A Black History Moment: Alonzo F. Herndon and the founding of Atlanta Life Insurance Company
Alonzo F. Herndon
I seek a historical model or an example of black business and achievement to share. I’m particularly focused on black business because I believe that business formation and economic development are the keys for the development of the African-American community. This is the reason behind the series of posts here on black history and the specific focus on African-American entrepreneurs. Social activists are covered extensively, but scant attention is paid to our entrepreneurial history and we do have a history in this regard.
As a black man, I can’t write about our history with a detached clinical sort of style. I can’t be dispassionate for this is the history of my people, hence it’s my own story. It is a story of abuses and long suffering. It’s the story of a love hate relationship with a nation that for too long turned its head at the horror it inflicted on those of the blood Afric. But, it’s also the story of those who persevered in spite of all the grief and injustice hurled their way and I want to focus mainly on that particular part of the story, but it’s necessary to weave in the conditions that black folks chafed under as those conditions actually led to the creation of many black business enterprises in the early 1900’s.
Even today, many African-Americans will only use a black funeral director, or a black barber or beautician without really appreciating why this habit persists. In part, these habits are echoes of a distance past harkening back to the days of segregation where the only person who would bury a black person was another black person. The same applies to hair care, life insurance and a host of other things. Segregation spawned conditions where there were no illusions; if you and yours didn’t provide the service or otherwise address whatever community issues there were, no one else was going to do it for you. Fundamentally that concept remains unchanged, it’s just that we’ve largely forgotten that rule.
Our timeframe again is that rich period of African-American history shortly after emancipation–the early 1900’s and our subject is Alonzo Herndon, the founder of Atlanta Life Insurance Company.
Herndon was a former slave and as you look at his picture above, from all outward appearances he appears to be Caucasian. His father was a white man. In slavery, there was really no such thing as a voluntary liaison between black women and white men. It’s likely that his father was his master.
Herndon was only about seven years old at the time of emancipation and his family came out slavery into destitution and struggle which meant that he had to go out and work at a very young age to assist his unmarried mother. He eventually hit upon barbering as a way to make money and ultimately found his way to Atlanta where he became part-owner in a shop owned by another African-American before splitting with his partner and opening a shop of his own.
This was the time of strict racial segregation in the south. Herndon’s staff was entirely black while his clientele was strictly the white elite of Atlanta. He was highly sought after for his services, partly due to his barbering skills and partly due to the racial codes of that day where whites generally liked being pampered and doted on by blacks and his staff was trained in showing the appropriate deference to the white clientele.
Herndon eventually opened three very successful barber shops and he made a fortune from this trade which he invested heavily in real estate. As his wealth grew, his influence also grew and he became a recognized leader in the African-America community.
The rampant racism of the early 1900’s affected African-Americans in a host of ways and the racial codes of the day barred the masses of black people from joining fraternal and mutual benefit societies established to provide insurance and death benefits. Insurance companies are based largely on the law of “large numbers”. Essentially, this means that the probability of everyone needing the event being insured against at the same time is remote, so only a small number of those paying life insurance premiums will file claims at any given point. So the key for a business like to this is to accurately predict mortality and to set aside the appropriate level of reserves so claims can be paid.
At the turn of the century, many black churches formed burial associations for this purpose and would collect money from the insured so as to provide death benefits. Unfortunately, the problem was that many of these associations frequently didn’t have adequate reserves which meant they couldn’t pay on death claims when families came to collect to bury their loved ones. In Georgia, laws were passed to mandate the level of reserves that all insurance companies had to maintain and this was a major problem for many of these black burial associations. It created a situation where a church burial association sought out Herndon to buy them out because they couldn’t raise the money to meet the required reserve of $ 5,000. He wound up buying them out for $ 140 and put up the money for the reserve.
