John Sibley Butler: Black America’s Algorithm of Entrepreneurship and Group Success

Decades ago, I arrived at the National Center for Neighborhood Enterprise to chat with Robert Woodson and William Raspberry, the late outstanding columnist for the Washington Post, about research on the success paradigm of black Americans.

After presenting the manuscript, Raspberry noted, “You had better put all of the data in the book because people will never believe your paradigm.”

In 1977, the first edition of Entrepreneurship and Self-Help Among Black Americans: A Reconsideration of Race and Economics, was published. Relying on scholarship that had lain dormant for years, the book explained how black Americans had created a blueprint for success for future generations.

Data for the work were taken from scholars who documented the success of black Americans under difficult circumstances. These works include W.E.B. DuBois’s “Economic Co-Operation Among Negro Americans” (1898) and “The College-Bred Negro American” (1911); Abram L. Harris’s “The Negro As Capitalist” (1918); Booker T. Washington’s “The Negro in Business” (1906); Charles Johnson’s “Negro College Graduate” (1947); and Josepha Pierce’s “Negro Business and Business Education” (1947).

My book allows for comparisons between other groups of all races who had followed this paradigm. Among the variables that are important — especially the relationship between entrepreneurship and education of children — there are striking similarities. Understanding the success model of America means understanding differences between segregation, homophily and different modes of adjustment to America, one of the greatest market economies that ever existed. We have over 150 years of data to help us understand strategies that lead to success in America under all kinds of circumstances.

So what is it that leads to success?

If we were to create a learning algorithm for group success or group failure through the generations, we would start with how groups enter market economies, either with an emphasis on wage labor or as entrepreneurs. The algorithm would tell us that, in the aggregate, those groups that entered by putting self-employment at their very center, and also created educational structures for success, have much better outcomes than those who joined the workforce as laborers without creating institutional structures.

In a real sense, America is the story of how different racial and religious groups (and combinations of both) come together and place entrepreneurship at the center of community. When this is done voluntarily, sociologists call it “homophily,” often defined by the aphorism, “birds of a feather flock together.”

As Max Weber noted in The Protestant Ethic and the Spirit of Capitalism, groups that face discrimination and a lack of opportunity to serve the state are driven into economic entrepreneurship and can become very successful. One can think of white Jews in Europe, the Igbo in Africa, Mormons in America, and the Japanese in California. Future generations among these groups have an intense interest in entrepreneurship and education.

Segments of black America throughout history have also fallen into this equation. In fact, during the days of forced segregation, no group carried out the algorithm better. Under segregation, there was an intense homophily that placed entrepreneurship and education at the center of community.

The effects of putting entrepreneurship and institution-building at the center of community began to appear in Henry M. Minton’s 1911 work, “Early History of Negroes in Business in Philadelphia.” The impact of self-employment was significant because entrepreneurs served as leaders of the community. This effect was further synthesized in Dubois’s “The College-Bred Negro American.” By 1938, Johnson’s “Negro College Graduate” was able to show that blacks in the entrepreneurial tradition were in their third generation of college matriculation.

Decades of research into the failure of blacks has obscured this relationship between self-employment and education. As a result, the country is reluctant to understand this groundbreaking blueprint established by early black Americans.

Recently, the chancellor of my undergraduate institution informed me that he is proud that the institution would be graduating “first-generation college graduates,” using code for black Americans. I answered by noting that when I enrolled in Louisiana State University in 1965, most of the incoming black students were aiming to become second- and third-generation college graduates. Before desegregation, there was already a strong tradition of black college graduates because of the entrepreneurial spirit of parents, grandparents and great-grandparents.

How strong was this entrepreneurial tradition? Margaret Levenstein’s 2004 paper, “African-American Entrepreneurship: View from the 1910 Census,” shows that black Americans were at that time more likely than white Americans to be employers, and almost as likely as whites to be self-employed. This was the result of free blacks setting the standard prior to the Civil War and Booker T. Washington and his Tuskegee Machine, which took self-employment of blacks to a different level under his National Negro Business League.

While in a constant battle with the NAACP, which had been founded to blunt the effects of his Tuskegee Machine, Washington worked to help black Americans create communities that produced entrepreneurs, who in turn supported private black colleges and universities, some established with the help of northern black merchants after the Civil War and the majority established by black religious institutions. The combined effect of this productive cycle was to continue to produce group success.

In recent years, more scholars have captured this buried history. Robert Kenzer’s Enterprising Southerners (1997); Margo Jefferson’s Negroland (2016); Elizabeth Downing Taylor’s The Original Black Elite (2018); and Black Georgetown Remembered (1991) by Kathleen Lesko, Valerie Babb and Carroll Gibbs all are in this tradition.

