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

Summary

  1. The story about traders on Wall Street, how the body and mind react to stressful moments, and how the mind does it so quickly that we aren’t consciously aware of it. It is the biology of stress and risk that the author will analyze and explain

Key Takeaways

  1. When there is a bull market or potentially a bubble, there are excess profits and this tends to lead to excessive risk taking, overconfidence, and general mania for those who are benefiting from it. 
  2. Some fascinating questions have been raised whether the increased use of anti-depressants and other drugs could have been so widely and regularly used in the early 2000’s that it changed the brains and risk-aversion tendencies of the traders who used them, exacerbating the dot com bubble
  3. Women were relatively unaffected during the dot com boom and the author argues it is because of their lower levels of testosterone which leads to lower risk taking and more independent thinking when everyone else around them is losing it
  4. Mistakes are made when we artificially separate and silo systems which are truly united. This happens in economics when we assume a perfectly rational human and, in this case, the author argues that the mind and body should be considered one – what happens in the mind affects the body and what happens in the body affects the mind
  5. The feelings we experience during stress comes about because our body is changing, preparing itself for physical movement
  6. There is a hypothesis that when fuel is running low our bodies and minds function by a last in first out methodology meaning that the things that evolve last such a self-control are the first to go when food is scarce
  7. Importantly, novelty, uncertainty, and situations which are out of our control can have as big of an effect on our bodies and minds as real danger does
  8. Goes deeply into the effects that cortisol and testosterone have on the body. Too little and we’re lethargic but too much leaves to overly risky behavior. Have to find the happy medium, flow
  9. The best traders, like the best athletes, are able to toggle between high stress moments and deep relaxation. The more amateur are in a consistent level of stress, never able to relax. The different physiological changes is also manifested in higher HRV in the higher level traders and athletes 
  10. Physical exercise, especially very intense and short spurts and cold exposure, can help us train our physical and emotional toughness 

What I got out of it

  1. Some decently fun stories about finance, risk taking, intuition. I’d recommend Sapolsky’s Why Zebra’s Get Ulcers if you’re interested in this