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naraburns  nihil supernum  1yr ago (text post)   32440 thread views

Culture War Roundup for the week of February 13, 2023

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There exists an entire consulting industry that performs research on the benefits of DEI training, the benefits of a more diverse workforce, the success of organizations which have more women/LGBT people in leadership positions, etc. Here is the consulting company Accenture's summary of the benefits of DEI to companies and organizations that adopt their practices.

I am of the belief that it is people's knowledge, experience and competence that determines whether or not an organization will be successful in its goals. It seems extremely unlikely to me that any problem corporations are interested in solving becomes easier the more members of your project team possess a uterus. Likewise, it seems unlikely your organization will gain magical insight into any real problem of interest by virtue hand-selecting team members whose ancestors have a specific continent of origin. And I have a hard time believing there is a benefit to adding more members of your team who are sexually aroused by humans who share their same sex organs (or adding members of your team who wish to change their sex organs via surgery or chemical sterization).

My priors are stacked so incredibly hard against studies which demonstrate that there is actually a benefit to structuring teams based on hand-selecting people who are LGBT, people from Africa, or adding more women. Indeed, it feels like if you lower qualifications to hire people from these groups, it can only result in organizations which are less qualified.

I'm wondering how it is possible that these consulting companies succeed in designing studies that show the opposite of (what I believe to be) reality. Is it all publication bias and p-hacking? My intuition says that it is. But there are some pretty powerful-looking studies that seem to be hard to explain via that explanation alone. Looking at an example of one of the studies done by McKinsey in the above link:

Earnings Before Interests and Taxes (EBIT) margins

McKinsey & Company’s global study of more than 1,000 companies in 15 countries found that organizations in the top quartile of gender diversity were more likely to outperform on profitability—25% more likely for gender diverse executive teams and 28% more likely for gender-diverse boards. Organizations in the top quartile for ethnic/cultural diversity among executives were 36% more likely to achieve above-average profitability. At the other end of the spectrum, companies in the bottom quartile for both gender and ethnic/cultural diversity were 27% less likely to experience profitability above the industry average. Researchers measured profitability by using average EBIT margins

What is the plausible mechanism behind which research that shows these kind of results are created? Are they measuring something that is real (i.e. does a more diverse workforce actually make companies more money)? Or are the brilliant people at McKinsey meticulously hand-selecting the companies to design studies which will show the opposite of reality?

  1. Imagine a universe where Steph Curry obtains Kobe Bryant's mystical manuscript book on basketball training, then brings in MJ to help him edit and add to the knowledge in it, and together they publish their work as The Basketball Bible which contains every piece of information to become the greatest Basketball player of all time, a flawless training program for any player if followed. Assume that if you follow the whole program, you will always be better than someone who doesn't. Except, there's this one weird thing, a superstition of Kobe's that they didn't take out because of the death thing, that you should always masturbate with your left hand, to improve ambidexterity. Now because the rest of the book does contain the sum total of basketball knowledge, and if you follow the program you will be superior at basketball ceteris paribus to someone who doesn't, studies would quickly find that basketball players who masturbate with their left hand are superior to those who masturbate with their right hand, on average. Of course, some people will question whether it really helps to masturbate with your left hand, but because devotion to the system helps you get better people who obey it unquestioningly will be more likely to follow closely and get better at basketball as a result; most people who don't do the pointless things probably will start skipping important drills too, and will likely drop out.

Now replace "Kobe Bryant's mystical basketball manuscript" with "the university and corporate system" and "left handed masturbation" with "diversity."

  1. Consider that your idea of "qualifications" may not be as important as you think it is. You say:

My priors are stacked so incredibly hard against studies which demonstrate that there is actually a benefit to structuring teams based on hand-selecting people who are LGBT, people from Africa, or adding more women. Indeed, it feels like if you lower qualifications to hire people from these groups, it can only result in organizations which are less qualified.

