I remember a particular phrase of my CFA tutor when discussing options:
“So even though an option is an agreement for a potential action in the future…Options have Value…”Michael Anyimah CFA, Formerly Vice President, Zenith Bank (moving to First Bank)
And truer words have never been spoken both in life and in finance…
Another financial nugget of wisdom is that diversifying your investments helps you to reduce your risk by taking advantage of the correlation between securities. This just means that if one door is closed a window somewhere will potentially be open.
Therefore, in life, there is value in the number of options you have and increasing the variety of your options reduces the likelihood of a negative outcome.
AND FINANCE PEOPLE HAVE KNOWN THIS FOR YEARS!!!
So why is it that we fail to see the rewards of options and diversity in our organisations, our leaders and our society.
A phrase that stayed with me during the CFA Conference in 2018 in Lagos by the keynote speaker, Ms Carla Harris was (and I paraphrase)
So the problem with diversity in the work place is that we have made it a social imperative instead of a financial imperative… we say it is the right thing to do when it is actually the economically more viable thing to doMs Carla Harris, Vice Chairman & Managing Director, Morgan Stanley
This is where the gap lies. Economists simplify human decision making into the theory of the rational man who acts out of self-interest and responds to incentives which traditionally had no place for charitable actions (or shall we phrase it as the incentives did not match up). However even though we know there is utility derived from philanthropy, not everyone assigns the same value to it.
But Money is not ordinal.
The value to the society and economy from the options that diversity creates are concrete and quantifiable (well “estimateable” at least).
I recently read in THISDAY newspaper about the awards and accolades that one of my stocks received and I felt justified in my research and analysis when I saw how inclusive their management is – when you limit your options, you limit your thinking, you limit your ideas and you limit your possibilities.
Think Equal, Build Smart, Innovate for Change.
This is largely because (and I am extrapolating from something I learnt in a Hult Business School course I audited where they advised us to “Never be the smartest person in a room but the most informed”) no one can know everything so the more diverse your sample, then the more information and views on a topic you have, and the better the decision you will ultimately make leading to more value created…and you can never have enough value.