American Dream, part two-Making it Big!

Kate Cooney (00:00):  

This is CitySCOPE. 

Eun Sun Cho (00:01):  

A podcast on cities and inclusive economic development from the Yale School of Management. 

Kate Cooney (00:07):

Are we ready? 

Manuel Morales (00:08):

Let’s go.

Kate Cooney (00:24):

Welcome to season 3 of the CitySCOPE podcast. I’m Kate Cooney, senior lecturer at the Yale School of Management and founder of the Inclusive Economic Development Lab. Season three focuses on supporting and scaling Black owned businesses, and we’re calling episode 3, “The American Dream, Part Two: Making It Big.” Last time we talked about entrepreneurship as the centerpiece to the American dream mythology and the realities underneath. This episode, we’re looking at Black entrepreneurs who have made it big despite the odds. Why do we care about this? Well, to get us started on the why, here’s Tim Bates, Professor of Economics Emeritus from Wayne State University.

Tim Bates (01:10):

The first question is this: minority entrepreneurship: why do we care about it? Why is it interesting? With a lot of reasons we might care about entrepreneurship, but specifically my interest as local economic development, minority entrepreneurship is interesting, potentially if it’s a potent tool to achieve local economic development objectives. But is that realistic? So we have a possible strategy for local economic development. Does it work or can it be made to work? Or is it just a pipe dream to think that minority owned small businesses are going to make a significant difference? Does it generate jobs? And if it generates jobs, who gets those jobs? Is it flowing to people in areas of our country where unemployment is high? Ideally, it’s generating lots of jobs, and those jobs are going to people who in many other instances would be underemployed or unemployed.

Kate Cooney (02:11):

This notion that supporting Black businesses as a primary way to support Black communities is an idea with a long history. Here’s Fred McKinney.

Fred McKinney (02:21):

My name is Fred McKinney. I’m the Carlton Highsmith Chair for Innovation and Entrepreneurship at Quinnipiac University and the Director of the People’s United Bank Center for Innovation and Entrepreneurship, also at Quinnipiac University. If you look at American history in general, it’s not a straight line. It may be trending up, but it’s up with dips and we can see some of those dips, particularly when it comes to Black entrepreneurship and the relationship between Black business and entrepreneurs in American society. There’s a history lesson here. Without sharing that history, you don’t really understand what’s going on today and some of the problems. If you go back to the post slavery, post-Civil War reconstruction and when northern troops were union troops were still in the south, and they ensured that Black people could vote and participate and own land and start a business and do things. And so you were beginning to see Black elected officials at the federal and state and the local levels in the former Confederacy, and there was a reaction. And so American history is all is always one of action and reaction. And so the reaction to northern troops in the former Confederacy was the KKK and essentially their attempt to re-establish their power in these regions. And one of the things that was really at the center of this struggle was what can and should Blacks be able to do in a society that’s dominated by former confederates? The reaction to post-reconstruction Jim Crow was that Blacks basically said, “OK, not that we accept this. We’ll fight this. But in the meantime, we still need to take care of ourselves.” And so that movement towards taking care of yourself is deeply rooted in Black political thought. I mean, so you can go back to the contrast between Booker T. Washington and W.E.B. Dubois. Booker T. Washington, who was about a half generation older than Dubois and the founder of Tuskegee, taught that OK, post slavery, Blacks needed to learn how to take care of themselves economically and to be able. We don’t need to socialize with white folks. We need to take care of ourselves. We can interact with them. But the most important thing is to become economically independent. He pushed for Black entrepreneurship in the late 19th century and early 20th century. The National Black Business League came out of Booker T. Washington. That’s something he created. Early Black entrepreneurs looked to Booker T. Washington as a model of “OK, this is what we got to do is self-discipline. We’re going to take care of ourselves. We’re going to learn what we need to learn about whatever skills we need to learn to perform.” But if it is a carpenter, you can become not just a carpenter, but you can have a business that sells carpentry services. If you are going to learn how to be a mechanic, you can do that. But you can also have a have a business that uses that skill in the form of a business. And so that’s what he taught. That’s what he told people to do. And they did it. And many of them did it well.

