Mellody Hobson: Scaling financial literacy to children & beyond (with Angela Ahrendts) | Summit 2024

Speaker 0:00 [upbeat music] [clapping] [cheering]

Angela Ahrendts 0:06 [laughs]

Angela Ahrendts 0:07 That's exciting.

Speaker 0:08 [laughs]

Angela Ahrendts 0:08 [laughs] Okay, the clock's gonna start. [laughs] Mellody, your investment firm is called Ariel, and you co-founded the Ariel Community Academy on Chicago's South Side. And you've said that your most important investment is empowering youth in underserved communities through financial education, and you've been involved in financial literacy and curriculum for many years. And as they just mentioned, today we're celebrating your new children's book, Priceless Facts About Money. So first off, huge congratulations.

Speaker 0:44 [clapping] [cheering]

Angela Ahrendts 0:50 I learned a lot. [laughs]

Mellody Hobson 0:51 [laughs]

Angela Ahrendts 0:52 I know it's for kids, but I, I learned a lot. It's incredible. So, what are your earliest memories of money, and what stories from your own life did you draw from for Priceless Facts About Money?

Mellody Hobson 1:08 Well, first of all, I'm really excited to be here. Um, you know how much a fan I am of yours.

Angela Ahrendts 1:14 Oh.

Mellody Hobson 1:14 Legend.

Angela Ahrendts 1:15 Please.

Mellody Hobson 1:15 Here.

Speaker 1:16 [clapping] [cheering]

Mellody Hobson 1:16 Legend. And someone who took my call when she didn't know me to give me advice, um, and has become a friend, so really, I'm honored. Um, so I'll just give you the high level. Last night I learned the book is number two on-

Speaker 1:31 [clapping]

Mellody Hobson 1:32 ... the New York Times Best Seller List for Children, which I'm just astounded by. Um, the goal of the book is actually, and I've heard this from a lot of people, I'm using children as a gateway to adults.

Speaker 1:43 [laughs]

Mellody Hobson 1:44 I'm hoping that adults are reading this book to kids and actually learning the things that they wouldn't know.

Speaker 1:49 [laughs]

Mellody Hobson 1:50 Because I literally spent four years researching this, I started working on it during COVID, because I decided I was so affected by the fact that we are, as a society, not really financially literate.

Angela Ahrendts 2:01 Mm-hmm.

Mellody Hobson 2:01 And I wasn't going to keep, as we say at Ariel, admiring the problem. I was gonna do something about it. What is my first memory of money, and I tell people this, money was a constant conversation in my family because we did not have any. And so it was a source of great anxiety and stress. And I remember, I tell people, I remember my first check, which was seeing it on the wall at the grocery store where my mom had bounced a check, and our name and everything was on the check. And I remember standing at the counter thinking, "Everyone in the store knows that that's us." And I felt such shame and embarrassment.

Angela Ahrendts 2:38 Mm-hmm.

Mellody Hobson 2:39 And in general, because we used to get evicted, our phone used to get disconnected, our-- we would hide our car to keep it from getting repossessed. And so because of those things having happened to me, I felt all this shame. And as a child, my husband says this, you have no advanced reasoning skills as a child. You don't know when something will be over. You cannot control any outcome. And so I became really burdened with this concept of money. So I don't think it's an accident I work in the financial services industry because as a child, I was desperate to understand money. Not have a lot, understand it.

Angela Ahrendts 3:13 Mm-hmm.

Mellody Hobson 3:13 And I said, "If I have the knowledge, I can live a better life and not repeat the cycle that I find myself in and that my family finds itself in." So the, the, the, the real purpose of my life was anchored in the depravity that I often felt as a child-

Angela Ahrendts 3:30 Mm-hmm

Mellody Hobson 3:30 ... which ultimately, even though it didn't feel like it at the time, became this amazing gift. And that is re- the reason why I'm so passionate about this idea of spreading the concepts because I think if, if it could take the burden off of children, young people, even adults, that they knew mo- know more and can make better decisions, that ha- that could be a real multiplier and quite powerful.

