To gauge an individual’s appetite for financial risk, banks and financial planners offer “risk tolerance assessments.” These quizzes are designed to estimate how daring you’ll be in the uncertain world of stocks, bonds, and cash — the building blocks of an investment strategy. A new study in Neuron, however, suggests these fill-in-the-blank assessments may one day be replaced by something far more futuristic: brain scans.
In the study, released last week, a team of University of Pennsylvania psychologists report that they’ve found where a person’s ability to tolerate economic risk — that is, the willingness to gamble — lives in the brain. Associate professor of psychology and co-author Joseph Kable, Ph.D., foresees a future where scans of the key areas his team identified could be used to provide people with the the best financial advice. In essence, these scans would help people know themselves better than they think they do.
“I can imagine a world where brain scans might be used in conjunction with other tools to assess someone’s tendencies, in order to give them appropriate advice,” Kable tells Inverse. “I think it’s even more likely that the kind of work we’re doing could point the way to developing better paper-and-pencil or computerized assessments of risk tolerance on which financial advice could be based.”
This study grew out of a larger project funded by the National Cancer Institute designed to test whether “brain training” could influence people’s tendency to make risky choices. The idea was that decision-making tendencies could influence health behaviors, like the choice to smoke or exercise, and that they could be malleable. But because the original project wasn’t able to show that brain training had any effect on a person’s decision-making tendencies, the researchers decided the better route of inquiry was studying specific aspects of brain structure related to risk.
So, in the new study, Kable and his team asked 108 healthy young adults to answer several questions involving their comfort with financial choices and then gave them the opportunity to gamble, involving them in 120 different scenarios that involved the risk of making more or less money. Using MRI to study blood flow in the brain in conjunction with diffusion tensor imaging, a technique that gives a glimpse of brain connectivity, the team showed that people who have a higher tolerance for financial risk have more functional connections between the brain’s amygdala and medial prefrontal cortex as well as greater gray matter volume in the amygdala.
Kable says that just by looking at these brain features, you can get a reasonable idea of how willing a person is to take lots of risks. This brain system, which has previously also been implicated in the development of anxiety, is most likely linked to taking risks at large.
“One of our assumptions in studying financial risk is that what we learn about attitudes to these types of risk will also apply to other kinds of risk,” says Kable. “There is some evidence that people who take more financial risk are more likely to take risks in other domains.”
But those who do have more gray matter and a well-connected amygdala to medial prefrontal cortex shouldn’t be too alarmed: While they’re predisposed to take risks, that doesn’t mean that they are financially doomed. When asked whether taking risks is a fixed thing, Kable says “not at all.”
“We know the brain changes with age and with experiences, as does someone’s propensity to taking risks,” he explains. “An important question for future research, for example, is going to be whether there are particular kinds of experiences that help shape a brain toward taking risks.”