Inclusive Economy | October 20, 2024

From North Carolina, a playbook for the Reconstruction of Black wealth

David Bank
ImpactAlpha Editor

David Bank

Two years. 

That’s what Napoleon Wallace wanted in order to leave his position as North Carolina’s deputy secretary of commerce and build a network of businesses and social enterprises that together, he thought, represented a path to racial equity through wealth creation for Black families and communities.

“He came to me and he asked, ‘Could I have just two years? To do everything I can and put everything I have into getting these businesses started. Can you give me that?’” his wife, Eddi Wallace, recounts in a new documentary, Equity and Ownership: Napoleon Wallace and the Reconstruction of Black Wealth, which premieres at SOCAP24 in San Francisco later this month.

Years earlier, Wallace had helped launch Activest, the “fiscal justice” investment advisor that had surfaced the racially charged practices of many cities that balance their budgets, and fund their police, on extractive fines and fees. 

He was a partner in Partners in Equity, which had developed a powerful asset-building strategy of helping Black business owners buy the commercial properties in which they operate. The appreciating asset can then be leveraged for growth capital, building generational wealth.

Wallace had long been a mainstay of the social finance ecosystem in Durham as a trusted lieutenant to Martin Eakes, the founder of Self Help, the pioneering North Carolina credit union and community development financial institution that has provided more than $11 billion in financing for homes, businesses and community resources across eight states.

And now he had teamed up with Dorian Burton at the Southern Reconstruction Fund, to raise FundONE, for “ownership and new equity,” a fund of funds to invest in emerging impact fund managers with strategies to build Black health and wealth and create self-reinforcing gains in southern cities like Memphis, Birmingham, New Orleans and Charlotte.

The idea: Stand up a cohort of emerging fund managers around what Wallace and Burton called “impact alpha” investment theses, based in place, and with enough scale to make them all work. You can’t just do one thing, Burton had learned from years of philanthropic wealth-building efforts, like housing or jobs or schools. You have to do them all. 

The tie-back was intentional to the historical Reconstruction that followed the Civil War. The southern US has a legacy of slavery and Jim Crow, but also of Reconstruction, a period of shared prosperity and multiracial democracy based on broad ownership, self-determination and collective power.

Burton and Wallace were thinking big, B as in billions. But why, they wondered, are billions considered big only when talking about Black people?

“So that was our agreement. He had two years to do everything he could to get his businesses up and off the ground,” Eddi, an educational consultant, says in the new documentary. “And it was successful and it was working. And then he got ALS.”

Narrative voice

Wallace was 38 years old when he was diagnosed in 2019 with amyotrophic lateral sclerosis, a degenerative nerve disease that affects nerve cells in the brain and spinal cord. Five years later, he cannot speak and can hardly move. A tube in his trachea provides oxygen. 

He communicates with an “eye pad,” controlling a cursor with his eyes as he points to letters and words. He can also use apps, open websites, exchange texts and write emails, and has become a speed typist – with his eyes. The text-to-voice software renders his words in an old-school robotic voice. “While I may sound like artificial intelligence, I promise I’m not that smart,” he jokes.

Wallace’s own voice comes through clearly in the new documentary, which was produced by ImpactAlpha with support from the Robert Wood Johnson Foundation. The 20-minute video includes interviews with colleagues and friends, and his father Art Wallace, a serial entrepreneur and now proprietor of the Gold Post Cafe in Greenville, NC, to whom Wallace credits his own entrepreneurial spirit.  

Wallace narrates the documentary through an AI-generated voice clone. Filmmakers Yuri Vaysgant and Tyler Schwartz trained the AI on podcasts and videos that had captured his booming, pre-diagnosis voice.

And he’s still building the network of organizations. All have roots in North Carolina, and in particular Durham, which had a vibrant Black Wall Street with some of the country’s first Black-owned banks and insurance companies, like Mechanics and Farmers Bank and North Carolina Mutual. The state also has the highest concentration of historically Black colleges and universities, including North Carolina Central University in Durham, where Wallace graduated before going across town to get his MBA at UNC’s Kenan-Flagler business school. 

At the SOCAP premiere, Activest’s Micah Gilmer and Partners in Equity’s Talib Graves-Manns will join a panel to elaborate on what could be called the North Carolina model for racial wealth building. 

“Our footprint is the Black belt of America,” Graves-Manns says, from the mid-Atlantic through the South and “out to other places where there is a high concentration of Black folks in business, like Chicagoland and the Los Angeles area.”