There is also renewed interest in scholarship that documents the emergence of black wealth under entrepreneurship. These include Black Fortunes by Shomari Wills; Staking A Claim: Jake Simmons, Jr. and The Making of an Oil Dynasty by Jonathan Greenburg; and popular magazines such as Fortune, which documents the evolution of black millionaires.

To be sure, not all black Americans followed this model of entrepreneurship and self-help. Like many Americans, they followed the model that stressed the importance of wage labor and the presence of factories. Both models are acceptable but produce different results. When factories fail, the results are devastating. This can be seen in William Julius Wilson’s 1980 book, The Declining Significance of Race. Using Chicago as a laboratory, Wilson showed how communities became “’hoods” and crime increased as industries failed that city. A similar pattern was seen all over the industrial North, and it affected everyone. But many blacks who had embraced education and entrepreneurship did not experience such a fate.

Wilson’s work is in the tradition of what I have termed the “failure paradigm”; there is no place for self-employment in that model. Indeed, there was no need to emphasize education because factory jobs do not require education. During the glory days of the North, one could complete high school, join a union, and have an outstanding work experience. But when homophily – that is, self-sustaining ecosystems of educated black entrepreneurs — was applied under segregation, the effects were substantial. Thus, by 1992, when work had disappeared in the North, the states that led in the percentage of black college graduates were Mississippi, Louisiana, Georgia, South Carolina and Alabama. These are all southern states with strong histories of legal segregation but also high levels of entrepreneurship and self-help among black Americans.

The failure paradigm, which neglects the blueprint of success, has influenced commentary on black Americans. Indeed, E. Franklin Frazier’s Black Bourgeoisie (1957) was very critical of black entrepreneurship. But entrepreneurship and community-building produced very successful future generations and opportunity structures in the past that have been buried.

Contrary to popular belief, black college matriculation did not start in the late 1960s. Tiger Woods did not bring golf to black America. As noted in Marvin Dawkins’s and Graham Kinloch’s African American Golfers During the Jim Crow Era, black country clubs existed around the old South and even boasted a black PGA that could have competed with the white golf greats before Woods.

Today, commentators in the public square would never acknowledge that black enterprises in Durham, N.C., survived the Great Depression as other enterprises were collapsing, or that black millionaires, such as Madam Walker, lived and succeeded at the turn of the century. Juliet Walker’s The History of Black Business in America documents success from the inception of the country.

To be sure, opportunities should be open to all. Hence the continued interest in the importance of opportunity structures. But as Harold Cruse noted in the The Crisis of the Negro Intellectual, the most successful Americans belong to groups who help them prepare for the future. This theme also runs through other groups and can be found in Joel Kotkins’s Tribes (which treats of the experience of white Jews); Min Zhou’s Chinatown (Chinese); and Edna Bonacich’s “The Economic Basis of Ethnic Solidarity (Japanese). But as noted by DuBois in “Economic Co-Operation Among Negro Americans,” although non-black immigrants could put their enterprises in any part of the city, black enterprises were forced from the central business district to all-black areas.

Entrepreneurship among black Americans is booming in the digital age, as well as in traditional sectors. Immigrant Africans, as is true of all immigrant groups, are more likely to be entrepreneurs than American-born blacks. The same relationship between entrepreneurship, education of children, and success is being shaped by these new Americans. American blacks — and no one else has to do this — have to celebrate their entrepreneurial history and move away from the paradigm that celebrates failure, which was established in the 1970s.

“Urban blacks” is only one tradition of black America. One should not seek explanation for the “plight” of black males, but instead look to the archives of Morehouse College, which has been graduating generations of blacks for over a hundred years.

Martin Luther King Jr. was a third-generation Morehouse man from the prosperous Sweet Auburn Avenue section of Atlanta. Such communities existed throughout the South. His educational success originated with the entrepreneurial spirit of black America, a tradition he did not enhance during the modern civil rights movement.

Self-employment hoovers around 10% in the U.S., and the foreign-born among all racial groups have higher rates. This pattern is being followed by immigrant Africans, as noted in Princeton scholar Tod Hamilton’s groundbreaking Immigration and the Remaking of Black America.” Immigrants are setting an old pattern of success for people of African descent. Robert Woodson’s The Triumphs of Joseph: How Today’s Community Healers are Reviving Our Streets and Neighborhoods concentrates on old values for a new black America.

I can say with a great degree of certainty that if your great-great-grandparents were entrepreneurs, your family is in its fourth generation of college matriculation. The model is there to make all black Americans in the image of what self-help blacks envisioned. Of course there are overlaps in all models, but the model of success is there. It should be acknowledged and celebrated.

This article first appeared in the Washington Examiner.

John Sibley Butler holds the J. Marion West Chair for Constructive Capitalism in the Graduate School of Business at the University of Texas.