The Montgomery Bus Boycotts: Evaluating Social Change With A Change Management Framework

While I was in business school, I wrote this analysis on the Montgomery Bus Boycotts for our Change Management class. After reading it again, I thought it was really pertinent to thinking sustainability of social movements in the age of #BLM #ENDSARS and similar movements all throughout the world.

Introduction

The Montgomery Bus Boycott was one of the largest and longest mobilizations of a community in the history of the civil rights movement. It set the standard for how major players like Martin Luther King, the NAACP and other organizations would mobilize, and effectively communicate and coordinate civil disobedience protest strategies all across the country. However, there are many questions and underlying topics that surround the Montgomery Bus Boycotts. Why Rosa Parks? What was the Montgomery Bus Boycotts looking to achieve? Was the Montgomery Bus Boycotts successful? In the following essay, I will explore many of these questions through the lens of change management theory.

Background

Late in the afternoon of Thursday, December 1st, 1955, Rosa Parks leaves work at the Montgomery Fair department store and boards a bus home. The bus fills up. A white man boards — but with no seats available he has to stand in the aisle. The bus driver orders the four front-most Blacks to surrender their seats so he can sit. Mrs. Parks recalls:

At his first request, didn’t any of us move. Then he spoke again and said, “You’d better make it light on yourselves and let me have those seats.” … When the [other] three people … stood up and moved into the aisle, I remained where I was. When the driver saw that I was still sitting there, he asked if I was going to stand up. I told him, no, I wasn’t. He said, “Well, if you don’t stand up, I’m going to have you arrested.” I told him to go on and have me arrested. He got off the bus and came back shortly. A few minutes later, two policemen got on the bus, and they approached me and asked if the driver had asked me to stand up, and I said yes, and they wanted to know why I didn’t. I told them I didn’t think I should have to stand up. After I had paid my fare and occupied a seat, I didn’t think I should have to give it up. They placed me under arrest then and had me to get in the police car, and I was taken to jail… — Rosa Parks. [1]

Rosa parks is then taken to jail and through a network of well connected friends, her bail is paid and the news of her arrest spreads like wildfire throughout the Montgomery community.

That night, students from the college nearby started making fliers that called for a one day bus boycott the next Monday. Friends of Rosa Parks start to build coalitions and develop the Montgomery Improvement Association (MIA) to lead the charge against Montgomery. Nixon, Rosa Parks friend and community leader within the NAACP, appoint a young pastor, Martin Luther King, as head MIA because he’s a young outsider who is not entrenched in the politics of the church establishment.

On Monday, December 5th, 1955 the bus boycott began. People walked to work, carpooled where they could and took taxis. That same day, Rosa Parks was charged with violating the segregation law and faced a $14 dollar fine. Due to the verdict and a successful one day boycott, the leadership decided to continue the boycott. For the next year, MIA coordinated with Montgomery community organizations to sustain the bus boycott through facilitating carpool routes, leveraging taxi services and coordinating other resistance strategies. When Montgomery didn’t change their segregation policy, lawyers associated with the MIA and NAACP chose to file a federal lawsuit challenging the constitutionality of the Montgomery segregation laws.

In June 1956, the federal court in Montgomery ruled in Browder v. Gayle that Alabama’s bus segregation laws, both city and state, violated the Fourteenth Amendment and were unconstitutional. The U.S supreme court upheld the decision later that year. In December, after an estimated $250,000 in lost bus revenue and millions in lost tax revenue and retail, the Montgomery Bus Boycott finally came to an end. 

Analysis

As a result of the Montgomery Bus Boycott, civil rights leaders are finally given a tangible model on how to facilitate change in society. While many of the concepts of nonviolence and civil disobedience are based in the teachings of Gandhi and Jesus Christ, there was no real macro model which mobilized institutions and coordinated people in the way that would amount to change. Ultimately, change in the civil rights movement was three fold. For the sake of simplicity, I’ll focus particularly on the Montgomery Bus Boycott. The three major changes include

  1. Transition from individual to community action
  2. Economic concept of equality
  3. Change in the laws that perpetuated segregation

Transition from individual to community action

Rosa Parks wasn’t the first person to be arrested for not giving up their seat on a bus in Montgomery. Based on our reading in The Power of Habit, there are three things that lead to the full out bus boycott.