I'm applying this in terms of the selective school that I attended. It was fairly well known that URM candidates could score about half a standard deviation lower on the primary entrance exam than white and asian candidates. Yet, in the time I attended the school, I never met any URM students who were significantly noticeably dumber than average. Nor did I notice usable correlations between entrance exam scores and class performance or competition performance. (For what it's worth, I was half a standard deviation higher than average at my school, I nonetheless achieved the same level I have from High School to TheMotte itself: above average, but just below the level at which anyone gives a shit)

Over time I came to the conclusion that the upsetting thing about AA for a lot of people wasn't that less qualified people were being admitted to our exclusive club, it was that the qualifications that the gunners were agonizing over for years before applying didn't mean shit once you got in, they had no really useful predictive value. Your SAT and your LSAT and your GRE not being real accomplishments is much more horrifying than race.

An aside on the same point, I find the idea behind the way AA is applied in colleges to be extra disgusting: SATs matter, but only for white kids, they don't work "as well" for Black kids.

So a mix of those two.

it was that the qualifications that the gunners were agonizing over for years before applying didn't mean shit once you got in, they had no really useful predictive value.

I mean, this really depends on the program in question. I agree that there are tons of programs for which these tests are not terribly predictive; even moreso when we consider individual components of such tests. My graduate program was pretty math-heavy. I spoke to multiple prospective departments, and they pretty much all didn't give a shit about the non-math parts of the GRE. And even then, it's hard to say that the math section was predictive of how you'd do once you got in, but this is because of how the math score was used. Basically everyone who was admitted had off-the-charts math scores; they only used the math score as a quick check, "Is there something off about this guy? Like, did they manage to get through some random university's undergrad program while avoiding math stuff or cheating their way through or something?" I wasn't actually part of those decision processes, so I'm not going to say that it would be impossible to get in if you only had a 700-or-whatever, but my sense was that if you only had a 700-or-whatever, they were going to go through extra steps to make sure that there wasn't something wrong and to ensure that you had some hope of actually being capable enough to succeed (and you better have a patron on the faculty who wanted you there).

In such cases, I would be shocked to see a department like that start admitting a bunch of, say, ~600 GRE math score students, of any race, for whatever weird political/non-political reason... and not have a meaningful, visible reduction in student quality that either leads to reduction of standards or significant failure rate. At the same time, I would be willing to bet that the non-math part of the GRE would be near useless in predicting how students perform in the program.

Your link admits:

A vast body of research documents the relationship between diversity and improved financial performance. However, it is important to note that research can only establish correlations, not causations, between the two.

So WindeningGyre's suggestion of selection bias seems very plausible to me. (Another possibility: the most prestigious companies hire from elite schools, so they get employees who are already woke-aligned, and expect/implement these trainings). I'm not sure about the noise aspect, since in at least some cases there's both a large effect size and sample size (although maybe the effect size increases the chance of selection bias). For example:

A study from the International Monetary Fund reviewed over two million listed and non-listed firms across 34 countries in Europe. Their analysis revealed that having a higher number of women in senior positions contributes to a significantly higher ROA. By replacing just one man with one woman on the board or in senior management, firms could experience an 8–13 basis point increase in their ROA. This relationship is even more pronounced in industries that employ more women in their overall workforces: a firm in an industry in the top quartile for gender diversity on boards or in senior management is associated with a 20 basis points increase in ROA. In knowledge-intensive and high-tech industries, this relationship translates into an increase of approximately 30 basis points in ROA

That seems nearly impossible to generate from noise mining, but also too large to just be a result of having more women in leadership.

Some others seem to have more believable effect sizes. E.g.

Credit Suisse studied 30,000 senior executives at over 3,000 companies across the world. Among their findings: companies in which women held 20% or more management roles generated 2.04% higher cash flow returns on investment than companies with 15% or less women in management roles

2% more cash flow seems believable to me, and 3,000 companies is probably enough data that it isn't noise (although they could always have checked very many outcomes).

However, I think there are some plausible explanations that are at least somewhat favorable to "DEI."

