Abnormal Returns is on a bit of a respite this week. That does not mean that we are content-free. As we have done in previous years we asked a panel of highly respected independent finance bloggers a series of (hopefully) provocative questions. Below you can see the blogger’s name, blog name and Twitter/StockTwits handle. We hope you enjoy these posts as much as we do. Feel free to jump in the comments with your own answers to the questions.
Question: It does not escape me that the entire distribution list on this “Blogger Wisdom” e-mail chain is entirely male. I have written extensively on why this is an issue for the investment industry. What, if anything, can be done to make the investment industry more inclusive? (Answers in no particular order.)
The investment industry is open to everyone. There are more and more women trading and investing their money and many of them are actually quite sophisticated. They are just too humble to share their opinion on the internet or don’t have the time. They prefer to read and learn. This is why on average, women are better investors and traders than men.
Financial blogging — and trading in general — tends to be something of a macho boy’s club. But then, Wall Street used to be one as well. As women joined the ranks, the culture changed and became more sanitized. Sure, some of the old rowdy frat-boy image remains. But you have a lot fewer booze-fueled meetings in strip clubs than you used to.
Financial blogging is already becoming more inclusive. A few years ago, I couldn’t have named a single female financial blogger. Today, I could rattle off a pretty long list. Also, the clientele matters. In the beginning, most blog readers were male. As more women read financial blogs, you have more demand for content written in a woman’s voice. But really, in the end, all that matters is the quality of the work. Good content will attract a following, whether it is written by a man or a woman.
I wish I had an easy answer for this one because it makes so much sense to have more women in finance as all of the studies show that they are better decision-makers on the markets than men and even have better returns, on average. But I think it’s a cultural thing that will unfortunately take time. My boss in a past role was a woman and it was almost like she was treated differently by some firms we worked with. She could always tell when this would happen and I know it bothered her. She didn’t want to be treated as a woman in finance, just as a chief investment officer who happened to be a woman. I would love to see more diversity of opinion in finance. Maybe a good first step is the fact that the most powerful position in finance is now held by a woman (Janet Yellen).
Have more female advisors. Also, repeal a lot of the regulations that don’t allow people to communicate online. Females are generally very good communicators. Not allowing them to Tweet, Blog Comment etc is bad for business.
I’m not sure, but as a white male, I doubt I’m qualified to answer that question.
We are open in our hiring, actively recruiting women on several occasions, including high-level positions. As we saw with minority hiring of football coaches, change does not come easily. A tough problem.
I have just written on this very topic and great length (even for me).
“No one should be surprised that there is an entirely human, often unconscious tendency to associate with, do business with and hire people who are in our networks and who thus tend to look the same as we do. But such in-group favoritism is a big mistake. If we aren’t prepared aggressively to try to make our lives and our businesses more diverse because it’s the right thing to do or because we have decided that the routine biases to which we are all subject simply don’t apply to us, we might consider doing so to be more profitable.
“Study after study show that firms with diverse leadership perform better. Diversity improves decision-making at the firm level and companies with more diverse workforces are more profitable (more detail here, here and here). Indeed, racial diversity is associated with increased sales revenue, more customers, greater market share, and greater relative profits while gender diversity is associated with increased sales revenue, more customers, and greater relative profits. We don’t often do it naturally, but real diversity is worth going way out of the way to achieve. Yet at our current pace (for example), it will take another full century for the U.S. to achieve gender parity in the C-suite. Meanwhile, programs that encourage gender diversity in hiring and promotions still center their narratives on men in precisely the same way that movies focusing on blacks fighting for equality are so often told from the perspective and with the support of a saintly white person.”
In short, we should be actively looking for greater diversity and, if and when those efforts fall short, we should be hiring talented people without experience and training them to make sure we have diversity – but not just because it’s right. Real diversity is performance-enhancing.
Big asset owners have the power to force the change, by recognizing that teams that aren’t diverse are less stable and less apt to provide good performance over time. Diversity considerations ought to be a part of manager selection criteria. If there were, there would be change. (Here’s a posting on the topic.)
