Systemic change can’t happen with a top-down approach, especially in corporate America. Creating a more inclusive and accountable business ecosystem starts with understanding the foundational issues at hand, says Mellody Hobson.
“You can’t hit a goal without a target,” says Hobson, the president and co-CEO of Ariel Investments who was recently named the chair of the board of Starbucks Corporation. “You have to know what you are trying to accomplish, and you have to understand what that really means on a measurable level.”
Hobson, who recently spoke during Greylock’s Iconversations virtual speaker series, shared her insights on what it will take for the demographics of the business world to represent the demographics of the actual world. Hobson, who is also a director at JPMorgan Chase, an active philanthropist and an ardent proponent of financial literacy, is the only Black woman to chair a Fortune 500 company. An outspoken champion for inclusivity, Hobson is the co-founder of the newly launched private asset management firm Ariel Alternatives, which will focus on scaling sustainable minority-owned businesses to serve as the suppliers to Fortune 500 companies.
During the conversation with Greylock general partner Reid Hoffman, Mellody described her lifelong passion for learning and hard work. Although her family at times struggled with financial instability, Mellody’s mother and older relatives were determined workers who consistently reinforced the values of education and accountability. She recognized that understanding the basics of any situation was the key to having control over it, particularly financial insecurity.
“It’s very unsettling when you don’t know what’s going on,” says Hobson. “That sense of insecurity drove me to the security of knowledge, and that’s how I became someone who is always solutions-oriented.”
Hobson applies the same approach in her mission to expand equal representation of women and people of color in educational and professional settings.
“If you understand something, then you won’t perpetuate the circumstances you are in,” she says.
You can listen to the conversation on the Greymatter podcast here.
EPISODE TRANSCRIPT
Reid Hoffman:
Hi, everyone. I’m Reid Hoffman, and I’m happy to welcome you to Iconversations, Greylock’s speaker series where we chat with iconic figures across tech, finance, media, and culture.
Today, I’m thrilled to have Mellody Hobson join us. Mellody easily stands out as a leader in each one of the categories I just mentioned. She is a nationally recognized voice on financial literacy and has been named one of Time Magazine’s “100 Most Influential People” – although, to me, she’s probably among the 10 most influential people.
She is currently the co-CEO and president of Ariel Investments, where she has worked since she was a college intern. Ariel just announced a new initiative called Ariel Alternatives. And Mellody was recently named chair person of Starbucks Corporation, making her the first and only Black woman at a Fortune 500 board. (You know, progress is slow, but hopefully inevitable, and Mellody is always a trailblazer, so I’m so pleased).
She’s also a director of JP Morgan Chase and previously served on the boards at Dreamworks Animation and Estee Lauder. Mellody is also deeply involved in philanthropy, arts and education. Last year at her alma mater Princeton, Mellody established Hobson college, which is the first residential college at the university named after a Black woman.
Mellody, thank you so much for being here today.
Mellody Hobson:
Thank you for having me. I’m excited to talk to you.
RH:
There’s so much I want to talk about today. But let’s hear a little bit more about how you got to where you are now.
By all accounts – we have a bunch of our mutual friends and a whole network together – you’ve always been very driven. Since elementary school, you’ve stood out amongst your peers for your level of focus and determination, and you retain that reputation strongly to this day. Tell us about your upbringing and how that set the tone for your professional career.
MH:
Well, I think that we all are a composite of a lot of people in our life. And I think my upbringing speaks to that and has a lot to do with who I am. I’m the youngest of six kids in my family, and in my family, I’m really young. My siblings are a couple of decades older than me. I have four sisters and I had a brother who passed away. And so growing up in that way, I was technically an only child, because they say if you have more than five years between you and a sibling, and my closest sibling to me had a nine-year difference. I think that’s very, very important because my siblings had a very different path.
My mom was a single mom and she worked extraordinarily hard, but often struggled to make ends meet for us, but she was very, very clear and somewhat demanding – not in a mean or aggressive way, but in a very clear and non-negotiable way with me about her expectations. And I think that had a lot to do with the person that I am. I told this quote that my mother used to say to me over and over again, as a child growing up, she said, “Be the labor great or small, do it well or not at all.” And that just was drilled into me. It didn’t matter if I was doing dishes, washing a floor, or studying for a test. She expected me to go all in on everything that I did or not to do it at all. And I think that very much framed how I think about my work and the effort that I put into things.
The other thing that my mom did was, starting was very young, she didn’t think that you should sleep past 6:00 AM. She worked really, really hard. And she said, “If you’re sleeping, the world is passing you by.” And so that had a lot to do with me wanting to wake up early and attack the day because I felt that that would give me an edge on other people, if I could wake up earlier and get more done.
So these crumbs of a person became big pieces of me. And I think that had a lot to do with how I attack things. And my focus, lastly, I think was a function of circumstance. I realized that the way that I could have a better life was to exploit every educational opportunity that was given to me because I said education is the one thing that cannot be taken away from you. And so, as a result of that, I was like a laser – I’m not easily distracted. It can be a beautiful day, and I’ll be sitting in a room with lots of windows and not look out the window if there’s something I have to get done. So I’m really, really grateful for that level of concentration that I’ve had actually since I was a child.
RH:
We’re going to get into some of the current and really important work in a bit. But actually, I know you’ve been working really hard and that’s moved you from 6:30 to 4:30. How did you move from 6:30 to 4:30, getting up in the morning?