I would not expect, a priori, interviewers and other people involved in the hiring process to be doing a particularly good job. As described in https://youtube.com/watch?v=5eW6Eagr9XA&ab_channel=Veritasium, interviewers don't have fast feedback and may be worse at predicting performance than a simple algorithm. Companies may also face principal-agent problems, where mid-level employees over-hire to make their own team seem more important. And individuals may very well be biased, even if the effect size for the whole market is much smaller than activists claim. So it wouldn't be particularly difficult to improve upon that.

Whether DEI actually does so depends on what it actually consists of. Just saying "hire more blacks and women no matter what" could maybe help if the company in question does engage in outright discrimination (or to be specific, its employees do), since it would correct a legitimately poor practice. More likely, a company might implement changes like having a longer interview process, having more people interview candidates, making the questions and the acceptable answers more consistent, etc. This would correct for some amount of individual bias, but would also improving the hiring pipeline more generally (something James Damore pointed out in his infamous memo). I know that many tech companies have extensive hiring processes for this reason; whether it does anything to increase female or minority representation I can only speculate.

The most obvious thing is reversed causality -- only profitable companies can afford the extra cost of DEI efforts and useless people on the board.

My understanding is that when studies actually follow changes to diversity -- such as when Norway mandated a certain percent of women on corporate boards -- you actually see a drop in profit. I'm not sure how robust that is, as one could imagine the overall economic situation changed, but still, AFAIK none of the studies that claim to show diversity helps profit do anything about causality.

But don't take my word for it: even the HBR (very DEI supportive) acknowledges it: https://hbr.org/2020/11/getting-serious-about-diversity-enough-already-with-the-business-case

Let’s start with the claim that putting more women on corporate boards leads to economic gains. That’s a fallacy, probably fueled by studies that went viral a decade ago reporting that the more women directors a company has, the better its financial performance. But those studies show correlations, not causality. In all likelihood, some other factor—such as industry or firm size—is responsible for both increases in the number of women directors and improvement in a firm’s performance.

In any case, the research touting the link was conducted by consulting firms and financial institutions and fails to pass muster when subjected to scholarly scrutiny. Meta-analyses of rigorous, peer-reviewed studies found no significant relationships—causal or otherwise—between board gender diversity and firm performance. That could be because women directors may not differ from their male counterparts in the characteristics presumed to affect board decisions, and even if they do differ, their voices may be marginalized. What is more pertinent, however, is that board decisions are typically too far removed from firms’ bottom-line performance to exert a direct or unconditional effect.

  • As for studies citing the positive impact of racial diversity on corporate financial performance, they do not stand up to scrutiny either.* Indeed, we know of no evidence to suggest that replacing, say, two or three white male directors with people from underrepresented groups is likely to enhance the profits of a Fortune 500 company.

The economic argument for diversity is no more valid when it’s applied to changing the makeup of the overall workforce. A 2015 survey of Harvard Business School alumni revealed that 76% of those in senior executive positions believe that “a more diverse workforce improves the organization’s financial performance.” But scholarly researchers have rarely found that increased diversity leads to improved financial outcomes. They have found that it leads to higher-quality work, better decision-making, greater team satisfaction, and more equality—under certain circumstances. Although those outcomes could conceivably make some aspects of the business more profitable, they would need to be extraordinarily consequential to affect a firm’s bottom line.

I like it.

Alice: We need to have more DIE.

Bob:Why?

Alice: It's because it is wonderful for company performance! Diverse companies do so much better financially?

Bob: This looks like confusing correlation with causation and maybe also we need some kind of confounder analysis?

Alice: Well, we need to put some women in our coprorate board and surely the results would show it!

Bob: OK, we did that and there is no significant relationship between women on board and performance.

Alice: Surely that's because women were always marginalized. This is what always happens.

Bob: So, how many women we need on the board to see some performance results that were promised?

Alice: Oh, come on, enough with that. Who cares about the financial performance anyway? It improves equality and team satisfaction (under certain circumstances)!

