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No, Diversity Did Not Break the Bank
This week in Pedersen's POV, our senior editor takes issue with a Wall Street Journal columnist's stance on the Silicon Valley Bank failure.
March 20, 2023
4 Min Read
While I've spent a lot of time considering what the Silicon Valley Bank collapse could mean for medtech, I'm not an expert on the banking industry, and wouldn't pretend to know exactly what led to SVB's failure. I don't believe for a second, however, that diversity and wokeness were the culprits.
There's no shortage of research showing that women-led companies show better returns, and are more innovative. Last year, the Harvard Business Review (HBR) published a ground-breaking analysis to explain why having more female executives is associated with better business outcomes. McKinsey researchers have also found that companies with more gender, racial, and ethnic diversity are more likely to have financial returns above their national industry medians.
So, I was genuinely shocked by Wall Street Journal columnist Andy Kessler's infuriating and misinformed argument that diversity distractions led to Silicon Valley Bank's downfall. Kessler seems to think that because SVB had the audacity to appoint women to its board – along with one Black board member, one board member who identifies as LGBTQ+, and two military veterans – that the bank may have been "distracted by diversity demands."
"I'm not saying 12 white men would have avoided this mess ..." Kessler writes, when actually, that's exactly what he's saying.
Never mind the fact that the bank's management team is all white (five white men, three white women).
Unfortunately, Kessler is not alone in this line of thinking. Many prominent conservatives have pointed to "wokeness" as the reason for Silicon Valley Bank's failure. Donald Trump Jr., Stephen Millar (a White House aide to Donald Trump), and Senator Josh Hawley (Republican of Missouri) were all quick to speak out about SVB's focus on "trendy woke BS."
Fortunately, there are a number of influencers out there who have penned thoughtful and well-researched responses to these arguments.
"It is nonsense," writes New York Times columnist Jamelle Bouie. "And while it shouldn’t be taken seriously on its own terms, this deflection is worth noting for what it represents: the relentless effort to mystify real questions of political economy in favor of endless culture war conflict."
Bouie goes on to say that "The real story behind the collapse of Silicon Valley Bank has much more to do with the political and economic environment of the previous decade than it does with wokeness, a word that signifies nothing other than conservative disdain for anything that seems liberal."
Kessler's column in particular has also been met with a data-backed open letter by Black Women in Venture Capital, BLCK VC, 1863 Ventures, and Living Cities.
"This insinuation is insulting and a slap in the face to the many organizations that exist to increase diversity at every step in the tech value chain. It is also part of a broader straw-man argument made by many individuals and organizations that believe making American society more inclusive for historically marginalized groups is detrimental to our economy's growth," write the authors of the letter.
The letter also cites research published by Morgan Stanley and CitiGroup that have shown that there has been a multi-trillion dollar loss in U.S. gross domestic product because of a lack of investing in diverse business owners over the past two decades.
The letter's authors say Kessler's column is "another unfortunate example of the backlash historically marginalized groups face when we begin to advance," and I couldn't agree more.
To suggest that having a board made up of 45% women, one Black board member, one board member who identifies as LGBTQ+, and two military veterans is enough of a "distraction" to cause the second largest bank failure in U.S. history is laughable. Actually, that's about all Kessler's argument is good for – a laugh.
But at the end of the day, there is nothing humorous about Kessler's diversity argument, however thin it is.
"Although Black venture investors make up 4% of all venture investors and 3% of Black partners, they're [four times] more likely to invest in Black entrepreneurs than their non-Black peers, per the BLCK VC State of Black Venture Report. Additionally, Black investors are much more likely to invest in women and Hispanic founders than the industry average," according to the authors of the above-mentioned open letter.
So, Kessler's mention of Silicon Valley Bank's diversity efforts isn't just misinformed, it's potentially damaging to a critical movement in America toward supporting Black, Hispanic, and women-led businesses.
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