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Andre Agassi and Bobby Turner
Andre Agassi and Bobby Turner on Scaling Change
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Andre Agassi and Bobby Turner on Scaling Change

Through their shared passion and frustration, tennis champion Andre Agassi and renowned real estate investor Bobby Turner created the Turner-Agassi Charter School Facilities Fund. In less than four years, it has developed 79 charter school facilities serving more than 41,000 students while generating strong risk-adjusted returns for investors. In this Summit Session, Agassi and Turner sit down with Jamie Gutfreund, Global Chief Marketing Officer of Wunderman, to discuss their personal and professional journeys and bold solution to America’s daunting educational challenges.

About the Presenter

Andre Agassi, Former World No. 1 Tennis Player, Philanthropist

After turning pro at the age of 16, Tennis Hall of Famer Andre Agassi rose to international fame, earning 60 men’s singles titles including eight Grand Slam titles. A former world No. 1 player, Andre is the only American to win all four Grand Slam titles and an Olympic Gold medal. Off the court, Andre established the Andre Agassi Foundation for Education which focuses on transforming public education so that all children have a shot at success.

In 2001, the Andre Agassi College Preparatory Academy, a tuition-free public charter school, opened with 1,200 children in grades K-12. In June 2011, as part of an effort to expand his impact on education, Andre partnered with Turner Impact Capital on an innovative new real estate fund – the Tuner-Agassi Charter School Facilities Fund – to promote the success and growth of best-in-class charter schools in urban communities by focusing on the development of learning-friendly, environmentally responsible charter school facilities.

Bobby Turner, Principal and CEO, Turner Impact Capital

Over the past two decades, Bobby Turner has established himself as a pioneer in the area of social impact investing. Since founding Turner Impact Capital in 2014, he has rapidly built one of the nation’s largest social impact investment firms, with over $2.5 billion in investment potential to help address some of the country’s most pervasive social issues with real estate solutions.

As former Chairman, CEO and Co-Founding Partner of Canyon Capital Realty Advisors LLC (CCRA), he oversaw a commercial real estate and mortgage asset portfolio totaling over $12 billion, and was responsible for launching several groundbreaking funds that helped define the “triple bottom line” investment movement. In his years as a social impact innovator, Bobby has dedicated himself to providing sound financial returns for investors while fostering opportunities for the communities in which his funds invest.

Jamie Gutfreund (Moderator), Global Chief Marketing Officer, Wunderman

As Global CMO, Jamie Gutfreund leads Wunderman’s global marketing, communications and partner initiatives. Working with Wunderman’s leadership team, Jamie is responsible for building innovative programs to drive awareness of Wunderman’s unique blend of creativity and data.

[applause]

[00:00:09] Andre Agassi: What makes an eighth grade dropout sitting here talking about his journey in education. It's been nothing if not that, it's been a real journey. I think if you go back 40 years and told my father that 40 years from now, I'd be speaking about education, he'd probably say, "I told you didn't work hard enough on your damn tennis game." I think the lack of education in my life combined with the lack of choice, led to my disconnect in a life that seemed to be pretty successful and a life that seemed to be pretty glamorous. I really was as disconnected as you can possibly be. As a result of that journey, I had to find my reason for playing the game, and that didn't probably happen till I was 27 years old. I had fallen from number one in the world to 140 in the world. I found myself at one of the lowest points in my life, ready to quit. When I was confronted with that reality, should I quit or should I start over? I really questioned what that means, starting over. I knew for the first time that I had to really do it differently. I knew I had to find my reason and coincidentally at that intersection, I saw a show on 60 minutes that was talking about KIPP knowledge is power program, who had a number of charter schools. Mark leavened, Michael [unintelligible 00:01:35]. I saw him rolling up their sleeves and affecting these children's lives truly systemically. When I saw that, I saw children that didn't have a choice in their life, except they didn't have the luxury of being the best in the world at something. They unfortunately would continue this downward spiral of a life that they were trying to break out of it. Overnight, literally, it seemed like I took on the Herculean task of building my own K through 12 public charter school and then economically challenged area of Las Vegas. I took out a $40 million mortgage and figured out I'd have to pay for it one way or another. I assure you, Ambien is no match for a $40 million mortgage, but where the fifth largest school district in America. My goal was simple, it was to give children choice through hope and education but it was also proved that we failed children, they don't fail us. We graduate 50th in the United States. In that journey which probably took about 15 years, I learned a lot of things. I learned how hard it was to raise philanthropic dollars. I raised about 185 million of philanthropy. I learned how tough it was to be in the business of educating because every day, this is our future, and you can't take your eyes off the ball for a second. I also realized, which was pretty difficult, that I'm not an educator and I'm not an operator. I was a facilitator of this dream, but the hardest reality that hit me was I had 1,200 kids in the school and I had over twice that on a waiting list to get in. It was the children I couldn't help. I come from a sport where you eat what you kill. I looked at that as being twice the failure, wasn't a success. At that moment, I said, "I need to figure out a way to scale this" and I couldn't. I don't know, sometimes things don't happen by accident. That's when this beautiful, beautiful follicly challenged gentleman came into my life. He called me, read my book, he shared my passion and frustration with education, with the frustration of our public trajectory with the frustration of the scaleability. He had a similar journey. We met to think out of the box and to figure out a way to really take on one of societal's most daunting issues. With his expertise and guidance, change the trajectory of my life and combined. We'll eventually talk about it, but it's been a step, one of the great transitions in my life period, specially after tennis.

