Testosterone and trade
Studies on male athletes show that levels of the male hormone testosterone surge when the athlete scores or performs better than usual.This “winning effect” helps build confidence and allows athletes to excel in their chosen sport.
But inflated egos can lead to reckless mistakes and irrational risk-taking, resulting in disaster.
American professional golfer Philip Mickelson is no stranger to this experience. After winning major championships two years in a row, Mickelson had a good chance of capturing a third consecutive win until a major mistake on the final hole.
Mickelson chose to use a driver in this instance. The ball bounced off the fairway to settle in a rough green patch enclosed with trees.
Still he chose to take another risk and instead of playing it safe by pitching out, he aimed for the green with the second shot.
His second ball hit a tree, and the third plunged into a bunker.
Finishing second, he remarked, “I just can’t believe that I did that. I’m such an idiot!”
Similar cries of lamentation echo throughout trading floors every day, and some blame the cascade of testosterone for the meltdown on Wall Street.
A British study showed testosterone levels soared when traders made profits, leading them to make higher bets.
The testosterone surge can blind investment bankers with greed, provoking them to take higher stakes and to compete with risky derivative products.
At the recent World Economic Forum in Davos, male speakers and executives agreed that the Wall Street debacle may have been avoided if Lehman Brothers had been Lehman Sisters, or more preferably, Lehman Brothers and Sisters.
If too many male hormones were the problem on Wall Street, replacing men with women at the helm of financial decision-making sounds reasonable.
American President Barack Obama named Mary Schapiro to head the U.S. Securities and Exchange Commission amid criticism over the agency’s failure to foresee the collapse of major brokerage houses.
Iceland, teetering on the brink of state bankruptcy, also placed female chief executives in two banks out of three that were bailed out with public funds.
Emilio Botin, the chairman of Spanish bank Santander, whom journal Euromoney calls the most talented retail banker in history, advises against buying unfamiliar financial products. He also believes that traders shouldn’t sell products that they wouldn’t want to buy themselves.
Female reserves are still limited, so men may just have to learn to control their hormones.
The writer is an editorial writer at the JoongAng Ilbo.
By Shin Ye-ri [shiny@joongang.co.kr]
with the Korea JoongAng Daily
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