Robert Smith (Vista Equity Partners Co-founder) – Discussion at Concordia with Dr. Henry Gates (Sep 2023)

Chapters

Abstract

Robert Smith on the Economic Imperative of Diversity and Digital Equity

The Vital Role of Diversity in Economic Prosperity

In a rapidly evolving global market, diversity stands out as a crucial element for business survival and sustainability. Robert Smith, a prominent global employer, underscores this point with compelling statistics and insights:

– Innovation and Agility: Diverse workforces are six times more likely to be innovative and agile, leading to better business results and exceeding financial targets.

– Employee Performance: Organizations that embrace diversity report 12% better employee performance, fostering a more productive and engaged workforce.

– Customer Attraction: Research by McKinsey indicates that organizations with diverse staff attract more customers, with notable spending increases from African American and Latinx populations.

– Economic Boost: Bridging the wealth gap, particularly between white Americans and African Americans, could potentially add $1.5 trillion annually to the U.S. economy.

Addressing Systemic Barriers to Economic Participation

Centuries-old systemic barriers continue to impede full economic participation for certain groups. These barriers range from limited broadband access and inadequate banking infrastructure to discriminatory practices like redlining. Notably, 82% of HBCUs are in broadband deserts, and 70% of African-American communities lack branch banks. Overcoming these barriers is essential for inclusive economic growth, and solutions like digitizing CDFIs and expanding banking services are critical.

Tackling the Debt Burden and Introducing the Student Freedom Initiative:

Robert Smith highlights the Student Freedom Initiative’s mission to alleviate the debt burden faced by students attending Historically Black Colleges and Universities (HBCUs) and Minority Serving Institutions (MSIs). The initiative establishes a revolving fund where students can borrow money to cover Parent PLUS loans at favorable rates and repay it later, enabling continuous support for future generations.

The Digital Divide: A Barrier to Small and Medium Business Success

Smith highlights the digital divide as a significant obstacle, particularly for SMBs, which are pivotal in job creation and economic growth in the U.S. He points out that SMBs with access to enterprise software see a staggering 900% average ROI, demonstrating the profound impact of digital infrastructure. Furthermore, initiatives like Hope Credit Union’s digitization, which increased its business loans significantly, illustrate the transformative power of digital access.

Addressing the Broadband Gap:

Recognizing the lack of broadband access as a significant barrier for HBCU students, the Student Freedom Initiative takes on the issue by organizing town halls across southern states. These town halls aim to address the broadband desert issue and help HBCUs develop plans to secure funding from the BEED infrastructure bill, allowing them to improve their infrastructure.

Bridging the Digital Divide for Economic Equity

To bridge the digital divide and address economic disparities, Smith calls for collaborative efforts among private citizens, public representatives, and the private sector. He cites India’s successful rollout of digital infrastructure as a model, emphasizing the importance of enabling digital access and capital flow to underserved communities. This approach is vital for addressing labor shortages and underemployment in the U.S.

GI Bill Parallels and Historical Discrimination:

Smith draws parallels between the challenges faced by African Americans in accessing the GI Bill after World War II and the current struggles to utilize BEED funding due to inadequate planning. He emphasizes the need for HBCUs to have proper plans in place to apply for BEED funding and avoid missing out on opportunities for infrastructure improvements.

Corporate Social Responsibility and Racial Equity Initiatives

Smith introduces the “2% solution,” encouraging corporations to allocate 2% of their profits to support racial equity. Through organizations like the Student Freedom Initiative and Southern Communities Initiative, he directs corporate funds towards closing the wealth gap and creating economic advancement opportunities. These initiatives focus on debt relief, education, broadband access, and infrastructure development to support digital age participation and economic growth in underserved communities.

Infrastructure Development for Economic Empowerment:

Smith stresses the importance of building infrastructure, particularly broadband, to enable African American communities to fully participate in the digital age. Improved infrastructure can facilitate access to banking systems, telemedicine solutions, and information for entrepreneurship, fostering economic prosperity and wealth creation.

The Benefits of Diversity and the Role of Private Industry

– Private Industry and Economic Equality: Private corporations have a significant role in driving economic equality by creating pathways to employment, access to capital, and opportunities for underrepresented communities.

– Diversity as an Economic Driver: Realizing the potential of diverse populations is crucial for the US economy’s growth and competitiveness. Neglecting these groups hinders the country’s overall capacity and competitiveness.

– The Digital Divide’s Impact on Small Businesses: Without basic digital infrastructure, SMBs, the largest employers in the United States, face challenges in competing, hiring, and expanding their businesses. Addressing the digital divide is critical for their success.

Fostering Small Business Startups and Community Development:

The Student Freedom Initiative collaborates with organizations like Grameen Foundation to establish small business startups, primarily targeting African-American women in six cities. The goal is to channel $1.3 billion into these communities to create sustainable and long-lasting benefits, addressing the need for infrastructure development in tandem with corporate pledges made after the murder of George Floyd.

Digital Transformation and Economic Growth

– Digital Infrastructure as a Foundation: Access to digital infrastructure, including enterprise software, is fundamental for businesses to thrive and hire more employees.

– PPP Program and the Digital Divide: During the COVID-19 pandemic, underserved communities faced challenges in accessing PPP funds due to the digital divide and limited banking infrastructure.

– Success Story of Hope Credit Union: Digitizing CDFIs can make a substantial difference in supporting small businesses in underserved communities.

Broadband Infrastructure Build-Out:

Smith emphasizes the need for broadband infrastructure development in underserved communities to facilitate digital economic opportunities.

The 2% Solution and Corporate Social Responsibility

– The 2% Solution: Smith proposes that corporations invest 2% of their profits to support racial equity through organizations like the Student Freedom Initiative and Southern Communities Initiative.

– Actualizing U.S. Citizens: To address labor shortages, existing U.S. citizens must be actualized by providing them with education and skills to participate in the labor force at scale.

– Key Actions and Perspectives from Robert Smith: Smith works with corporations to develop projects that foster sustainable economic development in underserved communities. He emphasizes the importance of informing corporations about the economic benefits of diverse workforces and continuing their commitment to diversity and inclusion.

Economic Reality of a Diverse Workforce:

Smith highlights the economic benefits of a more diverse workforce, leading to increased profits and shareholder value.

Informing Corporations:

Smith urges corporations to understand the positive economic impact of diverse workforce and to continue executing their mission without changing the core principles.

Hiring More Interns:

Smith suggests hiring more interns from Historically Black Colleges and Universities (HBCUs) and other underrepresented groups.

A Call for Equitable Inclusion and Growth

Robert Smith’s message to CEOs and leaders is clear: leverage resources and influence to drive equitable inclusion and growth. His emphasis on diversity, digital equity, and corporate responsibility outlines a path toward a more inclusive and prosperous economic landscape, underscoring the intertwined fate of business success and societal progress.

Impact of Affirmative Action Rollback:

Caroline Scullin raises concerns about the potential impact of the Supreme Court’s decision on affirmative action.



Robert Smith concludes his remarks by offering practical actions that CEOs can take to drive equitable inclusion and growth.

Notes by: TransistorZero