Elite C.E.O.'s Are Born Under the Sun

What do Warren Buffett, Lloyd Blankfein, and Larry Ellison have in common?

Besides being rich old white guys, they also happen to be summer babies -- which turns out to be a great thing for shareholders of the businesses they run.

Although there are fewer chief executives born in the summer months of July through September than in any other season, the firms that these C.E.O.'s control tend to be worth more and have better returns than their peers, according to new research by Qianqian Du, Huasheng Gao, and Maurice Levi of the University of British Columbia in Vancouver.

(This isn't to say non-summer C.E.O.'s can't be among the best. Take a look at our Corporate Zodiac slideshow to those who've beaten the odds.)

The trio looked at the performance of 249 C.E.O.'s of S. & P. 500 companies and found that a $1 investment in 1992 in firms run by summer-born C.E.O.'s grew to $20.01 by the end of 2006. Over the same period, a $1 investment in companies with C.E.O.'s born during the rest of the year grew to $9.87. That translates into an extra 5 percent-per-year in excess returns for summer-born C.E.O. businesses.

A more complex strategy which also shorted the stocks of the other companies in the S. & P. 500 improved returns by almost 9 percent-per-year. The researchers also found that the market value of a company helmed by a summer-born C.E.O. was about $9 billion higher than the average value for other firms.

Of course, a summer-born C.E.O. doesn't guarantee success. You only have to look at Ford under Alan Mulally to see that.

At first blush, the results seem to be at odds with recent findings into effect of birth season on long-term success. A growing body of research has shown that being born in the summer is actually detrimental to a person's long-term success. For example, one study found that a large portion of elite youth soccer players were born early in the school year, meaning that they were relatively older. Another study showed that among professional German soccer players, relatively older teammates earned higher wages. And similar results have been found in sports like hockey, baseball, and basketball. (The benefits of being slightly older also extend to the bedroom: The relatively old also lose their virginity sooner.)

The summer "relative age" effect doesn't have anything to do with the temperature, however. The real driving force is the deadline for school enrollment. Many states set their kindergarten enrollment cutoff dates to be right around September. So children with birthdays right before the deadline end up being the youngest in their class. This means that they're always likely to be less developed than their peers -- both mentally and physically -- and less likely to develop leadership skills.

Older children, on the other hand, benefit from their relative age advantage. A recently published paper by Elizabeth Dhuey and Stephen Lipscomb of UC Santa Barbara found that older students in the same class are 4 to 11 percent more likely to become leaders in high school.

This phenomenon hasn't gone unnoticed by parents. According to recent work by economists Susan Dynarski and David Deming of Harvard, the number of parents who enroll their children in a grade lower than the one they're eligible for has risen sharply since the 1970's.

So what explains the summer-born C.E.O. advantage?

First, it's important to repeat that among the four seasons, summer had the fewest C.E.O. birthdays. The following chart shows the proportion of C.E.O.'s as well as the overall U.S. population born in each of the four seasons.

It turns out summer is the most popular time to give birth, just not for birthing C.E.O.'s. The situation is reversed for winter.

As for the summer advantage, the researchers think it has something to do with triumphing over hardship. Since innate ability is unrelated to the time of year someone's born, it takes special inborn skills to overcome a relative age disadvantage. And the disadvantaged minority that do succeed are likely to have greater innate abilities than the rest of the population.

Or, if you don't buy that argument, perhaps the predictive power of the Zodiac will have more weight with you.

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