#19: Jon Stein, Betterment

Welcome to From Startup to Grownup, the podcast. My name is Alisa Cohn. I'm an executive coach, an angel investor, and the author of From Startup to Grownup. 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 Jon Stein to the podcast. Jon is the founder, former CEO, and chairman of Betterment, a financial advisory firm that uses automation to simplify investing. We had a fantastic conversation. Jon 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 Jon 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 Jon Stein. Jon, welcome to the show. I'm so excited you're here.

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

Thank you. I appreciate hearing that. And also, I, I was gonna say you were actually 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 was so experienced. I know, but you were the very first person I interviewed for my book. And I just wanna say thank you for your early support 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 wanna 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 'cause there's so many people who are smarter and cooler than me who are also in that book. So, good group.

Well, as I was researching for this sort of round 2 conversation, I realized that we both won writing awards. You wrote, 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— how did you dig this up? It's true, but this is like, this is not on the St. Mark's School of Texas website, you know, the 8th grade writing award. All right. So 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 to interview people. I enjoyed the something about it. And so I spent enough time that I became the editor of the paper. I loved the writing and I wrote. I interned at The Met, which was one of these arts and entertainment weeklies in Dallas at the time. And I just thought everyone there was the absolute coolest people in the world and I wanted to be like them. And they were hard drinking and hard partying and just knew all the shows in town. 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 I started working for the 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 got disengaged from it. And I realized processing all that and kind of like trying to figure it out, like why I wasn't all about it anymore. It 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 and, and, uh, 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, and, and, and put narrative to it. But as I connected those dots after college, uh, I thought, gosh, like, do I wanna be a doctor? I was doing this post-bac 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 these, 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 run, you know, running the newspaper. So maybe I should start a business. Maybe that's like what this means. Um, 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 of 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 post-bac pre-med program still at at Harvard, and I was living close to campus. And if 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 post-bac 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. Cause I just felt like it felt very isolating to me. Like that was, that, that wasn't— it wasn't 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, um, that year I, I started seeing a psychiatrist in, in Boston. And again, I, I'm a big believer in sort of getting reflection and, and feedback, but I felt at that time like aimless, right? I felt a little bit like lost and 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 it 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. I was sort of like always off doing my own thing. And that, and, 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, uh, and I would have to be kind of more self-directed and follow my own nose. Um, and I was laying in bed one night, I remember, and I had this painting of a, of a harbor across from my, my bed, and I was sort of like looking at it, and it's titled The Distant Harbor by Dutreleau. And I was just sort of somehow imagining in that painting the different future paths I could take. And I saw myself in this doctor role. I saw myself as a teacher. I was just sort of 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, mainly because I had a lot of friends there and they seem to be doing business or whatever.

Right. You moved to New York, the capital of business, to discover what is business.

What is business?

Yeah. Well, that's fascinating. I mean, and it's so interesting that you had the painting there to inspire you to really play out forward. There's an exercise that I regularly have my clients do which is to think about my best life, my best possible life, 1 year in the future or 3 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, uh, and I grew up in, in Dallas, Texas. There's not a big financial services industry in, in Dallas. You know, there's, there's other things, but not that, um, all the banks closed there in the '80s, basically. Maybe some are open again now, but anyway, the, the first thing I did was I, I got a, a job, uh, 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 in an ugly, you know, kind of smoke-covered, you know, skyscraper, like, like old brick building. And the— I, you know, there are a couple 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, the internet for data about our, uh, 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 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, uh, it was just a placeholder job while 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, uh, another friend. And I'll say, 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, 2000, and 2001, 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.

