Davis his phone number and told him to call him next time he was in town playing.
Davis would let him know, and the man would bring his friends, all of which were KKK members to watch him play. Some wouldn’t even enter the bar because of Davis skin color. Others would keep their distance. This intrigued Davis because he really wanted to know how people could hate someone they don’t even understand.
Davis’s curiosity got the best of him and he showed up at the man’s house unannounced and asked him to set up a meeting with him and the Klan Leader, the Grand Dragon of Maryland, Roger Kelly. The man warned Davis, “Do not fool with Roger Kelly. He will kill you.”
The man reluctantly gave him Roger Kelly’s phone number. Davis had his secretary set up an interview with Kelly, not telling Kelly that Davis was a black man.
The meeting was tense. Kelly had his bodyguard and when he saw Davis was black you could cut the tension with knife. But they ended up speaking for hours.
Davis asked Kelly questions about his beliefs and why he joined the KKK. Rather than confronting Kelly, Davis listened with an open mind. His genuine interest caught Kelly off guard – no one had shown interest in understanding his views before.
At the end of their talk, Davis and Kelly exchanged phone numbers. Davis called Kelly a few weeks later, continuing their discussion. Over time, as Davis shared stories about his life and asked Kelly probing questions, Kelly began to recognize their common humanity. His racist views slowly started to change.
Kelly had never interacted with an open-minded, intelligent black man like Davis before. His stereotypes and hatred were built on indifference and lack of familiarity. But Davis’s friendly persistence and patience began dismantling Kelly’s prejudices, piece by piece.
After several years of ongoing conversations, Kelly gradually realized his racism was misguided. Davis had become his friend – a living contradiction of the KKK’s anti-black propaganda. In 1987, Kelly left the Klan. He developed a close friendship with Davis that lasted until Kelly’s death in 2016.
“I would go to hell and back for that man. A lot we don’t agree with, but he respects me and listens to me,” Kelly said of Davis.
Over 30+ years, Davis has become friends with over 200 Klansmen and gotten them to renounce their membership. His one-on-one, compassionate style of confronting racism has proved remarkably effective in changing people. Davis says, “When two enemies are talking, they’re not fighting.”
“Do I not destroy my enemies when I make them my friends?” – Abraham Lincoln
Fear keeps us from our best life.
Do you ever have big dreams? Dreams where you see yourself accomplishing, achieving, getting rich, serving others, being recognized, making an impact.
We all had these dreams when we were younger. I know I did.
What happens next? As soon as you wake up you start convincing yourself “I couldn’t ever do that”.
Negative thoughts start swirling. You start adding up all your past mistakes, setbacks, failures, wasted time, below average performances, as a way to disqualify yourself from being more than what you are today. You sadly laugh at how ridiculous those dreams seem.
But here is the hard reality. Those dreams aren’t a fluke. They aren’t a joke. They aren’t the result of some bad sushi you ate the night before. Those images, those dreams are put there by God to show you your potential. It’s God, the Universe, whatever you believe in, literally showing you what you should be doing with your life.
I envision God up in heaven planting these images, these dreams in our minds. He sees us awaken and watches us as we immediately convince ourselves we aren’t good enough, capable enough, qualified enough, to live that life. The life we should be living.
I have dreams. I also have nightmares. A nightmare I had recently was the ability to see my son and daughter’s thoughts. I’m sure some of you are laughing thinking what a nightmare [sarcasm]. But in this nightmare, I was watching my kids struggling with negativity and self-doubt. I saw them feeling incapable. I saw them give up on goals and dreams they had. I think the worst nightmare for any parent is watching your kids giving up on themselves. I woke up emotional, my face wet in tears.
The crazy thing is we are fine giving up on ourselves. God tries to show us over and over what we should be doing with our lives and over and over we say no.
Fear will always try to convince you to stay where you. Fear will always try to convince you it’s too late. Fear is a liar.
Fear hurts our investing.
Fear impacts the mind and body in ways that reinforces short-term thinking. It narrows focus, fuels pessimism, amplifies stress and anxiety, activates loss aversion, and leads to overreactions. Fear undermines every pillar of long-term investing success.
Fear activates our fight or flight mechanism in our brain. When you are being chased by a bear (in a real sense or a bear market sense) you aren’t thinking about next year, next month, or next week. You are thinking about surviving today. Your focus with in our investments becomes next quarter instead of the next three years. You need “the next quarter” to be perfect. If anything is slightly off about the quarter, you sell. Fear shortens your time horizon because you can’t take being more wrong. Fear causes “tunnel vision,” blocking out the bigger picture. You only see present dangers in all your investments instead of future opportunities.
You become impatient and wanting to react quickly with your gut instead of logic. Your trading activity increases because the sense of “doing something” gives you some emotional relief. The trading activity is usually in new areas and new strategies instead of simply averaging down into businesses you already know and trust.
Fear amplifies pessimism and worries about the future. You often see fearful investors turn from being stock pickers to market strategists. Investors become more convinced that the short-term drop they see is the start of a bigger, longer downturn. Investors focus on every macro datapoint – interest rates, inflation, unemployment, manufacturing data, GDP. You get more and more negative. You look to grasp onto any short-term negative data point that reflects your bearish viewpoint so you can mentally regain a sense of control over something, anything. You focus on timing the market and picking the bottom instead of slowing nibbling on the stocks you’ve always wanted to own.
As stock pickers age we accumulate Battle Scars. As Howard Marks said, “There are old investors, and there are bold investors, but there are no old bold investors.” The more experience you gain the more you respect what you are up against. Sometimes you “respect” a bit too much. The accumulation of experiences (losers) chips away at you. The risk slowly but surely gets scared out of you. It gets diluted away through diversification and risk aversion. The ability to absorb the blows of the market and your experiences is key. The ability to quickly acknowledge, accept, sell, and forget when you are wrong on an investment is a superpower.
It is true the way you make your money might not be the way you keep it. But it’s hard for scared money to make money. I’m a big fan or playing offense. You can’t win unless you put points on the board. If you are a shooter in basketball, you can’t be afraid to shoot. If you are a stock picker you can’t be afraid to pick stocks. The best shooters in basketball have complete confidence. With every missed shot they know it increases the odds (not decreases) the next shot will go in. A series of missed shots doesn’t make them fearful to shoot. It increases their confidence. The next shot must go in. They reframe failure in a beautiful way. It might not work this way in investing, but just think if we lived life with that attitude.
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Nicolai Tangen is the CEO of Norges Bank Investment Management, Norway's $1.4 trillion sovereign wealth fund.
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