#19: Jon Stein, Betterment

Welcome to From Startup to Grown up, the podcast. My name is Alyssa Cohn. I'm an executive coach, an angel investor, and the author of From Startup to Grown Up. Each week, I talk to founders, creators, advisors, investors, and builders of all kinds about their insights and experiences in going from startup to grownup. This is episode 19, and I'm thrilled to welcome John Stein to the podcast. John is the founder, former CEO, and chairman of Betterment, a financial advisory firm that uses automation to simplify investing. We had a fantastic conversation. John talks about the twists and turns that led him to found Betterment, how he landed his first check when he really didn't know what he was doing, and how important culture is to the success of the company. We also talked about the difficult decision that John made to step down from the role of CEO and how he handled finding a successor. There's so much wisdom in this podcast. So please enjoy my incredible conversation with John Stein. John, welcome to the show. I'm so excited you're here.

Thank you, Elisa. It's great to be here. We've had such good conversations in the past. I'm excited to get to talk to you again. You always ask such good questions.

Thank you. I appreciate hearing that. And also, I was going to say you were actually the. In. In my book, From Startup to Grownup, I interviewed a number of founders, and, John, you were the very first interview I did for my book. I know I didn't tell you that. I wanted to pretend. I wanted to pretend. I was so experienced. I know, but you were the very first person I interviewed for my book. And I just want to say thank you for your early support of. Of me and of the book and of the work. You know, my mission is really to bring a lot of education and support to other founders. So I want to say thank you for supporting other founders and also me.

Well, it's an honor. It's a fun thing for me to get to do, and it was exciting to be a part of it because there's so many people who are smarter and cooler than me who are also in that book.

Well, as I was researching for this sort of round two conversation, I realized that we both won writing awards. You won a. An Award in 8th grade for writing, and I myself, I won an award for a college essay contest in 12th grade. And when you were younger, you thought you were going to be a journalist, is that right?

So where did you. How did you dig this up? It's true, but this is like, this is not on the St. Mark School of Texas website, you know, the eighth grade writing. All right, so I did, I did win that award at that time. Yeah, I was, you know, no one knows what they. Well, I guess some kids know what they want to do. I certainly was far from knowing what I wanted to do when I grew up. But I spent a lot of time back then with the student newspaper and I loved that. I enjoyed getting interview people. I enjoyed the something about it. And so I, you know, I spent enough time that it became the editor of the paper. I loved the writing and I wrote. I interned at the Met, which was a. One of these like arts and entertainment weeklies in Dallas at the time. And I just thought everyone there was like the absolute coolest people in the world. And I wanted to be like them. And you know, they were, you know, hard, hard drinking and hard partying and just knew all the shows in town. And, and, and so I applied to college thinking, I'm going to be a journalist and this is going to be it. And, And I got there and for the harvest, Harvard Crimson in my freshman year. And they were super cool too. I was like, oh my God, like these guys are fun to hang out with, but. And they gave me a column. But I just got sick of the writing. I just, I just, I got disengaged from it. And I realized processing all that, kind of like trying to figure it out, like why I wasn't all about it anymore was I wasn't running the show, I wasn't managing the team. I was just kind of like a small part in this bigger, much bigger machine. And I just didn't like it. And a college girlfriend said to me, you know, John, I think you really just like to be part of groups where you're in charge. That seems to be like a thing. But, you know, it stuck with me, that idea. And I did gravitate towards things like the, the Dunster Grill, where, you know, I sort of, you know, it was a small group and I got to then run the grill or my house activities. I love to like organize things there. And again didn't realize at all like how what that meant until later. And I can sort of tell a story about it now and put narrative to it. But as I connected those dots after college, I thought, gosh, like, do I want to be a doctor? I was doing this postbac pre med year. I thought, this is a great way to help people. This will be like a really, you know, important thing to do and improve people's lives. But I didn't like blood and I didn't like working in the labs and I was just like, so, so what should I do? And tying all those threads together, I thought, well, I love, I want to be managing the hospital, not being the doctor in the hospital. I want to be like running the grill or running the house activities or running the newspaper. So maybe I should start a business. Maybe that's like what this means. But I'm not such a leader. Like, I don't know if that's me, but let me give it a shot.

Is that what you thought? So I'm so curious about that. There's so many things about that. Like first of all, that your girlfriend was able to see that in you. And I think what's really powerful, we have people around us who can kind of be a mirror for us and give us a self portrait that we don't ourselves see. So that was really a gift she gave you. And then, I mean also it's so fascinating that you were clear that you liked journalism until you didn't. You probably liked the food, the grill, until you didn't. And what the common theme was that you liked, you know, running things and having small groups, people around you. But was it that conscious? Was it sort of, oh, I know, that's what I like, so ta da, I'm going to start a business. Or was it a little more complicated and maybe time consuming than that?

I had a, it was a tough year for me. That it was. I remember piecing this together in the year after I graduated. So at that time I was doing this postbac pre med program still at, at Harvard and I was living close to campus and like a good, like, you know, 25% of my friends from college were still like right around that area. So like it was like, you know, sort of like a postback year. I mean it was, it was a continuation and there were fun moments, but I was living on my own, right? I wasn't living in the dorm with everybody else and I've never since then lived alone again because I just felt like, it felt very isolating to me. Like that was, that, that wasn't, it wasn't, you know, great. And I was meeting new people in all my classes and everything, but I just wasn't. And I was engaged in the science, but I was like, I just don't know if this feels like the right path. And that year I started seeing a psychiatrist in Boston. And again, I'm a big believer in sort of getting reflection and feedback, but I felt at that time like aimless Right. I felt a little bit like lost. And in that, in the course of those conversations and sort of like the self reflection that I was doing at that time that was like helped by that process. I realized that one, that I was pretty add, you know, and like kind of like was obvious when I looked back on my life and saw, you know, that I wasn't good at paying attention in class. I wasn't good at paying attention really to anything. Like, I was sort of like always off doing my own thing and that. And it was going to be hard for me to sort of like organize my time and plan around like someone else's direction of like, you know, here's what you should go and do. And I would have to be kind of more self directed and follow my own nose. And I was laying in bed one night, I remember, and I had this painting of a harbor across from my bed. And I was sort of like looking at it and it's titled the Distant harbor by Dutrillo. And I was just like, sort of like somehow imagining in that painting like the different future paths like I could take. And I saw myself in this doctor role. I saw myself as a teacher. I was just sort of like playing each path out. I knew it was business. It kind of came to me and I was putting together this thread of, oh, yeah, I like all these things, but what is business? I have no idea what that means. How will I go about doing it? So I moved to New York once I finished my classes because. Mainly because I have a lot of friends there and they seem to be doing business or whatever. Right.

