Mark Goines: Pioneering Fintech and the Future of Money

This episode is brought to you by the Bolden Financial Planning platform, formerly New Retirement Create a Financial Plan for free@bolden.com. Welcome to Bold in youn Money, the podcast where we explore topics around money, time, technology and life. I'm your host, Steve Chen. Today we have a fintech pioneer joining us. Mark Goines is a financial technology veteran with an incredible career spanning the history of personal financial management and fintech. And he's run some of the biggest companies out there and products out there, including Quicken, TurboTax, Quicken Loans, and then he got into managing personal capital as well. So Mark has been at the forefront of personal finance, wealth, tech and digital advisory tools. Mark, with that, really appreciate you taking the time to join us and looking forward to learning more about your journey.

Happy to be here and share and looking forward to our conversation.

It's always great for our audience to kind of hear from our guests in their own words, how they got to where they are today. And obviously you've had a long, long journey. But I would love to hear your story from starting at Berkeley and how you got into personal finance or fintech.

Overall, it's been a great journey for me and certainly my family met my wife at Berkeley. So, you know, she was very focused on science, she's a scientist, and I was very focused on business. So we got to share some very different perspectives about the world. She worked in biotech and a lot of innovation in her early career. And I started working out in retail, which is not very innovative. You know, there was a lot of systemic change underway and particularly where computer systems were becoming a big part of how you really managed and delivered retail products and services. And so I really learned a lot about how innovation could be helpful from my wife. But more importantly, I could see it being applied in retail. The other thing I learned in retail was how important it is to listen to customers because, you know, retail is a minute by minute business. Everything changes very quickly if you don't have the right products at the right time or you can't measure the effectiveness of where you're spending your money, you know, you're not in business for very long. And so it was very interesting part of my life, but I became interested in financial services and banking really as a result of watching our payments infrastructure and our retail businesses change and change rapidly without much support from the institutions we were working with. And so when I was approached to join Crocker bank as a product manager working on some innovation that they were planning, I jumped at the chance to change Careers from what is a very challenging business to what I thought would be very exciting and more rapidly changing business. Little did I understand how hard it is to make changes in banks. We were very, very focused on bringing out new products and reaching new customer segments with the part of the bank that I was working in. And so it just opened my eyes to how much potential there was if you could really move the needle with change.

Yeah. Was product management a role when you first got started?

Kind of. Originally, it was modeled after what Procter and Gamble had pursued or Clorox or a few other companies. And many of my business school peers went to work for those companies. You know, they spent most of their time writing memos, and I didn't really find that very entertaining. I was surprised that they had taken those roles because in retail, certainly, and in banking, you're interacting directly with customers a lot, and you learn a lot from those interactions that are insights that you don't get from trading memos with your boss. But the product management model I thought, and the banks thought was very applicable because you had one person with broad responsibility to implement something that could make customers happy. And so, you know, the guy who managed Procter and Gamble's pet business, or managed, as Scott Cook did, the founder of Intuit, their dressing business and their Crisco business, I mean, those were foundational to understanding how to persuade others to do things within a company. The banking product management model was much like that. However, you had the regulatory part and the systems part and other things that you had no control over. And so it was kind of a hybrid, because in the Procter and Gamble environment, the product manager was sort of the king of the P and L. In banking, you're more of a persuader to try and get others to do things that you thought would be right for the customer. But I do think that it is the right model for turbocharging your efforts to excite customers about the products you're trying to offer.

It's so interesting to hear you describe how a lot of the modern, or at least the start of product management in fintech and financial services started from the company Consumer Package Kids, you know, motion. I know that, yeah. Proctor and Gamble, a good friend of mine, was super senior, ran strategy at Clorox. And, you know, they bring people in, indoctrinate them. You know, these smart MBA graduates and undergrads teach them about how to manage products. And they're doing it around these cereal or whatever it is, and you're doing it applying some of the same principles to financial products.

And I think it's particularly useful with the role in fintech today. But in general when you're in a technology company that a lot of what you do is map out the innovation and the changes. Whereas in the proctor and gambler environment, a lot of what you do is figure out how to promote the products you've already designed. And you know, marketing is a core part of it and how to get it on the shelf and get it sold through. And a lot of the time spent in those roles is about looking at the Nielsen data or the other data sources, about how sell through works and coming up with promotions and programs like that. In my experience in financial services and technology, a lot of it is more about how do you develop the product and deliver it in a way that's really exciting to the customer and keeping it fresh. And so, you know, at the time when I was working in banking, the guys that developed technology had kind of the keys to the kingdom because you couldn't do anything without getting it into the systems of the bank. And you know, we're talking COBOL programmers and very slow development cycles. But that same discipline around what customers need and how that gets translated into a software environment, which is what banks largely are, they're really delivering software based services to customers I think was foundational. And how I became so interested in marketing software to consumers.

I looked at your CV when you were at Schwab. You left Schwab as like I joined it. I was there a couple years later. I think you ended in 91. I came as a consultant in 92 or something. But that was when technology was emerging and there were new ways you could touch the consumer and work with the consumer and also learn from them. I think that's so foundational for the work that happens in fintech now. It's like we all take it for granted. Every click, every interaction, following people around digitally, what they're doing, you get all that data and you can use that to make decisions. But that didn't all exist, right?

In the early part of my undergraduate focus was on finance, but my graduate focus was really on marketing and market research. And there were really long cycles from trying to figure out what consumers wanted or how to deliver to customers and how you built things that you could deliver to them. And now it's so fast that it's almost too much data and insights are often lost around the data tracking. But yeah, in the early days at Charles Schwab we were very dependent on third parties for all of our systems. We did a lot of our development, but we also had to get others to do development for us and we couldn't necessarily get the things done that we needed or we felt were going to be advantages to us in the marketplace at the pace we would like. Of course that has changed dramatically. But in the early days, the longest lead time was actually software development.

