Maleficent or mindblind: questioning the role of Asperger's in quant hedge fund malfeasance and modeling disasters.

Author:Kibbie, Kelly S.
Position:Twenty-Seventh Annual Survey of White Collar Crime
 
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TABLE OF CONTENTS I. INTRODUCTION II. WHAT IS ASPERGER'S DISORDER A. Diagnostic Standards B. Dramatic Increase in Autism Spectrum Disorders C. The Illustrative Description of Dr. Michael Burry III. ASPERGER'S AND CRIMINAL ACTIVITY A. Asperger' s Features That May Increase Vulnerability To Commit Criminal Activity (1) "Mindblindness" (2) Obsessive Special Interests (3) Autistic Malice (4) Deceitfulness and Difficulties Admitting Mistakes (5) Weak Central Coherence B. Crimes Common in the Asperger's Criminal Population C. Hacking Crimes IV. HEDGE FUND MALFEASANCE AND QUANT DISASTERS A. Possible Reasons for Hedge Fund Malfeasance B. Examining Asperger's Connection to Certain Quant Disasters and Financial Crimes (1) Questioning the Connection Between Asperger' s and Certain Quant Disasters (2) Questioning the Connection Between Asperger's and Financial Market Manipulation Using Complex Computer Algorithms (3) Questioning the Connection Between Asperger's and Securities Fraud Related To the Active Concealment of Errors in Quantitative Programs (4) Questioning the Connection Between Asperger's and Insider Trading Based on Information Obtained by Computer Hacking Activities V. IMPLICATIONS FOR LAWMAKERS AND ATTORNEYS CONCLUSION I. INTRODUCTION

This paper examines the potential link between certain cases of the developmental disorder Asperger's Disorder and certain financial crimes and disasters. Leading Asperger's researchers have long noted that, due to the nature of the disorder, those with Asperger's who violate the law commit certain types of crimes at an overrepresented rate and other crimes at an underrepresented rate. (1) Recently, leading researchers have drawn a link between particular computer hacking crimes and certain presentations of Asperger's. (2) Logically extending the reasoning supporting such a link, this paper examines whether a link may also exist between certain "quant" financial crimes and disasters and some presentations of Asperger's. Specifically, this paper examines the role that Asperger's may play in the following three areas of criminal activity: (1) financial market manipulation using complex quantitative computer algorithms; (2) securities fraud related to the active concealment of errors in quantitative programs; and (3) insider trading using information obtained by criminal hacking activity.

Caution is urged in avoiding the implication of stereotypes, which is most definitely not intended herein. As with other academic works analyzing potential links between Asperger's and criminality, the goal here is to describe "the components of [high functioning Autism Spectrum Disorders] that might increase the vulnerability of an affected individual to break the law" and not to imply that "the likelihood of acting criminally per se" is enhanced. (3) Innumerable particularized factors in any one case necessarily complicate an ability to draw broad generalizations, and this discussion is qualified by that understanding. (4)

Examination of the possible relationship between certain presentations of Asperger's and particular financial crimes and disasters is timely in light of the recent convergence of technological, financial, legislative, biological, psychological, and criminal occurrences and phenomena, including: (1) the increase in the prevalence and global economic significance of quantitative traders; (5) (2) the noted draw of those with certain symptoms of Asperger's to this area of the hedge fund world; (6) (3) the recently-noted 57% increase in Autism Spectrum Disorders (including Asperger's); (7) (4) the large potential global impact of financial crimes; (8) (5) the recent focus by the Securities and Exchange Fund ("SEC") on hedge fund malfeasance; (9) (6) the potential impact of the Dodd-Frank Act (10) on hedge fund regulation (or the lack thereof); (11) and (7) the lack of serious attention to this confluence of events and phenomena. Consideration of this issue is of critical significance to investors, to those afflicted with Asperger's making a living in the financial markets, to lawmakers and attorneys, and to the global financial markets as a whole. (12) The purpose of this paper is to start a dialogue regarding these issues. (13)

Section II of this paper provides an overview of Asperger's Disorder and pertinent diagnostic standards. Section HI examines Asperger's features that may increase vulnerability to commit certain crimes and details crimes that are common within the Asperger's criminal population, with a specific focus on computer hacking crimes. Section IV provides a general overview of hedge fund malfeasance and specifically examines the possible connection between Asperger's and the above-noted crimes and certain "quant" disasters. Section V considers the implications for attorneys and lawmakers.

