James Rhee is a high school teacher, turned private equity investor, turned CEO/entrepreneur, turned movement builder. Deeply shaped by his life experience as the son of immigrant Korean caregivers, James spearheaded the acclaimed reinvention of the Ashley Stewart company, with a unique focus on human relationships and community. He is now looking to combine kindness and math to shape a more sustainable form of capitalism.
James is a newly elected member of Ashoka’s Entrepreneur-to-Entrepreneur Network, which brings together influential corporate entrepreneurs with the world’s most powerful social entrepreneurs at Ashoka. We recently talked about what he’s learned and what’s next.
Constance Frischen: James, you’re not shy about expressing your ambition: your most recent venture is a movement that aims to shape the future of capitalism. You call it red helicopter. Before we get into details, why did you choose this name?
James Rhee: When I was five years old I was in a public kindergarten and one day my friend’s father and his siblings came in and gave me a little red toy helicopter. At first I didn’t understand why, and it took me a long time to realize it was because I shared my lunch with my boyfriend. He often came to school without lunch, but it never occurred to me that what I was doing was worthy of an award or an award. But over the years, that story has really stayed with me. It is a very simple story about humanity and collective well-being.
Frischen: The toy helicopter as an act of kindness – how does that relate to your attempt to change the way our financial systems work?
deer: Unfortunately, the world of financial capital has taken over the word capital. But there are plenty of other forms of capital. In the story of this red helicopter, all these actions – I share the lunch, they gave me the toy as a gift – had virtually no economic impact, only the actual purchase was measured by GDP. But these actions created a lot of positive externalities, a lot of well-being. So the red helicopter is a reminder that systems of financial capital are part of a wider system of humanity. Measuring capitalism is now much more focused on results than on how you create those results. That ‘how’ is enshrined in the social systems, which both influence and are influenced by economic activity.
Frischen: You talk about kindness as an important strategy. That almost sounds “soft”.
deer: Kindness is not the same as ‘nice’. They are not words. Kindness is action. It’s very intentional. It’s ruthless. It is the basis of mutualism. When done right, it’s a series of actions through which you enter into a social contract with someone. It is a transcendent, human concept much debated by eighteenth-century Enlightenment thinkers.
Frischen: How did this approach manifest in your work with the Ashley Stewart clothing retailer?
deer: Ashley Stewart is a metaphor to me. It is a company that primarily served and employed one of the most vulnerable groups in the United States. Black women, plus-sized, with low to moderate incomes. Unfortunately, our systems in our society are not designed for this woman to thrive. And this company, serving and employing this demographic… no one understood. Or groomed. The company had zero credit, no Wi-Fi. I begged people for funding, but no one would. The markets told me this company was worth more dead than alive. But I thought it was beautiful and meaningful. For me, Ashley Stewart wasn’t really into selling clothes. It was a place of belonging, of community, of emotional and physical safety. It played a vital role in its communities. And the best part was that it was in a for-profit vehicle. So all these people who wouldn’t give us a dime were normatively and literally saying, we don’t think this company, all the relationships it nurtures, the non-financial, positive impact it’s having for these women in these communities, that any of that has any has value. But I knew they were wrong.
Frischen: And so, in the absence of substantial investment, you leveraged the resources at your disposal, namely the people.
deer: Yes. It was really unlearning everything I had learned on Wall Street and doing a better job of separating knowledge from wisdom. I recognized that there are other forms of capital, that there is social capital. That it’s okay to talk about humanity and generosity and kindness and love in any context, including in a business setting. I often think of it as a lemonade stand, a business where money is exchanged for a product, but it’s also deeply rooted in the neighborhood in which it operates. So I brought in these non-market values and said, “Why can’t we have these social norms here if they’re reinforced with the sophistication of a for-profit company? Why shouldn’t we do that?”
Frischen: You have also taken hard steps. You closed the C-suite, you invested in technology, you improved operations, you closed some locations. But you listened carefully to the employees, their wisdom and their experience. Would you say that mattered most?
deer: Yes, the most important thing was that I listened and said to the employees, “I’m not here to change or transform you. In everything you do, I see leadership, I see great values. So let’s start with that. Let’s unleash what’s already there.” Because what I saw in those neighborhoods with those shops was that lemonade stand. It is not capitalism divorced from civil society. It’s a form of economics that reinforces the values you want in a democracy instead of destroying them.