I have no answer for this. It’s quite strange. You could even go a step further and point out that it’s mainly white males. We’d all be better off with more diversity in the financial blogosphere, not sure whether or not there’s a fix for this or if it just happens organically over time. Overall, the pool of well-known investment bloggers is shrinking, not growing, so not sure this is something that’s destined to happen.
It is regrettable that the industry is so male-dominated, but in the long term I’m sure that will change. One of the reasons it attracts so many alpha males is the emphasis on competition, and also the gambling element to it. But investing is not a competition and nor should it be a gamble. As investor education improves, and as more and more people are exposed to the evidence about how the capital markets work, I’m hopeful that both of those aspects will become less important. Studies have repeatedly shown that women make better investors than men, so it will be a good thing for consumers when the industry does become more inclusive.
If the men on this planet don’t exterminate each other in the future I am certain that the women will come to their senses one day and do it for us. A perfectly efficient stock market will be the result.
Women have a different view of the world than men (I’ve learned this the hard way now that I’ve been married 10+ years and have 2 daughters). Women also make up a large portion of the client base in financial services–so a female perspective is critical. And these statements aren’t merely “feel good” statements, but based on empirical evidence. For instance, there’s research that suggests women are simply better investors than men. We even wrote a post on the subject, titled, “All firms can benefit from the positive influence of women.”
What can be done? The industry can sharpen its focus on gender diversity, and on leadership gaps at the senior level. Men and women alike can make an effort to connect with more women. For instance, Sallie Krawcheck runs Ellevate, which is a professional women’s network that encourages engagement, connections and knowledge sharing among women and business. Both men and women can study the psychology literature and become more knowledgeable about unconscious gender bias, which is easier to combat through awareness.
In the end, it will be market forces and forward-looking firms, who are willing to take action, that will drive broader cultural change. We are trying to do this at our own firm, and we haven’t been very successful, but we’re trying! For example, we only have 1 full-time female team-member (Tian Yao) out of 8. Tian runs circles around most of “the guys,” so we’re looking to actively increase that ratios!
There’s a story, possibly apocryphal, of the French Parliament considering equal rights for women for the first time. A Socialist pointed out how men and women are 98% the same – of course they should have equal rights. The next man to speak simply said “Vive le difference!” The assembly cheered, and the measure failed by a wide margin.
Many interests are sex-distinct. Finance is one of them. This is native and natural, and not a problem. When women come to finance, they adopt simple strategies that outpace the men, and go back to things that are more interesting to them. Why should they spend more time on it?
The disparity is not so great when it comes to the mainstream financial media. I have noticed many women in leading positions (journalists, bloggers, editors, producers, on-air talent) at some of the major financial media outlets (Bloomberg, FT, FT Alphaville, CNBC, WSJ, MoneyWeek, Reuters, BI, etc.) and their presence is definitely noticed on Twitter and StockTwits.
Actually, I’d like to know why there aren’t more independent trading and finance blogs written by women. Or are they going largely unnoticed? Maybe female readers and investors/traders would have some better input on that.
Where we may see a big shift ahead is in the world of online trading and investing. When trading was done on the exchange floors of New York and in the futures pits of Chicago, it was almost entirely a men’s club for over 100 years. As more women entered the business in the 1970s – 1990s, and as computerized trading began to take over, we saw a democratization in the trading world start to take shape.
From the retail side, anyone can now guide their own investments or get started in trading with an online brokerage account. We’ll see more and more women trading stocks, futures, cryptocurrencies, etc. in the years ahead. Just as women have become a growing audience in the video game market (once male dominated), we are bound to see major growth in the number of women trading online and entering the world of professional money management. Also, studies by Barber and Odean (2001) and Hedge Fund Research (2009) found that women investors tend to outperform their male counterparts.
Thanks to everyone for their participation. You can also check out yesterday’s edition as well. Stay tuned for another question tomorrow.