Move to New York, capital of business, to discover what is business.

What is business.

Yeah. Well, that's fascinating. I mean, and it's so, it's so interesting that you had the painting there to inspire you to really play out forward. You know, there's an exercise that I regularly have my clients do, which is to think about my best life, my best possible life one year in the future or three years in the future, and to write that out. And in some ways you spontaneously came up with looking at the painting and kind of playing out the different elements of your life. And then you came to an understanding that you like this thing called business. And did you then seek out what business was? I mean, I am curious now if you want to tell the story about how you really decided to found betterment.

Yeah, that's exactly right. Then I thought, okay, well, let me go figure out what business is. Both my parents were city planners and I grew up in, in Dallas, Texas. There's not a big financial services industry in Dallas. You know, there's other things, but not that all the banks closed there in the 80s, basically. Maybe some are open again now. But anyway, the first thing I did was I got a job from a friend who was doing some consulting work. And it was a bad job. It was, the office was right across from Grand Central and an ugly, you know, kind of smoke covered, you know, skyscraper, like old brick building. And you know, there are a couple of people in the office. But I was mostly on the phone with a team in Poland. I had some like researchers there. And we were just combing the Internet for data about our client, like IT clients. And we were telling them who else was selling into these clients so that they could kind of like do the right partnerships and have this information, information when they were going in to do sales pitches, something like that. And you know, it was like an easy, I was like sort of automating process and making, making these like decks very, very quickly. And it was just a placeholder job. But I, I, I looked for something, but it was consulting. So that, that helped me get a job as a consultant. I talked to like another, another friend and, and I'll say I should, it's worth pointing out this was in 2001, which was a time when all the tech world was melting down. Right? Like the big, the last big tech bubble was like 99, 2,021, 2002. Everything was sort of, everyone was losing their jobs. Everyone I knew in college who'd gone to get a tech job had lost their job.

I can say I remember it well. Yes, 2001, the sort of. The tech meltdown. Yeah.

Yes. So like that was like there's, I had no idea about going into tech. What was doing well was financial services at that time. Right. It was sort of booming. And although I thought financial service was kind of gross, like my, my friend's company which was focused on financial services, like he was a consultant there. He seemed to be really happy. He was traveling all around the country and around the world for clients like. And so I went in and interviewed and fortunately, although I bombed the interview, I remember that the partner telling me, well, that wasn't compelling.

Wow.

Because I wasn't, you know, I just, I think I am who I am and um, probably wasn't, wasn't like super interested about financial services and but I got a job, they took a risk on me and I loved it. You know, I learned, I learned a lot there. At first. Manhattan Consulting Group about banks. I felt like this outsider who'd been let in. You know, I felt like a lot of my colleagues were like, yeah, like we want to work in financial services. Maybe they didn't. But this is my own internal sort of narrative of like, what was going on there, right? And that I was different. And I was there as this renegade who was going to learn about this thing and then ultimately start a business. I had that idea, I think, the whole time, and then I was looking at opportunities. I had a lot to learn. So I spent four years there, and then I went part time because I told them I wanted to start a business and I needed capacity to do that. But part time is hard. And I ended up kind of getting. I just kept kind of getting sucked back into, you know, projects. And they wanted as much, as much time as they could get. So then I thought I either need to quit or alternative 2 is go to business school. And, you know, my family and all the people I talked to were like, john, just go to business school. Like, it's a great opportunity. Like, you can do the business there. That was also hard. It's hard to do two things at once, at least for somebody who's as scattered as I am. And so I did work a lot on betterment while I was at Columbia Business School. I taught myself to code in the summer that I was there, and I built out the whole business plan. Every class I was in was about this idea that I had to improve financial services. I'd been working in it, so I had credibility in it. That's why I was in it. You know, I had other ideas about, you know, putting voting online and, you know, doing LED lighting stores or, you know, I had like, all these other kinds of kind of. But I, like, had credibility and financial services. So people would talk to me about it and I'm like, all right, I can at least get this business funded. And my goal was to get to like, 100 million AUM. You know, like, I'll manage a nice lifestyle business. It'll be good, and like, I'll manage a small team. So when we launched in May of 2010, by then I had assembled a team of four or five, and it was already like a bigger team that I sort of, like, had wanted to put together. But we, you know, it took us about a year to get to 10 million in AUM and another six months to get to 20 and another three months to get to 30. It just kind of kept growing faster and faster, and we were at 100 million by the end of year two. And I thought, wow, you know, here, here we are. But as with, as happens in sort of venture funded businesses, you know, you get to that thing, but you're just, it's just, you're never there.

Right.

Like, it's just another point in this like ever, ever increasing. And the hockey stick kind of just kept growing. We grew, you know, we grew to a billion. And today the company is now at 35 billion in assets under management.

Wow.

It's, it's continues to do incredibly well. And so it's, you know, that, that little idea sort of, it's, it's, it's taken off.

Yeah. That's amazing. There's so much to just follow up on about that, including the fact that I didn't quite realize that that was literally your quote unquote dorm room at Columbia that you kind of were, you're curating or incubating the idea. So it sounds like what? It sounds like you decided to take the advice of everybody around you and quit the job and go to business school. Business school is always a holding pattern for so many of us, right. To sort of. But we learn a lot. Right. I myself went to business school, School of Cornell. And it's an incredible experience to be around people. And it sounds like you, you did. Even though you, you call yourself scattered, you were able to focus enough to really work out the business and kind of figure it out. And then by the time you ended business school, you already had the team in place. Is that the idea?

