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Find out more about an innovative plan to make inner city public housing residents, stockholders in their own data processing firm.
A Washington, D.C. investment banking firm founded by two former Wall Street bankers has joined forces with a Los Angeles based entertainment company to form a corporation that could lead the way in showing how to downsize government assistance in the next century. e.villages, the brainchild of Hamilton Securities Group and Adelson Entertainment, is an information technology company which provides selected database services for U.S. government agencies and the healthcare industry, with an innovative employment strategy.
"They have risked more than $1 million on the idea that the personal computer is to the global economy what the drill press was to the industrial giants of the mid-century - a sophistocated tool that has become simple enough for many semiskilled workers to operate," says the Washington Post, "The (e.villages) strategy is simple: Go into an inner-city neighorhood, intensively train a group of people... to provide high-quality data management at low prices. (Then) ..give the new workers a personal financial stake through stockownership."
The e.villages philosophy has another innovative twist - locate the company in the neighborhood where the employees live.
There's no commute, the overheads are low, and it builds a community's economic base from within.
In the case of the pilot project for e.villages, Edgewood Technology Services (ETS) is located in the housing project from which it gets its partners. (ETS is on the ground floor of Edgewood Terrace, an apartment building in a chronically depressed, drug ridden section of Northeast Washington, D.C.)
So far ETS has nine full time employees who have completed a spreadsheet of 19,000 mutlifamily dwellings and mapped federally insured properties in dozens of cities. According to the Washington Post, the "... company is almost breaking even, with monthly sales of $30,000 to $50,000. Most employees receive about $20,000 a year, plus benefits, for creating increasingly complex databases and spreadsheets."
Whether or not the ETS experience can be replicated is the biggest question now in the e.villages scenario. What do you think? Is e.villages a ground breaking innovation, or is it too expensive to replicate, helping too few people who need it? Ask the partners at the Hamilton Securities Group in Washington, D.C.
A question from Sadie Posen, Rossmor, NJ:
Your company gives a chance to an "at risk" workforce which is commendable. The ETS project seems to have very special people, but how sure are you that you'll find the same commitment in other places? How are you planning to manage quality control, and what social support are you offering workers?
Hamilton Securities responds:
The ETS project does have very special people. But we're convinced that low income communities across the country have many "performers" who can also be highly productive in the mainstream economy -- given a chance and the right incentives.
As you suggest, developing quality control and social supports is vital. Marvin Harris, the site manager that we hired to manage ETS, is as much a coach and support system for those employees, as he is a business manager. Some people have had almost no experience in the conventional job market. They need training in business and workplace practices. For some, we've had to work through the welfare and public assistance bureaucracy to make it possible for them to take a job and not be penalized financially.
As we go along, we are developing written protocols to reflect what we learn. From these, we are building quality control, administrative and personnel systems that will be needed to build a successful company. This will be a continuous process. We are also exploring partnerships with for-profit and not-for-profit enterprises that specialize in the assessment and social support functions that may be required by some trainees and new employees.
Ultimately, we believe that the most powerful quality control tool of e.villages is that all employees will be stockholders. A key to success in any business is that you have to "sell it for more than it cost you to make it." When every person in a company understands those costs and can benefit from the profits, they share a powerful incentive to perform.
A question from Harry Anderson, Milwaukee, WI:
You've put a million dollars into e.villages. When do you expect to make it back? Do you have a five year plan for reviewing your success? What criterion do you use, and what kind of margins do you realistically expect?
Hamilton Securities responds:
We do have a detailed business plan that is based on extensive market research. We looked into the data servicing, computer training and other related industries. Because it is still too early to determine profit margins based on our own experience, our estimates are based on experience in those industries. The timing of when the initial investors receive a return on capital will depend on a variety of financing decisions over time. We expect the returns to be very competitive.
A question from Steven Cohen, Chatham, MA:
You say that the ETS/e.villages project is a business, but there's obviously charitable aspects of company. Have other businesses seen the value of this kind of good publicity?
