Study Shows Testosterone is Bad For High-Stakes Decisions 213
itwbennett writes "According to a study by researchers at the University of British Columbia's Sauder School of Business, young CEOs with higher levels of testosterone in their system are 'more likely to initiate, scrap or resist mergers and acquisitions' — even when it's not in their best interest. 'We find a strong association between male CEOs being young and their withdrawal rate of initiated mergers and acquisition,' says Prof. Levi, whose research relies on the established correlation between relative youth and increased levels of testosterone. 'For instance, young CEOs, who have higher levels of testosterone, tend to reject offers even when this is against their interest.'"
Testosterone? Really? (Score:2, Insightful)
Testosterone? (Score:2, Insightful)
re: Not in their best interests (Score:5, Insightful)
are 'more likely to initiate, scrap or resist mergers and acquisitions' — even when it's not in their best interest. '
'For instance, young CEOs, who have higher levels of testosterone, tend to reject offers even when this is against their interest.'
First of all it says "even when it's not in their best interest". This is a strange claim. CEOs are not supposed to make decisions that are in their best interest anyways, they are specifically supposed to make decisions that are in their company's best interest, and in particular, that best serve the shareholders of their company. To intentionally do otherwise would be reckless, not what they agree to do by becoming CEO, and could get them sued, nonetheless.
Second of all what is in a person (or company's) best interest is subjective. To claim they are acting against their interest, you are applying prescriptive measures --- that they in your opinion should do certain things. For example "facebook should have agreed to merge with twitter". That is your opinion, which might or might not bear out.
To cast a point of view about whether it was in their best interests or not is "in retrospect". In retrospect it is always easy to say someone should or should not have done that, knowing the outcome. Not knowing the outcome, it is not so clear, and they are CEO there, not you, which is presumably out of some merit.
“We find a strong association between male CEOs being young and their withdrawal rate of initiated mergers and acquisition,” says Prof. Levi, whose research relies on the established correlation between relative youth and increased levels of testosterone.
I sense a case of post-hoc ergo propter hoc here.
Perhaps a better explanation would be, they are young, so they are as individuals less experienced, less wise, their age could have something to do with it.
Also, the fact that they're male doesn't mean testosterone -- if a different pattern was observed in females, there would be other differences besides testosterone difference.
You can't have an anecdotal study and have it be a legitimate study. You can't rely on knowing the fact that males of that age tend to have higher levels of testosterone and assume these groups of CEOs have higher levels of testosterone because they fall into that age category.
If you drew blood, you might find a totally different correlation between these CEOs and low levels of testosterone. Without even sampling the variable you are trying to make claims about, this is not an experiment, and not science.
Re:RTFA. SRSLY. (Score:2, Insightful)
The stereotype of the Real Man with real balls may have been a plus when it came to making him do dumb stuff like going to get stabbed at for his king, but it turns out to be a liability when the job requires more thinking with the head upstairs than with the one below the belt. You want someone taking economic decisions because they make logical and mathematical sense, not because it's his kind of measuring dick size against the partners.
Yet these same aggressive young men are the ones that start new businesses, thinking they've got what it takes to make it big, even though realistically the odds are against them. These same young men manage to convince investors and shareholders that they have got what it takes.
From an intellectual point of view I fully agree with you, but in the real world decisions are often made based on emotions, not facts. Just look around a big corporation who the guys are that rise to the top. Is it the quiet intellectuals that think with their heads or the sales guys that play people's emotions like a well tuned piano?
Re:RTFA. SRSLY. (Score:3, Insightful)
Well, as a general criterion, I would agree with you, but here we're talking a simple game with clear rules. The offer to get free money was clearly just an offer to get free money. The one offering it didn't get to write some "I own your kids now" clause in the fine print or anything.
Re:Control for experience? (Score:2, Insightful)
Hmm they seem to be a bit confused regarding causality here. In the interests of science, what if we try a small substitution/amendment:
"According to a study by researchers at the University of British Columbia's Sauder School of Business, young CEOs with higher levels of PARTICIPATION IN SOCCER/MASTURBATION/INTEREST IN SPACE TRAVEL/IPOD OWNERSHIP are 'more likely to initiate, scrap or resist mergers and acquisitions' — even when it's not in their best interest. 'We find a strong association between male CEOs being young and their withdrawal rate of initiated mergers and acquisition,' says Prof. Levi, whose research relies on the established correlation between relative youth and PARTICIPATION IN SOCCER/MASTURBATION/INTEREST IN SPACE TRAVEL/IPOD OWNERSHIP. 'For instance, young CEOs, who have higher levels of PARTICIPATION IN SOCCER/MASTURBATION/INTEREST IN SPACE TRAVEL/IPOD OWNERSHIP, tend to reject offers even when this is against their interest.'"
