Haas Research Intelligence
Research Story
Powerful People Take More Risks
Powerful people view life through rose-colored glasses, with their more
optimistic outlook ultimately leading them to engage in riskier behavior,
according to Cameron Anderson, an assistant professor at the University of
California, Berkeley's Haas School of Business.
Anderson and co-author Adam Galinsky of Northwestern University demonstrate how
a sense of power leads individuals to risk-seeking behavior in five separate
studies outlined in an article titled “Power, Optimism, and Risk-Taking” in the
latest issue (July/August 2006) of the European Journal of Social Psychology.
Although the studies involved students, Anderson and Galinsky's findings apply
more broadly to a range of powerful individuals, from heads of state to CEOs to
prominent community leaders.
In the business world, Anderson and Galinsky note that risky behavior can be
beneficial, helping individuals maintain or even increase their power. By
engaging in risky behavior, the powerful may take advantage of high upside
opportunities that others avoid, the authors write.
But the business world also is littered with examples of powerful executives
taking risks that ultimately hurt them, whether it’s the latest scandal over
backdating stock options or an unsuccessful merger or acquisition.
“Our work is shedding light on the psychological mechanisms for those sometimes
infamous blunders,” says Anderson, who earned a Ph.D. in social/personality
psychology from UC Berkeley.
Anderson notes, for instance, that when he and Galinsky began their research,
former President Clinton was embroiled in the Monica Lewinsky scandal. “It’s a
good example of someone who was feeling so powerful that he was totally blind
to the possibility that he was going to get caught,” says Anderson, a member of
the Haas Organizational Behavior and Industrial Relations Group.
Anderson advises that business leaders should be aware of this bias toward
riskier behavior and protect against it by more carefully weighing the risks
and benefits of their actions and decisions.
Experts have speculated one’s prior success or sense of power leads to
disastrous mistakes, but until now there’s been little research that
establishes such a link, Anderson notes.
In fact, some psychologists have argued the opposite, suggesting that low-power
people are willing to do anything to get out of their disadvantaged situation
with less to lose by risky behavior. Conversely, those in power might act more
conservatively because they have more to lose, some have argued.
However, Anderson and Galinsky’s cumulative results from five experiments
contradicted that theory and instead found a link between power and risky
behavior:
• Study 1 asked participants to estimate the likelihood that positive and
negative events would happen in their own life. Individuals with a higher sense
of power were more optimistic regarding personally relevant future events, such
as enjoying their post-graduation job and avoiding gum disease, and even events
outside their control, such as avoiding airplane turbulence.
• Study 2 tested whether powerful individuals view the outside world as less
dangerous and threatening. Participants with a high-power mind-set gave more
optimistic estimates of dangers in the world, such as floods, fires, and heart
disease, than those with those with a low-power mind-set.
• Study 3 extended the previous two studies by testing whether power influences
individuals’ actual preference for risk (versus just testing their perceptions
of risk). Participants’ sense of power was subconsciously primed and then
participants were asked to choose from various solutions for a large car
manufacturer that must close plants and lay off employees. High-power
participants were more likely to choose a riskier option than neutral and
low-power individuals.
• Study 4 created a vignette more relevant to student participants.
Participants were manipulated to feel a sense of power and then asked about the
likelihood they would engage in sexual intercourse without a condom.
Individuals in a high-power mind-set saw less danger in engaging in unprotected
sex and were more willing to engage in this risky behavior.
• Study 5 tested the link between power and risk-taking in actual face-to-face
interactions, with one student playing a job candidate and the other a job
recruiter in a negotiations exercise. The more powerful participants perceived
themselves in the negotiation, the more risks they were willing to take by
divulging information.
Study 5 demonstrated the research’s applicability to negotiations. “It cuts
both ways: Feeling less powerful can actually be detrimental because you’re
less likely to divulge some of your information that you need to in order to
create a win-win situation,” Anderson says. “At the same time, people who go
into the negotiation with a huge advantage over their opponent might throw
everything onto the table and feel like there’s no harm in doing so and get
taken to the cleaners.”
(September 14, 2006)
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