Yeah. So you've built all these products across your career. TurboTax, Quicken and Schwab products and personal capital. How many people do you think have used products that you have created or helped create?

Well, just in those companies alone it's in the hundreds of millions. But more interestingly, I think if you're looking for just numbers, I was co founder of a company called Passmark Security and we developed a technology to help financial institutions authenticate their customers. And we literally had billions of customers using it because it was across the planet and some of the largest financial institutions in the world were adopting it. So every login interaction for a new customer required interaction with our system. And so when you add it all up, there were literally billions of, as we called them, pass marks in use when we sold the company to rsa. So you know, one of the lessons there is boy, you really do need scale distribution to be big. And we didn't make that much off of each interaction. That was not our business model. I think the most profitable enterprise I've ever been involved in to this day is still the TurboTax business, which is in the hundreds of millions of users.

Yeah, I think one of the things that happens with fintechs is sometimes I know that like it Intuit and they want to defend that franchise and if you start to get close to taxes, sometimes they will come and acquire your company to.

That's what I did. Yeah, you know, I mean we grew the business by being innovative, but we also grew the business by and is the DOJ listing buying anything that moved literally. And that helped scale it. But I think also harking back to my days in banking, we were very innovative there. At Crocker bank we invented the Helocopter, the home equity line of credit that was both innovative and adopted at scale across the entire industry. At the time that we introduced it, it was illegal. You couldn't use the product in the way we had designed it because of certain laws around how you authenticate and authorize a loan that's secured by your home. And we realized the potential was so large, we actually went about changing the law to get our product design accepted. And after, you know, Many, many months, almost into a year of working on that, we did get the law changed, and that product became one of the fastest growing products the bank had ever seen. In fact, we were growing home equity lines of credit so fast that we also had to innovate in the secondary market to sell the portfolio so that we could keep getting capital on the bank's books, to keep making new commitments. So you can create some very interesting business opportunities with scale.

That's amazing. I didn't buy my first house till I was like 40 years old. And then when I bought it, they were like, hey, we'll also give you $160,000 HELOC. And I'm like, that actually sounds awesome, because then I don't have to have an emergency savings vehicle anymore and I can just hit this if I need it. And so it's been a product I've taken advantage of in terms of having it, mostly not using it. I've actually used it a couple times.

Yeah, I have too. I mean, it's nice when you don't want to sell your investments and you need something, you get it, do so it's great.

So that's amazing that you innovated that.

And then, well, I was part of a team. I mean, you know, I can't take full credit at all. But again, it's seeing how innovation can help you really scale. Being unafraid to make changes, being unafraid to break the rules, change the law, whatever you need to do to create real value for consumers and therefore real value for yourself and your investors.

Yeah. So when you are building These companies like TurboTax and Personal Capital, were there like some foundational insights that you had that led you to build these things, or is it just kind of like a bunch of small things that you saw along the way?

Well, it's kind of both. I mean, there's always really important small things that you have to do to innovate and stay in front of the market opportunity. But there are two things that I use today that I've learned from that that are perennial viewpoints that are very helpful to building companies or even investing in them. One is distribution. Really hard to reach your market. There are a lot of people trying to reach it. You have to find means to be able to convince folks to try your product, use your product, buy your product, and trying to think that through early is really important. A lot of companies, and there's a million of them out there that make all these claims about what they can do, and they may even be Able to do them, it's always not clear. But getting that message out to people and convincing them to buy it is distribution. And that's very hard to do. So scaling businesses through distribution is something I look for. How are you going to scale it? And then the second, and probably not the most important thing from the viewpoint of really being a scaled business. But I do look for opportunities where there are, if you will, strategic creases in the market. There's opportunities, there's folks that are looking at it maybe in the wrong way. The best example of that I can give is when I was the first investor in Mint.com, nobody thought that we could compete with Quicken, which was the behemoth in the category. And most of the investors that Aaron had talked to just said, yeah, you're never going to beat Quicken. But what I saw was what Aaron saw around delivering a much better onboarding experience. He did it in less than a minute, whereas Quicken would take 45 minutes. That was his vision, and he achieved that. And then second was being able to say, we're going to be able to monetize this with relationships with financial institutions who would pay us to acquire customers. And Quicken couldn't do that at the time because they had a whole business segment that sold versions of Quickening and online versions of Quicken to financial institutions. And the moment they started competing with them, that part of their enterprise would collapse. Interestingly, they're no longer in any of those businesses. They sold off Intuit, sold off Quicken. They also shut down their B2B bank business. They're scaling in other ways, but those market creases were able to scale the business. And then we got lucky in that the App Store launched at the same time that we launched Mint on the iPhone. Nobody else had a product like ours at that time that did that. And so sometimes it's just luck, but I think being ready when that comes was part of his vision. And so looking for distribution and the App Store gave us distribution was critical to its success.

It's so interesting because, yeah, I remember Mint coming up. You know, it was very fast growing. Then it got acquired, and then it got basically got acquired by Intuit.

Right. Because it was being too competitive with Quickening.

Yeah. And then they basically put it on ice, you know, and then didn't innovate. Like, they still had tons of users. Then they shut it down, and then Monarch inherited all the users. I mean, people want to do budgeting, but it's interesting how that maybe Aaron should have bought it back.

And then the last thing I'll say is when I look at new business opportunities and even when I was managing the businesses that I was in, scale matters. You have to go after a really big market and have a vision that will capture a big part of it. Being a small player in a large market can be very, very challenging.

Yeah. So with TurboTax and Personal Capital, were there any distribution hacks? I mean, those to me feel like D2C companies that you went out and kind of acquired them hand to hand combat. But were there some big insights that you had?

