-by Webmaster, Michael R. Hicks
With the next few "Mo'pinions," I want to share a series of ideas that I want you all to think about and consider. Most people, hopefully, will at least use this as an opportunity to think about — and more hopefully, serious cats put their money together and seek to do about — the abandoned and/or blighted areas in West Louisville neighborhoods.
There has been a lot of tragedy and way too much uncertainty on the streets of our neighborhoods. Explosions of violence, bouts of crew warfare, and too many cases of people dying well before their time. These problems are significant and in due time, I am going to share some solutions that our communities can implement to help make them a bit more safe. For now, I want to pivot from this onto the continued rehabilitation and development of our neighborhoods. The challenges are so many and some so considerable that we have to have some ability to multitask.
Brothers and sisters, as Booker T. Washington alluded to and what I am pulling in a 21st century 2015 context — "we have to make the bricks." We have to look hard at the abandoned and run-down spaces in the urban areas in our American cities, and we in particular in the neighborhoods of West Louisville communities, and use these areas as urban labs to fashion solutions and best practices that will collectively lift us from the decades, the centuries of racist fiat and policy. There is another election coming in 2016, and President Obama is walking away in January 2017. The "Barackalypse" is coming. Think back on the condition of Black folk in the administration before that. How the Black underclass was treated in New Orleans during and after Katrina in 2005. The housing and market meltdowns of 2007-2008 that cost tens of thousands of Black people their jobs, their homes...think about how many of us are paying on underwater houses even today!
In this Mo'pinion, I want to cover the matter of rent-to-own buying and want to share with you an alternative model and economic process that would better benefit our and our people's lives. As it is with check cashing services, payday lenders and pawn shops, the rent-to-own business is a bad bet for people with limited financial resources, the unbanked, and folks with poor to bad credit. Yes, they do provide a service that most financial institutions ignore, but it is not in your best interest to use them.
These ripoff TV and furniture rental places are the worst example of the types of "services" that puts a "tax" on strugglers and strivers in our communities. But look — we can create services that does not rip off people but designed for everybody to share resources as opposed to getting caught up in the competition for materialistic things. We can create models where a person can rent a suit for court, rent space to start a business or host family, and more. Many things can be rentable that too many mistakenly pay full price, get used once or twice, then it wastes time and resources sitting around and depreciating. Through leveraging existing resources in a neighborhood like used items that Black folk bought with disposable income and monetizing these items by renting to others, we tap into hidden assets and resources amongst Black folk without outside help.
High density urban cities with large Black populations, circular economics and collaborative consumption solutions will create quick economic empowerment with low upfront cost through stimulating economic activity from existing unused resources. I have said and I continue to say that Black Americans must learn to look globally for patterns and practices that we can use in the hood as solutions and modify and tweak them to work for us.
What's Circular Economics?
It is brothers and sisters sharing assets and services instead of purchases to facilitate personal wealth growth. It is using code and technology to implement digital payments like peer-to-peer mobile payments to promote spending and payment systems within our communities.
Here's a selection from Wikipedia about what circular economics are:
In broader terms, the circular approach is a framework that takes insights from living systems. It considers that our systems should work like organisms, processing nutrients that can be fed back into the cycle—whether biological or technical—hence the "closed loop" or "regenerative" terms usually associated with it.
As it is, the U.S. is driven by the industrial method of manufacturing, consumption and disposal for the next version or the newest product. You have people dumping their iPhone 4's or 5's now that the 6s and the new Samsungs and Motorolas are out. Wall Street's business model are based on the corporation's ability to do more and more, and they report on the number of phones sold as a metric that affects their stock price so Apple is compelled to keep creating newer versions. As it stands, Black folk are a docile consumer class that votes overwhelmingly for Democratic Party candidates and expect nothing in return. Our participation in this make-take-dispose model must be redefined. Overall, Black folk are hired to make (in areas where the labor has not been shipped overseas), use their paychecks to take, then dispose material items once the item goes obsolete. We all should know that this is not a good economic position to be in, especially as economic downturns happen in the reality that Black unemployment consistently remains twice the national average.