Kate Cooney (05:51):

In the later part of the 19th century, first half of the 20th, successful entrepreneurship was built out of necessity for goods and services not provided to the Black community by white owned businesses. Here’s Fred McKinney.

Fred McKinney (06:05):

Because in many respects, these enclaves, these Black entrepreneurs were responding to a market opportunity that white business owners didn’t want to deal with. So if you want it to be buried in America in the late 19th century, early 20th century, your only opportunity to get buried was to go to a Black mortician. So that was a one of those early industries that Black entrepreneurs flocked to because, you know, you’re going to have clients sooner or later, they’re going to come. And so that was a play, that was a source of great wealth. So one of the early Black millionaires in the early 20th century ran funeral homes. Same thing with insurance companies. Blacks had created these insurance companies because whites wouldn’t sell them insurance. And so Blacks understood that there’s risk and that there are ways to mitigate that risk. And insurance is a tool. And so you had what they call them policy-men. And what they would do is that they would go they were almost like number runners. They’d go door to door and collect your policy payment on a weekly basis in cash. And you know what Black folks were concerned about in the late part of the 19th century, early part of the 20th century was not being able to have a respectable funeral. It wasn’t, we wanted insurance to leave our children $100,000. No, this was. We just want to have a decent burial. And so it created all kinds of businesses. That created a business to make caskets, that created flower businesses that built up the churches. Even today, if you go to the Black churches, if they don’t have air conditioning, they will give you a fan. And I can guarantee you that fan has some mortuary on the back of its advertising services.

Kate Cooney (08:01):

Black business success, even when contained by the color line, was not always celebrated, or even tolerated by whites. We often talk about the risks associated with entrepreneurship, but the kind of risks Black entrepreneurs took in the 19th and 20th centuries weren’t just market-related. There could be life and death stakes if a Black entrepreneur or group of entrepreneurs were seen as too successful.

Fred McKinney (08:28):

One of the things that Blacks were not supposed to do was to become wealthy. They weren’t supposed to hire whites, so whites couldn’t work for Blacks in the post reconstruction south. Blacks had a very difficult time accumulating capital and generating wealth because as they generated wealth, they had a target on their back. Not just, you know, a target from a sort of a metaphorical sense, but this was a literal target on your back. You can tie directly to what happened in Tulsa and the Black Wall Street, which was burned down in 1921. That was really a manifestation of Booker T. Washington’s Black independence, Black economic independence movement and Black entrepreneurship. That was a reminder when the Greenwood section of Tulsa was essentially burned. These were movie theaters, restaurants, hotels, dining establishments, personal service establishments. They were two guys, two Black guys in Tulsa that owned airplanes that used to take people around the area. So this was a thriving community where the whites reaction to Black success here was violent. It was terroristic, and it was a reminder to many Blacks, entrepreneurship is dangerous. It could get you killed. And so, you know, that’s something that the whites don’t have to think about much. You know, you might lose your shirt, you might lose your home, but you don’t have to worry about anybody shooting you or your family. And but that was not the case for Black Americans, and Tulsa wasn’t alone. I mean, you had these enclaves of Black entrepreneurial success throughout the country.

Kate Cooney (10:27):

Gerry Jaynes, professor of economics at Yale University, is working on a new book tracing the way in which race relations have shifted over time and how that has affected Black strategies for mobility. In that work, we see that in different eras, business became an opportunity for mobility when other professional pathways were blocked. But in other eras with more career options, the incentives to go into entrepreneurship might be lower. Gerry considers this broad history by placing himself in different decades and reflecting on how those larger forces might have shaped his own trajectory.

Gerald Jaynes (11:08):

