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Lotto Loser?

To call Michael Carroll a loser or any other name that might be deemed appropriate for someone who manages to blow $15mil is an easy thing to do but in many ways it is a simplistic judgement. Certainly reading the article gives a sense of someone completely out of control. However, this is not an isolated phenomenon among those who have come into big wins through such things as lotteries. What is surprising is the number of people who have followed a similar route and the amount of money they have been able to blow through in a short period of time with almost one-third of lottery winners going bankrupt.

There are interesting parallels in this for traders since the urge to implode is strong within some traders. The classic case in point is the trader who lifts their account to a given size and then begins to unravel dragging their account back to either its initial starting size or worse down to zero. The archetypal example of this was Jesse Livermore.

Such a propensity for self destruction is a powerful threat to traders, I have already written on of the trader who approached us for a loan having blown $11 mil. My guess is that this sort of behaviour is what mental health professionals would call counter productive strategies. That is a series of defeating behaviours where the individual is looking for a positive outcome but ends up with the reverse. So the goal itself is positive but the mechanism of pursuing the goal is negative. My guess is that the reasons this sort of behaviour occurs is complex and multi faceted and probably tied up in threats made to the ego or having overall low self esteem.

Interestingly Lan Nguyen Chaplin (University of Illinois Urbana-Champaign) and Deborah Roedder John (University of Minnesota) found that there is seemingly a causal relationship between low self esteem and materialism.  So returning to the original theme of this piece then it is perhaps easy to see why people with poor coping strategies run into difficulty when faced with a financial windfall.


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