In this way, recruitment is meritocratic, a Darwinian survival of the fittest. Yet most organisations are not singular. They are team sports. What matters most to organisations is collective performance, not individual brilliance. Most successful ones are not a Darwinian dog-fight. Diversity is important precisely because it improves collective functioning, over and above individual ability – recall the “Page equation”. Diversity is, by definition, a collective concept. That lays bare a potential tension between recruitment practices, which typically focus on the characteristics of the individual, and organisational success, which typically relies on the characteristics of the collective. This disconnect is, interestingly enough, the self-same one exposed by the global financial crisis. Pre-crisis regulation was also individually-focussed. Regulators looked at banks one by one. Each of them individually had good CVs, strong social skills, were smartly dressed. Yet the collective consequence was a financial system in which everyone looked the same, thought the same and placed the same bets. That lack of diversity left the whole system vulnerable to collapse which, of course, it duly did. Since the crisis, regulators have learned their lesson. Regulation has taken on a systemic orientation, with regulatory measures calibrated to risk across the financial system as a whole. That means regulators taking measures which promote system-wide diversity, such as encouraging new entrants into the field with new business models. In short, financial regulation these days seeks to take explicit account of the social externalities of systemic risk.

To enhance their own self-image, members of the group often then systematically exaggerate differences with other groups, while emphasizing similarities within their own. 11 Perhaps most important of  7  Goldin et al (2011). 8  Further details available on the http://www.etymonline.com/index.php?term=diversity. 9  It uses Google’s Ngram Viewer. 10  For example, Tajfel et al (1971). 11  Karlan and List (2007). BIS central bankers’ speeches  Online  Etymology  Dictionary  at  3  all, people may discriminate or negatively stereotype the “out-group”, as a means of enhancing the image of the “in-group” and hence their own self-image. Behaviour consistent with social identity theory has since been detected in a wide range of social settings: in families, sports teams, schools, gangs, colleges and organisations. It generates important, but often subtle, biases in decision-making which may discriminate against members of the out-group. Despite laws against racial discrimination in most developed countries, there is evidence that racial stereotyping and discrimination in everyday decision-making has persisted, in everything from selling cars to making loans. 12 While deeply undesirable, these behaviours cannot be dismissed as entirely irrational. Indeed, economists and psychologists have developed models to show this behaviour may indeed be rational once the role of social identity and social norms are recognised. 13 And because a multicultural society gives rise to greater numbers of distinct groups and identities, this sociallydiscriminatory behaviour might even have become more, not less, powerful over time.