Narrator: Imagine the floor of a Wall Street trading desk. The air is thick with tension. A rumor, just a whisper at first, begins to spread: the Federal Reserve is about to announce an unexpected interest rate hike. Instantly, the atmosphere shifts. Faces tighten, breathing quickens, and a palpable wave of energy surges through the room. Traders lean into their screens, their bodies coiled like springs, preparing not just intellectually, but physically, for the impending chaos. Fortunes will be made or lost in the next few minutes, and the decisions driving these outcomes feel less like calculated logic and more like pure, primal instinct. What if these gut feelings, this irrational exuberance, and this crippling fear weren't just psychological quirks, but were deeply rooted in our biology?

In his book, The Hour Between Dog and Wolf, former Wall Street trader turned neuroscientist John Coates argues exactly that. He pulls back the curtain on the financial world to reveal a startling truth: the booms and busts of our global economy are profoundly influenced by the same hormones that govern our basic survival instincts. Coates demonstrates that risk-taking is a biological event, a full-body experience where hormones like testosterone and cortisol can hijack our rational minds, turning rallies into bubbles and downturns into devastating crashes.

Narrator: For decades, economic models have been built on the idea of a rational actor, a person who makes financial decisions through cool, detached calculation. Coates argues this model is fundamentally flawed because it ignores the most important variable: the human body. He challenges the long-held mind-body split, showing that our physiology is not just a passenger but an active participant in our thinking.

Coates’s own journey from a trader at Deutsche Bank to a researcher at Cambridge University was fueled by this observation. He saw firsthand how the physical state of traders—their stress, their euphoria, their exhaustion—directly impacted their risk appetite and performance. This led him to a core conclusion: the brain and body evolved together to respond to opportunities and threats, and this ancient programming doesn't just switch off when we sit down in front of a Bloomberg terminal. When a trader faces a risky decision, the brain triggers a cascade of physiological responses. The heart rate changes, muscles tense, and hormones flood the bloodstream. These bodily signals then feed back to the brain, coloring our thoughts, shaping our memories, and guiding our "gut feelings." Thinking, especially under pressure, is an embodied process.

Narrator: During the dot-com bubble of the late 1990s, a kind of madness took hold of the market. Companies with no profits and flimsy business plans were valued in the billions. Veteran investors who warned of the irrationality were forced into retirement as the market continued its relentless climb. This "irrational exuberance," as Alan Greenspan famously called it, wasn't just a matter of greed; it was a biological phenomenon.

Coates explains this through the "winner effect." In the animal kingdom, when two males compete, the winner gets a surge of testosterone. This hormonal boost increases confidence, aggression, and the appetite for risk, making the animal more likely to win its next encounter. Coates’s research found the same effect on the trading floor. On days when traders made an above-average profit, their testosterone levels rose. This created a dangerous feedback loop. Winning led to higher testosterone, which led to greater confidence and more aggressive risk-taking, which, in a rising market, led to even more winning. This biological momentum can turn a healthy market rally into a full-blown bubble, as traders, high on their own success, begin to feel invincible and lose their ability to rationally assess risk. Testosterone, Coates suggests, may be the molecule of irrational exuberance.

Narrator: Experienced traders often speak of making decisions based on a "hunch" or a "gut feeling." While this may sound unscientific, Coates argues that these intuitions are actually a form of high-speed data processing. He points to the work of neuroscientist Antonio Damasio, whose "Somatic Marker Hypothesis" showed that rational decision-making is impossible without emotional input from the body.

A classic example is the story of legendary investor George Soros, who famously reported that the onset of acute back pain often served as a signal that something was wrong with his investment portfolio. This wasn't a psychic premonition; it was his body pre-consciously detecting patterns of risk that his conscious mind had not yet pieced together. This process, known as interoception, is our perception of our body's internal state. The brain constantly receives signals from the gut, the heart, and the muscles. These signals are tagged with emotional significance based on past experiences. When a trader faces a familiar pattern, the body sends a rapid "warning" or "all-clear" signal long before a conscious, step-by-step analysis can be completed. In the fast-paced world of trading, where decisions must be made in seconds, this ability to think with the body is not a liability; it's an essential skill.

