Reading biology has never been more thrilling. Coates expertly blended finance with biology, taking us on a journey through the trading floor and what goes on in our bodies over time. If you are interested in what happens on the trading floor and what happens to our bodies during times of stress and excitement, this is the book to read. It will give you a new perspective, helping you understand your body better through a molecular lens (literally).
Content: The book was informational and the storytelling was fantastic. Coates went from describing how our hormones rise and fall during certain times, how we can build resilience, and even the setup of an investment bank and what traders do on a day-to-day.
Estimated reading time needed: 15-20h; it is a non-fiction book with technical jargons, so more time will likely be required to fully understand and process the information.
Key takeaways:
1) During a winning streak, we can become euphoric and our risk appetite expands (winner effect). Testosterone increases and so do confidence and risk-taking which segue into overconfidence and reckless behaviour. On a losing streak, we struggle with fear, reliving the bad moments and the stress hormones linger, which may ultimately result in high blood pressure and other infections.
2) If we want to understand how people make financial decisions, how traders and investors react to volatile markets, and how markets tend to overshoot sensible levels, we need to recognise that our bodies affect our risk-taking behaviour.
3) Ever wondered how a cricketer can catch a ball in a split second? The brain anticipates the actual location of the object and moves the visual image we end up seeing to this hypothetical new location.
4) Every millisecond matters. We hear events that happen near us before seeing them, and we see events that occur far away before hearing them. The intersection is called the "horizon of simultaneity". On the trading floor, traders see the price on the screen, but an audio feed could give traders a 40-millisecond edge in the market.
5) The four stages of competence - unconscious incompetence, conscious incompetence, conscious competence, and unconscious competence. "Thinking, one could say, is something we do only when we are no good at an activity". However, I believe this blanket statement should not be applied to every scenario. Make sure you check your work thoroughly before submitting it to your bosses!
6) Traders with a high IQ and insight into the value of stocks and bonds may be worth listening to, but if they do not have an appetite for risk, they will not act on their views. Good traders must also be able to scrutinise the screens for hours at a time, and they must move to trade before anyone else.
7) Computers may take over the job of quick trade executions, but our bodies will continue to be crucial for success in the markets because they provide us with perhaps the most important data informing our call on the market - our gut feelings. How can we train ourselves such that our gut feeling becomes more accurate?
8) Mentally toughened individuals welcome novelty as a challenge and see it as an opportunity for gain. Resilience to stress comes from experiencing stress. Toughening our minds can thus come from a process of challenge and recovery. The author also distinguished the difference between periodic stress and chronic stress. The former would give rise to toughened individuals, but the latter would cause infections and other health issues.
9) Exercise is the most important way to toughen ourselves, as it helps to inoculate us against anxiety, stress, depression and learned helplessness. Exposure to cold weather or water would also help us be more emotionally stable during prolonged stress.
Recommendation: Having studied biology and finance, it never occurred to me how one is affected by the other. I believe that understanding our physiological reactions can help us adjust and react to our environment easier, and at the same time remain calm and in control of ourselves over external events. If any of the above was interesting to you, I highly recommend reading the whole book.
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