Black Tech Startups: A Force Multiplier for Economic Equality!
Today, as I reflect on the life and contributions of the late Dr. King, I am reminded how he, along with African American community leaders such as A.G. Gaston, leveraged business incentives and constraints to advance the cause of equality amongst people of color. In this next phase of the civil rights movement, I am still profoundly convinced that business can and will act as a force multiplier to achieve the desired outcome which Dr. King ultimately gave his life for, genuine equality.
In this article we will learn how tech entrepreneurship can reduce the effects of racial bias. We will also unpack three specific paradigm shifts which will need to take place in order to fully leverage tech entrepreneurship as a tool for social change. Finally, we will learn how disadvantage can become our competitive advantage through the creation of Black Tech Startups. Let us first begin with a quick look at a study on the economics of prejudice.
Researchers at Northwestern University of Illinois observed in an experiment that the human brain demonstrated more cognitive conflict when it was engaged in economic trust games with people of a different religion, than it did when dealing with people of the same religion. According to the findings in this research, our brains have to work harder to engage in a win-win economic transaction with people who are perceived to be outsiders, regardless of the actual value of the economic transaction itself. These findings present a solid argument for the merits of tech entrepreneurship as a tool for social change. Put in business terms, when you solve a business or consumer pain point through tech, no one can see the color of your skin; they only know that you solved a problem for them. The business practitioner or individual consumer is not given the opportunity to use conscious or subconscious biases, such as skin color or cultural linguistics to assess value, rather they can only judge the suitability of your product or service to meet their need. To be clear, I am not implying that tech startups will eliminate racism, rather that Black Tech Entrepreneurship has the potential to neutralize some of the most detrimental effects of prejudice and at the same time, increase the probability of true economic parity. Let us now consider the first paradigm shift.
Paradigm Shift #1: Small Business Administration to High Growth Entrepreneurship
As people of color, have we been conditioned to think small? I think so. It almost seems as if those whose interests it is to prevent economic parity are saying, “You can have your small business because they don’t scale. We will even allow a few fashion designers or music artists to “make it rain” because the tradeoff is that only a few will ever achieve economic viability as the rest will waste valuable time that could have been allocated towards other more productive wealth creating endeavors. We are also perfectly fine paying a select few professional athletes because after all, we need our entertainment. What we don’t want to occur, however is for people of color to figure out how to hack the code to real economic prosperity and human flourishing within their communities”.
What if instead of a local Small Business Administration, we had a High Growth Administration? What if as entrepreneurs in historically black neighborhoods we started to move beyond highly competitive yet low growth businesses to allocate our entrepreneurial efforts toward tech businesses with disproportionately high margin and a higher probability of success? There are, of course, no silver bullets in business. It takes hard work, a relentless focus, and the discipline to see the most mundane of tasks through. The interesting thing though, is that it takes just as much work to start a small business as it does a high growth startup. The difference in many cases is not in the capacity of the entrepreneur, rather it is the size of his or her dream.
Paradigm Shift #2: Trustless Communities to a Trust Economy
Trust is the lubricant which makes economies flourish. One of the constraints that I have observed within our community is a lack of trust. The ghetto is as much a state of mind as it is a geographical location. In the ghetto, there is a zero-sum game that states, “I am gonna get mine, and you can get yours.” What if instead, we asked, “How can we take mine and yours and create an enterprise that produces greater economic wealth than we could create as individuals? The “getting mine” mantra has necessarily led to a phenomenon which many have come to know as the “crabs in a barrel effect,” where as soon as you start to see a little success, others in the neighborhood began to pull you right back to the bottom. Why does this counterproductive behavior occur? It is a result of a lack of trust.
The stage two economic outcome of a trustless environment is that business owners who operate under these conditions have higher costs of doing business than their counterparts do in the suburbs. The cost of which is naturally absorbed as a negative cost by the entire community in the form of higher prices for everyday goods, lack of jobs (particularly critical first-time jobs for young African Americans), and greater police scrutiny. Put differently, the lack of trust increases transaction costs for the entire community, regardless of the individual member’s involvement in the trustless behaviors. This unfortunate outcome is a big reason why the cycle of poverty persists. So what can we do about this? For a collective change to occur, it must begin with an individual choice. We must endeavor to increase the currency of trust. If we do this, we will unleash the dormant economic engine within our communities. As Pastor Chris Brooks of Detroit, Michigan states, “The greatest poverty which one can experience, is the poverty of relationship.” Expressed in mathematical terms, 1+1 x trust = financial abundance.
Paradigm Shift #3: Co-Dependence to Co-Creation
Inevitably in any society, there are going to be freeloaders. However, there is a false assumption about communities of color; that we have an unusually high population of enthusiastic and willing freeloaders. To the public it may appear the cause of this phenomenon is the result of government handouts, however when you consider the fact that poverty is an industry as much as it is a state of being, it forces you to think deeply over a different set of causal factors. Even the language used to describe people of color causes people to make subtle deterministic subconscious choices about the capabilities and potential of African Americans within society. For example, if I were to say to you that I work with “at-risk youth,” what is the picture which immediately comes to mind? I am guessing it wasn’t a picture of a 16-year-old Caucasian male. If you label a student an “at-risk youth,” how hard do you push him or her to achieve their highest potential in school? As it turns out not very much.
