Poker Player = Smart Investor OR Smart Investor = Poker Player

The other day a friend was going through my book case and came across the bestseller Liar’s Poker, a piece of immense frolic. In a wickedly funny way, Michael Lewis elaborates on his escapades as a rookie trader at Salomon Brothers. My friend wanted to know if the book was about the game poker. Not so, but was surprised to be told that poker is Wall Street’s favourite pastime.

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Think about it. Poker demands immediate exploiting or discarding. Cutthroat decisions to tear down your opponent at every turn of the card. The players have to make instant decisions where one does not have complete information since all the opponents’ cards are face down. Moves have to be made in an environment plagued by unknown variables and imperfect information. 

While I doubt there is a question on the parallels, there could be a slight disagreement on whether traders make great poker players or good poker players make good traders. Steve Cohen, probably one of the world’s most famous hedge fund managers known for his voracious appetite for art, sprawling mansion and prodigious compensation, says poker taught him how to take risks. And that he has taken. He is currently under investigation for federal insider trading charges. 

Carl Icahn (Icahn Partners) now in the news for his tussle with Dell, got mentioned in TIME magazine in 2005 while playing with professionals at the Bellagio in Las Vegas:

In a $40,000 game, he wound up as one of two players left in a hand of seven-card stud. Icahn had two pairs; his opponent was showing four to a straight. The pro tipped off Icahn that he had seen his cards and said that because Icahn was an amateur, he felt obliged to tell him so. The pro then bet the table max: $4,000. Icahn, who had been about to fold, announced to the table, "I learned a long time ago that in big business and big poker, there ain't no nice guys," and matched the bet. His two pairs prevailed.

A few years ago, he wrestled with Texas banker Andrew Beal when both wanted control over Trump Entertainment Resorts. What was not common knowledge was that Beal, a math whiz, dropped out of college to play poker. His winnings were the seed capital in setting up Beal Bank. Icahn once said of Andy Beal, “I always thought of myself as a good player, but I'm not in his league.”

"Poker is a trader's game. Roulette and blackjack are based more on luck,” says Scott Redler, cofounder of T3, a Manhattan-based day trading firm. “But with a game like No Limit Texas Hold 'Em, you need patience and discipline, or in other words the exact same skills needed to be a good trader."

A few years ago, LA Times reported on how trading desks and firms are looking for

candidates who are good poker players and inculcate the principles of the card game in their training programme. The logic? They need individuals who are quick-thinking, decision makers under uncertainty, have nerves of steel and a head for numbers — the very skills that lead to success in poker. A few years ago Toro Trading made news for hiring Chris Fargis who made a name (and a tidy sum of money) in the online poker circuit.

Some economists decided to dig deeper.

University of Chicago economics professors Steven Levitt (author of Freakonomics) and Thomas Miles attempted to get to the heart of the debate on whether poker is a game of skill or luck. True to their profession, they dug into data (made available by the 2010 World Series of Poker) to come up with a conclusion. The results were published a working paper titled entitled The Role of Skill Versus Luck in Poker: Evidence From the World Series of Poker.

The duo found significant evidence that poker is not a game of luck, but rather, a test of skill. Players assumed to be skilled earned 30% on their investment, compared to all other players, who lost 15%. To put that in perspective, Levitt and Miles compared the return on a poker investment with that common from the financial markets. The conclusion implied that if you are a very skilled player, your money has a better chance of growing at a poker tournament than on Wall Street (which has fund management fees to cater to).

So what are the skills that you can learn from professional poker players that can be applied to investing?

• Don’t get too big for your boots.

• Don’t try to be more intelligent, just less stupid.

• Have a plan. Stick to it. 

• Identify a strategy and don't drift.

• Control your emotions.

Vanessa Rousso, nicknamed Lady Maverick, is easy on the eyes but hard on the wallets of

her opponents. This poker pro holds a degree in economics and has a penchant for games of strategy like backgammon and chess. She cautions against overconfidence which she claims tends to come in after particularly large gains. “In tournaments when I’ve won a series of hands, it tends to make me loosen up and take excessive risks. What could have been a period of prolonged success is quickly shortened by overconfidence.”

Her solution in combating overconfidence? By recognizing when you’re deviating from your game plan.

