Would Women Have Helped Avert Wall Street Crash?

Would Wall Street have crashed as badly a year ago if women were in charge? Maybe not, says Barnard College president Debora Spar. She tells host Guy Raz about research that suggests higher levels of testosterone may lead to riskier financial decisions.

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GUY RAZ, host:

A year ago this weekend, U.S. Treasury officials came to a fateful decision that exposed the fragility of the financial markets. Lehman Brothers was allowed to go bankrupt, and the Dow dropped more than 500 points in a single day. Then, the insurance giant AIG nearly collapsed, and some of the biggest names in banking came to the government looking for help.

Many of the names in the news at the time: Richard Fuld from Lehman, John Thain from Merrill Lynch, Kenneth Lewis from Bank of America all share one major thing in common. They are, of course, men. And according to Debora Spar, this helps to explain a lot about what happened in the run-up to the financial meltdown.

Debora Spar is a former professor at Harvard Business School and now the president of Barnard College in New York. Welcome to the show.

Ms. DEBORA SPAR (President, Barnard College): Thank you so much. It's a pleasure to be here.

RAZ: Debora Spar, you argue that the meltdown might not have happened if women headed these financial institutions. What do you mean?

Ms. SPAR: One of the ideas that's been floating around since the meltdown is that women in particular may approach risk differently than men. They may, in the aggregate, because obviously individuals are all different, but in the aggregate, women tend to be more averse to risk than men. And insofar as a great chunk of this meltdown was the result of people, men, having taken on way too much risk, we could very well have gotten a different outcome had there been more women's voices in these rooms at critical points in time.

RAZ: You wrote an article back in January in the Washington Post, and you cited a study done by Cambridge University professors that ties high testosterone levels to high profits on the financial trading floor.

Ms. SPAR: What these two scientists did was they measured men's testosterone levels in the morning and then looked at their behavior on the trading floors during the day, and it turns out that when these men had higher levels of testosterone, they made riskier and often times more profitable trades.

RAZ: And so obviously the conclusion one would reach is that women wouldn't make those kinds of decisions.

Ms. SPAR: Well, you know, I think we have to be careful here because we need a lot more studies, but I do think we can at least start playing with the idea that if women do approach risk differently, then they might make less risky decisions and take less risky positions than men would.

RAZ: Debora Spar, next month, and this is according to the Bureau of Labor Statistics, women are set to outnumber men in the workforce for the first time in U.S. history. It may already have happened. Isn't that encouraging?

Ms. SPAR: The short answer is yes, it's encouraging. I think the long answer is that one wants to look much more closely at this data, and what I imagine you'll find is that while the total number of women may be greater than men, the higher and higher you go, particularly in the high-paid professions, the fewer women you see in those roles.

RAZ: Why do you think that is?

Ms. SPAR: I don't think we know. I don't think it's because the men are kicking them out, but women are choosing to step out of these roles before they reach the highest levels. In many cases, they are finding it harder than men are to juggle professional lives with personal lives, particularly once those lives include children. And I think we are seeing evidence that insofar as any given group remains predominately male, it's harder for women to become part of that.

By the same token, there have been a number of professions, veterinary medicine for one, that have in fact become dominated by women.

RAZ: Do you think that if women were the majority of the traders at the New York Stock Exchange, on the floor there, on the financial floor there, we would have seen the Dow rise to over 14,000?

Ms. SPAR: My guess would be you would not have seen the heights on the Dow, and you wouldn't have seen the lows. You would have seen a more middle-of-the-road, more conservative development.

RAZ: Debora Spar is the president of Barnard College in New York and a former professor at Harvard Business School.

Deborah Spar, thanks so much.

Ms. SPAR: Thank you.

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