Testosterone - to blame for banking crash?

[Rogie]

I've already referred to an article in Britain's Guardian newspaper (that appeared yesterday, Sunday) in the Forget Bachmann! Where's Obama thread.

 

Here, the author of that article extrapolates from political turmoil into the world of business and banking:

 

Darling's memoir shows the danger of big-man politics

In theory, just the same should apply to the management of big companies, including banks. Around the boardroom table, independent-minded people with business records of their own, are able to cross-question CEOs and managing directors. New ideas are thrashed out. Mistakes are honestly debated and learned from. If things go too wrong, then the wider electorate can call a halt – the real electorate in politics, and the shareholders in business. It's a theory of public life most people sign up to.

 

It is also, however, a pious caricature of how Britain really works. The people who rise to the top tend to be the scary bullies. They're the ones with personalities so large, and self-belief so shocking, that people around them shrivel and go quiet. They promote yes-men and yes-women. Their mistakes are unchallenged.

 

By the time the electorate or the shareholders find out, it's mostly too late. Behind a façade of democratic chatter it is as if we really live in a country of autocratic mini-states, personal fiefdoms of senior managers, often cut off from the rest of the world by government limos or corporate jets.

http://www.guardian.co.uk/commentisfree/2011/sep/04/dangers-big-man-politics-business

 

It is a fair assumption the vast majority of these 'scary bullies' are male. This ties in with another theory recently the subject of a book:

 

Male domination of City gives rise to 'risky and irrational' behaviour

The global financial crisis would not have happened if more women had held senior City posts, a new book by a close ally of George Osborne has concluded.

 

Conservative MPs Matthew Hancock, a former chief of staff to the Chancellor, and Nadhim Zahawi present scientific research showing that the male-dominated, testosterone-fuelled world of finance is prone to riskier, irrational behaviour that causes "market manias" and, ultimately, major crashes.

 

The authors appear to back up Harriet Harman's claim that if Lehman Brothers had been called Lehman Sisters, the 2008 crash could have been prevented.

 

While the lack of women on boards has been suggested before as a reason behind the crash, the book's findings are significant not only because they are by a close ally of the Chancellor, but because it collates current scientific research into behavioural influences on finance.

 

In Masters of Nothing: How the Crash Will Happen Again Unless We Understand Human Nature, the MPs conclude: "The current gender imbalance seems to be contributing to the kind of market manias which cause financial crises.

 

"The dominance by men does not exist because of the inherently masculine nature of finance. Rather, the masculine nature of finance exists because of its dominance by men.. . .

 

. . . It is time to accept that finance is not full of men because it requires masculine behaviour, but that finance is dominated by masculine behaviour because it is full of men. That must change."

 

http://www.independent.co.uk/news/uk/politics/testosterone-to-blame-for-banking-crash-say-tory-mps-2348912.html

[Guest thaiworthy]

I've already referred to an article in Britain's Guardian newspapeConservative MPs Matthew Hancock, a former chief of staff to the Chancellor, and Nadhim Zahawi present scientific research showing that the male-dominated, testosterone-fuelled world of finance is prone to riskier, irrational behaviour that causes "market manias" and, ultimately, major crashes.

 

Hey Rogie, I agree with you, in more ways than one! What do you think of my new debit card? But you're right, it did crash the ATM as well. What a gooey mess!

 

[Rogie]

Hey Rogie, I agree with you, in more ways than one! What do you think of my new debit card?

Neat, but. . . I'm keeping well out of your way.

 

I reckon you might turn into a scary bully!

[Rogie]

If anyone has ever wondered why there seem to be so many bad business decisions being made, here is something worth thinking about. It has been estimated that 4 times as many psychopaths have infiltrated big business as in the general population. That disturbing information came out of last week's Horizon, entitled Good or Evil, a weekly science programme aired on British TV.

 

Some of the characteristics of psychopaths seem to eerily mimic our worst suspicions concerning the behaviours and motives of individuals who've hit the headlines over the past few years. That clearly cannot and does not mean the majority of them are psychopaths, however a glance through a few of their traits makes interesting reading:

 

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• Psychopaths who have reached the top in big business are able to hide behind their high status, this status serves to keep the truth hidden.
  

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• They exhibit charismatic leadership, using charm, manipulation and intimidation to get their way
  

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• Even if they are not leaders, psychopaths can mimic leaders, in order to advance their career
  

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• Psychopaths can tell what you are thinking, but only intellectually. They cannot do so on an emotional level, hence they do not feel pain.
  

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• When a psychopath's actual performance is carefully analysed and the results come out, they are dismal. In short, he looked good but performed badly.
  

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• Psychopaths are thrill-seekers and thrive in a constantly changing environment.
  

 

This is just scratching the surface of some fascinating developments in neuroscience and genetics. I shall try and summarise these in another thread.

[Guest snapshot]

I can relate to a lot of that, Rogie. I have a lot of friends and top-performers who display similar traits. That's reality.

 

At the end of the day, the people making decision at the top of these fields are as human as you or me. They lack experience. They make mistakes. They have self doubt. They have to rely on their gut instinct to a certain extent. I've questioned some of their bigger decisions in the investment arena face to face and their rationale ain't always as solid as we'd like to imagine! That's life.