How do you tell if a group of bankers is dishonest? Simply by getting them all to toss a coin.
That may not seem like in-depth research, but it is the basis of an academic paper published in Nature magazine this week, which investigates whether the financial sector’s culture encourages dishonesty – and concludes that it does.
The academics from the University of Zurich used a sample of 128 employees of a large bank, and split them into two groups. The first set of bankers were primed to start thinking about their job, with questions such as “what is your function at this bank?”. They were then asked to toss a coin 10 times, in private, knowing which outcome would earn them $20 a flip. They then had to report their results online to claim any winnings.
Unsurprisingly perhaps, there was cheating - with the percentage of winning tosses coming in at an incredibly fortunate 58.2% (although the research omitted to say how many bankers also trousered the coin).
Meanwhile, the second group completed a survey about their wellbeing and everyday life, that did not include questions relating to their professional life. They then performed the coin-flipping task, which threw up a quite astonishing finding: these bankers proved honest.
Identical exercises in other industries did not produce the same skewing in results when participants were primed to start thinking about their work.
The research does not reveal which institution took part in the survey, presumably to avoid it suing the authors for unearthing some decent behaviour among the cheating.
“The effect induced by the treatment could be attributable to several causes,” the authors muse, “including the competitiveness expected from bank employees, the exposure to competitive bonus schemes, the beliefs about what other employees would do in the same situation or the salience of money in the questionnaire.”
They add that the “prevailing business culture in the banking industry may favour dishonest behaviour and could thus have contributed to the current loss of confidence in the industry,” before concluding that measures to “re-establish an honest culture in the financial sector are needed”.
Those may not be Nobel-winning conclusions, and it is perhaps less than candid to imply that this is somehow a new phenomenon. Financial markets have always been a mix of honesty and dishonesty – both of which are often suspected to be tactics deployed to gain some sort of advantage.
If you need proof of that enduring combination, look back at how the markets were satirised back in the 1987, in the guise of Sir Desmond Glazebrook, the fictional governor of the Bank of England in the BBC sitcoms Yes Minister and Yes Prime Minister. He mused that the City has only ever had one rule: if you’re incompetent you have to be honest, and if you’re crooked you have to be clever.
The rationale is that if you’re honest, the chaps will rally around to help you out when you mess things up. If you’re crooked, then you’re probably making decent profits for yourself and the bank, so nobody wants to ask questions.
Even honest bankers aren’t stupid, Glazebrook said. Well, not that stupid.
