What a performance!

GCSE results, cookery competitions and investment performance – Carole questions the value of a headline number



Hugging away the sobs

This summer, my eldest was one of over 700,000 16-year-olds to sit her GCSE exams. Results day in August sparked emotions up and down the country – not least in our own backyard. Flanked by me and my husband, our daughter trotted into school to find out her fate. As mere parents we were literally sidelined as she approached the desk to collect her envelope. Briefly I lose sight of her and the next thing I know, my husband is gasping as a blasphemous obscenity explodes from our daughter’s mouth just feet away from the headteacher. Within moments we are by her side as the tears well up and we hug away the sobs and shakes.

She has done unbelievably and exceptionally well.

A gift the girls are not sure they deserve

Now, I don’t want to suggest that being surprised at how well you have performed is an exclusively female trait. But I will say that I didn’t spot any boys crying because they had done much better than they had dared to hope. Interested mainly in whether they had ‘beaten’ their perceived classroom rivals, the male students who had done well were more inclined to punch the air or crunch their fists and abs to squeeze out a controlled “Yassss!” A good performance for them was a vindication of how good they always knew they were. For the girls, it was a gift they weren’t sure they deserved.

There is here undoubtedly a confidence issue and this is something that is not unfamiliar in the world of investing. In recent decades the field of ‘behavioural finance’ has gained ground as a branch of economics that can help explain why people act in certain ways around investing and finance. Understanding certain tendencies – known as ‘biases’ – is believed to play an important part in helping us avoid mistakes. One such bias is overconfidence in our own abilities. We think we will be great at investing. We think we will beat the system. We think that, because we have had success in the past, we are good at it and will continue to be so (I’m simplifying, but you get the idea).

Boys and men are under pressure to be competitive

This all feels very male to me and, by definition, quite alien. I remember being amazed a few months ago when watching a cooking competition on TV and two of the contestants (men) scored themselves 10 out of 10 before the judge had even delivered his verdict. The other contestant (a woman) gave herself 7. In the event, the judge marked both men down while the woman gained the top score. How could anyone have the nerve to score themselves so highly before an expert like that?

And yet – as with the boys who did well in their GCSEs – I have sympathy with the male position here. A legacy of our patriarchal society is the historical need for men to be the main earners in a household, Indeed, the gender pay gap that is still very much in evidence suggests that this remains the case in many situations. This position puts a subtle pressure on boys and men to be competitive and to reach for the top positions. As one of the very willing participants in my first ‘Women save, men invest’ workshops put it:

“The pressure men feel to provide pushes them to demand more and gives them confidence to ask for pay rises because there is more at stake”

Being able to score your performance with a number – be it your salary, exam results or in a cooking competition – makes it easy to rank it, which, in turn, allows your competitive drive to position itself and take action, if necessary. The confidence, whether it is justified or not, is a necessary part of that positioning and I think it is still true that men are more comfortable displaying this than women.

A headline that doesn’t tell the whole story

To my mind, the numbers are just numbers – a headline that doesn’t tell the whole story. When making a big decision, surely we should consider all aspects. If offered a job that pays more than your existing one you might be initially swayed by the numbers but, on reflection, perhaps the journey time is too long or the culture of the place isn’t right for you. Similarly, when choosing a school for your child you will, of course, look at the league tables – because those numbers can be persuasive. But you will also want to visit the school to – and this is a common phrase uttered by the mums – “get a feel for the place”.

I find it interesting just how much emphasis is put on ‘performance’ in investing. We are all familiar with the caution that ‘past performance is not a reliable indication of future performance’ but if we’re not supposed to take any notice of it in our decision-making, why mention it at all? Indeed, the rules given by the Financial Conduct Authority (FCA), which regulates the investment industry, state that any indication of past performance of an investment should not be the most prominent part in their marketing.

Men conquering mountains…

And yet, every time I try to bring an advert to mind for an investment product or investment manager, I see images of upward-trending graphs or men conquering mountains. I think that, because the men have historically been the ones with the money to invest, they have been targeted by the industry in a way that appeals to their competitive spirit. There is an unspoken emphasis on the headline numbers or performance ranking that implies that this investment company is better than the rest. And that this, in itself, should be reason enough to invest with them.

…and women worrying about the ballet fees

Often, performing better than the rest in the investment world means little more than ‘our collection of investments fell less than the rest of the market’. That’s of small comfort if you had something specific in mind for that particular investment. Another great pearl from my first ‘Women save, men invest’ workshop was:

“Men like the thrill of watching their (investment) decisions go up and down, while the women just want to be sure there is enough money in the account to cover the term’s ballet fees”

This, for me, sums up where men and women may differ in terms of what ‘performance’ means to them. I know I’m generalising wildly, but it does seem to be that men are more interested in headline figures as a tangible means of ranking things on which they need to make a decision; while women tend to think more along the lines of ‘Will it get me what I need?’

Does the investment cover our needs?

Good investing will take an appropriate level of risk to achieve the purpose it is intended for. Yes, there is always the possibility that you might not reach your goal. But if you do achieve what you set out to do, the fact that you might have gained even more if you had taken more risk should be irrelevant. I think women are good at this kind of thinking – and this is probably for historical reasons connected with being the ones in charge of making ends meet. We are less impressed by headline ‘performance’ and more focused on whether the investment covers our needs.

Just the headlines to her story

A couple of days after the dust had settled on the GCSE results, my daughter came to me and said,

“So, with these fabulous results, I have got into the Sixth Form – along with anyone else whose results were average. What else, exactly, do they give me?”

I had to admit that, actually, they give her nothing at all. They are a stepping stone to getting her to where she wants to go next. Yes, they are the headlines to her story, but the narrative – well, that’s something she will have to fill in for herself.

10 October 2019