Women and finance

[nancylebov]

In Michael Lewis's major article about the financial crisis, he says:

The surface rippled, but down below, in the depths, the bonus pool remained undisturbed. Wall Street firms would soon be frowning upon profanity, firing traders for so much as glancing at a stripper, and forcing male employees to treat women almost as equals. Lehman Brothers circa 2008 more closely resembled a normal corporation with solid American values than did any Wall Street firm circa 1985.

The changes were camouflage. They helped distract outsiders from the truly profane event: the growing misalignment of interests between the people who trafficked in financial risk and the wider culture.

He isn't blaming the crisis on feminism except to whatever limited extent making those changes distracted people from paying attention to what was being done with money.

However, in his more recent piece about the crisis in Iceland, where it's been unusually disastrous, he describes an unusually aggressive male culture:

The best way to see any city is to walk it, but everywhere I walk Icelandic men plow into me without so much as a by-your-leave. Just for fun I march up and down the main shopping drag, playing chicken, to see if any Icelandic male would rather divert his stride than bang shoulders. Nope. On party nights—Thursday, Friday, and Saturday—when half the country appears to take it as a professional obligation to drink themselves into oblivion and wander the streets until what should be sunrise, the problem is especially acute. The bars stay open until five a.m., and the frantic energy with which the people hit them seems more like work than work. Within minutes of entering a nightclub called Boston I get walloped, first by a bearded troll who, I’m told, ran an Icelandic hedge fund. Just as I’m recovering I get plowed over by a drunken senior staffer at the Central Bank. Perhaps because he is drunk, or perhaps because we had actually met a few hours earlier, he stops to tell me, “Vee try to tell them dat our problem was not a solfency problem but a likvitity problem, but they did not agree,” then stumbles off. It’s exactly what Lehman Brothers and Citigroup said: If only you’d give us the money to tide us over, we’ll survive this little hiccup.

******

One of the distinctive traits about Iceland’s disaster, and Wall Street’s, is how little women had to do with it. Women worked in the banks, but not in the risktaking jobs. As far as I can tell, during Iceland’s boom, there was just one woman in a senior position inside an Icelandic bank. Her name is Kristin Petursdottir, and by 2005 she had risen to become deputy C.E.O. for Kaupthing in London. “The financial culture is very male-dominated,” she says. “The culture is quite extreme. It is a pool of sharks. Women just despise the culture.” Petursdottir still enjoyed finance. She just didn’t like the way Icelandic men did it, and so, in 2006, she quit her job. “People said I was crazy,” she says, but she wanted to create a financial-services business run entirely by women. To bring, as she puts it, “more feminine values to the world of finance.”

Today her firm is, among other things, one of the very few profitable financial businesses left in Iceland. After the stock exchange collapsed, the money flooded in. A few days before we met, for instance, she heard banging on the front door early one morning and opened it to discover a little old man. “I’m so fed up with this whole system,” he said. “I just want some women to take care of my money.”

*****

Back in 2001, as the Internet boom turned into a bust, M.I.T.’s Quarterly Journal of Economics published an intriguing paper called “Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment.” The authors, Brad Barber and Terrance Odean, gained access to the trading activity in over 35,000 households, and used it to compare the habits of men and women. What they found, in a nutshell, is that men not only trade more often than women but do so from a false faith in their own financial judgment. Single men traded less sensibly than married men, and married men traded less sensibly than single women: the less the female presence, the less rational the approach to trading in the markets.

This suggests that if it weren't for affirmative action and sensitivity training and such, the US financial crisis would have been even worse.

Link for the Iceland article thanks to patrissimo.

Comments

Edited

[fengi.livejournal.com]

I don't think he's blaming women or equal rights in the first paragraph. I think he's, at worst, saying excessive greed and unethical behavior can hide within an otherwise fair environment.

Which I do buy, I had a friend who was a strong feminist, vegetarian, animal rights person and proud objectivist. To me, her patronizing attitude towards the lower classes and strident pro-business statements seemed like cognitive dissonance with her other arguments, but she was fine with it.

Re: Edited

[nancylebov.livejournal.com]

I was trying to fend off arguments which might or might not get made...

In any case, I think there was also a hint that there's only so much attention available, and it wasn't getting spent on the most crucial thing about the finance industry. On yet another hand, there's no reason to think people would have done a better job of paying attention to whether investments were making sense if they [the people] hadn't been distracted by feminism.

Re: Edited

[fengi.livejournal.com]

If you're reading it as he's saying there's only so much attention available, I'd agree.

I think he's wrong to emphasize feminism when talking about people mistaking a surface normality for change. The point could stand without bringing that in.