What was the state of race relations in 1989-1990 and the status of African-Americans? Well, obviously we cut compared to what? Well, compared to other groups, mainly whites and compared to 20 years earlier or 40 years earlier, and in particular compared to the end of the World War Two era, when Myrdal published his work. And we used a pretty standard metaphor, the glass is half full, half empty because what you found was huge change occurring in most parts of the United States and in most sectors and institutions, and for probably most African-Americans. But there were a lot of institutions, corporations, for example, and particularly rural, small city areas in the south and southwest, where change hasn’t been as rapid as it had been in the rest of the country. And there was a core, probably something close to 30 percent of the Black population who have not really participated in the improvements that have been going on. So for example, if I’d been born 40 years earlier than I was, I’d probably still be a professor because I really kind of like this, love this. But I have been teaching at some Black school, historically traditional Black school, probably, right. If I had been born 20 years earlier, I’d be a rich businessman. So say that’s a big switch, but things that opened up, I probably wouldn’t, maybe not even have had gone to college and a cousin of mine and I, we were going to open up this company in suburbs of Chicago, that was going to basically be one of the early landscaping companies. And we have been doing this at a really good time, the late 60s, early 70s. So I probably would be retired now, but my heirs would have big fleets of trucks and things like that because I’m sure we would have been pretty successful, but I wouldn’t be as happy, although richer. But that is saying something about possibilities and the opportunities that are available. I think that for someone who had been born 20 years earlier than me, there were more opportunities as a business person than there was to try to move into academia. And so it would have been easier to do that for a Black person, a Black male at those times.

Kate Cooney (14:13):

Gerry’s new work will feature the stories of Black entrepreneurs succeeding over the decades. Some of these are exceptional stories by entrepreneurial geniuses, which are told not to suggest that they are representative of the common story. But in these stories of Black entrepreneurs making it big, we can learn something about the times, about the barriers and the challenges that existed, because the ingenuity of the exceptional entrepreneur highlights the conditions he or she was working within to fashion that success story. We pick up the conversation with Gerry Jaynes reflecting on the relationship between education and entrepreneurship.

Gerald Jaynes (14:55):

Now the reason why it’s been in 2021 is quite different from why it was then in 1980. That gets back to that glass is half full and half empty, because what the period 1950 to 1980, did was it kind of disemboweled the Black community in a sense that people who came from better off backgrounds, which I would include myself, but that doesn’t mean I was, like, really better off. But I was better off in the following sense: I didn’t live under apartheid because I wasn’t from a big city. I was from a very small, ninety nine percent white town in northern Illinois, where there weren’t enough, less than a couple of hundred Black people, so there weren’t enough of us to give us separate schools if they had wanted to. And so pretty much my entire life had been in majority white cities. My parents weren’t from Alabama. My mother actually was born in the same town I was. My mother’s parents were married there in 1907. My father was born just 70 miles from there, also in Illinois. They were both high school graduates, all my aunts and uncles were high school graduates. That’s always a big problem, because some people will always point at an exceptional person like that. We’re going to talk about like Samuel B. Fuller would be an example of. Claimed to be during the 1950s and 60s, the richest African-American in the United States, the owner of the Fuller Brush Company, owner of the Pittsburgh Courier, a newspaper out of Pittsburgh, Pennsylvania, which was oriented towards the African-American community and owner of many other things. Truly, a man who pulled himself up by his bootstraps, came from nothing. Poor farmer parents in Louisiana. Went to Chicago and starts a business with twenty five dollars, buys a bunch of brushes. And he and his future wife go door to door selling those brushes and they make money. They buy some more brushes. Soon they buy a thousand dollars worth of supply, and they keep making money. Soon they start thinking about this and they write up what we today would call a business plan, a network system. And they start hiring salespeople and they branch them out all over the Midwest and then into the South and the West as well. And in the 50s, when I was a kid, we bought stuff from Fuller, the Fuller Brush Man. But he sold to a lot of people because white people didn’t know he was Black. Would have been a problem if a lot of white people would not have bought from him in the 1950s if they had known, he was Black. Now why did I bring that up? Great. We can talk about Samuel B. Fuller, great Horatio Alger story African American, but you can’t point at someone who is that exceptional and say, why can’t the rest of you, Black people do that? That would be like pointing at Muhammad Ali, and say why aren’t you all heavyweight champion of the world? Or pointing at the CEO of American Express and saying, why aren’t you all CEOs of Fortune 500 companies? There are always going to be these exceptional people. What we want to understand is what’s happening to average people or maybe slightly above average people with respect to entrepreneurial talent, because that’s what’s that’s what the real difference is between resources in our various communities.

