Iconoclast: A Neuroscientist Reveals How to Think Differently

by Berns, Gregory

  When we examined the brain responses of the different individuals, we found a neural fingerprint that differentiated the cool cucumbers from the extreme dreaders. A part of the brain associated with processing physical stimuli, called the secondary somatosensory cortex, had a rise in activity in the extreme dreaders when they were shown the information about how long they would have to wait. The brains of their more patient counterparts did not show this early response. Instead, their brains reacted with a gradual rise in activity up to the point of the shock. We found similar differences in other parts of the cortical pain network, including the anterior cingulate cortex, which lies in the midline of the brain and straddles the bundle of fibers connecting the left and right hemispheres, and is frequently activated during stressful events. Considering these findings from the other direction of causality, you could say that hyperactivity in this network of brain regions might actually be the cause of impulsive, irrational behavior, at least when it comes to the fear of something unpleasant.

  How Fear Clouds Financial Judgment

  Identifying differences in brain activation in the laboratory is one thing, but demonstrating that these differences have any practical application in the real world is an entirely different matter. Andrew Lo, a professor of finance at the MIT Sloan School of Management, has been examining the link between biology and financial decision making. Lo’s work is at the cutting edge of neuroeconomics and represents some of the most intriguing directions in which both neuroscience and biological information are being applied in the business world. Lo believes in the general principle of the efficient market, but because some individuals seem to do better than others, he has explored the possibility that biological differences underlie the performance inequities between winners and losers seen in any market. Although markets might be broadly efficient, Lo’s work suggests that differences between individuals in the market create small, but transiently leverageable opportunities for profit. The key lies in the emotional brain, especially fear circuits.

  In 2001, Lo teamed up with a young Russian physicist/cognitive neuroscientist, Dmitry Repin, to measure physiological responses in professional traders.10 Lo and Repin recruited a small group of traders who worked in the foreign-exchange and interest-rate derivatives unit of a major global financial institution based in Boston. On a typical day, this unit engaged in 1,000–1,200 trades and averaged $3 million to $5 million per trade. Lo and Repin wired up ten traders to measure a range of physiological responses that included blood pressure, body temperature, respiration rate, skin conductance responses (sweating), and measurements of muscle contractions in the face and arm. These measurements were collected for a period ranging from forty-nine to eighty-three minutes during live trading hours. After the session, Lo and Repin examined the correlation between these physiological parameters and specific volatility events in the market. Lo and Repin used a computer algorithm to extract these events in markets that traded foreign currencies, including the euro, the Japanese yen, and the British pound. The volatility events included price deviations, spread deviations, price-trend reversals, and both price and return volatility. Lo and Repin also divided the traders into inexperienced and seasoned categories to see whether experience affects an individual’s autonomic reactions to market events.

  Although this was a small sample of subjects, Lo and Repin found surprising correlations between physiological responses and market trends. The most strongly correlated parameter, blood pressure, rose in both novice and experienced traders when an asset’s maximum volatility went up. Volatility was measured as the difference between the maximum and minimum price over a short time interval and calculated as a fraction of the average price. It was related to the short-term variance of the asset. In a more detailed analysis, they found that this rise in blood pressure occurred well in advance of the key volatility event. This suggested that the traders’ bodies responded to cues in the market that preceded the large-scale event that subsequently showed up as a price change. This observation raises the intriguing possibility that the brain (and the body) picks up subtle cues in the market that are not apparent from trend analyses.

  As exciting as these findings were, Lo and Repin were not able to prove a causal link between physiological reactions and individual performance in the market. In a later experiment on eighty day traders who were participating in an online training program, they did find the first hint of a link between emotional reactivity and performance.11 Although they were unable to use physiological measurements, Lo’s team examined the link between trading results and emotional state. They also wanted to know whether a specific personality was particularly good at trading. Using standard personality inventories, Lo found no correlation between personality and trading performance. From this, he concluded that there was no ideal “stock market personality.” In contrast, Lo did find correlations of positive and negative mood states with daily performance, which, by itself, is really not very surprising. People are happy when they make money, and unhappy when they lose it. The key finding was that these correlations were the strongest for the worst traders. The worst traders let their emotions color their perception of valuation and cloud their decision making.

  Henry Ford and the Freedom from Fear

  Henry Ford was an iconoclast on so many levels, ranging from his views on capitalism and world peace to his development of the assembly line, but he had clearly articulated views about the damaging effects of fear in business and how to deal with it. Born in 1863 on a farm in Dearborn, Michigan, Ford recalls that he grew up witnessing too much hard labor on the farm. He started building steam engines first, with the goal in mind of alleviating the sweat-and-blood drudgery of farm work. And then he read of the gas engine. Built in England, these early engines couldn’t develop anything near the power of a steam engine, and Ford’s interest was more out of engineering curiosity than anything else. These single-cylinder jobs were hugely inefficient, requiring four cycles to develop one power stroke. And it wasn’t until 1890 that Ford took a serious interest in double-cylinder engines.

