Tag Archives: Community Development

HBCU Money™ Business Book Feature – The Business of Black Power


The Business of Black Power emphasizes the centrality of economic goals to the larger black freedom movement and explores the myriad forms of business development in the Black power era. This volume charts a new course for Black power studies and business history, exploring both the business ventures that Black power fostered and the impact of Black power on the nation’s business world. Black activists pressed business leaders, corporations, and various levels of government into supporting a range of economic development ventures, from Black entrepreneurship, to grassroots experiments in economic self-determination, to indigenous attempts to rebuild inner-city markets in the wake of disinvestment. They pioneered new economic and development strategies, often in concert with corporate executives and public officials. Yet these same actors also engaged in fierce debates over the role of business in strengthening the movement, and some African Americans outright rejected capitalism or collaboration with business. The seven scholars in this collection bring fresh analysis to this complex intersection of African American and business history to reveal how Black power advocates, or those purporting a Black power agenda, engaged business to advance their economic, political, and social goals. They show the business of Black power taking place in the streets, boardrooms, journals and periodicals, corporations, courts, and housing projects of America. In short, few were left untouched by the influence of this movement.

Detroit’s Bankruptcy: An Indictment On African America’s Institutional Power

Contrary to the commonly accepted belief, it is the risk element in our capitalistic system which produces an economy of security. Risk brings out the ingenuity and resourcefulness which insure the success of enough ventures to keep the economy growing and secure. – Robert Rawls

Hitsville 2

The year is 1988 and Berry Gordy is completing the sale of Motown Records to MCA and Boston Ventures LP for a reported $61 million or $121.6 million adjusted for inflation today. Motown Records was an African American institution for over two decades and in 1983 was the largest African American owned company in the United States according to Black Enterprise. It had been the stalwart of Detroit’s African American community and the home of legends like Diana Ross, Smokey Robinson, and global icon Michael Jackson. 25 years later the city of Detroit is a shell of its former self and filed the largest municipal bankruptcy in U.S. history at an estimated $20 billion. How did the symbol of African American power have such an inglorious fall from grace?

Detroit is 138.75 square miles and in terms of cities with 100,000 or more people in it there is no city with a larger African American concentration than Detroit with almost 85 percent of the population being African American. In 1950 the city’s population was near 1.9 million. Historically, Detroit was once home to 18 African American owned hospitals between 1917-1991, home to Lewis College of Business, the only HBCU located in Michigan, and First Independence Bank which is still one of African America’s largest owned banks with over $200 million in assets or almost 5 percent of all African America’s combined bank assets. The city’s African American population was thriving thanks to strong institutions throughout the city much like Motown, but many could argue that complacency settled in. The African American middle class there felt like they had “made” it. Time to set the ship on cruise control and go fishing. The problem? There was an iceberg ahead.

Today, none of the African American owned hospitals in Detroit remain, Lewis College of Business struggles to keep the doors open with no working website or functioning phone number, and the unemployment rate still hovers around 20 percent in the city for African Americans despite the country’s recovery. The political infrastructure seems to be more ripe with corruption over the past few decades than leadership doing more to inhibit progress than promote it. Corruption in the city would be epitomized by the fall from grace at the time by one of HBCU’s shining political stars, former mayor and Florida A&M graduate, Kwame Kilpatrick who is now serving 28 years in federal prison for laundry list of scandals as Detroit’s mayor. The city has a reported 70,000 abandoned buildings, 50 percent of the city’s street lights are not working, and over 40 percent of the entire city is currently below the poverty line. Often times it is confused that the auto bailout of General Motors and Chrysler was an assistance to Detroit. Great job on the public relations of that one to John and Jane Taxpayer who bought it hook, line, and sinker. Unfortunately, GM and Chrysler had long moved their headquarters and majority of operations out of Detroit to suburban areas that were more tax-friendly. They were Detroit in spirit only. The $80 billion they received in bailout was not though. A bailout out that would see U.S. taxpayers lose $11.7 billion as the government divested itself of ownership of both.

Detroit has fallen as its African American population has seen its power decline and some very questionable leadership at times from the aforementioned mayor’s office. However, there is real opportunity in Detroit for African America and the barrier to entry has been lowered because of the distress. Capitalism in a nutshell rewards the creation of chaos or the organization of chaos. The latter is what is present in Detroit. A real investment in Lewis College of Business would go a long way to stabilizing the education and social aspect of African Detroitians higher education access. Dan Gilbert, owner of Quicken Loans, Cleveland Cavaliers, and most notably known for his famous social media rant against LeBron James for leaving him, has invested over $1 billion the heart of downtown Detroit. As one Bloomberg reporter pointed out he is  basically sifting through the best of food at the top of the trash can. He has purchased 3 million square feet or the equivalent of 0.07 percent of the entire city. Not a major overhaul by any stretch of the imagination, but probably the best quality of what is there and any revitalization will leave Dan Gilbert reaping immense rewards. Despite a declining population this is still a city with 700,000 residents which means it is the 18th largest city by population in America and $6.7 billion in household income, but is being treated like a ghost town.

