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To start, I was certainly happy and enlightened when I first watched Halla Tomasdottir's TED Talk on how she started an all-female finance company in Iceland to combat what she considered a male-instigated financial crises in her country. Her story was as empowering as it was interesting and I have certainly told many a wary listener about the strength Icelandic women exude.
But, to be honest, I wasn't convinced. An all-female finance company seems like a bit too far of a step to counter-act a financial crises. Sure, in all countries, there are more men in finance than women, but to say that the gender disparity is why the world went into a financial recession (albeit depression in some places)? That seemed to be a bit of a leap.
Until today. In an interview with Forbes, senior researcher at Cambridge University Neuroscience and Finance departments John Coates made a very bold, yet scientifically backed, assessment of how we could have avoided the financial crises all together: more women on Wall Street.
According to Coates' research, young and middle age males are too quick to make risky investments, especially in times of increased gains or increased loss. Sound counter-intuitive? Check this out:
"We think on the upside, during the bubble, these testosterone levels were making the traders insensitive to risk-reward signals but also insensitive to price signals such as the rate of interest. During the crash it didn’t make any difference if you lowered interest rates as low and zero, they were so traumatized they were price insensitive. So if you have a financial community that, at the peak of the bubble, and the pit of the trough, is under the influence of these very highly elevated chemicals then they are basically price insensitive and I think that means that monetary policy stops working."
Coates suggests that because this reaction in based on chemical fluctuations in the male body, it does not affect females, meaning that in the exact same situation, women would act more rationally, thus saving us from a financial crises.
"I think that is probably the most important policy conclusion that has come out of this research that it is entirely possible that bubbles, not bull markets but bubbles, where a bull is just taken too far, are a young male phenomenon. One way of dampening that source of instability in the financial system is to increase the number of women and older men in the markets because they have very different physiology then young males."
Unfortunately, in order to test his hypothesis, Coates needs more women to join in on the banking game. And, even with employers looking to hire more and more women, it doesn't seem like the know-how to change the traditionally male working environment to be more female friendly has yet come to pass.
"Even with massive diversity pushes I don’t think there is more than 5 percent women taking risk in the financial world, starting from the trading floors to the asset managers. I think there is a great interest in increasing their numbers but I don’t think the banks quite know how to do that."
Looks like that is a call to action if I ever saw one. Ladies, to Wall Street! According to neuroscience, it is us, and our natural biology, who can turn this country around.
Be yourself. Be different.