When I was there, I joined up with my partner, my founding partner, Eli. So he was a friend. We were both in, you know, in the New York, you know, sort of friend group. I had a friend from college who I think went to law school with him. We ended up playing a poker game together. And so like, you know, that is how we first met was over a poker game and. But we started hanging out and at that time in 2007, 8, I was talking to everybody about this idea. I was telling them, hey, I want to go and do this thing. And I find that I give this advice now to folks. You know, when you just kind of put an idea out there, when you start like sharing it, you know, the world starts reflecting back on you and it starts to take shape and it starts to happen. It doesn't happen in your own head, you know. So I talked to everyone about was my project for all my classes and I iterated on it a lot. It continued to evolve. Um, and Eli was one of those folks who I shared it with and he's like, I get it, I see what you're trying to do and I'd love to help. I think at the time he was thinking about starting a food truck or, you know, he, like, he also, he was a lawyer, a securities lawyer who like, wanted to be entrepreneurial. And it just fit. It clicked. And then. Yeah, so that was one person. And then, you know, my, My other. My roommate Sean was helping me do some of the back end coding and stuff like that. We, I bumped into one of my former FMCG colleagues, Anthony Shroud, at a holiday reunion party thing, and I was telling him about this idea and he thought, that's really interesting. So we just kind of, you know, we kind of slowly accumulated mass and then we got enough feedback and we got, we had enough time to work on it that we got it launched.

Yeah, that is so powerful. I mean, people are always really so careful about sharing their ideas, but actually the idea is not really what's special. It's the ability to execute. And to your point, when you start sharing your ideas and talking about it, people give you feedback so you can iterate, iterate. But also you find people who are thinking the same thing or who want to join up with you and make this thing happen. So I think it's super powerful. And also what you're saying is, you know, you, like so many entrepreneurs, really tapped into your existing network. You know, I have this whole kind of section in my book around hiring your friends. And the truth is it's like super normal to hire your friends at first because that's who, you know and that's who you went through the trenches with and you're, you know, kind of sharing meals with and, and, and talking about these different ideas with. So I appreciate that kind of that context. And then before we get to the 35 billion in assets under management, as you mentioned before, I know that you launched Betterment at TechCrunch and you immediately got these users, which is great. And then you kind of slowed down and then you have this interesting story about how you got your first fundraise in. So I'd love to hear that story. And also how, how you advise other founders to do fundraising because yours was a, yours sounded a little easy. So maybe tell us that story and tell us how that really went.

I don't know if it was easy. It didn't feel easy at the time that, that series A. So we launched a TechCrunch in May of 2010 and at the time, like, you know, Just take you back. So there was no Fintech. There was no, there was no word that existed. I mean not, not just, there were no other companies. Like, but that wasn't a concept. You know, people who are starting. There was nobody starting new financial services companies. Like, it's just we, and we were told, oh, this is just, you know, this is too simple. It'll never work. Like, no, you know, like people want things that are more complicated. That's what Chris Sacca, who's a, who's a notable angel investor, you know, said to us on stage at TechCrunch Disrupt. And I, you know, I just, I sort of believed that, you know, if we make it simple enough, somebody's going to want it. Like somebody's going to be interested it, in, in this. And we, we were told that, that, and I believed that 10 crutch would, would be this kind of like coming out event. Like I, I had seen other companies launch the air and then quickly, you know, close around thereafter. And so I sort of knew that that's what we had to do. At that time. We had asked our employees, we asked Anthony and Kieran to buy shares of the company. And I and Eli also bought shares, more shares of the company. So we're putting whatever savings we had into it, but we're doing that to pay them their salaries, you know, which were already low because they were mostly earning equity. Right. So it was lean. Like we were sort of, we were, we were, we needed cash and, and that, you know, we, we went to TechCrunch, we started talking to all the investors there, blah, blah, blah. And everyone's like, great, send me your one pager. Send me, send me your deck. And I didn't have any of that stuff. I was just talking that was, I'm doing what I'm doing right now, you know, I just talk. And so I felt really ill prepared for actually fundraising. And over then, the next month after we stopped, people stopped calling us back. We talked to, you know, a dozen investors and everyone's like, yep, that's interesting, but you know, it's a little early. You know, call it, call us a few months, right? Like the no, but we don't want to say no kind of thing. And we took that time to put things together. And at that time I was lucky in that Eli, I think, reached out to Lowenstein Sandler and our attorney there said, oh, I know a few investors that you should chat with. And I think Bessemer was the first investor that he put us in touch with. We went to that meeting and we went big. I took all of the team. I think all four of us went out to Larchmont, which is like a train ride away from Manhattan. It's not like traveling across the country or anything, but, like, you know, I just wanted to make sure we represented the company as best as possible. And we did. You know, I remember at the end of the meeting, Rob Stavis from Bessemer said, well, we've been, like, looking for a company in this space of what should I do with my money? For a couple of years. And I think this is probably the best one that we've seen, and we'd like to support you. We'd like to write a check. And we've been looking for a million bucks. And he said, well, how about 3 million? And I just thought, like, oh, my God, that's so much money. Like, we'll never use that much money. It's. And it's like, it's just such a different time because today, you know, a $3 million is like, that's half of a seed round, you know, and this was our Series A, you know, so times have changed a lot.

Yeah, that's for sure now. You know, I just realized we haven't really clarified exactly what Betterment does, so maybe you could just give us a little pressy and background on. So, like, when you say the space is what should I do with my money? And it's also the fintech space kind of connect the dots for people who don't know about Betterment.

Betterment is the largest independent investment advisor. We help people manage their money smarter. We serve about 750,000Americans, and they come to us most often when they have been managing their money on their own for some time. Maybe they're doing some trading elsewhere, but then they. They come into enough money that they realize maybe they could be doing it better. Maybe they're not, you know, optimizing everything. And I'm an optimizer. We're a company of optimizers. We. We do all the tax management, we do all the forecasting and planning and goals and auto allocations and move things around to take advantage of the different account types for you automatically. All. All without transaction costs, all for less than a typical advisor would charge. So betterment charges about 25 basis points of AUM per year. A typical advisor would be 1% or 100 basis points, you know, which is a lot more. And it's a great product. It's. It's really the best. I like. I just like to say it's really the best thing most people can do with their money.

Yeah. And using technology, that's how you are able to do those things automatically. Right?

100%. It's all. It's software and, and, and that's. That's what differentiates us.

Yep. Amazing. So you got your 3 million. What you. I should say 1 million. Oops. 3 million. First check in.

Right.

From Bessemer. And you kind of grew and grew. And you know, when we spoke, you know, earlier the first time, we talked a lot about culture, and there was something so striking. You said, you said in some ways you built a company just in order to build a culture. Like, you wanted to start the company just to be able to build culture. And I'm curious, why is culture so important to you? Like, what's important to you about that? What was meaningful?

