Business Insider summarizes a fascinating article in the March/April issue of the CFA Magazine titled "The Financial Psychopath Next Door."
CFA Magazine is a publication for the Research Foundation of CFA Institute, a non-profit organization established to promote the development and dissemination of relevant research for investment practitioners worldwide.
The article was based on a study done by Dr. Robert Hare, who has 35 years of experience researching psychopathy. Hare received his Ph.D. in experimental psychology at University of Western Ontario and is professor emeritus of the University of British Columbia where his studies center on psychopathology and psychophysiology.
Some shocking statistics jumped out from the article:
Studies conducted by forensic psychologist Robert Hare indicate that about 1 percent of the general population can be categorized as psychopathic, but the prevalence rate in the financial services industry is 10 percent. And Dr. Christopher Bayer believes, based on his experience, that the rate is higher.
Bayer is a well-known psychologist who provides therapy to Wall Street traders.
The type of psychopath the author is writing about is characterized by compulsive gambling. And the Wall Street psychopath doesn't necessarily show up to his or her first day of work in this condition. From the CFA Magazine article:
Taken to the extreme, some traders become compulsive gamblers. The behavior is often latent--neither they nor anyone else knows they have this propensity. They hide small losses and keep doubling their position to try to eliminate them. When those trades turn sour, they dig themselves into a deeper hole and deny any wrongdoing or failure. They rationalize by telling themselves that poor investment decisions are an occupational hazard. They lie to family members or others to conceal the extent of their involvement with gambling and commit forgery, fraud, theft, and embezzlement to support their habit.
A little more color on these particular types of psychopaths:
These "financial psychopaths" generally lack empathy and interest in what other people feel or think. At the same time, they display an abundance of charm, charisma, intelligence, credentials, an unparalleled capacity for lying, fabrication, manipulation, and a drive for thrill seeking.
A financial psychopath can present as a perfect well-rounded job candidate, CEO, manager, co-worker, and team member because their destructive characteristics are practically invisible. They flourish in fast-paced industries and are experts in taking advantage of company systems and processes as well as exploiting communication weaknesses and promoting interpersonal conflicts.
Unfortunately, writes the author, the best candidates for many Wall Street jobs exhibit the traits of a financial psychopath.
In Other Studies:
Too Much is a project
of the Institute for Policy Studies and reported in their newsletter this week:
"This past August a team of psychologists reported out research on how the life experiences of the wealthy may leave the rich less altruistic than
other people of more modest means."
Last week brought still another round of research on the rich, this time from scholars at the University of Toronto business school and the University of California at Berkeley. And this latest research seems to be attracting far more media attention than any other research on rich people’s behavior to date.
Why all the attention? The new research, as one British daily puts it, delivers “a withering verdict on the upper echelons of society.” The wealthiest among us, the research documents, will routinely lie, cheat, and not stop for pedestrians. They’ll even snatch candy away from little kids.
The five investigators behind this new research didn’t set out to demonstrate how abominably people of means can behave. They set out to better understand the origins of ethical behavior.
To get at these origins, the researchers conducted seven studies, with two of these “field-based” and the rest conducted in lab settings.
In the field studies, the investigators concealed themselves at a San Francisco intersection and rated the affluence of motorists who passed through the intersection by car make, age, and appearance. They then contrasted the subsequent behavior of the motorists toward other drivers and pedestrians.
Drivers of high-status vehicles, the investigators found, cut off other drivers twice as often as the drivers of low-status cars. Half the drivers in the highest of the five car status levels the researchers tracked — the Mercedes level — didn’t yield for pedestrians. All of the drivers of cars in the lowest status cars did.
Similar results showed up across a range of lab experiments that involved everything from dice games to candy jars. In all the studies, the most affluent behaved less ethically than the least affluent.
What’s going on here? The five researchers caution against any use of their data to predict how any one wealthy individual will behave.
“We’re definitely not suggesting that any upper-class person,” notes Stéphane Côté, an expert in organizational behavior at the University of Toronto business school, “is going to be less ethical than every lower-class person.”
But the researchers do believe that “the upper class may be more disposed to the unethical.” Both structural and psychological factors, they explain, contribute to this predisposition.
“If you occupy these higher echelons, you start to see yourself as more entitled and develop a heightened self-focus,” as researcher Paul Piff told an interviewer last week. “Your social environment is likely more buffered against the impact of your actions, and you might not perceive the risks of your behavior because you are better resourced, you have the money for lawyers and so on.”
In this situation, an affluent individual tends to not particularly care what happens to others. Society, on the other hand, definitely does need to care about the inequality that nurtures this “heightened self-focus.”
“Our findings,” sums up University of California psychologist Piff, “suggest that if the pursuit of self-interest goes unchecked, it may result in a vicious cycle: self-interest leads people to behave unethically, which raises their status, which leads to more unethical behavior and inequality.”
And this blogger would also like to add: The top 1% is also the mostly likely to cheat of their tax returns too.
My post Proof that CEOs are Evil Psychopaths is about Eli Roth and his recreation of the infamous Milgram Experiment, and concludes: "The same qualities that are in a psychopath or serial killer are the qualities we look for in a CEO. You want them to kill the competition and make tough decisions, to be a strong leader, a dictator, a president. They have similar brain functions to a psychopath -- or someone that can just turn off and kill another person.”
In 2010 I went to Steve Wynn's website to apply for a busboy job at his hotel and casino. After I completed the initial application, I was directed to another website to take a psychological exam. Almost immediately I received an email saying my application was rejected because I failed the exam. No reason was given, but I was invited to re-apply in 6 months. Maybe I should have applied for a CEO position.
Higher social class predicts increased unethical behavior
Understanding Our National Empathy Deficit
Why the Rich Are Less Ethical: They See Greed as Good
Upper class people are more likely to behave selfishly, studies suggest
Richer people break the law, take candy from children
The Shocking Statistic About Psychopaths On Wall Street
Shame on the Rich
*Excerpted from the article Like Taking Candy from a Baby, Only Worse by Paul Piff, Daniel Stancato, Stéphane Côté, Rodolfo Mendoza-Dentona, and Dacher Keltner - Proceedings of the National Academy of Sciences, February 27, 2012.