Kate Cooney (19:28):

To put this history in perspective, S.B. Fuller died in 1988 when I was 17 years old. He only had six years of formal education and went into business for himself after he found he couldn’t get ahead working door to door sales for someone else. He turned $25, and that first set of soaps into a multimillion dollar conglomerate of companies that had sales of more than 10 million a year and offices in 38 states in the 1950s and 60s, according to his obituary in the New York Times. Part of that rise was built on the urban Black markets in cities like Chicago, Detroit, New York, and Pittsburgh, through his newspaper chain, The Courier. And part of that success came from hiding his Black identity from his white customers, S.B. Fuller carried on the tradition of Booker T. Washington by giving talks, providing training and even capital investment to inspire and support other Black entrepreneurs. Let’s continue with Gerry Jaynes’s thesis about Black agency and mobility over the 19th and 20th centuries.

Gerald Jaynes (20:35):

The most important African-American owned businesses of the apartheid period aren’t in any of the business history books. Zero. Most of the rich Black people, the venture capitalists, the people who are investing in Black businesses that become the top businesses, if you read any kind of history on Black business today, the first thing they’re going to tell you is the Black insurance companies. Life insurance for the most part, but other kinds of insurance to some extent as well but mostly life insurance. Those are the gold standard of Black business pre-1950. And they’re all over all the articles in journals and books about Black business. Their revenues were miniscule compared to the revenues that were going into Black illegal lottery operations. Now, there’s a moral problem here. I use the word illegal. Technically, they were illegal, but Black people didn’t think they were morally wrong. Why? The lottery systems that we see today, all the state lotteries, they’re all designed after the private lotteries that were operated by Black entrepreneurs starting in the early nineteen hundreds. There were some true entrepreneurial geniuses operating. And what I discovered, this is back to this book that I’m working on now, it’s not really about business. It’s really about Black agency during the 20th century. And its theme is the following that human beings strive for recognition, and there’s two kinds of recognition. What I call public recognition, the affirmation from others. That you are a good person, a successful person. But also, self-recognition, self-respect that you, in fact, are proud of the person you think you are. My proposition is throughout most of American history, those two things were in absolute conflict for African-Americans. Because in order to have self-respect, you had to fight racism and white supremacy. But if you fought racism and white supremacy, you lost public respect. When they start operating these lottery businesses all across the country, tens of millions of dollars, I’ll start with two things. One I said it was all over the country. Two many, many women operating at all different levels, from the lowest employees to the top, which are called bankers. Because if you if you’re going to have a lottery, somebody’s going to have to pay when there are winners. And the genius to these lotteries, just like the snatch where you pull off something, there’s winners every day. So people really get addicted and want to play, right. But all the way to these bankers are women. The first Black company to be listed on the New York Stock Exchange is a company out of Baltimore called Park Sausage. Venture capital came from a guy named Little Willie Adams, who was the biggest illegal lottery operator in the Baltimore area during the 50s. He claimed this money by going into things like that, right? The other thing I started out talking about Black insurance companies and how they were supposed to be the gold standard. In the state of Michigan in 1955, the largest Black owned business was an insurance company based in Detroit. That insurance company has been founded by Detroit’s biggest lottery bank. And so all through the 20s, 30s, 40s into the 50s, many of the successful Black businesses that we are seeing are getting their funds from these lotteries and the same kind of thing that has been going on with the double standard and drug laws. So we know cocaine laws. If you got powdered cocaine, you get a light sentence. But if you got crack cocaine, you get these mandatory horrible sentences. And we know that that’s Black people on the one hand and mostly white people, on the other hand. Same thing was going on with lottery. Why? Lottery is just gambling. Lottery, which was mainly operated by Blacks, was illegal, but all kinds of other forms of gambling weren’t. And then, of course, it gets mucky up even more when the states in the 1960s and 70s start to take over the lottery themselves.

Kate Cooney (26:08):

It’s at this moment that a new generation of Black entrepreneurs emerge, such as Earl Graves Sr. building on the success of entrepreneurs like S.B. Fuller and a desire to chronicle Black business strategies for success in the new policy landscape created by federal initiatives. The magazine Earl Graves Sr. is most known for Black Enterprise, emerged out of Graves’s work at the SBA, where he initially set out to produce a newsletter targeting issues relevant to Black businesspeople and to provide awareness about the market of Black consumers. And the market had changed considerably.

