Introduction

Patrick: [00:01:21] My guest today is Jon Stein. Jon is the founder and CEO of Betterment, which as a leading robo-advisor, manages about five billion dollars from more than 175 000 clients.

Jon and I discuss the challenges of getting young people to invest, Betterment's recent foray into areas like the 401(k) market, and how Betterment works with financial advisors.

Thanks Jon, very much for being here with me today. Maybe you could start since most of my listeners will be familiar with Betterment, but some won't. Maybe you could start by just describing briefly what you do, as if you were talking to say, a cousin, that doesn't know anything about Betterment.

Jon: [00:02:10] Right. I'd probably, first ask my cousin what she does with her money today. I always like to start with that, because people have so many different points of view, on financial services. If there was no answer, if I was talking to a group, I would say, we are an investment management service. Our mission is to make our customers' financial lives better, by helping them make better financial decisions.

Customers come to us, they tell us about their goals, and their financial needs, based on what we hear from them, we build portfolios for them, we manage those portfolios over time to reduce risk, to reduce taxes. To coordinate across their different types of investment accounts, and get them a better net return at the end of the day, and help them achieve their goals more quickly.

Patrick: [00:02:53] One of the things I'm most fascinated about because I generally failed at this same task, is how you get to young investors? So, I wrote a book called, Millennial Money...

Jon: [00:03:03] Yeah.

Patrick: [00:03:03] And what I found was, people love the message, nod their head, and then do nothing. Mostly because, you're talking about a goal that, in most cases, talking about retirement is decades away, and that's just not how people are wired to act. Maybe they'll nod their head but they won't do anything.

Thinking about customer acquisition, especially in the millennial generation, what have you learned? What's the secret, is it even possible to get younger people to act with such a distant goal in mind?

Jon: [00:03:31] It's funny, I feel your pain, and I sometimes say that our biggest competitor is inertia. It's so hard to get people to act, it's so hard to get them to pay attention to their money, because everyone's so busy, and has all these other things that they want to do, which is part of the reason that I started the company, right?

It's hard to get time to think about your money, to rebalance, or tax manage it, or to do the things that you know you should be doing. Many of us just want to put our heads in the sand or do something, anything other than actually, tend to our finances.

To make it accessible to people, and to get people over the hump and actually, get started, I knew that we had to make it as easy as possible. We had to make it really frictionless. From sign up to funding, to setting up your goals, to coordinating across all of them, we've made it seamless, we've made it efficient, it takes less time than it does anywhere else, anybody can do it. And I think, that has been our secret of customer acquisition, is just making it so easy, that people feel comfortable, they can get it done in a span of a small amount of time, and they get their questions answered as they go.

Patrick: [00:04:40] I certainly agree that it's easy, I've gone through the process to see the user interface... Very sleek, very easy, straightforward. My bigger question though is, granted that once you're on betterment.com, yeah, it's easy. How do you get people to even know about you, to know that this is an option?

Jon: [00:04:57] We were lucky at the start, that we launched at a tech conference, and something like 20,000 people saw that initial presentation at TechCrunch. And 500 of the braver ones decided to sign up. Back then, we were totally an unknown quantity.

Patrick: [00:05:15] This is about eight years ago?

Jon: [00:05:16] This is 2010.

Patrick: [00:05:18] Oh, okay, 2010.

Jon: [00:05:19] And there we had... Great, we had 500 customers. And ever since that day, our biggest source of new customers has been referrals. The single, most popular way that people find out about us is word of mouth. And that has continued to scale with the business.

Lots of people hear about us from others... And hey, this is what I do. We've been fortunate to receive good press along the way. We write a lot, we write our own content, and publish it, and distribute it. We try to get our message out there, through our customers, and through other means as efficiently as we can.

Patrick: [00:05:54] Does the data on your clients, does it fit the narrative that this kind of Robo-advice, or automated investing solution is something popular with young people. If you had to, say, a weighted average age, or something like that, of your clients, how old are they?