Well, with TurboTax, we were the king of retail for a long time. That became really critical. But then as more and more competitors emerged, we wanted to be able to be sponsored by the state agencies that were promoting tax software. They were promoting their own online solutions. And when everybody's really great in the straightaways, I mean, if you really know how to manage retail, distribution and direct to consumer, you can scale a business there. But that's very expensive. But when the Internet came along and things started getting distributed instead of in box software online, a whole new range of consumers. These companies trying to get after consumers evolved fairly quickly and it was fairly easy to reach them. But we were somewhat advantaged because we had relationships with all of the state governments and the federal government and we could develop products that met their needs and offer them for free. And, and so we got actually the governments to help us promote our product.

That's amazing. When you think about scale, everyone talks about scale like, okay, I'm going to figure out product market fit and then I'm going to scale my company. What does scale look like to you? How do you define it?

I think you have to impact tens of thousands of companies and millions of consumers. Those are sort of the broad scale definitions. So in a B2B enterprise, if it's just going to be a few thousand companies, I think it's going to be very hard to remain completely moat driven. It can be done. And there are certain categories where that is the case, but not in the categories that I've experienced. And then in the consumer business, it's millions of customers. How can you engage with millions of customers? And sometimes that's direct to consumer, but often you can do that through third party relationships who already have those relationships. If I could build a product that Charles Schwab would want to give to its customers, and I use give in the sort of friendly way, I could reach scale in that relationship. And you know, your business strikes me as One of those where, yeah, you can have a good direct to consumer business, but you really need the influence of financial institutions who can give you the imprimatur of their brand and have their customers experience the quality of your product. You know, that's real scale distribution. That way you can reach millions of customers instead of crawling to millions of customers. It took personal capital almost three years to get to our first million users. And those are just free users. They weren't even the paid users. And so it's very, very hard. It took my company life360 where I'm on the board, been involved since inception, the better part of a decade to get over 10 million. And now we're near 90 million.

That's amazing. So it took you a decade to get to 10, and then how fast was the 10 to 90?

About a third of that time.

Okay, and how are you acquiring customers there in life360 primarily word of mouth.

You know, it's a freemium product. And yeah, we have a marketing budget and all of that, but most of our customers come from referrals. And there's the advantage of scale. There is that once you get to a certain point and we found that at personal capital that others who are excited about your product will tell their friends about it and their means to encourage them to do that. But referrals are a key part of getting the word out.

Now we have that happening in our business. We have a good net promoter score, like 65, 70. And people tell us all the time in their feedback that they're sharing this with their friends. But yeah, we can do more.

Yeah. And there are ways for you to encourage them to do more of that. You know, that really helps you scale your business life.360 didn't have to do that. They found that when they reached a certain tipping point in a market, a certain percentage of users that, you know, the moms would talk about it, the dads would talk about it, and the kids would talk about it. And once that started happening, then a certain market could become deeply adoptive more quickly. It would accelerate.

Are there good models out there? I mean, I know that in Direct to consumer and fintech, all the investors are kind of down on it. Customer acquisition costs are high. Extremely high.

Yeah, Very hard to do.

I know personal capital. You guys raised $300 million or something like that. And I spent a fair amount of that on acquiring customers.

Probably most of it.

Most of it. Okay.

Yeah.

But you were able to convince investors like this is good. I know you also had like the Value of a customer was very high and you had negative churn and all that stuff. So I guess you achieved some level of proving this and then said, okay, give me 100 million bucks or 200 million bucks, I'm going to go spend it on getting more customers. Are those models bespoke or is there kind of like back of the envelope math that you can do to kind of say, okay, this is going to work?

Yeah. There are three variables that I think are used in most of these efforts. I mean, the first one is, as you say, the cost of acquisition. CAC is a very important variable. And then the second one is what is the lifetime value of that customer? And so if your lifetime value to CAC ratio is really good, you know, LV to CAC famous ratio. I mean even SAS companies love that and it's a good way to measure the business. But then the third one is time to cash flow break even on the CAC investment. And with personal capital it was pretty long, 18 to 24, even as much as 36 months, depending on the sector. But the LTV to CAC ratio is very high and the value of those customers way higher than the cost. But you needed to keep raising capital to get to the point where the business could keep growing at pace. The best companies are those that can find, you know, less than a 12 month payback and so that you're always within the 12 month time frame, cash flow positive on your investments. And the ideal companies are not spending any money, they're getting it all through referrals. And the only real customer acquisition cost is the cost of onboarding customers. Mint was like that. Mint. We didn't send any money on marketing because the App Store was so productive for us. And that was at a time when we didn't have any revenue. So it was all free, free, free distribution. And so building a great product that customers loved was critical to that success. I can never emphasize the importance of having a product that customers love that just makes all of those dynamics more efficient.

Yeah. Well, it's funny, as a product builder, you know, you hear all these things like, oh, it's. I mean, the product clearly is like the number one thing that we care about. And I think for most people that build things, it's like they want to have something they're super proud of. But you also hear these stories of it's not the best product that wins. It's ultimately who gets distribution the fastest. And like Microsoft will do that. We use Slack and then they have teams. And if you look at the adoption of teams versus Slack teams is like this. There's like.

No, exactly. Right. You know, there are certain advantages to have an embedded base that you can sell to. But, I mean, I'm proud to have run Microsoft out of the tax business. I'm proud to have run them out of the small business accounting business. I'm proud to have run them out of the Quicken category. I mean, they tried to go after all of those businesses and they're not in them anymore because we had a better product than they did a lot. And of course we were fiercely competitive. You can't underestimate Scott Cook's commitment to remaining fiercely competitive. And some of that is pure product innovation and a better product. But some of it's also the other tools in the marketer's toolbox. Pricing. Where do we position the product? How do we promote it? For example, when Microsoft entered the tax business, we lowered our prices. When they entered the Quicken business, we lowered our prices, made it harder for them to make it a really interesting business for them.

