Robert F. Smith Speaks at 2023 Concordia Annual Summit About the Benefits of Economic Inclusion

How can the private sector better engage with underrepresented communities, creating pipelines to employment, access to capital? How can the system help us catch up? Sure. I think it's more than just helping the community catch up. I think it is ensuring that America has a very strong economic base, which means making a more inclusive economy. You know, it's interesting, you know, as an employer of, you know, over 100,000 people globally, you know, I look at, you know, when you actualize people, what is the end result? You know, there's a consumptive dynamic. There is an enterprise dynamic of how do you actually, you know, excite people in a way that they're building more innovative products, they're more agile, they're taking, you know, in some cases, mitigating risk in the businesses. So I would argue, you know, we always talk about, it's the right thing to do. Economically, it is, you know, as a fiduciary, it is the only way you should approach your business. You should approach your business as a fiduciary to say what are the things that minimize risk and optimize outcome? And there's tons of data, and I brought a couple of data points to share. You know, Deloitte did a report that six times, organizations that are more diverse in their workforce culture, six times more likely to be innovative and agile, eight times more likely to achieve better business results, and twice as likely to exceed their financial targets. You know, BCG had something similar, where they talk about, you know, the products that are developed with a diverse workforce have 19 percentage points higher growth than those who don't. You know, Gartner talks that organizations have, diverse organizations have 12% better employee performance, and McKinsey, and this is, you know, one of the things that I look at, if you look at what McKinsey says, you know, diverse organizations attract customers, and the African-American and the Latinx population are saying that if you represent who they are, that's gonna increase spending annually by over $300 billion just in the US. So there's a consumptive dynamic that makes it, in my mind, a fiduciary duty to not only consider, but embrace diverse workforces. There's also the wealth gap, and if we were to equalize the wealth gap right now, you know, white Americans are about 12 times more wealthy than African-Americans. If you just equalize that, that's an additional $1.5 trillion annually that would be contributed to US GDP. Wow. Okay, so it's beyond the right thing to do. From a moral perspective, it's the right actual thing to do from an economic perspective, and we keep losing that narrative, and that's one of the most important parts of the narrative. So diversity is good for business. It is critical for businesses to survive and sustain, especially in a highly competitive global environment. If economies outside the US decide to, again, actualize all of their citizens, and enable those citizens through access to broadband, and capital, and enablement tools, they will then start to outstrip the US's capacity because we aren't actualizing all of our citizens, and I think that's an important element of what we have to do as a group here at Concordia. We, of course, do it at Vista and in academic institutions, is how do you actualize more of the citizenry to participate in what is now a digital, digital-centric economy? So it's an important part of what we do. But why has it taken the business world so long to figure this out? Or why are some sectors resistant to this? And you know this. You have written books on it. Well, I had to ask for the straight thing. Yeah, of course, right, and you did a good job of that. Okay. There are systemic barriers, many of which have been constructed over hundreds of years and generations, some of which we've been able to deconstruct, and some of which are trying to recrystallize, that we have to continue to fight against and fight for progress in that regard. So to me, I think about some very simple economic pillars that we can actually solve today that will create this enablement. One is broadband. Okay, we are absolutely moving increasingly into a more digital economy. 82% of HBCUs, which are historically black colleges and universities, are in broadband deserts. Okay, now I want you to think about this. 82%. 