Detroit, the once prosperous motor city currently down on its luck, has major potential to bounce back. Just like the auto industry bounced back a few years ago, Warren Buffett, legendary investor, feels the city has a real chance to prosper once again.
Buffett attended the event as a way to help bring in $20 million worth of loans, mentor programs and education to the state of Michigan and small businesses are alike. This is part of a $500 million Goldman Sachs national campaign that it intends to help entrepreneurs create more revenues and jobs.
“The resources are here to have a great, great city,” he mentioned during a news conference which said that they will include Detroit as of the 11th city in the 10,000 Small Businesses program by Goldman Sachs.
The 83-year-old chairman and CEO of Berkshire Hathaway, also advisory board cochairman of the Goldman Sachs program, mentions that ditch right is an underutilized resource. This creates great opportunities for growth. He also seems very enthusiastic about investing his own capital if he finds a company suitable to the task.
“I have a real love for the city, and the potential is huge,” said Buffett. “The United States with a flourishing Detroit is going to be a lot better than without one.”
The overall message: Detroit’s past greatness in industry is a base upon which they can build a new economy and a new generation of entrepreneurs.
“With practical business education and capital, small-business owners in Detroit have a much better chance of growing their businesses and contributing to the economic recovery of the city,” mentions Lloyd Blankfein, CEO of Goldman Sachs.
The city of Detroit is the latest in a list of other potential candidates that Goldman Sachs chose to participate in the program. They hope to create thousands of small businesses all across the United States.
As part of this program, Goldman Sachs will contribute $15 million to support the small business initiative through two specific lending funds. They are the Invest Detroit Foundation and the Detroit Development Fund. There is another $5 million allocated to support the education component that will help entrepreneurs learn the basics of managing and growing a business.
The first class consists of founders of 20 local businesses. The course will be taught at local colleges.
Buffett mentions that he signed up because he was quite impressed with Goldman Sachs earlier a few years back and the 10,000 Women global initiative, which launched in 2008. That initiative helped support female entrepreneurship all around the globe.
Warren Buffett currently owns about 2.8% of Goldman Sachs, through warrants when he helped shore up the investment firm with a cash infusion of $5 billion at the height of the financial crisis, immediately following the Lehman Brothers collapse in 2008.
The 10,000 Small Businesses initiative was originally rolled out in 2010 in New York City. It was then the later launched in nine more metro regions, including Los Angeles, Cleveland, Salt Lake City, Chicago, Miami, Houston, Philadelphia, Long Beach and New Orleans. If any applicants come from anywhere in southeast Michigan, it’s required that they will have to travel in order to take the classes in Detroit.
Buffett made a prediction that the trade business owners in the hundreds will eventually go through this training program, which was developed by the Wellesley, Massachusetts privately owned a Babson College business school.
There is also a more limited version that offers capital but it does not provide support services and education. It is currently running in six states, including Washington, Oregon on, Virginia, Kentucky, Tennessee and Montana. In total, roughly 1700 businesses have taken part in this program.
“I met one guy in Chicago that actually had an MBA, and he said he learned more from this operation than he got from his MBA at a very prominent school, said Buffett earlier.
Buffett also said, “I really like the program. It works. I would not spend my time on it otherwise, frankly.”