Capello unsure how to rebuild confidence
He also made a public apology to the fans for England's poor performances which ended with them losing 4-1 to Germany in the second round of the tournament after being ranked among the pre-tournament favourites to win the trophy.
"I think what is really important is the mind of the players but I don't know what we have to do to improve it," the Italian told a news conference as England prepared to face Hungary in a friendly on Wednesday which will be their first match since the World Cup debacle.
"At the moment I do not know. We did not play with confidence, we played with fear and that must change. I have a few ideas in mind, but I do not know."
He reiterated his view that things might have turned out very differently for England if Frank Lampard's legitimate goal against Germany had stood rather than not been given after the ball clearly crossed the line.
That would have made the score 2-2 against the Germans who benefited from the reprieve and went on to dominate the rest of the match and ruthlessly expose England's failings.
But even though the World Cup ended so badly, he said he had learnt a lot and improved as a manager which would help him prepare England for his next challenge: winning a place in the finals of Euro 2012 in Poland and Ukraine.
However, he expected England's fans to boo him and his team at the start of Wednesday's match.
"I expect that yes," he said. "I have to say sorry to the fans because our performance was not good. We know the fans spent a lot of money and time to support us in South Africa and I am really sorry.
"We did not play at the same level in South Africa as we did in the qualifying.
"In the World Cup you have to arrive in a really good physical situation. The level was not high."
Wednesday's match is England's only warm-up before the start of their qualifiers in which they face Bulgaria, Switzerland, Montenegro and Wales, but Capello's plans for the game were disrupted when goalkeeper Paul Robinson and defender Wes Brown announced their international retirements after being selected for the squad.
"I respect their decisions," he said.
Capello has called up just 10 of his 23-man World Cup for this squad, including youngsters Jack Wilshere and Kieran Gibbs of Arsenal, even though they have only a handful of first team appearances between them.
Wilshere made seven appearances for Arsenal last season and 14 appearances on loan at Bolton Wanderers. Gibbs played six times for Arsenal.
He has also selected 29-year-old striker Bobby Zamor