Today is the third class in our current four class set. We will start class with a casual conversation. Our reading this week is about deliberate noise. Our listening is about investing. Please listen once. I have included a transcript. We will finish class with our grammar review. Writing the sentences on a separate piece of paper by hand is a wonderful way to practice. For today’s mini grammar we will practice verb+ to + verb sentences.
Click HERE for the reading
SYLVIE DOUGLIS, BYLINE: NPR.
(SOUNDBITE OF DROP ELECTRIC SONG, “WAKING UP TO THE FIRE”)
SALLY HERSHIPS, HOST:
Ladies, all the ladies, single ladies - hell, all the ladies out there - we have a problem.
WAILIN WONG, HOST:
And we're not just talking about the gender pay gap, the glass ceiling or spending more time out of the workforce.
HERSHIPS: Oh, no. This is another fun one. We are talking today about how women don't invest as much as men. There are a lot of studies out there on this. And to be clear, we are talking about all kinds of investing - the stock market, bonds, 401(k)s.
WONG: And lack of investing and knowledge about how to do it can have all kinds of serious consequences. Women have less money to retire on. They already tend to earn less than men, and on average, women live longer. So it's like the beginning of a startlingly bad waterfall of awful consequences.
HERSHIPS: But there's this guy with a potential solution. He did a whole study on it, and he says it works. He and his colleagues had this idea. Maybe if they gave women, like, a tiny little push, like, baby-bird-out-of-the-nest-sized push to get them started investing, it just might work.
(SOUNDBITE OF MUSIC)
WONG: This is THE INDICATOR from Planet Money. I'm Wailin Wong.
HERSHIPS: And I'm Sally Herships. Today on the show, we look at how a teeny, tiny, little push, some newfound confidence and also some free cash may help women become more frequent investors.
(SOUNDBITE OF MUSIC)
HERSHIPS: Saumitra Jha, or Saum, is a professor at Stanford. Saum's main focus is looking at how economic development can help solve conflict around the globe.
SAUMITRA JHA: I grew up in India as well as industrial Scotland, and it seemed like, you know, part of the problem was poverty.
HERSHIPS: If people have more money, there's less to fight about. And when it comes to poverty, there's one big antidote - development. And this is where women come in. Saum says, if there's one big lesson we've learned, it's that women's education and empowerment are critical when it comes to development.
WONG: But back to that pesky problem - Saum knew that, overall, women don't invest as much as men, which is why he decided to do a study to tackle the issue.
JHA: So we had asked people, have you invested in any kind of stocks before the study? And 40% of the men, roughly, had said that they had invested in some kind of stock.
HERSHIPS: For women, it was only around half of that. To understand why the gender gap here is so big, Saum says you have to know that women's lack of investment is directly tied to how they feel about their own financial literacy.
JHA: And the word literacy literally, you know, is what it implies. It's about, you know, basic ideas about things like compound interest, about whether a stock or a mutual fund - you know, an index fund - has more risk. These questions, women are - you know, often really lag men by large proportions in many countries, including the United States.
HERSHIPS: Once again, women lose. Saum says this idea of financial literacy is key, so he decided to measure the financial literacy of the participants in his study before and after. And I did something horrifying. I volunteered to take his quiz even though I hadn't studied. But to be fair, I do invest in mutual funds, so I feel like I had a little leg up. Can you quiz me?
JHA: Yeah. So yeah...
HERSHIPS: We won't air this if I don't know the answers.
JHA: Well, I can ask you sort of the three...
HERSHIPS: OK.
JHA: ...Big three questions.
HERSHIPS: OK. I'm afraid.
JHA: One is, supposing you have a hundred dollars in a savings account, and the interest rate was 2% per year, after five years, how much do you think you would have in the account if you left the money in the account for the entire period?
HERSHIPS: Can I use a calculator?
JHA: No.
(LAUGHTER)
JHA: It's a multiple-choice question.
HERSHIPS: OK, OK.
JHA: So is it more than $102? Is it $102? Is it less than $102? Or you don't know?