Angela Ahrendts 3:54 Mm-hmm, mm-hmm, mm-hmm.

Speaker 3:55 [clapping] [cheering]

Angela Ahrendts 4:01 And you're around a lot of young people. What do you see firsthand with them not understanding money, and how have you helped demystify it for your young daughter?

Mellody Hobson 4:12 We are, as I said, I'm not saying this just to be critical. It's just a fact. As a nation, we're financially illiterate. Only twenty-five states in the United States actually mandate financial literacy in school, and often it's not what you think of. I don't think, um, reading a utility bill is financially literate. Helpful, but I'd rather we be learning about the Dow, the NASDAQ, the S&P, the power of compounding, what is inflation. I could go on and on. And these concepts can be taught starting at a very young age. In my book,

Mellody Hobson 4:42 I have this idea of barter. You know, they say, "You, how do you teach a three-year-old about money? A five-year-old?" I said, "Teach them value." How do you teach them value? Say to a three or five-year-old, "Do you want a cupcake or Barbie?"

Speaker 4:55 [laughs]

Mellody Hobson 4:55 And they start to assess value, like which one is more valuable to me? Which one do I want in the moment? Which one do I wanna think about? I'll have the Barbie forever, but I'll eat the cupcake. You want that kind of thought processes happening with a small child.

Angela Ahrendts 5:08 Mm-hmm.

Mellody Hobson 5:09 And so I would say to you that I've seen time and time again the fact that we are not a financially literate society. We have tremendous anxiety about money. Seventy-seven percent of Americans say they feel anxious when it comes to money. That's all people. That's people of means. That's people without means. This subject is incredibly important because all of our money habits are learned from our parents. So if you are not great on this subject, I can tell you, you are subconsciously passing it on to your

Mellody Hobson 5:39 child. The other thing is the whole concept of money, especially for children, is quite mysterious in our current modern day. And what I mean by that is, today's children see money s- being spit out of a machine at an ATM, or they see a phone or a piece of plastic as a means of payment.

Angela Ahrendts 6:00 Mm-hmm, mm-hmm.

Mellody Hobson 6:01 Versus when I grew up, my mother tended to use cash. So because we don't have that finality to something that's in your wallet that runs out, children start to say things to their parents, and many of you maybe have even heard this, when the parent says, "We can't afford this," they say, "Put it on a credit card."

Angela Ahrendts 6:19 Mm.

Speaker 6:19 [laughs]

Mellody Hobson 6:20 So they don't actually understand the cause and effect.

Angela Ahrendts 6:23 Yeah.

Mellody Hobson 6:24 And so just breaking this down is very important. How do I do that? My daughter is 11.

Angela Ahrendts 6:28 [laughs]

Mellody Hobson 6:29 Everest. I wrote this book for her, and she was my editor, and her art teacher is the illustrator.

Angela Ahrendts 6:35 Amazing.

Speaker 6:36 [clapping]

Angela Ahrendts 6:36 Amazing.

Mellody Hobson 6:38 She overheard me interviewing illustrators, and she's like, "Ms. Stevens could do this." She was seven years old. And I gave her a like, "Hm, thanks"

Speaker 6:46 [laughs]

Mellody Hobson 6:46 And she's like, "No. Look at her website." [laughs]

Speaker 6:50 [laughs]

Mellody Hobson 6:50 And I still kind of gave her a like, "Hm, nice," and she was like, "Mom, stop right now. Look at her website." I open up the website, and I was like, "Ms. Stevens could do this"

Speaker 7:00 [laughs]

Angela Ahrendts 7:01 [laughs]

Mellody Hobson 7:01 So Ms. Stevens is, is the illustrator of the book, first time illustrator as I'm a first time writer because of Everest Lucas. And so Everest, I used her as my guinea pig, and I had just the way my mom did. My mom had me pay for everything. If we went to a restaurant, even when I was very little, she would give me the money to give to the waitress or at the counter. Then she would have me, as I got older with math skills, count the change. Then as I got older with better math skills, she would have me calculate the tip. I had Everest sign the credit card receipt, write out the math, and she's like, "Mellody, I mean, Mom," she's like, "I can't sign it."

