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What makes an individual decide to become an entrepreneur? Wealth? Independence? Self confidence? Or are they just different?
“This question of ‘why’ is fascinating for economists because entrepreneurs benefit society as a whole to such a great degree. We would be worse off without them,” says Nikolai Roussanov, professor of finance at the Wharton school at the University of Pennsylvania.
Having looked closely at the behaviour of entrepreneurs, Prof Roussanov concludes that these individuals are different “They weigh risks and outcomes differently,” he says and look at potential hazards from a different perspective.
For entrepreneurs he says the important thing is not having enormous wealth. The vital thing is the social esteem that accompanies any increase in wealth, especially if this wealth is more than that of their peers. Entrepreneurs he adds have a great deal of faith in themselves, which is why they are willing to to invest both in terms of financial capital and human endeavour, even though he adds entrepreneurs who only wanted to make good financial returns would do just as well, or better by investing in the stock market.
However, says Prof Roussanov, entrepreneurs look at the issue differently and see “the idiosyncratic risks, the ones specific to their business and skills, as easier to bear than the aggregate risk in the stock market or the broader economy”.
Prof Roussanov advises would-be entrepreneurs to think carefully before embarking down the entrepreneurial route and consider their motives. Is he or she following this path because he wants to make money or because they want to work for themselves or have a better quality of life.
The paper “Diversification and its discontents: idiosyncratic and entrepreneurial risk in the quest for social status” is published in Knowledge@Wharton.
● We are all familiar with individuals who dodge a tricky or difficult question - politicians do it frequently for example, often answering a different question, one perhaps they would rather have been asked.
Now following up their previous research into “Conversational Blindness: Answering the Wrong Question the Right Way,” Todd Rogers, executive director of the Analyst Institute and Michael Norton an associate professor of business administration in the marketing department at Harvard Business School look at the issue from the listener’s point of view.
They have set out to examine what they describe as “conversational blindness” - the failure by the listener to realise that the speaker has dodged the question and is responding to something else.
The academics have discovered that listeners appeared to prefer those speakers who “answered the wrong question well, over those who answered the right question poorly”.
“In this research we find that, at least in part, people value style over substance because the style blinds us to the lack of substance,” says Mr Rogers.
Speakers who dodged the question were not castigated by the listener say the pair, in fact smooth and confident question dodgers were trusted above those who answered the question but did not appear to be confident.
In such conversations the pair advise listeners to pay attention and always remember their original question.
The research will be published in a forthcoming issue of Journal of Experimental Psychology.