I loved building the team. I loved being with the team. You know, like, just thinking back on all those stories I was telling earlier about my college friends or this or that, you know, here I was hired a lot of my friends. And I'm not saying people should only hire their friends. I think, I think you've got to hire a great team. But when I did bring people in, it was about how do we make the most effective organization together? How do we make sure that everyone has good relationships with one another, such that we all want to be here working long hours, we all want to work hard, we can talk if there's a disagreement and get around it and get aligned on the path forward. People feel safe and can air any concerns that they have, etc. Da, da, da, da. Like all of that. I believe culture is super important to that. I have this model of thinking about company culture, like a house. Did I tell you this before?

Yeah, but let's hear it again.

I love it. Okay.

The house.

So the house. So I believe that there's the values people talk about. Mission, vision, values, all that kind of stuff is your foundation. And it's super important to have a good one. Um, but. But you don't necessarily see it all the time. You don't pick it up. It's just under there and it supports the rest of the culture of your house. The stuff you see all around you is, is things like the team meeting and the weekly email and the okrs and the off sites and the office environment or the, you know, the, the zoom environment or like however it is that you engage the team, the lunches, blah, blah, blah. There's like all of this communications, architecture and stuff. That's the walls and the furniture of the house. The lived environment that people experience and that stuff has to be really right. And I spent along with my people team and particularly my people leader, Lucy Babbage, who's, who's, who is still at Betterment and was with me there for nine years, so much time agonizing over that built environment of the house in the way that things would go. My coo, Dustin, for many, many years, my president, Mike Royce, all of us, like, you know, that's what we were doing. People wonder what you're doing in management teams meetings and a lot of ways you're just kind of creating this environment for people to do their best work. And then the last piece of culture, I like to say, is the people. And this is sort of obvious, you know, but I think a lot of people forget it, that the people make the place. And you can have a great house that's like really nice looking with all the right stuff, but you're not going to want to spend time there if the people aren't amazing. So you gotta, you know, and you can have a not so good house with great people and you still want to hang out there. So the people make the place and you gotta hire amazing people to have a, have a great culture.

Did you see business results coming from building that kind of a culture? Like how did you, how do you kind of quantify that or how would you tell other founders that the culture is both wonderful and important to have a great place to work, but also really accrues value to the business?

Absolutely. We saw business value to it. I mean, for recruiting purposes, it was great. People would say, oh, I've heard amazing things about the culture here. I want to work here for that. And it's a place where people would be given clear feedback and promoted and could grow and could work with other really good people that they, you know, people they wanted to work with. And people raved about the, you know, the trips that we would do together and like when they would think back on the year. You know, the way memory works, right, is as you sort of like have like these like high points that you remember and like, like, you know, any experience you basically remember like that the high point and the end point, right, like that's, that's what's salient and, and people would remember these sort of like, you know, big events that we do, the, the this or that off site or holiday party or whatever it was. We do Thanksgiving for the team every year. And that was many people's favorite event, including my own, where we'd all invite our families, and it was a potluck, and everyone would come together, and it just. Even as it scaled, even as it got to be 300, 400, 500, 600 people with friends and family, it was like just a magical night, you know, like, everyone. Everyone had really positive vibes about it, and they remember that and would tell their friends about it. They would invite their friends, they would invite their parents, you know, and you just sort of, like, create this environment that people want to be around. So it's great for bringing people in, it's great for retention, it's great for culture building. All the kinds of things that, you know, like, you need this great culture in order to produce results. And. And so I spent a lot of time thinking about that.

Yeah, that's. I totally agree. Especially these days in the war for talent. It's so important. It's so interesting how you had, you know, your Thanksgiving is like a recruiting event in some way. So you brought people into the house, so to speak.

I would interview people, and they'd say, hey, do you remember, like, we met at your Thanksgiving party a year ago? And be like, yeah, well, no, but, like, great. You know, like, glad you were there.

So that's. That's great. And you built Betterment to this wonderful point. And then in December 2020, you stepped down as the CEO of Betterment. You're still, if I'm not mistaken, the chairman of the board. And I'd love to hear. I think everybody would want to hear, tell us about the decision to step down. How did you think about it? How did you decide to do it? What was in your mind?

You know, there were. These things are always complicated. There's always a lot that. That goes into it. But for me, I'd been thinking for some time about maybe. Maybe I'm not tied in here forever. Right. I remember I have this. This Venwise group.

What's Venwise?

Venwise is. It's like. It's a New York tech centric YPO equivalent, Right? Yeah.

Like a ypo.