MH:
Well, it’s actually 3:55 now. It just keeps creeping, because I give myself a few minutes to wake up. But it was really never six o’clock. That was her [my mother’s] sort of benchmark that, even on a weekend, even during vacations, you get up early. It’s four o’clock for me, just because my brain works really, really well in the morning and I really enjoy and appreciate the quiet time. And so I feel like I can get a lot of things done.
RH:
Yep. Yep. Makes total sense.
So we’re going to get to a number of the hats that you’ve donned in the span of your career – board member, educator, philanthropist – but the constant has been the role as an investor. What drew you to the financial world, and how has it captivated your attention, including all of your innovations in the last few years as well?
MH:
They say the average American has 11 jobs in their lifetime, and I’ve only had one since I graduated from Princeton in 1991.
What drew me to the financial industry was my basic desire to understand money, and that desire to understand money was an outgrowth of how I grew up, where money was, at times, very, very scarce. And I know my story is not different from many other people, but I did feel like I wanted to be solutions-oriented even as a child. And I didn’t say have a lot of money or make money – I said understand it, because I thought if I understood it, then I wouldn’t perpetuate the circumstance that I was in.
And so I feel like I had a calling; like something was pulling me towards the financial services industry, because that’s where all the discovery would occur. And so I don’t think it’s an accident that I work in the investment business. And I don’t think it’s an accident that I’ve done this for as long as I’ve done it, because I think very much that for every action, there’s an equal and opposite reaction.
It’s a countervailing force in the experience that I had as a child. My husband says whatever happens to you as a child really sticks with you because you don’t have any advanced reasoning skills. So I can tell you when you’re young and you have no control of being evicted, or having your phone disconnected, your lights turned off, or your car repossessed, it creates a tremendous amount of anxiety. It’s very, very unsettling when you don’t know where you’re going to go, which is why I have so much empathy and why I really do feel an obligation to work hard for people who find themselves in similar circumstances, especially as a fallout of the pandemic. And so that sense of insecurity drove me to the security of knowledge and specifically around finances.
RH:
Yeah. Well, and it’s part of the tales of you and folks who’ve gone on heroic journeys. You encounter serious challenges and then make it right. That shapes you into driving who you are. That’s been part of what’s amazing.
So you joined Ariel as a college intern. What was the organization like when you joined and where is it today?
MH:
It’s so funny when I think about those days. So we were small, so tiny at the time. I think technically I was the 19th person, but when you look back to then, and you jumped forward to today, I think only three of us are still there – John Rogers, who founded the company and it was the first minority-owned investment firm in the nation back in 1983; m colleague John Miller, who is one of our co-portfolio managers, and then myself, in terms of the old guard. It’s crazy to say, at 51 years old, I’m the old guard at the company, but that is in fact true. We were tiny. We had, I think, somewhere in the neighborhood of maybe a billion dollars under management. We were in a tiny little office really close together, but there was so much joy in that work.
At that time, I mean, it felt like we were all founders of the company. I think we all had this founder mentality, even though John technically started the company. There was a great sense of teamwork, culture, camaraderie, and belonging. There’s something you know, a lot about like Silicon Valley, in terms of that startup environment. I joke about the times that someone would bring in day-old Entenmann’s because they live next to the Entenmann’s outlet store. So they would bring us day-old Entenmann’s – one roll – and we would graze on it for the entire day. That’s how small the office was.
Today, we have 107 people. We are based in Chicago still, where the Avon center was on the 29th floor. But we also have offices in New York on Madison Avenue and we have a new office that’s opening in San Francisco after the pandemic. It’s finished, but none of us have actually worked there. We have people in Australia, we have an office in Australia, and we’ve really grown into a really unique and wonderful culture of ethnic diversity. There’s something for everyone inside of Ariel. And that’s really, really exciting to watch and to witness.
We manage about $16 billion, a little more than that, maybe close to $16 and a half right now. Markets have obviously been very strong and good to us. Performance has been really, really strong, especially our flagship.
David Rubenstein is the one who taught me that as the flagship goes, so do the firms. So you always want to make sure the flagship is doing very, very well. And we have just a core group of dynamic leaders that are making things happen on a day-to-day basis. And it’s incredibly gratifying for me to see the stage of our company really grow into what it is.
RH:
Yep. No, it’s category-defining in many, very important ways.
Let’s talk a little bit into your relationship with John Rogers, the founder you just mentioned. He was a mentor to you early on, and now you’re co CEO of the firm. Can you share more on that?
MH:
That’s crazy. I will tell you that. So in the beginning, when I got hired, I was like this pipsqueak. I used to call myself John’s grasshopper. So my job was to do whatever he needed to get done. Obviously, as I grew up and evolved inside of the organization, I was given harder and harder, more significant work to do, but literally I was an intern originally. I worked at this firm between my sophomore and junior year, and then between my junior and senior year. He helped me get a job at T. Rowe Price.
And then I came back the year that I was an intern. John used to go and sit in McDonald’s on Saturday mornings and read the Wall Street Journal, the New York Times, Barron’s, Cranes, and the Sunday New York Times (on Saturdays). He had this stack of newspapers, and I found out that he would go and do that every Saturday night. So I would go sit next to him and get the exact same things and just hope that he would talk to me. I know it feels a little stalker-ish.