82%, and the vast majority of African-American engineers, the vast majority of our doctors, the vast majority of our judges all come from HBCUs. Then think about being in college. And that percentage is going to increase because of the Supreme Court's recent decision about affirmative action. And talking to the HBCU college presidents on some of this last week, and I'm going to meet more tomorrow, record now enrollment, first of all, and they've got some housing issues we're dealing with, but also applications. So that dynamic is actually saying, okay, you're going to disable a big part of the growing population in America by not giving them broadband access. And as you know, software is the most productive tool introduced in our business economy in the last 50 years, will be for the next 50. And so we have to enable all of our citizenry to participate. So that's kind of point one. 70% of African-American communities don't have branch banks in their neighborhood. I grew up in a neighborhood where there were no banks, no branch, and my parents were both teachers, and you, as you know, had to drive across town to use the bank. Well, if you don't have a bank in your community, you don't have the ability to borrow money for a small business, to help you manage loans for your house, for mortgages, et cetera. And so in America, there's a couple ways, but the second wave of economic growth came from real estate. And if you were in an area that was redlined, where they couldn't borrow money to actually create a mortgage, then those areas remained depressed. And so wealth couldn't be created if you couldn't gain access for real estate development. Those infrastructure pieces, broadband on the one hand, banking infrastructure on another, and most of our communities are still banked by what are called CDFIs, Community Development Financial Institutions. If we have to digitize those and then drive capital into those infrastructure, because that's what creates economic activities and jobs and mobility, which creates a higher consumptive opportunity for all Americans in all of America to now participate in. Let me follow up on that in terms of the digital divide. No one has been more important to you or profit of this, focusing on bridging the digital divide. Tell us why this is a critical issue for you, how you spotted it at the beginning, and your organizations, and the impact that it has on our broader economy. Now you introduced it a little bit, could you elaborate? Yeah, so again, I'm in the world of enterprise software. Our companies, we operate in 180 countries, 70 different industries, we have over 440 million users of our software. And so not surprisingly, it becomes very clear who is consuming our products. I think we've got 1.5 million small to medium businesses. So we measure the impact of software on our customers. So we have our 80 plus companies, we go out and we measure, okay, what's the return on investment of the products that we sell to our customers? Our average ROI is 640%. Okay, this is products that we sell to banking, to insurance, to small to medium businesses, you name it. For the small to medium business segments, it's 900%. But if you not have broadband, and you are a small business owner, and there's no broadband in your community, so let's say you run a barbershop, or a restaurant, or insurance agency, or whatever it might be, and you don't have broadband, you're not gonna get that 900% ROI. So if you need things like scheduling software, accounting software, any of those sort of things, because if you don't have that access to the basic infrastructure, and I will argue today that enterprise software is basic infrastructure, if you don't have access to that, you are gonna be less and less competitive over time, which means you are gonna be able to hire fewer and fewer people. And small to medium businesses are the largest employers in the United States. And it's typically, as you know, where you grew up, West Virginia, where your first job, what was your first job? It was typically a business that was in your neighborhood that you could walk to. Well, if those businesses aren't operating efficiently, productively, then they can't hire the interns, and the kids, and then ultimately people who now help expand their businesses. We discovered this during, well, not discovered, but this was highlighted during COVID when we had the PPP program. And I worked with, at the time, with Secretary Mnuchin, and Senator Schumer, and others. I said, listen, these communities, and the businesses in those communities are basically gonna fail unless we get capital to them. And so the first act was, okay, great, we're gonna have a PPP plan, but we found out the capillary banking system didn't actually have access, or didn't have capital to push into those small businesses. And there was one credit union. And why was that? Well, A, they didn't have the digital capabilities. There's one credit union, for instance, Hope Credit Union, where they had, and Bill Bannon, who runs this, he did 60 business loans, six zero business loans. This is in the Delta, in Mississippi, kind of the year before that crisis. Once we digitized his bank, he did 1,500 loans a month. Oh, by the way, the average loan was $11,000, okay? The average size of company was five employees, right? And so, and his FDIC return rate, was higher than the FDIC level. So they were repaying the money faster, okay? And at a higher return rate than FDIC. If you digitize the CDFIs, and then push capital into them, so the first wave of PPP came, all the big banks sucked it up, then it went to the big customers, right? We then had to go back and carve capital out for that channel, which made a huge difference. And I know it saved