THE ENTREPRENEUR

Adaptive response to evolving opportunity

Peter C. Whybrow
Semel Institute for Neuroscience and Human Behavior, UCLA

Evolution, the Human Sciences and Liberty Special MPS Meeting, USFQ Campus Galapagos Islands, June, 2013 . GRAPHIC: THE ECONOMIST DECEMBER 13, 2003

CREATIVE CURIOUS IMAGINATIVE AMBITIOUS DRIVEN PASSIONATE RISK TAKER

INTELLIGENT RESTLESS INNOVATIVE RESOURCEFUL PERSISTENT IMPULSIVE GAMBLER

The temperament of the entrepreneur? Defining a phenotype

ROSEMARY AND PETER GRANT

DAPHNE MAJOR

DARWINS FINCHES --- FROM A COMMON SOUTH AMERICAN ANCESTRY

The brain is a transducer Fundamentally behavior is the expression of biological drive in interaction with environmental circumstance Through natural selection that interaction in turn shapes biology and subsequently modifies behavior in an ever evolving cycle This evolution trends toward an extended order of adaptive equilibrium.

AS FRIEDRICH HAYEK DESCRIBED IN THE SENSORY ORDER, 1952

SO WHO ARE WE?

ABUNDANCE

THE AGE OF MAN

SCARCITY

ENLIGHTENMENT INDUSTRIALIZATION FOSSIL FUELS

Graph credit Dr. William Stanton

AS MEMBERS OF THE HOMINID LINE..

Homo sapiens Neanderthal

Homo ergaster
African branch of Homo erectus

.WE ARE THE JOHNNY-COME-LATELY

After Naish, Schaubelt and Kieser: Landesmuseum, Darmstadt, Germany. (2005)

OUR BEHAVIOR IS BEST UNDERSTOOD THROUGH THE LENS OF EVOLUTION

CHOICE & SOCIAL BEHAVIORS

SURVIVAL INSTINCTS & MAINTENANCE

THE TRIUNE BRAIN

FROM MACLEAN: THE TRIUNE BRAIN

INSTINCTUAL BEHAVIORS ARE SHAPED BY ENVIRONMENTAL CIRCUMSTANCE & EXPERIENCE

THE BRAIN IS A TRANSDUCER: HABIT AND MEMORY ARE KEY

MATURES IN 2-3 DECADES

CHOICE & ACTION

Limbic structures

PERCEPTION

AFTER FUSTER: CORTEX AND MIND

IT IS THROUGH HABIT AND MEMORY THAT WE IMAGINE THE FUTURE AND GIVE MEANING TO CHOICE

Neurobiology of Entrepreneurial Behavior

PLEASURE
POSITIVE FEEDBACK LOOP

MEMORY

REWARD

Perception of OPPORTUNITY

RISK assessment

ACTION taken PUNISHMENT

MEMORY

FEAR
NEGATIVE FEEDBACK LOOP

OPPORTUNITY, RISK AND THE PERCEPTION-ACTION CYCLE

Entrepreneur
1. The director of a musical institution. 2. A person who organizes entertainment.
John Law (1671-1729)

3. An individual who undertakes or controls a business or enterprise and who bears the risk of profit or loss. 4. A contractor who acts as an intermediary.
The Oxford Shorter English Dictionary

Richard Cantillon (1780s-1734)

JOHN LAW (1671-1729) Born to a Scottish family of wealthy bankers 1671 1880s Father dies 1688 Duel over Elizabeth Villierskills Wilson Imprisonedescapes to Amsterdam Returns to Scotland. Seeks National Bank Failure. Moves to France Appointed Controller of Finance 1694 1703 1707 1711 1715

RICHARD CANTILLON (1688s -1734)

Born in Ireland of wealthy landowners

Moves to France, Citizenship

In Spain working for Great Britain Returns to Paris, Banking successful career lending money Becomes involved with John Law and the the Mississippi company Rides the bubble- makes fortune

Bank General formed . Paper credit Mississippi Company founded Mississippi Bubble.collapse Dismissed flees France Impoverished. Lives as a gambler

