Acharya Prashant explains that anger is not caused by external events or words, but by the frustration of one's own expectations. Using the example of a friend versus a stranger, he illustrates that we feel hurt and angry only when someone we have expectations of behaves in a way that contradicts our mental image of them. Anger is essentially the reaction to a false image being broken by reality. The speaker asserts that we create these images out of a desire for security and fear, wanting to believe others will behave predictably so our minds can remain at peace.