The Hour Between Dog and Wolf

April 16, 2012
Far from the preserve of cold-blooded rationalism, Wall Street is dominated by primitive drives and hormonal surges, argues this scintillating treatise on the neurobiology of the business cycle. Coates, a Cambridge neuroscientist and ex–Wall Street trader whose previous studies have shown that male traders perform better when they have elevated morning testosterone levels, draws an intimate portrait of life on a trading floor, with its intuitive, rapid-fire deal making under pressure, as an almost physical athleticism directed by brain processes and chemistries evolved for less cerebral pursuits. As bond markets soar and slump, he notes, traders experience involuntary fight-or-flight reflexes, jolts of dopamine, and convulsions of the primal “gut brain.” In bull markets, the euphoric boost in testosterone from successful trades fuels ever crazier risk taking until the inevitable collapse, when the defensive steroid cortisol takes over and turns financiers into risk-averse paralytics dependent on government bailout and stimulus. Coates takes economist John Maynard Keynes’s idea of entrepreneurial “animal spirits” and grounds it in hard science, while introducing readers to a brain that’s inseparably intertwined with a very demanding body. The result is a provocative and entertaining take on the irrational exuberance—and anxiety—of the modern economy. Agent: Natasha Fairweather, AP Watt, U.K.

May 15, 2012
An in-depth look at how financial risk-taking is linked to human biology, especially to the testosterone levels of young male traders, and the implications of this phenomenon for financial markets and the wider economy. Coates, who has a doctorate in neuroscience from the University of Cambridge and spent years as a trader at Goldman Sachs, Merrill Lynch, and Deutsche Bank, brings an educated, experienced eye to this examination of the biological side of the financial markets. In his view, the waves of irrational exuberance and pessimism that exaggerate bull and bear markets may be driven by physiological changes. The author has monitored the endocrine and autonomic nervous systems of traders in London to learn how physiological systems affect moods and behavior in competitive and risk-taking situations. When young male traders make money, their testosterone levels rise, and this chemical hit turbocharges their confidence and their level of risk-taking. Coates warns that overconfidence and overreaching lead to a bubble followed by a crash, and the stress response to a crash is a rise in another hormone, cortisol, leading to anxiety, fear and pessimism. The author also takes readers inside the brain, citing scientific research that explains how the brain and body work together, how gut feelings affect thinking, and how we might become physiologically more resilient to stress. Finally, the author suggests steps that banks and fund managers might take to manage the biology of risk takers--and thus keep them from turning from dog to aggressive, dangerous wolf. Among these are changing the year-end bonus system and reining in hot traders with mandatory cooling-off periods. Not surprisingly, another is to broaden trader demographics--i.e., hire more women and more older men. Generally, Coates uses concrete examples to make understandable both the financial and neurological complexities that are central to his argument. Well-presented and intriguing.

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May 15, 2012
Coates' contribution to the high-interest topic of decision makingthe arena of popular titles by Jonah Lehrer (How We Decide, 2009) and Daniel Kahneman (Thinking, Fast and Slow, 2011)hails from the realm of investment banking. A former financial trader, Coates combines his real-world experience and his clinical study of human physiology into a story of Wall Street speculators in action. Setting them as fictional characters in a bull market that turns into a bear, Coates constructs a perspective on financial bubbles in which the human endocrine and nervous systems are the central although unconscious actors. As his traders scan their screens, Coates dramatizes surges of hormones and firings of neurons as the traders place bets, comparing the traders' bodily sensations to those of athletes in competition and soldiers in combat. When crashing securities crush irrational exuberance, Coates reaches back to evolutionary biology to describe the fight-or-flight stressors besetting his traders. A provocative challenger to rational-choice views of high finance, Coates makes an exceptionally clear, readable presentation that is bound to influence arguments about the regulation of Wall Street.(Reprinted with permission of Booklist, copyright 2012, American Library Association.)