If The Shoe Fits: the Tao of Founders and Hedge Fund Managers
by Miki Saxon
A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here.
I had a $15 K lesson in founder ego when I lived in San Francisco. That’s how much I lost when I invested in a startup run by a guy with a bad case of it.
The only thing to do when that happens is to move forward and forget it. Money is replaceable — your sanity isn’t.
I haven’t thought about it in years, but reading the abstract from Do Alpha Males Deliver Alpha? Testosterone and Hedge Funds reminded me of “Craig,” in spite of its focus on hedge funds. (The full paper is available at the link.)
Using facial width-to-height ratio (fWHR) as a proxy for pubertal testosterone, we show that high-testosterone hedge fund managers significantly underperform low-testosterone hedge fund managers after adjusting for risk. Moreover, high-testosterone managers are more likely to terminate their funds, disclose violations on their Form ADVs, and display greater operational risk. We trace the underperformance to high-testosterone managers’ greater preference for lottery-like stocks and reluctance to sell loser stocks. Our results are robust to adjustments for sample selection, marital status, sensation seeking, and manager age, and suggest that investors should eschew masculine hedge fund managers.
This makes one wonder if the lack of testosterone is an underlying factor in the outstanding success of women-led companies outperforming those led by men.
Hedge fund managers have a number of traits in common.
They are white, attended ‘good’ schools, graduated from elite colleges and are connected through a web of similarly privileged friends.
Sound familiar?
That description fits much of Silicon Valley, both founders and investors.
As does the abstract.
As do the egos.
Image credit: HikingArtist