Yeah. It's like a group of founders. I've got a really great pod, as we call it, of six or seven other founders, and we meet every four weeks. And, you know, and I still meet with them, right? And, like, they're just a great group of friends. And I was joking with Eric schriter, who runs VanWise. I was doing a talk for him just last week, and we were joking. I was telling the other folks on the talk, like, I used to loathe coming to like these Venwise meetings sometimes, Sometimes I'd be like, oh, I am so busy, I do not have time for this. But I would get there and every time I would leave thinking, oh, thank goodness I came. Because that was just so valuable. That was, that was worth it. It's like working out or something, you know. But what I loved about that was it was like the humanity of it and like this sort of like seeing in other people's struggles, some of my own struggles, identifying being able to, you know, being a CEO, as they say, is a lonely job that means different things at different. But like, you know, just being there with other CEOs who, like, who get it is super valuable. And one of my dear friends in that group and continue to advise aside from that group today is, you know, said, I think I'm going to step down. And I just remember being like shocked by that, you know, and he said, yeah, like I'm. And he agonized over it a bit. It was hard. This was like a year long process. But eventually, you know, and he was like owned by private equity and it was complicated and, you know, they didn't want him to leave. And it was, you know, there's always all these financial implications, cultural implications. And he left and he felt like, you know, I remember him saying, I'm not an indentured servant, you know, I think I want to do something different. And I couldn't believe it. And then another of my dear friends in the group who had been. He was a serial CEO, you know, running a second company, he was forced out by his board. And that was another whole traumatic thing. And we sort of worked through that with him. And this is over two or three years before I kind of made my own decision. But I saw these points and my one friend who had left was so happy about it and I just couldn't believe it because I used to say that being at a certain startup is like being on a, on a roller coaster. And I mean that for the highs and the lows, right? And everyone kind of uses that analogy. And that's true. But I also mean it because you're strapped in and you can't get off until the end. You know, like you committed to this ride and you're, you're, you're doing very much felt like I was, you know, sort of stuck. And in fact, for, you know, more than a decade, I said, I have the best job in the world and I feel so, so lucky to be doing this, and I've built this team, and I get to be with them. And I love. I. You know, I still love that. I. I miss that today. I miss that, that part of the job. But increasingly, the job was about, like, more other things, right? It was about, you know, the. The process, the production of the annual plan, the production of the board meeting materials. And as. As I got kind of like long in the tooth, I was. I was the CEO for 13 years. I was the only person still at the company who'd been there for the first, you know, four years, right? Like, you know, and so, like. So, like, like a little bit, like, I'd outlasted everyone, you know, and some of my senior lieutenants, like the folks who'd been there then, you know, for nine years or however long, were starting to get tired, too. And I could tell I was going to have to turn a lot of that senior team over the next cycle. And I just thought about, do I want to be doing this, or do I maybe want to bring somebody else in who's got more skills, different skills, can take betterment to the next level and can build that team that's appropriate around them. And so I started looking and I looked for a coo. I looked for a Croft with this idea of that person will become the CEO. You know, it's. These processes are always complicated. But I, you know that I met Sarah Levy in that context of, like, would you be, you know, a CEO or CRO? She had been the CEO at Viacom. She was open to new opportunities, and I felt like she was just fantastic. I had this first meeting with her and thought, oh, my God, I want you to work here. I think she likes to tell the story that it was like I sort of ghosted her because, like, you know, like, we. We had this first call. But at that time, I was. I mean, I interviewed. This was 2020. I interviewed 100 people. No, no, no, no joke. And it was so. It was like, very easy during COVID you know, like, to have a million of these zoom calls. And so I was just, like, meeting, like, great senior, senior execs. And, you know, my thinking was evolving in the course of these conversations. And it's hard to talk about a CEO transition with, like, anyone, you know, you can, like, like, the team is there in part for me, right? And, you know, like, that's a component of it. And so, like, it's hard to talk to them about it because, like, then they're going to, you know, get. Get nervous. It's Hard to talk to the board about it because you know that, you know, once you do that, you sort of like unlock a process, right? That like, the board has to hire the CEO. So, like, do you. Are you ready for that process? And so I talked to my advisors and my coaches and my peer group about it, uh, all those, those folks. And I got mixed advice. I mean, I remember my, you know, one of my coaches saying, no, like, you can't leave. Like, like it has to be you. And you know, eventually I just kind of got to the point where, like, I talked about it enough times and I kind of kept getting that feedback. I was just like, you know, that like, I always tell people when you, like when you think maybe it's time to fire somebody, like, it's probably like already past time. I was like, look, it's like, it's time. It's time for this to happen.

It was true for you too.

It was true, right?

When you think about firing yourself, it's like, maybe, yeah, it's time. But it sounds like you got. Well, there's a lot to say about this. I mean, it sounds like you both got mixed signals and mixed advice from all the folks around you who you were able to talk about it with, as in your CEO group, and then also some probably confidentials advisors. And then to your point, you're keeping it locked up from the people you interact with day to day. So your team and certainly your board, you can't start. To your point, you can't like, talk about it with them, because if you do, you're going to maybe sow the seeds of doubt. And certainly with your board, they're going to start, they're going to know that that's what you're thinking and start the process. And in some ways it's out of the bag, but it sounds like you were able to talk about it enough to get yourself comfortable with it, because part of it was your inner voice. And as you gave that expression, you were kind of getting more and more comfortable with understanding your truth, coming to your truth. Is that right?

Absolutely. Yeah. I realized I was ready. Like, I was talking to my wife about it, and I was just like, I think this is a thing I want to do. But it's not without mixed emotions, right? It's not without this feeling of obligation. Right. I feel a guilt, right, to be leaving behind this amazing company that I've built, even if I do, you know, like, continue to serve as the chairman and continue to care a lot about all these people, continue to Spend a lot of time with all these folks. My stress levels are, like, way lower than they were a couple years ago, and I feel guilty about that. You know, like, the team is all still, like, cranking away and working so hard, and it doesn't quite feel fair, but I got there and. And listen, and the, like, when I did start talking to the board about it, you know, initially there was. There was resistance. Then, like, these. All these things, like, it's complicated. Then they were like, okay, well, like, if we're going to do this, we're going to do it. And that. That was complicated. And, you know, I sort of.

When you say complicated, what do you mean, complicated?

I had to convince them. I don't know if I had to convince them, but I had to. Like, I remember there was a question of whether I should chair, like, the search committee for, you know, for my replacement. I was like, I think I. You know, and like. But that's complicated because, like, is that the way these things usually happen? Probably not. And then I remember just who and how, like, with. I love Sarah. From the beginning, I really thought that she had had the full package beyond. Right. You know, and we were lucky. I mean, maybe it wasn't just luck, but I brought her in to start working with the team. I hired her as a consultant, and I had her run our annual planning process. And when I did that, I think that not everyone, but maybe some on the board might have had some skepticism about whether she could rise to the challenge. Right. And it was obvious to me that she would. But, like, let's test it, right? And so I had her run that process, and she just killed it. She did a great job running. And again, Covid helped here because, like, I had her in every meeting. And I think not everyone in the company saw that because it wasn't like, oh, yeah, she's always. Always with John, like, what's going on with this consultant? You know, it was like I brought in a couple consultants at the same time. I had them, like, doing different things, and, like, only the people who are in the room knew, you know, and whatever. So. And she worked. She's worked out so great. And that really helped to convince, like, the, like, any. And get rid of any skepticism on the board that she was the right fit. And, you know, we. We did have to go through process there. We did have to interview a bunch of candidates and. And there were some other great ones, but. But ultimately, I feel like we landed in a really good spot.

You know, I'm still so interested in Your decision about stepping down. Because I will say, in addition to your feelings, you know, this is really your baby, and maybe some feelings of guilt, but also knowing internally that this might be the next step for you, there's also something about, like, I think status about, if I can say so, like going the distance, like bringing a company to IPO or having some sort of exit. And I think this in, in Silicon Valley, in the startup world, there's a lot of like, pressure about that. Did you feel that pressure? Like somehow giving up was giving up or how did you see that?

