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Episode 05 Transcript

Episode 05: Battle of the Sexes, Money Edition


[music starts]

Allison Schrager: Mike - all these women I talk to say, "Well I don't really understand money." Or, "It's too complicated." And they believe it. And I know they have it in them to understand it. We just really need to change the conversation.

Mike Norton: There is this feeling that men somehow are like, amazing financial wizards who buy and sell companies and buy and sell stocks and make trillions of dollars and never make any mistakes. And we know that that's not really true 'cause we've seen men make huge mistakes in the market.

Allison Schrager: Yeah, all the time.

Mike Norton: We know that women and men are different in some ways, of course. But it seems like, with money, these differences get really, really magnified. It's like cultural norms or the way we're raised, or some combination of those create these really deeply ingrained beliefs
that we have to fight against when we're trying to think clearly about men and women and money.


Mike Norton: I'm Mike Norton and I'm the host of Talking Green. I'm also a social psychologist at Harvard Business School. And I study the way people behave, and misbehave. On Talking Green, we explore how psychological forces drive attitudes and decisions around money and investing. This episode, like every episode, I'm joined by Allison Schrager, an economist, journalist, and culture maven. She's the author of the recent book, An Economist Walks Into a Brothel.

Allison Schrager: Hey Mike. Today we'll be talking about gender and money. We're going to try to get to the bottom of the question: "Do men and women handle money differently? And if they do, why?"


Mike Norton: This is Talking Green.

Allison Schrager: An original podcast from TD Ameritrade and T Brand Studio at The New York Times.


Mike Norton: Today, we're going to spend time thinking about the role of gender in financial decision making, which is a very loaded topic, in part because we're having such a cultural moment around gender. I think an overdue cultural moment around gender and equality. I almost don't even know where to begin the conversation.

Allison Schrager: Yeah, it's definitely been in the news all the time. It seems like every day, there's another #MeToo or #TimesUp story.

Mike Norton: And it feels too like a lot of these conversations have, not all of them, but a lot of them underneath them, some kind of financial undercurrent where there's a inequity specifically with money that, that is an issue.

Allison Schrager: Yeah, issue with the gender pay gap is pretty well documented, as you know. It also just made headlines with the recent World Cup with women's team being paid less. But there's really interesting research about how men and women behave differently in all sorts of financial situations.

Mike Norton: Yeah. I feel like sometimes there's sort of two separate conversations going on. And one of the important conversations is about these issues of gender equity at the macro level, like, gender pay gaps across industries, and, and important issues like that. And then there's this other, kind of separate conversation which is at,sort of, the micro level, which is how men and women deal with money themselves and how that might also contribute to these larger issues.

Allison Schrager: Yeah. Like, I've just noticed that my female friends just tend to feel less comfortable talking about money than my male friends. I talk about money and finance with my male friends all the time. I'm an economist, so I talk about it with everyone. But, I find with my female friends it's almost more even socially acceptable or even considered somehow, feminine to just sort of not know about money.

Mike Norton: Yeah, and there is still this societal sense that, again, boils down to individual conversations which is that men are supposed to know about this stuff, and kind of, supposed to love chatting about it, too. Like, talk-, talking about, you know, bonds and stuff like that is really fun, and very, uh, a male activity.

Allison Schrager: I think it's fun. [laughter] But, I can't get any of my female friends to talk to me about bonds.

Mike Norton: But that's exactly the point, right? Which is that we have this belief, somehow, that like, bonds are a man thing to talk about. And you love talking about them. It really shows how we have these expectations that often just aren't born out in reality.

Allison Schrager: Alright, so one reason we might see just big differences in behavior, is that there's a lot of evidence that women have a lot less access to financial literacy programs. And just get less financial education. So you'd expect behavior to be different even if, intuitively, or innately, women have an ability to be just as good with money as men.

Mike Norton: Yeah. And I think it really speaks to this idea that the things we observe in the world we tend to think that, sort of like, the truth about people. So, if women are more likely to do this than men, then it means that that's what women are like, and that's what men are like. And we often forget that a lot of the reason people end up the way they are is because of underlying factors. And often the research seems to suggest that the big differences out in the world, [music starts] aren't really so big once we really boil things down to, "Are men and women really better or worse with things like money and financial decisions?"