WONG: Spoiler alert, Sally, you did get it right. The answer is more than $102. But to be fair, that was the easiest question. In another study Saum told us about, only around 20% of women and 40% of men were able to answer basic questions about, you know, compound interest and the risk of investing in individual stocks versus a fund.
HERSHIPS: Oh, so everybody's bad at this.
JHA: Yes, it's...
(LAUGHTER)
JHA: Men are not great about this, and women are, unfortunately, even more so.
HERSHIPS: And this is the feelings part. For women in particular, Saum says their lack of financial knowledge felt like a hurdle. Women didn't feel confident, so they didn't invest.
WONG: And here's where we get to the nudge. Saum and his colleagues tried to give women investors a push to get them feeling confident hopefully, - enough to invest - and here's how it worked. They gave a random group of investors - women and men - about 50 to a hundred dollars each. This is real money, by the way.
JHA: They got one asset they could buy or sell, so this was quite simple.
WONG: It was stock in big telecommunications companies or some big banks. And at the end of this study, which lasted up to seven weeks, they got whatever was left.
JHA: Basically, we gave them a link to a website and said, well, follow the asset on your own (laughter). But, you know, every week, we asked them to make the next decision, the trading decision.
HERSHIPS: Buy, sell or hold - and this next part is critical because the investors didn't get any lessons. They didn't get any stock investing tips. They were just left to figure things out on their own.
WONG: And Saum says it worked.
JHA: And so what we found is, by just having an experiment where we had people learn by doing, people learned the answers to these questions. They became more confident in this - and women in particular.
WONG: Saum says they checked in with the women a few months after the study. By then, not only were more of them investing, but the confidence gap between men and women had shrunk by about 40% - four-zero.
JHA: Which is quite a lot.
HERSHIPS: And the exercise was good for men, too, but for very different reasons.
JHA: One thing I - you know, we found, which was quite interesting, is that men - you know, their self-belief that they know stuff was significantly higher than women at every single level.
WONG: Oh, is he saying that men thought they knew more than they really did about investing?
HERSHIPS: Oh, yes. That is exactly what he is saying.
WONG: Mmm hmm.
JHA: I think both men and women became, you know, more financially literate. But I think the men who didn't know stuff became aware that they didn't know stuff, which was, I think, helpful because I think a little bit of humility goes a long way in the stock market.
WONG: Of course, we wanted to ask a lady person what she makes of all this. Blair duQuesnay is a financial adviser, and a couple years ago, she wrote an op-ed in The New York Times with a pretty spicy title - "Consider Firing Your Male Broker." Her column was about how women are better suited in the profession than men.
BLAIR DUQUESNAY: 'Cause we stereotypically as a gender are good listeners, more empathetic but also better investors.
HERSHIPS: By the way, Blair says she did not write that controversial op-ed title. The New York Times did. But she does appreciate it.
DUQUESNAY: And it was a wild success, in my opinion, because that's the reason people picked it up and read it.
HERSHIPS: Either way, she agrees with Saum that women tend to need more confidence when it comes to investing.
DUQUESNAY: So whether it's investing or pretty much anything, the evidence is out there that women tend to underestimate their abilities, and men tend to overestimate their abilities, and that is true when it comes to investing as well.
WONG: But, she points out, it's not just about giving women confidence. They also need to learn the best way to invest, and that is not day trading, which can come with all these pesky taxes and fees. Instead, it's leaving your money alone and letting time and the eventual upward momentum of the markets do all the hard work for you.
DUQUESNAY: Jack Bogle, who was the founder of Vanguard, had a wonderful quote where he said people should invest consistently and never open their statements for 50 years but then have a doctor standing by because they'll probably have a heart attack when they see how much money they have.
HERSHIPS: Saum agrees, but he says the first step is giving women the confidence to invest in the first place. So come on in. The water is warm.
(SOUNDBITE OF MUSIC)
WONG: This episode was produced by Corey Bridges with engineering by Robert Rodriguez and Josh Newell. It was fact-checked by Sierra Juarez. Kate Concannon is our editor, and THE INDICATOR is a production of NPR.
(SOUNDBITE OF MUSIC)