Over time he would say, “Well, did you read this article?” Or, “Did you see that?” And ultimately we had this phenomenal mentor – mentee relationship, and he put me through my paces, nothing was ever easy. Make me write a letter over and over and over again. It was in its own way challenging and just incredibly fun and great because he invested so much in me.
When I was 24 years old, he called Jack Bogle, the head of Vanguard, and said, “I have this woman that I work with that I want you to meet.” They were on the board of Princeton together. And Jack said (I’m sure this was not a high priority for him), he said, “I’m going to be riding a train from New York to Philadelphia on this day. You can come and ride the train with me.” So we flew to New York to get on a train, to ride it with Jack Bogle. We sat down in the dining car and John said to him, “She’s going to be president of Ariel.” And I nearly fell out of my seat. And he said, “I want her to meet people who can help her be successful.”
So he did a lot of work to make sure that I was trained and exposed. Now, the thing that got funny – and John would admit this – as I started to grow and rise through the organization, sort of suddenly the mentee is no longer a mentee. And so of course there were times when I felt like I had the better answer or the right answer. And yet we had this relationship that was tiered.
I became president when I was 31 years old and had that job running the firm, basically everything outside of research and investing until 2019, ultimately, so it was for almost 20 years.
And so ultimately, as our relationship evolved, we became co-leaders. It had moments that it was very, very hard. But always, in our toughest moments, John said something to me that I’ve never forgotten when we would disagree. He said, “We both disagree on this issue, but the one thing I know about you, and I know about me, is we want the best for this company. We just have different paths.” And once I recognized that, our disagreements became easier.
“Co” is very much in keeping with Ariel. I call it the buddy system. We do everything in twos because we think two are better than one. And it’s been a real gift to work alongside John for all these years. He knows there’s no one outside of my family that I love more than him and appreciate. He’s the godfather to my only child. And he is someone that I just have a tremendous amount of gratitude for. I continue to learn from, but I also push him as well.
RH:
Would you give any tips to folks? This is a stellar example of a common pattern that frequently blows up in some way: when the mentee grows up. And it’s obviously a massive success case where suddenly the mentee becomes a co-leader and a mentor themselves and all the rest. What were some of the things that you learned from that, that you would point out to other folks who are going through that?
MH:
Sometimes we use a referee. By that I mean use someone that you could really trust. We have a really, really good board, and so we used our board. And some of those situations – I’m sure it made them uncomfortable. I think there were times where I think maybe they thought they were choosing between mom and dad. But we didn’t. We needed sometimes to air a difference with others and to have some opportunity to have that issue litigated when it wasn’t just us.
The other thing that I think helped a lot is when we started, especially when I became president, John had the title of president and then he pushed himself up to use the title of CEO and chairman.
And so what was really interesting was that it was a situation similar to when you have friends who have children and they stay one size in your mind. So you go to see that friend and you’re bringing a child Legos and you’re like, “My boy is 17.” But to you, they’re still six years old. There were people who saw me as like a six year old: “She’s the one who walks after him and makes sure everything gets done. And, and you know, she’s great, but she’s not the decision-maker.” So having to do that was very, very hard. And it took a lot of discipline for John to literally be the person that they would come to and say, “Here’s the issue,” he’d say. “You have to ask Mellody.” And then they went back to him after I gave the answer and I had to train him to say, “You have to send them back to Mellody.” And that was something that was not always easy.
Last thing: we wrote it down. We just said, this is you. This is me. And when we’re not sure, we’ll talk to each other, but let’s just be as clear and black and white as we can be. [John said] I don’t do investing. I don’t pick those people, but you lean on me for my Rolodex. You bring me into the room. If you need my help. I have privileges that I can go to any meeting inside of the firm.
And then the flip side was, this is me. And these are the things that I make the decision on, but you’re also invited at one point because John realized that his persona looms so large, he decided he’d no longer want it to attend any of my meetings because he felt he was overshadowing the meeting. That was also again, a very thoughtful and kind thing to do. But I was always welcoming, but he had to show that I had that authority.
RH:
Awesome. And actually, this is a good time to ask one of the questions that’s kind of coming from the audience: So many times, you’ve most often been the first or only in the room. How has that shaped the way you show up? What guidance can you give to male allies who want to help those folks who are being the first and only?
MH:
I would tell you that I don’t take pride in being first and only. I’m actually not the first chair of a Fortune 500 company who’s a Black woman (Ursula Burns was the first, but I currently will be the only one). I’m elected to the board next week to be chair of Starbucks. I have a friend who races cars, Lewis Hamilton, who’s a seven-time world champion and who’s phenomenal in every way. And he had a quote once that he said, that I told him gave me chills. He’s like a little brother to me. And I think people like us find each other. When you have been someone who’s by herself – I’m not comparing myself to the global formula one champion, but just saying that they’re a unicorn-type personality in your industry – and Lewis said, “Being the first and only anything Back is a proud and lonely moment.”
And I thought it was such a profound statement of two countervailing ideas: proud and lonely. And so I think that that’s why it takes so much solace and comfort in knowing that John was always there for me, because he, too, was first and only so many times. And so we just intuitively understand each other.
I think that it also puts a lot of pressure on you because you recognize that if you blow it, no one like you, gets a chance. And by being first and only you’re breaking someone’s mental model – they have an idea of what an investment person should be, do, look like, et cetera. And they’d meet me or people inside of our firm and they have to readjust their expectations. And I can physically see it happen with people sometimes where I can see them look at me and almost tilt their head and readjust because I can hear their mind saying, “Oh, well this is interesting.” Or, “Oh, she’s smart.” And I say that with humility.
