Freakonomics Radio - 538. A Radically Simple Way to Boost a Neighborhood

Episode Date: April 6, 2023

Many companies say they want to create more opportunities for Black Americans. One company is doing something concrete about it. We visit the South Side of Chicago to see how it’s working out.

Today on the show, a rare story that you wouldn't think would be so rare. We decided to take a contrarian view and bet that bringing jobs to an area that hadn't had opportunity would be a good business decision. The experience of black people in the south Side of the city is a unique experience. Just about every big company says they want to create more opportunity for Black Americans. One company decided to do something very basic about it. What do economists think of their idea? You want the good news first? We should applaud and even incentivize well-intended and good-behaving corporations.

Or the bad news. I'm quite skeptical on the ability of PR campaigns to shape corporate America into improving economic opportunity for all. PR campaign, good-behaving corporation, or something else entirely? You will have to decide for yourself, starting right now. This is Freakonomics Radio, the podcast that explores the hidden side of everything, with your host, Stephen Dubner. Most big companies these days, and small ones too, are leaning hard into DEI programs that stands for diversity, equity, and inclusion. There was a lot of talk of systemic bias and systemic racism. And I know those are sort of loaded terms,

but for me, it just meant that the racism and the bias of previous decades reinforced itself in a system that continues to this day unless we do something to break the cycle. That's Roger Hochschild. And I'm the CEO and president of Discover Financial Services. Discover is best known for their credit card. They also run a fairly large bank, but they don't have a network of brick and mortar branches. Hochschild has been with the company since 1998,

and he used to be the chief marketing officer. This meant spending a lot of time shaping Discover's public image. As CEO, he's launched a variety of DEI initiatives, but in 2019, he attended a talk by the author and historian Ibram X. Kendi, and he was convinced that Discover needed to do more. He talked about the importance of, you know, being not just not racist, but an anti-racist, right? And making sure that you're a positive force for social change. And that was shortly

after one of the richest companies in the world had been doing a search for their second headquarters location. The company he's talking about is Amazon. They eventually built their new headquarters in the northern Virginia suburbs, just outside Washington, D.C. It is an area with good schools, low crime, a strong tax base, exactly the kind of place that most big companies like to put their offices. But with all the talk in corporate America about equity and inclusion, this choice struck Hochschild as slightly off. I just found something a bit distasteful about that process, which was more jobs and opportunity for a rich Virginia suburb, as opposed to somewhere nearby who really could use the jobs, like Anacostia, say.

This fit a larger pattern that Hochschild had seen in the corporate world. A lot of sloganeering against racism, but not much real change. You have companies, you know, they're not explicitly racist. They don't say, I'm not going to put my building in a black or brown neighborhood. But if their selection criteria are around, I want a highly educated workforce, I want a place with a low crime rate or top performing schools, or even I want to go somewhere with a high tax base because they can afford to pay incentives, you end up with advantaged communities getting more advantaged and no opportunity for the under-advantaged communities.

Now, the advantaged communities that Hochschild is describing here are the exact same places where his company has typically built their facilities in Utah and Arizona and Ohio and Delaware. Nice, safe, suburban-ish places that offer jobs to the people who live there. And what about Discover's corporate headquarters? So we were started by Sears, which was located in Chicago. And the people who founded Discover didn't want to be at the corporate headquarters. They wanted to have their own identity and break away. And so they picked Riverwoods. And is Riverwoods a kind of typical, beautiful, leafy northern suburb of Chicago? It's a bit like that. It's one of those corporate campus areas. When you look out the window at your office, what do you see?

We have a beautiful retention pond. So it looks kind of like a lake, trees. Frequently in Chicago, I see ice and snow, sometimes deer, coyotes. It's very pastoral. So that's where the company makes its big decisions in this pastoral coyoteville. But much of the real work is done elsewhere. Discover has 20,000 employees and over half of them work in call centers. Remember, they run a credit card company and a bank without branches. So their frontline workers are customer service reps based in those nice suburban-ish locations. We're probably the only large bank that has 100% U.S.-based customer service reps based in those nice suburban-ish locations. We're probably the only large bank that has 100% U.S.-based customer service. It's more expensive, but we think we get a great return on that investment.

