HBCUs can increase economic growth and lift minority communities

Economic growth is maximized when it’s not exclusive; when it invites engagement and diversity, when more people participate.

Yet, even in our most innovative cities, we often fail to engage existing racially diverse communities to fuel growth. This is part of a series of essays on the future of capitalism, innovation and humanity.

The more people who bring different perspectives and backgrounds to a problem, the better the solutions will be. Innovation comes from diverse thinkers and the movement of people and ideas and inspiration in an open adaptive system.

Without diversity (and we can see this when neighborhoods are gentrified), we end up with an environment characterized by a sense of uniformity and homogeneity, which decreases the activity of innovation. The exchange of ideas becomes increasingly one dimensional with a greater number of people who have similar backgrounds and ideologies.

Ultimately, an economically segregated society stunts economic growth. It also leads to wealth and racial disparities and other externalities.

A more inclusive economy will grow faster and bigger than any exclusionary economy. We all stand to benefit when a broader base of people participates in an economic expansion.

There are innumerable reasons that have contributed to the exclusion of minority communities from economic opportunity and prosperity, but I’ll address just one in this article.

Education.

The Rise of the American University System

In the late 1950s and early 1960s, California created a higher education system that became the model for the rest of the country and the world.

It began, at least symbolically, with Sputnik I, which was launched by the Soviet Union in 1957. It was the first satellite to circle the Earth and marked the beginning of the Space Race as part of the greater Cold War.

In response, in 1958, Congress passed the $1 billion National Defense Education Act to expand high school education in science, math and foreign languages.

As Baby Boomers were starting to reach college age, the pressure was on to meet the coming demand. If America was going to compete with the USSR or lead the world in scientific accomplishment, it needed a bigger educational funnel and expansive university system.

University of California President Clark Kerr and subsequently California Gov. Pat Brown (Former Gov. Jerry Brown’s father) recognized the importance of the moment.

Kerr and Brown established a master plan for a three-tiered university system: University of California system, California State Colleges (CSC) system and California Community Colleges system. Kerr and Brown’s vision provided a educational path for an unprecedented number of students.

It also became a model for the rest of the country and the world.

California’s economy today, the 5th largest economy in the world (ahead of India and behind Germany), was largely ignited and driven by that vision.

Minority Communities Left Behind

Unfortunately, some 60 years later, minority communities haven’t benefited from the university system as they could.

Compared to white students, black and Hispanic minorities don’t have the same access to college prep courses in K-12 levels, don’t qualify for admittance to universities at the same levels and don't have the same completion rates within universities.

At the K-12 level, according to a study by CLASP, only 57% of black students have access to the full range of math and science courses necessary for college readiness while 81% of Asian-American students and 71% of white students have access to such courses. 

In California, more than 50% of all high school seniors are Hispanic or African-American, but only 6% of African-American and 7% of Hispanic students were eligible for admission into the University of California in a 2008 state review. It’s unclear if those numbers have improved any since then.

Black and Hispanic students who attend college have about a 30% lower completion rate compared to white and Asian students. According to a 2017 study by the National Student Clearinghouse Research Center, Asian and white students had much higher completion rates (63.2 percent and 62.0 percent, respectively) than Hispanic and black students (45.8 percent and 38.0 percent, respectively).

At predominantly black institutions (PBIs), most of which are community colleges, only 15% of black students graduate and 50% drop out after the first year.

The problem is foundational. Many African-American and Hispanic communities have been structurally disenfranchised and don’t have a direct personal connection to the educational system, to its benefits and opportunities.

The problem is also generational, which further slows progress. For example, if the majority of parents in a minority community have not gone to college, that community has fewer role models who can light the path.

The statistics against those communities are daunting and in themselves can discourage individual prospective students before they even have a chance.

Whatever any of us hope to achieve in life, it starts by having the belief that it’s possible and within reach.

Can we say that young people in minority communities have the same beliefs about their potential in life as those in predominantly white communities?

The Legacy of HBCUs

There are 101 Historically Black Colleges and Universities (HBCUs) in the United States. Some of these institutions date back to before the Civil War and provide a profound perspective on the history of black education in America.

