Diversity Makes Everyone Smarter

On the occasion of the affirmative action case before the Supreme Court this week (Fisher v. University of Texas), Sheen Levine and David Stark, two professors from Columbia University’s Center of Organizational Innovation published an op-ed in the New York Times in support of continuing affirmative action, arguing from the positive impact of diversity on analytical thinking:

By disrupting conformity, racial and ethnic diversity prompts people to scrutinize facts, think more deeply and develop their own opinions. Our findings show that such diversity actually benefits everyone, minorities and majority alike.

They share the results of recent experiments they conducted to assess these benefits. In one, they led groups with varying racial and ethnic makeups through a stock market simulation, tasking participants to calculate the prices of simulated stocks by trading them in real money, and letting them keep any profit they made:

The findings were striking. When participants were in diverse company, their answers were 58 percent more accurate. The prices they chose were much closer to the true values of the stocks. As they spent time interacting in diverse groups, their performance improved. In homogeneous groups, whether in the United States or in Asia, the opposite happened. When surrounded by others of the same ethnicity or race, participants were more likely to copy others, in the wrong direction. Mistakes spread as participants seemingly put undue trust in others’ answers, mindlessly imitating them. In the diverse groups, across ethnicities and locales, participants were more likely to distinguish between wrong and accurate answers. Diversity brought cognitive friction that enhanced deliberation.

Overall, they found that “[d]iversity prompts better, critical thinking. It contributes to error detection. It keeps us from drifting toward miscalculation.” Levine and Stark were arguing for the value of diversity in learning environments such as universities, but there’s a lesson for business here as well: they’ve essentially proven that diversity manages against groupthink. It benefits the whole team, not just the previously underrepresented, and the bottom-line benefits are plain to see. Here’s another piece of fresh evidence to that effect, this time concerning gender diversity. Jena McGregor at the Washington Post highlights an MSCI study of 4,200 companies, which found that those with women in top leadership positions “had returns on equity of 10.1 percent per year, compared with 7.4 percent for those without.” That’s not all:

That finding mirrors other results, such as a comprehensive report from Credit Suisse. But MSCI broadened its definition of “strong female leadership” to include companies that not only had a female CEO but also had at least one additional female board director. The study found companies that meet this definition of strong female leadership were more likely to succeed on another surprising measure, beyond return on equity. There were “fewer instances of governance-related controversies such as cases of bribery, corruption, fraud and shareholder battles,” the study reports. The companies with the worst gender diversity on their boards had 24 percent more controversies than their country’s average, between 2012 and 2015.