And this is when Roger Hochschild had an idea to build a new call center in a different kind of place. We decided to take a contrarian view and bet that bringing jobs to an area that hadn't had opportunity would be a good business decision. In other words, an area that didn't have the best schools or the safest streets, but did have a lot of Black residents for whom a good job could be really meaningful. Even from his pastoral Coyoteville, he didn't have to look far for such a place. Chicago has some of the lowest rates of upper mobility in particular for low-income kids and low-income black males. That is Nathan Hendren. He is an economist at Harvard and a co-founder of a research institute called Opportunity Insights. Their big question is why the so-called American dream is stalled out for

so many people. There's a lot of ways of measuring something like the American dream. The statistic that we've used a lot of is what are the odds that you grow up to earn more than your parents? And that has declined over the last 50 years. That's a decline in what economists call income mobility. We have lower rates of upward mobility than a lot of people would like to believe. If you're born in the bottom fifth of the income distribution in the United States, you have only about a 7.5% chance of reaching the top fifth of the income distribution. And you would have expected, if you had equal odds, it would be closer to 20%. Hendren and his colleagues do massive research projects using data from census reports,

tax returns, colleges, and more. They compare the economic outcome of people based on the zip code where they grew up. Some of the worst outcomes for Black Americans are from Chicago zip codes. On a given day, kids who grew up in low-income families in Chicago, black males, 10% of them are incarcerated on a single day. On average, they grew up to have earnings of about $20,000 a year, which is about $5,000 less than their parents. If I just asked you to describe employment opportunities in Chicago

for the median black person, How would you think about that? Well, I would be able to tell you that the employment rates are quite low. We've got employment rates of about 60% for black males who grew up in the south side of Chicago, 80% for women, which is far below the national average, which is certainly suggestive of differences in opportunities and availability of work. This is where Roger Hochschild and Discover thought they could make a difference. They started looking at low-income neighborhoods in Chicago for a place to build a new call center. They kept the idea quiet.

The advice we got was don't announce. Pick your location first and then announce. Because if you announce first, everyone's going to want you to come to their area. You'll get a lot of pressure. So credit card debt is a big problem for millions of people and lower income customers have it the worst. I do see that Discover last year reported net income of $4.3 billion. So that's a lot of money. I'm curious, when you got excited about this anti-racist project, did you think about anything like forgiving a certain share of debt for low-income customers and or customers of color? To be honest, no. But we did think about things on the product side. You know, there's a lot of talk about food deserts. There also are communities that are

underserved through traditional financial services. And we thought with our low-cost model, you know, we have a great savings account that pays high interest rates and no minimum deposit. And so over time, we'd like to do more on the product side for some of these underserved segments to help them have brighter financial futures. Okay. So call centers are at the very core of your company's operations, and now you are proposing something new. What was the response from within the firm? Was there a pushback? There was some pushback. The real estate team kept coming back with these beautiful buildings in downtown Chicago. And finally, I said, no, you know, the model is only look on the south and west sides. And so that's how we ended up in a vacant big box store. The site they chose was a vacant Target store, 127,000 square

feet in a Southside neighborhood called Chatham. Until the 1950s, Chatham was nearly all white. Then came the Dan Ryan Expressway, cutting right through the neighborhood, and a massive white flight to the suburbs. Middle-class black families began moving in, including the gospel music star Mahalia Jackson. And what about Chatham today? Chatham is over 95% Black. It is a very proud community. Traditionally, one of the more middle-class communities on the south side of Chicago. Traditionally middle-class, but the median income in Chatham is now low and unemployment is high. It was just the kind of community Discover

was looking for, someplace where a job could make a big difference. So they had the location of their new call center. Now came the hard part. They needed someone to set it up and run it. And we knew it was going to be challenging because we wanted someone with experience doing things the Discover way. And so someone who'd worked in our centers, preferably at a senior level, but all the advice we'd gotten was you need someone with credibility in the community. And there lay the problem. To find someone with experience doing things the Discover way, that would be easy enough, but to find someone with credibility in the community, that would be harder. The senior ranks at Discover tend to be rather white, but not exclusively white.

