What caused the crunch? Men and testosterone

**frostyboy** · 30th-September-2008

Written by Matthew Syed for The Times: What caused the crunch? Men and testosterone

True to form, economists have offered a range of explanations for the financial crisis that threatens the world and which so few of them managed to predict. Some blame something called collateralisation, others easy money, still others lax regulation.

But, by focusing on the technicalities, have they overlooked a more obvious culprit - men?

After all, it is men who dominate the financial system that got us into this mess; it is men, by and large, whose trading inflated the profits of banks to levels that now seem like the stuff of testosterone-fuelled fantasy; and it is men who pocketed most of the bulging bonuses that even Gordon Brown reckons were a key cause of the crisis. All of which raises an important and deliciously controversial question: what would have happened if global financial institutions had been run by women?

Would they have been more focused on the human consequences and less on the next pay cheque? Would they have been more empathetic and less cut-throat? Would financial districts have had a few more crèches and a few less of those godawful bars where traders hang out to brag about their latest deal? In short, would we have avoided this calamity if markets had been doused with sufficient quantities of oestrogen?

Julia Noakes, a psychologist working with City high-achievers, is in little doubt. “The problem in finance is that there is too much thrusting individualism and not enough femininity,” she says. “A lot of women are deterred from striving for senior management positions because they don't want to deny 50 per cent of their personalities.” Heather McGregor, a City headhunter, echoes this analysis with the arch observation that “the UK bank that has come out of the current crisis strongest is the one that has most aggressively promoted women into positions of senior management: Lloyds TSB”.

But this is dismissed as stereotyped claptrap by other financial leaders. One senior banker summarised the views of several managers and traders to whom I spoke when he said: “If women ran the City it would have made no difference, and it is sexist to suggest otherwise. Sure, mistakes have been made, but are you saying that women would have walked away from the huge profits being dangled in front of us? Get serious.”

So, who is right? The question cuts to the heart of two of the fiercest modern controversies: “How do financial markets actually work?” and “Are men and women really so different?”

The first thing to note is that men and women may be similar in many ways but they are measurably different when it comes to risk-taking. This is borne out by the fact that men pay higher car insurance premiums, and corroborated by dozens of experiments into financial decision-making. Nobody disputes this, but a surprising number of psychologists (often women) argue that they are the product of a sexist culture and that women would be liberated into taking as many risks as men if they were not so oppressed - if, for example, they ever found themselves running the City. At the risk of sounding impatient, they are wrong.

The reality - familiar to anyone who has read Darwin - is that sex differences are, to a large extent, biological and would remain in place even in a society dominated by women. These differences are not limited to financial markets but manifest themselves in everything from walking the dog to catching a train. A study by researchers at Liverpool University, for example, showed that men were more likely than women to cross a busy road when it was dangerous to do so. But they also found that men were willing to take even greater risks when women were in the vicinity. This is not to say that men consciously calculated the risks and weighed them against the probability of getting laid, but rather that nature has cumulatively selected the rushes and thrills that men experience when they engage in risk-taking - and it has selected women to go weak-kneed in response. In short, it is the divergent reproductive strategies of the sexes that drive the differences in behaviour.

The coming together between risk-taking and sex was given a nice gloss in an experiment in which men were asked to gamble on the toss of a coin. This experiment was then repeated, except that an erotic photograph was flashed up just before they had to make their decision. And guess what? Although the photo was irrelevant, men tended to risk more money. To put it another way, men are inclined, on occasion, to think with something other than their brains (as, in different contexts, are women).

The mechanisms at work here are intriguing. It is well known, for example, that the surge of testosterone in male foetuses in the middle trimester of pregnancy is instrumental in building male-type brains, which are larger (although female brains have more densely packed neurons) and more compartmentalised into left and right hemispheres (which may explain why men are less adept at multi-tasking) than women's brains.

But testosterone not only helps to build the male brain, it also plays a key role in activating it. In one experiment, researchers followed 17 male City traders and found that when they had high morning levels of testosterone they made greater profits for the rest of that day. They reasoned that this could be because higher testosterone increases the appetite for risk - a phenomenon that could be extremely dangerous in certain market conditions.

As Professor Joe Herbert, author of the report, put it: “Any theory of financial decision-making in the highly demanding environment of market trading now needs to take these hormonal changes into account. Inappropriate risk-taking may be disastrous.” Looking back, it sounds almost prophetic.