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 services 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, um, although I I bombed the interview. I remember 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 probably wasn't, wasn't like super interested about financial services. 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, you know, was different and I was there as, as like this renegade who was like going to learn about this thing and then ultimately start a business. I really, I had that idea, um, I think the whole time. And then I was looking at opportunities. I just, I had a lot to learn. So I spent 4 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 kept getting sucked back into projects and they wanted as much time as they could get. So then I thought I either need to quit quit, or alternative 2 was go to business school. And, um, 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. Uh, that was also hard. It's hard to like do 2 things at once, at least, at least for somebody who's as scattered as, as I am. And so I, uh, I try— I did work a lot on, on Betterment while I was at Columbia Business School. I taught myself to code in the summer that I was there, and I, you know, built out the whole business plan. Every, every class I was in was, it was about this idea that I had to improve financial services. And 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, uh, you know, doing LED lighting stores, or, you know, I had like all these other kinds of kind of— but I have like had credibility in 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 this small team. So when we launched in May of 2010, by then I had assembled a team of 4 or 5, and it was already like a bigger team than 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 6 months to get to $20 and another 3 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 2. And I thought, wow, you know, here, here we are. But as with, uh, 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.

And it continues to do incredibly well. And so, that little idea, 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 were curating or incubating the idea. So, 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 at 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, in, you know, in the New York, you know, sort of friend group where 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, uh, that's, that is how we first met was over, over a poker game. Uh, and, uh, but we started hanging out and At that time in 2007, '08, 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. When you just kind of put an idea out there, when you start sharing it, 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. I talked to everyone about it. It was my project for all my classes and I iterated on it a lot. It continued to evolve. 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 he was a lawyer, a securities lawyer who wanted to be entrepreneurial and it just fit, it clicked. Uh, and then, yeah, so that was one person. And then, um, you know, my, my other, my roommate Sean was helping me do some of the backend coding and stuff like that. We, uh, I, I bumped into, um, one of my former FMCG colleagues, Anthony Shrouth, at a holiday reunion party thing. Uh, 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 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, 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. Like, 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 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 you advise other founders to do fundraising because 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 Series A, so we launched at TechCrunch in May of 2010. And at the time, just to take you back, so there was no fintech, there was no word that existed. I mean, not just there were no other companies, but that wasn't a concept. People who were starting, there was nobody starting new financial services companies. 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 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 in this. And we were told, uh, that, that, and I believed that TentCrutch would be this kind of like coming out event. Like I had seen other companies launch there 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, um, it was lean, like we were sort of, we were, we were, we needed cash and, uh, and that, um, you know, we, 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 your, 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 a dozen investors and everyone's like, yep, that's interesting, but it's a little early, call us in 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 like 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 4 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. Uh, 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'd been looking for a million bucks. Uh, 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. So, um, 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, uh, serve about 750,000 Americans and they come to us most often when, uh, 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, um, of, of AUM per year. A typical advisor would be 1% or 100 basis points, um, you know, uh, which is a lot more. Uh, and, uh, it's a great product. It's a, it's, it's really the best. I, I like, I just like to say it's really the best thing, um, 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, 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, if 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, I was, I was hired a lot of my friends. And I'm not saying people should only hire their friends. I think you've got to hire a great, 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 da, like all of that. I believe culture is super important to that. I have this model of thinking about company culture. It's like a house. Did I tell you this before?

Yeah, but let's hear it again.

I love it.

The house.

So it's the house. So I believe that there's the values, you know, people talk about mission, vision, values, all that kind of stuff is your foundation. And it's super important to have a good one. 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 things like the team meeting and the weekly email and the OKRs and the offsites and the office environment or the Zoom environment or like however it is that you engage the team, the lunches, blah, blah, blah. There's 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 Babich, who's still at Betterment and was with me there for 9 years, so much time agonizing over that built environment of the house and the way that things would go. My COO, Dustin, for many, many years, my— President Mike Roist, all of us, that's what we were doing. People wonder what you're doing in management teams meetings. In 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, but I think a lot of people forget it, that the people make the place. And you can have a great house that's 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 got to, 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 got to hire amazing people to 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. People raved about the, you know, the trips that we would do together. And like when they would think back on the year, the way memory works, right, is you sort of have these high points that you remember and any experience, you basically remember the high point and the end point, right? That's what's salient. And people would remember these sort of big events that we do, this or that offsite or holiday party or whatever it was. We'd 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. 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, uh, this, 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 so, I spent a lot of time thinking about that.

