Understanding the Personalities of Successful Founders

Who are the individuals achieving remarkable success in business leadership? Are they extroverted, analytical thinkers, or even those with psychopathic traits? Discussions surrounding the psychology and personality of business leaders have varied over time, often lacking consistency. Reports suggest a range of characteristics among CEOs—from high levels of psychopathy to confidence in change, friendliness, and other traits that may or may not be significant.

But what does contemporary research reveal? A recent study published in the journal PNAS (May 2023) provides valuable insights. Researchers from Columbia Business School examined over 10,000 startup founders to explore how their personality traits related to the outcomes of their businesses throughout their lifecycle.

To assess each founder's personality type, the team first developed a personality prediction model using data from Facebook. Between 2007 and 2012, Facebook users had the opportunity to complete a validated personality questionnaire known as the Big Five personality test, which measured five axes: openness, conscientiousness, extraversion, agreeableness, and neuroticism.

Using this data, the researchers trained their model to predict user personalities based on the language used in Facebook status updates. Consistent with previous studies, they found that the model could accurately assess a user's personality solely from their Facebook posts.

Next, the team applied their model to analyze the personality traits of startup founders through their tweets. Both tweets and Facebook posts share similarities: they are typically concise text snippets expressing thoughts, emotions, or actions. Thus, the researchers utilized their personality predictor to infer the traits of each founder based on their tweeting behavior.

To evaluate the success of each entrepreneur's venture, the researchers also gathered data from Crunchbase, focusing on two specific business outcomes: 1) the amount of funding raised by the business, and 2) whether the business successfully launched an IPO or was acquired. These outcomes can be seen as indicators of success at different stages: early-stage success and late-stage success.

By combining the personality estimates of the entrepreneurs with the business outcome data, the researchers assessed how well each personality trait correlated with business success. Here’s a brief overview of the Big Five personality traits: - Openness: Imaginative and open to new experiences. - Conscientiousness: Diligent and organized. - Extraversion: Socially outgoing and energetic. - Agreeableness: Trustworthy and empathetic. - Neuroticism: Prone to anxiety and mood fluctuations.

Here are some notable findings from the research regarding the link between personality traits and a founder's business success: - Founders who scored higher in openness and agreeableness were more likely to achieve success in the early stages of their businesses. Those who excelled in openness were more likely to secure funding, while those with high conscientiousness tended to raise larger amounts of money. - Interestingly, while conscientiousness positively correlated with early-stage success, it was negatively associated with late-stage success. Founders who were meticulous and organized faced challenges in achieving a successful exit despite their ability to attract initial funding. - Neuroticism was broadly linked to business failures. Those who exhibited higher levels of anxiety and emotional instability raised less money and had lower chances of successful exits.

Thus, the evidence suggests that a founder’s personality traits play a significant role in their business success. However, the narrative is complex. For instance, neuroticism affects both early and late outcomes, indicating that emotional instability can hinder the journey of building a successful business. Conversely, conscientiousness may assist in securing early funding but can impede long-term success.

The researchers propose intriguing hypotheses regarding the fluctuating impact of conscientiousness. In the early phases of a venture, diligence may lead to solid planning and goal-setting, qualities appealing to cautious early-stage investors. However, later success may require adaptability, rapid decision-making, and a readiness to seize opportunities—traits that conscientious individuals may struggle with.

Regardless of the reasons behind these trends, the findings underscore the value of diverse teams working collaboratively. Successful founders tend to surround themselves with talented individuals who offer different perspectives and are willing to challenge a leader's decisions when necessary. No one possesses a perfect skill set for every scenario, and achieving global success relies on recognizing when to leverage one’s strengths and when to depend on the strengths of others.

Ultimately, a keen sense of self-awareness and the ability to discern these differences might be the most adaptable strength a leader can cultivate.

The first video discusses how predicting a startup's success can depend on the personality traits of its founders. It delves into the characteristics that make certain personalities more adept at navigating the entrepreneurial landscape.

The second video explores specific personality traits that contribute to the success of founders, providing insights into the psychological makeup that often accompanies effective leadership in business.