On the occasion of International Women’s Day, this essay is adapted from Chapter Six of You Are What You Risk: The New Art and Science of Navigating an Uncertain World, now available in paperback.
Join me today, March 8, 2023 at 9:30 am PT/ 11:30 am CT/12:30 pm ET as part of the CapStrat Women’s Forum virtual event, Women and Risk: Changing the Narrative. Click HERE to register.
What would the world look like if we were to pay more attention to the damage that our stereotypes about gender and risk are doing, and then cast them aside?
Here are just a few of the consequences of the often false assumptions people make because of what we think we know about the impact of gender on risk:
- Risk stereotypes around gender have held back investors from funding women and companies from promoting them.
- Businesses whose management falls prey to gender risk stereotypes are overlooking human capital and missing out on some of the best new minds.
- Gender risk stereotypes can affect how doctors treat patients.
- Many financial advisers tend to offer women less risky investment alternatives than men (though this is beginning to change).
- Risk stereotypes affect how both genders think they are supposed to behave and can create conflicts when one member of either gender is not acting typically. In other words, they hurt men as well as women.
- Gender-balanced groups approach risk differently from single-gender or gender-dominant groups.
- The relationship between gender and risk preferences change across cultures and depending on whether people are asked individually or in a group.
Missing the Mark
Recent research shows that many stereotypes about men, women, and risk often miss the mark. Highly respected scholars are successfully challenging the tired and inaccurate notion that women are more risk-averse than men.
The economist Julie Nelson, author of the book Gender and Risk-Taking, makes a compelling case that academics have fallen victim to confirmation bias –the tendency to interpret new evidence in a way that reinforces their existing beliefs- in their assessments of men’s and women’s risk attitudes. She also argues that most academic studies have looked at the average risk attitudes of men and women, while ignoring just how much variety there is within each gender. When Nelson applied newer, expanded statistical techniques to the underlying data, the picture was quite different. Her research suggests that 95 percent of the risk preferences of men and women overlap. So much for that big difference.
To be sure, there are clear gender differences involving risky activities. Men are far more likely than women to engage in many risky behaviors: from drinking and smoking to choosing careers that involve risk-taking, to participating in extreme sports, to risky sexual behavior. They are involved in more vehicle accidents and are more likely to speed or drive under the influence of alcohol or drugs. Women are more likely to report that they wear seatbelts when driving or riding in vehicles, while men (in the United Kingdom, at least) are far more likely to be involved in pedestrian traffic accidents, and Western men in general are more likely to drown or be poisoned than are women.
When it comes to financial, health/safety, recreational, and ethical risks, researchers have found men to be more likely to perceive lower risks than were women and more likely to engage in those behaviors. Social decisions, like disagreeing with a parent or friends or raising a hand in class –or, say, flagging risks or opportunities in a business context were the exception.
These examples can be misleading, because the relationship between risk and gender is not that simple. For one thing, economists have found that women are much more sensitive to men to the context of risk decisions—which may explain why studies on gender and risk vary so widely.
In her fantastic book, How Women Decide: What’s True, What’s Not, and Why It Matters, the cognitive psychologist Therese Huston makes the important point that even if men and women engage in the same behavior, they do not face the same amount of risk. That makes it harder to measure differences between men and women, because the act itself of taking risk is, in fact, a bigger risk for women than for men. So even if both behave the same in face of a particular risk, their risk tolerance is not the same: A woman shows herself to have a higher risk tolerance for the same behavior, because the risk it entails is bigger for her than it would be for a man.
Even so, boards and investors often tend to take a risk on women only in situations where many men fear to tread. Despite the stereotype of women being risk-averse, companies often turn to women to lead through crisis in challenging, potentially career-suicidal CEO positions.
A 2003 study found little difference between male- and female-managed funds in terms of performance, risk, and other characteristics of the funds in question.
Too many conversations about lower-risk choices often include an unspoken assumption that less risk equals “aversion”—not meant as a compliment—when in some circumstances taking less risk is the right thing to do. Supposedly more “conservative” decisions often reflect an appropriate amount of risk judgment and not necessarily a bias toward risk aversion.
Other research suggests that women are less likely to be overconfident than men –and thus are less likely to take dangerous risks that ultimately do not pay off.
Stereotypes can hurt individuals who may not even be aware of the gap between other people’s false impressions of them and reality. We’re not immune to what we think other people think we’re supposed to think about risk. Psychologists even have a word for this: stereotype threat, or “the situational threat of confirming as self-relevant a negative stereotype about one’s group.”
In situations when men feel their manhood is threatened, they may be more likely to take unwise risks. Huston cites another study in which men were divided into groups and were asked to hold a power drill or to put some scented hand lotion on, and then given the chance to gamble on dice. The lotion smellers took much higher risks than did the power drill group.
Happily, in other contexts, being around women may lead men to temper their risk-taking. Researchers have found that when a woman is in the car, males drive more slowly and conservatively—for example, leaving more distance between them and the car ahead.
Undoing the Damage
So how do organizations, teams, leaders, and individuals combat the pernicious effects of misperceptions around gender and risk?
To start, it’s time to bust up the gender stereotypes so that people are used to seeing women in leadership positions. That also will bring women’s unique strengths into more corporate and policy leadership roles, and perhaps keep some companies and countries from reaching the kind of disastrous state that created the glass cliff phenomenon.
“The presence of women in the boardroom, in the seminar room, and at the negotiating table on an equal basis with men would create a very different atmosphere,” Julie Nelson has written. “If finance, economics, and policymaking were no longer considered stereotypically masculine spheres, the assumption that one-sided, stereotypically masculine, norms and behaviors are best would disappear. Perhaps then everyone might be more willing to face the real issues and get down to work.”
While we’re at it, we could throw out the problematic term “risk aversion” and focus on risk savvy, or the ability to recognize and assess dangers and opportunities reasonably accurately while balancing emotion and reason, and taking smart precautions so as to avoid being either foolhardy or overcautious.
Moving from risk stereotypes to risk empathy can give us a clearer picture of reality, avoid misunderstandings, and resolve conflicts. It also gives us an opportunity to learn from other perspectives that might help us to do better in all aspects of work and life, from careers to relationships to finance and strategic decisions.
Taking these ideas one step further, what if we were to use what we have learned about risk stereotypes and applied those insights to other groups that we might stereotype or not even consider at all?
Interested in learning more and helping your board, team, employee resource group, or customers to move beyond risk stereotypes in their own work and life? Email for details. For a limited time, I’ll be offering free fireside chats, workshops, and book club opportunities along with bulk purchases of You Are What You Risk.
This article is part of my LinkedIn newsletter series, “Around My Mind” – a regular walk through the ideas, events, people, and places that kick my synapses into action, sparking sometimes surprising or counter-intuitive connections. To subscribe to “Around My Mind” and get notifications of new posts, click the blue button at the top of this page.
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