How Black Communities Can Use Circular Economics
In the 21st century, brothers and sisters should think about how we can facilitate the returning of and renewal of existing resources and monetize the functional service of them. Consider this - circular economics is how predominantly Black communities can build a sustainable economic engine off the existing items already in our neighborhoods without a SBA loan and without validation from outside groups.
It doesn't matter if you are on probation or have a felony on your record! You are fully capable of starting circular economic cycles in your neighborhood. A lot of men and some women struggle to find work after they have been incarcerated. Some of this is the result of looking in all the wrong places for work - you may get a lot of rejection from the make-take-dispose cycle of small businesses and companies. Coming out and building a model around circular economics and doing that for your self can free you from demoralizing rejection, plus it gives you an opportunity to make restitution to your community and your people in becoming an asset rather than a liability. You can be a contributor to an economic system that resembles the biological cycle of nature.
Let's take a look at some circular economic models that we can use in the hood compared to make-take-dispose ones.
Furniture as a Service Model
There are a lot of people who go rent-to-own to acquire furniture because they are starting out, maybe living in a particular area temporarily, and other reasons. It is a service model that has an individual who pays for the use of furniture for a single household. A lot of these rent-to-own companies focus on providing new, yet generic-looking selections that are considerably overpriced compared to their real value. Furnished apartments tend to have unattractive, older used furniture. However, there are a lot of people in our communities who have old, yet classic, furniture.
Large opportunities exist for an entrepreneur to create a business were they take used furniture from around the community and rent it to others on that family's behalf. For example: if a family owns a couch and instead of donating it to Goodwill (particularly if you are not going to use it as a tax write-off) or throwing it away in the alley, someone could pick it up, refurbish the couch and rent it for $5.00 a week to a young person who just moved into the community. The business can take $3.00 a week and give the original owners $2.00 a week giving them an additional revenue stream. You could making a sharing agreement with households to lease their old furniture provides an incentive for people to renew and reuse furniture and create new income streams. A young family could move into Chickasaw with no furniture, they can find a vintage set that has been refurbished and looks nice. Rather than overpaying for a rent-to-own or splurging for a new dinette, they can rent it from your Circular Economics furniture joint for $25.00 a month and the original owner of the set can receive a $10.00 monthly payment when their item is rented out, creating a renewal system and personal income stream.
Micro-payments and -transactions allow for small payments to be moved into a bank account or prepaid accounts in a local area so that cash does not become necessary. Going digital also avoids the type of cash problem that can become an issue in economically challenged neighborhoods with security and those kind of concerns. There are a lot of technophobes who cringe at that kind of business model, being able to collect multiple streams of income that filter into your account is an accomplishment and an ego boost. Also, it's not crazy when you can have an old couch or dinette set that you planning on getting rid of, but you can give it to someone else for reclamation purposes and make $20.00 a month of extra income in the process! This is a model that allows new members to move into a community and get decent, affordable furniture from the community and the people will know that when they pay for this, they are empowering someone in the neighborhood and keeping the dollars circulating in the community.
Jobs can be created to help move the furniture as well as refurbish it. A warehouse (goodness knows we have more than a few of those) or a showroom can be established in a commercial center to drive traffic. Think about about. Remodel. Re-use. A revenue stream from within the community from the community. One more step toward greater economic empowerment.
For those that read this and are thinking, "Well, all of that sounds good, but what about deadbeats?" We have. The focus here is about service and utilization.
Back to the dinette set example. The original owner had little value on the furniture as it sat around their house (or basement, or garage) and this is the furniture offered for rent. There is a cost to refurbish it all and this cost should be recouped through your rental price. Like in any business, one has to mitigate their risk. The furniture refurb and rental entrepreneur can require a modest security deposit, where the original furniture owner can be paid from that and the renter might miss a 30 day payment but they will have to make up the security deposit. It does not have to be an unfairly high price for two main reasons: this is a business model that creates something (rental revenue sharing) from nothing (used furniture that has little if any resale value). Secondly, becaue this is a business from within and focused on community, your customers are more conscious about the purpose and plan of your business and they will tend to be more responsible in doing business with you. Note: I said more conscious, not perfect. Take steps to limit your amount of risk.
