Power has its risks
From the Briefcase: Research produced by America's Best Business Schools
Study: "Power, Optimism, and Risk-Taking"
Authors: Cameron Anderson (Haas School of Business, Berkeley) and Adam Galinsky (Kellogg School of Business, Northwestern)
Status: Published, European Journal of Social Psychology (July/August)
Summary: Some psychologists argue that people in positions of power are risk averse while those without it are willing to gamble anything to move up. But a new paper finds that the powerful are more likely to take unnecessary chances than they think.
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 associate professor at UC-Berkeley's Haas School of Business.
Anderson and coauthor Adam Galinsky, an associate professor of management and organizations at Northwestern's Kellogg School of Management, 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) 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, 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 has 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.
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