[00:04:28] Jamie: That's a pretty moment momentous change. Wait, you just read his book and called him? What's that all about? How that go?

[00:04:36] Bobby Turner: I actually went on to JDate to find him. It's where I really found him and I kept swiping, I'm not sure if it's a left or right, but I did find him. For me, my journey was a little different.

[00:04:51] Andre: It was a cold call. [00:04:52] Bobby: It was a cold call. [00:04:53] Jamie: Cold call. He called you? [00:04:54] Bobby: It was a warm reception. [00:04:55] Andre: First thing he said to me was, "No, no, no, this is a warm call. This is not a cold call".

[00:05:02] Bobby: For me, the vast majority of my career, I was a a capitalist and I was a philanthropist as well but I struggled at both. As a capitalist, I struggled almost with a moral discomfort that came from being in an industry, where the sole metric of success was making money. In the 1980's, I worked for a gentleman, by the name of Michael Milken, at a firm called Drexel Burnham Lambert. When Drexel failed, myself and a group of others founded a firm called Canyon Partners which we grew into about $25 billion dollars. All along, as I was creating wealth, which I always assumed would lead to happiness, I very quickly realized that it was very little correlation between wealth and happiness. That for me, the only thing that wealth could guarantee me was a more comfortable form of misery. Now, for the record, if you're going to be miserable, you might as well be comfortable, so that worked out nicely. Maybe in my desire to get balance or buy redemption, my wife and I became philanthropists, and we struggled there too. We didn't have the moral discomfort that came from making money off of other people's misfortunes, but rather we had an emotional discomfort that came from throwing money at other people's misfortunes. Because the vast number of organizations that we were funding really were just putting band-aids on issues. They were treating being reactive and in many instances, we were funding legacies of dependency. What I realized very quickly that-

[00:06:21] Jamie: Wait, can you just stop there. What's legacy of dependency? What is that? What does that mean?

[00:06:23] Bobby: It's not empowering people to tackle their own problems themselves. It's throwing money at an issue. What we realize is that if you want to treat an issue or a problem in society, then the government and philanthropy are just fine. If you want to cure, really cure, you have to create sustainable scalable solutions that stick and that means making a profit. It's no, no secret that we, as a country, suffer from some daunting challenges with education, health care, housing. Our reliance upon the government and or philanthropy have actually handicapped our outcomes. My mission was is how do I take my emotional discomfort with my moral discomfort, and create a business model that could do good and do well? As a philanthropist, I had built 38 public charter schools in Los Angeles for 15,000 school seats and same with Andre, I had this horrible frustration while we built 15,000 school seats over seven years, there was 38,000 kids in the wait list. We were over two times the failure. Very frustrated and when you most need philanthropy, is when it's least available. Back when the Great Recession hit, we were out of money in our philanthropy. I went back to our partners in philanthropy and they were on to other businesses, other philanthropic endeavors and I just read Andre's book. I said, "Here's a man who shares the same passion, same frustration and if I can convince him to join me in harnessing market forces to tackle an issue as important as education, we could actually make a difference in the world." I remember calling you. Originally, Andre was very hesitant and very skeptical because I was asking him to make money off of the very issue, the very passion in philanthropy that he cared most about. I would say that we dated for six months?

