Do The Math: HBCUs Owning Their Own Tournaments Can Pay Better Than Hoping To Be Cinderellas Against PWIs In Theirs

Posted on March 21, 2023 by | Leave a comment

“Take the fast road and get robbed then. Do you want to be famous or do you want to be rich? Because there is a likeliness that you might not be able to be both in this game. At a certain point you have to decide, do you want to be seen and known and look like you got bread and have everybody assume you got bread? Or do you really want to have bread and have people just assume you broke and not really getting it?” – Bun B

Jackie Robinson’s foray into Major League Baseball. Sam “Bam” Cunningham’s foray into PWI football. Texas Western’s championship in 1966 in PWI basketball. These are pivotal moments when an individual’s action would start the demolition of the institutions of African American institutional athletic power along with collapse of the infrastructure and ecosystems that made them such valuable assets to the African American community. In both instances, it would precipitate a talent and economic drain of African American institutions. 

The Negro Leagues would ultimately fold, ownership, executives, managers, hundreds if not thousands of jobs that were the byproduct of the Negro League wiped away to the sands of time. In 1947, there were zero African American owners in Major League Baseball. In 2023, there are zero African American owners in Major League Baseball. “Virtually all of the initial (Negro League) ownership was Black”, says Garrick Kebede, a Houston-based financial adviser and Negro League Baseball historian. In fact, across all major professional sports leagues (121 teams), there is only one African American principal owner – Michael Jordan, owner of the Charlotte Hornets and rumors are he is on the verge of selling the team almost eight decades after Branch Rickey poached Jackie Robinson. On the labor side, Major League Baseball reached its African American apex of players in 1981 with 18.7 percent of the players being African American. In 2023, that number has seen a precipitous decline down to 6.7 percent – a number not seen since 1957, a decade after Jackie Robinson entered the majors. Jackie Robinson’s move to the MLB did not just set the stage for the demise of the Negro Leagues, it would set the seed for HBCUs athletic demise just a few decades later.

A little over two decades later in 1966, Texas Western University (now, University of Texas El-Paso) would win the NCAA basketball championship with the first all-black starting lineup at a PWI and a few years later in 1970, Sam “Bam” Cunningham would take USC’s offense and run all over the all-white University of Alabama. Jerry Claiborne, an assistant to Head Coach Bear Bryant at the University of Alabama, famously said, “Sam Cunningham did more to integrate Alabama in 60 minutes than Martin Luther King Jr. did in 20 years.” But he did not integrate anything. Both instances simply convinced PWIs that Black athletes were the future of their programs and taking that talent from HBCUs could financially benefit them immensely among their STILL predominantly white fan bases and boosters. The fans and boosters just want to win. And while a decrease in European American players happened, the coaches, boosters, trustees, school bodies, and ownership in all the places that matter would still be what it has always been. Before enslaved Africans were brought to America, indentured servants who were the poor of Europe would be the labor pool of early America. This was to be no different of a transition. And ownership is ultimately the rub of where all of this lies for African America and HBCUs. 

