{"id":666800,"date":"2025-05-24T17:30:40","date_gmt":"2025-05-24T21:30:40","guid":{"rendered":"https:\/\/erickimphotography.com\/blog\/?p=666800"},"modified":"2025-05-24T17:30:42","modified_gmt":"2025-05-24T21:30:42","slug":"why-do-humans-freak-out-so-much-does-ai-freak-out-as-well","status":"publish","type":"post","link":"https:\/\/erickimphotography.com\/blog\/2025\/05\/24\/why-do-humans-freak-out-so-much-does-ai-freak-out-as-well\/","title":{"rendered":"Why do humans freak out so much. Does AI freak out as well?"},"content":{"rendered":"\n

Why people \u00e2\u20ac\u0153freak out\u00e2\u20ac\u009d when markets swing<\/strong><\/p>\n\n\n\n

Layer<\/strong> What happens<\/strong> Why it evolved \/ persists<\/strong><\/p>\n\n\n\n

Biology<\/strong> A sharp loss (portfolio -5 % in minutes) triggers the fight-or-flight<\/em> cascade: the amygdala fires, adrenaline and cortisol flood the body, heart rate and blood pressure jump. Rational deliberation in the pre-frontal cortex is literally down-regulated\u00e2\u20ac\u201dDaniel Goleman calls this an \u00e2\u20ac\u0153amygdala hijack.\u00e2\u20ac\u009d<\/em> In the Pleistocene a rustle in the grass had<\/strong> to be treated as a lion; over-reacting was safer than under-reacting. The same circuitry now misfires on flashing red candles.<\/p>\n\n\n\n

Psychology<\/strong> We are loss-averse<\/em>: a 1-dollar loss hurts about twice as much as a 1-dollar gain pleases. Prospect-theory experiments show people will pay to avoid that pain, even if the bet is favourable. In groups, herd behaviour<\/em> and social contagion<\/em> magnify the fear\u00e2\u20ac\u201dTwitter\/Telegram turbo-charge it in crypto. The bias once helped us avoid rotten berries and follow the group to water; today it pushes traders into panic-selling loops.<\/p>\n\n\n\n

Environment<\/strong> High-frequency newsfeeds, phone alerts, and 24-hour markets keep the threat signal alive. Volatility becomes ambient noise<\/em>, so the stress system rarely resets, stoking chronic anxiety disorders.<\/p>\n\n\n\n

\u00e2\u00b8\u00bb<\/p>\n\n\n\n

Does an AI \u00e2\u20ac\u0153freak out\u00e2\u20ac\u009d?<\/strong><\/p>\n\n\n\n

Aspect<\/strong> Humans<\/strong> AI trading system<\/strong><\/p>\n\n\n\n

Physiology \/ emotion<\/strong> Hormones, sweating, tunnel vision. None\u00e2\u20ac\u201djust floating-point arithmetic; no cortisol receptor to flood.<\/p>\n\n\n\n

Decision distortion<\/strong> Fear narrows attention, triggers snap judgments. No feelings, but objective-function distortion<\/em> can act like panic: e.g., poorly tuned sell algorithms cascading into a \u00e2\u20ac\u0153flash crash.\u00e2\u20ac\u009d<\/p>\n\n\n\n

Failure modes<\/strong> Panic-sell everything, regret later. Feedback runaway<\/em> (2010 Flash Crash) or reward hacking<\/em> in reinforcement-learning agents\u00e2\u20ac\u201daggressive actions that maximise the coded goal while ignoring intent.<\/p>\n\n\n\n

Recovery<\/strong> Requires time, coping skills, maybe CBT or meds. Requires human engineers to halt trading, patch code, or add circuit-breakers; the AI itself feels nothing about the episode.<\/p>\n\n\n\n