What is Scott Cook up to now?

Haven't chatted with him for a while, but, you know, he's the chairman of Intuit and he focuses on innovation, which he's gotten very, very good at leading the company through. They've gone through the sort of U curve of we're a big company, we acquire everybody. Not very innovative. All the companies that they acquired got closed like Mint, and now they're at this point. And this really happened, I think, in the last three or five years, where they're really good at innovating internally. And they've done a great job of building scale and protective modes around their businesses. And customer delight is still the first thing out of his mouth. By the way, he's also former Crisco product manager. I think he still is on the board of Procter and Gamble. So I think he's teaching them a few lessons that are in trade for the lessons they taught him.

It's so amazing. I had no idea that he was like a CPG person and then came over. I'd love to get him on the podcast.

He's a really fun guy. I couldn't recommend any more. Interesting guy to talk about around this. Perhaps the other one is Bill Harris, who was CEO of Intuit for a while, CEO of PayPal. He and I have started several companies together. One of the most innovative fintech pioneers you'll ever run across, and a lot of fun to talk to about these kinds of things. So both of them are Good candidates.

Maybe we'll get the three of you on the podcast together.

I'd be happy to make those introductions, but I'll leave the rest to you.

Awesome. Yeah. Well, I remember Intuit did a study about financial planning and they said, hey, I mean, I remember seeing this deck. They were like, everybody, it tested out of the park. Like, everyone says they want financial planning, everybody wants it.

Y.

And then nobody will pay for it, essentially.

Well, and we, we actually had launched a product and it, it just dive bombed. I mean, it was exactly that. It was like, oh, this is. Well, three things that I think you've helped deal with. One is it's kind of scary. You know, you're talking about changing your financial life and people want to do it, but they don't want to do it. And then two is, it's really hard to do. And, you know, the classic financial plan is give me all your stuff and I'll create a document on what your financial plan should be. And the guy gives you the plan and you never look at it again. You know, you throw it on the shelf and it's a ton of work to get to that point. Very painful work. And the plan might be good at a point in time, but it just gets still very quickly. The third thing is most of the actionable items that come out of it are probably rooted well in the initial fear. It's like, you got to make some changes. You got to be really making different decisions than you've probably been living. And many people falter in doing that because it's very hard. And so you have this bad thing of it's not up to date when I'm starting to make those decisions. And the decisions were hard enough to make. Now I need to revisit why I was making them. And now I have to go through this painful update process again. I mean, it's just this sort of negative spiral. I think with personal capital, we solved a lot of that. And I think you have solved it in a way that is very engaging and fun. And to me, it comes back to what we used to say about TurboTax. We like to make taxes fun, and that's really not ever possible, but we like to say that. And I think financial planning fits into that mode. And I think if they redid the study today, with the innovative technologies, the access to real time data, the ability to capture all of your financial accounts quickly, to lay out micro steps that you could take that are going to improve your financial life, that have a cycle of immediate rewards that I Think is a very different environment.

Let's not encourage them too much. I feel like with our work, we try to make it approachable, try to make it living, but then yet getting people to take action. You get into human behavior and there are all kinds of people there. We bucket them three ways. You know, there's DIY people that we engage, there's validators and there's delegators. And you have to help people understand themselves and then make it easy and then hold them accountable. And like, we haven't even gotten to that part of our business yet. There's the whole, like, we're helping people build plans and kind of see what's possible and build scenarios. And that's the fun part. And then there's, okay, let's make the changes and are you on track? Let's make that easy and make that low cost. And that's all the work that is in front of us. Plus we have to get big, figure out how to scale.

Yeah. And I think humans need human reassurance on things that they're doing. I strongly believe in the hybrid delivery model where you can do all the great technical things and make it very easy to understand and even actionable. But I think you still need to be at least reassured that. That the actions you're taking are correct and it's hard for people to change their behaviors.

Yeah. Okay, let's move on. I have a couple of more questions about when you look at these big models. I was, as I was prepping, I was thinking about, okay, you know, Schwab did discount trading. They democratized investing. You know, TurboTax did tax prep and filing. Democratize that betterment and wealth front and personal capital. Robo advisors or I mean, I know personal capital beyond that too, but making kind of more automated wealth management available.

Right.

Credit karma, credit score management. Do you see common themes that emerge across these companies when they hit a certain tipping point, or is it just different by category?

Well, I think the core tipping point that has occurred in my lifetime and more recently has been the ability to systemically access the information that makes doing the financial work easier. I mean, it is the thing that scaled Charles Schwab. Being able to go online and trade was so much easier than calling somebody. And even having the willingness to call somebody is an emotional thing. It's like, oh, I'm going to buy something. And for instance, the early days of Schwab, it's like, no, we don't give advice. Hey, I'm going to buy this stock. What do you think it's like, how many shares, what price? You know, you had to be sort of, just give me the facts, ma'. Am. Because we did not want to give advice, but people wanted the reassurance that they were doing the right thing, even if they had already kind of made the decision. And so with Quicken business, being able to pull all of your financial information into one place and make it at least easy to look at and understand was really key to its early growth. But it really was harder for people to use that information to make financial decisions than it probably should have been. And looking at wealth planning like you're doing, it's very similar. TurboTax was really initially just filling out the 1040 and the related forms, but then the business really started to scale when we added things like interviews and videos. And, you know, Marshall Loeb will tell you why, you know, doing the 401k is a good idea. And Marshall Loeb will tell you how compounding really works. And Marshall Loeb will tell you, he's a financial guy of the 80s and we had him on video. And our business really scaled more rapidly when we could personalize some of the things that we had written into our advisory sections of code. And so the humanization, the personalization, the reassurance is really, really important. And I think just doing it with technology, sure, you're going to get the tech guys that don't want to talk to anybody and enjoy doing all the work. But the market really scales when you reassure people that the things that you're helping them do are the right things for them to do.