The money behind the playoffs for football, the NCAA and NIT tournament for basketball, and the World Series for baseball and softball is dare we say – complicated. This in part is due to the way payouts are structured for each playoff/tournament and how schools and conferences choose to deal with the funds they receive for participating. For instance, in the NCAA tournament, “The NCAA urges the conference to distribute the earnings equally to the schools, but it is not a requirement. Typically, the bigger conferences will divide the money and send it to its member schools. The smaller ones, however, need the money to cover their own expenses, and then will send what’s left to its member schools.”, according to AS’s Jennifer Bubel. On the other hand, the NCAA’s ownership of the NIT operates a bit differently. “The NCAA has a complex way of rewarding teams for participating in March Madness. For the NIT, it’s much simpler. In addition to having travel, hotel and other expenses comped, each school in the NIT is given $4,000 for every game it plays. It’s a total payout pool of $128,000 this year.” says Sportico’s Eben Nvoy-Williams. Yet, Nvoy-Williams also points out that the NIT’s profitability to the NCAA while being lesser known is extremely profitable, “Though it’s nowhere near the commercial entity of March Madness, the National Invitation Tournament, or NIT, is a very profitable business for the NCAA. In 2019, the last year the event was held, it turned a $2.1 million profit on $3.3 million in expenses, according to financial documents. In 2018, the numbers were similar.” For football, “Each conference receives $6 million from the College Football Playoff for each team selected for a semifinal game and $4 million for each team that plays in a non-playoff bowl under the College Football Playoff.” reports Business of College Sports. Last but not least there is baseball, “In 2011, the NCAA included the College World Series as part of a $500 million television deal with ESPN for 24 sports championships through 2023-2024.” according to Huddle Up’s Joe Pompliano. Have we lost everyone yet? To sum it up, the finances of college athletics are extremely complicated. Adding to that complication is the fact that these playoffs and tournaments are all owned by the NCAA. But that ownership is now under threat as the Power 5 members realizing their own outsized power within the NCAA are vying to form their own entity. CBS Sports reports, “Majority of Power Five schools favor breaking away” and they primarily are looking to do so because they recognize they are a disproportionate contributor to NCAA events and more ownership would allow to share less and keep more within their conferences. Whether or not they determine that ownership is within the NCAA or a separate athletic association of their own is to be determined. Given their outsize influence in the NCAA though it may end up being a debate over how you pronounce tomato or potato. 

Many HBCU athletic supporters believe it is better that HBCUs fight for the respect and equality of their PWI counterparts in the NCAA as opposed to taking ownership of the HBCU Power Five (SWAC, MEAC, SIAC, CIAA, and GCAC) and forming the HBCU Athletic Association. This despite not having the alumni bases, boosters, or economic weight to be anything more than what we are in the NCAA’s ecosystem. In some respects, it harkens to the playing field of hip-hop where many artists finally started realizing that it was far better financially to be an independent artist than sign to a major label where an advance (also known as a loan) would keep the artist indebted to the label forever. A continued belief is that all we need to do is get the best athletes to come back to HBCUs and that resolves everything. Something no one seems to actually have an answer on how to accomplish or recognition in just how much that would cost – again, while not having the financial resources to accomplish it. Many think abandoning HBCU conferences and moving into PWI conferences is the answer despite multiple schools having tried and failing. HBCUs weakening HBCU conferences for PWI conferences is no different than African American athletes abandoning HBCUs for PWIs. It does not help us scale institutional power or circulate institutional capital. 

As it stands right now, the NCAA tournament is worth approximately $340,000 per win and with only the SWAC and MEAC participating (FBS schools only), even with a miraculous run it would workout to only $220,250 per school between the two conferences should they BOTH make it all the way to the Final Four. The secret to a conference actually making a lot of money in the NCAA tournament is having multiple teams from the conference get into the tournament. The SWAC/MEAC always only get one each and that is the automatic bid from winning their conference tournament. Money that a team earns in the tournament is usually (not required) split evenly among all of the members of the conference. Not always the case with smaller schools like HBCUs whose individual programs usually need every single penny. Given that every SWAC/MEAC athletic programs runs in the red and their 2019-2020 combined losses were to the tune of $161M it is hard to say whether the basketball programs that make it will share or can even afford to share.

The harsh reality of the probability for a deep run for HBCU men’s basketball is reflected in the SWAC/MEAC’s win-loss record in the tournament. Without comment, it is 4-55 all-time and we think that speaks for itself. It means that the SWAC/MEAC earned usually earn no more than the one unit times two teams for making it and this year that works out to a total of approximately $680,000 combined and $34,000 per school in the conferences if it is evenly divided. Can HBCUs create their own HBCU basketball tournament that would earn each school more than $34,000 per year? That is essentially the question that must be answered in considering creating our own tournament versus continuing to play in the NCAA tournament. If you included all 57 members of the HBCU Five, then that would need to be a tournament that produced a profit of $1.94M. Based on the NIT’s numbers, that would mean expenses of $3.1M or $55,000 per school approximately and revenues of approximately $5M or $87,700 per school. Again, this is a profit of almost $2M for the HBCU Five. The difference in this case is that of course the conferences would have an asset they could actually put on their financial statements that would be held in trust among their member institutions. Quite an enticing carrot in trying to recruit independent HBCUs to join the conference like Tennessee State University or PBIs like Chicago State University. The HBCU Five should be able to leverage a television contract for at least the cost of the tournament with everything else being profit thereafter. This could be repeated with football, baseball, and other sports.