[00:08:15] Andre: Yes, we held hands for the first three and then we started to get a little closer. The truth is I had to make that leap and I went through so many filters. Is this really something I want to do? My wife, who is the best things that happened in my life, truly, she's always been such a good judge of decisions, and she asked me a question I'll never forget that got me to make the leap. She said to me, "You know you've been going back and forth on this for so long," she goes, "What is the alternative?" and I said, "Wow, you're right. The alternative of me not doing this means we don't build 34,000 seats with this first fund. It means we don't impact all these communities throughout the United States. It means we don't maybe even redefine how we go about solving some of these issues." When I answered that question, that's when I said, "You know what, I'm ready to do this."

[00:09:17] Jamie: She's a wise woman, sounds like. Well, you guys are talking about a lot of things here. I want to bring this to life for a second because you're talking about your fund which is today, it's supporting how many kids? 42,000?

[00:09:29] Bobby: Yes, over the last four years, we've raised actually a half a billion dollars of private equity capital. With that, we've built 79 for 42,000 kids in some of the most economically challenged neighborhoods of America. [applause].

[00:09:41] Jamie: That's a pretty awesome accomplishment. I want to bring this. I believe in showing not just telling, so I pulled some pictures. I don't you guys can see this but I want you to break down a little bit about what you do. Can you guys see this is a Mervyn's, right? It's great. This used to be a Mervyn's and now look what it is. Can you guys tell us a little bit about the school, this is where?

[00:10:09] Bobby: It is in South Dallas.

[00:10:12] Jamie: Look at this, there's Andre. Andre, you teaching a class here?

[00:10:17] Andre: I'm wearing the same shoes.

[00:10:20] Jamie: Yes. Then we've got this. I just saw this pictures like, that's what you guys do, right. Well, hopefully, that's tears of joy but lets she saw you and she's, "Oh, those shoes are not good."

[00:10:34] Bobby: She was actually wearing the same shoes as Andre. I was so upset that he was getting the credit for the shoes.

[00:10:42] Jamie: This school is exactly the thing that you guys are doing but at a bigger scale and it's something that's a very big challenge to be able to accomplish and do this on a regular basis. What's the goal for the next year? What's the plan?

[00:10:56] Andre: Well, what I can say emphatically is I spent 21 years as a professional tennis player and I was always working backwards from goals. You have your plan and work your plan, plan your work, work your plan. It's always to peak, it's always to accomplish something that is very tangible, that requires all of you. One of the great things about post-tennis is that you don't have to work backwards. You work forwards, and you don't have to limit yourself by winning. You don't the limit yourself by by by a certain number. For me, it's about more and it's about not allowing goals to actually limit you anymore. That's what they feel they're doing. The second we set a goal, we just blow right through it. We stop setting goals. It's about doing more. We'll do more in the next three years than we've done in the last three years. I don't like talking about what we haven't done. I like talking about what we have done but the truth is, we're continuing this. Working forward is such a beautiful way to live in life. Then you wake up with anticipation every day. Where this leads? It leads to more good stuff.

[00:12:04] Jamie: Okay, good is the new cool? [00:12:07] Andre: Yes.

[00:12:08] Jamie: Let's talk about social impact investing because it's a little bit controversial. It's the ideas is philanthropy broken, because I remember I was at one of your events in Vegas and, oh, my God, you worked that event harder than any tennis match. You were running around like a maniac to meet your fundraising goal. That was exhausting, so that switch to doing it like this. It might make it a little bit easier for you. Bobby, can you at least explain what social impact investing is? Break it down so we understand what the mechanics are.

[00:12:40] Bobby: Well, I guess starting with what it's not. [00:12:41] Andre: I can break it down to you, but I want you to break it down. [00:12:44] Jamie: Or you could break it down? [00:12:45] Andre: No, I want Bobby to break it down [00:12:46] Jamie: You do it.

[00:12:47] Bobby: Isn't that a cue to music if you're going to break it now? Let's talked about what it's not. Social impact is not philanthropy and it's not government. Social impact is an investment strategy that quite simply recognizes it doing good and doing well needn't be exclusive. Who says that they've got a segregator. Anyone has to segregate as an investor or as a philanthropist, profits and purpose. Social impact investing recognizes that doing good and doing well can actually play nicely in the sandbox. The vast majority of pushback that we've gotten when we go out meet investors, is there is this natural tendency for an investor, a capitalist to assume, that when you superimpose a societal return on a financial metric, you will sacrifice yield. Which is not the case. I'm in the position of having been in the social impact business now for 20 years and I can refute that. The reality is, is social impact investing can actually drive better returns than more traditional speculators. Think about it. There's four ways to create wealth in life. Number one is you can inherit it, which Andre and I failed at miserably. You can marry it and needless to say, we both married up. There's no doubt about it, but we didn't marry rich. Number three, you-

[00:13:56] Jamie: Well, speak for yourself.