Bob: Why "equality" is even a goal - is it a communist cooperative? If I work better than Steve over there, why should we have equal outcomes? What "under certain circumstances" means - do we have the same circumstances here? And I heard people who are unhappy with DIE may have trouble staying employed in some places - would it confound the results on satisfaction with DIE?

Alice: Completely unrelated, you now have an appointment with HR tomorrow at 9am. They want to send you to a new exciting training "Avoiding offensive microagressions at the workplace". I'm sure it would be so much fun!

You can make math say anything you want it to say, apparently honestly, if you’re willing to lie about your input data. I think that was one of the lessons of the grievance studies affair, too- some of those papers(I think the rape culture in dog parks one?) had really high effect sizes because the input data was bullshit.

I mean, McKinsey may not be explicitly making up their numbers, but they’re probably selecting the hell out of it- compare Union Pacific(workforce overwhelmingly male and pretty heavily white or Hispanic, fairly low margins) to a company specifically picked for very high profit margins and lots of black lesbians on staff.

What is the plausible mechanism behind which research that shows these kind of results are created? Are they measuring something that is real (i.e. does a more diverse workforce actually make companies more money)? Or are the brilliant people at McKinsey meticulously hand-selecting the companies to design studies which will show the opposite of reality?

It works like this:

Step 1: High margin firm with very few workers comes into existence (Google, Apple, etc)

Step 2: Add diversity hires to avoid lawsuits

Step 3: Firm is still high margin because it still has very few employees

Step 4: Compare said firm to Ford, Waste Management, etc that have 1 million male working class workers.

Stipulating that they’re not just made up or otherwise fraudulent, these companies just don’t understand what reasonable empirical standards are for making causal claims using observational data. There exist rigorous methodologies for bridging the gap from correlation to causation in these settings but it can be tricky and subtle and McKinsey has no incentives to put in the effort nor do the consumers of these studies.

I know this because I’m an academic in a field with high empirical standards and I run across this McKinsey style of study in my domain from time to time and they’re just useless. Like the standards are so low it’s not even worth debunking. Down-thread substantive arguments about this are honestly kind of a waste of time; you wouldn’t spend time listing the reasons that a kid’s make believe is unrealistic or that some Aella poll is pointless. Consulting company studies, and I am really not exaggerating, carry the same epistemological weight. They just aren’t a valid way to learn about the world.

It could just be the wrong way around; established, profitable companies can afford to spunk money away on diversity hires and vanity projects like stuffing boardrooms for social goodboy points, and less or un-profitable companies who don't have that kind of capital would just go bust when they try to do so. The end result is that only the companies who can afford to shoulder X% of deadweight engage in this behaviour.

A more convincing metric would be if startups are more or less likely to fail due to being diverse, but even this can be skewed by things like grants for X-led companies or whatever.

Companies that make themselves attractive to investors by having high ratings in diversity ratings get more investments and therefore do better. When companies have to put stats such as percentage of female employees, diversity scores etc in their annual report, these numbers will matter. I was somewhat connected to a company that makes software that scrapes the numbers from financial statements and annual reports and helps investors make decisions without having to manually dig through tonnes of paper. These numbers did play a small but not insignificant role.

I can believe the relation exists and causality goes the opposite way. Anecdote: the woke tech company I work for recently had a big layoff+bad stock market results and now suddenly there's just less of all this stuff.

Teams devoted to diversity/etc had fairly big cuts, while teams devoted to making money with tech had comparatively small cuts. Within the tech part of the org it's openly acknowledged that individual performance played a big role in who got cut. Most of the people whose names you recognize for woke stuff are gone and the people who remain you recognize because of what they shipped.

You sound like a 'character', is that right?

While I'd heard similar groups had gotten caught, I'd heard mixed things about performance. It would actually be encouraging if it were more performance based, and less random-seeming, as it does from the other side of the Atlantic, where the cuts aren't all through yet.

This is definitely it. Big/more prominent companies generally adhere more to DEI ideology because they are bigger targets for woke gleichschaltung. Big/more prominent companies are also generally more successful otherwise they wouldn't be big/more prominent in the first place (plus they can more readily leverage economies of scale).