Continued delusion around HBCU athletics competing with PWI athletic programs that have budgets ten times their size, a roster of boosters who write million dollar checks annually, corporate relationships with executives who also are PWI alumni and owned by PWI shareholders is a one-way train ticket to Diasasterville with the brake lines cut. You can not do what your competitor is doing when your resources socially, economically, and politically are as obtuse as HBCU reality. There are no HBCU boosters writing million dollar checks annually, there are no companies with HBCU executives and owned by HBCU shareholders who can provide multimillion corporate sponsorships, and there are reasons we all know and only say in private about why many African American high school athletes and their families overwhelmingly choose PWIs. We have to do different, think different, be creative, and solve the Rubik’s Cube that is not only the athletic conundrum we are facing but the lack of ownership crisis that continues to have a chokehold on African American institutionalism since 1947.

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How Much Would The SWAC/MEAC Earn If Texas Southern University & Howard University Made The Final Four?

Posted on March 19, 2023 by | Leave a comment

How Much is 1 Unit Worth?

“The value of one unit changes each year, and in 2022, it is estimated to be $338,887. That’s up a little bit from 2021, when a unit was worth $337,141.” according to Boardroom.

Here’s how it all plays out:

  • The SWAC/MEAC sent two teams to the NCAA Tournament: Texas Southern University and Howard University.
  • The two teams have earned one ECF unit for the SWAC/MEAC by making it to the tournament ($338,887 x 2 = $677,774).
  • Let’s say Texas Southern University wins the 16/16 play in game in the First Four. By then playing the traditional 16/1 (the First Round), Texas Southern gets another unit for the SWAC and gives it the possibility of earning seven units versus Howard University being able to earn a maximum of six units due to not having to play in a play-in game.*
  • Let’s say Texas Southern and Howard both lose their 16/1 games. Texas Southern University would have earned two units and Howard University would have earned one unit.*
  • Should both win and then have a Second Round loss. That’s one more unit for both and nothing more.
  • Now, let’s say both go on a miracle run to the national championship game. They would earn an additional unit for playing in the Second Round, Sweet 16, Elite Eight, and National Semifinal, for a total of thirteen units.
  • In total, this gives the SWAC/MEAC 13 units from this tournament, to be paid each year for the next six years, resulting in a total of $4.41M annually given to the SWAC/MEAC. That’s $26.43M total, which the conference will pay out to each of its 20 teams. If distributed equally, that’s $220,250 per school, per year, for a total of $1.32M.**

*HBCU Money was not able to confirm that the play-in game is worth an additional unit but serves as one in our example.

**Wins in the semifinals or final don’t count for units.

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Tone Deaf: Harvard Launches A $100 Million Endowment To Itself To Study Its Ties To Slavery – An Amount Greater Than 99 Percent Of HBCU Endowments

Posted on March 9, 2023 by | Leave a comment

“Every year, our white intruders become more greedy, exacting, oppressive, and overbearing. Every year, contentions spring up between them and our people, and when blood is shed, we have to make atonement, whether right or wrong, at the cost of the lives of our greatest chiefs and the yielding up of large tracts of our lands.” – Tecumseh

