The black-owned business boom
Zachary Crockett : What's going on everyone. It's Friday, May 6th, and you're listening to The Hustle Daily Show. I'm Zachary Crockett. And I'm here with Nicole Phillip and Juliet Bennett Rylah. What are we talking about today Juliet?
Juliet Bennett Rylah: Today, we're going to talk about black owned businesses. They've been on the rise over the past year, but there are some serious underlying systemic issues that could threaten the longevity of this trend.
Zachary Crockett : All right, we're going to get into that in a bit, but first a little news. Mortgage rates hit their highest level since 2009. The national average for a 30 year fixed mortgage is now 5. 27%. That's almost double where we were this time last year, and for a median price home that works out to about three to$ 400 more per month. Meta announced that it's going to freeze hiring for most mid and senior level positions through the end of the year, in order to curb its spending. In the first quarter of 2022, the company saw its slowest growth since it went public in 2012. Disney plus sent a survey out to subscribers in Spain, asking about password sharing habits. And that has analysts thinking that the company might follow in the footsteps of Netflix, which recently announced its own intentions to crack down on password sharing. TikTok revealed plans to roll out a premium ad program that's going to let creators take a cut of the ads. The program is going to allow select brands to place ads alongside the top 4% of videos on the app. And the numbers at the gas pump have been causing us a lot of collective grief over the past months, but one company's loving the soaring prices. The oil giant Shell reported a record shattering 9. 1 billion in profits in the first three months of 2022. That's triple its figures from this time last year and the company's not alone. On Tuesday, BP also reported its highest profits in a decade. All right, let's get into our main discussion. And Juliet before we get into why black businesses are booming, set us up with some context. The pandemic was particularly rough on black owned businesses, right?
Juliet Bennett Rylah: Yeah, that's correct. So many were concentrated in retail or restaurants or other service sectors where social distancing is actually really hard to do. So that was one factor. And then between February and April of 2020, the number of black business owners in the United States dropped 41% compared to 17% for white business owners. And the first round of Paycheck Protection Program funding, pretty inequitable black owned businesses were five times more likely than white owned businesses to receive absolutely nothing.
Zachary Crockett : So now, despite all that black owned businesses are seeing a rise.
Juliet Bennett Rylah: Yeah. So an analysis of census data by Robert Farley research associate at UC Santa Cruz found that the number of black business owners was actually 28% higher in Q3 2021 than pre pandemic. There's a couple of reasons for this. For one, they were already growing. So they increased 8% between 2018 and 2019. And the pandemic also ultimately led to a lot of new business growth overall, as people had to pivot into new revenue streams. So there were a lot of people who were starting their own businesses, going to work for themselves, came up with an idea and decided to go do something else. And then on top of all of that, the racial reckonings of 2020 led to greater scrutiny of disparities facing black business owners and black people in general. And as a result, we saw a lot of people who were rallying to support black businesses. A lot of like here's a list of restaurants you can go to or a list of places you can buy from, if you want to support these communities. We saw initiatives that launched to help black entrepreneurs. And then later rounds of PPP were actually more equitable for minority owned ventures.
Zachary Crockett : And this growth is going to be presumably good for the economy at large. Do we have an estimate on the fiscal impact here?
Juliet Bennett Rylah: Yeah. So McKinsey report estimated that if we had an equitable business ecosystem that closed the wealth gap between black and white business owners, it could add over a trillion dollars in annual GPD.
Zachary Crockett : So Nicole turning to you here, it's obviously a great thing that these business owners are seeing a boom, but underneath all the success, we're still grappling with a number of obviously very large systemic issues that will likely take a lot longer to fix. Right?
Nicole Phillip: Yeah. So when I think about, okay, great. There's been this 28% increase in black business owners. That's awesome to see, but why do we even talk about, oh, the increase in black business owners? Why is it so important for us to speak about it? Well, I was looking into some of the numbers. CNBC reported that eight out of 10 black owned businesses fail within the first 18 months. Now there are like 30 million small businesses in the United States and about 30% fail by the second year. So for 80% of black owned businesses to fail within what that's a year and a half, that's insane. That's crazy.
Zachary Crockett : We're talking like more than double the rate of failure for other businesses.
