MIAMI — Many people rely on the impartiality and intuition of professionals in the financial sector, such as advisors and analysts, to do right with their money. But along with the many other factors that can get in the way of their objectivity arises an unexpected factor: their office floor level. A new study from researchers at Miami University’s business school finds that people who work on higher office floors tend to take more financial risks.
The authors believe that elevation may play a role in why some hedge fund managers are willing to invest in highly volatile cryptocurrency markets like Bitcoin and Ripple.
“When you increase elevation, there is a subconscious effect on the sense of power,” says lead author Sina Esteky, an assistant professor of marketing at the school, in a press release. “This heighted (sic) feeling of power results in more risk-seeking behavior.”
Esteky’s pilot study examined data from 3,147 hedge funds worldwide that accounted for more than $500 billion in assets. Researchers rated funds on their volatility and them compared their measurements with the floor level of each firm. Hedge funds used in the study were found in anywhere from the first to 96th floor of their building. The authors found that as the floor level increased, firms tended to become more volatile.
The researchers also conducted a study in which they asked 116 people to make betting decisions while they were riding in a glass elevator of an office building to or from the 72nd floor of a 73-story skyscraper in a large midwestern U.S. city. Those who were rising in the elevator tended to opt for the riskier bet with the potential for a larger payoff, while those who were going down tended to choose the more conservative option.
Results held true even for slight increases in elevation from the ground floor. Another segment of the study had 144 participants between the ages of 18 and 73 take part in a task where they made 10 decisions that yielded various payouts depending on the level of risk. Again, those who completed the assignment on the third floor opted for the riskier decisions more often than participants on the first floor. Esteky had these participants also complete a series of unfinished words to measure their moods and feelings of power. People who were on the third floor more often chose words demonstrating high levels of power, which the authors believe could explain the desire to make riskier decisions when on a higher floor.
Interestingly, being aware of these findings may help professionals stay more conservative. When participants were made aware that being on a higher floor caused people to take more risks, the effect no longer held true. Similarly, the authors found that people who worked in higher levels but weren’t near any windows didn’t show the same level of risk, indicating that people need to be able to see just how high up they are for the effect to occur.
“The important lesson is that when people become aware of the potential impact of elevation, it doesn’t happen anymore,” says Esteky. “The brain is very susceptive to subtle situational factors, but also really good at correcting for such effects, so awareness can help us be more rational in our decisions.”
Esteky says the effect may not be exclusive to financial professionals. Future studies should focus on other occupations, such as doctors who often weigh levels of risk when considering treatment plans for patients.
The full study was published Jan. 9, 2018 in Journal of Consumer Psychology.