Afro-Netizen

Invisible Capital and Why We Need to Democratize Entrepreneurial Opportunity

By Chris Rabb

Republished courtesy of The European Business Review

Invisible capital is the toolkit of our skills, knowledge, networks, experiences and other resources, along with the set of assets we were born with.

Invisible capital is the toolkit of our skills, knowledge, networks, experiences and other resources, along with the set of assets we were born with: our race and gender, our family’s wealth and status, the type of community in which we were raised, and the education we had as children.

Some of these assets are fixed—we cannot change who our parents are. Others are in our power to acquire or modify. What makes them “invisible” is that our society rarely acknowledges that entrepreneurial opportunities—and thus entrepreneurial outcomes— are greatly influenced by these assets.

You can predict which entrepreneurs will succeed with a fairly high degree of probability if you know some basic facts about them. And on the surface, race, gender, and the educational attainment and/or household income of their families seem like pretty obvious factors. It’s simply easier for some people to succeed. The playing field is not level.

If you want to become an entrepreneur, or help other entrepreneurs succeed, you have to be familiar with the terrain of the playing field because it is neither smooth nor level. Additionally, you have to understand the rules of the game. Those rules are not written anywhere. A rulebook has yet to be written by the institutions’ most vocal and influential regarding the cause of entrepreneurship.

To understand the lay of the land and be able to effectively navigate the often hidden obstacles on a playing field, you have to learn how the unseen forces that shape entrepreneurial opportunity work, in ways that even the “winners” in business may not fully appreciate.

Platforms to access versus proxies for success

When we limit “success” to such things as occupational prestige, higher education, income, and so on, too often we discount the impact of strong networks and other forms of access that correlate to increased upward mobility for successive generations. As the saying goes, “It’s not what you know, it’s who you know!” Of course, this expression is overly simplistic—and good connections alone rarely are enough for prolonged success in any field.

The truth is that there is a range of invisible factors that give some an unequal advantage on the entrepreneurial playing field. Successful entrepreneurs in the U.S., the data show, have a toolkit that tends to be more broadly valued in some communities than others, but the all-important mix of these assets is the invisible capital (or lack thereof) that helps or hinders entrepreneurial viability.

“Invisible capital is not a proxy for racism, sexism, classism, xenophobia, or heterosexism. Invisible capital is also no substitute for the entrepreneurial trinity of hard work, ingenuity, and positive attitude. But these qualities are often prerequisites rather than predictors of sustained viability in business.”

Let me be clear: invisible capital is not a proxy for racism, sexism, classism, xenophobia, or heterosexism. People who are on the receiving end of one or more of these “isms” are not powerless, nor are they devoid of invisible capital. Indeed, they have the capacity to build invisible capital strategically despite the clear social liabilities they may bear through no fault of their own. Invisible capital is also no substitute for the entrepreneurial trinity of hard work, ingenuity, and positive attitude. But these qualities are often prerequisites rather than predictors of sustained viability in business.

Invisible capital is not simply how big your Rolodex is or how many times you’ve traveled abroad. It is not just knowing that EBITDA stands for earnings before interest, tax, depreciation and amortization, knowing how to dress when meeting a loan officer, what degrees you’ve earned, or the level of your digital literacy.

It is all of those things and more.

Invisible capital revealed

Anyone can acquire invisible capital. Depending on the entrepreneurial opportunity, which aspects of invisible capital you need and in what proportion may change dramatically. If Woody Allen is right and just showing up is indeed 90 percent of success, then some portion of that must be attributed to the invisible capital that informs us where, when, how, and why we must show up in the first place.

Without equality of opportunity, we don’t know what (or who) represents “the best”. We can only safely know what the best is based on the rickety system we have inherited—along with those rare but highly visible exceptions society uses to validate the rule.

To fully acknowledge the importance of invisible capital in expanding opportunity for entrepreneurs, it’s vital to understand more about the different types of capital that constitute invisible capital.

