Reparations & Compounding Interest

I’m fascinated with novel ways to message political concepts that people are usually at each other’s throats about, so I liked this Between the Scene’s by Trevor Noah about Reparations:

I don’t agree with everything he said (I think some of his rhetorical framing around reparations vs other forms of disadvantage creates unnecessary divisions), but I thought he raised an interesting point about how a large part of reparations is reconciling the fact that historically black families have been denied loans, the ability to own property, and a significant amount of wealth creation is linked to that, so they have these historical disadvantages.

I don’t like the phrasing “historical disadvantages” though (from a rhetorical standpoint, not because it’s not true) because it frames it as part of history. It begs someone to say “that’s in the past. Things are different now. Get over it.”

I think the better way to think about it is compounding interest/returns. This is something a lot of businessmen will get, and anyone who understands the basic concept of interest and why $50 saved 30 years ago is better than $50 saved now, inflation aside.

Telling an 65 year old African American that “things are equal now, you can save $50 just fine” glosses over the fact that a White Person was able to put that $50 to work 50 years ago. This also assumes that things are equal now, which they aren’t, but lets leave that aside for now as someone who doesn’t see that isn’t going to come around easily.

Last week it came out that Germany’s second richest family, worth $30 Billion+, had a Nazi past and used slave laborers.

Their response was to be appropriately ashamed, but to only donate $11 million USD to some charities. Understanding compounding returns, I thought that was a pittance and kind of rolled my eyes. I’m sure that number wasn’t based on any actual slave labor benefit, but lets for a second say it was – 11 million USD 50+ years ago that gave them the leg up to start the flywheel that led to them becoming a $30 billion dollar conglomerate is worth a lot more than 11 million now. It’s almost like they got to take a loan out on their morality and pay it back 50 years later – with no interest.

I got a $10,000 loan from my parents that has led to my ability to build a 65 person business ( It would be comical to say that we were “even” if I paid them back the 10k now, 8.5 years later. Much like it would be comical to pay back the 3.3M given to me by investors after we sell the company, etc.

The money was worth way more to me at that time. There should be a bigger penalty for mortgaging one’s morality than simply “we’ll pay you back.”

FWIW I’m not advocating for or against reparations, but I do think this provides a new way of reframing historical disadvantages that helps illustrate in terms we all understand that history really isn’t “in the past,” compounding returns mean history is always with us.

Maybe talking about it in more of a raw economic way would get through to more people.

Or maybe I’m just a wonk.

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