Speaker 1: This is Master's in Business with Barry Ridholts on Bloomberg Radio.
Speaker 1: This week on Masters in Business on Bloomberg Radio, I
Speaker 1: have a really interesting guest. His name is Jeff Magian Calda.
Speaker 1: He is the co founder and CEO of Financial Engines.
Speaker 1: A reader and a fan of some of our early
Speaker 1: earlier podcasts had written in and said, hey, you know
Speaker 1: you should interview you should interview this guy, Jeff Magian
Speaker 1: Calda of Financial Engines. Are you familiar with them? And
Speaker 1: I said yes, I actually am very familiar with them.
Speaker 1: Their public company, uh, they run a hundred plus billion
Speaker 1: dollars in assets, and Bill Sharp, the Nobel Laureate economist,
Speaker 1: is essentially uh, the founder and the guy who put
Speaker 1: the original idea together. And I said, I would love
Speaker 1: to interview Jeff. I don't know him. I don't know
Speaker 1: how to reach him. I don't know his his information
Speaker 1: is in public. How do I how do I find
Speaker 1: this guy? And the reader said, well, I know them.
Speaker 1: Let me make an introduction. And that was about six
Speaker 1: months ago. He Jeff lives in Palo Alto. He's on
Speaker 1: the West Coast. He's not in New York all that often.
Speaker 1: And when I pinned him in made the offer of Hey,
Speaker 1: you should come on the show. Here's who we've had on,
Speaker 1: here's what it's about. He said, Um, that would be interesting,
Speaker 1: but I'm I'm rarely in New York. Two weeks ago,
Speaker 1: I said, Hey, any chance you're in New York anytime soon.
Speaker 1: He's like, yeah, I'm in New York on on the
Speaker 1: week of the of the first of the month. Let's
Speaker 1: let's see what we can schedule. So here we are.
Speaker 1: It was really a fascinating conversation and I think you'll
Speaker 1: really enjoy it. So, with no further ado, here is
Speaker 1: my conversation with Jeff Magian Calda, co founder and former
Speaker 1: CEO of Financial Engines. This is Masters in Business with
Speaker 1: Barry Ridholts on Bloomberg Radio. This week on Masters in
Speaker 1: Business on Bloomberg Radio, I have Jeff maggian Calda. He
Speaker 1: is the founding CEO of Financial Engines. Now, you, as
Speaker 1: a lay person, may not have heard of Financial Engines,
Speaker 1: but it's really an interesting company with a fascinating history. Uh.
Speaker 1: They are currently the largest r I A in the country,
Speaker 1: managing over a hundred billion dollars in assets. They were
Speaker 1: founded by Nobel Laureate Bill Sharp. Uh, we'll talk a
Speaker 1: little bit about Bill later. And Jeff was tapped by
Speaker 1: the three leading investors of the firm, literally right out
Speaker 1: of his Stanford NBA program to take what was then
Speaker 1: a free website offering suggestions for asset allocation models and
Speaker 1: turn it into the powerhouse that it's become today. Jeff,
Speaker 1: welcome to Bloomberg. Thank you glad to be here. So
Speaker 1: let's let's talk a little bit about that history, because
Speaker 1: it's so it's so amazing. Bill Sharp essentially created a
Speaker 1: free website. Hey, I developed the capital asset pricing model,
Speaker 1: eventually winning the Nobel Price for that. And here's the
Speaker 1: output of that work. You could play with this for
Speaker 1: your retirement accounts. It's free on the site. How did
Speaker 1: that morph into what's now with publicly traded company? Well so,
Speaker 1: so Bill, he's he's a genius and he is very
Speaker 1: well meaning. He's always wanted to use the work he's
Speaker 1: done to help people. Um. He has also been a
Speaker 1: total gear head and sort of hacker since the early days.
Speaker 1: He wrote one of the first compilers for the Basic
Speaker 1: programming language back in the day, and so he had
Speaker 1: his own son's sparkstation as which is his own web server.
Speaker 1: At the time, this is the beginning of the internet.
