Greg Smith’s Resignation: Are Wall Street Traders Psychopathic?

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When a Goldman Sachs executive director, Greg Smith, resigned on Wednesday, he left in his wake a scathing op-ed in the New York Times excoriating the firm for its greedy values. The op-ed shook Goldman “like a bomb,” according to another story on the front page the following day. Smith claimed that Goldman’s current leadership had let the firm’s values disintegrate. Where once the Goldman culture encouraged employees to serve their clients for mutual benefit, now, Smith said, the driving force was rapacious avarice. The firm promotes “ripping their clients off,” he wrote.

To the average 99-percenter, this hardly seems like a revelation. Unethical behavior and Wall Street go hand in hand — especially at the top, right? Goldman supporters might say this perspective reflects sheer jealousy and resentment; however, a growing body of research suggests that there’s more to it than that.

(MORE: When You Go Hunting for Psychopaths, They Turn Up Everywhere )

One 2010 study looked directly at the prevalence of psychopathic traits in a sample of 203 executives at seven companies who had been chosen for their leadership potential to participate in additional management training. (The researchers did not reveal the nature of the businesses that employed the managers, so the results here don’t apply only to financial firms.)

Just over 5% of the trainees in the study met the full criteria for psychopathy — a rate five times higher than that seen in general public. Many of those who qualified were already in high-level senior management positions. So, the snakes are indeed overrepresented at the top.

Psychopathic traits include being highly manipulative and callous, lacking empathy and remorse, having little concern about consequences, being willing to use deceit or threats to get what you want and caring little for others except in terms of what you can get from them. Although the stereotype of a psychopath is a serial killer, they are actually more likely to be con artists or shady businesspeople.

(MORE: Study: 1 in 25 Business Leaders May Be Psychopaths)

While no available research includes only financial firms, it’s not implausible to think that those whose primary values are materialistic and power-driven would be especially attracted to the business that currently fuels many of America’s biggest fortunes. Indeed, a psychologist whose practice is focused on Wall Street recently told CFA magazine that he thinks that, at minimum, 10% of workers in financial services are outright psychopaths.

Like other personality traits and disorders, however, psychopathy lies on a spectrum. As with autism and schizophrenia, there are far more people who have related traits that do not cause disability than there are those with the full conditions themselves. In fact, in the 2010 study of managers, 4% of executives were found to score abnormally high on psychopathic traits, but not over the cutoff point that defines psychopathy.

As Dr. Ronald Schouten, who is writing a book about people who are psychopathic but don’t quite meet the full criteria, put it on the Harvard Business Review blog:

Psychopathy is mistakenly regarded as an all or nothing affair: you either are a psychopath or you aren’t. If that were the case, saying that 10% of people on Wall Street are psychopaths could actually be somewhat comforting, since it implies that the remaining 90% are not and so shouldn’t cause us any concern.

That yes-or-no approach dangerously ignores the fact that psychopathic behavior exists on a continuum. A great deal of damage can be done by individuals who fall in between folks who are “normal” and true psychopaths. These are individuals who would never be diagnosed as a psychopath, but whose behavior to varying degrees can be just as deceptive, dangerous, and remorseless as that of a full-blown psychopath.

And unfortunately, there’s even more reason for concern than this. Additional research suggests that rich people in general tend to behave less ethically than those who are not at the top of the financial heap. Several studies have found that wealthy people are typically less empathetic than poor people, both in terms of being able to read other people’s emotions and in terms of sharing or caring for others.

In a recent set of experiments, researchers observed drivers at an intersection and found that people driving fancy cars — a stand-in for high economic status — were more likely than those driving beaters to cut off other drivers and to fail to stop for pedestrians at crosswalks. The researchers also found in subsequent experiments that wealthier people were more likely to cheat at a gambling game and to take candy that would otherwise be given to children.

The same research revealed that unethical behavior wasn’t linked directly to being wealthy but rather to how much people believed that greed was good — a view that correlated highly with wealth. But even poor people behaved just as badly as the rich when they were primed to believe that selfish, greedy behavior was acceptable. Indeed, according to some research, just being in the physical presence of visible wealth reduces sharing. And, of course, simply working in a financial district is likely to provide an abundance of such cues.

(MORE: Why the Rich Are Less Ethical: They See Greed as Good)

All of this suggests that Wall Street offers a perfect storm of an environment that is not only likely to attract psychopaths and to promote them to the top, but also to encourage them to behave in antisocial ways. There are many exceptions to the rule, of course, and these studies, which only hint at tendencies, shouldn’t be seen as condemning everyone in finance. But the findings do raise troubling questions.

Smith claims that Goldman Sachs previously went to great lengths to create a culture in which service to the client was the highest value. The overall idea was to make money, certainly, but in a mutually beneficial way. Now, he says:

These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets” [a derogatory term for clients], “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.

The thing about psychopathic values is that they’re contagious. We pick up the values of our leaders and often mirror their behavior. But determining what to do about it is a lot harder than making the diagnosis.

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Maia Szalavitz is a health writer at TIME.com. Find her on Twitter at @maiasz. You can also continue the discussion on TIME Healthland’s Facebook page and on Twitter at @TIMEHealthland.

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