Jon: [00:06:09] It is popular with young people, and they're flocking to it. Millennials love it. But our target customer is somebody who's maybe, age 45, or so. Somebody who's a mid-career professional with 250,000 to two million net worth. Somebody who's really facing the tough decisions about, am I prepared for retirement? Do I have enough saved to put my kids through college? Those kinds of big questions, those are the things that we think we're best suited to help advise on and solve for.

Patrick: [00:06:40] Would that be the average age of, let's say, large clients? Is it someone in mid-career, versus someone younger?

Jon: [00:06:46] That's right.

Patrick: [00:06:47] That is right.

Jon: [00:06:48] Yeah.

Patrick: [00:06:49] In the set-up process, the orientation has a list of, or at least did for me, when I went through it, and I'm 31 so, I'm sure it's different for different demographics, but a list of... I think they're called priorities or goals... Retirement, savings, general investing, et cetera. Is there one of those that has the lion share? If you were to bucket assets under management into the different priority buckets, is there one that takes most of it, or is it pretty well spread out?

Jon: [00:07:14] Retirement is by far, our most popular goal. It's the number one thing that people come to Betterment to save for. I think, partly, that's because that's just what... It's the most important thing in life that people have to save for, is retirement. You've got to save more for that than for anything else.

Number two is just general building wealth. I don't know when I'm going to use it, I might it use it up for a down payment on a house, I might save it and it'll put my kids through school. Number three is a safety net. I just want some funds that I set aside for today. But retirement is the top goal.

Starting Betterment

Patrick: [00:07:48] What's the... I guess, your and Betterment's combined origin story? What did you do prior to Betterment, and what was the threshold that you crossed, so to speak, to make the decision to go the entrepreneurial route and found the company?

Jon: [00:08:03] My background in college, I studied economics and psychology, and I was always really interested in the intersection of those fields, what we call behavioral economics, or the science of decision making, and how we help people make better decisions.

After college, leveraging that economics experience, I wound up in finance. I was consulting to banks, helping them with product management, risk management, investment portfolio policy, things like this. And I found through that experience of working with the banks, that I was learning a lot, and I loved it. But I find so often, they were building products without talking to their customers. It would be a six-month project, and we would never once talk to the customer to figure out what they wanted. We were just iterating on existing mortgage products or deposit products.

And in my own personal life, I was investing, and I had earned a CFA and I went to business school so, people were coming to me to ask about investing, and what do you do? And I'd say, well, I start here and I buy these mutual funds, and then you want to rebalance every once in a while, but people would glaze over pretty quickly. I realized it was complicated.

And I knew that the banks weren't going to solve that problem, I knew that the investment firms weren't going to solve that problem, because I'd been inside enough of them, to know that's just not how they thought about things. I wanted to start a company that focused first on the customer and built everything that, that customer wanted to solve that customer's problem.

That's when we talked about making it efficient to sign up. That was something that frustrated me, I'd open seven different brokerage accounts, and none of them was easy, none of them did exactly what I wanted, which was just manage my money for me. I wanted to automate the whole process and make it easy, and accessible.

Patrick: [00:09:43] Do you think of yourself as more a tech company or more of an investing company today?

Jon: [00:09:49] I definitely think of us as a tech company, that happens to be solving customer problems in investing.

Patrick: [00:09:55] Got it.

Jon: [00:09:56] We are engineers in our mindset, we are engineers, predominately in the makeup of the team. We've got about half the team is engineers or product managers, and a much smaller percentage of the team is investment professionals.

We've got... Some of the smartest people on the team are PhDs, and CFPs, and CFAs of finance, and they're building this advice, but we're building that, and automating it, and delivering it, and advising on it in a very efficient way to make those people really scale.

Betterment's Investment Portfolio Choices

Patrick: [00:10:33] Talk to me about the investment portfolio choices. The ETFs you've chosen, the partners you have, and how you chose... For example, I was actually, a bit surprised to see an emphasis on value in the U.S. portion of the equity portfolios. Given that, at least, prior to looking at that my impression was, most of you and your competitors have been pure, plain vanilla cap-weighted indexes.

Talk me through how you get, say, to a value tilt in the portfolio. What's that decision-making process?

