The automatic brain

Our brain will automatically leap into action when it senses danger.  If we are in physical danger, it will trigger our ‘flight or fight’ response.  If we are in social or emotional danger, it will message us through feelings such as anxiety so that we avoid that situation.  Unfortunately, this system doesn’t always act perfectly and can cause us to behave irrationally.  For example, we may feel a sense of dread when faced with an unpleasant task.  This leads to procrastination, an irrational behaviour that many of us wish we didn’t have.

This post will look at:

  • How our brains nudge us towards irrational behaviours.
  • How we can get rid of those irrational behaviours.
  • How we can use it to understand narcissists and how to deal with them.

The automatic brain

After we master a skill such as writing or driving, our ‘automatic brain’ takes over those tasks and frees up our conscious brain to do other things.  Once we’re able to drive without having to concentrate on the task, we can for example hold a conversation while driving.  Our automatic brain also takes action when it senses that we are in danger.  If we are about to be attacked by an animal, our brain will automatically take action by making us pay more attention, increasing our heart rate, dumping adrenaline into our body, etc.  Now comes the weird part… our brain will also “help” us with other threats such as social and emotional dangers.  If we are being bullied or pushed around, our brain will make us feel anxiety.  This is a signal that the situation is bad and that we should try to end that situation.

Unfortunately, our automatic brain can occasionally get us into a world of trouble.

  • Phobias:  Some of us will develop fears so intense that it prevents us from leading normal lives.
  • Panic / anxiety attacks:  Anxiety has physical manifestations that we may misinterpret as being a heart attack.  After that happens, our automatic brain may learn to fear anxiety-induced symptoms, which (ironically) causes even more anxiety.  This can lead to crippling levels of fear and anxiety and the sufferer may begin to panic.
  • Procrastination:  We fear unpleasant tasks so we put them off until the last minute.  Our automatic brain causes us to perceive the tasks to be more unpleasant than they actually are and to experience irrational relief when we dig ourselves a deeper hole by delaying the task.
  • Narcissistic personalities:  Narcissists are addicted to getting validation from others.  Their brains make them feel positive emotions when they receive validation (e.g. adoration, admiration) and to feel negative emotions when they are humiliated or invalidated.

Why does our automatic brain get us into trouble?

Our automatic brain can make mistakes and hold onto illogical connections.  This is quite obvious when it comes to procrastination, which is clearly an irrational behaviour in our modern world.

At the same time, our brains are capable of unlearning irrational fears.  Here are some common fears that many people unlearn:

  • Sleeping in the dark without our parents/caregivers in the same room.
  • Needles and syringes used for vaccinations.
  • Wild animals, insects, and domesticated pets.
  • Roller coasters.

So how do we explain why we are able to unlearn some fears but not others?  Perhaps the answer is that our automatic brain’s messages serve a very valuable purpose.  We are (likely) born with an innate fear of heights.  This fear protects us from serious injury and it is not a fear that our conscious brain should be able to easily override.  Similarly, our bodies will inform us when we’re hungry, thirsty, and when we need to breathe.  It’s very important that we fulfill our biological needs and do not override our automatic brain based on our whims.  It shouldn’t be easy for us to unlearn important fears.

Secondly, there is a component of faulty learning and faulty feedback.  When we feel dread over having to do an unpleasant task, our coping mechanism for the irrational anxiety/dread is to avoid doing that task.  Our automatic brain then learns the wrong lesson: that procrastination “relieves” anxiety, that we have “successfully” escaped a bad thing happening to us, and that procrastination is an “effective” tool in solving our problems.  Procrastination then becomes ingrained as a habit and we have a difficult time fighting it.  Our automatic brain erroneously learns that our maladaptive coping behaviours are “effective” tools in preventing bad things from happening to us.  Maladaptive coping behaviours then become the source of problems rather than the solution to them.

How to unlearn our fears

Think about what we do when we learn to overcome our fear of roller coasters.  We start by going on the least intense rides first.  Our first ride may be somewhat traumatic as we experience a strong sensation of falling.  Normally the falling sensation indicates that we are about to experience serious injury.  However, nothing bad happens.  This gives our automatic brain a chance to learn that roller coasters are safe and that there is no danger.  (*Some people learn to fear the anxiety of riding roller coasters and don’t overcome their fear of roller coasters.)  Once we are able to overcome a mildly traumatic experience, our fear of roller coasters decreases and we are ready to try riding more intense roller coasters.  The gradual process of escalation is the foundation of exposure therapy (variations on it have modern rebrandings such as cognitive behavioural therapy with exposure, EMDR, ERP, etc.).