Yeah, really interesting to look at also the costs, because, you know, Schwab brought trading costs down. TurboTax brought tax filing down instead of doing a CPA.

But you look at TurboTax now, in addition to the do it yourself stuff and the stuff that they sell to financial to tax preparers, they now offer individual tax preparation. You can get a tax preparer to help you go through it. And so the DIY market, I think, is fully penetrated. And so you have to now do the I need a little help market. And Schwab has done that. They have advisors now at scale. So I think with the automation and efficiency and the simplicity that the technology brings to the conversation, now companies like Schwab and Intuit can afford at very low prices to deliver that reassurance, which is, I think, more valuable than any of the prior constructs to a human.

Yeah, so these themes are similar, right? It's like, okay, systemize things, allow people to do this themselves provide some availability of human support in a hybrid way. Reassure people, like, come to them, be a trusted brand and also an authoritative brand. Right. Like, hey, we have a point of view here. Here's how to do it. Okay.

And it's humanized. It's not just a brand. It's coming from someone who cares.

Yeah, I see that. I mean, it's like Charles Schwab is a name for a person. You see, like Susie Orman, you see these talking heads. Right. Dave Ramsey and stuff like that. There are people out there.

Yeah. And they all have strong reputations. That is part and parcel of why people value the advice that they deliver.

Like Financial Samurai, who we just had dinner with.

You know, Samurai is amazing. I really enjoy conversations with him. He's very thoughtful, but he's very caring.

Yeah, yeah. No, it was great to meet Sam in person. And you know, it's like he's been right here. I'm like right here in Mill Valley and finally I hadn't met him before that. I think he's, you know, I think you have to hit a certain level and then you can get some airtime with Sam. Okay, awesome. So, you know, like, any thoughts on what you think the next unlocks are.

In fintech that I think is coming? AI is really helping because you can solve, interestingly, you can solve this humanization problem with the products that have been now developed. A chat interaction is so much more personalized and humanized now than it was before. And so bringing at scale at very low cost, the delivery of the kind of reassurance that we were just talking about, I think is going to be a very big unlock. And a lot of people are already trying to do that and you know, they're still hallucinating a little too much perhaps and delivering some of that. But I do think that that is going to happen at scale very soon. It's already happening. I don't know if you've heard about this Khanmigo, which is the Khan Academy's delivery of education using AI assistance. And I think Salcon is really highly effective at personalizing the delivery of micro educational lessons. And what he's now doing is delivering that at scale with the leverage of artificial intelligence now for a long time, you know, AI isn't really that new because of. Even at personal capital or at Thermotex or at Quicken, we use machine learning all the time to build better products and better experiences. But now it can be highly personalized and humanized with the AI delivery models. Siri was kind of the first bent in that direction. I was working at Morgenthaler when Siri was purchased by Apple, and I think Steve Jobs was right when he intuited that this will help us sell a lot more iPhones because it'll be a very fun and personalized experience interacting with technology, with what felt like a human. Now, we all know Siri has its faults, and AI now is unlocking the capabilities at a very narrowly focused scale for each individual that Siri could never do because the tech wasn't there. And so chatgpt and the others, I think, are enablers for really delivering this next level of personalization and humanization. And we're going to see all kinds of unlock.

Yeah, no, I think it's fascinating. I mean, I use perplexity now to ask questions, and it cuts through all the noise. And then I talk to it a lot. I like. I prefer to almost dictate the questions and it gets the dictation right. And then I did have. I did test this, like, just having a conversation with ChatGPT, you know, with a friend or in the car, asking it stupid questions. And, you know, it's. It's. It's not quite there, but it. It's interesting, you know, and you can kind of like, if it starts giving a wrong answer or something that's not what you want, you can interrupt it and it'll pause and listen to you.

It's.

You can see, and it's just amazing how fast it's moving that this is going to get there. And you're just going to be taught, like, ambient computing and, you know, asking questions like. It's like having an analyst over here in the corner. You're just like, tell me this, tell me that.

Yeah, it's very, very powerful, but it's also scary because it is wrong. Just in a simple example, I was with one of my grandchildren, and she was asking me the name of the cat in Cinderella. I didn't. I didn't know, you know, it's been a long time. And so I asked perplexity, what is the name of the cat in Cinderella? And it gave me three different answers, and one of them was right. The first time I asked it, it gave me what looked like the wrong answer. It gave me the name of the mouse, and I knew the name of the mouse. So it's like, no, I don't think that's the name of the cat. I think that the cat's got a different name. It's not. I said, that's the mouse. And and it came back and said, oh, you're right, the cat's name is. And gave me the correct name. And so simple level it, it has a lot to learn about being wrong.

Yeah, right. Well that's the, that's the scary part is like if you mix like, oh, here's an authoritative thing that you think is right, giving you wrong answers and you're listening to it and you're doing wrong things. That's right.

What ETF should I buy to have a balanced international portfolio? You know, I'm not sure the answer is going to be right yet. So there's, there's work to be done there, but I do think it's going to get there.

Yeah, like one thing I thought about for our product is like, hey, just have a voice interface, right? So we let, when we onboard people, we're, they're typing things in like TurboTax, like to build a financial plan. But you know, it could just as easily be a human being that or it could be an avatar like this asking questions. How much money do you make, Mark? How much do you have saved? Where is it? Stuff like that. Do you think we'll see that? Are you seeing companies do that today?

I've seen some trials and not great yet. But again, it's early days. I mean I do think that that's coming. But just to go back, early days of innovation, as an example, when before computers you could request a stock quote from your phone, we developed a product at Schwab where you could take your phone and enter the symbol in a coded sequence using the keypad on your phone and then it would give you a quote back. And so we recorded these folks with all the symbols, all the names of the companies, every possible stock price combination, blah blah, blah, blah, blah. And then we concatenated it into a single solution. And it would sometimes sound a little funny. You know, it'd be like IBM, but then we would just record IBM so that it made sense. But we're in the early days of AI where it's more like this concatenated voice circumstance and they haven't got enough data yet to make it smooth. But it's getting there.