Allison Schrager: So obviously, the sociological factors are pretty murky and complex when it comes to pay and gender equality.

Mike Norton: Yeah, and it's not just about whether men and women are paid the same amount in their salary, but also about what they do with their salaries once they take them home. And there's a fair amount of research on whether men and women spend their money, invest their money the same or differently. I got the chance to talk with Terry Odean, a professor of finance at UC Berkeley, and an expert in investor behavior. His seminal paper on gender differences in investing was published almost two decades ago. And I wanted to pick his brain about how he thinks about these questions today.


Mike Norton: Thanks so much for being here.

Terry Odean:  Absolutely. I teach personal finance to undergrads and MBA students. And I made about 50 videos on personal finance topics. And one of them was about spending your money in ways that make you happier. I put up pictures of your book and talked about it.

Mike Norton: Thank you for the PR, that means, uh, my sales might have doubled from one to two. [laughter]

Terry Odean: I suspect they're higher than that. It was very good. You know.

Mike Norton: So, Terry, I am a business school professor.

You are a business school professor. In theory, we should know everything there is to know about business and money and investing. But let's just say for a second that maybe I'm not the world's greatest investor. Can your research help me explain why?

Terry Odean: I might help you explain why you're so bad, but it's not probably going to make you much better.

Mike Norton: [laughs] And so why do we think, and, and not just me, but so many people continue to think, "Yeah, I've heard this, you know, the market, blah, blah, blah. But I still know that if I get into the weeds, I can outperform the market."

Terry Odean: It's a few things. One, many people are overconfident in their ability to trade. As part of the paper that you mentioned, we got ahold of some data on a survey that Gallup was running many years ago. And a couple of the questions in the survey were, "How do you expect your portfolio to perform over the next year?" And, "How would you expect the market to perform over the next year?"

Mike Norton: Uh-huh.

Terry Odean: Both men and women expected their portfolio to perform better than the market, but men expected theirs to perform by two or three percentage points more than the women did. And then another part that I think is really an issue for a lot of investors is they see this as, sort of, me versus this problem. You know, if I study these stocks, I can make better decisions than average. But really it's you versus whoever is on the other side of that trade. And if you're a US investor trading common stocks, there's a very high probability the person on the other side of your trade is either a machine, or a professional.

Mike Norton: Any evidence that people ever update that over time? Or do some people just keep churn-, the overconfidence is so strong, they just keep churning the wheels?

Terry Odean: There's a tendency, sometimes called self-attribution bias, for us to take credit for our successes, and to blame failures on bad luck and other people.

Mike Norton: This is like the classic case in the undergraduate, if you do well on the exam, you're a genius and if you fail, it's because the professor's biased.

Terry Odean: Yeah, that's right. So suppose an investor starts off, and he updates his opinion about his ability based on successes and losses, but he overweights successes. So he ends up overconfident.

Mike Norton: But you said there's sort of a difference between men and women, where men are a little bit more overconfident than women are. What's your sense from that research on, on why that is? Why do men, again, everyone's wrong, but why are men a little bit wronger than women in this context?

Terry Odean: Look, in certain areas, men tend to be more overconfident than women. These tend to be areas that are sort of perceived in our culture to be in the male domain. You see it in finance. You see it in the mathematical sciences. And we wanted to test this hypothesis that overconfidence causes people to trade more and as a result it hurts their performance. We sorted investors into men and women. And then we sorted them again into married and single. And we found what we expected to find, which is that men traded more than women. Men traded 45% more actively than women. Single men traded 67% more actively than single women.

Mike Norton: That is pretty astounding. Anything about kind of risk preferences, as well, playing into this? That within these domains where men feel that they have expertise, do they become riskier or less risky? How does that play out?

