Addressing unequal opportunity in an American city

| Podcast

Spatial inequality continues to limit the economic opportunity and mobility of millions of Americans. In this episode of the Future of America podcast, McKinsey senior partner Kweilin Ellingrud and Lata Reddy, senior vice president of Inclusive Solutions at Prudential Financial and chair of The Prudential Foundation, discuss Lata’s unique career at the intersection of civil rights, social impact, and capital markets, as well as Prudential’s long-term effort to promote sustainable, inclusive growth in Newark, NJ. An edited transcript of their conversation follows.

Kweilin Ellingrud: Welcome to episode eight of McKinsey’s Future of America podcast, where we explore how we can build a future that drives sustainable and inclusive growth. Join us in conversation with leaders who are accelerating progress to grow, broaden, and sustain prosperity for more Americans.

I’m your host for today, Kweilin Ellingrud. I’m a McKinsey Global Institute director and a senior partner based in Minneapolis. Today I’m joined by Lata Reddy of Prudential Financial. She’s a senior vice president for Inclusive Solutions at Prudential and chair of the Prudential Foundation. Lata helps position the company to promote inclusive economic opportunity and sustainable growth. Lata, welcome, and thanks for being here today.

Lata Reddy: Thanks for having me.

Kweilin Ellingrud: Lata, tell me a bit more about your role at Prudential.

Lata Reddy: I have the privilege of leading an organization within Prudential that leverages its expertise and resources with those that reside across all of Prudential. And so we are able to bring an outside–inside view to the work of our company.

That means that we can bring insights about customers who traditionally have been underserved by financial services institutions. We can help understand what emerging markets are experiencing and what they need, and those markets may be people, or they may be geographies.

And because of the set of partners that we invest in on the ground, we’re able to share those learnings with our colleagues, who can then use them to inform the products and the solutions that we are going to market with. All of that is in an effort to make sure that we are serving the needs of a broader group of stakeholders every day.

Kweilin Ellingrud: Lata, you’ve had so many different chapters of your career, including as a civil-rights attorney. Tell us about how you have chosen or steered your career.

Lata Reddy: For me, as it is for many people in my line of work, it’s personal. I began my career as a civil-rights attorney because of the experiences I had growing up. I’m the child of immigrants from India. Both my parents came to this country to pursue a better life for their family, a classic immigrant tale.

I saw in one generation what access to opportunities meant for my family. Both of my sets of grandparents came from very limited means. And because of access to education, access to a quality job, and frankly, access to benefits, my family within one generation is exponentially better off than we would’ve been.

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Kweilin Ellingrud: What have been some of your favorite roles across your career?

Lata Reddy: All of them taught me something different. But I think the role I have now is the culmination of the other roles. It brings together all of the different experiences I’ve had in one place on a very large platform. Having said that, I will say that there was a pivotal experience during my time in law school when I had the incredible privilege of working for a lawyer by the name of Bryan Stevenson.

Many people know Bryan from his memoir, Just Mercy, and from his work generally. But I learned so much about what it means to recognize our shared humanity, what it means to, again, have access to opportunity, and what it means when you don’t. That was a life-changing experience for me.

Kweilin Ellingrud: Across these different roles, across the sectors, you’ve had a lot of exposure to growth and inclusion. And we’re talking today about sustainable and inclusive growth. What does that mean to you?

Lata Reddy: To me, fundamentally, inclusive growth is about creating agency within people’s lives so that they have the ability to make the best decisions for themselves and their families. And that’s all people. Again, it is that they have the ability, which means people need the tools and the resources and the access to opportunity. But fundamentally, it’s about being able to decide for yourself.

Kweilin Ellingrud: Tell us a little bit more about your role at Prudential and how you’ve used the power of capital markets to drive financial and social mobility.

Lata Reddy: I have the privilege of leading an organization within Prudential that is focused on working across our businesses with our various leaders to enable Prudential to lead as a driver of inclusive growth. We have a somewhat unique mix of businesses that enable us to address people’s financial needs at various stages of their life cycle.

So we combine the resources that my team actively manages—which include our philanthropy, impact investing, and DEI [diversity, equity, and inclusion] expertise—along with the expertise that resides across Prudential to really embed a way of thinking within the company so that we can go to market more inclusively.

Kweilin Ellingrud: When you think about the state of social mobility more broadly across the US, where are we today?

Lata Reddy: Unfortunately, we’re backsliding. We’ve seen from research, and Raj Chetty’s research in particular,1 that people who were born in the 1940s had a 90 percent chance of earning more than their parents, and people born now have a 50 percent chance. That’s a pretty staggering statistic. And we know that that sits on another statistic, which is the reality that people’s destiny is often defined by their geography.

Kweilin Ellingrud: That brings us to place-based approaches to better equity. What have you done in this space of place-based work?

Lata Reddy: We’ve done a lot. Prudential was founded and remains headquartered in Newark, New Jersey. It is our hometown, and a place that we hold dear. So we have learned from the crucible of Newark and try to do right by our colleagues and the citizens of the city and do everything we can to create a more equitable system.