At first glance, capital is just a synonym for money. But it’s not.

Read more here.

VIDEO: Web-based video follow-up to ColorLines show on green equity + grassroots + good government

Watch: Comcast/NBC's Big Diversity Problem (VIDEO)

NBC and Comcast execs reveal their major diversity problems during a Feb. 25 House investigation on Comcast's proposed takeover of NBC.

What do you think?

WATCH: Afro-Netizen founder Chris Rabb hosts LinkTV show, ColorLines: Race & Economic Recovery (VIDEO)

President Obama says the stimulus saved or created two million jobs in 2009. But is the recovery really working? The American dream of good jobs and strong communities is still just a dream for too many. The unfair economy hurts certain groups more, and that ends up hurting everyone. From the bottom line to the unemployment line to the color line, watch a new in-depth program from Link TV and Applied Research Center (ARC) for a closer look: ColorLines: Race and Economic Recovery.

ColorLines: Race and Economic Recovery follows communities making ends meet in the Great Recession. The program narrates the moving story of Tisha, mother of three in Connecticut, facing a social safety net shredded further by the crisis. Then the program goes to Los Angeles where community-based organization SCOPE has mobilized to win green jobs for communities of color. Learn more on ARC's ColorLines page.

So, tune in to Link TV Friday, February 12, for ColorLines: Race and Economic Recovery on DIRECTV Channel 375 or DISH Network Channel 9410 at 9:30 PM Eastern/6:30 PM Pacific.

The entire 28-minute show is also available online here:

Afterwards, please join the roundtable discussion about what you've seen on Twitter @racialjustice.

Major Funding for this program provided by the Akonadi Foundation.

ARC's Green Equity Toolkit: Advancing Race, Gender and Economic Equity in the Green Economy

Tavis Smiley issues new statement on predatory lender Wells Fargo

By Mary Kane

Republished courtesy of The Washington Independent

As TWI has reported, Wells Fargo & Co. teamed up with talk show host and commentator Tavis Smiley for “Wealth Building” seminars in black neighborhoods beginning in 2005. A suit by the Illinois attorney general contends Wells used the seminars to market high-cost and risky subprime loans to minority borrowers.

Smiley declined any comment for our story.  On Friday, he told Richard Prince, author of the Maynard Institute’s “Journal-isms” column, that he has severed all ties with Wells Fargo until charges that the company unfairly steered African American borrowers into costly subprime mortgages are resolved. “I cut everything off with Wells Fargo,” Smiley told Prince.

Prince noted that Smiley’s comments came as TWI’s story “circulated.”

Today, Smiley has a new posting on his Website regarding his business relationship with Wells Fargo, saying that he severed his ties to the bank earlier this year, and not in recent days.

In his latest statement, Smiley says he actually made that decision in “the first quarter of this year,” some time “shortly after the State of the Black Union” and announced it then in a statement he posted on his Website.

The undated PDF file, which was not issued as a press release, notes that “Wells Fargo currently is not a sponsor of TSG or Tavis Smiley Foundation programs or events and will not be a sponsor for SOBU for 2010.” Wells had sponsored the State of the Black Union 2009, which was held on February 27-28. According to C-SPAN footage, Smiley lauded the bank at the symposium, telling the predominantly African American audience that “Wells Fargo is your financial action planning guide to every stage of life.” Later that day Smiley praised Wells Fargo for its generosity and said, “This conference is free this year because of Wells Fargo. Give them some love.”

On Friday, Smiley told Prince that Wells Fargo sponsored Smiley’s radio show on Public Radio International, and underwrote the annual C-SPAN-televised “State of the Black Union” conference that Smiley organizes. Smiley’s foundation also distributed Wells Fargo materials to young people at foundation events, he told Prince. Smiley also said the move to end his relationship with Wells cost “a lot of money,” but he said he did not know how much.

In the new statement, Smiley says that “I addressed this issue months ago with a statement on my website during the first quarter of this year when allegations against Wells Fargo first surfaced.”