Let's imagine that I, myself the writer of this post, suddenly found some app like in a hentai doujin that can perform actual hypnosis on people. And let's imagine that I hypnotized every player in the NBA to become a dedicated pedofascist. Does this prove that believing in pedofascism makes you a better basketball player or that a pedofascist ideological orientation has any relationship to skill at basketball? Would any of the answers to these questions change if I had merely browbeat, gaslight, etc. them into it or even just honestly convinced them (woke conversion is somewhere in between the two, though obviously leaning towards the more coercive end in many cases)? Of course not. Replacing "DEI" with a more obscure ideology makes it clear that the whole thing is a non-sequitur.

(To be clear, being a dedicated pedofascist might make you more likely to be a better basketball player, given that fascism tends to emphasize competitiveness and physical vigor, but a mere correlation created by convincing good basketball players of it could never prove that by itself. And unless "DEI" advocates can offer up a more fundamental explanation of why their ideology might enhance business productivity as I just did for my example, they have nothing else.)

This is spurious reasoning and it's an argument that requires inferring causation based on correlation alone. Accenture tries to protect themselves from this criticism by employing motte-and-bailey, stating "it is important to note that research can only establish correlations, not causations, between the two" while very clearly attempting to push the reader towards the conclusion that diversity is good for companies. Even if the studies they're seeing aren't fucked with and there isn't a massive file drawer effect going on (and I would probably wager there is) there are plenty of ways a positive correlation between performance and diversity could be seen even if the promotion of diversity has a negative effect.

For example, it's possible that the companies that already have a large advantage can afford to implement bullshit like diversity initiatives. They can make all sorts of profitability-hurting decisions without actually impacting their position relative to other companies all too much, whereas other companies not in the same position would get selected out if they did that. One of the big examples of a hegemonic company caving to internal pressures and going nuts on the DEI shit is Disney. Its position is so strong that it can do such things like incessantly arrange internal DEI initiatives (one of which they literally got Ibram X. Kendi in for), and take strong public stands on controversial legislation which immensely hurts their public image but in the grand scheme of things doesn't make too large of a dent. Additionally, if you wanted to pressure companies to endorse your social goals you would probably mostly target dominant players since they have the most clout to push the agenda through. So the more successful a company is, the more attempts at ideological capture it will be subject to.

All this then becomes a self-reinforcing cycle. For instance, if many large institutional investors become "woke" and attempt to use their influence as a shareholder to remodel the internal leadership of the companies they invest in to be more diverse, this is going to strengthen that relationship even further. This is, in fact, exactly what the world's largest asset manager is doing. "According to BlackRock, insufficient board gender diversity was the main reason for voting against a director in the Americas region, where it voted against 1,554 directors at 975 companies - or 61% of the votes that the firm cast against directors in the region - for board gender diversity-related reasons." This creates a situation where companies that are getting funding (which would also be the companies with the most promising prospects) are the companies that are facing most pressure to be woke.

There are many more plausible explanations you could add that don’t amount to “diversity is good for your bottom line” (some of which have already been covered below, such as urban-rural divides possibly affecting the results). In short, even if the relationship detailed here is real I would say it is very premature to come to the conclusion that this means diversity is beneficial. Rather, it is far more likely that profitability creates the conditions that lead to DEI and not the other way around.

EDIT: added more

deleted

Yep, at least when this was new and I cared enough to pay attention the studies were showing that view point diversity was good for overcoming groupthink but they were then mostly using those studies to extend the point that teams made up of different colors who all had the same viewpoint would do the same.

I can see some cases where ethnic diversity would genuinely help in gaining access to new markets.

I know a Chinese Malaysian girl who came to Australia 10 years ago. Reasonably proficient in English, but fluent in Mandarin and Malay. She has an understanding of business hustle that is far beyond what many people from the local Australian culture have (which is based on going to uni and getting a good career; as compared to starting your own business.)

