FEATURING:

Rendel Solomon
Managing Director, Muller & Monroe Asset Management
Founder, One Stock One Future

13
Investing in the Next Generation

September 16, 2020 | 38:50
In this episode, Rendel Solomon, managing director at Muller & Monroe Asset Management and founder of One Stock One Future, joins our moderator, Hugo, for a conversation on Rendel’s family history, his “One Stock One Future” initiative, which aims to turn 1 million underprivileged young people into public company shareholders, and the widening racial wealth gap.

Meet Our Moderator

Hugo Scott-Gall, Partner
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Transcript

Hugo Scott-Gall: Today, I have with me Rendel Solomon. Rendel is a managing director with Muller & Monroe Asset Management. Prior to joining Muller & Monroe in 2008, Rendel worked as an entrepreneur in the media and entertainment industry in New York and as an engineer at P&G in Cincinnati.

Rendel started the initiative “One Stock One Future” to turn one million young people into public company shareholders. He also created League of Superwomen, a networking and panel series designed to showcase female entrepreneurs. He is the oldest of three children raised on the West Side of Chicago and has an MBA from Columbia Business School.

Rendel, it’s a pleasure to have you with me. Thanks for joining.

Rendel Solomon: It’s a pleasure to be here, Hugo. Thank you for having me. Happy to be on The Active Share podcast.

Hugo Scott-Gall: Okay, let’s get cracking. So, in your TEDxChicago talk, you talked about how your success started with your great-grandparents. So, I’d love to hear about that and about your family history. Your talk was titled “Sharecropper to Shareholder.” Could you maybe talk about what that term means, sharecropper, as well?

Rendel Solomon: Thank you for that, Hugo. I’ll give a bit of background there. As you pointed out, I had the great fortune of doing TEDxChicago in — when was that? Was that ’18? It feels like forever ago, but I think it was 2018, entitled “Sharecropper to Shareholder.” And the background for that, if you think about the name of the TEDx itself, it starts with sharecropper. So, let’s start there.

So, sharecropping is a term given to a group of individuals, mostly African-Americans here in the U.S., who were plantation workers in the southern United States post-slavery. So, after slavery “ended” — air quotes — 1865, the individuals who were unfortunate victims of that institution still had to find a new way to live, survive, and those who owned those slaves still needed labor in a sense.

And so, they created this system whereby they would continue to keep these individuals in servitude by having them work on the plantations. Albeit in arguably better condition than slavery was prior, it was still a condition of indentured servitude where they would have to work and they would be cheated out of their funds from picking cotton and fruit. They would be abused in many ways. And they had small places to live. They got to stay on the farm, and it was just a constant working-class group of people who still struggled to find freedom. And so that sharecropping went on for decades and decades, part of the Jim Crow South.

And so my great-grandparents and my grandmother were sharecroppers in the South. That is how they lived, that is how they survived. So, my living grandmother today, who just turned 80 years old on April 24, 2020, when she was a young girl, was one of those children picking cotton in the field. While many of us were just headed to school at that time, when she was 10 years old, she was relegated to the fields along with her siblings and cousin to pick cotton on behalf of her white landowners in exchange for her family having a place to live — probably an uncomfortable place to live — but albeit a roof over their head.

So, let me pause there. I’ve thrown out quite a bit, but that essentially was the sharecropping, for lack of a better word, industry and system.

Hugo Scott-Gall: And so as you think about your family’s history as you move through the generations to you, how has that background story inspired you? What has it taught you? What lessons do you still draw from it?

Rendel Solomon: And so the phrase “Sharecropper to Shareholder,” and what I talk about in that TEDxChicago which can be seen on YouTube, is this transition and this growth that took place within my family even in the context or underneath the construct of a system which would not predict that I would achieve the successes that I’ve achieved to date, educationally or professionally. And that’s really the inspiration and the reason for doing that story.

It doesn’t absolve the so-called system of the challenges that it unfortunately has placed on Blacks and other underrepresented groups in America, but at the same time, I wanted to give this story of hope, inspiration, empowerment, and opportunity as I thought about the challenges that my great-grandparents had to face in the early 1900s to what my grandmother faced in the 1950s and ’60s and forward, and also the challenges that my late mother and father had in terms of trying to raise three children on the West Side of Chicago, one of the most notoriously challenging neighborhoods in our city.

There are 77 distinct neighborhoods or communities in Chicago, and my neighborhood, I believe, is definitely in the bottom 10, if not the bottom five, in terms of every aspect: education, crime, median income, which I believe is somewhere in the low to mid-twenty thousands.

