The Hour Between Dog and Wolf: How Risk Taking Transforms Us, Body and Mind

by John Coates

A successful Wall Street trader turned neuroscientist reveals how risk taking and stress transform our body chemistry

Before he became a world-class scientist, John Coates ran a derivatives trading desk in New York City. He used the expression �the hour between dog and wolf” to refer to the moment of Jekyll-and-Hyde transformation traders passed through when under pressure. They became cocky and irrationally risk-seeking when on a winning streak, tentative and risk-averse when cowering from losses. In a series of groundbreaking experiments, Coates identified a feedback loop between testosterone and success—one that can cloud men’s judgment in high-pressure decision-making. Coates demonstrates how our bodies produce the fabled gut feelings we so often rely on, how stress in the workplace can impair our judgment and even damage our health, and how sports science can help us toughen our bodies against the ravages of stress. Revealing the biology behind bubbles and crashes, The Hour Between Dog and Wolf sheds new and surprising light on issues that affect us all.

Genres: Psychology, Nonfiction, Finance, Science, Business, Economics, Biology

352 pages, Paperback

First published May 1, 2012

About the author

Librarian Note: There is more than one author with this name on GR. This profile might contain books by multiple authors with this name.

Reviews

[John · Rating 3 out of 5]

An interesting read for someone interested in research study results in psychology, neuroscience and the behavioral effects of hormones. Coates is clearly very familiar with both the world of the trading floor and the science he writes about. I was disappointed, however, in the lack of a real punch line as far as workable strategies to take advantage of these effects to make money in the markets. Male hormones increase volatility. OK, I was convinced of that half way through the book. What good is that information without a strategic approach to the market?

[Nichole Smith · Rating 1 out of 5]

Is there a duck nearby? Because I hear a quack.

In this book, Coates posits that rather than the rational economic beings we like to think make major financial decisions, we are actually driven by physiological impulses much more so than intelligent thought. I'll give Coates props for knowing his biology --but that's about the only redeeming characteristic of this book. First, I'm not sure what is particularly novel about his theory. There's been a lot of attention paid to these issues since 2008 and I think most people have acknowledged that traders are sort of an elevated form of gambler, reacting to the ebb and flow of the markets in the same way that a gambler reacts to the turn of the roulette table. Coates describes the biology behind that -- the testosterone that can lead to "irrational exuberance" and the cortisol that leads to "irrational pessimism".

That's all fine and not particularly earth-shattering. But then he discusses some pretty bizarre theories -- for example, that the amount of pre-natal testosterone exposure experienced by traders could be predictive of their trading acumen in later life. He measures this by taking handprints of a series of traders and gathering the ratio of their index and ring fingers (2D:4D ratio) which is supposedly an indicator of such exposure. Then he compares results to the traders' P&Ls, specifically their Sharpe ratios and supposedly finds relationships. Or when he discusses how markets always seem to crash in October -- and perhaps that's because of the falling testosterone of the male traders during this time of year... "Maybe in the autumn traders' animal spirits give up the ghost and risk taking dims, taking stock market prices down...I might point out another oddity in the stock markets, and that is their observed tendency to outperforming on sunny days and underperform between autumn equinox and winter solstice which is sometimes attributed to seasonal affective disorder. Perhaps this too is tracked back to testosterone levels..."

At the end he discusses possible solutions to the situation. Since women have 10-20% less testosterone than men, they typically are less affected by irrational exuberance and pessimism and can retain cooler heads on trading floors. So a reasonable solution is to recruit more women since only about 5% of traders are female. Also, since older men have less testosterone, a greater mix of young and old would be worthwhile. These are not terrible solutions, though I'm not sure how they are implemented. Or he says, let's change the bonus structure and pay out every 5 years so that we don't continue to encourage short sighted gains and risk-taking. Ok, but what about talent aquisition? Do we limit irrational behavior only to lose all of the most intelligent people in the field who are unwilling to sit and wait 5 years for their compensation, particularly in this day and age? And that's pretty much all he's got from a solution standpoint.

Overall, just very disappointing.

[Pavlo Illiashenko · Rating 4 out of 5]

I knew about author's research and had a basic knowledge of neurophysiology and neurobiology before reading this book . I don't feel that I've learned anything new. It was fun to read stories from the trading floor, in some sense even nostalgic. However, nothing beyond that.

One unexpected drawback is related to authors style. I was expecting to read more or less scientific book, but Coates writes more as a journalist or a wall street guy - to much pleasure of speculating with solid ideas than exploring those ideas in a scientific way.

Nevertheless, the book deserves at least 4 stars, especially for those unfamiliar with neurobiology and its role in financial risk-taking.

