Is an octogenarian capable of managing a multi-billion-dollar fortune? This is a question a French court is now trying to settle in the case of Liliane Bettencourt, the L’Oreal heiress and France’s wealthiest woman. At least ten people are currently being accused of having taken advantage of the cosmetics billionaire. The legal drama will be closely watched by a French public, who doubtless believe that one must be dotty to give 400 million euros’ worth of gifts to a photographer. It is intuitive to believe that elderly people are less able to make good money-related decisions. But is this really true?
Research has revealed a tendency for the elderly to be more risk-prone and more risk-averse. This suggests inferior decision-making ability. However, cognitive abilities like memory and processing speed also decline with age. According to researchers at Duke University, once cognitive ability is taken into account, age ceases to be a significant predictor of decision quality*.
In the study, a sample of older subjects (mean age, 71) and a sample of younger subjects (mean age, 24), with similar scores on cognitive tests, are indistinguishable from each other in terms of their decision-making. The more seasoned group could, similarly, outperform their youthful counterparts if the latter scored lower on cognitive tests.
The research leads to the conclusion that all elderly people need to keep their decision-making performance up to scratch is to have all the relevant information on the table, thereby reducing the reliance on memory, and to take more time in making the decision. Even young people’s decision-making would benefit from that.
* Processing speed and memory mediate age-related differences in decision making.
Henninger DE, Madden DJ, Huettel SA.
Psychol Aging. 2010 Jun;25(2):262-70.