Over the past fifty years, the United States has experienced a sharp rise in inequality accompanied by an equally steep decline in social mobility. Today, the top 1% of own more wealth than the bottom 92% combined and the long-held belief that anyone born into poverty can lift themselves out of this condition is no longer true: the percentage of children who grow up to earn more than their parents has dropped from 90% for children born in the 1940s to only 50% today. This decline in economic opportunities has left many Americans feeling disenfranchised and their frustration has led to increasing political polarization.
While there is no question that addressing systemic issues of this magnitude will require public policy changes, it will also require a new approach to running businesses and investing in them. Goldman Sachs believes all institutions can contribute to the well-being of society, whether they operate as a for-profit business or a nonprofit organization, and as impact investors, they also know that addressing racial and economic inequality in the United States can uncover tremendous untapped potential. As an example, Opportunity Insights, a group of economists at Harvard, noted that if women and minorities had access to innovators at the same rate as white men, innovation in this country would quadruple. In the context of the Capstone Workshop, Goldman Sachs hopes broaden our thinking by looking at different companies and funds that can help address economic, racial and environmental inequality in the United States. They are also interested in thinking about the best ways (or new ways) to measure an investment’s success of outcomes, given the oftentimes unquantifiable nature of social impact.