As you point out, it creates a hint of blame as you point out. Plus it's not true even there. Wall Street was still an obvious boys club doing the bare minimum to not get sued. I suspect there was more done against drug and alcohol use during business hours than anything else. Watching the boys at any bar near a major business district, it was clear the improvement was like a drunk who thinks responsibility is not driving afterwards.

[fidelioscabinet.livejournal.com]

Here's Odean's home page, which has a link to that article (in .pdf format), along with quite a few others on investors and their behavior.

I suspect the divisions of banks and investment firms that went completely wild and dragged the rest of the company down with them were either all-male or mostly so, and that the hyper-masculinized culture Lewis mentions in that Vanity Fair article, and in places like his book Liar's Poker, was the dominant environment. If you look at many of the great financial disasters of teh past, it's interesting to see how many were the result of a man or men who were, it appears, trying not just to make a lot of money, but to impress others somehow--Nick Leeson of Barings Bank infamy comes to mind. (Wikipedia has a category on financial scandals--most of the articles look to be well-documented, so that might be worth a look, if you want a tour of Great Financial Calamities.) The March issue of Vanity Fair also has a good piece on Bernard Madoff--they've been doing some good coverage of the various aspects of all this; the march and February issues have had good pieces as well, which are available online through the Archives link on the magazine's homepage.

[fidelioscabinet.livejournal.com]

Crap. I forgot to close links.

Odean's home page.


Vanity Fair's Archives page.

[nancylebov.livejournal.com]

This reminds me of something I saw in an investment advice book long ago: Before you make an investment, ask yourself "Would I do this if I couldn't tell anyone but my accountant?".

[rimrunner.livejournal.com]

Wow. That describes an incredibly foreign way of thinking to me—because it's never occurred to me to tell anyone BUT my accountant. (Even conversations with my husband on the subject go like this: Him: "Are we solvent?" Me: "Yes." Him: "Okay." End of discussion.) I think finance is incredibly interesting, which is one of the reasons I'm reading your LJ, but don't see how my personal investments could be of interest to anyone but me. Who cares?

I should ask my financial services firm how many female VPs they have.

[fidelioscabinet.livejournal.com]

There's a school of thought that keeps insisting that what you do has to be done for the sake of impressing others--and managing your financial affairs is included. Remember "Keeping up with the Joneses"? I suspect that if you are someone who can't imagine why you should bother to do that, the idea of investing to impress is also going to sit very strangely. But there are all too many people for whom the Joneses ot only must be kept up with, but outdone whenever possible.

[brewsternorth.livejournal.com]

Which observation, I suppose, goes some way to explaining why CEOs and hedge-fund managers take away, or have taken away in the past, such extraordinary bonuses.

[fidelioscabinet.livejournal.com]

An interesting and valuable point. Because are you investing for your financial welfare, or for the sake of your ego? It's like the issue of the house you live in or the car you drive, or the clothes you wear--are any of these selected simply to satisfy you, or for the sake of the impression they will make on outsiders? (Yes, that is an impersonal you, there.)

[kgbooklog.livejournal.com]

"Would I do this if I couldn't tell anyone but my accountant?"

Lawrence Watt-Evans wrote a multi-part essay about class in America, with sections about attitudes towards money (http://www.watt-evans.com/blog/?p=70) and possessions (http://www.watt-evans.com/blog/?p=73).

[tashadandelion.livejournal.com]

The guy must not travel much. It is common in MANY cultures outside of America for people to plow right into you on the street. Our concept of personal space and what we interpret as aggressive, rude behavior is not the same elsewhere. On the streets of Russia, for instance, it's just as bad as Iceland appears to be. (And yes, I'm applying a value judgement to it; I hate people bumping into me, and I don't care if it's un-PC to say so. :^D)

[nancylebov.livejournal.com]

More research is required. My impression from Lewis was that Icelandic men deliberately bash into each other. Are you saying Russians do that, or that they don't care if someone is in their way?

[metahacker.livejournal.com]

That struck me as odd. I don't know, but I can't see a culture where people crash into each other all the time, not with that force. It seemed like culture clash.

A parallel example:

The first time I took my wife to NYC (where I was raised), she got consistently run over by people on the street. I ended up having to literally tow her behind me as I led her down the sidewalk.

People on New York streets don't plow into each other normally, so I was curious. It turns out that the Boston paradigm (where she's from) is to give other walkers a wide berth, and generally yield to people on the wrong side of the sidewalk. (This parallels traffic.) There isn't room for this in New York, so the paradigm there is for each perosn to each adjust a half-person's width in the split second before impact. Lacking this training, she didn't adjust, and so kept colliding.

I have to wonder if Mr. Lewis encountered this sort of problem; failing to fit in with the flow, he decided that everyone was out to hit him, and upon testing his theory, it turned out they wouldn't shy away from doing so. This in turn made me worry about his conclusions in the rest of the article, if he couldn't be bothered to get to the bottom of this situation.