Speaker 7:39 [laughs]

Mellody Hobson 7:39 I was like, "Yes, I want you to sign it. I want you to sign it. I- you have power, and I want you to understand what you're doing." So I have her now doing all the same things that I did. She, she knows when we're in a, in a restaurant, she's going to get the bill and she's gonna deal with it. So now she says things like, "Wow, this is a really expensive restaurant"

Speaker 7:57 [laughs]

Angela Ahrendts 7:57 [laughs]

Mellody Hobson 7:58 Or she lit- I swear, she came home one day and she was like, "Mom, we went to Shake Shack. It was three people. How much do you think it was?" [laughs]

Speaker 8:08 [laughs]

Mellody Hobson 8:09 So I said, "I don't know. I've never been to Shake Shack." She was like, "It was $45, Mom." [laughs]

Speaker 8:14 [laughs]

Mellody Hobson 8:14 She went on and on about this. That's exactly what we want. The last example, real life examples, like every 11-year-old, she's obsessed with Sephora.

Speaker 8:23 [laughs]

Mellody Hobson 8:25 Obsessed. So we go to Sephora and I say things like, um, "It's hard to find the price tags", you know.

Speaker 8:31 [laughs]

Mellody Hobson 8:32 So I say, "How much do you think this is?" We get to the counter, I say, "What do you think we spent?" You know, having her try to estimate and understand the magnitude of what she's spending. I'll give the last example. We're at McDonald's. We're going through the drive-through. She got an order of french fries, and they said it's whatever it is with tax, and my daughter looks at me and she says, "What is tax?" We did tax on the entire car ride.

Speaker 8:57 [laughs]

Mellody Hobson 8:57 First of all, she was appalled that we work three or four months a year without any income.

Speaker 9:01 [laughs]

Mellody Hobson 9:02 And she was like, "Literally, they don't pay you?" I said, "No, they pay us, but if you added it all up"... Now, we know some of us, it's even more, but I said, "You know, you work and you give this. What happens to the tax?" Explaining all these things. Last example, 'cause this is a good one.

Angela Ahrendts 9:17 [laughs]

Mellody Hobson 9:17 I'm sorry to keep you. So my daughter likes this game on her iPad called Toca!, where she builds worlds. So she comes to me all the time, starting when she was really little, she knows she could never buy anything without asking, ever, ever asking. Ever. So she says, "Can I have a place?" That means can she buy a building in Toca!. So when starting when she was very little, I'm like, "How much is it?" She's like, "99 cents." I'm like, "I'm gonna think about it"

Speaker 9:42 [laughs]

Mellody Hobson 9:43 So never instant yes-

Speaker 9:45 Yes

Mellody Hobson 9:45 ... because you need to have some delayed gratification. Never just any amount. So I'd say, "Okay, you can have it." She comes back one day, she's like, "Mom, I... Can I buy this place?" And I said, "How much is it?" "290." It's expensive. I said, "How much?" "299." I said, "I have to ask Baba."

Speaker 10:01 [laughs]

Mellody Hobson 10:03 Baba is Dad. I was like, "I gotta ask Baba." I said, "I'll just, I'll come back to you on this." We get the 299. Last one. We're watching a movie on Disney+, and you have to pay for the movie, and it's 15.99. She's like, "This is ridiculous" [laughs]

Speaker 10:21 [laughs]

Angela Ahrendts 10:26 [laughs]

Mellody Hobson 10:26 So then I explain to her, I'm like, "The place is only like, maybe you play for it for like 20 minutes. The movie's two hours." You know, I'm putting value on it for her. I was like, "You're probably gonna watch it again." And so I got her to see that maybe the movie was actually a bargain. I said, "Everest, I used to be the chairman of an animated movie company, DreamWorks"

Speaker 10:43 [laughs]

Angela Ahrendts 10:44 [laughs]

Mellody Hobson 10:44 And I said, "A movie is like a toy for a child. You use it over and over again." So this is just using my own child as a real life example of explaining money.