Jon: [00:11:03] What we do is, we optimize a portfolio for our customers, and for each individual customer's needs based on their goals, based on their situation. If you're in New York, you can get New York uni-bonds, if you're in California, you can get California uni-bonds, and so on.

But at the top level, we think about, how do we most efficiently invest this customer's assets to reach their goals? And we have models that, say, if you're invested for the long term, you want a relatively aggressive portfolio that captures global equity, we have global asset allocations. We look at things like, what factors outperform in a long term? And values, and small-cap are some of those factors that tend to outperform just very slightly, over the very long term.

We have a slight tilt towards those factors in the portfolio. Within any given asset class, we'll choose the best ETFs in that asset class, from any provider, be it Vanguard, or Schwab, or Goldman, or whoever it might be. Looking at the expense ratio, looking at the liquidity of that fund, the tracking error, to minimize those things to optimize, and get the best net returns for the investors.

Patrick: [00:12:17] Is there someone here that has the title of chief investment officer?

Jon: [00:12:20] We have a managing director of investments who is that for us, and we have an investment advisory committee.

Patrick: [00:12:26] Got it. Could you foresee a world where you launched ETFs of your own? Where especially, as you continue to grow, I realized Vanguard's expense ratios are extremely reasonable, eight basis points, or whatever the case may be.

But as that, as Betterment continues to get bigger, do you think it will make sense for you to get into that part of the business ever?

Jon: [00:12:49] I won't say never because you never know how things go, but my sense of where the world is heading is that, ETFs are a great product, mutual funds were a great product before. ETFs are better because they're more efficient because they drive the cost down so low to access global diversification, it's almost free.

I mean, it's four basis points in some of these ETFs. We could not match that cost if we tried to manufacture our own ETF, and in fact, no one could. There's scale in those companies that are manufacturing those ETFs. It's so efficient, you've got to have so many assets to do it at that low cost.

We're really lucky to have those ETFs to be able to buy them at that low cost. ETFs, one of the great thing for customers about them is, you can buy any of them on the market, and so, there's competition in price in a way that there isn't in mutual funds. Mutual funds you go to one provider, it's hard to get funds from another provider if you're at that provider, you have to build separate pipes to do that, and so, there's less price competition.

ETFs are so cheap, because of the price competition. We're happy to take advantage of that, we don't see a lot of value in manufacturing our own ETFs, because they're already so cheap.

Patrick: [00:14:03] You mentioned small in value tilt, kind of classic, academic equity research behind those two factors. How often do you think that could or might change? There's other factors that are more recently popular. Some people now say small cap effect isn't really there, frankly, that's what we find. Something like momentum, or quality, and all these factors in the factor zoo that become very popular... Do you think that the tilts that you've introduced will change through time, or do you think it'll be pretty static?

Jon: [00:14:34] Our belief is, there is no one right way to diversify a portfolio. If you get 10 professors of finance or practitioners of finance in a room, each will have a slightly different view about factors you should use, or the tilts, or this, and that. And they'll all be equally right, and they'll all be equally wrong.

The truth of it is, when we make these kinds of predictions, we're looking at historical data. And as long as you're being relatively reasonable, and you have a globally diversified portfolio, a broadly diversified portfolio, you're doing about the best that you can with the information that's out there. You can optimize a little bit here and there, but somebody else might argue it the other way.

Our view is, we should diversify as much as possible. If you can demonstrate that over a long period of time, there's evidence that a certain strategy outperforms, then that's something that we want to make available to our customers.

Patrick: [00:15:30] Tell me a little bit about the non... What you see when you go to betterment.com, the straight to investor product. I've seen things about your foray into the 401(k) space, which I think, is a really interesting space. Partnerships with Uber, things like that, it seems like there are... I won't call them pivots, but I'll just call them extensions, right?

You're applying technology, and what you've learned into some new spaces. Maybe start with 401(k), tell me what you're doing there, what was wrong, what you're trying to make more efficient or fix, or improve upon for 401(k) investors.

