The Hour Between Dog and Wolf

Is your body telling you what your brain doesn't know yet? The secret to how we make decisions lies not just in our mind, but in the physiology that powers our actions.

1. Thinking involves the entire body, not just the brain

Your brain doesn't work in isolation; rather, your entire body contributes to your decision-making process. Hormones, like Ghrelin, act as messengers that influence what we perceive and how we act. For example, when your stomach is empty, Ghrelin activates to signal hunger to your brain.

Stress showcases how the brain and body collaborate. When the brain detects stress, it informs the gut to halt digestion, saving energy for survival instincts like fight or flight. This connected system ensures efficiency across multiple bodily functions.

The connection goes both ways. People with sensitive guts, such as those suffering from Crohn's disease, experience amplified emotional reactions. Their physical conditions make them more responsive to emotional stimuli, demonstrating how bodily processes deeply influence our thoughts and feelings.

Examples

• The release of Ghrelin when the stomach empties signals hunger to the brain.
• Stress halts digestion, saving energy for immediate challenges.
• Crohn's disease patients are more emotionally reactive due to their gut's influence on the brain.

2. Testosterone shapes behavior, especially risk-taking

Testosterone isn't only critical for physical growth; it also actively alters behavior. During challenges, higher levels of it can increase endurance, elevate mood, and improve thinking speed. But there's a downside. It nudges individuals, especially men, toward taking more risks.

This plays out vividly on trading floors. When testosterone levels surge, traders take larger gambles, regardless of their actual experience or skill level. Winning further fuels this effect, causing a "Winner Effect" cycle where success begets riskier decisions.

Such cycles aren't limited to humans. In animal studies, victorious males showed rising testosterone levels, often leading to confidence and even reckless confrontations. While their boldness might win battles, it also increases their chance of injury or early death.

Examples

• A testosterone spike powers athletes during competitions.
• The Winner Effect causes traders to keep risking more after each win.
• In animal experiments, winners of fights show increasing boldness but face higher physical risks.

3. Decisions often follow actions, not the other way around

Your body often acts before you consciously decide what to do. This happens because our physical reactions and movements are faster than conscious thought. For example, your brain anticipates a ball’s trajectory before you can even rationalize the movement.

Studies confirm this. In one experiment, participants’ brain activity peaked milliseconds before they consciously chose an action, like lifting their finger. This proves that your brain decides on actions before you're fully aware of them.

The process of catching a ball or reacting to stimuli illustrates this unconscious coordination. Even our conscious decisions might be mere observations of what our body has already set in motion.

Examples

• A ball catcher reacts before consciously understanding the motion.
• Benjamin Libet's study shows preparatory brain activity happens before conscious decisions.
• Brain regions predict the position of objects faster than our awareness.

4. Intuition stems from physical and subconscious pattern recognition

What many call "gut instinct" isn't mysterious; it's the body recognizing patterns it has learned subconsciously. This is especially evident in high-paced environments like stock trading, where experienced traders often react to market patterns without being able to explain how.

Long-time traders consistently outperform financial benchmarks, despite theories suggesting markets are unpredictable. This skill stems from physical and subconscious cues, where bodily reactions signal whether trades are promising.

For example, by subconsciously absorbing market data over time, experienced traders develop what are called "Somatic Markers." These markers help traders "feel" whether an action is correct, much like how athletes learn movements intuitively over years of practice.

Examples

• Veteran traders outperform markets despite unpredictable conditions.
• Subconscious body responses help traders develop reliable instincts.
• Somatic Markers serve as internal guides for decision-making.

5. Fitness strengthens trading performance

Successful trading isn't just about intellect – physical fitness matters. Healthy bodies make quicker decisions and better process market data. The physical demands of trading, such as visually scanning screens for hours, emphasize the importance of stamina and focus.

Traders who are healthy are better at interpreting their body’s signals. Studies show that fit individuals are more in tune with their internal rhythms, like heartbeat synchrony, improving their ability to trust hunches.

