Friday, December 23, 2011

OPPORTUNITY, A REWARD IN ITSELF

             The next time you here a money-maker say, “This opportunity feels good” you better listen. Many money-makers are conditioned from their youth to feel pleasure when they find an opportunity to make money. Money-makers are conditioned to feel pleasure when they see or hear about financial opportunities, and even the thought of an opportunity stimulates the reward system of the brain.
            Through studies of motivation we’ve learned that reward pathways in the brain are stimulated naturally through our peripheral senses (sight, sound, touch, smell) in the same way that a drug induced “high” satisfies an addict’s appetite for drugs. These pleasure signals are conditioned early in life and programmed to stimulate the reward system of the brain. David Linden a professor of neuroscience at Johns Hopkins University (2011) states, “It is important to realize that our pleasure circuits are the result of a combination of genetics, stress, and life experience, beginning as early as the womb.” The conditioned response can at times be so strong that it overrides basic drives such as food, water, and sex. Experiments show that when subjects are given a choice between food and brain stimulation of the lateral hypothalamus they chose the pleasure of the stimulation over food (Routtenberg & Lindy, 1965). The lateral hypothalamus contains a bundle of dopamine rich neurons and when it is stimulated by a rewarding experience it induces the greatest amount of pleasure and drive (Wise, 2002). Neuroeconomics is taking a hard look at reward seeking emotional behavior and the research reveals that the mesolimbic dopamine system (MLDS) modulates instincts by reinforcing or decreasing motivation in learning as well as decision-making (Alcaro, et al., 2007).
            What this means for the money-maker is that the pleasure they feel when they see an opportunity to make money is a conditioned response.  In many cases the stimulus is so powerful that it drives their behavior to the extent that they can think of little else than the opportunity before them. This may in part explain why money-makers have an aversion to market statics and business plans; because they don’t plan for opportunity they feel it.

Friday, November 11, 2011

THINK LIKE A MONEY-MAKER Cont.


         It is not unusual that an entrepreneur uses heuristics more often than systematic analysis for determining opportunity; however, the money-maker is more successful in choosing profitable ventures than the non money-maker, because their decisions are less influenced by a number of cognitive biases.

        Money-makers effectively avoid cognitive biases that set in motion a series of events that lead to failure. Baron (1998) states, “Successful entrepreneurs, as compared to unsuccessful ones, may be less subject to a wide range of cognitive errors. . .” People tend to be creatures of bad habits when it comes to investing time and money in business ventures.  Many entrepreneurs recognize opportunity at the peak of its potential, but by the time they choose to invest, it starts to decline. This is what researchers call a representative bias (Tverskey and Kahneman, 1974; Hogarth, 1980; Simon et al, 2000). In other words, an entrepreneur will use past or current successes to plan for success in a new market venture; however, in doing so they will overlook minor variables that can dramatically influence market performance over time.  A second common cognitive bias is the tendency for an entrepreneur to be overly persistent. Persistence can be a trait of strength, but when an entrepreneur anchors their initial decisions and ignores the need to make vital adjustments in the process they leave themselves vulnerable to problems that arise in the micro-environment. A failure to adjust the business plan will cause an entrepreneur to lose sight of problems that can create an internal financial hemorrhage. (Kahneman et al., 1982). A third common cognitive bias is that some entrepreneurs are too optimistic about predicting outcomes. They think that the strength of their belief will protect them from failure. Furthermore, their overly confident attitude about success can distort their perspective and they begin to think that the outcome is subject to their control; this is what Hogarth (1980) calls an optimistic bias. In order to understand why money-makers are more consistently profitable than non money-makers, cognitive bias is important variable in identifying the reason for success.

      In addition to identifying the cognitive biases of entrepreneurs, it should also be determined why some are less prone to biases and if it is a determining factor for financial success.
           

Saturday, October 15, 2011

THINK LIKE A MONEY-MAKER

            Money-makers think differently than the rest of us. The thought process of the money maker is often counterintuitive. They will be told that they are crazy; the idea will never work, no one will buy the product, it doesn’t make sense. The nature of counter intuitive thinking is that it is contrary to common sense thinking. A money-maker will open a business where many businesses fail. They will start companies in depressed economies. They will hire employees and expand their business when other companies are trimming their work force. We should understand that the money-maker doesn’t only think differently than most people, but the mind of the money-maker functions differently than the rest of us.
           