“A movement starts because of the social habits of friendship and the strong ties between

close acquaintances. It grows because of the habits of a community, and the weak ties that hold neighborhoods and clans together. And it endures because a movements’ leaders give participants new habits that create a fresh sense of identity and a feeling of ownership.” -Power of Habit pg 155

Duhigg argues that the reason Rosa Parks sparks the Montgomery Bus Boycotts is because of her close varied connections throughout the community of Montgomery. She has a diverse group of close friends that vary in profession, social status and interests. Once they hear about how their friend had been arrested, they are more likely to act and bring other close friends to action.

We see this play out in how easily accessible organizations like the NAACP, college professors and church members became throughout her story. This doesn’t play out the same way for others who were arrested. The power of Rosa Parks network galvanizes friends to feel directly offended as if they were the ones that were arrested. “If it happened to Rosa, it could happen to us.” This energy is leveraged to facilitate the actions steps that mobilize the whole community for the boycott.

Another spark that helps facilitate larger community action is the emergence of the Montgomery Improvement Association and of Martin Luther King’s leadership. Unless E.D Nixon was reading change management strategy 20 years into the future, he was ahead of his time when he suggested that Martin Luther King head the newly formed Montgomery Improvement Association. There were three very important characteristics that Martin Luther King possessed that made him an ideal candidate. Most importantly, he was a new member of the Montgomery community that was just starting to establish his identity and his church. He was younger than most of the ministers, so he had the energy and electric emotion to lead a group of people. Lastly, he was minister, which gave him the language to speak to a mass audience that was predominately Christian in belief.

Martin Luther King uses his newly appointed role to rally people around the concepts of civil disobedience and brotherhood. He unites people by consolidating the message and making it appeal to everyone. While MLK is effectively communicating for the bus boycott, MIA is developing the infrastructure to support the logistics for a yearlong battle. MLK brings people together through integrating non-violence into Christian doctrine and ties a people to a larger cause than themselves. The MIA creates new habit for the Black community in Montgomery that include walking to work, carpooling and taxi services. The organization and higher calling are what ultimately sustains the Montgomery bus boycotts for a year.    

Economic concept of equality

The Montgomery Bus Boycott was one of the largest mobilizations of a particular group in history of the United States. While there was segregation was at the center of the Montgomery bus boycotts, there was a more basic fundamental that one person’s 10 cents are worth the same amount as the next persons. The Black population in Montgomery was about 40,000 people. Blacks represented more than 75% of the ridership on the bus system. Imagine losing almost 75% of your ridership for a year. For a long time, there was a racial hierarchy/value given to money from whites versus blacks. The bus boycott was the first major example of how much economic power a community could have if they came together. Anyone with that large of a purchasing power cannot be ignored. Thurgood Marshall has been quoted saying that the Montgomery bus boycotts were won through the courts and not through the boycott in which he is technically correct. However, the hearts, minds and pockets of merchants, drivers and administration had already been pushed to the edge. The financial implications of the boycott were too enormous not to ignore but ultimately, for the first time, people became aware of how much spending power the black community had. The black community saw this as well and quickly replicated similar strategies all around the country.

Change in the laws that perpetuated segregation

Social norms play a significant role in determining legal structures. In the common law perspective, most laws are derived out of a set of common norms (core Christian values) Social norms that are normally entrenched in society for an extended period of time eventually convert into legal frameworks to sustain the social norms past societal changes. When Black leaders in Montgomery county started discourse to prepare a legal case against the city of Montgomery and Alabama segregation laws, they were battling a legacy of social hierarchy, through and policies were relics of southern society pre- civil war. These laws were put in place to institutionalize a mindset that decreased the rights of blacks positioned whites as the hegemonic power in the south. Ultimately, this was the long term, sustainable change that the Black community in Montgomery, AL mobilized and fought to reach.