[Mike Scialom · Rating 5 out of 5]

Like war, activity on the trading floor "consists of long stretches of boredom punctuated by brief periods of terror", writes John Coates in The Hour Between Dog and Wolf (Fourth Estate, £20).
What follows is a minute-by-minute analysis of the trader's metabolism which reveals the effects of the euphoria, the stress, the boredom and the heart-stopping moments of hyperactivity where "nature and nurture conspire to produce an awful train wreck, leaving behind mangled careers, damaged bodies and a devastated financial system".
Coates was a financial services worker on Wall Street in the 1990s and watched the bull market go wild, noting "how its energy and excitement overflowed the stock exchange, permeated the culture and intoxicated people". Traders "on an extended winning streak experience a high that is powerfully narcotic". This high, he notes, is an "irrational exuberance" which is very close to Keynes' "animal spirits", thereby providing the first bingo moment of The Hour. He wonders if this irrational exuberance "might be driven by a chemical". He calls the chemical the Bull-Market Molecule. He comes across a likely suspect: it's a hormone. Hormones are "chemical messengers carried by the blood from one tissue in the body to another". Hormones maintain life, for instance by telling us our body is thirsty, or cold, but they don't cause behaviour. If you're on a diet you have to ignore what your hormones tell you. This can be hard because "sometimes the lobby group is more like a foghorn" and "can be very hard to resist". The evidence becomes clear: mind and body are not separate, they are endlessly intertwined. You can't isolate pure thought, thoughts are "inextricably tangled up with motor circuits". And the conclusion, every bit as revolutionary as Copernicus' assertion that the earth goes round the sun: "Seeing yourself as an inseparable unity of body and brain may involve a shift in your self-understanding, but it is, I believe, a truly liberating one".
And so the second bingo moment kicks in, and there are consequences, huge consequences. Traders need to be physically healthy - fit - to do what they do. They need to learn from top-class athletes, "for they are the people with the most experience of controlling their hormones and emotions in the interests of optimising performance".
Traders need support from family and friends too. If they become isolated, they become less effective. "I am concerned (that) a financial community may develop, as a crisis wears on, into a clinical population." In other words, the reason the financial services sector continues to chase vast convoluted deals, and the reason traders are still losing billions - Kweku Adoboli of UBS, who lost his firm $2.3bn, being the latest in a long line that began with Nick Leeson at Barings in 1995 and shows no sign of abating any time soon - is that they may be verifiably bonkers, albeit temporarily. They are men addicted beyond any hope of redemption. The cure, says Coates, is to get more women on the trading floor, and employ more older men, men who are in control of the Bull-Market Molecule, men who are "less likely to jump into risks before thinking through a wide range of possible outcomes". And there is little evidence that age impairs judgment in this sector either: check Warren Buffett and George Soros.
On the surface of it, The Hour Between Dog and Wolf is about the physiological and neurological changes that take place within traders' bodies as they do their buying and selling. But Coates, who is affiliated to Cambridge's Judge Business School, disentangles the mind/body dichotomy with forensic skillto show how our bodies and brains are interlinked, and this book has profound implications for the history of philosophy and will, in my view, wobble the foundations of some of philosophy's most sacred tenets.
"If the walls separating brain from body came down," writes Coates, "so too would the barriers between many subjects." Such as economics and medicine, for starters.
And knowing how beautifully the brain is integrated into the body could "bridge the abyss of misunderstanding that has separated the `two cultures' of science and the humanities".
The Hour Between Dog and Wolf is a total gamechanger. Buy it and liberate yourself from a 2,000-year old dead end.

[John · Rating 5 out of 5]

Our stress response is designed to fuel a muscular effort, yet the stress must have us face is largely psychological and social, and we endure it sitting in a chair. The used glucose ends up being deposited around the waist as fat, the type of fat deposit posing the greatest risk for heart disease. At the extreme, stressed individuals, with elevated glucose and inhibited insulin, can become susceptible to abdominal obesity and type 2 diabetes. Patients suffering from Cushing's syndrome epitomize the change in body shape, having atrophied arms and leg muscles and fat buildup on the torso, neck and face, making them appear much like an apple on toothpicks. A year into the financial crisis, the testosterone ripped iron Man of the bull market start to look decidingly puffy.

Humans are built to move, so move we should. The more research emerges on physical exercise, the more we find that is benefits and far beyond our muscles a cardiovascular systems. Exercise expands the productive capacity of our amine-producing cells, helping to inoculate us against anxiety, stress, depression and learned helplessness. It also floods our brains with what are called growth factors, and these keep existing neurons Young and new neurons growing-some scientist called these growth factors "brain fertilizer"-so our brains are strengthened against stress and aging. A well-designed regime of physical exercise can be a boot camp for the brain. In the future, however, the advice to exercise, administered so literally by doctors everywhere, could be made more effective by being more explicit. What type of exercise? Antibiotic or anaerobic? How often? Once again, sports science could help enormously and tailoring this advice to the person receiving it.
Rats women regularly and Coldwater developed capacity to mount a quick and powerful arousal, relying on adrenaline more than cortisol, and just switch it off just quickly.when subsequently exposed to stressors they are not as prone to learned helplessness. Some tentative research has suggested that much the same thing occurs in humans.people who regularly exposed to cold weather or who swim in cold water may have undergone an effective toughening regime that has made them more emotionally stable when confronted by prolonged stress. It is surmised by some researchers that the exercise itself, coupled with acute thermal demands, provides these people with enviable pattern of stress and recovery. Perhaps the same effects could result from the Nordic practice of a sauna followed by a cold plunge.
people who have developed cold tolerance may have increased their emotional stability.
Today we may be paying a high price for our modern comforts. In fact, cannons fears of a decline in fitness may have been justified: recent evidence suggests that the widespread adoption of climate control in home, car and office may be one cause of the current obesity epidemic. The disappearance of thermal stress from our lives may have another unintended consequence: it may have largely eliminated a valuable toughening process.

