Monday, August 18, 2014

Are the rich wired differently?

What governs a person’s behavior is upbringing, exposure and the kick that one gets from risk-taking, wealth accumulation or social recognition. 

Not everyone is rich. In fact, only 0.05% of Indian households fall in the category that has assets of over Rs.25 crore, according to a report by Kotak Wealth Management. In the US, the number of millionaires at present is at least 9.6 million, but the number of “super rich”—with fortunes of at least $25 million—stood at 132,000 in 2014, according to Spectrum Group, a US-based research and consulting firm in the wealth and retirement industry. 

What does it take for a person to become rich? There are many who are born in rich families, or get married into one. But what about people who make it from zero? Are their brains wired differently? The answer seems to be “no”. “There is no evidence that clinically (brain structure-wise) they are different,” said Samir Parikh, director-department of mental health and behavioral sciences, Fortis Healthcare Ltd. What governs a person’s behavior is upbringing, exposure and the kick that one gets from risk-taking, wealth accumulation or social recognition, added Parikh. Secret’s in the brain There is enough evidence that suggests that individuals who eventually accumulate wealth over their lifetimes have certain common traits. 

A June 2014 article by CNN Money notes that “there isn’t a magic recipe for making millions, but certain ingredients can help”. The article summarizes findings of a survey of wealth managers whose clients have made it big and have some common traits. Most of these clients who have accumulated wealth were entrepreneurial; highly energetic; workaholics who devote 60-80 hours a week and take working vacations; modest yet extremely confident—they know that they are not the best in every sphere and so surround themselves with people who are; and finally, risk tolerant but not compulsive. 

However, even those who were not born with these traits can adopt these traits. In a 2012 article in Psychology Today, science writers and authors Susan Reynolds and Teresa Aubele (who co-authored Train Your Brain to Get Happy with Stan Wenck), wrote: “While some of us may have genetic and biological imperatives that may require medication or training to overcome, or at least to modulate, the vast majority of us have high functioning brains and thereby hold our financial destiny in our hands.” The column talks about various ways in which one can train the brain to maximize its potential to accumulate wealth. The journey gets easier once a person has started on the path of wealth creation. 

According to an August 2013 research titled Poverty Impedes Cognitive Function by Anandi Mani of the University of Warwick along with co-researchers from other universities such as Harvard, Princeton and British Columbia, the frontal cortex of the brain of the rich performs better compared with that of the poor. The frontal cortex is the part of the brain that controls various human cognitive aspects such as decision-making, emotions and long-term planning. The research demonstrates this with two case studies. In the first, a set of people comprising both rich and poor were given tests of cognitive function. Before the tests, the subjects were told to think of a car repair that they have to undertake. However, randomly chosen half of the group members were told that it would cost $1,500 and the other half that it would cost $150. In the group which was told that the repair would take $150, both poor and rich performed similarly. But in the other group, which was told that repair would require $1,500, the performance of the poor was drastically lower than that of the rich. The second study was done on 464 sugarcane farmers from two districts of Tamil Nadu. Some farmers were interviewed before harvest and some after the harvest and sale of the crop. Money from this sale was the only source of income for most of the farmers. Again, farmers who were tested pre-harvest performed poorly compared with farmers who were interviewed post-harvest. These two studies show that absence of financial stress—irrespective of whether one is rich or poor—enables better decision making. This could possibly be one of the reasons why once a person is rich, the chances of remaining rich are higher, whereas a person caught in the trap of poverty keeps swinging from one financial crisis to the other. 

Lady luck 

Then there is something called luck— being at the right place at the right time, and open to grab opportunities. “In the recently concluded football World Cup, there were so many players and there were so many goal scoring chances. But only the lucky ones were standing at the right place at the right time to get a goal against their names,” said Manit Rastogi, managing partner, Morphogenesis, a New Delhi-based architecture firm. Manit, 44, along with wife Sonali Rastogi, 46, started their firm in a space above a garage in 1996 with a capital of Rs.50,000. Today, their company’s net worth is Rs.225 crore. Their first break came when they were in their 20s and Apollo Tyres gave them a contract to build a state-of-the-art office in Gurgaon. “We very novices then and were competing with three reputed architecture firms. But luckily for us, Apollo’s board had quite a few young members and that I guess worked in our favour,” said Manit.

According to a study by UK-based professor and psychologist Richard Wiseman, people who consider themselves lucky and are quick at noticing and creating opportunities, make intuition-based decisions, remain positive and have a resilient attitude. So, if you have already made a fortune, you know what you have done right. Though this is not meant to be a self-help article, here is some good news for others. The Psychology Today column cited above also said that there is enough research to show that a human brain continues to adapt throughout a person’s lifetime. So, if you haven’t primed your brain for financial success, now is a good time to start.

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