As a proponent of free will or personal agency, I have a deep-seated resistance to biological positivism or biological determinism. That is, I object to the idea that our destiny is controlled by our genes or the biological process that they control. In most cases, this objection is well founded. In most cases the “nature/nurture” question has been pretty conclusively answered as “both”. The expression of genes is highly dependent on the environment, and the phenotype, or end result, is a function of the genotype and the environment. So, even if you have a biological predisposition to some illness or disease, it will often be triggered by some environmental cause. A family history of heart disease can often be completely countered by a healthy diet and exercise, for example. This is of course not to argue that there aren’t conditions which are wholly genetic, but recent experience suggests that they’re relatively rare.
As such, I was a little annoyed at the research which seems to be reported everywhere that the financial markets move at the behest of hormones. Or, more accurately, in a sample of 17 traders on the London Stock Exchange, risky trades are more likely to occur when they have high testosterone levels.
But which is the cause and which is the effect? A further analysis showed that traders who started their days with elevated testosterone made more money than those who didn’t. One trader went on a six-day winning streak, making twice as much money each day as the previous one. Over that period, his testosterone levels rose steadily, some 74 per cent.
Methodologically, I have problems with the study. Firstly, the sample size was too small, and arguably unrepresentative of those traders who drive worldwide financial markets. More problematically, however, it doesn’t really do anything to eliminate other variables (from what I can tell). The article argued for more female traders, for example, to balance the markets, but didn’t explore the testosterone effects on females. Maybe females are only likely to be attracted to such pursuits if they already have high testosterone levels, for examples, negating any balance they may bring.
In the case of this study, testosterone levels are essentially a proxy for risk-taking behaviour (something that is valued in traders, but which can be dangerous in large amounts), and we don’t know whether the risk-taking is caused by testosterone, or whether they’re both affected by some other underlying cause. How effective are traders who are on anti-androgens (drugs which reduce testosterone levels), for example?
About the only thing the article tells us which is actually interesting is that, over the long term, high levels of testosterone can negatively affect both health and decision making abilities. This is probably similarly true for other jobs in which there is a high level of ‘burn-out’. Unfortunately, the message is sends to the traders is that they’ll eventually get less effective, so it is in their best interest to be as risky as they can for as long as they can to make as much money as they can before they burn out.
All that said, I don’t think research like this is completely useless. It’s good to know some of the variables, psychological or physiological, which contribute to success or failure in certain tasks. Such knowledge can help pick people who may be good at it, or may help predict disasters. But claiming that one study involving 17 people tells us that testosterone controls the markets is just stupid.
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