I felt some of that, but I, you know, I don't think I, I didn't start the company so that I would IPO it and, you know, you know, be the CEO of a public company or something like that. It wasn't like the original intent, you know, it's like, it's like playing a video game. Like, once you get into it, VC is very much this thing about, you know, there's incentives and it's, there's a set of rules and it's all kind of similar across companies. And you're trying to get to this next thing and like, you know, it's like your score is, you know, your, your valuation or, you know, and you're trying to get to like, this, this IPO and do the right things in the right sequence. And I don't know, to me, like, you know, probably part of the reason I felt like, well, maybe I shouldn't keep doing this was like a growing sense that, like, I actually, you know, this is all great, but, but there's a lot more to life. Like, and I have a family And I have two kids now who are 5 and 7, and they were just getting to an age where I really wanted to be present for them. And I wouldn't say this was the one thing that was in my mind all the time, but it is absolutely true that during the pandemic, we were all living together, obviously, and hold up together out here in Pound Ridge, and we started having dinner together every night and I realized that I hadn't been doing that before. I always thought I was like, I mean, you know, I was at dinner with my parents every night. I always thought I was doing that with my kids, but just the contrast was so obvious. And I was like, wow, this is, this is amazing. And I said to my wife, I don't want to go back. Like, this is, this is what I want. Like, I'm all about this. And, you know, I, I feel really happy to have this Time, you know, to continue to have this time with them where they're at such a wonderful and impressionable age.

Yeah. So it was precious time. I think that the pandemic obviously crystallized a lot of it, a lot of ideas for us and thoughts about how we wanted to live our lives. And it sounds like that was, in some ways, doesn't it was a deciding factor, but it was one of the factors that kind of made you really realize this is precious time and I want to do something different with it.

Yep, yep, absolutely.

Now John, you have done so many different things, even you know, pre. Betterment and through betterment, I mean, bringing it, you know, through, through the processes as a CEO for 13 years, changing so much. I'm just curious, have you ever suffered from severe self doubt or imposter syndrome?

Oh yeah. I was talking to a coach recently. I asked, I asked her what she likes about it. She said, I really hate the conversations where I'm having to like help somebody on a, who's on a pip or whatever. I love to help the normal people. And I said, and what is it that you talk to them about? Like, what are those sort of like, you know, normal conversations? And she said, most of it is people feeling imposter syndrome. Most of it is people feeling out of their depth about whatever their, you know, working on or they've been assigned and just like, how do I, like how do I navigate this? And so I'm doing a lot of encouragement and kind of like building people up and reflecting back to them that they, they can do it and they'll figure it out. I was listening to her and I thought, gosh, I, I never felt that way, you know, like, I don't know if that's right.

Not a normal person. It's also not a normal person, John.

I think I always was like overly self confident and just like, you know, like I'm just sort of a glutton for punishment. Like I, like, I'm just like, I'm gonna go and figure this out. I'm gonna go and do it and whatever and I'll get it wrong and I'll get it wrong until finally like, you know, the, everything aligns and oh, that's what I should have done with betterment. I really thought I have a business plan to prove it and a, and a financial model to prove it. I really believed that I was going to be the only employee. I just thought I was going to like build this thing. I do all the tech, I'd set it up, I'd Figure out some online advertising and like, boom, I'd have a, I'd have a business. And I got to tell you, like, I'm doing the same thing again with like, these ideas that I'm into. Like, I know in my, like, I know that I need a partner. Like, I know that any business, like, doesn't really happen without, like a part partner. Like, you're much more likely to be successful. But the way that I think about it is I'm like, okay, well, then I'll just, you know, and like, and like, well, I gotta go talk to that. I just gotta go figure it out. Yeah. So I don't know. I just, I, I like to, I like to, I like to try things. I like to do stuff and. But ultimately, I guess the moral of the story is, you know, nothing actually happens until you find other partners and people. People to help make it. Make it.

To help make it. Yeah. That's, that's amazing. Okay, so now I want to ask you some tactical questions. It's great that you're advising new founders. I'm curious. Founders have a steep learning curve when it comes to hiring. What is a practice that you have developed or learned that you think is like a great practice to help you hire better?

I spend a lot of time talking to these folks about hiring. I like to say the two topics that, that I'll spend time on with people the most are product strategy, by which I mean, what are your competitive advantages? How are you, how are you, how are you differentiated, how you make sure that others can't copy you and you'll, you know, have sustainable advantage, blah, blah, blah. And then the org hiring, retaining, motivating culture, like, how do you, how do you build the org? And so for these early stage companies, so much of it is about hiring. And so that's, it's, it's, it's most often these conversations are entrepreneurs telling me, I have this real challenge and it's maybe in my engineering department and this person, and they're like, maybe I need to hire another engineer. And sometimes these companies are like, let's say they're 15 or 20 people. And I'm like, have you thought about hiring ahead of people? Or have you thought about hiring an EA or a chief of staff or a recruiter? And those are very often like the roles that I'm encouraging people to go and hire to scale themselves. Right. To help get, get themselves out of the way and unblock hiring and unblock great people ops. So I, my, this is not like, this is like Easy advice because it assumes you have some money and you know, like, you can just go and do it. And heads of people are hard to come by, so it's a lot harder to do than it is to say. But my advice oftentimes these days is get that great head of people in. Or, you know, if you're even, even before that, make sure you have an internal recruiter. Because I just, you know, there's a lot of challenges with using external recruiting firms. Just the quality is, isn't there? They can't tell the story as well as somebody who's, who's in the, in the room with you.

Yep, I love that. I love the idea that to fix a problem in engineering, you want to hire ahead of people. Like that is so wise. And I think it's so important to recognize that like leveraging yourself sometimes is the most, you know, scaling yourself is the most important thing you can do. So I think that's great. Now I'm curious, do you also advise these companies on sort of management tactics like delegation, you know, delegation, another one that's super hard for everyone. Seasoned leaders have a lot of trouble when to know when to zoom in and when to zoom out. And everybody says to founders and to CEOs, oh, step away. You gotta trust them. But it's not always so clear. So what are your thoughts and how do you help your founders? You advise, talk about delegation or think about delegation?