Because they are clustered mostly in the South and Southeast, HBCUs are under the radar for many Americans. Spelman, Morehouse and Howard are probably the most well-known. Vice presidential candidate Kamala Harris went to Howard.

HBCUs are in 19 states, the District of Columbia and the U.S. Virgin Islands. According to the United Negro College Fund (UNCF), HBCUs enroll almost 300,000 students, approximately 80 percent of whom are African American, and 70 percent are from low-income families.

This list isn’t representative of all black colleges. To be designated as an HBCU, a college had to be established before 1964, according to the Higher Education Act of 1965. 

In 2008, a new classification was established for Predominantly Black Institutions (PBIs) to provide federal grants to minority-dominant schools. PBIs include colleges and universities that have at least 40% African-American students and at least 50% low income or first-generation degree seeking students. PBIs are largely made up of community and state colleges, but may also include HBCUs.

Similarly, the U.S. Department of Education maintains several lists of accredited minority institutions.

Community colleges provide a great first step toward a four-year education, but they aren’t necessarily inspirational to young people.

Kids want to dream about making a difference in the world, about achieving accomplishments that reflect on their ideas and values. Those dreams are molded largely by the people and community around them. Without examples of success and role models and institutions that can light the way, their aspirations and dreams might not be as ambitious as they could or should be.

HBCUs Offer a Direct Path to the Middle Class

According to UNCF, HBCUs make up only three percent of the country’s colleges and universities, but they enroll 10% of all African American students and produce almost 20% of all African American graduates.

Likewise, UNCF says HBCU graduates can expect to earn an additional $927,000 in their lifetimes, which is 56% more than they could expect to earn without an HBCU degree or certificate.

A 2019 study by the Rutgers Center for Minority Serving Institutions found that HBCUs are a pipeline to the middle class for minority students. Approximately 70% of students at HBCUs reach the middle class or higher by their mid-30s.

Those numbers would likely be higher if HBCUs had anything close to the funding of predominantly white institutions (PWIs).

Funding and endowment levels for HBCUs are abysmally low. According to Yahoo Finance, the total combined endowment for all HBCUs (101 schools) amounted to $2.1 billion. For comparison, the endowment for Harvard University alone is about $35.7 billion. Further, the endowments of more than 50 predominantly white institutions (PWI’s) are individually larger than all HBCU’s combined.

Several technology billionaires recognized the need and recently made large donations. In June of this year, Netflix CEO Reed Hastings and his wife donated $40 million apiece to Spelman College and Morehouse College and $40 million to the United Negro College Fund. Then, in July, Mackenzie Scott (former wife of Jeff Bezos) donated $40 million to Howard University.

HBCUs need funding just to survive. The federal government, UNCF and other donors should do everything possible to help these schools with their mission and help their students succeed.

Most HBCUs are Clustered in the South and Southeast

Few HBCUs are located where the highest paying jobs are, in our financial and technology centers, where the cutting edge of innovation is happening.

Most HBCUs are in the South and East regions of the country: North Carolina has 12. Georgia has 12. Alabama has 15. Texas has 9. Tennessee has 7. Mississippi has 7.

Meanwhile, Pennsylvania has 2. California has 1. New York has none. Washington State has none. Oregon has none. Illinois has none. That’s not to say that these states don’t have good colleges that provide excellent educations to large numbers of minorities. They do.

But they don’t have symbolically black or Hispanic colleges, whose mission is to represent and serve their communities.

There are no HBCUs in Silicon Valley or Seattle or Chicago or New York, which are hotbeds of economic opportunity. Howard University, in Washington, D.C, is likely best positioned to high-paying jobs in the nation’s capital. Likewise, there are several HBCUs located near the expansive high-tech Research Triangle Park in North Carolina. While these, along with Spelman and Morehouse in Atlanta, provide excellent conduits to high paying jobs, it’s not enough.

It’s the big cities that drive innovation and economic growth that need these institutions, to provide visible stimulus to minority communities and more importantly, to young people in those communities, who can aspire to become part of a great African-American or Hispanic university in their own community as they’re growing up.