Development of influences affect the way a person handle stress later in life. They have found that acute stress, and other parts short-lived and moderate stressors, early in life can toughen an animal for adulthood. Young rats that are handled by humans will develop larger adrenal glands, but never the less as adults will show a more immediate stress response to threats.they also tend to live longer, one study finding a life expectancy 18% longer than the non-stress rats.acute stressors early in life, such as maternal separation, Foster and anxious adult ill-prepared to deal with the slings and arrows of normal life events. Each stressor can toughen the rat. Call it the School of hard knocks.

Older people's may suffer a more serious decline in the growth index because they may stop producing testosterone and growth hormone all together, while producing ever-increasing amounts of cortisol; as a result they come to suffer what is called a "failure to thrive," there high cholesterol levels draining them of muscle in vitality. the simple ratio of testosterone to cortisol, easily accessed through either a saliva or blood sample, can serve as a sensitive measure of our immunity to daily stress in our state of preparedness for competition.

Hormones in the Cascade of other molecule signals hormones trigger-they build up in the bodies of traders and investors during bull and Bear markets to such an extent did this shift risk preferences, amplifying to cycle.
Indeed, under the influence of pathologically elevated hormones, the trading community at the peak of a bubble or in the pit of a crash may effectively become a clinical population. In this state it may become price and interest rate insensitive, and contribute greatly to the violence an intractability of runaway markets, "black swan" events.
Consider older men. Hormones change over the course of a man's life over a woman's too.testosterone levels in men rise until their mid-twenties, then go into a slow decline that accelerates after the age of 50. At the same time, cortisone levels drift upward. as they age, men may therefore become less and less susceptible to the testosterone feedback loops that I have argued can morph risk-taking into risky Behavior. In addition to their altered biology, older men bring to a bank or fund a lifetime of valuable experience. They have seen bad things happen-the crash of 87, say, or the savings and loans crisis of the late 80s and early 90s, when hundreds of US Banks became insolvent-so they are less likely to jump into risk before thinking through a wide range of possible outcomes. Yet the trading floors are traditionally hostile to order traders, perhaps because they're slow reaction times or they're more cautious attitude is misinterpreted as fear. But there is little evidence that agent pierce the judgment of investors, or their ability to take risk. Warren Buffett and Benjamin Graham achieved their status at a later stage in their lives, not as young men. Women, for their part, have very different biology's for men. They produce on average 10 to 20% of the amount of testosterone as men, and they have not been exposed to the same organizing effects prenatal androgens,so that you may be less prone to the winner effect than young men. Women's stress response also differs substantial commence. a woman will indeed experience fight or flight if faced by a grizzly bear, just as a man will; a woman's natural reaction to threat, at least within the social situations that are today are normal environment, is what she calls the "tend and befriend" reaction, an urge to affiliation. She reasons that if you have children to care for, tend and befriend makes more sense than launching into a fist fight or run away which is more Man-Thing.
as for the long term stress response, women on average have the same levels of cortisol as men, and these are equally volatile. But research has found that women stress response is triggered by slightly different events. Women are not as stressed by failures in competitive situations as our men; they're more stressed by social problems, with family and relationships. What all these endocrine differences between men and women add up to is the following: when it comes to making and losing money women may be less hormonally reactive than men. Their greater numbers among risk-takers in the financial world could therefore help dampen the volatility. Women make up at most 5% of the traders in the financial world, and even that low number includes the results of diversity pushes at many of the large Banks. The most common explanations ventured for these numbers are that women do not want to work in such a macho environment, or that they are too risk-averse for the job. There may be a kernel of Truth to these explanations, but I do not Place much stock in them. To begin with, women may not like the atmosphere on the trading floor, but I'm sure they like the money. There are few jobs that pay more than a treasure in the financial world. Besides, women are already on the trading floor: I make up about 50% of the sales force oh, and that sells for sits right next to the trading desks.so women are already immersed in the macho environment and are dealing with the high jinks; they are just not trading. conducted studies in behavioral finance that suggests that on computerized monetary Choice task women are more risk-adverse than men. But, I have not entirely convinced, because other studies, of real investment behavior, show that women often up for men over the Long haul, and such a performance is, according to formal finance theory, a sign of greater risk-taking. In an important paper called boys will be boys, analyze the brokerage records of 35,000 personal investors over the. 1991-1997 and found that single women I'll perform single men by 1.44%. a similar result was announced in 2009 which found that over the previous nine years hedge funds rampart women had significantly outperformed those run by men.
Womens are performance was chased the fact they traded their accounts less. Men on the other hand tended to over trade their accounts, a behavior the author's take as a sign of overconfidence, a conviction on the part of the men that they can beat the market. The trouble with every training is that every time you buy and sell security you have to pay the bid offer spread plus any commission, and these cost at up so quickly that they substantially diminishing returns. Is the superior performance of women Risk takers due to the lower transaction cost? Or Transportation cost? Or perhaps to better judgement? How can we reconciled experimental findings that women are more risk-adverse with the data on their actual returns, which suggests either greater risk-taking or better judgement? There is a clue that may help solve this mystery.
Some of the biggest asset management companies in the UK women make up as much as 60% of the Risk takers. Asset management is risk-taking, so it is not the case that women do not take risk; it is just a different style of risk-taking from the high-frequency variety so prevalent at the banks. And asset management one can take time to analyze a security then hold the results in trade for days, weeks or years. So the difference between men's and women's wrist taking may be not so much the level of risk aversion as it is to the. Of time over which they prefer to make their decisions.

