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Jay-Z’s Billionaire Ascension Highlights The Black-White Billionaire Wealth Gap In America


“I want to inspire people. I want someone to look at me and say “Because of you I didn’t give up.” – Reginald F. Lewis

Forbes Magazine recently declared that Shawn Carter AKA Jay-Z AKA Hova officially has the net worth to enter billionaire status. We wonder if there will be a follow-up to 50 Cent’s I Get Money song that was remixed and called the Billionaire Remix or Forbes 1-2-3 where Jay-Z, Diddy, and 50 Cent who at the time were worth a combined $1 billion between the three of them. Now, Jay-Z can do the song all by himself. Unfortunately, while social media celebrated Mr. Carter’s new found billionaire status, it does open up an additional layer to the conversation on the racial wealth gap in America. Of course, no one who is a billionaire is going to garner sympathy from Main Street America, but the lack of African American billionaires certainly can be argued as a point of why there is continued institutional weakness among Main Street African America.

African Americans make up 15 percent of the American population, but of the Forbes 400 wealthiest Americans there are only three who make the cut – Mr. Carter is not one of those three. This amounts to less than 1 percent representation. According to the website, “The minimum net worth to join this exclusive club hit an all-time high of $2.1 billion while the average net worth for a Forbes 400 member rose half a billion to a record $7.2 billion.” The only three African Americans present on the Forbes 400 are Robert Smith, who recently made headlines by promising to pay off all of Morehouse’s 2019 class student loan debt. Then there is David Steward, a man who could walk into almost every room in African America and would not be recognized, but has made his $3 billion fortune through co-founding an information technology firm that is integrated in the highest levels of corporate and government. Lastly, Oprah Winfrey, who ironically is not even the wealthiest HBCU graduate but is the wealthiest African American HBCU graduate. It would take 60 African American billionaires with a net worth exceeding $2.1 billion to be representative according to our population’s percentage. Overall, there were 680 billionaires in the United States in 2018 and only four of those at the time were African American, Michael Jordan being the fourth who is also a recently minted billionaire and also is a case study in himself of just how astonishing the wealth gap is among African American and European American billionaires, but more on that later. The irony of representation for African Americans is that the United States in 2018 comprised almost 25 percent of the world’s billionaires despite being less than 5 percent of the global population according to Wealth-X.

In 2014, the median wealth for African America stood at $9,590 versus $130,800 for European Americans, according to the U.S. Census Bureau. This means that for every $1 that African Americans have European Americans have approximately $14. This in itself is an astonishing number until you examine the gap among the billionaire class. The five wealthiest European Americans (Bezos, Gates, Buffett, Zuckerberg, & Ellison) have a combined net worth of $427.7 billion versus $13.4 billion for our billionaire five of Smith, Steward, Winfrey, Jordan, and Carter. It is a ratio of the aforementioned having $31 to every $1 of the latter, which is almost 2.5 times greater than the overall gap. For the gap to be progressively worse as the wealth goes higher is in some ways astonishing and in a lot of ways expected because of how the wealth is being created. Re-enter, Michael Jordan.

There is the man who built Nike and the man who owns Nike and they are not the same. Very few will argue that had Michael Jeffrey Jordan not signed with Nike in 1984 the company, founded and majority owned by Phil Knight, probably never becomes more than a two-bit player behind the likes of Adidas, Reebok, and New Balance. Jordan was a paradigm shift. The financial gods aligned the stars in 1984 for Phil Knight with the signing of the man who would become arguably the greatest NBA player of all-time, the NBA’s continued meteoric rise in popularity, cable television, and ESPN. All of these ingredients came together to take Nike from a company that in 1984 was doing $867 million in revenue to the behemoth that it is 35 years later with revenues of $36.4 billion. An increase of 4200 percent over the time period. Jordan’s brand accounts for almost 10 percent of the company’s revenues today despite Jordan himself not having played in the NBA for almost 20 years. No other brand comes close to the singular importance that Jordan still holds for Nike, and therefore Phil Knight. Yet, Knight’s net worth is almost $34 billion, while Jordan’s is only $1.9 billion. Ultimately, Jordan who earns around $100 million annually from Nike or 3.2 percent of the Jordan brand revenues is simply well compensated labor, while Knight, the owner, truly reaps the fruits of His Airness.

