A Woman’s Place is in the Money

Money Maketh Woman

The research showing that women are better investors than men has been around for a while.  This is linked to the evidence that women are more risk averse than men – they tend to take less chances in general and with their money in particular.

This leads to a simple idea; that we should encourage more women to get involved in trading, both in the professional world and in the home.  The reasoning is that if women are more cautious, and therefore more successful, investors then their stabilizing influence will lead to a safer and less volatile financial world.  Which is a nice idea, but is probably wrong, although you’ll need balls to admit it.

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On Incentives, Agency and Aqueducts

Risk Management, Roman Style

There’s an aqueduct in Segovia, in Spain, that’s stood the test of time. A lot of water has flowed over that bridge … two thousand years worth, more or less, since it was built by the Roman Empire. Back then risk management consisted of getting the chief engineer to stand underneath the structure when they removed the supports: now that’s a proper incentive.

Incentives stand at the heart of a lot of human behaviour in corporations but financial theorists have had a great deal of difficulty in understanding that an incentive is not necessarily the same as a financial reward. Although the ideas of psychologists and sociologists are slowly seeping through there’s still a long way to go before there’s a proper appreciation of what motivates people. In the meantime we’re stuck with Agency Theory, the sheer power of grim self-interest: it’s like real life but not as we know it.

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