Diversity Is Strength, A Trader’s Proof
(6 min read)
I typically refrain from dipping into the vast array of human resources topics when I can. However, the more prevalent that phrases like ‘sorry, we have to let you go’ became in my social circle, the more I started wondering why, even in pre COVID-19 days, more people seemed to get the sack when times were tough compared with the equally miserable periods we used to experience on occasion in the good old days. How is it, in today’s world of zero interest rates and high volatility, that highly qualified business school graduates, middle managers with fancy finance-related degrees and their highly selective chiefs seem as prone to becoming disposable as their diminishing returns? How did things go from bad to really, really bad, causing an ever faster staff merry-go-round?
My suspicion is that it’s correlated with the diversity of employees to be found in the workplace these days. And by that I mean the complete lack thereof – a diversity so vigorously propagated and yet so apathetically achieved. Might that homogeneity be responsible for the dire situation financial institutions find themselves in?
I firmly believe that a diverse workplace brings with it significant strengths. And as something of a geek, I am going to see if I can mathematically prove as much. Of course, Markowitz proved (and bagged a Nobel prize in the process) that a sufficiently large selection of constituents can reduce the volatility of negative returns in a portfolio. But there must be a more accessible way of transferring this ingenious discovery into the world of human resources.
First, Some Folklore
In what now feels like another lifetime, I was sitting in front of too many screens doing what you do as a market maker for equity derivatives. When times were tough, rarely were my colleagues – an Oxford graduate in Ancient Greek from Yemen who ran the cash equity sales team; the risk controller, an ex-SAS man from Sheffield; the equity sales trader, a former concierge in a luxury hotel from Ireland – so easily replaced as they are today. My boss was, in his former life, a trained TV technician who ended up running the derivatives operations, and we always joked if he ever f***ed up big time he could always return to fixing television sets. Well the first he did, but not the second, though that’s another story…
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