THINKING UNDER PRESSURE

Keeping Your Mind – and Your Money

Our financial roller coaster has offered many opportunities to observe people thinking about their financial situations under stress – or not.  A new book offers some good examples of how businessmen and investors can keep their cool.

After the collapse of Lehman Brothers two years ago, the owner of a real estate firm specializing in high-end luxury sales obviously faced a serious threat to his business.  That event sent shock waves through his potential customers.  They stopped spending.  How to survive?  But, first, how to think clearly about his options?

The book’s author, Paul Sullivan, tells the story in the business section of today’s New York Times.  In this case, the real estate broker had to get past his pride, and face unpleasant facts.  His CFO told him the risk, and suggested closing some offices to cut costs, but the broker wanted to wait before acting.

Sullivan commented:  “Under financial pressure, most people do not and cannot think dispassionately until it is too late. They choke because they wait too long to sell, thinking their situation will improve. When it does not, they have burned through their reserve funds and are still going to lose what they were struggling to keep.”  (See, “The Art of Thinking Clearly Under Great Pressure.”)

He makes some sensible suggestions, the most important of which is focusing on the problem.  In other words:  keep it in mind, don’t distract yourself, don’t succumb to overly optimistic projections.  But how do you do that?  How do you overcame what the real estate broker called his “pride,” the embarrassment and disappointment he faced in cutting back his business.

The story suggests three critical factors in becoming focused.  The first is getting clear about the financial facts:  the business was over-extended and it faced hard times.  The other two are more subtle.  He found someone to talk it over with, someone to whom he could listen who was not filled up with his own emotions.  Finally, he gave himself the opportunity to reflect.  He went for a long walk.

That may seem simple, but it was the key.  He created the inner space he needed to review the facts, to think clearly on his own, to help himself shake free of the anxiety and pressure that beset him.  If he didn’t have the facts or the advice, it’s unlikely the walk would have done him much good.  He would most likely have just circled around and around the problem that worried him.  But with those elements in his mind, he could let the conclusions he needed to reach settle into a clear course of action.

As usual, we need information and we need help to face our problems.  But we can only arrive at the solutions by ourselves.  The trick is giving our minds the space they need.