I have mentioned this study briefly before but this is nice long form piece.
This idea—that Wall Street takes in ambitious, hardworking young people and corrupts them—is the premise of a recent study, “Business Culture and Dishonesty in the Banking Industry,” by three economists at the University of Zurich. The researchers recruited 128 employees from a large, unnamed international bank and another 80 employees from other financial institutions and asked them to participate in a simple experiment. The typical subject had worked in banking for about 11 years—long enough to have fully absorbed the industry’s cultural norms.
The task at hand was to flip a coin 10 times and report the outcomes of the tosses online. Subjects knew in advance whether heads or tails would be deemed the winner. If they reported that a coin toss yielded the right result, they would be given $20. Otherwise, they’d get nothing. At most they could make $200, or $20 each for 10 correct coin tosses. No one was watching as the bankers flipped a coin or reported their results, allowing the researchers to try to isolate behavior that looked like dishonesty.
The results of the study were published in November, in Nature. Of course, the expected outcome is that half of each person’s tosses were heads and half were tails. And that pretty much was the result the researchers found when the bankers were not reminded, through a series of social cues, that they were bankers. They reported a winning toss 51.6 percent of the time, an outcome that is statistically indistinguishable from the 50 percent expectation.
The result changed dramatically, alas, when the bankers were encouraged to remember their profession—a psychological phenomenon referred to as “identity priming.” When so prompted, they reported a winning result 58.2 percent of the time. It was very likely, the researchers found, that more than a quarter of the bankers had cheated. Worse, they discovered, this increased predilection to cheat was unique to banking. When nonbanker coin flippers were reminded of how they spent their time as professionals or as students, they showed no change in their tendency to cheat. “Our results thus suggest that the prevailing business culture in the banking industry weakens and undermines the honesty norm,” the researchers concluded. Or, more simply, as Alain Cohn, a lead author of the study, told me recently, “the apples are good, but the barrel is bad.”