Physical fitness correlates with sharper intuition. This is why former athletes often thrive on trading floors – they have honed focus, mental discipline, and a strong link between their bodies and decision-making abilities.

Examples

• Fit traders process visual patterns for hours without fatigue.
• Heartbeat awareness tests show fitter individuals perform better.
• Former athletes often excel in trading due to strong body-mind coordination.

6. Rising stock prices can create addiction

Winning trades often come with a dopamine boost, which can be addictive. Like gamblers chasing highs, traders may get caught in cycles of escalating risk-taking. Dopamine’s interaction with testosterone makes the addiction stronger on trading floors.

This risk-reward behavior intensifies during bullish markets where successive wins fuel an intoxicating Winner Effect. As traders take more risks to chase gains, they may make irrational choices that destabilize their portfolios.

Animal studies parallel this phenomenon. Rats accustomed to sugar rewards showed surging dopamine even in anticipation of further rewards. Similarly, traders experiencing repeated trade wins grow addicted to the adrenaline-fueled highs.

Examples

• Dopamine spikes occur when risky trades pay off.
• Bull markets combine dopamine with testosterone, fueling risk spirals.
• Sugar-drinking rats demonstrate addictive anticipation of pleasure, resembling traders' cycle.

7. Stress during market crashes worsens recovery

Market crashes cause profound stress among traders, making rational thinking harder. Hormones like cortisol flood the brain, impairing memory and executive function while increasing risk-aversion, which can prolong the chaos.

Elevated cortisol causes traders to recall failures more vividly. This fear-based memory prevents them from taking actions that might stabilize markets. Simultaneously, stress erodes collaborative behavior, and competitive bullying becomes common.

In primates facing danger, dominant males react aggressively toward weaker group members. In trading, stressed managers mimic this, compounding the anxiety of their teams and damaging morale during crises.

Examples

• Cortisol makes traders remember losses over profits.
• Emotional decision-making replaces logic under stress.
• Stressed leaders on trading floors impulsively fire or antagonize employees.

8. Experience with stress builds resilience

Moderate exposure to stress can toughen individuals over time, making them better equipped to handle future challenges. This principle applies to humans, animals, and even traders. Moderately stressed rats handled as juveniles grew into less reactive and longer-living adults.

Cold-weather exercise is another stressor that enhances resilience. For example, Nordic traditions like cold-water swimming strengthen stress responses by improving both mental and physical resilience.

The right kind of stress helps – but the wrong kinds harm. While moderate stress leads to growth, extreme or prolonged stress, like childhood trauma, can weaken future resilience instead.

Examples

• Juvenile rats handle stress exposure better as adults.
• Cold-water swimming boosts brain health and stress resistance.
• An active lifestyle helps traders adapt to high-pressure environments.

9. Diverse trading floors stabilize markets

Trading floors thrive on energy and confidence but suffer from over-concentration of testosterone-fueled risk-taking. Adding diversity in age and gender would mitigate extreme behaviors and lead to steadier markets.

Older men, with naturally lower testosterone, make more cautious and deliberate decisions, minimizing volatility. Although slower, their wisdom balances younger colleagues' impulsiveness.

Women, who operate with less testosterone on average, bring a collaborative mindset. Their “tend-and-befriend” approach contrasts with the prevalent fight-or-flight responses in high-stress male-dominated environments.

Examples

• Older men bring steadiness to markets with their tempered decision-making.
• Warren Buffett’s late-career success shows the value of caution over speed.
• Women’s tend-and-befriend stress responses encourage teamwork on trading floors.

Takeaways

1. Hone intuition by paying closer attention to your body’s subtle signals, as Somatic Markers can guide decision-making in complex environments.
2. Embrace moderate stress and physical fitness as tools to build resilience in both work and life, preparing you for high-stakes situations.
3. Diversify leadership teams with a mix of genders, ages, and perspectives to bring balance and reduce the effects of impulsive decisions driven by hormones.