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Sensation-Seeking
Inside the Mind of a Risk Taker
Successful entrepreneurs like Oprah and Warren Buffett have this in common
Posted April 26, 2016
Oprah Winfrey launched her own show, which became the highest rated program of its kind in history, airing 25 seasons from 1986 to 2011. Her estimated net worth is $3.1 billion.
Warren Buffett, Chairman, CEO and largest shareholder of the investment firm Berkshire Hathaway, is considered the most successful investor in the world. His nickname in investment circles is the “Oracle of Omaha.” His current net worth is estimated at $67 billion.
What do they have in common?
They are both calculated risk takers.
Most people who decide to become entrepreneurs or small business owners fail, and usually within the first five years. They often make business decisions based on the motto "No guts, no glory."
But there is a crucial difference between being a risk taker and being a calculated risk taker. And that crucial difference is what Winfrey and Buffett both have in common.
Commons sense tells us that financial decisions dominated by emotion are often bad ones, and research confirms this bit of wisdom—but with a twist. It isn't the emotional charge that's the problem. It's that we don't accept our emotions as sources of information that can be differentiated, appraised, and used.
The key insight is that emotions enhance or hamper decision-making performance depending on whether we first identify the nature of the emotion we are experiencing, and next regulate them efficiently.
You would think that people who habitually suppress their emotions would be more risk-seeking than risk-averse, but you would be wrong. Research has shown that people who suppress emotion do not reduce risk-aversion because it is an ineffective way of regulating negative emotions. In contrast, cognitive reappraisers who change a situation’s meaning in a way that alters its emotional impact increase their risk-taking in ways that improve financial outcomes.
The take home message is this: To be an effective financial decision-maker, you need to take calculated risks. And that means asking yourself each step of the way how you can minimize losses, and cognitive reappraising your negative reactions when losses happen.
Copyright Dr. Denise Cummins April 26, 2016
Dr. Cummins is a research psychologist, an elected Fellow of the Association for Psychological Science, and the author of Good Thinking: Seven Powerful Ideas That Influence the Way We Think.
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