Terry Odean: First of all, there are lots of plus sides to having some overconfidence, some optimism. These are sometimes called self-serving biases. Generally if people are moderately overconfident, moderately optimistic, it makes them a little bit happier. It's easier to get up and go to work when you think everything's gonna work out well. It doesn't make for better investing. There's quite a bit of research that shows that, on average, men are less risk averse. We do see, and there's a fair amount of research, that women tend to be slower to actually invest in the stock market. And I'm not talking about like, buying and selling common stocks, but just having investments say, in the S&P 500 Index Fund rather than keeping your, your money in a savings account or CDs.

Mike Norton: They invest later in life and when they invest they take longer to make decisions?

Terry Odean: Yeah, that's right. And over a long period of time, if you're saving for retirement, that's not a good thing. I think the traditional view, you know, "Finance is more a man's area," has served women poorly as they became more, you know, responsible for their own saving and retirement investing.

Mike Norton: A paper has to be pretty old to be called, "seminal." [laughter] So we know, so we know that your seminal work, it's nearly 20 years old now. And I'm curious if you see sort of cultural changes for sure as, as you're noting, but also have you seen kind of changes in, in men and women's investment strategies, or overconfidence in these domains?

Terry Odean: You know, I've, I've been doing some research trying to understand why more women don't go into the finance industry. And we've had some interesting findings. We did a survey of Chartered Financial Analysts. One thing we found was that in countries where the math gap in middle school between boys and girls was larger, that the percentage of CFA members that were women was smaller. We even found that state by state in the US. And afterwards I was talking to a woman who had grown up in Finland, and was now living in Kansas. And she said that before coming to the US, she had never heard anyone suggest that men should be better at math than women. Well actually in Finland there is no math gap, uh, in middle school.

Mike Norton: That's, that's fascinating. A small difference in math ability at, you know, at age six or at age 10, over time can then develop into a large difference in, not math ability, but,

Terry Odean: I think it's not even ability? It's self-, your image.

Mike Norton: Right.

Terry Odean: Yeah.

Mike Norton: How does that then play out, you know, after we're not in first grade anymore, but we're adults, in terms of thinking that, "I'm not good in this domain," or, "I'm good in this other domain."

Terry Odean: So, I saw a very interesting paper. And the researchers looked at the difference in basically financial competence for couples that had just gotten together, and who chose to take over making financial decisions. Often it was the man but sometimes it was the woman. And they said that a small difference in like financial literacy would make the difference as to who chose. But then, 30 years later, the gap would grow because whoever had started taking over and making the investment decisions, and you know, other financial decisions, had gotten more and more, or had at least maintained uh, financial literacy, and the other partner had lost it. In a culture such as ours, where it's more often, not always, but more often the man who's making these decisions, that can lead to some serious problems later in life. And I think they should both be involved throughout the process.

And it's particularly important for women because women not only live longer than men, they tend to marry older men. They're more likely to find themselves having to make decisions that they've never made. For single women, they live longer. We still have a pay gap in this country. So they have to live longer, often on less savings. Being involved in decision making and becoming financially literate is a big deal for women.

Mike Norton: So the early intervention seems so important to, to counteract some of these trends.

Terry Odean: Absolutely.

Mike Norton: Awesome. Terry, thank you so much for joining us. This was such an interesting conversation to have.

Terry Odean: Thank you. I've really enjoyed it.


Allison Schrager: Ok. So I totally get this idea of overconfidence. And how that affects how men, in particular, approach investing. And I also get the flip side that historically women tend to show under-confidence in investing.

Mike Norton: Yeah, and I think we're still not sure whether these differences are sort of hardwired between men and women. Or whether they're sort of culturally determined. Whether they’re these stereotypes and then people kind of absorb them, and then they become self-perpetuating. And I got a chance to talk about that with Iris Bohnet, who's a behavioral economist, the Academic Dean at the Harvard Kennedy School, and author of the book, What Works: Gender Equality by Design.


Mike Norton: Welcome to the show, Iris.

Iris Bohnet: Thanks for having me.

Mike Norton: So I want to chat with you today about some things that people often get wrong, and that is that men and women are like completely different. Like there's all these books that men and women are from different planets, and all this sort of stuff. So I'm curious about your thoughts on this financial decision making in, between men and women. And differences that seem to be, as in many domains, blown up into much larger proportions.