So really understanding and owning the fact that you could shape a person’s opinion of all the other people who are going to be like you, behind you, is heady and heavy, but I’m up to it. And I tell my colleagues all the time, I’m not in a field picking cotton. This is not hard relative to what people who came before me had to do. So I will take up that challenge and that responsibility, and recognize all that is at stake and do everything I can to exceed expectations in terms of what others can do in the room.
There are so many verbal and nonverbal cues that happen in those moments. You know, the one that I talk about all the time is the number of times people will not actually make eye contact with me. And you’re just like, there’s something uncomfortable for them. I can see it, even though they’ll tell me how terrific they are and inclusive and make all these statements about diversity, but their eyes keep averting. So I would just say that you try your best to see where your nonverbal cues are. You could ask women in your life, “Do you find me doing anything that is off-putting, or that does not suggest that I am as inclusive and concerned about you as I believe myself to be?”
Last thing, I think those individuals can just make sure there’s more than one. I always tell people first and only is not something to be proud of, and some Black and Latinx people are. I want to be the first of many. And so having other people in the room is something that I think is really important.
I’m fishing for something on my desk, because I just actually got a note today from someone and it was just so profound that I brought it out to read it to my husband a few minutes ago. We’re building this office in San Francisco, and I got a letter from the architect that did our office, and he wrote me a letter saying how wonderful it was, just by design, to see the office together, et cetera. And then this is a paragraph – it’s a personal note on a personal level – meeting with your team for the first time was the first time in my 35 year career where people of color outnumbered whites around the conference table for a kickoff meeting. And I smiled in a way that was unexpected. I was so…you know. In a 35-year career, he’s never had that happen. And that said something to me, because that told me I had many in the room with me. Right? That I’m walking the walk and talking the talk.
RH:
Yeah. And one of the things I’ve also heard from you in multiple environments – because you’re frequently called upon to offer advice and leadership on this – is what everyone can do is make sure you’re building up the network. Make sure that the network is something where you look around and say, “Well, I don’t actually have many women. So this might not work. I don’t really have many members of the black community. My network will change it, work on it. It could happen.” Right? Because if you’re not doing that, you’re part of the problem, not part of the solution. It shouldn’t be just like, “Oh, my views are fine.”
What does your network look like? You’ve given us a bunch of advice on this at Greylock and we’ve been extremely appreciative, like with building the network with Management Leaders Tomorrow and other kinds of things are exactly the thing that we have been highly appreciative of.
MH:
You know, people always say to me, “I can’t find this. I can’t find that.” And I always just go back at them and I say, “There are 330 million Americans. I promise you, there is someone capable and qualified to do that job. I promise you.” So the question is your sourcing. Where, and to whom, are you speaking? Where do you reach out? And the one thing about our minority communities: We know each other. I did something recently and I told people we’re our own headhunters. We know how to find each other. And knowing that, you know, having the ability to tap into those networks, I think can become very, very, very powerful, but you have to work at it.
RH:
Yup, absolutely. This is probably a good transition to Ariel Alternatives. What do you hope to accomplish with this new initiative, and what makes a private investment a good vehicle to do so?
MH:
We’re doing something we’ve never done before, but we’re super excited about it. So Ariel Alternatives is our first foray into private equity, but we’re doing something very, very different in a long-dated fund structure. We are going to scale sustainable minority-owned businesses by bringing two things together: Capital and customers. John Rogers is the person that kept saying to me over and over again for almost 30 years, when people talk about minority business enterprises, they over-indexed to capital. Capital is important. We hear about access to capital, access to capital. And of course in Silicon Valley, you know this all too well, but John would say access to customers is as important. And maybe even more so, because I can promise you, if you have a fist full of receivables, JPMorgan will lend you money.
So this idea of bringing capital and customers together was something we said we want it to do. And we want to scale these minority businesses that will become tier one suppliers to Fortune 500 companies. So many companies have made these pronouncements and announcements about having more diverse suppliers, more diverse vendors, et cetera. We’re asking them, by virtue of doing what they already do, their corporate spend recycling, all of that – to create more impact in scaling large Black and LatinX businesses.
Now here’s the problem. The problem has been what we call the scale challenge. Ninety-five percent of minority business enterprises in this country have less than $5 million in revenue. Ninety-five percent! So the Fortune 500 companies out there that want to do business with minority businesses have that scale challenge.
Right now, 2% of Fortune 500 spend is with MBEs. That represents about $125 billion a year. And yet these companies are saying they want that number to be in the neighborhood of 12 to 15%, which means there’s a trillion- dollar opportunity without the scaled organizations to meet that opportunity. We are going to create those businesses. So we’re going to target middle market businesses between 10 to 100 million and a billion dollars in revenue over the course of a decade by maybe six to seven, plus six to 10 platform businesses and scale those businesses.
Now, one thing you’re probably thinking – and it is true – is that they may not be minority-owned when we buy them. And this is novel. I had one private executive say to me, “Well, you’re just buying white businesses. We can buy white businesses.” And I said, “But we can’t. We haven’t been able to do that.”
