Do businesses in highrises make riskier decisions than those at lower levels?

July 11, 2018 8:00 am

Winston Churchill, himself known as a risk-taker, famously said: “We shape our buildings and afterwards our buildings shape us.”

If you’ve ever seen the view from on top Khalifa tower, you’d know that besides being impressive, it does may you feel powerful.

From the legendary Tower of Babel to Burj Khalifa, people have a fascination with heights.

“Historically, tall structures were the preserve of great rulers, religions, and empires. For instance, the Great Pyramids of Giza, built to house the tomb of Pharaoh Khufu, once towered over 145 meters high,” said a CNN report.

It was the tallest man-made structure for nearly 4,000 years, before being overtaken by the 160-meter-tall Lincoln Cathedral in the 14th century.

“The monasteries of Athos were constructed atop mountains or rocky outcrops, to bring them even closer to the heavens,” added CNN.

In business, working atop highrises could also mean taking higher risks than normal.

Read: Cryptocurrency buyers: You are at risk

Higher risks

People who are avid risk-takers often seek the thrill experienced in high elevations, such as parachuting, skydiving, bungee-jumping, and even skiing.

In a study published recently in the Journal of Consumer Psychology, researchers looked at data from more than 3,000 hedge funds all over the world which collectively oversee more than $500 billion in assets.

It found a correlation between the volatility of each fund and the elevation of the building floor (ranging from the first to the 96th) where the firm was located, Citylab, an online architecture site, reported.

“The higher the office, the more expensive it is to rent or own, so a company sitting pretty at the top may have more money to wager,” said CityLab.

Sina Esteky, the lead author of the study noted that there’s an architectural association between elevation and power stretching back through history.

“Powerful buildings are put on top of a hill, [and] a lot of religions discuss divinity, or people of high power, being in high physical positions. It seems to be a deeply rooted association, [and] it seemed like the reason elevation can lead to people taking more risks is they usually feel more powerful,” Esteky said.

Read: Entrepreneurs ‘don’t have to take risks, but manage them’

More heights

Now that it’s nearly finished, 432 Park Avenue joins elite company. It’s the world’s 100th super-tall tower. That’s the finding from the Council on Tall Buildings and Urban Environment, which is tracking the dramatic emergence of skyscrapers that are 300 meters tall or more. Half of them are brand new. and 2017 set a record for the number of new skyscrapers built in a single year according to a report from the Council on Tall Buildings and Urban Habitat.  Around the world, there are a staggering 144 new towers that reach above 200 meters tall.

They’ve also gone up in far more cities than before. From Shenzhen and Jakarta to New York City, to even Pyongyang in North Korea, 69 cities have erected at least one skyscraper (compared to 54 cities last year).

Esteky recommends a restaurant might work better than a hedge fund on the top floor of a tower.

“If you’re talking about high-stakes risk-taking—financial, medical, legal—I would encourage people not to put their offices on high levels of a building,” Esteky said. “Or, if they are [near the top]: have a thick curtain.

Read: SMEs without proper insurance are taking huge and unnecessary risks

The case for each type of space

Studies have shown that people are more creative in rooms with high ceilings, more likely to vote in favor of educational initiatives when they are physically in a school, seek more variety when shopping in narrow aisles, prefer romantic movies in cold rooms and are more likely to donate to charities in brightly lit settings, according to the Conversation, an independent source of news and views, sourced from the academic and research community and delivered direct to the public.

So what does all this have to do with risk?

“Research has shown that risk-taking is a function of situations as much as traits. Behavioral economics pioneers Daniel Kahneman and Amos Tversky, as well as others that followed, have found that risk preferences and behaviors can shift dramatically depending on a multitude of extrinsic factors, such as how a decision is framed, resources available to the decision-maker and social pressure,” said Conversation.

As Churchill alluded, the buildings that surround us can have a powerful impact on our decisions. Scientists have barely scratched the surface when it comes to understanding the complex ways in which it can shape us and subtly guide our thoughts and actions.


Hadi Khatib
By Hadi Khatib
Hadi Khatib is a business editor with more than 15 years' experience delivering news and copy of relevance to a wide range of audiences. If newsworthy and actionable, you will find this editor interested in hearing about your sector developments and writing about it.