That’s good advice for investors, too. When you’re tempted to take more risk, recognize the effects of overconfidence and methodically think through your plan. Overconfidence could lead to big losses. Don’t go overboard in a bull run and shift huge chunks of your portfolio into equity. Or, if a type of fund is doing well such as a mid cap or an international one, don't increase exposure indiscriminately to it. When the bubble bursts, so will your fortunes. 

The problem is that most humans, as investors or poker players, like to consider themselves rational and are prone to becoming overconfident. Jason Zweig points out in his book Your Money & Your Brain, about 75% of people will judge themselves better than average at anything -- from driving to basketball to telling jokes to scoring well on an IQ test. Of course, half of any group, by definition, must be below average.

Most poker players believe they are fully capable of making sensible table decisions based on their knowledge of the game combined with a basic understanding of the laws of probability. But if this were really true, there would be no losing poker players. All poker games need players who think irrationally, exercise poor judgment, and lack discipline. And you are stupid if you think that it cannot be you. Warren Buffett says it well. "If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy."

Hedge fund manager Ray Dalio says that investing bets, like poker, are a zero-sum game. The nature of investing is that a very small percentage of the people take money (essentially, in that poker game) away from other people who don't know when prices go up whether that means it's a good investment or if it's a more expensive investment. It is very important for most people to know when not to make a bet, because if you're going to come to the poker table, you're going to have to beat me, and you're going to have to beat those who take money.

How does he counter that in investing? We spend hundreds of millions of dollars on research and we don't know that we're going to win. So we have to have a lot of diversified bets.

Poker players differ from each other in strategy. 

Chris Ferguson, an ex-trader at a prop trading firm, holds a PhD in Computer Science and has an advanced understanding of poker mathematics and game theory. His knowledge compensated for his lack of experience when he won the World Series Main Event in 2000. Gus Hansen, on the other hand, is said to be more “feel-based” and once said that he takes risks that no-one else would take, but if he thinks those risks are justified then there’s no reason for him to back down.

Hedge fund manager David Einhorn gave a speech in 2006 on the strategies of different poker players.

• Loose aggressive types play lots of hands – virtually any two cards – and try to win lots of small pots. They are the day traders of the poker tables.

• Others play any Ace or any King or any two high cards. They play too many hands, but don’t play them well. These folks can do fine for a while, but get outplayed after the flop by the loose aggressive types who eventually wear them down so that they wind up in a 1 of 11 desperate spot playing a decent hand against a strong hand for the remainder of their chips. I would compare them to long-only closet indexers who trade too much.

• Then there are the rocks. These folks sit around waiting for premium hands – high pocket pairs or an Ace, King. They fold and they fold and they fold. They are going to wait until they know they have a huge advantage. Then they bet as much as they can. It is very hard to beat a player like this. They can last a long time. Once people figure them out, nobody will play them when they do play. So they don’t get the chance to get enough chips in when they have a large advantage. Could this be what is becoming of Berkshire Hathaway?

Incidentally, Buffett too tries his hand at the game, though much more skilled at bridge. He once confessed that he does not care about poker as much as bridge. Not surprising when you take into account his buy-and-hold temperament as against a trader’s mentality. 

Investors, like poker players, must stick to their own game plan– what to invest and how to diversify based on their strengths and comfort levels and strategy. There will be bad patches. There will be certain investments that will not deliver. Everyone is bound to lose money sometime. But don’t pull out in haste when the market crashes and hide your money under the mattress. Stick to your strategy with your eye on the long term.

Losing a big hand in poker hurts, a lot. And when that happens, players lose focus and start to play more risky or avoid betting altogether, either way they are hurting themselves.

Keep the big picture in mind. It's not the individual hand or investment that matters, it's the game. You can lose a big hand every now and then as long as you have all the chips at the end.

Most importantly, keep the emotions under control. The biggest mistakes are made when you let them get the better of you. Daniel Negreanu, one of the world's best poker players has said that "having emotional stability and emotional control is key to both investing and poker." According to the Chicago Tribune, success at investing and gambling has much to do with controlling emotions. This is because the psychological issues that drive them both are identical. 

