Why is Warren Buffett Bullish on America?

Pop quiz: In a 2013 interview in Fortune, Warren Buffett said that:

  1. “Entrepreneurial spirit and free markets”
  2. “Low interest rates and an accommodative banking system”
  3. “Women”

are key to why America will do so well economically in the future.

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The correct answer is C. He believes women are being underutilized and underpaid and are capable of contributing significantly more to economic growth.

Emphasizing gender differences in cultural upbringing, Buffett declared “The moment I emerged from my mother’s womb…my possibilities dwarfed those of my sisters, for I was a boy!” He mentioned that his parents loved his sisters and him the same, and they had similar IQs and grades. The one major difference between how they were raised was that his parents gave them different “signals” for what success would mean. His sisters were taught that “marrying well” would be a success while he was told that “the world’s opportunities were there for me to seize.”

Buffett is talking about the financial gender gap--the fact even when we equalize educational levels and types of jobs--men make more money than women. Not only is this hurtful on a psychological and cultural level, it inhibits and constrains the growth of our economy. This makes it important then for us to understand the primary causes of this gap so we can develop ways to reduce or eliminate it.

We believe there are at least four major cultural and psychological factors that produce the financial gender gap. We like to use acronyms to help others (and ourselves) to remember important ideas (e.g. see previous blogs about the RAPIDS). LAMB is our acronym for the causes underlying the financial gender gap.

  1. L is for the Leadership Ambition gap as written about by Sheryl Sandberg in her bestselling book, Lean In. You might have seen her on 60 Minutes earlier this year, or watched her TED talk from 2010 or have read her book? This gap is about more men being in leadership jobs and wanting to reach top leadership jobs than women. Women have different approaches to leadership such as sharing their ideas while men have a more dominating style.
  2. A is for the Assertion gap which pertains to women being less assertive. Women are actually less likely to ask for a promotion, a raise, or to stand up for their point of view in a work setting. Think about this: Historically, when a man is assertive, it is commonly perceived as a sign of confidence and strength vs. in a woman, it is often viewed as aggressive or pushy.
  3. M is for the Money Management and Investing gap which is supported by a 2012 report by Financial Finesse, a leading financial education and counseling firm. It found men have more knowledge and confidence in how to manage and invest money than do women.
  4. B is for the Belief gap which means that men have been raised much more consistently to believe in their ability to handle and make money. Men also tend to attribute financial successes to skill, hard work or talent while women tend to attribute financial victories to luck, support or help by others.

We remember in 1980s, Mattel marketed a Barbie that said “I’m not good in math.” Programming girls to believe they are not good in math shocked and outraged us. Having a young daughter at the time, we spoke out in our classes against Barbie’s programming and encouraged our students to have voice and be assertive. In less than a year, (I’d like to believe we played a small part in their decision) Mattel removed that sentence from Barbie’s vocabulary!

For those who want to help to close the gender gap, we suggest:

  • Realize the importance of women contributing more to the economy
  • Teach girls and women to feel empowered and be assertive with seeking promotions and leadership jobs and negotiating salaries.
  • Educate girls and women to learn more about money management (saving, spending, investing) and financial literacy.
  • Have more financial conversations with your family.
  • Learn more about psychology of money and your relationship with money.
  • Appreciate the different styles of leadership women have than men such as sharing more and greater empathy.

If you have any comments, stories or opinions about the gender gap, we would love to hear them. Stay tuned for the next blog which will published very soon and feature gender differences with empathy and how to increase you empathy in one day!