Diversity, Equity & Inclusion 2: Kim Lew – The Opportunity and Challenge (Capital Allocators, EP.152)

Episode Summary

Executive Summary: Kim Liu describes how being half Black and half Chinese shaped her experience with identity, bias, and belonging from childhood through Wall Street, business school, and allocator roles. She argues diversity is both a moral issue and an investment advantage: it improves decision-making, widens the pipeline, and can enhance returns when paired with deliberate sourcing and business-building support.

Main Topics: Identity, belonging, and early bias (Priority: 5/5): Kim explains how her mixed-race background made her feel different in every community, and how early experiences taught her to anticipate bias and protect herself emotionally. Gender discrimination in early career (Priority: 4/5): She contrasts race and gender in her first banking job, describing overt sexism that pushed her out more than race-based exclusion at that stage. Bias and self-doubt in elite institutions (Priority: 4/5): Kim recounts racist incidents at Harvard Business School and subtle comments that created self-consciousness and reinforced the importance of supportive environments. Building inclusive teams at Carnegie (Priority: 5/5): She details how she and her team use complementary perspectives, constructive disagreement, and broad communication styles to create a stronger investment process. Evaluating and sourcing diverse managers (Priority: 5/5): Kim describes a practical framework for reducing unconscious bias in manager selection, including challenging shortcuts, widening sourcing, and assigning a team member to screen with a broad lens. Measuring diversity and linking it to outcomes (Priority: 5/5): Carnegie added diversity to its scorecard and found the highest-ranked managers also had the strongest diversity scores, reinforcing the case that diversity and performance can align. Industry change, pipelines, and external advocacy (Priority: 4/5): She argues the biggest lever is making large firms more diverse while also supporting diverse emerging managers and organizations such as SEO, Girls Who Invest, NASP, and TWIGO.

Key Arguments: Diversity is partly a prioritization problem: if institutions make it important, they can solve it over time. Diverse perspectives can improve investing because they challenge assumptions, expose shortcuts, and surface opportunities others miss. There is no investment-performance reason to assume diverse managers underperform; the distribution should be at least as good as the broader manager universe if selection is done well. The biggest long-term impact comes from making large firms more diverse because they create the future pipeline of spinouts and leaders. In illiquid and less efficient asset classes, out-of-the-box thinking from diverse teams may produce the greatest performance edge. LPs can add value beyond capital by helping managers with business-building, pipeline development, and organizational design. Many barriers are not overt discrimination but habitual shortcuts and proxies that inadvertently disadvantage people without traditional access or backgrounds. Scarcity thinking and fear of losing seats are major obstacles; institutions need to expand the pie rather than treat inclusion as zero-sum.

Data Points: Miniseries format: 4-part introduction - Ted Seides describes the Diversity, Equity, and Inclusion miniseries as a four-part exploration of the issues. Interviews referenced: 2-time former guest - Kim Liu is introduced as a returning guest on Capital Allocators. Mixed heritage: Half Black, half Chinese - Kim describes her parents as an African-American mother and a Chinese immigrant father. Age of parents at birth: 17 years old each - Ted introduces Kim as born to two 17-year-old children/parents. First job tenure trigger: Left after first post-college job due to gender issues - She says sexism at Chemical Bank drove her departure. Business school incident: First N-word experience occurred within 2 hours of arriving at HBS - Kim recounts being shouted at from a car shortly after arriving on campus. Foundation career role: Youngest person at Ford Foundation - She notes she was far younger than peers when she joined Ford. Carnegie role: One of the oldest people when she joined - Kim contrasts her role at Carnegie with being the youngest at Ford. Team composition issue: Initially tried to add a man - She says Carnegie’s team was heavily women and they sought gender balance first. Diversity scorecard rating scale: 1 to 3 - Carnegie used a blunt three-point diversity score in portfolio scorecarding. Relevant diversity threshold: Around 30% - Kim says the relevant percentage for a diverse team was around 30% (she notes she may not recall precisely). Portfolio review cadence: Every 2 or 3 years - Carnegie scorecards its managers on a multi-year basis. Manager scorecard dimensions: 3 dimensions of diversity - Kim notes the portfolio had multiple diversity dimensions, each scored separately. Family-income figure for SEO scholars: Average family income about $25,000/year - She describes SEO’s scholarship program for disadvantaged students. SEO founding year: 1985 or 1986 - Kim says Sponsors for Educational Opportunity started in the mid-1980s, close to those years. Walking/running habit: At least 3 miles - She says her daily habit is to get outside and walk or run three miles or more.

Pivotal Quotes: "You know when you're not aligned." — Kim Liu: She explains why honesty and directness matter in manager relationships and fee/alignment discussions. "If you are in a seat and you are not challenging people on these issues, you're wasting that seat." — Michelle Obama (as quoted by Kim Liu): Kim cites this as motivation for using her position to engage on diversity and inclusion. "If you make it important, you will solve that problem." — Kim Liu: She argues diversity progress is achievable if institutions prioritize it consistently.

Implications: The conversation suggests DEI can improve both fairness and investment outcomes, but only if LPs and firms move beyond vague intent to deliberate sourcing, honest conversations, and pipeline-building. Change is possible, but it requires sustained prioritization.