It's been demonstrated over and over again, but businesses refuse to learn the lesson: Homogeneity is its own punishment in the world of business. From the Washington Post today:
[T]he experience of the past year suggests that we desperately need to bring more women into leadership positions on Wall Street, in politics, in regulatory bodies and in American life generally. For decades, corporations and financial firms have sponsored expensive training programs to promote more women into their ranks. They have launched much-needed maternity policies and flexible work arrangements. Most of these initiatives, however, have been pursued to make life easier for the women involved — or, more cynically, to remove the threat of lawsuit or adverse publicity for the firms.
The financial crisis has exposed a quieter but equally pressing concern: We need women in leadership positions not only because they can manage as well as men but because they manage differently than men; because they tend — over time and in the aggregate — to make different kinds of decisions and to accept and avoid different kinds of risk. We need women who will say no to bad decisions based on male-dominated rivalries and clubby golf course confidences. We need women to blow the whistle when risks explode and to challenge the presumptions that too many men, clustered too closely together and sharing a common worldview, can easily indulge.
As the constant wail from Wall Street should remind us, diversity isn't just nice in theory. It makes for better business.
There's a related question here which no one is asking, which is whether the economic catastrophe facing the global marketplace is a result of a failure of white culture in America. The media is always quick to ask whether problems like violence plaguing minority communities are symptoms of a toxic culture in that community, but I haven't seen any questions to that effect in regard to this financial meltdown.
I've written a good deal about monoculture on this site over the years; The correlation between diversity and success has been repeatedly demonstrated.
I'm so glad you had the guts to bring up the 'white culture' question.
It's tricky, because, if one accepts that libertarian, individualist culture is partly to blame for the economic crisis, then you'd have to more specifically highlight American or British 'white culture'.
But yes: if a large part of white culture is predicated upon the sovereignty of the individual and small-governemnt, Big-C conversativism, then yeah, white culture - which even those of us who aren't 'white' are a part of - needs to do some self-examining.
I second Nav's comment: sometimes it's not easy to be the one to point out the obvious, especially when the obvious is the status quo.
I worry a lot about the lack of gender diversity in the tech community, which might be the one place that has it worse than Wall Street. Enrolment in Comp Sci programs is down across the board but even more so with women. Startup communities and events tend to largely be attended by men. Even worse: this is a self-fulfilling prophecy. The fewer women there are in tech, the fewer women who are interested in being there.
This has come up many times in the Toronto startup/emerging tech community, but it most often ends up being a bunch of men sitting around discussing it. That's a big part of the challenge: how does a mono-culture make itself more appealing to others if it doesn't necessarily understand why they aren't there in the first place?
Maybe it's too many Indians in the IT departments of Wall Street that caused them to incorrectly model the risk? I'm kidding, but isn't this blaming men or white men a correlation=causation argument...
I dunno, the *title* of the post says that monoculture is what's bad for business, and yet the only defensive responses I've gotten have asked "Why are you blaming white men?" If I'm blaming anything, it's the culture of unquestioned privilege.
Anil, don't Jay Goldman's comments sutaibly apply to your question. The questions iteself if fundamentally wrong. Jay has put the best example forward!
Do you want to state that 'only' white people (or men more so) are responsible for the current market conditions? I think your question of 'unquestioning' is more to state than to ask.
I had a good time reading this but sadly, your critisim fails to deliver the point.
So, if the "monoculture" is responsible for the current recession, doesn't that also imply that that same monoculture is responsible for the vast and incredible wealth, and subsequent increases in freedom, health, and human rights, produced over the past, say, 100 years?
As part of that monoculture, I'd just like to say "you're welcome".
This is a great post, Anil, there is so much here. I would add that it is not a problem of unquestioned privilege, it is a problem of unquestioning in general. We are living through an economic Charles Van Doren "Quiz Show" scandal on a continental scale. I think a primary vector of its economic and cultural pathology is the place of "smartness" in the white subculture you are talking about. Look at the titles of recent books: "The Smartest Guys in the Room" (Enron), "When Genius Failed" (Long-Term Capital). The failures of those with the extreme and unimaginable intelligence required to turn subprime lead into securitized gold will generate similar disbelief among WSJ and NYT journalists looking for book deals. The exaltation of the cohort of people who at 17 were very good at word and shape puzzles is so complete that it is literally taboo to disagree with them. See, for example, Robert Schiller's talk on the subprime crisis at the London School of Economics regarding the difference between candid post-academic-conference talk and the acceptable beliefs required on stage. By the way, it isn't taboo in white culture at large, just the top-20 college, banking-media-DC subgroup. The scorn and condescension they have for outsiders, especially white ones, is very thorough. The idea that lending should be a slow, prudential, and boring business, comprising a finance sector the same size it has been for decades, is still anathema to that insider group, as crazy as opposing Geithner or $10^12 annual deficits. And since very smart people would rather spend those trillions themselves, and not work in industries where their brilliance could not express itself in ever more complex and lucrative scams, or accept that a theoretical economist is rather less useful to society than a nurse -- because they are smarter than you, you deserve scorn for questioning them. (By the way, guess who isn't smart?) There are other vectors, but I think this is a big one.
On the day after this piece ran in The Washington Post, a news article appeared in The Wall Street Journal called Housing Push for Hispanics Spawns Wave of Foreclosures:
This article says the following:
This is a very diverse group of people who pursued a number of different agendas to achieve what should have been a great social good. But the means that some of these people used to participate in this attempt at diversifying housing ownership in the USA are a significant part of the problem that we are living through today.
It would be sad if we were to lay blame for this economic crisis at the feet of one particular demographic group simply because we would like to see greater opportunity for all in certain industries.
Dave, I totally agree. The problem is not *with* any one group, it's *when* a homogenous group of any sort makes decisions that affect everyone without the (for lack of a better term) sanity check that comes from having diverse opinions and the perspectives that only arise in a hetereogeneous population.
I would agree that diversity in the professional ranks of an investment bank has -- in my experience -- been of the most superficial, Benetton-ad sort. Administrative employees sometimes add a dose of much-needed levity and perspective -- that is, when they aren't young women hired expressly for their looks. Beyond that, the "team-player" ethos rules, and applicants -- already a pretty self-selecting bunch -- are rigorously screened for philosophical compliance (generally business school degrees from the "right" schools, participation in team sports, etc, are all viewed very highly, as indicative of the sort of conventionality they're looking for). Those chosen enter an oligopolistic "industry" encompassing businesses (corporate finance, M&A, asset management) whose efficacy is rarely questioned, let alone their fee structures, and a capital markets operation premised on levering up in a mad quest for excess yield. The whole notion of "financial innovation" should be consigned to the scrap heap, and those fees, long considered sacrosanct, should be subject to discounting and being competed away just as you would expect with any other product or service. In short, one side of the business needs to become more stodgy, and the other side less so. Given the dictates of these cultures, I cannot see either happening except through the intervention of Washington.