Narrator: If testosterone is the fuel for market bubbles, then cortisol is the accelerant for market crashes. Cortisol is the body's primary stress hormone, released in response to novelty, uncertainty, and uncontrollability—the three defining features of a financial crisis. During a market downturn, traders are bombarded with all three.

Coates illustrates this with the harrowing story of a trader named Scott during the 2007 credit crisis. As the mortgage market began to collapse, Scott’s position soured, and he faced massive, uncontrollable losses. His body was flooded with cortisol. The effects were devastating. Chronic exposure to cortisol impairs memory, damages the hippocampus (a brain region vital for learning), and heightens the activity of the amygdala (the brain's fear center). It creates a state of learned helplessness and irrational risk aversion. Traders in this state don't just avoid bad risks; they avoid all risks, selling off good assets along with the bad. This creates another dangerous feedback loop: market losses trigger cortisol, which triggers risk aversion, which leads to more selling and further market losses. The entire trading community can become a clinical population, trapped in a state of irrational pessimism that turns a correction into a crash.

Narrator: Given the powerful influence of our biology, are we doomed to repeat these cycles of boom and bust? Coates argues no. The key is to build resilience by training our physiological stress response, much like an athlete trains their body for competition. He distinguishes between two types of stress. Chronic, unrelenting stress is destructive. But acute, short-lived stress, followed by a period of recovery, can actually "toughen" our systems.

Experiments with rats showed that those exposed to acute, manageable stressors developed a hardier physiology and became more resilient to future challenges. A toughened physiology is characterized by a rapid and powerful adrenaline response to a challenge, but a more moderate and short-lived cortisol response. These individuals see novelty as a challenge to be mastered, not a threat to be feared. This toughness can be cultivated. Practices like regular exercise, which expands the brain's capacity to produce key neurotransmitters, and even exposure to cold, can help train the body's stress response. Furthermore, social support is a powerful buffer. Studies show that a strong network of friends, family, and colleagues can dramatically mitigate the harmful physical effects of stress.

Narrator: Individual resilience is important, but Coates argues that we must also redesign the financial system itself to account for our biology. The current structure of Wall Street often amplifies our worst instincts. The annual bonus cycle, for example, encourages short-term, high-risk behavior. A trader can make enormous bonuses for a few years and then lose the bank a fortune in a single crash, yet still walk away a multi-millionaire.

Coates proposes several structural changes. First, bonus schemes should be calculated over a full business cycle, typically four to five years, to reward long-term, stable performance. Second, risk managers should actively monitor for signs of the winner effect and mandate "cooling-off" periods for traders on hot streaks. Finally, and most controversially, he argues for greater biological diversity. The financial world is dominated by young men, the demographic most susceptible to the testosterone-fueled feedback loops of the winner effect. Studies show that funds run by women and the investment portfolios of individual women often outperform men's, largely because they trade less and take more calculated, long-term risks. By increasing the number of women and older men on trading floors, we could introduce a natural brake on the market's hormonal tides, leading to more balanced judgment and greater stability.

Narrator: The single most important takeaway from The Hour Between Dog and Wolf is that the economy is not a machine; it is a biological system, driven by the collective physiology of its human participants. The invisible hand of the market is attached to a body, with a beating heart and surging hormones. The cycles of boom and bust are not just mathematical aberrations but are deeply intertwined with the biological rhythms of euphoria and fear.

Coates leaves us with a profound challenge. The goal should not be to create a financial system devoid of human emotion and instinct—an impossible and undesirable task. Instead, we must build a system that acknowledges our biology. This requires us to heed the ancient wisdom to "Know Thyself," not merely as a philosophical exercise, but as a practical imperative for financial stability. Can we create a world of finance that is not only smarter, but wiser about its own animal nature? The answer may determine the health of our global economy for generations to come.