But before concluding that the financial catastrophe is all the fault of testosterone-intoxicated delinquents, let us consider the nuts and bolts of financial decision-making by looking at a major culprit in the current crisis: mortgage-backed securities. As we all now know, banks pooled mortgage assets of varying quality and sold these on to other institutions, who sold them to others, and so on. It is financial products derived from these securities whose value has plummeted with the collapse of the US housing market and which are now likely to be purchased by the US Government at a cost to the taxpayer of about $700 billion (£388 billion).

Now, a lot of people have blamed the crisis on the very existence of these securities, but this is simplistic. The problem is not the securities per se but the fact that the risk associated with them was mispriced, in part because the rating agencies (paid by the lenders) failed to do their job properly. Had the risks been properly priced, lenders would have been paid less for the securities (whether they were being purchased by men or women), which would have made lenders less hell-bent on making risky loans, which would have drained oxygen from the housing bubble, and so on. This suggests that the crisis had little to do with male risk-taking but was a simple case of market failure which could be rectified easily with a tweak or two.

A similar analysis can be applied to almost every link in the complex chain connecting home-buyers, mortgage brokers, lenders, credit agencies, central banks and we the taxpayers, who may yet be left holding the baby. Does this mean that the “technical” explanations offered by economists are right on the money, and that I have led you on a wild goose chase? Well, no. This mini-detour is being taken for a reason, for it shows how the reasoning of traditional economics is so dangerously seductive. It shows how, by focusing on the links in the chain, economists have lost sight of the chain itself. And, more pertinently, how they failed to notice that the chain is, to speak metaphorically, a very male thing: gold, chunky and ostentatious.

We have already seen that behavioural differences between the sexes are on-average differences (yes, some women are greater risk-takers than some men). But here we should note that even small average differences can come out big when they are driven by the cumulative effect of thousands of individual decisions and become embedded in a dominant culture. And it is this, I think, that is to blame for the current crisis.

The mispricing of risk in mortgage-backed securities, to go back to our example, was not merely a failure of the rating agencies, it was systemic. It drew on an entire, male-dominated ethos: rating agencies were a part of it, but there were also the banks that failed to provide sufficient information about the securities they were selling, buyers of securities who displayed a staggering disregard for the principle of caveat emptor (buyer beware) and traders who, intoxicated by a booming market, were not merely unaware of what they were purchasing but didn't even care. All in all, it was propelled by a dizzying disregard for risk and it took only a few broken promises for the house of cards to collapse.

The problem is that the market became too primal, too dominated by men and their baser instincts, too preoccupied with greed and too little with the consequences. But have I not implied that this is unalterable and that men are slaves to their impulses? Well, no. I did not suggest that culture and ethics are impotent, merely that they are rarely sufficient to eradicate the evolved differences between men and women. Take physical aggression. Although absolute levels of aggression vary from nation to nation, the difference between male and female aggression is pretty consistent (the ratio of men's to women's same-sex murders, for example, is remarkably constant at about 10-1).

So how do we limit excessive risk-taking? Tougher regulation and beefed-up moral hazard (ie, making banks more accountable for their mistakes) will never be enough. What is needed is a transformation in culture that would most readily emerge from a huge influx of talented women into the boardrooms and on to the trading floors. A scattering of women is insufficient, for the women who tend to make it into the upper echelons are precisely those likely to be at the male end of the behavioural spectrum.

A critical mass of females, however, would transform the ethos, the working environment and even the working hours in a way that would reduce the probability of another financial apocalypse. It is worth remembering that the whistleblowers at both Enron (Sherron Watkins) and WorldCom (Cynthia Cooper) were female. The City needs more women - and it needs the remaining men to get more in touch with their feminine sides.

**Stan** · 30th-September-2008

You won't find out from the politicians or their hangers on.

A big part of it was that the quasi-govermental entities were never looked at carefully. As in Fannie Mae and Freddie Mac. That would be like one part of the government overseeing another part, something they seldom care to do.

**Marx** · 30th-September-2008

Do people not realise by coming out with totally sexist views of the world and constantly 'bashing' men - 'family' courts, employment law, or any other area of life, they are ultimately contributing to the disgusting rate of suicide among young men?

I thought nazi bigotry had been left in 1945.
Simon, York, England

Good point.

**gaynorbarry** · 30th-September-2008

Testosterone gets a lot of flak, how many times have these experts confused testosterone (confidence booster and strength) with adrenalin which both sexes produce in equal amounts and therefore the outcomes would be the same with the fight or flight response. To long living on high levels of adrenalin, high stress has a negative impact on health and wellbeing.

In fact if the city men where high on testosterone they would be less likely to panic and loose control and concentration, it could be that city men lacked testosterone and in fact that was the problem.