Jon: [00:16:06] I think that 401(k) is so exciting. I mean, it is our biggest product launch in a year, and the Uber thing is an extension of that. I think that's a good word for it, it's making our service available to all of the Uber drivers, just to more people.

The 401(k) is so exciting because everyone's got one, right? You have to save in your retirement plan, it's so tax-advantaged that everyone has to do it. And uniformly, everyone says their 401(k) is terrible. I mean, you go around, and people complain about the options that they have. If it's not the investment options, it's the user experience and the difficulty of managing the account. There's complaints about every 401(k).

There's just been so little innovation in there, and we see that... A lot of people say, when you see these spaces where there hasn't been a lot of innovation, watch out, that's a tricky business to get into. I see that as a real sign of opportunity. I mean, it was the same thing when we go into investment management in the first place. People said, and you maybe had a similar experience... Boys, that's a tricky business, that's difficult, there's lots of entrenched players, this and that.

To me, that's a sign that there's a real opportunity. People are scared of going into it, that's probably, a pretty attractive business to go into.

Patrick: [00:17:23] You find the S&P 500 funds, and these things charging a percent, or percent and a half is a crazy, entrenched system. What is the process there? Is it a business-to-business sales process where you are... People on the Betterment team are going to institution X, Y, Z, and saying... Here's our offering, and swap it in. Is it that simple?

Jon: [00:17:44] It is going to the business, and competing head to head against Fidelity, or whoever the current 401(k) plan is, and winning that business.

Patrick: [00:17:54] I guess, now, and in the near term future, how does Betterment... If you aggregated up your revenues, what does the pie look like, in terms of, assets or revenues coming from these different sources? I know 401(k) is new, but I think, it's five or six billion that you manage now. How much of that is still the simple direct-to-consumer, versus some of these other things that you've started to work your way into?

Jon: [00:18:16] We don't really talk about the break down of assets. The retail business, the direct-to-consumer is still the lion share of our assets, it's still the biggest. And as we look toward the future, I think, the 401(k) business could be just as big. There's something like five trillion in retail investment accounts, there's something like seven trillion in IRAs, and another five trillion in 401(k)s for customers like our target customer.

And all of those are big, and interesting markets to us. And I don't know, in 10 years, which will be the largest, but I hope that we'll build big, exciting businesses in the future.

Patrick: [00:18:52] If I wanted to hire Betterment for my firm's 401(k), is the process that my employees would go through basically, the same as what I would go through as a straight investor?

Jon: [00:19:03] It's different just because it's a 401(k), the company is signing up rather than the individual. But once the company signs up, the process that the participants see, or the employees see is almost identical to the Betterment experience. You set your contribution levels, but you still get the same great web experience, the mobile experience, you could see all your accounts in one place. You get the account aggregation, you can your IRAs, and your taxable accounts right there next to your 401(k). That's one dashboard for all of your finances.

Patrick: [00:19:30] It would be... Right now, I can go in, and mess around, and make stupid, behavioral, tiny mistakes to my heart's content. And change percentages, and go to cash, and do all the dumb things that ruin everyone's returns. In your system, it's the same idea where you take some questionnaire, you have a risk level, and then the portfolio matches that, and it's not really, monkeyed with. Is that fair? Is that right?

Jon: [00:19:53] It's right. Now, you're the owner of the account-

Patrick: [00:19:55] Of course, I can go ratchet up and down my risk tolerance, right?

Jon: [00:19:58] Yes, you can. Now... And we try to help you make good decisions around that so, one of the things that we've done is, and you may have seen this in your account when you're about to make a transaction, would tell you what are the likely taxes that you'll pay on that transaction. We call it tax impact preview.

And when we show customers that information, 75% of those who have a costly transaction, decided not to go through with the trade. Which is incredible, because this is data that's always been there, no matter where you're investing, no one else has ever surfaced that information to customers in an automated in-app way.

Customers are making better decisions. I mean, reducing 75% means, not only did all those people not pay the tax, but they also didn't market tap and so, it has a really huge impact on their returns.

Patrick: [00:20:45] Tell me a little bit about the decision to gate people from trading during Brexit.