When markets are roaring, Banks hire as if growth will continue exponentially;and when the inevitable downturn comes, they fire just as indiscriminately. I heard the hiring policies at Banks refered to as a rotating door. I heard managers refered to trading floors, with the rapid turnover, as self-cleaning ovens. These practices were to exaggerate the stress once a crisis hits.
Once we come to understand the signals are body sends us, including fatigue and stress, there is a great deal we as individuals can do to toughen ourselves against the ravages, we as managers can do to minimize the impact. It is the wise and farseeing managers who put health and stabilized risk preferences at the top of their companies agenda.

Executing plans handed down by upper management. Most jobs and companies adhering to this model had a high workload and low control; they also had a high incidence of stress-related illness. Stress-related illness is not the inevitable price we pay for her profits. The healthy worker is a productive one. Moreover, a healthy worker is one with far lower medical cost, and these can add up to substantial savings both for the employment company and for the economy as a whole.
Levels of workplace stress and worker Health should become goals of management just as much as short-term profits.

Fatigue should be understood as a signal are body and brain use to inform us that the expected return from our current activity has dropped below its metabolic cost. The brain quietly searches for the optimal allocation of attentional and metabolic reserves, and fatigue is one way it communicates its results. If we are engaged in some form of search and have not turned up any results, our brain, through the language of fatigue and distractibility, tells us we are wasting our time and encourage us to look elsewhere. The cure for fatigue, according to this account, is not rest; it is a fresh tasks. support for this idea comes from data showing that overtime work does not in itself lead to work-related illness such as hypertension and heart disease;these occur mainly if workers have no control over their allocation of their attention. applying such a model could benefit workers and management alike, for more flexibility and choosing what to work on, and when, could produce worker fatigue, while management might be delighted to find that workers may be just as refreshed by a new assignment as by a vacation.this model of a day provides a good example of how understanding a bali signal can alter the way we deal with it.
Novelty made that prove rejuvenating when we are battling fatigue, but under circumstances it can turn toxic-when we are trapped, for example, in a state of chronic stress.novelty and complexity beyond moderate levels can promote anxiety. If we return to chronic stress and look at the influence of novelty in this condition, we can find another example of how we frequently misunderstand the source of our problems.
Social readjustment rating scale, which used to predict future illness and death. They found that all the obvious dressers, such as divorce, the death of a spouse or financial difficulties, predicted a higher risk of illness and death. but also high on their list or more welcome changes, such as marriage, birth of a child, a change of job or, incredibly, outstanding personal achievement. while these events were no doubt welcome, they add it novelty to the lives of the recipients, and that could later take a toll on their health. Are complete unawareness of the damage being inflicted on us at such terms is one reason hypertension and heart disease are called silent killers.

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[Tab Williams · Rating 1 out of 5]

Couldn't get through it. There is too much talk about human physiology and chemical use and it really hampers the readability of the book. Reads more like a science book with a finance overlay than a finance book with a science overlay. This is one of the books where a summary of main takeaways is far more efficient use of time than actually reading the novel. Would not recommend.

[Kris · Rating 4 out of 5]

Good, quick read. Mixes some interesting trading anecdotes with some neuroscience pretty well, going back and forth between providing examples and explaining. That well-executed interweave is probably one of the best points of this. A lot of the neuroscience was somewhat familiar from related works, such as Kahneman's Thinking Fast and Slow, but there were some interesting new points as well, and some framed in different manners. Also fun to have the trading perspective in there for me.

[Celeste · Rating 5 out of 5]

I immensely enjoyed this book. The insights Coates shared were illuminating, especially in an era where people prize logic without knowing the limits of their rationality. It's a shame such findings would hardly be shared in business schools, where theoretical academic knowledge would be conferred instead.

[Rick Wilson · Rating 2 out of 5]

Oscar Wilde said, "A fool is someone who knows the price of everything and the value of nothing".