Clothing as a Circular Economics Service Model
Clothing is one of the fundamental utilities (food, clothing, shelter, transportation). Some clothing is for utility and not needed for permanent ownership. Why own a wedding dress? Why own a suit when you may only wear it two or three times a year? Under this model, you can utilize these items for that event and allow others to use the items and you keep the rest of your money and do not pay for manufacturing costs.
Retailers could be created in our communities that specialize in used clothing for these purposes like a Plato's Closet but larger. This model can allow people to sell us their clothing and to buy new clothing but rent it, moving beyond the simple tuxedo, bridal wear setup. People can wear the clothes and return them as a rental or they can be sold used and have alterations performed on them to wear as new styles of fashion. This is the whole nature of what happens in Japan and Harajuku culture. Think that's silly, think that's unworkable? ThredUp, a marketplace for used apparel, just raised an $81M Series E round led by Goldman Sachs Investment Partners. ThredUP has raised over $125M to date.
There are plenty of economic development opportunities from buying and selling and renting used clothes, refurbishing used fabrics to sew existing and new pattern styles to eccentric people who love to have a unique look...when you have ideas like this that have the opportunity to cluster, perhaps a new fashion scene like Harajuku could be created from Black communities (particularly around major events such as the Kentucky Derby), creating a new economic driver and the birth of fashion designer houses that can export skills worldwide.
Collaborative consumption goes hand-in-hand with the concept of circular economics, it is systems of organized sharing, bartering, lending, trading, renting, gifting, and swapping. Through collaborative consumption, people have the benefit of ownership with reduced personal burden and cost and also lower environmental impact. One of the calls at the 20th Anniversary of the Million Man March in Washington, DC October 10th was to withdraw from Christmas consumption by boycotting Black Friday and Cyber Monday (for starters). For well over a year, Black men and women refused to ride the buses in Montgomery, Alabama, making the decision to walk on foot as well as utilizing a system of jitney ride-sharing to get back and forth to work. This is a model of operating that could well serve the strugglers and the strivers in poor and working-class predominantly African American neighborhoods, as lowered material consumption of new goods and services and a refocused use and sharing of the existing goods and services that we have already (over)paid for, can deliver a serious economic statement to the power of African American spending, as well as provide opportunities for Black communities across America to see and understand that there is strength in numbers, power in even our limited dollars and how keeping that more of that money within our communities can be to our material benefit.
Here's some national examples.
Rachel Botsman and Roo Rogers found three major types of systems that the many thousands of examples of collaborative consumption fall under:
Product service systems enable companies to offer goods as a service rather than sell them as products. Goods that are privately owned can be shared or rented peer-to-peer. PSSs appeal to the increasing number of people shifting to a usage mind-set: They want the benefits of a product, but they don't need to own the product outright.
In redistribution markets, used or preowned goods are moved from somewhere they are not needed to somewhere they are. In some markets, the goods may be free, as on Freecycle and Kashless. In others, the goods are swapped (as on thredUP and SwapTree) or sold for cash (as on eBay and craigslist). Over time, "redistribute" may become the fifth R—joining "reduce, reuse, recycle, and repair"—and a key form of sustainable commerce.
In collaborative lifestyles, people with similar needs or interests band together to share and exchange less-tangible assets such as time, space, skills, and money. These exchanges happen mostly on a local or neighborhood level, as people share working spaces (for example, on Citizen Space or Hub Culture), gardens (on SharedEarth or Landshare), or parking spots (on ParkatmyHouse). Collaborative lifestyle sharing happens on a global scale, too, through activities such as peer-to-peer lending (on platforms like Zopa and Lending Club) and the rapidly growing peer-to-peer travel (on Airbnb and Roomorama).