I guess I can end with a quote from hedge fund manager Daniel Shak: "The skill set you need to succeed in corporate life and the financial world is the same skill set you  need to succeed at the poker table".

 Most of the above tips have been sourced from Kiplinger, US News Money, Business Insider, FSP Invest.  

When art seems like such a rip-off

Three Musicians
(Picasso)

Orange, Red, Yellow
(Mark Rothko)

The Scream
(Edvard Munch)

This year, Le Rêve was bought for $155 million by hedge fund billionaire Steven Cohen. In 2006, he picked Woman III for $137.5 million. Last year, private equity baron Leon Black purchased The Scream for $120 million and Orange, Red, Yellow bagged nearly $87 million. Seven years ago, Dora Maar au Chat sold for $95.2 million. 
I must be really stupid for not getting it!

Three Musicians reminds me of a jigsaw puzzle gone haywire. Orange, Red, Yellow gives the impression that someone messed up on a wall painting job. The Scream is nightmare inducing. Dora Maar au Chat's face is horribly disfigured and reminds me of a horse. I don't find Mona Lisa attractive, nor do I find her smile enigmatic. She seems to  mock us with a "what are you gaping at sucker?" look. Weeping Woman looks positively hideous. Call me a prude, but Le Rêve's eroticism puts me off. 15 Sunflowers is plain dull. Woman III resembles a WWF female wrestler.     

Dora Maar au Chat (Picasso)

Weeping Woman (Picasso)

Mona Lisa (Da Vinci)

Le Rêve
(Picasso)

Vase with
15 Sunflowers
(Van Gogh)

Woman III
(Willem de Kooning)

Unless you are really slow on the uptake, you would have gathered by now that I am completely baffled with this fascination for art. I see nothing appealing in all the above masterpieces. And though I am willing to admit that I could be in the minority here, I have a sneaking suspicion that nobody is actually into art. Expect a few exceptionally rich people who give the impression of being very cultured and evolved when compared to commoners like me who obviously cannot appreciate such beauty. 

An article in The Guardian a few days ago was provocatively titled 'Bean-counters will never understand the transcendent value of art.' It stated that art was 'too important to be placed in the hands of those who seek reductionist explanations of their value.' If you thought that was pretentious, the writer quoted some philosophical dude called Herbert Marcuse: 'The power of art lies in its power to break the monopoly of established reality.' Seriously, what on earth are these condescending bores babbling about? The established reality is that art spells money. And that has got people's attention.

A recent piece in London’s Financial Times threw up some statistics when talking of art's growing popularity.  

• Annual sales of art at Christie's, the auction house, were £3.92 billion in 2012, up 10% from 2011
• 19% of registered bidders were new clients
• The average number of registered bidders is up 53% compared to 10 years ago
• The Art & Finance Report 2013 estimated that assets in art investment funds rose 69% in 2012 to touch $1.62 billion worldwide, driven by Chinese demand for art investments
• In 2003, sales at Christie's Hong Kong totalled $98 million; by 2011 they were $836 million, showing a very enthusiastic Asian clientele.  

Ah! I pity all the elite snobs. The air is no longer thin at the top.  

Art is fast evolving into an asset class. 

Like any other investment, there are indices to track it. The Mei Moses Fine Art Index, Mei Moses World All Art Index, Blouin Art Sales Index, Art Market Research indices, and Artnet indices are some that come to mind.  The Mei-Moses World All Art index climbed 22% in 2010 and 10.2% in 2011, but was down 3.3% in 2012.

Then there are art funds. London-based Fine Art Fund Group apparently controls the biggest chunk of the market, with more than $150 million of assets in 5 specialised funds that invest in old masters, impressionist, modern and contemporary art, each requiring a minimum $250,000 investment. It claimed an average annual internal rate of return of 20% on artworks sold so far. New art funds keep sprouting. 

What's alluring as an investment is art's so-called “uncorrelated” status. As an asset class it is not correlated to movements in the equity, debt or property market. The New York Times reported that from 2003-2007, the fine-art market grew faster than subprime housing. Eleven of the 20 highest prices ever paid at auctions have occurred since 2008, when the global economy went into a tailspin. 

