How Real Estate Developers Think. Peter Hendee Brown

and helps them identify a new entrepreneurial opportunity.⁶

      This underscores an important difference between managers, who work at optimizing an existing business, and entrepreneurs, who, according to Shane and Venkataraman, identify new “means-ends relations” and “combine existing information and concepts into new ideas.” The latter is more difficult to do, and people who are very intelligent and have the right set of cognitive skills are simply better at it. Intelligence may even influence how different people assess risk. Numerous studies have shown that entrepreneurial people see opportunities in situations where other people see only risks, and this may be because highly intelligent people are better able to accurately assess risk while the average person overvalues the downside risk as compared to the potential upside gain. In other words, according to the behavioral psychologist Daniel Kahneman, for most people, losing a dollar feels twice as bad as winning a dollar feels good. Those who are able to value the upside and the downside equally are better at assessing risk and reward and exploiting entrepreneurial opportunities.⁷

      Studies have identified several other attributes common to entrepreneurs. First, they are optimists who perceive their chances of success to be much higher than they really are and much higher than those of their competitors. They are likely to be overly optimistic about the value of the opportunities they discover. This optimism, while driving them forward, can become a disadvantage if taken too far as they undervalue the downside risk. Entrepreneurs must also possess a higher-than-average tolerance for ambiguity because, unlike established businesses, entrepreneurial ventures take shape through a messy, uncertain, and fluid process. Finally, people with a high need for achievement are more likely to engage in entrepreneurial ventures because they offer greater opportunities for wealth creation and public acclaim.⁸

      Entrepreneurs make their money by conceiving of new combinations of resources and ideas and creating new products and new markets for those products. They also share certain characteristics—intelligence, optimism, drive, and comfort with ambiguity, to name a few—that are further illuminated by recent research in the area of genetics.

       The Geneticist’s View

      In Born Entrepreneurs, Born Leaders, Scott Shane summarizes a growing body of scientific research that proves that our genes influence whether or not we are likely to become entrepreneurs, and that the genetic indicators of our tendency to engage in entrepreneurial behavior fall into three areas.⁹

      First, genes influence an individual’s predisposition to entrepreneurship through a number of personality traits. Each person falls somewhere on a range of high to low for each of what are called the “big five,” or OCEAN, personality traits: “openness to new experience,” “conscientiousness,” “extroversion,” “agreeableness,” and “neuroticism.” Entrepreneurial people typically rank very high on the first three of these traits and very low on the last two.¹⁰

      Entrepreneurs are more likely to be open to new experience, which is helpful because each entrepreneurial venture is new and different from the last. They are also more likely to be extroverts, and extroverts are also more likely to start their own businesses. Entrepreneurs are usually very conscientious, which translates into determination, discipline, organization, and perseverance in the face of obstacles, challenges, and uncertainty. Entrepreneurs are less likely, however, to be neurotic, to be insecure, or to be worriers. Rather, the entrepreneur must remain emotionally stable, flexible, and positive in the face of stress, financial risk, social isolation, setbacks, and the uncertainty that is inherent to any entrepreneurial activity. Finally, although they can be very charismatic and socially skilled, entrepreneurs are less likely to be agreeable—they do not need to be liked. Indeed, being agreeable—“cheerful, courteous, trusting, cooperative, kind, and altruistic”—is of little benefit to the entrepreneur who must “pursue his own interests, often at the expense of others, and drive hard bargains.”¹¹

      The Influence of Genes on Other Personality Traits and Correlations Between Traits

      There are several other personality traits through which genes predispose an individual toward entrepreneurial behavior. The idea of “locus of control” has to do with how much a person believes that he or she can control the world—or that the world controls him or her. A person can have either an internal or an external locus of control but entrepreneurs typically possess a high internal locus of control, which translates into a strong belief in their own ability to influence outcomes through their own behavior. Entrepreneurs must also have a high degree of self-esteem, which translates into high self-efficacy and confidence in one’s own ability to achieve goals even in the face of obstacles and uncertainty, and at times when others don’t believe in you. Finally, genes influence our predisposition to “novelty seeking,” a high “need for autonomy,” and “risk-taking propensity,” all three of which correlate with entrepreneurial behavior.¹²

      There are also correlations between the OCEAN personality traits and these other personality traits that are driven by genes. Extroverts, for example, often also possess the “impulsiveness” and novelty-seeking personality traits that correlate with entrepreneurial behavior. Further, conscientious people often have the persistence, impulsiveness, and novelty-seeking traits. And people who are open to new experiences are also typically imaginative, creative, curious, and inventive.¹³

      The Influence of Genes on Intelligence and Energy Levels

      Beyond our personalities, genes influence several other important sets of traits that correlate with entrepreneurial behavior. First, genes influence intelligence, and entrepreneurial people are more likely to be highly intelligent. Second, all people are active at some level, ranging between sedentary and hyperactive, and genes influence this “activity level.” Entrepreneurial people tend to be more active than others, and people with ADHD (attention-deficit hyperactivity disorder) are more likely to become entrepreneurs than to pursue other professions, in part because, despite their high intelligence, they are less able to focus enough to excel in areas that require hours of reading, study, and concentration, like engineering, law, and medicine. Finally, ADHD and reading disorders such as dyslexia both correlate positively with high intelligence and people with these conditions are also more likely to be entrepreneurs. Many entrepreneurs have neither ADHD nor dyslexia but for those who do have them and who can put these traits to work, the combination can lead to wild success as evidenced by entrepreneurs such as Sir Richard Branson of Virgin Enterprises and David Neeleman, formerly the CEO of JetBlue.¹⁴

      This biological perspective reveals much about the personality of the entrepreneur but genetics is not the only influence on the entrepreneurs’ behavior. Environment, upbringing, and life experience play equally important roles in creating and shaping the entrepreneur. Stepping away from the microscope, where do entrepreneurs come from, how do they get their start, what other factors influence their development, and what is it that they actually do all day long?

       The Sociologist’s View

      According to Villette and Vuillermot, the entrepreneur’s goal is to identify and exploit a “market imperfection,” earning a large, one-time entrepreneurial profit before others involved in the transaction are able to properly value their own contributing resources. This is called a “good deal,” which is when “you get a lot for a little” while minimizing your own exposure to risk. Success in exploiting a good deal requires the entrepreneur to use know-how, social position, and reputation to engage in a political pursuit that involves culturing relations with important government representatives, businesspeople, and others who can help him or her succeed. But a good deal happens only once, so the entrepreneur is in a perpetual hunt for the next good deal. Each good deal increases the amount of capital under the entrepreneur’s control, paving the way for still larger deals in the future. So for each good deal, the entrepreneur’s success depends not on economic or technological innovation but rather on a social framework, “created by real human beings using an informal web of transactions.”¹⁵

      Villette and Vuillermot then debunk a handful of common misconceptions about entrepreneurs, most important their attitude toward risk. Rather than taking huge, crazy risks, as is commonly believed, successful entrepreneurs succeed