“The bonuses bankers have handed themselves in recent years aren’t just excessive- they may have hastened Wall Street’s collapse. Although cash incentives tend to make people work harder, expending too much effort can actually hinder tasks that require creativity, problem solving and concentration. Anticipating large bonuses can lead to excessive self –consciousness and a focus so narrow that it warps perspective by blocking important outside information-like say common sense.”

– from “Large Stakes and Big Mistakes” Review of Economic Studies as excerpted in the May 2009 Atlantic

HKO Comments- Wall Street needs a deep look and its short term and destructive compensation systems.