Consequences of these gaps is not unnoticed institutionally within communities. Billionaires tend to be major donors to institutions like education, healthcare, and more philanthropically. These are areas of institutional infrastructure for African America that are severely under built and underfunded.  Never mind the investments they make in the order of private equity or venture capital that spawns new generations of wealth and influence, which tends to lead into immense political influence in the form of political contributions that shapes policies for hundreds of millions. Phil Knight has contributed well over $2 billion to his former alma maters, the University of Oregon and Stanford Graduate School of Business,  an amount equal to the value of all 100 plus HBCU endowments combined. He has so much influence that the state of Oregon has changed laws just to accommodate his giving to the University of Oregon.

Unfortunately, coming back to one of Jay-Z’s most prolific lyrics tells a lot of the issues facing African American wealth accumulation where he says “I’m not a businessman, I’m a business, man.” For many this line is interpreted as Mr. Carter braggadocios that he is bigger than just being Phil Knight, he is Nike – and he is right and that is where he is also wrong. Instead of controlling the company and brand, he is the company and brand. In other words, if he does not work, then he does not eat in a sense. Many of Mr. Carter’s businesses are built on their relationship to him. They are what is considered a lifestyle brand and he is the lifestyle brand you aspire to be. You drink his liquor or wear his clothes because this allows you to share in his coolness. For his business to continue to produce, then he himself must remain relevant. Three of the five African American billionaires have made their money via sports/entertainment and mainly off their own image, while four of the five European American billionaires have built their companies via technology and scaled those businesses to something that the entire world wants and needs. Even Mr. Buffett, who has largely made his money through investments and lords over companies like Geico, Wells Fargo, and many other companies is so integrated into people’s lives, often in ways they do not even realize on a day-to-day basis. Their companies and brands are far more well known to the world than the founders themselves. Governments buy Microsoft software. In fact, Microsoft Windows still accounts for use on almost 80 percent of the computers worldwide. They have created systemic companies, while our billionaires have created mostly popularity brands and as we know popularity eventually fades as new generations arise. The fact that Mr. Carter has remained relevant this long is a testament to him for sure (and his wife), but not something anyone should assume can last a lifetime. There is also the reality that even if it does, he can not pass his social capital along to his children, but Jeff Bezos’ children can and will most likely inherit Amazon even if they choose to not run it.

The situation is also not isolated to African America. Worldwide, the sons and daughters of Africa are battling the same fate. Asia is experiencing a meteoric rise in their billionaire class and now trails only Europe/US with the Diaspora with the most billionaires. Africa, one of the world’s fastest growing economies, has less than 2 percent of the world’s billionaires but contains over 15 percent of the world’s population – mainly, due to Asian and European interest continuing to siphon the continent of resources and burden it with predatory debt to their own interest and benefit. Simply put, we are not going to sing, dance, or chase balls in closing the wealth or power gap overall or the gap in the pantheons of the two. We are going to have to build institutions that wield wealth and power on a mass scale not just in small silos. Mr. Carter and Jamie Dimon are financially worth roughly the same, but Mr. Dimon is the CEO/Chairman of J.P. Morgan bank that controls almost $3 trillion in assets. An amount that is 600 times all African American owned banks combined. Mr. Dimon is not a business, man. He is “just” a businessman.

A multilayered cake is what the wealth gap entails like so many other issues that African America is looking for solutions to as a community. This data ultimately just gives us another layer to examine to help level the playing field. Mr. Carter’s billionaire status while admirable also should raise pertinent strategic questions for the community in its economic development. How is African American wealth being created? Is it scalable? Is it replicable? Are we seeing the wealth circulated back within the our community’s institutions? The reality of what it means that the gap at the apex of wealth is so pronounced must be examined and what it can tell us is still to be determined, but we do know that while men lie, women lie, numbers do not.

