Why powerful people take more risks


What is it about power that can make a good apple turn bad? Perhaps it is that powerful people view life through rose-colored spectacles – and it is this optimistic outlook that drives them to engage in risky behaviour.

This insight into the seductive nature of power emerged from research by Cameron Anderson, an associate professor at the University of California, Berkeley Haas School of Business and Adam Galinsky of Northwestern University, which set out to show how a sense of power leads individuals to risk-seeking behaviour

Although the research, published in the European Journal of Social Psychology, is based on studies involving students, Anderson and Galinsky argue that their findings apply equally to other powerful individuals such as heads of state and CEOs.

In the business world, they suggest that risky behaviour can often be beneficial, helping individuals maintain or even increase their power. By engaging in risky behaviour, the powerful may take advantage of the sort of opportunities that others avoid.

But the business world also is littered with examples of powerful executives taking risks that ultimately hurt or even destroy 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," said Cameron Anderson.

He 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," Anderson said.

He added that business leaders should be aware of this proclivity toward riskier behaviour 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 claimed.

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 behaviour. 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 behaviour:

"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 said.

"At the same time, people who go into a 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."