Nicole Phillip: Yeah. And I know there might be people out there who are tempted to say, well try harder or whatever it is, but there's a history of systemic issues holding back prosperous black communities, black businesses that have been trying to flourish for many, many years. And those things just kind of morph into different issues, different systemic practices that then hold back black business owners. Like we've heard about the Tulsa race massacre, that was a prospering bustling black community that was torn apart by angry white rioters. And then recently I also learned about the Rosewood massacre. So similarly to Tulsa, a rumor that a white woman was harmed by a black man sparked chaos and wiped out another prosperous black town in Florida. So there is definitely this history of black people trying to raise up the community, raise themselves up, bring in money and business only to be shot down by racism. And we see similar issues with black businesses, having trouble getting funding, having trouble just being out there, getting the same marketing reach and things like that, that other businesses are able to access.
Zachary Crockett : So there are big social issues and historical context to contend with, but there are also economic issues here. I feel like another thing we have to discuss is generational wealth. Black founders only receive around 3% of all venture capital. That means when they start businesses, they often have to rely on bootstrapping and bootstrapping, you often fall back on family support networks, but a lot of the brightest business minds just don't have access to generational capital.
Nicole Phillip: Yeah. So when you think about it, there was actually a 2018 study that showed that white boys who grew up rich are actually more likely to remain that way. Whereas black boys that were raised at the top, they're more likely to become poor than to stay wealthy in their own adult households. So if you think about people pulling themselves up by their metaphorical bootstraps, as people discuss, there's often a familial support, generational wealth there to help support some of these people who say, oh, I didn't have any help, but where are you coming from? What's the history that you have that kind of helps support you as opposed to some people in your same position that are trying to do the same thing, but don't have that same financial backing through generations of accumulating wealth as others.
Zachary Crockett : Sure.
Juliet Bennett Rylah: Right. It's a lot easier to take a risk and go off and start your own project if you know that if it fails, your family can support you.
Zachary Crockett : Yeah.
Nicole Phillip: And as a result of some of these generational inequalities, white families had a median net worth 7. 8 times that of black families, meaning they're less able to rely on financial support from family. And of those who do succeed, there's often a feeling of obligation to help others in your family financially. And we've talked about this kind of offline, where even within my own family, as a black American, I'm one of the first people to graduate from college. And I do have to financially support my family. And it would be great if I could have those extra hundreds or a couple 1000 dollars to put into a pot for a business to be able to help myself in a few months or a few years to start something.
Zachary Crockett : Right.
Nicole Phillip: But unfortunately I do have to think about the family that I have to help support. And there is that obligation that not just myself, but other people feel when you're coming from these sorts of circumstances.
Zachary Crockett : Yeah. I mean, if you were to think about starting a business, I mean, where would you start? Yeah. I'm curious.
Nicole Phillip: I thought that was a rhetorical question. Well, I mean, for myself, it's not so much of an option for me right now to even think about starting a business because of how financially in a sense strapped I am. I can say like, I'm better off than a lot of other people perhaps in my situation, but in order to even get this sort of funding, there are black venture capitalist firms out there. I actually met someone not too long ago who worked for one that was owned by Snoop Dogg or something like that. So there are some out there that are black owned that you would hope will offer some better equity when it comes to funding. But you have to just kind of save your pennies together to try to fund your own dreams. And then with the failure rate that we just mentioned, which is 80% ending within just a year and a half, it's almost like, well, why bother? Why would I even start? Sometimes it can just be kind of discouraging when you look at those numbers and know the fact that it's going to be really, really hard for me to even get this money together. There are a lot of people who have businesses, that'll tell you, oh, I failed 18 times. I can't afford to fail 18 times. And then finally get a business going, because I don't have unlimited capital. I don't have a bunch of investors throwing money at me because they believe in me.
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Zachary Crockett : I know this is kind of a controversial thing to say for some listeners, but there is this mythology around failure in Silicon Valley, but failure is a thing of privilege I believe. It's just true. Some people can't afford to fail as much as others can.
Nicole Phillip: Yeah. It's expensive to fail when you put thousands of dollars behind something, thousands of dollars that let's say I, because I couldn't get venture capital funding had to then save myself, do a GoFundMe page, whatever it is. And then to have to fail after all that, after all that money raised that actually rose a pretty interesting point for me, like in terms of as you know I do social. So I think about like black creators and in this creator space. When someone like the catch me outside girl becomes super popular, people are throwing money at her. She gets deals. She's a rapper. She's on OnlyFans. I think she recently made 50 something million dollars in a year. Like she blew up. But do you guys remember the woman from few years ago, she coined the term eyebrows on fleek?
