The high-powered world of finance demands ruthlessness and manipulation from hedge fund managers and other money makers, right? Wrong, say researchers. Being nice is key to better investments.
A new study has revealed finance sector workers in senior positions would actually benefit more in the long term from being less mean — and generally nicer.
According to a team of American academics whose findings are published in the latest issue of the Personality & Social Psychology Bulletin, people who exhibit what health professionals consider psychopathic traits, actually perform worse than their peers over a period of time.
Psychologists define a ‘psychopath’ as someone who, among other things, lacks a conscience and acts in a manipulative fashion for personal gain.
While such traits aren’t necessarily the best way to win friends and influence people outside of work, they are viewed by the more mercenary as the best way to climb the career ladder or make money.
“More psychopathic individuals tend to be able to talk the talk, but not walk the walk. Over time — and measured by an objective standard such as investment returns — their shortcomings can become glaringly obvious,” said Professor Leanne ten Brinke, of the University of Denver, who carried out the study alongside Dacher Keltner, of the University of California at Berkeley.
As part of this latest research, the American psychology professors teamed up with a hedge fund expert, Aimee Kish of the San Francisco-based investment firm TeamCo Advisers, to study the personalities and performance of 101 hedge fund managers.
The participants — all men, and all in top positions within their companies — controlled and managed assets of US$4.6 billion, boasting average annual returns of more than seven percent.
From the outset, the researchers didn’t directly diagnose them as ‘psychopaths’ but, instead analyzed clips from videos where they were quizzed about their fund strategies and performance. Professor ten Brinke watched and coded every clip, looking for verbal and nonverbal cues to establish their exact psychological traits.
A manager would get higher marks for psychopathy, for instance, if he smiled at the misfortune of others, or displayed an ‘eerie calm’ when discussing otherwise emotional situations. Another would get high marks for narcissism if he talked about himself a lot, or referred to himself in the first person.
Having categorized each person’s behavior that could be labeled psychopathic, the researchers examined as to how good each hedge fund manager did their job.
Their results found a pattern that being nice pays while the most ‘psychopathic’ managers had the worst investment records. Similarly narcissistic managers also turned in mediocre results although their clients had to ‘endure more volatility to get them.
Previous studies have also revealed psychopaths are often difficult to work with. Last year Professor ten Brinke analyzed United States senators and found that the more psychopathic had fewer co-sponsors of their bills.
“There’s good research to suggest psychopaths are poor leaders. If you put someone with psychopathic traits (in charge) of a group, they’re more likely to divide the group.”