Diversity is 365 Days a Year

We’ve all heard the buzzworthy stats on diversity. And I think, for the most part, it’s now widely accepted that there are merits of having a diverse workforce. Or at least people believe in it enough (or believe in the optics of it enough) to use the words “diversity, equity, and inclusion” in their corporate charter or on their company website. But the fact remains, change is hard work and as an industry, finance, consistently falls short. (And if there are any doubts, I would refer you to Allison’s blog post from last year, “Change is Hard, Let’s Go Blogging?”) I spent the last thirteen years as a trader on the sell-side, and I was consistently the only female trader in meetings, in the row, in the entire department, and at times, even on the whole floor. It was that way when I started and it was that way when I left my most recent job, little to no progress over the span of 13 years. I witnessed, first hand, how hard it was to change the status quo. As a result of watching these failed efforts over the years, I think it’s worth highlighting some of the pitfalls and misconceptions we’ve seen and how at Proof, we hope to do better.

First, it’s important to define diversity. At Proof, we think of diversity as truly being varied in composition. Yes, that means diversity in all of the “classic” ways, gender identity, race, sexual orientation, military status, but we would also add diversity in background. This is a little harder to define, but it could be socio-economic background, educational background, career background, or something we haven’t even thought of. But if the value-add of diversity is diversity of thought and exposing blind-spots, then it’s not just the nominal definitions that matter.

Pitfall: Focusing on the optics

When reporting diversity stats, you often see companies intentionally lumping together specific functions that are traditionally better balanced with less diverse functions to optically make the sum look more diverse. It defeats the purpose of diversity initiatives, but it does offer a way to ignore the problem. It’s certainly a lot easier to say “our sales and trading department consists of 35% women” than “our trading department consists of 5% women”. The latter stat has rarely been presented by a senior leader, but I’m sure at a majority of financial institutions today, the percentage of women making investment decisions or in risk taking functions is a lot closer to 5% than it is 35%. The pressure from external forces for companies to report optically diverse stats is so high, seemingly a lot of efforts go into containing the problem from onlookers and quelling the workforce rather than solving the problem.

Pitfall: Diversity loopholes

I’ve seen the “loopholes” of diversity too many times. Just because you hire 4 males that tick a racially diverse checkbox but graduate from the same program and come from similar backgrounds, doesn’t mean that your workforce has somehow magically become more diverse.

Misconception: Diverse candidates are too expensive

A misconception I’ve witnessed over the years, is a perception that because diverse candidates are “highly sought after”, they are more expensive and harder to recruit, often creating an impression that recruitment efforts will be futile. I agree, diverse candidates are hard to recruit. But only because the pool of candidates is dramatically smaller (especially at the senior level). And that’s the only part of the aforementioned claim I agree with. It’s most certainly not more expensive. In fact, just about every industry compensation analysis, even the cherry-picked ones, will tell you they are vastly underpaid versus their peers. And when evaluating employment prospects, diverse candidates likely ascribe more value to an equitable workplace (I can speak from personal experience). So if a company creates a culture where diverse candidates are valued and help shape the future of a company, being competitive to a diverse candidate shouldn’t be any harder. Yes, the hard work of seeking these candidates still exists, but we didn’t claim this would be easy.

Misconception: Sacrificing quality

I’ve also seen the quest for diversity create a narrative that sometimes diverse candidates are somehow less qualified for the job, and were simply hired to fill a quota. That companies are somehow sacrificing on perceived “quality”. It often times echoes the same arguments counter-affirmative action groups make. Without jumping down that deep rabbit hole, I think it makes sense to take a step back and think about what this perceived “quality” is. The traditional framework around quality employees in finance has often been associated with a certain “pedigree”, largely focused on academic background through target schools. This unsurprisingly yields candidates that are extremely similar to each other and sets a questionable definition of “quality”. While diverse candidates may not always satisfy “quality” in the ways people are accustomed to in our industry, we think they create even more value. Simply put, we are confident that the benefits, economic and otherwise, we gain from having a diverse workforce far outweigh any costs associated with it.

Misconception: Mentorship is the cure-all

There are benefits of good mentorship, and I consider myself lucky to have had the support of some exceptional leaders throughout my career, both women and men. But the industry needs some introspection on what mentorship is and perhaps the word needs some re-imagination. It comes too easy; it’s a placebo and honestly, feels like a cop-out. It’s always some version of the following: Q: “What are you doing to support your firm’s diverse employees?” A: “Mentorship.” What does that mean? Typically it leads to a formulaic “buddy-system”, and often times it shifts the responsibility back onto the diverse workforce to do said mentoring. Mentorship at the junior level is almost synonymous with apprenticeship. It’s someone you learn about the trade from, but everyone needs that in their career- that’s not specific to diverse employees. What diverse employees need is closer to allyship and sponsorship, people that will help push forward progress, help forge a new culture where their ideas and impacts are not marginalized. And it’s certainly not a singular path, it’s by changing a lot of long established practices regarding hiring and pay.

Pitfall: Treating diversity as a cost center

In the midst of layoffs during the early days of the pandemic and the recent wave of tech-layoffs, it has been noted that diverse populations have been disproportionately affected and diversity programming has been the first on the chopping block. I think that speaks volumes to the level of commitment companies have to diversity. It paints the picture that diversity is a “nice to have” rather than a fundamental building block of the company.

The Proof Approach: Unrelenting transparency

At Proof, our transparency goes beyond the transparency of our algorithms and tech stack. We have complete transparency in our business practices and that includes pay. We have a thoughtful and objective formula that determines compensation and make it available to all our employees. As we grow, we certainly plan on being held accountable for diversity standards we set for ourselves. And we want to be intentional with additional hires we make bringing diversity in thought to the current composition of company. Obviously we’re currently a small company with a small and noisy data set. But the same zeal we have for data integrity in our research reports will be applied to any stats we publish on the composition of our workforce. And the same wariness we approach making sweeping assumptions based on singular examples with our algos (see Allison’s blogpost “On the Power and Peril of Examples” for more on that topic) apply to any claims we make about our own diversity measurements.

Frankly, as an industry, we can continue to pontificate on the value of “mentorship programs” or “inclusion trainings” or we can take action. I’m not saying there isn’t value to these programs, but that’s not the real heavy-lifting. It’s 2023, raising “awareness” is not enough. We need to do the hard work- do the exhaustive search to hire a diverse workforce at all levels, and in turn, create an environment that motivates talent to stay. And in times of adversity and tumult, make the conscious effort to retain diverse employees. At Proof, we have the luxury of building our personnel from scratch, and we plan to do the work. At it’s core, we have a value system that aligns deeply with equity and transparency. As a start up, we have the advantage of building a new culture, but we’re also disadvantaged with a smaller network. We don’t have an army of recruiters and a hyper-competitive pay package. But what we do offer is a compelling mission, the opportunity to work with a team of talented individuals who truly want to effect change by challenging nefarious practices in the US equities market and making strides in creating an equitable workplace. And yes, it implicitly requires all our employees putting on a long term trade, betting on the success of Proof.

Finally, if any of these ideas resonated with you or you have any candidates you think may be a great fit at Proof — please don’t hesitate to reach out at info@prooftrading.com. Thanks!