The quote could be translated to this book. “A fool is someone who can tell you what neurotransmitters are firing, but not actually how to do the job.”

This author overstates the correlation between things he’s researched and his limited experience at Goldman Sachs. He uses a sort of hamfisted approach to understanding neuroscience that was really popular when fMRI machines first were invented. “The amygdala activates when there is fear“ “your prefrontal cortex inhibits impulsivity“ resulting in portrait of what goes on in the brain while trading stocks, bonds, whatever, but it’s done with primitive tools so it’s like trying to draw a really comprehensive picture of a mountain with crayons. An updated understanding of this talks about how this correlations between brain regions, but there aren’t necessarily defined walls that are solar contributors. The brain is much more holistic, and integrated than we could ever have thought at the advent of trying to understand this.

So holistically, there are some issues. And then there are just the flat out things that are wrong.

I’m not exactly sure how this book proposes, with a straight face, that higher testosterone leads to higher performance in the market. And the simple fact that the author spends a whole chapter talking about it makes me doubt all the other claims.

There is some interesting framing how the neuroscience of fear impacts market activity. But I’m not sure that any of it is really useful beyond cocktail conversation. Like if you try to extrapolate this to some other situation, it’s not useful in any meaningful way. Breaking down the thought process and chemical pathways of a football player as they dodge tackles is entertaining, and sure you can get your PhD in it, but I’m not convinced that there’s any significant impact that an athlete would gain with that knowledge. And even the author made the joke that there’s plenty of Ivy League dudes who can’t trade worth a damn and who make less money then state school hustlers. This book directly feeds that type of thinking. It’s a lot of science talk with little application.

So what were left with is kind of an interesting tour through neuroscience research circa 2012. Honestly I’d probably just recommend re-watching Margin Call for the 147th time if you want a more usable version of these concepts.

[Cooper Easthope · Rating 3 out of 5]

Firstly, what an amazing title. Wow.

This book focuses on the biological (and specifically, neurological) effects of stress. The author is a previous Wall Street trader and used the example of hypothetical Wall Street traders to demonstrate the environments talked about in his book.

The title and description on the back of the book had me very interested. I expected an analysis of behaviours that change when we are exposed to risk and how to mitigate rash decisions. Instead, this book delivered Neuroscience 101. The author spends maybe 20 of the 260 pages of this book in his Wall Street storytelling. The strong majority of this book is spent explaining sections of the brain and hormones that affect the human body.

I didn’t go into this book expecting such an extended discussion of human anatomy and I find the topic to be quite dry. Because of this, I felt like I had been misled by the title and book description. I powered through, but the anatomy discussion was unrelenting through the book.

If you’re interested in neuroscience and currently unfamiliar with it, this would be a great book to get you started. If you’re picking this book up expecting an in-depth discussion about financial-risk taking, I would encourage you to look somewhere else.

[Ardon · Rating 4 out of 5]

A disproportionate number of my friends work in finance, whether they be wealth managers, quantitative traders, or private equity analysts. As a result, I often hear a lot about how individuals within this general field respond to specific events to shape how markets move (most recently about how Trump’s tariffs have sowed the seeds of uncertainty and fear into the US securities and bond markets).

Many of these responses operate on a near hair trigger, which got me quite curious about any physiological changes that might occur in traders when they are forced to deal with pressing situations or make difficult decisions. The additional interest I had relating to this was because I thought this might also be highly relevant with regards to one’s physiological state might change while playing poker - you never know what might help you build your edge in the game!

Coates’ book has an interesting style to it, starting off with fictional stories from the trading floor and then applying psychology, neuroscience, and basic macroeconomics to dissect every aspect of why a trader might make a particular move in a specific situation. Admittedly, it’s heavier on the psychology and neuroscience than information on trading/the markets, but depending on what you’re looking for, this might be a positive. The main focus of the book is on how steroid hormones modulate trading behaviour, notably, testosterone and cortisol. Coates ties in his dissection of this with a plethora of facts from the world of neuroscience and psychology, applying them adeptly to the trading situations he paints.

However, my point of annoyance with the book relates to this - it is largely descriptive and not particular useful in terms of how one might be able to use this knowledge to optimise how one might manage high risk, time pressured decisions. I was also expecting more on how, historically, stimulant use (e.g. cocaine) was rampant among those who worked on Wall Street, and how this might have linked to performance as well as larger market events.

[Sheldon · Rating 4 out of 5]

This book touched on a really interesting concept by focusing on understanding what is happening physiologically when taking risks. I also found the focused discussion on finance to be rather helpful for someone who does not have deep understanding of the financial field. I felt like the author went a bit far in ionizing the profession through some rather glowing descriptions to make the work of finance sound more intense and important. I also was looking for more discussion around some of the ways stress hormones affect people outside of a particular context. Overall, I don't think I would recommend this broadly as the writing style was dry at points and the flowery description of trading felt alienating at times. It did provide a useful frame for thinking about the impact of risk taking and there were a few useful takeaways about how our behavior is changed by succeeding and failing at risk management.