Hugo Scott-Gall: And yet you went to college. Your two sisters went to college as well. Your parents must have been very strong and very sort of disciplined and really forward-thinking people.

Rendel Solomon: I would give a lot of the credit to my mother as well. And my father — and, again, I don’t know if you knew this, Hugo, but sadly I just lost my father seven days ago from the time that we are having this conversation on this podcast. And it’s been an interesting journey. I lost my mother in 2006 to kidney failure and my father, who struggled with alcoholism most of his life, unfortunately, we believe succumbed to some of the medical and perhaps other challenges that came from that.

So, as I think about the effort and sacrifice that they both made — again, my mother was the primary breadwinner in the household and was really the one pushing for our education. She was forward thinking in that way. She recognized that having an education, in whatever format that you would receive that education, would be one of the greatest tools that we could have as it relates to achieving success.

What I don’t recall her discussing, which is where I’m often challenged today as I speak to young people and other groups, is that that education does not guarantee success for sure. That there is so much more even beyond our individual efforts. And that, as we get more into this conversation, Hugo, is where I am continuing to learn and try to study and listen to others.

But a phrase that I came up with recently is “Do not confuse the success of a few with the plight of the many.” Do not confuse the success of a few with the plight of the many. So, you and I were talking about Robert Smith a little bit earlier. And unfortunately, for every Robert Smith or Rendel Solomon — and we are lightyears apart, by the way. I joked about that in my introduction. Even though we do have some similarities, like our initials.

When those success stories happen, the unfortunate side effect is that they are seen as the positive side, they’re seen as possibilities. But on the negative side, it begins to, again, absolve the so-called system of its responsibility in terms of the negative impacts that it has had. So, by all predictive measures, the odds that this woman on the West Side of Chicago, given the circumstances in that household, would be able to get three children through college and one through grad school — astronomical. You’d hit Powerball twice before that happened.

And so I love what my mother provided, the achievement mindset, the excellence mindset, which is what I continue to try to instill in any of the youth, in particular, who I am talking to about their education, their professional goals and desires. I will always push for excellence. But I have to simultaneously address the external factors that could have a negative impact on them but try to do so in a way that doesn’t burden or saddle them with that pressure at a time when they should be focused on their learning. And that is a huge challenge that we’re facing in today’s society.

So, yes, did she have great foresight? If I ever get a chance to ask her directly, I will do so. But you’re right. My grandmother barely had a high school education. My mom and dad both finished high school. Then me and my two sisters have all finished college and I’ve gone to grad school. And now my niece and my nephew, both of my middle sister’s two children — Kaydence, whom I speak about in the TEDx, and now my nephew, who is almost two years old now — they are going to likely be the second generation of college educated young people in our family, which is an accomplishment in and of itself.

And so as I think about the future for those two young people, I’m reminded about the challenges that our family faced many decades ago. And I’m excited about the future, but I believe it would be a gross misuse of the skills and the sacrifices that my grandparents and parents made if all I did was prepare them to enter into a world which has shown that opportunities will be less available to them than they are to their peers who don’t look like them.

Hugo Scott-Gall: Okay. So, that is a good jumping off point to talk about One Stock One Future.

Rendel Solomon: Excellent.

Hugo Scott-Gall: Can you just give us an outline of what the program is and how it works and what you’re trying to achieve, which I think is a wonderful thing what you’re trying to do there?

Rendel Solomon: Thank you so much, Hugo. So, the genesis for One Stock One Future sort of came at — you know how two roads converged? That’s sort of how I think about One Stock One Future. So, on one of those roads was a young man — me, Rendel Solomon — always wanting to mentor, always looking to educate youth, and I found myself involved in various educational programs, mentorship programs, and financial education programs.

And as I was doing these programs, I noticed something. I noticed that there were often small numbers of students involved in those programs. Ten students here, 20 students there. And so early on, I began thinking, “Is this really having an impact? Taking 10 kids to teach them about financial education?” I knew intuitively that it was important to those 10 kids, but as I thought about society as a whole, I asked myself how many more groups of 10 kids will need to be educated before we actually see real impact in terms of their views, their thoughts, their ability to manage money, or that community’s ability to manage money more broadly.

So, that’s sort of the first piece. And the most significant moment came when I was working on a program with the Chicago Urban League and they asked me to come work with a group of students to help them build real stock portfolios. And that there was a bank, I forget which one, that had donated and distributed some monies so these young kids could build actual portfolios. And when I showed up, there were three kids, Hugo. And I committed to do the program. And I said, “You know what? I’m going to keep doing it even though there’s only three kids here.”

