Netflix and the importance of Black-owned banks

Yet because he is one of the few Black investors operating at his level, he is primarily asked for his thoughts on diversity and equity, not the economy or trends in business. Since he’s typically as tireless in his social justice advocacy work as he is with his investment analysis, he’s always gracious about it.  

That said, during a recent Fortune-led Zoom call with Rogers (along with McKinsey & Company diversity chief Lareina Yee), it did sound like he was running a bit low on his trademark patience. We were there to talk about the widening Black wealth gap, and the Black-company founder dropped a fundamental truth. “Black companies need customers,” he said simply.

And not the small allocations reserved for now outmoded “supplier diversity programs,” which typically cater to the lowest margin businesses like catering, janitorial, and construction. The good juice, the money that creates actual wealth, is in professional services — technology, financial, legal, and other high-margin businesses that scale. “That’s where the cash flow is. That’s where the jobs are,” he says. And as a Black man running a $10 billion business, he knows that’s where the bias is. “People continue to think that we’re not qualified to do the complicated tasks, the legal services, the counting services, money management, things like that,” he says. “When people close their eyes and think about an African American leader, they think about someone in sports or entertainment, not an investment banker.”

I was thinking about his comments when I read the news that Netflix, which seems to be doing so many things right lately, is committing some $100 million to lenders that serve the Black community, many of which are Black-owned themselves.

Black companies need customers. Black customers need companies who will actually meet their needs. And when it comes to growing their wealth, Black people need lenders they can trust. 

Netflix says they will start by shifting $25 million into the Black Economic Development Initiative, a new fund that’s being managed by Local Initiatives Support Corporation, or LISC, a unique nonprofit that acts as a bridge between under-resourced communities and governments and for-profits. The initial investment will be allocated as bridge loans, participation loans, and bank deposits in Black-owned institutions, which in turn will be made available to Black businesses and borrowers in communities across the country. 

Going forward, the company announced plans to steer 2% of its cash on hand, or around $5 billion, to financial institutions that serve Black communities—and then issued a call to action.

“If every company in the S&P 500 allocated a modest amount of their cash holdings into efforts like the Black Economic Development Initiative, each 1 percent of their cash would represent $20-$30 billion of new capital,” Netflix said in a statement. “And that would help build stronger communities, offering more Black families pathways to prosperity and a more equitable future.”

At this scale, a collective 1 percent investment turns a rounding error into a revolution. 

Somewhere, I like to think, there’s a future John Rogers (or Ariel co-CEO Mellody Hobson) patiently sitting in a bank office looking for the next big investment idea. Maybe they’ll find it in Detroit, Atlanta, Newark, Tulsa. With some care and capital, a company prospers, taking families and communities along for the ride. With lots and lots of Johns and Mellodys making good loans and smart investments… who knows? 

It kind of sounds like a screenplay, right?

Ellen McGirt
@ellmcgirt
Ellen.McGirt@fortune.com

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On point

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The Register

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CNET

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Medium

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On background

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TED

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The Atlantic

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Aeon

Speaking of: raceAhead is edited by Aric Jenkins.

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