You know, being a 25, 26-year-old African-American woman sitting around the table with a bunch of white dudes. They were all very nice, but that's not going to cause me to be authentically who I am and talk about the things I care about. I had to listen to them talk about hunting and beer-bewing and golfing and all the things they wanted to talk about, but it was never about my experiences

or getting my hair braided or what I was going to do for the weekend. That is Watice Gathings. When Discover's CEO, Roger Hochschild, decided to put a new call center on the south side of Chicago, she had been a Discover employee for about a decade. She was working in Utah. Salt Lake City. How did you like that? I would describe it as liked. Maybe dislike is probably more appropriate. Because why? It was different. For starters, it's not as diverse. I mean, the people in Salt Lake are so friendly and so welcoming.

And so I really enjoyed it from that perspective. But being a single African-American woman that thrives on being in diverse environments is probably not the best place. Okay, so what was Wattis Gatherathings doing in Salt Lake City? We need to go backwards for a bit to where she grew up, which was on the south side of Chicago, not far from Chatham. She and her brother were raised there by a single mother. She was awesome.

Like her number one goal was for us to not be a latchkey kid. So she did whatever she could to be able to drive us to school, pick us up from school, be interactive with us, come to our games. I can't remember there was ever a game that she missed, a parent-teacher conference that she missed. But that meant that she had to oftentimes choose between a livable wage and a strong job or relying on government for assistance. So I watched her make many

sacrifices. And then she got me enrolled in selective enrollment high school. So we traveled an hour, hour and 15 every morning just to get me to school and took my brother to a different part of the city for him to go to a pretty good elementary school. And then by the time I was in the middle of high school, she decided that the city had become too much and she wanted something better for us. So she picked us up and moved us to Arizona. She decided that the city had become too much and she wanted something better for us So she picked us up and moved us to arizona When you say the city had become too much, what do you mean by that? You think about thriving business corridors where you can walk to the corner store or have a grocery store in your neighborhood

But slowly over time all of those things disappeared and those things turned into vacant lots She lost her brother to gun violence. Her sister had passed away from an accident over on Lakeshore Drive. And so I think the city just represented a lot of hardship for her. It was not this thriving experience that she once had known. So she felt like the very best thing she could do was move us to a place where she didn't have to worry about things like physical safety and not being able to have access to a place where she didn't have to worry about, you know, things like physical safety and not being able to have access to a quality job. And so she had a friend that had lived in Arizona. She told me she was going on a girl's trip and apparently found us a house while she was there

and then came back and told us that we were moving. The family settled outside of Phoenix in a small city called Surprise. For Gathings, the name was fitting. My first day of school in Arizona was like that wide awakening that I finally realized that not all neighborhoods were created equally. Like you have open campuses, you can leave campus to go to lunch, you go to McDonald's and something as simple as ketchup is plentiful. You don't have to ask for ketchup from behind the counter. People are polite. It was not the same experience, but it's not until you experience something different that you know actually what you deserve. I was bitter when I had to move.

And then when I got there, I finally understood from like a physical and kind of foundational need perspective why that move was necessary. What Watice Gathing saw in Surprise, Arizona, is what economists like Nathan Hendren have observed in their research. Neighborhoods matter a lot. Neighborhoods are this amorphous basket of things that provide and shape every dimension of outcomes that you have later in life. What our research suggests is that you look like a weighted average of the neighborhoods in which you spent your childhood. So if you spent your time growing up in a place where people tended to be very upwardly economically mobile and had a really good chance of reaching, say, the top 1%, you're more likely to reach the top 1%. If most people went to college, you're more likely to go to

college. If people were more likely to end up in jail, you're more likely to end up in jail. All of these different characteristics of a neighborhood seem to wear off on people in proportion to how much time they spent growing up in those neighborhoods. You could picture Wattie Scathings as a single data point in Nathan Hendren's massive data set as her family moved from a Chicago neighborhood with low economic mobility to a more upwardly mobile neighborhood in Arizona. After high school, she went on to college with plans to become a special ed teacher, but instead she got hooked up with Discover. I needed a part-time job, so I started

working in one of our customer care centers in our Phoenix office. And to explain to you how much we've advanced over the last 12 years. My job at the time was trying to convince people to give me their email address so I can send them a link to sign up for the Discover website. Part-time turned into full-time, and that turned into a career. She worked on a variety of projects, market research, collections, fraud prevention. By the time she was promoted to a new job in Salt Lake City, she was 27 years old. I was senior manager of operations and I was probably making $175,000 a year.

