February 1, 2013 6:21 pm

The risk addicts

What makes some City traders develop a pathological gambling addiction? The secret lives of gambler-traders
Illustration by Noma Bar of a gambler sinking into addiction©Noma Bar

On any night of the week in London, if you go to a Gamblers Anonymous meeting, you will find a City banker turning up in tears over how much money he has just lost. This is according to Martin, a 29-year-old banker, who one night in the winter of 2011 stumbled into such a meeting, distraught at having lost nearly £200,000 playing blackjack online.

Phillip is another pathological gambler who used to be a trader and who, like Martin, doesn’t want his real name appearing in the Financial Times. Until 18 months ago, he used to trade foreign exchange in a small team. Four of them would fritter away idle moments spread betting, as a result of which they lost a great deal of money – as well as a marriage apiece. What was unusual about Phillip was not that his losses were the biggest of the four but that he was the only one who sought help.

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Lucy Kellaway

“Only about 1 per cent of traders with gambling problems ever come forward,” he says. “No one wants to admit it. Partly, it’s pride, but it’s also because everyone’s scared of losing their job.”

The story of Kweku Adoboli proves just how much damage a gambler on the rampage can do to the bank that employs him – as well as to himself. The former UBS banker lost $2.3bn in rogue trades but also sank £123,000 of his own money on spread betting – the most lethal sort of gambling there is, as the losses are unlimited.

Illustration by Noma Bar of a risk addict©Noma Bar

Spread betting is forbidden at UBS, as it is at most banks, but Adoboli took no notice. Neither did Phillip, whose spread betting losses were even higher than the rogue trader’s. “The rules are incredibly easy to get around,” he says. “And the spread betting companies never ask questions as most of their best customers are City traders.”

No one knows how many pathological gamblers work in trading rooms. The banks don’t want to talk about it. None of them would be quoted for this article; even the British Bankers’ Association declined to comment on the grounds that “personnel issues” were outside its remit. Most banks deal with gambling addictions in the same half-hearted way that they deal with their employees’ other awkward problems: with an all-purpose, confidential helpline that people can use (but in practice almost never do) to ask for advice.

This lack of concern may be because banks persist in viewing trading as an analytical, rather than a human, process. John Coates, a former trader who now researches the physiological effects of risk-taking at Cambridge university, argues that they need to look at it differently. “They see it as a cognitive activity but they need to understand the biology of risk-taking,” he says.

In his book The Hour Between Dog and Wolf, Coates examines how the brain responds to risk by producing vast amounts of dopamine – making us feel euphoric and motivated. He argues that traders on a roll are in the grips of an addiction, needing ever bigger doses of risk to sustain the high. Becoming addicted to risk-taking is something that can happen to any trader, he says, although in practice some seem more susceptible than others.

“I worked 13 years on Wall Street and most people were satisfied at the end of the day,” he says. “But there were a handful of individuals who took too much risk. They were the ones who went off to Las Vegas at the weekend.”

. . .

On the fourth floor of a health centre in Soho in London is the National Problem Gambling Clinic, the UK’s only NHS centre for treating the condition. It was set up in 2008 by Dr Henrietta Bowden-Jones, an addictions psychiatrist working for Central and North West London NHS Foundation Trust, and has so far treated 2,000 people, of whom a disproportionate chunk – around 20 per cent – work in the financial sector.

Although there may also be a disproportionate number of gamblers working in the City, Bowden-Jones does not subscribe to the view that all traders are gamblers. “Most traders are very successful and make balanced risk management decisions,” she says. “Being a pathological gambler is a very specific thing.” She defines that specific thing as “a persistent and recurrent gambling behaviour that disrupts family, social and professional pursuits”. It usually involves other undesirable things too, such as chasing losses, lying and breaking the law – stealing or committing fraud – to fund the habit.

What is interesting about the trader-gambler is that he doesn’t seem to fall into quite the same mould as other pathological gamblers. For a start, he always is a he. Bowden-Jones has yet to meet a female trader with a gambling problem, though she points out that this may be because there are so few female traders in the City. While other gamblers range in age from teenagers to geriatrics, banker-gamblers are bunched between their late 20s and early 40s.

Henrietta Bowden-Jones, addictions expert©Jennifer Pattison

Henrietta Bowden-Jones, addictions expert

Their defining trait is a grossly exaggerated confidence that they are going to make money – something that, in a weaker form, may be a good thing in a trader but in this extreme variety is a disaster. “They have an overinflated perception of their ability,” she says. “They are intelligent and socially skilled. They have high expectations of themselves and if they don’t succeed the consequences of that may lead them to take greater risks.”

