The XX Edge: An interview with Ruth Shaber

Ruth Shaber is the Founder and President of Tara Health Foundation, a co-founder of Rhia Ventures, and an active gender focused investor in her personal portfolio. Her new book, co-written with Patience Marime-Ball, Founder of Women of the World Endowment, makes a persuasive data-led financial case for investing with a gender and broader diversity lens for as-yet-unconverted mainstream allocators. We discuss the risks of not paying attention, and what it will really take to shift the status quo.

Tell us about the book. What’s it about and why did you write it?

It is our attempt to explain to asset allocators and asset owners that if they use gender analysis in their allocation of capital, they’ll make more money. Our overall paradigm is that women need to be included in financial decision making as the agents of change.

We’re not comparing men to women, we’re comparing gender-diverse teams to male only teams. And there’s very good rationale for why women are excellent financial decision makers. First of all, they’re closer to many of the problems that need to be solved so they often have the innovative solutions that will help drive better outcomes and, as a result, better returns. There are also inherent gender differences in how women lead. Women tend to be more collaborative and more risk aware – not that they don’t take risks, but they factor in risk in a different way than men do. And they are less likely to sacrifice a long view for short term gains. Also, if you’re only taking the top 5% of any demographic, you’re missing out on 45% of the above average talent that’s just not in the room.

When we started out writing this book, we were wondering if we were going to have to cherry pick the data. But that was not true at all. We looked at pretty much everything available on gender across every asset class, and anytime there was a gender stratification in terms of returns, diverse teams or women only teams came out ahead.

There are also material risks to companies’ financial performance from sexual harassment and gender-based violence, COVID and healthcare, the care economy. Bringing women to the financial decision making table is going to mitigate those risks.

Who is your ideal reader?

Of course we want everyone to read it, and the information in the book will be more affirming for women than new information. But, our ideal readers who we hope will read the book and take action are men.  Specifically, a man who works for a mainstream investment bank who wants to do more, who is curious, excited, motivated, ambitious, but has no idea what a gender analysis even is or why it would be important to him. We have some easy checklists that are very implementable. It’s a question of overcoming the biases that assume that women don’t need to be at the table.

Gender focused investing is still seen as a side niche, and most capital is not paying any attention. If we want to actually make a difference, we have to be paying more attention to the 95% of capital that is not paying any attention to us.

It’s about making the case for gender analysis as a tool that’s going to improve your financial returns. It’s also a tool for making the world a better place – but most capital doesn’t care about that.

Were you left with any unanswered questions?

There are some areas with a relatively skewed evidence base. For instance, in debt, most of the data comes from the developing world – for instance with, small and medium sized enterprises or microfinance. I would like to see more research on mortgages in the US – who pays them back better? And why do women tend to pay higher interest rates? Why do they have to go through more hurdles to get loans when in fact, they’re more reliable debt holders?

There was a great study that came out about investment analysts and the heuristics of buying and selling. The researchers interviewed around 2,500 investment advisors, and they compared all of the due diligence that the average analyst puts into the decision to purchase an equity versus selling. They were remarking on how there’s very little due diligence that’s done on the decision to sell, it tends to be more impulsive and emotional. And then there’s no follow up. So with a decision to buy, obviously you’re holding that stock, so you watch how it performs. But then once you sell, investors never think about it again, right? So you don’t know what you missed by selling too soon. And in fact, we know that the overall market actually performs better than most analysts, because they just leave the stock alone. By selling prematurely, we’re actually doing damage to our portfolios.

I got in touch with these researchers, and turns out they never did a gender analysis. Wouldn’t it have been interesting to know – even if it’s only 5% or 10% of their cohort – if the behaviour between the men and women analysts was different. It’s probably along a bell shaped curve, none of this is absolute, it’s all trends. But I would imagine that the women probably pay more attention to their sell decisions. And that might very well be why women analysts tend to do better. So there is a lot of opportunity to go deeper with gender analysis and financial engineering research.

Is there also a racial equity lens in your research?

Yes, our thesis is that diversity in general is better. And there are times when we use racial diversity data to bolster this argument – we call it a “total talent paradigm”. While we emphasize gender diversity, all of our arguments around inclusivity, around proximity to the problems that need to be solved, those things are all transferable to any type of diversity argument.

What gender lens investing challenge keeps you up at night?

Getting mainstream capital to understand what they’re missing. A dear friend of mine, who is an investment advisor and wealth manager, acted as a focus group while we were writing the book. I had dinner with him the other night and he was very excited about it, and very helpful. And I said, now that the book is about to be published, how is it going to change your behaviour in your practice? He said, not at all. Not at all.

So you might say this is because he still just doesn’t get it. But, I actually think the reason his behaviour is unlikely to change is because he has no agency in the decisions he makes or the financial products he offers to his clients. He accepts products from the big banks, and the sole demand from his clients is “make me as much money as you can”. So I asked him, “What if you had a couple of clients who read the book and said, “We really think this is important, and we want you to start filtering for gender in the fund managers of where you put our money.” He said he wouldn’t know what he would do, because he doesn’t have access to that information. And he made it sound like he would sacrifice those clients before he would change his practice. Which to me was just like, wow. That’s kept me up a lot of nights thinking about that.

Do you think it’s worth pushing to try and convert people like that?

I think change happens in interesting and unpredictable ways. Let’s say that there is someone who just read the book or is jogging and he hears a podcast. So he’s heard about it, but he doesn’t consider how it’s going to change his own professional work. But maybe he’s got a wife and daughter he cares about. Maybe he had a conversation with his sister about something related. And then a couple of clients come in, men or women, who are also interested because they saw the book. And then at their company there’s some gender initiative happening because it’s women’s history month. And so all of these small cues start to line up so that when the next client comes in there happens to be a product available that he had never really noticed before, and he can actually make a match.

It’s not unlike if you’re a grocer in a small convenience store, and your customers come in and ask for organic food, and you think, ‘I don’t care about organic food’. But then your distributor says, Hey, we’ve got some new organic products, you want some? And you think, Yeah, I had a customer last week who I could have sold that to. So I’ll buy some. When you’re in the middle, and the middle is the hardest part to change, those [cues] have to come from both the bottom and the top.

Where do you want to be in 12 months?

Well, ultimately, I’d like to work myself out of a job, as we all would. When a gender analysis is considered mainstream excellent financial engineering, then we can all take a long vacation. 12 months might be a little optimistic though! My hope is that the book sparks this conversation and change.

The XX Edge: Unlocking higher returns and lower risk by Patience Marime-Ball and Ruth Shaber is released on 21 June, 2022. Pre-order today on Amazon. Any royalties from sales will go to the authors’ non-profits, WoWE and Tara Health Foundation.