The NAACP filed suits against Wells Fargo and HSBC on March 13, alleging racial discrimination in lending.

TWI cited Smiley’s earlier statement regarding his relationship with Wells in its story last week. Smiley has declined any additional comment.

Suit alleges trusted Blacks drew Blacks and Latinos to "ghetto loans"

Wells Fargo Hired Tavis Smiley as Headliner for Seminars Targeting African Americans

By Mary Kane

Republished courtesy of The Washington Independent

As the housing market began booming in the mid-2000s, Wells Fargo & Co. teamed up with prominent African American commentator and PBS talk show host Tavis Smiley and financial author Kelvin Boston, the host of “Moneywise,” a multi-cultural financial affairs show, to host something called “Wealth Building” seminars in Black neighborhoods.

Smiley was the keynote speaker, and the big draw, according to Boston and Keith Corbett, executive vice president of the Center for Responsible Lending, who attended two of the seminars. Smiley would charge up the audience — and rattle the Wells Fargo executives in attendance — by launching into a story about how he hated banks, and how they used to refuse to lend him money for his real estate projects in Compton, Calif., and elsewhere. After Hurricane Katrina, Smiley also emphasized the importance of building assets and wealth, saying those who had done so were able to leave New Orleans, while people with nothing had to stay behind, Boston said.

“My spiel was the financial planning process, how you want to be able to save and invest for the future, and to have a plan of action,” Boston said. “Then Tavis talked about his experiences with the banks, and how people should be thinking about some real estate.”

The seminars in some cities drew standing room only crowds, with numerous Wells Fargo representatives on hand, seated at carrels to meet one-on-one with potential borrowers who lined up after the speeches, which were usually held in hotels. The free, day-long events were heavily advertised in the black media, and launched in eight cities, including Baltimore, Chicago, Richmond, Va., and San Francisco.

But what appeared on the surface as a way to help Black borrowers build wealth was actually just the opposite, according to a little-noticed explanation of the “Wealth Building” seminar strategy, contained in a lawsuit recently filed by Illinois Attorney General Lisa Madigan.

Wells’ plan for the seminars all along was to target Black borrowers for higher-cost subprime mortgages, not for wealth-building, the suit charged. And the seminars were a part of the bank’s overall illegal and discriminatory practice of steering Black and Latino borrowers into riskier and more expensive loans, the suit said.

“According to a former Wells Fargo Home Mortgage employee, one of these ‘Wealth Building’ seminars held in Maryland was planned for an audience that would be virtually all African American,” the suit said. “The plan for the seminar was for Wells Fargo Home Mortgage employees to talk about subprime mortgages, although they were directed by Wells Fargo Home Mortgage to use the term ‘alternative lending’ when marketing these products.”

The former employee, who is white, was scheduled to speak at the seminar, but was told by a manager that she was “too white,” and that only Black employees could make presentations, the suit said.

Wells Fargo, one of the nation’s largest mortgage lenders and a recipient of $25 billion in government bailout money, has denied all the charges in the Illinois suit, as well as other allegations of unfair lending. The bank did not respond to requests for comment on the seminars. Smiley, an author and advocate who hosts the late night talk show, “Tavis Smiley,” and who organizes the State of the Black Union symposiums each year, also declined comment.

Corbett pointed out that Wells’ outreach to the minority community through the seminars wasn’t unusual. Lenders sponsoring financial literacy sessions, holding wealth building seminars, or contributing to local minority advocacy organizations, became a common marketing strategy as the subprime market grew. Some of the efforts were genuine, aimed at finding new customers in Black and Latino neighborhoods once deprived of credit. But sometimes they were used instead as a cover to push predatory loans, Corbett said.

“The wealth building seminars are certainly needed,” Corbett said. “But, if, in fact, Wells was selling bad products out of them, it was totally wrong.”

Boston, for his part, described himself as the small player in the seminars, giving an opening talk before Smiley went on. Boston said he spoke in general terms about the need to save money and to invest. Neither he nor Smiley ever mentioned or discussed subprime loans, he said.

