Are you risky, risk averse or risk neutral in work, purchasing, and in life? Gender differences worth taking a risk!

Alison Booth, professor of economics at the Australian National University, says in Canberra Times, May 18, 2012, that Australians are risk averse – reflected in the occupations we choose, the cars we buy and how fast we drive, lotteries, and the holidays we take.

Booth indicates that research shows both men and women are averse to risk, but women are generally more risk-averse than men, and she poses the question whether the difference is behavioural or learned. She also stimulates the debate that, because women are more risk averse at work, women are paid less than men, are under-represented in high level jobs, and file very few patents for inventions (96% of Australian inventors in the IP Australia database are male).

She says that individuals are said to be risk averse if they choose an outcome that is certain in favour of when the expected value gives the same result, but is uncertain; risk-loving people are those that choose the lottery (something that is uncertain); and risk-neutral people are if they rate the certain outcome and the uncertain outcome equally. For example, if people are asked to make a choice between being offered $30 in the hand immediately or a 50-50 chance of getting either $10 or $50 – Booth says most people will choose $30 in the hand because it is certain. This is despite the other option in which the weighted average of the risky choice is exactly the same (i.e. half of $10 plus half of $50 equals $30). Maybe, the reality is that people can’t instantly do the mathematics!

Booth says gender differences may be due to either nurture, nature, or some combination of the two due to cultural or other factors. Booth conducted a series of controlled experiments with colleagues Lina Cardona-Sosa and Patrick Nolen, with results showing that the environment in which young men and women are placed can affect women’s risk-taking tendencies. They found that women would take more risks when men were not present.

Booth asked all incoming first-year economics and business students at a British university to make choices between a certain outcome and a number of real-stakes lotteries at two distinct dates (uncertain outcomes), the first and eighth week of term. Before the start of the academic year the timetabling office randomly assigned students to tutorial classes of three different types: all female, all male, or mixed. Booth said the results were striking: women were significantly less likely to make risky choices than men. However, after eight weeks in the single-sex environment, the all women group of women were significantly more likely to choose the lottery (uncertain outcome) than women in the mixed group.  They found no differences for males. And women in the all women group were no more risk averse than men. Therefore, Booth states, the research indicates that gender differences in risk attitudes found previous studies might actually reflect social learning rather than inherent, in-born gender traits.

Booth states that women in single-sex groups have more confidence, feel more supported by the group, and avoid gender identity.

The research, Booth states, suggests that at work and in educational institutions, there are rational reasons for separating the sexes, and having all women classes or work teams. She suggested that organizations take the risk themselves to determine whether performance and outcomes improve. A suggestion includes implementing pilot schemes in education in traditionally male areas in which young women are placed in single-sex classes or tutorials. This is a cost-effective way to evaluate schemes to see if women perform better in single-sex environments across a variety of outcomes – such as performance, confidence, creativity, and innovation due to being more inclined to take risks. In terms of invention patents, among science and engineering graduates, segregating the workforce, in pilot schemes, might produce some unexpected positive outcomes for women – and for the organization.

MARTINA NICOLLS is an international aid and development consultant, and the author of:- The Shortness of Life: A Mongolian Lament (2015), Liberia’s Deadest Ends (2012), Bardot’s Comet (2011), Kashmir on a Knife-Edge (2010) and The Sudan Curse (2009).