Women and Hedge Funds

Matthew Yglesias:

Evidence of intra-firm gender discrimination in the assignment of tasks and irrational aversion to appointing women to boards of directors is fascinating to me not only because sexism is an important issue, but because there’s a very clear and simple theoretical argument that this kind of widespread gender discrimination can’t exist. In a well-functioning competitive marketplace, firms that don’t discriminate will outperform those that do. And yet it’s obvious that systematic implicit discrimination against women is in fact widespread. So it should come as new surprise that the latest reports show that the small minority of hedge funds run by women outperform the (dismal) industry average.

More generally, massive male overrepresentation in the lucrative and prestigious finance sector strikes me as interesting because in most respects it cuts against prevailing gender stereotypes.

In typical situations, women are cast as the responsible prudent risk-managers while men are seen as much more reckless. That’s particularly true when it comes to younger people. Car rentail companies and landlords alike strongly prefer to lease to 23 year-old women than to 23 year-old men. Yet you see on Wall Street an awful lot of young men, as if the task at hand is to mount an amphibious assault on fixed German defenses or run into a burning building.

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  • Robin

    It would be interesting to see how the gender bias in finance stacks up against the gender bias in top firms in other industries like law.

    I suspect some of the bias is due to (less talented) males being perceived as willing to work longer hours and make more sacrifices due to anecdotal disregard for personal lives…similar to what you would expect in major law firms.

    The difference here being that even if that is the case, there is an objective measure (financial performance) that indicates though they may be willing to make the sacrifices that move them up the ladder, the end result is still bad for the firm. Better to hire the talented female, even if you think she might want to have a family and take time off, than the subpar male whom you believe will be more devoted to the company.

  • Robin, in a word to your 2nd paragraph: Not!

    The gender bias has little to do with hours worked, or with talent/not. It’s much more sexist than that. The gender bias in Wall St. investment banking is long standing and relates directly to the facts that sexism is endemic to this system and that more women (not all) are less apt to “go along” and more apt to question/ challenge foolish risk-taking, greed, stupidity and poor ethics (e.g., shunting risk to dupes). It is within my adulthood that those of us who worked in Wall St firms couldn’t file sexual harassment or discrimination suits because we were required to med/arb them with panels of good ole boys. So, we went to class action remedies, which have recently been shut down by newer paperwork for employees and protections for the status quo of men (i.e., white men). There were strippers on trading floors for many birthdays. I was on my way OUT the door on one memorable occasion and was literally stampeded and shoved against the door jamb by men trying to get onto the floor to see one. One guy actually said irately to me, “Hey!! Don’t you want to see the stripper?” I shoved him back, looked him in the eye, and said, “is that a trick question?” He backed off and let me out the door. 8)

    I’ve noted in recent documentaries and reports that the majority of people exposing the under-belly of Wall St. investment banks and hedge funds, and their tactics for stripping money from everyone who has banking and pension accounts were women and non-white. That is not a coincidence. Groupthink is a significant problem in finance (cf., Lehman Brothers, Bear Stearns, AIG, Citibank, Merrill Lynch…ad nauseum) and, in my experience, the vast amounts of money exacerbate Groupthink terribly, because money and financial manipulations blind folks. Having more balance among gender representation reduces our innate tendencies to go along with the lemmings, and allows more questioning and dissenting voices.

    FWIW, having heard, seen &/or experienced every reason in the book for women’s non-advancement in high finance, it just cracked me up – on a good day, anyway – when I heard those very same reasons trotted out, reworded a smidge and “sanctified” by certain texts of Scripture in the Church justifying women’s lowly place. Riiiiiiight. I have a derivative to sell you…