Wow. And that goes pretty far in Utah, I would assume. It goes pretty far in a lot of places. Watice Gattings was undeniably a success story, but she wasn't at peace. In meetings, she was usually the only Black person in the room. And then shortly after she moved to Salt Lake City, COVID happened. So everything shuts down. I'm living in a two-bedroom condo, working from home now after going to the office every day. I like to interact with people most of the time. But then I think the thing that was most critical was the summer of 2020 was the murder of

George Floyd. For the first time, I had to deal with my own, and I'll just say like my own escape of what it meant to be an African-American woman in the United States. I mean, I had, after leaving Chicago, started to be very comfortable and tolerant to just being in white spaces all the time. And I recognized that I had done a lot of things to try to build my career, but those things really didn't matter because I had also felt like to a certain extent, I had left behind or diminished the black experience that was super important to me as a human being. And it was crazy to think at the time I had a thriving career at Discover, getting access to critical projects, but that wasn't enough. There was like this level of discomfort that I couldn't figure out what it was. And so my best solution at that time

was just to quit. And so I called up my boss at the time and I said like, hey, really appreciate the opportunity, really appreciate the work that we're doing, but I want to let you know that I'm going to leave the company. He's like, what is wrong with you? I'm like, I don't know what's wrong with me. That's the whole thing about it. Her boss suggested that Gathings at least stay at Discover until she figured out what she wanted to do next. I agreed to do that. And then it wasn't even two months later that another guy that I had worked with called me and mentioned this work that we were doing in Chicago. This work we were doing in Chicago being the

company's new call center in Chatham. When he initially called me, it was kind of like, hey, we're not super sure yet, but if we were to do it, would you be willing to help out? And I'm like, sure. Like, I'm not going to say no. I always say yes. This also solved Roger Hochschild's problem of finding a veteran leader who would have, as he put it, credibility in the community. I'm really glad we were able to save Wattice because she's amazing. It's almost a miracle. The miracle was that Discover not only found a leader, but that the old Target store was just a few miles from where Wattice Gavings had grown up, where she still had family and friends. And thus began the planning to go home. Being an African-American woman, there are times in which that comes with

stereotypes and perceptions of what people may think about us. But for me now, I think it's a superpower. I think it's part of the magic. Coming up after the break, how does the magic happen? Well, look who it is. I'm Stephen Dubner. This is Freakonomics Radio. We'll be right back. We recently visited Discover's new call center in Chatham on the south side of Chicago. Watice Gathings set up the new operation and now she is running it. Hey, Martez.

How are you, man? I like the fit. You're looking good on a Monday. You look good. You feel good. It's a huge facility. Several big rooms filled with rows of cubicles where the workers field calls. In the center, there's an atrium with a big skylight, and there's music playing. Walking around with Gathings is like walking around a city with a popular mayor. I heard you're doing a very nice job. I talked to Eric today. He's very complimentary of you.

I'm mic'd up, Tanya, so I can't say what I want to say to you right now. There are roughly 500 employees across all shifts. By the end of the year, Discover hopes to double that. The starting wage is $18 an hour, with premiums for early morning and late night. It's pretty standard call center work. The reps read from their scripts. Hi, welcome to Discover. My name is Marissa in the Chicago location. May I have your full name?

Discover spent over $40 million on the renovation. It's not just a place they come to work. We have an on-site full-time counselor. We have an on-site nurse practitioner. We provide our employees with free lunch every day from a collective of 20 local Southside restaurants. And also, we have a community center. So a lot of our employees feel a strong sense of pride and purpose in the work that we're doing, even to support the community. I think the key is sharing that this was not just the

right thing to do. It's actually a great business decision too. And that again is Roger Hochschild, the CEO of Discover. I asked him why it's a great business decision. Well, we're seeing that in terms of the performance of the center. The Chatham Center is performing equal to all our other centers other than in employee attrition, and there it is significantly better. Black men typically have a much higher unemployment rate than black women. Do you have any ideas or plan to address that? Yeah, we're tackling that in the recruiting side. And one of the great things about Chatham is it's had us rethink all of our policies, where we recruit, how we qualify employees. In particular, black men are more likely to have some sort of criminal background. We'll accept people who have a criminal background. It depends a bit on what it is, but we think they're selecting out of the process and reps about their experience thus far.

