Neurology Study: Best Stockmarket Investors are "Functional Psycopaths"

[buzzsaw_23]

Psychopaths may apply
September 21, 2005

"Wanted: psychopaths to make a killing in the markets". Such an ad will not be appearing in the world's press any time soon, but it may have a ring of truth after research revealed the best wheeler-dealers could be "functional psychopaths".

A team of US scientists has found the emotionally impaired are more willing to gamble for high stakes and that people with brain damage may make good financial decisions, The Times reported on Monday.

In a study of investors' behaviour, 41 people with normal IQs were asked to play a simple investment game. Fifteen of the group had suffered lesions on the areas of the brain that affect emotions.

<snip>

One of the researchers, Antione Bechara, an associate professor of neurology at the University of Iowa, said the best stockmarket investors might plausibly be called "functional psychopaths" .

http://smh.com.au/news/world/psychopaths-may-apply/2005/09/20/1126982062527.html

[3waygeek]

1. Probably also

explains why so many of them vote Republican. :evilgrin:

[Jackpine Radical]

3. Actually, yes.

Evil grin or not, I think I could support your idea from the literature. Psychopaths are deficient in empathy and are relatively insensitive to both failure experiences and the prospect of failure.

[The Doctor.]

7. Agreed.

Those who operate on an instinctive basis with disregard for many social (or financial) protocols would certainly support anyone who appealed to the base need for immediate gratification.

[Cleita]

11. Hmm. Does Ivan Bosky come to mind?

eom

[Jackpine Radical]

12. Boesky, Milk'em, pretty much the whole bunch.

Igt leaves you wondering about people like Soros & Buffett, don'it?

[Cleita]

14. Soros seems to be of the school of giving back some like

Ted Turner. This was the old style. Most of these super moguls in the past had a philosphy of doing philanthropy. They believed they needed to give back some of their good fortune. I personally feel that getting rich takes a lot of luck as well as working at it 24/7.

I think guys like Soros and Buffett realize that. I'm not so sure about Donald Trump. I think he really believes he's the greatest and earned every penny of it. But the rest of them like our White House in situ are just psychopaths and sociopaths, like the study says.

[buzzsaw_23]

15. "this was the old style"

actually if you look at the old school robber-barons they were as vicious and unfeeling as it could get. Carnegie, Mellon, Ford, Rockefeller, etc. these guys were wicked to the bone.

Also most so-called philanthropists give to "charities" that are within their ideological reference points or give to elite institutions such as art museums.

Soros has quite a brutal record when looked at in total.
Turner seems to be of an entirely different strain. Who knows with Ted?


"Your honor, years ago, I recognized my kinship with all living beings, and I made up my mind that I was not one bit better than the meanest on earth. I said then, and I say now, that while there is a lower class, I am in it; while there is a criminal element, I am of it; while there is a soul in prison, I am not free."
-Eugene Debs

[Cleita]

16. Whatever,

The new elite don't even do that much except phoney photo ops that cost the taxpayer millions of dollars.

[despairing optimist]

2. How did Rove miss this one?

He backed the wrong guy after all. Brain damage in the wrong places, I guess.

[Canuckistanian]

4. It's true, Ted Bundy made a killing on wheat futures

And Jeffrey Dahmer? Flipped 3 office buildings in Cincinatti, made a cool $2.7Mil.

Never mind me.

[madeline_con]

5. Absolutely. Two ways children can turn out...

when they lack empathy are as serial killers or as excellent businessmen.

[Jackpine Radical]

13. Not to mention garden-variety conmen, US Presidents,

used car salesmen & the like. IQ and ability to delay gratification are probably critical variables in determining outcomes. (And being born into the right social class. Especially being born into the right class.)

[The Doctor.]

6. A little harsh of her to say that...

It is more likely a result of apathetic engagement coupled with strenuous fixation.

Essentially the investor is devoid of any sense of consequence, but psychopathy does not strictly involve ignorance of consequences. These people could therefore not be characterized as 'social psychopaths', but rather (and tenuously) 'financial psychopaths'.

One might as well find that such individuals are high risk-takers because any validation of self-worth must be gained through extreme examples of success or failure.

Then there is the re-interpretation of market dynamics that a subject may unwittingly perceive as an instinctive environment, thus allowing the subject to 'feel' his options and make decisions based on those 'feelings' rather than unweildy 'deliberation'.

I would characterize this more as 'adaptive neuropathy' than 'psychopathy'.

[Selatius]

8. I have had a hunch similar to this for some time

However, my hunch was more in general. I felt that psychopaths are "natural leaders" in general. They do not allow emotions to cloud their judgment, and they have more of an ability to suspend moral/ethical questions in favor of achieving the goal. I would not say it is "the ends justify the means" approach, but it's one that may be morally questionable if not ethically questionable.

If a leader was faced with an awful choice between, for instance, sacrificing the lives of 10,000 people to save 100,000 people or losing them all, naturally logic would dictate that you kill off the 10,000. Of course, people in touch with their emotions or people who have the ability to feel for others may stall or become hesitant, but psychopaths will not.

In these emergency situations, they may show themselves as very strong and decisive.

[swag]

9. A few more details about the study, which I haven't read.

http://www.bloomberg.com/apps/news?pid=10000102&sid=a.eCGz4Nscks&refer=uk

From the Bloomberg account, it looks as though the "functionally psychopathic" tendencies of the more successful subjects were probably less threateningly "psychopathic" than the more sensational headline implies.

Nevertheless, as the burgeoning field of Behavioral Finance is pointing out in so many ways, emotion does play a great role in trashing the returns of even the most supposedly rational long-term investors. There is evidence for this in tomes ranging from Jeremy Siegel's Stocks for the Long Run (the bullish case) to Robert Shiller's Irrational Exuberance (the bearish case).

Risk and return have been linked through history, hence the "equity risk premium," but the risk premium may have diminished substantially, hence a quandary for today's investor.

That the "psychopaths" who are less risk-averse should find higher returns by being able to resist emotional swings so is no surprise. It confirms what has been known for decades (though it may have less valence as we move through economic time): that a willingness to buy and hold "higher risk" assets (a basket of stocks vs. a bunch of bonds) over a period of time, will generally give an investor a higher rate of return (though there is evidence that this formula for success is diminishing in its power).

Successful investing over the long-term has long involved suppressing emotion (such as the emotions so many investors felt and acted on when during the 1990s bull market: to buy high-priced holdings when chasing "hot stocks" on the upswing, and to sell those same plummeting holding holdings at the bottom of the market; the exact opposite of "buy low/sell high."). This is why folks who can afford it often hire money managers who can allegedly suppress such emotions. But of course they often end up hiring brokers who bilk the fuck out of them for commissions on shitty trades.

And this is why adopting and abiding by a sound asset allocation strategy is the key to 94% of investment success (I'm not making the number up - there have been studies).

Anyway, oh, blah blah blah.

Behavioral Finance is an interesting field of study. But I don't think the "psychopaths make the best investors" is a fair representation of what this studay is actually discussing.

[bettyellen]

10. no kidding, those Wall St guys have some real problems

with self control, treating others like human beings.... it's the worst neighborhood i ever worked in. so many total assholes.

[EstimatedProphet]

17. Wow. "American Psycho" just became more real n/t

[buzzsaw_23]

18. kick n/t