Quiet: The Power of Introverts in a World That Can't Stop Talking - Susan Cain (2012)
Part II. YOUR BIOLOGY, YOUR SELF?
Chapter 7. WHY DID WALL STREET CRASH AND WARREN BUFFETT PROSPER?
How Introverts and Extroverts Think (and Process Dopamine) Differently
Tocqueville saw that the life of constant action and decision which was entailed by the democratic and businesslike character of American life put a premium upon rough and ready habits of mind, quick decision, and the prompt seizure of opportunities—and that all this activity was not propitious for deliberation, elaboration, or precision in thought.
—RICHARD HOFSTADTER, IN Anti-Intellectualism in America
Just after 7:30 a.m. on December 11, 2008, the year of the great stock market crash, Dr. Janice Dorn’s phone rang. The markets had opened on the East Coast to another session of carnage. Housing prices were plummeting, credit markets were frozen, and GM teetered on the brink of bankruptcy.
Dorn took the call from her bedroom, as she often does, wearing a headset and perched atop her green duvet. The room was decorated sparely. The most colorful thing in it was Dorn herself, who, with her flowing red hair, ivory skin, and trim frame, looks like a mature version of Lady Godiva. Dorn has a PhD in neuroscience, with a specialty in brain anatomy. She’s also an MD trained in psychiatry, an active trader in the gold futures market, and a “financial psychiatrist” who has counseled an estimated six hundred traders.
“Hi, Janice!” said the caller that morning, a confident-sounding man named Alan. “Do you have time to talk?”
Dr. Dorn did not have time. A day trader who prides herself on being in and out of trading positions every half hour, she was eager to start trading. But Dorn heard a desperate note in Alan’s voice. She agreed to take the call.
Alan was a sixty-year-old midwesterner who struck Dorn as a salt-of-the-earth type, hardworking and loyal. He had the jovial and assertive manner of an extrovert, and he maintained his good cheer despite the story of disaster he proceeded to tell. Alan and his wife had worked all their lives, and managed to sock away a million dollars for retirement. But four months earlier he’d gotten the idea that, despite having no experience in the markets, he should buy a hundred thousand dollars’ worth of GM stock, based on reports that the U.S. government might bail out the auto industry. He was convinced it was a no-lose investment.
After his trade went through, the media reported that the bailout might not happen after all. The market sold off GM and the stock price fell. But Alan imagined the thrill of winning big. It felt so real he could taste it. He held firm. The stock fell again, and again, and kept dropping until finally Alan decided to sell, at a big loss.
There was worse to come. When the next news cycle suggested that the bailout would happen after all, Alan got excited all over again and invested another hundred thousand dollars, buying more stock at the lower price. But the same thing happened: the bailout started looking uncertain.
Alan “reasoned” (this word is in quotation marks because, according to Dorn, conscious reasoning had little to do with Alan’s behavior) that the price couldn’t go much lower. He held on, savoring the idea of how much fun he and his wife would have spending all the money he stood to make. Again the stock went lower. When finally it hit seven dollars per share, Alan sold. And bought yet again, in a flush of exhilaration, when he heard that the bailout might happen after all …
By the time GM’s stock price fell to two dollars a share, Alan had lost seven hundred thousand dollars, or 70 percent of his family nest egg.
He was devastated. He asked Dorn if she could help recoup his losses. She could not. “It’s gone,” she told him. “You are never going to make that money back.”
He asked what he’d done wrong.
Dorn had many ideas about that. As an amateur, Alan shouldn’t have been trading in the first place. And he’d risked far too much money; he should have limited his exposure to 5 percent of his net worth, or $50,000. But the biggest problem may have been beyond Alan’s control: Dorn believed he was experiencing an excess of something psychologists call reward sensitivity.
A reward-sensitive person is highly motivated to seek rewards—from a promotion to a lottery jackpot to an enjoyable evening out with friends. Reward sensitivity motivates us to pursue goals like sex and money, social status and influence. It prompts us to climb ladders and reach for faraway branches in order to gather life’s choicest fruits.
But sometimes we’re too sensitive to rewards. Reward sensitivity on overdrive gets people into all kinds of trouble. We can get so excited by the prospect of juicy prizes, like winning big in the stock market, that we take outsized risks and ignore obvious warning signals.
Alan was presented with plenty of these signals, but was so animated by the prospect of winning big that he couldn’t see them. Indeed, he fell into a classic pattern of reward sensitivity run amok: at exactly the moments when the warning signs suggested slowing down, he sped up—dumping money he couldn’t afford to lose into a speculative series of trades.
Financial history is full of examples of players accelerating when they should be braking. Behavioral economists have long observed that executives buying companies can get so excited about beating out their competitors that they ignore signs that they’re overpaying. This happens so frequently that it has a name: “deal fever,” followed by “the winner’s curse.” The AOL–Time Warner merger, which wiped out $200 billion of Time Warner shareholder value, is a classic example. There were plenty of warnings that AOL’s stock, which was the currency for the merger, was wildly overvalued, yet Time Warner’s directors approved the deal unanimously.
