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How CEOs are Different Than Risk Pros

Forrest ChristianOverachievers Leave a Comment

Hersh Shefrin, long-time Santa Clara prof and father of Behavioral Finance, points out that Lopes’s SP/A theory explains why CEOs and risk professionals have so many “what are you talking about?” moments:

… my research indicates that CEOs are the most hopeful of all groups, the most apt to set specified goals, and the most likely to try to achieve highly favorable outcomes. These differences are features that feature prominently in situations that risk managers will be called upon to manage…. risk managers often advise CEOs, whose psychological profiles typically differ from theirs

Shefrin, Behavioral Risk Management, p. 30

We can talk about how people attracted to risk professions tend to be more fearful and less hopeful, with the exception of the “entrepreneurial risk manager” (a distinctly rare breed, but I’ve worked with one). But more interesting is whether Shefrin is quite right about CEOs.

I raise this because I am coincidentally reading material by another California-based professor, the Stanford professor Brian Knutson. Which I was doing because, and I’ll just admit this, we knew each other at university.

In one of his many research thrusts, he and his partners investigated the neurological differences between how White Americans and East Asians respond to different types of people asking for money. It turns out that White Americans like the slightly aggressive, overly friendly types. It’s the affect — the emotional face they wear — that they want. And when they see someone like that asking for money, they are more likely to give them some greenbacks.

But not the East Asians in the investigation.

Their neurology lit up for those who matched their “ideal affect”. Which is calm. And they gave calm affected people more money.


Would Shefrin’s CEO knowledge replicate in East Asian CEOs? I’m assuming that several CEOs available around Santa Clara would be of east Asian descent, and even some born there. Were there differences? If I ran these tests in Taipei, Shanghai, Tokyo, or Seoul, would I see the same results?

I’m assuming that any CEO requires these facets. It takes a lot to lead a company, and hopeful goal-orientation is key to leading.

But it makes you think about things when you start taking them cross-culturally.

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