Entrepreneurship Can Close the Ethnic Wealth Gap in America

I write a lot about wealth. Over the years, I have acquired a deeper understanding of the topic and the implications it has not only for Latinos but for the country overall. I have come to believe that the ethnic wealth gap is the single biggest threat to American prosperity. I don’t think that is an overstatement. The wealth gap and its causes are no secret. It is widely understood that redlining, income inequality, limited educational opportunities, and segregation have caused generational disparities in the distribution of wealth in this country for centuries. For obvious reasons we need to ensure that we rid the nation of discrimination at every level; closing the wealth gap is not only the fair thing to do, but because of demographics, I believe it is a requirement if the United States is going to maintain its leadership in the global economy.

Let me explain. Economic growth is a factor of labor force growth and productivity. The more people we have in our workforce producing and buying things, the larger our economy gets. Over the next two decades and beyond, the overwhelming majority of new entrants in our workforce will be Latinos and other people of color. Latinos are the youngest demographic in the country, almost 15 years younger than the Anglo population on average. They will be the ones buying homes, cars, and just about everything else. The more income and wealth they have, the more they will spend in our economy. It’s pretty simple.

Exactly how we close the ethnic wealth gap is less clear. Education, healthcare, homeownership, and improving diversity in America’s largest corporations are critical components, but I believe the biggest opportunities are tied to business ownership and entrepreneurship. Entrepreneurship is THE foundation of capitalism and the most efficient wealth builder in our system – especially for Latinos. It shouldn’t be a surprise to anyone that Latino-led companies employ more Latinos in key roles. What’s more, the more successful those companies are, the more wealth they create for their employees and investors. While Latinos have not historically been major investors in start-ups, that is starting to change. What is not widely understood, is when Latino-led companies reach scale, they sometimes disrupt major corporations, who respond by investing more capital in Latino markets themselves. I wrote about this a few weeks ago in a blog about Latino representation in the entertainment industry. I said in that blog that I thought Tyler Perry and Oprah Winfrey did more to promote Black Americans in the entertainment industry than 50 years of advocacy because they proved that there was money to be made by investing in media products that included and appealed to Black consumers. This could be applied to several industries. I’ve written about how companies like New American Funding, a privately held mortgage company with Latino ownership, go from a niche player to a major force in the industry. By focusing on Hispanic homebuyers, they took market share from some of the larger and more established companies, forcing those companies to follow suit or continue to lose share.

Facts and data are critical, and advocacy is important, but in a country that was founded on free-market principles, nothing is more effective than literally showing people where the money is. In 2022, I will be laser-focused on finding the best ways to catalyze Latino-led businesses and start-ups. When we succeed, the country will be better for it.