Testosterone Affects Some Women's Career Choices

Reporting in the Proceedings of the National Academy of Sciences, researchers write that women with higher levels of testosterone may seek riskier finance jobs. Study author Paola Sapienza discusses how hormones, not sexism, may explain the gender imbalance in banking.

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PAUL RAEBURN, host:

This is SCIENCE FRIDAY from NPR News. I'm Paul Raeburn. Ira Flatow will be back next week.

Later in the hour, how cooking may have shaped our bodies and our society. But first, we all know the affects of hormones on middle schoolers. But would you believe that testosterone, a hormone we of course associate with males, could influence what women major in, in school and what careers they might choose. New research suggests that could be a possibility. The study is in the journal Proceedings of the National Academy of Sciences this week. And its authors write that women with high levels of testosterone and a greater have a greater penchant for risk and tend to gravitate towards high stakes jobs in finance.

But other women with lower levels of testosterone might aim for a little less pressure and a little less risk. But is it really just hormones? How can we be sure that they do play a critical role? Our guest is Paola Sapienza, an associate professor of finance, Kellogg School of Management at Northwestern University in Evanston, Illinois. Welcome to SCIENCE FRIDAY.

Professor PAOLA SAPIENZA (Finance, Kellogg School of Management, Northwestern University, Evanston, Illinois): Thanks.

RAEBURN: So, give us a call. Our number is 1-800-989-8255 that's 1-800-989talk. If you're on Twitter, give us a tweet, using the @ sign, followed by scifri. If you want more information about what we're talking about this hour, check out our Web site, sciencefriday.com and you'll find many links to the topic. So, Dr. Sapienza, tell us a little bit about the study. Rundown the results for us, if you could.

Prof. SAPIENZA: So we found that women with higher testosterone have more appetite for risk. And risk in this particular case was measured in a lab game in which we also offered students to choose between a gamble in a certain amount. And we changed the certain amount, increasing it over and over. We wanted to see when, how big the certain amount had to be for inducing a switch to the certain amount. Those students who never switch, they really liked risk, they prefer a higher reward to higher risk gamble. And in that way we measured their risk appetite. We also took saliva of all these students twice and we coordinated the saliva with the choices in the lottery.

Subsequently, in two years later, we followed their career decisions and we looked at, which of them chose to go into riskier career, defined as career that have higher expected returns, higher expected salaries but higher risk - which means the higher probability of being unemployed or, you know, or higher variance in the level of the salary. Those jobs are generally concentrated in finance.

RAEBURN: Don't we - don't we all want the jobs with the highest salaries? What was the distinction there?

Prof. SAPIENZA: Well, higher salary comes with higher risk. So, if you choose a job where the - maybe lower salary, you may have for example, tenure, you have a secure job for life; or alternatively you can choose a job that with some probability would give you a really high salary, if you climb the ladder for example - but with some probability, you know, that job after five years, they're going to fire you. And that's basically the choice that many of these MBA students make, especially if they go into investment banks, they know they know the lotteries, they tough. So at the beginning, they accept the higher expected salary but there's a chance that they will not make it and they're going to have to restart over.

RAEBURN: So, what example of what we're talking about is these sort of wild people stock traders, the people that are sort of scrambling on four phones at once and that's the kind of high risk type job you're talking about?

Prof. SAPIENZA: That's one kind. There are other jobs that (unintelligible) in investment banks, for example, that - like corporate finance in which you're not on the trading floor but still if your clients don't like the kind of job, you're going to be, you know, fast - it's going to be very likely that you're going to lose the job and there going to be high turnover. It's important to keep in mind that, you know, these finance jobs they have a high potential higher rewards. So we hear these outrageous numbers in terms of salaries. But there's also a much higher chance than a typical job, to lose the job subsequently. Think about the financial crisis now.

I mean this is - so some of the students actually who graduated in 2008, they ended up going to work for firms like Bear Stearns, Lehman Brothers - those firms disappeared altogether. And so those - some of those jobs evaporated altogether.

RAEBURN: Now this is - is it true in men that the men who have those jobs have higher testosterone levels then men who do something a little less frantic?

Prof. SAPIENZA: The results are a little bit mixed. So what we found is that the in the overall sample of men, the answer is no. And we were puzzled by this. We wonder why this hormone that is often associated with men, didn't work in men in the same way as women. So we formulated two hypotheses: one was that since in men we have a way more extreme level of testosterone, we thought maybe that once you pass a certain level of testosterone, these effect doesn't make a difference. In other words, if you take a man with 100 and one with 110 there is no difference in risk attitude between those two because they pass a certain level.

So in order to evaluate this hypothesis, we actually look at men with moderate level of testosterone. Those men are more comparable to our sample of women in terms of testosterone. What we found though that the affect exist. So the answer is yes and no.