Speaker 1: No one, no one had personal computers in right, and
Speaker 1: he has like a note on the darknet or something
Speaker 1: and uh, and so he thought, you know what, I
Speaker 1: can write some simulation software and some some optimizers and
Speaker 1: I can make this available because I mean he saw
Speaker 1: early on that the demographics of the baby boomers, uh,
Speaker 1: and the shift away from defined benefit plans towards four
Speaker 1: O one case was going to mean a lot of
Speaker 1: people had a new responsibility to invest, but but really
Speaker 1: didn't get access to very good advice, so didn't have
Speaker 1: the skills, didn't have access to people who can help
Speaker 1: them in so many for one case, are under a
Speaker 1: hundred thousand dollars. Nobody is really going to take that
Speaker 1: as a as a client. That just doesn't work. So
Speaker 1: so what did he do with that? So he started
Speaker 1: a website and back in the days where they used
Speaker 1: to index popularity, it was actually a pretty popular site.
Speaker 1: But you know, among the people using the internet the time,
Speaker 1: which were kind of the more actively technically, it was
Speaker 1: much more of a crowd. It was very much else.
Speaker 1: So his buddy Joe grin Fest, lawyer at the law school,
Speaker 1: former SEC commissioner. Um. He said, Bill, if you really
Speaker 1: want to make a difference, you gotta start a company.
Speaker 1: Bill was not really interested in starting a company. He's like, look,
Speaker 1: I want to do something good for the world. I
Speaker 1: don't really want to charge money for it. And Joe said,
Speaker 1: if you want people to really promote the idea and
Speaker 1: create a good product that people can really use, you
Speaker 1: got to start a company. So so you're saying Bill Sharp,
Speaker 1: noble laureate, kind of a wonky academic. Is that the description?
Speaker 1: Why does that not surprise? Yeah? Yeah he he uh
Speaker 1: his his his his pursuit of sort of the intellectual breakthroughs,
Speaker 1: and this pursuit of doing good in the world definitely
Speaker 1: trumps his pursuit for financial gain. Not not uncommon. You
Speaker 1: look at people like Bob Schiller or Jeremy Siegel, or
Speaker 1: when when I spoke with Siegel, it was he was
Speaker 1: amazed that he made any money because that wasn't what
Speaker 1: he ever expected. He expected to just toil away and
Speaker 1: academic obscurity and have a satisfying life. It sounds like
Speaker 1: Bill is Sharp is similar very much so. So so
Speaker 1: you're tapped. You're literally twenty seven years old, just graduating, Uh,
Speaker 1: Stanford NBA program. What's it like when a couple of
Speaker 1: heavy hitters like Sharp and Grunfest and who's the third
Speaker 1: Craig Johnson. Craig Johnson also not no lightweight. Um says, hey, kid, come,
Speaker 1: we got an idea for you. How do you how
Speaker 1: do you respond to that? Well? So, so I was
Speaker 1: at the time, I had I had worked for McKinsey
Speaker 1: over the summer. I had taken a full time job.
Speaker 1: So I my wife had spent the signing bonus on
Speaker 1: new furniture, and we had two kids. We were weigh
Speaker 1: in debt and the big sum of money comes and
Speaker 1: what did the economists say when you get a windfall,
Speaker 1: the propensity to spend is like one you like, just
Speaker 1: spend it? And uh. So she did and um and
Speaker 1: the account and uh And I had been approached by
Speaker 1: our professor at the business school, h. Robert Bergelman. He
Speaker 1: at the time, I think he still teaches, And he
Speaker 1: taught a class with Andy Grove, who was at the
Speaker 1: time the CEO of Intel on kind of strategy and
Speaker 1: information technology. And they had no cases on the internet.
Speaker 1: And so as an undergrad. I was an English and
Speaker 1: economics major, so I knew about statistics and quant stuff.
Speaker 1: I knew how to write, and they said, would you
Speaker 1: be a case writer and write a bunch of cases
Speaker 1: on the internet. So I said that would be fun
Speaker 1: to do. I called McKensy. I said, well, you know,
Speaker 1: I'll becoming in January. And then it was during the
Speaker 1: time that I was writing cases that I got this
Speaker 1: call from Joe grin Fast, who I had worked with
Speaker 1: previously at at a litigation consulting firm. And I was like,
Speaker 1: Bill Sharp was my hero. It was amazing because when
Speaker 1: I graduated in he had received the Nobel Prize the
Speaker 1: year before, and he was my graduation speaker. And I
Speaker 1: just thought this guy was the most amazing guy in
Speaker 1: the world. And I love the elegance of his model.