Yeah, 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 ways. 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 I'd be like, "Yeah, well, no, but yeah, like great." You know? 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?

It's like a YPO.

Yeah, it's like a group of founders. I've got a really great pod, as we call it, of 6 or 7 other founders, and we meet every 4 weeks, and I still meet with them, right? And they're just a great group of friends. And I was joking with Eric Schreeder, who runs Venwise. 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 these Venwise meetings. 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 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 the 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 times. Times, but like, you know, just being there with other CEOs who like, who get it, um, is, is super valuable. And one of my dear friends in that group, and continue to advise aside from that, that group today, is, um, you know, said, I'm, I think I'm gonna step down. And I just remember being like shocked by that, you know. And, uh, and he said, yeah, like, I'm— I— 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 and 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. Um, who's forced out, uh, by, by his board. And that was another whole, like, traumatic thing. And we sort of, like, worked through, through that with him. And this is over, you know, like, the 2 or 3 years before I kind of, you know, like, made, made my own decision. But I, I saw these points, and I— and, and, you know, my, my one friend who, who had left was so happy about it, and I just couldn't believe it. Um, because I used to say that being at a, at a startup is like being 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 committed to this ride and you're doing it. It very much felt like I was sort of stuck. And in fact, for more than a decade, I said, I have the best job in the world and I feel so lucky to be doing this. And I've built this team and I get to be with them. And I love, I still love that. I miss that today. I miss that part of the job. But increasingly the job was about like more other things, right? It was about the process, the production of the annual plan, the production of the board meeting materials, the da da da da da. As, uh, as I got kind of like long in the tooth, I was, I, 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, 4 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 9 years or, or, or however long, were starting to get, you know, like tired too. And I could tell I was going to have to like turn a lot of that senior team over the next cycle. And I just thought about like, do I want to be doing this or do I maybe want to bring somebody else in who's got more skills, different skills, like can take Betterment to the next level and can like build that team that's appropriate around them. And so I started looking and I looked for a COO, I looked for a CRO, with this idea of that person will become the CEO. These processes are always complicated, but I met Sarah Levy in that context of like, would you be a COO or CRO? She had been the COO 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 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. Um, 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 get 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 gonna, you know, get, get nervous. Um, it's hard to talk to the board about it, uh, because, um, 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, for that process? And so I talked to my advisors and my coaches and my peer group about it. All those folks. And I got mixed advice. I mean, I remember one of my coaches saying, "No, you can't leave. It has to be you." And eventually I just kind of got to the point where I talked about it enough times and I kind of kept getting that feedback. I was just like, you know, I always tell people when you think maybe it's time to fire somebody, it's probably already past time. I was like, look, it's time for this to happen.

It was true for you too.

It was true for me too.

Right. When you think about firing yourself, it's like maybe it's time. It's time. Yeah.

It's time. Yeah.

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 confidential 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 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 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, I was ready. Like I was talking to, you know, my, my wife about it and I was just like, I, you know, I think this is a thing I want to do. Um, but it's so, it's, it's, it's not without mixed emotions, right? It's not without this feeling of obligation, right? I feel like guilt, right? Like to, to, to be leaving behind this, like, 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 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 started—

