We know that markets move in cycles.

Expansions give way to contractions. Optimism turns into fear, and fear eventually resets into opportunity. This rhythm is not unusual. In fact, it is fundamental to the world we live in.

So why do we keep treating it as if it is?

What should be expected feels threatening. In that shift, something important happens – we stop engaging with markets as they are, and start reacting to them as they feel.

That is where the real risk lies.

When conditions change, we tend to abandon the very understanding we claim to hold. Instead of staying anchored in the cyclical nature of markets, we default to short-term, instinctive thinking.

We zoom in. When we zoom in, we don’t see cycles. We see threats. We only see what is right in front of us, stripped of context.

This is what psychologists and decision scientists often refer to as first-level thinking.

The Trap of First-Level Thinking

First-level thinking is immediate, intuitive, and compelling. It focuses on the obvious: “This is going down. You need to get out.”

It is not irrational. In the moment it often feels perfectly logical. But it is incomplete, because it ignores what comes next.

In many areas of life, especially investing, the first outcome is rarely the full story. Decisions that feel right in the moment often carry consequences that only reveal themselves over time.

Markets, by their nature, punish decisions made without that broader view.

Second-Level Thinking: Seeing Beyond the Moment

Second-level thinking introduces distance. It forces you to step back and ask not just what is happening, but what follows from what is happening.

It is the difference between reacting to the cycle and understanding your place within it.

Anne-Laure Cunff describes this as a shift from immediate reward to long-term consequence. We are wired to prioritise what feels good now: certainty, action, relief. Better outcomes usually require us to tolerate discomfort in the present in exchange for what we desire in the future.

Second-level thinking is how we bridge that gap.

Two simple tools make this practical:

1. Ask “and then what?”—repeatedly.
   Don’t stop at the first outcome. Follow the chain.

• If markets fall and you sell… then what?
• If you sit in cash and miss the recovery… then what?
• If you re-enter later at higher prices… then what?

This process reveals the hidden costs of seemingly “safe” decisions.

2. Use the 10–10–10 lens.
   Evaluate your choices across three distinct time horizons:

• How will I feel about this in 10 minutes?
• In 10 days?
• In 10 months?

What feels urgent now often looks trivial later. And what feels uncomfortable now is often necessary for long-term progress.

Zooming In vs Zooming Out

Rick Rubin captures this distinction simply: “When you zoom in, you obsess. When you zoom out, you observe.”

Zooming in amplifies noise. It pulls you into the emotional current of the moment.

Zooming out restores perspective. It reconnects you to the structure beneath the noise, the cycle itself.

It is only from that vantage point that good decisions tend to emerge.

The quality of your engagement.

Ultimately, this comes down to a simple question: “Do you respond from clarity, or react to the prevailing mood?”

The cycle will do what it has always done. It will expand, contract, and reset. It is indifferent to your expectations.

Your outcomes, however, are not. They are shaped by whether you chase what feels good in the moment or stay aligned with what is true over time.

You don’t need to outsmart the cycle. You need to understand how you tend to behave within it.

In the end, your long-term results will not be determined by the existence of cycles, but by how you engage with them.

 

Written by Marius Kilian

 

Source

* “Thinking Deeper”, Anne-Laure Cunff, nesslabs.com

* “What matters: Cycles without drama”, Jawad Mian, Jawad@stray-reflections.com