October 15, 2008

Why Women Should Control Wall Street

By Andrea Schneider

So last week when I received my TIAA-CREF statement (like many professors, I assume) you might have heard me scream from Milwaukee.  But now I have a better idea–I should be running the market!  Tim Harford, a columnist for the Financial Times and author of The Logic of Life: The Rational Economics of an Irrational World explained last week on NPR that men are too hormonal to be running Wall Street.  Yes, let me repeat that, men are too hormonal.  As Mr. Harford explains,

There’s a former Wall Street trader who is now a researcher at Cambridge University in the UK. His name is John Coates. What he told me was that when he ran a trading desk in Wall Street during the last dot com boom and bust, he found that his traders were exhibiting almost physical symptoms of mania. So they were punching the air. They were yelling. There was – not to put too fine a point on it – there was more pornography floating around in the office. This is of course is a very masculine, macho environment. But what John Coates also noticed was that the few women who were on the trading floor didn’t seem to be affected.

Looking into this, he discovered that this sort of behavior is actually really common in many male animals. What happens is, you have, say, two gorillas or two stags fighting each other. One of them wins. They get a surge of the hormone testosterone. It makes them aggressive. It makes them take risks. And that goes on for several days. And then one day, effectively they are suffering from testosterone poisoning. These traders are basically suffering from exactly the same symptoms as rutting stags.

Ari Shapiro, the NPR reporter then follows up with the next logical question, “So we should put women in charge of Wall Street, is that what you’re saying?”  Mr. Harford replies, “Well, that’s a possibility, assuming that women want to be in charge in Wall Street, yeah.”  This, of course, leads to the question of who actually wants to be in charge of this mess.  But, in fact, some limited studies demonstrate that when women serve on corporate boards, the companies do better.  See Conglomerate for more on this conversation. 

So, the lesson for my pension fund advisors–I hope you have a mix of men and women making investment decisions and I also hope you are investing in companies with a mix of men and women on the board.  (I also hope that my next quarterly statement is an improvement!)

Last 5 posts by Andrea Schneider

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Comments

  • Brother Mat says:

    Personally, I have a team of eunuchs managing my portfolio. But that’s just me.

  • Scott Butler says:

    This article while interesting posses another question: Should we recognize or ignore inherent differences in the sexes? Some would argue no, and that we should never treat people as inherently different due to their sex.

    People who would make that argument would argue that any assertion that men are inherently different from women (even if the men are different in negative way) is sexism. And that we should treat all people as equally the same and to suggest otherwise would be sexist.

    I would argue that by recognizing the inherent difference in the sexes we could create a better more diverse society. By recognizing that male and female investors tend to do better in different economies (men when more risk taking is appropriate, women when risk taking is a bad idea) companies can achieve two important goals: First by diversifying who works for them (the male to female ratio) they can create a better portfolio for their clients because the investment portfolios will do better in a wide variety of economic situations, and second, and perhaps more importantly, they can diversify their workplace.

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