Hamilton Securities responds:
You are right that e.villages is hiring a workforce that we as a society tend to associate with needing public assistance or charity. But we don't consider e.villages as "charitable." We are hiring this workforce because we see a business opportunity. That opportunity did not exist even five years ago, when inner cities were, in fact, very isolated economically. Today, telecommunications and advances in computer software are breaking down those barriers of isolation.
e.villages will succeed or fail based on the bottom line. And it will be the bottom line to both ourselves as well as the communities in which we invest. e.villages is one of a small but growing number of private businesses in the U.S. which have committed themselves to satisfying "two tests." First, our activities add value for the larger community. And second, they generate value for the company and its shareholders. Ultimately, we think the enduring success of any enterprise today depends on its usefulness to its greater environment.
A question from Sherry Silver, Huron, OH:
What's at the root of this enterprise? If it works it sounds like a GOP dream. Does you plan involve Republican lawmakers?
Hamilton Securities responds:
We don't think of e.villages as Republican or Democratic, and there are no lawmakers of either party involved in this effort. We see e.villages as reflecting the fundamental American grassroots philosophy of community and "can do." At the root of e.villages is our perception that the opportunity to build a profitable inner city workforce is possible today. Three forces are converging to make this happen.
The first force is telecommunications, which now enables private commerce to flow in and out of poor communities easily through the Internet and cyberspace. The second force is the computer software revolution, which makes it possible for people with relatively low education and skill levels to be trained fairly quickly to handle sophisticated data management tasks.
The third force is philosophic: The American people -- Republican and Democrat alike -- have ordered their lawmakers to stop sending substantial amounts of public aid to poor communities where they produce a low return for their investment. Americans have not stopped caring about our people. Rather, we want results. We are tired of funding a system that is not working. There is nothing wrong with the people who live in poor communities. But there is something wrong with the current system that manages investment in those communities.
The American people have a long tradition of investing successfully in ourselves and our future. And we're reaping substantial returns as a result. Many of us or our families owe our success today to the GI Bill after World War II. We mandated free public education early in our history.
In this respect, e.villages' goal to create training centers throughout underserved communities is not all that different from the thousands of one room school houses that our forefathers built across the prairies more than a century ago. Our hope is that e.villages can demonstrate that there is indeed a way to produce a good return for our investment in lower income communities. And that once this is demonstrated, hundreds of other companies will see this opportunity and invest in these communities, too.
A question from Jennifer Klein, Minneapolis, MN :
Is the government giving you any waivers regarding OSHA standards, business zoning regulations or tax breaks?
Hamilton Securities responds:
Hamilton Securities and Adelson Entertainment have funded the entire e.villages effort from our own capital. We haven't sought or received waivers of OSHA standards or zoning regulations or tax breaks. That said, we do believe that going forward, there may be opportunities for public sector investment in e.village-type activities to help speed along the transition of inner city residents from public assistance to self-sufficiency. One potential candidate for public investment is training costs.
If the public sector would help defray the cost of training people, e.villages and companies like ours could hire more people faster. Such public investment might be modeled on what states now do to help attract automobile plants or other businesses to their borders. Most states and many local communities provide assistance for training in exchange for locating there.
A question from Gail Davis, Cincinnati, OH :
There are only nine people employed at the Edgewood Technology company! How can a plan like yours possibly help the large numbers of inner city people who need it?
Hamilton Securities responds:
We hope to build a substantial work force. At the same time, our employee base will be very small relative to the potential size of the total workforce in these communities. We do hope that our ideas, models, network, and software, can be used by other entrepreneurs and companies and communities to recognize and tap the potential value of the workforce in poor communities.
ADDITIONAL COMMENTS:
Michael Kelly, Grand Junction, CO:
Why Just Inner-Cities
It would seem to me that the portability and independence of the electronic information world would easily allow inner-city residents to escape to other less populated parts of the country and continue their work. I live in a semi-rural part of western Colorado and would like to find a way to use my three years Internet research experience to generate a living wage for myself. If inner-city folks could bring their skills and income to less crime and drug ridden parts of the world, it would seem their lives would be enhanced. It would allow for mobility without the fear of unemployment or the need to tap into the welfare system in another community.
Just a thought. Thanks.
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