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An Occupational Hazard: How Cocaine embodies what’s wrong with the culture of High Finance


By Ken Cates, Staff Writer

 

Was cocaine the cause of the financial crash of 2008? According to David Nutt, the former drug czar of the UK, the answer is a most definite yes. Nutt, also a professor of neuropsychopharmacology at Imperial College, talked of how the ever persistent nose candy made bankers and traders “overconfident” as they took on more risks at the expense of their clients. Dr. Chris Luke of Cork University Hospital, Ireland, also shares this view, where he concludes that rampant cocaine use fuelled the megalomania of financial titans that led them to make irrational decisions, “thinking they were 110% right.”

However nutty this opinion may sound, if you can forgive the pun, it does help explain why bankers and stockbrokers keep reminding me of Rob Ford. Both were in drunken stupors, and both revealed themselves to be complete train wrecks. The key difference however, is that acting like a raging coke addict is completely normal within the culture of high finance, a culture that Prof. Nutt describes as one of, “excitement and drive and more and more and more.”

A company’s culture determines the character of the firm and the values to be communicated, not through any rulebook but through its daily practices. If this is indeed the case, what does it mean when a company culture turns a blind eye to its coke addled employees?

Former Bear Stearns CEO Jimmy Cayne was said to keep his stash in a bottle of antacid in his desk. Cocaine abuse was so rampant in Bernie Madoff’s  company his office was referred to as the North Pole. And of course there are the ever-growing firms of Wall Street, getting caught in association with the drug as early as 1915. To really understand the place of cocaine within the banking culture, its important to start with a simple question. Out of all the drugs to take, why is cocaine the long time favourite  for traders?

Scientists say  that trading and coke going together is no accident. There’s growing evidence from cognitive neuroscience stating that making money affects the same “pleasure centres” of the brain that are activated by certain drugs. Neill Junor, a former analyst at the British firm BT Alex, knows the sensation all too well. The powder often went hand in hand with heavy boozing, all for the sake of keeping the thrill of the office going. “It’s the same rush from doing a deal and doing cocaine,” reflects Junor. “The adulation from doing a deal spills into going for a beer and then a party … it’s an amorphous blob of energy.”

According to cognitive neuroscientist Trevor Robbins, both trading and cocaine involve risk taking and raises dopamine – the feel good chemical – levels within the brain. As with skydiving or betting on stocks, an afternoon snort break in the company washroom can boost the sense of euphoria, increase confidence and the  workers’ level of energy. “Cocaine is highly desirable in our busy 24/7 society,” says addiction specialist Dr. Ray Seidler. With the blow reducing the need for sleep and resulting in bouts of over-exuberance, it is the ideal drug for a trader selling a complex product he knows little about with boundless – and often groundless – overconfidence.

In both banking and snorting coke, a central component is the somewhat fatalistic notion of risk taking. This notion reflects the realities that shape the culture of finance, where layoffs and downsizings are abundant even during a boom in the market. Even employees working 120 hours a week are constantly talking about their job insecurity. According to the banker turned anthropologist Karen Ho, what is valued within such an environment is not job insecurity but a constant synchronization with the market and stocks. Ho remembers how one banker told her, “I might not be at my job next year so I’m going to make sure to get the biggest bonus possible.” As is the case with obscene bonuses, the use and abuse of alcohol and coke is something the workers feel entitled to. They believe they earned the right to do so.

Another factor that is reflected in both trading and cocaine is the emphasis on the workers’ energy levels. “Some of the banks’ embodied controls focused on managing employees’ energy and included providing free caffeine and “energy slumps,” hiring young people, focusing on energy as the main hiring criterion, and firing low performers because of their energy drain,” writes business professor Alexandra Michel.

A former banker herself, Michel writes of how the 24/7 administrative support provided by banks  erased the distinctions between work and play. Leisure at work is encouraged along with the provision of free amenities such as childcare, valets and free meals. This makes it all the more helpful to drown yourself into an amorphous blob of energy, to keep working at whatever cost.

So why does the drug habit of filthy rich traders matter? It matters because the practice and beliefs of high finance trickles down to other service sector jobs. In any knowledge-based industry with long hours, hard work, constant deadlines and critical thinking, the burst of energy cocaine provides goes perfectly well with a risk taking culture. The bosses turn a blind eye to the employees’ drug habits as long as you rake in the deals. They encourage you to be a gambler and a risk taker, pushing a short-term view on both trading and living.

