Could Women Have Prevented a Financial Crisis?

The economist Anne Sibert hypothesizes that gender inequality in the finance industry is partly to blame for the financial crisis. She points to evidence that men are less risk-averse in financial decision-making, more overconfident, and perhaps susceptible to testosterone-fueled feedback loops in asset bubbles. She concludes, “If — as the research may suggest — men are less risk-averse than women, then a work group composed primarily of men (or primarily of women) may be a particularly bad idea.” (HT: Free Exchange) [%comments]


She has a point, but for different reasons. Men tend to diss each other by comparing accomplishments, like, I did that 300 billion deal just yesterday, and you only scored 270! ha-ha!
Women, on the other hand, tend to diss each other more eloquently and on a more personal level, targeting personal integrity and social competence.
The crisis, as made by women, woud most probably be a social instead of a financial crisis.


Imagine the reaction if this argument had pointed the other way.

Since one of two possible hypotheses is stifled by political correctness, research in this area is meaningless - just like a steering wheel that only turns in one direction.

Christopher Smith

Seems like Ms. Sibert is overlooking the common factor, which is the risk tolerance itself. I suspect that the women who *are* in high-level decision-making positions are just the ones who are willing to take large risks, which of course mostly pay off during the boom times. In this case, the male predominance is probably a reflection of who's more risk-tolerant; specifically including more women would tend to draw the risk-tolerant as well, making the exchange a wash.


Wow, talk about leaping to conclusions. The most recent meltdown would not have been averted by having more risk-averse investors since the way the bonds had been sliced and diced was designed specifically to shield the banks from risk ( of course the models turned out to be wrong in some situations ). Everyone in the chain thought they were getting the good stuff and passing the risk along to the next person.

Also if risk = profit, the risk-averse would have been shut out of the market pretty quickly.

Gary Arndt

There is a well known correlation between risk and reward. If women are more risk-adverse, would that explain why they are less represented in higher levels of business?

It seems if you want to make a blanket claim about a whole sex, you have to take the good with the bad implications of the claim.


This sounds about right but how to inject sanity within the hiring process since they will be looking for "go getters"?

"testosterone-fueled feedback loops in asset bubbles"

As a correlation from Liar's Poker by Michael Lewis that defined: Big Swinging Dick — A big-time trader or salesman. ("If he could make millions of dollars come out of those phones, he became that most revered of all species: a Big Swinging Dick." (p.52) The opposite of this term is Geek, used to describe a just-hired trainee.


It is a lovely feminist (mis) conception. Unfortunately this hypothesis has just been tested large scale in Sweden, at the Stockholm School of Economics, the result:

No difference what so ever in levels of risk taking?

Sex hormones do not affect economic behavior

A new study published in the April 6 advanced online issue of the Proceedings of the National Academy of Sciences (PNAS), shows that neither testosterone nor estrogen had any effect on financial risk taking.

Neither had it no effect on other “economic behavior” (altruism, fairness concerns or trust).

It is well established that women are more reluctant to take financial risks than men are; women for instance are less prone to invest their retirement savings in the stock market. It has been argued that these differences are due to sex hormones. Particularly, testosterone has been thought to increase risk taking and estrogen has been thought to decrease risk taking.

To test the hypothesis that sex hormones affect economic behavior a team of researchers at the Stockholm School of Economics and Karolinska Institutet conducted a double-blind randomised clinical trial. In the study women in the ages 50-65 years were randomly allocated to treatment with, testosterone, estrogen, or placebo. After 4 weeks of treatment, the women participated in a series of economic experiments to measure financial risk taking, altruism, fairness concerns, and trust. But no difference in behavior between the groups was discovered.



At the root of the problem are advisers who preach "investment for the long-term" while being compensated in the short-term via bonuses.


The real question is not about differences on the whole between men and women, but about differences between men and women in decision making roles. Furthermore, looking at just the trading activities of financial institutions as the cause of this crisis is extremely narrow sighted, considering failures on many levels, some of which were not taking risks. Politicians, regulators, borrowers, businesspeople from not just financial firms, but retail, industrial etc, missed things that have cost themselves and their institutions dearly.
In regards to the financial industry, I think it would be safe to say that women who enter high level roles in this field possess similar levels of risk aversion and aggression as do their male counterparts. A poor study at best.


Its not risk taking, its basic honesty.

For New Yorker men, if you want to keep a blond, busty, bimbette in a brownstone, you need a 7 figure income.

Being honest doesn't allow you to swing the "big dick"!

Robot Mistake

The concept fits nicely into the agrument that men and women and complements and not equals. This is misguided religious doctrine that has been accepted by society at large. I reject the premise.

Teaching is dominated by women.

It would be rediculous to agrue a bridge collapse was due to not enough women in engineering. Or that the twin tower of NYC would be standing today had more women been involved with the design.

Finally, women have been very successful in the US in the last 20 years entering the legal profession, yet an arguement that the law is becoming more risk averse does not pass the laugh test.


it's not gender- people are less risk-averse with other people's money


Women would simply have their own version of financial crisis eventually, because, every system at some point does break (more of less spectacularly)

Women may be different people to men, but ... they are not 'better' people at all. Just people (and female)

BTW, usually it is women who make the decision about which house to buy, and the nesting instinct when it's in full swing can cost the family hundreds of thousands of pounds.

Realtors all over the world know this very well, and usually try and use this to their advantage.

So, in a way, women are kind of responsible for the current crisis somewhat too anyway, directly so by the decision they made, which was to buy too much house on too little income.

caveat bettor

It was really good that Bernie Madoff had Laura Pendergest-Holt's risk aversion to check his testosterone.


It used to be said that female heads of state would be unlikely to go to war.

That theory didn't stand up to Golda Meir or Indira Ghandi or Margaret Thatcher.

This theory wouldn't fare any better, although I can't blame women for suggesting that they get their turn at overpaid incompetence.


Oh come on. Don't care who was running the show, it all boils down to:

"The money was too good. I got stupid."

Jayne Cobb - Firefly


Wow, there are some hostile responses. The article didn't suggest that all women wouldn't have caused a crash or had their own problem. Rather it suggested that a more gender balanced field might have lead to less rampant risk taking. It was also only one of several points made (and not badly made at that).

It's also worth noting that sex hormones aren't the only difference beetween men and women- years of evolutionary influence has had its toll. It's also not clear testosterone has the same effect on women as men for that reason.

As some have pointed out though, the real problem is that the selection bias for the financial industry is for people with low aversion to risk. This, in turn, leads to an industry full of type-A ego-driven males and a small handful of equally agressive women (the smaller number being accounted for by the smaller number of women who fit that role well). The trick is not to attract more women, but to attract and resist penalizing more risk averse people to balance the risk takers.



I've worked for more female bosses than male bosses, and I can definitely say that they are no better than my male bosses.

Just think of Dilbert's pointy-haired boss(es) wearing skirts, and you should get an idea of how decisions seem to be made at the managerial level in IT (and their customers).


Financial engineering is an arms race due to capitalism. We could put risk-averse management into all of the firms.

The first firm that decided to take on a little more risk would generate a higher return for their investors. More money would start to flow into this firm because many investors will want to capture the high returns. The other companies would notice this and many would change their practices so they can stay competitive. Then someone else would take on more risk … the race is on.


It's simple: the jobs in finance selected heavily for risk-takers during the bubble. Whether they were men or women is hardly relevant.