Why are there so few women in finance. Barry Ritholtz writing at Bloomberg asks this question in relation to the guest list for his excellent interview series Masters in Business. Barry looks at the data for finance and business in general and comes to the conclusion:
There are so few women in senior positions in finance because there have always been few women in finance. I know, because I’ve tried so hard to hire more of them. But the numbers are changing, and that’s all for the better.
This is an example of the “gender-matching effect” that is present in other situations as well. The question is whether there are things that can be done to accelerate this process. In other fields the use of “blind auditions” has been used to great effect. Curt Rice at The Guardian writes about how orchestras have used gender blind auditions to increase the number of female orchestra members. In the physical world, blind auditions require a great deal of care to ensure neutrality.
However in the virtual world this process should be much easier. In a recent study done on contributions to open-source software it was shown that female produced code was accepted at a higher rate than male produced code when the process was gender blind. Valerie Woolard at Slate notes that when there was even a hint of gender this advantage went away. Woolard concludes:
So for all that is being done to encourage women, to educate and prepare them to take part in the open-source community, it still seems necessary for them to adopt at least a gender-neutral persona in order for their contributions to be valued as equal to those of their male counterparts. Perhaps there are ways in which to see the results of the study as good news, but it also reminds us of the many hurdles women have to contend with simply to get to the point of making contributions to open software and the biases that may continue to haunt them when they do.
You would think that coding, in general, would be a perfect place to adopt an anonymous approach. Code is, for lack of a better term, code. Claire Cain Miller at NYTimes writes about how some firms in Silicon Valley are using tools to try and make better, more neutral, hiring decisions. This important because we humans are not all that good at hiring. Miller writes:
A study of top banking, law and consulting firms found that similarities in things like leisure activities and personality were the most important factor in their evaluation of candidates. Hiring now resembles choosing a romantic partner more than an employee, says Lauren Rivera, an associate professor of management and sociology at Northwestern and the author of the study.
That is why Silicon Valley could be a model at using technology to make better hiring decisions. The problem isn’t that there are not women and minorities with the requisite skills, but the challenge is getting them through the funnel. Miller again:
Workplace practices that start in Silicon Valley often spread to other industries — like open office arrangements, and yoga classes. Despite its reputation today, the tech industry could one day become a model for other industries. If so, the American workplace could soon look less like the people who are doing the hiring and more like the people graduating with the skills to join it.
I have been writing for some time now about gender disparity in money management. The situation can be described this as a true market failure. Whether the problem is one of explicit or implicit bias it remains a problem. As with the female coders, it is likely the case that women who reach the level of portfolio manager are highly motivated. This motivation helps create the market failure we discussed and remains an opportunity for institutional funds doing manager hiring. It is unlikely these managers will go with a truly “bias-free” hiring approach but maybe they should.