“I did it with as much or more excitement and enthusiasm as I did when I first made love some forty-two years ago,” exclaimed Ted Turner, one of those directors and the largest individual shareholder in the company. “TED TURNER: IT’S BETTER THAN SEX,” announced the New York Post the day after the deal was struck, a headline to which we’ll return for its power to explain why smart people can sometimes be too reward-sensitive.
You may be wondering what all this has to do with introversion and extroversion. Don’t we all get a little carried away sometimes?
The answer is yes, except that some of us do so more than others. Dorn has observed that her extroverted clients are more likely to be highly reward-sensitive, while the introverts are more likely to pay attention to warning signals. They’re more successful at regulating their feelings of desire or excitement. They protect themselves better from the downside. “My introvert traders are much more able to say, ‘OK, Janice, I do feel these excited emotions coming up in me, but I understand that I can’t act on them.’ The introverts are much better at making a plan, staying with a plan, being very disciplined.”
To understand why introverts and extroverts might react differently to the prospect of rewards, says Dorn, you have to know a little about brain structure. As we saw in chapter 4, our limbic system, which we share with the most primitive mammals and which Dorn calls the “old brain,” is emotional and instinctive. It comprises various structures, including the amygdala, and it’s highly interconnected with the nucleus accumbens, sometimes called the brain’s “pleasure center.” We examined the anxious side of the old brain when we explored the role of the amygdala in high reactivity and introversion. Now we’re about to see its greedy side.
The old brain, according to Dorn, is constantly telling us, “Yes, yes, yes! Eat more, drink more, have more sex, take lots of risk, go for all the gusto you can get, and above all, do not think!” The reward-seeking, pleasure-loving part of the old brain is what Dorn believes spurred Alan to treat his life savings like chips at the casino.
We also have a “new brain” called the neocortex, which evolved many thousands of years after the limbic system. The new brain is responsible for thinking, planning, language, and decision-making—some of the very faculties that make us human. Although the new brain also plays a significant role in our emotional lives, it’s the seat of rationality. Its job, according to Dorn, includes saying, “No, no, no! Don’t do that, because it’s dangerous, makes no sense, and is not in your best interests, or those of your family, or of society.”
So where was Alan’s neocortex when he was chasing stock market gains?
The old brain and the new brain do work together, but not always efficiently. Sometimes they’re actually in conflict, and then our decisions are a function of which one is sending out stronger signals. So when Alan’s old brain sent its breathless messages up to his new brain, it probably responded as a neocortex should: it told his old brain to slow down. It said, Watch out! But it lost the ensuing tug-of-war.
We all have old brains, of course. But just as the amygdala of a high-reactive person is more sensitive than average to novelty, so do extroverts seem to be more susceptible than introverts to the reward-seeking cravings of the old brain. In fact, some scientists are starting to explore the idea that reward-sensitivity is not only an interesting feature of extroversion; it is what makes an extrovert an extrovert. Extroverts, in other words, are characterized by their tendency to seek rewards, from top dog status to sexual highs to cold cash. They’ve been found to have greater economic, political, and hedonistic ambitions than introverts; even their sociability is a function of reward-sensitivity, according to this view—extroverts socialize because human connection is inherently gratifying.
What underlies all this reward-seeking? The key seems to be positive emotion. Extroverts tend to experience more pleasure and excitement than introverts do—emotions that are activated, explains the psychologist Daniel Nettle in his illuminating book on personality, “in response to the pursuit or capture of some resource that is valued. Excitement builds towards the anticipated capture of that resource. Joy follows its capture.” Extroverts, in other words, often find themselves in an emotional state we might call “buzz”—a rush of energized, enthusiastic feelings. This is a sensation we all know and like, but not necessarily to the same degree or with the same frequency: extroverts seem to get an extra buzz from the pursuit and attainment of their goals.
The basis of buzz appears to be a high degree of activity in a network of structures in the brain—often called the “reward system”—including the orbitofrontal cortex, the nucleus accumbens, and the amygdala. The job of the reward system is to get us excited about potential goodies; fMRI experiments have shown that the system is activated by any number of possible delights, from anticipation of a squirt of Kool-Aid on the tongue, to money, to pictures of attractive people.
The neurons that transmit information in the reward network operate in part through a neurotransmitter—a chemical that carries information between brain cells—called dopamine. Dopamine is the “reward chemical” released in response to anticipated pleasures. The more responsive your brain is to dopamine, or the higher the level of dopamine you have available to release, some scientists believe, the more likely you are to go after rewards like sex, chocolate, money, and status. Stimulating mid-brain dopamine activity in mice gets them to run around excitedly in an empty cage until they drop dead of starvation. Cocaine and heroin, which stimulate dopamine-releasing neurons in humans, make people euphoric.
