There is a social group about which there has been little academic research. This group values its privacy, and therefore it’s quite a challenge to even gain access, let alone be permitted to conduct psychological evaluations. I call this group the “wealth elite,” but put another way, it’s that group of ultra-high net worth individuals with a net worth in at least the tens to hundreds of millions. Little is known about the personal and behavioral characteristics that helped them achieve such economic success.
As a historian and sociologist, I therefore undertook and published the first academic study into the psychology of this wealth elite. The research consisted of conducting extensive interviews with 45 ultra-high-net-worth individuals, worth between some €30M to €5B, asking them to complete a psychological test, and analyzing the responses. The findings proved very revealing.
One of the most telling findings from the biographical questions was that there was no correlation between their educational achievements and the scale of wealth they went on to achieve. The interviewees who performed best at school or university were not among those with the very highest net worth. One in three had not studied at university, and one in seven had not even graduated from high school.
Their activities outside school played a far greater role in their success. Almost all were either competitive athletes or earned money in an atypical, entrepreneurial way. More than half were involved in competitive sports as students. As competitive athletes, they learned to deal with victories and defeats, developed self-confidence as well a tolerance for frustration.
It was particularly striking to learn how these individuals earned money alongside school or university. Typical hourly wage student jobs were the absolute exception. Looking at their many ventures, it quickly became clear how creative they were. The list of items sold is extensive and remarkable. Here are a few examples:
- Sold Cosmetics products via structured distribution
- Sold private winter gardens
- Organized homework supervision delivered by others
- Sold old egg cartons as noise insulation
- Raised, slaughtered, and sold animals
- Bred and sold pigeons
- Traded in stocks, warrants, and other derivatives
- Set up a film club and used the income to finance the renovation of an old train station
- Redeveloped an old factory building into a communications center for political work
These experiences were clearly formative. They learned to organize, sell and think like entrepreneurs. Often unconsciously, they learned the skills and acquired the implicit knowledge necessary for entrepreneurs and investors to be successful. They were the best preparation for their later independence. The hypothesis that entrepreneurs are “misfits,” i.e., difficult and rebellious employees who could not have climbed the career ladder within an established company, was confirmed by a number of the interviewees. They view themselves as difficult individuals, too non-conformist to submit to existing structures or other people. This was often evident from as early as their school days. Many reported huge conflicts with authority figures, especially their teachers.
Which skills did the interviewees rate as most important in achieving above-average financial success and great wealth?
In modern entrepreneurial research and wealth research, the ability to sell has been largely underestimated as a factor in achieving economic success. However, there is almost no other point upon which the interviewees agreed so overwhelmingly: sales skills contributed significantly to their financial success, regardless of the industries in which they made their fortunes.
All of the interviewees also agreed that they were extremely optimistic. The Big Five personality test confirmed this. But what did they mean by optimism? It became clear that what these wealthy individuals mean by optimism is the same as what psychologists call self-efficacy. In their own words, the interviewees defined optimism as the belief that “as a result of your own abilities, or the network you have built, or your intellect, you are always able to identify solutions and overcome anything.” This confirms the findings of entrepreneurship and wealth research that high self-efficacy is an essential personality trait of entrepreneurs and the rich.
The hypothesis that the rich, more often than not, base their decisions on “gut feelings” was also confirmed by the interviews. However, gut feeling, as many interviewees stressed, is not something you’re born with: it develops as the sum of one’s life experiences. This corresponds to the theory that gut feeling is the product of implicit learning – flashes of insight will appear in a fraction of a second, triggered by the recognition of a pattern, an awareness that is the result of years of collected experiences.
This implicit knowledge, a result of implicit learning, manifests itself in gut decisions. It’s therefore not surprising that educational qualifications are not the key factor in the genesis of wealth. The interviewees did not acquire their implicit knowledge from formal education, but from informal learning situations, example e.g. competitive sports or early entrepreneurial activities.
For many of the interviewees, their willingness to engage in conflict corresponds to the fact that they are contrarians who opposing majority opinions and swimming against the stream as investors or entrepreneurs. Few of the Big Five personality test’s 50 questions got as positive a response as the statement: “I would describe myself as someone who prefers to forge my own path.” The majority of the interviewees – especially the investors – attributed much of their financial success to their ability to swim against the tide.
The interviews revealed two types of entrepreneurs and investors:
The first group took great pleasure in acting against majority opinion and swimming against the stream as a matter of principle. They were almost irritated when their view of things lined up with “the mainstream,” as they put it.
The other group acted more independently of the majority. They were indifferent to prevailing opinions, forging opinions without feeling a need to compare them to those of the majority. They had no problems with what anyone else thought, nor did they take particular pleasure in going against the majority. There were times when they’d actually acted similarly to the majority. For this group, being a contrarian or swimming against the stream were not fundamental attitudes.
Almost all of the entrepreneurs and investors reported setbacks and crises, some extremely serious. So, how did they react to these setbacks?
They demonstrated a fundamental attitude of not blaming external circumstances or other people but instead looked for the cause of the problems they faced in themselves. They never saw themselves as victims of circumstance, nor of the actions of their rivals; they always took personal responsibility for any problems. Nor did they use negative market developments as an excuse; they blamed themselves for misjudging the market.
In handling their crises, they not only focused on solving the problem and restoring the status quo but they also tried to turn setbacks into opportunities, reporting how these only served to make them even more successful.
Entrepreneurs explained that the growth of their companies, conquest of new markets, decisive improvements to their corporate strategies and products were only achieved in response to severe setbacks and crises.
Contemplating these traits of ultra-wealthy entrepreneurs, we can better understand their path to attaining financial success.