Don’t laugh this one off, little research has been done lately on testosterone and we are still stuck with the believes that its all about men behaving badly. There are some research that indicates behavioural problems arise with a lack of testosterone and not overproduction, its not an open and shut case as the experts would have you believe, just convenient and easy.

As for women in the city their adrenalin would kick in and you would have pretty much about the same. In addition there have been many analyst since the 80s including men who have warned of the outcomes of deregulation of the banking system in the UK in the 80s and an economy based on easy money. Well it took a while but it all went tits up in the end.

**gaynorbarry** · 1st-October-2008

In addition to my last email which may be considered a bit far fetched I add this newspaper story from todays newspapers underlining the fact that even now our understanding of human behavior is still very limitted and a number of groups attempt to steroetype based on assumptions from the 1940s and 50s. I read a prominent poster on the Guardians comment is free state boys bad behavior was to do with testestorone and it was the general problem with all men, she was a primary school teacher god knows how many of her boys grew up hating themselves for being men.

Though the research below is still in its early stages it proves a reavaluation of many of peoples pre conditioned ideas needs re avaluation and research, though many posters on this site are already aware of this. It could also be argued that knowingly taking part in anti social behavior may lower cortisol levels, only time will tell (and alot of resources ie money to research such ideas probably why people stick to old fashioned stereotypes its just easier).

http://www.telegraph.co.uk/news/news...l-illness.html

Youths given anti-social behaviour orders may benefit more from medical treatment than punishment, according to doctors who claim they are suffering from a mental illness.

By Rebecca Smith, Medical Editor
Last Updated: 12:27AM BST 01 Oct 2008

Research carried out by Cambridge University found differences in the brain chemistry in youths with behaviour problems when they were under stress.
The team subjected 165 boys from schools, pupil referral units, and the Youth Offending Service to stressful situations designed to induce frustration.
There were 70 boys with a diagnosis of conduct problems and 95 with no history of behaviour problems or psychiatric disorders to compare to the first group. All were aged between 14 and 18.
They all played a video game in which the pre-recorded opponent always failed to cooperate and sent antagonistic messages. The boys had to play a game under time pressure with the video opponent and the experimenter watching and the opponent continually giving negative assessments of their performance.
Normally, in these situations, the body increases levels of the stress hormone cortisol which makes people focus more, behave more cautiously and regulate their temper and violence.
But in the boys with severe anti-social behaviour problems, the cortisol levels actually went down.
The scientists, led by Dr Graeme Fairchild and Professor Ian Goodyer, said: "If we can figure out precisely what underlies the inability to show a normal stress response, we may be able to design new treatments for severe behaviour problems. We may also be able create targeted interventions for those at higher risk.
"A possible treatment for this disorder offers the chance to improve the lives of both the adolescents who are afflicted and the communities in which they live."
These results suggest that antisocial behaviour may be more biologically-based than previously considered, just as some individuals are more vulnerable to depression or anxiety due to their biological make-up.
According to a Home Office research study, almost three quarters of antisocial behaviour orders are given to offenders under the age of 21. Responding to reports of antisocial behaviour costs the government approximately £3.4 billion per year.

**Kuuenbu** · 2nd-October-2008

Just saw MSNBC freely offer this article's "wisdom" on the Rachel Maddow Show. Any doubts I once held that MSNBS was the left-wing equivalent of Fox News were thoroughly quelled that very moment.

Needless to say my mom had absolutely no problem with it, regardless of my attempts to sway her with equivalent metaphor. Imagine if Fox Noise had promoted an article blaming a national catastrophe on estrogen.

**Incognito** · 2nd-October-2008

Julia should speak only for herself here. Quote: "...there is too much thrusting individualism and not enough femininity..."

I don't know about her, but I happen to enjoy thrusting individualism.

And...quote: "dominated by men and their baser instincts..."

That's not always bad, either.

