A shortcoming of our academic system is the startling dearth of “weaving” disciplines together.
It’s not unheard of… There are Neuropsychology courses, for example. But where is “Socio-physics”, for example, or Asimovian “Psycho-history”?
It’s really surprising that physics isn’t woven into our understanding of sociology, given that we humans are all bound to the laws of physics. Physics literally underpins everything about our existence…
Another thing that there isn’t much research on is how our biology drives our psychology, often through our endocrine system.
Despite this, let’s have some fun and spend some time theorizing with what can be found on google about the subject.
Google searches on “how are our hormone systems affected by trading in markets” yield very little in the way of any studies.
This medium article will focus on a theory about how testosterone-feedback loops impact men and male psychology within the realm of trading markets. fooo has found even less data about female neuroendocrinology and trading.
Here is an excerpt from an article that drew on a few studies though:
https://www.thestreet.com/investing/why-testosterone-hurts-trading-14390588
“A study from Trinity College Dublin in Ireland indicates that the need to attain higher social status is a testosterone effect, said Patrick Morris, CEO of New York-based HAGIN Investment Management. Since the amount of money is one way to show a higher social status, the “risk-taking among males to achieve disproportionate success is another source of long-term underperformance,” he said.
So it appears that testosterone is bad in any environment that pays for a strong risk/reward discipline,” Morris said. “Higher levels of testosterone can lead to riskier behavior. So the higher the testosterone, the higher the risk of each successive trade. Since each winning trade amplifies testosterone, the result is a series of wins followed by a big loss on a high risk, low probability trade.”
Let’s wrest the raw data from this study and sift through the dumb, incomplete conclusions they make in the article and conduct a lil sleuthing of our own.
Premise: Testosterone pushes males to compete for status.
Absolutely. This is well-substantiated.
Premise: A winning trade will boost testosterone short-term.
Absolutely. fooo looked into this. It checks out.
Low-IQ Conclusion: testosterone is bad in any environment that pays for a strong risk/reward discipline.
No.
Tell that to Genghis Khan. He took alot of risks…He got alot of brain-feel-good-chemical reward for it. Did he fuck up because of that and piss it all away? No. He literally succeeded at the majority of his huge ambitions and left a massive impact on the world. (yeah he butchered a shitload of people, but right now we’re not discussing whether it was “right or wrong”, we’re dispassionately discussing the risk/reward system’s efficacy within the parameters of what it seeks to achieve).
If Morris’ conclusion that “testosterone is bad in any environment that pays for a strong risk/reward discipline” is unerringly correct, how have high-testosterone men dominated society since pre-agrarian times?
It’s because you can’t lump “high testosterone men” indiscriminately into one group…
Do you think “the patriarchy” (whether you believe patriarchy is an oppressive reality, an excuse for handouts, or anywhere between) invented itself out of thin air? Was it magic? No. It was high testosterone men taking calculated risks, gaining payoffs, and then using gained prestige to weave society to solidify traditions surrounding it.
Let’s go back to the article for a second:
“Female investors tend to outperform males over longer periods of time since males often are more aggressive and willing to take on more risk in their portfolios than women, said Tamra Stern, partner and director of wealth management at Main Street Research in Sausalito, Calif…
Women tend to take less risk in portfolios than men, mitigating the downside risk to the portfolios and allowing portfolios to recover quicker and participate sooner when the markets are doing well.”
Most high-test, finance bro men will underperform their female counterparts (there’s a fair amount of research on this), because the males will be more reckless, less disciplined, and not measured in their understanding and analysis, driven by their hormones to seek reward…
but what about the man who recognizes all of this about himself. What about the man who craves excellence, and the freedom afforded by status (dopamine), but doesn’t care about the approval of others and doesn’t feel defined by society, others’ opinions? (serotonin)
Probably most high-testosterone, extroverted men will probably not be very good traders. There will exceptions, of course. fooo is not saying extroverts lack the capacity to introspect, reflect, see things objectively or exercise discipline. They can. However, they are wired differently, and their high testosterone will not be checked by an introverted dimension to their character, and their propensity to rely on defining status as “social dominance” will lead their egos to control them.
But what about introverted, introspective men with high testosterone, who are motivated strongly by problem-solving, and the pleasures and privileges of status and power, but don’t rely on others for their energy.