Speaker 10:54 Yeah. [clapping]

Angela Ahrendts 10:54 Incredible. Okay, let's step away for a second from, like, dollars and cents. And, um, you've also been incredibly committed to breaking down barriers by prioritizing diversity and inclusion as an investment strategy, and you've also been a staunch advocate of diversity on boards, so thank you.

Speaker 11:20 [clapping] [cheering]

Angela Ahrendts 11:27 But, but we've all been reading that some corporations are rolling back or pulling, pulling out of their DEI commitments, and why do you think this is, and where do we go from here?

Mellody Hobson 11:38 I think the black hats have been very effective. They've scared people legally. So it started with Harvard. I really do think that that had a, a chilling effect on diversity in the country. They went to an elite institution, and they argued a case that ultimately they won. We can all agree or disagree on what the merits of that case were, but I will tell you, I went to Princeton, and I do believe I was a benefi- beneficiary of affirmative action, and I think that is better for society that I am in the seat that I am today.

Speaker 12:08 Yeah. [clapping] [cheering]

Mellody Hobson 12:08 So I am unapologetic about it. And I think if it hadn't existed, I wouldn't have had the same shot to go to that school, and going to that school opened a lot of doors for me after I left there. And that's just a fact.

Angela Ahrendts 12:25 Yeah.

Mellody Hobson 12:25 And so what I would say is right now, there is, there's this sense that it is a zero sum game in this society, that if someone's winning, someone else is losing. I do not prescribe to that. Our s- economy and our society has been built on the fact that the pie keeps getting bigger, and the greatness of America is that you had this middle class and others who could share in that over time. Though sometimes I do believe, and I'm not saying we are perfect in any way, I think there needs to be more opportunity for people of color and women. I am 100% convinced of it because I am in the rooms where we are not.

Angela Ahrendts 13:00 Yes. [audience applauding]

Mellody Hobson 13:03 And so even though people think we're taking over-

Angela Ahrendts 13:06 [laughs]

Mellody Hobson 13:06 ... after you have one Black president, we're not.

Angela Ahrendts 13:09 Yeah. [audience applauding] [laughs]

Mellody Hobson 13:11 And so there's been this effort to roll back. Because the legal argument has gotten people nervous, you have general counsels and others saying, "We have to be careful", or you have people who actually agree and it's just convenient for them. So I think s- those of us who are in roles where we can continue to push and explain, every, every piece of data shows that diversity helps outcomes. Every piece of data. If you have like-minded people around you, you will not have barrier-breaking ideas. You want innovation to come from different thought process, different backgrounds, different genders, sexual orientations, et cetera, in order to, to be bold and, and audacious. And unfortunately, um, some people do not agree with that.

Angela Ahrendts 13:58 But I also think that, um, that we all have a role to play. And I will tell you, best TED Talk I have ever watched or listened to in my life is hers from 10 years ago. And, and it's called Color Blind or Color Brave. And I'm telling you-

Mellody Hobson 14:15 Good one

Angela Ahrendts 14:16 ... spread it to everybody you know, and maybe that'll help.

Mellody Hobson 14:19 Thank you.

Angela Ahrendts 14:22 But I've also heard from time to time that you host these, um, that you host, like, thought-provoking global leaders from all over the world and, uh, kind of like a mini Aspen Festival or like a small Masters of Scale Summit. So, why? And, um, and can you share- [laughs]

Mellody Hobson 14:46 [laughs]

Angela Ahrendts 14:46 ... [laughs] some incredible insights that you gained in some of the most recent ones?

Mellody Hobson 14:50 Well, they're shh. [laughs]

Angela Ahrendts 14:55 [laughs]

Mellody Hobson 14:57 Private, small, not public in any way, but let me explain something 'cause this was a big lesson. So some people know this. My husband is George Lucas, and I joke I married Yoda's dad.

