On February 22, 2021, Aspen Ideas, presented by The Aspen Institute, kickstarted its year of conferences with Aspen Ideas: RE$ET, a virtual two-day event created in conjunction with Bloomberg Economics. While the full Aspen Ideas Festival is scheduled for late June, Aspen Ideas: RE$ET tackled the views of policymakers, business leaders, entrepreneurs and global citizens as they reimagined a new definition of a healthy economy.
The conference featured a variety of plenaries and breakout sessions, all centered on revitalizing the economy in all aspects during and after a most unprecedented time. The plenary “Resetting for Equity and Inclusion” kicked off the conference, focusing on how to establish an equitable economy that serves every citizen, especially people of color who already had poor access to capital even before last year. While the plenary was made up of several sessions, the first was “The 2% Solution: Shifting Capital to Drive Economic Growth,” which was led by three prominent business leaders: Reed Hastings of Netflix, Bill Bynum of Hope Enterprise Corporation and philanthropist and entrepreneur Robert F. Smith of Vista Equity Partners.
The majority of the session centered on how black financial institutions can close the gap for those that the economy does not quite reach through a program called the 2% Solution. Smith led the panel, making it evidently clear that the economy just does not work for everyone, especially people of color. Each corporate leader took turns talking about what they are doing to help all people of color, especially in impoverished places, whether that be driving capital into black businesses, handing out paycheck protection loans or investing in educational opportunities for African Americans.
Furthermore, inspired by Robert F. Smith’s 2% Solution idea, Hastings noted that he took 2% of Netflix’s corporate assets and put them in banks and economic institutions that mostly sponsor those in African American communities. In fact, Reed put $10 million into Hope Enterprise Corporation, a credit union and enterprise corporation of which Bynum is CEO. Putting that capital into these banks helps to foster a better quality of life for people in that area, as well as helps to close the economic gap.
Smith closed out the session by asking each corporation to take 2% of their assets and put them into Community Development Financial Institutions (CDFIs) and/or Minority Depository Institutions (MDIs) in African American communities. Bynum also mentioned how his organization, and others like it, were able to help institutions in the area, including colleges, survive in this unprecedented time, echoing Smith’s point that it is more important than ever for corporations to embrace the 2% Solution.
More on the 2% Solution
The 2% Solution is not a new idea, although many corporations are slow to adopt it. In the summer of 2020, Smith introduced the 2% Solution at the Forbes 400 Summit on Philanthropy. At the summit, he argued that an investment of 2% over the next decade would help restore both equity and mobility in the United States. The average American household, Smith claimed, already charitably donates 2% of its income annually, and it is now time for corporate America to do the same by providing 2% of their net earnings to CDFIs and MDIs that primarily service African American communities.
“The deprivation of capital is one of the areas that creates a major problem to the enablement of the African American community,” said Smith. “The first thing to do is put capital into those branch banks to lend to these small businesses to actually create an opportunity set . . . drive it into these small businesses, which employ 60%-plus of African Americans.”
This capital from corporations, which could total $25 billion, could be used to strengthen healthcare infrastructure and equalize broadband access in minority communities, fund STEM education at historically African American colleges and digitize minority small businesses.
Watch Robert F. Smith’s entire session, “The 2% Solution: Shifting Capital to Drive Economic Growth,” as part of “Resetting for Equity and Inclusion” on the Aspen Ideas website.