So we’ll buy these middle market businesses, install and add to the C-suite with Black and LatinX talent, have a majority minority board, and have exceptionally diverse workforces throughout the organization. Give everyone ownership in the business from the rank and file to the top of the house. Whenever a growth opportunity occurs – domiciles growth or new divisions in underrepresented communities – in order to leverage the economic impact of those businesses and ultimately create a ripple effect (While first and foremost, chasing returns because without returns, none of this works – what are we doing?)
We’re doing what’s in the DNA of Ariel Investments since our beginning and what we are as a firm. Everyone owns shares of our business. We’re exceptionally diverse. Our senior leadership team is exceptionally diverse. We’ve a majority minority board, everything we’ve done. We were actually going out into the world now and saying, we’re going to scale that for a large impact, and will ultimately be able to narrow the wealth gap in this country.
RH:
Yup. And this is by the way, for people that missed it, the reason why you’re getting up at four in the morning; wanting to make this in order to make this work.
What’s the reception been like so far for Ariel Alternatives?
MH:
It actually has been something we’ve never seen before. So that’s actually really crazy. Within 48 hours, we had 600 emails, and now it’s thousands. We see people nodding along because they’re saying you’re right, this is the – and you know my joke here – the “white space”. This is the place where no one has ever been before and you’re going at it in a way that we get to leverage what we already do. And so that is something that we think will make a huge difference over time.
RH:
Yup. I think it’s part of the thing that you and other leaders have taught me. All the fundamental things you want to change systemically – social justice, economic change, economic opportunity – that’s key. I think this is going to be one of the big levers.
MH:
This is what I said. I applaud all of the philanthropy, all of the things that have been done perfectly and programmatically. You know, people talk about the pipeline, all of that. All of these things are important, but we can all just rest with what hasn’t worked in terms of the fact that we haven’t narrowed the wealth gap in this country.
In fact, after the pandemic, it probably has increased. And to this day, there’s a lot of academic data on this: a white person who has not graduated from high school is more likely to make more than a Black person who has graduated from college. There’s something wrong with that. Or if you use the statistic that you had of me, being (as of next week), the only Black woman to chair a Fortune 500 company, or the fact that with Rosalind Brewer and Mary Winston, we’ll now have six African-Americans as CEOs of Fortune 500 companies, which will drop to five when Ken Frazier retires from Merck.
As I like to say over and over again, math has no opinion. This isn’t right. And so I’m all for just trying something new, because I don’t think it’s right for us to sit around and just hope for a better outcome.
RH:
Yes. What is that phrase? “Insanity is expecting a new outcome from the same previous behavior.” So let’s actually take multiple shots on goal experiment, make it happen.
You bring up boards. This month you become Chair of Starbucks’ board after having served as vice chair. What is the state of corporate boards in America? What are the kinds of things we need to do in order to evolve?
MH:
The state is not where it needs to be, but I think we’re going to see some frenzy of activity over the last 12 months, because post George Floyd’s horrific murder, as well as the countless other people – we all know the names, Brionna Taylor, I mean, like we could just go on and on – post that, I think boards have realized they’re exposed. And so I don’t think anyone wants to have their next annual report come out and have an all-white male board.
The fact of the matter today is that white men make up 30% of the U.S. population and they represent 70% of the board seats. I said this over and over again: talent and genius do not discriminate. And yet, if you look at the top of corporate America, one would think the most talented and all of the genius lies in one group of people. And that just isn’t true.
I think now that people recognize that this is not acceptable, I think that we’re going to see some changes, but there’s still almost a couple hundred Fortune 500 companies that don’t have a diverse board member. It’ll be interesting to see again, 12, 18 months out, how all of what kind of direction that moves in.
If we just look at women, where there have been real strides made, 20% of board seats in America represent women. We are way down the list when you compare us to other countries because of the mandates that have taken place in the UK with the 30% club, and the laws that have taken place in France or Norway, I think 40% of board seats in France are comprised of women.
I mean, you wouldn’t think America would be lagging in these kinds of statistics when we are considered the melting pot of the world. And yet the truth of the matter is that is the case. And the same is true of when you look at Black and LatinX representation. We are not tracking with the demographics of our society. And so we have a tremendous amount of work to do here, but I think that bell has been wrong.
I do hope that we’re going to see real changes. And I know that just based upon the CEOs that have reached out to me, I joked we’re our own headhunters. I must’ve spoken to three dozen CEOs who asked for names lists, et cetera. And then I learned something just to change the outcome. I used to give people less and never hear back from them. And now I say, if you want to list, I have to be on a call with you. I have to go through each name with you. And I have to tell you why I’m recommending them. That has led to people being hired.
RH:
Yup. I’ve actually seen you do that and I’ve been the recipient of that, which I’ve been very pleased with because I’ve gotten a whole bunch more interesting people of color. One of the things that I find when I think about myself: I look at it as a network of mentors around me. You’re a mentor on how we change society, but you’re also a mentor on boards, and actually some of the discussions and the lessons of where you compile these boards in terms of high performance, in terms of responsibilities, in terms of abilities to deliver.
You’ve done so much board work. What do you see as the critical attributes of effective boards? And what have you learned from being on boards?
MH:
I have learned so much. Warren Buffet says he was a better businessman because he was a board member, and a better board member because he was a businessman. And I think that’s really, really true.
