The Wall Street Journal recently produced an article titled “The Power Trip.“ The gist of the article can be found in two points. First, contrary to what many may think, studies show that power tends to flow towards nice people. “People give authority to people they genuinely like.” Second, once individuals are in a position of power, they often stop exhibiting the qualities of empathy that helped them obtain power in the first place. “It’s an incredibly consistent effect,” says Berkeley psychologist Dacher Keltner. “When you give people power, they basically start acting like fools.”
The article is a good one, full of thought-provoking content.
I have been thinking about this article in large part because it seems to apply to investors. I have been investing in public and private companies for more than 15 years, and I continue to be struck by the arrogance and lack of empathy exhibited among investors. Some of the reasons may be somewhat forgivable: reacting to being burned by previous slick stories, managing information overload, etc. But I think a dominant contributor to investors’ self-absorption traces back to some of the factors mentioned in this Wall Street Journal article. Investors feel a certain sense of power and simply forget to have empathy for individuals who are sweating it out “in the arena,” as Teddy Roosevelt once said. And that is one of the most unfortunate aspects of the investment world.
