In the ongoing hunt for evidence to understand The Woman Effect Manifesta, I’ve discovered that the Return on Women (WOR) is really high! I've been delighted to discover that women have excellent investment instincts! For those of us with entrepreneurial instincts, this is particularly important, whether we exercise them in home-based or small businesses, or whether we’re corporate high-fliers.
At first this finding flummoxed me because it was right up along side stats in Forbes and The Center for Venture Research that said that women were not actually very prevalent in the investment community. But digging deeper I noticed a few things, not least of which was my own experience with Venture Capitalists during my startup years where I learned that VCs are both clubby and traditionally interested in one thing: quick profit. Looking at the investment perspective that women bring to the table, it’s no wonder we aren’t more present in the traditional VC communities.
However, women are gaining new respect as investors, and part of the reason why is our neuroeconomics. According to Denise Schull “New research shows that investors or traders who are tapping into their people-reading skills are better at predicting markets.”
But the reasons we make good investors go beyond just our wiring. This fantastic TEDWomen video by Halla Tomasdottir makes it clear why. Listen to Halla as she explains her investment firm’s feminine-influenced investment values:
- Risk Awareness: understand the risks you’re taking and don’t invest in things we don’t understand.
- Straight Talk: use simple language and explain the good and bad in ways people can understand.
- Emotional Capital: emotional due diligence is as important as financial due diligence because people make and lose money.
- Profit with Principles: we care how we make our profit (including positive social and environmental benefits) and are willing to do it with a long term view.
I want to highlight two of these factors contributing to our investment prowess because I don’t think they get enough attention.Women Take a Considered Approach to Risk
Investing is risky by definition because your returns are in the future.
On the surface, the data on women and risk appears a bit contradictory and confusing, but from what I can tell reading the research, the studies don't seem to use a common definition of "risk." In reading them, and in considering the general use of the term, I see two distinct patterns of "risk" discussed:
1) Seat-of-the-pants, hope-and-a-prayer kind of risk that some researchers say is testosterone influenced and
2) Calculated, researched and considered risk.
None of the studies I read distinguished these kinds of risk, however, a high-level view of the research leads me to believe that women are uncomfortable with the first kind of risk and comfortable with the second. This makes sense to me personally too.
There is some swagger associated with risk (including investment risk) that culturally credits the first kind of risk, the go-with-your-guts kind, with phenomenal success. Really, if you think about it, the gut-risk story is baked into the rags to riches American Dream. When people packed their worldly possessions up in wagons to head west, they were often following little more than the promises from a flyer tacked on the saloon wall. Reading the research and associated commentary after the Great Recession, it seems that our financial sector suffered from a bit of bravado, didn't it? You could even make the analogy between the saloon flyers and the mortgage and refi brochures we kept finding in our mailbox, no?
Contrast that with the other kind of risk, the more considered kind, which is based on analysis and a willingness to more openly deal with unwanted news where women excel. It turns out that women are excellent investors in charity too, because they are motivated to conduct in-depth research, focus on results and provide strategic support.
If you're giving your money to someone to invest in an uncertain future possibility, which kind of investor would you like to have? Right.Women Have a Broader Sense of Returns
In addition to being good risk-takers, women tend to take a longer term and broader view of success, which helps protect the business against the volatile cycles that the quest to show shareholders quarterly profits tends to produce. As quoted in a Forbes “data from the Center for Talent Innovation (formerly the Center for Work-Life Policy) show that most talented women aren’t motivated by money alone. More than half (56 percent) want their work to have a positive effect on society; in fact, more women place a higher priority on that karmic paycheck than on high financial compensation. Furthermore, the vast majority of college-educated women want to amplify their own altruism through their employer: 88 percent of Gen Y women, 91 percent of Gen X women and 90 percent of female Baby Boomers feel it is important to contribute to their community or the wider world through work.”
In fact, recent commentary out of The Great Recession has called into question the viability of our short term financial success model entirely. If the market's definition of success shifts to reward a longer-term view of returns, then women's natural talents at managing for the long term will become even more valuable.
I find it fascinating that this dialog about women as investors is happening in and about the wealthiest markets in the world at the same time it's being discussed in the smallest and poorest villages, too. Research by the World Bank is finding that when women thrive in tiny villages and towns, so do the villages and towns! Why? Because women manage resources differently. They ensure that the children eat and become educated so they can contribute more to the economy – definitely a long term view of their investment. They invest differently and in ways that contribute to the health and build the wealth of the whole community. Whole economies perform better.
And if that isn't proof of women's investment instinct, I don't know what is.
What is your experience? Do you see women's investment styles paying off in your business pursuits? Have you tried your hand at investing in money, assets, people? Yourself? What results have you seen?
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