DePaul Finance Fireside Chat with Dr. Esteban and Ariel Investments’ John Rogers
On Feb 26, 2021, the Diversity Council of the DePaul Finance Advisory Board hosted a fireside chat event with Ariel Investments Chairman, Co-CEO & Chief Investment Officer, John W. Rogers Jr., and DePaul President, A. Gabriel Esteban, PhD. This event was a special conversation in celebration of Black history month.
Esteban met Rogers when first arriving in Chicago and they immediately bonded over a connection and love of basketball. Esteban played basketball while growing up in the Philippines and Rogers was captain of the varsity basketball team at Princeton University. However, unlike Rogers, Esteban never had a chance to play Michael Jordan one on one, joked Esteban.
Rogers founded Ariel Investments in 1983. The global value based asset management firm has offices in Chicago, New York City, Washington DC and Sydney, and is the first Black owned mutual fund firm. Having founded Ariel at the young age of 24, Rogers has one of the longest track records in the business. He worked at Ariel in a patient investment or long term investment philosophy, leveraging the market short-term focus to uncover mispriced companies whose true value is realized over time. The firm’s flagship “Arial” font has a 34 year track record of outperformance. This month, the Wall Street Journal has Ariel on its list of top performing mid-cap value funds. Rogers is a member of the board of directors at McDonald’s, Nike, and the New York Times Company. He also serves as Vice Chair of the Board of Trustees at the University of Chicago, is a member of the American Academy of Arts and Sciences, and serves as director of the Robert F. Kennedy Center for justice and human rights. Rogers is a strong, vocal advocate for closing the racial wealth gap. Last week, Ariel launched a new initiative to invest in and scale sustainable minority owned businesses, called Project Black. The private fund business is backed by a $200 billion commitment from JP Morgan.
If you missed this event, below are some key takeaways from our featured guests:
Esteban: It doesn’t seem like the wealth gap in this country is getting better, especially over the last few months to say the least, your thoughts on this?
Rogers: I think the major point that I’ve been emphasizing is that it’s getting much, much worse. People know there’s this huge wealth gap between African Americans and white Americans. That’s widely understood now. But I think what is not widely understood is how much it’s getting worse year by year, even before the pandemic. Ray Bashara, Director, Center for Household Financial Stability, Federal Reserve Bank of St. Louis, has data that shows between 1992 and 2016, college educated Blacks’ older wealth declined 10% while college educated whites saw their wealth increase by 96%. That’s a huge discrepancy over roughly 25 years. Secondly, you might know Dean Carlin Charles of Yale’s business school, used to be here at the University of Chicago. He has data, lots of data. But my favorite point that he makes is that relative to white Americans, today, Black Americans are worse off than our grandparents were, which is pretty dramatic. The final thing from a wealth gap standpoint that I’d like to bring up is if you look at Crain’s Chicago, who every year comes up with a list of the Top 300 Privately Held Companies, roughly 20 years ago, six of the 300 companies were African American. And today, we only have three on the list.
E: As we build our communities and businesses, there have been strong calls for working with Black owned businesses. Is that the reason or the impetus behind launching Ariel’s new initiative, Project Black? Can you tell us more about how you hope this new fund will help?
R: We’re hoping that Project Black will really help change the conversation, because so many people talk about the importance of access to capital. But we also need access to customers and one of the things we talk about is that it’s so important to get the narrative going that we want to build large Black businesses of scale. A generation ago, we had these giant Black businesses here in Chicago. Johnson publishing was the largest Black business in the country. It had a HQ building in the south loop that was just beautiful, overlooking Grant Park. We had Johnson products, the first and largest Black owned company to go public in the United States. They made Afro sheen and ultra sheen hair care products. These giant companies employ hundreds, if not 1000s of people. They work with Black businesses and in everything that we did, from architecture to accountants, law firms, to consulting firms to money managers, they were one ecosystem that built enormous wealth on the Southside of Chicago. So what Project Black hopes to do is to replicate those success stories, not just have a couple of Johnson products and Johnson publishing, but to have hopefully a dozen of those that are being built up over the next 10 years. Companies that are having hundreds of billions of dollars in sales that will build real scale, real multi-generational wealth, and be here for the long term. And we’ll do it by not only raising capital to support growing Black businesses, but help them have capital for Black entrepreneurs to buy divisions and large white companies. And by buying them, all of a sudden with our capital and their leadership, these white divisions and large companies will become Black owned. And they will be businesses of scale where big giant fortune 500 companies have said they can’t find Black businesses of scale. Now they’ll have more companies that they can work with, and help them grow and thrive and succeed, which will make our economy stronger, and make our Black business ecosystem stronger. And again, great wealth and opportunity for African Americans they never could have dreamed up.
