Talking about the South Side and startup culture, it seems like there would be an opportunity for something, but it needs some sort of incubation or spark. What’s your sense about that?
Theaster [Gates] is doing some interesting things. I think that Bronzeville is a real opportunity area. I think that the McCormick Square is a significant commitment of resources. You go down there—I just was at a game—my first DePaul game. Amazing facility, that new stadium. And I think that there’s a chance for that to anchor some new development.
And then I think that one of the things that I like about this thing we’re doing with Rhymefest is that music—his view is all of the people—Kanye and Common and all these people—came from Chicago, and they left. And his thing is, there’s no reason they needed to leave. I mean, Chess Records was here. Chicago has a huge history of music.
I did some stuff with the blues people and with all the different clubs and things over the years, when I was running Tribeca. And so, I think that the feeling is that all of the entrepreneurial culture around the arts and music is one of the ways to re-envision how Bronzeville can be a whole new sort of rebirth.
And when you drive around there, there are some beautiful homes. There are some beautiful properties there. It’s all part of a strategy that is, and it has to be, organic, and it has to be driven by the kids and their parents. It’s not going to be something that the city does. But I think there’s a real possibility.
I also think that the U of C—this just isn’t remotely in their wheelhouse. This is not something that they can get their arms around. And so, I think it’s going to have to be done apart from all of the different sort of structural entities in the city.
Why do you feel that way? They’ve got a business school and the Polsky Center…
They have a business school. But you know, the MBA programs, these venture plans—the last couple of years, in fairness, they’ve started to have a focus on some social good, on making a difference, on some kind of solutions. But fundamentally, they’re business plans, and they’re about building economic businesses in this new world, which is a connected world and a digital world, and a technology-driven world. And we need to start a little lower.
One of the problems with the Whole Foods that’s sitting in Englewood, and some of the stuff, is if you really understand how a dollar works—a dollar spends about seven minutes in the ghetto. In the Englewood area. Seven minutes. Because then it goes to the corporate partner. It goes out.
To build something that is going to really rebuild the economic environment down there, it’s got to be a local business that’s locally owned, that’s providing services to the local population, and that employs local workers.
This is one of the reasons why, for all of the bad things, Uber is really interesting. There are people who are able to go places, people who are employed, people who are making a living, out of nothing. Just out of nothing, because of an enabling technology.
We’ve talked to a number of the churches. The churches could be business incubators. You don’t need bricks and mortars. You need sort of the instruction and the resources. There are big churches, and a lot of the churches are like, “Well, we’re going to build an incubator.” We’re like, “It’s not about the real estate. You’ve got plenty of real estate.” It’s about a strategy that really is going to help people be successful in the community.
We’re working with Bright Star, we’re working with New Life [churches]. We’re working with several of these—Corey Brooks is here regularly and some of these other guys, Chris Harris—who are next-generation pastors. Really next generation. They’re business people. They’re people who understand economic development as much as they understand the religious components of how they connect to their congregations.
We haven’t focused on the violence stuff. We haven’t focused on the crime stuff. We’re trying to just stay within the things where we have some reasonable credibility.
Talk about what 1871 does in a general sense.
We have on our plate twenty different business ideas, and every one of them is astonishing. I’m trying to figure out how do I populate these with teams, because that’s another part of what’s going on. We have ideas where we’re looking for entrepreneurs, and then we have companies coming to us and saying, “Can you help us be innovative?” And truthfully, that’s the real gain here. 1871 was not built necessarily to build startups. It was built to do economic development. And the economic development is changing the way Allstate does business, not the way that Joe Blow and his startup with three people does business.
And we’ve done that. Allstate now uses one of our phone apps to do collision estimating. It’s such a sea change that two years ago when I first showed this to them—because these were all my customers in my CCC days—they laughed. We said, “No, you don’t understand. Six out of ten times, we can do with a phone what you’re sending somebody halfway across the city to do.”
And two years goes by, and they announced two months ago, they’re closing all the drive-ins, firing 500 adjusters. Guess what they’re doing? They’re using the phone. Why? Because when you take pictures—and it’s not the adjuster, it’s you at home—you take ten pictures, we’ll adjust that loss. We’ll do twenty a day instead of two a day. We’ll adjust it in three hours instead of three weeks. And there isn’t an insurance company in the world that isn’t going to do that now. There may be three or four companies providing that technology to them, but we were first.
