The Hour Between Dog and Wolf: Risk Taking, Gut Feelings, and the Biology of Boom and Bust

From the 2012 book:

* another remarkable fact struck me during the years – that women were relatively immune to the frenzy surrounding internet and high-tech stocks. In fact, most of the women I knew, both on Wall Street and off, were quite cynical about the excitement, and as a result were often dismissed as ‘not getting it’, or worse, resented as perennial killjoys.

* When traders, most of whom are young males, make money, their testosterone levels rise, increasing their confidence and appetite for risk, until the extended winning streak of a bull market causes them to become every bit as delusional, overconfident and risk-seeking as those animals venturing into the open, oblivious to all danger. The winner effect seemed to me a plausible explanation for the chemical hit traders receive, one that exaggerates a bull market and turns it into a bubble. The role of testosterone could also explain why women seemed relatively unaffected by the bubble, for they have about 10 to 20 per cent of the testosterone levels of men.

* One brilliant and particularly influential description of its effects was written by Andrew Sullivan and published in the New York Times Magazine in April 2000. He vividly described injecting a golden, oily substance about three inches into his hip, every two weeks: ‘I can actually feel its power on almost a daily basis,’ he reported. ‘Within hours, and at most a day, I feel a deep surge of energy. It is less edgy than a double espresso, but just as powerful. My attention span shortens. In the two or three days after my shot, I find it harder to concentrate on writing and feel the need to exercise more. My wit is quicker, my mind faster, but my judgment is more impulsive. It is not unlike the kind of rush I get before talking in front of a large audience, or going on a first date, or getting on an airplane, but it suffuses me in a less abrupt and more consistent way. In a word, I feel braced. For what? It scarcely seems to matter.’

* hypothesis: testosterone, as predicted by the winner effect, is likely to rise in a bull market, increase risk-taking, and exaggerate the rally, morphing it into a bubble. Cortisol, on the other hand, is likely to rise in a bear market, make traders dramatically and perhaps irrationally risk-averse, and exaggerate the sell-off, morphing it into a crash.

* thoughts are intimately tied to our physiology. Decisions are decisions to do something, so our thoughts come freighted with physical implications. They are accompanied by a rapid shift in our motor, metabolic and cardiovascular systems as these prepare for the movements that may ensue. Thinking about the options open to us at any given moment, scrolling through the possibilities, triggers a rapid series of somatic shifts. You can often see this in a person’s face as they think – eyes widening or squinting, pupils dilating, skin flushing or blanching, facial expressions as labile and fleeting as the weather. All thoughts involving choice of action involve a kaleidoscopic shift from one bodily state to another. Choice is a whole-body experience.

* Hearing is faster and more acute than seeing, about 25 per cent so, and responding to an auditory cue rather than a visual one can save us up to 50 milliseconds. The reason is that sound receptors in the ear are much faster and more sensitive than anything in the eye. Many athletes, such as tennis and table-tennis players, rely on the sound a ball makes on a racket or bat as much as on the sight of its trajectory. A ball hit for speed broadcasts a different sound from one sliced or spun, and this information can save a player the precious few milliseconds that separate winners from losers.

* the higher we rise in the nervous system, moving from the spine to the brain stem to the cortex (where voluntary movement is processed), the more neurons are involved, the longer the distances covered by nervous signals, and the slower the response. To speed our reactions the brain tends therefore to pass control of the movement, once it has been learned, back to lower regions of the brain where programmes for unthinking, automatic and habitual actions are stored. Many of these learned and now-automatic behaviours can be activated in as little as 120 milliseconds.

* The trouble with these reaction times is just that – they are reactions. But good athletes are not in the habit of waiting around for a ball or a fist to appear, or opponents to make their move. Good athletes anticipate. A baseball batter will study a pitcher and narrow down the likely range of his pitches; a cricket infielder will have registered a hundred tiny details of a batsman’s stance and glance and grip even before the ball has left the bowler’s hand; and a boxer, while dancing and parrying jabs, will pre-consciously scan his opponent’s footwork and head movements, and look for the telltale setting of his stabiliser muscles as he plants himself for a knockout blow. Such information allows the receiving athlete to bring online well-rehearsed motor programmes and to prepare large muscle groups so that there is little to do while the ball or fist is in the air but make subtle adjustments based on its flightpath. Skilled anticipation is crucial to lowering reaction times throughout our physiology.

* The financial markets are replete with stories of hunches, instincts and gut feelings. These feelings consist, according to legend, of an inexplicable conviction that an investment is destined to make or lose money, a conviction often accompanied by physical symptoms. The symptoms reported by traders and investors are often quirky, like a coughing fit before the market goes down, an itchy elbow before it goes up. George Soros, founder of the hedge fund Quantum Capital, confessed that he relied a great deal on what he called animal instincts: ‘When I was actively running the fund I suffered from backache. I used the onset of acute pain as a signal that there was something wrong in my portfolio.’

* ‘Everyone knows how panic is increased by flight,’ [William James] wrote, ‘and how the giving way to the symptoms of grief or anger increases those passions themselves. Each fit of sobbing makes the sorrow more acute, and calls forth another fit stronger still, until at last repose only ensues with lassitude and with the apparent exhaustion of the machinery. In rage, it is notorious how we “work ourselves up” to a climax by repeated outbreaks of expression.’

* When the world sends us a message it does so through the language of surprise and discrepancy; and our ears have been tuned to its cadences. There is nothing that fascinates us more, little that agitates the body more completely. Information warns us of danger, prepares us for action, helps us survive. And it enables us to perform that most magical of all tricks – predicting the future.

About Luke Ford

I've written five books (see My work has been covered in the New York Times, the Los Angeles Times, and on 60 Minutes. I teach Alexander Technique in Beverly Hills (
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