I honestly didn’t think it was the best use of my time for once a month on a Saturday. And I think two of the kids might have been related or siblings. And so when the parent couldn’t bring them, then it was me and one other kid in the class. And I stuck with it for six months, helping them build an actual stock portfolio. But when I finished that six months, I said to myself, “That is not how we move society forward. We can’t move society forward three people at a time. We can’t take three people without homes off the streets and fix society. We can’t do it three, five, ten people at a time in terms of having impact.”

And that’s just the way my mind works. I know that if we all help three people, then maybe that would have a greater impact, but I decided I wanted to do more. And I said, “Why were there not more children in this program? Is there that much apathy? Was it that the parents didn’t know about it? Was it a marketing issue?” I asked myself, “Was it a transportation and access issue? They couldn’t get them there?” Maybe these parents from low-income communities, maybe they worked on the weekends, so they couldn’t bring their kids on Saturday. I struggled to understand how a bank could be giving away money yet there not be an influx of people in this program.

And so then — so, hold that thought. That’s one road. The other road is my own niece, who shortly, I believe, after that was turning eight years old and I decided to buy her shares of Nike, Apple, and Disney. Not an endorsement of those stocks just in case the SEC is listening, but they just happen to be brands that I knew this young child recognized and understood. And I said, “Kaydence, you now own stock in Nike, Apple, Disney.”

And as I say in the TEDx, I take her to those stores here in Chicago and I tell her she owns everything in the store. And she intuitively began to understand what that meant. She asked if she gets free stuff now. I said, “That’s not exactly how ownership works, Kaydence.” But then she asked, “Do I make money when people buy stuff?” And I said, “You kind of do. Let’s discuss that further.”

And so as I thought about her own reactions and curiosity and her inquisitive questions around this newfound ownership, this idea struck me that what we’ve done with education is said, “Hey, young people. Sit here and listen to us adults tell you what you’re supposed to know.” And we do that until they’re 21 years old, Hugo. And then we say, “Now, go out in the world and be adults.” Have a job, pay your bills, drive a car, pay your taxes, have families, raise other kids, and there’s not been a single class about those things. I don’t know about you, but I never had a class about having a family, managing money, paying taxes. Never — not a single class about that.

I’m not professing to be a sociologist or have a Ph.D. in education, but as someone who was really good at school growing up, I realized even I had trouble learning things. You know what I can do really well, Hugo? I can listen to what you tell me and then tell it back to you in two months on the exam. That does not make an educated person. That makes me someone who was good at memorizing and picking up on — I was good at math and I loved it, but there was this disconnect between how does this work in the real world.

And that’s where we get One Stock One Future, I said, huh, if I simply give a young person a share of a public company, something that they can see, touch, feel every day, whether it’s McDonald’s or FedEx or Sony or anything else, and say, “You now own that company,” I was curious what might that spark in these young people’s minds. So, let me pause there before we move on and I can share more about One Stock. But I wanted to give that as the backdrop.

Hugo Scott-Gall: Sure. And it’s super interesting and I’ve got lots of questions for you. But I guess let’s just talk about your goal is to turn one million young folks into shareholders in public companies, which is great. How are you going to get there?

Rendel Solomon: Crystal ball. Crystal ball, Hugo. So, I’ve given this some thought. It started with me doing sort of 45-minute workshops with groups of young people through non-profits, school organizations, religious organizations, civic organizations, city organizations. I really wanted to work with all underserved youth and to give them that sense of hope, inspiration, empowerment, and opportunity through this newfound stock ownership. And it’s not easy. I found some challenges along the way. As a matter of fact, let me tell you about a little bit of that and then I’ll talk to you about how I think I get there.

One of the challenges that I realized is even when I was trying to get the shares for my niece Kaydence, it was not easy. Now, I work in financial services. I have a college degree. I have an MBA from Columbia. So, I could call Fidelity or I could call Charles Schwab and say, “Hey, here’s what I’m trying to do. I’m trying to open up an account for this young person,” and I’d be attached to it because she’s under the age of 18. And I was finally able to get that set up.

But there was one other challenge. It’s that the shares of the companies I was thinking about getting for her were pricey at times, in terms of just their share stock price. I’m not speaking about whether or not it was worthwhile, but just from a dollar value perspective. Let’s say I wanted to get her a share of Amazon. No. I love my niece. I’m not buying you a whole share of Amazon right now. So, I’d say, “Well, what if I could just buy a piece of it?”

Now, I wish I had come up with that idea a while back because companies have now created an ability to buy fractional shares, and we’ll get to this in a little bit when we talk about the wealth gap. When you think about something like that, Hugo, from a systemic perspective, I recall when I first looked at opening a Fidelity account years and years and years ago, their minimums were $2,500.00. And so now you’re saying if you don’t have $2,500.00, you can’t invest. And if you can’t invest, you can’t grow wealth.