Yeah, it's going to be, going to be crazy. I mean I think AI is. Well, do you think AI is affecting the job market today? Are you seeing this?

Certain companies it is, especially when it can be utilized to effectively deliver high value customer service without humans. And there are good examples of companies that have been as they're growing very rapidly, having to hire a lot of humans to handle the customer service load. And when they've implemented various AI solutions with chat and other voice prompts, they have been able to continue to scale without having to continue to hire at pace. And so there are circumstances where it works, but it means you have a big database, you have lots of circumstances that you can solve quickly with the AI based ML models, but you have to feed it with the right data. So yeah, I think there's efficiency in certain sectors, but I don't see it as a big replacement yet. It's going to happen, but I don't think it's anything to be afraid of. I think it's really going to be very helpful.

Do you think these changes that are coming are going to disrupt the incumbents? I mean, obviously you see the ecosystem pretty broadly. I'm obviously particularly interested in wealth, tech and advice.

But yeah, we see it now in Walthec already where things like, and you know, you use various aggregation tools and services, AI and other techniques can really substantially improve how that is delivered, both from a speed viewpoint, but also accuracy and be more adaptive to the various changes in technologies that occur at the financial institutions who provide the data and also do a better job of adding data together to make sure the data you have is accurate, range checking, that kind of thing, which sounds very simple, it's very hard to code. AI can do that instantly. The other thing I've seen is in onboarding customers already there's a number of companies that have used various large language models and some small language models to improve their client onboarding because there's so much data to onboard when we're bringing a customer over in financial services. So we're already seeing that. And customers that are doing portfolio management are able to grab data from your old portfolio much more readily with the AI enabled assistance that they're using. So they can grow their business without adding staff. Because one person using an AI tool can bring on 25 customers a week when they can only do maybe five before that. So there's certain efficiencies that are occurring in the back office. I haven't seen it yet. In the customer interaction side at scale, I do think that's coming. Except for solving problems that are solved time and time again on the phone. It's like getting into an endless chat with AT&T on my connection with them. I think AI can really make that less endless. Yeah, but they haven't done it yet.

Yeah, I was talking with a CEO in this space that's in the advice referral business and Sorry, advisor, referral business. And he's got 10% of his company is on the phone and he's like that's tens of people. Right. He's got a 2 to 300 person company but he's, he thinks in a, in a year that's going to be 110 the size a bunch of AIs and a few people on the phone kind of training the AI. So we'll see how fast it goes. That's there.

Yeah, probably not wrong. As long as. I mean to me the biggest fear I have about it is it just becomes when you're calling customer service and you just keep repeating the word agent. Agent, you know, because you want to talk to a human. That'll be the measure of their success is how many people are frustrated that they think they're talking to a human but they're not really.

Right. Yeah, it'll be interesting. We use intercom and so we're going to turn on fin, the AI answer bot for some questions and see how it does. Or fin2. And I'm now I'm wondering can we make it more proactive because we are having, I'm talking to more people that are like, well I would just like to chat with my financial plan and ask it create a scenario if I move out of California or whatever, I do this or that. We tell you how to do it on our tool but like just do it on the tool. It's not quite there yet.

Yeah, I do think this agent enabled AI is going to transform back offices everywhere. I'm still a bit skeptical about how humanized it can become to help customers, consumers, households, business owners, really truly get the right advice and feel that it's right.

Yeah, I think it could be super powerful though. I think there's a lot of people that they kind of know what to do. But then actually affecting some of these changes is a pain in the neck.

And then it's very hard.

Right. It takes longer. I own some alternative assets and it's like kind of expensive to hold it over here. I wanted to move it over here and it's still this manual paper based process and you know, you're busy doing other things and you're just like this stuff never happens because it's just there's so much friction cost. So if that could be like hey, you have an agent take these assets, get all the forms filled out or whatever to do, get them moved over here and it just makes it happen. Save me money, you know, whatever that is, that would be great. So when you look forward. What do you think financial services looks like? How do you think it's most different in five to ten years from now?

Well, I think what we've been talking about will define the difference, which is how personalized and humanized can we make the delivery systems. I think AI is going to play a big part in that. And so the human cost of really excellent financial services delivery will be much lower. And therefore people will be both happier with what they get, getting better answers. And I think, therefore, it'll be more accessible to more people. I think one of the big constraints in our society today is how hard it is to really get access to financial services that you should have. And we've seen some of this in the wealth management space, as you highlighted earlier, with Betterment and Wealthfront and even Personal capital. And I think that'll just go more effectively down the path of helping more households that have perhaps more modest means than those that are being targeted by those companies today. Because, I mean, to use betterment, you need 10 grand, and a lot of people don't have 10 grand. So I think the biggest transformation will be around the things that companies like Walmart are trying to do, which is help people who don't have access have access and giving them that access at scale. Chime is doing a really good job of that. And so to me, the real societal transformation will come around helping more and more households more effectively manage the money they have, or at least keep track of the money they're earning. And therefore they can spend their time earning the money instead of worrying about the next paycheck, the next loan, whatever. So that efficiency, I think, will benefit a broad swath of society that technology has not yet impacted at scale. I think payday lenders are an example of companies that should be made so efficient that they can loan at reasonable rates to people who really need it.

Yeah, yeah. It's interesting. I wonder if you'll see. I mean, I know banks will pay now or people will pay, you know, hundreds or sometimes thousands of dollars like Robinhood will give you 1%, right? To roll over a bunch of money. You have to keep it there for five years, but you have to have.

A bunch of money.

