Stock Market Rollercoaster: How to Handle a Scary Situation

Last Updated May 10, 2010 2:37 PM EDT

After last week's stock market rollercoaster ride, I got to thinking about some harrowing experiences in my life, how they related to each other, and what leadership lessons could be learned. What I came up with was a rule for adult behavior in scary situations. Surprisingly, not all leaders behave that way.

I was working last Thursday, sitting on the patio with the laptop as usual, when my wife came outside and said, "Have you heard?" She sounded serious, which put me on instant alert, "The market's down over 600 points!" I'm pretty sure that sent my blood pressure up a few notches.

At that point, I suspect our response was fairly typical:

  1. Check the market to see what's going on and assess its impact on our situation.
  2. Decide what action to take. In this case, the answer was none.
  3. Settle down, ride it out, and try to make sense of what happened.
A few hours later, my mind began wandering to the place it often goes when this sort of thing happens: traumatic childhood experiences:
  • Getting separated from my parents in a bustling New York City department store.
  • My brother forgetting to pick me up at school, sitting alone outside and it's getting dark.
  • Walking home from my first day at school after moving to a high-rise apartment building and finding the unit deserted (I went to the wrong apartment).
Of course, those early life experiences turned out okay in the end. And once you've had enough of them, you begin to think of them like rollercoaster rides. Scary as hell, but you tell yourself it'll all be over soon so try not to freak out.

Later in life, we begin to experience events that don't always turn out so well. Our youthful view that everything works out in the end begins to morph into more of an adult realization that our actions have consequences. Eventually we realize that there's a method to employ in all scary situations:

Listen, Learn, Act, Wait, Repeat.
If only we all grew up that way. Some executives either never get there or, more likely, become drunk with their own success and power and begin to handle situations like children again. They begin to behave as if their actions have no consequences and, ignore the risks their intelligence and experience must be alerting them to on some level.

When that happens, in the best case, company performance suffers. In the worst case, there's fraud and devastation. Names like Ken Lay and Jeff Skilling of Enron, Bernie Ebbers and Scott Sullivan of WorldCom, Dennis Kozlowski and Mark Schwarz of Tyco, John and Tim Rigas of Adelphia, and Bernie Madoff, among others, come to mind.

I don't know about you, but I've seen executives behave that way in the real world. Not to that extent, but the risks they were taking were somewhat out of proportion with reality. Yesterday's post, What To Do When The Executive Has No Clothes, was all about taking action during those situations, but expanding on that a bit, the actual steps I take in scary situations, like when the stock market is in chaos or my CEO is out of control, is this:

Listen, Learn, Act, Wait, Repeat.