Kweilin Ellingrud: What are some of the initiatives that have been most successful?

Lata Reddy: I think the work we’ve done with intermediary organizations are things that we would point to as showing evidence of success and places where we can continue to build. For example, we have been deeply invested in the issue of public safety in the city of Newark.

And we helped create and maintain a collaborative, the Newark Public Safety Collaborative, where institutions across the city have come together to create a more integrated public-safety system that is integrated with the community, that democratizes access to data, and that empowers and supports community-based organizations to implement their own strategies related to public safety.

So it’s that notion of aggregating and having a collective view of what success looks like, making deep investments in the organizations that can drive that success, and remaining at the table with other stakeholders to ensure that we push it forward.

Kweilin Ellingrud: Given your unique experience across all the various sectors, what role do you think each of those sectors can play in the solution?

Lata Reddy: I think that’s the beauty and the importance of cross-sector collaboration, that we all do bring such unique skill sets. So when you think about the philanthropic or the corporate sectors, we have the ability to convene. We can bring people to the table.

The city and the universities have data, and the data are so critical as we’re making decisions. Others bring that type of research expertise and community expertise through the lived experience of how these issues play out on the ground every day. So I think, again, it’s important to bring all these different stakeholders together to really mine that expertise and make sure you get to the best possible solutions.

Kweilin Ellingrud: As we hopefully emerge from COVID-19, what kind of place-based markers are you looking at to assess if we are truly getting out of this in an equitable and hopefully quick way?

Lata Reddy: There are a few things that we are very focused on. One is access to quality jobs. How do you open up more pathways to quality jobs for local residents, in our case in Newark, but it also applies to other cities around the country and around the world where we’re engaged?

And quality jobs mean jobs that have career growth opportunities and robust benefits, where we’re really connecting work and wealth in the way that it used to be but no longer is. We are very focused on access to capital and access to financial services.

How do we invest in the small-business ecosystem, particularly those owned by people of color who are employing a large number of local residents in these local economies and driving the local economies? How do we ensure that they have the capital and the technical assistance and access to customers that they need to thrive? And speaking of thriving, creating thriving neighborhoods and making sure that these cities are rich with amenities, including cultural amenities, with safe green spaces and high-quality educational systems.

Kweilin Ellingrud: You’re deeply committed to addressing inequalities and promoting sustainable and inclusive growth in the Newark home of Prudential. In this section I want to dive deeper into your work in the city. Can you talk us through the story? How did it start? How did you get involved? What are the key elements of your place-based work and impact in Newark, New Jersey?

Lata Reddy: I have the privilege of coming in at the middle of a story. Prudential, as I mentioned, was founded and remains headquartered in Newark. We were founded there almost 150 years ago. Our history of deep engagement in the city began about 50 years ago. And we have not looked back since. So I’m just carrying on a proud tradition of engagement in the issues of the city.

Kweilin Ellingrud: I want to dig deeper into Prudential’s work and your broader work in the city. What are you focused on?

Lata Reddy: Those initiatives have changed over time. When we first began doing this work, it was really about rebuilding the infrastructure of the city and building a civil society. And this was following the civil unrest in the summer of 1967. Other companies chose to leave the city.

We decided to stay and made an affirmative decision to be part of the rebuilding. Our first tranche of work was around that. We then moved to helping to build capacity and pilot new initiatives that we thought would have the impact that we were seeking.

We then took some of those initiatives that were having positive impact and began to scale them. Now we’re at an interesting moment as we are coming out of the impacts of COVID-19, and the setbacks that cities like Newark faced as a result of the pandemic, and embarking on yet another sort of phase of this work.

Kweilin Ellingrud: As COVID-19 unfolded in Newark, what were some of the biggest shifts and challenges that you saw?

Lata Reddy: We’ll start with the assets that Newark brings to the table. It is an incredible city. It has five universities and seven hospitals, a port, and a transportation and logistics hub. So it’s an asset-rich place. And prior to the onset of the pandemic, the city was on a trajectory to make a step change in terms of the economic activity and the amenities that were coming to the city and, most importantly, the access that was available to residents of the city.

Obviously the pandemic was a huge setback in terms of the health impacts and the economic impacts that it created. So we and other stakeholders in the city have been doing a lot of work on really understanding what those impacts were and devising strategies to not only mitigate and come out of that but really to create a faster trajectory to the vitality that we want to see.

Kweilin Ellingrud: What did other stakeholder groups do? You’ve talked a lot about a kind of collaboration in bringing solutions to Newark. How did businesses, government, and local nonprofits all react?

Lata Reddy: I would say, prior to the pandemic, Newark was a highly collaborative city. There were leaders who came together on a regular basis. We founded the Newark Anchor Collaborative—and by the way, we broadened the definition of anchor institutions beyond the typical “eds” and “meds” to include large corporate entities and large nonprofits that fit the classic definition.

