Fire all the males! They suffer from testosterone poisoning. Hire the women! They don’t.

This is Financial Times writer Tim Harris’ advice for preventing a future financial crisis, like the one we are now suffering. He is the author of a new book The Logic of Life, in which his theory is presented. He was interviewed on America’s National Public Radio on Oct. 6.

Here is the basic idea.

The financial services industry is driven by fund managers, traders, brokers, analysts, investment advisors,  who are largely male. They are incentivized by bonus schemes based on outperforming competitors. So the system itself is biased toward taking risk (you do not lose a $10 m. bonus if you take excessive risk; so the incentive payment scheme is really like a huge option, take the upside, forget the downside, especially after the huge ‘bailout’ was put into place).

When the males succeed, in good times, and make millions in bonuses, there is a ‘high’, a surge of the male hormone testosterone. This happens among male animals (gorillas), who succeed in defending their ‘harem’ and their family group, and it happens among human males, who take risks, survive and succeed. The testosterone tends to push these same males toward taking even more risk in future, until those risks become excessive – and ultimately, the risk-takers push themselves and their organizations to the edge…and then over the edge. So crisis is built into the system, as long as the system is run largely by males and as long as the male body generates testosterone.

Women do not suffer from testosterone poisoning.

Why not, then, urges Harris, turn the financial services and banking industry over to the women?    

Harris is not speaking tongue-in-cheek. I believe he is at least partly serious. For years I have urged high-tech companies to expand the role of women in senior management, because they bring powerful skills of collaboration and communication. Now, this advice is extended to investment banks. 

Bring in the women. What we need is a bit less ‘balls’.

A typical male investment banker