This talk that I was doing the other day that I mentioned earlier was, was about the journey from being a founder to being a CEO and what are the big things? And it was really a Q and A. It was, it was driven by the questions from this, this, this, this group of nine early stage entrepreneurs. But I'll tell you like, there were, there were three things that, that we talked about. The first idea is, you know, it's really about what you're, you're not doing and how you're not doing it, which is your question about, about delegation and how you delegate. You know, the second was about growing up and moving from this like product and family team focused to more like being principles and brand focused in your leadership. And the third was about taking care of yourself, self care, keeping in touch. You know, some, some of those, those items we've, we've already kind of touched on here. But back to the, you know, how do you get yourself out of the way and how do you delegate and do less? I have a lot of, a lot of thoughts about this because I am that sort of person who loves to do everything myself and get into it and be in the weeds. And so had to get a lot of coaching over the years to like level up and like, you know, get, get out of the room and you know, shut the door behind you. Sort of like one of my favorite articles is, is or thoughts on this is from Molly Graham from, from Google and later Quip who talks about giving away Legos. We scaled a team from 25 people to 125 people over some short period of time. Nine months I think. And she said every two months my job was changing and you know, I had to like give away the thing and sometimes the thing I love doing a lot. And she used this analogy of giving away Legos that if a kid is sitting in a room and playing with a bunch of Legos and some other kid comes in, they want to start playing with the same Legos and like there's a fight, you know, like immediately. But usually, you know, like if that kid just got up and went over to the bin, there's a whole other pile of Legos over there that like no one is touching. It's just like, that's not anyone's instinct. And, and so people get very, you know, turfy about, hey, that's my job. This person's. You're hiring ahead of marketing. They're going to be like my boss. No way. Like, you know, like I'm doing this. There's so much work to do at a startup. You know, like just go, like go back, improve yourself and show that you can take the initiative and do something else. That's what it's about. That's, that's the core idea. And I think that's, that's so true. It's, it's great. We use that all the time for our managers and as advice. Another idea that, that resonated with me that I just read recently. I read There's a H HBR, like 10 best articles about managing yourself that I picked up at the airport, you know, the last time I was on a plane. And it's not great. I'm not recommending this as a book, but I flipped through it and there was one in there from 1974 and they said it was the most, it was the second most ever published, you know, most highly requested HBR article. And it's called who's got the Monkey? Have you heard of this 70s? No, that's so, it's so, it's so 70s who's got the Monkey? And it's, it's about how in Every interaction, you can either end up with a monkey on your back or, like, the monkey is on someone else's back, right? And you should just never take a monkey. Like, if somebody comes to you and is like, never say, great, I'll get that back to you, or follow up with you. It's like, great, why don't you go and do that thing and tell me when you need something from me? One of the analogies I always used to. To like, to use was this. You know, there's two kids fighting on the playground, and, like, they come over to the teacher and they, you know, they're complaining about this, and, like, the. The best thing to do is to say to them, okay, you guys go and figure it out. You know, don't. Don't try and get in and solve other people's problems for them. And, you know, it was funny because our girls were fighting the other night. And I kind of, like, relayed this and, like, you know, I said to my wife, it's not as though, like, every, like, you know, family, you know, like, dynamics problem is also a business problem, but this one, this but feels like it has some parallels. And I told some stories about employees that I had who just, like, weren't getting along. And I would say to one of them, okay, well, why don't you go and talk to the person about it? And the other would come to me and complaining, like, oh. And I'd say, well, go talk to them about it, but they just wouldn't. Like. I realized, like, they weren't actually communicating. They were just complaining about each other. And I finally, like, I just booked them a conference room for an hour, and I, like, watched them go in and, like, sit down and, like, you know, like, you know, it was like. It was clearly, like, it was, like, intense. I wasn't in the room, though, right? Like, I was just, like, I knew that, like, they were going to go and have a conversation, right? And I don't think they were, like, best friends after that, but, like, they stopped complaining about each other. They got along, you know, like, they were able to work together effectively after that anyway. I think that there's so many tricks to delegation and kind of getting out of the way and just constant iteration and remembering that you've got to scale yourself. I used to say, I'm trying to hire myself out of a job. I said that all the way until I did. And I'm just, whatever I'm doing, I shouldn't be doing. I need to find somebody else who can do this. Thing so I can think about the bigger picture.

Right. I love that I had Sid from True Pill on the podcast and he said I get so much satisfaction from problem solving, solving problems. And I realized that when I solved a problem, it was a failure because I should have had somebody else solve it. Right. It was a sort of a failure of mine from a leadership perspective that somebody else should be doing that. I also, John, I love that your talk was focused on those areas. Of course. My book From Startup to Grownup is focused on the areas of managing you, managing them, and managing the business, which is really what you're talking about. And those are the areas, Right. That it takes to grow from founder to CEO and certainly from any really founded any kind of leader. So I love all that. And I especially love that what I have found to be true with all of my 20 years of coaching experience is when you're a parent, your skills at parenting are relevant for the workplace. And when you are a leader, your skills as a leader are relevant for the family. You discover that too.

Totally.

I love that. I love that.

It's all just people.

It's all just people. It's all just people with all their people stuff. Totally. So just a few more questions. I'm curious. What's some of the best advice you've ever been given?

Oh, boy. What stands out to me is I remember when I was still a consultant back at fmcg, I went to one of my high school alumni, like they had a happy hour. And I talked to somebody, I don't remember his name. I don't. You know, he was like this older guy, right? And I remember I was telling him about betterment. I was telling him about this thing that I wanted to do. And I remember him saying to me, just like, pull the rip cord, man. Like, you got to go and do this. Like, you seem like really like ready to do it. Like, what are you waiting for? And it's funny how just kind of like that objective outside opinion, like stuck with me, you know what I mean? Like, as somebody who doesn't. Didn't know me at all, but, but really kind of gave me like a kick. And I talked to lots of other people who I did know who were like, ah, like, you know, you have a pretty good job, you know, you know, maybe you should, maybe you should keep doing that or whatever, go to business school or whatever. And I'm glad I did go to business school. But I, I love that advice. I, I remember my, my co founder, Sean Owen, who, you know, would say why are you spending John, all this time, like figuring out like what the in app, you know, guidance is going to look like. We don't even have like a sign up process yet. Like, you got to start with like the basics and like, do I just. I do. I have this tendency to want to go like, you know, down into the thing and like make it so good. I'm very producty in that way. And I think that's important. Important. I think we would not have been successful without all of that stuff. But also like, Sean was right, you know, like, you got to kind of like, you got to focus on making it real and making it, you know, first. You know, as my COO Dustin used to say, you know, like we build bridges first by stringing a single cable across, you know, and then winding wire around that and hanging things off of it. Not by like one foot at a time, going, going across. So kind of doing like the simplest MVP all the way across is an idea that, you know, a couple of people have given me advice on that I think is really, is really stuck with me.