These entities have been partnering and collaborating and co-creating for many years alongside the city. And throughout the pandemic that collaboration continued, albeit from afar, as those of us who were fortunate enough to be able to work from home were doing so.

That meant that it took a different form of collaboration but continued nonetheless. And now that people are returning to the physical workplace, we continue to invest our time and our money. It takes the form of collaborating on our purchasing power and pooling funds so that we can procure goods and services from local Newark businesses to help them grow. It is collaborating on job-training programs and hiring people from these training programs so that residents have access to quality jobs within our own institutions within the city, and things like that.

Kweilin Ellingrud: That cross-sector collaboration is so impressive. Let’s focus on the private sector for a moment. Prudential has committed over $1 billion to promote economic and social opportunity across Newark. That is a staggering number: $1 billion. Tell us how is that funded? How do you invest that in impact?

Lata Reddy: That money is Prudential’s balance sheet money, and it takes the form of two different tranches. One is through our philanthropic efforts, and the other is through impact investing. That enables us to invest in both people and the place.

And on the people side of it, we have invested in education. That is ensuring that everybody has access to a high-quality education by supporting a portfolio of options, such as traditional district public schools and charter schools and independent schools.

We have provided funding for youth development programs to ensure that young people have access to educational opportunities as well as job opportunities when the time comes. We have invested in umbrella organizations that are working on business attraction and economic development.

And then, on the physical side, we have invested in various infrastructure projects. So redeveloping large assets in the city that had been dark for many, many years and bringing them back to life, creating affordable housing options and retail amenities, and opening up green spaces as well.

Kweilin Ellingrud: Lata, one of the things I’ve seen organizations really struggle with in this space is how to measure impact, right? Some of the outcomes take so many years, if not decades, to actually happen. How do you think about impact? What’s worked in terms of the measurement? What hasn’t?

Lata Reddy: For us, well, for everybody, it’s been complicated. I think because we have different resources that we’re bringing to the table and have a different type of impact; we are measuring multiple things. So for us, ultimately, success looks like that notion of agency.

And along the way, there are milestones that we are looking to see. For example, in the education space, we made heavy investments in early childhood education about a decade ago to ensure that students were reading at grade level by the fourth grade.

We are seeing the results of that now in terms of increased graduation rates and persistency into and through college. Those are the kinds of milestones and markers that we’re looking at, where we know that people’s lives can go off track. So, making sure that we are understanding and investing in those places.

Kweilin Ellingrud: You were appointed to lead the economic-recovery committee that Newark Mayor [Ras] Baraka named, and it was called the Newark Reopening and Recovery Strike Force. Tell us a bit about that experience.

Lata Reddy: It was a wonderfully collaborative and engaging experience, and I was honored to serve in that role. The mayor was very clear that he wanted to bring together a cross-section of stakeholders to bring their diverse experience and expertise to the table to create the best solutions in terms of how we bring the city out of the pandemic and into the future, in the next iteration of what living in Newark means. So it was an opportunity, again, to really think through what some of the critical issues of that moment were, as well as plan for the future and the rebuilding of the city’s economy.

Kweilin Ellingrud: What a wonderful way to think about not only Prudential’s impact but also collaborating for greater impact as well.

Lata, thank you for sharing your insights with us today. I’ve been inspired by the boldness of your commitment and the long-term focus on making a difference for the residents of Newark, New Jersey. We’re wrapping up each of our Future of America episodes with a rapid-fire Q&A. We’re going to start with whether there is a book or an article that you’ve recently read that excites you about a more sustainable and inclusive future?

Lata Reddy: This is going to sound very nerdy, but I recently rediscovered, when I was back in my physical office, a book that we at Prudential published a few years ago—well, many years ago—called The Power of a Story. And the reason it’s important is because it chronicled our history.

Prudential was founded on the principle of equity and opening up markets to those who have been shut out. So it was a wonderful reminder in this particular moment of the opportunity that exists for companies like Prudential to drive inclusive growth.

Kweilin Ellingrud: Wonderful. I’ll have to pick that one up. What makes you optimistic that we can achieve more sustainable and inclusive growth?

Lata Reddy: At this moment, the fact that so many more people are getting, as Bryan Stevenson says, proximate to the issues of inequality. We haven’t seen this before, I think, in our lifetime. It gives me some hope that with a better understanding of the issues and the structural barriers that have created the inequities we see, we’ll be in a better position to solve them.

Kweilin Ellingrud: What’s one thing that listeners can do today to promote more sustainable and inclusive growth?

Lata Reddy: Frequent local, diverse, small businesses. Spend your money where it matters.

Kweilin Ellingrud: Love it. Lata, thank you so much for joining us today and sharing your insights.

Lata Reddy: Thank you so much for having me.

Kweilin Ellingrud: That was Lata Reddy, senior vice president of Inclusive Solutions at Prudential Financial and chair of the Prudential Foundation. I’m your host, Kweilin Ellingrud. You have been listening to McKinsey’s Future of America podcast series. Thank you for joining us.

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