Recent research in the studies of socio-ecology has raised an intriguing side effect associated with coping strategies and perceptions of environmental risk – where a perceived ability to cope with the effects of climate change and ecological degradation leads to an over-estimation of self-reliance and resilience. Known as the ‘paradox of resilience’, little has been understood about how or when such over-estimations occur. This paper sheds light on such phenomena by constructing a fabula (or narrative structure) of the paradox by investigating the case of extreme water shortage and the coping strategies of residents in the Kathmandu Valley, Nepal. Despite the long delay in providing public access to water, and the high cost this imposes on the public, members of the public have grown accustomed to the unreliable water supply, and willingly accept the high and coping costs of finding alternative sources of water. Using the lived experiences method, the paper reveals a link between self-perceptions of resilience, the incremental nature of the problem, a perceived ability to pay coping costs, and a lack of confidence in government capacity.