James Rhee

James Rhee is a transformative CEO, investor, and educator on a journey to becoming an influential thought leader. A former high school teacher and private equity investor, James received widespread acclaim for saving the nearly bankrupt clothing retailer Ashley Stewart as a first-time CEO. His TED Talk, “The Value of Kindness of Work,” in which he shares this inspiring story, has received over 2 million views. Since leaving Ashley Stewart in 2020, James has been working on red helicopter, a movement he started with the aim of spreading his philosophy for building a better version of capitalism, based on “a combination of kindness and math.”

The Entrepreneur

James’ career path has been an eclectic one, where he often took opportunities because they felt right to him, rather than because they were a logical next step in a linear career. He taught history at a historically disadvantaged high school, earned degrees from Harvard College and Harvard Law School, and worked for prestigious private equity firms, before starting his own investment firm in 2009.

His firm, FirePine Group, focused on two highly entrepreneurial types of investments: dynamic, high-growth companies; and distressed firms that needed to be turned around. He calls his approach to the latter distress venture, where, as opposed to the traditional cost-cutting methods of distress investing, he focuses more on rebuilding the company.

One of these distress venture investments was Ashley Stewart, a clothing retailer that historically catered to plus-sized, predominantly African American women. Founded in 1991 and with most of its stores in low-income, urban neighborhoods, Ashley Stewart was saved from bankruptcy in 2010 by FirePine Group and another investor. The company never managed to become profitable, and by 2013, it was facing another bankruptcy and even imminent liquidation.

Having been on Ashley Stewart’s board since 2011, James felt that it was unjust for the company to disappear. He had seen the important role its stores played in the social fabric of their neighborhoods, and he made the radical decision to try to save the company. He resigned from the board and took over as CEO, initially intending to stay on for six months. His objective was to stave off liquidation and “gently” lead the company into bankruptcy, preserving its existence and most of its jobs.

James had no experience in retail or as a CEO. In addition, as an Asian man, he took over the leadership of a company that both catered to and was staffed primarily by African American women. In his first town hall, he told the staff that he was “probably the least qualified person” to lead them. Yet despite that – or perhaps thanks to it – his approach worked.

Spending most of his time at the company’s stores, James took a humble attitude and asked his staff to teach him everything he needed to help them succeed. At the same time, he introduced a highly entrepreneurial spirit at corporate headquarters. He shut down the C-suite and moved everyone – himself included – into cubicles, and he installed a meritocracy where everyone was asked to be part of the solution.

James invested heavily in technology to streamline the company’s operations and revitalized the defunct e-commerce business. He introduced a relentless focus on the company’s key strength: the relationships between the staff and their customers. Inviting store personnel and customers to feel part of Ashley Stewart’s story not only became the key to its survival; it contributed to tremendous organic growth in low-cost marketing through social media.

Ashley Stewart’s growing online presence enabled the company to broaden its customer base, encouraging the African American women at the heart of its community to be role models for other women. They shared what James described as a value proposition for women who often struggle to find clothes that make them feel good: self-esteem, confidence, and feeling good about yourself, manifested in apparel.

Underneath all these strategic shifts, James infused Ashley Stewart with something much less tangible: kindness. In a company where years of underperformance had caused a toxic atmosphere, James made the introduction of a “culture of kindness” a strategic priority. As one example of this shift, he introduced the CEO Citizenship Award, the most prestigious, highest compensated bonus system in the company. The award is not based on sales or revenue, but on three intangible aspects: act like an owner, be a good friend, and be a good mentor. 

In addition, James prioritized kindness through philanthropy, even in the company’s most financially difficult times. In the 2013 Christmas season, despite still being on the brink of bankruptcy, he organized a sales competition where the top 40 stores were allowed to give away $250 each to a local charity of their choice, and the company held its Christmas party at a YWCA in Brooklyn. Activities like these galvanized staff and customers alike, forming a crucial part of pulling through the most challenging months.

James ended up serving Ashley Stewart as its CEO for seven years. He not only succeeded in his initial goals of preventing liquidation and successfully guiding the company through and out of bankruptcy in April 2014; his strategy dramatically turned around Ashley Stewart’s fortunes. Although he closed many of its stores and lost part of the corporate team, the remaining stores and its nascent e-commerce business thrived. By 2016, Ashley Stewart made $20 million in profit, after two decades of posting losses year after year.

In addition, the company’s success empowered the many African American women working and shopping at its stores. Ashley Stewart encouraged and enabled staff and customers to register to vote through its stores. By making his store personnel a strategic priority and listening to them extensively, James gave them agency in the company’s success, and enabled them to perceive their capacity as changemakers. The same goes for Ashley Stewart’s core customers, who were encouraged to see themselves as role models in unexpected ways. 

By 2018, the income from e-commerce coming from non-urban sources was sufficient to cover all salaries in physical stores. In so doing, Ashley Stewart became a net importer of capital into these low-income neighborhoods, while exporting the value systems of African American women.  

The achievement is indicative of how James looks at Ashley Stewart and the role it plays for its community. “We are a mission-driven business,” he said as CEO. “We believe in advocating for a woman who could sometimes use a little more advocacy.” 

The Vision

Since leaving Ashley Stewart in 2020, James has been focusing his efforts on spreading his philosophy of “kindness and math” that made it successful. He calls his movement red helicopter, inspired by a formative experience he had as a 5-year-old. The father of one of his Kindergarten friends gave him a red toy helicopter, as a thank you for being friends with his son at a time when the boy’s mother was passing away. James often shared his lunch with the boy, when he’d come to school without lunch of his own. 

Years later, the experience helped James define the concept of goodwill, which is an accounting term that refers to a company’s intangible value beyond its tangible assets. When a company changes ownership, goodwill makes up the difference between the amount the buyer pays and the net sum of the company’s tangible assets and liabilities.  