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 the search committee for my replacement. I was like, I think I should, but that's complicated because is that the way these things usually happen? Probably not. And then I remember just who and how. I loved Sarah from the beginning. I really thought that she had the full package beyond, right? 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've had some skepticism about whether she could rise to the challenge. Right. It was obvious to me that she would, and, but like, let's test it. Right. And so we, so I had her run that process and she just killed it. You know, she did a great job running, you know, 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 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's worked out so great. And that really helped to convince, like, any— and get rid of any skepticism on the board that she was the right fit. And, you know, we did have to go through a process there. We did have to interview a bunch of candidates. And there were some other great ones. 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 is 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 you're trying 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, to me, like, you know, probably part of the reason I, 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 like, there's a lot more to life, you know, like, and I have a family and, you know, I have two, two kids now who are 5 and 7. And, you know, they were just getting to an age where I really wanted to be present for them. And I won't— I wouldn't say this was like the one thing that was like in my mind all the time, but I— it's— it is absolutely true that like during the pandemic, um, I started— we, we were all living together obviously and sort of like holed up together, uh, out here in Pound Ridge, and we started having dinner together every night. And I realized that I hadn't been doing that, um, before. I always thought I was like— I mean, you know, I always had 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 amazing. And I said to my wife, I don't want to go back. This is what I want. I'm all about this. And I feel really happy to have this time, 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— it doesn't only was a deciding factor, but it was one of the factors that kind of made you 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, uh, 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 her what she likes about it. She said, I really hate the conversations where I'm having to like help somebody 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 they're working on or they've been assigned and just 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 can do it and they'll figure it out. I was listening to her and I thought, Gosh, I never felt that way. 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 overly self-confident and just like, I'm just sort of a glutton for punishment. I'm just like, I'm going to go and figure this out. I'm going to 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, um, 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'd 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 business. And I gotta 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 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. Um, yeah. So I don't know. I just, I like to, I like to, I like to try things. I like to do stuff. And, um, but ultimately I guess the moral of the story is, you know, nothing actually happens until you find other partners and people to be able to help make it, make it happen.

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 I'll spend time on with people the most are product strategy, by which I mean, what are your competitive advantages? How are you differentiated? How do you make sure that others can't copy you and you'll 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, that's, it's, it's most often these conversations are entrepreneurs telling me, I have this real challenge and it's maybe in my, you know, engineering, you know, department and this person, you know, 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 a head of people? Or have you thought about hiring an EA or a chief of staff or a recruiter? And those are very often the roles that I'm encouraging people to go and hire to scale themselves, right? To help get themselves out of the way and unblock hiring and unblock great people ops. So, uh, uh, 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. Um, 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. It's just the quality isn't there. They can't tell the story as well as somebody who's in the room with you.

Yeah, I love that. I love the idea that to fix a problem in engineering, you want to hire a head of people. Like, that is so wise. And I think it's so important to recognize that like leveraging yourself sometimes is the most, 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? 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 about the journey from being a founder to being a CEO and what are the big things. And it was really a Q&A. It was driven by the questions from this group of 9 early-stage entrepreneurs. Well, I'll tell you, like there were, there were 3 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, some of those items we've already kind of touched on here, but back to the, how do you get yourself out of the way and how do you delegate and do less? I have 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 level up and get out of the room and shut the door behind you. One of my favorite articles is, or thoughts on this is from Molly Graham from Google and later Quip, who talks about giving away Legos. You scaled a team from 25 people to 125 people over some short period of time, 9 months, I think. And she said, every 2 months my job was changing and I had to give away the thing. Sometimes the thing I love doing a 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, um, and so people get very, you know, turfy about, hey, that's my job, this person's You're hiring a head 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 and prove yourself and show that you can take the initiative and do something else. That's what it's about. That's the core idea. And I think that's so true. It's great. We use that all the time for our managers and as advice. Another idea that resonated with me that I just read recently, I read there's a 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, which have you heard of this?

Oh, '70s. No, that's hilarious.