Unlike any other investment, it would make sense to buy art if you have a genuine and true appreciation of it. I can imagine German billionaire Reinhold Würth enjoying the beautiful "Madonna with the Family of Mayor Meyer" being displayed in his home. So when he picked up Hans Holbein's art for $70 million, he would not mind holding on to it for at least 7 - 10 years (in some cases 15+ years) before he got a substantial appreciation, if he ever chose to sell. However much you love your stocks or funds, you won't put a list of that on the wall. Art is more that an investment, it is also a collection. 

It is expensive. You pay jaw-dropping prices to own it and then spend more to insure it. You won't get a steady stream of income by way of dividends. It is a fairly illiquid investment where over half the market is apparently traded privately. 

The money may be eye-popping, but there are numerous intangibles to be considered. Do you understand the artist's technique? Do you take pleasure in owning that painting? Are you buying it purely for snob value to signal erudition? Is the sole purpose to flaunt your newly amassed wealth? Are you willing to hold onto to it for years on end to get the appreciation you are after?

Like every investment, it is not risk-free. What every art investor should know is that there is a difference between the commercial price of an artwork and its value. The price is determined by market conditions, size of the work, the medium on which it has been done, the artist, the rarity of the painting etc. The value is its perceived worth or a subjective opinion of the viewer and the demand. That is why at an auction, the actual price for which it is sold could be much higher than the reserve price estimated, simply due to competitive bidding which indicates demand for a product. And therein lies a big risk. 

You may find the work of an artist ephemeral and sensuous and look down your nose at anyone who does not get it. Don't get too uppity about it. Because when you want to sell it and the art patrons brand it as mundane and innocuous, you may end up forcibly passing it to your reluctant heirs. 

Adding art to your portfolio can be a lot trickier than hanging it on your wall. It is a buyer beware market. 

Why smart people do stupid things

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This week Judge Richard Sullivan sentenced former hedge fund manager Anthony Chiasson to 6.5 years in prison for insider trading. It was reportedthat the judge marveled at his prodigious wealth by looking at his annual income figures ($16 million, $10 million, $23 million) before commenting: “It’s hard to imagine why someone would risk all that to engage in a crime like this.”

In other words, why did such an intelligent and hugely successful man do something so stupid? Chiasson is no stand-alone idiot. He has plenty of respected company.

Remember Robert McCormick, ex-CEO, Savvis, a US-based tech company? I rephrase. Remember McCormick’s night out at Scores?

Scores is a gentlemen’s club, famous for its sexy strippers, topless dancers and bottles of champagne that each cost thousands of dollars. Apparently, a lap dance could set a ‘gentleman’ back by $10,000.

Now I am not saying that McCormick was stupid to go there.

But he certainly was a dolt to foot the bill for all his friends and ring up a tab of $241,000 in just one night, that too on the company credit card. To save his family (wife and 3 young kids) the embarrassment, he should have settled the bill quietly. But no! His stupidity was compounded by his refusal, citing fraud. After being sued by American Express, his company reached an out-of-court settlement and he was forced to resign. New York Daily News bestowed on him the well-earned title “The Lap Dunce”.

General Petraeus took everyone by surprise. This 4-star general led American forces in Iraq and Afghanistan. He was the highest-profile military officer of the post-9/11 years and was widely credited for his role in running the "surge" in Iraq and implementing a counter-insurgency strategy in Afghanistan. He joined the CIA in 2011 and last November resignedas its director citing an extra marital affair and “extremely poor judgment”. Now he stands a diminished figure thanks to one colossal indiscretion.

Rajat Gupta said it best. He lost his parents as a teenager but carved an absolutely stellar career for himself, almost iconic to many young Indians. Now in his 60s, declared guilty of insider trading by an American court and sentenced to a 2-year prison term with a $5 million fine, stated: “I’ve lost my reputation I built over a lifetime.” 

All these men are well known in their respective fields. They are brilliant. They did not get to where they were by being incompetent slackers. So what does this teach us? That the measure of intelligence is in no way a precursor to smart decisions?

