by John Coates
But pre-conscious parts of her brain and her body are not quite so convinced. Pre-consciously, other information is being weighed: rumours of a reorganisation of the desks, a joke Ash made at her expense at a recent client dinner. Fifteen minutes later, coffee in hand, she recalls Ash’s look and her stomach knots once again. This time she cannot shake off her concerns. Things are starting to add up; she suspects she is going to be reassigned. But where? Why?
Gwen now faces a long-term challenge, and to deal with it her steroid hormones take charge. That is what steroids do: they prepare the body for a change of behaviour. For example, should she encounter a situation of extraordinary opportunity, such as a bull market, then testosterone, produced by both ovaries and adrenal glands, takes charge and prepares her body for an extended period of competition. If, however, she finds herself faced by an uncontrollable stressor, such as a market crash or an angry boss, then cortisol organises a coherent long-term physical defence. Steroids, acting over the course of hours, even days, are the final, slowest and most comprehensive step in our body’s graded response to a challenge. Gwen may be blessed with an admirably toughened physiology, and her extensive experience on the tennis circuit makes her almost unshakeable in the face of risk. But not office politics. Office politics unnerve her. She hates them. Over the next few hours – days, if this thing is not resolved soon – under the influence of ever higher levels of cortisol, she develops a mood called anticipatory angst, and it vexes her every waking minute.
A number of points emerge from this scenario. To begin with, Gwen’s bodily feedback during this emotional encounter is not confined to her fight-or-flight nervous system, as Cannon argued it was. Messages from her body are carried by muscles, fight-or-flight nervous system, rest-and-digest nervous system, and hormones, and are in fact diverse and subtle enough to transmit a rich emotional life (see fig. 7). In fact, many scientists have found that each of our emotions is tagged with a distinct pattern of nervous and hormonal activation. Gwen tailors her heart rate, muscle tension, digestion, vascular resistance, sweating, bronchial contraction, blushing, pupil dilation, facial expression and so on to each situation.
Fig. 7. Gut feelings and feedback loops between body and brain.
These physiological reactions then feed back on Gwen’s brain. But what her brain experiences is not pure observation; she does not watch her body in a disinterested way. She experiences this feedback in the form of an emotion or a mood. Emotions and moods are different; they operate over different time scales. Emotions are short-lived. It has been suggested that emotions are designed to be fleeting, because they provide our brain with valuable and timely information. If they were to persist, they would interfere with other, newer information being brought to our attention. A mood is slower, more like a long-term attitude, a background and slow-burning emotion which slants our view on the world. Emotions and moods both alter Gwen’s attitude to events, tinker with the memories she recalls, change the way she thinks.
Pre-conscious regions of brain rapidly register threat
Muscles in body and face prepare for fight-or-flight
Visceral organs support muscles
Glands produce hormones for longer-term support of muscles
Muscle tension, heart rate, breathing, hormones, etc. send signals to brain
Pre-conscious regions of brain experience this feedback as gut feelings
Conscious regions of brain experience this feedback as short-term emotion or long-term mood
Emotion and mood ensure conscious thoughts synchronise with body to produce coherent behaviour of anger, fear, happiness, etc.
This anecdote brings us back to the question we are trying to answer: why are we built with these feedback loops? What purpose do these emotions and moods serve? Are the feelings they carry largely superfluous? Not likely. What is more likely is that these feelings help slant our attention, memory and cognitive operations so that they synchronise with our bodies. When we face an attack, for example, we want our body to be tensed and ready, but we also want our brain to think aggressively. When we want to start a family, on the other hand, we want body and brain to be in sync in a gentler, more loving manner. During important moments in our lives like these we do not want our tissues multi-tasking; we do not want, say, a body gearing up for battle but a mind thinking amorous thoughts. Feedback ensures that our tissues do not work at cross purposes. Feedback, carried by nervous system and hormones alike, unifies body and brain at the most important points in our lives. And at these moments – of euphoria, of flow, of love, of fear, of fight – body and brain merge.
