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What If Women Ran Wall Street?

Testosterone and risk.

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Early in the morning on a typical weekday, men can be seen resolutely streaming down lower Broadway, braced against a pulverizing wind. They are preparing to enter their office buildings, put on their headsets, flick on their Bloombergs, and go to war. And if they look miserable—or weary, frustrated, angry, or petrified—it’s because they have one of the most emotionally taxing jobs in the world. Playing the market is a constant ricochet between panic and euphoria. There’s a reason the burnout rate is high. But the formula for succeeding in a high-stress financial environment is simpler than you might think. If you ask a trader, or someone who studies them, what the single most important factor is in determining whether a person will be good at trading, they will say that it’s the ability to control one’s emotions.

The trouble for all those men pouring into the trading desks is that recent studies suggest purely rational behavior may not come as naturally to them as gender stereotypes would suggest. A couple of weeks ago, for instance, the investment-management company Vanguard released data showing that men were more likely than women to sell stocks at the bottom of the market. Could it be that the fairer sex is better able to ride the ups and downs of Wall Street without letting their emotions get in the way?

“There were always very few women on the floor of the exchanges,” says a hedge-fund manager named Henry Lee, who spent years on the floor of the American Stock Exchange. “But the women who were successful at it were unbelievable.”

Lee is sitting at a trading desk with his friend Harley Evans, a derivatives trader at a firm called Mako Financial Markets, talking about gender differences in their line of work. “They never got ruffled, never got upset,” Lee continues. “Losing their temper? Never.

“I think women can be very emotional, too,” Evans says, not entirely convinced.

“Women respond to stress differently,” Lee says. Rather than throwing the phone across the room, “women cry.”

“Well, I’ve cried, too,” Evans says.

“Not that I’ve seen. You cried alone in your closet,” says Lee.

“I cried in my beer.”

“The notion of taking chances is definitely more male,” Lee says. “Look, men are much more willing to take a shot on something with incomplete knowledge.”

So, I ask, how would Wall Street be different if there were more women making decisions? Lee offers an analogy based on the fact that he’s going through a divorce: “I would say that when you’re married, your life is much more level,” he says. “And when you’re single, you tend to experience many more swings. For example, you might not go skydiving if you’re married, or go out drinking all night with your buddies, or you may not pursue that Ironman.” Having women around, in other words, “prevents extreme behavior—or irrational exuberance.”

Despite what we’ve been led to believe, the market isn’t rational or efficient at all—it’s all about feelings. The major plot points of the crisis largely turned on emotion: Dick Fuld was too egotistical to sell Lehman Brothers when he had the chance, so his pride drove it into the ground; Bear Stearns hedge-fund managers lost huge sums of money on subprime mortgages despite the fact that they suspected the worst (“I’m fearful of these markets,” Ralph Cioffi e-mailed a colleague back in 2007); Merrill Lynch was the “fat kid,” as the investor Steve Eisman has put it, so desperate to be like Goldman Sachs that it barreled into every dumb investment imaginable and had to be bailed out by Bank of America. Almost every single bank chief doubled down on mortgage junk at exactly the wrong moment. Emotions led otherwise intelligent men—because, let’s face it, all of them were men—to make terrible decisions.

According to a new breed of researchers from the field of behavioral finance, Wall Street’s volatility is really driven by our body chemistry. It’s the chemicals pulsing through traders’ veins that propel them to place insane bets and enable bank executives to make risky decisions—and those same chemicals tend to have the same effect on everyone, turning them into a herd of overheated animals. And because the vast majority of these traders and finance executives are men, the most important chemical in question is testosterone.

Here are a few things we know about testosterone: Both men and women produce it, but men make fifteen times as much of it as women, on average. It causes all sorts of physical differences—in body hair, muscle mass, jawlines, and so on. Behaviorally, it does all the things that one would expect: It is linked to increased aggression and dominance, confidence, hostility, violence, sensation-seeking, and the searching out of mates (“I felt like I had to have sex once a day or I would die,” Drew—formerly Susan—Seidman told The Village Voice, after having testosterone injections as part of his transformation from a woman to a man). One of the most fascinating things about testosterone is the way it can be influenced by the environment. A man who stays home with his kids, for example, is likely to see his testosterone level drop over time. Testosterone varies throughout the day, peaking in the morning and gradually ebbing through the afternoon. Perhaps not surprisingly, single men have higher levels than married men. If you eat more meat, it tends to be higher. As it does when a man is in the presence of an attractive woman, or looking at the Sports Illustrated swimsuit issue. Or in a highly competitive environment with other guys, like a rugby game—or the Bear Stearns trading floor.


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