“Basically we were just speakers for hire,” Boston said. “We didn’t have any role or any control over what else happened. The main point is that we were not involved in any of their discussions or in anything they sold.”

Corbett said that after the speakers finished, bank employees and other financial experts were offering credit checks, real estate counseling, and other kinds of assistance. Corbett said he also believes some employees were signing up people for loan pre-approvals, on the spot, though he couldn’t be sure of what kind of loans they were. He said attendees lined up to talk to the Wells employees in both events. “If they weren’t actually selling loans, they were setting up borrowers for the kill,”  Corbett said.

Once their speeches were over, however, Boston said he and Smiley  had nothing to do with the workshops and counseling. He said he and Smiley together did about 15 seminars over a period of about two years. He declined to comment on how much he or Smiley were paid.

In 2005, before the subprime crisis, Boston said, the main worry in the Black community over mortgage lending was the banks were lagging behind in their lending to Black and Latino neighborhoods. He said expressed his concerns about this to Wells Fargo. Smiley, he said, also later raised questions about subprime lending tactics with the bank. “Tavis definitely had some dealings with them on this issue,” Boston said.

Nonetheless, in hindsight and with the collapse of the subprime mortgage market, Boston said he has second thoughts about participating in the seminars.

“Were we probably used? We probably were,” he said. “If I had the chance to do it over again, would I do it in a different manner? Probably.”

“You look back now and you feel for the homeowner who could have qualified for a better mortgage and got the costly type of mortgage. That concerns me a lot, not just for Wells Fargo, but for everybody out there, Citigroup, Countrywide … they were all doing the same events.”

But at the time, Boston said, having a major bank doing outreach in the Black community was considered an encouraging development, after so many years of redlining and restricted access to credit. “We all thought at the time that we were doing a positive thing,” he said.

Boston said he quit doing the seminars after his contract ended two years ago. Smiley, he said, continued to work with Wells Fargo, particularly on his annual State of the Black Union symposiums. On his website, Smiley recently posted a statement regarding Wells Fargo that said, “in this economic climate, we continue to be reminded every day that there is no perfect company.”

Smiley said in the statement that his relationship with Wells began in 2005, as part of the bank’s  “commitment to increase financial literacy in the African American community.” He said that “the partnership with Wells Fargo focused on building personal wealth, which for most Americans begins with buying a house.”

According to the statement, Smiley also has had partnerships with other companies, but has never served as a spokesperson or representative for any of them, including Wells Fargo. The statement also said Wells Fargo will no longer be one of the sponsors of his Black State of the Union event in 2010, although the bank sponsored the event as recently as last spring.

“Given the fact that Wells Fargo has been an industry leader, they have partnered with many African American and Latino national civil rights organizations on various community initiatives,” the statement said.

The Illinois lawsuit against Wells is one of many such actions winding their way through the court system around the country, offering more details of alleged discriminatory tactics by lenders during the height of the subprime boom. As TWI reported last week, housing advocates call these lawsuits the “smoking guns” of the housing crisis, providing what they see as proof that lenders deliberately targeted minorities for high-rate and risky subprime mortgages, while white borrowers with similar incomes and credit scores received lower-cost loans.

In a city of Baltimore lawsuit against Wells, former employees charged that Wells Fargo loan officers referred to minority borrowers as “mud people” and called subprime mortgages “ghetto loans.” But some prominent black bloggers find the “wealth building” seminars just as egregious, and question why Smiley, Boston, and anyone else who participated in them hasn’t been called on further to account for their actions.

“If Tavis Smiley was white, Wells Fargo and ‘Ghetto Loans’ would be front page news,” wrote Genma Stringer Holmes, a Nashville, Tenn., business owner and blogger who has blasted out several posts on the seminars.