E: The FDIC recently published a report about the decline in minority owned banks in the mid 1980s. There are nearly 15,000, minority owned commercial banks across the country compared to just under 4500 in 2019. What impact do you think this has had on minority businesses across the board?
R: It’s had a devastating impact. Here in Chicago, we went from having two of the largest Black banks in the country, Independence Bank and Seaway to having them both gone. It’s had a devastating impact as part of the reason we don’t have the success that I would have hoped to see over the last 40 years and why we don’t have as many successful Black businesses because we don’t have as many successful Black banks. Now, that’s a critical miss. I think it happens partly because our anchor institutions are not working. We did not work with those large Black banks. If all the anchor institutions in Chicago 40 years ago, 30 years ago, 20 years ago had made a commitment to bank with Seaway Independence Bank, those banks would still be thriving. The big corporations in town, the big universities, the big hospitals, the big museums, all should have cared. But what happened is, we lost that thread and the sense that there was a responsibility for our anchor institutions to work along with minority owned institutions, particularly minority owned banks. These anchor institutions didn’t see the spin off effects that if they supported Black banks, then those Black banks will be loaning to local businesses, and our urban communities would be that much stronger. And so we’ve lost that thread.
E: What can elected officials locally and across the country do to support Black business?
R: I think a couple of things. I think, from a federal level, it would be a dream come true if the major contractors understood that they should be doing business with Black businesses in everything we do. Defense contractors and health care companies, the airlines, all those kinds of folks. I think, from a federal standpoint, we can make that change with this new progressive leadership that we have in Washington, both in Congress and in the White House. I think secondly, locally here in Illinois, I think leaders can push all the anchor institutions to work with minority businesses, universities, hospitals, and corporations because so many people go to Springfield for support and help. We need to ask those tough questions, have our leaders ask those tough questions, and do it in a couple of ways. One of the things we’ve agreed to do with the Black Directors Conference, is to keep track of purchases by category. And to really get rid of the term supplier diversity and make it like the University of Chicago uses the term “business diversity”. Because as you know, the economy has moved from a sort of commodity based economy to professional services, financial services, and technology based economy. So if we want to make a dent in this wealth gap, we’ve got to include African Americans in the parts of the spin, where the wealth and jobs are created today. So that’s where political leaders can push to get these anchor institutions to do business with Black people in the parts of the economy and with jobs to create wealth today.
E: Your father was a Tuskegee Airman. And your mother was the first Black female graduate from the University of Chicago Law School. How did their level of achievement influence you?
R: I’m sure it happens to a lot of families who have parents that were very, very smart and successful, — they were just mom and dad, to me. I didn’t have any idea what pioneers they were as I was growing up. My dad was a Tuskegee Airman. He flew over 100 missions. He was in the original 99 fighter Pursuit Squadron. I actually just got a letter, a copy of it, that he wrote to his sister as he was getting ready to go off to war, where he talks about how he’s going to be fighting for freedoms that he didn’t enjoy here in the United States, and how tough that was on him. He was willing to die for America when he couldn’t really benefit from the kind of freedoms that we were fighting for. So what he taught me was that the most important thing in life is to live up to the commitments that you make to others. He pounded that home to me, very few people keep their word, but if you live up to the promises you make to others good things will happen. And that was how he lived his life. It made such a difference to me. He also of course, bought stocks for me every birthday and every Christmas after I was 12 years old, making sure that I was exposed to the stock market, and he made sure I got a summer job at age 16. I was a vendor at the ballpark selling cokes and beer at Wrigley Field and Sox Park. So he had these really strict rules that really helped shape me as a person. On the other side, my mom was inspired to be a lawyer because of her grandfather. JB Stratford owned the Stratford hotel that burned down in the famous Tulsa race riots 100 years ago, and he escaped Tulsa, just by the skin of his teeth. Tulsa was trying to extradite him back because he was a leader in Tulsa at the time and owned this very successful hotel. The whites in Tulsa, the time we’re trying to help, you blame him for being part of inciting that Riot, which of course was not true. My grandfather, my mom’s father, used his legal skills to stop Tulsa from extraditing him back. My mom said she became a lawyer because she saw her father save her grandfather’s life with his legal skills, and that led to my mom being the first African American woman to graduate from University of Chicago. And then being the first African American woman assistant US Attorney, Deputy Solicitor General, and many, many other firsts in her career. So, what I learned from her was that anything was possible and I could be the first of something. I think that was the inspiration for us to be the first African American money management mutual fund company in the country’s history. So even though they both talked to me about the racism they experienced in Chicago, and the lack of opportunity as Black lawyers in the 40s, and the 50s, my mom, in particular, said, “don’t let that bother you. You go out there and fight, work hard, you’re creative. Anything can happen”. And that was an important lesson that I found at home. Everything was possible.
By Damita Menezes