Is There Alpha In Gender Disparities?
The conventional wisdom for years, as this Harvard Business Review post exemplifies, has been that having more women as senior executives and directors would improve corporate performance. It appears that this may be untrue. I elaborate below, and discuss whether awareness of this may be a potential source of alpha.
Background: What You Can’t Say
If investing in companies with fewer women executives and directors were a simple way of finding alpha, you would figure you’d hear more about this. In fact, the first I heard this suggested was by Got News founder Charles C. Johnson, at a dinner in New York last summer. He talked about the possibility of a hedge fund that bet against diversity in general. I don’t recall reading any similar suggestions since. Why not?
Thirteen years ago, Silicon Valley luminary Paul Graham, offered an answer. The co-founder of the accelerator Y-Combinator, which launched companies such as Dropbox and AirBnB, wrote an essay on contemporary taboos (“What You Can’t Say”), which he analogized to “moral fashions”:
What scares me is that there are moral fashions too. They’re just as arbitrary, and just as invisible to most people. But they’re much more dangerous. Fashion is mistaken for good design; moral fashion is mistaken for good. Dressing oddly gets you laughed at. Violating moral fashions can get you fired, ostracized, imprisoned, or even killed.
Alphabet (GOOG), (GOOGL) subsidiary Google essentially made Graham’s point for him recently when it fired a Harvard-trained scientist for writing about differences between men and women that might explain why men are overrepresented in certain fields, such as information technology, while women are overrepresented in others, such as veterinary medicine, and why men might be more likely to pursue career tracks that can lead to senior executive positions.
Conventional Wisdom, Correlation, And Causation