Extroverts’ dopamine pathways appear to be more active than those of introverts. Although the exact relationship between extroversion, dopamine, and the brain’s reward system has not been conclusively established, early findings have been intriguing. In one experiment, Richard Depue, a neurobiologist at Cornell University, gave an amphetamine that activates the dopamine system to a group of introverts and extroverts, and found that the extroverts had a stronger response. Another study found that extroverts who win gambling games have more activity in the reward-sensitive regions of their brains than victorious introverts do. Still other research has shown that the medial orbitofrontal cortex, a key component of the brain’s dopamine-driven reward system, is larger in extroverts than in introverts.
By contrast, introverts “have a smaller response” in the reward system, writes psychologist Nettle, “and so go less out of their way to follow up [reward] cues.” They will, “like anyone, be drawn from time to time to sex, and parties, and status, but the kick they get will be relatively small, so they are not going to break a leg to get there.” In short, introverts just don’t buzz as easily.
In some ways, extroverts are lucky; buzz has a delightful champagne-bubble quality. It fires us up to work and play hard. It gives us the courage to take chances. Buzz also gets us to do things that would otherwise seem too difficult, like giving speeches. Imagine you work hard to prepare a talk on a subject you care about. You get your message across, and when you finish the audience rises to its feet, its clapping sustained and sincere. One person might leave the room feeling, “I’m glad I got my message across, but I’m also happy it’s over; now I can get back to the rest of my life.” Another person, more sensitive to buzz, might walk away feeling, “What a trip! Did you hear that applause? Did you see the expression on their faces when I made that life-changing point? This is great!”
But buzz also has considerable downsides. “Everyone assumes that it’s good to accentuate positive emotions, but that isn’t correct,” the psychology professor Richard Howard told me, pointing to the example of soccer victories that end in violence and property damage. “A lot of antisocial and self-defeating behavior results from people who amplify positive emotions.”
Another disadvantage of buzz may be its connection to risk—sometimes outsized risk. Buzz can cause us to ignore warning signs we should be heeding. When Ted Turner (who appears to be an extreme extrovert) compared the AOL–Time Warner deal to his first sexual experience, he may have been telling us that he was in the same buzzy state of mind as an adolescent who’s so excited about spending the night with his new girlfriend that he’s not thinking much about the consequences. This blindness to danger may explain why extroverts are more likely than introverts to be killed while driving, be hospitalized as a result of accident or injury, smoke, have risky sex, participate in high-risk sports, have affairs, and remarry. It also helps explain why extroverts are more prone than introverts to overconfidence—defined as greater confidence unmatched by greater ability. Buzz is JFK’s Camelot, but it’s also the Kennedy Curse.
This theory of extroversion is still young, and it is not absolute. We can’t say that all extroverts constantly crave rewards or that all introverts always brake for trouble. Still, the theory suggests that we should rethink the roles that introverts and extroverts play in their own lives, and in organizations. It suggests that when it comes time to make group decisions, extroverts would do well to listen to introverts—especially when they see problems ahead.
In the wake of the 2008 crash, a financial catastrophe caused in part by uncalculated risk-taking and blindness to threat, it became fashionable to speculate whether we’d have been better off with more women and fewer men—or less testosterone—on Wall Street. But maybe we should also ask what might have happened with a few more introverts at the helm—and a lot less dopamine.
Several studies answer this question implicitly. Kellogg School of Management Professor Camelia Kuhnen has found that the variation of a dopamine-regulating gene (DRD4) associated with a particularly thrill-seeking version of extroversion is a strong predictor of financial risk-taking. By contrast, people with a variant of a serotonin-regulating gene linked to introversion and sensitivity take 28 percent less financial risk than others. They have also been found to outperform their peers when playing gambling games calling for sophisticated decision-making. (When faced with a low probability of winning, people with this gene variant tend to be risk-averse; when they have a high probability of winning, they become relatively risk-seeking.) Another study, of sixty-four traders at an investment bank, found that the highest-performing traders tended to be emotionally stable introverts.
Introverts also seem to be better than extroverts at delaying gratification, a crucial life skill associated with everything from higher SAT scores and income to lower body mass index. In one study, scientists gave participants the choice of a small reward immediately (a gift certificate from Amazon) or a bigger gift certificate in two to four weeks. Objectively, the bigger reward in the near but not immediate future was the more desirable option. But many people went for the “I want it now” choice—and when they did, a brain scanner revealed that their reward network was activated. Those who held out for the larger reward two weeks hence showed more activity in the prefrontal cortex—the part of the new brain that talks us out of sending ill-considered e-mails and eating too much chocolate cake. (A similar study suggests that the former group tended to be extroverts and the latter group introverts.)
Back in the 1990s, when I was a junior associate at a Wall Street law firm, I found myself on a team of lawyers representing a bank considering buying a portfolio of subprime mortgage loans made by other lenders. My job was to perform due diligence—to review the documentation to see whether the loans had been made with the proper paperwork. Had the borrowers been notified of the interest rates they were slated to pay? That the rates would go up over time?
The papers turned out to be chock-full of irregularities. If I’d been in the bankers’ shoes, this would have made me nervous, very nervous. But when our legal team summarized the risks in a caution-filled conference call, the bankers seemed utterly untroubled. They saw the potential profits of buying those loans at a discount, and they wanted to go ahead with the deal. Yet it was just this kind of risk-reward miscalculation that contributed to the failure of many banks during the Great Recession of 2008.