That's really well said. Now what do you wish you had known earlier on your journey, John?

Hire more folks. I mean, I. But like I got that advice and maybe just didn't take it. Firing can be built as a muscle. You know, I think one of the companies I'm advising just now, the CEO said on our last board meeting, we've got it now. We fired three people in the last two quarters and in every case the organization has breathed a sigh of relief afterward. And we've very quickly we found replacements and we've leveled up our process and we realized that, you know, we were carrying this, this dead weight. And I think we finally are starting to build a muscle around recognizing like when we need to fire people and get it done. But I acknowledge that I didn't do this quickly enough. And even though people said to me like, you should go ahead and do this, and I felt lucky to have been like one of those people sort of like, you know, encouraging rapidity. But that's something I learned along the way. And I wouldn't say came came, I don't think that comes naturally to anyone because it's so hard to hire folks. It feels really scary to let them go. Just that's another thing I have to do. It's another thing on my plate. And this is one of the reasons why I encourage folks so early on to build that hiring muscle and to build the HR muscle because it gives you the flex and the ability to, you know, won't be necessarily on your plate. You'll have partners in, like, continuing to build the team so that you can continue to optimize and build that firing as well as the hiring muscle.

That's so true. And so many founders come to that. Leaders come to that. And it just takes some time and experience. Totally. Now, John, this may be, in fact some of the same answers, but I'm curious for my last question. What advice do you have for other founders as they embark on their journey to grow into leaders?

One thing that I maybe haven't talked about is the importance of keeping in touch. I think that this comes naturally to most leaders, that you got to continue to check in with your friends and check in with your family and have a coach, have a group of other CEOs that you chat with. When I was just out of college, so this would be. I guess this was after I did my postbac pre med year, after I decided that I would probably move to New York City. But I wasn't quite ready to go learn what business was. I wanted to do a little something in between. And I. I went to Florida and I bought an old 1984 Cadillac Biarritz convertible in fire mist red with, like, red leather seats. I bought it with my roommate from college, and it was $8,000. We bought it from a collector. So it was all, like, shined up and, like, had extra bling. It was like a sexy car. Something. It was something. And we drove it. We put 20,000 miles on it and drove it to all 48 lower states. And we slept in national parks. And we slept and we stayed with friends and we did this. This whole tour. And one of the stops on that tour was Las Vegas. And my first ever trip to Las Vegas, we were out, you know, we drove the great drive from LA to to. To through Palm Springs to Vegas. And we went to the Bellagio because I'd seen Ocean's Eleven and I was like, oh, we should go check out that. That's a fancy hotel. Let's go see it. And so I walked up to the bar and I ordered my drink, which is a gin and tonic. And. And somebody next to me said, oh, well, like, you don't want to get that. That. That drink. That's, you know, they just bring that out of, like, the. Well in the back. I've seen the back room where, like, they pour the gin into different bottles here. You know, you should order this gin. And so he ordered me some different, you know, fancier Gin and tonic than whatever that the. Well, gin I'd ordered. I said, okay, like, sure. But we started chatting and it was, you know, we, you know, we're like. We're like. My roommate and I were kind of like, you know, characters, I guess. Like, we're on this big road trip, so we have a story to tell. And this guy was a real character. It was Jeff Skilling, who was one of the founders of. Of Enron.

Well, you ran into Jeff Skilling in the Bellagio.

At the Bellagio on your road trip in Vegas.

That's quite interesting. Okay.

Yeah, we talked to him for. For two hours. And he. He did most of the talking, right? Like, he. He was telling us about how he wanted to run away to South America. You know, he'd already been, like, indicted. And it was things. Things were not looking good. There was a lot of bad press about him. I knew who he was. I'd read the Powers report. Like, I was like, into that story and I had owned Enron stock. I bought Enron on the way down. Like, this was back in, like, that, that. That year when I was kind of doing all the things that I knew, like. Like the opposite of the things that I learned in college. I was, like, trading. You know, I was, like, actively managing all my money. And those experiences led me to start betterment later. But I digress. I'm sitting. You know, I knew the context of this guy. I owned his stock when it went to zero. And, you know, he was just saying, we're going to escape. We're going to get away. I'm going to take my son. We're going to go. I'm going to paint a red cross on the side of this white, you know, like, Tahoe that we have or whatever, and, like, we're gonna go across the border and get this. And I asked him about, like, his experiences. And, like, it was evident. I mean, he said we didn't do anything wrong. Like, we were making so much money, he said, and, oh, like, if it only weren't for those, like, stupid regulators, like, we would have, like, we'd still be getting away with it. It was like that Scooby Doo ending kind of a thing. It was just evident. I was, like, really fascinated by it, by. By him. And, you know, he just. He really didn't believe that they'd done anything wrong. And what I realized was that he totally lost touch with the outside world. Like, anybody in that role, if you just talked to somebody and said, like, does this feel right? Like, does this seem like that, you know, it's obviously like, no, they're like, they're like robbing people, you know, who are paying for their gas and they're shifting it around to inflate the price and defrauding people and defrauding their investors and defrauding their employees and like. But, you know, like, there were lots of bad things there. But if you're inside the walls and only talk, it was evident that he was only talking to the other, you know, sort of senior execs there. Like, everything's going great. Like, we're just, you know, like, let's do it again, do it again. And so what, you know, like, this will be fun. You just got to keep in touch. Was. Was my. My lesson that I took away from that and so kind of checking in with the real world outside of your company, outside of your investors, you know, go out and see what. What real people are doing and think.

Back to normal people, I guess, like we talked about early in this podcast, keep in touch with normal people and stay connected to what's the. To reality, grounded in reality. John, what an incredible conversation. Thank you so much for joining me today. It's super valuable. I really appreciate it.

It's my pleasure. It's always fun to talk with you. You still ask the best questions. It's fun to go deep and to get to share some of my stories. So thank you.

Thank you. Thanks for listening to From Startup to Grown Up. If you like what you heard, give it a review on Apple Podcasts so other people can find it. And if you know of a founder or someone else who is meant to be on this podcast, drop me a line through my website, alyssacon.com.