You can unlearn your own fears with the same principles.  Suppose that you would like to work on overcoming procrastination.  Start by thinking about a scenario that is slightly traumatic but not overly traumatic.  In this case, you could imagine yourself writing the first sentence of a report.  As you play out the scenario in your head, actively think about how you logically should be feeling and what you logically should be doing.  Have an inner dialogue with your automatic brain:

“Hey brain, thank you for informing me about the awful things that will happen if I were to start writing this report.  Thank you for caring.  However, your message is not logical.  We’ve gone through this procrastination dance before.  Doing the unpleasant task has never been as unpleasant as you’ve made it out to be.  On top of that, procrastination has always made the situation worse rather than better.  So you can hold off on telling me how awful this will be.  I know that it actually won’t be that awful at all.  K thanks bye.”

When your anxiety level dies down and becomes manageable, escalate and move onto a tougher aspect of the problem.  Write the first sentence.  Then think about writing a paragraph.  Will you suffer through an emotional breakdown if you do that?  Probably not.  Keep going.

Also realize that there is no need for coping mechanisms (such as deep breathing or relaxation for phobias).  While procrastination does reduce anxiety in the short term, the use of coping mechanisms implies that your emotions and anxiety are real threats or serious concerns.  They are not.  There actually isn’t any need to rely on coping mechanisms because there is no real danger in the first place.

How we can use self-therapy to improve our lives

Whether or not we like to admit it, all of us have traumas and fears.  We’ve all had setbacks and negative experiences in our life.  Even doing homework for school is a minor trauma that can create problems for us such as a procrastination habit.  Our automatic brains are filled with illogical connections that don’t make sense for our present situations.  Resolving our traumatic memories, fears, failures, and embarrassments can help us become emotionally balanced and to become happier, more productive people.

Why fears and maladaptive behaviours persist

The process for unlearning a fear is counterintuitive.  Our natural instinct when it comes to facing a fear is to ‘white knuckle’ it and to try to use our willpower to get through it.  The mindset is that “we’ll put up with the fear because it’s really important to do so”.  This reinforces the fear as something that is valid.  The correct approach is to expose yourself to the fear with the mindset that you don’t need to take any precautions against danger because there is no danger.  Because that approach is so unnatural, we are unlikely to spontaneously use it in our everyday lives.

It is also difficult for people to face their fears if those fears are intense.  Intense fears can develop for one of two reasons:

  • Abuse for an extended period of time and/or intense abuse.  An abused person may receive poor treatment from their parents/caregivers, bullies, siblings, etc. for their entire childhood.  Narcissistic parents may recruit other people (relatives, therapists, siblings of the child) to do their bidding by joining in on the abuse of the child.  They might also turn a blind eye to somebody sexually abusing their child and intentionally allow the abuse to continue.  There are some very messed up people in this world.
  • In people who suffer from debilitating anxiety, there is a vicious cycle of anxiety leading to physical symptoms leading to even more anxiety and more physical symptoms.

Deeply ingrained fears are more difficult to resolve.  Stigma over mental health, shame, and denial can also get in the way of recovery.  Denial can be a coping mechanism that some people rely on to shield themselves from painful emotions and thoughts that they are afraid of.

Narcissism – a common maladaptive personality type

In financial markets, it makes sense to pay attention to narcissists because they tend to be overrepresented.  These people are highly motivated to reach positions of prestige (e.g. CEO, fund manager), often do not let their moral compass get in their way, and are willing to take crazy risks.

In a way, narcissists are like validation addicts.  When they do not receive admiration or adoration, they become emotionally unstable.  Typically, narcissism begins in childhood when the child is constantly told that they aren’t good enough.  The parents/caregivers may use a child like an object so that the child can be molded into a trophy for the parents to show off.  The child learns that they must constantly seek validation from others so that they don’t receive abuse from their parents.  They are extremely uncomfortable when they don’t receive validation because they’ve learned from experience that abuse is imminent.  When exposed to such an environment for a long period of time, their fears become entrenched and stay with them for the rest of their lives.

The problem with narcissists is that they are willing to sacrifice a lot to keep their fears under control.

  • Surprisingly, they actually don’t care too much about their own money or well-being.  If they find a good source of validation, they will start to pay attention to that person to figure out how to keep the validation flowing.  They will also work hard to get that validation because that’s what they’ve learned as children.  If you want to exploit a narcissist, simply supply them with validation and then make the flow of validation intermittent (or create uncertainty about the future flow).  If validation is hard to get, they will value it more.  As well, the uncertainty over their supply of validation means that they really need to pay attention to their supply and what the supply wants.  Unfortunately for narcissists, they tend to have poor defenses against narcissism because their abuser wanted to exploit them and did not want defenses to get in the way of their manipulation.
  • Narcissists are willing to take crazy risks such as going to jail.  If narcissists are engaged in questionable activities, you can get them to talk about them if they take pride in their expertise in doing questionable things.  Narcissists may also engage in fraud as a short-sighted attempt to maintain their supply of validation.  They have a tendency to engage in magical thinking and just hope that everything will work out in the end.  They don’t give much thought as to how they can avoid jail time.
  • Narcissists are willing to telegraph their frauds.  Because narcissists are extremely sensitive to criticism and often have maladaptive strategies for dealing with criticism, they will sometimes launch vicious campaigns against their critics (e.g. vitriolic personal attacks, expensive lawsuits) in ways that normal people won’t.  This gives away their fraudulent activities.
  • Narcissists are not very good at operating companies.  They tend to promote employees based on their supply of validation rather than competence, eventually resulting in a highly political workplace.  They also create toxic environments around themselves, which is not great for employee retention or morale.  Their inability to show weakness and to admit mistakes means that they don’t correct their errors.  They have grandiose and unrealistic fantasies that lead them to piss away money.  Or, they may favour particular business strategies simply because they think that it will make them look good.  For example, they may drink the Kool-aid on heavily hyped technologies such as cloud, AI, and blockchain so that they receive validation from others.