Speaker 1: I thought his overall philosophies. I totally bought into it.
Speaker 1: You know, generally speaking, he can't beat the market, so
Speaker 1: go for a low costs. I thought that was great.
Speaker 1: I think by the way, that's managed to catch on
Speaker 1: quite a bit. It seems to have pretty well among
Speaker 1: the the investing public. So so so I was really
Speaker 1: kind of stuck, and I was like, well, I'm kind
Speaker 1: of tied up right now. And and I talked to
Speaker 1: my wife, who's you know, PhD and evolutionary biology. She's like, Jeff,
Speaker 1: you have to do this. This is a once in
Speaker 1: a lifetime thing. You have to do this. We'll figure
Speaker 1: out the the money and I we'll figure that stuff
Speaker 1: out later. And uh and so I'll like, you're totally right.
Speaker 1: I mean, how often do you get to work not
Speaker 1: only with the Nobel prisminer, but with like a hero
Speaker 1: of yours? Uh And and so I sort of took
Speaker 1: the plunge, not having any idea what I was gonna do.
Speaker 1: I'm Barry Ridhults. You're listening to Masters in Business on
Speaker 1: Bloomberg Radio. My guest this week Jeff Magian Calda. He
Speaker 1: is the co founder and former CEO of Financial Engines,
Speaker 1: the country's largest r I A, which manages over a
Speaker 1: hundred billion dollars in four one K money. And I
Speaker 1: want to talk about how you guys moved into that space.
Speaker 1: But first, there's this great little story about you playing
Speaker 1: Monopoly with your wife and you decided to let's run
Speaker 1: a million simulations of Monopoly to figure out what the
Speaker 1: ideal move is for each property and what have you.
Speaker 1: Essentially high frequency trading the monopoly board, a little bit
Speaker 1: of cheating, and your wife, instead of being angry, was actually, oh,
Speaker 1: you should do something. Yeah, how did that about? So?
Speaker 1: So so Monopoly is a is a really fun game.
Speaker 1: It's mostly about trading, but but a lot of it
Speaker 1: has to do with the probability is landing on certain spaces,
Speaker 1: and so you know, it's it's a game with pretty
Speaker 1: simple rules, right, you roll the dice, you roll doubles,
Speaker 1: you go again. But if you do it three times
Speaker 1: and you go to jail and then you pull certain
Speaker 1: cards advanced to St Charles, blah blah blah blah. They're
Speaker 1: very simple rules, but it's really hard to get a
Speaker 1: distribution of the likelihood that you land on any property.
Speaker 1: And so I was like, well, look, the value of
Speaker 1: a property is going to be based on the probability
Speaker 1: that you land on it, plus the rents that you
Speaker 1: get of something if you have a house or whatever,
Speaker 1: and then you have to look at the cost of
Speaker 1: building those houses. But I just want to know what's
Speaker 1: the probability of landing on every space on on the
Speaker 1: on the on the board and turns out what computers
Speaker 1: is pretty if you have a game with simple rules,
Speaker 1: even if it's a very complex set of distributions. At
Speaker 1: the end, you just play the game millions of times
Speaker 1: and you just see like how often did you land there?
Speaker 1: So my wife didn't know I was doing in this.
Speaker 1: I had actually create a little cheat sheet and uh,
Speaker 1: I was using it to kind of assess the odds
Speaker 1: that I buy a proper trade of proper collections of properties.
Speaker 1: And it was basically just a sheet that showed the
Speaker 1: probably beloy of landing on any space. And it turns
Speaker 1: out certain spaces are way more likely to be landed
Speaker 1: on than other space. So what are the greens the oranges?
Speaker 1: What are the greens? Are bad? Greens are bad and
Speaker 1: the oranges best the best. Yeah, because people go to
Speaker 1: jail all the time, and if you play they come around.