So, when you put literal barriers in place to prevent groups of people from participating in said system to create wealth, that is how institutional racism rears its ugly head. It doesn’t always come in the form of men in hoods burning crosses. It comes in the form of denying opportunity, which we’ll talk about later. So, as I was creating One Stock One Future, I said, okay, that barrier to be able to put just $25.00 into a company is now gone thankfully. So, you can do that. And so that’s what I did for my niece.

So, then I started doing these classes and I said I’m going to donate $20.00 worth of stock to each kid in the class through monies that I had raised through a fundraising campaign. So, what happened there is I then emailed an electronic gift certificate to each of the families to go open an account. Unfortunately, what happened, Hugo, is many of those gift certificates were not redeemed. In some cases, I understand why, but I didn’t have the resources in place.

I don’t have a staff right now to be able to make those follow-up phone calls to understand, okay, how do we go from me or somebody else teaching a class, a short class, introducing a young person to what it means to be an owner of a public company, to then getting their parents, who, unfortunately, as we talked about what happened even in my own family — because the parents have to be connected to that account. Those parents have to have bank accounts. Those parents have to have internet access. Those parents have to have a basic knowledge and understanding about money and how it works.

And that is probably one of my biggest obstacles. I’m trying to turn a million underserved youth into shareholders when their parents haven’t been introduced to these concepts either. And so I’m rethinking how I run this campaign. Right now, it’s a non-profit organization, but I’m exploring is there another structure that I might use.

This gets to your question about the solution. Maybe it’s not a non-profit organization. I thought about that because I was raising monies that I wanted to give to these young people. But maybe it’s more like a campaign. Remember the truth.com, for example? And I don’t know if that was an actual non-profit to try to eliminate cigarette smoking. But maybe it’s a campaign. Maybe it’s a slogan. Maybe it’s a movement and doesn’t have to be a non-profit. But it’s a movement to encourage people.

So, one of the ways I get there or one of the ways I’ve thought about is by partnering with a corporation. And I don’t know exactly what that looks like but let’s say I talk to Nike or Apple or Disney and I say, “Guys, I want you to help me turn a million youth into public company shareholders.” Maybe Disney says, “Great. We’re willing to donate a thousand shares of stock to give away to young people.”

It sounds like a crazy idea, but a lot of the things we use every day — we’re looking at each other on a computer right now, Hugo, having an entire conversation from across the world.

So, maybe it’s a crazy idea to say to a corporation, “Look, give away stock to young people to inspire them, to give them hope, to give them the understanding and the education about what it means to be a shareholder.” So, that’s one path: working with corporations.

The other one is, even if I can’t be in the room teaching a class to young people, working with the adults as well and working with others to say you, too, can help a young person become a shareholder. I don’t need to be there to do it, but if I can inspire them through my social media, through podcasts, through talking to them, through a book that I’m working on, then that’s really the path to get this movement of a million young people becoming shareholders.

Hugo Scott-Gall: I think it’s a great idea going to companies and saying, look, it’s a very small issuance of shares, but it could do a tremendous amount of good. And around that point, on the tremendous amount of good, I’m really interested to know, for the kids in the program who have become shareholders, what are the questions that they ask about companies? How do they think about companies?

I’d love to know more of the brands they like, the brands they don’t like, and what their, even at an early age, what their values are. How do they think about which companies are doing good things and which companies are doing bad things? Have you got any sort of thoughts and, I guess, general sort of characteristics around them? I’d love to hear it.

Rendel Solomon: Well, one of the things that I do — one, I don’t dictate which companies they purchase. So, I’m not a broker in any way, shape, or form. I’m not recommending nor suggesting any stock to them. And I do that purposefully because I want to get at exactly what you asked, Hugo. I want them to have the conversation. So, after I go through my short 45 minutes — a little bit about my background, a little bit about what is money, what is saving versus spending, what is a company, what are goods and services, and what is a stock — so, I just walk through those five modules fairly quickly.

And then I say to the young people, “Now, let’s talk about companies.” And I explain to them how stocks are divided into industries and I say, “Let’s pick a few different industries and I want you guys simply to yell out a company that you know in that industry.” And I ask one young person to come be a scribe and I say, “All right, let’s do airlines.” And then they just start screaming, “Delta! American! Southwest!” And I go, “Great.” And so I have the young person write that on the board.