However, the concept has a very different meaning in the world outside of the accounting profession, and it was the gift of the red helicopter that made James experience goodwill as a real-world asset: something you earn by doing the right things the right way, which compounds slowly, and which delivers real value over time. Decades later, investing in real goodwill – with Ashley Stewart’s staff, customers, and other stakeholders – turned out to be the key to making the company successful. 

Prioritizing and properly accounting for that real-world version of goodwill is at the core of James’ philosophy for reshaping capitalism and the role business plays in our society. A reshaping that is desperately necessary, because at the same time that James was investing in kindness at Ashley Stewart, he increasingly experienced a lack of it in our broader society. He worries that our social fabric is deteriorating and that it is increasingly hard for us to have civil discourse. And despite being an avid proponent of the idea of capitalism, he observes several existential issues with its present-day version, which have contributed to these problems. 

These issues include: the lack of equitable access to capital for all, especially minorities; the disconnect between capital and people; and the growing disparity between capital owners and non-capital owners. In addition, capital owners have been increasingly prioritizing growth and financial returns in recent decades. In doing so, they have turned many companies into nothing more than assets in a portfolio, neglecting the crucial importance that (especially small) businesses play in our social fabric. 

Most importantly, our current model of capitalism does not value the kinds of human values that create that real-world version of goodwill. In our private lives, we encourage people to act on kindness, integrity, and grace, but in the world of business and finance, these values are often seen as a liability rather than an asset. 

To resolve this, red helicopter aims to be a global movement towards a different, kinder version of capitalism, one that prioritizes real goodwill. In the business world James envisions, basic human values will be seen as true assets and businesses will be more aligned with those values, access to capital will be more fairly distributed, and diversity, equity, and inclusion will be natural consequences of its design. James’ ultimate vision looks something like “Mister Rogers’ Neighborhood,” with a little added savviness about business and money. 

James himself plays several core roles in creating this movement. In the public domain, he shares his philosophy of kindness through strategic platforms: a highly popular TED Talk, an interview on Brené Brown’s podcast, and a book that will be announced in October 2022. In the more private sphere, James is exerting influence on the people who have the power to change systems. He is doing this by holding up a mirror, questioning, and providing suggestions. His goal is not primarily to tell these people how to do things differently, but to get them to ask themselves: “Why are we doing things this way?” 

In both of these capacities, as well as in his work at universities like MIT and Howard, James’ role is more that of a teacher than a consultant. He doesn’t have all the answers, and that would fit neither his mission nor his personality. Instead, he questions and makes suggestions for change, and trusts that those in his audience will themselves see the solutions in the mirror he holds up. 

Finally, James is still an investor, and he is ready to invest his poly-capital in those he believes in and are doing business aligned with these basic human values. 

The Person 

James Rhee is married and a father of two daughters and one son. The middle of three children himself, he was born shortly after his parents immigrated from Korea to the U.S. His mother was never able to fully learn English, and he regularly translated for her in public places. He often found himself having to defend her from racism and ridicule; experiences that fueled his life-long desire for social justice. 

Growing up Catholic, James has been on a spiritual search that intensified after his mother passed away several years ago. He finds inspiration in Buddhism and Gary Zukav’s book “The Seat of the Soul.” In particular, James resonates with the teaching that we need to be connected to the spiritual mission that brought our soul into this earth.  

James’ mission and his desire for social justice have shaped many of the unconventional decisions throughout his career path. Upon graduating from Harvard College, he decided to become a high school teacher, in an area where many students did not have a realistic prospect of attending college. Beyond teaching history, he helped run a dorm, taught football and baseball, and created a basic financial literacy class. He developed an approach with his students that he later applied as a distress investor and as Ashley Stewart’s CEO: rather than repeating society’s dominant narrative by telling his students all the things they weren’t good at and all the ways they wouldn’t be able to succeed, he tried to identify the things they were good at, and then focused on having them do those as much as possible. 

After two years as a teacher, James joined Harvard Law School with the idea of becoming a public defender. He cross-registered for business classes at Harvard and MIT, essentially building his own JD-MBA. When he graduated, he decided to start a career in private equity instead of going into law – a decision, he now says, that was driven by his “catching the ego bug.” 

Almost a decade later, his career in private equity came to a dramatic end when he decided to walk away from a highly lucrative opportunity. As one of eight partners at a prestigious firm, James was offered the partnership stake of one of his co-partners and friends, in return for taking the responsibility of pushing him out. James refused, resigned instead, and ended up starting his own investment company, which eventually led him to Ashley Stewart. 

James believes his decision to take over as Ashley Stewart’s CEO – and his ability to succeed – are the result of his extremely diverse background and set of experiences. Thanks to these experiences and the skill sets he has developed through them, James believes he has gained a profound understanding of the world and the role of business in it; something he has described as an experience akin to “seeing the Matrix.” 

Building on that wisdom, James sees himself as someone who can predict the future, a teacher, connector, and problem solver, and someone who advocates for and actively encourages people who have been disadvantaged by the systems in our society. Through his work with red helicopter – and by his nature – he brings together people and organizations whom he believes should be collectively working towards a better future. Specifically, he likes to connect those who should change with those who can teach them how to change, and ultimately step out of the way himself. 

James’ role as a connector and co-creator is indicative of how he views his future and that of red helicopter. Rather than telling the world exactly what red helicopter will look like, he is happy for people to come to their own conclusions about it and take it into whatever direction works best for them. In the meantime, he will continue to do the legwork on spreading his vision, whether it’s to an online audience of millions, a classroom of thirty, or a single CEO.

 

James Rhee has been a member of Ashoka's Entrepreneur-to-Entrepreneur Network since 2022.