Speaker 1: That's right, you end up in jail. You've got ten
Speaker 1: spots free parking if you play crafts what number comes
Speaker 1: up the most? Seven? Seven? Right, Well, the other two
Speaker 1: are going to be six and eight, and those are
Speaker 1: the oranges. So and that basically gets there. Going to
Speaker 1: jail a lot and rolling anything six to nine is
Speaker 1: pretty good for the oranges. So so how did that
Speaker 1: then lead to the idea of, hey, we could run
Speaker 1: analyzes and come up with the best probability for people's
Speaker 1: retirement portfolios as opposed to letting them just randomly pick
Speaker 1: whatever fun manager is hot that much. Well, so it
Speaker 1: only helped me get the job by convincing Bill Sharp
Speaker 1: I knew something about money Carlo simulation. He had been
Speaker 1: doing this for the defined benefit pension managers for a
Speaker 1: long time because they're trying to figure out on the
Speaker 1: pension side, how much do we have to fund these
Speaker 1: pensions and how should we invest to have you know,
Speaker 1: certain probability of being able to pay these pensions? When
Speaker 1: are our people all looking for the greatest return with
Speaker 1: the least amount of risk and just end up in
Speaker 1: the fat part of that car Well, so so that's
Speaker 1: kind of how you set your portfolio. But then you
Speaker 1: even have to say how much money are we likely
Speaker 1: to have thirty years from now if we invested a
Speaker 1: certain way, And that's really about simulating, well, what if
Speaker 1: the markets do well, what if they too poorly? What
Speaker 1: if interest rates are high or lower? Inflation does this
Speaker 1: or that, or you know the spread between you know,
Speaker 1: a small cap and and MidCap stocks varies. Sharp described
Speaker 1: it as a thirty variable dimensional analysis. Yeah, and so
Speaker 1: we would. So so he was already doing this for
Speaker 1: pension funds to kind of get a sense for like
Speaker 1: how much is this pension gonna be worth twenty years
Speaker 1: from now, and he wanted to do the same things
Speaker 1: for individual to answer the bay is a question like
Speaker 1: are you going to have enough money? Well, it's an
Speaker 1: easy question. It's a pretty hard answer because you don't
Speaker 1: know what the future holds. It doesn't mean you throw
Speaker 1: up your hands you say I have I have absolutely
Speaker 1: no idea. It's a little bit like predicting other things
Speaker 1: that are stochastic or uncertain, where you say, we don't
Speaker 1: have a perfect idea, but we could put a range
Speaker 1: around it. You know, if you're all in in very
Speaker 1: very vaulatile stocks, a couple of stocks, it's gonna be
Speaker 1: a very wide range that probably goes down to almost
Speaker 1: zero in a bankruptcy situation. If you're in money market
Speaker 1: funds of treasuries, it's gonna be a very tight range.
Speaker 1: And anywhere in between you're gonna have a higher sort
Speaker 1: of expected outcome, but a bigger range depending on how
Speaker 1: much risk you having that porfile. So the monopoly thing
Speaker 1: was was was useful because when Bill Sharp said, hey,
Speaker 1: you know, we're gonna be doing a lot of simulation
Speaker 1: and a lot of optimization. What do you know about that?
Speaker 1: I said, well, you have already kind of used it
Speaker 1: to my game previously in life. Although you know, my
Speaker 1: my wife didn't didn't take kindly when she found out
Speaker 1: that cheat sheet. That's that's great. So so now I'm
Speaker 1: trying to follow the path of this. So this is
Speaker 1: a free website. And then of eventually Grundfest and Johnson say, Bill,
Speaker 1: what are you doing? This is a there's a business here.
Speaker 1: You don't have to do the unpleasant. You don't have
Speaker 1: to do the firing and hiring. Let's get a guy
Speaker 1: who's never done that to do right. But here your
Speaker 1: your chairman emeritus. You're the nobel laureate. You're gonna be.
