The early humans who were able to react fastest to the unexpected sight of a lion in the long grass were the ones who passed their genes onto us. Those who reacted slower made no further contribution. We modern humans have inherited an evolutionarily adaptive neurobiological system, one that is designed to react very fast to unexpected stimuli or disturbances.

In the case of a visual stimulus, when the image of the source of the disturbance hits the occipital lobe of the brain via the retina, another part of the brain, the amygdala, sounds the alarm for the body to prepare for sudden action. The amygdala sends its message via the sympathetic component of the autonomic neural system to the adrenal glands, which pump a cocktail of hormones into the bloodstream, mostly adrenaline and cortisol, which readies the body for fight or flight.  

These hormones have a catabolic effect: they create a sudden boost in energy through an increase in blood sugar and blood pressure, and they cause an expansion of the blood vessels and the bronchi in the lungs. Visual acuity is increased by the dilation of the pupils and by the loss of peripheral vision. Any systems that are not required for the immediate objective of physical survival are shut down: the immune system is suppressed and digestive processes cease. All of this takes place in milliseconds, much faster than conscious voluntary thought.

This process is sometimes referred to as amygdala hijack because metabolic resources are diverted away from the executive centre of the brain, the prefrontal cortex. This leaves you unable to think or plan because all your resources are required for physical action to ensure your immediate survival. Your higher order cognitive functions become redundant when there is a lion in the long grass.  

The priming effect of the fight/flight reaction is experienced as a state of physical tension, and there is an overwhelming biological urge to do something, almost anything, to discharge the tension. What gets overwhelmed by evolutionary design is your ability to think clearly and rationally. The process works wonderfully well in circumstances where your physical survival is threatened but it serves you poorly when you encounter acute disturbance in financial markets.

In these circumstances you would be far better served by making use of the tool that is designed for analysis and reflection, the prefrontal cortex. But your evolutionary design makes no distinction between physical and financial survival. The fight/flight reaction ensures that the reptilian complex of the brain is activated, and this lizard brain is precisely the wrong tool for the job of making sound investment decisions. And because you are hardwired this way, reacting instinctively to acute noise in the domain of financial markets will feel right and natural even when it’s almost invariably wrong.  

From a neurobiological perspective, acute noise has the simultaneous effect of charging the body for immediate action and bypassing the capacity for conscious thought. An investment decision taken while in this state is characterised by the very absence of rational analysis and reflective judgement. Unless you are remarkably lucky, such a decision will lead to the destruction of alpha.

  • When last did you experience acute noise?
  • What was the quality of your investment decision-making at that time?
  • What did you learn from the experience? What’ll you do differently next time?


  • Justin Newdigate: Noise (2019)
  • Wilhelm Jordaan: People In Context (2003)