Married Men and Money Management
- Joshua M Brown
- May 20th, 2012
“…male participants primed with pictures of attractive female faces were more likely to demonstrate risk taking behaviors, once memory effects were taken into account. In essence, participants became more or less of a risk-taker dependent on whether they were exposed to pictures of attractive women.”
My old friend Stevie from my brokerage firm days struts around Manhattan like a stud horse, one mutual friend describes him as “swimming in a sea of available p***y day and night.”
I’ve seen him get phone numbers from girls during the course of a 25 second elevator ride or on line at Starbucks. He’s taken dozens of waitresses out of New York City restaurants over the years I’ve known him – sometimes right after the meal we’ve eaten and sometimes during. He has girlfriends and he has girlfriends who have girlfriends, you’d have to see the pics stored in his iPhone to believe it and even then you still might not.
Anyway, Stevie is a ladies man, a player, a rake and a raconteur. He takes all the right risks in approaching women and much of the time it pays off. And he is probably the worst manager of investors’ capital I’ve ever seen in my life – which is not merely coincidental.
Friday night I got a string of texts from him – “I saw you on TV last night downplaying the Facebook IPO pop, I should have listened to you. I got so blown up today, long GSVC and SWEB. I hate this business.”
I responded, “you never know, the market could bounce Monday, Facebook and stuff could bounce…”
He was like, “the market looks terrible, Facebook looks cooked. I really fucked up this time.”
I’ve been watching this same exact excitement-daring-defeat-hopelessness cycle play out for years and years, I once branch-managed a room full of these guys (you have no idea).
Stevie is a great guy at heart but let’s keep it real – he gambles for a living. But on his business card it says “financial consultant” or “financial adviser” or “Executive Vice President of Equity Management” or some such shit. It should say Stock Market Desperado / Sex Maniac. Luckily, his clients are all gamblers, too (they started with him by taking a flyer trade over the phone, after all). Everything is high octane all the time, huge swings up and then crushing defeats that end up zeroing out the accounts (margin is a helluva drug). In the beginning he makes a lot of money for his clients and himself when the market is rockin’ and rollin’, getting paid tax-free on a 1099 as an independent contractor. He ends up watching it all get blown to bits when the market corrects (and it always does). Then it’s time to pay the taxman and the clients have all pulled their accounts. So now he’s starting over, back in “rebuilding mode,” and out looking for ten new “whales” to trade with him.
It’s a way of life for the retail stockbroker and I think it’s wearing on him; he’s my age for god’s sake, I have no idea how he can continue to do this. When I was a young broker I used to play the markets the same way. It’s what I was taught, the only thing I had ever known. In the equity markets of the 1990′s, this actually worked.
Then I bought an apartment and got married. Then I had a baby and then another baby and bought a house. I got life insurance worth a million bucks and started going to doctors again. We set up college accounts for the babies. And with each of these milestones, a little bit of the devil-may-care attitude that defined me as a broker faded from my repertoire. Stevie would say that I was having “my balls cut off.” And I guess that’s a little bit accurate.
But the game becomes about reward relative to risk once you have something to lose. Stevie isn’t there yet personally and so professionally he’s not even close. Once you do get married and have kids, being a professional gambler is a one-way ticket to fighting and divorce. The ups and downs of a career in speculation are completely incongruous with the desires for safety and certainty in the domesticity of the American Nest. That’s what the whole Suburban-Dentists-on-Motorcycles thing is about, the outlet and the controlled risk.
And there’s a scientific underpinning to these ideas you should be aware of. It comes back – as most important socio-biological things do – to Charles Darwin. Consider this from the Psy-Fi Blog:
Sexual selection – the competition for mates – lies at the heart of Charles Darwin’s theory of natural selection. All things being equal – which they never are, of course – any behavior or attribute which makes an individual more attractive to breeding partners should end up being selected for because the unsuccessful individuals in the mating game leave no offspring.
Given the biological imperative to pass on their genes you’d expect people to fairly aggressive in trying to do so. The evidence suggests that humans, like other species, tend to become risk-takers when confronted with the need to acquire a partner, particularly one of higher status. All of which leads to the slightly odd conclusion that, if you want your money handled as safely as possible, you should look for married managers in stable relationships. Or women.
I’m not saying a single guy can’t manage money rationally and take appropriate risks. I’m also not saying that all married men are prudent and forgo excessive risk-taking. What I am saying is that investing is an inexact endeavor and it is all about putting the odds in your favor, it is never about absolutes or certain outcomes.
One easy way to tilt the odds in your favor is to avoid taking direction or advice from the swashbucklers and the cowboys. In their personal lives, they “play by their own rules” and answer to no one. They are climbing the latticework under balconies to profess their love and lust, trading with a rose stem between clenched teeth while a codpiece barely suppresses their risk-induced erections. Don’t you think this cavalier bearing and overheated state of mind insinuates itself into their stewardship of investment capital?
Of course it does. They have nothing to lose, everything to gain, and they play the game that way exactly as you’d expect them to. On the other hand, Married men and women with less to prove and plenty to lose tend not to.
Take it from me, take it from Stevie.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.