And then I ask them, with their phones, to look up the stock ticker. So, now I’m incorporating how to understand what a stock ticker is. And they tell me the letters for the stock ticker, so we write that on the board. Then I say, “Cell phones.” Then I say, “Video games.” Then I say, “Cars.” Then I say, “Banks.” Then I say, “Television.” I pick categories — or fast food. So, I just pick a few different industries and just have them list a few companies.

Then I break them into groups, and I say, “Okay, guys. Now it’s your guys’ chance to be interactive. I want you to speak in your small groups about which company you want to own and why. I want three reasons. I want three reasons why you’d like to own that company.” And I also tell them don’t worry necessarily about the financials and the metrics. That’s one of the things I profess in my program. It is not a financial program. And everyone thinks it’s this deep, intense financial program.

Something I forgot to mention earlier when I was explaining the genesis is that I believe a lot of the financial education programs, especially for youth, go too far, too deep, too fast. In other words, they cater only to the kid that was like me, Hugo, who was already getting straight As in math, who had the parents who had the wherewithal to make sure they were going to go to that extracurricular program.

So, you end up with 10 of the smartest kids in the class, who were likely going to learn this stuff anyway, who are part of that program. You don’t get the young student who has challenges reading, has challenges with math, and maybe doesn’t have both parents around to encourage and push them to that class. So, simply giving them a share of stock or even $20.00 worth of stock begins to incite some interest that I think we can build upon.

So, I have these young people in the class and now they’ve broken up into their groups, and I say to them don’t worry about the numbers, necessarily, as part of your why. Just give me any — and I said, “There’s no wrong answer.” I gave them the reason that my niece gave me for why she wanted Starbucks stock next after her Nike, Apple, Disney. And she said, “Well, I saw that their stock was up today,” because she had learned how to read or look at a stock chart at that point. And not that even that’s a reason to buy stock, just because it’s going up. But she said, “I saw that they were up today, and my mommy buys coffee from there all the time.” That’s the answer I’m looking for. I just want them thinking.

And so as they began rattling off companies from Amazon to Google to Microsoft to Apple to — you name it. If it’s a popular brand, they said it. And the answers ranged from — everybody has one of these, Hugo. Everybody has an iPhone. Great. That’s a wonderful reason to think about owning Apple stock. Or Google. They said Google is everything. Which, by the way, if Google is listening, that is an awesome slogan by the way. Google is everything.

Hugo Scott-Gall: That is true. That’s true.

Rendel Solomon: Because it kind of is. They created a company that’s literally everything. There’s not a day that goes by that one does not interact with Google probably. And that happened with every company. This is my favorite airline. Those shoes suck, their stock is going to go down. So, just listening to these young people talk about investing through the lens of the products and companies that they know and like, my goal has already been achieved at that point. Just getting them to have the conversation.

Now, there were some conversations around certain ethics things. I spoke to — let’s pick on Starbucks again. So, the incident a few years ago where there were two African-American men arrested in one of their stores in Philadelphia for supposedly loitering, which prompted more protests, and then eventually Starbucks decided to close all their stores for a day and go through a training around diversity, equity, and inclusion.

Now, that’s a powerful statement and hopefully that still — whatever was learned in that time sticks with the company. But they even recently had, I think, a little bit of backlash after the George Floyd killing, where they said that they did not want baristas wearing Black Lives Matter t-shirts. And so it’s those conversations — and I’m not choosing a side here, but it’s about getting people early on to engage in that dialogue from owning one stock.

Just think about the power of that conversation. My niece is now a shareholder in Starbucks. So, I can say, “Kaydence, what do you think about your company’s decision to do this?” And she’s now 12 years old. That’s a conversation that probably many of her classmates may not be having right now but should be. And so if I can turn a million young people into shareholders, my hope is that more of them will be having that conversation. So, they do start to have the dialogues, at least when I’m there. The challenge, Hugo, is what happens when I’m no longer in the room.

Hugo Scott-Gall: Exactly. Exactly. It’s fascinating. I love your answers about how they select certain companies. And also, I think it’s fascinating with the rise of ESG investing, ESG is a more and more important part of investing, that you’re getting people as young as 10 years old taking their values into their investing strategies, which I think is super interesting. It’s super interesting. But as you said, if you can get people into this program, then that definitely makes one more optimistic as to their future. But the key is getting them into these programs.

And I guess that does bring us on to the racial wealth gap. And you have been vocal around the issues here. So, could you maybe talk a little bit, I guess, from your point of view, how you think about all the reasons for the origins. Why is there such wide inequality in incomes by race and why is it actually, for some parts of society, getting worse? From already hugely wide levels, it’s getting worse.

