More on gender and analytical problems

Here is another interesting story with a gender angle. A study shows that stockholders in companies with women in the Board achieved better returns than those without.
The obvious and likely correct point is that women add something valuable to the Board and is the company performs better. Diversity is a good thing in general, not least when it comes to considering complex issues with multiple stakeholders. It makes a good deal of sense to get this result.

Of course it’s not the only possible reason. It’s also not absolute proof that putting women onto a men-only Board would improve performance.

The problem is cause and effect. It might be that enlightened Boards add well-performing companies are more likely to add women to their Board. It might be that successful companies spend the time to get their Board composition right.

Finally, it might be stronger than the diversity argument. Women may simply be better at running companies than men. It’s a pity there are too few women-only boards to compare their performance to help answer the question whether women are better board members than men or is the benefit simply one of diversity. Interesting implications for other forms of diversity on Boards too.

Time and age and cohorts

More women than men get home loans in South Africa up to the age of 39 or so. This is fascinating in itself and needs further analysis.

Unfortunately, the analysis in the linked story misses a key point. 30 year old women and 50 year old women differ in that there is a 20 year age gap and there is a 20 year generation gap.

The 50 year old women were born in 1962 and grew up in the 60s, 70s and 80s, were educated in that period and influenced by social norms in that period and were given the opportunities that period provided.

Importantly, this means less educated, lower paid, larger families and less career oriented in their 30s than 30 year old women (born in 1982) are today. We can’t extrapolate from that study and compare the two age groups and say it’s a function of age. It’s likely to be heavily influenced by how different the world is.

That aside, I would not have guessed that more women under 40 would be successfully applying for home loans than men. (Not because they “shouldn’t” I just didn’t expect it based on the greater opportunities still available to men.)

I do wonder how the number of applicants compares, and what differences remain after controlling for education, province and many more others. If only I could get my hands on the data!

Book Review: The Trouble With Strategy

Kim Warren has a trouble. His trouble is with the art and science of business strategy. His book, The Trouble with Strategy: The brutal reality of why business strategy doesn’t work and what to do about it, outlines how poorly mainstream strategy ideas have performed and how slowly (if at all) the “profession of strategy” has evolved over time.

He lays into business schools, many strategy consultants, academics and anyone in spitting distance.

The good news is that the first half of the book is engaging and fresh, outlining a novel way of understanding the performance of strategy as an area of study and practice.

I slowly found myself wrinkling my nose, tilting my head to one side and thinking “that’s not really a fair comparison”. For example, comparing the rigour of engineering or accounting or even medicine to business strategy I can’t help but wonder if Warren understands the the difficulty in running repeatable, controlled experiments on corporations when virtually no two are alike. The human body is extremely complex, but we have 7 billion examples to look at, all made in mostly the same way with limited evolution in front of our eyes.

I lost interest towards the end of the book as the insights quickly dried up.

Warren has a point. Strategy and strategy consulting is possibly a broken discipline. Academics and consultants and executives need to share what works better. Business schools may not all be perfect. But his book doesn’t provide much in the way of useful answers.

Prediction: Spanish yields to end week higher

This one is a mini prediction.  The sort of foolish short-term market movement calls that I think are usually such a waste of time.

But there is an angle here I’m exploring. Spanish yields have been climbing for months now on the very real risk of Euro breakup and Spanish default (at least in Euros). Yields were up to 7.6% last week before Draghi made a comment that the market believed meant they would buy Spanish bonds, as many and as often as necessary.

My take is that this is just one more in a long series of smoke screens without a real solution. The fire is still burning.  Spanish bond yields started the morning just below 6.8%. I’m fully expecting a further sell-off in bonds and yields to close Friday at above 6.8%.

Renewable Energy and Policy Risk

South African government policy and Eskom lethargy have long posed a risk to independent power providers and particularly renewable energy project developers. The rules change, policy documents take forever to be released, and ultimately the economics of the subsidies can be quite different from envisaged.

FT has an OpEd on virtually the exact same issue in the UK, albeit in a far more developed market for renewable energy. The article actually throws the net wider and talks to traditional fossil-fuel based companies also having to deal with tax and regulatory uncertainty.

I suppose the message here for South African Independent Power Producers and Renewable Energy initiatives is that, get used to it, uncertainty around public policy in the energy space is here to stay.

Discrimination and anti-selection

Medical Schemes in South Africa are actually pretty fair.  It doesn’t matter how old or sick you are, as long as you’ve been part of the programme at some scheme, you’re generally covered.

There is a natural subsidy from young to old, healthy to sick and that is absolutely intentional. It’s “fair” in that you get cover no matter what your genes gave you at birth or what you’ve been exposed to in life. It’s “unfair” in that healthy individuals will pay more on average for cover than they will claim.

The black-and-white meaning of the word “fair” really breaks down here. What is important is what the outcomes are and whether it is the best system.

Enter the Consumer Protection Act and Anti-gender-discrimination laws in Europe. The Consumer Commission is investigating whether Medical Schemes discriminate against pregnant women by requiring a waiting period before providing cover.  Well, yes they are, but pregnant women (and not-yet-pregnant women) are anti-selecting against medical schemes when they choose not to belong for years, or upgrade to a more comprehensive plan just before giving birth and incurring all the additional costs of childbirth for the expense of other members.

I’m not saying this is “fair” or “unfair”. The point is, do we feel all pregnant mothers should be able to claim full benefits for their pregnancy regardless of whether they belonged to a particular scheme or any scheme at all before they became pregnant? This cost will be picked up by other members.

The theory goes that as medical scheme contributions increase to fund this increased cost, more members will elect not to belong to a scheme until they are actually pregnant, this decreases the pool of people paying the subsidy, requiring an increase in the subsidy per remaining member. And so on.

In practice I’m not convinced this matters much except at the absolute margin.

Whatever the decision, the Consumer Commission should deal directly with the Council for Medical Schemes and not individual schemes.  When our laws are possibly inconsistent, the laws must get resolved first before any individual scheme, trustees or administrator incurs costs of explaining the issues and trying to figure out how to comply with inconsistent legislation.