Hedge Fund Managers May (Or May Not) Be Terrible People

It’s no secret that the rhetoric surrounding Wall Street since the financial collapse has been strong and often irrational. Democrats will insist that deregulation in the ’90s led to outrageously stupid risk-taking and fraud, and Republicans will insist that Wall Street’s actions were the result of capitalism corrupted by government influence. It’s not unreasonable to believe that the truth may lie somewhere in the middle. No matter our political beliefs, we can all agree on a few basic facts: there are plenty of bankers who have made an honest living and don’t deserve the ire thrown at them and at the same time, some behaviors at the top level of America’s financial institutions crossed more than a few ethical boundaries. Politics aside, these sorts of stories cause us to ask “How bad is Wall Street really?

A few recent studies suggest that some investment bankers (and the like) may be pretty awful. One article in CFA Magazine (behind a paywall) goes so far as to claim that a full 10% of Wall Street employees may be “clinical psychopaths.” For reference, this is ten times the national average. It’s important to make the distinction between “clinical psychopath” and “axe-murderer,” as one term often conjures the image of the other. There’s no insinuation that the average banker will be using farm tools to kill you and your family. The attributes that comprise clinical psychopathy are the same qualities people have been accusing the financial sector of for years. Sherree DeCovny, the author of the piece, explains: “[Wall Street clinical psychopaths] generally lack empathy and interest in what other people feel or think.” This gets compounded when trouble arises, as DeCovny asserts clinical psychopaths “dig themselves into a deeper hole and deny any wrongdoing or failure,” and may even “commit forgery, fraud, theft, and embezzlement to support their habit.” DeCovny’s work comes primarily from discussions with trade psychologists.

Gordon Gekko’s classic (psychopathic?) speech on greed from the 1987 film ‘Wall Street’

A similar study released in January claims that upper-class individuals have a higher chance of unethically in certain situations than lower-class counterparts. A series of experiments showed that upper-class parties were more likely to “take valued goods from others, lie in a negotiation, and endorse unethical behavior at work than were lower-class individuals.”

Whenever these sorts of studies come out, we should remember a few things. One, they generally work with small sample sizes in carefully controlled laboratory conditions and cannot be immediately extrapolated to the entire population. Two, our assumptions about what they mean are sometimes biased and often flawed. It may be true that Wall Street has a higher concentration of clinical psychopaths than other career fields. It may also be true that the qualities that make them clinical psychopaths are the same qualities that make them successful investors and attractive employees in their sector. As tempting as it is to bend science (especially the less rigidly empirical fields of psychology and sociology) to our own beliefs and desires, we should always put the facts first and leave preconceived notions far behind.


Why Is Wall Street Full Of Psychopaths?
Higher Social Class Predicts Increased Unethical Behavior

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