Speaker 1: We'll trot you out when we have big clients that
Speaker 1: we want to razzle dazzle, and I'm based on your
Speaker 1: client list, so you don't. Essentially, it's not like individuals
Speaker 1: come to financial engines and say take my four oh
Speaker 1: one K. It's companies like Ford and other giant employers
Speaker 1: who say, we're not gonna play this crazy game. We're
Speaker 1: just gonna do this simply and and crank uh crank
Speaker 1: out one of Bill's simulations, and we'll use that for
Speaker 1: or a couple of options for our clients. So so,
Speaker 1: but how do you get from A to B? How
Speaker 1: do you get from a free website run by a
Speaker 1: quirky Nobel laureate to all right, this is a real
Speaker 1: business with a hundred billion in assets, a public company
Speaker 1: and generating drives and millions of dollars on revenue. If
Speaker 1: I had boiled down to kind of one thing, I
Speaker 1: would say hardcore learning and iteration, which which sounds a
Speaker 1: lot like failure. And you know, if we had given up,
Speaker 1: it would have been failure. But it was kind of
Speaker 1: close to failure a lot of times. So what were
Speaker 1: the first few What what what are the first few versions
Speaker 1: of this look like? So the first thing we tried
Speaker 1: to do is and I thought it was a pretty
Speaker 1: decent idea. The Department of labor At just issues from
Speaker 1: regulations saying that if an employer hired someone who did
Speaker 1: not give specific recommendations, just asset allocation advice, it wouldn't
Speaker 1: be advice. It would stay on this fiduciary safe harbor
Speaker 1: and they could do without worried being worried that would
Speaker 1: be constituting advice. And and our original thought was, let's
Speaker 1: be an education company. Let's actually just just give education.
Speaker 1: Let's not be an advisor, let's not give advice. And
Speaker 1: what kind of sell as an employee benefit? Kind of
Speaker 1: financial literacy? And so I read up a big business plan.
Speaker 1: This is my big document. I'm excited to go raise money.
Speaker 1: I go out to walk to uh To to sand
Speaker 1: Hill Road and all the vcs and they're like, this
Speaker 1: is a stupid idea, and we're not going to fund
Speaker 1: an education company. Uh. They didn't really say what do
Speaker 1: They're just like, you know, tell me when you get
Speaker 1: a better idea. And a couple of guys at work,
Speaker 1: and there are only five of us, but two of
Speaker 1: the guys are like, yeah, this is so stupid. We
Speaker 1: shouldn't be just doing education. We should become an investment visor,
Speaker 1: because that's how you can charge of some percentage and
Speaker 1: get paid on the assets under management and surreptitiously work
Speaker 1: the education. Yes, and and and what we what we
Speaker 1: really did have a sense for And so I agree
Speaker 1: with them. I didn't want to kind of take on
Speaker 1: that headache of becoming an advisor, but the fact that
Speaker 1: the matters most people want to know what to do
Speaker 1: and kind of hey, you're getting warmer, you're getting colder.
Speaker 1: Study a little bit of this now, they're like, just
Speaker 1: tell me what I should do, what fund should I buy?
Speaker 1: What find should I sell? In order to really do
Speaker 1: a good job with that, you gotta be an investment visor.
Speaker 1: I'm Barry Rihults. You're listening to Masters in Business on
Speaker 1: Bloomberg Radio. My guest this week is co founder and
Speaker 1: former CEO Jeff Agian, called of Financial Engines. They are
Speaker 1: the largest r i A in the United States, managing
Speaker 1: over a hundred billion dollars in four oh one k money.
Speaker 1: And I've described, by the way, whenever I described financial
Speaker 1: engines to people, because so many people have never heard
Speaker 1: of you. You're not selling into the retail market. You
Speaker 1: sell essentially into corporate and institutional markets. Financial Engines, I've
Speaker 1: I've never heard of them. Well, really, they were the
Speaker 1: original robo advisor. They started doing this before one case
Speaker 1: we started, so it's almost twenty years twenty years old,
Speaker 1: and essentially you were using software and algorithms to drive
Speaker 1: investing decisions, long before all the cool kids started doing
Speaker 1: Oh yeah, I mean there was no JavaScript. I mean
Speaker 1: web servers were brand new job and didn't even exist yet,
Speaker 1: and so there was a whole different world out there.
Speaker 1: And when we first did this, you it took about
Speaker 1: fifteen minutes to download our software. Uh when Java finally
Speaker 1: came out and and people were using dial up modems.