  At that time, Ford was working for the Edison company, and, not too surprisingly, there was little interest in gas-powered forms of transportation. The focus was on electricity. The prevailing opinion was that electricity, not gasoline, would be the power of the future. Ford bucked this trend and became an iconoclast when he quit his job in 1899 to go into the automobile business. He spent the next three years developing a two-cylinder engine that was powerful enough to move a “horseless carriage.” The result was the famous Model A. It sold for $750 (about $17,000 in 2008 dollars) and could reach a speed of 45 mph. The Model A wasn’t a best seller—more of an oddity—but Ford did well enough to plow the profits into the development of what really made the Ford Motor Company: the Model T.

  The Model T became possible only when Ford heard about a new type of steel that was being smelted in France. French steel contained a secret ingredient, vanadium, which made it three times stronger than regular steel. This changed everything for Ford. As with other iconoclasts, his perception of the automobile instantly changed when he saw what could be done with a vehicle that weighed a third less. Now, little gas engines that struggled to pull a heavy car suddenly weren’t so anemic anymore. A little engine could do a lot with a car that didn’t weigh very much. The Model T was released in 1908, and within the first year, Ford had sold 10,607 of them, more than any other manufacturer.

  None of this was luck. Ford believed steadfastly in the value of work: “Freedom is the right to work a decent length of time and to get a decent living for doing so.”12 At the core of his philosophy lay the belief that he had an obligation to face the uncertainty of the future and not fear failure (two of the three basic fears that distort perception). Ford wrote: “One who fears the future, who fears failure, limits his activities. Failure is only the opportunity more intelligently to begin again. There is no disgrace in honest failure; there is disgrace in fearing to fail.”13

  With
time, Ford came to believe that money was at the root of these fears: “Thinking first of money instead of work brings on fear of failure and this fear blocks every avenue of business—it makes a man afraid of competition, of changing his methods, or of doing anything which might change his condition.”14

  Ford sets a good example of how successful iconoclasts deal with fear. The first step, indeed the most important step, is the recognition that fear permeates any business. Fear is to be taken as a warning sign, not as guide for action or inaction. Once fear is recognized, it can be deconstructed and reappraised. Ford also points out that when fear is deconstructed, you will often find fear of losing money to be at the root of it. Even so, the iconoclast vanquishes the fear of failure. Ford also gives a good example of how reframing fear of failure, as in the possibility of learning from one’s mistakes, allows a potential negative be turned into a positive.

  Using Genetics to Diversify a Team and Mitigate the Effects of Fear

  Are iconoclasts born, or are they made? Some, like Feynman, seem to fall in the first category, while others, like Ford and Dreman and Miller, seem self-made. The fact is that all brains are not created equal. The neuroimaging evidence points to dopamine as a key neurotransmitter in decision making, so it follows that there should be something different about how dopamine is released in the iconoclastic brain. Although it is not possible to measure dopamine levels directly in the human brain, the level of dopamine activity can be inferred from an entirely different source of information: an individual’s genetic fingerprint. And taking a cue from the law of large numbers, there should be substantial benefit to diversifying the genetic composition of a decision-making team.

  The human genome is comprised of DNA, itself composed of complementary pairs of four nucleic acids (base pairs). This DNA is broken up into twenty-four chunks that make up the chromosomes. All told, there are about 3 billion base pairs in the human genome. Most of this is so-called junk DNA because it doesn’t code for genes. The rest, however, contains the code to make proteins, which are the building blocks of the body. Amazingly, the genome contains the instructions for building every one of the proteins in the body.

  When dopamine is released into the synaptic space, two things happen. First, the dopamine binds to the dopamine receptor, which causes a chain of biochemical and electrical events in the postsynaptic neuron. Second, after the initial event, the dopamine molecules must be reab-sorbed into the neuron that released them. The dopamine transporter, or DAT, is the protein that serves this function. The DAT is interesting in its own right because virtually all the stimulant-type drugs, such as cocaine and amphetamine, bind to the DAT and block its function. This typically results in an excess of dopamine floating around the synapse. After dopamine is reabsorbed into the releasing neuron, it might be repackaged for a subsequent release, or it might be broken down into its constituent parts. This breakdown process, or catalysis, is accomplished by another protein called catechol-o-methyltransferase, or COMT for short. Together, the DAT and COMT regulate the amount of dopamine available for release.

  DAT and COMT are proteins; thus the human genome contains instructions to make them like every other protein in the body. It turns out that there are subtle variations between people in their gene sequences for these proteins. Both DAT and COMT are big, a little over 1,000 base pairs for COMT and 3,900 for DAT. The mutation of a single base pair within this chain means the substitution of one amino acid for another. For COMT, a single base-pair mutation changes the 158th amino acid from a valine (Val) to a methionine (Met). Because everyone has two copies of every gene, one inherited from each parent, some people have two valines (Val/Val), some people have two methionines (Met/Met), and some have one of each (Val/Met). It turns out that Val/Val individuals have four times as much COMT activity as their Met/Met counterparts. The DAT gene is similar, and, like COMT, it is found in two common forms, called 9R and 10R.15 The 9R form has been linked to a lower amount of DAT synthesis, which, like cocaine, may have the end result of lowering the clearance of dopamine from the synapse.

