How can he appear “fine” to others?

There’s no question that sometimes paranoia manifests not as baseless delusion of persecution (e.g., the CIA is tracking me), but as fear of behaving in public in a way that might freak out others and maybe result in arrest and forced hospitalization. Since some people suffering from SZ can’t gauge social reaction, and perhaps have had some legitimately bad experiences, they don’t trust themselves to behave in public in a way that is safe for them, which is why so many withdraw socially.