Speaker 1: So it's kind of a problem that the technology really
Speaker 1: wasn't there yet when we were starting, not not a
Speaker 1: whole lot of graphic interface and a lot of interesting
Speaker 1: web flash before Java, before Flash before all the things
Speaker 1: we take for granted on the internet. Yeah. Yeah, So
Speaker 1: let's talk about I don't even know if I could
Speaker 1: call them your competitors, although they have talked about moving
Speaker 1: into the four O one case based. There are a
Speaker 1: dozen or so companies, the probably the two best known
Speaker 1: or wealth Fronts and Betterment. What are these other robo
Speaker 1: advisors doing right? What are they getting wrong? It's hard
Speaker 1: to say for sure. I mean, I clearly have a
Speaker 1: lot of biases because I've been in the industry for
Speaker 1: a long time, and obviously we we compete, um, but
Speaker 1: you know what, I what I think they're doing right
Speaker 1: is that they recognized a really big need, which is
Speaker 1: that more and more Americans do need help. And there's
Speaker 1: a lot of inefficiency ease, and a lot of conflicts
Speaker 1: and a lot of poor quality when it comes to
Speaker 1: individual Americans getting advice, and so I think there is
Speaker 1: a big need. I think that they are also kind
Speaker 1: of carving up different sorts of spaces. Well Front is
Speaker 1: going after kind of the the younger millennial, generally tech
Speaker 1: person who made a lot of money. They're focused a
Speaker 1: lot on tax loss harvesting, betterment, has a few different
Speaker 1: distribution channels, including going through r A s not through
Speaker 1: corporate are big thing. You know has been going through
Speaker 1: our A. So we last time and I'm not the
Speaker 1: company anymore, so I just kind of read the press
Speaker 1: releases and the earnings reports when they come out. But
Speaker 1: company now has more than a trillion dollars in four
Speaker 1: win K plans that have hired them and managing over
Speaker 1: a hundred and fifteen billion in a u M, so
Speaker 1: that that's a pretty big company. It's the largest independent
Speaker 1: area in the country and a big part of the
Speaker 1: success has been making it really easy and safe for
Speaker 1: an individual to say, yeah, I want you to be
Speaker 1: my advisor. And by going through the workplace, we get
Speaker 1: the trusted introduction from the from the company, keeps acquisition
Speaker 1: costs low and because we manage your four O OK,
Speaker 1: you don't need to sign any paperwork, you don't need
Speaker 1: to move any money, you don't need to figure any
Speaker 1: it's just like, yeah, please do this. I think without
Speaker 1: that trust to introduction and not having to move money,
Speaker 1: it gets very difficult. So I know our unit economics
Speaker 1: quite well, and they were very they were very compelling.
Speaker 1: It's a very profitable company. I think it would be
Speaker 1: really really difficult to do this without a some sort
Speaker 1: of secret sauce on the acquisition side, because acquisition costs
Speaker 1: are huge to say the least. So let's ask the
Speaker 1: flip side of of the question. So, what's the role
Speaker 1: of a live human in providing financial advice or financial
Speaker 1: planning either as an adjunct to or above and beyond
Speaker 1: the al GOO driven allocation strategy? And so so this
Speaker 1: is something that took us a long time to figure out.
Speaker 1: We started as an education software company that didn't work
Speaker 1: at all. Then we went to advice, but we the
Speaker 1: tagline was your personal online advice. But this was your
Speaker 1: personal online advisor. Our whole thing was we didn't want
Speaker 1: to have our own advisors. They cost too much. You know.
Speaker 1: We talked to customers and they said, it's great thing
Speaker 1: you're giving me a tool. I don't know how to
Speaker 1: use the tool. I think I'm gonna misuse the tool.
Speaker 1: So he said, well, what if there was an advisor
Speaker 1: you could talk to anytime you want who could actually
Speaker 1: manage your portfolio for you. Now, actually, what we weren't
Speaker 1: saying is it's all the same technology. It's a it's
Speaker 1: an advisor center with Series sixty five license advisors out
Speaker 1: in Phoenix. Their their financial enges employees. But they're just
Speaker 1: basically using our software in a call center, but talking
Speaker 1: to people and making sure that those people feel comfortable
Speaker 1: about the decisions that they're making. It's the behavioral side,
Speaker 1: not the investing, absolutely is. So what we found is
Speaker 1: that at least for baby boomers, where there's a lot
Speaker 1: of the five trillions and four oh win K accounts
Speaker 1: are with people who are older than fifty. I think
Speaker 1: last time I checked it was sixty seven percent of
Speaker 1: the four K asks are held by people fifty and older.
Speaker 1: Give me that number again, sixty seven of four oh
Speaker 1: one k assets. Sure, that would make sense. You warned more.