Juliet Bennett Rylah: Barely yeah.
Nicole Phillip: Like people started saying on fleek.
Zachary Crockett : Sure.
Nicole Phillip: And it was a whole thing. It was trending for like a whole year. She had to do a GoFundMe to start her makeup line.
Zachary Crockett : Wow.
Nicole Phillip: Whereas this little girl who became popular just for being rude on Dr. Phil blew up.
Zachary Crockett : I mean, we've seen black creators go on strike on TikTok in the past, right?
Nicole Phillip: Yeah. For these very things. So it's adjacent to this idea of the business world and starting from scratch in the sense that when you're a black creator, you're a black business, just how much harder it is to get people to believe in you to give you the same funding, to give you the same resources that others get so easily.
Juliet Bennett Rylah: Right. And that's a great point because I feel like the catch me outside girl was in the news for weeks and weeks and weeks for saying this one thing. And she was what a teenager, right? I mean, she didn't even have a plan. She was just a teenage girl.
Nicole Phillip: Just a rude teenager on Dr. Phil and people threw money at her for this one phrase. Whereas as I mentioned, I believe her name was Peaches Monroe. She coins this term on fleek. It just on fleek in general was the phrase, but it was in reference to eyebrows when she said it and everyone's saying it, but she had to struggle to even get anyone to help fund her actual business. She wasn't trying to become a rapper like the catch me outside girl was. She actually wanted to start a business and she had to do a GoFundMe because that's how little attention she got for also having a same similar, popular phrase.
Juliet Bennett Rylah: But everyone took her phrase and started using it themselves. Of course.
Nicole Phillip: Of course.
Zachary Crockett : Yeah. I think I remember reading a New York Times article a while back. I mean, obviously there's been a lot written on this as you touched on, but just a lot of the most influential creators on TikTok are black creators and they just have their dances or their catch phrases co- opted and they lose creative control and they don't actually end up benefiting at all from their creations, from their creative work. So this is a big problem. It's particularly on social channels too.
Nicole Phillip: Yeah. It's definitely a big problem in this digital creator age, but I definitely think that it's just indicative of the larger issue, just the larger issue of the resources for black businesses, black creators, people that are trying to start things and not being, I guess, believed in, in the same way as others. Because it does take a certain sense of like, I believe in you to give money to help fund a project, help fund something from a startup or anything like that. Right.
Zachary Crockett : So Juliet, you mentioned back in 2020 we saw kind of a groundswell of support for black business owners, but there was a general fear that that support would be ephemeral. And I think a big question now is are these upward trends we're seeing in support for black owned businesses going to last?
Juliet Bennett Rylah: Yeah, I think that's a great question because we saw that happen in 2020 and then I remember maybe a year after that we saw that happen with the Asian American community. It just feels weird that something really bad has to happen for people to turn around and be like, oh, I should do this. I should be more like, like these are the things we should have been doing all along. And since it's taken us so long to even do that, I do fear that people are going to forget and go back to the status quo.
Nicole Phillip: Yeah. It's really unfortunate. I was thinking about that. And just in the sense that remember every company, everyone's posting black squares, which by the way, was not very helpful.
Zachary Crockett : Right.
Juliet Bennett Rylah: Right.
Nicole Phillip: And everyone's like, oh no, who knew that this was happening to the black community? The black community knew, but like who knew that this was happening? Let's help everyone. And then as soon as I guess, everything kind of died down and the celebs were done singing, what was it Lean On Me or Imagine? Imagine, Imagine Me.
Juliet Bennett Rylah: Imagine Me. Yeah.
Nicole Phillip: Whenever they were done doing all that and all the fanfare and the circus, whatever was done, then they went back to status quo. And it's like, okay, I can go back to pretending there aren't issues anymore. I can go back to pretending that there's nothing going on and no disparities that I should actually try to address. And that is what happens. We don't hear companies talking about all the different changes as often that they want to make toward anti- racism and things like that. And so when the larger, big entities aren't talking about it, what do we think about the smaller people? The you and me, like are people like us still thinking about it, still talking about it? Is it still in the conversation? And then it just kind of dies out, unfortunately. And that's why we saw as CNBC reported, kind of like a plummeting in the support for these businesses, because it was kind of like, this is my way of showing I'm like, okay with black people, I'm not a racist. I'm like, let me give money, let me help. Almost like, it's just make yourself feel better in a sense. But if you're not going to continue, if you're not going to continue to help, where does that actually go?