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Will Morehouse’s 2019 Class Be The Greatest Donors In HBCU History? After Robert F. Smith’s Donation, They Better Be


“The results of philanthropy are always beyond calculation.” – Mary R. Beard

By now we have all heard the breaking news, on May 19th in the year of our lord 2019, Robert F. Smith, an angel of God descended upon the sacred grounds of the AUC in Atlanta, Georgia and in his commencement speech to an estimated 400 Morehouse College graduates also pledged to ensure that his family would pay off each and every one of their student loans. The grant is estimated to be a gift valued at $40 million making it the second largest donation to the HBCU community, still trailing Bill and Camille Cosby’s gift of $20 million in 1988 to Spelman College, which adjusted for inflation is valued at $43.2 million today. Stating the obvious, there still has yet to be a gift of $100 million or more in HBCU history, while HWCUs received 13 gifts of $100 million or more in 2018 alone. This is not to take away at all from Mr. Smith’s gift as the reality that the return on investment to HBCUs  on gifts of $10 million or more are often worth a multiplier effect because of the size of our schools, how starved we are for donations of any sort especially major ones, and lastly our schools often being so adept at doing more with less that when we get more it often feels like it maybe overwhelming (it is not, please feel free to give any HBCU $100 million, seriously). But what will this gift mean to the HBCU landscape for the coming generation?

You hear it all the time among recent HBCU graduates and alumni when asked what are some of their primary reasons for not giving back. At the top of the list tends to pertain to the burden of their student loan debt. It is no secret that HBCU students bear a serious burden when it comes to student loan debt in comparison to their HWCU counterparts, especially those counterparts who attend an institution that is among the Top 50 in college endowments. In our 2016-2017 HBCU Graduate Student Loan Report, 86 percent of HBCU graduates finish with student loan debt at a median debt load of $34,131 versus 40 percent of Top 50 college endowment graduates who finish with student loan debt at a median debt load of $24,237. This is due to a mixture of factors, most notably HBCU endowments and familial wealth.

The top 30 college endowments in America control over 50 percent of the nation’s $500 billion college endowment value, while 100 plus HBCUs control less than 1 percent. Combine this with the African/European American wealth gap not moving for 50 years, which according to a Forbes article, “African-Americans had a median wealth of $13,460 in 2016 or only 9.5% of the median wealth of $142,180 of whites”. These major pinpoints make it extremely difficult for HBCU graduates to reduce their student debt loads while matriculating and therefore build wealth after college. The result becomes they are either prolonged before they can become donors or never do and the sword of educated poverty is what they and our institutions fall upon decade after decade with no end in sight.

Morehouse College Class of 2019 though sits in a special position to change the trajectory of not only Morehouse College’s endowment, which we have argued has grossly under performed compared with the likes of Hampton, Spelman, and Howard in its fundraising efforts. This despite the help from the likes of another billionaire, Oprah Winfrey, who herself as put hundreds of Morehouse Men through college as well. To what extent her giving to Morehouse has reduced student loan debt for graduates is unknown, but knowing Ms. Winfrey’s giving history, it has been formidable. However, the Class of 2019 may prove to be worth a longitudinal study in HBCU philanthropy. What happens when an HBCU graduate finishes with little or in this case no student loan debt? Do they see it as an opportunity to be more active donors back to their institution and to other HBCUs. Will their donor rate be higher than other classes? It is no secret that despite the Morehouse pride, the alumni giving rate at the institution has been underwhelming at best. If these 400 young men properly build their wealth and give back to Morehouse and other HBCUs, then have we potentially unlocked one of the keys to making our institutions sustainable? We have also long argued what it would look like if African Americans supported HBCUs in a major way, even if they did not attend an HBCU. Giving because a strong African American institution of any sort is a reflection of themselves in society and that our fates are always intertwined. That a people are ultimately only as strong as the institutions that represent their interest.

However, to do what Robert F. Smith did on an institutional level is going to require more than just one billionaire (or even two), but it is definitely a pivotal step in the right direction – hopefully. After all, it has been over three decades since a donation of this size for HBCUs. The lack of multimillion dollar gifts to HBCUs and African American educational institutions in general has been, continues to be, and is problematic systemically. For instance, if we extrapolated the notion of helping HBCU graduates be debt free, endowments at our institutions would have to be exponentially greater than what they are now. Howard University, Spelman College, and Hampton University, the three largest HBCU endowments, which have current endowments of $688 million, $389 million, and $285 million, respectively, would need endowments exceeding $6 billion, $1.7 billion, and $2.5 billion, respectively. In other words, they currently have a combined endowment value of $1.4 billion but need $10.2 billion, which is a margin of $8.8 billion, greater than Robert F. Smith and Oprah Winfrey’s wealth combined, an estimated $7.6 billion. This of course speaks nothing of and to the number of HBCUs who are hanging on for dear financial life and whose endowments if they even exist are paltry at best. Like many small and state colleges, lesser known HBCUs struggle to attract major donors, but the Morehouse 400 does/should know who they are and should take the vanguard in being integral over the next 50-60 years of ensuring that all HBCUs drink from the fountain of opportunity that they have been granted access too. These young men have a chance to alter the trajectory of the HBCU universe and we hope with this great opportunity they have been gifted that they also know comes a great responsibility. Will they become the greatest HBCU donors in HBCU history? Only time will tell.