THE FAINTEST FEEDBACK
Just as emotion and mood slant our thinking to suit the situation at hand, so too do gut feelings, the most subtle of bodily feedbacks. Gut feelings economise on limited computational resources and safeguard our decisions, pre-consciously steering us away from dangerous options we might be considering.
Damasio and Bechara tested for the effects of gut feelings, or what they call somatic markers, with a computer game known as the Iowa Gambling Task. Players were presented with four decks of cards. Each card when turned over showed an amount of money the player had either made or lost. The decks had been stacked in the following way: two of the decks displayed low amounts of money, like making or losing $50 or $100, but choosing from them would, over time, lead the player to make a profit; the other two decks displayed higher amounts, say $500 or $1,000, and were therefore more exciting, but choosing from them would over time lead the player to lose money. At the beginning of the game the players did not know the properties of the decks, or even that they differed; they had to play the game naïvely and figure out how to make money as best they could.
In time, the players figured out how the decks were stacked, and which ones they should play from if they wanted to make money. But the course their learning took provided some interesting results. What Damasio and Bechara found was that players began to choose from the money-making decks before they knew why. Just as in the Lewicki experiments, where subjects had to predict the position of a cross on a computer screen, the players were learning the rule pre-consciously well before they could consciously state it. More intriguingly, their learning was guided by a signal from their bodies. While they played the game, all participants were monitored for a somatic marker, the electrical conductivity of their skin. Your skin experiences rapid and unnoticed changes in electrical conductivity, the result of momentary changes in the amount of sweat lying in its crevices. Skin conductance is highly sensitive to novelty, uncertainty and stress. The players’ skin conductance began to spike when they contemplated playing from the money-losing decks, and this somatic prod proved enough to steer them away from these dangerous choices. Aided by these brief shocks, normal players were guided towards the money-making decks long before their conscious rationality had figured out why they should be doing so.
FEELING THE MARKET
As we undergo an apprenticeship in an activity like trading, we store more than patterns: we store patterns twinned with muscular and visceral reactions. When Martin is in the flow, when he encounters a market event like the DuPont trade, he has little time to carefully weigh all possible outcomes of his actions, but must volley sales enquiries quickly and profitably, and react to prices that appear fleetingly on the screens. He rapidly scrolls through patterns stored in memory looking for a match (although a perfect match is rare), and with each one his body and brain shift kaleidoscopically from one state to another. Body and brain rev up and down together. In fact, to speed up decision-making, his brain, according to Damasio and Bechara, uses predictive models, called ‘as-if loops’, which allow him to rapidly simulate the bodily reaction most likely to follow a considered choice of action. Relying on this as-if loop Martin can rapidly flip through all the options open to him while contemplating the market, discard those that fill him with a momentary dread, and choose the one that feels just right.
These physical echoes of our thoughts are gut
feelings, and we all, whether athlete, investor, firefighter or police officer, rely on them. I learned this basic piece of neuroscience the hard way. While trading on Wall Street, I often conceived trades that I thought were brilliant, identifying some securities that were cheap, others that were expensive. But my boss, habitually sceptical, would always ask, ‘If the trade is so compelling and the money-making opportunity so amazing, why haven’t other people spotted the trade? Why is the price discrepancy just sitting there on the screens for all to see, like a $20 bill lying on the sidewalk?’ These were irritating questions, but in time I recognised their wisdom. For more often than not, trades conceived with obvious lines of reasoning turned out to lose money. It was a troubling discovery. Troubling because these trade ideas were usually arrived at using my best analytical efforts, drawing on my education and a wide reading of economic reports and statistics. I was acting as rational economic man.