Culture is something that feeds on itself. By emulating the never sleeping, win-at-all-costs business titan enshrined Fortune or Forbes magazine, various industries end up mimicking the beliefs and behaviors of Wall Street culture. This is especially true with the promotional process of a company. As the practices of a company become a routine, those who are more compatible with the established culture climb up the ranks.

Hard work itself becomes a fetish where job stability is next to nonexistent. The focus on instant action and performance makes it harder for the company to take a step back and think of the consequences of its actions.  Speaking of Titanic, it’s important to keep in mind that the iceberg is always closer than you think.

About a year before the financial crisis, Citigroup’s CEO Chuck Prince was quoted in the Financial Times thusly, “but as long as the music is playing, you’ve got to get up and dance. We’re still dancing”. While the quote refers to the buy-out boom at the time, it is useful because it captures the psychological aspects of a culture that thrives on risk taking. Where traders and bankers were doing the dancing, the beat they were dancing to was the inflated subprime bubble. The employees who warned of the risk to come were labeled as naysayers and fired faster than you can say Dance Dance Revolution. For once George Bush had a point in saying that, “Wall Street got drunk.”

Dancing itself evokes a form of emotional expression. The excitement of dancing to the beat of wealth made it even harder for them to slow down or stop. This dynamic is best explained by the congressional testimony of MIT economics professor Andrew Lo. After referring to the scientific evidence of how making money and cocaine have the same neurological effect he testified, “that prolonged periods of economic growth and prosperity can induce a collective sense of euphoria and complacency among the investors that is not unlike the drug-induced stupor of a cocaine addict.” It’s amazing to think that this testament came years before the Rob Ford saga had even begun.

Drunken stupors aside, the notion of dancing tie in with another key component of financial culture, as described by Ho. It’s the obsession with the ideal of “the market”, where near-term thinking and acting in the moment are paraded as the only way to synchronize oneself with the ups and downs of the market.

This concept is easier to understand if you think of investment banks as a rave. A massively profitable deal flow takes on a trance-music like momentum. It becomes harder to stop partly because of the emotional and financial attachment that the top brass of the company has. As the rewards grow and the beat speeds up, it takes an amorphous burst of energy to keep you moving on the dance floor of the stock market. As the pay bonanzas and the competition with other firms intensify, the body naturally shuts itself down. Thus, cocaine, among other drugs, to quote Michel, “is an attempt to feel alive,” yet shutting down the body by doing so.

However anticlimactic it may sound, in a sense what poisoned financial culture – and of the industries imitating this culture – was its success. Competitive success influences a company’s culture by reinforcing the pre-existing perceptions and inferences existing within the psyche of a company’s culture. While success allows  a company to unite and focus in order to survive the stress of the market, in the end, the simplified beliefs it fostered to survive becomes dominated by a narrow focus and accompanying routines and myths. It happened to Enron, it happened with Lehman and it happened with Lance Armstrong. If your workplace is successful enough, it could happen to you too!

A company’s culture is something that is forged by the accumulation of unique beliefs and practices that symbolize the values that it will communicate. Thus, clear-cut mission and a corporate code of ethics becomes the key principle in deciding to emphasize on short-term gain or long-term stability.

As the beliefs and myths of Wall Street trickle down to various industries, having a mission that provides distinct guidance and a clear decision making ethic becomes crucial to fight the rave like influences and the impulse to dance. Once the momentum of shortsighted risk taking builds up, stopping it would be like standing in front of speeding train driven by a coke addict who is in a hurry. Although I am in no position to give any solutions, I will leave you with some words worth remembering. Cocaine is a dangerous drug, so be careful when business is booming.

 

 

Ken Cates has double majored in international relations and political science at the University of Toronto, while currently pursuing a certificate in freelance writing at the schools continuing studies program. Inspired by writers such as Christopher Hitchens and Chris Hedges, Ken writes about religion, politics, ethics, society, and on the little bits of irony surrounding our daily lives.

Blog: http://beuncomfortable.wordpress.com/

Twitter: https://twitter.com/dinowithsaddleK

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