HBCU Money’s 2018 Top 10 HBCU Endowments


The past 365 days for HBCU endowments has seen a lot of press, mainly led by Bennett College’s #StandWithBennett campaign as the school is embattled and was raising money to retain its accreditation and keep the doors open. A constant reminder of the fragility of HBCUs and their financial uncertainty. Economic conditions in the United States have made overall growth in higher education tempered and with it HBCU endowments have been a mixed bag. While the top ten HBCU endowments have five endowments that beat the median increase in endowment market value, only two endowments beat the national average. In comparison the top ten PWI endowments had eight endowments beat the national median average and seven of the ten exceeding the national average.

Over the past 12 months, the top ten HBCU endowments have increased their market value by $134.5 million or an increase of 7.4 percent over last year. There is plenty of argument that HBCUs should not be compared to the largest PWI endowments in behavior and instead to schools that are comparable in their size and scope. This is certainly a valid argument, but at a time when there are more PWIs with $1 billion plus endowments than there are HBCUs, it maybe hard to continue to lean on such an argument. The reason being is that higher education in general is experiencing and going to continue to consolidation and contraction with education alternatives entering the market. Smaller colleges and HBCUs are going to have to be over capitalized and nimble in order to shift to changing market demands and conditions. At the moment, over 90 percent of HBCUs do not have even $100 million endowments leaving them highly vulnerable as we have seen with the closure of a number of HBCUs in recent years and more than just Bennett in current crisis.

This year we included more than just the top ten, but all HBCUs who reported to NACUBO, which is the reporting endowment organization we use to keep our reporting date uniformed.

All values are in millions ($000)

1. Howard University – $688,562 (6.5%)

2. Spelman College – $389,207 (6.3%)

3.  Hampton University – $285,345 (2.2%)

4.  Meharry Medical College – $159,908 (4.1%)

5.  Morehouse College – $145,139 (2.6%)

6.  North Carolina A&T State University  – $63,827 (14.9%)

7.  University of the Virgin Islands – $61,491 (10.7%)

8.  Tennessee State University – $58,697 (5.1%)

9.  Texas Southern University – $58,158 (7.4%)

10.  Virginia State University – $54,479 (6.6%)

OTHERS REPORTING:

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.

*Note: 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 FY2016 to FY2017 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.

2016’s Million Dollar Donations Come Roaring Back For PWIs, But For HBCUs Not So Much


After a timid 2015 where colleges and universities only saw 482 donations and pledges over $1 million, this was the first time since 2012 that less than 500 such donations had been made, donors came roaring back in 2016 with the largest amount of $1 million or more donations ever with 567 such donations and pledges according to The Center of Philanthropy. However, a rising tide does not always lift all boats as HBCUs witnessed. After a banner year in 2014 of nine gifts of $1 million or more that totaled $20.5 million, HBCUs only saw four in 2015 for a total of $7 million. The 2016 numbers are a bit better than the prior year, but not by much.

HBCUs in 2016 received five donations of $1 million or more for a total of $10.5 million. The leading donation comes from Calvin and Tina Tyler (pictured above with Morgan president David Wilson), who gave $5 million to Morgan State University to endow a scholarship for incoming freshmen from the Baltimore area. A gift that should help increase Morgan State’s ability to compete and keep the talent in their backyard at home.

The arms race that is fundraising continues to be an uphill battle for HBCUs who are dealing with a significantly smaller alumni base due to desegregation’s impact a generation ago. African America’s abandonment of most of their own institutional ownership has seen a starvation of institutions that were built to serve African America’s interest almost to the point of extinction. Whether or not a new awakening is on the horizon is more hopeful than optimistic.

To note, Morgan State University becomes the first HBCU since we began tracking in 2013 to appear more than once.