In time, though, I realised I needed more than these cognitive operations. Often, while looking at a problem face-on and coming to some obvious solution I would catch a glimpse with peripheral vision of another possibility, another path into the future. It showed up as a mere blip in my consciousness, a momentary tug on my attention, but it was a flash of insight coupled with a gut feeling that gave it the imprimatur of the highly probable. An experienced trader, I think, learns to recognise these voices speaking from the fringes of awareness. To trade well you have to tear your attention away – and it can take a great deal of discipline – from the obvious piece of analysis lying under your nose, and listen to these faint voices.
LISTENING TO OUR BODY
And what an angelic choir they make. If only we could hear their music loudly and clearly, we would have at our disposal some of the most valuable signals in all the financial markets. For our bodies and pre-conscious parts of the brain, both cortical and sub-cortical, act as large and sensitive parabolic reflectors, registering a wealth of predictive information. They remain the most sensitive and sophisticated black boxes ever designed. When correlations between assets break down, when new correlations emerge, chances are our muscles, heart rate and blood pressure will register the changes before our conscious awareness. Just as galvanic skin conductance in the Iowa Gambling Task spikes before someone chooses cards from the losing decks, so too the bodies of experienced traders snap to attention well before they consciously understand the risks they are contemplating. Bodily signals, running ahead of consciousness, cry a warning. Yet traders often fail to heed them, because these messages are notoriously, frustratingly hard to hear. They fade in and out like a radio picking up a distant station, and leave us hanging on their every note, or worse, over-interpreting a burst of static. Our bodies and the pre-conscious regions of the brain may hear these songs clearly, and know what to do with the information they carry, but our conscious brain has only the most tenuous access to them.
In fact our conscious brain has surprisingly little grasp of what makes us decide to do one thing rather than another. A telling example of this ignorance has been provided by Joe LeDoux and Michael Gazzaniga, two neuroscientists who conducted a study of patients with a severed corpus callosum, the bundle of nerve fibres connecting the two hemispheres of the brain, leaving the two sides of the brain unable to communicate with each other. LeDoux and Gazzaniga gave instructions to these patients, via their right hemisphere (hemispheres can be targeted with instructions shown to either the left or right visual field), to giggle or wave a hand, then asked them, via the left hemisphere, why they were laughing or waving. The patients’ left hemisphere had no knowledge of the instructions given to their right hemisphere, but the patients would nonetheless venture an explanation, saying that they were laughing because the doctors looked so funny, or waving because they thought they saw a friend. However implausible the answer, the patients were convinced they knew why they were acting in the way they were; but they were deluded in thinking so. Their self-understanding was pure confabulation.
A host of similar experiments have been conducted by Timothy Wilson and are reported in his book Strangers to Ourselves. He, like LeDoux and Gazzaniga, has found that people constantly trick themselves into thinking they understand the true springs of their actions. But the commentary people provide on their behaviour is often a meaningless accompaniment to action taken by pre-conscious parts of the brain. LeDoux, puzzling over his own and Wilson’s observations, concluded that ‘people normally do all sorts of things for reasons they are not consciously aware (because the behaviour is produced by brain systems that operate unconsciously) and that one of the main jobs of consciousness is to keep our life tied together into a coherent story, a self concept’. In other words, we make things up.
I found a disturbingly similar result in an experiment I conducted with a group of traders. I and a colleague were trying to find out how stress hormones respond to losing money and to high volatility in the markets. What we found was exactly what one would expect on the basis of previous stress research: the traders’ stress hormones were remarkably sensitive to uncontrollability in their trading results, and to uncertainty and volatility in the market. So far, so good. However, in addition to the hard data I collected, in other words the physiological markers and the financial data, I also gave the traders a questionnaire to fill in at the end of each day, designed to determine among other things how stressed they were. What I found was that their opinions on how stressed they were had little if anything to do with reality, nothing to do with the fact that they might be losing money, or that their trading results seemed more than usually uncontrollable, or with market uncertainty as measured by its volatility. In fact, their opinions had little to do with anything I could discern. They seemed about as random, and irrelevant, as the confabulations provided by the split-brain patients. This result conjured up an almost comical picture of humans parroting words with little meaning and little connection to the physiological processes truly controlling their actions.