1716

1720

Pursued by those who lost money in the scheme. 1729 1730 1734

Dies in Venice

Writes essay on Economic Theory Dies mysteriously in a London fire

CREATIVE CURIOUS IMAGINATIVE AMBITIOUS DRIVEN PASSIONATE RISK TAKER

INTELLIGENT RESTLESS INNOVATIVE RESOURCEFUL PERSISTENT IMPULSIVE GAMBLER

Cultural Factors of Influence

POSITIVE FEEDBACK LOOP

MEMORY

PLEASURE

MYOPIC VISION

REWARD

Perception of OPPORTUNITY

RISK assessment

ACTION taken PUNISHMENT

MEMORY

FEAR

NEGATIVE FEEDBACK LOOP

OPPORTUNITY, RISK AND THE PERCEPTION-ACTION CYCLE

Cultural Factors of Influence

POSITIVE FEEDBACK LOOP

MEMORY

PLEASURE

MYOPIC VISION

DEBT & CREDIT

REWARD

Perception of OPPORTUNITY

RISK assessment

ACTION taken PUNISHMENT

MEMORY

FEAR

NEGATIVE FEEDBACK LOOP

BUT ALSO LAW AND CANTILLON WERE BOTH MIGRANTS.

Entrepreneurship and the Migrant Temperament

Ambition, curiosity and risk-taking.

THE MIGRANT MIND

The American Temperament: A Mania for Prosperity About the same time that Darwin was wandering about in the Beagle, De Tocqueville was investigating Prisons in the US

It is odd to watch with what feverish ardor the Americans pursue prosperity. Millions of men are all marching together toward the same point on the horizon; their languages, religions, and mores are different, but they have one common aim. They have been told that fortune is to be found somewhere toward the west, and they hasten to seek it
Democracy in America, 1835.

Alexis de Tocqueville: ADAM SMITHS ENGINES OF ECONOMIC GROWTH--SELF-INTEREST, CURIOSITY AND PERSONAL AMBITION--ARE ESPECIALLY WELL REPRESENTED IN AMERICAS MIGRANT POPULATION
(1805-1859)

AMERICAN MANIA: When More is Not Enough

THE MIGRANT MIND: SOME FACTS

Only 2% of the worlds people migrate. Most individuals die within 50 miles of where they were born. Thus migrants are self-selected, largely by temperament. In our own time America is the quintessential migrant culture, the largest congregation of migrant people in the world today. Ninety-eight percent of Americans were born elsewhere, or into families that have migrated there within the past 300 years. The other 2% walked there 10-20 thousand years ago. Optimism, self-interest, curiosity and short attention (often described as restlessness or novelty seeking) and a vigorous ambition are the best predictors of an migrs adjustment.
OPTIMISM & DRIVE! 70% of Americans believe that with luck and the right timing they will become rich and famous

ADAM SMITHS POSTULATE:

A FREE MARKET ECONOMY IS A SELF-REGULATING COMPLEX OPEN SYSTEM

SMITHS INVISIBLE HAND

Self-love
ENGINE

Social Sentiment
IMPARTIAL SPECTATOR Sympathy & empathic awareness The need to be loved by others Peer recognition and social acceptance The man we naturally love the most is he who joins..to his own..selfish feelings the most exquisite sensibility of others LARGELY LEARNED BEHAVIORS, CULTURALLY DEPENDENT

BRAKES

INDIVIDUAL FREEDOM Self-interest Gods incomprehensible remedy Curiosity & love of novelty keeps in motion the industry of mankind Social ambition (competition) the distinction of ranks INSTINCTUAL, REWARD-DRIVEN BEHAVIORS

NEURONAL SUPERHIGHWAYS & THE BRAINS REWARD SYSTEM

Amygdala

THE DOPAMINE REWARD PATHWAYS DRIVE THE ENGINES OF THE MARKET

(self-interest; curiosity; ambition)

THEY ARE EASILY HI-JACKED & PRONE TO ADDICTION

THE NOREPINEPHRINE SUPERHIGHWAY MAINTAINS THE ALERT STATE THE DOPAMINE (REWARD) PATHWAY MONITORS NOVEL STIMULI THE SEROTONIN SYSTEM IS THE MODERATOR

EVOLUTIONS GENETIC FOOTPRINTS

EUROPEAN MIGRATION 400 YRS AGO

CHICAGO TRIBUNE; APRIL 27, 1997

EVOLUTIONS GENETIC FOOTPRINTS

The Ancient Migrations

CURIOUSITY, EXPLORATION & RISK?

