The Hour Between Dog and Wolf: Risk-taking, Gut Feelings and the Biology of Boom and Bust

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John Coates. The Hour Between Dog and Wolf: Risk-taking, Gut Feelings and the Biology of Boom and Bust

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JOHN COATES

The Hour Between

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Cortisol is the main hormone of the stress response, a bodywide response to injury or threat. Cortisol works in tandem with adrenalin, but while adrenalin is a fast-acting hormone, taking effect in seconds and having a half-life in the blood of only two to three minutes, cortisol kicks in to support us during a long siege. If you are hiking in the woods and hear a rustle in the bushes, you may suspect the presence of a grizzly bear, so the shot of adrenalin you receive is designed to carry you clear of danger. If the noise turns out to be nothing but wind in the leaves you settle down, and the adrenalin quickly dissipates. But if you are in fact being stalked by a predator and the chase lasts several hours, then cortisol takes over the management of your body. It orders all long-term and metabolically expensive functions of the body, such as digestion, reproduction, growth, storage of energy, and after a while even immune function, to stop. At the same time, it begins to break down energy stores and flush the liberated glucose into your blood. In short, cortisol has one main and far-reaching command: glucose now! At this crucial moment in your life, cortisol has in effect ordered a complete retooling of your body’s factories, away from leisure and consumption goods to war matériel.

In the brain, cortisol, like testosterone, initially has the beneficial effects of increasing arousal and sharpening attention, even promoting a slight thrill from the challenge, but as levels of the hormone rise and stay elevated, it comes to have opposite effects – the difference between short-term and long-term exposure to a hormone is an important distinction we will look at in this book – promoting feelings of anxiety, a selective recall of disturbing memories, and a tendency to find danger where none exists. Chronic stress and highly elevated stress hormones among traders and asset managers may thus foster a thorough and perhaps irrational risk-aversion.

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