Odd as this finding may sound, it is a pretty standard one in endocrinology – opinions and physiology frequently travel along different tracks. What was odd was that the traders’ hormones seemed to register risk far more accurately than did their opinions. Do their hormone-producing glands have a firmer grasp of financial risks than their frontal cortex? They could. If the traders were drawing heavily on pre-conscious processing of patterns coupled with gut feelings, they could display a disconnect between money-making skill and self understanding. This too is a pretty standard finding on a trading floor: it is frequently said that if you want to know what traders think of the market, do not ask their opinions, look at what trades they put on.
PHYSIOLOGICAL COACHING
We frequently and often comically misinterpret our actions. Given this unfortunate fact, we can appreciate the necessity when making an important decision of obtaining a second opinion. This opinion can take several forms. One of the most valuable sources of a second opinion, one that brutally and coldly exposes the faults in our reasoning, is the use of statistics. Alternatively, another person working with you, a coach say, can also help improve your decision-making. An increasing number of professions are coming to use coaches, and they have lately been appearing on more and more trading floors.
There is yet another form this external observation can take, and that is the form of physiological monitoring devices. If our bodies provide a highly effective early-warning system for both danger and opportunity, and if gut feelings tap into a wealth of experience, and if, furthermore, these somatic markers are largely inaccessible to conscious inspection, then perhaps we can hack into them by means of an external listening device, such as an electronic monitor.
Physiological monitoring could help scientists answer a number of intriguing questions, such as: do some people have better gut feelings than others? There is very little research which could help us answer this question, but at the same time there seems no prima facie reason why some people could not have better hunches than others. Train
ing, of course, is essential in building up a library of trading patterns and developing hunches worth listening to; but as with athletes, traders differ in their physical endowments. Some of them may naturally enjoy more sensitive interoceptive pathways, and these people I am tempted to call hunch athletes. To qualify for this title a person would need to generate powerful somatic markers.
But hunch athletes would need more than strong somatic markers, for these are not of much use in themselves if we remain unaware of them. Of equal importance to gauging gut feelings is the measurement of our awareness of the signals. Here we do have some research at hand. Several scientists have found that sensitivity to somatic markers can be measured by means of a test called heartbeat awareness. In this test, participants are asked to time their heartbeats, or to say whether or not they are synchronised with a repetitive tone. Experiments with heartbeat awareness have found this marker is a good proxy for visceral awareness. The experiments have also found that heartbeat awareness is lower in people who are overweight, almost as if the signals are being impeded. Perhaps this is one reason trading floors are populated with relatively fit people.
This research raises the possibility of using tests of interoceptive awareness as a recruitment tool, to be used alongside regular interviews and psychometric testing, to help spot risk-takers with good gut feelings.
Could we also monitor traders’ gut feelings while they take risks? Today a range of monitors can record heart rate, pulse, respiratory cycle, galvanic skin conductance and so on, and do so non-invasively. In fact, physiological monitoring of traders has been suggested by the magazine The Economist, when reporting on a result that emerged from one of our studies, mentioned above, on hormones in traders. That study had found that when morning levels of testosterone in male traders were higher than average, the traders went on to make an above-average profit later that day. The reporter for The Economist suggested that managers should test their traders first thing in the morning, and if their biochemistry was not just right, they should send the traders home. It sounds far-fetched, but this practice is already common in sport. Many sports scientists monitor their athletes’ physiology non-stop, and look for just these sorts of signs that they are either ready for an upcoming match or need more work. In fact, today we are in a position to do the physiological spot checks suggested by The Economist. Such physiological monitoring could perhaps help managers tell when traders have succumbed to the siren call of irrational exuberance or the despondency of irrational pessimism.