The influence an African-American or Hispanic university goes well beyond just the students who enroll. It becomes a point of community pride and an inspiration for minorities in pursuing the American Dream. It becomes a symbol for possibility and empowers young people in minority communities to imagine their own potential without limits.

The big cities that are drivers of economic growth need them: San Francisco/Oakland/San Jose, Seattle, New York, Los Angeles, Chicago, Portland, Philadelphia, Boston. Although this is an incomplete list, it's a start. It's where the highest-paying jobs are and where the conduit from minority communities to those high-paying jobs needs to be improved.

Let’s Put HBCUs in our Financial and Technology Centers

We can build new African-American and Hispanic colleges and universities. We can also invite existing HBCUs to establish new campuses in the financial and technology epicenters. Both models provide possibility.

I’ll conclude this piece by challenging the leaders in our technology and financial centers to build black and Hispanic universities where it matters most, where they can stand as both educational institutions and inspirational symbols to those minority communities, and provide a direct conduit into the best job markets in America.

The HBCUs provide a cultural and economic roadmap for minorities to reach the middle class. It’s time we built minority-focused institutions in our financial and technology centers. The impact to the economy, and the benefit to all of us, would be exponential.

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Thank you for reading.

Tags: #BlackLivesMatter #BLM #WealthDisparity #EconomicGrowth #Innovation #Education #Gentrification #Humanity #RoadAhead

People across the country have been moving out of big cities en masse during the pandemic. The exodus began before the pandemic but has sped up since.

Many people were leaving expensive urban metropolis areas like San Francisco or New York for affordable destinations, whether that meant the suburbs or a smaller city or town.

There’s been some speculation that cities will be left empty following Covid-19. And others say the changes will be temporary, as they were after previous shocks (e.g. 9/11, 2008 Financial Crisis).

The Cost Benefit of Leaving Cities

As people leave cities like San Francisco for destinations like Reno or Boise, they are likely seeking quality-of-life changes.

They may not earn as much in Reno, but they can buy a bigger house and live economically better than they were able to in San Francisco. And as cities have shut down, the amenities of city life are no longer compelling. But that’s likely temporary.

Many technology and knowledge workers can do the core of their jobs from anywhere, so it makes relocating easier and financially attractive if they can keep a big city paycheck. But they may have fewer options if they decide to change jobs in the future.

Cities are vital for innovation-driven economic growth. Cities are where people come together, where ideas are exchanged, where innovation happens. It’s where energy is converted to creation.

Cities are Complex Adaptive Systems

Why are cities important to innovation and growth?

First, cities are metabolically more efficient the larger they are, meaning they consume less resources per capita to sustain themselves as their populations grow in comparative scale. Second, socioeconomic activity, such as innovation or wealth creation, increases exponentially as population size increases.

Geoffrey West, a complexity scientist at the Santa Fe Institute, is an expert on cities. His book, Scale: The Universal Laws of Life, Growth, and Death in Organisms, Cities, and Companies, explores how cities are essentially complex adaptive systems, not unlike living creatures. In it, he says that when comparing cities by population size, as the population increases, it follows two logarithmic scaling laws, one that provides economies of scale (efficiencies) in infrastructure and the other providing exponential socioeconomic growth.

West says that as cities get larger, they scale sublinearly with infrastructure, which means they use less resources per capita, the larger they are. They realize economies of scale as they grow. Specifically, this follows a logarithmic power law with an exponent of about 0.85. Essentially, as the population doubles, it uses 15% less energy than a linear relationship would show.

At the same time, socioeconomic metrics (innovation, economic growth, wealth, crime, disease) scale superlinearly, following a logarithmic power law with an exponent of about 1.15. Essentially, as the population increases, innovation and wages and wealth increase exponentially. Unfortunately, so does crime and increased transmission of diseases, as we’ve all experienced with Covid-19.

West pointed out that the 15% energy savings we see with every doubling of size of the city is complementary and approximately equal to the 15% gains in socioeconomic activity.

With this in mind, the cost benefit analysis of people migrating out of cities is counter to economic growth.