  1. WHAT IS ASPERGER'S DISORDER?

    In 1944, a Viennese pediatrician, Dr. Hans Asperger, sought to find a description and explanation for a small group of similarly afflicted children referred to his clinic. (14) The children all exhibited marked problems in social interaction, preoccupation with "unusual and circumscribed interests" which interfered with the development of other skills, difficulty dealing with their feelings, deficient empathy, difficulty interpreting social cues, clumsiness, and difficulty with nonverbal aspects of communication including the use of facial expressions and gestures. (15) He labeled this syndrome Autistischen Psychopathen im Kindesalter or "autistic personality disorders in childhood." (16) Dr. Asperger was unaware that the year before Leo Kanner, another Austrian physician living in Baltimore, had published an account of eleven children with similar yet more severe symptoms, which he labeled "early infantile autism." (17) Almost forty years later in 1981, a British psychiatrist, Lorna Wing, described thirty-four cases of children resembling Asperger's description who did not match the autism criteria being used at the time. (18) Wing used the term "Asperger's Syndrome" to provide a new category within the autism spectrum. (19) Thereafter, several varying diagnostic guidelines were proposed, each taking slightly different views as to what symptoms were necessary for a diagnosis. (20)

    1. Diagnostic Standards

      In 1992, the World Health Organization for the first time included Asperger's Disorder as a pervasive development disorder in its tenth edition of International Classification of Diseases ("ICD-10"). (21) The American Psychiatric Association followed suit in 1994, including Asperger's Disorder in the fourth edition of its Diagnostic and Statistical Manual of Mental Disorders ("DSM-IV"). (22)

      Under currently accepted diagnostic guidelines, Asperger's is defined as a chronic neurodevelopmental disorder characterized by qualitative impairment in social interaction and restricted, repetitive, and stereotyped patterns of behavior and interests. (23) While the disorder causes significant social, occupational, or other impairments, there is no significant delay in language or cognitive development. (24) Finally, in diagnosing the disorder, doctors check that the criteria are not met for other pervasive development disorders (including autism) or schizophrenia. (25)

      It should be noted that the newest proposed draft of the fifth edition of the Diagnostic and Statistical Manual (26) moves Asperger's Disorder into the Autism designation, creating a new diagnostic category labeled "Autism Spectrum Disorder." (27) This new category would include Autistic Disorder, Asperger's Disorder, Childhood Disintegrative Disorder, and Pervasive Developmental Disorder Not Otherwise Specified. (28) The draft explains: "A single spectrum disorder is a better reflection of the state of knowledge about pathology and clinical presentation; previously, the criteria were equivalent to trying to 'cleave meatloaf at the joints."' (29) Many researchers already conflate Asperger's and high-functioning autism. (30) Importantly, the change might allow

      people currently diagnosed with Asperger's Disorder under DSM-IV to receive services that they are now unable to receive. (31) For example, certain states, including California, deny services to children with Asperger's Disorder but provide services to children with Autism Disorder. (32)

    2. Dramatic Increase in Autism Spectrum Disorders

      The recent staggering increase in the rate of Autism Spectrum Disorders is a societal phenomenon that cannot be ignored. The Center for Disease Control reported an overwhelming 57% increase from 2002 to 2006 in the occurrence of the disorders among one age group. (33) The study estimates that, as of 2006, approximately one in every l l0 children was classified as having an Autism Spectrum Disorder. (34) Approximately 85% of those with high-functioning Autism Spectrum Disorders are male. (35)

    3. The Illustrative Description of Dr. Michael Burry

      In his recent popular book The Big Short: Inside the Doomsday Machine, Michael Lewis writes a fascinating description of Dr. Michael Burry, a man diagnosed with Asperger's at the age of thirty-five, (36) whose obsession with stock picking led him to quit his medical residency in neurology at Stanford Hospital and launch a successful hedge fund. (37) Late at night after his long shift at the hospital ended, Dr. Burry would post his stock picks on his online blog. (38) His obsession was so great that he was working sixteen-hour shifts at the hospital and then blogging mostly between midnight and 3:00 a.m. (39) Due to the attention from readers of his blog, he decided to quit his neurology career and pursue his special interest full-time. (40)

      Lewis paints a portrait of Burry's Asperger's that allows the reader to see the sometimes debilitating symptoms. Burry became incredibly anxious when he had to speak to people face-to-face; he disliked the experience so much that he avoided it whenever possible. (41) "He found it maddeningly difficult to read people's...

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