Gerald Jaynes (26:48):

Entrepreneurial success for a Black person, back during those days, apartheid, pre-950 let’s say. You want to be a Black entrepreneur your consumer base is going to be Black people, they’re poor and they live in the rural areas. So urbanization, those two World War migrations change everything for the Black population. All of a sudden, there’s three hundred thousand Black people in Harlem. Couple of hundred thousand in Chicago. Eighty thousand in Kansas City. Sixty thousand in Birmingham, all of a sudden, now you’ve got an urban consumer base and you can start to try to sell them products.

Kate Cooney (27:39):

The holding company, Earl G. Graves Associates, eventually included publishing, marketing, radio, television, and event coordinating arms. Here’s Gerry Jaynes talking about the first time he met Earl Graves Sr.

Gerald Jaynes (27:52):

Earl Graves, I knew well, the publisher of Black Enterprise magazine. I met him through Yale. They have a thing called a Chubb Fellowship at Yale, they bring some usually highly successful person, but it could be from any profession and they come to Yale and they spend three days or so. They go to teas at the undergraduate colleges. They might give a little talk about their business if they’re a businessperson like Earl Graves was. He died a couple of years ago. And so, Earl Graves came. It must have been like 1979. I had been on the campus two years. I get a call from the president’s office. Earl Graves is coming. This is a little bit funny. Earl Graves is coming. And we’d like you to be his host so you can spend a couple of days with him, show him around campus, you know, go to all the events where he’s supposed to go. And the president asked me, so of course I said yes. But as soon as I hung up the phone, remember, I was a 30 year old assistant professor of economics working in micro theory. I hung up the phone and I said, “Who the hell is Earl Graves?” I didn’t know who he was, and I had never heard of Black Enterprise magazine either. But I found out soon enough. He turned out to be a delightful person. He is another Sam Fuller, exceptional man who was second generation American, whose parents were from the Caribbean. He grew up in Brooklyn. Kind of amazing, I was at a meeting with him once and he started naming off all the people that had come out of his high school within a 10 year period. And there were just tons. They all grew up in that same neighborhood, famous African-American people. But Earl Graves had a vision, and he always kept working towards. A man with probably one of the most organized minds I’ve ever dealt with, in the sense that he’d say, “This is what I want to do. I’ve thought it out. This is how I’m going to do it.” And then he was just fixated on getting it done. And that kind of showed me, OK, this is the kind of person that it would take to be able to make it to the level that Earl made it. But Earl and I hung out, had some fun. About two years later, I get another call in my office. But this time it’s Earl. “Gerry, I’m coming to Yale in a couple of days, I’m bringing my son who’s going to be a freshman in the fall, and he’s been recruited by Yale.” But his son was an all-American basketball player. So he was being recruited by a lot of people, but he decided he was going to go to an Ivy League, so Harvard and Yale were heavily recruiting him. So the president’s office told me, “Get that kid.” So they came, I hung out for a couple of days with Earl Sr. and Earl Jr. We go over to the gymnasium and the coach says, tells Earl Jr. to suit up and watch a scrimmage with the Yale team. At the time I was 32, I was a high school basketball player, and Jr. looks at me and says, “Why don’t you suit up, too?” So I suited up, so I scrimmaged with the Yale team. And here’s the funny thing. I had a couple of quick 20 footers and the coach jumps up and says, “Hey, Professor, you got any eligibility left?” And so we all started laughing. So of course, I like that story.

Kate Cooney (32:09):

That’s great. I was just looking at, you know, Earl Graves and thinking about the history that you’ve contextualized for us and, you know, if he’s starting to come into his business career in the 60s and 70s, really 50s, 60s and 70s, it was interesting to see he’s in publishing, he’s in radio. And at this time, maybe these are still sort of segregated markets for Black newspapers.

Gerald Jaynes (32:40):

He’s operating in segregated markets. That’s right. At that time, and the other important thing about this. Earl started his career mainly, he’s a great networker, and he started his career in politics, not as a politician, but working for politicians. He worked for Bobby Kennedy. So that’s how that operated. Then the same sort of thing. So you can sort of see what’s going on here I hope. Earl’s got the Bobby Kennedy and therefore a lot of New York, because by that time, Bobby Kennedy was a senator from New York. So that opens up a lot of avenues for Earl during the 60s. So when the time comes and he’s ready to make his move in the business, he’s got those networks and he’s well situated with the Black local politicians in New York City, particularly being in New York City, Brooklyn boy. Right. So he’s got that networks.