At about the same time I evaluated that portfolio of loans, I heard a story circulating on Wall Street about a competition among investment banks for a prestigious piece of business. Each of the major banks sent a squad of their top employees to pitch the client. Each team deployed the usual tools: spread sheets, “pitch books,” and PowerPoint presentations. But the winning team added its own piece of theatrics: they ran into the room wearing matching baseball caps and T-shirts emblazoned with the letters FUD, an acronym for Fear, Uncertainty, and Doubt. In this case FUD had been crossed out with an emphatic red X; FUD was an unholy trinity. That team, the vanquishers of FUD, won the contest.
Disdain for FUD—and for the type of person who tends to experience it—is what helped cause the crash, says Boykin Curry, a managing director of the investment firm Eagle Capital, who had front-row seats to the 2008 meltdown. Too much power was concentrated in the hands of aggressive risk-takers. “For twenty years, the DNA of nearly every financial institution … morphed dangerously,” he told Newsweek magazine at the height of the crash. “Each time someone at the table pressed for more leverage and more risk, the next few years proved them ‘right.’ These people were emboldened, they were promoted and they gained control of ever more capital. Meanwhile, anyone in power who hesitated, who argued for caution, was proved ‘wrong.’ The cautious types were increasingly intimidated, passed over for promotion. They lost their hold on capital. This happened every day in almost every financial institution, over and over, until we ended up with a very specific kind of person running things.”
Curry is a Harvard Business School grad and, with his wife, Celerie Kemble, a Palm Beach–born designer, a prominent fixture on New York political and social scenes. Which is to say that he would seem to be a card-carrying member of what he calls the “go-go aggressive” crowd, and an unlikely advocate for the importance of introverts. But one thing he’s not shy about is his thesis that it was forceful extroverts who caused the global financial crash.
“People with certain personality types got control of capital and institutions and power,” Curry told me. “And people who are congenitally more cautious and introverted and statistical in their thinking became discredited and pushed aside.”
Vincent Kaminski, a Rice University business school professor who once served as managing director of research for Enron, the company that famously filed for bankruptcy in 2001 as a result of reckless business practices, told the Washington Post a similar story of a business culture in which aggressive risk-takers enjoyed too high a status relative to cautious introverts. Kaminski, a soft-spoken and careful man, was one of the few heroes of the Enron scandal. He repeatedly tried to sound the alarm with senior management that the company had entered into business deals risky enough to threaten its survival. When the top brass wouldn’t listen, he refused to sign off on these dangerous transactions and ordered his team not to work on them. The company stripped him of his power to review company-wide deals.
“There have been some complaints, Vince, that you’re not helping people to do transactions,” the president of Enron told him, according to Conspiracy of Fools, a book about the Enron scandal. “Instead, you’re spending all your time acting like cops. We don’t need cops, Vince.”
But they did need them, and still do. When the credit crisis threatened the viability of some of Wall Street’s biggest banks in 2007, Kaminski saw the same thing happening all over again. “Let’s just say that all the demons of Enron have not been exorcised,” he told the Post in November of that year. The problem, he explained, was not only that many had failed to understand the risks the banks were taking. It was also that those who did understand were consistently ignored—in part because they had the wrong personality style: “Many times I have been sitting across the table from an energy trader and I would say, ‘Your portfolio will implode if this specific situation happens.’ And the trader would start yelling at me and telling me I’m an idiot, that such a situation would never happen. The problem is that, on one side, you have a rainmaker who is making lots of money for the company and is treated like a superstar, and on the other side you have an introverted nerd. So who do you think wins?”
But what exactly is the mechanism by which buzz clouds good judgment? How did Janice Dorn’s client, Alan, dismiss the danger signs screaming that he might lose 70 percent of his life savings? What prompts some people to act as if FUD doesn’t exist?
One answer comes from an intriguing line of research conducted by the University of Wisconsin psychologist Joseph Newman. Imagine that you’ve been invited to Newman’s lab to participate in one of his studies. You’re there to play a game: the more points you get, the more money you win. Twelve different numbers flash across a computer screen, one at a time, in no particular order. You’re given a button, as if you were a game-show contestant, which you can press or not as each number appears. If you press the button for a “good” number, you win points; if you press for a “bad” number, you lose points; and if you don’t press at all, nothing happens. Through trial and error you learn that four is a nice number and nine is not. So the next time the number nine flashes across your screen, you know not to press that button.
Except that sometimes people press the button for the bad numbers, even when they should know better. Extroverts, especially highly impulsive extroverts, are more likely than introverts to make this mistake. Why? Well, in the words of psychologists John Brebner and Chris Cooper, who have shown that extroverts think less and act faster on such tasks: introverts are “geared to inspect” and extroverts “geared to respond.”
But the more interesting aspect of this puzzling behavior is not what the extroverts do before they’ve hit the wrong button, but what they do after. When introverts hit the number nine button and find they’ve lost a point, they slow down before moving on to the next number, as if to reflect on what went wrong. But extroverts not only fail to slow down, they actually speed up.
