Not to IQ test before you invest -is potentially a waste of money
Most (if not all) investors are risk averse. Very much so.
A Due Dilligence (DD) process tries to minimize risk by acquiring as much knowledge as possible about the objective of the potential investment. Track records, assets and what not.
However very few (if any?) profile the individuals they are investing in. There are tons of information to be found in a Five Factor profile and even more in a General Mental Ability (GMA) test.
General mental ability is the ability to make sense of new information, find patterns and to overcome challenges. GMA can not be trained (more or less) and it is what it is.
GMA is an integral component of human capital and stongly relates to the acqusition of job-relevant knowledge. Human capital matters the most in dynamic, knowledge intense and complex environments. The question is wether GMA is an intcremental part of entrepreneurial performance AFTER controlling for other types of individual differences.
DeGeest, Seibert and O´Boyle 2018 published in 2018 a meta study on the relationship of GMA to entrepreneurial performance.
No less than 45,749 observations and studies going all the way from 1950 to present days are included.
The results are clear..... individual differences are important predictors of entrepreneurial performance.
Also the results in this study inticates the GMA effect generalizes across industry, economic stage and firm age contexts.
Effects sizes ranges from .20 to .40 and the results are more specifically:
Financial performance (p=.30)
Firm growth (p=.30)
Firm size (p=.17)
Subjective performance (third party assessments) (p=.40)
These are what we call moderate to strong effects. The results are, in one way, remarkable, because they say that a IQ test as a part of any DD will give you certain predictability to your case. No other fact can do that!
Also during that process one can also find out possible anti-social traits in the individuals who are about to receive a hefty amount of money for their business idea.
But what about motivation and passion you might say?
Well, because intelligence and motivational traits are largely separate psychological domains, realtively high levels of passion and tenacity may compensate for relatively low levels of GMA. Of course, as these are separate domains, one need not choose between cognitive ability and motivation – individuals who have both are likely to have the greatest performance.
It is possible to find the probability to motivation if one conducts a Five Factor Personality profile, even if motivation itself is not a biological trait, motivation can come easier for some.
(Please read the blog:s on passion and grit to learn more)
NGr provides you with a highly cost effective Due Diligence package which will not only reduce risk in your next investment. It will even give you some predictability.
Please reach out for a cost free offer we promise you will not be disappointed. We even bet you will be surprised......