[Nancy Mills · Rating 4 out of 5]

Pretty fascinating, and ties in well with the other one I'm reading, Behave: The Biology of Humans at Our Best and Worst. Talks about the neurology and endocrinology in a Wall Street setting, and how the testosterone and cortiods and what all coursing through the bodies of Wall Street traders affect their decisions, and how the market affects their physiology.

[Michael · Rating 3 out of 5]

Quite interesting! How our biological nature exacerbates booms, excessive risk taking and how the system rewards this behavior.
Sometimes a bit too much detail for what is actually needed to provide evidence for the point.
Some good ideas at the end to resolve the incentive mismatch.
Overall some good takeaways :)

[William Florence · Rating 5 out of 5]

As a former trader and current investment specialist. I loved the details of this book. Really have an insight into what happens on a science level in the body when making risk decisions. Also was interesting to hear his ideas on how the underlying chemistry in the body can affect market movements. Very interesting read for anyone in investments/trading.

[Siddharth Tripathi · Rating 5 out of 5]

Good read for people who have been in the markets for some time! Too much to relate to! Can get repetitive but that's with all non-fiction books! Love the way hormone changes are defined and once you learn about it, cannot help but noticing the effects in real life!

[Palsko · Rating 5 out of 5]

This book is a well-written piece on mind-body tandem. Ranging from a pinch of philosophy sprinkled by Aristoteles to the restless trading world, it drew me in, particularly in the part that discusses the peril of novelty and fatigue. There's no need to purchase a cheap Ryanair ticket during upheavals; instead, it suggests returning to familiarity. Mental fatigue ought to be addressed with a fresh task.

[Tejasvi Muvvala · Rating 3 out of 5]

The intro would’ve been enough

[Steve Vott · Rating 4 out of 5]

Worth the read. The mid section gets repetitive but otherwise an educational and eye-opening book.

[Harshad · Rating 4 out of 5]

Fascinating book! Completely changes the way you would look at risk taking. Lot of interesting things to think about on evolution of human brain too. The story of human body and brain, evolution, hormones and risk taking: told in a very accessible and engaging style.

[Lone Wong · Rating 5 out of 5]

The unique title is taken from a French since the Middle Ages have called "L'heure entre chien et loup" and refers to the moments after sunset when the sky darkens and vision becomes ambiguous, making it difficult to distinguish between dogs and wolves, friends and foe. John Coates has brilliantly interpreted this unique title that it is this moment that we human being irrational and euphoric that makes us become appetite for risk and making a bad decision.

In fact, the appetite for risk-taking is so universal that anyone who involved in sports, runs for political office, fights in a war or being an entrepreneur. But the book he wrote only focus on financial risk-taking, and do so for good reason. First, because finance world is a world where John came from and having spent 12 years on Wall Street is a good place for him to do the research and collect numerous of empirical data with his own personal experiment in financial trading. Second, he describes finance is the nerve center of the world economy. If athlete succumbs to overconfidence, they lose a match, but if traders get carried away on a flood of hormones, the global market fluctuated. (It is easier to comprehend the book for people like me who have no knowledge background of any science or biology.)

In one important respect, he describes that financial risk carries even graver consequences than brief physical risk. A change in income or social rank tends to linger, so when we take risks, it carries with us for months, even years after our bets have settled, an inner biological storm. But during the average win or loss in markets can change us, Jekyll-and-Hyde-like, beyond all recognition. On the winning streak, we become overconfidence, euphoric, what the ancient Greeks called hubris and nemesis, and our appetite for risk increases so much that we puffed up with self-importance and feel indestructible. On the other hands, during the losing streak, we struggle with fear, dwelling in the bad moment over and over again, so that stress hormone linger in our brains, prompting us to be risk aversion, even depression for months or even years.

And the point I want to make is this: the overconfidence and hubris that traders experience during a bubble or a winning streak just does not feel as if it is driven by a rational assessment of opportunities, nor by greed–it feels as if it is driven by a chemical in our body.

Hormone plays a central role in our body. The maintenance of vital signs, like blood pressure, body temperature, glucose levels, etc., with the needed for our continued health. Most other internal chemical operates in our body preconsciously, in other words without our being aware of them. In the book, the author argues that the statement about biology and the financial markets may sound strange to the people who are teaching economics. Usually, people perception about the financial markets and the assessment of financial risk as a purely intellectual affair that requires a lot of acute and precise calculation of assets returns, probabilities, and strategic planning - carried on for the most part rationally. But he argues that recent advances in science proven that we humans do a lot more than just thinking about it. We sometimes rely more on our "Gut Feeling" more than the conscious mind. Thinking, one could say, is something we do only when we are no good at an activity. We are for the most part on autopilot during our daily tasks.

