The Hour Between Dog and Wolf

Book review: Wall Street is frequently described as a testosterone-fuelled environment. As it turns out, this isn’t just a metaphor for a macho culture but a biological fact.

0
CB_coates_raw

(Photo: Natalie Castellino)

The Hour Between Dog and Wolf: Risking-taking, Gut Feelings and the Biology of Boom and Bust
(Random House Canada)
John Coates

Wall Street is frequently described as a testosterone-fuelled environment. As it turns out, this isn’t just a metaphor for a macho culture but a biological fact. Coates, a University of Cambridge neuroscientist who previously ran a trading desk for Deutsche Bank, argues the markets are governed as much by human physiology as they are rationality. He note male animals priming for a fight experience a jolt of testosterone, which increases their confidence and appetite for risk. (This transformation turns “dogs” into “wolves,” hence the book’s name.) When the fight is over, the victor exits with even more elevated testosterone. Eventually, the wolf becomes overconfident. This testosterone feedback loop helps explain how bull markets become bubbles. Traders make money and gain confidence “until the extended winning streak of a bull market causes them to become every bit as delusional” as animals picking fights they can’t possibly win. With its examination of how hormones fuel financial risk-taking, the book gives a biological explanation for elements of the markets often described in quasi-mystical terms, from John Maynard Keynes’s “animal spirits” to Alan Greenspan’s “irrational exuberance.”

Leave a comment

Your email address will not be published. Required fields are marked *