Speaker 1: As you get older, you can contribute more, absolutely, and
Speaker 1: you start thinking about it more because you're getting close
Speaker 1: to retirement. So when you've saved all your life and
Speaker 1: now the question is how you gonna invest that money,
Speaker 1: you really want to make sure that you're not screwing
Speaker 1: something up, and at least for that age, cohort talking
Speaker 1: to someone to make sure, like, you know what I'm
Speaker 1: saying right, you know what you got the data right?
Speaker 1: I want to make sure I understand what you're doing.
Speaker 1: There's just an interest in knowing, alright, someone is accountable
Speaker 1: and they know how to use these these tools in
Speaker 1: this technology. So I'm not going to get it wrong.
Speaker 1: You're listening to Masters and Business on Bloomberg Radio. My
Speaker 1: special guest this week is former CEO and co founder
Speaker 1: of Financial Engines Jeff Nagian Calda. And you got to
Speaker 1: work with a hero of yours. You graduate Stanford, the
Speaker 1: NBA program, what you was at undergrad was alright, so
Speaker 1: your Stanford undergrad and then you stay so you really
Speaker 1: like that party. I like and I have two of
Speaker 1: my three daughters go there. Uh and my wife got
Speaker 1: a couple of degrees and that's where we met. So
Speaker 1: so Stanford has been uh home away from home for
Speaker 1: you basically, so you should talk to them about their
Speaker 1: in down terrible and could use your your assistance. Um.
Speaker 1: But you go to your graduation for your m b A.
Speaker 1: And the commencement speaker is Bill Sharp, Nobel Laureate, and
Speaker 1: you're entranced. What was it like after that experience to
Speaker 1: get a phone call essentially from Bill Sharp? Hey, kid,
Speaker 1: I got ah, I have an idea. I'd like to
Speaker 1: have you helped me build this into a business. Yeah. Well,
Speaker 1: so he spoke at my undergrad graduation. I was an
Speaker 1: econ major, but I always thought that he was just
Speaker 1: a magnificent mind. I was like, this guy is super smart,
Speaker 1: and I happened to think he could that he was
Speaker 1: saying a lot of things that could help people. I
Speaker 1: didn't ever meet him until he interviewed me, and I
Speaker 1: was shaking up my boots. I mean, I'm like, I'm
Speaker 1: not worthy, but he was really down to earth. It
Speaker 1: was interesting. He wanted to make sure that this is
Speaker 1: that says a lot about Bill Sharp. He quickly said,
Speaker 1: you know, are you smart enough in terms of the
Speaker 1: economic stuff, But he really wanted to do you know
Speaker 1: how to program? I'm like yeah, and and when real
Speaker 1: programming scripts like you could really you could like like
Speaker 1: like real programming now literally he wrote in C plus
Speaker 1: plus and he wrote an assembly, so he this guy
Speaker 1: is like a really serious old school so I couldn't
Speaker 1: do that. But I was mostly I was mostly programming
Speaker 1: sort of Pascal and kind of lightweight stuff. I mean,
Speaker 1: I'm not really a hacker, but I programmed enough stuff
Speaker 1: to kind of know the basics. And then he said,
Speaker 1: what do you know about graphic arts? And I go, uh, well,
Speaker 1: I used to have a graphic arts business. Because I
Speaker 1: used to I learned how to use it Adobe Illustrator
Speaker 1: back in the back. Still it's still around. And he said,
Speaker 1: you know, one of the most important things about this
Speaker 1: business is going to be figuring out how to communicate
Speaker 1: these principles to people so they can understand it. And
Speaker 1: if you if you're not able to communicate, you know
Speaker 1: we're gonna have it. It's gonna be tough. So for him,
Speaker 1: it was kind of checked the box on the on
Speaker 1: the math and economics, but really Let's make sure we
Speaker 1: get someone who can solve the hard problem, which is
Speaker 1: helping people understand it, making it simple, easy to understand
Speaker 1: visual graphics. Are you know a picture does health is
Speaker 1: worth a thousand words? And if you can communicate this dry,
Speaker 1: complicated stuff in a way that makes sense to people,
Speaker 1: you're two thirds of the way that. He was also
Speaker 1: really clear that Jeff, I don't want to run this business.
