Study Shows Testosterone is Bad For High-Stakes Decisions

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.'"

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re: Not in their best interests

[mysidia]

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.

Leading, no doubt, to the adage...

[hyades1]

..."Age and treachery beat youth and enthusiasm every time."

Re:RTFA. SRSLY.

[joss]

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.