This seems strange; why would anyone do this? Newman explains that it makes perfect sense. If you focus on achieving your goals, as reward-sensitive extroverts do, you don’t want anything to get in your way—neither naysayers nor the number nine. You speed up in an attempt to knock these roadblocks down.
Yet this is a crucially important misstep, because the longer you pause to process surprising or negative feedback, the more likely you are to learn from it. If you force extroverts to pause, says Newman, they’ll do just as well as introverts at the numbers game. But, left to their own devices, they don’t stop. And so they don’t learn to avoid the trouble staring them in the face. Newman says that this is exactly what might happen to extroverts like Ted Turner when bidding for a company on auction. “When a person bids up too high,” he told me, “that’s because they didn’t inhibit a response they should have inhibited. They didn’t consider information that should have been weighing on their decision.”
Introverts, in contrast, are constitutionally programmed to downplay reward—to kill their buzz, you might say—and scan for problems. “As soon they get excited,” says Newman, “they’ll put the brakes on and think about peripheral issues that may be more important. Introverts seem to be specifically wired or trained so when they catch themselves getting excited and focused on a goal, their vigilance increases.”
Introverts also tend to compare new information with their expectations, he says. They ask themselves, “Is this what I thought would happen? Is it how it should be?” And when the situation falls short of expectations, they form associations between the moment of disappointment (losing points) and whatever was going on in their environment at the time of the disappointment (hitting the number nine.) These associations let them make accurate predictions about how to react to warning signals in the future.
Introverts’ disinclination to charge ahead is not only a hedge against risk; it also pays off on intellectual tasks. Here are some of the things we know about the relative performance of introverts and extroverts at complex problem-solving. Extroverts get better grades than introverts during elementary school, but introverts outperform extroverts in high school and college. At the university level, introversion predicts academic performance better than cognitive ability. One study tested 141 college students’ knowledge of twenty different subjects, from art to astronomy to statistics, and found that introverts knew more than the extroverts about every single one of them. Introverts receive disproportionate numbers of graduate degrees, National Merit Scholarship finalist positions, and Phi Beta Kappa keys. They outperform extroverts on the Watson-Glaser Critical Thinking Appraisal test, an assessment of critical thinking widely used by businesses for hiring and promotion. They’ve been shown to excel at something psychologists call “insightful problem solving.”
The question is: Why?
Introverts are not smarter than extroverts. According to IQ scores, the two types are equally intelligent. And on many kinds of tasks, particularly those performed under time or social pressure or involving multitasking, extroverts do better. Extroverts are better than introverts at handling information overload. Introverts’ reflectiveness uses up a lot of cognitive capacity, according to Joseph Newman. On any given task, he says, “if we have 100 percent cognitive capacity, an introvert may have only 75 percent on task and 25 percent off task, whereas an extrovert may have 90 percent on task.” This is because most tasks are goal-directed. Extroverts appear to allocate most of their cognitive capacity to the goal at hand, while introverts use up capacity by monitoring how the task is going.
But introverts seem to think more carefully than extroverts, as the psychologist Gerald Matthews describes in his work. Extroverts are more likely to take a quick-and-dirty approach to problem-solving, trading accuracy for speed, making increasing numbers of mistakes as they go, and abandoning ship altogether when the problem seems too difficult or frustrating. Introverts think before they act, digest information thoroughly, stay on task longer, give up less easily, and work more accurately. Introverts and extroverts also direct their attention differently: if you leave them to their own devices, the introverts tend to sit around wondering about things, imagining things, recalling events from their past, and making plans for the future. The extroverts are more likely to focus on what’s happening around them. It’s as if extroverts are seeing “what is” while their introverted peers are asking “what if.”
Introverts’ and extroverts’ contrasting problem-solving styles have been observed in many different contexts. In one experiment, psychologists gave fifty people a difficult jigsaw puzzle to solve, and found that the extroverts were more likely than the introverts to quit midway. In another, Professor Richard Howard gave introverts and extroverts a complicated series of printed mazes, and found not only that the introverts tended to solve more mazes correctly, but also that they spent a much greater percentage of their allotted time inspecting the maze before entering it. A similar thing happened when groups of introverts and extroverts were given the Raven Standard Progressive Matrices, an intelligence test that consists of five sets of problems of increasing difficulty. The extroverts tended to do better on the first two sets, presumably because of their ability to orient quickly to their goal. But on the three more difficult sets, where persistence pays, the introverts significantly outperformed them. By the final, most complicated set, the extroverts were much more likely than the introverts to abandon the task altogether.
Introverts sometimes outperform extroverts even on social tasks that require persistence. Wharton management professor Adam Grant (who conducted the leadership studies described in chapter 2) once studied the personality traits of effective call-center employees. Grant predicted that the extroverts would be better telemarketers, but it turned out that there was zero correlation between extroversion levels and cold-calling prowess.