Jon: [00:20:50] Sure. I think that's broadly misunderstood, and I think, it's just one of those things, it's a hard topic for people to get their heads around. We always look at volatility, and we thoughtfully trade for our customers, we always pause trading at the open, because markets tend... And ETF markets especially, tend to be quite volatile at the open, and at the close so, we watch out for things like that.

And Brexit was one of those days when all the major banks paused trading, because they were worried about volatility. The same thing that we were worried about. Not levels of the market, doesn't matter if it's up or down, but just... Can you get a fair price? Will you get good execution on your trades?

And as soon as we were sure that we would good execution on our customers' orders, we executed everyone, and... We executed everyone that day faster by the way than any of our competitors actually, executed orders for customers. I'm not really sure why that's a story, but it's one of those things.

Patrick: [00:21:45] Yeah, fair enough. How do you think your clients will behave during, whenever we get our next real protracted bear market? One of the... Again, maybe this is a story that doesn't deserve to be one, but one of the common refrains is that the value of a financial advisor is now more, and more behavioral.

They used to pick stocks, now maybe, they pick an asset allocation, or pick managers, but above all else, they're earning their keep through behavior management. Do you think that that's valid, and what do you think will happen with your clients, relative to a well-managed, behaviorally managed client of a financial advisor during a bad, bear market?

Jon: [00:22:25] I think, advisors who talk about behavioral management are selling themselves short. I think, there's a lot more that a good advisor can do, understanding the clients' needs, understanding their goals, investing them appropriately given those things. It may feel like market-related behavioral management, but it generally isn't. In our research, and in our own customer base, customers aren't calling in because of what the market's doing, they're calling in because of life events, they're calling in because they have a question about... I got this inheritance, or I'm going through a divorce, and I want to know this and that will work, I'm thinking about setting up a joint account, I just got married... It's stuff like this that causes real financial questions and prompts the need for advice.

And we provide advice in those same situations where people need advisors. I mean, we've got advisors that we'll refer you to, who are partners on our Betterment for advisors platform. We've got our own financial planning experts here, who will help people get started, and get set up with an appropriate financial plan, and answer questions. And of course, there's the advice in the app, if you prefer self-service.

Betterment as a Technology Support Tool

Patrick: [00:23:29] What are the key tools, or ways that you're working with advisors? Selling not to 401(k)s but to other financial advisors a technology tool. What's the potential for growth there, what are the services that you offer?

Jon: [00:23:40] For financial advisors, we offer a way to automate many of the typical back-office processes that you might have to do, especially if you're a smaller advisor, and you don't have a whole team of people working on this stuff behind you.

Things like tax-loss harvesting, or tax coordination across a portfolio, or just rebalancing, and simple things like changing an asset allocation over time on a glide path. We do all of that for you so, that you can do things like set the appropriate goals for the client, and walk them through that plan. You can do things like estate planning, or create trusts, or whatever it is that's your specialty. And you can do that for more clients because you can leverage this across more clients, and spend more time talking to those clients and building the relationships.

It's a great service, because not only does it help you with your existing clients, but we'll refer clients to you. If clients have a question that suits your specialty, we will connect them to you, and we think, that's a valuable service.

Patrick: [00:24:41] You mentioned before that part of why you built this was, you were frustrated that you couldn't use a service like this. It was a need that you had that you wanted to fulfill. If I think about that same thing, I think, Betterment is a lot of it, but I would love if there was an ability to have more customization, where I get all the same stuff, but instead of S&P 500, I get to choose something else. Is that something that you are open to? Or do you think that that is a recipe for disaster? To give people more leeway to maybe, just keep making all the same mistakes they tend to.

Jon: [00:25:15] I'm excited to hear you say that because just last week we announced partnerships with Vanguard, and with Goldman Sachs. We now have a Vanguard set of portfolios, and GSAM, or Goldman Sachs Asset Management set of portfolios. The Vanguard is the classic, Vanguard, purely passive approach. By the way, the Betterment portfolio is a combination of maybe, four different ETF manufacturers that we think are best in each asset class.

