What They Don’t Teach You in Business School

How Businesses Can Perpetuate Economic Immobility

by Sanjana Chidambaram

I prided myself on telling anyone who asked me about Ohio State that “Columbus is a growing, up-and-coming business community. Great for startups! Supportive environment! You can get Buckeye Donuts catered to your office!” So, I was shocked to see the differences when pushed just outside of downtown and the university district.

This past summer, I interned at Kiva Columbus, a nonprofit crowdfunding platform that provides microloans to entrepreneurs at a 0% interest rate. The organization places a deep emphasis on enabling economic mobility — it was the classic teach-a-man-to-fish-and-he’ll-spur-economic-growth-in-his-respective-field analogy. The platform helps people secure loans who may not have been able to from a conventional bank.

I spent three months working with entrepreneurs and small businesses outside of the tech-concentrated space in central Columbus, conversing with other nonprofits, and scratching the surface of what economic development looks like in the forgotten places.

After this experience shattered my perspective of Columbus, economic segregation, and the role businesses play, I was left wondering why we don’t learn about the different socio-economic environments we impact in business school. Businesses control the majority of the jobs and capital in our economy, yet when it comes to the conversation of increasing economic mobility, businesses are notably silent. So why aren’t businesses students taking a step back and looking at our influence on the economy as a whole?

There Are Multiple Columbuses

Kiva works with many people who can’t secure seed or slightly later-stage funding from conventional banks or VCs. I used to think of startups as consisting of very Silicon-Valley-esque tech innovators backed by VCs like Drive or Rev1, young engineers and businessmen in khaki shorts trying to take Jeff Bezos on by the horns. The startups we worked with at Kiva, however, were filled with middle-aged people finally commanding their careers. They often had years of experience in their field but limited education backgrounds. Resources available to them were Kiva, the Economic & Community Development Institute, and other programs that were more low-funded than any of the Columbus VCs. They were the startups pushed away from Startup Week. It was something like a tale of two Columbuses — that is, until I realized there were actually multiple Columbuses.

Last year, The Columbus Dispatch released maps concerning the economic segregation in Columbus. Despite our relatively low income inequality, the city is faced with a concerning geographical split in income.

Economic Segregation in Columbus (Columbus Dispatch)

A foot over the Scioto River and workers earning less than $1,250 a month increases exponentially. A step across Hamilton Road and the percentage of people earning less than $1,250 increases by nearly 24%.

In a city as shining as Columbus, how could this be possible? And how have we not learned anything about it in our business education?

How Businesses Impact Access

Economic segregation can loosely be defined by the geographical split in income due to historic and current policies, painted over by conflicts of race and gender and further perpetuated by gentrification of inner cities. The best way to look at it is the effect that systems we have created over the years have amalgamated to provide varying levels of access to different people, especially related to access to capital, housing, and education.

Economic segregation is bad because it makes it impossible to move up or develop these areas. And it’s bad because when you look at a city that’s completely economically segregated, you’re looking at a city that’s built for businesses, not for people. (More on this later.)

My time at Kiva showed me not just the differences in home environments, but differences in business environments in economically segregated areas. The idea of the economic ladder of mobility is alluring — the quintessential American dream of making-it-by-your-bootstraps. It dictates that wherever or whoever you are, you have an opportunity to move up. But often, it’s impossible to move up or develop an economically segregated area because of the disparities in business opportunities.

There were two key differences I saw in the business environments between downtown and the surrounding areas.

1. Risk-taking funding

It’s not a new concept that low-income areas are usually not funded by conventional banks. Women and people of color, especially, see loans funded at lower amounts at lower rates and higher interest.

But it’s not just banks. VCs tend to take calculated risks, but they are risks in tech-based spaces and are excessively exclusionary to women and people of color. Nationwide, only 2% of venture capital funds are going towards female-owned businesses and only 1% to African American-owned businesses (despite African American people making 12% of the population).

I saw that many of our Kiva clients needed someone to take a chance on them — mostly because no one else would. Caroline, one of our Kiva clients, was turned away from many traditional banks for a loan because she had spent years out of the workforce taking care of her father. When he passed away, he left her with an inheritance that helped her start her organic farm, and she later applied for a Kiva loan, which got approved. Caroline had the tools and abilities, but a few unorthodox notes on her background left her unable to secure a loan, despite her sound business plan and willingness to learn.

The risks that funders take are exclusionary in nature for this reason; the ability to have someone take a risk on you is a privilege only a few have, and so goes in hand the ability to succeed.

2. Community development

I found that many Kiva businesses developed community building efforts alongside business expansion. This is not the norm. Per the Friedman doctrine, the first duty of a business is to its shareholders, which is a sentiment that holds today — corporate social responsibility efforts are a side task. But I’ve found that community development is critical to shareholders as well.

