3

THE PRINCIPLE OF INCLUSION

CREATING OPPORTUNITY FOR THOSE LONG EXCLUDED

Incubating equity in Portland economic development

Collapse and regeneration are experiences Tyrone Poole knows intimately. There was that period back in 2006 when he was homeless—that moment when, on crutches and in excruciating pain, Tyrone found himself staggering into the bus station in Portland, Oregon, where he collapsed on a bench and threw up. That was how a policeman found him that night and later took him to the YMCA homeless shelter, where he got a cot on the gym floor. Everything he owned was in a bag under the bed.¹

What had led to Tyrone’s downslide was medical debt. He’d completed his associate degree at Portland Community College and was training to be a firefighter when he suffered a debilitating injury. The treatments left him buried under medical bills, evicted, his car repossessed.

As Tyrone told his story, he sat across the conference table in the elegant Williams & Dame Development building on Everett Street, in Portland’s hip Pearl District, where his new business has free office space. It’s part of the intricate web of support that has come to surround him, the physical embodiment of the community that oriented itself toward growing the seeds of resilience and genius in him. Tyrone is 34, African- American, with a trim beard and close- cropped hair, and on this day he was wearing a green T- shirt and crisp new blue jeans. He’s the founder of OneApp, a startup that has launched an online platform originally designed to match applicants for affordable housing with appropriate openings. Tyrone talked about being named Oregon Entrepreneur of the Year, how his team won a contract with the Portland Housing Bureau, and how other cities and states are lining up to tap his services.

None of that seemed in reach when he first hatched his idea. While in the homeless shelter, Tyrone began helping other residents find housing with their vouchers from the city government. Before long, the YMCA hired him as a family advocate.² From his own struggles, he’d seen the reality of the statistic that people with housing vouchers have applications turned down by landlords 40 percent of the time.³ The system left thousands of low-income families stranded—in a system rife with racial discrimination, black residents were three times more likely to be homeless than white Portlanders. A 2011 audit by the Portland Housing Bureau found discrimination against prospective black and Latino tenants by landlords and leasing agents in 64 percent of cases.⁴

Tyrone saw it as a math problem. He developed an algorithm that could match applicants with openings. “There’s little you know about how you fared on the screening criteria,” Tyrone explained, because those criteria are undisclosed. “It may be that if you pay off Sprint and an overdue library book, you’ll be OK.” With each application costing $30 to $50, a housing search can add up to a painful sum for threadbare pocketbooks.⁵

Tyrone began to develop his idea for the web platform. “I knew it would work,” he said, “but I didn’t have the business knowledge.” Then he learned about the Startup PDX Challenge, a contest for entrepreneurs the Portland Development Commission (PDC), the city’s economic development agency, ran for three years.

Kimberly Branam, executive director of the PDC, explained to us how that contest evolved to support underrepresented entrepreneurs like Tyrone. The original concept was that would-be entrepreneurs could compete to receive a package worth $50,000 that included mentoring, free office space, legal assistance, business planning support, and $10,000 (later increased to $15,000) in a working capital grant.

When the contest’s first group of winning founders was gathered together, Kimberly recalled, “We looked around the room, and they were largely white men.”⁶ The next year, the PDC refocused the contest on underrepresented founders, primarily women and people of color. It was one move in what would become a wholesale reorientation of the PDC toward racial and gender inclusion—not as one piece of its mission, but as its new core.

