Nice Guys vs. Psychos - Who Does Better on Wall Street?

For years, the best hedge-fund managers have been depicted in popular culture as ruthless risk-takers who put profits before people. Recent research, however, suggests that being callous and ruthless may in fact be counterproductive to success on Wall Street.

Hedge-fund managers who exhibited more psychopathic traits earned .88% less each year than their less psychopathic peers. That means with compound interest, an investment of $1 million would earn $161,694 (15%) less over the course of 10 years if invested with a manager who displayed more psychopathic tendencies, researchers said.

To identify which hedge-fund managers were psychopathic, researchers watched video interviews of the managers, looking for behaviors that would reveal psychopathic traits, such as gloating over rivals' failures or showing no emotion when discussing mass layoffs.

Generally speaking, psychopaths have a propensity to lie and manipulate others for self-gain, and an appetite for taking risks . . . they also tend to show a lack of conscience.

What do you all think? What personality traits are the most conducive to success on Wall Street? Do you think that individuals who exhibits traits such as honesty and morality outperform their more ruthless and scheming counterparts?

From Market Watch

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France

Comments (23)

Nov 26, 2017

That would be an interesting study. I think there are definitely many variables that extend beyond morality (nature of built relationships, ability to sell, general competency of team(s), among others). I've actually observed that some of the more successful folks I've seen and met spent more time observing, listening, and held a bit more reserved sentiments, but there could be a bit of observation bias on my part :)

I read a case study a few months ago on the positive effects that come from a top down organizational culture of ethical decision making and good dealing. The thinking is that dealing in good faith and always going about it the right way is both morally good, and would promote positive profits in the long run even if maintaining this mentality in terminus ends up leading to some loss opportunities in the short run.

My personal view based on the short time I've been in banking is that an honest and good faith policy will likely be the winning formula for most people most of the time. This isn't in isolation however, and would need to be paired with other strong characteristics (e.g., aptitude, work ethic, robust industry relationships). A good faith sentiment will be outpaced by a psychopathic and at time tribalistic mentality when the former doesn't exhibit the tertiary characteristics, but I think it ultimately wins out over a representative period when all else is equal. Others may certainly disagree, however :)

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Nov 27, 2017

Really interesting point. I definitely think that it's easier to make the case for more moralistic and honest behavior winning out in the long-run. After all, relationships last, and being known as someone without a sense of ethics will almost certainly cost you in the long run.

Nov 26, 2017

As far as entities are concerned it's those with 0 soul and emotion that do.

How else can Goldman Sachs justify cornering the metals market and ripping customers like Coca Cola off just to make more money on coca cola cans ? 0 shame.

D.I.

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Nov 26, 2017

I feel like this question is repackaged and asked at least once a week...

Far more variables to consider than "a little psychopathy" or "a little less psychopathy" - behavior is not a number line. It's not even a 2D plane, or even a 3D sphere. It's multi-dimensional, and there's a million different job roles on "wall street" that all require different strengths & weaknesses...many of which are diametrically opposed.

Short-term/long-term is indeed another way to think of it - psychopathy might be good short-run, bad long-run. Hard to say. Also, all of this is blunted by the fact that we're in very unusual market conditions right now. So, in short...this study alone is at best an anecdote, it would seem.

"When you stop striving for perfection, you might as well be dead."

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Best Response
Nov 26, 2017

There's absolutely no right or wrong. Both are necessary to succeed on the Street.

Prime example of this is how the usually "nice" Morgans f*cked Goldman on the Facebook IPO. Downright brilliant. Quietly trashed Goldman to third place by playing it's shitty rep against its own bid. One dirty and seriously badass strategy without any loss to their integrities. Ultimately, Facebook took the more stable, trust-worthy advisor for the lead advisor position, while dropping "psycho" Goldman into a humiliating third.

Takeaway: from the client's standpoint, the preferred advisor is one perceived to be most stable and trust-worthy.

Point two: "nice", trustworthy guys with the dirtiest winning strategies take the big ones. A contradiction, I know. But it's a competitive business, our md's can't show up to the client with an honest, "Well, this other bank pulled a lot more deals last year than we have, so you're probably better off with them..." The client will go with the guy with the most compelling pitch, and sometimes when your rep is a hair away from the other guy, the "psycho" tactics need to come into play.

So, to answer the question, to succeed you need to be both the "nice guy" and a "psycho". The nice guys make great client relations managers.

The "psychos", meanwhile, are the ruthless money/deal makers. They are badass managers who will burn everybody's asses to get the money made.

You need both qualities to win the business. It isn't a question of one being better than the other.

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Nov 27, 2017

Psychos? Investment banking?