It's so '70s. Who's Got the Monkey? And it's about how in every interaction you can either end up with a monkey on your back or like the monkey's on someone else's back, right? And like you should just never take a monkey. Like if somebody comes to you and is like, never say, great, I'll like 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 like to use was this. There's two kids fighting on the playground and they come over to the teacher and they're complaining about this. And the best thing to do is to say to them, okay, you guys go and figure it out. Don't try and get in and solve other people's problems for them. And it was funny because our girls were fighting the other night and I kind of relayed this and I said to my wife, it's not as though every family dynamics problem is also a business problem, but this one feels like it has some parallels. And I told some stories about employees that I had who just 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 tense. 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, uh, I don't think they were like best friends after that, but like they stopped complaining about each other. They stayed, they got along, you know, like they were able to work together effectively after that. Anyway, I think that, um, there's so many tricks to delegation and kind of getting out of the way, um, and just constant iteration and remembering, um, that, uh, that it's— that, that you've got to scale yourself. I used to say I'm trying to hire myself out of a job. Um, I said that all the way until I did. Uh, and, you know, like, I'm just— whatever I'm doing, like, I shouldn't be doing. I need to find somebody else who who can do this thing so I can think about the bigger picture and so on.

Right. I love that. I had Sid from Truepill 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. It was a failure of mine from a leadership perspective that somebody else should be doing that. John, I love that your talk focused on those areas. Of course, my book, "From Start-Up to Grown-Up," 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 founder to 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, it's all just people.

It's all just people. It's all just people with all their peopley 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. Uh, oof. Um, what stands out to me, um, is, is like, I remember when I was still a consultant back at, at FMCG, I went to like a, my, one of my high school alumni, like they had a happy hour. Um, and, uh, 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 ripcord, man. Like, you gotta go and do this. Like, you seem like really like ready to do it. Like, what are you waiting for? Um, 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, um, 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, like, you know, maybe you should, maybe 'You should keep doing that,' or whatever, or 'Go to business school,' or whatever. And I'm glad I did go to business school, but I, I love that advice. Um, I, uh, I remember my, my co-founder, um, Sean Owen, um, who, uh, 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 signup process yet. You got to start with the basics. And like, dude, I have this tendency to want to go down into the thing and make it so good. I'm very producty in that way. And I think that's important. I think we would not have been successful without all of that stuff. But also, Sean was right. You got to focus on making it real and making it first, as my COO Dustin used to say, we build bridges first by stringing a single cable across and then winding wire around that and hanging things off of it, not by one foot at a time going across. So kind of doing the simplest MVP all the way across is an idea that a couple of people have given me advice on that I think has 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, I think one of the companies I'm advising just now, the, the CEO said on, on our last board meeting, we've got it now. We fired 3 people in the last 2 quarters, and in every case, the organization has breathed a sigh of relief afterward. And we've— we're 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, you should go ahead and do this. And I felt lucky to have been one of those people sort of encouraging rapidity. But that's something I learned along the way. And I wouldn't say 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, oh, 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 all 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 post-bac 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, right? I wanted to do like a little something in between. And I went to Florida and I bought an old 1984 Cadillac Biarritz convertible in firemist 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 ridiculous—

Sexy car.

Wow. 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 whole tour. And one of the stops on that tour was Las Vegas. And my first ever trip to Las Vegas, we were out, we drove, we did the great drive from LA through Palm Springs to Vegas. 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, uh, somebody next to me said, oh, well, like, you don't want to get that, that, that drink. That's a, you know, they, 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, the well gin I'd ordered. I said, okay, like, sure. But we started chatting and it was, um, uh, you know, we, you know, we're like, we were 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, um, one of the founders of, uh, of Enron.

Wait, you ran into Jeff Skilling? In the Bellagio.

At the Bellagio Hotel.

On your road trip in Vegas. That's quite interesting. Okay.

Yeah. We talked to him for 2 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. Um, 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. For it. Like, I, I was like into that story, um, and, um, 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, I'm, you know, I, I knew the context of this guy. I I'd owned his stock when it went to zero. And, you know, he was just saying, we're gonna escape, we're gonna get away, I'm gonna take my son, we're gonna go, I'm gonna paint a red cross on the side of like this white, you know, like Tahoe that we have, or whatever. And like, we're gonna go across the border and get to stuff. 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've, 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, I was like really fascinated by it, by, 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 he just talked to somebody and said like, does this feel right? Like, does this seem like the, the. 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 fine. You just gotta keep in touch was 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 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 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 ask— 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 Grownup. 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, alisacohn.com.