[00:14:00] Andre: Okay.

[00:14:02] Bobby: Number three, you can speculate, which is what the vast majority of investors do. They're speculating on buying high selling low, selling low buy high, whatever it might be. In my career, I've yet to find anyone who can consistently speculate well. Social impact investing is in the fourth form, which is value investing. Value investing is not as glamorous as the first three. What it requires you to do, is to scour the market of opportunities, looking for marketplaces that are overlooked, misperceived, difficult to underwrite and require unique skills to identify, quantify and mitigate risk. That's what social impact is. We're not focusing or trying to create demand. Andre and I have recognizes there's 1.2 million kids today on a wait list for a great charter school. At $20,000 a school seat, that's a $22 billion infrastructure opportunity. It's well above and beyond any philanthropist capacity to tackle that issue. Doing good and doing well needn't be segregated. That's what social impact is. It doesn't come at a sacrificing yield. What we tell most investors, is that we can actually drive better risk-adjusted returns because there's no correlation between our returns and the broader market indices. Think about this, you can invest in a real estate fund that's going to invest in high-end condos, and in a bull market that fund will do incredibly well. Because leverage is a competency, bed underwritten is forgiven and a rising tide lifts all ships. What happens to the demand, those high-end condos, when the Dow Jones collapses in half? It's going to disappear. What happens to the demand for charter school seats when the Dow Jones collapses or unemployment increases or inflation increases? Absolutely nothing. What I like to say, is social impact will underperform in bull markets and while they outperform in bear markets.

[00:15:49] Andre: To give you an idea of how it works, if you really look at it, you're talking about a charter school can't access public dollars to build their facility but once they have their charter, the money from the state follows a child to your school. You're almost relieving the public overcrowding that's happening as well. On top of that, the money that follows that child to your school is a direct revenue stream on day one. If you can build, if you can bring private capital at the table, go to a great operator who wants to expand in a place where there's a huge demand and need for high-quality educational seats and you build a facility. A $10 million facility and they have 800 kids and they're in a state that allows 10,000 per child to follow that child. That's $8 million of revenue. Well, guess what? There's a business deal to be had there, because if we can bring that capital a table, then use a tax-exempt bond market to refinance you out of it, where you have ownership over your whole school. These schools run sustainably in perpetuity and by the way, we've satisfied a like-minded investor. We have investors that are saying, "Okay, we're not looking to get huge, huge returns but the truth is we're either tired of giving away our money, we don't want to give away our money, we don't feel like it's the right thing to do in a scalable sense, but we still want to have huge societal impact." We ran into a lot of different kinds of investors along the way, that we're very fascinating. I'll let Bobby do the honors of talking about that journey if he wants.

[00:17:16] Jamie: Yes, but you have a story. Pretend I'm an investor, how does that-

[00:17:18] Andre: I have a lot of good story.

[00:17:19] Jamie: I know you have so many good stories but tell me, if there's an investor, how does that usually go? How do you convince them if they're all about-

[00:17:26] Bobby: Recognize it. We came across four kinds of investors when we have to raise the fund. The first would be the capitalist. Having been in the hedge fund business for 25 years, I had great access to capitalist. Some of my biggest investors what we would call were the union's, the pension funds. Imagine the conversation that I had with the State of California public pension fund, Teachers fund, CalSTRS. I would call the head of the real estate division of CalSTRS and I would say, to this gentleman, I'd say, "I have an amazing fund we'd like you to invest" and he asked me how big is the fund. I said, "A couple $100 million," he said, "I'd take half the fund" and he goes, "What's the asset class?" I said, "Well, hang on a second. Let me take about the fundamentals of this industry. This industry is about the future of America. It's funded by the government. There's a huge mismatch." He goes, "Bobby, you've been a great manager for me for 20 years, I'll take half the fund. What's the asset class?" I said, "Are you sure you're going to take half the fund?" He goes, "I'm taking half the fund. This is the unionist" and he goes, "What's the asset class?" I said, 'Do you swear?" He goes, "I swear," I go "Pinkie swear," he goes, "I pinkie swear. What's the asset class?" "I go Charter Schools." He goes, "Fuck you." "Mike, fuck me? Why?" He goes, "Bobby, charter schools are the Nemesis of the public school district, so therefore, what you're doing is undermining the teachers union," to which I said, "Oh, no. We're incredibly pro-union. It's just the children's union that we're representing." As long as education is going to be about adults, were in trouble. The unionists didn't work out so well.