Think Elon Musk, for example. Elon Musk clearly doesn’t give a hot shit about having the biggest lawn gnome on the suburb, or what people think about his rolex…
Musk has taken MASSIVE risk in his life on multiple occasions, and each time it has paid off. Was “ testosterone bad in any environment that pays for a strong risk/reward discipline” for Elon Musk? No. And fooo is pretty sure he isn’t low test. You know, given that he’s the richest man in the world and puts everything on the line for causes most who buy his Tesla cars to show off or virtue-signal don’t really care about or even comprehend.
fooo contends that it is HIGHLY LIKELY that introspective men who are high testosterone are likely to profit from the same testosterone risk/reward system that punishes their less cunning, more serotonin-laden extrovert high testosterone counterparts. It supplies the will to win, and the drive to excellence, without the need for approval or recognition. Introverts also, crucially, have a longer neuropathway to dopaminergic reward than extroverts, who find a rush much more quickly. Hence introverts naturally comprehend delayed gratification more keenly (more on that later).
Introverts and extroverts have the same amount of dopamine in their brains all else equal. However, while extroverts get a rush when they get the phone number of an attractive member of the opposite sex, or by gunning for a promotion at work, introverts gain a greater buzz when the neurotransmitter acetylcholine enters the mix, and they focus inward, think deeply, reflect, and focus on one thing for long periods of time.
The differences are pronounced, and it’d be folly to think they don’t directly and strongly apply to the cultivation of a high risk/reward skill.
Ok. How does this directly apply to us? What is useful about this theory?
Think of sports for example:
It has been clinically proven that men whose sports team prevails experiences an increase in testosterone, and he loses testosterone if his team loses.
Men experience vicarious testosterone fluctuation through their teams, and hence their tears and blood-thirst surrounding sports.
Link to study here:
Why would you think trading is any different?
The introspective high testosterone man will realize that a good trade will often punish him with short term decreases in testosterone and other neuroendocrinological punishments as they will probably suffer some initial loss when buying Bitcoin, for example, on a 26% dip.
Maybe it falls a bit further first, then painfully drags sideways for a month in accumulation everyone fears is distribution, until it pumps.
If he is calculating and self-disciplined enough to hold through early pain (and if his trade thesis is cunning), transient, short-term testosterone drops will give way to a higher baseline testosterone level as he is made richer by a good trade which required patience, analysis and self-discipline to hold through as his delayed gratification pays off.
The gears of this absurd crypto market are mostly greased by men who aren’t introspective, patient and disciplined. If they are constantly second-guessing themselves by reading up on what everyone else thinks on fucking etoro, trading with too much leverage, or fomo’ing for a rush, they will get crushed, because they are the npc.
This short-term spike in pleasure is followed typically by them getting liquidated, crushed, or drawing down, and ultimately, they likely experience a testosterone and neurochemical cocktail of badfeel.
In a Pavlovian way, this probably trains them to seek more thrills with higher leverage to make it back.
These same unintrospective guys, without introspection and analysis on WHY they win, might get lucky a few times, and THEN Morris’ theory about testosterone reward cycles pushing such men to take greater and greater risk probably maps out better onto reality.
KEY TAKEAWAYS:
- high testosterone introverted men probably comprise the largest portion of highly successful traders, and if this is true, it is likely because of how their brains work. They are motivated by success and excellence, but not energized by others, and hence are less beset by concern for the opinions of others. They have greater capacity and natural proclivity to introspect, understand the “why”, develop systems and reflect on their failures and successes.
- trading, like sports (if he cares what happens in it) has a real impact on a man’s hormones, which have a very real impact on one’s psychology and hence ones’ trading — this can be advantageous or disadvantageous based on whether one uses this knowledge or discards it
- delayed gratification can bring longterm neuroendocrinological reward when an intelligent trade pays off — initial pain for long term gain
- fomo trading and chasing pumps very likely has a tangible basis in neurochemical cocktails in the brain which motivate it, and not only will likely destroy ones portfolio, but will likely self-reinforce.
This is all pure theory based on limited data right now. fooo isn’t married to any of it. Just having fun spitballing on some notions fooo finds interesting.
Would be interesting to see some better studies conducted on this stuff tbh.
