Where to invest your finances ?

The ability to predict a company’s success is extremely valuable. Stock traders try to do it every day to make their clients and themselves wealthy. It turns out that we can predict the accomplishments of CEOs at least as measured by the profitability of the companies they run. All from a photograph.

My good friend whose father makes a living by investing in stocks knows the importance of choosing the right company to invest in. Because we are all not blessed let this post be the alternate.

In a landmark study by Nicholas Rule and Nalini Ambady they set out to answer the question whether we can predict the profits of companies by examining the facial tells of their CEOs?

They went about by examining at a glance ratings by complete strangers who knew nothing about the CEOs’ day to day behavior and decisions. The researchers asked subjects to examine head shots of male CEOs who ran the top and bottom 25 companies listed on the Fortune 500 from the year 2006. 50 companies in total.

The subjects rated the faces on the following:

POWER: assesed by ratings of CEOs’ competence, dominace, and facial maturity

WARMTH: assessed by ratings of CEOs’ likeablitity and trustworthiness

LEADERSHIP: assessed on a seven point scale in response to the question “How good would this person be at leading a company

How could strangers who knew nothing about the identities of the CEOs or the companies they run look at a businessman’s face and predict the success of their companies?

As with every study a link surfaced, CEOs with faces preceived as powerful competent, dominatnt and mature were significantly more likely to run profitable companies. Those with less powerful looking faces tended to run companies at the bottom of profitability. These findings held even when the researches statistically controlled for CEOs’ attractiveness, emotional displays in the photos and age. The CEOs’ perceived warmth had no link to profits.

According to Rule and Ambady the ability to infer success from faces was applicable to both male and female CEOs.

Most previous studies that have failed to find potential links between CEOs’ characteristics and the success of their company relied on surveys from employees who knew their bosses. The fact that people who knew nothing about a CEO can predict his or her company’s profits is powerful stuff.

For more great advice read The Tell by Mathew Hertenstein.

 

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