Creativity and Cities

We’ve long recognized the importance of creativity and innovation in cities as a driver for economic growth. Countless studies and books have been written about Silicon Valley magic.

Cities are often ranked by their potential or desirability, partly based on innovation or creativity metrics. Some of the indicators of various rankings include: number of patents filed; number of cafés; number of startups; proportionate amount of office space used by startups; number of museums or art galleries or film festivals; air quality; food diversity; job diversity; number of and distance to nearby research universities, and so on.

In fact, city builders around the world try to emulate aspects of creative cities like San Francisco and San Jose.

But it’s not that easy. The energy that creates that environment cannot necessarily be manufactured by design. It’s organic. It’s driven by the reactivity of people coming together, engaging one another.

The late urban activist Jane Jacobs who led the effort to save Greenwich Village’s Washington Square Park from being torn down to build an expressway in the 1960s, once said, “[Cities] differ from towns and suburbs in basic ways, and one of these is that cities are, by definition, full of strangers.”

The bringing together of strangers, of diverse people from diverse places, is what provides cities with the spark of life, with energy to create.

Passion, Serendipity, Innovation and Growth in Cities

John Hagel at Deloitte writes and talks frequently about the importance of passion and a learning disposition, as a driver for both individual and organizational growth. He uses the term “passion of the explorer” to describe an archetype and outlines a basic taxonomy to describe passion. He says passion of the explorer starts with a “commitment to personal improvement,” supported by a two key dispositions: 1) A questing disposition to push oneself and try to attain higher levels of performance and realize potential; and 2) A disposition to connect with others who share the same or similar passion.

Hagel juxtaposes the passion of the explorer with the passion of the true believer. The true believer has a clear destination and firm commitment to reaching it, but they can be closed to possibilities or information that’s counter to their goals. Entrepreneurs are often true believers.

Passionate explorers, on the other hand, commit to a domain but often have no idea where the path will take them. They’re constantly seeking new challenges and take in the world with an open mind, always trying to improve themselves and provide greater impact on the world around them. They have a learning mindset and openness that enables them and their organizations to adapt to change more easily and overcome obstacles.

The passionate explorer certainly doesn’t define everyone who migrates to cities, but it characterizes many of those people who are driven to be part of a domain or movement, who want to meet and engage others who have similar passions, who want to participate in the Zeitgeist, even if they don’t know where it might lead them.

When we go to a new city, we often meet many more people in that first year or two than we do after we settle into our careers, pastimes, and relationships there. We open ourselves to the unknown and unexpected, to the happenchance of synchronicity. This openness prepares us for possibility. And it’s a key underlying factor to learning and innovation. In a previous whitepaper, The Metrics of Innovation, I explored the importance of networks to innovation in and around organizations. The same applies to innovation and economic growth in cities.  

In some ways, it’s why we go to business conferences or even cultural events, to participate in a similar environment for a few days. We don’t go for the content (those long slide presentations!). We go for the serendipitous encounters we’ll have in the bar or at dinner or randomly in the hallway. We go to connect with people who have a passion for the same domain. We go to discover something new, to uncover some unknown, to gain new insights, which can help us and our organizations grow and expand.

Building Economic Cities

Cities are complex and dynamic. They aren’t embodied or characterized by the buildings and architecture. Cities are the people and the vast web of their connecting interests.

Let me digress for a minute and talk about building cities from scratch before returning to talk about innovation and economic growth in our companies and cities.

A few years ago, I briefly advised on a pilot city building project in China.

One of the projects, the first of six pilot cities was ambitious. Located just north of Beijing, it was a 55-square kilometer city (about half the size of San Francisco) modelled in vision as a high-tech innovation city, with a life sciences park, a cyber port on the water and a venture capital island connected by tram over a river to the adjacent district, and high-quality residential neighborhoods. The mockups looked like Disneyland.

This Disney version of Silicon Valley will eventually thrive, but it may thrive in ways that haven’t yet been conceived and only after the spark of life grabs hold and a community naturally emerges. This may take several generations and economic cycles, and it may have an identity that has little or nothing to do with the ambitious vision.