Rendel Solomon: That is an intense conversation, Hugo, that I’m happy to have with you on this in this discussion. So, I appreciate you asking that. Let me start by first saying let’s first distinguish the racial inequality we see in wealth compared to income.

Hugo Scott-Gall: Yeah.

Rendel Solomon: Right? So, as you are probably well aware, but for some of our listeners, there’s clearly a correlation between the level of income that you can generate and in your ability to use that to derive wealth down the line. However, I want to be very clear, addressing the income gap will not, cannot address the wealth gap. Simply bringing people to parity on income today will never fix, particularly for Blacks in America, 400 years of extraction of value and denial of opportunity. It cannot. It will not.

Let me read a quote from Darren Walker’s New York Times article from the Ford Foundation. He’s the president of the Ford Foundation and he says in his article: “If we, the beneficiaries of a system that perpetuates inequality, are trying to reform this system that favors us, we will have to give up something.” Let me read one more quote: “Our economy is unbalanced because conscious choices in the aggregate amount to a conscious-less capitalism. These choices erode democracy and foment distrust. We the people can make different choices and we, the wealthy and privileged, should lean into our discomfort.”

And there are a couple of key items there that I’ll hone in on. This idea of giving up something and discomfort, Hugo. This is not going to be comfortable. You cannot comfortably address this wealth gap which was created from centuries — and I’m going to repeat these two phrases — extraction of value and denial of opportunity. It is going to be uncomfortable.

I just graduated from the Chicago Urban League’s Impact Fellowship Program. It’s a leadership program here in Chicago for African-Americans. We study a lot of the history in Chicago, things like the great migration and redlining with housing that was a big part of the denial of opportunity for Black wealth, in particular. And we did an exercise in loss aversion.

So, that group, as Darren Walker talked about as the wealthy, as the privileged — of which to a certain extent, despite the color of my skin, I have a little bit of that. Perhaps not as much as some of my white peers, but I’m college educated, I’m grad school educated, I have a job that pays well, I live comfortably. So, to many in America, I would be seen as privileged.

But when we think about it specifically on racial standards and along racial lines, there’s this idea that there’s a group that needs to give up something for another group to have an opportunity while ignoring that that same group had so much extracted over so many years and was denied opportunity for so many years. And this loss diversion concept is one that I hadn’t studied very much, but I think it’s one that’s very relevant in this discussion, as Darren Walker says, we will have to give up something. The idea that you have to give up something, Hugo, hurts. It hurts people.

So, that’s a powerful aspect as we talk about closing this wealth gap. Again, does it mean we stop going to school and working hard and trying to have a good job and trying to start a business and trying to buy real estate? It does not. We have to keep doing those things. But unfortunately, they’re necessary but not sufficient.

Hugo Scott-Gall: And so, I guess you’re saying two things. One is there’s a sort of redistribution and second is there’s a change in — there’s equality of opportunity rather than lopsided opportunity. Now, there are various ways of changing opportunity. There’s education but then there’s some things such as — as you said earlier, if your minimum required savings to go into a basic stock account is a number above what a lot of people might have, that rules them out from the ability to compound capital. And as you and I both know, compounding is a very powerful thing.

Rendel Solomon: Extremely.

Hugo Scott-Gall: The sooner you start compounding, the better it is. And so as you look, and I guess it almost links back to One Stock One Future, financial education and then financial opportunity has the ability to use what you’ve learned — because you can learn a lot but if you’re not given the opportunity to use it, it depreciates in value. So, part of that is how do you enable financial opportunity, whether that is access to getting a mortgage, whether it’s being able to invest? Are there some easy wins there or there’s no such thing as an easy win here? Everything is tough?

Rendel Solomon: I think there are some. For lack of a better word, there’s some low-hanging fruit that we can go after, Hugo. I mean, I mentioned one of them — lowering the amount, for example, that you would need to be able to invest. From a venture capital, early stage investment perspective, crowdfunding has become much more popular and even available. After Dodd-Frank, after the great financial crisis, it gave individuals who did not necessarily meet the accredited investor standard the ability to now invest in a private enterprise. Yes, there is immense levels of risk associated with that and that’s where the education and the learning comes in.

So, we’re trying to have a parallel path of creating the opportunity, Hugo, and the learning. I need to write down what you just said, by the way, about the depreciation of the value of one’s learning if the opportunity is not there. That is powerful. Mark my words here at this moment in our conversation, you will hear me quote you on that at some point. I’m not sure if you created that, but I had never heard that. There is depreciating value in your education if you are limited or denied opportunity to use that education to advance your own goals. That is hugely powerful.