Montgomery Bus Boycott through a change management perspective

After research on the Montgomery Bus Boycott and applying some of the change management theories we’ve learned in class, I found that the Montgomery bus boycott is not only an exact fit within the Kotter model, but a more integrated application. In this next section, I will break down the Kotter model and explain for each section how the Montgomery bus boycott applies.

Establish a sense of urgency

Upon Rosa Parks arrest, her mother quickly calls all of her friends and from there the sense of urgency is born. Imagine hearing that one of your friends was in jail for a crime that might have landed you in jail as well. Many of Rosa Parks friends mobilize the resources and people needed to not only get her out of jail but facilitate the boycott. This is an example of perfect place and perfect timing. Civil rights leaders are more equipped to establish a sense of urgency here because of Rosa Parks role in the community. She is very connected and helps to bring a diverse group of people together that normally wouldn’t be in the same group at any other time. By leveraging a perfect opportunity, the sense of urgency is timing. Its an opportunity to get back at Montgomery bus system for disrespecting “one of our own” .

Create a Guiding Coalition

During the development of the Montgomery Improvement Association, Nixon pushes for Martin Luther King to be the face, leader, and voice of the organization, thus making him the head leader of the Montgomery bus boycott. The creation of the Montgomery Improvement Association is the first step in building a guiding coalition, but the most important move was placing Martin Luther King as head of the organization. As I mentioned previously, MLK’s position in the community, in all facets, makes him an ideal candidate to lead the Montgomery Improvement Association. He’s an outsider, young and a minister. These three characteristics play an intricate role in his ability to reach the masses and made him one of the most effective leaders in the civil rights era.

Develop a Vision and a Strategy

The MIA was the operational tool of the Montgomery bus boycott. They developed a message and strategy that MLK stated:

“I want it to be known that we’re going to work with grim and bold determination – to gain justice on the buses in this city. And we are not wrong. We are not wrong in what we are doing. If we are wrong – the Supreme Court of this nation is wrong. If we are wrong – God Almighty is wrong! And, we are determined here in Montgomery to work and fight until justice rolls down like water and righteousness like a mighty stream!” [3]

MIA developed a goal that eventually stalled negotiations they were:

  1. Treat Negroes with greater courtesy
  2. Hire Negro drivers for Negro routes
  3. Desegregate bus seating.

The overall strategy was two prong. Blacks would boycott the bus system until demands were met and Black leaders would look for ways to challenge the legality of the policy in higher courts.

Communicate the Change Vision

I believe that this is the true differentiator that takes the Montgomery bus boycott and makes it sustainable. It all goes back to the selection of Martin Luther King as the head of MIA. There were major pieces of social change entangled in the boycott but King’s knowledge in Christianity and his ability to mold the conversation and the message makes it palpable and translatable to audiences outside of the black community. Even within the black community in the south, the church is the cornerstone of society and appeals to the masses. King takes many of the ideals and messaging and integrates in into his sermons and applies scripture as arguments for equality. It’s the equivalent to some of gummy vitamins, masked in something you know and enjoy but inside is something that’s really good for your body. In my opinion, this is what gives the civil right movement the legs it needs to be replicable and appeal to those that are who are not black but share Christian values.

Empower Broad Based Action

Montgomery Improvement Association was the central hub of logistics during the early periods of the Montgomery bus boycotts. However, the boycott is sustained once people start taking ownership and start to own that they are individually boycotting the bus system. This is when you start to see weekly block meetings setting up logistics for how people will get to work, and other people start to move into management/leadership roles within the organization. The ultimate goal of empowering broad-based action is that the change agent doesn’t have to be the person enacting or facilitating the change vision and strategy. MIA achieved this by getting buy in early in the process and through the effective messaging by Martin Luther King that pressed a message of long-term benefit and endurance. (Most of the time, embalmed in Christian doctrine.)

