I did the Sydney half marathon today (made it to the end!) and because of the design of the course, the most thrilling moment was the point when the front runners ran back towards us back-of-the-pack-ers. The top runners, of course, got a cheer from the field. But the cheers for the top women were, if anything, louder, as they ran past us amongst the men (Nikki Chapple, the top woman was ranked 16th overall, with the next two ranked 32nd and 38th). Australian female marathon runners have (like many of our sportswomen), on average done better internationally than our men, and it’s great to see them getting their deserved cheers.
In financial economics, there is a concept called the efficient frontier of investing. You can combine a portfolio of shares and other investments in many ways. In theory, there is one line which consists of the intersection of the best return for each level of risk (or alternatively, the lowest risk for each level of return),
While I was futilely trying to convince myself that the shoes I was trying on would become more comfortable with a bit more wear, in my annual shoe buying expedition, I realised that it’s quite a useful concept for shoes, as well.
In buying shoes, there is generally an optimal level of comfort for a given level of dagginess. So in buying shoes, I try to optimise comfort at the least stylish point on the curve I think I can get away with for a given occasion. Others will choose comfort, and optimise fashion, but either way we will end up in the same place.
In putting together the efficient frontier graph, I realised something else. Changing gender from female to male moves the line upwards AND makes it much flatter. The only place the two lines intersect is at runners, and the dagginess factor at that point is MUCH higher for me than women.
Cross posted at actuarialeye.
When I was in Norway last year, I took the opportunity to research the experience there of women on Boards – had the sky fallen in after all companies had to appoint at least 40% female Boards? (the quick answer is that nearly everyone in Norway thinks it was a non-event). There has been a flurry of research and articles recently, as other European countries consider following in Norway’s footsteps (so far Australia’s response has been restricted to requiring better reporting).
The most reported research has been this study (pdf) by Cranfield University on Gender Diversity on Boards: the Appointment Process and the role of Executive Search firms. The study was in two parts; a general review of the process of Board appointments, and then a specific set of interviews with headhunters to understand the appointment process from the key intermediaries in the process.
One of the first observations was that change in the pool of Directors appointed will come from changing the criteria – the brief given to the Executive Search firms. If you focus on experience, rather than skill set, you are going to appoint the same set of people who are already on boards:
So our next step is to say, what you’ve got to look at it’s not experience, i.e. I want somebody who’s either been on the Board, or been on the executive committee of a large company, is I need someone who can make a contribution around the Board table. Using our competencies, it is about strategic input, about focus on results, around influencing style and skill, and integrity and independence. Those are sort of the four major areas we look at. And what we say is you can get those skills from people who haven’t been on the Board yet.
But there is also quite a lot in the study about the later parts of the process, including the interview process:
As you know, many interviews are ‘Oh, you worked at JP Morgan, do you know X? Oh, a lovely chap, he knows all these people I know’. So… but is he any good at the job? ‘Oh, we never got there. We never actually got to the meat of it’. [...] Now, what you want people to do, when they go through a series of interviews, is to be asked the same questions, or at least cover the same issues. And that’s one of the weaknesses of a lot of interview processes, is that many people don’t know how to interview, and don’t know what to interview for. So our interviews are structured interviews based on behaviours, based on competencies. But if Board members don’t know how to do that, then they may come up with the wrong answer. So, actually, a lot of it is about training directors to look for the right things.
And right at the end of the process, when a fabulous woman has been found, the executive search firm also has to gee up the Chairman to appoint a woman:
The critical moment is often towards the end where there are two candidates, and the female candidate is maybe the less experienced one. And it’s preventing the Chairman from losing his nerve when somebody else around the boardroom table may say, well I like them both, and Jim looks like a terrific chap, but look at his record, but she’s never sat on a FTSE Board before, she’s been on the Board of her own business. So there’s a danger of constant voices of conservatism, and actually part of the value that we add is just helping the Chairman say ‘No, remember what we’re after.’
