Study of traders finds balanced professional networks lead to better high-risk decisions
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E-mail Xinhua, June 18, 2019
CHICAGO, June 17 (Xinhua) -- A study from Northwestern University's (NU) Kellogg School of Management finds that balanced professional networks are more important than individual talent when it comes to high-risk decision making.
The study, posted on the website of NU on Friday, is the first longitudinal study to prove several key tenants of structural balance theory (SBT), which consists of four primary rules for relationships among individuals: a friend of a friend is a friend; a friend of an enemy is an enemy; an enemy of an enemy is a friend; and an enemy of a friend is an enemy.
From 2007 to 2009, researchers analyzed day traders' instant messages to determine the relationships among traders and compared those relationships to performance data for individual traders, controlling for factors including market volatility and work days. They found that the traders with the highest level of balance in their networks also made the best trades, regardless of the objective level of talent of any individual trader.
"This data shows that companies reap the benefits when conflict among employees is reduced," said corresponding author Brian Uzzi, a professor of leadership and organizational change. "There are certain types of conflict that can't resolve themselves. This work can help managers identify those conflicts and actively step in to resolve them, ultimately leading to better performance."
"We suspect that conflict in networks monopolizes some portion of workers' mental energy," Uzzi said. "Resolving that conflict frees up mental energy to make better decisions and perform at a higher level."
The findings of this study apply to individuals who engage in extensive high-risk decision making, particularly in situations where polarization is common, such as politics or in the military.
Further research is needed to determine whether the same rules hold in other work situations, such as creative and innovative endeavors.
The study has been published in Nature Communications. Enditem
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