The Vanguard one is their take on a globally diversified portfolio, the GSAM one is more actively managed, it's got some smart beta style approaches to it. Different customers and different advisors place value on those things, and again, if you think about 12 professionals in a room, all experts in the field, they'll have slightly different answers. These are slightly different answers that appeal to other people, and we think, that's appropriate. If that's your philosophy, and that's how you wan to manage your account, then your advisor can put you into those types of funds.

Patrick: [00:26:13] That's a broader set, what about maybe, the anarchy version of this, where anything that's exchange-listed, I have access to. I can go and say, okay, you got me at 37% VEA, I want that to be in some random ETF that I choose.

Jon: [00:26:29] There is more flexibility than that so, there's more than just those couple. I mean, I think about Cambria as an another advisor on the platform. Meb Faber is...

Patrick: [00:26:36] One of my good friends.

Jon: [00:26:37] Yeah. I mean, great guy, and great funds. And we continue to introduce more and more flexibility there. There is some limit to that, where if you just let people do anything, well, you're not providing much advice.

We're doing all of it through this lens of... There's an advisor intermediating it, and helping the client with those choices, or there are guard rails on it, and it works within our advice framework.

Patrick: [00:27:03] Tell me a little bit about how you run the business, personality-wise, how you think about experimentation, exploration, failure, things like that, in trying to come up with interesting lines of business, entire new products, improvements...

Jon: [00:27:19] Yeah. I mean, I risk sounding trite I feel like, in this, because I'll probably, tell you a lot of the same platitudes about yes, we want to fail fast, and test lots of things. I think, where... What we value most when I think of our core values, we talk all the time about efficiency.

Efficiency is core to what we do. We think we've built one of the most efficient financial services companies ever, and that's essential to us. We think about iteration, as a core value. And this idea of... It's not about failing fast, it's just trying things, and constantly improving.

You're never looking for perfect, you're just looking to make it better, and better with each iteration. We talk about building an institution, and by that I mean, building for the long term, right?

We may talk about... Here's what we're going to do this year, but we're doing it with an eye toward this vision of being our customer's center for financial relationship, of being one of the most impactful financial services companies of a generation, and we talk about empowerment.

I think, we empower our team to do great work, by giving them great information, transparency, and then letting them execute. And the final thing I'll say, the fifth value that we have is, the idea of pursuing happiness, that ultimately, this is what we're all pursuing. We want to make sure that our customers are delighted in the experience, that we're helping them to pursue their goals.

Patrick: [00:28:45] Is there any systematic process, or checklist, or set of rules around that exploration, and all those values? In thinking about, let's say, new areas of research or development, things that people want to explore, build, test. How is that... Is the system... Is there someone at the head of a... Let's call it, a research team that's deciding what gets resources, and who those resources are?

Jon: [00:29:12] I'm thinking of our investment and advice teams, and there's a number of really smart people on those teams, and you might know some of them from the website, or other podcasts, or things like this.

People like Lisa Wang, or Dan Egan, or Alex Benke, all of them, real experts in their respective areas whether it's investments, or quantitative investing, or advice, and they're each pushing experiments and learning in those areas.

Future of Robo-Advisors

Patrick: [00:29:41] Do you think it's fair to say that the 1.0 version of robo-advice, call it, question and answer risk tolerance matching portfolio, basic rebalancing tax lost, that kind of stuff, will be free as a commodity that will cost nothing in say, five years?

You have someone like Schwab, and I realize all the caveats around what they do, but still, the bottom line is that it's a zero percent fee, right? Even though, it's not really, because you're going into their ETFs, and there's cash, and there's other things.

But it seems like, just like fees across the asset management business, there will be downward fee pressure towards zero. What do you think about that?

Jon: [00:30:21] No, it won't be free, just like ETFs aren't free, just like a Schwab brokerage account isn't free, or a bank account isn't free. Nothing is free, because it costs money to provide these services. Will there be downward fee pressure? Maybe. I think, what's actually, mattered most to people is the value that they're getting.

And I think that services, I think, at Betterment for instance, continues every month to provide more, and more value, we keep doing more for our customers, and we're including it all in the same fee.

