Women's History Month: Insights into Finance and BankingWomen's History Month: Insights into Finance
Published on 3/25/2023
With the markets shaky, let’s celebrate Women’s History Month through the stories of three women, outliers and trailblazers, whose financial savvy may hold some lessons for the present. Hetty Green, Maggie Lena Walker, and Elinor Ostrom, lend us insights into value investing, community building, and community-centered solutions when resources are limited.
Just under fifty years ago, women still needed a father or husband’s signature to take out a line of credit. Before that a woman like Hetty Green (1834-1916) was usually subjected to rules of “coverture,” which transferred her assets from her father to her husband at the time of marriage, but Green would have none of that. Educated by her father and grandfather to know how to manage her estate, she advocated for herself, and later for financial education for women.
“American women would be much happier, if they learned the principles of business in girlhood,” Green said.
Independent and strong-willed, Green was either miserly or very thrifty, depending on how the stories are told. She employed the strategy we call value investing, whereby a person picks high-quality investments that appear undervalued and doesn’t part with them for decades.
To quote Green: “There is no great secret in fortune making. All you do is buy cheap and sell dear, act with thrift and shrewdness and be persistent.”
Compare her philosophy to Warren Buffett’s, “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” And “Only buy something that you’d be perfectly happy to hold if the market shut down for ten years.”
Buffett has said, “do not confuse the cost of living with the standard of living.” Getty built her fortune by living far below her means. According to Smithsonian Magazine, she demanded her husband Edward Green sign a prenup, so she controlled her money. She placed him on an allowance and when his financial dealings left him in ruin, she refused to rescue him. Anecdotes of her thrift include waiting until her undergarments were in tatters before replacing them and cooking oatmeal on her radiator. Some rivals implied that her refusal to seek medical care for her children resulted in her son’s leg amputation. - Notably, he disputed that account saying his infection in his youth hadn’t led to the amputation years later.
A generation behind Getty came Maggie Lena Walker (1864-1934), a woman who knew the value of the penny. Born to enslaved parents, Walker was inclined towards math, accounting and entrepreneurship from her youth. Her father’s death when she was young pitched the family into poverty, so she worked alongside her mother as a laundress. By 1903, she started the St. Luke Penny Savings Bank in Richmond, Virginia, her hometown, to help the Black community save money and build economic independence. Later when she saw banks struggling before the 1929 Stock Market Crash, she consolidated two other banks with St. Luke’s creating Consolidated Bank and Trust, which is thought to be one of the oldest continuously Black-owned bank in the U.S., sold to Premier Bank in 2009. Walker also served as president of her local NAACP chapter, and she opened an insurance company for Black Virginians.
Walker’s expansive care of her community represents the conscience that makes any monetary system work. Much later, another woman who survived the Great Depression would lend insight into the interaction of human behavior and limited resources. Elinor Ostrom (1923-2012) grew up planting Victory Gardens and handknitting scarves for soldiers. She paid her way through college, and worked her way past presumed “women’s” work - secretarial duties - before she earned her PhD in economics where she studied human behavior around “the tragedy of the commons.”
Explanatory comma here for “tragedy of commons:” imagine twelve people around a table with twelve slices of bacon laid out on a plate. The twelve each have the chance to snatch and eat as much as they like, no restrictions. However, they cannot talk to each other, and if they leave any on the plate after a minute, that number will be doubled. Some will take as much as they can for themselves, right? That is the tragedy of the commons. Now, give them a second chance. This time, they have fifteen seconds to discuss how to handle the bacon. Otherwise, the same rules apply. Each can gobble up what they want, but whatever they leave will be doubled.
Some communities will trust each other. Others will not. Those who establish a plan for preventing the depletion of the bacon are creating community governance procedures from the bottom up. The success of these depends upon each participant’s ability to manage their urge towards self-preservation (or bacon!) while building trust with those around them. It’s all about human psychology, which is also true when it comes to markets and inflation. The ability to build and sustain resources requires vision and discipline. It also requires us to communicate and foster solutions that tolerate risk-averse members of our community to achieve a greater good.
Final Note: Ostrom was one of us. She finished her career at Indiana University and died in Bloomington in 2012, the only woman to earn a Nobel Prize in Economics. So far.