            Some of the common cognitions of money-makers are that they have less of a tendency for counter factual thinking (Roese, 1997; Baron et al., 2004). In other words, the money maker spends less time thinking of the possibility of failure than most people. A study comparing entrepreneurs with non entrepreneurs showed that non entrepreneurism frequently thought about the possibility of failure and as a result had a much higher occurrence of failures in their life. When entrepreneurs were asked to list the three events in their life they regretted, many of them could not think of three negative life experiences. Money makers tend to be forward thinking and rarely consider that failure is a possibility (Baron, 2000).
           
            Money-makers show a preference for heuristic thinking verses systematic processing of information. Cognitive scientists have drawn a clear distinction between two modes or styles of thought: systematic processing, which involves careful, analytic thinking, and heuristic processing, a contrasting style in which information is processed quickly and effortlessly, in accordance with various simple heuristics (e.g., ‘‘If it comes from a good source, then I will believe it; if not, I will reject it’’; Petty and Caciopo, 1990). It should be noted; however, that a money-maker can easily switch between analysis and the heuristic. Unsuccessful entrepreneurs, on the other hand, may cling to their heuristic when it would be more prudent to slow down and analyze the facts (Baron, 2004). What this means in the real world is that the money-maker is less guided by market trends, statistics, or what the experts are saying about capital investments. This kind of thinking allows them to stay ahead to the trends and often make decision in contrast to current statistics.  

Monday, September 19, 2011

WARRIORS IN PINSTRIPES

"I would rather live a short life of glory than a
 long one of obscurity."           Alexander the Great

       In 324 BCE Alexander the Great established world domination. His generals encouraged him to return to Babylon to rule his Kingdom. Alexander could think of nothing worse than to live out the rest of his life as an administrator of Babylon. The end of battles did not mean security for Alexander, it meant obscurity. For a year he reluctantly ruled over his kingdom, and in the end he drank so heavily that in his weakened state, at the age of 33, he caught pneumonia and died.

       When a nascent entrepreneur establishes his or her company, so that it is financially solvent they are already thinking about starting another business; when they win the bid or secure the contract they’re off to another negotiation. For people who don’t understand this kind of drive it seems strange that money-makers seldom celebrate their accomplishments. However, it’s not the accomplishment that drives them – it’s the battle. The money-maker has a high need for achievement. If the nascent entrepreneur talks about making the final deal and settling down to enjoy the fruits of their labor, it’s for the benefit of others; a wife or husband that complains about never getting to spend enough time with them. A company that wants to promote an entrepreneur into an administrative role, such as Vice President of Marketing, or Sales VP will find a lot of resistance and often lose one of their best money makers, because the need for achievement in administrative roles is never fulfilled in the same way as it is in the trenches.

         A need for achievement (nAch) is a stable trait to obtain satisfaction by continually striving for a higher standard. When John D. Rockefeller was asked how much is enough he replied, “A little bit more.” McClelland, Koestner, and Weinberger (1989)  viewed nAch as an animal like drive that energizes and selects behavior. In other words, an entrepreneur with a high need for achievement is not driven to succeed by some outer force, but rather is motivated by an internal drive to always obtain a higher standard. For the money-maker the achievement incentive, a term coined by Spangler (1992), is triggered by a potential opportunity to make a lot of money. The potential opportunity is the driving incentive for the money-maker, but without it there is no incentive to achieve. McClelland (1965) conducted a longitudinal study, looking at graduates 14 years after graduation, and found that significantly more of those originally scoring high in nAch were currently in entrepreneurial occupations. This supports the theory that there is a strong relationship between high need for achievement scores and “entrepreneurial” behavior. What the McClelland research did not show us is a correlation between entrepreneurial drive and money-making success. Therefore, nAch alone is not a predictive trait of the money-maker. 

       As we continue to search for money-making traits, it is this researchers belief that the composite nature of successful entrepreneurs will come together like pieces of a puzzle to reveal the predictive characteristics of money-makers.



