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Another Reason for Wall Streeters to Avoid Cocaine

CNBC's Robert Ferris breaks down a recent study on how cocaine affects decision making and how people perceive wins and losses.
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Cocaine addicts may have more difficulty recognizing the effects of bad decisions, because the drug may impair the circuits in the brain responsible for recognizing and predicting loss, according to a new study.

The research, published in The Journal of Neuroscience on Tuesday, may help to explain why it's so difficult for users to quit even after suffering imprisonment, broken relationships or other personal problems. It could also provide a warning of sorts to cocaine users engaged in activities such as high-level decision making—or investing.

"The human species is guided by the prospect of maximizing rewards and minimizing costs," said Rita Goldstein, one of the scientists on the research team. "We see that everywhere, from basic survival—getting food and avoiding the poisonous stuff—to relationships and work in the modern world. If people cannot predict losses, their long-term planning and decision-making will be very different. This type of brain-activity loss might be contributing to a downward spiral in addicts."

A team of researchers at the Icahn School of Medicine at Mount Sinai recorded the brain activity of 50 cocaine users and 25 nonusers while they played a gambling game. The scientists were specifically examining the signals in the brain that help humans predict the possible rewards and punishments that might result from a decision.

If people cannot predict losses, their long-term planning and decision-making will be very different.

Many scientists think that our capacity to learn is connected to our ability to calculate risks—combining our past experiences with other things we learn about the world helps us weigh in our heads the possible positive or negative results of a decision. In order to do this, our brains have to be skilled at recognizing an unexpected result when it happens. The researchers wanted to know if the brains of addicts were chemically handicapped when it came to that task.

In the study, each participant played a computer game that involved guessing which one of four doors hid a small monetary prize. Before each round, the game told the players how many doors out of the four held such a prize. Sometimes, three doors each hid a reward—meaning players had a 75 percent chance of guessing correctly. Sometimes, two doors out of four hid prizes, and sometimes only one did. Knowing the odds of guessing correctly, the players chose one that might hide the reward. The computer then asked each participant to predict whether they had picked the right door, before revealing whether or not the guess had been correct.

Confidence in predictions

Measuring their confidence in each prediction was important. If a player knew that three doors out of four hid prizes, it would be reasonable to predict that a guess was the correct one. On the other hand, guessing the correct door when you only have an 25 percent chance of being right might be unexpectedly pleasant; you might feel the rush of beating the odds.

The design of the experiment allowed the scientists to test not only how participants reacted to winning and losing; it also allowed the researchers to predict how people reacted to being wrong when they were confident they would be right (and vice versa).

The team used electrodes to look for spikes in certain kinds of brain activity indicating when the subjects were reacting in one way or another to an unexpected result.

Scans of the brains of the study's cocaine users showed them responding far less to an unexpected loss than the nonusing control group. Their brains were not reacting as strongly to the negative consequences of a failed prediction in the way that they otherwise might.

But there was a further wrinkle. There were actually two groups of cocaine users: Some had used the drug within 72 hours of the test, while others had abstained during that time. And there was one striking difference between them: The ones who had more recently used the drug reacted to an unexpectedly positive outcome in much the same way the nonusers did. The brains of those who had used cocaine hours before taking the test were not processing their losses normally, but they were reacting to an unexpected win.

This led the researchers to conclude that cocaine might be skewing the brain toward making bad decisions by registering only unexpectedly positive consequences of risky choices. "When you are taking the drug again, you are getting that high, and you are getting those positive responses, but you are not getting the ability to predict the negative ones," said Dr. Muhammad Parvaz, a researcher involved with the study.

That might sound appealing to some—after all, one might argue the key to happiness is to feel the wins in life and forget the losses. But feeling loss is vital to future decision-making—which in turn is vital to human survival. Suffering unforeseen negative repercussions of a decision ideally encourages us to learn from the experience and choose differently in the future. Making a bad business decision or investment are both key examples.

Parvaz and Goldstein noted that while the results are interesting for their scientific value alone, they also hope their work can contribute to better methods of diagnosing and treating addictive behaviors, by understanding more clearly why some addicts keep returning to a drug that is destroying their lives.