This opinion piece from Allison Pearson in the Financial Times breaks down the research for those who don’t feel like reading an 80 page report:
A report this week by Cranfield School of Management bears out my theory. It says the appointment of women to FTSE 350-listed non-executive director roles is being held back by selection processes which “ultimately favour candidates with similar characteristics to existing board members”. Or penises, as they are more widely known. Chaps are more comfortable with other chaps. Only when a woman has been foisted on them and does a terrific job without crying or talking about Tampax do they start to see that we can be quite useful.
McKinsey has done the most definitive research on why this matters – performance of companies generally improves with greater gender diversity at senior levels. But the final word should go to this post from a Silicon Valley venture capitalist :
This is why I personally care about diversity: it’s the canary in the coal mine for meritocracy. When we see extremely skewed demographics, we have very good reason to suspect that something is wrong with our selection process, that it’s not actually as meritocratic as it could be. And I believe that is exactly what is happening in Silicon Valley.
There’s plenty of good research on the subject of team performance that shows that diverse teams outperform homogeneous teams on many different kinds of tasks. The problem is that this research doesn’t argue for demographic diversity, but rather for a diversity of perspectives. So, again, racial or gender diversity is not an end in itself. But we have to ask ourselves: if teams are consistently being put together with homogeneous demographics, what are the odds that they also will contain a diversity of perspectives? Shouldn’t we be worried that the same selection process that produces homogenous results in one area might be accidentally doing the same in the area that we care about (but that is harder to measure)?
Cross posted at Actuarial eye
Sheryl Sandberg, COO of Facebook, always leaves the office at 5.30 so that she can have dinner with her kids at 6 (via Laura at 11d). I’m pretty sure that her commute is not like the average commute of the working mother of young children (bluemilk nails it as usual), and she probably has someone at home preparing the dinner, too, so she doesn’t have to spend the first half hour with tired, hungry, fractious kids while she scrambles some food together for everyone. She almost certainly spends lots of time later in the evening working in some way, and when she is in Washington talking to the President, she might have to be a virtual presence at dinner.
But that doesn’t invalidate the value of someone that senior speaking out about the value of family time. Too often the speech is from a man like Michael Hawker talking about how he spends 80 hours a week at work because he loves what he does. And so the model of a senior person is of someone who necessarily spends all their life at work. It becomes the only model of success.
I have found that when I am open about the fact that I leave the office early (I say 5, but it is more often 5.30 when I actually get out the door), a surprising number of senior people will admit to doing the same. But nearly all of those early leavers sneak out. They tend not to admit to wanting to have dinner with their kids, or any other reason for spending time with people not from work, in case some unspecified person thinks they aren’t serious enough.
We need to have more senior people, male and female, talking openly about the ways in which they carve out time in their lives for their families. And, of course, we need more senior people actually doing it.
Cross posted at actuarialeye
Last year I read a fascinating book, Unnatural Selection: Choosing Boys Over Girls, and the Consequences of a World Full of Men, by Mara Hvistendahl. She talks about the issue of missing women, how demographically, there should be more women than there are in many different countries of the world. The issue was the subject of an Economist cover nearly two years ago.
The authors, instead of doing a fairly high level comparison of ratios between men and women at birth, and men and women in the population as a whole, look at projections of the relative proportions of men and women given the same relative birth and death ratios between genders that happen in the first world. They readily point out that there are many different ways to work out what the “appropriate” relative birth and death rates are, but nevertheless they come up with some fascinating conclusions.
Our study of excess female deaths by age yields two key ﬁndings. First, once we control for natural variations in the sex ratio at birth, sub-Saharan Africa has as many missing women as India and China: signiﬁcantly more as a percentage of the female population. Second, the majority of missing women are of adult age. Sub-Saharan Africa has no missing females at birth, while the corresponding proportion for India is under 11%. China’s missing females, in contrast, are largely prenatal. About 37–45% of them may be classiﬁed as missing at birth. But all these regions display missing women at a variety of ages. For instance, excess female mortality up to age 15 does not account for more than a third of the total in India or sub-Saharan Africa.