They also tend to be in less of a mess mentally than many other gambling addicts – at least initially. “With other gamblers the anxiety and depression comes first. With these guys it’s the illegal acts and the gambling that leads to the depression,” Bowden-Jones says.

In general, people who become addicted to gambling fall into one of three camps. For some, it’s genetic. With others, it can come as a result of early childhood trauma. But most trader-gamblers fall into a third category. Bowden-Jones believes they get hooked on gambling because their brains are wired differently: the thrill they get from putting money at risk is irresistibly large. “These young men who become addicted to gambling become wildly aroused by winning – and losing – money.”

She is interested in the idea of conducting a clinical study to measure how they respond to wins and to near losses. It would look at the reward circuitry in their brains, measuring heart rates and skin responses and the release of dopamine, and compare the results with the brains of other gamblers that have been scanned at the clinic.

It is easy to see why people with brains wired like this are drawn to jobs in trading rooms. It is equally easy to see why banks are the worst possible places for them. Both Martin and Phillip are adamant that had they not worked for banks their addictions would have been far less severe.

They attribute this to four things, all of which underline just how dysfunctional trading rooms can be as places to work. First, there is the culture of recreational gambling that thrives despite attempts to squash it. Second is the stress and unhappiness, which makes gambling tempting as an escape. Third is the way that all success is gauged in terms of money – you are only as good as how much you make. But most lethal of all is the sheer amount of cash sloshing about, both in salaries and bonuses, and in the outsize sums traded. The result: any lingering respect for money is lost.

“I spend a lot of time working in my clinic telling patients who are problem gamblers not to go back into the City if they want to stay safe and avoid a relapse,” says Bowden-Jones. “Partly for their own sakes but also because it is simply not safe to have them handling other people’s money.”

Most gamblers who work in trading rooms manage to make a distinction between betting with their own cash and with someone else’s. If the money isn’t theirs, the rush that comes from putting it at risk is much weaker, and so their professional judgment is not distorted. But this isn’t the case with all traders. One who attended the gambling clinic explains how it worked for him: “The rush comes from the making of money, even if it’s not your own. It’s the status on the trading floor – that’s what makes you go on. Because you want the status you can get into chasing losses.”

Which, according to Bowden-Jones, could be the reason why Kweku Adoboli acted in the way he did. “He may have been driven by status and wanting to be the big earner among his peers. It is hard to say for sure but I think we could have helped him avoid the sequence of events he found himself involved in.” This last claim sounds an extravagant one. But if true, UBS would have saved $2.3bn, and Adoboli would not be looking forward to spending the next seven years in a prison cell.

If the former UBS trader had indeed presented himself at the Frith Street clinic, he would have had eight sessions of cognitive behavioural therapy. He would have learnt how to recognise the condition, and to understand the damage it has done. He would have learnt how to spot the “triggers”– the things that start people on a gambling spree. Most important of all he would have been taught how to be more realistic about his chances of winning.

The success rate at the clinic is pretty good. Six months after the treatment, Bowden-Jones says only a quarter of the patients had returned to gambling; the City gamblers fared better still.

“Traders are easy to treat,” she says. “They are quick thinkers who really understand the therapy. They are able to apply relapse prevention at every step of the way.”

The charity Gambling Concern, which raises money to support the clinic, is attempting to get the banks more involved and to see both that they have a duty to look after their workers, and that more screening and early detection could save them a lot of money. Bowden-Jones argues that there are various things they could do. Her favourite idea is to hold workshops explaining the condition to traders. She would like to see leaflets on the back of toilet doors and questionnaires allowing traders to identify the problem themselves and refer themselves to the clinic if needed.

Her patients, bearing the scars from their own wild gambling binges, want to see more extreme measures. Phillip argues that credit card companies should refuse payment to all spread betting and online gambling sites. American Express already does this but others should follow, he argues.

Martin, who now works in compliance at a major bank, believes that every young City banker should be given lessons on how to deal with money, just as newly rich young sports stars are. “You might say bankers should be intelligent enough to deal with their money but in my case, I wasn’t.”

More than that, he would simply ban all recreational gambling by bankers, and enforce it savagely with invasive screening and constant checking of individuals’ bank accounts.

“I’m in favour of zero tolerance. It should be in the contract. If you work in the City you don’t do gambling – simple as that.”

For more information on this subject go to www.gamblingconcern.org; www.cnwl.nhs.uk/cnwl-national-problem-gambling-clinic

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Phillip, ex-trader, London

When you say “gambler” to Phillip, a shadow crosses his face. “I still struggle to use that word,” he says.