CHICAGO TRIBUNE; APRIL 27, 1997

CURIOSITY.EXPLORATIONNOVELTY.RISK

CELL NUCLEUS

.THEN REWARD OR PUNISHMENT

DOPAMINE D4 RECEPTOR GENE POLYMORPHISMS

Dopamine D4 receptor gene (DRD4), on chromosome 11, encodes one of 5 known protein receptors that mediate the post-synaptic actions of dopamine. DRD4 displays high variability in the human population. The main source of this variability is a 48 base-pair region that can be repeated 2 to 11 times. The variable region occurs within the third cytoplasmic loop by which the receptor couples to the cells G-protein binding system that drives intracellular adenyly cyclase inhibition. The distribution of DRD4 mRNA in the brain (in contrast to the motor actions of D1 and D2) suggests that DRD4 has a role in modulating cognitive and emotional behavior.

DOPAMINE RECEPTORS (CODED ON CHROMOSOME 11) ARE AN EXTENDED FAMILY

.AND SOME MEMBERS ARE MORE SENSITIVE THAN OTHERS.

EVOLUTIONS GENETIC FOOTPRINTS

In the ancient migrations, the risk taking gene (the dopamine receptor 4-7 allele) is associated with the distance traveled THE DR4-7 REPEAT IS ASSOCIATED WITH RISK-TAKING

RISK-TAKERS In native Americans the DR4-7 allele predominates

CHICAGO TRIBUNE; APRIL 27, 1997

THE ANCIENT MIGRATIONS AND THE RISK-TAKING DOPAMINE RECEPTOR ALLELE (DR4-7)

SOURCE: CHANG et al, THE WORLDWIDE DISTRIBUTION OF ALLELE FREQUENCIES

AT THE HUMAN DOPAMINE D4 RECEPTOR LOCUS. HUMAN GENETICS (1996) 98, 91-101

DRD4 DIVERSITY: SIMPLIFIED MODEL FOR EXON 3, 48-BASE PAIR REPEAT SEQUENCE
2-ALLELE

1-4

1-4-7

3-ALLELE

1-2-3-4 1-2-3-4
MOST COMMON

1-2-3-4 1-2-3-4 1-2-3-4 1-2-3-4

6-ALLELE

4-ALLELE

1-2-3-4

1-2-3-2-3-4

Multiple mutations & gene conversions

1-2-3-4 1-2-3-2-3-4

1-2-6-5-2-5-4
7-ALLELE

ADAPTIVE ADVANTAGE

1-3-2-3-4
5-ALLELE
ADAPTED FROM DING ET AL, PNAS VOL 99, 309-314, 2002

THE RISK-TAKING DOPAMINE RECEPTOR ALLELE (DR4-7)

MIGRATION & THE ATTENTION DEFICIT, HYPERACTIVITY DISORDER

In many studies the DR4-7 allele has also been associated with the ADHD phenotype

In 2004 3 million children in the US were taking stimulants for ADHD. 95% of the stimulants prescribed in the world are prescribed in the US

SOURCE: CHANG et al, THE WORLDWIDE DISTRIBUTION OF ALLELE FREQUENCIES

AT THE HUMAN DOPAMINE D4 RECEPTOR LOCUS. HUMAN GENETICS (1996) 98, 91-101

THE CULTURAL PERMISSION.AMERICAS MANIFEST DESTINY

WITH THE LOUISIANA PURCHASE (1803) AMERICAS WESTWARD MIGRATION ACCELERATED

AMERICAN PROGRESS BY JOHN GAST, 1872

AND THE ENTRPRENEUR SAW PLENTY OF ACTION..

"Herd Quitter," 1897, Charles Marion Russell.

BUT WHATS THE CONTEMPORARY CULTURAL NICHE FOR THOSE WHO ARE.

.....YOUNG, ENERGETIC, RISK TAKING AND NON-COMPLIANT?

SENSATION SEEKING & FINANCIAL RISK TAKING

DOPAMINE D4 RECEPTOR GENE POLYMORPHISMS (ALLELES)

Identical twin studies (9220 individuals) demonstrate that sensation seeking is highly heritable, 45%-60%, in both men and women. (Stoel et al. Behavior Genetics, 36, 229-237, 2006) In a study of 94 young men (Harvard) the DRD4-7 allele was highly correlated with financial risk taking, accounting for some 20% of the variance. (Dreber et al. Evolution and Human
Behavior, 30, 85-92, 2009)

In a sophisticated choice study of escalating financial risk (140 subjects) the presence of the DRD4-7 allele correlated with those individuals who take increased risk under ambiguous and speculative circumstances, frequently heavily discounting future rewards. (Carpenter el al, Journal of Risk and Uncertainty
42,233-26, 2011)
SENSATION SEEKING.THE NEED FOR VARIED, NOVEL, AND COMPLEX EXPERIENCES

FINANCIAL CHOICES BY DRD4 POLYMORPHISM..

