From Vanity Fair, Michael Lewis provides a fascinating look at the aftermath of financial implosion in Iceland and what it can teach us about the economic melt-down all over the world. This is a country where men are men, and women have full equal rights but avoid bumping shoulders with their ever so manly men. Even their political parties are segregated by gender. It made me wonder whether the first founders, or at least the survivors of that icy carapace, were overflowing with testosterone.
There is a lot of interesting description and background of how a remote island of fishermen became a centre of high finance to the tune of fifty times its GDP and then fell into a debt of $330,000 per man, woman and child in the country. This sounds extreme, and it is, but the American debt is pretty huge, too: $186,000 per person.
The article is worth reading in its entirety, for its clarity of thought and quality of journalism. On the one hand, Iceland is a strange and singular place, a northern moonscape with a population of 300,000. But at the same time, it reveals us to ourselves because its economic simplicity shows quite clearly what happened over the last five years to create its (and our) current financial crisis. This is fine reporting and brings to mind the value of magazines and newspapers that have the resources to support it.
I’m highlighting here the part of the article that adds another piece to the puzzle of gender and the financial crisis, which I wrote about here.
Back in 2001, as the Internet boom turned into a bust, M.I.T.’s Quarterly Journal of Economics published an intriguing paper called “Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment.” The authors, Brad Barber and Terrance Odean, gained access to the trading activity in over 35,000 households, and used it to compare the habits of men and women. What they found, in a nutshell, is that men not only trade more often than women but do so from a false faith in their own financial judgment. Single men traded less sensibly than married men, and married men traded less sensibly than single women: the less the female presence, the less rational the approach to trading in the markets.
One of the distinctive traits about Iceland’s disaster, and Wall Street’s, is how little women had to do with it. Women worked in the banks, but not in the risktaking jobs. As far as I can tell, during Iceland’s boom, there was just one woman in a senior position inside an Icelandic bank. Her name is Kristin Petursdottir, and by 2005 she had risen to become deputy C.E.O. for Kaupthing in London. “The financial culture is very male-dominated,” she says. “The culture is quite extreme. It is a pool of sharks. Women just despise the culture.” Petursdottir still enjoyed finance. She just didn’t like the way Icelandic men did it, and so, in 2006, she quit her job. “People said I was crazy,” she says, but she wanted to create a financial-services business run entirely by women. To bring, as she puts it, “more feminine values to the world of finance.”
Today her firm is, among other things, one of the very few profitable financial businesses left in Iceland. After the stock exchange collapsed, the money flooded in. A few days before we met, for instance, she heard banging on the front door early one morning and opened it to discover a little old man. “I’m so fed up with this whole system,” he said. “I just want some women to take care of my money.”
Full story is here