Because of this, she has years of experience in sourcing manufacturing direct from Chinese factories and an understanding of the tastes and predilections of consumers in Malaysia. Australian born executives in the major retailer that shes contracted to had no idea how to directly commission products, or organise drop shipping from factories in China. She also has a better understanding of the scalability of eCommerce platforms in larger markets (Australia is a small market at ~25 million people compared to many countries in Asia. There are big profits to be made if you posture yourself correctly, but who knows how to do that when the culture and language are so different?)

tldr; People from other countries and ethnic backgrounds can have knowledge that is unavailable in a homogeneous society.

But would this apply to women, LGBT, people with a disability etc? Probably not beyond their tastes and needs as consumers/users. And would it work at scale? Would more than 1 person from Malaysia be able to provide more information? Would a person from Nigeria be able to provide the same value with knowledge of African markets and customs?

Edit: added a bit more info.

Read the studies and find out.

Mostly it's down to just making shit up in the discussion and conclusion sections, only loosely connected to parts of the results.

If I remember correctly, that McKinsey conclusion only holds for a certain set of businesses but there are anti-correlations in others, which they don't mention in the summary.

Companies based in cosmopolitan enviroments should have an advantage due to networking oppertunities, cross-pollination of specialists, easier access to experts in diverse fields, etc. Lets call this environmental dynamism.

The pool of available workers for any particular position in a cosmopolitan enviroment is often more diverse (but not always). In addition companies in more cosmopolitan areas are more likely to be proactive at hiring diverse candidates for cultural reasons.

So if you could measure environmental dynamism it might show that that is where the magic is coming from. Diverse places just happen to be dynamic places.

I was under the impression that bolstering diversity scores raises ESG scores which in turn allow you access to more and more funding. When you make your workforce more diverse you're in large part making it worse, but you are also making it easier to borrow large sums of money at low/zero interest, and that will show up in the numbers somewhere. Bad move for the longterm, but most of the people making those decisions aren't interested in the long term and won't be harmed by the eventual consequences (they will be using their golden parachute to take a nice and relaxing flight to a similar position in another company).

I think this is the goal, not the state of current practice for lending. And EBIT wouldn’t consider it. It’s pretty much revenue less opex.

Could be some sort of selection bias. Craft your filters in just the right way. Easily within the capabilities of any Accenture associate.

My default assumption is that any kind of financial figure associated with DEI initiatives is massaged and distorted, and those funds could easily be "laundered" out of the statistical analysis. I have worked in a professional capacity long enough to know that you can make the numbers say whatever you want, and in this case they don't even need to try too hard - if you launch an objection to those figures, you're effectively arguing for the racist position, and nobody competent enough to get the qualifications required is going to do something that terrible for their future employability.

My prior would be, McKinsey will meticulously hand-select companies to design studies that will flatter elite opinion. Staying on the right side of the right people is how those lucrative public contracts keep flowing in.

I've never heard any mechanism proposed either. Do you know if they controlled for company size? Would be funny if they were just measuring returns to scale, with big companies having more diverse employees due to having more resources to devote to DEI.

I don’t think you actually have to hand select companies very hard, because there’s lots of infra-oriented companies with low margins because they have to maintain lots of infrastructure and workforces that are as white and male as you’d expect blue collar infrastructure workforces to be. Just stuff the ‘low diversity’ group with those and let companies with more normal profit margins and representations contrast, then don’t double check how far the best fit line extends.

Yet there can be costs to diversity (eg communication issues, cultural differences causing strife). I do believe in balance the sign is likely positive but almost certainly dwarfed by competence (ie a competent workforce trumps a diverse one).

I've never heard any mechanism proposed either.

Is it not usually something along the lines of "Different backgrounds = different perspectives + more domain information"?

I watched a documentary on the Yorkshire Ripper the other day, and (the show alleged) that the retrospective enquiry into "Why did it take so long to catch him" concluded that, because the task force was composed near-exclusively of set-in-their-ways Old Boys 1970s Norf FC supporters, they for years stuck to the theory that any working-class woman out unchaperoned at night was a prostitute, therefore the Ripper was targeting prostitutes, and that made them incorrectly focus their inquiries in that direction. Whereas if they'd had a few women in senior police roles maybe they could have said "Hey wait a minute, a women out at night isn't automatically a whore".