Re:RTFA. SRSLY. (Score:2, Insightful)
On the contrary... I really don't want econ majors making economic decisions. The idea the ultimatum game forces people to treat each other fairly... well, that's a world I want to live it.
In the case of the ultimatum game, as long as all of society is consistently utility maximizing or fairness maximizing, it works. It's the mixture where it breaks down.
Thinking with your dick, and being known for thinking with your dick can be a lot better for you than acting in a short-term profit maximizing manner.
Leading, no doubt, to the adage... (Score:5, Insightful)
Re:Testosterone? Really? (Score:4, Insightful)
Re:RTFA. SRSLY. (Score:3, Insightful)
Otherwise, economically speaking, they're being irrational.
And humans would never do that!
Re:RTFA. SRSLY. (Score:3, Insightful)
That's wrong though. By accepting the $20, you make yourself poorer than the other guy, which is why it's irrational to accept that offer (obviously some people aren't always rational...).
Money doesn't have absolute value, only relative value. In a market economy, the guy with $80 can always outbid the guy with $20 on everything. That means if you deliberately place yourself in a position to be outbid, then you are coming out behind. Since you can fix that by not accepting, that strategy (of accepting the $20) can't belong to a Nash equilibrium.
Re:Leading, no doubt, to the adage... (Score:1, Insightful)
"Never get in a fight with an old man, if he cannot beat you he will kill you."
Re:Testosterone? Really? (Score:1, Insightful)
Let me guess: you're under 30?
Re:RTFA. SRSLY. (Score:4, Insightful)
Your "Give me more than you" ultimatum results in a persistent loss for both, which is undesirable. Relatively you are no worse or better off. Realistically you are poorer.
Re:RTFA. SRSLY. (Score:3, Insightful)
Beside, the participants of the game were NOT CEOs, so it has no meaning whatsoever. It's not because you are taking cranky boosted adolescent to play a game that you can compare to CEOs taking important decisions. The first thing is that it was all a game..
Re:Control for experience? (Score:3, Insightful)
More importantly, it misses the point. Assuming that the symptoms are true, that older CEOs tend to make better business decisions, assigning it to lower testosterone levels is a bit absurd. Perhaps it is due to experience? Perhaps we get a little less impulsive as we age, tend to not make snap decisions, and exercise better judgement at 55 than at 25? Maybe we just see the big picture better as we age. Some call that wisdom.
Saying that testosterone is the root cause of bad CEO decisions is like the FSM comparison of the correlation between global warming and the number of pirates in the world. It might be an entertaining read, but it isn't science.
Re:Gynocentric crappola (Score:3, Insightful)
Re:RTFA. SRSLY. (Score:3, Insightful)
However, Business is a continuous, statistically driven environment. That means for an organization to move forward the majority of the decision would be logically based, but at some point of time, a business have to take chances. In this example, if you were able to successfully bid out to receive at least $60 (not necessarily getting the $80 the other person would have received), you just even out the three $20 offers you refuse. That is quite an incentive to take a chance on something.
Of course, gamblers usually don't last too long. But for some major decision with potentially high payout, sometime a risk is worth taken. You would have to mitigate the risk and the liability of the "wrong" decision, or be able to swallow the loss as a result of that (e.g. people still getting paid, company not losing a big chunck of operating cash reserve, etc.).
Re:RTFA. SRSLY. (Score:5, Insightful)
The 'rejection of free money' is from a test where A is given $100 and has to offer a proportion to B. If B rejects, neither A nor B get anything. The ultimatum game.
The test is supposed to measure irrationality. Since the game is only played once, economists say whatever the offer made by A, if it is more than zero, then B should accept. According to their limited reasoning powers, A should offer B $1 and B should accept. In real life, A typically offers much more than that, and B typically rejects an offers of less than around 40%.
Far from demonstrating the irrationality of the participants the test nicely demonstrates two forms of stupidity particuarly prevelant in economists.
The first form of stupidity is thinking that if something is impossible to measure in monetary terms, then it has no value. They think that by rejecting the offer B gets nothing. Actually, B gets the satisfaction of punishing someone for being stingy. Suppose we were playing with $100 and A offered me $1. I would certainly reject the offer as the satisfaction of seeing A get nothing for being a dick would be worth more than $1.
The second form of stupidity here is the belief that if something cannot be modelled, then its not real. This situation has elements of paradox which makes it hard to model. If we ignore the fact that non-monetary things can have value, there's still something interesting going on here. The fact the B might behave 'irrationally' by rejecting A's offer means that in practise, B ends up making more money than he otherwise would. A knows that B will reject an offer he deams too low, and so A offers much more than he would if he knew that B would take anything he offered. If we stick strictly to money, after the offer has been made B should always take it.. its supposedly 'irrational' not to. However, without the fear of irrationality A would always take $99 and B would get $1. Actually B typically gets much more than that so the 'irrational' behaviour is actually smarter.