If you ask most people to name some successful investors, chances are that Warren Buffett would be on the list. As the third wealthiest person in the world and with a net worth of $84 billion, Buffett is undeniably one of the world’s most successful. Known to be determined, conscientious, self-aware and introverted, are these characteristics the secret to his success? Or are they in fact common traits amongst all investors?
Good&Co’s psychometrics team shed some light on this by investigating the personality traits most common amongst professional investors. Analyzing investor personality profiles from our user database, we compared these personalities to the people they actually provide funding to – CEOs and CFOs – to try to uncover what really defines them.
Investors vs. CEOs
The success of investors and CEOs is surely linked. Investors look for an exceptional leader, one who is adaptable, driven and objective. They’re often the ones keeping companies afloat and are expected to be analytical, persistent and a little bit ruthless.
One of the most notable differences when comparing investors with CEOs is their attitudes towards challenges. Investors, on average, appear to be 9.4% more driven and thrive on working to overcome challenges more than CEOs.
A career in investing is highly demanding. They’re playing the ‘long game’; as Warren Buffett once said, “Someone is sitting in the shade today because someone planted a tree a long time ago”. It’s fitting that they’d need to be exceptionally challenge-driven to pursue this path and see returns on their investments. That said, it would also be reasonable to expect any of these roles to be highly driven and challenge-oriented.
Our data also suggests that investors are 6.5% less moral than CEOs. As investors are expected to make unpopular decisions on a regular basis, being overly polite can be contrary to their goals. As Carl Icahn, a private equity investor says, “You’ll learn in this business… If you want a friend, get a dog”.
Since their world is focused on financial gain, it’s conceivable that investors wouldn’t be bothered by the morality of their investment decisions. They’re likely to simply prioritize the most lucrative path (for example, knowingly investing in an unethical company because of the potential value). Especially when acting on behalf of a client, they must be able to place the client’s needs above their own morals.
Investors vs. CFOs
Chief Financial Officers (CFOs) are responsible for the company’s financial health, being expected to identify areas of growth and keep the company efficient as possible. Basically, CFOs are responsible for making the most out of investors’ money. They’d therefore be expected to be more careful, organized and concrete in comparison.
The data supports our assumptions. Investors score 7.9% higher than CFOs on levels of excitement-seeking; they’re more inclined to explore adventurous pursuits for the sake of excitement and novelty. This makes intuitive sense, investors are constantly on the lookout for new ventures, and the relative uncertainty associated with their work is likely to generate a feeling of suspense and thrill to fulfill that want for excitement.
Possibly related to investors’ gusto for challenges and novelty is the finding that they’re more tolerant of ambiguity than CFOs. This is a difference of 9.5% on average, and makes a lot of sense. Investors understand that there’s always an element of risk in what they do; they not only accept risk, but may even enjoy it. CFOs, on the other hand, likely need a higher level of clarity in order to ensure that the company remains financially viable.
A finding that appears to relate to investors’ higher tolerance of ambiguity is that they’re also less inclined to be organized. Scoring 7.5% lower on this trait, this isn’t necessarily reflective of an inability to be organized, but a lower desire or less value placed on organization. It could also be the sometimes unpredictable nature of investing, they aren’t able to plan and be organized because they need to be more reactive.
So, what traits really define a successful investor?
Taking all of the findings into consideration, it’s possible to identify five key characteristics that appear to be helpful for investors:
Motivated by challenges: Investors are constantly taking on new challenges – each new investment is a one in itself. In a highly demanding career, being driven by this is important to avoid burnout.
Excited by novelty: Every investment and every client is unique, and investors need to constantly keep up with the latest market trends to make effective decisions.
Tolerant of uncertainty: No investment decision is guaranteed to be successful. With so many factors potentially influencing the success of their decisions, investors must be comfortable with the relative uncertainty and risks involved.
Flexible and reactive: Given the reactivity required to respond quickly and effectively to changes in the market, investors need to be flexible and not tied down to rigid plans.
Willingness to contradict existing norms and morals: Not to suggest that investors should have no morals, but it seems to be beneficial for them not to be so concerned that it prevents them from making effective decisions, especially if acting in the interests of a client.
Proving himself every bit the typical investor, here’s a quote from Warren Buffett himself:
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
To see how your personality compares and if you share any of the characteristics of a typical investor, try the quizzes in Good&Co’s Personality Test app!