There is still a “Hitsville” in Detroit for those that can see through the chaos of the battered and broken city. A chance to bring a phoenix from the ashes if you will. The city is in need of industry and a way to stem its declining population which for someone with a background in community development is like the opportunity given to Michelangelo to paint the sistine chapel. If African America was ever looking for an opportunity for a home run where the stakes of high risk and high reward, then there is no better place in America right now than Detroit. Warren Buffett is famously quoted as saying “be fearful when others are greedy and greedy when others are fearful” and right now Detroit is screaming to African America for an opportunity to be greedy. With 137 square miles still left of needing investment, maybe it is time to put some of that $1 trillion of buying power to use.

The University of Power & Wealth

“Our success educationally, industrially and politically is based upon the protection of a nation founded by ourselves.” – Marcus Garvey

Many in the African American community believe that colleges and universities are simply there to educate a student so that they can go on to get a job. However, colleges and universities more than any part of our society are institutions of power and wealth creation more so than any other institution.  I’d touched on some of the economics of universities previously in the article “Can African American Muscle save African America?” This is mainly because they, more than any other institutions,  can touch all three parts of the SEP (social, economic, political) development model. Through their teaching they can influence the social aspects of a community by providing strong cultural identity. Through research they can create economic opportunities, and their research can also influence policy in local, state, and national governments.

The social development of students to serve their community can be seen in a university like Brandeis, a Jewish institution, which has a MBA program in Jewish studies. This program identifies potential Jewish leadership and hones their skills to run Jewish institutions in the community handling the social, economic, and political aspects of these institutions. Per their website it states “This innovative program prepares future Jewish community executives with the full complement of MBA/non-profit skills and specialized knowledge of Judaic studies and contemporary Jewish life.” They also offer a program called the MPP-MA in Jewish Professional Leadership which states “By preparing professional leaders with a full array of policy analysis and development skills, as well as specialized knowledge of Judaic studies and contemporary Jewish life, it trains students to design and implement innovative solutions to the Jewish community’s most critical problems, and to analyze and reform existing practices.” As you can see the university is catering to the core demographic that it was founded to serve. It is ensuring that their institutions that serve their community are well equipped with leadership that understand the historical & cultural (social), economic, and political aspects that the Jewish community face and will allow it to prosper and protect itself.

Next, let’s look at the economics that colleges and universities can produce for a community. What do Google, Time Warner, FedEx, Microsoft, Facebook, and Dell have in common? They were all founded on college campuses. Google founded at Stanford, Time Warner & FedEx at Yale, Microsoft and Facebook at Harvard, and Dell at the University of Texas. The six companies whose wealth value as measured by their market capitalization (except Facebook who has a private valuation are measured by a stock’s share price times number of company shares outstanding) is worth an estimated $530 billion. To put it in perspective these six companies wealth alone is 63% of African America’s buying power which is valued at an estimated at $850 billion.

Economically-speaking, colleges & universities primary driver of funding is research. Research in many instances is turned into businesses. These businesses tend to hire and have its initial investors come from the very university and nearby communities they are launched from. The wealth these businesses generate comes back to the university and community in the form of larger endowments, more research dollars, and more scholarships. These scholarships allow its students to graduate with less debt, which allows for early accumulations of wealth instead of paying down student loan debt. These businesses by hiring primarily from the institutions they sprung from help the employment of the demographic they serve. In the case of University of Michigan their research that will be transformed into business ventures will attempt to transform Michigan’s economy to one less dependent on the auto industry and its appears more into bio-tech businesses which should drastically improve Michigan’s unemployment rate (presently at 12.9% vs. National of 9.2%) in the years to come. The state of Utah’s UStar program (using taxpayer dollars) through its two state universities Utah and Utah State is focusing on the spillover industry from Silicon Valley. UStar’s mission stated on their website is stated as “UStar created a number of research teams at the University of Utah and Utah State University. Spearheading these teams are world-class innovators hungry to collaborate with industry to develop and commercialize new technologies.” BP in 2007 gave $500 million to the University of California-Berkeley to “develop new sources of energy and reduce the impact of energy consumption on the environment.” This $500 million is more than ALL HBCUS research budgets combined ($440 million) according to the National Science Foundation tracking of college and university research budgets.

