Thursday 25 October 2012

Identifying Wealth Creating Personalities That Grow Business Success


Monday 3 October, 2011
The common view is that success is due to having a great product or service. If the company creates great wealth it is because of this product or service, with some solid management thrown in for good measure. But what if an organisation's success has nothing to do with the product or service - and everything to do with the personality of the founder or key managers?
We now have new disciplines of behavioural economics and behavioural finance. Unlike traditional disciplines, these assert that much of our behaviour is based on irrational factors. Their view is that many - if not most - of our decisions are based not on rational analytical factors, but on unconscious irrational drivers of which we are not aware. The idea that most of our decisions are based on irrational and unconscious factors casts a completely new light on the factors behind the success of new companies and how wealth is created.
Findings from the new disciplines are opening up new insights into the reasons for company success and wealth creation. Some of these include:
  • High intelligence, at least as measured by IQ, is probably inversely correlated to wealth creation

    In other words, the smarter you are, as measured by IQ, the less likely you are to create high wealth. The effect seems to kick in particularly for those with an IQ above 120.
  • Higher degrees also seem to be inversely related to wealth creation

    That is, the more and the higher the degrees you hold, the less likely it is that you will create wealth. Think Bill Gates, Michael Dell and Mark Zuckerberg - all who dropped out of university.
  • If this seems to be counterintuitive, remember that there is a difference between income and wealth. High IQ and high academic qualifications are almost certainly directly related to high income; however making a high salary is not the same as creating a new company - or creating wealth.
These new behavioural disciplines focus on our deep cognitive biases that are unconscious filters, that lead us to make bad or even stupid decisions, even when we are smart and well-informed.
One of these cognitive biases is called the overconfidence bias. This bias is due to people thinking they are smarter than they actually are, because they are senior, powerful, highly educated or very intelligent. This frequently causes them to do dumb things.
So if wealth creation isn't due to great products, high intelligence or great academic qualifications, what is it really due to? The emerging evidence demonstrates that it is due to personality, and that certain types of personalities make more money, while other types make less. There appears to be specific personality types that determine which is which. Here are some of them:

The personalities that make big money

There are four personality types that make big money. These are:
  1. The visionaries

    These are big thinkers with expansive ways of looking at things, and are ambitious. Warning: If they are too altruistic or too self-centered they won't make the big money, since their expenses will be too high - either on themselves or on causes that they believe in.
  2. The geeks

    These are extremely introverted people who, although highly intelligent, are distrustful of formal logic and analysis. They have an intuitive, not an analytical style.
  3. Canny salespeople

    This personality type are extroverted, frugal and cost-sensitive. Warning: If they are too extroverted, they will focus too much on helping the customer rather than their own company, and so they pass on the implied subsidy to the customer rather than to themselves. If this is the case, they won't make money.
  4. Self-less planners

    This personality type are strong and disciplined planners, who are extremely detail-oriented and do not try to over-control or allow too much democracy in their company. Warning: If they tend to control too much, they won't make a lot of money, because they will reject good ideas, and if they are too democratic, expenses tend to rise and products slow in being released, so they can't make a lot of money.

The personalities that consume a lot of capital

There are six types of personalities that consume a lot of capital or lose money. These are:
  1. Conservative-self-centered

    These types avoid major risks, but are self-centered, so tend to spend a lot of money on themselves and their personal interests. They don't tend to generate great products with the great profit margins they need in order to afford their expensive taste.
  2. Conservative-altruistic

    These personality types are still conservative, but they want to help society and others, which they do liberally. But the problem is, their natural conservatism doesn't allow them to develop the great products and profit margins they need to be able to be as charitable as they want to be. So they end up losing money.
  3. Extroverted analytical

    Extroverts invest in relationships rather than products, so they tend not to develop great products and profit margins. However their highly analytical capabilities lead them to over-invest in plans and to trust ambitious schemes, which cost money. So their high expenses can never be recouped by their products or services.
  4. Sales operational

    These personality types focus their energy on sales rather than product development, which means they get good growth, but low margins. Their focus on quality and operations lead to high costs, which cannot be recovered from their low margins. So they lose money.
  5. Fast-acting control freaks

    This personality type make ultra-fast decisions which are often wrong, so that keeps quality and margins low. Their speed also leads to a lot of mistakes which increases expenses. But their desire to control others means they won't listen to better ideas, so the possibilities for different behaviours which would increase profit margins, but reduce costs, are not open to them. So they waste a time and money.
  6. Fast-acting consensualists

    These personality types are fast decision-makers with the opposite problem. Their fast action leads to low quality and profit margins and high costs. However in their case, they like to hear everyone's ideas, which leads to lots of different strategies and directions, causing confusion and even more waste. Which leads to them losing money too.

