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Like to Take Risks? Blame Your Social Life

A recent study suggests feeling excluded by peers can complicate your relationship to money and risk-taking.
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Feeling lucky? Before you do anything brash--in your business or otherwise--maybe you need to take a look at your social life.

A recent study published by the Journal of Consumer Research (via University of Chicago Press and the Harvard Business Review) found that feeling socially isolated can cause people to pursue riskier but potentially more profitable financial opportunities.

According to authors Rod Duclos of Hong Kong University of Science and Technology, Echo Wen Wan of the University of Hong Kong, and Yuwei Jiang of Hong Kong Polytechnic University, the desire for social acceptance can play a significant role in your financial decisions.

“Consumers are often willing to invest or sacrifice important resources to secure social bonds. In the absence of social support, consumers seek significantly more money to secure what they want out of the social system surrounding them,” they write.

The study showed that people who were excluded by their peers in a game were more likely to engage in financial risk later on. These excluded participants expressed a higher preference to participate in a risky lottery (rating their interest at 4.23 on an 8-point scale) than their peers who felt socially included (only 2.79 out of 8).

While feeling socially rejected may cause individuals to take greater risks with money, the correlation between social rejection and financial risk does not appear to be driven by low self-esteem, say the authors.

“Rather, interpersonal rejection exacerbates financial risk-taking by heightening the instrumentality of money (as a substitute for popularity) to obtain benefits in life.”

While the study focused on consumers and didn't mention entrepreneurs specifically, the results may be relevant for founders who are weighing the risk against reward in major financial decisions. Are there other emotions or personal issues tied up in your decision?   

If there are, you “might choose to delay important financial decisions following a breakup or a falling out with friends, colleagues, or family,” the authors conclude.

Last updated: Jan 23, 2013

FRANCESCA FENZI | Staff Writer

Francesca Fenzi reports on entrepreneurship, technology and small business news from San Francisco. Her work has previously appeared in TIME, USA Today, Pop City and The Northside Chronicle.




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