Why Smart People Underperform
We’re asking so much of team members on such a regular basis that it is now creating a recognized disorder, ADT – Attention Deficit Trait. Characterized by unfocused and unproductive activities, it reflects an increasingly overwhelmed workforce.
The branes take? Consider the Sharpen and Shed ™ process. Times may be more intense in terms of data flow and speed, but in many ways things are still the same as decades ago when management guru Peter Drucker declared that our jobs, as managers of ourselves and our company’s future, must cut through the clutter. We must define that 10% – 20% that will make 90% of the difference. And then, as Drucker said, it’s probably more about what you need to stop doing than what you need to start.
Scientists at Cambridge University wondered to what extent hormones might influence investment decisions, so during a week full of earnings and government reports they studied testosterone and cortisol levels for “noise traders” at a major London brokerage firm to determine the extent to which they correlated to trading activities and results. Noise traders profit from market “noise” or disequilibriums, making even seconds-long trades to take advantage of small variations in stock prices. Their trades risked up to $2 billion at a time.
The scientists wanted to know whether testosterone and cortisol may contribute to the irrational bubbles and busts of market behavior.
According to an April 18th WSJ article (subscription may be required), researchers wanted to determine the extent of, “…the ‘winner’s effect,’ in which successive victories boost levels of testosterone higher and higher, until the winner is drunk with success — so overconfident that he can no longer think clearly, assess risk properly or make sound decisions.
‘I wondered whether the same thing was happening on Wall Street,’ said Dr. Coates. Too much testosterone might make traders foolishly overconfident, exaggerating a market’s rise. Too much cortisol, secreted in response to stress, might in turn make them overly shy of risk, making a market’s downward slide even more precipitous.”
The results: 82% of traders with high morning testerone levels made more money than usual. And those with high cortisol (stress) levels did not fare as well. “We actually think this molecule (testosterone) is destabilizing risk-taking,” Dr. Coates said, “rather than optimizing it.”
Do Humans Really Behave Like Mice?
Now that earnings announcements are upon us and earnings generally aren’t very good, it’s a good time to ask: Do those ever-ballooning executive bonuses actually help shareholders get a better return for their money? Do we really scurry after monetary rewards like mice after cheese? And if so, how does such a singular focus on money affect our performance.
These studies by Dan Ariely and colleagues in the US and India imply a surprising conclusion. Would you believe those big pay-outs actually hurt performance? Perhaps even more interestingly, what is the implication — not just for corporate CEOs, but for professional sports players?