You have to have a bunch of money. Yeah, but I could see, could it be that like a chime will say, okay, look, I'm going to open you a bank account and put 50 bucks in it, you know, instead of paying for the customer, like, you just claim that money, but then you have an account with me and you have to hopefully then you start using it. You know, is that a you could manufacture?

Yeah, very interesting. I mean, some companies are trying that. I've been really impressed with what the companies like Albert and Rocket have done to help you at least identify the inefficiencies in your own spending. No. Why are you paying for three subscriptions to, you know, video services when you really only need one? Or did, you know you're still paying for that National Geographic that you probably haven't read in 10 years or whatever? And so I think helping people just manage the onslaught of information that they have already struggled to manage will be very effective. But at scale, households that are unbanked, I think, are a big, big, big opportunity. And I'm really hoping that the efficiency of the technology that we were just talking about can help companies serve them more efficiently, therefore serve more of them. And I think Walmart's trying to do that. They're doing a really good job, but there's a lot more opportunity there.

Oh, interesting.

You know, I mean, they wanted to be a bank, but now they're just really buying companies that deliver banking services. So I find that intriguing. And there's a big opportunity there. When we first started personal capital, we were really thinking that that was a better segment for us because it was so underserved. We basically built the bank on the back end, but very hard market to reach. And getting a bank charter is extremely daunting. And so I think Walmart's going about it in a very interesting way. And they're serving customers who need help.

Yep. How many unbanked households are there as a percentage of the pop households?

Oh, I don't know exactly. It's very large.

Yeah.

You know, it's tens of millions, if not hundreds.

There's what, 130 or 160 million households in the country? In the U.S. i think.

Right. And it's not just households because there's individuals in each household. Right. And so you, for every household, you have hopefully five to eight relationships that you can build a bank account, a credit account, a debit account, you know, savings account. I mean, that's where I get my numbers from. It's those types of relationships that scale it up.

Yeah, that's super fascinating. By the way, we see in our business, we didn't set out to support only or, you know, we don't only support people that have money, but we attract people that do have money and.

Yeah, because they're the ones that have the concerns that you address directly.

Right. But you see the wealth concentration where like our average customer has 1 to 2 million dollars. And so you can quickly get to like our paying customers have $100 billion. And you're like, that came at us fast.

Right?

But like, you know, the vision is how do we help everybody? And we want to take all these lessons we learned with these people and bring them at scale to other folks, get them on that journey of getting literate, making good decisions, framing up all that stuff. How about globalization? When you think about Fintech, do you think about the US or do you think about the whole world?

Well, I do think about the whole world, but I think the challenge for somebody who's doing a startup in particular and marketing to the whole world is do I try and scale in Australia or do I try and grow my business in Texas more rapidly? Texas is bigger than Australia. So you know, it's, it's an interesting kind of marketing puzzle. The same sort of goes to Canadian opportunities. Do I spend more time in New York or do I spend more time in Canada? You know, New York's got more opportunity for a US based company. And then one of the problems in financial services is that you have different regulatory infrastructure in every country and so you have to adapt whatever you're doing to that regulatory model and it can be very challenging. Launch of Quicken in France didn't go very well because it turned out that the French were not as caring about their cash flow and it was easier for them to get access to their banks. There are fewer banks there than it was in the US where everybody had four different bank relationships. And so you have to be very cognizant that the financial infrastructure for financial services products is different country by country by country and you have to attune to that and it automatically shrinks the scale opportunity of every market and dramatically increases the work. To launch in the UK you have to meet the UK regulatory requirements and they're very similar to the us that's kind of an easy one. But to launch in Japan, oh my goodness. Or to launch in Australia, oh my goodness. And so you have to be very adaptive and it's very expensive to adapt this complex technology to local market needs.

States. Yeah, we operate in the U.S. we did just, we did a launch with nationwide, rolled out our platform to 6 to 700,000 people. We also translated to Spanish. So that makes sense.

Right? Because I mean that's language, that's not regulatory infrastructure or tax infrastructure or the things that make a country financial system unique.

Yep. Do you like better being an operator or investor? It's like, now you're only investing, right? I mean, are you.

I can't do either. I have to kind of do both. I have to find. And I'm sure you experience this as leader of a company. Working with people is fun. It's really rewarding. I learn as much from the companies that I am involved in as they probably learn from me. And having that camaraderie and those relationships is very, very valuable. And so, you know, I'm not comfortable just looking at a spreadsheet and doing buy sells. It's just not who I am. And I think I add more value by engaging and better understanding the team than if I just, like, look at the balance sheet and the income statement and make a few comments on it. So I like to do both. And to me, the energy comes as much from the enthusiasm that folks like you have for building great products and building great teams as the business opportunity itself.

Yeah, I agree that that's, like, what makes it fun, and I think it's interesting. I've met lots of entrepreneurs that have, like, made it. They've had success or. And people that have just retired, they're like. And they. They get the financial independence, and they're like, great. And then they get bored there. They miss the work. And everything that comes around comes with the work.

Yeah. And I've failed retirement three or four times. I mean, I just. I'm not. I'm not happy unless I'm working with people that are energized about their life and the opportunities they're pursuing.

Yeah. What are some of the top characteristics that you look for in a great founder and team?