Angela Ahrendts 15:06 Yes. [laughs]

Mellody Hobson 15:07 So I married Yoda's dad. And one day we were sitting and reading, and this is where, you know, there's so much power that comes from thinking, big thinking, which is in George's brain, and he's a remarkable thinker, just really. The movies are not an accident. They're a small tip of the iceberg of the brain that he has, and I am so grateful that I get to experience it every day, even with the kookiness, and there's a lot of kooky.

Angela Ahrendts 15:33 [laughs]

Mellody Hobson 15:33 But, but one day I was talking to George about someone, and we were reading about them, and I was like, "Wow, that person's so neat. I'd love to meet 'em." And he's like, "Call 'em." And I was like, "What?" He's like, "Just call and say you wanna have lunch." I was like, "I can't do that." He's like, "I bet you could."

Angela Ahrendts 15:50 [laughs]

Mellody Hobson 15:51 And I was like, "Really?" He's like, "Just call them." So I did, and they said yes. [laughs]

Angela Ahrendts 16:00 [laughs]

Mellody Hobson 16:01 And he was like, "You could call anyone, Mellody." And I was like, "Re- no." And he's like, "I bet you could." He's like, "They might just say no, but they might say yes." And so then I started to realize that, um, I wanted to live in a big world, you know. I didn't wanna live in a small world, and more importantly, I wanted my child to have so many perspectives and opportunity to grow and learn from people of all walks of life. Not about famous, not about wealthy, about bravery and courage and strength of convictions. And so over time, I just started bringing together people that I thought we could learn from, and I learn a lot. I mean, a lot. And I've been... It's a, it's a, it's a gift that has happened. And I know George loves the engagement, artists, business people, you know, whatever it is, but it's more just to learn and to have conversations that are rich and important.

Angela Ahrendts 17:04 Mm-hmm. Amazing.

Mellody Hobson 17:05 But it's not speeches or anything like that.

Angela Ahrendts 17:08 Yeah, yeah. Amazing.

Mellody Hobson 17:08 Even though they call it sometimes Mellody TED. [laughs]

Angela Ahrendts 17:12 [laughs]

Mellody Hobson 17:12 'Cause some people I have make presentations.

Angela Ahrendts 17:14 [laughs] Amazing. Well, I'm gonna pull us back because you have such an incredible audience here today. Talk about great minds, right?

Mellody Hobson 17:24 Yes.

Angela Ahrendts 17:25 And, um, and when you talk about scaling financial literacy and what's at stake if we don't, what can, what can we do to help? What can... I bought 100, and I'm putting in my Toys for Tots gifts bag, gift bags that we give out at Christmastime. That's, like, nothing. So, you know, getting it in the schools. What can AI do to help? Um.

Mellody Hobson 17:52 So let's start off with the fact that every dollar of this is donated. This is not benefiting me per- personally in any way, so that's not where my energy is coming from at all. I just wanna make that clear. I just want kids to have the knowledge, and I actually want adults to have the knowledge, too. So my goal is that you will see this book, and you will say to yourself, "Let me think about every niece, nephew, or young person that I know, friend, family friends, et cetera, that I should give this to, that maybe it also will help the parent." Then I would hope that you would think about, we had one person in New York, they bought the book for every library in the city of New York.

Angela Ahrendts 18:26 Yes.

Mellody Hobson 18:26 They gave two copies to every-

Angela Ahrendts 18:27 Amazing

Mellody Hobson 18:27 ... branch of New York Public Library, which is a great idea because libraries can't just buy books on the budgets that they have right now. Then I've had a lot of people talk about that they would buy the book for their child's school. Um, I can't for some reason buy it for my own child's school or give it to them because my child is too embarrassed. [laughs]

Speaker 18:47 [laughs]

Mellody Hobson 18:47 So [laughs] she's kinda... I gave that to the library. I told her, I was like, "We're gonna give the book to every kid." She was like...

