The power of diversity

I was at a conference recently where one of the speakers showed a startling chart that showed that Fortune 500 companies that had more diversity on their boards of directors were likely to be more profitable than the rest.

I was curious and skeptical. I started researching the matter.  Here are some of the more interesting studies I found:

• This study by Deloitte suggests a very strong correlation between diversity and performance.
• This one suggests a U shaped relationship between diversity and financial performance.
• While this one in Wiley publications suggests that the relationship is much more complex and depends on circumstances.

The summary seems to be that there is insufficient evidence for a causal link between diversity and financial performance of companies. Overall, it would be hard to make a simple case that more diversity is always good, especially when its just gender or racial diversity and not thought diversity.

On the other hand, there seems to be directional evidence that there is some correlation between diversity and financial performance.  My hunch is that companies having diversity above a certain threshold are likely selecting talent from a larger and more diverse pool and are likely encouraging more thought diversity.  So, higher than a threshold diversity in upper management may be indicative of better human resource management practices in other areas, which in turn may be what is driving financial performance differences.

What is Obamacare?

The website healthcare.gov still only works intermittently.  Admittedly, its better, but it was down last night when I tried. 

Meanwhile, as the demonization of the law continues, I thought it might be useful to recap what exactly Obamacare does:

• It prevents insurance companies from discriminating based on age, gender or preexisting conditions
• It makes it illegal for insurance companies from cancelling your insurance because you are sick
• It mandates that you must be able to pick your primary care physician and Ob Gyn
• It mandates that kids can stay in their parents' plans till age 26
• It guarantees emergency care coverage
• It guarantees that there is no lifetime cap on your coverage - i.e. you can't be denied just because your treatment is too expensive
• It guarantees free preventive care - i.e. vaccinations, wellness visits, etc.
• It forces insurance companies to cap costs - only 20% of the total cost of insurance can be for non medical expenses
• It standardizes disclosures to make it easy for insurance plans can be compared
• It guarantees your right to appeal
• It standardizes plans ensuring that every plan covers:
• Ambulance
• Emergencies
• Hospital care
• Maternity and newborn care
• Mental health and substance abuse
• Prescription drugs
• Rehabilitation services
• Laboratory services
• Preventive, wellness and chronic disease management
• Pediatric services
• It creates health exchanges where you can compare and buy plans.
• It says, if you don't buy insurance, you have to pay $96 in taxes every year to cover the government's costs.
• It provides Medicare assistance based on income for poor people who can't afford the plan (but the Supreme Court has given states the right to opt out of this relief program)
• It mandates that employers with more than 50 employees should pay for their employees' healthcare (i.e. it says that if you can afford to have 50 employees, you have a responsibility to pay the employee enough to be able to afford insurance).

I listed these because in my limited experience, I have been unable to find anyone who has a major objection to any of these.  In fact, most people are surprised that these would need to be in a law.