Plan and Generate Short-Term Wins

The most effective short-term win was the one-day boycott developed by MIA and Black leaders. Once people saw how feasible it could be to continue the boycott, it almost seemed logical to continue until demands were met. This is also another interesting step that was altered due to the selection of MLK. As a minister in Christianity, it is easy to preach postponing immediate gain for long term wins as long as people are constantly aware of the long-term goal. I also believe that the belief in delayed gratification is what also sustained the Montgomery bus boycott for as long as it did. There were still short-term victories, but MIA and MLK did a great job of celebrating the small victories that did occur and managing expectations for the long term.

Consolidate Wins and Produce More Change

For all intents and purposes, the black community in Montgomery was winning the boycott. The bus system was losing thousands of dollars a day, retailers were losing out on income and Montgomery was losing out on tax income. However, in order to truly win and produce the maximum amount of change, MIA negotiated with the city of Montgomery to alter their segregation policies. After stalled negotiations, MIA and the NAACP decided to make a legal case for the unconstitutionality of Montgomery and Alabama’s policies.

Anchor the New Approaches in the Culture

The supreme court ultimately rules that Montgomery and Alabama’s laws are unconstitutional under the 14th amendment. As previously stated in the paper, laws are social norms that have been agreed upon as the common actions/ policies toward citizens. By challenging and having the segregation laws overturned, the law sets a whole new precedence by which other laws can be exploited and changed. Ultimately, the supreme court ruling ensures the longevity of the essence of the Montgomery bus boycott.

Conclusion

While the Kotter model is a great fit to the Montgomery bus boycott, there are great lessons to be learned from one of the most pivotal boycotts in the history of our country. Most importantly, your change thesis has to be palatable to your champions but eventually has to get through to the enemies of change. MLK was great at taking civil rights arguments and integrating concepts into Christianity. By doing that, it disarms most of the arguments the opposing side uses. It’s important when facilitating change, you pick leaders in the change coalition that speak the language of the masses and effectively know how to communicate a streamlined message. Secondly, momentum is significantly important in establishing a sense of urgency. The effectiveness of Rosa Park’s network is only utilized in the moment. If the boycott started a week after, it wouldn’t have had the same adoption rate. Building of a momentous occasion builds a larger case for the sense of urgency. Lastly, change isn’t just a change in habit or beliefs, but it needs to be founded in policy and governance. The Montgomery bus boycott is successful because it changes the hearts and minds of a majority of the people involved but the defining and sustaining success lies in the policies being declared as unconstitutional. In organizational change management, its important to facilitate change but sometime the best way to facilitate change and sustain it is through policy and governance interventions. The Montgomery bus boycott would serve as model for future civil rights battles all across the country. While certain elements couldn’t be replicated, the core served as a great model for leaders to apply.

Bibliography

Berg, Allison,“Trauma and Testimony in Black Women’s Civil Rights Memoirs: The Montgomery Bus Boycott and the Women Who Started It, Warriors Don’t Cry, and From the Mississippi

Boycott. DVD, directed by Clark Johnson. Los Angeles: Home Box Office, Inc., 2001.

Burns, Stewart, ed. Daybreak of Freedom: The Montgomery Bus Boycott. Chapel Hill: University of North Carolina Press, 1997.

Duhigg, Charles The Power of Habit Random House LLC, Feb 28, 2012

Eyes on the Prize: Awakenings (1954-1956 ). DVD, directed by Henry Hampton. Boston: Blackside, 1987.

Gray, Fred D. Bus Ride to Justice. Montgomery: Black Belt Press, 1994.

King, Martin Luther, Jr. Stride Toward Freedom. New York: Harper, 1958.

Robinson, Jo Ann Gibson. The Montgomery Bus Boycott and the Women Who Started It. Knoxville: University of Tennessee Press, 1987.

