Helaine’s Blog

Hormones don’t hurt female investors – inequality does

May 28th, 2013 | via The Guardian

Thoughts about sex and stocks have a long lineage on Wall Street, and they’re not meant to be helpful to women

If a gaffe, in the famous formulation of journalist Michael Kinsley, can be best described as when someone accidentally admits the truth, then hedge fund star Paul Tudor Jones made a doozy of one at an off-the-record chat hosted by the University of Virginia last month.

“You will never see as many great women investors or traders as men,” Jones, the founder of the multi-billion dollar Tudor Investment Fund, told the audience. Why? It’s the children, damnit. “As soon as that baby’s lips touched that girl’s bosom, forget it. Every single investment idea, every desire to understand what’s going to make this go up or go down is going to be overwhelmed.” The Washington Post obtained a recording and posted it online last week.

Never mind multi-tasking. We’re talking the power of Oxytocin here. Ladies, a full complement of nannies and supportive husbands won’t help, not when your hormones are taking charge.

Jones quickly attempted to take his words back, claiming he was only referring to “global macro traders,” those traders who seek to profit from world-wide economic trends in world financial markets, where “life events, such as birth, divorce, death of a loved one and other emotional highs and lows are obstacles to success.”

Ah, work-life balance. Gaffe explained. We can move on now.

Not so fast.

Jones’ slip points out the truth of what is going on: men don’t trust women to get this investing thing right. Things have not been going well for the ladies on Wall Street since the Great Recession – not, mind you, that the going was so good before. Disproportionately impacted by the downsizing of the financial services industry, their numbers in the business have been dropping. One day it’s Zoe Cruz being held responsible for losses at Morgan Stanley, the next it is Ina Drew taking the hit for JPMorgan Chase’s so-called “London Whale” trading scandal.

It’s become popular among those who would like to see women’s status on Wall Street improved, after the 2008 financial crash, to claim that hormones cause women to enjoy a calm and risk-averse nature and that if they worked on Wall Street in greater numbers, we’d all be in better financial shape. Think about it. Who was brought in to take charge after the falsehood of the Iceland economic miracle? Women. Who tried to bring attention to Wall Street’s increasingly risky practices? Brooksley Born, who warned frantically and repeatedly about the dangers of derivatives, only to be shouted down by the men in the rooms of power.

There is a pseudo-scientific streak among lazy thinkers who believe that women just can’t help it- their hormones leave them unsuited for the halls of power, be they in Washington or Wall Street. As legal historian Christine Sgarlata Chung observes, “Wall Street’s prevailing narrative assumes that women lack the skills and characteristics necessary to navigate on Wall Street” and treats them as either “hapless victims” or “incompetent shrews.”

Under this reasoning, women’s lack of investing or leadership prowess comes down to a lack of testosterone. Testosterone, of course, is supposed to be the hormone of the alpha male, of leadership and strength and risk-taking. Cheerleaders for women’s empowerment even claim this same testosterone is the problem. Yet even this is simplistic.

When John Coates at the University of Cambridge claims he began investigating the impact of testosterone on investing because he didn’t meet any women who fell for the dot.com bubble, we nod in agreement. Perhaps testosterone made Coates so impulsive about his theory he forgot to do a basic LexisNexis search – and, as a result, neglected to discover Morgan Stanley’s Mary Meeker, who acquired the moniker “Queen of the Net” for her role in pumping up the turn-of-the-century Internet economy.

In fact, let’s look at the assertion that women are more likely to avoid unreasonable risk than men. Are women more cautious? University of Massachusetts Boston economics professor Julie Nelson recently put two-dozen such studies supposedly proving that point through the statistical wringer.

Her conclusion? The difference between men and women when it came to risk were minuscule. Researchers were simply finding the results they wanted to find.

So what about that finding by Wall Street consulting firm Rothstein Kass, which showed that, since 2009, female-owned hedge funds posted better results than those helmed by men? That doesn’t mean women are better investors than men. It could mean … why it could mean anything.

Maybe it’s the estrogen or the lack of testosterone. Or maybe women need to be better at investing than their male peers to even get the funding to open their doors before they place their first hedged trade. It might even be a perverse benefit of sexism: as Rothstein Kass director Meredith Jones pointed out, women-owned hedge funds have less in the way of funds than those run by men. That can cut into their profits – but it also allows them a flexibility in investing that larger firms lack.

The truth is a stereotype is a stereotype, and there is next to no evidence that hormones help women invest any more than they hinder it. All in all, Jones’ gaffe reminds us that thoughts about sex and stocks have a long lineage on Wall Street – and they’re not meant to be helpful to women.

So instead of relying on half-baked theories on sex and the stock market to promote women’s progress perhaps we’d do better to go back to a more simple ideal: fairness. Testosterone and estrogen not required.

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