Is Wall Street Full of Psychopaths?

One estimate suggests that one out of every 10 employees on Wall Street is a psychopath. That's probably off, but consider how many almost psychopaths there are instead.

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Wall Street and its collective psyche have taken some very public lumps lately, with an executive director resigning from Goldman-Sachs via The New York Times because of the "decline in the firm's moral fiber," and the headline-generating article in CFA Magazine by Sherree DeCovney claiming that 10 percent (at least) of the people in the financial services industry are psychopaths (subscription required). That 10 percent figure could go a long way toward explaining the resignation, couldn't it? Perhaps. But, before deciding the answer to that question, it will be helpful to understand what psychopathy is.

While the common perception of a psychopath is an axe-wielding serial killer, that is not usually the case. Psychopaths are not all violent criminals (though some are). Psychopathy is a psychological condition based on well-established diagnostic criteria, including superficial charm, conning, and manipulative behavior, lack of empathy and remorse, and a willingness to take risks.

Determining whether a person is a psychopath is usually done by using a test like the Psychopathy Checklist - Revised (PCL-R), developed by Robert Hare and his colleagues. People are rated on a scale of 0 to 40 points; presumably, everyone scores a few points, and true psychopaths score in the top 25 percent of the scale. Using such formal diagnostic criteria, researchers have estimated that about three million Americans (one percent of the population) are psychopaths. Based on this statistic alone, there are psychopaths on Wall Street.

And, it would make sense that a disproportionate number might work on Wall Street. Certain maladaptive personality traits (a lack of empathy, an increased willingness to take risks) might be considered desirable in some settings (a cautious person overly concerned with the feelings of others might not be the best fit at an investment firm).

Also, there are studies that support the idea that corporate executives have certain personality traits. Researchers at the University of Surrey found that, compared to criminal psychiatric patients, senior business managers were more likely to have one of three personality disorders (histrionic, narcissistic, and obsessive-compulsive). And, in 2010, researchers studied 203 participants in management development programs at seven different companies and found that approximately four percent met the diagnostic criteria for psychopathy. While not studies of the financial services industry specifically, they do support the notion that there may be more psychopaths in the corporate and financial world than in the general population.

Still, though, the estimate that 10 percent of those in the financial services industry are psychopaths is precisely that -- an estimate that is not based on any scientific study. And it ignores an important concept: psychopathy is not an "on/off" proposition -- it exists on a continuum (as shown by the PCL-R scale, which ranges from 0 to 40). There are those whose scores do not reach the top 25 percent of the scale and who would not be diagnosed as psychopaths, but whose manipulative and uncaring actions may cause great suffering to those around them. These are the people who my colleague Ronald Schouten (an associate professor of psychiatry at Harvard Medical School) and I refer to as "almost psychopaths" in our forthcoming book, Almost a Psychopath. Almost psychopaths differ from true psychopaths not in the types, but, rather, in the frequency and intensity of their remorseless and damaging behaviors.

Research studies suggest that as much as 15 percent of the general population (that's about 45 million Americans) can be characterized as almost psychopaths. If Wall Street does, in fact, select for people who display certain characteristics of psychopathy, it is safe to assume that at least 15 percent of people in the financial services industry are almost psychopaths (and, therefore, more prone to acts of fraud, deceit, and self-serving manipulation).

So, yes, Wall Street may have a significant percentage of self-serving, ruthless, and manipulative psychopaths and almost psychopaths. And, yes, this fact might be of considerable importance in assessing the "moral fiber" of an investment bank. Whether this is a new phenomenon, though, is a separate question. And, in the current zeal to castigate Wall Street, let us not lose sight of the fact that about one out of every 100 people is a psychopath and 15 out of every 100 people are almost psychopaths. They are husbands, wives, doctors, lawyers, teachers, and store clerks.

And they are a lot closer to you than Wall Street.