Here's Kobe Jones. So every day I speak to customers front line and address issues, problem solve, do a little troubleshooting if I have to, but mainly just listening and kind of handling everyday needs. Jones grew up nearby, and he says the new call center is changing things. It's a lot more vibrant now. Chatham brought a lot of noise to the community for sure. They're doing a lot for the community, which is creating buzz as well. Jones used to work in sales at a logistics company with an office in downtown Chicago. Some days it took him an hour to get home. The traffic is really bad. It's a lot

of congestion, especially coming from the loop. Now his commute is 10 minutes. We heard similar stories from a lot of his co-workers. Before this, I actually worked downtown and my commute was about an hour and a half on the metro. It took about an hour going and an hour coming home. It was on the north side of Chicago. On a bad day with traffic, I get here in maybe 25 minutes, but other than that, I'm here 15, 20 minutes tops. 90% of our employees live within five miles of the center. And that, again, is Wateese Gathings. She now lives about four miles away.

And most of those guys were, you know, gainfully employed other places, but it took them all over the city to get access to those jobs. So if you think about spending an hour, hour and a half in the car or on the train one way and coming back, that's three hours that you would have otherwise spent with your family that most people get to do.

And so when you talk about like this idea that my mother had of not having your kids be latchkey kids, that's what typically happens. When your mom was working, what kind of work did she do? So when we were very young, she was a dental assistant. Once we became school age, she stopped doing that and she would work just part-time jobs primarily at parking garages to be able to make sure she can meet the expectations of getting us to and from school. What do you think your life and her life would have been like had Discover had their call center in your neighborhood back then? It would have been marginally different for sure.

I think that having an option where she could still have balanced home plus work would have been a plus. But I also think that just the way people think about and look at the neighborhood significantly changes too. And she could have a job that she is like proud of would have been super important and impactful. But, you know, at the time, that wasn't how the cards were stacked. She was driving downtown to work in the parking garage just for four hours to make it back to pick us up from school. Talk about what had to happen to open the call center here. As you're starting to recruit employees and so on, what kind of outreach did you have to do with government officials,

community leaders, et cetera? We did a lot. So Chicago's governed by the local aldermens. Following our announcement, we had a chicken and waffles breakfast at a local restaurant, Josephine's on 79th. Lots of alder persons in the room, lots of elected officials and faith leaders. And we share with them our work and our thoughts

and we kind of just listened. But quite honestly, it wasn't all roses and cream and happy to be here. They wanted to make sure that we understood that they govern this city and it was a privilege for us to be invited in, which we don't take lightly, but also just understanding the role that corporations had played on the south and west side of the city and how there was a lot of work to do to rebuild some of that trust.

What were they specifically worried about? I would say longevity, right? You know, how long will we be around? And also, they didn't want it to be another activity of gentrification. So if you're going to put the thing in our neighborhood, how are we going to make sure neighborhood individuals have access to the space? That's what helped us double down on our goal of having 80% of our employees live within five miles of the center. If you think about the five miles surrounding us, you hit five of the most underserved neighborhoods

in the city of Chicago. The other idea was you build wealth, not just through the Discover jobs, but also through the trades, right? So our goal was to make sure that everything from pest control to cleaning crew to the people who put nails in the wall, that it was a reflection of the black community that we were located in. And I think that's what mattered the most to them. What about other local constituencies like the schools? One of the messages I got when I first launched was from a local principal, Principal James over at Avalon Park Fine Arts. And she told me that she was my aunt's best friend in elementary school. Oh, wow. And one of the stories we hear from her all the time is, you

know, a family that she had at the school that had multiple kids that had a caseworker that was often truant and really didn't participate in the education process began to become like a very excelling family at the school. And when she asked the kids, like, what was different, they told her that their mother had acquired a job and she worked at Discover. It's safe to say that this Chicago call center is different from the firm's other locations. And there's one more key distinction. So we're in the process of downsizing all of our other locations. That, again, is CEO Roger Hochschild. In Delaware, we let our lease expire. In Phoenix, we sold our center and now are in temporary space because, you know, they were sized to hold a couple of thousand people. And representatives want to work from home and are doing so very effectively. Consider this yet another after effect of the pandemic.