tens of thousands of small to medium businesses in those communities. And because I got letters and notes from people saying, hey, had we not done that, I would have gone out of business. But you think about the ability to generate economic opportunity. In today's economy, it's digital and it's capital. And these communities are lacking both. So part of what we have to do as private citizens is bring our capability, and frankly, also our votes, to our public representatives to say, we need to enable this to happen so our communities are stronger and it makes a stronger America. So that's what we're focused on. What would it take? I mean, can you envision everybody everywhere having access to, you know, just walk it down the street, you could just take it for granted. Right. That we can be online without a big deal. Right. Will that happen? Can it happen? There is no reason it shouldn't. You know, our friend, Makesh Ambani, okay, many of you know in India, rolled out a system, Jio. Now they have one, it is the first digital country, 1.3 billion people have access to 4G. Just walking down the street. Right now. So you go to India today and someone comes up to your window and wants to sell you a bottle of water, you pay him digitally. Wow. Okay, think about that, right? They use that time in COVID to build out a digital infrastructure which will give them a sustainable, competitive advantage for generations. And you're telling me we can't do that for, you know, 70 HBCUs? So obviously we could do that. India just did it. Right. Why aren't we doing it? Well, that's up to us to ensure that it happens and to ensure that our politicians and to ensure that frankly, the private sector is making a call. You know, I sit on the board of the Business Roundtable and one of the key issues that I hear every single day out of that organization and the companies as large as 240 companies in America is, we don't have enough labor. We're sitting here today at 3.5% unemployment. Right. But yet, we haven't built the infrastructure to actualize existing US citizens so that they can participate in the labor force at scale. Okay, actualizing that will solve a lot of the labor issues and a lot of the problems we're addressing today. And addressing underemployment. Absolutely, underemployment. Underemployment. And you know this, in our neighborhoods we grew up in, you know, when someone had a really good job, they supported five, six, eight, 10 people, okay? And so we have to regenerate that, you know, in the importance of educating and enabling these people to participate in the next generation of opportunity. Let's talk about, excuse me. Let's talk about the 2% solution. Yeah. The idea that corporations, of course, as you all know, should invest 2% of their profits to support racial equity. You are also the chairman of Student Freedom Initiative. I have the pleasure of being on your board. And a leader of Southern Communities Initiative, along with Dan Shulman, that's CEO of PayPal, and Rich Lesser, global chair of Boston Consulting. Student Freedom Initiative and Southern Communities Initiative are two organizations that use and direct those corporate funds to drive racial equity. So for us, could you elaborate on how these organizations are working with corporate partners to invest that money into black and brown communities to help close, crucially, the wealth gap? Right. So again, the early part of Student Freedom Initiative was how do we ensure that the students who go to these HBCUs and MSIs aren't, you know, overly burdened with debt. So, you know, what we've set up, of course, is a fund where they borrow, it's typically to offset the Parent PLUS loans, which, you know, the rates and terms of those, I think, are quite oppressive, where they borrow money from this fund and they pay it back into the fund and it gets relent back out to the next generation. So again, elegant solution to a really complex problem. Paying it forward. And then we said, well, we figured out, well, once, as we were going through and said, you know, the broadband desert issue is a big issue for the HBCUs, where our students were coming from. They're saying, well, this is great, but I don't have access to broadband. And so we took that on as an initiative, which is part of what we're accomplishing. So now I think we've had, you know, 15 town halls and across, you know, six Southern states, and which overlaps with our Southern communities, where we're now able to address and put together plans so that each one of those HBCUs can now submit to get B funding, which is the infrastructure bill funding that has passed. We've got to get that done by the end of this year. And, you know, corporations here want to help. You can just go to any of the websites, SFI or SEI. It's important that if we, you know, again, like, as you know, in the GI Bill, one of the challenges with that, you know, 1.2 million African-Americans came back from fighting in the war. You know, my grandparent being one of them. My father. Applied for the GI Bill, only 5% of them were able to use