Black Entrepreneurs: Lost in the Crowd?

Drive down the streets of any black neighborhood in California’s big cities and look at who has been buying the liquor stores and beauty parlors and convenience markets and gas stations and fast-food places. Immigrants, mostly. From South Korea, India, Vietnam and elsewhere.

There is no shortage of long-established black-owned businesses, but not much evidence of new black entrepreneurs in black neighborhoods.

What’s happening here? Didn’t the 1980s show the most explosive increase in the start-up of small businesses in California history? Were blacks left out again?

Answers--but certainly not opinions--are hard to come by. Some say blacks’ traditional lack of access to capital became even more noticeable and painful during the booming 1980s, especially as government programs to assist minority entrepreneurs shrank. They add that the legacy of redlining, discrimination and poverty may have sapped the energy of those who otherwise might have participated.

Others, shrugging their shoulders, believe that immigrants have always been the ones to start the most businesses in California, and that the 1980s were simply bigger but not different.

Still others maintain that more blacks finally entered the corporate mainstream in the 1980s and that, therefore, the people most likely to open businesses in their old neighborhoods were less interested in taking that difficult path.

There is no consensus among all those opinions. But what seems clear is that the changing demographics of California are significantly altering the economic landscape and making old ethnic assumptions about business obsolete. And if you view the 1990s wearing 1960s glasses you will likely miss many of these changes.

Statistics tell part of the story. The huge increase in business formations is a nationwide trend, but it’s a bit more pronounced in California. The Census Bureau estimates that the total number of businesses in the state jumped by more than a third between 1982 and 1987, compared to a 28% rise nationally.

Dun & Bradstreet, the credit reporting company, figures that in 1987 more than 13% of the nation’s new businesses were launched in California. And the state’s Employment Development Department reports that the largest percentage growth of any business sector during the 1980s was the 51% rise shown by tiny, often brand-new outfits with three or fewer employees.

What all this means is that more people in California are going into business for themselves than ever before, and they are doing so at a faster clip than any other Americans. They also succeed more often, with the California business failure rate well below the national average.

The state’s reputation as a hothouse that nurtures young business seems well-deserved.

But at the same time, immigration has changed the culture and economics here. The state’s population grew by 21% in the past decade, in large part through immigration. Ethnic patterns are changing virtually everywhere; by 1992, it’s projected that Anglos will be no more than about 40% of the population in Los Angeles County, with blacks, Latinos, Asians and others making up the remaining 60%.

During the past 10 years, however, there has been little new immigration by blacks to California. In fact, some demographers have detected at least a small out-migration to other states.

“The motivation of immigrants to California has always been to get rich, to latch onto the ring,” says Gene Grigsby, a planning consultant and chair of the economic development subcommittee of Los Angeles 2000, a quasi-public group that studies local trends. “So if a population group isn’t growing through immigration, you might expect to see less entrepreneurial zeal.”

Nearly a half century ago, as California’s black population swelled through immigration during and after World War II, entrepreneurship flourished. Black-owned shops and businesses lined the streets of neighborhoods in Los Angeles, San Francisco and elsewhere. Most were in the service industries--the same economic sector that showed such a huge rise in the 1980s.

That generation of black entrepreneurs is aging, and many have sold their businesses and moved away. A number of black-owned California companies born in the heady days of the 1960s civil rights movement did grow and prosper during the past decade. But the federal assistance programs that helped give birth to many of them have shriveled.

Also, the traditional black neighborhoods of California that were based on segregated housing are fading now, with many younger blacks moving to other areas.

What often remains, tragically, is an underclass of unemployed people, many of whom have never known a black entrepreneur. Lacking incentive and a good education, they watch in frustration as immigrants buy businesses and move in.

In the meantime, the new Californians, coming from a dozen different cultures, have arrived with hopes every bit as high as any of their predecessors. Pooling money among themselves and hiring their relatives for little or no salary, they are buying up or starting small businesses across the state and somehow are making a go of it. Sometimes unaware of the cultural sensitivity involved, many buy shops in black communities or other economically disadvantaged areas because the prices tend to be lower.

The story doesn’t stop here; there may even be a happy ending. Mainstreaming programs begun in the 1960s have achieved some success. Although the number of blacks attending college is little changed, there has been an increase in those attending business schools. There is also a measurable increase in the number of blacks rising through the corporate ranks.

Some of these people have been bitten by the entrepreneurial bug, but don’t look for a lot of them in South-Central Los Angeles, in San Francisco’s Fillmore District or in other traditional black neighborhoods.

There has been a growth of black-owned businesses in the real estate industry, in communications and in information processing. But these firms are scattered across the state, in places that might be called unlikely if you fail to grasp the demographic changes that are occurring.

It’s such a new development that most observers aren’t sure yet just how significant it is. Does it mean that entrepreneurship in California is finally becoming colorblind? Will there be no more “traditional” black businesses? Maybe, but don’t count on it.

More likely, it means that you’ll have to look harder to find them in the crowd.

A CHANGING POPULATION

Estimate, July 1989:

California population: 29,063,000 White: 58.8% Latino: 24.4% Asian/Other: 9.5% Black: 7.5%

1979 comparison:

California population: 23,255,000 White: 67.5% Latino: 18.7% Black: 7.5%

Asian/Other: 6.3%

Source: Demographic Research Unit, California Department of Finance