Monday, August 25, 2014
Dutton & McNab, The Good Psychopath’s Guide to Success
I suppose Kevin Dutton and Andy McNab would characterize these traders as bad psychopaths. They possess some character traits that could propel them to great profits, but if left unchecked these traits may lead to financial implosion instead.
The Good Psychopath’s Guide to Success: How to use your inner psychopath to get the most out of life (Apostrophe Books, 2014) is co-authored by a (good) psychopath and a psychologist. McNab is an SAS (British Special Air Service) legend who, as he himself claims, is “considered to be one of the top thirty writers of all time”—I assume by someone whose education was tragically cut short. Dutton, a research fellow at Oxford, has spent a lifetime studying psychopaths. The book, reflecting the penchants of the authors, illustrates self-help principles with rough and tumble adventure tales.
A psychopath has a distinct subset of personality characteristics, including ruthlessness, fearlessness, impulsivity, self-confidence, focus, coolness under pressure, mental toughness, charm, charisma, reduced empathy, and a lack of conscience. Depending on how these traits are dialed up, down, or omitted, the psychopath can be either good or bad.
I’m not going to try to construct a profile of the ideal trader (who presumably would be a good psychopath) using the book’s guidelines. Instead, let me give two examples of how a good psychopath would proceed.
The first, actually a negative example, comes from a London cabbie. Asked how business was, especially since it was a beautiful day and lots of people were about, he replied: “The sun brings them out all right. But no one wants to take a cab in this weather. All they want to do is sit about in parks and get pissed. I wanted to watch the football tonight but instead I’ll probably be working now. I have to make £200 a day just to cover the cost of hiring this thing. Then there’s the diesel on top of that. Give me the rain and the cold any day of the week. Once I’ve reached my quota I can knock off early.”
As McNab pointed out, the cabbie has things the wrong way round. “If it was me I’d be working my bollocks off on the good days and knocking off early on the bad days instead. Think about it. If you’re going to knock off early, why do it on a day when you’re coining it right, left and centre? It’s madness! On a day like that you should keep your foot on the gas and maximize your profits, surely? On the other hand, it actually makes sense to knock off early on a slow day because not only is your profit margin going to be jack shit anyway, you’ll be conserving energy for your next shift—which could turn out to be a good ’un.”
The second example comes from a study of how we make financial decisions. “The study took the form of a gambling game consisting of twenty rounds. At the beginning of the game each participant was handed a roll of $20 bills and, at the start of each new round, was asked whether they were prepared to risk the princely sum of $1 on the toss of a coin. A loss incurred the penalty of that $1 invested, but a win swelled the coffers by a cool $2.50. Now, it doesn’t take a genius to work out the winning formula. Logically, … the right thing to do is to invest in every round.”
The study participants were divided into two groups. One group had lesions to the emotion areas of their brains; the other had lesions in other areas. Predictably, “as the game unfolded, ‘normal’ participants began declining the opportunity to gamble, preferring instead to conserve their winnings. But participants with problems in their brains’ emotion neighbourhoods—participants whose brains were not equipped with the bobby-on-the-beat, everyday emotional police force that the rest of us take for granted—kept right on going. And ended the game doing quite a bit better than their thriftier, more cautious competitors.” As one of the researchers claims, “This may be the first study that documents a situation in which people with brain damage make better financial decisions than normal people.”