There are two families in the same neighborhood. The Johnsons and the Smiths. They both have the intention of building magnificent homes for their families. Homes they intend to pass down generation after generation. The Smiths have the Johnsons work for them and build their home, hold them hostage in fact on their land while they do so, and after their home is finally finished and pristine allow them to leave and go off and build their own – at least that is what the Johnsons think. As the Johnsons work diligently to build their home, they often awake many mornings to see their work burned to the ground, members of their family kidnapped in the middle of the night never to be seen again, and yet they persist in building their home. They often end up having to buy low quality materials from the Smiths at arguably predatory prices and even after purchasing these materials may awaken to see those same materials stolen or damaged, and yet they persist in building their home. Sometimes they catch the Smiths in the act of harm, but more times than not it is as if they are ghosts in the night. To make matters even more complicated, sometimes the Smiths will invite the Johnsons over for days at a time and allow them to sleep in their attic. The Johnsons often naively believing that the Smiths are wanting to commune with them often failing to see that every moment they spend entertaining and staying at the Smiths is a lost day they could be building their home. And while the Smiths enjoy being entertained by the Johnsons and having them sleep in their attic they are well aware only one of them has a home for their family. A place that is theirs. This reality has given the Smiths control of the neighborhood at every social, economic, and political turn. The Johnsons know that without their home being finished they will never be able to have a place to call home, but fewer and fewer of the family wants to continue building the home. Instead, they find themselves more and more settling for sleeping in the Smiths attic, cooking their food, and entertaining them and while they seem “free” to go and come as they wish, somehow they are right back where they started and their entire ability to exist is dependent on the Smiths. 

The greatest magicians in history know that the key to any successful magic trick is the sleight of hand. To have one’s audience focused on what they believe is happening while actually something out of their focus is instead happening. Harvard University is the nation’s largest non-system endowment at approximately $50 billion. It is an amount that is well over 15 times the size of ALL HBCU endowments combined. To put in perspective just how insulting the $100 million endowment Harvard created for itself is, if it were an HBCU endowment, then it would rank number eight among the 2022 HBCU Money Top 10 HBCU Endowment list. It could easily double the size of all HBCU endowments with roughly 5 percent of its endowment. To add to the harshness of that reality, the gap between the top ten PWI endowments and top ten HBCU endowments has skyrocketed over the past the past decade from $103 to $1 in 2013 to a staggering $128 to $1 in 2022, there is absolutely no movement to atone for what slavery, Jim Crow, and segregation did to HBCUs and African American institutions. Simply put, write the check – but we know they will not. 

For all of the frustration African America has with European American conservatives across the South, their European American liberal counterparts offer little more than lip service to right history’s wrongs, especially on the institutional level. And even when they “attempt” to do so they always do it in a way that leaves that them just as institutionally empowered and us just as institutionally dependent. A recent example of this is European American owned banks like J.P. Morgan and others “investing” in African American owned banks in the wake of the George Floyd protests. These banks did not simply write a repertory check to African American owned banks and step back so the African American owned banks had the autonomy to build with it as they saw fit. No, they “invested” and ensured that they receive the public relations bump for doing so while also ensuring that they are able to profit from anything they put into African American owned banks. Never is it, we know we owe you for the damages done and that we have disproportionate wealth and resources because of the history of slavery and Jim Crow. It is instead, a flashpoint like George Floyd’s death that European American institutions maneuver to look more inclusive by letting a few of us in their house to sleep in the attic, cook their food, wash their clothes, entertain them, all the while knowing that we still will have no home. 

Harvard could have easily paid five to ten HBCUs between $10-20 million each to conduct the same research. Both accomplishing its goal of studying its ties and actually helping the financial coffers of HBCUs. This would have given a precedent for other PWIs who could then do the same with the same result. Assuming there are other PWIs that want to broach that subject of their own history. Harvard could have also picked up the mantle and took the vanguard on an effort to have itself and the rest of the top 25 largest endowments in the country redistribute $6 billion into HBCUs with those PWIs paying proportional to the size of their endowment. America’s largest twenty five endowments combine for $454.6 billion which works out to $151 to $1 for all HBCU endowments combined. A $6 billion infusion from those twenty five endowments would equate only 1.3 percent of their total. A percentage that is still less than the representation of HBCUs (3 percent) of the U.S. higher education institutions. 

Instead, Harvard pats itself on the back with an accounting trick and says to the world and primarily to African America that it is serious about what who knows. This initiative got an immense social bump within African America when the now former president of Prairie View A&M University, Dr. Ruth Simmons, in one of her last events on the campus hosted the outgoing president of Harvard University and creator of the slavery initative, Dr. Lawrence Bacow. The Pan-African historian Dr. John Henrik Clarke would say we (African American institutions and leadership) are doing ceremony without substance. Harvard acknowledging or not acknowledging their ties to slavery does nothing for the social, economic, or political capital of HBCUs and African American institutions. Yet, we give them space in our spaces and credit for something that we already knew – that PWIs have exorbitant resources pools in large part because African America was choked for centuries from being able to build themselves into competitive institutions – and that is as true today in 2023 as it was in 1823 and 1923.