How to spot full-blown narcissists

  1. They make their grandiosity obvious.
  2. They are extremely sensitive to criticism.
  3. They have maladaptive coping strategies when dealing with criticism.  For CEOs, this may be difficult to figure out as CEOs rarely receive criticism on conference calls.  Instead, look for employees and ex-employees that publicly talk about a CEO’s behaviour in interviews or on  The Glassdoor reviews for Overstock (OSTK) are particularly interesting as the employees really get into the company’s bizarre politics and the CEO’s eccentricities.  Patrick Byrne also personally responds to Glassdoor reviews; it is one of his many eccentricities.
    • Unusual hatred, bitterness, or attention towards enemies/critics is also a maladaptive behaviour.

Narcissism is a spectrum

Narcissism exists across a spectrum.  Some people are able to keep their narcissistic tendencies mostly hidden and mostly under control, allowing them to avoid a lot of bad decisions.  They try to hide their maladaptive responses to criticism so their maladaptive responses may be quite subtle (e.g. ignoring a source of invalidation/criticism and hoping the problem goes away).  If they are humiliated on the inside, they can keep it bottled up inside unless that humiliation is extreme.

As these people will still have a fairly strong desire for validation, genuine praise can be quite useful in dealing with these people as it may expose their vulnerability.  Because mild narcissists have some degree of control over their narcissistic tendencies, they do have some defenses against being manipulated and may not sacrifice everything to get their next hit of validation.  Insincere flattery on the other hand can be quite risky against them.  Genuine praise is a much safer strategy in general as it is unlikely to backfire against any personality type.

Should you bet against narcissist CEOs?  Probably not.

While a management team is “supposed” to make a meaningful difference on the performance of a stock, stocks often do well despite the CEO running the company.  In many cases, the underlying business is a franchise that is difficult to screw up.  If you were to do a deep dive on WWE (see my post “Wrestling and CEOs sabotaging their business”), you will understand that the CEO Vince Mcmahon is a highly eccentric human being who cannot take criticism and constantly makes poor business decisions.  His competitors are also mostly dysfunctional human beings.

A narcissist CEO may not matter very much when that CEO is sitting on a proverbial gold mine.  Sometimes, real life is just as weird as the WWE plotline where Mae Young gave birth to a hand.


All of us have problems in dealing with the illogical connections that our automatic brains form.  Narcissists happen to have more problems with their mental health than other human beings.  They often make bad decisions because they are constantly trying to get their next hit of validation.  Unfortunately, they cannot learn from their mistakes because they have deep-rooted fears that they cannot fight against.  Understanding narcissism can help you understand why so many CEOs make poor business decisions and why they keep doing it.


*Disclosure:  I am short TSLA and RH.  No position in OSTK, WWE, CLF, etc.

A few examples of narcissist CEOs

  • Lorenco Goncalves of Cliffs is extremely sensitive towards negative comments from investment bank analysts, even from those who aren’t particularly critical of him.  His personal attacks towards analysts that “criticize” him are shockingly unprofessional as he openly berates analysts on conference calls and refused to answer questions from an analyst that he didn’t like.
  • Gary Friedman of Restoration Hardware constantly compares himself to famous people.  A Forbes profile piece noted that he “can also be rambling and inarticulate in a way that borders on offensive, at one point comparing his effort to commission a piece of art for a stairwell in the Manhattan store to the work of Martin Luther King Jr”.  He also writes colourful memos in all caps: “NO ONE WAS FOCUSED ON THE PEOPLE IN THE BUILDING WHO WERE ON FIRE. THEIR CLOTHES BURNING, AND MANY OF THEM DYING. WE HAVE LET CUSTOMERS DIE.”

Resources for narcissistic abuse

If you suffer from narcissist parents or other forms of narcissistic abuse:

If you are a narcissist, those with narcissistic personality disorder (NPD) talk about their experience over at r/NPD and r/narcissism:

Some additional resources for narcissists:

Exposure therapy

To see exposure therapy in action, you can find a video on Youtube where it is used to treat a phobia such as a fear of snakes (below) or confined spaces.

One thought on “The automatic brain

  1. Pingback: Writing for finance: 10 tips from a mildly successful blogger – Glenn Chan's Random Notes on Investing

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