This tacit knowledge is shared between body and mind. Most of it, like homeostatic regulation, remains inaccessible to consciousness; some of it, like gut feelings, can be brought to the fringes of awareness; and some, like fatigue and stress, can be brought to full consciousness but are often misunderstood. We are in the strange position of creatures who on the one hand generate bodily messages intended to maintain health and happiness or prepare us for movement, but on the other sometimes do not know, rather do not consciously know, what they mean.

The author explains the most likely reason for our beliefs about the mind, the brain, and the behavior have been indoctrinated by a powerful philosophical idea we inherited from the Western culture almost 2,500 years ago–that of a categorical divide between mind and body. It originated from the philosopher Pythagoras, who needed the idea of an immortal soul for his doctrine of reincarnation, but the idea of a mind-body split was cast in its most durable form by Plato, who claimed that within our decaying flesh there a spark of divinity, this being eternal and rational soul. The idea was subsequently taken up by St. Paul and become as Christian dogma. Later known as the mind-body problem; and physicists such as René Descartes's dualism for his famous quote: I think; therefore I am. In other words, we choose our course of behavior after thinking it through–and guided by a rational mind. According to this school of thought, we are walking computers who can calculate the rewards of each course of action open to us at any given moment, and weight these rewards by the probability of their occurrence.

I remembered that when I read The Story of Philosophy by Will Durant. He says that the epistemology has kidnapped the modern philosophy. People during this modern era with so much of abundant resources of knowledge and science yet can't be able solves the problem of knowledge we humans are facing right now. Maybe there is a limit of human knowledge that we can't even understand the species of ourselves. But the recent discovery of behavioral economics by Daniel Kahneman and Amos Tversky have succeeded in building up a more realistic picture of how we behave when dealing with money. (For more information, please read his best selling book. Thinking Fast & Slow as I couldn't be able to interpret the idea of the book within this limited paragraph) Daniel Kahneman, for one, has conducted research in the physiology of attention and arousal and has recently pointed out that we think with our body. In fact, it may be more scientifically accurate, although semantically difficult, to stop speaking in terms of brain and body at all, as if they were separable, and to speak instead of a whole-person to respond to events.

Recalled that the Hormones play a central role in our body and how it affects us in rational judgment and decision making. There is, in fact, a connection between preconscious decisions and the body, because it is gut feeling that allows us to rapidly assess whether a pattern and a considered choice will most likely lead to a pleasant or nasty outcome, whether we like or dislike, welcome or fear it. For instance, he describes that the Dopamine that our body produces prompted us to try things we had not tried before. It surges most powerfully when we perform a novel physical activity that leads to unexpected reward. It drives us to push beyond established routines. Other than that, the reason that drives the overconfidence traders in the financial market to overestimate their ability to take graver risk is the Steroid Hormone that produces by our body when the profits come in drastically. The author also describes that, when our body is placed entirely on hormones, there is some evidence that the nucleus accumbens, the thrilling center of the brain, outgrows the more rational prefrontal cortex of our brain. The euphoria, overconfidence and heightened appetite for risk that grip traders during bull market may result from a phenomenon known in biology as the "winner effect" that an animal winning a fight or a competition for turf was more likely to win its next fight. For this is the reason why so many successful traders or entrepreneur bragged about their success story, the winners experienced a self-reinforcing upward spiral of testosterone.

Nevertheless, the book is written in a very easy comprehend and interesting narration of story about traders in Wall Street. It's well written with a lot of meticulous research and by far the best scientific book that explains the human biology and psychology about risk taking and decision making. It is highly recommended for general readers who are involved in business, finance, or any other industry that requires decision making.

[Gumble's Yard - Golden Reviewer · Rating 3 out of 5]

A complex, wide ranging and thought provoking (although far from flawless) book.

The book includes a fictionalised account of a trading desk during the period leading up to, through and after the financial crisis. This is interspersed with detailed neuro-science and (more crucially) bio-chemistry/physiology.

One of Coates crucial assertions is that the mind/body divide (with an implicit belief that the mind is superior and the body becoming increasingly redundant) which has become common in modern thinking is flawed and increasingly contradicted by scientific evidence. In a (for him) crucial early chapter he argues from research in various fields that: that we are designed to move; that as a result the body and mind operate a feedback loop with both operating on the other; that our bodies are in many senses more evolved and more distinct from those of animals (as well as machines/artificial intelligence) than our minds. Later when he first examines the world of trading he argues that much of it is a physical activity operating at much faster speeds than careful thought.

He then starts to examine various responses of traders to market events or periods – intermixing the fictional account with the underlying neuro-science and biology and with the physical manifestations (which he argues are not just symptoms but which give important signals back to the brain). In particular he looks at various functions of the body and mind (for example the fight or flight response) rooted in our evolutionary path – some of which can serve useful purposes but which can also backfire especially when applied to non-physical stressors which are very different and often much longer term then those our evolutionary ancestors faced. The physical symptom part is interesting and at various times Coates describes both the physical manifestation, the hormonal control and the evolutionary reason for things like: stress-induced loose bowels (the body jettisons excess weight by expelling faeces but before the intestine has the time to extract the water from them as they normally do); dry mouths (water conservation); butterflies (blood leaves the stomach as digestion is not a priority).