“The extroverts would make these wonderful calls,” Grant told me, “but then a shiny object of some kind would cross their paths and they’d lose focus.” The introverts, in contrast, “would talk very quietly, but boom, boom, boom, they were making those calls. They were focused and determined.” The only extroverts to outperform them were those who also happened to be unusually high scorers for a separate personality trait measuring conscientiousness. Introvert persistence was more than a match for extrovert buzz, in other words, even at a task where social skills might be considered at a premium.
Persistence isn’t very glamorous. If genius is one percent inspiration and ninety-nine percent perspiration, then as a culture we tend to lionize the one percent. We love its flash and dazzle. But great power lies in the other ninety-nine percent.
“It’s not that I’m so smart,” said Einstein, who was a consummate introvert. “It’s that I stay with problems longer.”
None of this is to denigrate those who forge ahead quickly, or to blindly glorify the reflective and careful. The point is that we tend to overvalue buzz and discount the risks of reward-sensitivity: we need to find a balance between action and reflection.
For example, if you were staffing an investment bank, management professor Kuhnen told me, you’d want to hire not only reward-sensitive types, who are likely to profit from bull markets, but also those who remain emotionally more neutral. You’d want to make sure that important corporate decisions reflect the input of both kinds of people, not just one type. And you’d want to know that individuals on all points of the reward-sensitivity spectrum understand their own emotional preferences and can temper them to match market conditions.
But it’s not just employers who benefit from taking a closer look at their employees. We also need to take a closer look at ourselves. Understanding where we fall on the reward-sensitivity spectrum gives us the power to live our lives well.
If you’re a buzz-prone extrovert, then you’re lucky to enjoy lots of invigorating emotions. Make the most of them: build things, inspire others, think big. Start a company, launch a website, build an elaborate tree house for your kids. But also know that you’re operating with an Achilles’ heel that you must learn to protect. Train yourself to spend energy on what’s truly meaningful to you instead of on activities that look like they’ll deliver a quick buzz of money or status or excitement. Teach yourself to pause and reflect when warning signs appear that things aren’t working out as you’d hoped. Learn from your mistakes. Seek out counterparts (from spouses to friends to business partners) who can help rein you in and compensate for your blind spots.
And when it comes time to invest, or to do anything that involves a sage balance of risk and reward, keep yourself in check. One good way to do this is to make sure that you’re not surrounding yourself with images of reward at the crucial moment of decision. Kuhnen and Brian Knutson have found that men who are shown erotic pictures just before they gamble take more risks than those shown neutral images like desks and chairs. This is because anticipating rewards—any rewards, whether or not related to the subject at hand—excites our dopamine-driven reward networks and makes us act more rashly. (This may be the single best argument yet for banning pornography from workplaces.)
And if you’re an introvert who’s relatively immune to the excesses of reward sensitivity? At first blush, the research on dopamine and buzz seems to imply that extroverts, and extroverts alone, are happily motivated to work hard by the excitement they get from pursuing their goals. As an introvert, I was puzzled by this idea when I first came across it. It didn’t reflect my own experience. I’m in love with my work and always have been. I wake up in the morning excited to get started. So what drives people like me?
One answer is that even if the reward-sensitivity theory of extroversion turns out to be correct, we can’t say that all extroverts are always more sensitive to rewards and blasé about risk, or that all introverts are constantly unmoved by incentives and vigilant about threats. Since the days of Aristotle, philosophers have observed that these two modes—approaching things that appear to give pleasure and avoiding others that seem to cause pain—lie at the heart of all human activity. As a group, extroverts tend to be reward-seeking, but every human being has her own mix of approach and avoidance tendencies, and sometimes the combination differs depending on the situation. Indeed, many contemporary personality psychologists would say that threat-vigilance is more characteristic of a trait known as “neuroticism” than of introversion. The body’s reward and threat systems also seem to work independently of each other, so that the same person can be generally sensitive, or insensitive, to both reward and threat.
If you want to determine whether you are reward-oriented, threat-oriented, or both, try asking yourself whether the following groups of statements are true of you.
If you are reward-oriented:
1. When I get something I want, I feel excited and energized.
2. When I want something, I usually go all out to get it.
3. When I see an opportunity for something I like, I get excited right away.
4. When good things happen to me, it affects me strongly.
5. I have very few fears compared to my friends.
If you are threat-oriented:
1. Criticism or scolding hurts me quite a bit.
2. I feel pretty worried or upset when I think or know somebody is angry at me.
3. If I think something unpleasant is going to happen, I usually get pretty “worked up.”
4. I feel worried when I think I have done poorly at something important.
5. I worry about making mistakes.
But I believe that another important explanation for introverts who love their work may come from a very different line of research by the influential psychologist Mihaly Csikszentmihalyi on the state of being he calls “flow.” Flow is an optimal state in which you feel totally engaged in an activity—whether long-distance swimming or songwriting, sumo wrestling or sex. In a state of flow, you’re neither bored nor anxious, and you don’t question your own adequacy. Hours pass without your noticing.