It's a little bit like Amazon Prime, you don't see the Prime fee dropping, but Amazon just keeps building in more, and more services for that same fee.

Patrick: [00:31:03] Do you have kids?

Jon: [00:31:04] Yeah, I've got two daughters. Two years old, and five months.

Patrick: [00:31:08] Almost exactly the same as me.

Jon: [00:31:10] Is that right?

Patrick: [00:31:10] Yeah, I've got two and half year old son, and a six month old daughter.

Jon: [00:31:15] Wow.

Patrick: [00:31:15] I'm curious, as a dad, and it's something I think about a lot, thinking forward to when maybe, they can... Are first allowed, or first able to put some money in an account, what do you think that will look like? That's a long time from now, and I realized that forecasting these sorts of things can be folly, but it's fun so, I'm going to ask anyway.

Jon: [00:31:33] It's almost easier to look 10 or 20 years out, in a way, than it is to look three or five years out. I know that in 10 or 20 years when my daughters graduate from college, they're not going to have to think about... How much should I put in my retirement accounts? Am I on track to retirement?

They're not going to have to think about... Should I open a ROTH, or a traditional IRA, because those are questions that there are answers to, and those answers will be accessible to everyone. It'll be like, just the same way that you can Google, and figure out what's the capital of Iowa.

Just as easy, the future of investment advice is that it is available to everyone, and it's automated for us in a way that we don't have to think about it. I sometimes make the comparison to the self-driving car, you don't know really, where it's going to be in three or five years. You know in the long term, that we're going to have self-driving cars, the technology will be there, and we're not going to have to worry about that thing.

You still have agency over where you're going, you'll still set the destination, and be able to drive if you want, but the technology will be so great, that we're not going to have to worry about it so much, and we can go on enjoying the things that we really want to do most in life.

Patrick: [00:32:45] What would you say is the most memorable day in Betterment's history?

Jon: [00:32:49] I often think back to the day that we launched at TechCrunch, and I talked about it at the top. At the time, I had never spoken in front of such a large audience. It was 20,000 people watching, and probably, 2000 people in the room.

I was really intimidating just by that large of a crowd and wasn't a natural public speaker. And I had memorized the entire speech that I gave, I would never do that now if I were doing it again. I would do it more off the cuff. But I had every word scripted, and I just remember pacing in the halls backstage for hours practicing, and going over it. I got it wrong... And all night the night before being up, and at the time, I had a Blackberry, it dates that.

But I was typing notes in there to edit the presentation at the last minute, and I had this record in the morning, of every 30 minutes, all night long, there was another note, I just wasn't sleeping. That was one of the most stressful, but also most wonderful days of my life, and it was... It felt like we'd made it when we launched, and we saw those first 500 customers on the platform.

Patrick: [00:33:56] Pretty incredible. Yeah, I'm sure that, that... That's a big audience, that's a big one. Yeah, 2000 people is big.

Jon: [00:34:01] It's funny too, because 500 customers, that's an average day now for signup trends. But that was, at the time ...

Patrick: [00:34:08] You feel those early ones more though.

Jon: [00:34:10] Yeah.

Patrick: [00:34:10] Yeah, that's great. What is the... Professionally, the kindest thing that anyone has ever done for you?

Jon: [00:34:17] Wow. Kindest thing, that's a good ask. So many people have been so generous to us along the way. And our partners with various firms and people have been so giving. It's hard for me to pick one person out. I don't know, I was thinking back to my days as a consultant and all the... I had so many great mentors.

I feel like I'd be leaving someone out if I singled another one out.

Patrick: [00:34:44] This you can single out, because it's a little more inanimate. If you had to come up with a couple life-changing books, what would those be?

Jon: [00:34:52] A recent one, and this is everybody's favorite at the moment, but I really enjoyed Sapiens. I think that's a great book.

Patrick: [00:34:58] That's awesome.