What is the proportion of money-makers to money-losers?

There are very few people in the category that make the most money - probably around 1% of all people. So the good news here is that this article is giving you the information on what sorts of personalities make lots of money. The bad news is, that it is highly unlikely to be you or most of the people around you!
There are a lot more people in the category that loses the most money than there are big money-makers. In fact there are around 10% of all people in this category versus the 1% in the big money-making category. So you are 10 times more likely to be a big money-loser than you are a money-maker.
However I have only told you about the biggest money-winners versus the biggest money-losers. What about all money-winners versus all money-losers?
Our research shows that around 12% of all people and managers will make money or create wealth. That compares with around 50% of all people and managers who will lose money or consume capital. So you are statistically about 5 times more likely to be in the money-losing group than the money-winning group.
There is a group in the middle. These are the people who neither make money nor lose money. That's about 38% of all people and managers.

Can you change your personality?

So the obvious question becomes - can you change your personality? Of course, the answer is no - but you can change your behaviour. The issue is how hard is it to do that? And - even if you can - what do you change to in order to compensate for your own particular personality vulnerabilities?
Changing your behaviour is possible. But to do so requires a lot of mental agility. Some people have high agility, but most people don't. So even if they know what changes need to be made, they still may not have enough agility to accomplish lasting change.
It's kind of like exercise. You may know that you need to exercise - and you might even know the exercises you need to do in order to get the right muscles to be stronger. But it takes a lot of effort to keep exercising and even though a lot of people start, most soon stop. Changing behaviour is similar, but even harder.
If you have a high level of agility, you can change your behaviour, but you need to be very determined. And you need to be able to sustain that level of determination over a long period of time. In fact it must become part of your life.

Some ways to change your behaviour

Here are some techniques you can use to change your behaviour.
  1. Find a partner

    The most common way, is to find a partner who has the characteristics you need, but don't possess. Then you can work with the partner so that they not only perform the necessary behaviours for you, but also teach you how to perform them yourself.
  2. Set-up processes

    Another way is to set up processes to force you act differently to how you would otherwise. For example, if you are very salesy, and don't like doing product work, you can set up a product committee meeting every week for two hours, at which you have to attend - even if you don't really feel like it.
  3. Learn to follow-through on what you usually avoid

    Another way is to develop a list of the things you need to do that you usually avoid doing, and follow-through with the list even if you don't feel like doing it. Many successful people do this. 

Choosing the right people

Of course another way to create wealth for your company is to choose people who have the right personality - even if you don't. There are countless examples of founders who realised that even if they could create a company or develop a product, they didn't have the right personality to make money.
In most cases they hired a person who did have the right personality. In some cases, the founder has dropped the role of CEO to allow the right personality to become the CEO themselves while the founder became, for example, Chairman and Chief Technology Officer. Such a move reflects a high degree of maturity and wisdom.
What this teaches us, is that the true issue is not whether or not you have the right personality to create wealth yourself. The true issue is whether you have the level of wisdom to acknowledge you might not have the right personality to create wealth. It is the maturity to realise that others may have what you do not, and you need to allow them to operate freely so that their behaviour will compensate for your own vulnerabilities.
Most people do not have the right personality to create huge amounts of money. But many people do possess the wisdom to choose people who can act to compensate for their own behaviours.
Understanding what your personality can and cannot achieve is the first step in wisdom. The second step is finding people whose personality can complement yours. This is a much surer route to success than assuming that you have the correct personality to succeed on your own without any help from others. 
 
Source:ceoonline.com

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