Within five years of this initial acquisition, Herndon purchased several other associations that were in similar straits and put together a qualified staff to run the business and named it Atlanta Life Insurance. Acquisitions of these associations formed the primary strategic path for growth both within and outside of the state of Georgia. By this mere act, he performed a great community service as well by shoring up the community confidence that their insurance claims would be met in the event of the death of their loved ones; something that was frequently uncertain.
The Herndon Mansion
Atlanta Life enjoyed considerable growth in both the types of insurance offered and the volume of insurance in force both during and in the ensuing years after Herndon’s death and the company was integrally involved with supporting Martin Luther King and others in the civil rights struggles of the 60’s. Herndon also became involved in a number of initiatives supporting the development of other black businesses and organizations. His 105 year old insurance company continues today as Atlanta Life Financial Group.
Again, it’s not sufficient to simply “know” African-American history without gleaning its lessons. Here are my takeaways from this story:
- The most successful entrepreneurs are experts at problem solving. If you want to make big money in America, figure out a problem to solve. The bigger the problem, the more the potential reward. The problem that Herndon solved was the need for the black community to have life insurance to bury their loved ones. They also needed to have the confidence that once premiums were paid that the life insurance company would be there to pay claims. Herndon really provided a much needed service and made a fortune at the same time.
- Wherever there exists a lot of problems, there’s often opportunity abound. This has obvious implications for the African-American community given the problems. I’m not suggesting that there’s money in every solution to every problem in the black community, but clearly some have profited. For example, the “problem” of many unemployed and unemployable youth has been “solved” by the illegal drug merchants with hugely negative implications. What we need are solutions of a positive nature.
- An independent economic base tied to your community allows one the freedom to speak out as you’re somewhat insulated from reprisals. Although I didn’t detail it above, Atlanta Life was heavily involved in support of the Student Nonviolent Coordinating Committee (SNCC) and Martin Luther King at a time when it was very unpopular to do do. They could do so because their economic base was in the black community and there was no concern about a drop in sales. (Actually, the converse was probably true—being a good corporate citizen in this regard probably increased sales). The reason why we truly don’t have representative leadership today can be tied directly to this or the lack thereof. We don’t really “own” those who supposedly represent us and as a consequence, they’re really not accountable to us. Effectively, Atlanta Life was effectively owned by the community at that point.
- A real business becomes an institution that survives its founder. This is the key for a business or any other organization to continue to benefit those it serves and the community. It must be built to last. Institutionalizing things is particularly important in the African-American community as their are few positive institutions of any kind to counter the negative ones that seem to sprout up overnight.
- If you or your community needs something, the best way to provide it is to do it yourself. Herndon, Madam CJ Walker, John Abbot and none of the other entrepreneurs I’ve written about in this series sat around waiting or convincing someone else to do what they had in their own power to do. These folks were fearless and supremely confident at the same time. They did what was needed and didn’t bother with asking permission.
- Racism, although generally uneconomic, is sometimes good for business. I think most of us today would find it hard to operate as Herndon did with his barber shops by reinforcing the master-servant relationship of the antebellum south. Herndon was able to set this aside and just make the trade. He decided that there were bigger fish to be caught and that dealing as he had to deal was only of consequence for the moment and not a permanent condition, so if that’s what they wanted, they had to pay for it. He redeployed his barber shop earnings to ensure his independence, hence freeing himself from that business. Effectively, racism built his economic empire and the insult of “serving” folks came out in the wash so to speak. The racist policies behind the American system of apartheid actually created a number of viable black businesses. So, even virulent racism doesn’t necessarily impede one’s economic progress.
- Trade, not aid, is the ticket for economic development in the African-American community.
- The circumstances you were born in don’t prescribe your limits. Herndon was a slave and yet still achieved success. Horatio Alger never made black folks the center of his stories, but our history is replete with those who overcame their circumstances. This is the mettle these folks were made of. This is a yardstick against which we can measure many of our so called leaders today who seem to believe that achievement can be had by begging someone to do what we should be doing ourselves.
I just find that our history holds many lessons that have been forgotten and the models of the past can be used to address issues today.