The Jungle is Neutral

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Between stimulus and response there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom.1

In his book, The Jungle is Neutral, Freddy Spencer Chapman describes his experience as a World War II British soldier fighting in the Malaysian jungles. The fighting was intense, but the effect on the soldiers’ mindset was even more unsettling:

My experience is that the length of life of the British private soldier accidentally left behind in the Malayan [modern day Malaysia] jungle was only a few months…to them the jungle seemed predominantly hostile, being full of man-eating tigers, deadly fevers, venomous snakes and scorpions, natives with poison darts, and a host of half-imagined nameless terrors. They were unable to adapt themselves to a new way of life and a diet of rice and vegetables; in this green hell they expected to be dead within a few weeks – and as a rule they were…

It’s not surprising how the terror of jungle warfighting took a toll on soldiers.

However, not all soldiers capitulated. Some soldiers viewed the jungle opportunistically, with supplies and cover available for all:

The other school of thought, that the jungle teems with wild animals, fowls, and fish which are simply there for the taking, and the luscious tropical fruits-pawpaw, yams, bread-fruit and all that, drop from the trees, is equally misleading. The truth is that the jungle is neutral. It provides any amount of fresh water, and unlimited cover for friend as well as foe – an armed neutrality, if you like, but neutrality nevertheless. It is the attitude of mind that determines whether you go under or survive. There is nothing good or bad, but thinking makes it so. The jungle itself is neutral.

The jungle was neither for nor against any soldier. Neither good nor bad. Just neutral. How soldiers responded to this neutral environment determined the “good” or “bad” outcomes.

Chapman continues:

I met in the jungle six NCOs [noncommissioned officers] and men who had been cut off. A month later they were all dead. Yet there was nothing wrong with them…it was their mental attitude, which was slowly but surely killing them. They were unable to adapt themselves to the new way of life.2

No environment, no matter how adverse, determines how you can or will react. You decide how you will react. That’s the power of agency. And that has lessons for investors.

Investment markets, like the jungle, are neutral. Markets are not out to get you, nor will they guarantee you a fair return. The market is impersonal – it doesn’t care who you are or where you came from.

Your responses to market events are what matters. The market never forces a buy or sell. You do. You choose how to behave based on your training, incentives, leverage, emotions, goals, etc. These factors are under your control. It’s never preset how you should or will react.

Acceptance of this responsibility replaces a victim mentality with an agency mentality. You free yourself from being reactive to being proactive. From defensive to offensive.

In the 2009 financial crisis, there were investors who made a lot during the crisis (think those who shorted subprime), some who lost it all (those heavily invested in Lehman/Bear Stearns or who bailed at the bottom), and many investors somewhere between those two extremes.

The decisions and outcomes of these groups were not predetermined by destiny nor fate nor lottery. It was the investors’ actions that led to the results they got. That’s it. Actions that were under their control. Actions that are freely available to any market participant, if they choose.

The best investors do well because they don’t take their cues from the market. They decide what they will buy and sell based on their research and their work. If the market disagrees with them, so be it. Instead of panic and worry, they are excited when things go to hell because it means potential opportunity. Instead of endless rumination, great investors quickly get back to work finding new ideas.

Instead of complaining, they take action.

Instead of worry, they see excitement.

Instead of being overwhelmed and paralyzed by endless what-ifs, exceptional investors take control and deliberately direct their attention and effort towards meaningful, specific work.

This is simple goal-directed behavior. John Leach, who has studied why some people survive extreme events and others perish, explains why goal-directed behavior is critical to responding well under adversity:

Extrinsic survival clearly requires goal-directed behaviour. However, witness testimonies suggest that such goal-directed behaviour is the first function to fail when under threat…the importance of a rapid return to normal cognitive function is reflected in the comment of Bill Garleb, a former prisoner of war of the Japanese, that the survivors were those who had the ability to reason quickly and accurately and who could attune their minds and attention to taking advantage of ‘targets of opportunity’.3

As Leach states, the first thing that goes during adversity is our ability to direct our action to worthy goals. In the investment world, it’s the equivalent of endlessly watching CNBC rather than analyzing new ideas. Investors direct their attention and behavior in the worst possible way – towards hysteria and panic.

This is not a new idea.

This idea of having agency over your decisions is a key tenet of the Stoic philosophy.

The Stoics figured this out centuries ago. Epictetus, one of the big three Stoic philosophers, elaborates:

What really frightens and dismays us is not external events themselves, but the way in which we think about them. It is not things that disturb us, but our interpretation of their significance.4

It’s always your interpretation of things that’s the problem, not the thing itself. And it’s your interpretation of market events that are the problem, not the events themselves.

Markets go up and down. It’s not a smooth, straight line up. But investors forget this fact and expect the market to behave in a linear and predictable manner. When it doesn’t, investors are dismayed. It’s simple - don’t be surprised when the market doesn’t do what you expect it to do. Markets will oscillate. Markets will go down. It’s an unmitigable feature of the market.

Roman emperor and Stoic philosopher Marcus Aurelius explains:

Remember: you shouldn’t be surprised that a fig tree produces figs, nor the world what it produces. The good doctor isn’t surprised when his patients have fevers, or a helmsman when the wind blows against him.5

Epictetus reminds us that even in bad times, there is opportunity. But it’s not comfortable nor easy. While I doubt Epictetus was thinking about investment markets when he wrote this, it perfectly explains the proper investment mindset during tough markets:

In any events, however seemingly dire, there is nothing to prevent us from searching for its hidden opportunity. It is a failure of the imagination not to do so. But to seek out the opportunity in situations requires a great deal of courage, for most people around you will persist in interpreting events in the grossest terms: success or failure, good or bad, right or wrong. These simplistic, polarized categories obscure more creative and useful interpretation of events that are far more advantageous and interesting.6

Seeing your portfolio get cut in half is painful and should not be ignored. So never suppress your emotions and pretend they don’t exist. The difference is always what you do next. Do you complain and wallow in the unfairness of it all, or do you take action and make the most of the situation? It’s this decision that separates successful from unsuccessful investors. Ryan Holiday, author of The Obstacle is the Way, explains:

No one is saying you can’t take a minute to think, Dammit, this sucks. By all means, vent. Exhale. Take stock. Just don’t take too long. Because you have to get back to work. Because each obstacle we overcome makes us stronger for the next one.7

Sources:

1. David, Susan. Emotional Agility: Get Unstuck, Embrace Change, and Thrive in Work and Life

2. Chapman, Freddy Spencer. The Jungle is Neutral

3. Leach, John. Survival Psychology: The Won’t to Live

4. Epictetus. The Art of Living

5. Aurelius, Marcus. Meditations

6. Epictetus. The Art of Living

7. Holiday, Ryan. The Obstacle is the Way: The Timeless Art of Turning Trials into Triumph