How to prevent a financial crisis

How to prevent a financial crisis

Here’s a startling statistic:  according to Bloomberg, women run just 3%  of UK hedge funds but produce  55% better returns than male run funds.   A fascinating  article in the Observer quoted Michael Lewis's (Liar’s Poker and The Big Short) answer to the question of how to make the financial system safer : hire more women.  Maybe it’s not really necessary to re-structure, regulate, separate banking functions at all.  Perhaps a touch exaggerated and more than a little tongue in cheek but certainly hiring more women would be easier. The facetious remark that Lehman Sisters would still be alive and functioning may not be so facetious after all. 

There is apparently quite a lot of large scale evidence that women in domestic financial roles make better returns. (Men believe they understand every detail in financial news items and continually change their positions whereas women know they don’t understand and tend to hang on to a position longer.)   But only recently has there been much by way of explanation - thanks to neuroscience and the study of how hormones affect brain activity.  The culprit is testosterone which builds in a competitive situation encouraging   greater and greater risk. In excess this can be dangerously self-deluding, but the situation is then exacerbated by another hormone that kicks in after testosterone peaks producing unusually erratic decision making.

When I’ve had discussions with people on the subject of how  women approach decision making, build teams, solve problems and that this can be different from men I usually get the Mrs. Thatcher response: if a woman gets to a top job, she’s likely to behave like a man, effectively eliminating differences along the way.  Which,  certainly in my experience, is more or less true if the woman is a lone woman in a mainly male context. However, what is  more interesting is that when women comprise 30% of a board or more, the culture of the board begins to change to accommodate more female modes of decision making – less tribal, more considered, less competitive.

In fact, there is in existence a ‘30% Club’ composed of a selection of CEOs (male and female) of financial organisations, PR and communications companies with the purpose of getting more women into top positions in financial organisations. I’d like to think that the idea behind the ‘30%’ Club might spread.  Women are still under-represented in senior marketing jobs and vastly under-represented as non-executives on boards.  As to that quintessentially male institution, the House of Commons, I fear it’s tribalism fever.

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