Peter Beavis; Getty; Nick Wilson
John Coates at the London Metal Exchange, one of the workplaces he studies
John Coates at the London Metal Exchange, one of the workplaces he studiesPeter Beavis; Getty; Nick Wilson


How do hormones such as testosterone and cortisol affect our ability to work, rest and play? A stock-market trader turned neuroscientist has the answer.

One day in 2000, a Wall Street trader called John Coates went to visit Linda Wilbrecht, a neuroscience PhD student in the Laboratory of Animal Behaviour at The Rockefeller University on the Upper East Side of Manhattan. Wilbrecht and Coates had met casually six months earlier on a flight from Paris to New York. The two North Americans got talking and soon found they had something in common: they had both studied at Oxbridge. "My life is a series of accidents," Coates tells Wired. "After studying philosophy, politics and economics [focusing on philosophy] I got a full scholarship to Cambridge. But I was put in the economics department by mistake -- and if I turned the scholarship down, I'd have to reapply the following year. Who turns down Cambridge? After my PhD, I was offered a job at Goldman Sachs because a manager wanted someone to discuss philosophy with. Then I met Linda and she invited me to visit her lab. Oddly, I had no interest whatsoever in the brain at the time."

Coates was unprepared for what he saw. "Within 20 minutes of being in the lab I was hooked," he says. "Hearing the word 'plasticity' applied to the brain horrified and fascinated me." After his first visit, Coates started to attend the neuroscience lecture series at the Caspary Auditorium on the Rockefeller campus. There he saw neuroscientist Bruce McEwen, a pioneer in the study of the effects of hormones on the brain, and primatologist Robert Salpolsky reporting on his work with baboons in Kenya. When the markets were slow, Coates would nip away from his desk and walk to the neuroscience laboratories, where Wilbrecht would sometimes give him small jobs, such as pipetting samples, and show him how to measure testosterone in serum and how to stain new cells. Gradually, Coates got hooked on experimental science. All his life he had studied purely theoretical subjects such as philosophy and economic theory. He never enjoyed it. Miring himself in a mountain of data, watching the signal emerge from the noise, be it in the laboratory or on the trading floor, was a challenge that he seemed to embrace.

Coates had been working as a trader since 1989. During the 90s, he had been at the centre of the dotcom boom. "It was like watching A Midsummer Night's Dream," he says. Traders were euphoric and investors delusional. Few heeded Federal Reserve chairman Alan Greenspan's prescient warning in 1996: "How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions, as they have in Japan over the past decade?" Coates was not even interested in high-tech IPOs, so he was very much an outside observer. "I would see people get on a winning streak on the trading floor and go lunatic. It happened to me as well. For weeks, even months, you feel like the hero of the floor. Every trader who has made money knows what this feels like. You think you're infallible."

Coates felt that while Wall Street was questioning the nature of irrational exuberance, the scientists at Rockefeller were getting close to explaining it. "Economists assumed that all behaviour was conscious and rational," he says. "They were ignoring the fact that signals from the body, both chemical and electrical, affect how we take financial risks."

Canadian-born John Coates is partly bald, with the physique of someone who swims regularly. When Coates talks about his research his manner is passionate and persuasive, his speech interspersed with hearty laughs. He lives in London and works at Cambridge University as a research fellow in finance and neuroscience. In the summer, he leaves Europe to spend holidays with his family in a cabin on a lake in Canada, where only a single phone-line snaking through the woods keeps him in touch with the rest of the world. Every day he writes for hours on end, like a modern-day Henry David Thoreau. "Difference is, Thoreau went to the pub every night," Coates tells me. "Here there's nothing for miles in every direction." 

Coates wrestles with his hormone levels, London, November 2012
Coates wrestles with his hormone levels, London, November 2012Peter Beavis; Getty; Nick Wilson

Coates conducted his first study in the financial district of London. At a trading floor in the City, he recruited 17 traders from a mid-sized firm and followed them for two weeks. The subjects were high-frequency traders who held their bets -- which could go up to two billion dollars (£1.25bn) -- only for a short period of time, sometimes just for a matter of seconds. Every trader was sitting in front of six or seven computer screens displaying live information on currencies, commodities, bonds, stock-index futures, live news-feeds and ongoing commentary about daily economic statistics by a resident economist. Twice a day the traders would register their profit and loss statement and give saliva samples, from which cortisol -- the hormone we release when we are stressed -- and testosterone were measured. "I was just looking for preliminary data that would convince me that I wasn't wasting my time," says Coates. "I wasn't fishing for patterns, it was hypothesis-driven. This kind of field work didn't exist in finance."


"Cortisol is likely, therefore, to rise in a market crash and, by increasing risk aversion, to exaggerate the market's downward movement," the report states. "Testosterone, on the other hand, is likely to rise in a bubble and, by increasing risk-taking, to exaggerate the market's upward movement. These steroid feedback loops may help to explain why people caught up in bubbles and crashes often find it difficult to make rational choices."

Coates first learned of steroid feedback loops during his regular visits to Rockefeller University. The testosterone feedback loop is known as the winner effect. The winner effect had been observed in nature for many different species, from cichlid fish to rhesus monkeys, and its physiology is well understood. When two animals square off in anticipation of a fight, they experience a rise in testosterone levels. This self-doping mechanism prepares the animal for competition, increasing the blood's capacity to carry oxygen, quickening the speed of reactions, and, via its effect on the brain, increasing fearlessness and appetite for risk. In the aftermath, winners can emerge with a tenfold increase in the amount of testosterone circulating in their bodies, whereas losers' testosterone levels can be suppressed by the same order of magnitude.


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