Partners in Equity, which also includes Wilson Lester, is well over halfway to the planned $10 million initial close of its first fund. What Graves-Manns calls the urgency of time makes him impatient to deploy capital. A widely cited 2017 report from the Institute for Policy Studies warned the median wealth of Black households was on track to hit zero by 2053.

“I’m driving through neighborhoods, and I’m watching Black folks who are never invested in sell their properties for basically pennies on the dollar to outsiders. And now all those outsiders are making all the money on the equity,” he said. “It burns me up and that’s why I show up to do the work.”

Activest has matured from a research outfit to a registered impact advisor that, through its affiliate Next World Partners, has received a $50 million mandate from Kataly Foundation to chart an equitable bond strategy. Its first deployment was in a $58 million bond issued by North Carolina Agricultural and Technical State University, a historically black land grant university, which is building new student housing to serve its growing enrollment. Activest is likewise expanding from its North Carolina roots to work across the US. 

“I’m really excited to be investing in those ways,” Gilmer told ImpactAlpha. “We see, Black- and Brown-serving, Black- and Brown-led cities and counties either not having access to capital to be able to build infrastructure for their city, or paying a premium for that capital. They’re subject to a credit system that doesn’t take into account their strengths and really focuses disproportionately on their deficits.”

Reparative capital 

The documentary represents a two-year collaboration between Wallace and ImpactAlpha, where he is now a contributing editor. The partnership includes “Metrics Madness,” through which Wallace is advancing his quest for a “universal, convertible metric” to account for social health and wealth that Southern Reconstruction Fund can use across its portfolio. 

From his eye pad, Wallace is organizing a bake-off, in partnership with local business schools, for enterprises willing to account for the “quality-adjusted life years,” or QALYs, generated by their products and services. 

“I believe that measuring years of life is about as objective a measure of impact as we can get,” he told me in a Zoom interview that will be part of the SOCAP premiere.

The collaboration informs ImpactAlpha’s coverage across beats. “Muni Impact,” our project to explore opportunities for racial equity in the $4 trillion municipal bond market, draws heavily on Activest’s research and methods. Partners in Equity is part of the growing ecosystem of funds and enterprises in the emerging Ownership Economy.  

And North Carolina has become a locus of our focus on what might be called place-based investing. Geographic strategies must grapple not only with local realities, but with local histories.

The new documentary connects today’s Reconstruction with the remarkable success story of Wilmington’s “fusion” politics of the 1890s, when the city’s majority Black population supported banks, department stores and newspapers. And to the white supremacist coup that overthrew the city’s elected government in 1898 and massacred citizens in the streets in the aftermath (listen to our podcast, “Lessons from the Wilmington coup of 1898”)

“We’ve been on the long, uphill climb to expand access to the ownership economy to all, and remove the dangerous presuppositions of race, gender and wealth as indicators of entrepreneurial talent,” Wallace says in the post-film interview.

Wallace’s most provocative line in the film is his indictment of impact investing itself. 

“It’s clear that impact investing has fallen short of the promise to create substantive change in Black, Brown and modest wealth communities,” he says. “This shortfall is partly due to a lack of diversity among asset owners and advisors and partly due to an inability to scale novel products and partly due to a lack of impact accountability and incentives to change.”

That’s the impetus for FundONE, he says. The fund of funds aims to back what Wallace calls “super-early, back-of-the-napkin impact-alpha theses that are still living in the imaginations of future first-time fund managers.”

Just as Wilmington’s Fusion Party brought together a diverse coalition of wealthy abolitionists, newly freed Black Americans, poor white sharecroppers, and Indigenous peoples, Wallace is looking to work with diverse allies.

“There is immense power and potential in building a coalition that includes both the historically privileged and the most marginalized, working together toward a common goal of inclusion and shared prosperity,” he says.

Readers of ImpactAlpha know that I have long been fascinated by the historical Reconstruction, which the playwright and labor organizer Gene Bruskin calls “a time when America, almost, did the right thing.” In 2021, we produced a podcast series, hosted by Monique Aiken, around the themes of what some are calling the third Reconstruction (the civil rights movement of the 1950s and 60s being the second). 

On one of my visits to Durham, Brittany Bennett Weston, the founding executive director of ResilNC, corrected me when I referred to Reconstruction as “an experiment” in multiracial prosperity. Rather, she said, such prosperity is the natural result once artificial constraints on Black economic and social mobility are removed. 

“Reconstruction, in my mind, represents a time in American history when we were striving to correct the deep divides that had torn the country apart,” Wallace told me through his text-to-voice translator. ”Today, I believe we face similarly troubling divisions. To overcome them, we will need a new kind of reconstruction—one that invests deeply in our communities and institutions to build a more united, healthy and prosperous future.”