Last year, we hired over 7,000 representatives to work directly from home, and they never set foot in one of our facilities. What about the Chatham Center, though? You happen to build a big new place in a neighborhood that really needed jobs just in time for the pandemic, it sounds like. So what's the status there of working from home? In the Chatham Center, the representatives are coming into the office, but a lot of them are really excited to do that. Part of it is the commute, right? The combination of the short commute plus the great environment, you know, we provide free food in the center. It's really a vibrant culture. And so we've got employees there coming in and very happy about it. Why do your call center employees at the Chatham site want to work on site? I appreciate what you're saying about it's a nice site, but I'm

guessing the other sites in Arizona and Utah were nice as well. Some of it depends on what your home is like, right? You need broadband access. You need a dedicated, quiet area to be able to take calls. And not everyone has that at home. I asked Watees Gavings why everyone in Chatham wants to go to work instead of working from home. I think it's the case for a lot of different reasons. I think that, you know, creating a space where people want to come to is critical. And quite honestly, when you think about the spirit of people wanting to work from home, a lot of that is the transportation barrier and the commute, et cetera. But for the most part, they really enjoy, you know, being there and interacting with one another. It's a great environment.

I think it's the single most important thing. I think the experience of Black people in the south side of the city is a unique experience. Okay, so this new call center has brought jobs to a neighborhood that needs them, and it's a fun place to work. But how big of a difference can one call center make? I mean, I think it is an outlier. I'm Stephen Dubner. This is Freakonomics Radio. We'll be right back.

Nathan Hendren, the Harvard economist who studies the opportunity gap, already told us that the neighborhood where you grow up has a big effect on the rest of your life. If most people went to college, you're more likely to go to college. If people were more likely to end up in jail, you're more likely to end up in jail. So here's a question. How much difference can it make if one company brings a thousand jobs to a neighborhood? The Discover Call Center project in Chatham was founded on the belief that a job can change a life for the employees themselves, but also their families. What we know is that it takes a long time for neighborhoods to quote unquote change. And so I think there's a long way to go for the vast majority of neighborhoods on the south side of Chicago. And I think there's a lot of questions over what is the right way to make those changes. This is an investment in the adults living in those areas. You'd want to see

complementary investments in the kids, in the housing stock. And those are all investments that we know, when you step back and think about it from society's perspective, can have really high returns. I'm curious to know what your first thought was when you heard about this new call center. I mean, I think it is an outlier. I don't think that you see this happening in many other neighborhoods. Certainly you see companies that try to come in and do various elements of investment, but this one strikes me as something that's fairly large and targeting a neighborhood that has a long history of underinvestment. Among economists, there is a longstanding debate about the best way to address inequality and poverty. Should society invest more in people, in their schooling

and health and welfare, or in the places where low-income people live? This debate can be reduced to people-based economic policy versus place-based economic policy. Place-based policy is focusing on investments in places, things that would maybe provide incentives for companies to move into a particular neighborhood, perhaps put a call center in an abandoned target on the south side of Chicago. These types of policies are providing incentives for locating economic activity in particular areas. But most economists have traditionally argued you get more leverage by investing directly for locating economic activity in particular areas. But most economists have traditionally argued you get more leverage by investing directly in people. The idea is kind of simple.

If you believe that it's easy to move across places, then a lot of the gains to investment in place accrue to people who just choose to move to a different place as a result of that investment. And it doesn't accrue to the people that you might have been trying to target in a particular place. You end up just distorting the location of economic activity, and you don't help people as much as you could for the same amount of money if you just focused on investing in people. Do you also worry about driving up housing prices in those places?

Exactly. So in a lot of these models, the investment in a place gets capitalized into housing prices and the people who really benefit at the end of the day are the owners of housing in the location as opposed to the workers in the area. Economists who think about place-based incentives

versus people-based incentives have also increasingly recognized the role that race has played in determining which neighborhoods thrive and which ones don't. We called up another economist to talk about that. In the aftermath of perhaps the largest protests since the civil rights era, where people were uttering, regardless of their race, their gender, even their class, that Black Lives Matter. We've seen changes. Derek Hamilton is director of the Institute on Race, Power, and Political Economy at the New School in New York City.