Professor Keith Stanovich from the University of Toronto and the author of What Intelligence Tests Miss: The Psychology of Rational Thought has a very interesting perspective. He believes that there is a narrow set of cognitive skills that we track and refer to as intelligence that gets measured in IQ tests. BUT, this is not the same as intelligent behavior in the real world. A high IQ (which we refer to as intelligence) does not guarantee, or necessarily translate into, rational behaviour. You can be very intelligent, but that does make you rational. He’s even coined a term to describe the failure to act rationally despite adequate intelligence: “dysrationalia.” Conversely, you can be a rational thinker without being especially intelligent.

A friend of mine completely agreed. His brother, who lives in Canada, is a brilliant academician with a high IQ. But he suffers from a gambling addiction which has gotten him heavily in debt. He showed me that Stanovich’s researchreveals that problem gamblers score low on a number of rational thinking tests. They make more impulsive decisions, are less likely to consider the future consequences of their actions and are more likely to believe in lucky and unlucky numbers. They also score poorly in understanding probability. For instance, they’re less likely to understand that when tossing a coin, five heads in a row does not make tails more likely to come up on the next toss. Their dysrationalia likely makes them problem gamblers – people who keep gambling despite hurting themselves, their family and their livelihood.

Try these 3 simple quizzes. 

Test 1

A bat and a ball cost $1.10. The bat costs $1 more than the ball. How much does the ball cost?

Test 2

In a lake, there is a patch of lily pads. Every day, the patch doubles in size. If it takes 48 days for the patch to cover the entire lake, how long would it take for the patch to cover half of it?

Test 3

Jack is looking at Anne. Anne is looking at George. 

Jack is married. George is unmarried. 

Is a married person looking at an unmarried person?

Answers: Yes - No - Cannot be determined

The answers

Test 1 - Is your answer 10 cents? Wrong. If the ball costs 10 cents, the bat would then have to cost $1.10, for total of $1.20. The correct answer is 5 cents for the ball and $1.05 for the bat.

Test 2 - Is your answer 24 days? Wrong. The correct answer is 47 days because on the 48^th day, the patch would double in size to cover all of the lake.

Test 3 - More than 80% say it cannot be determined. We need to know if Anne is married to answer that question. The correct answer is yes, a married person is looking at an unmarried person. If Anne is unmarried, then a married person (Jack) is looking at an unmarried person (Anne). If Anne is married, then a married person (Anne) is looking at an unmarried person (George). Either way, the answer is yes. 

By using the above examples, Stanovich and his research partner Dr Richard West believethat most of us are “cognitive misers”, employing mental shortcuts that sometimes lead to incorrect conclusions or foolish decisions. Rather than carefully evaluating the information presented or the situation before us, we skip to the solution that requires the least mental effort and gives us instant gratification. “For most of us, really hard thinking is something we like to avoid as much as possible. And yet a lot of rational thinking profits from this type of information processing,” says West.

To understandwhere the rationality differences between people come from, Stanovich thinks of the mind in 3 parts.

1. Autonomous mind: This part of the mind engages in problematic cognitive shortcuts or Type 1 processing. It happens quickly, automatically and without conscious control. This can be executed at the same time as other higher levels of processing. eg: Crossing the road and having a simultaneous discussion on the phone.
2. Algorithmic mind: This part engages in Type 2 processing - the slow, laborious, logical thinking that intelligence tests measure. It requires conscious mental effort. 
3. Reflective mind: It decides when to make do with the judgements of the autonomous mind, and when to call in and engage the heavy machinery of the algorithmic mind. The reflective mind seems to determine how rational you are.

Temple Grandin, author of The Autistic Brain: Thinking Across the Spectrum, gives her perspective on the accident at the Fukushima nuclear plant a couple of years ago. The people who designed the plant probably had high scores on tests of IQ and math skills. And then they put the backup power generator in a basement where it was going to be useless in a flood—just when they would need it most. That was a stupid move by really smart people. But you can’t say that those who anticipated the problem were smarter than the nuclear engineers, since most of the problem-anticipators would have no idea how to design something as complicated as a nuclear power plant in the first place. Dr. Grandin said when she was younger and less diplomatic she might have called the engineers stupid. But now she thinks they just have a different kind of intelligence. Or, they just don't bring their full mental faculties to bear on the problem. 