Iris Bohnet: So I recently was on a panel in Switzerland with some other representatives from banks. And they told me about a study that I hadn't known about before showing that potential gender differences in financial decision making starts really early in that girls are given smaller allowances than boys. So I fear most of the differences that we see more generally between men and women today, much of this happens really early. And, you know, the question is, "Is it nature? Is it nurture?" I typically just try to avoid answering it in that, and I, I think most researchers should, because I don't think they'll ever be able to do it because it starts so early. It starts with the toys, with the exposure, with the cartoons, the books that our kids read at a very early age. And then the allowance of course I thought was completely shocking to me.

Mike Norton: It's fascinating.

Iris Bohnet: Hadn't known about that beforehand. So, you know, what are the differences in financial decision making? So we typically find in lab experiments which focus on money, um, and that's also important, it's not true for every domain. So women are not more risk averse in every domain. But in the money domain we typically find small differences between male and female participants in that women make slightly more risk averse choices and invest slightly less in stocks than in bonds. I do think we have enough evidence to suggest that there's a bit of a there there. We don't quite know when the there starts. You know, it seems to be very early in childhood already. But then in our minds they become like huge differences. And then these differences become, self-stereotyping in that, you know, the whole world has shaped me to think that I should probably be a little more conservative and I'm starting to feel that I am more conservative and in fact, I am more conservative than my husband in our financial decision making. It's uh, um, it's true. But you know, I don't quite know where, where that comes from.

Mike Norton: Yeah. One of the areas that I think is, is super interesting with men and women, is just this idea that kind of men are, for lack of a better word, aggressive, overconfident, lots of words like that. I'm thinking in, like in the domain of finance for example, there's a fair amount of research that says that men are like more aggressive and they trade more and they do all this stuff. Why do we kind of persist with the belief that that's the right way to do it? Even in the face of evidence that might suggest these beliefs are a little wrong?

Iris Bohnet: I think first of all, and most importantly, we do have to remind ourselves that the differences between men and women are actually much smaller than we think they are.

Mike Norton: I always think about that in terms of height.

Iris Bohnet: Yeah.

Mike Norton: Where, it is, in fact, true, that men, on average, are taller than women. But, what that means is that men are a little bit taller, on average, than women. So, it's not like all men are 10 feet tall and all women are 2 feet tall. There's these distribution of heights. There's huge overlap. There's lots of men who are shorter than women. There's lots of women who are taller than men. We tend to think of the fact that men are taller as being this huge chasm when in fact, like most things with gender, the real difference is much, much smaller.

Iris Bohnet: Yep. And then, you know, the bigger question, "Is that good or bad for the world?" Or, "Is it good for Wall Street, or bad for Wall Street?" Not even just for the world. And, um, I think the evidence is quite strong that there's some self selection going on. And you know, including kind of biological evidence such as testosterone levels of traders. And the evidence is also quite strong that we should really think of traders like we think of everyone else, not as individuals but as a packet of people. You know, a bundle of people, and that diversity would be a good thing in any collective decision task. And yes, trading when it has individual choice aspect, absolutely. But we do know that a bit more diversity, more collective intelligence would have been very helpful in the financial crisis.

Mike Norton: Um-hmm.

Iris Bohnet: And I think that's what we have to think about. Right? We, we'd love to have some people who are probably quite assertive in the risk taking domain. And we'd love to have some people who are a bit more concerned about risk taking, and a bit more risk-averse. And, and, but that portfolio of people would likely be the good outcome. And we do have some good lab experiments by Catherine Eckel and others, suggesting that that's in fact the way to go, including for financial decision making. That you want to have a portfolio of people. And of course when I say portfolio, that shouldn't be, um, in a foreign language. Um, particularly in this sector, that that portfolio of people, that's in fact the thing to do.

Mike Norton: One of my favorite examples in your research is your work on gender and negotiation, and the beliefs that people bring to that. Like, "Women will be this way and men will be that way." Can you give us a sense of kind of your work, and the work in that area, and what we really know about how men and women negotiate?