The whole of African America’s education problem does not solely lie with HBCUs, but starts from early childhood through graduate school. An African American child can not go from birth through graduate school in the African American educational pipeline. Other communities most certainly can and do. We have yet to see the profound problem with our educational dependency and as such have done nothing to formulate a strategy let alone act on one. We see Harvard and its peers lure us into a false sense of individual inclusion while continuing to starve our institutions. It is one of the greatest long games to ensure that a group of people have no institutional representation of their own nor control of that which is fed into their minds. Harvard University should pay if they truly believe in righting history’s wrongs and we would owe them no thank you or gratitude for doing so. Ultimately and without waver we must not be distracted by their shiny illusion of inclusion, but remember that is our duty and responsibility to continue to empower and build upon that which our foreparents started and ensure that our people have a home.

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Ariel Capital’s 2021 Black Investor Survey: African America Is Closing The Engagement Gap But The Capital Gap Is Widening

Posted on March 5, 2023 by | Leave a comment

“It was a wild year in many respects, but the stock market turned in a solid performance in 2021. Except for a few brief sell-offs, the S&P 500 gained 26.9% for the year. The Dow Jones Industrial Average (DJIA) gained 18.7% in 2021, while the Nasdaq Composite gained 21.4%.” – Forbes

Ariel Capital’s 2021 Black Investor Survey* continues to be a mixed bag of optimism and pessimism. Despite the increased engagement of investing among 401K plans, African Americans now only trail their European American counterparts by 20 basis points which is the closest it has ever been there is still significant struggle in the amount of capital invested. “For Black Americans, disparities grow every month; while they save $393 overall per month, whites are saving 76 percent more, at $693 per month. Even Black Americans who earn more than $100,000 a year consistently save or invest considerably less than their white counterparts at the same income level.” There are a number of factors at play, none more pronounced that with a community so impoverished that the likelihood that African Americans have to pull back on how much they invest even when their income is equal to their European American counterparts is typically attributable to how much African Americans are likely to have to help friends and family financially.

KEY HIGHLIGHTS:

  • More than twice as many Black 401(k) plan participants (12% vs. 5%) borrowed money from their retirement accounts.
  • Almost twice as many Black Americans (18% vs. 10%) dipped into an emergency fund.
  • And 9% of Black Americans (vs. 4% of white Americans) say they asked their family or friends for financial support in 2020, while 18% of Black Americans and 13% of white Americans acknowledged giving financial support to family and friends last year.
  • White 401(k) plan participants invest 26 percent more per month toward their retirement accounts than Black 401(k) plan participants ($291 vs. $231).

The conundrum that faces a great deal of African America is age. While the number of African Americans under 40 (see below) are participating on par with their European American counterparts, the hidden complexity there is older African Americans are not. This means that inheritances by the older demographics will continue to bolster younger European Americans and burden younger African Americans as the latter is more likely again to be burdened by immediate and extended financial issues even as they age. Carrie Schwab-Pomerantz, President of Charles Schwab Foundation, “notes that while 51% of white Americans say they have inherited wealth, just 23% of Black Americans have.” Once again, HBCUs have a critical role to play.

Getting African Americans to engage investing as early as possible in the 18-22 range is vital. This is because a primary way that younger African Americans as they age can buffer against the family burden is to have more money sooner and that is most easily accomplished through teenage/young adult investing. An added hedge to that is in IRAs where they can serve as an insurance policy of sorts given an investor is not supposed to access them until 59 1/2. Although we know we are more likely to due to our and our families’ financial situations. The problem of course is that we are not participating in IRAs (see below) anywhere near at the clip our counterparts are.

