I do believe that a “correlation does not equal causation” was mentioned (and a “but maybe, if we look at the actual research, it goes beyond that.”)
Anyways, first from first, it is. First study reference is “Diversity Matters” from 2015. Here’s the link:
I see, on the 2nd page, a table that explains the “Herfindahl–Hirschman index for diversity” that explains some underlying math to score businesses within their industry and it continues on to say (p 3), “The companies in the top quartile for gender diversity were 15 percent more likely to have financial returns that were above their national industry median”. That is to say, we’re comparing businesses to other businesses within their same industry.
That helps us to reduce the risk of issues like rural vs urban, tech vs agg, etc. We’re comparing apples to apples, not apples to oranges.
However, they point out that ethnic diversity seems to matter more than gender. A 35% boost vs 15%. That may point, at least in part, to our other alternate hypothesis that what we’re seeing is a side-effect of scaling. As you grow, you need more people and you start to recruit globally.
One of our leading theories for why diversity matters is the ability to understand the customer. A man can sell better to men and a woman can sell better to women, since they understand what things do and don’t appeal to that class. Most multi-national businesses are still largely focused on their domestic market. Having more Latinos doesn’t help you to understand your customer if you’re producing toaster ovens in Mexico but selling them in the USA, for example. You’re a multi-national company but not a multi-marketplace company. Whereas, understanding women helps you no matter what. They’re half of every single marketplace that you could be in.
Under that lens, we would probably expect the difference to be reversed from what the numbers are telling us. It also seems a bit questionable that the only way to perform market research is to hire the market and promote them to the top. Do we need to hire country bumpkins and make them VPs? Somehow, businesses seem to have figured out how to target the lowest common denominator while staffing smart people.
A second big hypothesis for “why” diversity would help a business to succeed, which has been proposed in the thread, points to a positive outcome of tribalism. If you’re a Democrat and you’re on a team with a Republican, you’re going to feel more competitive, work harder, and bust your butt to show up that other a-hole. If you’re white then, apparently, you’re going to be racist and more competitive with darker folks than you would be if the other person was also white (?).
Now…that theory be as it may, we’re just going to accept it at face value since a) I’m not the one who proposed it and, b) at the end of the day, reality will or won’t demonstrate itself through the scientific method. We don’t need to rule things in or out based on how we feel about them.
Under this theory, the numbers would seem to say that we’re more racist than we are sexist.
To be sure, genocidal movements have largely been racial. Colonialist-era slavery was racial. But the most consistent and durable class-distinguisher through history was between men and women. In the US, property rights, voting rights, etc. all came for ethnic minorities before women. In my own experience, I feel like people are more likely to complain about having a female boss than one of a different skin color.
I’m a bit skeptical that there is such a difference in the quantity of racism versus sexism, let alone that the lean towards one over the other is so extreme as to lead to a 15% versus 35% difference in business size. I’m also skeptical that racism and sexism are so prevalent among the workers of the larger - probably more urban - workforce. And I’m skeptical that the magnitude of the effect of tribalism would be so large and so positive for a company.
We can look at the studies that address this more but, for the moment, I’m not leaning towards this hypothesis.
The third DEI hypothesis is that people from different backgrounds just bring more novel ideas, since they’re attacking problems from new and interesting angles.
Plausibly, that could explain what we see. For every man that grew up in a white, suburban household in America, there’s also a woman who grew up in that same situation. Their backgrounds are differentiated by gender but not by education, income level, location, etc. Whereas, a minority might have been more likely to have been raised in a poor neighborhood with bad teachers, might have inherited a somewhat different outlook, based on the cultural learnings of the place that their parents came from (e.g. Tibet). We might suppose that there’s a larger differentiator between ethnicities than genders.
That said, in my experience, most people don’t bring anything to the table. If you collect 15 people in a room and say, “Let’s brainstorm business ideas.” There will be one or two people who contribute 90% of the ideas and the remainder are almost nothing.
I bought stock in an Indian company in 1997, because I read an article about tech outsourcing to India. I thought, “There’s a billion and a half Indians. If the definition of a genius is the top 2% of people on an IQ test, then that’s 30 million people. The US only has 6 million. There’s five times more of them and they’re cheaper.”
I grew up in a rougher territory. We fought, punched, and kicked each other at my school, when I was a little kid. My friends went out to hunt with their dads for deer and rattlesnake, to help stretch their food budget. Now, if you put me in a room with other people who are all from the city and suburbs and ask for business ideas, I’ll throw them out by the dozen. Is that because I’m from redneck central or because I’m just a clever bastard? Well, let me go ask the gas station attendant from my hometown and see whether he’s got much to throw in. Probably not.
A common bit of advise to people who have some idea for a new product is that they should tell people about it. By default, we want to keep our great new product a secret, patent the idea, keep it from getting out there and being copied. But that’s not an actual problem, in the real world, because the problem isn’t usually in coming up with ideas and products, it’s in having the manpower and the force of will to see that idea through to production and sales. All you need for ideas is to throw a couple of clever bastards in a room for an hour every few years. It’s not a problem.
The third hypothesis sounds good but, in my experience and based on how my stock did, I think that the main thing you get by opening yourself up to women, Indians, Chinese, Brazilians, etc. is that you gain access to a larger talent pool and - often - a cheaper one.
It matches the numbers but I don’t know that I’d call it DEI.
Ideally, the research would discount immigrant workers. Otherwise, you’re basically just counting headcount and labor prices.