Mass. State Rep. Calls on University VP to Increase Transparency for Allston Multimodal Project
Harvard President Lawrence Bacow Made $1.1 Million in 2020, Financial Disclosures Show
Harvard Executive Vice President Katie Lapp To Step Down
81 Republican Lawmakers File Amicus Brief Supporting SFFA in Harvard Affirmative Action Lawsuit
Duke Senior’s Commencement Speech Appears to Plagiarize 2014 Address by Harvard Student
According to Bloomberg Magazine, over 15 percent of the class of 2013 went to work for Wall Street, down from an incredible high of almost 50 percent in 2007. Goldman likes their Ivy Leaguers, and so they should. Anyone smart enough to get into Harvard can beat the market, right? Well… not really. The lure of money on Wall Street was, and still is, simply overpowering. Any educated psychologist knows how devastating gambling addiction can be, but no one really thinks of the people in the perfectly-tailored suits and shiny leather shoes as possible sufferers. Most societies view investing as the most socially acceptable form of gambling, and a job in the finance sector carries significant social prestige and signifies a high level of education. When people think of gambling, we imagine nine-to-fivers wasting away their life-savings at the blackjack table.
However, there is not much that separates stock-trading for profit from horse-racing. Based on past experience and performance, one chooses what he thinks will be the best option and bets money on it in hope of monetary gain. Even the smartest bankers are not impervious to the perils of money addiction. Multiple studies have shown that those addicted to money show similar brain damage to those addicted to cocaine. In an even more disturbing study, psychiatrists in Switzerland took day traders from major banks and clinical psychopaths and had them take the same personality tests. Surprisingly, bankers showed the exact same destructive traits that characterized psychopaths. Extreme competitiveness, aggression, lack of empathy–it was all there. In an editorial earlier this year in the New York Times, former Goldman-Sachs millionaire Sam Polk wrote about his years on Wall Street, and came to one simple conclusion, declaring, “I see Wall Street’s mantra — ‘We’re smarter and work harder than everyone else, so we deserve all this money” — for what it is: the rationalization of addicts.” As Nobel Prize-winning behavioral economist Daniel Kahneman said, people don’t realize when they are acting irrationally. That is, we are blind to our own blindness. And in Wall Street’ case, money blocks out the Sun.
Before the financial crises of 2008, the bull run in the market seemed like it could last forever. Anything could be turned into a profitable security, from student loans to subprime mortgages. Clearly, that all changed very quickly, and government regulators have been trying their hardest to reign in the excesses of Wall Street. But the devastation that the crisis in 2008 left in its wake puts serious questions on the table when it comes to the bankers who thought they had the risk under control. Was the money in the short term really worth all the losses sustained during the crisis? And the frightening answer is, yes actually it was. The psychological evidence of the effects of money on the brain is damning. Bankers aren’t nearly as invincible as their bonuses make them feel, and the crash in 2008 was a rude illustration of that vulnerability.
Now, don’t let any of this dissuade you or your friends from taking that six-figure offer from a bank that you’ve been praying for all recruiting season. But be smart once you get there. The free market principles that have led to America’s global economic dominance remain intact. Unfortunately, nothing as complex as the trading that goes on in investment banks can be perfect. Money is even more powerful then you think.
Eric J. Hollenberg '17 lives in Adams House. His column will appear every two weeks this summer.
Want to keep up with breaking news? Subscribe to our email newsletter.