In 1965 psychologist Robert Rosenthal and school principal Lenore Jacobson, through their Pygmalion Study, set out to test if what a teacher thought of a student’s potential determined the learner’s academic performance. Students from grades one through six were tested in an elementary school in San Francisco. The teachers were told that the test was to identify the students who were intellectually high potential late bloomers. At the end of the testing, each student's name was placed in a hat by the researchers and then randomly picked. The teachers were then given what they thought was the results of the test and instructed not to say anything to the students about their results. A year later these randomly selected students objectively outperformed their non-selected counterparts. What the study revealed is when the teachers believed that a student had great potential, they both consciously and subconsciously invested more time developing that student. Moreover, it substantiated the truth that it was not a matter of the capacity nor capability of the learner, rather it was about being given the opportunity created by an educator’s belief in the student.
So again, I ask what is the danger of labeling a learner an “at-risk student”? The at-risk youth becomes underemployed, the underemployed becomes the hustler on the street, the hustler on the street becomes the incarcerated inmate, the inmate becomes the unemployable ex-con upon his release, and the unemployable ex-con becomes the repeat offender. If he decides to leave his criminal behavior behind, he is still an unemployable ex-con, which necessarily forces him to rely on government assistance because he can’t find consistent and meaningful employment as a result of his record. The progression, known as the school to prison pipeline, is a chronic and daily reality within communities of color. When you think back to my earlier statement, that is, poverty is an industry, it makes sense. Every industry has the economic incentive to keep itself alive. The question is now, after you adjust for inflation created by the poverty industry (or school to prison pipeline), how many enthusiastic co-dependent community members do we really have?
I have never met a self- made millionaire who was genuinely self-made. Collaboration creates abundance, but the lone individualist only knows scarcity. “But what about the superhuman entrepreneur,” you may ask? “You know, the one who defies all odds on the way to financial abundance and prosperity.” Is there any truth to this notion? Perhaps on the surface it may appear that way. Take a closer look and what you will find is that each larger-than-life business mogul has a network of relationships which led to their rise to the top of their perspective industry. For example, John D. Rockefeller had Frederick T. Gates and Henry Flager; Andrew Carnegie had Henry Clay Frick. In modern history, Warren Buffett had Benjamin Graham, David Dodd, and has Charlie Munger. In other words, contrary to popular belief, starting a successful scalable business enterprise requires the process of co-creating, not the superhuman effort of one individual. Co-creating identifies the native genius in each business partner and then mashes up the ideas, insights, and strengths of the collaborators until it produces useful products and services which generates greater value than the collaborators would have been able to achieve on their own. Let us now consider how we change our disadvantage into our competitive advantage.
Black Tech Startups: Turning disadvantage into competitive edge
According to an article published in Fast Company in 2017; only 1% of African-American founders receive venture capital. Moreover, women of color in particular, who are one of the best-educated and most entrepreneurial groups in America, accounted for only 0.0006% of venture investment in 2016. Yet research shows that when black founders succeed at procuring venture capital, they have the same rate of success as all other founders. What this data clearly shows (and has been known for quite some time) is that Black Entrepreneurs are at a disadvantage to their non-black and brown counterparts. This lack of investment doesn’t just harm communities of color, it hurts society as a whole. For example, in 2016, the Center for Global Policy Solutions reported that due to discriminatory financing practices and a bias towards companies primarily operated by white males, America lost out on over 1.1 million minority-owned businesses, and as a result, foregoing over 9 million potential jobs and $300 billion in collective national income. As disturbing as this data is, it has also highlighted a tremendous investment opportunity for impact investors committed to driving social change. For example, in the VC world, there is a term that is used to describe a privately held startup company valued at over $1 billion, known as a unicorn. What this very discriminatory financing practice has created is a heard of under-invested unicorns just waiting for the opportunity to create new industries, new jobs and societal impact. Moreover, as a result of the struggles which communities of color have historically faced, I am convinced that Black and Brown Founders are uniquely prepared to handle the rigors of the startup life.
In this article, we have explored three significant paradigm shifts which will lead to economic and human flourishing in our communities. We have also examined how Black Tech Founders can turn our disadvantage into a competitive advantage by investments through impact investors. I now leave you with a few thoughts.
We are standing on the shoulders of giants of the Civil Rights movement. Although we have a long way to go, we would not be in the position to get there had it not been for the sacrifice and contributions of community leaders such as Dr. King, Annie Malone, Madam C. J. Walker, and A.G. Gaston. Furthermore, with the creation of resources such as massive open online courses (i.e. Edx.org, iTunes University etc.) I believe that we have fewer barriers to reaching our fullest potential than ever before. Wakanda doesn’t have to be a place to be explored only in our imaginations. Welcome to the Black Tech Startup Revolution!
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About the Authors:
Dr. Paul Campbell is one of the co-founders of Brown Venture Group, LLC. Launched in 2018, Brown Venture Group, LLC is a venture studio venture capital firm exclusively for Black, Latino, and Native American technology startups. Brown Venture Group is writing a new playbook for both those interested in launching a minority-owned technology startup and those interested in investing in new technologies. For more information go to brownventuregroup.com.
