Nobel Prize–winning psychologist Daniel Kahneman found that we make financial decisions 90% on emotion and only 10% on logic. His research also showed that the fear of losing is about twice as powerful as the excitement of potential gains. What keeps us awake at night is far more likely to be anxiety about possible disaster than anticipation of pleasant surprises.
This feels especially true now. Anxiety runs through society like a low, steady hum, barely audible, yet setting the tone for our time. It means we are more likely to make decisions driven by fear than by any other emotion.
Fear-based decisions often seem like the safer bet. They can look like attempts to control outcomes that are beyond our control. Fear can show up as hoarding or as the inability to spend without guilt, even when we can afford what we need. It can keep us stuck in unsatisfying jobs when better opportunities exist elsewhere.
Some of us are more prone to anxiety than others. I’m not referring to clinical anxiety, but to the everyday emotion of fear and how it shapes our behaviour. It can stem from childhood environments where money causes tension or from physiological sensitivities, because some people are more finely tuned to potential threats.
Fear, like most emotions, can quietly run our lives. Unless we become aware of it and name it, it will override rational thought, which often disguises itself as reason. During a recent strategy session, I was challenged to consider both the positive and negative scenarios for our business. I realised how much more intelligent it feels to plan for the worst, even though success usually depends on managing, not avoiding, risk.
Of course, fear isn’t all bad. It has kept us alive as a species. Ignoring risk entirely would be foolish; a healthy dose of fear leads to sound financial planning. As Arthur Brooks writes in Build the Life You Want, co-authored by Oprah Winfrey, emotions like fear are signals to pay attention, and then allow your conscious mind to decide how to respond.
But fear can also be manipulated. It’s an old trick of insurance salesmen and politicians. The better we recognise how fear directs our decisions, the sooner we can correct course with reason. This skill will be essential in the coming years, as change and uncertainty grow.
Fear may never leave us, but it need not determine our future. We can choose differently.
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Kind regards,
Sunél