[00:19:04] Andre: Capitalists. [00:19:05] Bobby: The capitalists. [00:19:06] Andre: No, no, the capitalists didn't work out. [00:19:08] Bobby: The Unionist. I screwed up. [00:19:08] Andre: Oh, sorry, you do. [00:19:09] Bobby: You may be nervous. [00:19:11] Andre: Oh, sorry.

[00:19:12] Bobby: The unionists didn't work. Next, it was a capitalist. The capitalists were those who absolutely could not comprehend that doing good and doing well, could play nice in the sandbox. People like George Soros, one of the greatest philanthropist and greatest capitalists in the world, believed that you had to segregate. Make money, then give it away. It was very difficult for us to educate those capitalists on the symbiotic relationships between profits and purpose. Unionist not so good, capitalist not so good. The communists were the third group.

[00:19:43] Andre: No, these guys are awesome.

[00:19:46] Bobby: Andre and I met with one of the largest sovereign wealth funds in the world, CIC, China Investment Corporation. At the end of our presentation, the gentleman from China leaned into the table and said, "Mr. Agassi and Mr. Turner." Actually I embellishing said, "Mr. Agassi, welcome to my life," and he said, "Mr. Agassi, we'll take the entire fund," and Andre leans in. I knew we're in trouble and Andre leans in, he's going to ask a question, but let me tell you why I know we're in trouble, because Andre is one of the most curious human beings you'll ever meet. When I first met Andre maybe six weeks into our relationship, I get a call on a Sunday morning to our house. I'm laying in bed with my wife Lauren and he says, "Bobby, I need your help with math," to which I said, "That's fantastic, I need help with my backhand." To which Andre responded-

[00:20:37] Andre: There's no helping your back.

[00:20:41] Bobby: I think the quote was, "I've seen your backhand, I don't need that much help with that," I said, "Well, what's the problem with math?" He goes, "My son Jaden who was maybe 10 at the time has a math test on Monday on multiplication, and I cannot figure out how to explain to Jaden in what world a minus three times a minus three can be a positive nine.

[00:21:09] Andre: Think about that, you got three, you got three shitty things that happen to you ,and then you multiply that shit by three times the shit, you're swimming in shit, this is bad. [applause].

[00:21:29] Bobby: Fair enough. I had the exact right answer, ask my wife. I rolled over in bed and I said, "Lauren," who's sitting here today, and I said, "Help me explain to Andre how a minus three times a minus three can be a positive nine." She goes, "Explain to Andre the following, when you do a bad thing to a bad person, that's a good thing." [laughter]. [applause]. Fair enough, smart lady. I roll back, said, "Andre, let me make it simple for you, if you do a bad thing," he goes, "I heard your wife, but what does that have to do with minus three times minus three?" To which I responded, "I don't know, I actually don't know why minus three." Here I am the Wharton grad, minus three times minus three, I don't have a fucking clue why it's a positive nine."

[00:22:20] Andre: He told me to memorize it as if it is.

[00:22:22] Bobby: I said to you, it's one of those rules in math you just have to memorize, and he said to me, "Wow, maybe you can live your life that way but I can't." [laughter]. I'm like, "Okay eighth grade dropout." Now we are with the government of China who's just said they'll take the entire fund and Andre leans in. "Oh, my gosh shit, there goes the money." He says to the gentleman from China, he goes, "I'm flattered, I'm humbled, I'm honored but explain to me why the government of China, wants to invest in a private equity fund in America focused on real estate?" To which the gentleman from China looked at us, Andre and said, "Mr. Agassi, it might come as a surprise to you but your country is indebted to my country to the tune of nearly two trillion dollars. None of us here today at this table will be alive to see that debt repaid. Therefore we the government of China, have got to invest in the next generation of Americans so that you can grow your economy out of the debt you owe us, and you are failing miserably." To which Andre said, "We don't want that money, do we?" To which I said, "No, but if we can't raise it elsewhere, you are jumping on the airplane and playing every exhibition match necessary to get it back." Again, the Unionist not so good, the capitalist not so good, the Communists definitely not good but eye opening, because why is it the government of China recognizes the need to invest in generational-

[00:24:00] Andre: You have a generational investor and then you have the short-term thought investors, and we just never going to understand why we couldn't find the next category.