Holmes said Smiley should speak out more against discriminatory subprime lending practices – but he hasn’t been forced to, because the Black media has been silent on the issue, she said. The scandal that remains is that the ads and seminars targeted the most vulnerable members of black community, according to Holmes. “People who follow Tavis will follow him off a cliff,” Holmes said.

Boston said he still does seminars and presentations pushing wealth building, but he focuses on avoiding foreclosures and helping with loan modifications. He recently wrapped up work on an upcoming show on helping homeowners facing foreclosures, he said.

The Destruction of the Black Middle Class

By Dedrick Muhammad and Barbara Ehrenreich
Guest Contributors

To judge from most of the commentary on the Gates-Crowley affair, you would think that a "black elite" has gotten dangerously out of hand. First Gates (Cambridge, Yale, Harvard) showed insufficient deference to Crowley, then Obama (Occidental, Harvard) piled on to accuse the police of having acted "stupidly." Was this "the end of white America" which The Atlantic had warned of in its January/February cover story? Or had the injuries of class - working class in Crowley's case - finally trumped the grievances of race?

Left out of the ensuing tangle of commentary on race and class has been the increasing impoverishment-or, we should say, re-impoverishment--of African Americans as a group. In fact, the most salient and lasting effect of the current recession may turn out to be the decimation of the black middle class. According to a study by Demos and the Institute for Assets and Social Policy, 33 percent of the black middle class was already in danger of falling out of the middle class at the start of the recession. Gates and Obama, along with Oprah and Cosby, will no doubt remain in place, but millions of the black equivalents of Officer Crowley - from factory workers to bank tellers and white collar managers - are sliding down toward destitution.

For African Americans - and to a large extent, Latinos - the recession is over. It occurred between 2000 and 2007, as black employment decreased by 2.4 percent and incomes declined by 2.9 percent. During the seven-year long black recession, one third of black children lived in poverty and black unemployment-even among college graduates-- consistently ran at about twice the level of white unemployment. That was the black recession. What's happening now is a depression.

Black unemployment is now at 14.7  percent, compared to 8.7 for whites. In New York City, black unemployment has been rising four times as fast as that of whites. Lawrence Mishel, president of the Economic Policy Institute, estimates that 40 percent of African Americans will have experienced unemployment or underemployment by 2010, and this will increase child poverty from one-third of African-American children to slightly over half. No one can entirely explain the extraordinary rate of job loss among African Americans, though factors may include the relative concentration of blacks in the hard-hit retail and manufacturing sectors, as well as the lesser seniority of blacks in better-paying, white collar, positions.

But one thing is certain: The longstanding racial "wealth gap"  makes African Americans particularly vulnerable to poverty when job loss strikes. In 1998, the net worth of white households on average was $100,700 higher than that of African-Americans. By 2007, this gap had increased to $142,600. The Survey of Consumer Finances, which is supported by the Federal Reserve Board, collects this data every three years -- and every time it has been collected, the racial wealth gap has widened. To put it another way: in 2004, for every dollar of wealth held by the typical white family, the African American family had only one 12 cents. In 2007, it had exactly a dime. So when an African American breadwinner loses a job, there are usually no savings to fall back on, no well-heeled parents to hit up, no retirement accounts to raid.

All this comes on top of the highly racially skewed subprime mortgage calamity. After decades of being denied mortgages on racial grounds, African Americans made a tempting market for bubble-crazed lenders like Countrywide, with the result that high income blacks were almost twice as likely as low income white to receive high interest subprime loans. According to the Center for Responsible Lending, Latinos will end up losing between $75 billion and $98 billion in home-value wealth from subprime loans, while blacks will lose between $71 billion and $92 billion. United for a Fair Economy has called this family net-worth catastrophe the "greatest loss of wealth for people of color in modern U.S. history."

Yet in the depths of this African American depression, some commentators, black as well as white, are still obsessing about the supposed cultural deficiencies of the black community. In a December op-ed in the Washington Post, Kay Hymowitz blamed black economic woes on the fact that 70 percent of black children are born to single mothers, not noticing that the white two-parent family has actually declined at a faster rate than the black two-parent family. The share of black children living in a single parent home increased by 155 percent between 1960 to 2006, while the share of white children living in single parent homes increased by a staggering 229 percent.