And so I think that in order to get some of those smaller wins that can become a much larger part of the solution, this is where I do believe data does come in handy. Now, I’m not talking about the data to “prove” that systemic racism exists and that it has an impact. There are plenty of studies that do that. I’m not the expert on that. Sometimes I think this just becomes a conversation about common sense, and so it’s tough for me to engage in dialogue trying to prove that it’s an actual thing versus conversations like you and I are having which are about solutions. You’re not asking me to prove that it’s there. We know it’s there. We’re having a conversation about solutions.

And so the data that I’m referring to are the company data, the school data, the institutional data about where are you in the metrics across racial lines. Because it would be difficult for these institutions to have a real conversation about a solution if they’re unwilling to release the data.

There’s a Knight Foundation study that talks about the — in my area, in the asset management industry — about how about 98.7% of $70 trillion is managed by all large majority-owned organizations, and that less than two percent, 1.3 to 1.5%, is managed by diverse organizations, which includes women, including women who are not of color, as well as people of color — all put together only manage 1.3% of assets. And so for anyone looking at that piece of data to somehow assert that that lack of distribution is based primarily on the talent and efforts of the people in those communities is preposterous. It is absolutely preposterous, Hugo.

Hugo Scott-Gall: Is one way of changing this by entrepreneurship? If you look around the world, different countries have different levels of entrepreneurship. Some countries really don’t have much in the way of entrepreneurship for many parts of society. Other countries actually will have a lot of entrepreneurship. And there are a number of reasons for this, but I wonder whether one of the reasons — there’s access to capital and there’s certainly the existence of a safety net — but I wonder whether one of the reasons is role models.

Do you think more role models begets more entrepreneurs begets more role models begets more entrepreneurs? Do you think that it sort of goes through a circle and that role models — it doesn’t have to be entrepreneurs — but play a really important part in signaling this is possible?

Rendel Solomon: That’s a great point as we continue this discussion. I’m talking to a group of young people in California this Thursday, ages 13 to 18, and role model is going to be one of the key items that I mention to that group. This idea that having role models creates a sense of hope and possibility and you instill that, particularly in a young person’s mind. But where I am — and I had that. Thankfully, I had that.

My mentor, whom I work for today, I see him as a role model. He’s an African-American man who runs a private equity firm. I had never seen that. I’m 17 years old when I meet him. That’s powerful. He didn’t make me want to go into private equity necessarily, but here I am meeting an African-American man who is an entrepreneur when, up to that point, the only sort of successful African-American men that I had seen, particularly on television, were athletes, entertainers, and in my community, unfortunately, drug dealers and those who were involved in criminal activity. They were seen as successful because they had money, they had cars, they seemed to be living the life.

And so it’s powerful to have those role models. But as I said earlier, the unfortunate part is that is not enough. It is part of the circle. I’ll give you that. It’s part of the circle. You need that. But it doesn’t help with the external opportunity set. If I wanted to start a business today that required $1 million of funding to get going — maybe a little bit high — but even if it was just a few hundred thousand dollars, I’m thankful to have built a network, fortunately, where I may have some “friends and family” — as we talk about in the venture capital industry — to call on for some of those funds.

Many entrepreneurs — women entrepreneurs and people of color, especially Black people — do not have that. There’s no community or network to whom they can go to get that first $50,000.00. Unfortunately, perhaps due to their own challenges — even those who are educated, Hugo. Because Blacks come out of college with more student loan debt. They don’t get paid the same when they get the jobs. So, those disparities brought about by institutional racism, that’s where the compounding unfortunately has continued to happen.

And so we have to compound in the other way. So, mentorship is one of them, but access, real access, to capital for these small businesses is critical. And without that, you can have the greatest idea in the world, but if it never gets funded because you don’t have the resources yourself, because you’ve had to spend money just to survive — also, unfortunately, within the Black community, something I talk about, we unfortunately have to pass whatever wealth or resources or assets that we do have, we often pass those up instead of down. We pass assets up instead of down.

What do I mean by that? So, we talked about my niece, for example. And so I don’t have kids yet, but if I do, the hope is that whatever assets I’ve accumulated are going to go to them upon my moving on out of this world. But what has happened over a few generations now within Black communities is that the elder, the parent, hasn’t really been able to accumulate any resources. So, they have to work longer, rely on Social Security, and then unfortunately when they pass, things haven’t been put in place to address their final arrangements.

And so now the kids and grandkids have to often spend years, perhaps, caring for an elderly parent or grandparent and then use additional resources to make sure things are taken care of.