Individually speaking we can see how this wealth has culminated into the hands of people at the universities who were fortunate to be a part of these founding companies. Facebook’s 1st investor Eduardo Saverin was a fellow student of Mark Zuckerberg at Harvard. His $15,000 investment, had he actually held onto it, today would be worth $7 billion. Google’s initial investors were professors from Stanford where Page & Brin founded the search engine. Same goes for Microsoft where Bill Gates initial investor and partner was classmate Paul Allen whose current net worth is $13.5 billion primarily in part to his Microsoft holdings. Dell Computers founded by Michael Dell in his University of Texas dorm room also has his primary investors from UT.

We have also seen the philanthropic power of this wealth to impact communities at work as well. Mark Zuckerberg recently donated $100 million donation to Newark, NJ school system. T. Boone Pickens four years in 2006 ago set a record with a $165 million donation to Oklahoma State University which, as has been reported, “surpasses the $100 million Las Vegas casino owner Ralph Engelstad gave the University of North Dakota in 1998.” The two donations by Pickens and Engelstad together are equal to over 25% of all HBCU endowments combined and over 50% of HBCU research budgets. T. Boone Pickens donation alone could put 412 African American students a year through undergraduate DEBT FREE or 110 African American doctors through medical school DEBT FREE at HBCU medical schools Charles Drew Medical School in California or Meharry Medical School in Tennessee. Graduating debt free could allow these doctors to be more likely to choose working in hospitals in African American communities as opposed to chasing a high paying job they need to pay down the massive student loan debt they occur. How would that be for improved medical care to our community?

The power to influence political policy is evident at Rice University’s Baker Institute for Public Policy. Their current areas of focus are Arab media & politics, conflict resolution, drug policy, energy, health economics, homeland security, international economics, religion & culture, science & technology policy, space policy, tax & expenditure policy, the Americas Project (Latin America policy), the Transnational China Project (Chinese culture & policy), urban studies (African American policy), and the U.S.-Mexico Project (border policy). They have also recently sponsored an organization for the Iraq Study Group. Even our beloved Barack Obama’s cabinet is infected with Ivy Leaguers as noted in the article “Barack Obama taps into the Ivy League revolution with his cabinet” which notes that 22 of the 36 cabinet members are from Ivy League universities. Universities that still hold less than a 10% African American population. While Obama has a diverse cabinet the probability of this happening if he himself were not African American is highly unlikely (see previous 43 cabinets). It goes on to say “Even in Obama’s Washington, money and surnames matter.” The reality is people in power tap into those whom they know and who are qualified (or not) more than they tap those who they don’t know and are qualified. The old adage “Its who you know not what you know” speaks to a large part of the social networking importance of colleges and universities.

The question is then how do we improve our HBCUs to become the vehicles that can serve our SEP interest? First realize that these institutions are more than just a place to get a degree. As you can see their depth is possibly the greatest vehicle of development our community has at its disposal and that their existence is for the very thing we seek and that is to help uplift our community today and for generations. Secondly realize every mind and body has a value. This IS capitalism people. EVERYTHING has a value. For American college and universities each warm body generates an average of $33,000 in tuition revenue per year. HBCUs only get $6 billion of the $54 billion in African America’s annual tuition revenue pie meaning $48 billion is leaving our community to predominantly European American colleges & universities in tuition revenue alone. This forces our 95 HBCUs to operate on an average of $63 million per HBCU to have very little in the way of improving facilities, recruiting talented faculty, and expanding their research budgets, which could influence the SEP of our communities. To put that $63 million in perspective Ohio State University’s ATHLETIC department operates on $107 million per year (primarily funded by African American muscle). The fact that only a roughly 10-12% of African American students who can attend college choose to go to HBCUs limits these institutions from improving themselves as they are always strapped for operation revenue meanwhile being asked to compete from the perspective of: Howard v. Harvard, Charles Drew Medical v. UCLA Medical, or even Prairie View A&M vs. Texas A&M in the areas of SEP development and leaves us at the mercy of someone else’s institution solving our problems who has no real interest in doing so.

We must redirect our charity giving. A blog on African American giving I read recently said of our $11 billion we give annually to charities, $7 billion goes into churches. By making a concerted effort to redirect $2 billion of this would vastly improve the state of our HBCUs and should not dampen our religious institutions. Because while I’m all for saving our souls it is high time we invest in improving the fate of the bodies which house our souls and the institutions that were created to serve them and our communities. Too many of us faithfully pay our tithes and give little thought to our secular institutions like HBCUs. Their fate I dare say will be our own and without our own institutional power to combat institutional power of other communities we will be forever at the mercy of others awaiting them to bless us with their leftovers. It is time to once again do for self as all others do and as we use to do. Operate like a nation or become a destroyed people.