The city realized how important it was to provide seed capital and mentoring at very early stages for underrepresented founders, so in 2015, it put out a request for proposals, looking for fund managers willing to manage an early-stage seed fund for these founders. The $2 million fund was launched in partnership with PDC, Multnomah County, and the State of Oregon and was the first publicly backed preseed fund in the country, to which the city contributed $750,000.⁷

When Kimberly became director in 2017, she led the agency’s rebranding as Prosper Portland to reflect its reorientation to focusing on the traditionally disadvantaged. “Building an Equitable Economy” was the new goal. The challenge, the agency explained on its website home page, was “[t]he growing income and asset disparity between white people and people of color. Solution: Collaborate to grow jobs and increase assets among communities of color.”⁸

We first encountered Kimberly a few years earlier, when she spoke at one of our Learning/Action Labs for Native Americans. What was striking to us was her frank acknowledgment of how the agency’s own work had contributed to racial exclusion. We learned that she’d talked about this not only to our small group, but at the massive Social Capital Markets conference held annually in the Bay Area. In a presentation titled “A Tale of Two Cities,” she’d spoken about how the progressive image of Portland was belied by a stark racial divide to which city economic development had actively contributed. Something remarkable seemed to be happening in Portland—a powerful, citywide pilot in the principle of inclusion. It warranted a journey there to learn more.

BUILDING HIS TEAM, OVERCOMING HURDLES

Far from considering himself a self-made man, Tyrone credits the large team of helpers he’s assembled. For example, when he hit his first stumbling block in the $150 application fee for the PDX Challenge, Tyrone found help from Stephen Green, business development officer with the City, himself a prominent black entrepreneur. He was “my saving grace,” Tyrone said.⁹

Then came social obstacles. “I remember going to the first mixer PDC hosted for the Challenge,” Tyrone recalled. “There were people there with logos and matching T-shirts” speaking a jargon-filled language he found intimidating. “Everyone was mingling. I mingled with no one,” he said.

At each step of the process, Tyrone expected to be eliminated. “I remember my first pitch ever,” he recalled. “Everyone had handouts with diagrams, graphs, and PowerPoints.” He had a tablet with a single piece of paper. “I ran to the copy machine to copy things. I had on my only suit, and I was sweating so bad, my suit was soaked.” His pitch that day proved so compelling, it advanced him to the top 20 out of 150.

“I work at a place where 50 percent of the families will be out on the street, even though they have a letter from the city government authorizing access to housing,” Tyrone explained. “When I got out of the hospital myself, I qualified for 1 percent of all available housing—10 out of 1,000. That’s like finding a needle in a haystack. Do you know how much time it takes to find a needle in a haystack? If it exceeds the amount of money and time a family has, it will result in denial of housing. Every application, every screening, costs resources that the people who are applying have in short supply. The two moving pieces have to match up. I can reduce the information to one platform. With one click, an applicant can be screened against all available homes.”

Tyrone became one of the six winners, receiving a $15,000 cash grant and other services. His challenges had only begun.

“I didn’t need cash,” he explained. “What I needed was a clue, how to make this idea a reality.” The development commission connected him with a mentor, Jon Maroney of the Oregon Angel Fund (OAF)—a group created in 2007 to invest $100 million in 100 local startups, with an aim of creating 10,000 jobs in Oregon. “He gave me a check for $25,000,” Tyrone said, which was used to create a beta site. “It was trash,” he added with a laugh, but it demonstrated proof of concept.

“The most important thing Prosper Portland gave me was validity,” he continued. “That social capital, I was able to use it like it was capital.” There was the time TransUnion, a large credit rating firm, denied him access to the credit scores he needed for his platform. Then development staffer Katherine Krajnak asked Kimberly to draft a letter. “The next thing you know, TransUnion gave me the credit database,” he said. “This is information that you can go to prison for misusing; they gave it to me, a nobody, because of the City of Portland.”

