Lance Armstrong and Bruno Iksil may have something in common.
A former Deutsche Bank and Goldman Sachs trader who is now a neuroscientist has come up with a theory he calls the “winner effect” – a hormonal mechanism that kicks in during a winning streak and spurs more risk taking.
Reuters’ Kate Kelland describes how John Coates, a Cambridge research fellow in Neuroscience and Finance, was determined to figure out what was behind the “narcotic-like high” triggered by trading-floor victories.
“You become euphoric, delusional, you have less need for sleep, you have racing thoughts, an expanded appetite for risk, and less stringent requirements in the risk and reward trade-off. Basically, you become a rogue trader.”
In his research, Coates took spit samples of 17 male traders over eight consecutive business days to measure the levels of testosterone during daily trading.
“Daily testosterone was significantly higher on days when traders made more than their one-month daily average. And on morning when they had high testosterone levels, their profits for the rest of the day were significantly larger than when testosterone levels were low.”
In extreme situations, Coates asserts the winner effect can result in traders bringing down banks, corrupt political leaders, and drive soldiers to become mass murderers. Of course, the euphoria can even be felt in sports.
“When you see this transformation take place in people, they start carrying themselves like masters of the universe. And it’s not a cognitive process. It isn’t even about greed. It’s more this feeling of consummate power, a feeling that you’re dominating the world.”
This seems a lot more enjoyable than a loser effect.