Tuesday, July 29, 2014

The Proactive Personalities of Traders and Entrepreneurs

Successful traders share a number of qualities with successful entrepreneurs.  This is not surprising, as trading is all about defining, discovering, and realizing value in a marketplace.  Both successful traders and entrepreneurs have a proactive side to their personalities:  they possess a vision of what they want and work in a directed way to achieve it.  As Lori Greiner astutely observes, it is this drive that leads entrepreneurs to work long hours to avoid working the standard work week. 

While broad personality traits have been associated with entrepreneurial success, research suggests that very specific personality characteristics are the best predictors of entrepreneurial pursuit.  Specifically, four traits are common among successful entrepreneurs:

*  Proactivity - the ability to spot opportunities
*  Creativity - the ability to generate innovative ideas
*  Opportunism - the tendency to pursue opportunities as they arise
*  Vision - the desire to make a difference in the world

What stands out is that successful entrepreneurs are thinkers, dreamers, and doers.  This is very similar to successful investment success, which combines research and idea generation with the management of positions and portfolios.  The vision dimension is particularly interesting.  Having unique ideas might not be sufficient to motivate the entrepreneur to get through inevitable roadblocks and setbacks.  It's the vision of creating something worthwhile--something that makes a difference--that provides the extra motivational push.  Interestingly, many of the Market Wizards interviewed by Jack Schwager are known for their involvement in charitable causes.  Those activities are one way that market success becomes a way of making a difference in the world.

The proactive personality that distinguishes entrepreneurs is seen among people who are not especially constrained by situational forces.  They tend to take action and persevere in challenging situations, particularly when they perceive opportunity.  This capacity to sustain intentional action in the face of potential distractions and obstacles speaks to a high degree of focus and motivation.  In short, the successful entrepreneur is good at locating opportunity and then pursuing it relentlessly.  This sounds very much like a domain-specific version of the "rage to master" noted in the recent blog post.  Indeed, it would not be far wrong to suggest that entrepreneurs have a rage to create.

This may be the key to why some traders succeed over time, adapting to ever-changing markets, while others do not.  If a trader's primary motivation is proactive creation, then he or she will sustain innovation.  When we think of the great business leaders, they are not just entrepreneurs--they are serial entrepreneurs.  The rage to create ensures that great traders will remain creative, continually searching for fresh opportunity.  It's what traders do when they make money that reveals their capacity for long-term success:  do they become comfortable and complacent, or do they chafe at the status quo and look for continued ways to innovate?

Further Reading:  Trading, Entrepreneurship, and Gambling