Contingency Planning

Normalcy Bias vs Situational Awarenes

For my part, whatever anguish of spirit it might cost, I am
willing to know the whole truth; to know the
worst, and to provide for it.

Patrick Henry (1736-1799)

These immortal words were spoken by a young Patrick Henry in his famous “Give me Liberty” speech at St. John’s Church in Richmond, Virginia on March 23, 1775 leading up to the American War of Independence. As later recorded in the Declaration of Independence on July 4th, 1776, the Colonies had patiently suffered “a long train of abuses and usurpations” from the British Crown with the “design to reduce them under absolute Despotism.”  Among these abuses were the Currency Acts of 1751 and 1764, which limited payment of Colonial legal tender to Britain and the Stamp Act of 1765, which required all printed materials to have a “revenue stamp” to help quarter British troops in the Colonies. The first Continental Congress met in the fall of 1774 with 56 American delegates who later became signers of the Declaration. Just like today, a political and economic crisis was unavoidable in the early Colonies and yet most people did not want to come to grips with this reality and provide for it. Why is this?

Behavior psychologists in the modern cognitive sciences have identified a phenomenon known as the “normalcy bias” that affects an individual’s ability to effectively respond to a serious crisis or threat to life. In short, empirical studies demonstrate that most people want things “to be normal” and they resist any factual information that might suggest otherwise. Anecdotal evidence reveals that our brains are equipped with a survival mechanism that can place us in grave danger when we are faced with a traumatic situation because we simply want everything to be okay. It is an irrational mental disorder that can be historically studied and evaluated; and these include the sinking of the Titanic in 1912, the Crash of 1929, the Jews remaining in Nazi Germany, the Pearl Harbor attack in 1941, the Apollo 13 crisis in 1970, the Space Shuttle disaster in 1986, the 9/11 attacks in 2001, Hurricane Katrina in 2005, the current financial crisis that began in 2008 and natural disasters like snow, tornadoes, hurricanes, earthquakes, fires and floods. The normalcy bias has also been known as the “incredulity response” or “analysis paralysis” and even the “ostrich effect” that forces people to stick their collective heads in the proverbial sand. In other words, people prefer to be in denial.

So what can be done about the normalcy bias? Studies show that in most crisis situations there is an 80/10/10 dynamic in which 80% of the people are complacent and usually either die or suffer great loss; 10% who act foolishly and perish; and 10% that can survive any crisis because they have a clear “threat assessment” and they are prepared in advance. According to behavioral researchers these are the individuals who have “situational awareness” that is almost like a sixth sense. Some like to refer to this as good old “street smarts” that help people survive in dangerous situations. These are the people who instinctively anticipate the need for insurance, computer backups, protected passwords, spare keys, battery cables, flashlights, extra ammo and so on. The only way to survive the normalcy bias is to adopt this same mindset. In other words, just like the Boy Scout motto we all need to “be prepared” for tough times ahead because lives may depend on our actions and ability to respond.

So why don’t most people come to grips with reality or critical situations? As stated above most people are locked into a normalcy bias that distorts their cognitive ability to think rationally. A good example is that most people are trusting in the conventional wisdom of their bankers, brokers, advisors, friends and family who may be well-meaning, but they are among the 80-90% who also suffer from a normalcy bias. If you have come to this website and you have read this far you know exactly what we are talking about! These are the people who think that an economic recovery is around the corner, real estate will always come back, hold stocks for the long term, America is too big to fail and the US will never default on its sovereign debt. This kind of thinking is very similar to the classic Kubler-Ross five-step model that reveals how people deal with death and trauma as follows:

1. Denial (this can’t be happening to me or neural cognitive dissonance).
2. Anger (at politicians, circumstances or anything else but themselves).
3. Bargaining (perhaps if we can do some small things it won’t be so bad).
4. Depression (an awareness that normal circumstances have changed).
5. Acceptance (a new situational awareness and the ability to move on).