Thornton, J. Mills III. Dividing Lines. Tuscaloosa: University of Alabama Press, 2002.

Overcoming Collaboration Trauma

I try to write and post by Friday but this topic had a lot of angles and research involved so I thought I’d take the weekend. Here we goooo.

Collabo

Earlier this week, I was on a call with a group of black founders thinking of collaborating in a major way. (More details to come) During the meeting, one of the founders said something that I’d never heard before. “ As we work together, we have to understand that many of us have “collaboration trauma” and we need to be cognizant of that as we find new ways to collaborate.”

After the meeting, I went down a rabbit hole trying to figure out if there was any information out there on collaboration trauma and I used my google-fu to find research or articles mentioning collaboration trauma. I couldn’t find anything significantly substantial.

Taking a step back, I walked through my experiences with collaboration to better understand what they meant….Some background for those who still wonder what I do for a living.

  1. I work at Kohactive as a product manager. I help companies build software products for internal and external usage. Yes, that is me on the first page.
  2. I teach at General Assembly as a part-time instructor – I teach product management twice a year.
  3. I invest and advise early-stage startups at the intersection of technology and impact at tiphub.vc
  4. I assist my father with his ventures in Sierra Leone, Nigeria, and Kenya.

Collaboration, in most of my work, is essential to unlocking significant value for the parties involved. But with certain areas, there’s a lot of structures that are repeatable and trustworthy which makes collaboration easier.

For example, as a product manager at Kohactive, there are processes and methodologies in place for me to leverage to ensure I’m working well with designers, engineers, users, customers, etc. I rely heavily on those processes to make sure there’s maximum collaboration.

As an instructor, there’s a standard norm of teacher/instructor to student. I spend most of my time navigating that predefined role in order to create a positive experience for students. On my end, I look at it as getting paid to learn about different industries.

With tiphub, there’s a lot of collaboration opportunities but this is where most opportunities fall through. Most of the time, I’m caught taking meetings / having conversations that make me feel like I’m stuck in a power struggle. I feel like there’s someone who is trying to finesse me or I’m getting the better end of the transaction.

Working with my father is a total crapshoot. Sometimes it hits and sometimes we get burned. But over time, there are wins.

Epiphany: The Prisoner’s Dilemma

The Prisoner’s Dilemma came to mind as a great mental model to think through strategies of collaboration. (I finally get to show I learned something in econ class.) Here’s a quick rundown:

The Prisoner’s Dilemma is a subset of Game Theory that explores the incentives for collaboration between two actors. It was originally framed in the 1950s with this scenario:

Two members of a criminal gang are arrested and imprisoned. Each prisoner is in solitary confinement with no means of communicating with the other. The prosecutors lack sufficient evidence to convict the pair on the principal charge, but they have enough to convict both on a lesser charge. Simultaneously, the prosecutors offer each prisoner a bargain. Each prisoner is given the opportunity either to betray the other by testifying that the other committed the crime, or to cooperate with the other by remaining silent. The possible outcomes are:

  • If A and B each betray the other, each of them serves two years in prison
  • If A betrays B but B remains silent, A will be set free and B will serve three years in prison
  • If A remains silent but B betrays A, A will serve three years in prison and B will be set free
  • If A and B both remain silent, both of them will serve only one year in prison (on the lesser charge).

There’s a ton of research on this but one of the best examples of the prisoner’s dilemma is in the movie Dark Knight. Just to give a little more context, during the movie, activities facilitated by the Joker cause two ferries, one full of prisoners that Harvey Dent and Commissioner Gordon locked up and the other full of other people, to escape the city on a boat.

While sailing off, the two ferries lose all power and their engines die. Both ships realize there are explosives all about the boat, and they both find detonators. It is at this time that the Joker’s voice is heard over the loudspeaker of both ferries, and he informs them that they are part of a social experiment. The detonator on each boat is for the other boat.