[00:24:09] Bobby: We were lucky in the sense that, well again, the Unionists, the capitalist, and communist didn't come to the rescue, we found the realists. The realists were those when, and Andre referenced this before, when asked the question, "What are the consequences of you not investing in a fund that's going to invest in education, the future of America? If the answer is, is unconscionable, it's disheartening, you became an investor. They came in two forms, what I would call the evolved capitalist. The evolved capitalists was someone who recognized that doing good and doing well need to be desegregated, the University of Michigan by one example, Prudential Insurance, Citibank. These are profit-driven organizations who are less interested in the social impact we have, but we're educated to recognize that by investing in these social injustices you can drive better risk adjusted returns. The other group was the enlightened philanthropists, folks, like the Rockefeller Brothers fund who had realized that over the last 100 years they'd given a billion dollars of way of capital and grants and realized that the vast majority of their impact had been, again, building legacies in dependency. Steven Heinz who's the president of the Rockefeller Brothers fund realized, that when and where there is a sustainable for-profit solution that also tackles the mission of the organization, it behooves them to invest. Why invest in a hedge fund that invests in long, short commodities, or why invest in a real estate fund that's doing high-end condos, when you invest with Andre and Bobby that's going to drive a great return and tackle the same mission.

[00:25:42] Andre: Think about this from this perspective, I raised 185 million in philanthropic dollars in order for one school that has 1,200 children to live in perpetuity. We were having our first investor meeting, we were having it at my school and I'm looking around as we're going over all these numbers, and I'm looking around at this school and I started to calculate what I've put into the school. I quickly got up already to a hundred million. Let's just say that 185 million that I raised in philanthropic dollars, I could go back in time or fast forward and give to what we're doing now. That 185 million not only will build 20,000 school seats instead of 1,200, it not only will live in perpetuity but that same 185 million about maybe 200. I will get numbers a little wrong because I need to concentrate on it, 250 million dollars back. My 185 is going to be now 250 plus I can go do more. It all of a sudden, it just hit me in one moment that that transition and how important it is to understand that form of scalability and sustainability.

[00:26:47] Jamie: Did you tell your wife that she was right?

[00:26:49] Andre: I tell her that every day about everything.

[00:26:51] Jamie: Smart man.

[00:26:54] Bobby: Jamie, think about it, people in this country I think, listen, we all recognize those daunting challenges but I sit here as an optimist, as Andre because daunting challenges actually prevent generational investment opportunities. I think it's important to recognize that there's a misperception of the problems we face as a society. I think that we could all raise our hands, one of the biggest if not the biggest problem most people believe is the disparity of wealth in this country. That when 1% of a country controls 99% of its wealth, you undermine the very fabric of a healthy society. Raise your hand if you believe that. [applause]. I disagree. I appreciate the applaud but the reality is, is disparity of wealth is a problem but disparity of hope is a bigger problem. Because this country is built on disparity, well, this is not the United Socialist States of America, this is a capitalist society and you need disparity of wealth. It's more extreme than it's ever been, but what we're suffering from is the disparity of hope, because I grew up in 99%, you grew up the 99%, you did. We always believed in the feasibility of the American Dream, we believed that with a great education, with hard work, with affordable housing for our parents, with access to preventative health care and a little bit of luck, we could become the 1%. When there's hope in a community, you actually are encouraged. What we have today is we have tens and tens of million of families in this country who don't believe in the feasibility of the American Dream. They actually believe that there is not a level in fair playing field, they have been foreclosed out of the American Dream. When you're growing up a single African-American woman in East Baltimore and you're not working one job, you're working two jobs, maybe three jobs. You're coming home, you're spending 60 or 70% of your income on rent at the expense of food security, health security, retirement, your children are relegated to a public school with a likelihood of your son graduating high school, is below 40%, graduating college below 2%, going to jail by the age 40, greater than 50%. Where is their hope in that family? When you remove hope from the equation, what fills that void is despair. An intensive despair is what I believe leads to the intensive violence, it also leads to the political circuses that we see today. A vote for Donald Trump in my mind was not a vote for hope, it was a vote in defiance of the existing system that had failed to tackle the issues that come from the injustices from social determination. Social impact investing is harnessing market forces to do what the government and philanthropist haven't done, it's investing for profit but it's investing for positive societal change. Boom. boom, boom. [applause].