So the fascinating thing about this study for me is the complexity it adds to the story. While the standard story of why there are “missing women” is sex specific abortion and female infanticide, that is only really the explanation in China. In other countries, the story is much more complex, with relative female death rates much higher than males at a variety of ages, and in sub-Saharan Africa, particularly because of maternal death rates and deaths from HIV-AIDS.
Ultimately, the conclusion of the paper is not that different from the Economist’s attention grabbing “100 million missing women”. But the reasons are far more interesting.
We ﬁnd approximately 20 million missing women in India, 58 million missing women in China, and 8 million missing women in sub-Saharan Africa. Look at the enormous difference between China and the other two regions (in ﬂows all three regions were about the same). This comes from the fact that excess female deaths in China are clustered at age 0. We reiterate, though, that these estimates must be treated with a great deal of caution.
The missing women in India and sub-Saharan Africa are largely because a variety of causes (injury, suicide, various diseases) disproportionately kill the women there. That’s a reason to worry, and potentially an easier issue to fix, if the will and the resources are available.
It looks at the latest thinking on longevity, and what that means for retirement planning. Some US life insurers are providing insurance older and older, even for people who have had brushes with cancer and other nasty diseases, on the basis that modern medicine really is getting much better. Some of the underwriters interviewed for the article suggest that you really should plan on living to age 95.
Many Australian financial plans tend to look at the average life expectancy and save on that basis. On average, a 65 year old Australian man should expect to live to 83, and a 65 year old woman should expect to live to 86. So if you are likely to live to 86 (based on your current age) you should make sure you have enough capital and income to last that long. If you die sooner, at least you can pass on the left over money to your heirs.
But what if you live longer? Most Australians would assume they will live off the aged pension in that case. And it is generally enough so that you won’t starve (although if you don’t own your own house you’ll find it tougher). But the aged pension is not a huge amount of money. The maximum rate for a single pensioner is $748.80 per fortnight, and $564.50 per person for one half of a couple. That’s $19,536 for a year for the single pensioner.
Longevity is a real risk, but not one that most people are willing to insure against. It feels like a bet that you lose twice. If you die too soon, you’ve missed out of years of life, and an insurance company got to keep your money. I blogged about this years ago. I don’t believe the longevity insurance (generally annuities) will ever be more than a tiny niche product in Australia. But it is still a risk most people should think about.
My broad conclusion was that fertility rates are pretty stable in Australia, with the very important caveat that that stability is in the number of children the average woman has in her lifetime, not necessarily how old she is when she has them.
So first, the headline. In the last two years, the total fertility rate for Australia (which represents the average number of babies that a woman could expect to bear during her reproductive lifetime, assuming current age-specific fertility rates apply) has dropped from 1.97 in 2008 to 1.89 in 2010. That is a reasonably significant drop (nearly 0.1 of a child!).
But the movement in the headline fertility rate is always much more than the movement in the average fertility for a woman over her lifetime. Below, you can see that the lifetime fertility rate for women this century has stayed quite stable.
Women born in 1933 had the most children, on average – 3.1 in total. But women born in 1966 (the most recent date for whom lifetime projection is reasonable) are expected to have 2.05 babies, on average, over their life.
So why does the headline rate move around so much? It is all to do with when women have their babies. Those women born in 1933 had already had two of their children by the age of 28. In another three years, on average, they’d had another half a child. In contrast, the woman born in 1966 had had one child by the time she got to 28. And it took her until the age of 33 to have the next half a child (on average). But she was still having children in her late 30s and 40s – she was having 50% more children then than her mother’s generation 30 years earlier.
This graph shows that effect.
Interestingly, the generation from 1906 shown in this graph is much more similar to that woman born in 1966. While the woman born in 1906 had more children in her twenties than her granddaughter’s generation, she kept having them well into her late 30s and 40s, even more than women who are that age now.
Every year the news of the latest statistics gives rise to articles like this one, pointing out that Australia is in danger of not reproducing its population. But while we do seem to be dropping under replacement rate slightly, the bigger news is the change in the age of most parents – that’s the main message from this year’s statistics.