Pay off credit cards % cash in savings $ Needed only cash withdrawal

DR4-4

DR4-7

Debit over credit Overdraft protection Automatic bill pay

(Carpenter el al, Journal of Risk and Uncertainty 42,233-26, 2011)

IN HABITUAL GAMBLERS EXECUTIVE CHOICE IS HIJACKED

VmOFC

VmOFC

Amygdala

+
NON-ADDICTED

IOWA GAMBLING TASK

VmOFC

Amygdala VmOFC

+
ADDICTED

COURTESY OF EDYTH LONDON PHD, LABORATORY OF MOLECULAR NEUROIMAGING, SEMEL INSTITUTE, UCLA

OF RISK AND REWARD: AMERICAS BUBBLES & BUSTS

HOUSING BUBBLE

BANKING CRISIS

DOT.COM BUBBLE

Financial Times January 25th, 2008

BUT IS THIS ENTRPRENEURSHIP?

BALANCING RISK & RETURN? EXPERIENCE (& PERHAPS GENDER) HELPS..

It has been suggested that more women would help..

(Coates, J M; Herbert, J. Proceedings National Academy of Sciences 2008)

One genetic study of 60 seasoned Wall Street stock traders, against age matched controls, showed no difference between the groups in the prevalence of the DRD4-7 allele. Moderation wins the day. (Sapra et al, PLoS ONE, Jan 2012)

THE ENTREPRENEUR AND THE CREATIVE CYCLE

WORKING MEMORY

ATTENTION-DEFICIT (DRD4-7 allele) DYSLEXIA ASPERGERS MANIC-DEPRESSION

NOVEL IDEAS

HABIT INHIBITION WITH COGNITIVE CONTROL

THE TENNENBAUM CENTER FOR THE BIOLOGY OF CREATIVITY

HARNESSING MIGRANT TALENT

(23% of Americans are immigrants: 40% of the Fortune 500 founded by immigrants)

The optimism, curiosity, drive and vigorous ambition of the migrant provide a foundation for entrepreneurial activity. But that optimism must be focused and adaptive to todays challenge. The successful entrepreneur is not a gambler but a passionate, disciplined expert who sheds old certainties for new opportunities in science, the arts, business, social issues and, yes, even in the political realm.

But that energy and vision must be schooled.

Heres some encouragement: a new series of developmental studies in young children has demonstrated that the Dopamine Receptor D4-7 allele interacts with parent quality to predict effortful self-control in four year old children. Thus, rather than being dismissive of the migrant gene as a (ADHD) nuisance, in fact it can remain adaptive, increasing a childs sensitivity to parental guidance. (Sheese, Posner et al, Child Development Research, ID 863242, 2012)

THE PERCEPTION-ACTION CYCLE INTEGRATES PASSION & REASON

MATURES IN 2-3 DECADES

CHOICE & ACTION

Limbic structures

PERCEPTION

AFTER FUSTER: CORTEX AND MIND

It is that integration that builds empathic understanding, responsibility and trust

FOXP2 GENE
(Forkhead box P2)

EMOTION & ATTACHMENT

Emotion is a pre-verbal system of communication that human beings share with the primates and other animals.
Charles Darwin. The Expression of Emotion in Man and Animals in Man and Animals, 1872

In Conclusion. Entrepreneurial activity needs the oddballs, the misfits, and the risk-takers . But what gave humans the edge and still does is not the the iconoclast working alone but the capacity to collaborate in building adaptive strategy within large social groups. Key to that collaboration is language. Evidence suggests that it was the retuning of FOX P2 some 50,000-100,000 years ago that made the critical difference in enhancing our ability to communicate and to adapt to evolving opportunity. .

CREATIVE CURIOUS IMAGINATIVE AMBITIOUS DRIVEN PASSIONATE RISK TAKER

CHARLES DARWIN (1809-1882)

INTELLIGENT RESTLESS INNOVATIVE RESOURCEFUL PERSISTENT IMPULSIVE GAMBLER