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The need for more diversity

Posted November 7, 2016

By Geoff Candy

There is an aspirational timbre to the slogan “Make America great again” that belies its dog-whistle like nature.

While some hear it clearly as a rallying cry, for others America has never been greater. For those on the other side of the divide, calls to return the country to a less inclusive past don’t register at all. At best, they appear tone-deaf, at worst, deeply troubling.

From the outside that slogan and the campaign around it look like the wild flailing of a group of people conscious that their in-built head start is slowly being eroded – in any situation, it is harder to win when the dice are not loaded in your favour.

Similar arguments can be made for much of the rhetoric around the UK’s referendum on the EU and for the rise of many other nationalist movements globally.

In the context of this growing nostaligic nationalism, it is deeply encouraging to see the launch of the Investment Association’s Diversity Project.

First announced in June, the initiative (which launches on Tuesday) aims to “target diversity in its broadest sense for investment and savings firms, aiming to tackle gender, ethnicity, socio-economic background, degree discipline, sexual orientation, age and disability.”

While it is in part driven by a “recognition that current diversity levels are unacceptably low”, the call for greater diversity are by no means purely altruistic.

For many years, investment managers have been preaching the benefits of diversification and there is finally a growing acceptance of the fact that these benefits extend further than just asset classes.

As Andy Haldene, chief economist and executive director, monetary analysis & statistics at the Bank of England and IA chair, Helena Morrissey, explain in a piece in the Financial Times:“The best safeguard against the complexities and ambiguities of politics and technology is diversity of thought and experience among decision makers. The best way of rebuilding trust among diverse and demanding customers is to have employees who are their mirror image. The best way to tackle inequalities of income and wealth is to first tackle inequalities of educational opportunity and social mobility.”

And, while the pair acknowledge that there is a risk, in the current climate, of “diversity fatigue” setting in, I would agree with them that it is exactly at such a moment when “the returns of diversity are likely to be greatest”.

The other thing to bear in mind about slogans like Make America Great Again is that nostalgia is almost always inaccurate.

As Warren Buffett pointed out in his latest annual letter: “The babies being born in America today are the luckiest crop in history.”

“American GDP per capita is now about $56,000. As I mentioned last year that – in real terms – is a staggering six times the amount in 1930, the year I was born… U.S. citizens are not intrinsically more intelligent today, nor do they work harder than did Americans in 1930. Rather, they work far more efficiently and thereby produce far more,” he said.

He goes on to add, however, that while the pie to be shared by the next generation will be far larger than today’s, “how it will be divided will remain fiercely contentious.”

“Just as is now the case, there will be struggles for the increased output of goods and services between those people in their productive years and retirees, between the healthy and the infirm, between the inheritors and the Horatio Algers, between investors and workers and, in particular, between those with talents that are valued highly by the marketplace and the equally decent hard-working Americans who lack the skills the market prizes.”

That is the fight that has always occured and it is from within that cauldron that great new things emerge, there are now just more smiths hammering away at it.

And, more importantly, when the multitude of voices are being listened to, a divisive call like Trump’s becomes increasingly difficult to hear.

The sooner it comes, the better.

This article was originally published under Portfolio Adviser

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