DEI, Juneteenth, and the racial wealth gap

John Rogers: Here in Chicago as recently as 20 years ago, if you looked at the Cranes list of top three hundred companies in Chicago, three of the top 150 on the Cranes list were African American, roughly 2%.

You jump ahead 20 years later, zero of the top 150 companies in Chicago privately held are African American. So it's just important to anchor us in the things, that things have gone down so precipitously as we get further and further away from the height of the civil rights movement.

I think what happens is we need to get back to messaging that we had 40 years ago, that Maynard Jackson and the mayor of Atlanta pounded home, and Harold Washington here in Chicago, and Coleman Young in Detroit. They understood that not only was it important for government to do business with minority businesses, but they pushed all the anchor institutions in their communities to do the right thing. The universities, the hospitals, the museums, the other institutions were expected to do business with black folks. The banks were expected to do business with black people, and at the same time give them loans.

But we've lost that thread. That kind of dynamic leadership that understood the importance of black entrepreneurship. Again, the jobs that were created, the philanthropy that was created, and the economic and the political empowerment that was created during that time.

So what we have to do, I think, is to bring that back, to get corporations to understand that they have a responsibility to do business with black businesses and everything they spend money on. We think that is just so critically important.

And as a part of that, keep track of their spending by category, and get rid of the term supplier diversity. That implies that black people could only work in sort of the construction, the catering, and the supply chain. But use the term the University of Chicago coined: business diversity. That implies that people should be able to do business in everything that institution spends money in.

They are black entrepreneurs. They are willing and able to do that business in a first-class and world-class way. And if all progressive corporations and anchor institutions in our community spend money with black businesses, we will have—we’ll get back to the kind of heyday that we had here 40 years ago in Chicago.

John Rogers: What we've tried to do at Ariel is several things, and from the beginning, being the first African American owned money manager and mutual fund company in the country's history, we felt a responsibility to push all the companies we invest in to be what I call 21st century companies. We tell them it's hard for us to buy stock in your company if your management team and board of directors looks like a 1940s company.

How are you going to compete in the 21st century as our country becomes more diverse and your customers become more diverse, etc.? So we can point to now over 50 times that we've been able to convince the company to have their first minority director in their history. From companies like Sotheby's to Jones Lang LaSalle—over 50 times. We’re quite proud of that, think that we—hopefully—we’re making a difference in that way.

Second way: We roughly 25 years ago, when former Secretary of Education Arne Duncan was working here at Ariel overseeing our philanthropy, we created a small public school called the Ariel Community Academy. It has roughly 500 students in it, almost all African American, K through 8.

And we created a robust financial literacy curriculum for these young folks. We give them real money to invest in real stocks and have had them exposed to as much as possible. We've had everyone coming to visit them, from Magic Johnson to George Lucas and Joe Mansueto, the founder of Morningstar, to our state treasurer, etc., etc. We really think it's important.

We used to take them every year to the McDonald's annual meeting, where I'm on the board. And you take 40 or so young people and one of them gets to ask a question. And after the board, after the annual meeting, they would go and spend an hour with Don Thompson, when he was president and then CEO of McDonald's, and Andy McKenna, the chairman of the board.

And this is something we thought was important. Getting young people exposed to the stock market at an early age and giving them real money to invest. And many of those young people have worked at Ariel as summer interns and work full time at Ariel.

I spoke yesterday to a bunch of kids where one of our graduates had created an education business himself, called Rapunzl, which helps educate the next generation investors. So the Ariel Community Academy has been a been a big deal and it's sort of for us, and hopefully it's a model of the way the financial services companies can partner with urban public schools.

The third thing we've done to try to make a dent in the wealth gap that we're really proud of, is about 20 years ago, working with Charles Tribbett, who is a managing director, managing partner at Russell Reynolds. We created a conference for African Americans on corporate boards. And we bring in speakers, people you'd expect—Ken Chenault, Ursula Burns, Jamie Dimon, Jeff Immelt—everybody has come. President Obama has spoken there. It's been wonderful success.

We typically have 200 directors come together for three days. But the highlight of the conference is on Friday night. We have what we call the conscience of the conference, and it's been typically someone who had direct ties to Dr. King—Harry Belafonte, Andy Young, Reverend Jackson, the next generation of leaders, the late Congressman John Lewis, people like that—that can remind all of us that are fortunate enough to be in the boardroom that we have a responsibility to follow in John Lewis's footsteps and speak up, make a difference, make good trouble. And not be shy in the boardroom.

And we think that part of the reason we haven't progressed in corporate America around diversity and inclusion is too often the diverse directors in the room sometimes are not speaking out around these important issues and uncomfortable doing so.

We really think our conference is a way of trying to get people inspired to speak out and comfortable speaking out and help show them the way by having success stories of others who have made a difference in their leadership roles. So we kind of think that Black directors’ conference has been a kind of a big deal.

Greg Davis: So if we were to switch gears a little bit and just talking a bit about the Ariel edge. That's the edge is something that on the Manager Oversight Committee we always ask our outside managers. And so for those folks who may not know, Ariel was recently added as a subadvisor for the Vanguard Explorer Value Fund because of the strong investment philosophy, the performance, the people, the process.

And one of the things I’d just love to know from you, John, is when you think about Ariel's edge in terms of the deep relationships that you guys have cultivated and the partners that allow you guys to get better insights and deepen your conviction, how have you cultivated that approach and how do you plan to sustain it?

John Rogers: When I said we're thrilled to be able to work with you at Vanguard, it's really a very important relationship that we're very, very proud of. And just, again, I can't overemphasize how much we appreciate this opportunity.

When it comes to the edge and what we're doing, I think it comes from several areas where we think we have an edge. I mean one you touched on a little bit is that we are relatively rare with the long-term approach that we take to investing. Yeah, we're patient investors. We have a turtle as a logo.

But everybody is getting so obsessed with what's happening in the short term and the emotions take over the markets in the short term. It can often create opportunity. You know, Warren Buffett always says volatility should be your friend. And the great investor John Templeton, he always said you want to buy when there's maximum pessimism. So I think this ability that we've had to show that we're going to think really long term is an important distinction for our approach.

And then the second, it kind of works together, is we're willing to take the opposite approach to whatever the emotional themes are the moment. When everyone's bullish, we're going to be getting—scaling—out, and when everyone's getting afraid and bearish, we're going to be moving in and building out our positions and finding new ideas. So I start with that.

Because we're long-term investors who will buy companies while they're out of favor, it's helped us to build relationships with our management teams and we think we have better access to the CEO and CFO and the experts within the industries in which we choose to invest because you can imagine companies love having us as shareholders.

And so during crisis times like what's going on these last several months, or what happened during COVID, or what happened to 08 and 09, or 1987, we’re able to get the management teams on the phone and talk to competitors and customers and get ideas and insights.

I think because of the reputation we built, we have better access to information more quickly. We think that's an important competitive edge.