We can find similar efforts (old and new) around the world, particularly in the developing world: Astana, Kazakhstan; Songdo, South Korea; Naypyidaw, Myanmar; King Abdullah Economic City, Saudi Arabia; Masdar, UAE; Canberra, Australia (not a developing country); Brasilia, Brazil.

The visions for many of these cities seem bounded in Utopian ideals with ambitions for innovation and economic growth. They’re driven by cutting edge architecture and aspire to be global economic hubs and seats of government.

None inspire a sense of life and vitality.

Some of the reviews of these cities are eerily like critiques we often hear about suburbs and gated communities. It’s not a surprise that many are modelled, at least in part, after Ebenezer Howard’s garden city movement, which has also influenced many suburbs:

Canberra: “Canberra is like going to grandma’s house. Other Australian cities are doing brash, creative things but here everything is wrapped in plastic.”

Brasilia: “Brasilia is a mirror of Brazilian society,” historian and urban planning professor Vicente Del Rio says. “Those with power live in a little island or cocoon. Those who don’t—which is the majority—live on the outside.”

Masdar: It’s been described as a “a green ghost town.” Another said, “When I first came here three years ago, Masdar City was very quiet. Unfortunately, it is still very quiet.”

Astana: “For a large part of the year, public life in the city practically freezes over.” "The way the city is planned means that citizens principally live in isolation, travelling by car from home to work and back again. There are few public spaces for people to congregate."

Jane Jacobs criticized the ideas of the garden city movement. “[Ebenezer Howard’s] aim was the creation of self-sufficient small towns,” said Jacobs, “really very nice towns if you were docile and had no plans of your own and did not mind spending your life with others with no plans of their own. As in all Utopias, the right to have plans of any significance belonged only to the planner in charge.”

Many of these cities will likely come to represent economic and class disparity. Just as we can segregate in the suburbs to a degree, these cities will effect segregated societies to a similar degree, as Jacobs suggested.

Emerald Cities: Why do We Try to Build Economic Utopias?

Most, if not all, of these planned cities have already been (or will likely be) called failures. Not because they cannot succeed, but because cities, as Geoffrey West pointed out, are complex adaptive systems; they grow and thrive in ways similar to how bacteria might grow. They evolve like life evolves, adapting to the environment. For a city, that environment is made up of the people, to which the city must adapt.

The architectural vision and urban planning have little ability to drive what happens within that framework.

Or, as Jane Jacobs said, “There is no logic that can be superimposed on the city; people make it, and it is to them, not buildings, that we must fit our plans.”

Man has made many attempts large and small at building private and exclusive Utopias, whether as economic systems or in the form of a city or gated suburban community. Our efforts at creating a man-made Eden will no doubt continue. In these endeavors, we overlook the complexity of life. We overlook the fact that we’re messy, that we make irrational decisions. That our interests and ambitions are varied.

As I previously said in an article about values, innovation and the future of capitalism, if we learned anything from neo-classical economics, it is that people are unpredictable. No Utopian ideal and no amount of refining and finessing of the blueprint in an economic vision (whether it’s an urban planning document or a grand unifying theory of economics) can make the purely theoretical fit the complexities of life and choice. Thus, Utopias of any sort (which we might view as theoretical expressions of frictionless economic perfection) will always fall short.

Former New York Times architectural critic Nicolai Ouroussoff wrote in 2010 about King Abdullah Economic City in Saudi Arabia. His words can apply to all these cities as economic experiments: “These cities are driven by anxiety over the future, not utopian idealism.”

Ouroussoff is right about the anxiety that drives the visions of these cities.

But I’ll amend his sentiment slightly: Utopian idealism is born from anxiety over the future.

This is why we try to build economic Utopias: We fear others who are different from us. And thus, we fear the process of open organic growth and that fear is likely based in desire to maintain the status quo, particularly for the class of economic people who imagine and develop these Utopian cities as landscapes of frictionless perfection.

The world will continue to urbanize. In 2018, the United Nations World Urbanization Prospects Report reported that by 2050, 68% of the world’s population will live in cities. Today, 55% of the world’s population lives in cities. Most of that urban migration will occur in developing countries. We need to build cities, but we simply don’t know how.

