For Want of a Couple of ZZZZ’s

As I continue to ponder how we have found ourselves in such a pickle I can’t help but wonder how so many very smart people seem to have overlooked or ignored the increasing risk taking that became the norm in the financial marketplace? What could cause such a contagion of self delusion?

I believe a glimmer of an answer lies in the concept of “executive function.” A psychiatric term, it “describes a set of cognitive abilities that control and regulate other abilities and behaviors. Executive functions are necessary for goal-directed behavior. They include the ability to initiate and stop actions, to monitor and change behavior as needed, and to plan future behavior when faced with novel tasks and situations… The ability to form concepts and think abstractly are often considered components of executive function.”

This seems rather straight forward. Now here is the “ah-ha moment.” Multiple studies have shown that lack of sleep (and this can build cumulatively) will impair executive function. In fact a study in 2004 concluded that there was significant impairment in executive function in tests after one night’s sleep deprivation.

In the 90 hour wall streeter week (and its parallels around the world) it was seen as a weakness if you couldn’t hack the pace. So much time was given to doing the job that one’s time off the job was derided. By the way a 90 hour week implies 15 hour days six days a week (or 13 hour days seven days a week). There doesn’t seem to be a lot of time in here for restorative sleep.

I thought about this most particularly in reading Citibank’s announcement of its sale of Smith Barney to Morgan Stanley. It is doing so reluctantly as it is suffers the mistakes made by senior management, the board, and even prestigious advisors such as Robert Rubin (who recently announced his resignation.)

Yet I wonder whether the bank gets it.  In commercial after commercial it tells us: “The Citi never sleeps!”… perhaps it should.