HBCUs and their alumni could be helping students open up Roth IRAs in particular. A 22-year old HBCU graduate with $6,000 in their IRA by graduation that never adds another penny and gets normal market returns would have almost $225,000 by age 60. This can be achieved by ensuring that any student participating in on-campus work study would automatically have a Roth IRA account opened for them, alumni could offer matching funds or just supporting funds into their accounts, etc. Again, the earlier they are invested the better. Should they achieve that $6,000 mark by age 20 and add nothing else it bolsters that $225,000 up to $271,000. This is the profound impact of earlier is more when it comes to compound investing.

For the full survey and analysis click here.

*About the survey

The online survey was conducted in December 2020 by Helical Research among 2,104 Americans age 18 and older with $50,000 or more household income in 2019. The margin of error for the total survey sample is two percentage points.

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HBCU Money’s 2022 Top 10 HBCU Endowments

Posted on February 21, 2023 by | 2 comments

When the PWIs have a cold, then HBCUs have pneumonia. That common saying in African America is as true today as it has ever been and among HBCU endowments in 2022 it reverberated across the landscape. Of the top ten HBCUs that reported their endowments to NACUBO that only two out of ten showed a positive gain versus three out of ten showing positive gains among PWIs. The caveat there is the top PWI endowments are all operating with a minimum of $15 billion. An amount that ranges from six times the size of all HBCU top ten endowments combined and all the way up to twenty four times the size of the top ten HBCU endowments combined by UTIMCO, the managing entity of the Texas A&M and University of Texas endowments. UTIMCO is actually $10 billion larger than Harvard’s endowment. It poses an interesting lesson that many HBCUs should consider – merging their endowments and/or foundations for economic and capital scale capabilities. Virginia State University and Norfolk State University. Prairie View A&M University and Texas Southern University. A really aggressive strategy of course would be to have endowments at the conference level, but that will be an article for another time.

2022 was a down year in the markets which inevitably had an outsized negative impact on HBCU endowments who are less likely to be invested in venture capital, private equity, or other alternative investments that hedge against the volatility of the stock markets. HBCU endowments limited capital usually means limited investment options and those options tend to be heavily tied to public equity markets. It also did not help that just a few years removed from George Floyd’s death when HBCUs saw over thirty million dollar plus donations that in 2022, HBCUs only saw a whopping three while their PWI counterparts had fourteen donations over $100 million.

Without HBCUs capturing more than ten percent of the African American students going to college, then this struggle is likely to persist. Simply put, HBCUs need much larger alumni pools to even start to put a dent in the endowment gap long term.

The PWI-HBCU Endowment Gap for 2022 stands at $127.5 to $1, which is an increase from 2021’s $121.7 to $1.

HIGHLIGHTS:

  • Top 10 HBCU Endowment Total – $2.5 billion
  • Top 10 PWI Endowment Total – $318.8 billion
  • Number of PWIs Above $2 billion – 69
  • Number of PWIs Above $1 billion – 136
  • HBCU Median – $138.0 million (-8.4%)
  • NACUBO Median – $208.7 million (-9.6%)
  • HBCU Average – $217.9 million (-8.7%)
  • NACUBO Average – $1.2 billion (-5.1%)

All values are in millions ($000)*

1. Howard University – $862,784 (7.0%)

2. Spelman College – $459,463 (-13.4%)

3.  Hampton University – $348,849 (-8.2%)

4.  Morehouse College – $186,523 (-9.7%)

5.  Meharry Medical College – $169,169 (-9.5%)

6. North Carolina A&T State University  – $164,541 (4.6%)

7. Florida A&M University – $111,477 (-6.3%)

8. Morgan State University – $89,516 (-8.5%)

9. Norfolk State University – $71,161 (-10.9%)

10. Virginia State University – $69,564 (-7.3%)

OTHERS REPORTING:

*The change in market value does NOT represent the rate of return for the institution’s investments. Rather, the change in the market value of an endowment from FY21 to FY22 reflects the net impact of:
1) withdrawals to fund institutional operations and capital expenses;
2) the payment of endowment management and investment fees;
3) additions from donor gifts and other contributions; and
4) investment gains or losses.

SOURCE: NACUBO

Take a look at how an endowment works. Not only scholarships to reduce the student debt burden but research, recruiting talented faculty & students, faculty salaries, and a host of other things can be paid for through a strong endowment. It ultimately is the lifeblood of a college or university to ensure its success generation after generation.

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