Did Cocaine Cause the Financial Crisis?
Was the financial crisis the hangover from a gigantic coke binge?
That's the line of reasoning of David Nutt, a British professor of something called neuropsycopharmacologist.
From The Independent:
The controversial academic, who was sacked for claiming that ecstasy was as safe as horse riding, told The Sunday Times that abuse of cocaine caused the financial meltdown.
"Bankers use cocaine and got us into this terrible mess," he told the paper, adding that the drug made them "overconfident" and led to them taking more risks.
Nutt, who is professor of neuropsychopharmacology at Imperial College, claimed that cocaine was perfect for a banking "culture of excitement and drive and more and more and more. It is a 'more' drug."
To be honest, when I first saw this story I assumed it was a hoax. The professor's name is "Nutt." His occupation is the nonsensical sounding "neuropsycopharmacologist"—and if you say it loud enough you'll really sound precocious. But I was wrong to turn my nose up at the story—Nutt's a real person and neuropsyco-yadda-yadda is a real thing.
Nutt's at least partly right here. There is a lot of cocaine use in finance. A head of one of Wall Street's top firms used to keep an antacid bottle full of the stuff in his desk drawer. A top trader from Bear Stearns once showed me a cocaine dispenser he had built from a retractable ballpoint pen that had his firm's logo on it. At the TGIF's near Wall Street you could silently pick up cocaine just by leaving a very large tip for the bartender; he'd then slide a napkin covering a baggie of coke across to you. Talk about an over-the-counter trade.
But if you're searching for pharmacological contributors to the crisis, you shouldn't stop at cocaine. Far more prevalent than cocaine were Ritalin and Adderall. Sometimes it seemed as if every single analyst and junior associate at a Wall Street firm was popping little blue attention-deficit pills. And not just popping them. Late at night, you would sometimes see a nose or two tinged blue because the pills had been crushed and snorted.
The virtue of "Ridderall," as one of my friends use to call the two drugs, was that it was perfectly legal. You could have it in your desk in its own bottle. On your desk, even. Everyone had a doctor who would prescribe it. If your doctor hesitated, you just went to another one. It was far cheaper than actual illicit drugs, and you didn't have to worry about what else was in it.
"All the dopamine, none of the dope," a Wall Street friend of mine once said.
Some folks on the Street even believed that ADHD drugs could make you a better trader by regulating your dopamine levels. A scientific study backs it up—kind of.
No doubt a lot of the billion little decisions that contributed to the financial crisis were made under the influence of drugs. But they typically were legally prescribed rather than the stuff Tony passed to you over the bar at TGI-Fridays.
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