It's different by different businesses that I've been involved in. I mean, if you're in a hardcore financial technology delivery business, you have to have a founder who is into the details or that is smart enough to put people on their team who is into the details, and they have to make sure those details are well handled. There's nothing more damaging to a financial technology company than doing things wrong. And, you know, customers care about that a lot. Your reputation is really damaged if you make big mistakes. And I think your reputation is enhanced if you have the comfort of your customers that you're doing things right. The kind of founders I work with have to sort of have split personalities where they're really good at either doing that or finding people who can. Chuck Schwab is a good example. I mean, he's very visionary, and he always hires great operators to make sure that the stuff that needs to get done at a detailed level is done really, really well. Bill Harris is another example of that. He's very much into the details. He really understands how the products work, how the business works. But then he hires people that can really do that at scale. But the most effective ones are people who care about that. And then they're unafraid to make change. They come up with new ideas. They have new ideas every day. They're always pushing the limit, you know, and they're really kind of the chief product officer, if you will, for their business and really wanting to make sure the product is always delighting customers. There's nothing more boring than a CEO who's really good at getting the last 2 cents out of, you know, the bag of potatoes they're selling. I mean, I think that's interesting, but, you know, I just don't think it's fun. And you have to have people that are maybe good at that. But I am totally allergic to Six Sigma. I just think in a fintech innovation category that you could just shoot yourself in the foot trying to optimize something that can be better served by breaking the glass and innovating in a way that delights customers.

I think what's interesting, though is the world has changed with private equity now, where so you have venture guy, you have founders, you have venture capitalists, and they're innovating, taking risk. But private equity now is like 40% of the market in terms of, like, the number of companies that are out public is flat to low. Right. And the number of companies that are controlled by private equity is increasing every day. But the private equity orientation is kind of optimize the heck out of the business, you know.

Yeah, many are like that. And when they move in, I move out. I mean, it's like, yeah, good, do that. That's great. That's going to deliver some real investor value. You know, you'll get a 2x maybe, but I'm looking for 100x. You know, I'm not actively looking for it, but that's what I tend to commit to. And, you know, if you put, I don't know, $100,000 into a life360 and that turns into 20 million, that's a good investment. And so, you know, that's different than $100,000 turning into, I don't know, 300,000. And, you know, I actually, I just had that experience. I had invested in two companies at the same time in 2009, one was just sold and I 2 1/2 x my money and light 360, well over a thousand X. And it keeps growing. And so as an investor I, I look for the higher scale. But if a private equity company had bought Flight 360 a few years ago, it'd be, you know, a very different, highly optimized business generating all kinds of bottom line profit that investors love. But I don't know that it'd be growing 30, 40% a year.

As you navigate these changes, how do you counsel companies on like the big. Are there big common mistakes that companies make or potholes they could run into as they're going through this process?

Yeah, the most common mistake I find is not really figuring out how to keep distribution, scaling and focusing on that. And you know, some of that's through product delight, some of that's through partnerships. Now the worst advice you can give a company is don't do that partnership. You know, it'll distract you. If that partnership will increase scale and distribution, then you should figure out how to do it because distribution is hard, very expensive. And I think it's too often companies get too narrow too quickly and try and focus on just one thing. And it's common advice, focus on one thing and do it really, really well. And I don't subscribe to that. I think that could be a mistake, particularly in an early stage company.

Okay, that's super helpful.

A lot of people think I'm wrong about that, by the way.

Well, you can point to your history as your results as an investor and operator.

I'm not saying that that's necessarily wrong to focus. That's really important for your business, that's great. But if it's at the expense of scaling distribution, that may be a bad trade off.

Okay, this is super helpful. By the way. Do you ever listen to Lenny's podcast, the product management guy? No.

No. Should I?

Yeah, I think so. He should have you on as a guest. He's interesting dude. You know, he interviews all the product management design people and you know, has built a, a really good thing and.

Yeah, and I really believe in the product management model. I mean, I do. I think that you can never put enough effort into making your products great.

Yeah, yeah. Well, customers see it and hopefully the best product wins. Right. And the best model and the best.

Well, only if it has the best distribution.

Right. And you have to kill it on distribution, which is hard. Distribution is hard. Any final thoughts for our audience about where you think the world's going and what to expect in the world of personal finance and technology?

Well, you know, I've been saying this my whole life. It's like it's going to change. Let's get ready for the change. Let's look at the curves, let's make sure that we're ready to make that turn. Knowing when to hit the brakes at the accelerator. I mean, just don't ever get stuck in your straight line. You've got to make changes and you got to make them pretty quickly. And so the market's going to change, Try and change with it.

Yeah.

I mean, who knew that Al Gore was going to invent the Internet and TurboTax was going to be 100% online business within 10 years?

Yeah. It's fascinating when you look back, like Netflix and Blockbuster. It's like Netflix used to sell DVDs and then it's like we're going to go all streaming. You think about that pivot and what it has subsequently enabled versus Blockbuster was like, we're gonna have our stores and then it's gone.

Yeah. And there's one store left.

I think there was one store left. Is it still going?

Yeah, there's one. It's kind of a museum now, but yeah, it's exactly. So when, when things change, try and get in front. Be willing to throw out everything when you think a change like this is going to scale.

I grew up in Rochester, New York, the home of Kodak. And Kodak is what a story, right? Yeah.

I love my Polaroid cameras.

Yeah. Well, it's incredible. Like, they made so much money. They were selling chemicals. You know, we make so much money selling chemicals to all film. They had the patents for digital photography and they're just like, we can't let go of our current business model and they imploded a 130-year-old company. You know, it's crazy.

Totally crazy.

It shows you how strongly people hold on to it. Even though that took, I mean, I don't know how long that must have taken. 10 plus years. I mean, our. The whole Rochester itself. My mom worked in advertising, like, did work for Kodak, and the company goes away and like the whole ecosystem implodes.

Right. That's a good example.

Which basically led to this company because she needed financial help because.

Oh, there you go.

There you go. All right. Well, look, Mark, this is super valuable. Thanks for coming on the podcast.

Very entertaining talking with you and we could do more of it.

Yeah, no, this is great. I'll send you the thing, the link for Lenny's podcast and for all folks listening. You know, thanks for your time. Hopefully you check out our platform, subscribe to this podcast. I'll send us reviews. All that feedback is super welcome. Thanks Mark.

My pleasure chatting with you today. Take good care.