What is fair, what does inequity cost, and what is smart? Part 3
Reinventing institutions = reinventing ourselves
In our first post in this series inspired by the closing plenary of SOCAP15 [featuring Ed alongside Nikki Silvestri and Ben Jealous, and moderated by Decker Ngongang], we riffed on questions of justice, prudence, and insight with regard to persistent social and gender inequity. You may recall that the panelists’ definitions of equity include agency, privilege, access to opportunity, and tapping into genius wherever it exists. In the second post, we discussed examples of the panelists’ four keys to overcoming persistent barriers to social and gender equity: relationships, opportunity, education, access to capital at all levels.
In response to Decker’s question, “how do we reinvent institutions?” Ed channeled the ancient wisdom that in order to reinvent institutions we must reinvent ourselves. We cannot wait for others, but must hold ourselves to account. Not only is this a core tenet of many faith traditions, it has been vividly espoused by secular icons as diverse as Mahatma Gandhi and Michael Jackson. Or as our friend and colleague Joy Anderson has so colorfully put it, “Why should we think capitalism can’t be fixed? We made up this shit. We can make up better shit!”
And yet change and reinvention are both far more difficult in practice than most of us would like. So in this final installment of the triad, we gather encouragement from historical examples of institutional reinvention, current developments in investing for impact, and Ed’s own history of reinventing investing.
The personal is financial
Reinventing investing is part of a long legacy of citizen movements to remedy persistent social ills. Specifically in the way that reinventing investing reconnects personal values to financial decisions, by rejecting the false premise that fiduciary responsibility is somehow separate from social or community values, it recalls more recent movements by women and people of color:
The personal is political, also termed The private is political, is a political argument used as a rallying slogan of student movement and second-wave feminism from the late 1960s. It underscored the connections between personal experience and larger social and political structures. …The phrase figured in women-of-color feminism, such as “A Black Feminist Statement” by the Combahee River Collective, Audre Lorde’s essay “The Master’s Tools Will Never Dismantle the Master’s House,” and the anthology This Bridge Called Home. More broadly, as Kimberlé Williams Crenshaw observes, “This process of recognizing as social and systemic what was formerly perceived as isolated and individual has also characterized the identity politics of African Americans, other people of color, and gays and lesbians, among others.” [Wikipedia]
The financial has always been personal. Now is a ripe moment, in which we see many people beginning to require their money to better serve their values, rather than the other way around. The personal is financial. And we know from history that individual choices matter and have real impact, both direct and collective: systemic change often happens in dramatic bursts that were unthinkable only a few years or even months before their occurrence. Think of the Obama Presidency, marriage equality, and other recent US national milestones.
At Mission Investors Exchange in May, hundreds of attendees across all categories shared their questions, experiments, aspirations, and results from investing for impact. From the main stage we heard progress updates from Bain Capital, MacArthur Foundation, Ford Foundation, Heron Foundation, Case Foundation, Kresge Foundation, and others who are in process of reinventing whole investment strategies and portfolios to align with social and environmental values. There are numerous domestic and international impact conferences still ahead on the 2016 calendar, and more individuals and organizations are joining the conversation every day.
Human element is inextricable from profit
In her concluding thoughts of the SOCAP panel discussion, Nikki Silvestri emphasized that the human element is inextricable from profit. We couldn’t agree more.
One of the reasons social and gender inequities have become so extreme in the US and elsewhere is because we have somehow forgotten that markets are people. Corporations are not persons — that’s a useful legal fiction — but they comprise people who harvest, make, sell, transport, and provide products and services to other people. Governments, however fractious, are made up of people. Communities, schools, news organizations, hospitals, and yes, even banks and investment firms are simply variations of forms in which people collaborate to exchange knowledge and other social goods with other people. When we recall this simple truth, it becomes intuitively obvious that the pursuit of profit without regard to the human element, as Nikki puts it, is detrimental to our shared social fabric.
One of the reasons UNC Partners was so successful (32% IRR over the last 10 years of Ed’s leadership)* is because it focused on identifying and cultivating talented people. Because UNC sought out founders (almost) no one else was looking for, it established a uniquely respected reputation among entrepreneurs of color. Because UNC worked with those founders to structure investment deals that benefited all parties, it was able to attract highly sought-after syndicate investors such as Harvard University, State Street Bank and other institutional investors. Because UNC worked closely with its portfolio company founders — referring to them as clients — to grow and share wealth across their stakeholders, it was able to create value for whole communities, not just a few individuals.
The Reinventure investment thesis is based closely on UNC’s example. We are delighted that there are more capital sources now for founders of color and women, but there are still nowhere near enough. We believe that by identifying and cultivating talented overlooked people, working with them to structure investment deals that are equitable all around, and by collaborating closely with our portfolio company founders to grow and share wealth across their stakeholders, we can generate respectable returns while contributing to reducing social and gender inequity here in the US.
Reinventure can’t solve the whole problem, but we don’t need to. If we do our part, and join together with others doing theirs, we believe that history can reverse direction and make another dramatic burst toward equity, justice and prosperity.
At Reinventure, we’re reinventing investing. We’re proud to be in extraordinary company. Please join us.
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While there’s no such thing as a guarantee in investing and no one can reliably predict the future, Ed’s record at UNC Ventures provides some historical evidence that it is indeed possible to invest for both financial returns and social equity. To learn more, please contact us.