Speaker 18:52 [laughs]

Mellody Hobson 18:54 "No." Um, she's like, "You're not doing that." So I get it. She's 11. Her name's in the book, the whole thing. She was like, "No." But it's in the library. So giving the book even to the school library, I think is very important. The other idea, the state of Maine bought the book for every elementary school student in the state.

Speaker 19:13 Oh, wow. [applause]

Angela Ahrendts 19:13 Wow.

Mellody Hobson 19:13 13,000 books.

Angela Ahrendts 19:15 Wow. Crazy.

Mellody Hobson 19:16 Every single elementary school. So just think, in Maine it's 13,000 books. It's actually doable. I've asked all my friends, "Will you just buy the book for everyone in your office?" I was like, "Literally go home and just buy the... If you have 100 people, 200 people, 300 people, 500, 1,000, will you buy the book for your office?" Because the office takes it home to their children, or they get inspired and I'm, I'm telling you, when I talk about the fact that you will learn things that you never knew because I spent years researching these

Mellody Hobson 19:47 facts, you will. Just to attest to that, and I think he would be totally comfortable with me saying this because he called me. Mike Milken called me and he's like, "I had no idea."

Speaker 19:57 [laughs]

Mellody Hobson 19:58 This is the king [laughs] of junk bonds and you know, we know his financial prowess. He was like, "I learned so much, Mellody." That was Mike Milken. So I think the idea that even if we think we are experts, there are these nuances. One example, the knight's ring is the first credit card in my view. The knight had a signet ring, and the king or queen would give the signet ring to the knight so that the knight would not have cash on their body when they were traveling around the village because they didn't want them to get robbed. So they'd get to an inn or a pub and they would put their ring in wax and that would be the receipt. Then the innkeeper would go and take the bill to the castle and that's how they got paid. So I said it gave new definition to the term charge when you think about a knight.

Speaker 20:46 [laughs]

Angela Ahrendts 20:47 [laughs] Very good.

Mellody Hobson 20:48 Or you know, most people don't know precious metals are from the meteorites that crashed into the Earth billions of years ago. That's where gold and silver and everything comes from. So explain to... I said that was the fir- the earth's first deposit.

Speaker 21:00 [laughs]

Angela Ahrendts 21:04 [laughs] Amazing. Amazing. Well, um, knowing what you do on the other side of your life, I don't think we can let you go without, I don't know, maybe just a little in- investment tip and it'll just be between us.

Speaker 21:18 [laughs]

Mellody Hobson 21:20 Well, I won't talk about any specific stock, but what I will talk about my full-time job is running an investment firm. I will say that I think there are areas of the market that have been completely orphaned because the Mag Seven have gotten so much attention. I keep saying it's really the large cap growth industry. The, the S&P 500 is now a large cap growth industry, and it's really overweighted by, as we know, the Mag Seven. And you can be an amazing company, which most of them are, and not an amazing stock because they are priced for perfection. So if anything goes wrong, you know, they could miss. It is possible even though it becomes very hard to think that because they've only gone up and up. But along the way, there are 293 other companies in that S&P 500 who have mostly been overlooked. But even more importantly, we live in the world of small cap and mid cap stocks. The small cap Russell 2000 index is orphaned. So you have one Mag Seven that's the entire index. I haven't seen that in my entire life. Over the long term since 1926, small stocks have outperformed large ones. I'm just not a believer that this time is different. It's easier to grow a small company than it's a large one. You have higher risks that are tied to that, so you should get a higher return in terms of a premium. That is not broken. It's just been decoupled for the last dozen years and I expect that to move back to some rationality in some way. The pendulum will swing back even if you just believe in mean reversion. Most people have ignored smaller stocks. I think they will have their day. I don't know when it will happen, but I will tell you I am not questioning if.

Angela Ahrendts 22:55 Amazing. [applause] So I think you'll all agree. Uh, Mellody Hobson, I think I know why you named this Priceless, because you are absolutely priceless and we are so grateful. [applause]

Mellody Hobson 23:05 Thank you. Thank you for having me. Thank you. [upbeat music]