The former foreign exchange trader is sitting in a small consulting room in the clinic to which he referred himself nearly a year ago, having lost a couple of hundred thousand pounds, his house, his wife and his family.

His whole life may have been torn apart by his gambling addiction but that word still upsets him.

“Bankers and traders have a superiority complex,” he explains. “We don’t want to be surrounded by people who go to the bookies and play on slot machines. But ultimately I know it’s the same. I know I have a problem.”

Phillip is quite clear about one thing. He is a professional, and a good one at that. “If I was given some capital now, I know I’d be successful with it. In my job I always made money. I have complete belief in my ability.”

The problem, he says, is that he could never replicate what he did at work with his own money. The adrenaline rush got in the way.

“Spread betting is like having a casino open 24 hours a day. It doesn’t stop at night. You wake up every hour and look at your position. Some nights I didn’t sleep at all and the less you sleep the less you make intelligent decisions. My saddest memory is my kids – who were three and five – telling me to put my phone down.”

At his worst, Phillip was unable to take his children to the swimming pool. “I couldn’t do anything that involved being away from my phone for even half an hour,” he says. “It’s a horrible memory.”

It all began in the seaside town where Phillip was born to a family he describes as working class but not poor. His parents divorced when he was two and he was brought up by a mother who was always criticising him.

“She always said: ‘You shouldn’t do that. You must hate yourself for doing that.’” Phillip and his friends would sometimes play on pin machines, and more often than not, he would win.

“I liked to think I was smart. I’d recognised patterns. I knew how to make money.”

Otherwise his main release came at school. “It came easy. I liked the thrill of the grades and the success.”

By the time he was 16, Phillip had decided that what he wanted most in life was to make as much money as he could, as fast as possible.

“I would look at the job adverts in the FT to see which was the best paid.”

In the mid-1990s he joined the City as a trainee foreign exchange dealer. And at first he loved it.

“From the markets I got the sense of being bright and successful. It was tangible feedback that I wasn’t getting at home.”

But after the first couple of years he started to find the atmosphere toxic.

“It was so stressful. I didn’t enjoy the environment or the people. The FX market is also very aggressive – and it’s not at all intellectually stimulating.”

Along with the other traders, Phillip would deal with the stress by spending wild amounts of money on cars and things that gave them no pleasure and on gambling together. “Money was our way of dealing with stress.” If they made losses it didn’t matter: their bonuses would take care of them.

But mostly, back then, he won. “In 2008, I moved to a big house with a big mortgage. I was trading foreign exchange for myself and made £80,000 which I paid into the mortgage.”

But then came the financial crisis and what had been a diversion became a compulsion. “Partly it was the boredom of the job. There was very little trading at work, so I traded for myself and lost more and more.”

In 2010, Philip was made redundant but times were hard and the payoff made almost no dent in his gambling debts.

Out of a job and in the dead of winter he started gambling even more heavily, chasing his losses.

“You start losing money and you think: I’ll wait for it to come back. You think: I can’t afford to lose £1,000. My wife will kill me. But then you think if I lose £2,000, she’ll still kill me so you go on. Then the loss is £5,000. Then you think: I’m so scared I may as well lose £10,000. If you get back to £5,000 you think: this is better so I’ll wait. It goes on and on and there’s no end to it.”

What made it worse was the willingness of three different credit card companies to finance Phillip’s binges. “That was what did the damage. I can face losing what I have – not what I don’t have.”

At the end of the first binge he confessed to his wife, who insisted that they sell the big house to pay his debts. “She thought I’d hit rock bottom but I hadn’t. I never took responsibility for what I’d done. That’s why it happened again.”

One day, soon after he had moved into a smaller place, Phillip went to visit a friend who was also a trader. “He’d had this massive extension built. I felt down and thought, I can’t believe I’ve lost so much money. I need to make it back.”

The second binge began. “I got very dark. I had lost the support of all my relatives and I just hit self-destructive mode. I was betting on cricket, football. I wanted to lose money. I just wanted it to be over.”

A year later, Phillip lives on his own, working to pay off his debts. “I identified trading as the wrong place for me,” he says. Now he works for an IT company with banks among its customers.

“I feel a completely different human being. I’m using my brain. I used to value everything, including my self-worth, by how much money I made. Now it’s different. It’s about whether I can solve a problem for a client.”

