I agree that it's surprising that (1) working long hours seems to have been found ineffective in academic studies and yet (2) businesses tend to want it.

Since when did businesses behave according to perfect economic rationality, untainted by macho complexes or status displays/contests?

I think I've seen something very like this offered as an explanation for investment banks' punishingly long hours: one of the things an i-bank's clients are paying a lot of money for is knowing that at any time they can call up the person who's trying to put together a deal, and discuss it with them. That means that those people need to be around for long hours, which means that the people doing analysis for them also need to be around for long hours.

Think what you might do if you were actually trying to make sure someone was awake and on-call for discussing a deal at all hours. To my mind, redundant staff or shift-work would function better than espresso-driven manias.

Whereas I've heard plenty about I-banking hours being a form of hazing, which makes perfect sense.

The smarter the hedge fund, the shorter the hours.

One claim I've heard about investment banks is that low-level employees do nothing all day and then the boss leaves at 6 and gives them an assignment to be done when he come back in the morning.

Finance has a weird incentive structure. As my brother the stock trader explained it:

1) There is a practically infinite amount of work that any one group could be doing - there's always more data to be analyzed, companies to consider, etc., but there's diminishing returns to more work, because the best opportunities are exploited first and many kinds of financial activity are zero-sum competition over a finite pool of money. Hiring more people makes the total workload greater rather than dividing a fixed pile of work over more people. 2) Hiring someone takes money directly out of the pockets of their co-workers and the boss doing the hiring, so it's a last resort. Employee labor is the main expense, and pay and group "productivity" are tightly coupled: each group basically gets paid out of their own profits. If you're running a small group of traders - say, five people - and you decide to hire a sixth person, you and the other four people take a pay cut equal to that person's salary. (And because of diminishing returns, they don't make as much money per person as the smallest possible group that can do your kind of finance.) 3) Finance selects for people who want money more than time. People who can't devote just about every waking hour to work don't stay employed in finance very long - whether voluntarily or not. 4) Just about everyone in finance retires much earlier than in other professions. Once someone hits 40 or so they're usually burned out and leave the industry - they already have a huge pile of money, so they don't really need to keep working hundred hour weeks.

I think a lot of the finance industry overwork is outright about impairing employee judgement. Desensitization training - If a lot of what you do is abhorrent or just flat out nuts to the faculties of your recruits, work them until they are numb, and their sunk costs so high that quitting is no longer an option they can easily conceive of. Because they have no life other than the job. I also recall a highly hilarious study indicating that "skill" was essentially a nul factor in employee productivity in investment banking - so maybe it just flat out doesn't matter that the guy manning the desk is punch-drunk with sleep deprevation as long as he isn't so out of it he forgets to call frankfurt when the price of steel moves.