Robert F. Smith on becoming the richest black man in America, what companies get wrong about diversity
- Robert F. Smith was among the first African Americans to run a private equity fund, he told Business Insider.
- The billionaire businessman pushes diversity initiatives at every software company he invests in, and says it helps them create better products.
- Smith made headlines in May after announcing that he would pay off the student loans of a Georgia-based, historically black college's graduating class.
- Visit Business Insider's homepage for more stories.
Robert F. Smith is the richest black man in America, and one of only four to currently have a net worth of more than one billion dollars. The son of two Denver-based school teachers, he earned degrees from Cornell University and Columbia Business School before founding Vista Equity Partners, a private equity firm that specializes in software companies, in 2000.
From the journey of becoming a black private equity titan, Smith knows one piece of conventional wisdom to be true: Life really is lonely at the top. Smith is now spending his $5 billion (R225 billion) fortune to make sure it doesn't stay that way.
Most famously, Smith volunteered to pay off the student loans of Morehouse College's entire graduating class while delivering their commencement address in May. He later expanded the gift, which the historically black university said totaled $34 million, to cover any outstanding educational debt owed by the students' parents.
Smith's efforts don't only benefit African Americans. Vista exclusively invests in software companies - a rarity in private equity - and has emphasized gender diversity initiatives at all of them. Vista also hosts an annual conference where female leaders from across the firm's portfolio, representatives from Columbia Business School, and other tech executives discuss strategies for getting more women into their highest ranks. After moderating a panel at this year's event on February 19 in New York City, Smith sat down for an interview with Business Insider.
The following interview has been edited for length and clarity.
Taylor Nicole Rogers: One of the things Vista is best known for is looking beyond the Ivy League to pull talent from a wide variety of backgrounds. How do you do that?
Robert F. Smith: What we're really looking for are the smartest people on the planet to work for us. The key is to make sure that we go as broad as we can, so we can be reflective of what this planet looks like in the companies we operate.
Our products service every industry. We're in 175 countries, we have 225 million users of our software. They all look different. If you design software for just one certain segment and one certain way, then that, most likely, is all that's going to use it. There are about seven billion people on this planet. Only 26, 27 million of us actually know how to write code. So we have got to go find those folks and cultivate and develop them.
You have to create a workforce process and a workforce environment that makes people feel not just invited to the party, but also asked to dance. It's a matter of necessity more than anything else.
Rogers: How do you explain that line of thinking to your investors and to the executives in your portfolio companies who don't share the same approach?
Smith: Take a company like Jamf [a company Vista invested in in 2007 that sells software that allows businesses to pair all of their Apple devices]. This is a company in the Midwest and by its natural evolution, it just would not have the most diverse workforce. But the CEO, Dean Hager ... looked at our best practices and expanded the opportunity set of our applicants. He now has one of the most diverse workforces and one of the faster-growing companies in the portfolio because we went through what I call the retooling effect.
They [are now] 30% women and they have four or five times the number of people of colour that they had five years ago. They put in a concentrated effort and said, 'We've got to change this - not because it's the right thing to do, but because it's a business necessity.'
What companies have to do is be more thoughtful about how they engage their customer base. And what's their customer base? Well, they look like what the world looks like. You've got to build an organization reflective of your customer base so you can maintain product superiority and gain market advantage.
Rogers: Does diversity impact the way that you run your company?
Smith: Our business is a little different in that we're business- and not consumer-focused. We realize the importance of reflecting what the business environment looks like, not necessarily the localized consumer environment. The business environment globally has some attributes associated with higher intelligence and capacity and the ability to execute. You've got to make sure you have people in your organization who are reflective of that.
Rogers: Speaking of the global business environment, there aren't a lot of people out there who look like you that have achieved your level of success. What has that been like?
Smith: I realized when I decided to go into chemical engineering that there were very few African American chemical engineers. I could probably name six African American chemical engineers that I've met in my entire life to date.
When I decided to go into this world of private equity, there were no African Americans running funds of any size. And today I have a group of more diverse managers who I work with. We have our own organization, where we talk and we help each other create. I call it peer-to-peer engagements to help each other think about raising money and organising our businesses better.
There was nobody who looked like me running a major private equity firm anywhere near the size that we are - or even near the size that we were at the time. So that's part of being a pioneer - it's not just blazing the trail, but putting some trail markers, knocking the weeds down, and putting some pathways of support behind you for others of your community to follow.
Rogers: You're now one of the best-known philanthropists of your generation, but you've focused your giving on a population not many other donours have: African Americans. Why is that?
Smith: I tell people there's nothing greater than liberating the human spirit. Think about 400 young African American men who had just done the heavy lift. Many of them had college loans and parents PLUS loans coming out of their neighbourhoods, fighting what they were fighting for, and then getting educated. Now they did all the heavy lifting. And I thought, what can I do to uplift their spirit that is already high? And I thought liberating 400 spirits 400 years after 1619 is probably a good, good thing to do.
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