(Soundbite of laughter)

Prof. SAPIENZA: It's not - if you pass a certain level of testosterone for moderate level of testosterone, testosterone seems to have the same effect in men and women.

RAEBURN: Now I think, I don't actually know this for a fact, but from the images we see it certainly seems like most of the people who have this very high risk jobs are men. Is - do we know that's the case?

Prof. SAPIENZA: Yes, it is the case and just to give you a sense of the sample we are looking at. In our sample of MBA students coming out from the University of Chicago Booth School of Business, which is a very selected sample. It is a school that is famous for finance. We have that only 30 percent of the women go into finance. And about 60 percent of men go into finance. So that gives you a sense that even in a homogeneous - relatively homogeneous sample - because these students have similar background or similar abilities, the choice is dramatically different.

RAEBURN: Now, so those finance jobs are these - many of them are these high risk jobs we're talking about?

Prof. SAPIENZA: Yes. Just to give you a sense, 10 years out, after you took a finance job, on average you may know 2.8 times more than in other similar student who actually took a non-finance job.

RAEBURN: Right.

Prof. SAPIENZA: However, the risk of being unemployed is much higher, again, 10 years out…

RAEBURN: Right.

Prof. SAPIENZA: …and the standard deviation in the salary is twice as big as any other job. So, you know, with risk it, comes rewards. There is no free lunch.

(Soundbite of laughter)

RAEBURN: Now, The Economist had a piece this week that you might have seen, in which it basically said - at least in the headline in the top of the story - you know, most of these jobs are held by men and now we know it's not sexism, it's hormones? Is that a fair thing to say?

Prof. SAPIENZA: That's a little bit extreme.

(Soundbite of laughter)

Prof. SAPIENZA: We looked at tough preference - the preference side. There is a chance that there are other things at play. And in the debate about gender gap in finance, but in any other field, there are a number of forces at play. And I don't think we ruled out the others.

The forces could be - one component is preference: I don't really like to work with those guys. I don't like to have risk. And what we were trying to do in this study is measuring that.

However, for example, there are studies that show that even though women have higher risk aversion, they're perceived to have much higher risk aversion than they actually do. So if you think about the hiring side on the other side, some of the stereotypes or biases may play a role, as well.

RAEBURN: Now, do the - we're often taught, as science reporters, to be skeptical of any single study because no single study, no matter how well it's done, in most cases anyway, offers a definitive answer. So have there been other studies along these lines that lead us to be confident in these results?

Prof. SAPIENZA: Yes, there has been some studies that looked at testosterone and risk aversion. They - generally, the studies never looked at woman. So our novelty is actually to have a very large sample of women that eventually will make relevant decisions. So that's the important side. But for example, there was a study published PNAS a couple of years ago that deliberately tested the testosterone of traders at the moment in which they were trading. And what they found was that the more, the higher the testosterone, the riskier the trades done by this person.

RAEBURN: If there were more women in these jobs on Wall Street and in finance, would it change those fields, do you think?

Prof. SAPIENZA: It would change the risk attitude.

RAEBURN: Could that be a good thing, or a bad thing, or hard to tell?

Prof. SAPIENZA: No, I think in - the honest truth is that - and there are many different finance jobs, and we need probably some diversity there, as well. I would say that if you think about the excessive risk, for example, taken by some banks, who led, at some level to the current crisis; having had a naysayer, maybe more conservative in terms of risk, in the rooms when taking a big decision, that would have helped. And in fact, you know, some of the rumors is that the banks that fared the best were the banks that allowed - I don't know about gender composition - but it allowed, actually, people to speak up and people with different opinions.

So having a diverse group of people in terms of preferences, I think, is always a positive thing in business.

RAEBURN: So where do you go next? Do you plan more studies along these lines?

Prof. SAPIENZA: Well, first of all, we have permission to follow the students over time, for 40 years. So we're being very optimistic about our lifetime.

RAEBURN: For how many years?

Prof. SAPIENZA: Forty.

RAEBURN: Four-zero, wow, okay.

Prof. SAPIENZA: And so I can live forever, and you can imagine how often…

RAEBURN: You are permanently employed.

(Soundbite of laughter)

Prof. SAPIENZA: And you know, what will be fascinating is to see how things evolve over time for this subject…

RAEBURN: We're going to have to stop right there because we're - we're going to have to stop there. We're out of time. Thanks so much for taking the time.

My guest has been Paola Sapienza, an associate professor of finance in the Kellogg School of Management at Northwestern University. Thanks.

Prof. SAPIENZA: Thank you.

RAEBURN: After the break, did cooking make us human? Stick around.

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RAEBURN: This is SCIENCE FRIDAY from NPR News.

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