Iris Bohnet: So clearly negotiation is an important topic for everyone. And, you know what, when we say negotiation, most people think about pay negotiations since they are important. So I'll actually start there, but clearly there are many more important negotiations, such as peace negotiations, that we should also think about. But yes, um, you're right. There's been quite a bit of research into this question of whether men and women negotiate differently. And there's some truth to that. And then the big question, of course, is, "Why?" So why does it look like men negotiate a bit more assertively, and women just negotiate slightly less assertively? And in fact, there's very good research suggesting that women hold back, quite smartly and strategically, because there's social backlash. It's called social backlash in the environment where women are just judged differently for behaving exactly the same way, um, as their male counterparts. So women have learned that, and have incorporated that in their negotiation strategies.

Mike Norton: Are there advantages to not being aggressive? Like, a stereotypical aggressive negotiator? Or, generally speaking, do women need to think about changing strategies to get better outcomes?

Iris Bohnet: I think there's a bit of both. But you know, most importantly we have to change the environment and that's really an important message. This is not about fixing women, or fixing men, or you know, anyone else, for that matter. But it really is about fixing the environment. But the, but you know, again, we can't just tell women, you know, "Let us fix the environment and get back to you in a hundred years,"

Mike Norton: Right.

Iris Bohnet: "When we have done the job." So, that kind of can't be the answer. But you know, in the meantime, so what is it that women can do and, you know, should be doing? For example, when women negotiate on behalf of someone else, that difference goes completely away and it plays a much smaller role for men. And that seems to matter basically, not at all. But for women, they become lionesses when they negotiate on behalf of somebody else. And, you know, imagine an attorney negotiating on behalf of her client, or even a professor negotiating on behalf of our students or our advisees. You know, we can be very, very forceful in those moments. And that's, you know, one way in which I frame the discussion often, in that, remind yourself why you're doing this. You know, you probably have a family at home, or if you don't have a family, you might have parents to take care of. You, there's other people who rely on your negotiation skills. And then there's your future self who might need that money in, um, you know, more senior stages of your life.

Mike Norton: If a woman is acting as a third party, does that penalty go down? So she's able to not take the hit of being seen as rude, or whatever the other words are the people use?

Iris Bohnet: In fact, the research suggests that the penalty goes away when women negotiate on behalf of somebody else because now what they're doing is compatible with our stereotypes of what a good woman does. She is a carer. Right? Now, she cares for someone else. And you know, by the way, um, of course it's important to remind ourselves that these stereotypes are broadly shared. So the research suggests that this is not just women negotiating with men, but also women negotiating with other women. When I talk about fixing women, I kind of have to add, second sentence, that is really about fixing the system.

Mike Norton: Can you break that down a little bit more? This, because the, I, often when people hear, "You need to redesign the environment," they think of like, policy solutions and legal solutions. Like we need to redesign the, a quota, for example, is, this is what everyone has to do now.

Iris Bohnet: Yeah. Let me give you a concrete example. So, about a year ago, a little more than a year ago, I was in Stockholm, invited by the Nobel Prize Foundation. And, uh, they invited me because they had noticed that 97% of all Nobel Prize recipients in the sciences have been men. And they were kind of wondering whether maybe something could be done about their procedures. And the one thing that I started out with is in fact the form that I get every year inviting me to nominate a Nobel Prize recipient in Economics. Um, and I'm starting with that form because sometimes behavioral insights can be as simple as changing the design of a form. And that's in fact what I suggested to them. And that's also now, you know, public knowledge, so I can talk about this. Um, but they did change the form. Here's what they did. So the old form asked me every year to nominate one person for that given year. And there's quite a bit of research suggesting that when people make bundled choices and people think about more than one recommendation, diversity is much more likely to emerge. So the new form now asks nominators to make three recommendations. Now, this is not, of course, research, right? This is a story based on, thankfully, research evidence. Um, but I can report that last year was the first year where we had two women receive the Nobel Prizes in Chemistry and Physics for the first time. So, so I am hopeful that these types of interventions could eventually lead to sustainable behavior change where we actually learn to behave in a different way. And it's a bit like the seatbelts, right? There, there's a law, of course, but it is second nature to most of us now to just wear the seat belt, and it's possible. Helmets are another example. Bicycles. Used to be a time when I grew up when nobody wore a helmet. And it was really not cool when I was a teenager,

Mike Norton: Yeah.

