<p>Not sure psychopaths, though having worked in the financial industry now for well over 25 years, there are traits that many share with psychopaths. The old statement “it wasn’t personal, it was business” comes to mind (kind of like Tessio in the Godfather telling Michael why he was involved in the plot against him), there is a lot of rationalizing, there is a lot of dissociation between what they do and the effects of what they do. Whether it was ‘borrowing’ from customer accounts to keep a company afloat (MF Global, others), or brokers calling their customers with ‘hot stocks’ that often were turkeys they were trying to unload from their own or their corporate accounts (especially true when firms underwrote an IPO that was going south), to the chicanery of cooking the books of a company to boost the stock price, or executives slashing payroll of successful companies, putting thousands out of work, to boost their own compensation (since most of it comes from stock price) and so forth. </p>
<p>As far as business schools, the real problem isn’t what they teach as much as what they don’t teach. The basics of business school are relatively innocuous, they teach about accounting and finance and how to analyze the financial health of a company and on decisions of whether it is better to expand capacity or get more out of existing capacity, etc, it is in operational efficiency, on building markets, organizational structures, you name it. The real problem is very little is spent analyzing what we used to call stakeholder management, of the consequences of actions, of the consequences of decisions that stretch beyond the bottom line, of the next quarter, or putting ‘shareholder’ interests above that of the company itself (for example, putting in short term things that make stock analysts go gaga, usually cutting costs, that cause the stock price to jump, that may be undermining the company). Things like ethics get short shrift, since the big business schools know that won’t sell their graduates to corporate,inc, or things like social responsibility. Last I checked, they had a lot more work on ‘branding’ a company, of ‘projecting’ an image, basically pr, then on the ethics and responsibility of business. </p>
<p>Not to say they don’t have gems, I read a piece by some schmuck in the Harvard Business review that stands out who basically argued that insider trading should be legal, how it was all about ‘the game’ and so forth (couldn’t figure out if the guy was some game theory analyst playing with a theoretical proposition, or someone with their ethics chip turned off), how insider deals and manipulations and stuff are actually good for companies …</p>
<p>And you can see some of it in the current headlines. JP Morgan chase just took a 2 billion dollar hit in derivatives trading (they basically bet the wrong way on credit default swaps they sold), this only 4 years after the financial world melted down over similar things, and what is coming out is senior management and risk managers basically ignored a slew of red flags to allow this trading to go on…last I checked, between the trading losses and the hit to their stock, they have lost 20 billion dollars in value. Yet Jamie Dimon has been particularly vocal that the Volcker rule, which would stop banks from doing this kind of prop trading, wasn’t necessary, that banks were aware of their responsibilities and how vulnerable they could be if risk measures weren’t followed and so forth, and that they were ‘good stewards’ of the economy and would no longer put commercial lending at risk from such trading…</p>
<p>I suspect the wording would be better served to say that the culture tends to reward those whose behaviior is more aligned towards the psychopathic end of things, that is probably closer to the truth.</p>