Image by Prajakta More

We are forced to engage in rational thinking on a daily basis: what to wear, where to invest, where to holiday, how to deal with a difficult boss, whether or not to have an affair. But, in addition to being cognitive misers, we also suffer from cognitive illusions and thinking biases. So when arrogance, lust, greed, and other emotions come into play, seeming intelligent people can act with head-slapping cluelessness making rational judgement the casualty. I will escape the consequences. I will never get caught. My investment will work. We completely undermine the possibility of a fallout.  

Humans are obsessed with intelligence. We test it, rank it and then judge others by where they fall on that scale. But face it, it’s a very limited concept. Just because we preen around with a smart degree or a high IQ, it does not mean that our actions are always noteworthy. Social intelligence, emotional intelligence and rational intelligence all contribute. 

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So don't be surprised when high IQ individuals overestimate their own capabilities and commit embarrassing blunders that leave everyone scratching their head. Are we not all guilty of going down a path which we later look back and say “What on earth was I thinking? How could I have been so stupid?” 

Remember, rationality and intelligence don't go hand in hand. You may score high on an IQ test, but that does not exempt you from acting like a bonehead sometimes. If anything, that should cause you to be less forgiving towards the other so-called idiots that populate this planet.  

Here's to stupidity. Something that all of us are capable of. 

Bad market? Blame it on testosterone

The other day a friend was venting about her husband.
She was not referring to his peccadilloes but his financial maneuverings that were turning out to be a potential fault line in their relationship. She swore that if he had only followed her suggestions, they would have been much wealthier. When she did cite specific examples, I could not help but agree.  

At that time, I recollected a statement made by Jonas Ridderstrale when he wondered what the state of the world would have been if Lehman Brothers was instead Lehman Sisters and founded, not by Henry, Emanuel and Mayer, but Henrietta, Emanuelle and May. While the names are an original, he was actually echoing Christine Lagarde’s statement that if Lehman Brothers had been Lehman Sisters the crisis would have had a different complexion. 

Which makes me wonder, is too much of testosterone bad for investing? 

Doug Hirschhorn, a trading psychology coach, wrote a piece in Forbestitled Think like a woman and make more money. He once said to a journalist, that at his workshops on Wall Street, he has to “literally deconstruct a lot of their testosterone”. Hirschhorn believes that significant behavior, which can be classified as dominant male traits, is actually counterproductive to success in trading such as being too aggressive, stubborn or ego driven which results in not knowing when to cut losses and sell. 

Remember Ralph Cioffi and Matthew Tannin, once heavyweights of the hedge fund world? During the trial, the prosecution referred to their internal emails.
"The subprime market looks pretty damn ugly," Tannin wrote to Cioffi. He added that if the report was "anywhere close toaccurate," they should close their hedge funds immediately, because "the entire subprime market is toast."
"I’m fearful of these markets," Cioffi wrote to a colleague in March 2007. "Matt said it’s either a melt down or the greatest buying opportunity ever. I’m leaning more towards the former." 
Why did these Bear Stearns hedge fund managers go on to lose immense sums of money despite the fact that they expected the worst?

Or take the case of Michael Steinberg. He is fabulously rich, good looking and happily married. He was arrested last month for insider trading. What was he thinking? Over the past 3 years, Preet Bharara, the federal prosecutor in Manhattan, has claimed 71 insider trading convictions. Did Steinberg think he was never going to get caught? Was it not inevitable? 

What about Richard Fuld? The Lehman Brothers chief executive overplayed his hand and refused offers until the very end, either out of stubbornness or ego. Who can forget his pretentiousness: “As long as I am alive this firm will never be sold. And if it is sold after I die, I will reach back from the grave and prevent it.”The theatrical lyrics continued when Alistair Darling, British MP and then Chancellor of the Exchequer, apparently toldthe Americans that “we are not going to import your cancer”. He vetoedthe deal for Barclays to buy out Lehman Brothers, which worked out well since Barclays picked it up later for “next to nothing”. That obviously ticked off former US Treasury Secretary Henry Paulson who accusedDarling of "grin-f***ing" America over the bankruptcy of Lehman Brothers (I did not know such an expletive existed!).

Anyway, back to the subject at hand. 

