Ross Gittins is a columnist with the Sydney Morning Herald. I find he often makes a lot of sense. On June 8, 2009 he wrote an article talking about the effect of personality on markets. He cites research by Bruno Frey in Zurich that suggests that happiness is often based on “unrealistic optimism and unrealistic perceptions of control”. People with these traits are better able to adjust to difficult situations often by just ignoring evidence that is contrary to their view. Sound familiar? It will to anybody who’s ever put together a business plan or maybe even those who’ve applied for a mortgage that’s a bit bigger than they can manage.
In fact most of the advances in a capitalist market system are based on somebody’s unrealistic expectations. Such people are optimistic, have high self-esteem, welcome change and are enthusiastic. And the usual culprits are the Extraverts with low Emotionality. Go into the Mergers and Acquisitions specialists. They are full of people like this. They can always see (and explain with conviction) that merging Company A with Company B is the most obviously brilliant idea in a century. Can’t go wrong! Look at the synergies!
So how come so many mergers fail? They hardly ever deliver what was promised and in many cases the organisations would have delivered higher returns had the companies been left separate. Run a Google search for it – it makes interesting reading. And keep it in mind the next time you have a brainwave. Are your projections sensible or are they underpinned by a large chunk of wishful thinking? If you’re an Introvert with a healthy chunk of Emotionality then you might be more worth listening to than the super confident Extravert. Trouble is – he tells it and sells it better!