“You have to go to bat for folks,” Katherine emphasized, when we sat down with her later. “This is about more than setting up programs.” Katherine is one of the project managers for the entrepreneurship program at Prosper Portland, and as she joined us at the agency’s small meeting room, she’d just come from a meeting of the Equity Council, an internal working group on inclusion. She talked about how trainings brought staff through exercises to get in touch with unconscious biases. “You have to examine yourself as a white person, or as a man, or as an able-bodied person,” Katherine explained. People are asked to caucus—gather with others of the same color or gender—to “see how we each internalize superiority or inferiority. Why does one person feel entitled to interrupt another, or talk over them?” Why do some not speak? “There’s internalized oppression,” she said.¹⁰

Underrepresented groups can include women, people of color, veterans, and the disabled. “Women business owners’ have average revenue that’s one- fifth that of men,” Katherine said. “There are plenty of women-owned businesses, but they’re not growing.” She talked about how a body isn’t healthy if half isn’t working. “If my right arm and right leg don’t work, I’m not a fully functioning human,” she said.¹¹ When some neighborhoods or certain kinds of potential business leaders lack opportunity, the entire city is affected. Conversely, studies show that when there is less segregation by race and income, regions enjoy longer periods of economic prosperity.¹²

The principle of inclusion is fundamental to creating a democratic economy designed for the flourishing of each and all. In such an economy, Tyrone’s perspective as a once- homeless person becomes an asset to be developed. He, in turn, takes a market approach, not a social service approach, to helping the low- income. Inclusion is thus built into basic economic processes: entrepreneurship, economic development, product development. That’s fundamental to democratic economy design; social purpose isn’t added on but is at the core.

This is a very different approach from giving welfare to the disadvantaged while giving economic development assistance to wealthy whites, as in today’s economy. Such an approach reflects an implicit belief that stigmatized groups cannot advance “the progress of history,” in the words of Martin Luther King, Jr.¹³ What is lost is a loss to the whole.

Imagine if Portland had not run this contest, if there had been no mentoring—what would Tyrone’s future have been? In our extractive economy, how much talent is left to wither painfully on the vine?

PORTLAND’S TALE OF TWO CITIES

Racism, King reminded us, is not “just an occasional departure from the norm on the part of a few bigoted extremists.”¹⁴ If it found its most vicious face in the South, it was manifest elsewhere in the actions of real estate brokers, bankers, employers, policymakers—and, as Kimberly acknowledged, economic development leaders. In 2014, a damning report by Portland State University and the Coalition for Communities of Color found that income for blacks in Portland was half that of whites, and that city and state governments had been slow to dismantle “overtly racist policies.”¹⁵

Those policies flowed from the region’s racist past. When Oregon entered the union in 1859, it forbade black people from living there. A subsequent law prevented black people from owning land.¹⁶ Portland’s history of urban renewal was cut from the same cloth. In 1956, voters approved the construction of an arena in a largely black neighborhood, Albina, resulting in the destruction of more than 400 homes. Then the PDC (the precursor to Prosper Portland) approved the clearing of vast tracts in northeast Portland to construct highways and Legacy Emanuel Hospital, leaving more than 300 African- American homes and small businesses dislocated.¹⁷

In setting out to remedy this past, Prosper Portland has at times stumbled. For example, controversy surrounded the Hill Block, part of the area razed for the Legacy hospital, which long stood vacant. When the development agency announced it had secured commitment from Legacy to grant the property to the African- American community and invest in the community process to determine what would occur at the site, residents protested. They feared a deal had been made behind closed doors that wouldn’t ultimately help minority businesses. “You’ve changed your name,” local resident Rahsaan Muhammad told the Prosper Portland board, “but you haven’t changed your behavior.”¹⁸ In working through that controversy, Prosper Portland, Legacy, and the city relied upon a community-led working group and visioning process for the development that they designed together.¹⁹

That’s an example of the active listening Prosper Portland seeks to practice, which can be contentious but potentially healing. Dialogue, rebuilding lost trust, examining one’s own biases, admitting past failures: all this is part of the difficult process of inclusion. Essential to this process, in the largest sense, is coming to terms with the racial bedrock on which our economy has been built.

WHAT IS LOST IN THE LANGUAGE OF CAPITAL

The traditional story of capitalism’s early days extols Adam Smith’s pin factory and the benevolent invisible hand. Black writers tell a different genesis story, focusing on the South’s cotton plantations and the brutal hand of racial extraction.

