Tuesday, September 27, 2011

Predators running / ruining the world

One should be a bit cautious about formal studies with small sample sizes.  The rule of thumb when I took statistics was that a study with a sample of 100 was interesting but probably needed further verification before folks got too excited about the results.  If you really wanted good results, the sample size should be around 1000.

So here we find a really interesting study that unfortunately has a sample size of 24 / 27.  This doesn't mean the conclusions are wrong—it's just that a statistical warning light should be flashing.

With that proviso, this study only confirms what my class analysis has predicted for years—Predators wreck things because that is all they really know how to do.  As the agrarian radicals liked to say about their "social betters" in the thieving classes, "Any jackass can kick down a barn."

Going Rogue
Share Traders More Reckless Than Psychopaths, Study Shows
What makes individual stockbrokers blow billions in financial markets with criminal trading schemes? According to a new study conducted at a Swiss university, it may be because share traders behave more recklessly and are more manipulative than psychopaths.

Two weeks ago, yet another case of rogue trading shocked the financial world when UBS trader Kweku Adoboli was arrested for allegedly squandering some $2.3 billion with a risky and unauthorized investment scheme. The 31-year-old, who had been based in London for the Swiss bank, remains in jail. The bank's chief executive Oswald Grübel, meanwhile, has resigned over the scandal -- the third major embarrassment to rattle the institution in just a few years.

The situation mirrors a similar scandal at French bank Société Générale, where another young "rogue trader," Jérôme Kerviel, gambled away billions in 2010. He is still serving a three-year jail sentence. But why do these situations keep arising in the financial world?

According to a new study at the University of St. Gallen seen by SPIEGEL, one contributing factor may be that stockbrokers' behavior is more reckless and manipulative than that of psychopaths. Researchers at the Swiss research university measured the readiness to cooperate and the egotism of 28 professional traders who took part in computer simulations and intelligence tests. The results, compared with the behavior of psychopaths, exceeded the expectations of the study's co-authors, forensic expert Pascal Scherrer, and Thomas Noll, a lead administrator at the Pöschwies prison north of Zürich. 
Appetite for Destruction 
"Naturally one can't characterize the traders as deranged," Noll told SPIEGEL. "But for example, they behaved more egotistically and were more willing to take risks than a group of psychopaths who took the same test."

Particularly shocking for Noll was the fact that the bankers weren't aiming for higher winnings than their comparison group. Instead they were more interested in achieving a competitive advantage. Instead of taking a sober and businesslike approach to reaching the highest profit, "it was most important to the traders to get more than their opponents," Noll explained. "And they spent a lot of energy trying to damage their opponents."

Using a metaphor to describe the behavior, Noll said the stockbrokers behaved as though their neighbor had the same car, "and they took after it with a baseball bat so they could look better themselves."
The researchers were unable to explain this penchant for destruction, they said. more
And another take on the same study complete with an interesting list of just what makes a psychopath.
STUDY: Stock Traders Are Worse Than Psychopaths
Bruce Krasting  Sep. 26, 2011

The University in St. Gal len, Switzerland (how appropriate) has come out with a study that compares traders with psychopaths.

The surprising result was that not only do traders act like psychos, they’re worse. I’m not surprised at this at all. From NZZ:

"The study reviewed the direct comparison of results with an existing study of 24 psychopaths in German high-security hospitals and a control group of 27 "normal" people."

The “normal people” that is referred to are 27 traders. Stock guys, FX/commodities traders and derivative types were the “normal' people that were stacked up against the actual crazies in the German nut house.

Even the experts were surprised by the result. They attest to the stock market professionals with a penchant for immense destruction.

The performance of the 27 dealers is even worse than the psychopaths.

"It's like beating one of the neighbor’s expensive cars with a baseball bat with the sole objective of owning the most beautiful car in the neighborhood."

Now that we “know” (what was has been suspected all along) that traders are nuts it’s worth looking at what a textbook definition of a psycho actually is.
  • 1. Considerable superficial charm, verbal facility and average or above average intelligence.
  • 2. Unreliability, disregard for obligations, no sense of responsibility.
  • 3. Untruthfulness and insincerity.
  • 4. Inexplicable impulsiveness.
  • 5. Antisocial behavior.
  • 6. Poor judgment and failure to learn from experience.
  • 7. Total self-contriteness.
  • 8. General poverty of deep and lasting emotions.
  • 9. Lack of any true insight, inability to see oneself as others do.
  • 10. Fantastic and objectionable behavior, after drinking and sometimes even when not drinking--vulgarity, rudeness, quick mood shifts, pranks.
  • 11. An impersonal, trivial, and poorly integrated sex life. more
If you have the stomach for this sort of thing, here is one of those traders joyfully predicting the crash of the Eurozone markets and claiming he intends to be one of the winners from this mess.  Think psychopath—it explains a LOT!

No comments:

Post a Comment