1. Calvin & Tina Tyler – $5 Million
Recipient: Morgan State University
Source of Wealth: UPS

2. James & Marilyn Simons – $2.5 Million*
Recipient: Morehouse College
Source of Wealth: Finance

3. Leonard & Louise Riggio – $1 Million                                                        Recipient: Spelman College
Source of Wealth: Retail

4. Sean Combs – $1 Million*                                                                                    Recipient: Howard University
Source of Wealth: Entertainment

5. Joe Jr. & Kathy Sanderson – $1 Million
Recipient: Alcorn State University
Source of Wealth: Food & Beverage

*Pledge

Source: The Center for Philanthropy

 

From HBCU To Bank CEO: 4 HBCU Alums Help Lead America’s Black Bank Revival


“If your actions inspire others to dream more, learn more, do more and become more, you are a leader.” – John Quincy Adams

What good is a pipeline if it is not used, promoted, strengthened? Going to an HBCU or graduating from is not the beginning or ending of the African American ecosystem, but it is a key part of it. Unfortunately, the data shows that African American intellect and labor (even HBCU graduates) are primarily being used to build up firms owned by other communities. Recent data from the US Census shows that it is likely that less than one percent of African Americans work for an African American owned firm. It stands to reason that the subdata for HBCU graduates working for an African American firm is likely to parallel.

If HBCU business schools are not being trained to run African American firms and the unique path that they face, then what is the point of having them? Goldman Sachs, J.P. Morgan Chase, Bank of America, and Citigroup all have CEOs that attended PWIs (shocker) and even more to the point, attended Ivy League colleges. It would be fair to say that of the almost 7,000 banking institutions in the United States, if you were to subtract out the African American owned banks, that 75 percent of those banks would not be being run by those who went to HBCUs. However, that is exactly what is happening in the African American banking and private sector in general. The vast majority of our institutions operating in isolation, not in conjunction with each other. HBCUs are not banking with, training for, or encouraging their graduates in choir with African American banks and private sector so therefore the institutional leadership at most of our financial institutions and private firms is using a playbook not tailored to our needs.

However, there does appear to some change on the horizon. OneUnited Bank, headquartered in Boston, Massachusetts, and headed by one of the most powerful women in banking Teri Williams, although not an HBCU alum herself is showing herself to be a strong HBCU advocate, and the bank has two HBCUs banking with them in Roxbury Community College (MA) and Florida Memorial University (FL). Something that should lead to many future opportunities for graduates of the two institutions in the future both through internships and employment creating a future pipeline for more HBCU graduates to head up African American owned  firms. So who are the HBCU graduates sitting in African American owned banks c-suites helping lead the current #BankBlack revival that has seen millions of dollars in deposits over the past year?

Dr. Deborah A. Cole; Tennessee State University

As the president of Citizens Bank, headquartered in Nashville, Tennessee and noted as the oldest African American bank still in operation, Dr. Cole has led an impressive increase in the bank’s balance sheet with assets increasing 5.6 percent over 2016, third among the 20 AAOBs.

Ms. Jacquitta Powell Green; Alabama A&M University

A dual role, Ms. Green as she heads up Mobile, Alabama’s Commonwealth National Bank as CEO and Chairwoman of CNB Bancorp, the bank’s holding company. “Mrs. Green is the Vice President of Northside Exchange, which has offered financial services to the unbanked and underserved of the Mobile area for more than 30 years. In 2001, a national tax preparation franchise extended her an offer, and she established Envision Enterprises to offer unbiased and honest tax preparation services.”

Mr. James A. Sills, III; Morehouse College

Mr. Sills heads up one of the most prominent and well known brands among African American owned banks, Mechanics & Farmers’ Bank in North Carolina. The bank has changed its name to M&F Bank a few years ago in an effort to rebrand and attract a young demographic. “Prior to starting his own company in 2007, Mr. Sills was an Executive Vice President of MBNA America Bank (now Bank of America), the largest credit card institution in the world. In this capacity, he served as the Director of Corporate Technology Solutions for the $80 billion US Card Division.”

Ms. Evelyn F. Smalls; North Carolina Central University

Lastly, Ms. Smalls is the President and CEO of United Bank of Philadelphia. The only HBCU graduate heading up a bank outside of the South. “With over 30 years experience in banking and community development, Mrs. Smalls is responsible for the leadership and management of the Bank including setting the direction of the organization, communicating its vision and adapting the culture and operations to achieve success. Her leadership helped transform the Bank’s strategic focus into a “Business Bank” to ensure small businesses have access to affordable loans through the SBA 7A program.”