Boards have brought me so much. I used to joke that my boards were my business school, because I didn’t go to business school. And I don’t mean that as some neophyte that’s not contributing. But I got so much high-level expertise drilled into me just from the people around the table and from the subject matter that we would discuss. And I liberally borrowed all sorts of good ideas that came up in those rooms that I think have made Ariel better. And I know that is true of John Rogers, who sat on some magnificent boards as well, and still does – including Nike, McDonald’s, and the New York Times.
We’ve been in these world class rooms. What makes those rooms work? What makes those companies so effective? Starbucks, JPMorgan, I mean, literally I’ve worked with these iconic CEOs that are world famous. The Lauder family, Jeffrey Katzenberg, David Geffen, Steven Spielberg. I mean, all of them in their own way, these icons.
I find that there are two key ingredients and they have been true of all the boardrooms I’ve been in, thank goodness: There’s a high level of collaboration, and there’s also a very high level of candor, despite even having these mega leaders who are so iconic in their own right. I’ve been in rooms where people are truth tellers and who would speak their truth, push back on things that they didn’t agree with. They are huge cheerleaders to great success and great work. And I just learned a lot from that candor and that collaboration, which are essential. And if you lose one or the other, I think the board effectiveness really does deteriorate very, very, very quickly.
Again, I’ve been very fortunate because I’ve been spoiled by those environments. I’ve only known that kind of environment. And I think that’s a function of the kind of leaders that lead those companies that are very bold and visionary and tend to be pretty fearless in their thinking. And I think they attract a certain type of person around them. You know, I’ve had those founder entrepreneurs as people that I’ve worked with. And even though Jamie Dimon didn’t found JPMorgan, it feels like he did. He runs a company like he did.
RH:
Yeah, no, well, that’s actually one of the really key things about the amazing CEOs is they act like founders. Satya Nadella also is the one those people where he’s like, “I’m not going to be a hired gun. I feel the genetics and the blood of the company, and I will take the risks and I have the moral authority to do what to do to grow the company.”
MH:
I think a founder mentality is key, because I tell people all the time, I didn’t start Ariel, but you would think I did. A lot of people are surprised by that. And again, seeing that in many of the leaders and leaders, how Kevin Johnson has taken over at Starbucks, or that having that same DNA, I think is critical to the success of the business.
RH:
Yup.
So shifting to financial literacy because – as we have been talking about how we actually get racial justice and social justice – it’s through the actual networks of economic opportunity, and through networks of economic opportunity is the realization that you are expanding financial literacy.
You’ve done this in highly visible arenas, like in your roles as a TV host and contributor to financial news on, I think, every major network, as well as in internal settings like schools. Talk a little bit about your work.
MH:
This is something that I feel very strongly about. I tell people I’m like an evangelist preacher when it comes to financial literacy, because of the travesty that exists in our society. America is financially illiterate. We just are, and it’s a tough pill to swallow, but it is the truth.
We’re financially illiterate because we don’t learn about money and finances in school in America, even at the highest levels of education. Maybe you learned about corporate finance, but you probably didn’t take a course in investing, even if you went to a great school.
And so, as a result of that, I tell people what just boggles the mind for me – I cannot figure this out – that in high school, in America today, you can take woodshop or auto and not a class on investing, which always leads me to ask audiences the same question. Who’s whittling in their spare time? Who’s cleaning their own carburetor? No one, right? And yet that class on investing profoundly changes lives, or could change lives; the lives of minority students, the lives of young people, because the one thing about finances and investing – which we know all too well, and why Warren Buffett calls compounding the eighth wonder of the world – is that the younger you start, the better off you’re going to be. You can even start with a little amount and that can grow to be substantial.
I think finance and money is a language. I have a seven-year-old girl, as you know, Reid, you’ve met Everest before, and you know Everest is fluent in Chinese because we started when she was born. I want children to start learning about money investing at the earliest ages you could possibly imagine. Warren Buffet says you should be able to explain a stock to a six-year-old. I actually believe that that is true. And so if we could teach the language of money to elementary school students, we could have a financially literate society.
There’s also the added bonus that when you teach children, parents learn. I call the kids like the gateway drug to teaching parents about financial literacy, because the kids are coming home with homework that the parents don’t understand, and that ultimately can influence their financial decisions that they’re making.
And so this is a mission critical, ethical issue. I know plenty of very wealthy people who have children who don’t understand anything about money. And I know plenty of people without any money who know a lot. And so this isn’t just about how much money is in your pocket book. It’s about the fact that you must educate individuals about the decisions that they make.
If we were financially illiterate, we wouldn’t have had a financial crisis where people had taken out mortgages that they did not understand. We would not have people taking out credit cards that have interest rates in the 25% range, and are using payday lenders to bridge their lifestyle between paychecks because of the interest rates that are charged there. All of that would change pretty substantially.
And we’d be better savers. Last point – Americans save when things are bad and we spend when things are good. That’s not the way it’s supposed to work. Our savings rate goes up during the great recession, during the pandemic. It should be just the opposite. These are the kinds of things that we need to ,as a society, understand.
RH:
Absolutely. And one of the questions we’ve had from the audience: what can we do as taxpayers and parents to advocate for financial literacy and investing classes in public schools?
MH:
It’s really tough. Arnie Duncan used to work at Ariel. He ran our Ariel Community Academy and our foundation before he went to be the head of the Chicago public school system, and ultimately became Secretary of Education. Arnie and I have had numerous conversations about this because at Ariel, we started a school. We have the saying at Ariel, “We’ve admired the problem long enough, what are we going to do about it?”