Kate Cooney (33:41):

We see how that was true for Earl Graves Sr. It was also true for Dave Bing, the next entrepreneur whose story Gerry Jones shared. Our listeners might remember Dave Bing as mayor of Detroit, but those of Gerry’s generation knew Dave Bing as an NBA player who eventually became a successful steel industry entrepreneur.

Gerald Jaynes (34:03):

Dave Bing is a pretty unsung African-American entrepreneur because he owned a steel company, which is not, you know, you don’t think a steel company and think of African-American entrepreneurs, and he owns a steel company way back in the 80s. How did that happen? Dave Bing played basketball for the Detroit Pistons. He was an NBA All-Star. That’s his network connection. He was able to utilize that. And when the time came, he was able to get partners and buy a steel company.

Kate Cooney (34:43):

Here we can see Bing’s entrepreneurial ambition and his approach. The first offer he received was to do commercials for the steel company as an NBA player. But Dave Bing asked if he could have a job, instead, in the warehouse, which was followed by stints in shipping and sales. Why did he do this? To learn the business. Then he went out on his own. First, by trying to open his own steel manufacturing firm, but quickly pivoted into a market intermediary position. By 1984, Bing Steel had two plants, 63 employees and revenues of over $40 million.

Gerald Jaynes (35:27):

What did I say? I said something that was important about networking. And their basis for how they were able to get into business and become very successful. One through political networking, the other through sports networking, which Dave Bing met, a lot of people, the owner of the Detroit Pistons, for example, and other businesspeople in Detroit. That could not happen in 1950. Because no white politicians would be hiring any Blacks to work for them unless they were, you know, pushing brooms, or maybe they could be the driver. One of my uncles was the driver was the driver for the governors of Illinois for about four consecutive governments. That in the 1940s and 50s and 60s was a great job. Although this uncle of mine was a really superb person who, if he were my age, would probably be really successful businessman today. But driver for the governor of Illinois was the job he had because of this would have been somebody born around 1920. Those possibilities wouldn’t exist. And even the NBA, they didn’t get their first Black player until 1950-51. So even through sports, you couldn’t network like that. Let’s not forget baseball. All those sports. No Blacks. What’s the difference? Want to go back to Sam Fuller? People like Madam C.J. Walker, the first African-American woman millionaire. They operated in that segregated society. They didn’t have networks which would take them to the mainstream. So their clientele is the Black clientele. So if we look at all the businesspeople who come before 1970, they’re going to come out of that situation as opposed to more of what we’re seeing today, where you have the opportunity to be able to network across different ethnic lines than simply other Black people.

Kate Cooney (37:51):

Gerry’s work helps us to appreciate how far we’ve come. Stories like S.B. Fuller also inspired what became a central economic strategy from the federal government during the civil rights era. Here’s Tim Bates.

Tim Bates (38:03):

Well, here we get to Richard Nixon, who in his 1968 presidential campaign for president, the centerpiece in his civil rights platform was promotion of Black capitalism. We were going to have Black owned firms in inner city areas expand greatly in number and size and scope, and generate very large numbers of jobs.

Kate Cooney (38:29):

Tune in next time for episode four, where we continue our conversation with Tim Bates and Fred McKinney, as we dig into the policy side of the story. 

Manuel Morales (38:42):

This podcast was created by Kate Cooney in collaboration with James Johnson-Piett and the students of the Spring 2021 Lab.

Eun Sun Cho (38:50):

All engineering and production by Ryan McAvoy and Kate Cooney.

Kate Cooney (38:54):

Special thanks to Rhona Ceppos for administrative support and to Ryan Carpenter for assistance with Zoom.

Eun Sun Cho (39:01):

Music from the album City Trees, composed and performed by the artist K-Dub.

Manuel Morales (39:05):

For more information and show notes, visit our website at IEDL.yale.edu.

Eun Sun Cho (39:12):

Thank you for listening.

[Music]