Iris Bohnet: To wear a helmet. And, and now everyone wears a helmet.

Mike Norton: Yeah.

Iris Bohnet: Um, so I, I think that behavior change is possible, but it requires these sustained kind of nudges, or other types of mechanisms over some period of time until we have internalized the norms.

Mike Norton: [music starts] One of the amazing things about your work in general is you're one of the very few academics who can do really tight experimental research in the lab, and then at the, at the same moment, later that day, then you're out in the world trying to implement those, those things, those insights into huge organizations all over the world. So it's such a pleasure to chat with you and thanks so much for taking time, Iris.

Iris Bohnet: Thanks for having me, Mike.


Allison Schrager: Ok. So, what I think I've gathered here is that this relationship between gender and money is really complicated.

Mike Norton: I think, "complicated" is almost an understatement. It's so rich and so complex. And I think one thing that I took away from talking with both Terry and Iris is that, if we stripped away all of our social conditioning, and all of the way we were all raised, if we threw all of that out the window, it might actually be the case that men and women would behave exactly the same with money. We have all these stereotypes, like men are aggressive and chase risk. And women are cautious and risk averse, but they're kind of really reinforced by how we're raised and by society, which is partly why they're so hard for us all to overcome. But it isn't really that women are inherently hesitant about investing, or inherently risk averse about asking for a raise. Some of those things are culturally determined. But it really takes a lot of awareness to try to overcome all of these deeply ingrained patterns.

Allison Schrager: Yeah, for sure. And, you know, it's great to have women on more boards, or taking more of an active role in family finances, but it doesn't do them any good if they're specifically cast in the role as the shrew who tries to reign in everyone else's risk-taking, 'cause some women, you know, like you said about averages, are much better risk takers than men. And some aren't.

Mike Norton: Yeah, I think it's so interesting to think about a world where we remove all of this acculturation and the way we're raised and societal expectations, and men and women actually just act the way they would regularly act with money. And I think that leads to my second takeaway, especially from the conversation with Iris, which is that in order to get to that world, yes, it's incumbent upon each of us to try to change our own behavior. Yes, it's incumbent upon us to try to not bring stereotypes to our treatment of other people. But also, we need to redesign environments, as well. So it can't just be up to individuals to change these patterns, we need to have our workplaces, and our public spaces, and our social circles, and our company boards, and our public policies, all working together to help support equal treatment and expectations for women and men.

Allison Schrager: Yeah, and this could even start at the household level. I mean, instead of just having the traditional role, the husband look after family finance, you know, these tasks should be divided up based on risk tolerance. And, whichever partner is more risk-comfortable could invest the riskier portfolio for more sort of long-term investing. And the more risk averse partner could, you know, invest the sort of money that they need right away, like, for emergency funds, and sort of less risky assets.

Mike Norton: I think that relates to my final takeaway, which relates to this idea of the composition of groups of people making financial decisions. So, aggregating up from couples to any group of people that's making decisions about money, which could be a corporate board, or just any group of people who are trying to decide how to invest, how to save, how to act with their money, would probably benefit from bringing together people with different attitudes towards risk, different attitudes towards investing to try to improve the decisions and also make fewer mistakes.


Allison Schrager: Talking Green is an original podcast from TD Ameritrade and T Brand Studio at The New York Times. Learn more at

Mike Norton: And subscribe to Talking Green now so you don't miss a single episode. Join us next time as we explore financial wellness, and how we can all be a little bit less stressed and maybe even a little bit happier.

AW: I think when we think about work life balance, when we think about changing our behavior in ways that are going to have these really dramatic increases in our happiness, we're thinking about things like quitting my job, leaving my partner, uh, moving to a completely different country. And our research really suggests that it's small changes around the margins that can have powerful and unexpected impacts for happiness.

Mike Norton: I'm Mike Norton.

Allison Schrager: And I'm Allison Schrager.

Mike Norton: Thanks for listening.


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