What role do personality assessments have in entrepreneurship?
Scalable professions are those that require years of work with a modest baseline reward but an outside chance of a disproportionately large payoff. Examples of this could be a research scientist in search of next generation antibiotics, an artist, an app developer or speculative entrepreneur. The rewards are uncertain, but will be enormous if they hit the jack-pot.
Non-scalable professions are those that offer incentives directly proportionate to the amount of work put in. This includes most professions such as therapist, car mechanic, cafe owners, accountants, teachers.
The differential between a scalable and non-scalable profession is that there is a ceiling to the earning potential of the non-scalable profession delimited by the number of hours that they can work. However much a lawyer charges for each hour, they can only work so many hours a week. An author on the other hand can work for years with little or no pay for their efforts. They may never actually see a real return on the time they invest. For the lucky few that make a breakthrough, earnings may become completely disproportionate to the time invested.
Another, hypothetical, illustration of the difference between scalable and non-scalable professions:
Sample 1 – 1000 teachers
Wages range from 22 to 80 thousand
Mean wage is 34 thousand
You would see a bell curve in this wage distribution model
Sample 2 –
Wages range from 0 to 400 million
Mean wage is 1 million by sheer virtue of the 1% who are successful in scaling their investment
You would see a bell curve, but one with a positive skew and a fat-tail. The money bought in by the top 1% in these professions skews the model.
Entrepreneurs are regarded as the holy grail of scalable professions. The most successful can achieve returns beyond their wildest expectations. For this reason, entrepreneurialism has become viewed as the answer to all economic woes and the search is on for the magic formula; the key personal attributes that can be guaranteed to turn straw into gold.
Candidates for entrepreneurial personality traits might include drive, risk-taking propensity, creativity, curiosity, resilience or bloody-minded determination. But, isn’t there a contradiction in seeking to formulate the perfect entrepreneur profile, whether by identifying personality trait combinations or by using existing entrepreneurs as a ‘boiler plate’ template in the search for future entrepreneurs? After all, the only non-negotiable defining characteristic for the epithet ‘entrepreneur’ is business success – and that may well be the only thing that entrepreneurs have in common. Like Heads of State, Prime Ministers or successful premiership football coaches, it is not at all clear what, if anything, they have in common.
For every operator in a scalable profession that makes it big, there are thousands that fall short. Those from these professions that do hit the jack-pot are statistically unusual and it is the impact of their atypical earnings that skew the distribution of incomes. For every J K Rowling, there are hundreds of authors just about making a living. When we examine the personality traits of the successful we ignore the far larger pool of those who have achieved success but on a lesser scale.
In A proclivity for entrepreneurship: A comparison of entrepreneurs, small business owners, and corporate managers, a study by Stewart Wayne et al., this phenomenon is studied at length by broadening the definition of entrepreneurship to take in the small or medium-sized business owner. They found that although many of the entrepreneurs exhibited the expected traits, other factors, such as the amount to which they were driven by financial reward, were better indicators of what kind of organisation they would create. Some preferred stability, whilst others were growth orientated.
There may be some value in identifying a core of base line attributes that would identify those in the running, but there is always a degree of serendipity in the alignment of the probabilities that select out the really big winners. One lucky break can set the ball rolling on a series of events that allow for continuous leveraging of scalability. This is not to belittle the accomplishments of any successful scalable professional, but to assume that there is a critical identifiable feature or special quality that distinguishes them from others, a ‘magic ingredient’, would be misleading. Improbable things do happen but tracing back through the complex chain of events and all the happenstance behind a ‘jack-pot’ success doesn’t, onb the face of it, look a very hopeful approach.
If personality assessment has a role to play in the pursuit of entrepreneurial success, it is much more likely to be in terms of personal development of aspirants rather than in the selection of some kind of ‘high potential’. There must be innumerable combinations of personality characteristics that could prove successful, not just a few. Each of those potentially successful personality combinations define what that individual will have to deal with, within themselves, in order for them to be a big winner; what resources are available to them and what they will need to overcome. Self-knowledge and realism are a better basis for the development of successful entrepreneurial strategies than blind optimism – but then again, every week someone wins the national lottery!