“The land that enslaved people planted in cotton,” Harvard professor Walter Johnson wrote, “had been expropriated from the Creek, the Cherokee, the Choctaw, the Chickasaw, and the Seminole.” In the emerging capitalist system of the 1800s—which knit together the cotton plantations of Mississippi with the looms of Manchester, England, and the financiers of New York—“[e]nslaved people were the collateral upon which the entire system depended,” Johnson noted. As cotton merchants loaned money to planters to finance operations until harvest, they required security. “That security was the value of the enslaved,” Johnson said. “Enslaved people were the capital. Their value in 1860 was equal to all of the capital invested in American railroads, manufacturing, and agricultural land combined.”²⁰ [Emphasis in original.]

Acknowledging this past helps us see what is lost in the language of capital—how seemingly benign processes like securitization and protection of property rights can have a dehumanizing underside. Despite widespread revulsion against slavery in the era of abolition, it was respect for property rights that blocked progress. Even after emancipation, it was the planters who were paid for their loss of property. “No one compensated the slaves,” historian Catlin Rosenthal wrote; “the enslaved were never seen as the ones who had been expropriated.”²¹

A democratic economy recognizes the rights of property, yet balances those with other human rights—an inclusive right to human flourishing, the primary aim of protecting the common good, the moral obligation to atone for harms committed. Building an inclusive economy is part of the long movement away from bias of every kind toward creating a society that serves the well-being of all.

TAKING INCLUSION TO SCALE IN ECONOMIC DEVELOPMENT

Embracing inclusion is about cultivating empathy, as the leaders of Prosper Portland are seeking to do. Since running the contest that Tyrone won, Prosper Portland has evolved a broader ecosystem to support under-represented entrepreneurs—the Inclusive Business Resource Network, which partners with others to offer programs such as microloans, seed funding, business loans, legal support, accounting, and market research. These services are offered to business owners of color, immigrants, women founders, and other underrepresented entrepreneurs, reaching 600 businesses each year. Prosper Portland’s plan for 2017 and 2018 was to invest $2.5 million among the network providers, with an aim of seeing 1,000 businesses strong and stabilized by 2022.²²

Portland isn’t alone in this kind of work. Seattle, Milwaukee, and Madison, Wisconsin, are also taking steps to advance racial economic equity. Cites like these come together in the Government Alliance on Race and Equity, a national network in which 50 city, state, and regional governments are pursuing racial equity work.²³

If racial inclusion is vital, by itself it’s not sufficient—a point Martin Luther King, Jr. emphasized in his final years. As he planned his Poor People’s Campaign, his focus was widening to embrace economic justice for all who are dispossessed. He became increasingly outspoken in his dissatisfaction with capitalism and was in Memphis to support 1,300 striking garbage collectors when he was shot.²⁴

In the period leading up to this, King shared a growing sense of unease with Harry Belafonte. “We have fought long and hard for integration,” he told Belafonte. And King said he felt confident about winning. But without economic justice for all—without transformation of the system itself—King said he feared “I am integrating my people into a burning house.”²⁵

After our visit to Portland, we saw in the Portland Business Journal that Tyrone’s platform was live and 5,000 Portland families had accessed it. He’d succeeded in landing $2.25 million from investors by the close of 2018—bringing the company’s total investment to about $3.5 million. The funds were from individual angel investors, with about 50 angels in total backing the enterprise, many of them people of color. Tyrone had pitched many institutional investors and venture funds, but they hadn’t written checks. “The opportunity for minorities in these funds doesn’t exist,” Tyrone told the Journal. According to research firm CB Insights, only about 1 percent of the billions invested by venture capital funds goes to African- American founders.²⁶

The article brought to mind something Tyrone had said when he’d first walked into the conference room where we waited. “I’m sorry I won’t be able to talk for as long as we originally scheduled,” he said. “One of my angel investors is on life support and a group of her family and friends are meeting around her bedside to say goodbye.” He’d promised us an hour, and we ended up having 45 minutes. Something important was calling.