Keltner’s Theory of “the Power Paradox” in a Corporate Environment

Dacher Keltner’s paper (2016) on “the power paradox” relates to my previous discussion of charismatic, trait-based leadership. He argues that “people usually gain power through traits and actions that advance the interests of others, such as empathy, collaboration, openness, fairness, and sharing.” Keltner’s analysis has conclusions that are applicable in the context of a firm’s operation and effectiveness. In fact, a bolded quote in the paper (2016) directly refers to power in a corporate environment, saying “Studies show that people in positions of corporate power are three times as likely as other employees to interrupt coworkers, raise their voices, and say insulting things at the office.” I found this statistic interesting because, were I in a big Wall Street bank, I would not be surprised to observe such behaviors at work. I mean no offense in saying this, I just feel that it is a widely understood stereotype that investment bankers and individuals in sales/trading act in ways that reflect Keltner’s theories on the corruption of power. Keltner himself claims that “when [individuals] start to feel powerful or enjoy a position of privilege… [they] are more likely than other people to engage in rude, selfish, and unethical behavior.” Moreover, movies such as The Big Short and The Wolf of Wall Street uphold Keltner’s depictions of individuals who have been corrupted by power.

With all of this, I mean to say that I do NOT observe such behaviors at Mirador. I continue to believe that Mirador, although grounded in Wall Street, can be thought of as a separate entity due to its size. At a small firm, employees know each other more intimately, and thus are more likely to “outsmart” Keltner’s power paradox. Keltner (2016) claims ” by practicing the ethics of empathy, gratitude, and generosity, [leaders] will bring out the best work and collaborative spirit of those around [them].” Keltner also believes that leaders, too, benefit from “a burnished reputation, long-lasting leadership, and the dopamine-rich delights of advancing the interests of others.” I believe Joe Larizza, co-founder and managing partner of Mirador, outsmarts the power paradox with his empathy.

Although Mr. Larizza arguably holds each of the qualities Keltner mentions to “advance interests of others,” I want to focus on empathy. I believe that empathy is the most powerful trait a leader can have. In Dr. Forsyth’s group dynamics class, I crafter my 16-page final portfolio around the theme of empathy. Keltner says, to practice empathy, leaders should:

• “Ask a great question or two in every interaction, and paraphrase important points that others make”
• “Listen with gusto. Orient your body and eyes toward the person speaking and convey interest and engagement vocally”
•  “When someone comes to you with a problem, signal concern with phrases such as “I’m sorry” and “That’s really tough.” Avoid rushing to judgment and advice”
• “Before meetings, take a moment to think about the person you’ll be with and what is happening in his or her life.”

I immediately thought of Mr. Larizza with this list because he is an embodiment of empathy and the understanding of others. In fact, it was his ability to put himself in the perspective of others that allowed Mirador to be founded in the first place, as their financial reporting services are essentially just the task nobody at, say, a wealth management firm really wants to do. Since Mirador started small, Mr. Larizza had to onboard employees and clients with qualities such as empathy and collaboration; since Mirador remains a small firm, they now market themselves with said collaboration and compassion for clients. While empathy is just one personality trait that makes up an individual, there is a degree of humility to it which allows empathetic individuals to better understand the world, as a common pitfall of narcissistic leaders is their inability to see things from the perspective of others.

Overall, I argue that bringing empathy to finance is what our future needs. BlackRock’s Private Equity Partners, as well as Citi Bank, have helped catalyzed this movement with impact investing in causes that promote equity and inclusion and sustainability. While social issues like racism and climate change have become politicized, money has the ability of directing people’s attention. Investing in educational and racial equity, and investing in our planet, ends up investing in our future. Mirador’s avoidance of the power paradox is something I hope to see more big Wall Street banks do, as they have the funds to fuel real change at the systemic level.