We often think about structures of communities as leading to economic outcomes, but perhaps we should consider a different causality, that well-resourced communities actually promote lower crime, greater agency in promoting family well-being, promote greater activity with regards to school outcomes. So the jobs programs that come to these neighborhoods have effects well beyond the individual. They promote better families, more stable families, more stable communities. So what does Hamilton think of the new call center on the south side of Chicago? I think it's fantastic that the CEO of Discover is taking

a moral responsibility. I think these type of activities should be applauded. But I also, if I'm considering structural change, if I'm considering social stability, I would have the caveat that we should not be solely reliant on the charitable as well as moral inclinations of that CEO. We should not be vulnerable to that being the case for all other CEOs for which there's no expectation that there will be. We know that the profit motive in and of itself will not necessarily lead to these outcomes. Nathan Hendren is skeptical about the Discover project for a different reason. I think, you know, there's a lot of programs. When a company makes what they would call an investment in a place, there's a lot of reasons to want to advertise that to get some pr there's certainly tax breaks that come into play

i think if i did my research right it looks like they got about two and a half million in property tax relief at the end of the day these kinds of decisions don't go forward unless they see a business path to it and part of that business case can be the monetization of the pr big gain from these types of acts and i'm a little bit concerned about the scalability of that dimension. So am I then by creating a program on this topic being totally played for a sucker? I don't know if you're being played, but you might be monetized. I don't know. I'll let you decide whether that's being played. Well, let's say that you, Nathan, and your colleagues at Opportunity Insights are attending a conference with, let's say, a couple hundred CEOs of firms across the country. And they're all talking about wanting to expand opportunities for populations that have typically been not well served. What kind of evidence would you want to see from this Discover call center project

to persuade you that you should recommend to those CEOs that they should do something similar? I think I'd already be at a point where I would try to convince the CEOs to do it. Because if you think about it, what we're asking them to do is make decisions where we think there might be a large positive benefit to the people who they would potentially hire. And so I would encourage them to experiment on these dimensions, especially with populations that are historically excluded from the labor markets. So you sound a little bit more enthusiastic than I thought you would have. It sounds like the idea suits you based on your priors and based on what you know about income mobility. Is that the

case? If I'm talking to a firm, the idea suits me. If I'm talking to somebody who is a mayor of Chicago deciding whether to invest in schools on the South Side or whether to invest two and a half million dollars into this project, there I think it's a much tougher question. And I'd want to think about how to judge the relative tradeoffs of that use of money. But when we're talking with people who are in firms who are interested in creating both value to their customers, but also an image that aligns with the image they want to have in society, then I think these are great efforts to take advantage of things that can have large benefits on a local population. One thing you haven't mentioned yet is subtracting commute time, right? So a given person living in Chatham is now going to work at the Discover Call Center. Let's say they're working there 35 hours a week, and their total commute time is something like, let's

say, two or three hours. Let's say the previous job maybe paid the same, maybe even paid a little bit more, but was downtown or somewhere where the commute time was, let's say, two hours a day, 10, 12, 15 hours a week. How do you start to think about factoring that in? Yeah. I mean, maybe they're able to pick their kids up at school. I think it's certainly a big factor. There's a lot of studies that suggest the biggest predictor of unhappiness is how long your commute is. And I think that that could be an important factor to consider. And I think that kind of speaks to this, perhaps pushing back on this idea that it doesn't matter where the jobs are. It might not matter just in terms of income, but perhaps it does have impacts on other aspects of life. I went back to Discover CEO Roger Hochschild for a final question. Roger, if there are other CEOs listening

or CMOs or HR people or call center people, they've heard your story, what would you say they should do next? Gosh, they can send me an email or give me a call. Okay. But I would say just get started. Plant a stake in the ground. When you can engage your organization in problem solving, you'll be stunned as to what they do. There's nothing like seeing it.

I went back to Watis Gavings, too. She had told us all the good things about the Chatham Call Center. I asked where there's room for improvement. I mean, there's a lot of room for improvement. One of the things that I'm recognizing is, you know, it's more important for us as an employer to show up in the right way than it is for the employees. When you think about things like human-centered design or anti-racist work, sometimes the policies and procedures that we create doesn't set up individuals for success. And I'm learning that those are the tough conversations that we have to have in order to make sure that the model that we're building is sustainable. Obviously, when we started Discover 40 years ago, there was no Chatham in mind, right? Like these policies and procedures were not created for a group of Black people and these economic conditions that will and have excelled above and beyond everyone else. But we still have biases within our system. The things that we face in our neighborhood when it comes down to marginal things such as resources and wraparound services.

