Reading hedge-fund giant Paul Tudor Jones’ recent comments that having babies makes women bad traders reminded me of a close friend of mine, a very senior investment banker at a major Wall Street firm, who once worked for someone she called the Screamer. I would regularly show up to lunches or dinners with my friend and hear stories about how the Screamer had shouted yet another round of expletives during a conference call or thrown something at his secretary. I was always amazed that a man this emotionally unhinged had been allowed to hold any position of power, let alone one in which he was running billions of dollars of other people’s money.
Which is why Jones’ comments are so fascinating, and so flawed. If I’m reading his rather convoluted argument correctly, he’s saying that women can’t be good traders because they are too much at the mercy of their emotions. Actually, plenty of research has shown just the opposite. In the best-selling book, The Hour Between Dog and Wolf, John Coates, a former trader who is now a neuroscientist at Cambridge University, looks at just how emotionally influenced traders — mainly men — are. Coates finds that fluctuations in traders’ hormones play a crucial and unexamined role in the financial markets, creating major boom-and-bust cycles as vast amounts of dopamine flood the brain during a good — or bad — trade. Indeed, it’s a snowballing cycle, as traders need ever-bigger doses of dopamine to feel the buzz.
London Whale anyone?
What’s interesting is that female traders don’t go as much to those extremes. Research shows they tend to be more risk-adverse, yes, but that means that while they avoid the highs and lows, they can often have better returns than men.
I’m guessing that vast amounts of dopamine in the brain during a billion-dollar trade make you just as emotional as having a baby does. Maybe that’s one reason that regulators on both sides of the Atlantic are looking to start tracking traders’ hormone levels as a matter of public policy and financial safety, as my friend, Financial Times columnist Gillian Tett, noted in a piece last year.
All I can say is that if I had my money invested with Paul Tudor Jones, I might want to know more about his risk-mitigation strategies.