Monday, August 30, 2010

Risk-Taking and the Entrepreneur Brain

Young and the impulsive. When young people are given the Cambridge Gamble Task, teens to early twenty-somethings were the most likely to be impulsive and take risks. As the ages go up, impulsivity and risk-taking go down...at least if you're not an entrepreneur. If you're an entrepreneur, your performance on the gambling task is more like a young person's.

Risk-taking and impulsivity usually conjures up talk of ADHD, substance abuse or deliquency, but higher levels of risk-taking and impulsivity also correlated with higher likelihood of being an entrepreneur rather than a manager.


On a test of cognitive flexibility (Tower of London), entrepreneurs were just as likely as managers to score high. And on the Gamble task, both managers and entrepreneurs were able to to make good decisions 95% of the time.

But where entrepreneurs differed from managers is on "hot" or risky decisions in which they had to risk a greater portion of their earnings in order to win bigger. On these high reward-high punishment decisions, managers were  risk-averse.

"Entrepreneurs demonstrate creativity through the development of positive financial opportunities for society as well as themselves. Although we know little about the psychopathological ‘dark side’ of entrepreneurship10, we would argue that the effects seen with our gambling task reflect functional impulsivity11, a subtype of impulsiveness that may enable impulsive individuals to capitalize on environmental niches. This functional impulsiveness of entrepreneurs combined with enhanced cognitive flexibility is a winning combination."

So the question is - when we see bright and creative impulsive children, are we really thinking, wow these kids would make great entrepreneurs...

Innovative Brain - Nature pdf

3 comments:

  1. This is interesting, but I wonder whether the "impulsivity" of entrepreneurs is really the same as that of adolescents. Adolescent impulsivity seems to be characterized by a lack of (conscious) forethought, but is this true of entrepreneurs? It seems to me that many of them may be taking calculated gambles, fully cognizant of the risks they are taking. But is that sort of behavior really impulsive?

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  2. Good question, Nyx.

    We've been especially interested in entrepreneurship because we're interviewing many serial entrepreneurs (some very highly successful) for our book The Dyslexic Advantage (due at the publishers the end of this month...yikes!). We'll be posting more on dyslexia and entrepreneurship: http://www.dyslexicadvantage.com

    Many of these highly successful entrepreneurs showed a risk-taking streak as teenagers (or younger). Some of the impulsivity really doesn't go away - for instance many CEOs are much more likely to take on very risky hobbies (mountain climbing, skydiving, more).

    Some of the impulsivity is channeled in different ways, but there is a continuum. Some of these extremely brash impulsive teens have what it takes to make great entrepreneurs - including their comebacks from death-defying situations. They try things that life-time middle managers may never do - and may fail big time, but often win big-time too.

    There can be such a gulf because K-12 teachers as a group are not as impulsive or risk-seeking ...and they may see mostly the negative of these traits. But there can be very positive sides.

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  3. Really, really interesting! I look forward to the new book, and am more impressed than I can express that you manage to juggle the clinic, this blog, the other blog(s) and write awesome books at the same time! (not to mention the most important job: parenting!) You are truly inspirational.

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