  In a recent neuroimaging study, Christian Büchel, a neuroscientist in Hamburg, Germany, measured the relationship between fMRI activity in the striatal dopamine system during a gambling task similar to the one used to study the Ellsberg paradox.16 Büchel genotyped all of the 105 people who participated in his study. He then looked for differences in brain activation that were linked to the different genotypes for COMT and DAT. Büchel found greater activity in the dopamine-rich areas of the brain when winning was more likely. How much greater depended on the particular combination of genes the individual had. Büchel found that people with the Val/Val form of COMT and the 10R form of the DAT showed no relationship between brain activity and probability of winning. In other words, these people were insensitive to the level of risk. On a standard measure of personality type, these people also scored high in sensation seeking.

  The implications are striking for decision making, especially group decision making. These particular genetic variants are associated with lower dopamine activity, which is borne out at the level of brain activation. If a relative insensitivity to dopamine means that these individuals exhibit risky behavior when the potential rewards do not offset the level of risk, they might be driven to goose their brains with dopamine by ever-higher levels of risk taking. They thrive on risk and are comparatively immune to the damaging effects of fear on decision making. We don’t know whether these forms of the genes are more common in iconoclasts. Nobody has done such a study. But given the rate of advance in both imaging and genomics, it may not be such a bad idea to find out which you are. And if you are assembling a team of individuals, it might make sense to take a cue from modern finance theory by diversifying the genetic portfolio of your team.

  Brain Circuits for

  Social Networking

  How you suffered for your sanity …

  But still your love was true.

  —“Vincent,” Don McLean

  Girls could not resist his stare:

  Pablo Picasso never got called an asshole.

  —“Pablo Picasso,” The Modern Lovers

  HOWARD ARMSTRONG was an iconoclast because he invented things, such as FM radio, that others thought could not be done, but when he killed himself, he died an unsuccessful iconoclast. His failure was not in perception or a lack of courage to stand up for what he believed. His failure was one of social intelligence: he couldn’t sell his idea. To be clear, social intelligence is not strictly necessary to be an iconoclast, but it is necessary to be a successful one. The issue comes down to the iconoclast’s ability to connect with other people. As we shall see in this chapter, connecting with noniconoclasts depends on two key aspects of social intelligence: familiarity and reputation. Both functions can be understood through the circuits in the brain that implement them.

  Consider two of the most iconoclastic artists of modern times: Vincent van Gogh and Pablo Picasso. Paintings by both have fetched over $100 million.1 And both of them are responsible for some of the most iconic images in the art world: Van Gogh’s Self-Portait (the one sans earlobe) and Starry Night, and Picasso’s The Old Guitarist and Guernica. But there is an important difference between Van Gogh and Picasso. Van Gogh died penniless, while Picasso’s estate was estimated at $750 million when he died in 1973. Although both were iconoclasts, it was Picasso who was the successful one, at least during his lifetime.

  For the iconoclast, two aspects of social intelligence figure prominently in success or failure: familiarity and reputation. The two go hand in hand. In order to sell one’s ideas, one must create a positive reputation that will draw people toward something that is initially unfamiliar and potentially scary. Familiarity helps build one’s reputation. Picasso was a master at both. He became familiar to the art world through his massive productivity. While Van Gogh produced about nine hundred paintings in his lifetime, Picasso produced over thirteen thousand paintings and about three hundred sculptures, making him the
most prolific artist ever. And everyone loved Picasso. People were drawn to him because of his charisma. That many were lovers illustrates the correlation between the charisma he displayed in peddling his art and the charisma that attracted people to his bed. Since he was five foot three, physical stature had little to do with Picasso’s appeal. Van Gogh, on the other hand, while equally brilliant in his art, repelled people. The whole earlobe incident was provoked by an argument with Paul Gaugin—the recipient of Van Gogh’s “gift.” Where Picasso smoothly navigated multiple social circles, Van Gogh struggled to maintain connections with even those closest to him. Van Gogh inhabited an alien world. Picasso, on the other hand, was a social magnet. And because he knew so many people, the world was at his fingertips. From his perspective, the world was smaller.

  Picasso was a node. He possessed a rare combination of social skills that allowed him to function both as what Malcolm Gladwell called a “connector” and as a “persuader.”2 Picasso’s unique position illustrates a key point that differentiates successful iconoclasts from obscure ones (and Van Gogh and Armstrong fall in this category, at least during their lifetimes). Successful iconoclasts connect with other people and, in the process, shrink their worlds.