The key to flow is to pursue an activity for its own sake, not for the rewards it brings. Although flow does not depend on being an introvert or an extrovert, many of the flow experiences that Csikszentmihalyi writes about are solitary pursuits that have nothing to do with reward-seeking: reading, tending an orchard, solo ocean cruising. Flow often occurs, he writes, in conditions in which people “become independent of the social environment to the degree that they no longer respond exclusively in terms of its rewards and punishments. To achieve such autonomy, a person has to learn to provide rewards to herself.”
In a sense, Csikszentmihalyi transcends Aristotle; he is telling us that there are some activities that are not about approach or avoidance, but about something deeper: the fulfillment that comes from absorption in an activity outside yourself. “Psychological theories usually assume that we are motivated either by the need to eliminate an unpleasant condition like hunger or fear,” Csikszentmihalyi writes, “or by the expectation of some future reward such as money, status, or prestige.” But in flow, “a person could work around the clock for days on end, for no better reason than to keep on working.”
If you’re an introvert, find your flow by using your gifts. You have the power of persistence, the tenacity to solve complex problems, and the clear-sightedness to avoid pitfalls that trip others up. You enjoy relative freedom from the temptations of superficial prizes like money and status. Indeed, your biggest challenge may be to fully harness your strengths. You may be so busy trying to appear like a zestful, reward-sensitive extrovert that you undervalue your own talents, or feel underestimated by those around you. But when you’re focused on a project that you care about, you probably find that your energy is boundless.
So stay true to your own nature. If you like to do things in a slow and steady way, don’t let others make you feel as if you have to race. If you enjoy depth, don’t force yourself to seek breadth. If you prefer single-tasking to multitasking, stick to your guns. Being relatively unmoved by rewards gives you the incalculable power to go your own way. It’s up to you to use that independence to good effect.
Of course, that isn’t always easy. While writing this chapter, I corresponded with Jack Welch, the former chairman of General Electric. He had just published a BusinessWeek online column called “Release Your Inner Extrovert,” in which he called for introverts to act more extroverted on the job. I suggested that extroverts sometimes need to act more introverted, too, and shared with him some of the ideas you’ve just read about how Wall Street might have benefited from having more introverts at the helm. Welch was intrigued. But, he said, “the extroverts would argue that they never heard from the introverts.”
Welch makes a fair point. Introverts need to trust their gut and share their ideas as powerfully as they can. This does not mean aping extroverts; ideas can be shared quietly, they can be communicated in writing, they can be packaged into highly produced lectures, they can be advanced by allies. The trick for introverts is to honor their own styles instead of allowing themselves to be swept up by prevailing norms. The story of the lead-up to the Great Recession of 2008 is peppered, alas, with careful types who took inappropriate risks, like the former chief executive of Citigroup, Chuck Prince, a former lawyer who made risky loans into a falling market because, he said, “as long as the music is playing, you’ve got to get up and dance.”
“People who are initially cautious become more aggressive,” observes Boykin Curry of this phenomenon. “They say, ‘Hey, the more aggressive people are getting promoted and I’m not, so I’m going to be more aggressive too.’ ”
But stories of financial crises often contain subplots about people who famously (and profitably) saw them coming—and such tales tend to feature just the kinds of people who embrace FUD, or who like to close the blinds to their offices, insulate themselves from mass opinion and peer pressure, and focus in solitude. One of the few investors who managed to flourish during the crash of 2008 was Seth Klarman, president of a hedge fund called the Baupost Group. Klarman is known for consistently outperforming the market while steadfastly avoiding risk, and for keeping a significant percentage of his assets in cash. In the two years since the crash of 2008, when most investors were fleeing hedge funds in droves, Klarman almost doubled Baupost’s assets under management to $22 billion.
Klarman achieved this with an investment strategy based explicitly on FUD. “At Baupost, we are big fans of fear, and in investing, it is clearly better to be scared than sorry,” he once wrote in a letter to investors. Klarman is a “world-class worrier,” observes the New York Times, in a 2007 article called “Manager Frets Over the Market, But Still Outdoes It.” He owns a racehorse called “Read the Footnotes.”
During the years leading up to the 2008 crash, Klarman “was one of the few people to stick to a cautious and seemingly paranoid message,” says Boykin Curry. “When everyone else was celebrating, he was probably storing cans of tuna in his basement, to prepare for the end of civilization. Then, when everyone else panicked, he started buying. It’s not just analysis; it’s his emotional makeup. The same wiring that helps Seth find opportunities that no one else sees can make him seem aloof or blunt. If you’re the kind of person who frets every time the quarter is good, you may have trouble rising to the top of a corporate pyramid. Seth probably wouldn’t have made it as a sales manager. But he is one of the great investors of our time.”
Similarly, in his book on the run-up to the 2008 crash, The Big Short, Michael Lewis introduces three of the few people who were astute enough to forecast the coming disaster. One was a solitary hedge-fund manager named Michael Burry who describes himself as “happy in my own head” and who spent the years prior to the crash alone in his office in San Jose, California, combing through financial documents and developing his own contrarian views of market risk. The others were a pair of socially awkward investors named Charlie Ledley and Jamie Mai, whose entire investment strategy was based on FUD: they placed bets that had limited downside, but would pay off handsomely if dramatic but unexpected changes occurred in the market. It was not an investment strategy so much as a life philosophy—a belief that most situations were not as stable as they appeared to be.