And, you know, we've had issues in the community. Those are unique to the South Side. What do you mean when you say issues in the community? Back in October, we unfortunately had to bury one of our employees, awesome young woman who was thriving, just happened to be caught up in the, at the wrong place at the wrong time. And unfortunately passed away. Those aren't things that we experienced in our other locations. So how we respond to that, like telling the mother to submit the death certificate to 1-800-HR, that doesn't work in the moment. That's the last thing she wants to do. So being able to respond with the level of appropriateness, but also make sure families understand and feel our support is

different. One of the things I realized though, is we got here because of disinvestment. We got here because there is not economic opportunity. But on the flip side of that, I cannot fully push Discover's work without caring about those things too. There are issues in the community that will impact our operations that we have to be prepared to respond to. So what do you do in that case with the mother of that young woman? Her mother and I, we text still almost daily. She's a grieving mother, her only child. And so it's been very, very hard for her. We made sure her funeral services were taken care of because we felt like that's the least we can do

in this instance. I'll never forget her face. And I hope every day she knows how much her loss has personally impacted me, but also impacted the way we think about the work and how we want to make sure we show up in the very best way as an employer. Watis, how would you say this opportunity and this job have changed you in the last couple of years? I think it's definitely, you know, breeded a more authentic and more vulnerable side of myself. I would say internally it was healing for me to know that it was finally safe and finally comfortable and something I had worked so hard for because I didn't take lightly the idea of leaving Discover, because you invest in something you wanted to pay off

and have a return at some point. So place-based investments are a favorite phrase of certain economists who are trying to figure out why some communities have been hollowed out and continue to not have good opportunities. The way you're describing this, it sounds like it's working and it becomes a kind of virtuous circle. Why aren't we seeing a lot more of it then? I don't know. That's a great question. I think it starts with people's beliefs, right? I think that you have to believe that opportunities is the problem, not the talent. If I think that you have to believe that, you know, opportunities is the problem, not the talent. If you think that talent is everywhere, then it wouldn't be as hard for you to make this decision. But there is a disconnect with what people say they believe, but what they're actually willing to do.

Something in me tells me that it's belief. There has to be a shift of power in order for people to really get it and really understand it. And I don't think we're quite there yet. I'd like to thank Watis Gathings and Roger Hochschild from Discover and the economists Nathan Hendren and Derek Hamilton for leading us through today's conversation. And I'd love to know your thoughts. Our email is radio at Freakonomics.com. You can also leave a rating or review on your podcast app.

That is a really helpful way to support the podcasts you love. One more note, Discover Financial Services has advertised on our show in the past, but there's no connection between that sponsorship and this episode. We do what we want to do, how we want to do it, and no amount of sponsorship will change that. Unless maybe you send like a trillion dollars in unmarked bills, how we want to do it, and no amount of sponsorship will change that. Unless maybe you

send like a trillion dollars in unmarked bills, then we can talk. Coming up next time on the show. Facebook, Twitter, Visa, MasterCard, Verizon, Tesla, Chrysler. Why are so many of the world's biggest companies incorporated in the same tiny state? A corporate secrecy campaigner will say it's because they allow corporate anonymity. What's the matter with Delaware? That's next time on the show. Until then, take care of yourself and if you can, someone else too. Freakonomics Radio is produced by Stitcher and Renbud Radio.

You can find all our episodes on any podcast app. And now you can also hear them on YouTube. If you know someone who doesn't listen to podcasts, but does spend a lot of time on YouTube, tell them to go to youtube.com slash at Freakonomics. That's the at sign followed by Freakonomics. This episode was produced by Zach Lipinski and mixed by Eleanor Osborne. We had help this week from Jeremy Johnston and in Chicago from Lou Carlozzo. Our staff also includes Greg Rippin, Morgan Levy, Ryan Kelly, Alina Kullman, Catherine Moncure, Rebecca Lee Douglas, Julie Canfor, Jasmine Klinger, Daria Klenert, Emma Terrell, Lyric Bowditch, and Elsa Hernandez. The executive team of the Freakonomics Radio Network is Neil Carruth, Gabriel Roth, and me, Stephen Dubner. Our theme song is Mr. Fortune by the Hitchhikers.

All the other music was composed by Luis Guerra. As always, thanks for listening. Thank you so much for having me on, And hopefully I was more impressive than Roger. And if you can tell me that, that'd be a great day for me to text him about it. A hundred percent. If you send me an affidavit, I'll sign it even. Dope. The Freakonomics Radio Network.

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