One ferry must press the button and destroy the other boat by midnight, or else the Joker will destroy both boats. This drags out for a while, but eventually, people in the ferry decide not to blow the other boat up.

If you’re interested- here’s the scene in how it plays out at the end:

Probably on the top 10 list for best movies of all time, this scene encompasses so much.

The Joker, as he’s swinging back and forth, said, “Until their spirit breaks completely.” (keep this in mind, we’ll need it later)

One of the major areas of research in the prisoner’s dilemma is focused on incentives for collaboration. This is best evaluated in a matrix.

The dominant strategy for a player is one that produces the best payoff for that player regardless of the strategies employed by other players. The dominant strategy here is for each player to defect (i.e., confess) since confessing would minimize the average length of time spent in prison.

The payoffs make sense in different scenarios. For example, imagine playing 100 rounds and you don’t know how the person will interact. Tit for tat might become the more effective route.

In reality, there are ways to skew outcomes for effective collaboration. For example, #nosnitching law in the streets ensures you understand what to do if you end up in a cooperate/ defect scenario. Standards and norms, in certain scenarios, set up the way we should play the game. In my work life, instructors vs students roles encompass norms that help us understand the best way to collaborate. Even in product management, agile sprints, user stories, wireframes…etc, all of that are tools to engage in more cooperative outcomes for stakeholders.

As I start to look in other areas, specifically in finance and business development, there’s a lot of tailwinds to effective collaboration. For example, there are fewer norms around cooperation when you’re figuring out how to create untapped value. There’s less trust. And in low trust environments, people tend to operate in their own best interest and have no real incentive to collaborate.

This takes me back to what the Joker said in the clip; “Until their spirit breaks completely.” He was responding to Batman’s assertion that people are inherently good and will choose to cooperate over and over again. I believe Joker was onto something, at a certain point people would get fatigued from cooperating and not getting the same incentive as they should. They lose trust in the game and eventually decide to set up a new game with better players, or they play a whole different game.

Collaboration Trauma

Often times black founders who are building startups in the tech space are operating in low trust environments for several reasons:

  • A smaller amount of resources: Less than 1% of venture capital goes to Black founders. (To give you perspective, there was 34 billion USD of venture capital investments done in 2020 Q1) Most founders are in hyper-competition for resources. So the incentive for collaboration might be misaligned.
  • Knowledge/ information asymmetry: Black founders in tech are operating in spaces where they have been systematically shut out. As a result, the knowledge of the processes or communities that help facilitate trust and increased likelihood of cooperation is not available. Ultimately, black founders in tech end up in less cooperative scenarios.

I’m sure there are other industries where this happens. I’m sure there are other groups that are shut off from opportunities in way that leads to, as the Joker described, a broken spirit. This is the trauma that many disenfranchised groups carry with them when they think about collaboration.

So how do we fix it? Well at tiphub, we’ve definitely identified this problem and we’ve started to realize transparency is one of the largest impediments to collaboration. So we’ve really been focused on how we can work on exposing things we normally wouldn’t think to share. For example, we have a playbook where we walk through every process about our company and how and why we make decisions. If you want to read more – read here .

We made our playbook open source. We’re also going to start releasing data on our programs and benchmarks to everyone. A lack of transparency and process is the best way to ensure collaboration is difficult. We’re on a mission at tiphub to increase our success rate by sharing already existing frameworks and making sure everyone has the information needed to increase trust and collaboration.

If we’re going to increase the likelihood of more equitable collaboration in our organizations and interactions, we have to look for those spaces where there’s gray area and work to bring process and transparency as much as we can. If we don’t, we’ll continue to stifle collaboration and perpetuate less optimal outcomes.

