Tracy Palandjian on Investing in Opportunity: A Conversation with David Rubenstein

Timestamps:
Tracy’s opening remarks: 25:28
David and Tracy in conversation: 35:24

Tracy’s Opening Remarks:

The American experiment began as an act of faith — written in ink, but carried forward in practice by all of us. As we approach the 250th anniversary, it feels like the right moment to revisit the ideas that set this country in motion — and to ask how we are doing, and whether we are delivering on the promise of the American Dream.

I come to this conversation as someone who arrived here as a foreign student from Hong Kong in the 1980s — an outsider who chose to stay and become an American. So I don’t take lightly the chance to reflect on this — especially in this room, at this moment.

At the founding of this country were two powerful beliefs — that people could shape their own futures, and that free markets, paired with strong institutions, could organize human initiative productively.

Those convictions converged in a remarkable year. In 1776, America declared independence — and Adam Smith published The Wealth of Nations. Two documents, published the same year, each affirming human agency: one political, one economic — together shaping a society built on freedom and opportunity. And 250 years later, those principles still shape our economy and our democracy.

Markets rely on participation — people willing to work, invest, take risks, and build. Democracies rely on legitimacy — people believing the system gives them a fair chance to succeed.

At the heart of both is economic opportunity.

In its simplest form, it means having a steady income, the ability to weather a setback, and a real chance to build wealth — to start a business, to buy a home. By that measure, how are we doing?

Today, income and wealth inequality in the United States are at levels not seen since the Gilded Age. The American Dream — the idea that each generation will do better than the last — is increasingly in doubt. For those of you born in the 1940s and 50s, roughly 90 percent of your generation earned more than your parents — you lived that experience. For those born in the 1980s sitting here tonight, those odds are now a coin flip.

And when half of American households are one unexpected expense away from financial crisis — when a medical bill or a car repair can tip a family into distress — we don’t have a resilient economy. We have a brittle one.

15 years ago, my co-founders and I started Social Finance with a question: could the tools of capitalism be used to address some of the challenges capitalism has helped create?

Social Finance is a nonprofit 501(c)(3) — and an SEC-registered investment adviser. That unusual combination is intentional. We believe in the power of markets — and we believe that that power can be directed to expand opportunity by bringing capital to places traditional markets have not reached.

Our organization’s name is also the name of our approach. Social finance — with a small “s” and a small “f” — means using financial tools deliberately to achieve measurable outcomes for people. We structure capital to address market gaps — in workforce training, rural economic development, and in areas like homeownership and employee ownership, where traditional markets often don’t reach low-income families and workers.

In many ways, our work draws on two traditions that have long defined this country: the instinct to build and the instinct to give. We have the deepest capital markets in the world — and we have a culture of extraordinary generosity. Americans donated nearly $600 billion to charitable causes last year, and more than $2 trillion sits in foundations and donor-advised funds already set aside for public good.

And yet, neither tradition on its own is enough to meet the scale of the challenges we face. Traditional philanthropy — in financial terms, negative 100 percent — cannot do it alone. And traditional capital markets often overlook promising solutions — because the time horizons are longer, the risks are higher, and the returns fall outside conventional investment profiles.

Between those two systems lies an opportunity — a way to use capital for impact that doesn’t have to be spent once and gone.

Traditionally, people think about money in two wallets: one they invest from, and one they give from. We are opening a third — a wallet for impact where capital can come back and work again.

Just as an investment portfolio compounds returns, the third wallet compounds impact.

Let me share a few examples of solutions funded out of the third wallet.

• Helping a worker retrain for a new career through a zero-interest forgivable loan— so the path forward doesn’t begin with debt.

• Financing childcare centers in neighborhoods where none existed — so parents can return to work while creating jobs.

• Providing small, affordable loans to women entrepreneurs — so they can open a business and hire their first employee.

• Helping hourly workers become owners of the businesses they power — so they can build wealth and share in the success they help create.

• Converting predatory land contracts into fair mortgages — allowing families to finally hold title to their home.

These are not hypothetical models. They are real, and they are working. And unlike a traditional grant, the capital that funds them can come back — to be redeployed for the next worker, the next learner, the next entrepreneur.

In that sense, social finance is not just a new investment strategy. It is a reimagining of philanthropy — a way to make each dollar go further.

This is not a one-size-fits-all approach. Some challenges will always be better suited to traditional philanthropy — humanitarian relief, basic research, civic institutions. But where financial tools can drive outcomes, the potential is powerful: to give in a way that gives again.

That is the work we are trying to do — new models to invest in opportunity, adding that third wallet alongside the other two. In a sense, that is what connects Adam Smith to a woman opening her first storefront — and what connects the Declaration of Independence to a family holding the deed to their home.

At its core, this work is about expanding economic opportunity — so that more people have a meaningful stake in the economy, a genuine chance to build a life, and to experience what we’ve long called the American Dream.