This “suited the two men’s personalities,” writes Lewis. “They never had to be sure of anything. Both were predisposed to feel that people, and by extension markets, were too certain about inherently uncertain things.” Even after being proven right with their 2006 and 2007 bets against the subprime mortgage market, and earning $100 million in the process, “they actually spent time wondering how people who had been so sensationally right (i.e., they themselves) could preserve the capacity for diffidence and doubt and uncertainty that had enabled them to be right.”
Ledley and Mai understood the value of their constitutional diffidence, but others were so spooked by it that they gave up the chance to invest money with the two—in effect, sacrificing millions of dollars to their prejudice against FUD. “What’s amazing with Charlie Ledley,” says Boykin Curry, who knows him well, “is that here you had a brilliant investor who was exceedingly conservative. If you were concerned about risk, there was no one better to go to. But he was terrible at raising capital because he seemed so tentative about everything. Potential clients would walk out of Charlie’s office scared to give him money because they thought he lacked conviction. Meanwhile, they poured money into funds run by managers who exuded confidence and certainty. Of course, when the economy turned, the confident group lost half their clients’ money, while Charlie and Jamie made a fortune. Anyone who used conventional social cues to evaluate money managers was led to exactly the wrong conclusion.”
Another example, this one from the 2000 crash of the dot-com bubble, concerns a self-described introvert based in Omaha, Nebraska, where he’s well known for shutting himself inside his office for hours at a time.
Warren Buffett, the legendary investor and one of the wealthiest men in the world, has used exactly the attributes we’ve explored in this chapter—intellectual persistence, prudent thinking, and the ability to see and act on warning signs—to make billions of dollars for himself and the shareholders in his company, Berkshire Hathaway. Buffett is known for thinking carefully when those around him lose their heads. “Success in investing doesn’t correlate with IQ,” he has said. “Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”
Every summer since 1983, the boutique investment bank Allen & Co. has hosted a weeklong conference in Sun Valley, Idaho. This isn’t just any conference. It’s an extravaganza, with lavish parties, river-rafting trips, ice-skating, mountain biking, fly fishing, horseback riding, and a fleet of babysitters to care for guests’ children. The hosts service the media industry, and past guest lists have included newspaper moguls, Hollywood celebrities, and Silicon Valley stars, with marquee names such as Tom Hanks, Candice Bergen, Barry Diller, Rupert Murdoch, Steve Jobs, Diane Sawyer, and Tom Brokaw.
In July 1999, according to Alice Schroeder’s excellent biography of Buffett, The Snowball, he was one of those guests. He had attended year after year with his entire family in tow, arriving by Gulfstream jet and staying with the other VIP attendees in a select group of condos overlooking the golf course. Buffett loved his annual vacation at Sun Valley, regarding it as a great place for his family to gather and for him to catch up with old friends.
But this year the mood was different. It was the height of the technology boom, and there were new faces at the table—the heads of technology companies that had grown rich and powerful almost overnight, and the venture capitalists who had fed them cash. These people were riding high. When the celebrity photographer Annie Leibovitz showed up to shoot “the Media All-Star Team” for Vanity Fair, some of them lobbied to get in the photo. They were the future, they believed.
Buffett was decidedly not a part of this group. He was an old-school investor who didn’t get caught up in speculative frenzy around companies with unclear earnings prospects. Some dismissed him as a relic of the past. But Buffett was still powerful enough to give the keynote address on the final day of the conference.
He thought long and hard about that speech and spent weeks preparing for it. After warming up the crowd with a charmingly self-deprecating story—Buffett used to dread public speaking until he took a Dale Carnegie course—he told the crowd, in painstaking, brilliantly analyzed detail, why the tech-fueled bull market wouldn’t last. Buffett had studied the data, noted the danger signals, and then paused and reflected on what they meant. It was the first public forecast he had made in thirty years.
The audience wasn’t thrilled, according to Schroeder. Buffett was raining on their parade. They gave him a standing ovation, but in private, many dismissed his ideas. “Good old Warren,” they said. “Smart man, but this time he missed the boat.”
Later that evening, the conference wrapped up with a glorious display of fireworks. As always, it had been a blazing success. But the most important aspect of the gathering—Warren Buffett alerting the crowd to the market’s warning signs—wouldn’t be revealed until the following year, when the dot-com bubble burst, just as he said it would.
Buffett takes pride not only in his track record, but also in following his own “inner scorecard.” He divides the world into people who focus on their own instincts and those who follow the herd. “I feel like I’m on my back,” says Buffett about his life as an investor, “and there’s the Sistine Chapel, and I’m painting away. I like it when people say, ‘Gee, that’s a pretty good-looking painting.’ But it’s my painting, and when somebody says, ‘Why don’t you use more red instead of blue?’ Good-bye. It’s my painting. And I don’t care what they sell it for. The painting itself will never be finished. That’s one of the great things about it.”