Wednesday, September 21st, 2016
in the company of women

The first analyst day I attended was at the Vista International Hotel in the World Trade Center.  When I walked out into the hall during a break, there were long banks of pay phones jammed with analysts delivering the bad news to trading desks and clients.  The price of Control Data stock probably never saw that level again, but I was so clueless that I didn’t have any idea what had happened.

The other thing I remember from that day was standing behind the rows of analysts in the ballroom and seeing a sea of gray and blue, with two splashes of color, one red dress and one brown.  There were a few other women in attendance as well, but they had adopted the corporate colors of the time.

At the hundreds of conferences and large meetings I’ve attended since, there has rarely been more than ten or fifteen percent of the attendees who were women.  Last week, the shoe was on the other foot at a CFA Institute conference, “Alpha and Gender Diversity: The Competitive Edge.”  Now I know how it feels to be outnumbered.

I hadn’t attended the inaugural conference on the topic the year before, because I felt that the agenda was designed for women.  Despite the gender imbalance this time around, the content was much more focused on the important question at hand — whether gender diversity improves the performance of teams and organizations.

If you know me (or if you read my piece on “guerrilla girls” last yearthe research puzzle | The title was inspired by a group who protests the exclusion of works by women from art museums and galleries.), you know that I think the answer to the question is “yes.”  And the available research backs that up, even though it seems to be widely ignored by many of those who profess to be turning over every rock to find alpha.

Paul Smith, the CEO of CFA Institute, is an outspoken advocate for change in an industry he sees being at risk of “withering on the vine.”  Ronald O’Hanley, the CEO of State Street Global Advisors, says that “clients need more from us at a lower cost.”  Other speakers (yes, several of them were also men) echoed those concerns and shared their reasons why increasing diversity in the investment profession is one part of the equation for success going forward.

Sallie Krawcheck provided a candid look at her personal ups and downs during her run as the most prominent woman in the investment world.  She also aptly summarized the male-dominated culture of the business, with its war analogies, sports analogies, that ever-present symbol of a bull, and those frequent times “when guys get together and show off for each other,” something I have seen time and time again (usually resulting in poor decision making).

She called for “courageous conversations” about the issues that haven’t been properly addressed.  As someone who says, “A business is only as good as its conversations,”the research puzzle | I stole the line from cartoonist Hugh MacLeod. I couldn’t agree more.

Lucy Kellaway of the Financial Times entertained the crowd with an irreverent look at the banality of corporate life, with its “horrendous jargon.”  But mostly she talked about being “post-fear” and willing to be bold in whatever way she wants (acknowledging that having money does make that easier), saying that “if you’re a post-fear employee, you’re kind of a weird thing to manage.”

In my estimation, the highlight of the conference was the pairing of Anita Williams Woolley and Scott Page.  The two professors, who had never presented together before, gave a fascinating look at the research on group decision making.  To me, their work (and those of others that they cited) is required knowledge for investment leaders trying to build better organizations.

What leads to smart groups?  As Woolley outlined, it’s the right people with the right goals, in an atmosphere marked by good collaboration.  A  group should have cognitive diversity, with a high degree of “social perceptiveness” (the ability to read other people) among the participants.  In general, they should balance their attention between a focus on process and one on outcomes, since each provides value, depending on the environment and the nature of the task at hand.  And there should be a high level of communication and generally equal input among the participants.

A recipe like that is quite unusual in the investment world.  That should tell us something.

Page examined related and equally interesting research.  He said that a key question for managers is, “How do we get smart people to think differently?”  While there is a resistance to quotas, the fact is that identity diversity is strongly related to cognitive diversity and better outcomes.  Hiring another smart person is not helpful if the background, training, knowledge, and experiences are the same as the other smart people around the table.

Insight comes from making connections across disciplines.  75% of mutual funds are now managed by teams (the opposite of twenty years ago), but if the informational networks of the team members are similar, not much has been accomplished in the process.

I quite liked my day and a half in the company of women.  But that’s been a constant throughout my career.  Women seem to have a higher content-to-bluster ratio than I do (and, in my estimation, than most men do) and they are better at the kind of collaborative skills that we really need.

As Anita Williams Woolley said, all the jobs where collaboration isn’t required will be going to robots sometime soon anyway.  If we’re going to get better at this craft/art/business of investing, we’ll need to have some different people at the table.