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A few years ago, two neuroscientists undertook an experiment on the trading floor of a major investment bank in London. Over eight consecutive business days, at 11am and 4pm, samples of saliva were taken from the mouths of 17 traders. The results revealed that the traders performed much better on days in which they registered higher morning levels of the testosterone. The researchers also found that on days when traders beat their previous monthly average, their testosterone levels would go through the roof. 
In other words, better traders produced more testosterone and testosterone made them better traders. 

That’s what interesting about testosterone; it not only influences the environment but can be influenced by it too. It tends to go up in certain instances, such as when looking at the Sports Illustrated swimsuit issue. Or, when participating in a highly competitive environment such as a tennis or football match, or the trading floor of a large firm. Levels rise in preparation for the competition and then go up in winners and down in losers. In one experiment, 5 men were confined on a sail boat for 14 days. Towards the end of the trip, the higher ranking men (a social hierarchy was formed with 15 days on a sail boat in the middle of the ocean!!) had higher testosterone levels than the rest. 

In an absolutely bizarre case in 2007, Andrew Tong, a junior trader at SAC Capital, sued a trader Ping Jiang. The sexual harassment suit claimed that Jiang told Tong to take female hormones to prevent him from being too aggressive on the trading floor. Tong stated the repercussions of taking the supplements as causing him emotional distress, wanting to wear women's clothes and unable to perform sexually. As far as I remember, Tong lost the case and Jiang was sacked. But Jiang must have been an ardent believer in the too-much-of-testosterone theory. 

John Coates, initially a trader at Goldman Sachs and Deutsche Bank, now a neuroscientist, is convinced that physiology plays a driving role in markets. After all, market participants are biological organisms with neural and physiological apparatus. 

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He remarked that during the dot-com bubble, the markets were running on something deeper than dispassionate reason. The traders, normally "sober and prudent" were becoming "euphoric and delusional" and "overconfident in their risk taking, placing bets of ever-increasing size and ever worsening risk-reward trade-offs". Incidentally, he went on to state that traders were not upset with his observation. "Every trader knows when you're on a winning streak you act like a d*** and then you end up giving back all the money you made on the way up. I got a lot of emails from traders saying it was good to know where this odd behaviour comes from."

Last year, physicist Mark Buchanan, wrote an interesting piece in Bloomberg. He spoke about the "winner effect" which is a testosterone-driven dynamic. If 2 male lions fight over a potential mate, the level of testosterone in the winner skyrockets. By boosting confidence and risk appetite, the testosterone priming makes that winner more likely to win again until successive winning backfires. The animal becomes so aggressive and overconfident that it takes stupid risks - eg: standing in open ground where it can be seen and attacked by several rivals together. 

According to Buchanan, "a good part of the giddy energy and aggressive excitement that spills over during a long bull run must reflect a surge in general testosterone levels. The more the market rises, the more confident and risk-seeking traders and investors become. The ultimate outcome is a market of people largely convinced of their own invincibility and read to take irrational risks." 

To reinforce what was said above, better traders produced more testosterone and testosterone made them better traders. But what makes a better trader for a day or week can in the long term lead to disastrous mistakes. 

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So basically, testosterone turns the traders and investors into a herd of overheated animals and there is nothing anyone can do - except live with the market volatility and perhaps hire more women for the job. 

If only it was Lehman Brothers & Sisters, the world might have been a different place!
Meanwhile, I second Buchanan: It's time to launch a testosterone index.  

Why do men lie?

My friend has been dating this really nice guy but harbours a peculiar grouse against him. She claims he is lying when he says he loves her.

And her logic for his blatant lie: He wants to seduce her.

To which another friend had an observation: “If he has to say he loves you to get sex, his seduction capabilities leave much to be desired”. Frankly, I could not figure out whether this was to compliment my friend or insult the boy friend (maybe both).

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She ended up with: “To profess love to get sex is disgusting”.

Now on this sentiment, I am completely in sync. But don't we all lie, even if we don't profess love?

Right now, George Soros drives home the point that men say many things when dating, not all of which are true.

Soros is the most famous hedge fund manager in the world, not to mention probably the richest (ranked 30 on the Forbes Billionaire list with an estimated wealth of $19.2 billion). The octogenarian finds himself in the news either for his currency bets, his philanthropic ways (in 2010 he donated $100 million to Human Rights Watch) or his sexual dalliances.