Thursday, September 1, 2011

LOOKING THE OTHER WAY

            Being a money-maker is often confused with the concept of success. A person can make a company profitable and be considered successful, but being successful doesn’t always mean that a person is a money-maker. Regardless, much of the research on success focuses on the attributes of top level leaders in Fortune 500 companies. Many researchers are enamored by the power of C Street executives and tend to misattribute success traits to them. In other words, researchers assume that if the company is large, influential, and wealthy that the top level leaders of organizations are responsible for the financial success of the company. Is it the leader that makes a company successful or the company that makes the leader successful? To be sure, a top level executive has an indirect effect on the financial success of a company, by establishing policy, casting vision, choosing the executive management team and keeping the stock holders informed of current conditions. Jim Collins (2009) wrote, “Generally speaking leaders that help their companies survive tough financial times must revisit and discuss departmental budgets, create new and more effective marketing plans, and boost customer service to an all time high.” To put Collins statement in perspective, out of 1435 large companies, his research team only found 11 companies that met the criteria of sustained financial growth. Even though leaders of successful corporations possess many entrepreneurial traits it is difficult to identify them as money-makers. Britton et al. (1992) found that profitability in corporations was a poor indicator of success. “Performance indicators are very difficult to measure, says Britton. Efficiency is usually measured by profitability and the calculation of profitability is problematic. There is a lack of correspondence between the theoretical concepts and the available data, as the firm’s calculation of profit is different from the economist’s concept of profit.” In order to build a basis of empirical evidence for predicting financial performance among CEO’s the project requires an assessment process that is comprehensive and comparative to top level leaders in large companies.

            At the other end of the entrepreneurial spectrum the nascent entrepreneur is directly responsible for the financial health of his or her company. Thirty years of research reveals trait-like characteristics for the financially successful entrepreneurs (Kirzner, 1979; Gilad, Kaish, & Ronen, 1989: 48; Hills & Shrader, 1998; Shane, 2003).  If we are to find money-making traits we must first look away from power and prestige and find reliable markers for trait-like attributes of money-makers.


Friday, August 12, 2011

WHERE THE MONEY-MAKER DWELLS

        Perhaps entrepreneur is hard to define, because we’re viewing it from too narrow of a perspective. Entrepreneur is better defined as a process rather than a person. Chris Steyaert (2007) reviewed 20 years of entrepreneurial research and concluded that the entrepreneurial process is a culturally shaped achievement, the result of engaging with and transforming social practices of doing and living. What this means for us is that we can view entrepreneurism as a process on a continuum. We will find a normal distribution of entrepreneurs at every stage of an organizations development, but says Stevens (2009) those at either end are considered to have distinctive traits that set them apart from the average business leaders. It is the needs of the organization that determines the traits necessary for success.

        One success trait that is common to entrepreneurs at the extreme ends of the continuum is an unusually high drive for success. The entrepreneur that gravitates to the start up operations of a company has a strong drive to initiate revolutionary change. People at this end of the continuum have the ability to break out of existing paradigms generating ‘‘less expected and probably less acceptable solutions’’ (Kirton, 1988). On this end of the continuum we find the Warrior Entrepreneur. They love the fray; the everyday battles that challenge their interpersonal and cognitive skills. However, on the opposite end of the continuum dwells the Empire Builder Entrepreneur. This is the individual that has a strong drive for planning strategies and applying systematic step-by-step approaches to business. (Lynch 1986; Mintzberg, 1989). I propose that if we place either entrepreneur at the opposite end of their cognitive abilities they will fail. In other words, the Warrior struggles to make money when the social structure requires building the organization and the Empire Builder will be defeated in the battle of new company start ups.