Zachary Crockett : Right.
Juliet Bennett Rylah: Yeah. Because we're talking about issues that have been going on for generations. And so we need systemic change to combat these. But a lot of times it really is just, I'm going to post something on my Instagram. So everyone knows that I support this thing and then I'm going to donate to this cause that my friend is raising money for on their birthday. And then like that's it. There's no more. And as we've seen, these are issues that have been festering for years. You can't just post on Instagram one day and say you support something and expect change to occur. It's got to be constant. It's got to be intentional.
Nicole Phillip: It's like we're watching the transformation of slacktivism. Remember when that phrase was coined back with Kony 2012 and then the guy was like naked on drugs on the street.
Juliet Bennett Rylah: Oh, right. Right.
Nicole Phillip: We're seeing like, instead of it just being, let me just post on social, we saw that with the black squares, but now we're seeing, okay, well I'm going to do a little bit more than that. So people won't say that I'm just like an internet activist. Like I'm going to do a little bit more than that, but now that the eyes are off me and no one's really talking about it anymore, I'm going to stop.
Zachary Crockett : Yeah. Yeah. It's like a slightly more involved virtue signaling.
Nicole Phillip: Yes. Slightly more involved, ever so slightly.
Juliet Bennett Rylah: People talk about this all the time. Like, let's say someone comes out and they announce that they're gay or they're trans or something and then I will see all of the comments will be like, why do we need to talk about this? Why does anyone care about this? And it's like, because you're here making that comment. And because this person still in certain situations does not know that their rights are protected. We wouldn't have to talk about it all the time if change was happening, if things were good, but like, we do need to talk about it because you're here. And I can tell that you need to talk about it.
Nicole Phillip: Yeah. Which is a great full circle moment there as to like why we're even having this conversation about black owned businesses. It's because there are people out there that still don't get or understand why we need to help support black and minority owned businesses. Why it's amazing that there could be an increase in black business owners by 28% in the third quarter of 2021. Why those things are important because there will inevitably still be people in the comments somewhere in the internet world saying, why do we care about this? If we stop talking about it, it'll go away. Why call it black owned business? Just business. That's it. We're all in this together.
Juliet Bennett Rylah: Yeah. Right. And there's a lot of comments that are like, well, what about white owned businesses? And it's like, well, I invite you to look at the news every single day of your life and you will find plenty of news about white owned businesses.
Zachary Crockett : Yeah. Look at the fortune 500.
Nicole Phillip: Are people really making those arguments too? The like the white entertainment news, like arguments, like why don't we have white entertainment television?
Juliet Bennett Rylah: Yeah. Welcome to the Academy Awards for the last, however long it's been going on.
Zachary Crockett : Yeah. Right.
Juliet Bennett Rylah: And you'll find it.
Zachary Crockett : All right. Well, I think that's a good place to sign off here. Nicole, Juliet, thanks for joining today. And thanks to all of you for joining in to The Hustle Daily Show. We're proud part of the HubSpot Podcast Network. Our editor is Robert Hartwig and our executive producer is Darren Clarke. And if you liked what we heard today, we've got a lot more tech and business coverage over at thehustle. co. Have a great weekend. And we will catch you all next week.
Juliet Bennett Rylah: Hey, it's Juliet from The Hustle Daily Show. And I'd like to tell you about another podcast, Business Made Simple hosted by Donald Miller and brought to you by the HubSpot Podcast Network. Business Made Simple, takes the mystery out of growing your business, like is a weak brand identity holding your business back? In this episode, Donald talks to Kaytlyn Wells, a physical therapist in owner of Beyond Repair in Missouri. She works with athletes who've been injured, helping them get back to their sport. She and Donald have a conversation about how to ramp up her business. Essentially, how does Kaytlyn brand and scale Kaytlyn in such a way that she can charge double what she does now? Listen to Business Made Simple wherever you get your podcasts.
Black-owned businesses have been on the rise, but there are some serious underlying systemic issues from under. Plus: Mortgage rates skyrocket, Meta’s hiring freeze, TikTok’s plans with creators & ads, and more.
Join our hosts Zachary Crockett and Juliet Bennett Rylah, who are joined by Nicole Phillip (Social Media Manager at The Hustle) as they take you through our most interesting stories of the day.
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