Juneteenth

I learned about Juneteenth for the first time in 3rd grade. Ms. Anderson, the student-teacher in my class at the time, read to us about how Major General Gordon Granger landed at Galveston, Texas with news that the war had ended and that the slaves were now free. This was two and a half years after President Lincoln’s Emancipation Proclamation. (signed in 1863)

“The people of Texas are informed that in accordance with a Proclamation from the Executive of the United States, all slaves are free. This involves an absolute equality of rights and rights of property between former masters and slaves, and the connection heretofore existing between them becomes that between employer and hired laborer.” – General Order #3

I may have learned about it at an early age, but I didn’t understand the significance of Juneteenth until I moved to Washington DC in 2010 DOE (During Obama’s Era). Juneteenth was celebrated throughout Through my students and the community, I got to see what Juneteenth looks like up close. I got a chance to participate in parades, go to exhibits opened up specifically to celebrate the day, and enjoy cookouts. I may have participated but it didn’t click until a couple of weeks later.

This was also my first fourth of July in the nation’s capital. Of course, there was a ton of stuff to do. I got a chance to visit the monuments, went to a couple of cookouts, and watched fireworks. I also got to listen to President Obama’s 4th of July speech.

He mentioned something always normally mentioned in most 4th of July presidential addresses but it hit differently.

“Two hundred and thirty-four years later, the words are just as bold, just as revolutionary, as they were when they were first pronounced: “We hold these truths to be self-evident, that all 1 men are created equal, that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty, and the pursuit of happiness.” (to read the whole speech click here.)

And at that point, I realized what Juneteenth meant. It was more than the celebration of the end of slavery. Juneteenth is the celebration of a promise fulfilled. Part of the quote in Obama’s speech is from the Declaration of Independence.

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty, and the pursuit of happiness.”

All men… created equal… endowed by their creator… inalienable rights… This is what the founding fathers wrote to King George to justify their need to break away from Great Britain and form their own country. This is the foundation of what drove collective action in the revolutionary war. People fought against an oppressive regime for these inalienable rights.

Sounds familiar? It’s crazy a country that had just shed blood over these inalienable rights would then go and create a 10x more oppressive state for black people. That isn’t living up to its promise if this isn’t for everyone. That’s why June 19th, 1865 is so important. The end of slavery as a state-sanctioned institution in the United States brought us one giant step closer to a more perfect union.

As we can all see, we’ve still got a long way to go. That’s for damn sure. I see all the companies getting the day off and all the celebrations around the country and honestly, it’s great to see. But I wonder, do people get it? Do they understand why Juneteenth is so central to the history of the United States? Do they understand, its way more than a black holiday? This is our history. This is the history of us.

It’s Time To Build Pt. 2

Marc Andreessen, one of the co-founders of Andreessen Horowitz, wrote a timely piece during the height of the US COVID-19 crisis. Titled It’s Time to Build. It’s essentially a call to arms for builders to focus on creating a better reality where we’re prepared for tomorrow’s challenges. It was a collective call to create a more conducive environment for builders and sounded like a call to get back to what made the United States great; making and creating. 

Fast track to George Floyd’s death and we’ve seen a significant outpouring of support and collective action around ending racism and destroying racist institutions. Now more than ever, there’s an awakening to the fact that black people are suffering from systems built to disenfranchise and systematically ensure they’re held down. We’re at a pivotal point globally. We’ve all seen the decentralized protests around the world demanding change and justice for George Floyd and others who have died at the hands of those sworn to protect them. People, now more than ever, want to tear down and rebuild these institutions. 

As we think of building and tearing down institutions we should make sure we’re focused on building a more inclusive type of institution. The only way we’ll really achieve the promise of a future where there’s equality for all is to ensure everyone is in the workshop as we’re building. We know this is currently not the reality. Black people lag behind on most indicators that would lead them to be in the rooms to be a part of this building process. In venture capital, for example, where the rubber meets the road when it comes to building, the stats are abysmal. For those who aren’t familiar with the venture capital space, here’s some data to provide some color:

  • 77.1 percent of founders were white—regardless of gender and education.
  • Just one percent of venture-backed founders were black.
  • Women-funded startups received only 9 percent of investments.
  • Latino founders made up 1.8 percent of those receiving funding, while Middle Easterners totaled 2.8 percent.
  • Asians were the second most-backed group, making up 17.7 percent of venture-backed founders.