There are many who think that the sharing economy as getting rid of the middle man and brokering/haggling process, but I disagree. What this model can do is change the middle person to YOU, the aspiring entrepreneur, in part because of the threat that sometimes happens with robbers, stalkers and scammers on sites such as Craigslist. Instead of direct peer-to-peer, there should be a platform or exchange business model like Uber, ZipCar or Airbnb in place to facilitate these examples of collaborate consumption and the companies does this through web and app services to the consumer who is renting and the provider who has ownership of the service or item. There can be challenges in the control or supervision of the peer-to-peer transaction. However, true collaborative consumption models should have a middle broker service as well as supervision over the product or service to establish and maintain operation rules for a shared economic solution and fair trade between peers. Our kin site at Dream and Hustle have developed code libraries that can be used to develop the web infrastructure for this class of business.
How Product Service System Models can work in West Louisville
As I've said earlier in the Circular Economics discussion, this model spurs economic activity instantly and generates a revenue source in a Black community, especially high density areas and neighborhoods. A screen printer in the hood can rent out their machine for two hours during otherwise downtime for that cat to hustle in the community. A contractor who does business during the weekdays with his or her tools can rent the tools out on a weekend project to build a walking park on acquired abandoned lots. A DJ can rent out some of their own 12-inch discs to another DJ for a weekend set. Elderly couples who kept their furniture pristine with the oldschool plastic covering can rent the furniture out to a young upstart couple in the neighborhood.
To think of it in an easier way, look at it like a "reverse pawn." In a pawn shop model, a person is given a loan for an item and they have to pay that loan back with interest with the item working as the collateral. With a "reverse pawn," a person is renting out an item and generating income as a result. In both examples, the person gave up ownership of the item for money but the "reverse pawn" has benefits that the former does not, namely an emotional one in seeing the items that one owns generating income versus the desperation model of a pawn: a person no longer has to worry about not paying the pawn shop on time and losing their item. The product(s) offered can generate more revenue than perhaps the actual sale value of the item, so instead of being a predatory model taking money away from our predominantly Black neighborhoods, the Product Service System model is a revenue generator using goods that people already own but were not using. For risk protection, provide insurance binders like the car rental companies sell to end users to replace the item at cost for a fee and hold the renter accountable through their own home or renter's insurance.
Additional note: There is an IRS section on renting personal items and tax deductions such as cost of maintaining/repairing the item for rent and depreciation that can offset your income tax revenue. Please check out this link and consult a tax expert on possible benefits of renting out personal items.
The Heart of the Matter: Making this work and happen in West Louisville
For decades, Black folk have been make-take-dispose consumer spenders. Given that, our communities are filled with plenty of materials that can be renewed and reused to create transactions and economic activity without any assistance from the outside. Now keep in mind, this is not the same as pawning used stuff or even thrift shop diving, this is a business model that focuses on micro-payments or even virtual currency like Bitcoin and monetizing existing items sitting in wasted spaces unused.
Think about it - if Black people would pull their money from the Buddy's, the Aaron's, the Rent-A-Center's...shoot, even perhaps the Furniture Liquidators, the Ashley's, the Furniture Showroom's...and we spend and keep that money in the hood? Think of the possibilities!
Don't buy new furniture if it is a squeeze or a burden. Rent it for 24 months at fair payment, no more crazy installments. No more need to celebrate the opening of a fancy brick-and-mortar only to see it shut down in two years or less - we own the buildings already and accommodate pop-up store models, rotating entrepreneurs to keep our commercial districts fresh. There's less of the need to buy the latest kicks and clothes, we can create unique patterns, rent out the latest fashions and return them.
This saves a lot of money for West Louisville yet still allows us the use of material goods. It creates jobs, real jobs that can expand out and grow. Aspiring entrepreneurs can apply circular economics and the people can engage in collaborative consumption in Black communities, and the wise and enterprising ones can expand these ideas to international markets in Africa, South America and China. People can take the code base and software that we share to accommodate models to provide item sharing and reuse.
Implementing this, we save more, we are kinder to the world's environment, we generate income and revenue streams in predominantly Black neighborhoods and we keep more of that money circulating within our neighborhoods. It is an all-around win for the people. Do For Self.