Ambition, Power-Drive, and the Psychology of Calculated Risks: Lessons from DSK

Let's face it, we wont ever really know whether DSK did or not rape that woman in his hotel room. The event is know confined to those interests in the study of conspiracy theories, whatever the judges say. That said, there is an important lesson to learn about DSK's reputation.

The former head of the IMF was clearly pushing the limits. Sarko's first reaction to the affair was apparently "I told him to be careful" and the French media seemed totally unsurprised by it all. Reputation is fate, and DSK will need to work very hard to redeem himself... but then again that is the speciality of any politician. The idea that DSK may end up being president of France (he will apparently run) seems quite absurd, and would damage also the reputation of France - again, even if it turns out that he is innocent.

So what can the science of personality tell us about the causes and consequences of the DSK saga, and is there a logical way to explain these events? Three personality characteristics come to mind, and they are all inter-connected. First, we can expect DSK to continue his quest for more and more power, whatever happens. Indeed, the main difference between the average citizen of the world and people like DSK is his pathological ambition, that is, extreme power drive. With a good job, a nice wife, and a lot of wealth, why would anybody want to become the most influential person in global finance? Many reasons, but all relate to excessive power hunger and a psychological, even physical, "high" that is experienced by some people when they keep climbing the power ladder.

The third trait has not yet been explored sufficiently: it is the ability to take "calculated risks". Indeed, most theories and data in this area argued that risk taking is a direct consequence or manifestation of impulssivity, which, in turn, is biologically wired and genetically transmitted. According to this view, there is no conceptual or empirical difference between a pathological gambler, and a successful entrepreneur, other than the fact that one has problems and the other one a successful career.

However, there seems to be a substantial difference in the personality profile of someone who is capable of taking calculated or instrumental risks, and someone who is a victim of his or her own anxious, temperamental, almost psychopathic, personality style. Unsurprisingly, the two profiles are often found in the world of finance, especially among bankers. With the recent economic crisis, people everywhere have been reminded that investment bankers are not really different from compulsive gamblers (except they use someone else's money); but still, we believe there are huge individual differences in the ability and tendency to take emotional, systematic, or calculated risks.

Back to DSK as example: as an economics maveric, there can be no doubt that DSK must have shown a sublime level of mastery of finances and that he is able to understand and influence economic factors like a Michelin-star-chef can transform different food ingredients into a magical meal. Indeed, the fact that he ended heading the IMF implies that his approach to finance and economics was much more cautious and calculated than, say, someone who heads up a big investment bank (though recently those guys have also headed the US treasury, which turned out to be a mistake).

But in other domains of life, DSK was clearly a pathological risk taker, someone who felt immune about the potential risks of his actions, a megalomaniac who showed little consideration for the little people, and who's only explicit interest was being more and more powerful - to conquer the world.

In our latest study, we try to disentangle these two distinct aspects of risk taking, focusing on financial or economic risk taking. The question is simple: is there are different personality profile for someone who is out there looking for reasonable and somewhat risky ways to increase his or her profits, and someone who cannot control his or her spending habits? The analogy that comes to mind to illustrate this difference, is the difference between a creative person and a psychologically disturbed artist. Both are usually seen as creative, but the former lives a happy life and feels in control of his acts, whereas the latter may only produce artistic products at the expense of psychopathological symptoms (and does not feel in control of the creative process).

So, want to find out how you score on our different dimensions of financial risk taking? Take our 10-min test and get instant feedback now!