Monday, July 25, 2011

BEING A MONEY-MAKER

            In 2005 I was invited to attend an annual Mary K conference. Besides the fact that there were no men’s bathrooms it proved to be an inspiring experience. Hundreds of women paraded across the stage to celebrate their success. Many women were making significant livings selling cosmetics, but I was mainly impressed with the women who were making 50k . . . a month.
            I attended a workshop led by a 50k woman and her husband. The intended purpose was to suggest how to lend support to a wife or significant other on her way to success. One man told the group that his wife spent 70 hours a week on the business. She listened to all the tapes and attended all the meetings, but she made very little money, then he turned his question to the workshop leaders, “What’s she doing wrong?” The 50k woman said, “I can’t give you a specific answer without knowing what your wife is doing, but most people who put that much effort into their business and don’t make money are probably spending most of their time doing things that don’t make money.” I tend to agree with her answer, but there are people who seem to do exactly what money-makers do and can’t make it happen.
            Sustaining profitability must be more than merely doing the right things. An integrationist approach to entrepreneurial profitability claims that successful entrepreneurs have a specific combination of personality traits, genetic propensity, and experience that gives them an advantage over other business people. Strategic Growth Markets Area Leader for Americas, Maria Pinelli (2007) writes, "there are traits and experiences that make it more likely that an individual will choose the path of entrepreneurship and, crucially, succeed over the long term." Recent research indicates that succeeding as a money-maker requires certain cognitive and affective qualities that are uniquely selected in certain individuals. “Entrepreneurs are truly a different breed of person. . .” (Bender, 2007). Much of the current research contradicts many of the caricatures of successful entrepreneurs. The business community has depended too much on anecdotal evidence for identifying entrepreneurial profitability. It is to their advantage, however, to invest resources to recognize individuals with money-making traits in the early stages of their development. “It [Successful entrepreneurship] is highly under-researched and has potential to answer several questions regarding traits and behaviors of entrepreneurs, is why, when, and how some people and not others discover and exploit opportunities” (Shane, 2000). So far the research reveals that successful entrepreneurs are not like the rest of us. When successful entrepreneurs are compared to others it's like comparing apples to oranges. In future blogs I will reveal the research identifying distinctive trait-like properties of the money maker.  

Wednesday, July 13, 2011

UNCOMMON EDGE

One of the most cutting edge observations in the Psychology of Success is John Gartner’s (2005) hypomanic edge. Dr. Gartner finds the entrepreneurial spirit inherent in the family of bipolar disorders. He categorizes hypomania as a milder form of bipolar disorder that is not normally debilitating like clinical mania or depression. Gartner speculates that the American spirit germinated from the seeds of hypomania and he says, "[hypomania] has made us what we are . . .”
The concept of finding entrepreneurial characteristics in bipolar illness may not be a new idea.  Harvard Business School’s Alexander Zelaznick (1986) said in a New York Times interview, "To understand the entrepreneur, you first have to understand the psychology of the juvenile delinquent." Zelanznick was talking specifically about risk taking. Peter C. Whybrow said to the Boston Globe (2005), "We do know that in the American population you find a much higher prevalence of the D4-7 allele, which is the risk-taking gene.
According to the DSM-IV-TR risk is characteristic of hypomania, along with inflated grandiosity, decreased need for sleep, easily distracted, flight of ideas, attention deficit hyperactivity disorder, increased psychomotor agitation - not the kind of person that you want to be your financial investor. Alden Cass is a therapist in Upper Manhattan and he may not agree with your initial judgment. Many of his clients are bankers, brokers, traders, and financial advisers. He claims that the majority of his clients fit the description of a hypomania. He helps them work through the negative effects of the illness – depression, burnout, substance abuse, infidelity, and wrecked marriages and family, but then he adds, “Hypomania is great for business.” It may be great for businesses that want fast turnover and don’t mind high risk ventures, but companies that want to be establish themselves as landmarks and sustain long-term profitability should steer away from reckless business practices.
It is probably true that many entrepreneurs are hypomanic, but it may be true because they find it difficult to work for others for long periods of time. When the research is in, I suspect it will show that money makers have some characteristics of hypomania, as many of us do, but in order to sustain profitability there needs to be an uncommon stability and persistence that the hypomania is incapable of maintaining.