We tend to overlay simplistic ideas on top of the real complexities of life and existence. And not to be overlooked, we overestimate our own abilities.

Or rather: We’re overconfident in our ability to conquer nature.

Innovation Comes from the Free Exchange of Ideas

What China and Saudi Arabia and Myanmar and Kazakhstan and other developing countries that are building visionary economic cities might not fully appreciate is that creativity and innovation and passion and leadership (the foundations of economic growth) involve the free exchange of ideas more than anything else, certainly more than architecture and shiny buildings and using form in an attempt to prescribe outcome.

Why is this relevant to American cities and economic growth?

Innovation doesn’t come from a vision of a city with great architecture or a city that has a venture capital island. It comes from the people who make the city, who engage in it daily; it comes from freedom of expression.

It comes from art, philosophy and the expressions of Uneconomic Man; it comes from a passion to realize our own potential as well as humanity’s potential.

It comes from trust and from feeling safe enough to share ideas and collaborate.

It comes from diversity and the movement of people and ideas and inspiration in an open adaptive system, not a closed, controlled system.  

Economic growth is maximized when it’s not exclusive; when it invites engagement and diversity, when more people participate. This brings me back to American cities.

Economic Growth Cannot Afford to Leave Minorities Behind

We know that diversity of ideas and people drives innovation and exponential economic growth, yet even in our most innovative cities, we often fail to engage existing racially diverse communities to fuel growth.

Is it because it’s the outsiders and newcomers who are meeting new people and engaging in new ideas at scale, while those who are already part of the landscape continue to go about their lives as they’ve always done, which reinforces a status quo?

That might be part of it, but certainly not the whole of it. Systemic racism plays a role and is often perpetuated through economic cycles.  

How can we ensure that the next growth cycle is more inclusive and raises more people into the middle class?

One of the biggest challenges that thriving cities have is that the socioeconomic growth tends to lead to gentrification in previously diverse neighborhoods.

Even though gentrification is often a result of economic growth in a city, it creates an environment that is characterized by a sense of uniformity and homogeneity. It diminishes the feel and dynamic culture of a thriving city as neighborhoods start to emulate the suburbs. At the same time, it disenfranchises minorities and the poor. Recall those large planned cities I just talked about. They’re essentially preplanned for homogenous populations, which is part of their failure.

Diversity Should Drive the Next Wave of Growth

The consequences of gentrification are that the activity of innovation and the exchange of ideas becomes increasingly one dimensional with a greater number of people who have similar backgrounds and ideologies.

It’s the same homogeneity we sometimes see in C-suites and Boardrooms of large Fortune 500 companies. Many of those companies, though certainly not all, are led by people who largely grew up in similar communities, went to similar schools, got similar educations, hold similar business philosophies and share many of the same biases.

There’s not much diversity, not only racial, ethnic and gender diversity, but diversity of thought driven by outside thinkers who challenge prevailing mindsets. This leads to groupthink, status quo bias, risk aversion, and other biases. It also makes those companies less able to innovate and adapt. They mostly operate to sustain the status quo and their efforts at innovation are largely focused on safe efficiency gains.

Gentrification does the same thing to innovation and creativity. The spark of life in cities that Jane Jacobs invokes starts to fade.

The irony of a downturn and the exodus of people from a city is that most of those leaving are the gentrified. That perhaps creates an opportunity for change.

As people return to the big cities over the next couple years, let’s recognize that economic growth will go further with greater diversity of ideas and people. Let’s also remember that cities are the people. It’s their ideas and passion and vision that create.

I don’t know if it can be said any better than what urbanist Lewis Mumford said (and Geoffrey West echoed): “The chief function of the city is to convert power into form, energy into culture, dead matter into the living symbols of art, biological reproduction into social creativity.”

Thank you for reading. I posted this article on LinkedIn. Please leave a comment there.

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Tags: #Innovation #UrbanPlanning #Humanity #Passion #EconomicGrowth #Diversity #Serendipity #StatusQuo #BehavioralEconomics #GardenCityMovement #WealthDisparity #Bias #Gentrification #RoadAhead