[00:29:50] Jamie: You're among friends here, this is a group of people who are well on their way to changing the world and making their own contribution to society. Are you telling everybody in this room that they shouldn't give to philanthropy?

[00:30:03] Bobby: No, not at all. Philanthropy, this social impact doesn't put philanthropy out of business, in fact, philanthropy is alive and well. There are so many issues that cannot be treated with a sustainable for-profit solution.

[00:30:14] Jamie: Like what?

[00:30:14] Andre: Here's what social investing does, it makes philanthropy much more efficient. Philanthropy is an important part of our society, it's an important part of our culture, it's an important part of being a human being. I mean the idea of caring and giving, always needs to be at the forefront of everything we do. I can tell you right now, I have in my foundation which is public, which is transparent, I sit over a $100 million in the portfolio. What I can tell you now, is I can use that money to direct it in the things that help facilitate the educational experience of these kids, based on what we have been doing over and don't get me wrong. There's a disconnect but anybody once given education, we provide the engine that helps these people grow, when you start to give a little bit, they can do multiples with it. I think there always a place for philanthropy, but they work together to make some more efficiency.

[00:31:13] Bobby: I mean, they can complement each other again, we haven't figured out a way to make money off of teenage pregnancy, but it's an issue. We haven't figured out a way to make money off of childhood obesity but that's an incredible issue and we have 42,000 kids in the schools that we've built over the last four to five years. I would say that 85% of our students qualify for free under reduced lunches and breakfasts. Yet, 85% of that 85% of kids are fat, why? Because we serve them crap in school. Well, think of the intersection and the reinforcing mechanism that social impactful investing could have by enriching communities with hope. Andre and I built an amazing K through seven charter school and probably one of the most violent neighborhoods of Washington DC. Anyone from Washington DC? Okay, so you know the Anacostia area Ward 8, it's a very violent neighborhood and we built a school in probably, one of the most economically challenged densely populated diverse communities in America.

[00:32:11] Andre: LEED Platinum as well.

[00:32:12] Bobby: We built a LEED Platinum school for 700 kids K through seven rocket ship academies out of San Jose, and right across the street from this school is the woodland Terrace public housing project. One of the most violent public housing projects in America. In under one year, of us opening the doors of our school, Violent Crimes fell by over 50% at Woodland Terrace. Now- [applause]

  • is that because we built a school, or maybe the local liquor store closed down? I have to believe that the community that has been neglected of investment for the last 50 years, when all of a sudden someone is demonstrating and believing in the community, and we invested $50 million to build this school, all of a sudden community looks around and says, "We're worthy of an investment, we need to hold ourselves accountable for our actions in our behavior." That's the reinforcing mechanism, so people can have.

[00:33:10] Andre: The same people responsible for the crime are the same people protecting the school. I mean it's really what it boils down to, it gives people hope, and when you take away hope as Bobby says enter desperation, you do the desperate acts and it all works together so multiple ways communities benefit. That old down Mervyn's that you showed earlier, I mean these great educators they don't get into education for fame or fortune, they get in because they want a learning-friendly environment to teach the future of our of our country. If you can provide that forum, and what is a learning-friendly environment, we're all stealing best practices from each other. Everything I do in my school is stuff I've stolen, everything that I've stolen I give away, that's a great way to live. All you really need is an environment of accountability and culture and respect and that's it and that's a bunch of lights that you punch through, that's plumbing, and that's taking a little bit of technology. These people who Charter schools aren't dependency answered education. Matter of fact, most of them don't outperform and I believe in Bobby believes that, every school that doesn't have perform should go into a different business because you're too responsible for something that is too important, but the top 15% of great Charter school operators by far in a way outperform their district peers. These are the only people we partner with, because we're not interested in scaling mediocrity, we want to scale success and we're seeing it in multiple ways in these communities.

[00:34:37] Jamie: That's accountability right? Social impacting, how do you know if it's working? You said its profit is one way to manage it, so you know it's working if you're making money, you know it's working if the people feel better. If a few years from now, how do we know that this concept of social impact is actually making an impact by doing good?