So we ended up with this problem where you don’t learn financial literacy in school, so do something about it then. So we started a school where we have a savings investment curriculum. Every first grade class is given $20,000 to invest and that money follows them through their grade school career, with the kids taking over increasing for managing the money. But Arnie is the one who left Chicago and went to the U.S. government and was in charge of the Department of Education and could not get financial literacy to be in schools, because it’s a state’s rights issue.
So as individuals, we have to go and lobby for our own children, our nieces and nephews, our godchildren, our grandchildren, whatever it might be, and really push the schools, including great private schools, to put this subject matter on the agenda.
We put together an investment curriculum for elementary school students called Financial Futures. And we’ll give it to anyone who wants it. It’s a curriculum that goes from first grade through eighth. And we said that is to make sure that we can help move the needle in society and pass on the learnings that we’ve developed over the 20-plus years that we’ve had the Ariel Education Initiative and Ariel Community Academy.
RH:
Yeah, you’re so right. That it should basically be mandated.
MH:
Just one other point about smart, thoughtful, fantastic trained, studied people. I will say to them, how was your 401k plan invested? How much money do you put away every month? They can’t answer these questions. I’m telling you. So you know, this isn’t about race. It’s not about poverty. This is a societal issue.
RH:
Yup. I completely agree. Another question that we’ve had from the audience – and which is to be anticipated, so we care a lot about this. We find diversity recruiting hard in Silicon Valley tech companies. Do you have any pointers that may just work, and aren’t the “hire one” hierarchy?
MH:
There’s so many that I kind of write a couple of notes down here. The first one, which I think is very, very important, is a very basic point. It sounds a little preachy, but everything you all do, every single day, is hard. You disrupt, disrupt and disintermediate the world. It’s hard.
That doesn’t stop you from being successful in solving the problem and getting to the issues of race and diversity. It goes into the “too hard” category for some reason for a lot of people. They use a term that makes me crazy, which is, “We’re working on it.” I tell people I married Yoda’s dad (George Lucas is my husband). And what did Yoda say? “Do or do not. There is no try.”
With everything else we do in corporate America, there is no try. It is make or break, or you do not have a job or you don’t get that next round of funding. But something that people say – and this is the term that is in all the annual reports – is that “It’s a strategic imperative.” If at all, like for something that is a strategic imperative or mission critical, we don’t lean into it the same way we lean into everything else that we do, pulling all nighters, all this stuff that we are also used to and trained to do at this point in our lives. So that’s number one.
Number two, you have to have targets. This is the thing that makes me crazy. You can’t hit a goal without a target. So when you ask people, what are you trying to accomplish? Do you just want to be more diverse? In what way? Is there a number? Do you want to track the overall society? Are you trying to increase your senior leadership by a certain percentage a year? Like, what’s the goal? So I say that to people and then they say, “Well, I don’t believe in quotas.” I was like, “There’s a difference between a target and a quota. Quotas are mandatory. A target is a goal.”
And again, in corporate America, how many targets do we have? Earnings targets, profitability targets. Let’s just go through all those targets. You know, when we give estimates and ranges for quarterly earnings, we don’t hit on one number and say, “Here it is!” So, this is in the DNA of what we do already. Having a goal is super important. You get what you incent, and we all know that incentives are hugely important.
And so what I say to people is, “Can you be a superstar in your company, not have any diverse people in your team, and get your whole bonus?” If diversity is a strategic imperative, and the answer to that is yet, then it’s not. So stop saying it. I’d prefer you not to.
I’ve talked to many leaders, interestingly in Silicon Valley – I don’t say this to be disrespectful – but they’ll say, “This is just not my thing.” I’m like, “Well, I appreciate you saying it.” Instead of telling me that it’s super hard and you’re focused on it. No one’s confused by your priorities. So, you know, okay, if it’s not your priority, don’t pretend it is, and then not make progress. So we solve hard problems. You get what you incent. We need targets.
RH:
Yup. A hundred percent. And by the way, all companies have hiring targets. How many engineers do you need to hire, how many salespeople are going to hire, etc. Hiring targets are our bread and butter of a corporation.
MH:
Absolutely. Right. And the thing is, you know, you’ve said it: It can’t just be one. It doesn’t work. You know, it’s too much pressure on one point. I’ve heard it so many times, that the stretch goal for this person, or, you know, you need a pool of people and it can’t always be the pipeline. You know, one thing I tell people, they’re like, “Well, I can’t find this, that, or the other.” I’m like, “Listen, Black and Latinx people go to law school, you could have a general counsel.”
We need to see some people at the top of the organization, or you won’t get the best young people at Ariel. Our diversity is a competitive advantage. We get the best resumes. We get them versus our financial services peers. Project Black got thousands of emails saying, “How can I be with you?” We have people coming from great firms because they see, “Oh, she looks like me and she’s at the top of the place. And so was the other guy. And I’m ambitious and I want to be at the top of the place too, or maybe start my own business, et cetera.”
RH:
Yep. So last question, before the lightning round. Given the impressive nature and span of your career, you know, today is not obviously the first time you’ve had to navigate drastic challenges in the market and long swaths of uncertainty. What have you learned from past times of economic and cultural crisis? And how has that informed the work you do?