It’s not a private-vs.-public sector idea. The public sector requires the use of the private sector to leverage social change. For example, the Columbus mayor’s office has realized that the prosperity of Downtown Columbus, though good for the businesses in the city, has further perpetuated economic segregation, so the city is working to bring up the lower-income areas of Columbus with a more equitable growth model. They’re looking, in particular, at Parsons Avenue, and working in partnership with Nationwide Children’s to create opportunities in the neighborhood.

This is important for Nationwide and other businesses, too. I mentioned earlier that economically segregated cities are built for businesses, not for people. Columbus isn’t far enough on the track to show the consequences of this, so let’s look at a different example — San Francisco, one of the most economically segregated and gentrified cities in the country. Since the dotcom boom, public education quality has dropped in San Francisco, especially due to an exodus of teachers to the suburbs due to high living costs and low teacher wages. Tenants have been displaced from their houses; buyouts and Ellis evictions are rampant. Traffic in San Fran has deteriorated due to relocation of people to the suburbs and commute times to the city from these areas. Even tech workers, employees of the big companies — are paying higher prices for tiny apartments, and businesses continue getting massive tax cuts and abatements for land development purposes — which further push people out of their homes in these pockets of the city.

In the even longer run, businesses won’t be able to diversify their talent, because any careers not in the tech or business field won’t make a wage acceptable to live in the city. Say goodbye to the creative fields in the city — there won’t be an incentive for them to live there anymore. Businesses won’t have access to their consumers; they won’t truly understand their needs. A large portion of the surrounding society won’t be a target audience, because they’ll be lacking basic necessities. It’s not good for the shareholders anymore either because the consumer audience would be narrowed. So if we want our businesses and local economies to stay afloat, we have to take a long-term approach to community development.

Kiva businesses are starting out with their eye on community impact. For example, Lamont Evan’s Unique Image Salon has made economic development a priority, especially with education and literary outreach efforts, because it’s when the two go hand in hand that a community can truly develop. It is possible to be both financially sustainable and contribute to a healthy local economy, and I want to see more of that in Columbus.

Businesses control much more than a finite amount of money. Businesses are in charge of who gets access to what. My time at Kiva Columbus showed me a fraction of the control businesses have — in small business and startup funding, in community development. But there’s so much more. So much more. There are complex socio-economic issues today that aren’t going away any time soon, and businesses have their hands in every portion: in education, in housing, in gentrification. In mass incarceration, food insecurity, gender equality.

That’s why we need a more comprehensive business education. Business leaders of tomorrow can’t have a deeper understanding of their actions without a better education of the historic relationships between our economy and social issues. Our classes in business school are narrowed to our respective fields — Excel classes, corporate finance, accounting, investment banking, etc. But each of these fields, though they may seem narrowed, generate tangible ripples in our society. Our choice is whether or not these ripples are created consciously.

We need conversations. We need to get involved in our local communities outside of the business space. We need to take more economics classes, city planning classes, and even classes in the Women, Gender, and Sexuality Studies department, to truly understand the effect corporations have had in giving power to different groups of people, the standards in our society that businesses create and perpetuate.

This summer, an offbeat part of my business education, was my entrance to the conversation, and I hope that every business student pushes themselves to have a similar experience over the course of their education, even if they’ve decided they want to go into a different field. I fell in love with the mission of Kiva because it was so different from other businesses, even other nonprofits — it encouraged a sustainable future for business owners; it took a proactive stance in disrupting business fields and creating opportunities that are not stopgap solutions but spur economic mobility. I was inspired to find that business leaders who are conscious of social and economic issues have found ways to make an impact in their community while providing a sustainable revenue for themselves and their families. Like Lamont, Caroline, and countless others. They are examples to me of what a healthy interaction between a business and its community should look like. They make me believe that it is possible to do better.

We shouldn’t close ourselves off to a new ecosystem of business. It shakes me to my core that boundaries are impassable, especially the metaphysical borders of our cities. But I believe that with a deep, historic understanding of policy, positions of power, and privilege in our business atmospheres, we can develop better cities— better for businesses, better for employees, and better for communities.

Helpful sources and some further reading:
How the Startup Mentality Failed Kids in San Francisco
Can Columbus, Ohio Become a Model for Equitable Community Development?
“How to Kill a City” by Peter Moskowitz

A huge thanks to Lily Vail, Kiva Columbus lead and an amazing friend and mentor. You are why I know anything. Thank you for this opportunity.

Interested in bolstering local businesses? Through Kiva Columbus, you can lend to an Ohio business of your choice at a 0% interest rate here! #LendLocal #KivaColumbus

Questions? Email us at kivacolumbus@gmail.com.