Friday, July 8, 2011

THE ORCHID ADVANTAGE

Are you familiar with the child that few people can control? That child may be the future CEO of your company. Genetics tells us a lot about why people behave as they do, but until recently most behavioral genetic studies have been done on people with clinically diagnosed mental illnesses. “Most genetic researchers,” says Jay Belsky (2009), a child-development psychologist at the University of London, “don’t see the upside, because they don’t look for it.” Researchers are beginning to see the advantages of genes that make people vulnerable to dramatic mood swings, risk taking, and attention deficits. Bakermans-Kranenburg and van Ijzendoorn (2004) wanted to see how children with a risk gene allele for externalizing behaviors (crying, screaming, hitting, throwing toys) would respond in a positive environment compared to children with a no risk gene allele. The results were astounding; in protective environments children at risk reduced externalizing behavior by 27% compared to the no risk children that reduced externalizing by merely 12%. In a subsequent study of the environment-gene interaction Bruce Ellis from the University of Arizona and Thomas Boyce a pediatrician from the University of British Columbia recognized that some people are like Dandelions who can adapt to almost any environment and others are like Orchids that will wilt if they are ignored or mistreated, but will become spectacular when nurtured in the right environment.

The less numerous and more vulnerable orchids in our society offer great potential. The orchid perspective is a new way of looking at people that don’t fall in the normal range. Malcome Gladwell (2008) in his book Outliers describes in detail successful individuals that lie outside the bell curve, “I think you have to look around them—at their culture and community and family and generation. We've been looking at tall trees, and I think we should have been looking at the forest.” The environment-gene interaction may be an important indicator in predicting the money maker in our society. Imagine what could happen to a society that recognized potential for the kind of success we’ve only begun to realize. Consider the possibility of identifying and transplanting orchid individuals into an environment that nurtures success.

Wednesday, July 6, 2011

WIRED FOR SUCCESS

       Are some people’s brains hardwired for success? It turns out that this may be the case for highly successful individuals in business, politics, or even the clergy. One of the newest and most interesting trends in behavioral psychology today is the “gene-environment interaction.” Researchers have identified dozens of variant genes that appear to be responsible for a susceptibility to depression, Attention Deficient Disorde
(ADD), Attention-Deficit Hyperactivity Disorder (ADHD), Violence, and Antisocial Disorders (Bakermans-Kranenburg, 2004), but the negative effects of the gene alleles only occurs in stressful environments or as a result of traumatic experiences. In other words, a Dr. Jekyll can become a Mr. Hyde in certain environments. However, in the right context we have also seen that the same genes are responsible for individual’s great success. We suspected genes that could be so deleterious to the species had redeeming value; otherwise selection would have eradicated it from the gene pool. Researchers Bruce Ellis and Thomas Boyce (2009) stated, “At first glance, this idea, which I’ll call the orchid hypothesis, may seem a simple amendment to the vulnerability hypothesis. It merely adds that environment and experience can steer a person up instead of down. Yet it’s actually a completely new way to think about genetics and human behavior; risk becomes possibility, vulnerability becomes plasticity and responsiveness.”

Thursday, June 30, 2011

ANCIENT HUNTERS IN MODERN BUSINESS

      There are so many apparent similarities between our ancestral hunters and the modern day business person that it begs the question, Are we genetically predisposed for specific behaviors within the context of society? 
     Tim Noakes, (2001) in his book, The Lore of Running proposes that the love of running long distances, such as marathons, is an inherited trait. “Perhaps we are the direct descendants of that group of humans - the ancestral hunters - who outran their prey during many hours of pursuit.” It is reasonable to propose that successful ancestral hunter possessed genetic traits that allowed him advantages over other hunters? Taking this line of thought a step further, suppose that the success traits of the ancestral hunter are passed genetically to the modern day descendants that use similar traits in a hunt for profitability in business.
 
     The successful ancestral hunter perpetuated a strong gene pool. From an evolutionary perspective the more successful hunters were married to stronger, healthier, and perhaps younger women. Anthropologist Dr. Kristen Hawkes (2001) in her study of the modern hunter gatherer tribes theorized that our ancestral hunters passed on stronger genetic traits, “Men with better hunting reputations are married to women who have children faster and have more surviving children (Blurton Jones et al., 1997; Hawkes, 2001).
 
     We now realize that genetic traits have a stronger influence over success than we once thought to be the case. A British study of 609 pairs of identical twins and 657 non identical twins found that the identical twins were 48% more likely to start businesses.  Professor Tim Spector (2006) director of the Twin Research Unit, said: "This relatively high heritability suggests the importance of considering genetic factors to explain why some people are entrepreneurial, while others are not. The study said little with regard to the success of twins in business, but now we have evidence to suggest that genetic traits are an important consideration in determining business success.