Jon: [00:34:59] I guess, everyone's reading that. To me, it builds on things that I've learned in other books like, Guns, Germs and Steel, the Jared Diamond book which is a great one. Or if I think back to college, one of my behavioral biology textbooks, Sex, Evolution, and Behavior, and others. I just learned a lot about people, and how we have evolved, and how we behave, and I think, all of that is really, really interesting. Fascinating to me.

I also... I've been recently enjoying books of entrepreneurs, and innovators, and one of my favorites is, maybe, less well-read is, the Vanderbilt biography.

Patrick: [00:35:36] Never heard that.

Jon: [00:35:36] It's called, The First Tycoon, and it is amazing. If you're interested in the history of business in America, Vanderbilt wrote... I mean, he is the history of business. He created the corporation, he created the first stock. If he didn't do it himself, he was there. It's a really interesting history.

Patrick: [00:35:55] Funny you mentioned, Sapiens, like any active manager, we have periods of bad underperformance, right? And we think that discipline is the key, and you get stressed out, right? I mean, as I'm sure you do when there's problems in the business, and there's a line in, Sapiens, that... I spent a lot of time in the woods, and I always repeat this to myself, because my favorite part about, Sapiens, is this concept that we're just telling ourselves stories.

We're creating fictions that then govern how we live, and there's a line in there that's something like... Millionaires sincerely believe the story of money and limited liability corporations.

Jon: [00:36:28] Yes.

Patrick: [00:36:28] And it's this little funny line and reminder. In some sense, it's all kind of a farce, right?

Jon: [00:36:33] Yep. It only exists, because we say it exists.

Patrick: [00:36:36] Exactly. And sometimes, you make fun of people for their stories, and their beliefs, but that's all we're doing, right? It's both... Makes you laugh, but also gives you some perspective about what's important on a day to day basis.

Jon: [00:36:48] I love it.

Patrick: [00:36:49] Speaking day to day, my pet passion is people's daily systems. Things that you feel are important, and this isn't just professional, this is just you as a person, you feel it's important to do, if not every day, most days.

Jon: [00:37:06] I mean, personally, it's important to read my daughter's bedtime story every day, I always try and get home for that.

Patrick: [00:37:13] Does she have any favorites?

Jon: [00:37:15] I like the classics, and so we love Dr. Seuss...

Patrick: [00:37:18] Yeah.

Jon: [00:37:19] And we spend a lot of time with those, she has so many books. Make Way For Ducklings, and all of these great...

Patrick: [00:37:25] That's a good one.

Jon: [00:37:25] ... books. Professionally, I'm pretty rigorous about prioritization, I keep a Google Doc of my top priorities, and I'm just executing through that. Otherwise, I get distracted by my inbox, or whatever is the most urgent thing that people are coming to me with, and that happens anyway, don't get me wrong.

It's hard to keep out that noise, but I just try to work through those things in priority order, and thereby, focus on whatever is most important.

Patrick: [00:37:52] To make sure you get home to see your daughter. We'll just ask one more question, and then wrap up. If there's anything that you want people to know about Betterment, that maybe, they don't already know, something new that's coming down the pipe, something that they should explore if they're a financial advisor, if they're an end investor, or if they're an institution... Any last, closing, asks of people out there?

Jon: [00:38:16] Asks would be if you think you know what a Robo-advisor is, or does, but you haven't tried it out, check it out. See for yourself. I think, that the breadth of services that we offer surprises people who maybe, checked in a couple of years ago, and we continued to expand, and innovate, and I still feel like we're just getting started.

And I know you share that feeling, there's so much more to do, there's so much more personalization, the kinds of things that you asked for. And that's all coming online now.

Patrick: [00:38:45] One of the problems with some of the podcasts like this, or conversations between people like us is, that we tend to be preaching to the choir, right?

Jon: [00:38:51] Right.

Patrick: [00:38:52] People listening will have already been converted so, I would just add on top of that to say, if you agree, which I bet most of you do, go find some 21 year old, and drag them to a computer, and help them figure this out, because it seems like that first step, just opening the damn thing, and getting that automation train rolling is the most important aspect so, please do that.

And with that we'll wrap up, and thanks again for spending the time with me.

Jon: [00:39:17] Thanks so much for having me, it was fun.

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