The Root Interview: Mellody Hobson on Black Investors
The president of Ariel Investments reveals results from the firm's annual survey, including a fundamental shift in blacks' investment mind-set after the housing bubble burst.
It's no surprise that middle-class black Americans, hit the hardest by the recession, scaled back investments and tapped out their savings. But their financial situation may be startling when compared with that of their white counterparts.
According to the 2010 Ariel Black Investor Survey, 48 percent of the 501 blacks polled said that they had pulled money out of their savings to make ends meet in the past two years, versus 31 percent of whites who did the same. Also, blacks are nearly twice as likely as whites to have reduced their contributions to 401(k) plans.
"We knew that our unemployment rate was twice as high as our white counterparts'," Mellody Hobson, president of Ariel Investments, tells The Root in an interview. "But we really took a hit during this recession."
Hobson, however, points out a few promising surprises in the 2010 survey. Black Americans reported feeling a higher level of optimism for the economy than did their white counterparts; they also reported having a change of heart about investing in real estate.
Here, the 2009 Root 100 honoree provides some sound financial advice for weathering the current storm -- so take heed.
The Root: The survey comes at an interesting time for financial markets and the overall economy. What would you say is the most surprising element about this year's survey?
Mellody Hobson: For me the big surprise was the extent to which the recession affected African Americans. We knew that our unemployment rate was twice as high as our white counterparts'. But we really took a hit during this recession, and the numbers bear that out in so many ways -- not only [with] us reducing the amount that we're contributing to our retirement accounts, but also us having to tap into our retirement dollars, which is one of the things you do [only as a] last resort.
TR: But what's interesting from this year's survey is that black Americans are still very hopeful about the economy -- more so than their white counterparts.
MH: Right. I don't think it's a surprise if you're African American because you know that we are optimistic -- which I think is what America is all about. So I think from that perspective, the degree to which we are optimistic, the degree to which we expect a brighter future, the degree to which we are anticipating an economic recovery versus our white counterparts, those numbers are substantially different. The degree is surprising, but the optimism is not.
TR: What's behind that jump in optimism?