Hardwired for Risk | Personal BALC #71
When you see people who are successful at dealing with financial risks, you know you’re looking at the product of hard work and careful planning. But what you’re also seeing are people whose innate hard-wiring made them more likely to be winners at this kind of game. The past several decades of research into human brains have included deep looks at how people deal with risk. Scientists say they have discovered neural pathways that seem to correlate with the kinds of people who deal well with financial risk.
These links are far from iron-clad, but there are some interesting experimental results. Consider the role fear plays in how we approach risk. Some have a personality trait called “reward-sensitivity,” which combines thrill-seeking with a focus on winning rather than a fear of losing. These people have a particular part of their brain fire up with unusual strength when presented with situations that had the greatest possibility of losing money. These people tend to win more than those who were less reward-sensitive.
The ability to learn from one’s mistakes is another vital factor in dealing with risk. Ironically, whether one believes their abilities are innate or improvable may affect how well they learn. Brains of people who believe intelligence improves with effort gave off different signals compared with the brains of those who did not. In testing, people who believed they were “improvable” actually did improve more. A better attitude causes the brain to work better? Perhaps, but it certainly involves the ability to rebound from mistakes.
Willpower is another trait that the financially successful have. Researchers believe the supply of willpower in the brain can be temporarily used up and can be increased through practice (like exercise makes muscles stronger). Taking a risk requires the willpower needed to force that first step. A lack of willpower can affect our ability to take a successful risk.
(find the full article on risk-taking at cnbc.com)