**drifter23337** · 2nd-October-2008

What a bunch of bull-crap. This is like saying that "If too many women dominated the financial industry, then they would act TOO OFTEN on impulse due to hormone swings, and would make impulse buys due to estrogen poisoning." I love how testosterone gets lambasted on a daily basis, yet we forget that women get seriously ill every month due to their hormones. First of all, testosterone leads to greater risk-taking, but there is no evidence that it leads to irrational risk-taking. There is AN ENTIRE SCIENCE devoted to risk taking: ACTUARIAL SCIENCE. Guess what actuaries tend to major in: MATH. Who does better in higher math? MEN. Just 'cause you take risks does NOT mean the risks are IRRATIONAL. If too many women were in finance, by their logic, the economy wouldn't collapse, but it also probably wouldn't GROW either. The greatest risk is NOT TAKING ONE. I know that sounds cheesy, but this bigoted article serves up more fem-cunt bullshit that we should condemn men even though there is limited connection between testosterone and aggression and NO connection between testosterone and irrational behavior. Why is it OK to condemn testosterone but we have to pussy-foot around estrogen? That's BULLSHIT. If women didn't take risks, they would probably still waste the money on personal bullshit like shoes - there, I said it. Bigotry begets bigotry. You wanna know why the men took irrational risks? Probably because the shitty math education in western countries led to shitty actuaries who didn't analyze the risks properly. And you know what? Isn't it interesting that the decline in math performance in the west coincides with the rise of FEMINAZISM? Clearly, the feminists and their mathematically challenged slaves should be to blame for not giving the "testosterone junkies" the right information and actuarial analysis! There! eat that jerk-off! The author of this article probably thinks that men are not good for anything other than jerking off and digging ditches. What a prick. And "get in touch with your feminine side"? I think WOMEN themselves need to do that more than men do! And how 'bout they learn some MATH while they're at it if they think they can crack it in a hi-pressure finance job! I swear to God, if someone else attacks the biology of men again, then I will spam them with pictures of Adolf Hitler - that's what they are, god damn EUGENICISTS....

**Incognito** · 2nd-October-2008

Quote from drifter23337

What a bunch of bull-crap. This is like saying that "If too many women dominated the financial industry, then they would act TOO OFTEN on impulse due to hormone swings, and would make impulse buys due to estrogen poisoning." I love how testosterone gets lambasted on a daily basis, yet we forget that women get seriously ill every month due to their hormones. First of all, testosterone leads to greater risk-taking, but there is no evidence that it leads to irrational risk-taking. There is AN ENTIRE SCIENCE devoted to risk taking: ACTUARIAL SCIENCE. Guess what actuaries tend to major in: MATH. Who does better in higher math? MEN. Just 'cause you take risks does NOT mean the risks are IRRATIONAL. If too many women were in finance, by their logic, the economy wouldn't collapse, but it also probably wouldn't GROW either. The greatest risk is NOT TAKING ONE. I know that sounds cheesy, but this bigoted article serves up more fem-cunt bullshit that we should condemn men even though there is limited connection between testosterone and aggression and NO connection between testosterone and irrational behavior. Why is it OK to condemn testosterone but we have to pussy-foot around estrogen? That's BULLSHIT. If women didn't take risks, they would probably still waste the money on personal bullshit like shoes - there, I said it. Bigotry begets bigotry. You wanna know why the men took irrational risks? Probably because the shitty math education in western countries led to shitty actuaries who didn't analyze the risks properly. And you know what? Isn't it interesting that the decline in math performance in the west coincides with the rise of FEMINAZISM? Clearly, the feminists and their mathematically challenged slaves should be to blame for not giving the "testosterone junkies" the right information and actuarial analysis! There! eat that jerk-off! The author of this article probably thinks that men are not good for anything other than jerking off and digging ditches. What a prick. And "get in touch with your feminine side"? I think WOMEN themselves need to do that more than men do! And how 'bout they learn some MATH while they're at it if they think they can crack it in a hi-pressure finance job! I swear to God, if someone else attacks the biology of men again, then I will spam them with pictures of Adolf Hitler - that's what they are, god damn EUGENICISTS....

"I love how testosterone gets lambasted on a daily basis, yet we forget that women get seriously ill every month due to their hormones."

You've definitely got a point there.

You know, I used to feel sort of sorry for my stepdad....when I was growing up, I had two sisters and a mom who, under the same roof, went through various hormonal cycles every single month. There probably wasn't a single day that went by that my poor stepdad didn't have to deal with someone's emotional roller-coaster...and by God some days he dealt with all of us and our hormones all at the same time...lucky him.

**drifter23337** · 2nd-October-2008

Whoa.... Are you.... agreeing with me? 'cause I was just defending my hormone with an honest rant. Against the onslaught. Not trying to be too bigoted. Just expressing my opinion now. And lets not forget the piercing argument about poorly educated actuaries, due to declining math ed. I'm done now.

**Incognito** · 2nd-October-2008

Yep...I'm agreeing with you.

I go absolutely psycho about four days out of every month.

