I’m a millennial.

I was born in the 1980s.

I haven’t been around very long.

And yet, in my relatively short life, I’ve already seen five major events that have stirred up an incredible amount of fear. Here’s how they played out:

  • The hole in the ozone layer. We were told to panic. UV radiation was surging through our atmosphere and hitting us at an unprecedented rate. It was only a matter of time before our planet’s ecosystem was destroyed.
  • The Y2K bug. We were told to panic. As the new millennium rolled around, computers everywhere would crash because of two missing digits. It was only a matter of time before we fell back into the Dark Ages.
  • The War on Terror. We were told to panic. Radical Islam was an existential threat, and sleeper cells had infiltrated every level of our society. It was only a matter of time before a dozen 9/11-style attacks hit us.
  • The Global Financial Crisis. We were told to panic. Subprime mortgages were experiencing a meltdown, and the radioactive poison was spreading. It was only a matter of time before our banking system collapsed entirely.
  • The Covid pandemic. We were told to panic. A new virus was crossing borders like wildfire, and it was supremely deadly. It was only a matter of time before it came for you and your family.

Now, look at all these events. Study them closely. You will start to see a pattern, don’t you?

  • It’s all about fear. Again and again, we were told that our Western civilisation was on the brink of annihilation. An apocalypse awaited us. The end of days.

But today, in retrospect, ask yourself these questions:

  • Was the fear exaggerated?
  • Was the fear oversold?
  • Was the fear just plain wrong?

Of course, whenever a crisis happens, it’s natural for us to feel scared:

  • We’re desperate for a sense of direction. So we turn to our leaders. Our politicians. Our policymakers.
  • But when we don’t get a result that satisfies us, we become frustrated. We might blame our leaders for doing too little. It feels like they are not being decisive enough in addressing the problem. They are moving at a snail’s pace. There is no sense of urgency. Why aren’t they reacting? What on earth are they waiting for?
  • But then again…the opposite also holds true. Perhaps we might blame our leaders for doing too much. They are being too forceful, too frantic. They have a big hammer, and they are going around, swinging it with wild abandon. The violence they inflict leaves a trail of collateral damage. They are hunting for nails even though there may actually be none. Gosh, why on earth are they being so obsessive? Where is their sense of proportion?
  • Well, uh-huh. Yes, indeed. That’s the dilemma we face, isn’t it? For every person who thinks the government is doing too little, I can guarantee you, there’s always going to be someone else who thinks the government is doing too much.
  • In fact, some people with an anarchist streak believe that governments on both the Left and the Right are always evil and oppressive. Therefore, our entire political system should be dismantled entirely. Smash the state.
  • But…are such sentiments actually reasonable? Are such emotions fair? What is the truth, really?

Well, the truth may not be as dramatic as you think. In fact, it’s far simpler. British author Alan Moore has spent his entire career exploring conspiracies. And with a touch of dark humour, he explains:

‘The main thing that I learned about conspiracy theory is that conspiracy theorists believe in a conspiracy because that is more comforting. The truth of the world is that it is actually chaotic. The truth is that it is not The Illuminati, or The Jewish Banking Conspiracy, or the Grey Alien Theory. The truth is far more frightening — nobody is in control. The world is rudderless.’

So, is this true? Is no one actually in control? Is the world rudderless?

  • Well, let’s consider this important point. Our leaders are not gods. They are not deities. They are not supervillains.
  • They are human. Painfully so. And because of this, they come with their fair share of human frailties and failings.
  • Ultimately, what really drives them is this inescapable fact: the fog of war.


Source: Image generated by OpenAI’s DALL-E


It was the great Prussian strategist Carl von Clausewitz who first introduced this fascinating idea:

  • The fog of war is the state of eternal twilight that exists during warfare.
  • So, just imagine this: you are a military commander on a battlefield. You have soldiers. You have armoured vehicles. You have aircraft.
  • But I have bad news for you: despite all the powerful assets at your disposal, you can never completely understand the true nature of the fight you’re engaged in.

Here’s why:

  • A lack of situational awareness. During a conflict, you will have limited intelligence about your enemy’s position, capabilities, and intentions. This can make it frustratingly difficult for you to evaluate the overall situation on the battlefield.
  • Communication difficulties. During warfare, the information channels that you rely upon can become muddled, creating confusion. Bad input leads to bad output.
  • Changing conditions. War is a highly dynamic, highly fluid situation. You will find it hard to keep track of the weather, the terrain, and the movements of your enemy. This makes it impossible for you to maintain a clear picture of the battlefield.
  • Confirmation bias. Your emotions will compromise your actions. You will always interpret intel in a way that confirms your prejudiced beliefs. This will distort your decision-making.
  • The ticking clock. You will be forced to perform under pressure. Eventually, the mental exhaustion takes its toll. You will start to lose your grip on reality. Your strategy breaks down. In the end, no plan survives first contact with the enemy.



What can you do as an investor?


There’s no hiding it. The fog of war is always present. It permeates every level of our society:

  • In fact, you can study the entire history of mankind. You will find that it has always been shrouded by an eternal twilight; a murky lack of clarity.
  • You will see rash decisions being made on emotional impulses. Misguided views that led people down the wrong path. And always — always — an existential fear that is exaggerated.

Just think about the all the major events that I mentioned earlier. The hole in the ozone layer, the Y2K bug, the War on Terror, the Global Financial Crisis, the Covid pandemic:

  • Each time, the experts on both the Left and the Right predicted an apocalypse. And each time, of course, they were wrong.
  • The fear is oversold. The fear is always oversold.
  • The rule of Hanlon’s razor applies here: ‘Never attribute to malice that which is adequately explained by stupidity.’

But watch out. The fog of war is not always a bad thing:

  • In fact, a wise investor may actually welcome fear as a golden opportunity.
  • You see, whenever risk is mispriced, it becomes the perfect entry point. To get into the market. To buy the dip. To capture value.
  • A wise investor looks beyond the immediate macroeconomic shock. A wise investor understands that it’s the time horizon that matters the most. A wise investor accepts that the historical tide can work in his favour.

Warren Buffett himself has acknowledged the fog of war that he deals with while running his company, Berkshire Hathaway:

‘We haven’t the faintest idea what the stock market is going to do when it opens on Monday. We’ve not been good at timing. We’ve been reasonably good at figuring out when we were getting enough for our money.’

I love this kind of humility from Buffett. It’s great because it speaks to an essential truth:

  • Rational investing depends entirely on an investor’s ability to master his own fear.
  • This is the best way — perhaps the only way — for him to navigate short-term uncertainty.
  • Because, ultimately, it’s the long-term picture beyond the fog that matters the most…


Source: AMP

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John Ling

Analyst, Wealth Morning

(This article is general in nature and should not be construed as any financial or investment advice. To obtain guidance for your specific situation, please seek independent financial advice.)