And that cycle has continued for too long in our communities. So, I would encourage, truly encourage every person that I know to get some form of insurance. I mean, I can’t say that strongly enough. Have some form of insurance. Even if it is a basic term policy, at least there’s something in place. One thing we know is going to happen is that we are not going to be on this planet forever. And so why not have something set up as early as you possibly can so that there is something to leave behind?

And that’s probably one of the fastest ways to immediately have some assets to pass down to your heirs. Or to a sibling. I’ve heard stories, people say, “If you don’t have kids, you don’t need insurance.” I’ve got to tell you that’s the dumbest thing I’ve ever heard in my life. If you don’t have kids, you don’t need insurance. Do you have anybody that you care about? Hugo, if you don’t have kids and you don’t have insurance, if you’re looking for a beneficiary, Rendel Solomon will gladly be your beneficiary, my friend.

Hugo Scott-Gall: I’ve made a note. I’ve made a note.

Rendel Solomon: I will cry. I will miss you, Hugo.

Hugo Scott-Gall: Yes.

Rendel Solomon: And I will await that check coming in the mail and I’ll put it to good use for you as we seek to solve some of these issues.

Hugo Scott-Gall: It will take away some of the pain, I know. I think we’re out of time, so, Rendel, I want to say thank you very much for coming on the show, for joining me. We’ve had a great conversation. I’ve learned a lot and I know that anyone listening will learn a lot. And promise me this. When you hit a million in One Stock One Future, come back and tell us about it.

Rendel Solomon: You’ll be one of the first calls, my friend. I’ll have to do a world tour on all these shareholders. And we’ll finish off with this. One of my big ideas once I get all these — I might not even wait until then, maybe when I get to 50,000 — is to hold a shareholder meeting. And that’ll be the annual meeting for all these young people and invite all the companies that they own shares in to come speak, showcase new products, give them access to things that others don’t.

Can you imagine a convention center somewhere full of 20,000 youth with the young people running around, playing sports on new Nike products, and then teenagers over here playing with the Microsoft and Apple folks, doing some programming and playing with new devices? That’s my vision for One Stock One Future. So, thank you so much for having me. I greatly appreciate being on The Active Share podcast.

Hugo Scott-Gall: No problem. Thank you. Thanks a lot.

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Hugo Scott-Gall, Partner
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Glossary

INDICES
The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid ARM pass-throughs), asset-backed securities, and commercial mortgage backed securities.

The MSCI ACWI IMI Index is a free float-adjusted, market capitalization-weighted index that captures large, mid, and small cap representation across developed and emerging markets.

The MSCI ACWI ex-US IMI Index is a free float-adjusted, market capitalization-weighted index that captures large, mid, and small cap representation across developed and emerging markets, excluding the U.S. The Value and Growth Indices are a subset of the Index that adopt a framework for style segmentation in which value and growth securities are characterized using different attributes. Multiple factors are used to identify value and growth characteristics.

The MSCI ACWI Small Cap Index is a free float-adjusted, market capitalization-weighted index that captures small cap representation across developed and emerging markets.

The MSCI Emerging Markets Index is a free float-adjusted, market capitalization-weighted index that is designed to measure the equity market performance of emerging markets.

The MSCI World Index is a free float-adjusted, market capitalization-weighted index that is designed to measure the equity market performance of developed markets.

The Russell 2000 Index is a market capitalization-weighted index designed to represent the small cap segment of the U.S. equity universe.

Index performance is for illustrative purposes only. The indices are unmanaged, do not incur fees or expenses, and cannot be invested in directly.

TERMS
Alpha is a measure of an investment's return in excess of the market's return, after both have been adjusted for risk.

Beta is a measure of the volatility of an investment relative to the overall market, represented by a comparable benchmark.

Half-life is a statistical measure of the time required for the discrepancy between price and value to contract by half of its starting value. Fundamental value estimates are based on the Dynamic Allocation Strategies team's proprietary research.

P/E Ratio is a measure of valuation which compares share price to earnings per share, calculated using estimates for the next twelve months.

Standard deviation is a statistical measurement of variations from the average.

QUANTITATIVE MODELS – FACTOR DEFINITIONS
The William Blair Earnings Trend Model captures information about short- and medium-term changes in analyst estimates in an attempt to anticipate future estimate changes and stock performance. The score combines measurements of earnings revisions, momentum, and earnings surprise.

The William Blair Valuation Model combines varying metrics used to characterize the relationship between the stock’s trading price and its intrinsic value. By going beyond using only one or two measures, the model attempts to build a more holistic version of a stock’s worth vis-a-vis the market. The score combines measurements of earnings/cash flow based, asset-based, and model-based factors.