From Ratemyinvestor.com 

We can’t build this new reality if there’s this much inequality in the venture capital industry. I don’t think individual actors are deliberately enforcing inequality – I believe the “system” of risk capital is flawed and perpetuates actors to not act in an equitable way. Venture capital is just one example. There are disparities in healthcare, education, job creation, urban development, and etc. Everywhere we look, there are systems that disproportionally affect black people, and most of the time, for the worst.

If we aren’t careful, we’ll build on the same bias and power structures and we’ll be back in the same spot 20 years from now wondering how we got to where we are. 

The License To Suck

Chris Rock, one of my favorite comedians, said something some years ago that changed my perception of equality in venture capital. I’d recommend watching the whole thing. He’s dropping gems, especially at the end. Its just a 3-4 minute video.

“TRUE EQUALITY IS THE EQUALITY TO SUCK”

While this goes against what most black people, especially in hyper-competitive white-majority spaces, have been taught, black founders seeking venture capital need this form of equality the most.

Let me explain…

Benedict Evans wrote an article in 2016 on failure and the economics of venture capital here. I’ll be cherry-picking some points so you don’t need to go and jump into reading it now. Essentially, Evans was able to get aggregate data from one of their limited partners on over 7000 investments made by the venture funds they deployed capital to from 1985 – 2014. All to say, they had a treasure trove of data to explore VC activity over a 29 year period.

Here are some major takeaways:

  • Around half of all investments returned less than the original investment.
  • 6% of deals produced at least a 10x return, and those made up 60% of total returns
  • A fund gets better returns by having more really big hits, not by having fewer failures

The way venture works, most investments have a high probability of failure, and few companies produce significant returns. Speaking with black founders, there seems like there’s an extraordinary case needed to justify investment in their startup to early-stage investors. Most of the time, they feel like they need to have everything figured out… exceptional team, major traction, product, and massive market. There’s a return the fund hurdle that’s put on each opportunity. Where in other situations, white founders have been given what I like to call “figure it out money”. You may have one exceptional part of the puzzle going for you but go figure it out. This return the fund hurdle isn’t applied equally.

Most companies who get “figure it out money” don’t. Some do. But the opportunity to figure it out or not is at the core of equality. Entrepreneurship is a muscle, the more you flex it, the stronger you get. I agree, black founders need to return the fund, just like every other founder should try to if they accept venture capital but VC funds have to be okay with the reality that black founders will most likely return less than they invested, just like their white counterparts.

“It’s not that I want to be bad, but I want the license to be bad and come back and learn.”

– Chris Rock

A couple of extraneous thoughts I couldn’t fit into the essay

  • My main goal was to build on a quote from a conversation on Twitter yesterday. “The key here is that Black people need the same room for failure and repeated failure that our white peers enjoy. And can turn their failure into the narrative, in which they’ve emerged on the other side more enlightened.” (from The Myth of Blackness in Venture ) I wanted to add more color to the mechanics behind why failure is essential.
  • I’d often get into arguments in meetings with my white counterparts about the market opportunity, especially around black founded companies. To be honest, I’ve never really trusted market opportunity slides or rationale. If you’re investing early, the math will most likely change.
  • That goes to say, its 2020. There’s more than enough data for VCs to learn and understand black focused market opportunities. There’s untapped value to be created if you’re willing to explore.
  • I’m torn on the conversation that black founders need to find larger markets than black people. I think its a simplistic and outdated statement. Most people build for who they know and what they know. Most of the time, companies who brand themselves as going specifically after black customers most likely have adjacent markets that could add to scale. What I’m trying to say is I somewhat hear the market opportunity argument but it’s up to the investment team and the founders to really think about the bigger opportunity. Extend the same imagination about how an opportunity can work to black founders too.