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Making money without testosterone

By Halla Tomasdottir, Special to CNN
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Feminine response to a financial crash
STORY HIGHLIGHTS
  • Iceland suffered a devastating crash, wiping out 90% of banking sector
  • Halla Tomasdottir says women-owned firm survived by avoiding unnecessary risk
  • She says a lack of diversity in banking led people to follow the herd
  • The empowerment of women offers a great business opportunity, she says

Editor's note: TED is a nonprofit organization dedicated to "Ideas worth spreading," which it distributes through talks posted on its website. Halla Tomasdottir, who spoke at the TED Women conference in December, is the co-founder and chairman of Audur Capital, a financial services firm based in Iceland. She founded Audur Capital along with Kristin Petursdottir, a former investment banker, just over a year before Iceland suffered an almost complete economic meltdown in the fall of 2008. Audur Capital got through the eye of the financial storm without experiencing direct losses to their own equity or to their clients' funds under management, Tomasdottir said.

Reykjavik, Iceland (CNN) -- You might wonder why two women decided to leave successful careers and start a financial services company emphasizing feminine values.

To put it briefly, we were somewhat overwhelmed by the testosterone levels in business and finance, and we lost faith in the sustainability of operating this way.

This was not about women vs. men, but rather about the lack of diversity in the field, which led to serious following-the-herd behavior and poor quality decision-making. We started to worry about what this behavior could produce and felt that a more balanced and sensible approach was needed.

So we founded Audur Capital, based upon values that made more sense to us. These values are:

-- Independence. We make sure that we always provide unbiased advice to our clients and remain true to our mission.

-- Risk awareness. We make sure we understand the risks we take and that we never invest in things we don't understand.

-- Straight talk. We do not overcomplicate things and we tell people the truth, sharing the downside and the upside in a straightforward and simple manner.

-- Emotional capital. We find emotional due diligence to be just as important as financial due diligence. After all, it's people and not Excel spreadsheets who make the profits.

-- Profit with principles. We care about how we make our profit, and we are willing to take a long-term view and include social and environmental considerations in our definition of profits. This was common sense to us, but unfortunately at the time, common sense was not all that common.

Iceland's banking system had grown to be nearly 12 times the size of the Icelandic economy when the banks collapsed. It seemed like becoming big was an objective in and of itself, and such an objective leads to excessively risky behavior. Compensation and bonus practices further encouraged risk-taking and short-term thinking.

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The same behaviors were certainly present on Wall Street and in the City of London, but the small size of Iceland and the small currency made the consequences more dramatic.

More than 90% of the banking sector collapsed, and shareholders and clients experienced significant losses. The few remaining financial services providers also experienced significant difficulties and losses. Most ended up receiving governmental aid.

At Audur Capital, we believe our values were instrumental in avoiding losses for ourselves and our clients.

We told people the truth about our concerns about the system and generally advised them to adopt a risk-aware investment strategy for what we thought would be turbulent times. I guess you could say that we took a hard look at the data -- both the financial data and the emotional data -- and decided to play it safe until things would make more sense again instead of going with the herd.

I see entirely too many people striving to rebuild the very things that failed us -- which to me seems senseless, if not insane.
--Halla Tomasdottir
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But founding Audur Capital was not just about values. We also firmly believe in the business opportunity offered by two related trends: the growing empowerment of women and the increasing demand for sustainable ways of living.

The growing human and financial capital of women is one of the most compelling commercial opportunities for the future. We know from ample research that enhanced diversity improves the bottom line, as do responsible and sustainable business practices.

Now that the Western world has experienced the greatest economic downturn in decades, one has to wonder whether we will learn and change our ways? I have to admit that there are days that I have great doubts that the crisis will bring about the change we need in business and finance.

I see entirely too many people striving to rebuild the very things that failed us, which seems senseless, if not insane. But most days, I remain hopeful because I believe in people. Consumers and investors are becoming more conscious of how their money is handled and are increasingly voting with their wallets.

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Change is more likely to happen if we mobilize and empower women. Men and women bring different views and perspectives, and instead of fighting that fact we should celebrate it and embrace the beauty of balance. It shouldn't be about either women OR men, or about business OR philanthropy.

We should give up on the tyranny of the either/or and embrace the beauty of both and start doing business that is good, in all senses of the word. It is the only sustainable future.

The opinions expressed in this commentary are solely those of Halla Tomasdottir.