MH:
This is economically and culturally different, even though they also are one in the same. And a lot of the civil unrest in this country is because of economic inequality. I believe that with every fiber of my being. Capitalism has to work for more people: you are in the realm of where capitalism works beautifully, and you get the benefits of compounding and your money working while you’re sleeping, et cetera. I do too. But the rest of the country needs to have more access and more opportunity, and that is slowly occurring, but it needs to be sped up.
And part of that access and opportunity has to come in the form of opportunities inside of corporate America; opportunities to grow businesses, all which you know all so well. I think those two things are inextricably linked.
But when I look at the cultural issues and I look at the issues around the economy, there are some differences on the cultural side. I’ve been calling this civil rights 3.0. With 1.0 being the Emancipation Proclamation, 2.0 being the 1960s with the Civil Rights Act and the Voting Rights Act, and 3.0 is different. The two prior civil rights moments were the problem of government, so the government had to solve it. It was policies, it was laws. There were new rules and regulations.
This time, 3.0 civil rights is at the feet of corporate America, as many things are that we didn’t necessarily ask for. And when people tell me, “It’s not at the feet of corporate America,” I can tell you all the things that are now at the feet of corporate America that were never there before: We weren’t having live shooter drills 10 years ago, we didn’t have mental health benefits for people a decade ago. And now we have these diversity issues that have not just bubbled up, they’ve become significant.
And the thing is, now our people and our society are holding us accountable. And it’s the viral nature of our society – that was born in Silicon Valley – that is making that happen on the economic side. It’s a very different set of circumstances. And I’m actually incredibly optimistic.
I’m optimistic in general, even though I think we have a long way to go in terms of race in this country, but in terms of the economics of what has happened, we’ve been to this movie before in different ways. America has been proven to be very, very resilient. Again, quoting Warren Buffet. He said, “Champions adapt.” If we learned anything in the last 12 months, it is that that is exactly what occurs. We all adapted to a horrific environment and we’re able to still not just get the work done, not just survive, but thrive in many cases.
And what I do believe coming out of this pandemic, I think we’re going to be in that period that we’re calling at Ariel the roaring twenties – there’s so much pent-up demand. There’s so much liquidity in this market because of stimulus that I think that that is going to propel a lot of economic growth in this country. I think the market will continue to be very, very strong. The leadership will change because I think inflation is likely to come sooner rather than later because of the stimulus. And that inflation will change where the market leadership has been because the interest rates won’t be able to stay as well. So that should be good. Typically, smaller companies outperform coming out of an economic recovery, which should also help value investors like us.
So I see a lot of upside from here, despite the tremendous pain and anguish that has been suffered in this country – life and limb first, which, you know, you can’t get back, but also the economic devastation that has occurred. I am still optimistic coming out of this. And despite the fact that the stimulus bill was very large and it could have been a bit more targeted from my taste, it was absolutely the right thing to do.
RH:
Yep. Totally agree.
So we’re going to wrap this up with a quick lightning round. Ready? Which actor would play you in the movie version of your life?
MH:
My husband would say Janelle Monae, who is a friend of ours, but he thinks that there’s a resemblance – not the blonde version of her now, but her normal black haired-version. She’s a good friend and a good soul. And I would, I hope my soul is as good as hers.
RH:
Well, I don’t know her, but the good soul is the thing that just sold me on that one, because I think that’s exactly right.
What’s the thing that you have learned about yourself in COVID that you didn’t know, or the first thing you are going to do when it’s over?
MH:
There’s not a lot of things that I miss in the real world. We were locked down in a pretty dramatic way because he’s 76. And we were told this is not the thing he survives, so you have to be super, super, super careful. And I took that literally. So we spent months not leaving our house and there isn’t a lot that I miss. I miss people, but everything else is pretty perfunctory to me.
RH:
Handwritten notes or note taking apps?
MH:
I write with my hand. I process information better if I can write it out. So I like taking notes. Then, when it comes to hand-written notes to people – no one runs to the bill in their pile of mail. They first run to anything they perceive to be personalized. And I think a handwritten note is a very powerful way to communicate with someone.
RH:
Yep.
And last but not least, what would you be doing if you weren’t doing this?
MH:
This, meaning this interview right now? Or in life?
RH:
Yeah. No, Ariel Investments and Ariel Alternatives and the move to economic justice and social justice.
MH:
I think we are born as we are what we’re going to be, and that it just takes a form. You just don’t know how it’s going to come, but your essence is the same. And no matter what job I would have done, I think I would have still been an advocate.
We did these Enneagrams at my firm, and I’m an eight, so I seek truth and justice. I was glad to see, I put myself in the same breath that supposedly Martin Luther King is: an eight, so that was interesting to see. George is supposedly a nine, which would make him one of my wings, and nines are super creative. So that makes sense. But that idea of seeking truth and justice has always been something that has been in me. So I think whatever I would’ve done, I would’ve had that proclivity, I think.
Just in terms of other jobs that I would have loved – I’ve loved the media. I really love the media, in every way. I’ve always loved all of those media companies. I just love them. And the ability to communicate with people – maybe that’s why I married a storyteller. George said I could have been a good producer because he says I’m really organized. But in the immediate term, I think I do what I love.
RH:
Mellody, thanks so much. As always, an incredible conversation. You’re been extraordinarily generous with your time and insights. I always learn, and I’ve learned today. I’m sure all of our guests did too.
Thanks again for joining us, Mellody.
MH:
Thank you for everything you do. You advocate for so many. And I learned from you and I am so grateful to have you as a friend.
RH:
Always. Thank you.