Phillip has not gambled for more than a year, and when I ask what has prevented him from relapsing he gives me two reasons. First, that he doesn’t have the money and, second, that it would ruin his chances of getting his family back.

Then, after a pause, he gives a third, more fundamental answer. “I know I wouldn’t end up winning.”

Martin, ex-banker, London

Round his wrist Martin wears a black rubber band. He slips it off, rolls it up and puts it back on. He repeats the action over and over again, an incessant, restless fiddling.

“This band was given on our first session in the clinic,” he says. “I look at it and it symbolises what I’ve lost.”

When I ask what precisely he has lost, Martin doesn’t mention the £200,000 he sunk playing blackjack online. Neither does he say that he lost his job as a rising star at one of the big UK banks.

“It’s the trust,” he says instead. “My family lost trust in me. My girlfriend lost trust in me. That hurts the most. The money thing doesn’t matter. I don’t have issues with that.”

The gambling began innocently enough, when he was a student at university and he and his flatmates used to gamble on sporting events. “We did it out of boredom,” he says.

Leaving university in the mid-noughties with a first-class degree, Martin joined a UK clearing bank on a graduate trainee scheme in the cash management department. The only thing that set him apart from the others on the programme was that he was more hardworking, more ambitious and more frequently promoted. “The speed I progressed through the bank gave me a feeling. I was very arrogant. You could say invincible.”

With the promotions came pay rises and by the time he was in his mid 20s he had more money than he knew what to do with. And so he started going to casinos with his friends, his bets always a bit larger then theirs, as were the kicks he got from winning.

“I thought: this is really easy, and I’m really clever and I’ll continue doing it.”

Soon Martin was playing blackjack and betting on horses at home in the evenings online. Once he won a full year’s salary at one sitting, yet still it wasn’t enough. He always needed more. “This success made me blind to everything else. I always thought: I am going to win.”

Despite the large amounts of money he was earning, none of it gave him any pleasure. He bought a house and a car, but not because he wanted either: they were merely a cover.

“Otherwise, people would have asked questions – if you’ve got so much money, why don’t you own a house? It’s really sad: the day you get the keys to your first house is meant to be a really cool moment but to me, owning one house isn’t anything, owning an estate – five-plus houses – is something. That’s where I wanted to get to. That’s a character flaw.”

As Martin wasn’t a trader, risk-taking wasn’t part of his job. However, his work in treasury management meant that every day he was dealing with prodigious sums of money.

“Billions are passing through your hands and the hands of your team so you lose the value of money. It meant that the size of my bets didn’t scare me.”

Unlike many City gamblers, who boast to their colleagues about their winnings, Martin kept his to himself. “I’m quite an insular person. I thought I’d found a smart way of making money and wanted to do it on my own.”

His girlfriend, with whom he was living, had no idea. He would join her on the sofa having won or lost tens of thousands of pounds playing blackjack online, order a pizza and stare numbly at the TV without taking in a single word.

Soon he was gambling pretty much all day, making excuses to work from home so as to do it undisturbed.

“I’d get up at 7, work full out until 2 o’clock, more than a lot of people did in a day, and would spend the rest of the day gambling. In 2011 I started experiencing losses. I thought, I can win, I can win. It became compulsive. I ran up dozens of thousands of pounds in debt.”

The credit card companies, he says, were at first only too happy to increase his limits as he was earning so much.

By then, something strange was happening to Martin: the more he lost the more excited he became.

“If I think about that now, it’s crazy talk. I realised that there was far more excitement and adrenaline in losing than in winning. In the end I didn’t even want to win. I had borrowed all I could, I had spent all I could, I couldn’t borrow any more. It was an absolute relief when that happened. If I had had access to another £100,000, I would have lost another £100,000. It’s that simple.”

At first, he says, his work didn’t suffer. It was only as the losses mounted that he became so distracted that he made a serious mistake – as a result of which there was a disciplinary procedure and he lost his job.

“I now see it as a cry for help,” he says. “They got my bank records, they saw everything – the times of day when I was gambling – and I got sacked.”

Out of a job, unable to borrow any more money, he sought help. Critical to his recovery has been getting a job where he is no longer handling money. He is still with a bank but now deals in the compliance department and is out of temptation’s way.

“I have no interaction with money at all. My girlfriend looks after all my money. I’m starting all over again. I’m now learning what £10 is.”

I ask if his new employer knows about his history and for the first time he looks a bit cagey. “I said I had had a problem with my previous employer and that I had been in therapy. But did I tell them everything? No. Because if I did I don’t think anyone would employ me. Because it’s a stigma. It’s still a stigma.”

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