In probably the main part of the book he then looks at the role of testosterone in bull markets and ultimately fuelling irrational exuberance and the role of cortisol in leading to depressions and ultimately irrational pessimism (operating over a much longer period than it was designed to operate). He then examines stress and identifies that three key factors in it are novelty, unpredictability and a lack of control.

The conclusions he reaches are: (disappointingly unimaginatively) that banks should reward long-term performance rather than short-term success; that banks should employ more women and older men (less vulnerable to testosterone); that banks could select for those more physiologically stronger - for example with a better ability to harness the vagus nerve which can operate as a handbrake on stress and instigates the “rest and digest” response which is a much better response than the depression and risk-aversion induced by long-term cortisol; that there may be ways to train the body – although the only one he really recommends is exercise (other than in the case of extreme stress where a familiar routine is better).

[Andrew Griffith · Rating 4 out of 5]

I read John Coates, The Hour Between Dog and Wolf, another in a series of books on behavioral economics, from the interesting perspective of someone who has been both a trader as well as a researcher. Again, much like other work in this field, such as Thinking, Fast and Slow by Kahneman, largely demolishes the classical economic rational decision-making, as it maps out the linkages between our conscious and unconscious systems. Quote:

"Today Platonic dualism [mind-body divide] … is widely disputed within philosophy and mostly ignored in neuroscience. But there is one unlikely place where a vision of the rational mind as pure as anything contemplated by Plato or Descartes still lingers – and that is in economics.

Many economists … assume our behavior is volitional – in other words, we choose our course of behavior after thinking it through – and guided by a rational mind. According to this school of thought, we are walking computers who can calculate the rewards of each course of action open to us at any given moment, and weigh these rewards by the probability of their occurrence…

… Unearthly ideals, we have learned at great cost, too easily lead to social and political disasters. Equally, otherworldly ideals of economic rationality can too easily lead to the sign of a marketplace fatally prone to financial crises."

His policy recommendations for trading desks largely revolve around more diversity (dilute testosterone through more women and older traders), move from short to longer-term compensation, and acknowledge and account for the irrationality in decision-making. All in all, a good read for those interested in decision-making in any sphere, not only the financial markets.

[Jeremie Averous · Rating 5 out of 5]

This author is a former trader turned neuro-scientist and he explains how stress and hormones drive the behavior of traders, leading to irrational exuberance and well as irrational panic on the markets.

The interesting side of this book is how our physiology is influencing our decision-making, and how it can be contagious in a group. The book describes in minute detail the working of our nervous and hormonal system when we are faced with the stress of modern life.

If there is a proof that the rational approach of economists and market theorists can only be wrong, it is this book. In effect our primitive brain happens to drive a lot more of our actions than what we'd like to believe - and thus creates irrational behaviors that can have far-flung impact on our economy and our lives.

Read this amazing book to understand to which extend what we believe are our choices are in fact dictated by our deeper, primitive nature; how our physiology influences deeply our behavior and choices - and how seldom in fact our rational, evolved brain intervenes in our decision-making.

A must-read book in my opinion.

[A Ter · Rating 4 out of 5]

For someone who's pretty familiar with financial markets but not at all familiar with biology, this was a fascinating read. The author describes how the human body reacts to risk taking, victory and defeat through both neurological and endocrine responses, and due to evolutionary biology.

On the downside, I think it could have been shorter and the "recommendations" aren't very compelling. The book might read better if the author had just ended with his research. Overall, however, I was very satisfied.

[Ted Lehmann · Rating 5 out of 5]

This book goes a long way toward clarifying issues of the mind/budy connection in trading in the financial markets. Implications for management in that world and, more broadly, for understanding our political world in different ways are exciting and challenging. I've posted the review on my blog. http://tedlehmann.blogspot.com/2012/0...

[Mark · Rating 5 out of 5]

This book is a delightful concoction of the sciences and humanities. Coates dechipers the deeply rooted aspects of human nature and paints a brilliant image on how factors such as stress and exuberance impact the financial world. I would recommend this for any reader , for it has something to offer for everyone.

[Sophia Dunn · Rating 5 out of 5]

Everyone interested in the current state of global economics really needs to read this book. Written by a neuroscientist, who is also an economist and an ex-Wall Street trader, Coates is uniquely qualified to give us a neurobiogical understanding of how we got into our current situation. It is simply a FASCINATING read.

[Laura Kinsale · Rating 5 out of 5]

Gave this 5 stars for the subject matter. Very readable, but mainly this is a topic that REALLY needs some airing. The impact of our biology on our behavior is profound. I've always thought "rational markets" were BS. Very interesting and quite fun to read.

[Mark · Rating 3 out of 5]

Interesting companion to Thinking Fast and Slow and other behavioral econ texts. The author explores the physiology behind our often-irrational thinking and behavior around risk-taking. Normative section is half-baked, as is much of the science here, but probably worth exploring further.