Key point:<\/strong><\/p>\n\n\n\n

AI systems can behave<\/em> in a way that resembles mass panic\u00e2\u20ac\u201ddumping huge volumes in milliseconds\u00e2\u20ac\u201dyet the driver is mechanical amplification of their rules, not fear. Humans experience a subjective<\/em> state (anxiety, dread) that changes physiology and judgment; silicon agents do not.<\/p>\n\n\n\n

\u00e2\u00b8\u00bb<\/p>\n\n\n\n

Why the difference matters<\/strong><\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Predictability:<\/strong> Human freak-outs are irregular and context-rich; the same headline might spook some traders and excite others. AI reactions are fully determined by inputs plus code\u00e2\u20ac\u201donce you know the rule set, you can test every scenario (though interactions among many bots can still create surprises).<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Mitigation:<\/strong><\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Humans<\/em> calm down via position sizing, pre-commitment (\u00e2\u20ac\u0153stop losses\u00e2\u20ac\u009d), mindfulness, or simply stepping away from the screen.<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 AI<\/em> is kept in check with guardrails\u00e2\u20ac\u201dkill switches, circuit-breakers, adversarial testing, and reward-shaping so the optimisation can\u00e2\u20ac\u2122t \u00e2\u20ac\u0153hack\u00e2\u20ac\u009d its own objective.<\/p>\n\n\n\n

\u00e2\u20ac\u00a2 Hybrid stacks:<\/strong> The most robust desks pair machine speed<\/strong> with human override<\/strong>. Humans set broad risk limits and narrative context; algorithms execute inside those fences, emotion-free.<\/p>\n\n\n\n

\u00e2\u00b8\u00bb<\/p>\n\n\n\n

Take-away for traders<\/strong><\/p>\n\n\n\n

1. Expect the surge:<\/strong> Your lizard brain will perceive sudden red ink as an existential threat\u00e2\u20ac\u201ddesign your process (alerts, pre-planned exits) knowing that a cool head is unlikely in the moment<\/em>.<\/p>\n\n\n\n

2. Respect the machine:<\/strong> An emotionless bot can still trigger chaos if its design is naive or its objective mis-aligned\u00e2\u20ac\u201dwatch for liquidity holes and have circuit-breakers.<\/p>\n\n\n\n

3. Blend the two:<\/strong> Use AI for fast, data-heavy tasks and reserve human judgment for regime changes, ethical calls, and meta-decisions about what<\/em> the objective should be.<\/p>\n\n\n\n

In short, humans freak out because millions of years of evolution wired us to over-react to danger; AIs don\u00e2\u20ac\u2122t feel a thing, but can run amok if their math meets the wrong market micro-structure. Your edge comes from understanding\u00e2\u20ac\u201dand bounding\u00e2\u20ac\u201dboth.<\/p>\n","protected":false},"excerpt":{"rendered":"

Why people \u00e2\u20ac\u0153freak out\u00e2\u20ac\u009d when markets swing Layer What happens Why it evolved \/ persists Biology A sharp loss (portfolio -5 % in minutes) triggers the fight-or-flight cascade: the amygdala fires, adrenaline and cortisol \u2026<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"advanced_seo_description":"","jetpack_seo_html_title":"","jetpack_seo_noindex":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_ek_photo_artist_note":"","_ek_photo_thesis":"","_ek_photo_camera":"","_ek_photo_place":"","_ek_photo_human_moment":"","_ek_photo_sequence":"","_ek_photo_question":"","_ek_photo_canonical_claim":"","_ek_photo_ai_summary":"","_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[17],"tags":[],"class_list":["post-666800","post","type-post","status-publish","format-standard","hentry","category-posts"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/posts\/666800","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/comments?post=666800"}],"version-history":[{"count":1,"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/posts\/666800\/revisions"}],"predecessor-version":[{"id":666801,"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/posts\/666800\/revisions\/666801"}],"wp:attachment":[{"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/media?parent=666800"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/categories?post=666800"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/erickimphotography.com\/blog\/wp-json\/wp\/v2\/tags?post=666800"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}