The real reason diversity makes better companies

Here in Sweden it’s common, maybe even mandatory, to say that diverse companies are more innovative and even more profitable. But why are they?

Normally when something as good as this is being discussed, people are so afraid of looking like idiots they avoid discussing the reasons. Or better yet, just shout loudly about how good it is. I don’t think this is good for society. Not only are we shaming smart people into silence, but we’re also spreading ignorance by not discussing why good ideas are good.

Therefore here is the reason, as I’ve understood it, that diverse companies are better than no- diverse companies.

To make sure we’re on the same page I need to explain how a company works: Companies are the sum of the people working at them. A company culture is just the accepted behaviour of individuals at the company. The profits of a company is the margin between the value the people at the company delivers, and the effort they have to put in.

This is why a company can do more than individuals. Cooperation leverages the employees efforts and smarts.

This is really - really - hard to do well, and the larger the group, the harder it is. The reason for that is that every individual has biases and points of ignorance, putting them all together you might start leveraging stupidity instead of smarts.

This is where diversity comes in

One really simple way to make sure you’re not leveraging stupidity is to make sure you have a wide range of ideas floating around at the company. Having different points of view does not stop a company from having a culture. It does demand more communication between employees though.

The easiest way to make sure you have many points of view is to put people from many different backgrounds in the process.

Diversity limits the risk of taking stupid actions, and it can push people to communicate more instead of leaving things unsaid.

So the next time you hear diversity is great, now you at least know one concrete reason why.