Even I know this is a low-hanging fruit for the people of WSO who love to quote a certain movie about a psycho investment banker...

"Work ethic, work ethic" - Vince Vaughn
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Nov 27, 2017

The most successful guys I have came across in real estate, AM and HFs are brilliant communicators and are humble and show humility, however they can be massive dicks to get stuff done for the better of their business (which to be honest I respect and don't see an issue with at all, I wouldn't say thats a psycho trait, but maybe its just me being a psycho not recognising the actions as being that bad, which is a trait of psychopathic people.

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Nov 27, 2017

That makes sense. You can be a nice person in general, but when it comes time to getting work done, being more assertive can pay off.

Nov 27, 2017

Be a nice guy but show no emotion. It's healthy. Would you be emotional in the jungle? We would be eating each other's face off if it wasn't for the blanket of civilization.

Nov 28, 2017

I'd be interested to read the study.

For one <1% is likely well within any margin of error, and I doubt that the results are statistically significant (pretty sad state of "qualitative" sociology nowadays, but that is a subject for another thread)

Two, the methodology sounds like horseshit: This guy didn't blink or smile enough with his eyes in a video interview - PSYCHOPATH!

But you do touch a great point. Wall Street is portrayed as ruthless killers, but in my experience the most successful guys in finance (maybe they are all on the buyside or in corporate) are always high EQ, stand-up guys.

In my estimation it has something to do with self-actualization and structuring yourself properly so that you can be the best version of yourself, whereas the depiction comes from a natural stereotype to be scared/wary of strange / powerful things.

Nov 28, 2017

I'm pretty sure one of the elements of a good, high functioning psychopath is that they have the ability to do both: they can come across as a charming and trustworthy, even if their actual tactics are psychopathic.

So maybe the most successful psychopaths are the ones that nobody realizes are ruthless psychopathic people. In this case, the videos where people display typical psychopathic behaviors are actually the less successful, less self-aware psychopaths, and the real winners are the psychopaths who are able to craft a facade of niceness and trustworthiness. Because I feel like any good psychopath who knew he or she were being recorded wouldn't reveal their self-interested, bad side -- they would try to come across as good people, because that's really what's in their best interest. Gloating about your rivals' failures or showing no emotion when discussing layoffs, to me, just comes across as narcissistic, because you can never trust what a real psychopath says -- they're a lot more deceitful and careful about their image and how they're portrayed. If something isn't in a psychopath's best interest, they won't do it. I feel like analyzing video interviews makes this study worthless, because it's completely forgetting the psychopath's trademark deceit.

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Dec 3, 2017

Not that I am a high functioning psychopath, but you are right.

Nov 28, 2017

Were they looking at total return or risk-adjusted return? Because there's a huge difference and many (possibly most?) hedge funds are not attempting to simply maximize total return but to provide a superior risk-adjusted return with lower correlation with the broad market.

I don't think something this subjective can be measured accurately given the variations in investment strategies and the way people express personality traits.

But I appreciate the researchers taking a stab at it.

"Now you's can't leave." -Sonny LoSpecchio

Dec 3, 2017

CNBC has devolved into clickbait. Their website is junk. Really sad since finviz blows up my work computer.

Dec 3, 2017

Didn't read the article, but the writer sounds like they're a type D person and are afraid of go-getters.

Dec 3, 2017

Author writes for Jezebel. I'm shocked.

Dec 3, 2017

According to many creative types anyone who doesn't share their exact world view is a psychopath, myself included.

Follow the shit your fellow monkeys say @shitWSOsays

Life is hard, it's even harder when you're stupid - John Wayne

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Dec 3, 2017

Or Hitler. And if that fails they just tremble and run to a closet where all their faults are normalized and justified.

Dec 3, 2017

I loved this part, "A true psychopath is someone that has a blend of emotional, interpersonal, lifestyle and behavioral deficits but an uncanny ability to mask them. They come across as very charming, very gregarious. But underneath there's a profound lack of remorse, callousness and a lack of empathy."

So basically these CEOs are great at sales, have a strong understanding of how to control and manipulate people's goals and expectations, they know how to make people feel good and play the office politics.... sounds like some core skills to get to a C-suite position. Baffles me that some people are surprised you don't have to cuddle with every person you meet in order to be a strong leader.

...

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Dec 3, 2017

I hate how people use clinical terms and just make up attributes. A sociopath (psychopath is derogatory) has a number of traits as defined by the DSM IV. This click bait moron doesn't know what she is talking about - as expected and I'm sure as usual.

Nov 28, 2017
Comment

heister:

Look at all these wannabe richies hating on an expensive salad.

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