The volatile chemistry of the business brain

Abstract: Think your staff think rationally? Think again. They’re held hostage to chemistry…

It’s alluring to believe that we are the masters of our thinking, especially in a business environment; but hidden away in bits and pieces of our bodies are chemicals and bursts of electrical activity that hold our reasoning hostage.

Towards the end of 2011 when Britain was still immersed in navel-gazing over the riots that had left its capital in flames, I was attached to the science desk of the Financial Times in London. One day I approached the editor with an idea that there were similarities between mob behaviour and the actions of market traders. He seemed bemused that I should even suggest that the responsible and calculative thinking that underpinned the world’s financial capital could in any way mirror that of the rampant youths who had trashed and burned it.

To keep me out of his hair he allowed me to investigate further and write an article, possibly thinking it would never run. However, as the story developed it attracted the attention of those further up the editorial food chain and eventually became a full-page feature piece.

To cut a long story sideways, because humans are social creatures, we are influenced by group behaviour. However, unlike other social animals, we don’t actually need direct visual feedback to identify with a group. This means that we don’t necessarily have to see someone else throwing a stone to want to throw a stone ourselves. Simply by following the tumbling of numbers on a screen is sufficient to repeat the behaviour of others.

Importantly, neuroscientists believe that a part of the brain called the nucleus accumbens – more commonly known as the ‘pleasure centre’ – plays an active role in developing this desire to mirror crowd behaviour. This part of the brain is associated with generating feelings and emotions such as fear, reward, pleasure and punishment, which are critical in encouraging adherence to, and punishing defiance of, ‘accepted’ social behaviour.

Experiments by neuroscientist Dr Vasily Klucharev from the University of Basel in Switzerland that temporarily immobilised the function of this part of the brain rendered subjects immune to social influence and thus the desire to display herd mentality.

His conclusion: the desire to mirror the behaviour of others isn’t a ‘rational’ decision, it’s reflexive.

More recently, further studies of the supposed rational thinking of market traders have found a link between their performance and the steroid hormone testosterone. Joan Coates, a former Wall Street trader, and now a Cambridge University-based neuroscientist believes he can predict whether or not a male trader will make the correct decisions to generate above-average profit on any particular day by measuring his levels of testosterone at the beginning of that day: high levels forecast high earnings.

The link ties back to the nucleus accumbens and the heightened sensation of reward associated with risk. This is a wholly natural process called ‘self-doping’, and can help the drive to win in sport. Hence it’s also called ‘the winner effect’.

Now I know what you’re thinking: what about women, after all they produce, on average, only ten percent of the amount of testosterone as men. Coates believes that when it comes to financial markets, men are more hormonal than women, and with those hefty doses of testosterone coursing through their veins, take more risks and, in the short-term, may be more successful, but that women are more calculating and, in the long-term, perform better.

Gregory Burns, a professor of neuroeconomics at Emory University in Atlanta in the US points to the nucleus accumbens as also playing an active role in mediating the release of dopamine, a powerful neurotransmitter that produces the sensation of a ‘high’. It can be addictive, and even the anticipation of reward is sufficient to generate a healthy dose of dopamine.

But wait, as the saying goes, there’s more. There’s another chemical that affects your decision-making, and it’s another steroid hormone: cortisol. This is released through an interconnected series of glands when the body is exposed to stress. Its function is to rapidly increase the levels of glucose in the bloodstream to provide a burst of energy to the muscles in the body. It also shuts down nonessential bodily functions for a fight-or-flight response such as digestion and the reproductive system.

But it’s a short-term chemical reaction, and if the source of the stress is not removed, the resultant high levels of cortisol can gradually render a person risk-averse to the point that they can become almost dysfunctional – a condition called ‘learned helplessness’.

Now think what this means for your office. The staff you thought were individuals calmly concentrating on their individual tasks, are in fact a crowd, all feeding off each other, their pleasure centres fired up with dopamine, and testosterone powering their risky behaviour. That’s of course unless the daily stresses are producing continual bursts of cortisol, slowly robbing them of their capacity for risk, and numbing them into despondency.

And to think you were relying on them to make calm, rational decisions!

Originally published in the Business Day online 28 March 2013