How this lesson against groupthink applies to other industries I'm not sure, but if you're marketing consumer goods then it might be profitable if you have a gay or a black to ask them what's the "in" colours amongst the minority community this season, or something, idk.

Similarly, two Milwaukee cops managed to be convinced by Jeffrey Dahmer that a naked14-yr-old Laotian kid was actually his 19-yr-old boyfriend. Given well-established issues re cross-racial eyewitness identification and the like, it seems possible that an Asian cop, or perhaps even a non-Asian cop who had seen photos of the kids of Asian colleagues, might have been less likely to have been fooled.

Norf FC supporters

Thank you for reminding me of this classic meme, gonna do a little binge.

Are these results controlled for other variables? If they just took random companies from various locations and industries, I would expect that the various diversity metrics are serving as proxies for other, more meaningful variables. It could be simply that firms headquartered in big cities turn out to do better than firms headquartered in smaller cities. Perhaps big cities are more likely to have a progressive culture which results in a more diverse workplace. In reality the better performance is more likely to be due to network or selection effects, a larger labor pool, or any of an uncountable number of other variables.

I can think of a few reasons that companies with a more 'diverse' or 'female' exec profile are more profitable.

1 - more profitable companies can afford affirmative action.

Some reports are coming out that the recent tech layoffs disproportionately affected middle-managers, women etc.

Some software companies were making millions with teams of 10-30 and then bloated up to teams of 300 or 3000.

2 - affirmative action is profitable due to federal contracts. Administrative rules or laws surrounding government contracts make it so that large companies that want to bid on large federal contracts have to have a certain %age of diversity or a certain %age of diversity spend. Ie they need to either directly have affirmative action, or give business to companies that have affirmative action.

Some companies launder diversity in such a way. They buy products from a regular company and sell the product at a higher price as 'woman-owned' or 'minority' spend or some such. I'm sure that has to be a very profitable enterprise.

3 - people that are familiar with such schemes may be more likely to design profitable companies.

Indeed, why start a regular b2b business when you could set up your wife as the owner and make it a 'woman-owned' company?

4 - new companies might be more profitable than older, bigger ones

It's a lot easier to set up a few women or minorities on your board when you are a small start-up instead of a publicly-owned corporation, or any large company for which leadership is intensely scrutinized. The individuals who would make 'appropriate' candidates from a business or shareholder's point of view may not tick the boxes that the DEI crowd wants ticked, due to under-representation due to systemic oppression etc.

The fact that the largest, most data-driven, well-informed companies in the world in all of history (Silicon Valley giants) are still mostly male, east-asian and european despite their own avowed, desperate efforts tells you all you need to know about the business value of diversity.

I've always figured that this sort of study simply identifies that the businesses that are sufficiently tech-orientated and abstracted away from people doing any actual productive work being able to essentially carry trophy diversity without it significantly hitting the bottom line.

Yeah, this seems like the most likely explanation. I would guess that the biggest, most powerful companies in the world make a lot of their money based off of their ownership of capital, and subsequent rent-seeking. With a side hustle of regulatory capture that lets them extract more rent, and acquire more capital.

I feel like the companies with the means to extract those rents will also have a desire to signal to everyone else how virtuous they are. The Vanguards and Blackrocks of the world can point to their 50% woman, 30% black executives and say "look at how diverse your consent-manufacturer overlords are!"

Right. A two person business probably doesn't have an HR department, never mind a diversity officer.

It's also more likely that a very small business can have nobody in the company pressuring them for diversity. If 1 out of every 50 employees is an activist, a company with 10 employees might not face much pressure because it's easy for them to win at the statistics. Of course, small business are also notoriously prone to failure.

(These are just hypotheses. We'd need studies, but getting them will be hard.)

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