How a Growth Mindset Contributes to Financial Success
“No matter what your ability is, effort is what ignites that ability and turns it into accomplishment.” – Carol S. Dweck
One of my goals for 2016 is to make my screen time more active and less passive: watch fewer shows that let my brain switch off and more shows that introduce me to new ideas or teach me more about the world. I especially like TED talks because they’re fairly short (which dramatically reduces the risk I’m going to ‘zone out’ part way through) and the myriad of topics means there’s no issue finding something new to learn.
One talk I watched a few weeks ago focussed on the difference between a fixed and a growth mindset. It really made me think differently about how we talk to ourselves and others about success and how a simple change of attitude can have a profound impact on many aspects of life, including financial success.
Professor Carol Dweck has spent many years researching the impact of mindset on achievement and she has shown in multiple studies that the brain has the ability to change and become more capable when we challenge our abilities. She believes that people fall into two groups: those with a fixed mindset and those with a growth mindset and that each group has a distinct and very different attitude to challenge and failure.
When you praise someone for their grades, scores or intelligence, you’re fuelling a fixed mindset. People with a fixed mindset get fired up by feedback based on grades, test scores and quotas. They often identify as being more intelligent than others and, as a consequence, they thrive on being judged positively based on innate ability (how smart they are) and they tend to perceive effort as something negative; a sign of incapability. This creates issues when challenges arise because those with a fixed mindset see effort as a sign of inability. This means that any challenges they come up against will be seen as a sign of something they’re not good at because they’re not ‘smart’ enough to get it right first time.
When faced with setbacks, the instinctive reaction of a fixed mindset is to lose interest and withdraw. Phrases such as “I’m not a math person”; “I’m just not good with money” and “I just can’t lose weight” are typical of a fixed mindset: there’s no suggestion that the challenge can be overcome, it becomes simply a statement of fact: “I can’t and therefore I never will.” This perception that challenge is a sign that you’ve reached your limit, combined with the fear of “failing” and being seen by others as unsuccessful, holds those with a fixed mindset back and leads them into a cycle of sticking only to what they “know” rather than exploring their potential.
When it comes to financial success, a fixed mindset is what keeps you from breaking the habits you know aren’t helping you reach your goals and what stops you from risking failure by trying something new. It’s the thinking that keeps you at the same level of wealth year after year and stops you from moving out of your financial comfort zone into an even wealthier one. A fixed mindset will force you to lay the blame for your situation on the doorstep of something beyond your control: the markets, your income, lack of education/support/understanding rather than entertain the idea that there might be something you could do to alter your situation if you were willing to approach it a little differently.
A growth mindset allows our brain to become more capable because, when we challenge our abilities, it fires up the neurons in the brain and creates new neural pathways. Rather than attributing success to innate ability and intelligence (which can’t be controlled), those with a growth mindset see the level of effort we put into something as the true marker of achievement. These are the people who thrive on constructive criticism because it teaches them where to focus their efforts and shows them how to become more successful. They put their focus on learning and welcome challenges as an opportunity to learn rather than a symbol of personal failure.
The impact of adopting a growth mindset can be seen very clearly in a number of studies conducted by Carol Dweck who focussed much of her research on children in underperforming schools. Teaching the kids to see their challenges with learning as evidence of their brain growing and getting smarter, rather than as proof that they were stupid, dramatically improved their achievement levels and significantly narrowed the achievement gap within classes. Over the course of 12 months, a kindergarten class in Harlem, NY progressed from being barely able to hold a pencil to scoring in the 95th percentile, 4th grade kids in the South Bronx outperformed every other fourth grade class in New York state in the statewide math test and a class of Native American kids went from the bottom to the top of the classes in their Washington State school district, which included one of the most affluent areas of Seattle.
While it’s logical that a greater level of effort will equal a higher level of achievement, what Dweck’s research shows very clearly is that it’s the story we tell ourselves about the challenge that dictates whether or not we’ll embrace or reject the chance to put in that effort. Attributing success to effort and tenacity rather than intelligence, and seeing failure as “not yet there” rather than “never going to get there” are key components of the growth mindset. When it comes to finance, this means not letting our past “failures” prevent our future success and looking for opportunities to make our financial situation better rather than being content with the status quo.
Like Emily Dickenson, the growth mindset encourages us to “dwell in possibility” but it puts the responsibility for bringing those possibilities to reality entirely in our hands. If you’re interested in learning more, check out the TED talks by Carol Dweck and Eduardo Briceno for more insights and inspiration.