Just last month on NPR, commentator Juan Williams dismissed the NAACP by saying that more up-to-date and relevant groups focus on "people who have taken advantage of integration and opportunities for education, employment, versus those who seem caught in generational cycles of poverty," which he went on to characterize by drug use and crime. The fact that there is an ongoing recession disproportionately affecting the African American middle class - and brought on by Wall Street greed rather than "ghetto" values - seems to have eluded him.

We don't need any more moralizing or glib analyses of class and race that could have just as well been made in the 70s. The recession is changing everything. It's redrawing the class contours of America in ways that will leave us more polarized than ever, and, yes, profoundly hurting the erstwhile white middle and working classes. But the depression being experienced by people of color threatens to do something on an entirely different scale, and that is to eliminate the black middle class.

Barbara Ehrenreich is the president of United Professionals and  author, most recently, of "This Land Is Their Land: Reports From a Divided Nation."

Dedrick Muhammad is a Senior Organizer and Research Associate of the Institute for Policy Studies.

Is Obama shortchanging HBCUs?

H/T to Michael Cottman of BlackAmericaWeb for his article, "HBCU Heads Miffed Over Obama's Budget Cuts".

In it, he writes:

Leaders from the nation’s 105 historically black colleges have complained privately that President Barack Obama has allowed deep cuts in funding to black universities at a time when many of these institutions are struggling to survive.

. . .

The money is needed in large part to help keep some black colleges from possible foreclosures and others from considering staff layoffs, so representatives from black colleges say they will turn up the heat on Obama starting this month.

. . .

The presidents were willing to give Obama "the benefit of the doubt" because he's black, the source said, but they were also concerned that Obama does not have anyone in his "inner circle" who graduated from a historically black college to advise him on the critical - and immediate - needs of black institutions.

Lezli Baskerville, president of the National Association for Equal Opportunity in Higher Education, which represents the nation’s HBCUs, wrote a letter to Obama in June saying that federal funding has not kept pace with the rising financial burdens of black colleges.

“The elimination of $85 million in mandatory institutional aid to HBCUs, even with the minimal increase you propose to the HBCU formula funding, would have adverse consequences for our institutions and run counter to your agenda, that we wholly embrace, of expanding educational access, affordability and accountability,” Baskerville wrote to Obama.

“We are disappointed ... that there was no request for the extension of the $85 million that is designed to strengthen HBCUs,” the letter said.

. . .

But a senior White House advisor who requested anonymity told BlackAmericaWeb.com that Obama is not cutting funding to black colleges, but actually allocating more money.

The advisor said in 2007, during the Bush administration, Congress approved a two-year $170 million allocation for black colleges, and now the funding has expired.

. . .

"To say the president is purposely undermining black institutions, when he understands the historical role that black colleges play in educating black students, is ridiculous," the White House advisor said.

. . .

Today, 60 percent of students supported by the United Negro College Fund are the first in their families to attend college; 62 percent are from families with annual income of less than $25,000; and 93 percent qualify for financial aid. . .

Read the full article here.

Payday Loans: Do borrowers know what they're getting?

Republished courtesy of Huffington Post

There's been a lot of finger-pointing lately about who is to blame for the untenable financial circumstances of many American families. Among the usual suspects--Wall Street quants, fly-by-night mortgage brokers, the households themselves--none is an easier target than payday lenders.

These storefront loan sharks are portrayed by their detractors as swindlers preying on the desperation and ignorance of the poor. A payday backlash is already well underway--Ohio recently passed legislation capping interest rates at 28 percent per year, and the Military Personnel Act limits interest charged to military personnel and their families to 36 percent. The average payday loan has an annual interest rate of more than 400 percent.

Check out the Center for Responsible Lending's 8 Signs of Predatory Lending.