And I think ultimately there won’t be. It’s a winner-take-all thing, so I think eventually these companies will give up the ghost to try to invent their own. Because what’s interesting about the platform economics is we can invest millions, because we’re doing it for forty insurance companies. And let Allstate try to keep pace with that.
Now when you say “we,” who is “we” in that scenario?
Typically, when I say “we” apart from the royal “we,” it means 1871 companies, where we’ve done something different from simply hosting them and helping them be successful in themselves. And that’s this whole practice around connecting our startups to larger companies, and managing the process, and doing the matchmaking, in order to make them successful. Because it’s really hard.
You’re not taking equity as a company in these things?
We have seven venture funds here. We’re a non-profit. So 1871 does not, but everyone here is free to. And a lot of people do. A lot of our board members are mentors and investors. The venture funds that are upstairs. Our corporate partners invest in these companies.
What we’ll do is build the technology, and then twenty different companies will go use it in whatever it is they’re doing. And it’s an enhancement, and they don’t have to invest in that technology and the time in making it industrial strength.This is something that is so completely unique to this place. And it’s because you have a technologist running the place. It’s because this is what I love doing anyway. We have three or four proprietary technologies that are being used by our businesses all over the world.
You said, “I’ve got twenty ideas here, and we’re looking for entrepreneurs for them.” That does not sound like the classic model of “I have the idea and I bring it to you the investor and sell you on it.”
Here’s what happens that’s different. We take about seven out of ten people into 1871 who come to the front door. And for a few, we say, “No.” We’re a B2B thing, so if you’re building a dating site for pets, we don’t care. You know? If you’re the four-thousandth provider of some kind of ice cream, we don’t care, right? Number one, show me how you’re going to save me time, money, make me more productive, help me make better decisions—those kinds of things. But even when you get in here, a bunch of times, your idea doesn’t get traction. Somebody else has got a better version, whatever.
So we do a lot of moving of this talent around. We have two full-time recruiters. We have schools here where we train these people, and then they go work for our companies as well. I have this huge talent pool that’s fairly mobile, and this is how they want to spend their lives.
It’s a little different, because when the VCs tried to do this, they failed one-hundred percent of the time. The VCs tried to do rollups. You know, let’s go hire the number-three guy at waste management, and do a garbage business. And the number-three guy, he would take it, but he didn’t have the passion. He wasn’t entrepreneurial.
Here, you start with people who are entrepreneurial, but everybody understands that the desire plus the idea still takes a whole lot. And so that’s what I say. And when these big companies come to us, they say five things. They say it so consistently it’s astonishing. “We’re not inventing enough new ideas internally”; “The people who built it won’t break it”; “We can’t hire these young technology people”; “We’re doing things in years that we need to be doing in months.” And, “We’re scared to death that all the domain expertise can’t be transferred to these next generations. We don’t have a strategy for doing that.” So we help them do that.
Here there are four groups of people. Everybody thinks 1871 is all complexion-challenged fifteen-year-old white guys. You know, little entrepreneurs. We have serial entrepreneurs who are really smart, and who are like, “You know what? I’m not going to invest in an office lease until I see that the dog eats the dog food this time around.” You’ve got guys who are forty and fifty years old sitting next to people who are fifteen years old, in essence.
Serial entrepreneurs, young entrepreneurs, career changers. You know, “I spent my twenty years, now I want to go do my passion. I want to go do something I love.” And then the last one is really what you said, and that is people with domain expertise, who are really smart, and know everything about their business, and don’t know the technology at all.
We’ve got an ophthalmologist here. For twenty years, he has dreamed of a practice-management system, and he has been trying to jam his business into Salesforce or Quicken or QuickBooks. Now he’s here with two kids, and it’s hard to tell who’s more excited. And they’re building an app and he knows exactly what it should do. He’s got plenty of money. But the biggest thing he has is, if it works for him, he’s got 399 other members of his ophthalmology association, and they’ll all buy it in two seconds. And then we’ll take that platform, and we’ll go to dermatologists and a zillion other people.
And that’s the model. And that creates a tremendous amount of value to the companies, to the participants. We’ve really grown from simply serving the entrepreneurial community to really trying to figure out what’s a model for building real economic development for the whole city—moving the needle for big companies, helping big companies inject this technology and sort of this methodology. That’s all part of what goes on here.