These are the five steps that people need to process today and they need to do them immediately as we approach a financial reckoning day. As we like to say, an optimist is one who does not know all the facts! The Bible says, “My people are destroyed for lack of knowledge” (Hos. 4:6). Again we read, “A prudent man sees evil and hides himself, the naïve proceed and pay the penalty” (Pro. 27:12). People need to wake up!

The Four Gs

When it comes to contingency planning we always to refer to the Four Gs; which are God, guns, gold and groceries. As a practical consideration, every household needs to evaluate their own critical needs in a crisis or emergency situation. This will include toiletries, medicines, clothing, footwear, personal items, communication, lighting, energy equipment and so on. A good website to research is www.survivalblog.com in addition to Contingency Planning website links available on this site. For quality food storage programs and water storage you can contact www.freezedryguy.com, www.nitro-pak.com, www.efoodsdirect.com and the folks at Emergency Essentials who have an excellent website at www.beprepared.com and a free catalog at 1-800-999-1863.

As already mentioned, financial diversification must include a core position in precious metals as a foundation of an Investment Triangle and this requires a “contrarian strategy” that runs counter to the normalcy bias of the investment-retirement complex that usually does more harm than good. In his book The Survivor’s Club, Ben Sherwood emphasizes the need for people to resist the normalcy bias and particularly as it relates to a financial crisis. Researcher Sharifa McFarlane writes:

The normalcy bias has severe consequences. When people don’t face the facts of an imminent disaster such as financial crisis, or act to protect their loved ones or their assets from danger that might be developing around them, the negative effect that the disaster has on them is much greater. People who face the situation early and start taking measures to alleviate the impact that the disaster has on their loved ones and their assets are more likely to survive the disaster and even benefit from it.

The best way to hedge your financial assets is not only in gold, but silver for reasons discussed elsewhere on this site that you can benefit from. Silver bullion not only has greater upside market potential but silver will be a more practical asset for trading and bartering in an underground economy and during hard times. You can learn more about the silver market on my blog link articles on this site and you can also download the IDP Investor’s Checklist provided to clients of IDP Consulting Group on this menu.

When it comes to personal defense and protecting your family in a crisis you need to exercise your unalienable 2nd Amendment right “to keep and bear arms” as laid down by our Founding Fathers in the US Constitution. This means that you need to get yourself armed and trained in the use of firearms. As Larry Pratt, founder of www.gunowners.org says, when the government fears your guns you need to fear that government. This is where we are today and it was the same in the early Colonies. In less than a month after Patrick Henry’s famous speech the British marched on Barrett’s Farm in Concord, MA on April 19, 1775 to seize arms, gunpowder and two bronze cannons. This battle led to “the shot heard around the world” and the beginning of the American Revolutionary War. This was a call to arms and Patrick Henry concluded his speech with these words, “Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery? Forbid it, Almighty God! I know not what course others may take; but as for me, give me liberty or give me death!”

Finally, in these uncertain times we need to trust in Lord for His providential care and not hit the panic button! We need to be “prudent” as the Bible says and take deliberate steps to avoid the normalcy bias and adopt a situational awareness that requires some serious contingency planning. “But realize this, in the last days difficult times will come” (2 Tim. 3:1-5). Jesus said that “night is coming when no man can work” (Jn. 9:4). These difficult days are upon us and you need to take the necessary steps for financial diversification, personal preparation and awareness of the times. As mentioned earlier, you can go to our website links page for more information, and we need to be mindful that “God is our refuge and strength, a very present help in trouble. Therefore we will not fear, though the earth should change and the mountains slip into the heart of the sea” (Ps. 46:1-2). “The Lord is near to all who call upon Him, to all who call upon Him in truth. He will fulfill the desire of those who fear Him; He will also hear their cry and will save them. The Lord keeps all who love Him” (Ps. 145:18-20).

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