Wall Street is Big
And so are the egos of the traders.
New York Magazine: What If Women Ran Wall Street?
By Sheelah Kolhatkar
Despite what we’ve been led to believe, the market isn’t rational or efficient at all-it’s all about feelings. The major plot points of the crisis largely turned on emotion: Dick Fuld was too egotistical to sell Lehman Brothers when he had the chance, so his pride drove it into the ground; Bear Stearns hedge-fund managers lost huge sums of money on subprime mortgages despite the fact that they suspected the worst (“I’m fearful of these markets,” Ralph Cioffi e-mailed a colleague back in 2007); Merrill Lynch was the “fat kid,” as the investor Steve Eisman has put it, so desperate to be like Goldman Sachs that it barreled into every dumb investment imaginable and had to be bailed out by Bank of America. Almost every single bank chief doubled down on mortgage junk at exactly the wrong moment. Emotions led otherwise intelligent men-because, let’s face it, all of them were men-to make terrible decisions.
According to a new breed of researchers from the field of behavioral finance, Wall Street’s volatility is really driven by our body chemistry. It’s the chemicals pulsing through traders’ veins that propel them to place insane bets and enable bank executives to make risky decisions-and those same chemicals tend to have the same effect on everyone, turning them into a herd of overheated animals. And because the vast majority of these traders and finance executives are men, the most important chemical in question is testosterone.
Here are a few things we know about testosterone: Both men and women produce it, but men make fifteen times as much of it as women, on average. It causes all sorts of physical differences-in body hair, muscle mass, jawlines, and so on. Behaviorally, it does all the things that one would expect: It is linked to increased aggression and dominance, confidence, hostility, violence, sensation-seeking, and the searching out of mates (“I felt like I had to have sex once a day or I would die,” Drew-formerly Susan-Seidman told The Village Voice, after having testosterone injections as part of his transformation from a woman to a man). One of the most fascinating things about testosterone is the way it can be influenced by the environment. A man who stays home with his kids, for example, is likely to see his testosterone level drop over time. Testosterone varies throughout the day, peaking in the morning and gradually ebbing through the afternoon. Perhaps not surprisingly, single men have higher levels than married men. If you eat more meat, it tends to be higher. As it does when a man is in the presence of an attractive woman, or looking at the Sports Illustrated swimsuit issue. Or in a highly competitive environment with other guys, like a rugby game-or the Bear Stearns trading floor.
This article adds new meaning to the phrase Big Swinging Dick from Liar's Poker.
New York Magazine: What If Women Ran Wall Street?
By Sheelah Kolhatkar
Despite what we’ve been led to believe, the market isn’t rational or efficient at all-it’s all about feelings. The major plot points of the crisis largely turned on emotion: Dick Fuld was too egotistical to sell Lehman Brothers when he had the chance, so his pride drove it into the ground; Bear Stearns hedge-fund managers lost huge sums of money on subprime mortgages despite the fact that they suspected the worst (“I’m fearful of these markets,” Ralph Cioffi e-mailed a colleague back in 2007); Merrill Lynch was the “fat kid,” as the investor Steve Eisman has put it, so desperate to be like Goldman Sachs that it barreled into every dumb investment imaginable and had to be bailed out by Bank of America. Almost every single bank chief doubled down on mortgage junk at exactly the wrong moment. Emotions led otherwise intelligent men-because, let’s face it, all of them were men-to make terrible decisions.
According to a new breed of researchers from the field of behavioral finance, Wall Street’s volatility is really driven by our body chemistry. It’s the chemicals pulsing through traders’ veins that propel them to place insane bets and enable bank executives to make risky decisions-and those same chemicals tend to have the same effect on everyone, turning them into a herd of overheated animals. And because the vast majority of these traders and finance executives are men, the most important chemical in question is testosterone.
Here are a few things we know about testosterone: Both men and women produce it, but men make fifteen times as much of it as women, on average. It causes all sorts of physical differences-in body hair, muscle mass, jawlines, and so on. Behaviorally, it does all the things that one would expect: It is linked to increased aggression and dominance, confidence, hostility, violence, sensation-seeking, and the searching out of mates (“I felt like I had to have sex once a day or I would die,” Drew-formerly Susan-Seidman told The Village Voice, after having testosterone injections as part of his transformation from a woman to a man). One of the most fascinating things about testosterone is the way it can be influenced by the environment. A man who stays home with his kids, for example, is likely to see his testosterone level drop over time. Testosterone varies throughout the day, peaking in the morning and gradually ebbing through the afternoon. Perhaps not surprisingly, single men have higher levels than married men. If you eat more meat, it tends to be higher. As it does when a man is in the presence of an attractive woman, or looking at the Sports Illustrated swimsuit issue. Or in a highly competitive environment with other guys, like a rugby game-or the Bear Stearns trading floor.
This article adds new meaning to the phrase Big Swinging Dick from Liar's Poker.