94 JOHN COATES
For exposing how biology affects Wall Street.
Neuroscientist | Britain
When John Maynard Keynes used the term "animal spirits" in 1936, he was referring to the ways human hubris and fear can inflate profits and deepen losses. But that is only part of the story. John Coates -- who ran a trading desk at Deutsche Bank during the dot-com crisis and left Wall Street to become a Cambridge University neuroscientist -- realized that his traders' responses to big gains and losses were also driven by their physiology, an insight that is changing our understanding of financial risk at a time when the actions of a handful of traders can increasingly dictate the course of global markets.
Humans' innate fight-or-flight response, which primes the body for danger, forms the basis for the kind of risky behavior that can drive big gains. But these physical processes can also work against Wall Street traders. The title of Coates's fascinating 2012 book, The Hour Between Dog and Wolf, refers to a medieval French expression that describes the transformation in a man as his testosterone level climbs and he is primed for a fight: He becomes cocky, aggressive, and confident in his own superiority. These are qualities that have helped humans overcome risky situations for millennia, but on Wall Street, Coates argues, our primal instincts can backfire.
His research measuring traders' hormone levels, which has helped spur newfound interest in the biology of risk, reveals that as profits mount, testosterone levels increase, contributing to the irrational exuberance crucial to a financial bubble. Conversely, when losses increase, a different hormone, cortisol, begins to build up. That stress hormone contributes to the irrational pessimism that can turn a market downturn into a full-fledged crash. The solution, Coates suggests, is simple: Hire more women and older men on trading floors and end the practice of massive bonuses for short-term profits. "If we want to understand how people make financial decisions, how traders and investors react to volatile markets," Coates writes, "we need to recognize that our bodies have a say in our risk-taking."
Reading list: The Wisdom of the Body, by Walter Cannon; Creation, by Gore Vidal; Arabian Sands, by Wilfred Thesiger. Best idea: None come to mind. Worst idea: Too many come to mind. American decline or American renewal? Holding steady. More Europe or less? More. To tweet or not to tweet? Not.
95 JONATHAN ZITTRAIN
For staring down the Internet's enemies.
Law professor | Cambridge, Mass.
When the World Conference on International Telecommunications convenes in Dubai in December, delegates will tackle an enormously consequential question: Should the United Nations assert greater control over the Internet, or should a motley collection of public and private "stakeholders" continue to govern it? Ahead of the summit, authoritarian countries such as China and Russia have expressed support for international standards in the name of cybersecurity -- raising concerns that human rights will be trampled and the Internet shackled.
We can't say we weren't warned. Jonathan Zittrain's 2008 book, The Future of the Internet -- and How to Stop It, focused on the threat that government regulators and companies, in their quest to address security problems and assert control, pose to digital freedom. It helped establish Zittrain as the general counsel of the digital age, and the Harvard University law professor has continued to wrestle with the web's biggest questions ever since. Is Internet access a human right? How do we respect the rights of the unwitting people who become the subject of Internet memes? Is it legal for an insurance company to set rates for its customers based on GPS data? More than anyone, Zittrain has asked who the Internet's public and private gatekeepers are, how they're acting, and what that means for the future of the open web. And he has addressed his own questions by helping establish the OpenNet Initiative, which monitors Internet surveillance around the world, and Chilling Effects, which posts legal complaints about online activity. In May, the U.S. Federal Communications Commission tapped Zittrain to chair a committee tasked with evaluating the agency's efforts to keep the Internet open and the telecommunications market competitive. There's little doubt Zittrain is skeptical of this latest bid by Russia and China to put the Internet back in the box; the web can't be governed by committee. As he wrote in his book, "The Net and its issues sail blithely on regardless of the carefully worded communiqués that emerge from a parade of meetings and consultations."
Reading list: Consent of the Networked, by Rebecca MacKinnon; Interop: The Promise and Perils of Highly Interconnected Systems, by John Palfrey and Urs Gasser; Some Remarks, by Neal Stephenson. Best idea: Dealing with cybersecurity problems through technically facilitated mutual aid among many participants, rather than solely top-down mandates or rigid best practices. Worst idea: Rioting over a YouTube video. To tweet or not to tweet? Tweet! With a link to a more thorough blog entry and a willingness to tweet later corrections.
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