**Feckless** · 2nd-October-2008

Fits to another post I made here yesterday. When the hormon cycles stop with the menopause women seem to feel better:

Happier, healthier, sexier - and over 50

**paul parmenter** · 2nd-October-2008

Here we go again: the misandric press have an opportunity to indulge in another bout of mindless male-bashing, and they don't waste a moment in doing so. Never mind logic, reason, common sense, facts or perspective; none of that matters all the while there is the chance to put the boot in.

Let's look at the essence of this preposterous article. Boiled down, the "reasoning" amounts to this:

The banking and financial service system has made a gigantic and expensive blunder. The banking system is run by men. Therefore there must be something intrinsic in the nature of men that is prone to making gigantic and expensive blunders. That something is obviously testosterone, which is ergo the villain of the piece. So we can't trust anyone with testosterone, the cause of gigantic and expensive blundering, to get anything right; we must put our faith in people without testosterone if we want to avoid any more gigantic and expensive blunders. And those people are of course female, because oestrogen is better than testosterone. QED.

Anybody see any tiny flaws in this reasoning? Let's point out a few. Firstly, who set up the bloody banking system in the first place - was it those brilliant oestrogen-charged females, or the hopeless and hapless testosterone-poisoned males? Oddly enough, it was the latter. Strange that, isn't it?

And who was in charge of the system when it worked superbly for centuries, opening up new horizons for industry and commerce, oiling the wheels of business and facilitating the creation of huge amounts of wealth from which a massive proportion of the world's population - male and female alike - has benefited in all kinds of ways most of them cannot even begin to appreciate? Again, would that have been those blessed with a surfeit of oestrogen, or those hamstrung by the curse of testosterone? Oddly enough, again it was the latter. Stranger still, don't you think? Seems to contradict all reason.

And who is going to solve this current crisis - because it will be solved. Do you think that will be the oestrogen princesses? Or do you think they will continue to do what they have done throughout history - sit on their fat backsides carping and moaning until men have solved the problem for them? Let you tell you categorically that it will be the latter. Men will solve this problem, because they have the wherewithal to solve every problem, given enough time and opportunity. It's what men do. We are the problem solvers.

Now I don't know for sure if it is a specific property of testosterone that turns us into the problem solvers, the drivers, the creators and the winners; but I simply point out that it is invariably those with a healthy dose of the stuff in their bodies that turn out that way, while those with tiny little amounts of it have a long and undistinguished track record of NOT being problem solvers, drivers, creators or winners. I can't prove the connection, but I suggest it is unlikely to be coincidence. And I suspect one day it will be proved, although only over the dead body of feminism.

So the major flaw of Mr Syed's article is to fail to put the current crisis in context. If he had, he would have had to conclude that if testosterone is the reason for the current failure, it must also be the reason for the previous long story of success - and the reason why the current failure will be turned around. But will we find anybody in the MSM making that claim? Not on your life. When males are successful, the misandrists hide away in their holes ensuring they do nothing to draw attention to that fact. They only come crawling out when they think they have a male failure to celebrate.

But two can play at Mr Syed's game. If we are into articles that rely on sexism and bigotry to inform them, then allow me to join in. I can point out that all the while men kept the financial industry to themselves, they were incredibly successful. This crisis has only occurred since women started to infiltrate the system and plant their dainty feet under boardroom tables.

I can go further down this route. There is a strong argument that the crisis has arisen primarily because banks started lending crazy amounts of money to people who were a dodgy risk, and unlikely to be able to pay it back when required. That was the catalyst that precipitated the whole credit crunch: the inability of lenders to say no to borrowers. But is that not an essentially feminine characteristic - taking the soft option because they want to appear nice and helpful, rather than taking the tough but correct decision that makes them look mean and hard? Can we therefore not lay the blame at the feet of the oestrogen-worshippers?

And again, what about all those borrowers who were too weak to control their spending and took on more debt than they could handle? Which sex is more likely to fit that description? Who is used to spending money like there is no tomorrow because they figure they won't ever have to do the hard work to pay it all back?

Of course I accept that this doesn't prove women are responsible for the credit crunch: I am basing my argument on biased and skewed reasoning. But the difference is that I am openly admitting it, not like Mr Syed who is putting it forward as a serious explanation and obviously wants us to swallow it.

Nothing doing, Mr prejudice-is-my-middle-name Syed. You have been rumbled.

**RobYork** · 2nd-October-2008

The “Credit crunch” has been engineered by the ruling elite, nothing in this world happens by chance !!!

The poor will become poorer, whilst the very rich will become even richer.

A poor population is easier to control.

My bills, along with others in the UK, have risen in leaps and bounds, whilst I am still being paid what I was four years ago.

It is my opinion that many people in the UK are surviving on credit card debt.

Robert.