Source: NY Post

When Soros was 80, he was dating 27-year old Adriana Ferreyr and promised her an apartment in Manhattan which was worth around $2 million. One day, when lying in bed, she asked him about the apartment and he coolly told her that his “other girlfriend” Tamiko Bolton was living in it and very happy there. Soros obviously believed in hedging all his bets. And the fight began!

Ferreyr claimed that he slapped her and attempted to hit her with a lamp which completely traumatized her. She then filed a $50 million suit against him for reneging on his promise to buy her the house.

Soros filed a countersuit of defamation and assault stating that it was she who picked up the lamp to hit him and struck him on his (80-year old) forearm. After it crashed on the floor, she cut her foot on the shards of glass when she got out of bed.

Now in this quintessential 'he-said, she-said' saga, I am not pondering on which one of them is lying about the lamp. The point here is that Soros probably lied when he promised her the apartment (the crux of the lawsuit). His lawyer William Zabel saidit well: “If every promise to a girlfriend was an enforceable contract, I’d be in court every day”.

When I asked a colleague in Singapore if he believes that men lie for sex, his answer: “Of course men lie for sex and women lie for marriage”.

Basically, all of us liars. Isn't it true? Don't we all lie?

If not all the time, most of the time?

If not most of the time, some of the time?

If not some of the time, at least very occasionally?

But it’s not just love (or lust or sex) that brings out this side of us. 

Don’t bosses lie? I am not addressing you if you are having sex with your boss and he said he loves you :) :) :) 

Seriously, don’t tell me you have never ever heard such statements.......

“I truly want to see you successful”

What was meant: “Your job is to make me successful so you better grovel to get me there”.

 “Your raise is above average”

What was meant: “Your wounded puppy look is grating my nerves. Obviously I could not give you more; it would have been taken out of my raise.”

“I’m your friend”

What was meant: “I need you to be the office mole and inform me about all the office thievery, gossip and sexual exploits so that I can use the information to further my cause.”

“We are one big family”

What is NOT said: The family is full of dysfunctional upstarts who are either belittlers, slackers, finger pointers or conniving back stabbers. Technically, this may not qualify as a lie but the boss was certainly economical with the truth.

This is where I need to clear the air since all MY bosses read this blog.
This post is NOTabout them (really, am not lying!).

But, hey, let’s be fair. Are employees themselves not great liars?

If I continue to elaborate I could find myself in really hot water, so let’s move on to more neutral territory.

Amongst the merry band of liars, most politicians stand head and shoulders above all other mortals. This is no revelation; everybody and their dog knows that politicians lie. Latest has been David Cameron talking about the national debt. The Independent questioned whether he can qualify as a liar. Fraser Nelson of The Spectator called it "astonishingly dishonest". In fact, it forced Robert Chote, head of the Office of Budget & Responsibility, to write a public letter to UK's prime minister. And did Greece not admit to lying in 2009 on its borrowings and huge deficits forcing a multi-billion euro bailout? But the most honest statement came from Luxembourg PM Jean-Claude Juncker who quipped "when it becomes serious, you have to lie". 

Though he was referring to meetings being held by the Eurogroup, this quip could be valid for any issue - politics, business, relationships or love. 

While some are born liars or pathological liars, others are moulded into one. A study done last year showed that studying economics has the high propensity to turn you into a liar. The researchers designed an experiment on students that gave its subjects every conceivable incentive to lie, and none to tell the truth. Though a large portion of students lied from every field, economics and business students beat the competition.

Source

There is an even more racy side to economists. According to a survey done in the UK covering 100+ universities, students studying economics were found to be most promiscuous, measured as the number of sexual partners since starting university. In case you are interested, students studying theology were at the bottom (they have more spiritual matters on their mind) proceeded by the environmental science students (they are too busy trying to save Mother Earth).  

So if you are dating an economist, chances are that s/he is one promiscuous liar. Don’t easily fall for the “I love you” line. Ask for evidence (the apartment in your name is adequate proof of love). Oh by the way, Soros has publicly expressed his desire to marry Bolton who actually did get the apartment.