Frischen: Within three years, Ashley Stewart went from two decades of losing money to a $20 million profit…
deer: …and to a nine-figure business valuation!
Frischen: That’s impressive. We’ve talked about the importance of kindness in that achievement, but you say yourself that you want to “combine kindness with math.” How does math play a role?
deer: Before I get into the details, the most important thing is the change of perspective, which leads to a change in behavior. As a collective, we do a poor job of teaching young people things like ethics, philosophy, and kindness, not to mention accounting, finance, and money. If and when we teach them these disciplines, we don’t connect them in a systemic way. We teach them with a mature mind that is conditioned to think in boxes. So when you learn about financial matters, it’s like you have to wear this persona and you have to kill and be aggressive and only consider maximizing financial wealth. We do not normalize the language of money and entangle it in a broader contract with humanity.
Frischen: Correct. There is a dichotomy in that.
deer: Precisely. So that’s what I’m trying to change. And from a financial and accounting perspective, we need to change what we’re looking at. In our society, especially in the US, we are obsessed with flow, not inventory. We focus on the profit and loss statement, on sales and profit, and maximizing them. It’s quite easy to do that in a free money environment. We don’t look at the balance sheet and ask like, how did you finance it, how did you get that money, what were the unmeasured results of how you did it? So we need to focus on leadership on the balance sheet, not leadership on the income statement.
Frischen: What does that look like?
deer: At this point, we don’t measure all the positive and negative externalities created by your behavior, by how you make money. Most of these externalities, good and bad, are not recorded on a company’s balance sheet, according to the ‘rules’. Instead, they are sent to the public. It is a burden on society that no one measures. So with Ashley Stewart, I tried to measure these things.
Frischen: Can you give us an example?
deer: Take employee benefits. When I finally scraped together the money to keep Ashley Stewart from going bankrupt, I almost gave up because I couldn’t get workers’ compensation. Nobody wanted to insure the company, because for twenty years the results were terrible. So I begged and got a policy, and our claims ended up dropping 90% to 99% and staying there. We searched the actuarial tables. For employees, there are two reasons when the number of incidents is high. First, there are bad surgeries, which lead to bodily harm. But it is also mental and emotional. It’s a sign that people don’t feel good about working for you or the company. So when our claims dropped, that showed kindness, which was reflected in really good operations. Everyone “benefited”.
Frischen: How did that translate into accounting?
deer: I made myself accountable to the workers’ comp. I reported on it. We put it on a synthetic balance sheet. But instead of looking at it as a liability, I looked at it as an asset. To me it was a mark of the goodwill of how we did with our colleagues. So as the employees’ comp incidents decrease, if you have it on your balance sheet, your liability decreases, which means your equity should increase. This is reflected in a reduction in your premium. And I paid out that savings, in the form of people working fewer hours, because that’s what people said they wanted. In other words, we took a collective behavior and made it a collective asset, and then we shared that asset in common. We gave the employees the agency and said, it’s our collective actions, it’s our asset, we’ve earned it. That sounds subtle and small, but it’s not. This is fundamental behavior change, where you unleash leaders. And you take concepts more akin to barter and a social compact economy and introduce them into how a “free market business” works.
Frischen: Super interesting. So it starts with seeing differently, and leads to different bookkeeping.
deer: I know it sounds so simple, but let’s start by saying that most people don’t want to wake up and go to this place called work and stop being treated like a person. Let’s look at humanity. But it’s hard because let’s face it, all the healthcare sectors — senior life, public education, anything that cares for vulnerable people — where you create a lot of positive externalities for society, those are the industries that have come under the most fire in recent years . All these people who do this work without expecting to get fair economic value for the positive externalities they create, they do because they care. But now they stop because they have too much. And that ultimately becomes a burden on society. Society pays for it, we all pay for it. And so it’s all a feedback loop, right? It’s all one giant open loop. And I decided to start on just page one of the loop, because it’s not linear. That’s the disturbing thing, right, with non-linear things. It’s like, where do you start? And to me it sounds simple, but I say can we just start with a perspective on what kindness means? And then apply the math to measure it more responsibly?
This interview has been edited for length and clarity. You can learn more about James Rhee’s philosophy here and find his biography here. You can read more about Ashoka’s Entrepreneur-to-Entrepreneur Network here.
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