Wealth Matters | v1.009
Wealth determinants are not immutable
In light of the pandemic and the Black Lives Matter movement, we are gaining a stronger, collective social consciousness, coming to grips with our country’s history of slavery and recognizing how racial discrimination and inequity persists today. I have written about the need to reckon with Slave capitalism before, so here is a slightly longer, complementary read (about 6 minutes) you can bookmark.
Today, I want to focus on a certain racial disparities study from 2018 that reported the following:
In 99% of neighborhoods in the United States, Black boys earn less in adulthood than White boys who grow up in families with comparable income. White boys who grow up rich are likely to remain that way. Black boys raised at the top, however, are more likely to become poor than to stay wealthy in their own adult households.
When The New York Times featured this study, it was accompanied by an animated infographic to illustrate the study’s findings. Watching the animation is heartbreaking. The findings of the study show that opportunity is not created equally — especially for Black men. One of the root causes, the study highlights, puts a fine point on a long running question about the determinants of wealth — where you are born determines economic prosperity. The analysis disrupts any fantasy we might have about equal access meaning equal opportunity, belied by systemic racism.
I can’t help but revisit this study again to highlight what is happening in the small business sector today. The economic situation is not only dire for companies with fewer than 500 employees, but for Black-owned businesses we might be witnessing near extinction with perhaps irreversible consequences:
12.3% of the U.S. population is Black, but only 2% of small businesses are Black-owned. Due to COVID, the number of active Black businesses declined by 41%.
Read that again, my People … let that sink in for a moment longer.
The potential closure of nearly half of existing Black-owned business feels like a gut punch. We have yet to hear all the many real, human stories behind those numbers, but I don’t think we need to wait to act. This moment requires urgency to address building a supportive ecosystem for Black-owned businesses, as a more recent 2020 McKinsey study indicates:
The right business ecosystems can mitigate or negate the effects of structural obstacles to business building for Black business owners—and add $290 billion in business equity.
This study confirms what many of us already know. Forming a new business requires significant startup funding, often depending on savings or friends and family support. Entrepreneurial ideas suffer in early stages from short runways, too much debt, and insufficient access to knowledge and support. To overcome these barriers, we need to build trust, reduce barriers to expertise, and unlock investment from the public and private sectors. Doing all this has well-known, positive GDP growth impacts ranging from $1 to $2 trillion — yes, TRILLION!
Both studies leave me optimistic, despite the stark insights. They both indicate that the determinants of wealth and success of a business are not immutable. We can intervene and shift the environmental causes that keep Black and Brown communities from wealth creation. And the levers are beginning to get pulled, simply because it will benefit everyone.
We will need explicit racial equity policy. We can begin by building from the Biden plan. Meanwhile, we are seeing commitments from private sector actors like Goldman Sachs and Comcast step up. Last year, efforts over at Netflix caught my attention when they announced they would deposit $100 million to Black financial institutions to increase lending to small businesses.
This is a game-changing time, friends. Let’s keep our eyes on all this, knowing that we need a new ecosystem for an old problem.
Share what you’re seeing from your vantage point.
Onward, my People.
The “I Am a Man” poster above is more than a lasting statement of truth — it’s a response to one of the greatest historical hypocrisies of American democracy: the deliberate and knowing exclusion of Black people from the full rights of American citizenship. Read more about the genesis of this poster here.
Thanks for writing on this Jorge. It’s so important right now. 🙏🏽👊🏾