So last week when I received my TIAA-CREF statement (like many professors, I assume) you might have heard me scream from Milwaukee. But now I have a better ideaâ€“I should be running the market! Tim Harford, a columnist for the Financial Times and author of The Logic of Life: The Rational Economics of an Irrational World explained last week on NPR that men are too hormonal to be running Wall Street. Yes, let me repeat that, men are too hormonal. As Mr. Harford explains,
There’s a former Wall Street trader who is now a researcher at Cambridge University in the UK. His name is John Coates. What he told me was that when he ran a trading desk in Wall Street during the last dot com boom and bust, he found that his traders were exhibiting almost physical symptoms of mania. So they were punching the air. They were yelling. There was – not to put too fine a point on it – there was more pornography floating around in the office. This is of course is a very masculine, macho environment. But what John Coates also noticed was that the few women who were on the trading floor didn’t seem to be affected.
Looking into this, he discovered that this sort of behavior is actually really common in many male animals. What happens is, you have, say, two gorillas or two stags fighting each other. One of them wins. They get a surge of the hormone testosterone. It makes them aggressive. It makes them take risks. And that goes on for several days. And then one day, effectively they are suffering from testosterone poisoning. These traders are basically suffering from exactly the same symptoms as rutting stags.
Ari Shapiro, the NPR reporter then follows up with the next logical question, “So we should put women in charge of Wall Street, is that what you’re saying?” Mr. Harford replies,”Well, that’s a possibility, assuming that women want to be in charge in Wall Street, yeah.” This, of course, leads to the question of who actually wants to be in charge of this mess. But, in fact, some limited studies demonstrate that when women serve on corporate boards, the companies do better. See Conglomerate for more on this conversation.
So, the lesson for my pension fund advisorsâ€“I hope you have a mix of men and women making investment decisions and I also hope you are investing in companies with a mix of men and women on the board. (I also hope that my next quarterly statement is an improvement!)