it. Right. Various reasons I won't go into. Right. And it gets distributed at the state level. So if you don't have the plans built, you can't apply. So we're working with each one of these HBCUs in Alabama and Mississippi and Tennessee and actually Ohio and a few other states to ensure, Louisiana, to ensure that they have the adequate planning functions done and the proposal so they can now get this funding. Cause if we can build out that infrastructure, it's going to be a massive enablement for, you know, this community of Americans to participate. So that's a critical element that we need to focus on. So my father, your grandfather, missed the opportunity to be part of the greatest economic boom in terms of the size of the middle class. Right. Through the GI Bill. Right. Because of discrimination. Right. So, you know, our grandfather, your father, went and said, okay, no, you can't go to college. You can go to this trade school. And by the way, the money went to the trade, to someone who managed the program, you know, their trade school. And then they wanted to buy a house. Well, it's in a redlined area. So you can't buy that house. You can't put a loan on that house cause there's no FDIC insurance on it. So they ended up renting as opposed to buying, which was, that was a major expansion in economic prosperity and wealth creation in America up till the digital age. That's right. And so now we're in the digital age. And being screwed. Right. And so now we don't have the infrastructure for the digital age. So this is what we're focused on with SFI and SCI because once you have that broadband capacity, you can drive dollars into the banking system, CDFIs, MDIs. You also can deliver telemedicine solutions, right? You can also deliver information into those communities to how to build and run their businesses. We just opened another one with Grameen Foundation in Atlanta. And so we'll be able to deliver, the plan is about $1.3 billion in these six cities for small business startups, principally African-American and principally African-American women in that construct. So building the infrastructure was an important part of what we're doing with, you know, SFI and SCI. Building the infrastructure so that $340 billion of corporate dollar pledged after the murder of George Floyd has a place to go that creates sustainable, long-lasting benefits to the community. Yeah, repeat that. That was pledged. The key word in that sentence was pledged. How much of that has been actualized? Yeah, very little for what I'm saying. People go, huh? I didn't say that. Yeah, I know, right? Well, it's kind of interesting. There's about 90% of it comes from a few corporations. So we're working directly with them and saying, okay, here are, I'll use the word, shovel-ready projects that now create an enablement, a sustainable enablement in those communities as opposed to a one-time episodic transfer of capital. We want to make sure we create sustainable business infrastructure, economic infrastructure and wealth-generating capacity in those communities. You know, I see we have one minute and 15 seconds. We could talk all day. I love talking to you. Yeah, I love talking to you. And I learned a lot. So I'm going to ask you two things and then you dance your way through it. All right. One is, what is going to be the impact of the rollback of affirmative action? Since a terrible day in April, 1968, when Dr. King was assassinated, black middle class doubled, black upper middle class quadrupled, yet the wealth gap, as you said twice, has remained. So one, what will the impact of the Supreme Court decision be? And finally, in closing, for all the other CEOs in this audience, what are the couple of things that they can go out and do today to help drive equitable inclusion? So impact, part of what we have to do is inform corporations, their outside directors, inside directors, CEOs, human resources departments, that it shouldn't change what is the economic reality of a more diverse workforce, enables more profits and more, call it shareholder value that can be created. So we have, and we're driving that information out. So that's kind of one of the most important things you don't have to do anything differently. You may have to change the words around it, but you can still go to execute on your mission. And most of the CEOs I've talked to are saying, yeah, I'm gonna continue executing on my mission, but they need to be informed on how. Second thing, what you can do, hire more interns. That's the first thing. We have a platform, InternXL, and we've got 23,000 STEM students on it from HBCUs, et cetera. State, still continue to bring people into the workforce. And of course, work with us to enable the broadband infrastructure build out so that these colleges and these communities have access to what is gonna be the next greatest wealth generating opportunity in America, which is leveraging digital infrastructure. So those are things to do. Robert Smith, thank you very much. Skip Gates, always a pleasure. Thank you, ladies and gentlemen. Thank you all. Thank you.