Women, Money and the Confidence Gap

Note that this example of confidence doesn't mean a woman has to turn into Attila the Hun. She just needs to obsess less about having to be, and feel, perfect.

Perfection: Enemy of the Good

Women's pursuit of perfection is the most crippling way they sabotage their own confidence. "We set the bar impossibly high, so we inevitably feel inadequate," Shipman said. "And we avoid taking action until we feel we're better informed, better prepared and better qualified than anyone else. We watch our male coworkers lean in, while we hold back until we believe we're perfectly ready."

We learned this ourselves some years ago when we surveyed financial confidence among different generations of Mount Holyoke College graduates. One of the issues we hoped to resolve was why even educated women were so unsure of their money mastery. One member of an investment club made up of MHC alumnae told us, "Women never claim their competence until they know everything, while men are willing to wing it."

Even Christine Lagarde admitted to Kay and Shipman that she overprepares for everything. "[German chancellor] Angela Merkel and I have talked about it," the International Monetary Fund managing director said. "We want to be completely on top of everything and we want to understand it all and we don't want to be fooled by somebody else."

One of the major conclusions of Kay and Shipman's investigation—and perhaps their most striking finding—is that success correlates more closely with confidence than it does with competence. In other words, even a Ph.D. from the world's best business school won't get you far if you aren't confident.

Granted, women's greater cautiousness can be an advantage in the financial world. Studies have found that female hedge fund managers earned triple the return of their male counterparts over the past five years, while female investors often do better than men because they're less susceptible to the thrill of frequent trading.

"Women's instinct for caution is valuable," Shipman agreed. "But being able to make decisions and move on is critical to a manager. Women need to find a balance between our natural caution, and knowing when to make decisions quickly and move on."

Wired for Overthinking

Women's lack of confidence is due to "a cocktail of lots of different things" besides perfectionism, Kay noted. One of the key ingredients is genetics-influenced brain chemistry. What she and Shipman call "a messy stew of hormones and neural activity" tends to slow down decision making in the female brain. In particular, while testosterone—the primary male hormone—promotes competitiveness, risk taking and demonstrations of power, women's larger supply of estrogen fosters social skills, bonding and avoidance of risk and conflict. Simply put, women are genetically programmed not to take chances that might create dissension or put them in danger.

A further complication is women's greater proportion of brain "white matter," essential for integrating information. Men have more "gray matter," useful for tackling isolated problems. Although we both have the same primitive fear centers (the two amygdalae), men's brains tend to activate the one associated with taking action while women rely more on the one involving thought processes. In essence, when a man is leaping forward to fight off a saber-toothed tiger, a woman may still be evaluating the options.

One other key difference reported by Shipman and Kay is that women's brains produce 52% less serotonin than men's do. The relative shortage of this hormone, crucial in calming the amygdalae, leads women to be more anxious and worry-prone, and (we speculate) consequently to seek support from therapies and medications that promote serotonin uptake.

'A Critical Workplace Skill'

Along with the discovery that lack of confidence is partly genetic, Shipman and Kay were glad to find that it can be fixed. "There's a lot we can do about it, even late in life, to change our confidence level," Shipman told us. "We think that the cornerstone for women is learning to risk and fail, and jettisoning our perfectionism."

"The Confidence Code" gives practical advice about how women can build their confidence using tools from psychologists and neurologists. "A lot of it comes down to taking action," said Kay. "Doing the thing that's a little bit hard for you; going outside your comfort zone"—in other words, "practicing the nonhabitual" as Mellan has advocated for years. (For more tips, see sidebar above.)

Kay continued, "One other thing we can do is to talk about this and recognize the value of developing confidence. One male law partner said to us that confidence is so important, it should be a formal part of the review process."

"We've come to the conclusion that confidence is essential for women," said Shipman. "We need to start thinking about it as a critical workplace skill."