[00:34:56] Bobby: Well, I don't think that we have to worry about a few years from now because we have 20 years of evidence that it works. What we need to do is spread the gospel. For those of you who don't know me, I'm very fearful of public speaking and I don't like crowds. Here I am in a crowd publicly speaking and the reason is because-

[00:35:16] Andre: You're also a germaphobe.

[00:35:18] Bobby: I am a germaphobe- [laughter].

  • in dirty laundry and someone asked me, "Why are you and Andre so willing to talk about the business model?" Aren't you afraid of competition? My response is, "No, I'm afraid that there's no competition." The issues are so daunting. If you think about housing, there's 43 million renter households in America. One out of two, is rent burden spending over a third of their income on rent, one out of four is severely rent burden spending over 60% of our income on rent. When you think about health care, we're number one in the world and what we spend, we spend 18% of our GDP on health care, yet our outcomes from the bottom quartile. These issues are so big, so daunting that it's our job to get up on a bully pulpit and talk about the responsibility we all have. One of the things that made me fall in love with Andre are many things. Number one is we anyway, what makes Andre such a kind human being and such a soulful human being? It's because he recognizes how much of a role that luck has played in his life, that luck has played in both of our lives. Yes, we're very fortunate, we talked about how you define success. Having a great fortune, I think comes with a responsibility to pay it forward, and the more people that we can convince that doing good and doing well don't have to be more exclusive, the sooner we're going to be able to tackle some of the more daunting challenges that we face as society.

[00:36:57] Jamie: You've got these people all frothy and excited, this is a summit, people want to do something. What should we do? What should all these people do when they walk out of here? How can they change their approach? What's the recommendation?

[00:37:10] Bobby: Listen, number one is, if you have the financial wherewithal, think about diversifying your portfolio and making sure that the investments you make are being accountable and practicing and employing socially responsible practices but not everyone can be an investor, social impact investor, but you can be an advocate for change you can be an advocate for change wherever you work. Make sure that whatever company you work for, thinks out of the box. Doing good is good for enterprise value, think about CVS drug stores. Who shop at a CVS drugstore? Do the math, two years ago the chairman of CVS drugstore stopped selling tobacco in their pharmacy. Now, as a traditional hedge fund investor I'd say, God, it's a horrible idea. 100 billion in sales, two billion in tobacco. Only 2% but the profit margins on tobacco were 20%, so 200 million. They traded a market cap of 20 times it's $4 billion a market cap that just would have disappeared overnight. When he announced that, a traditional investor would sell short that stock but what happened was the market rewarded him, because here is a chairman or a president a company, who is taking ownership for employing social responsible practices. How can you in the healthcare industry sell cigarettes? If you're and the health care industry, and what happened is the market reward. I remember my wife and daughter came home that afternoon one of them said, "Dad, did you see what CVS did today?" I said, "I did," and they both said, "We've got to support CVS." Number one is, when you make investments or wherever you work, make sure that you preached that employing social responsibility, social practices are important to our revenues and to our enterprise value, number one. Number two, the greatest form of activism you all have in this room, is voting with what? Voting with your pocketbooks, supporting brands that employ social responsible practices and rejecting brands that don't. Everyone here can walk out saying, if you're wealthy, think about allocating a portion of your portfolio to socially impactful but wherever you work everyone has a job make sure that with whomever you're working that you're thinking in the front the forethought of your thoughts, that we need to be a socially responsible organization. Number three, vote with your wallets, support brands that are employing social responsible practices, and reject brands that don't. [applause].

[00:39:36] Jamie: I think this is incredible. Adrea, do you want to close up the session and leave people with the final thought?

[00:39:43] Andre: All these thoughts are good, first of all, I just congratulations to all of you in this room right now, because you're not here by accident, you're here for a reason and this is where it all starts. It starts by meeting one another, it starts by thinking out loud, it starts by dreaming out loud and having your backbone be as strong as you wishbone. We all can sit here and dream, but make it more than that. Get out there and like Bobby said on how to do it, there're some tools. Come up with your own ways, but don't be scared to show that you're strong enough to go after those dreams. You were what we count on. Thanks for making it an important to you.

[00:40:28] Jamie: You're here. Thank you, guys.

[applause]

Thanks for being here. Thank you for sharing.

[00:40:40] Andre: Thanks.

More talks and performances to come.

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