Why do we sometimes make catastrophic decisions when hit by a crisis – like – do nothing or blow up!. It has to do with our physiology.
When things are good we are able to switch between an emotionally positive motivated and enthusiastic state, and an emotionally positive relaxed or calm state. We are coherent, creative and make good decisions, balancing the ups and downs that life throws at us with an appropriate response.
However when a crisis hits, some of us enter an emotionally negative, angry and anxious state, acting irrationally, or an emotionally negative depressed and disengaged state, where we may literally freeze. Neither of these states are very helpful.
So the key is to remain in a positive emotional state by working on our physiology through focused breathing, exercise and diet, our personal skills through better emotional intelligence and our interpersonal skills through better social intelligence.
In the attached article by John Coates he relates this very phenomenon to how markets respond in a crisis and why financial disasters occur.