Speaker 1: You're going to run it, which means you're gonna deal
Speaker 1: with the headaches. He didn't say, I want to spend
Speaker 1: all the time doing the research, and he was involved
Speaker 1: every day in actually writing the early code, helping us
Speaker 1: with the algorithms. It was amazing, It was amazing, he was.
Speaker 1: Was it a little surreal working with that close with
Speaker 1: someone like him? Tell you what's awesome? Because you're trying
Speaker 1: to recruit a team of finance people and you're like,
Speaker 1: how'd you like to sit next to Bill Sharp working
Speaker 1: on something that we think is gonna change the world.
Speaker 1: I mean, it wasn't hard to hire talent when you've
Speaker 1: got Bill Sharp there. So let me jump ahead to
Speaker 1: a question, because there was a quote of yours that
Speaker 1: I really liked, and I'm gonna paraphrase it. You mentioned,
Speaker 1: you know, when you're building a company, there are three
Speaker 1: key elements that a CEO has to focus on, strategy, culture,
Speaker 1: and hires, and you just basically, uh, touched on on
Speaker 1: the higher side. So before we get the strategy and culture.
Speaker 1: So you're you're recruiting from a pool of Stanford and
Speaker 1: other top schools. You're right there in Silicon Valley. How
Speaker 1: difficult was it finding the right people and then convincing
Speaker 1: them to come sit with you and Bill? I mean, honestly,
Speaker 1: it wasn't that hard. I didn't think it was. I mean,
Speaker 1: I'd like to say it was really hard. Nowadays it's
Speaker 1: much harder. There's there's so much money and people. I
Speaker 1: think we're realizing the value of talent, so much competition,
Speaker 1: and there's a huge competitionists. But the kinds of Bill
Speaker 1: here we're sitting in Bloomberg, this is testament to how
Speaker 1: you have to compete for talent. I mean, you have
Speaker 1: to have really compelling reasons for people to join your company.
Speaker 1: You asked me about the food segment. When you walked
Speaker 1: in this food space on the sixth floor, you want
Speaker 1: to hire somebody, they walk by, they're like, Wow, this
Speaker 1: place is for real. It's just one of those parks
Speaker 1: that people see and say, oh, I think I could
Speaker 1: play with you guys exactly back in the day though, right,
Speaker 1: So I had raised a lot of money. That was good.
Speaker 1: The Internet was really just ramping up. I think Netscape
Speaker 1: went public, it was right at the beginning, and so
Speaker 1: people were hungry for this, and we had the VC money,
Speaker 1: we had a big idea, we had a Nobel Prize winner.
Speaker 1: We were in Palo Alto, and you wouldn't have been
Speaker 1: that difficult to do it was. It wasn't hard to
Speaker 1: get the early team on board. And so now let's
Speaker 1: talk about the other two elements you mentioned, strategy and culture. Yeah.
Speaker 1: Culture is the one that I find fascinating because it's
Speaker 1: very easy to have a culture go astray. It's very
Speaker 1: easy to lose sight on those core values. How do
Speaker 1: you focus on building a culture at a company? Yeah, well,
Speaker 1: i'd say I'd say that it starts with the leadership team.
Speaker 1: I mean, it's easier if you're just like, well, what's
Speaker 1: the personality of the leaders because it's if there's a
Speaker 1: big mismatch between what you want the culture to be
Speaker 1: in the in the way they actually act and the
Speaker 1: leadership team acts, then it's gonna ben it's not authentic
Speaker 1: that people will be like, yeah, that's really that's our culture.
Speaker 1: Uh huh um. So a lot of it really comes
Speaker 1: the culture. So the way I usually think about it is,
Speaker 1: you know, first of all, get the strategy right and
Speaker 1: and the strategy is really about where do you choose
Speaker 1: to focus your energy in a way that you can
Speaker 1: win a big opportunity. And if you win, you can
Speaker 1: keep winning because you have some advantage that that other
Speaker 1: people can't compete away. And I think if you don't,
Speaker 1: if you don't pick your battles properly, you can execut
Speaker 1: incredibly well. You have a great team, but you just
Speaker 1: want to have a valuable business, and it's winning the
Speaker 1: business that doesn't matter isn't as important as winning the
Speaker 1: business that does matter, right, And I hear a lot
Speaker 1: of people say, oh, you know, execution beat strategy every day. Well,
Speaker 1: I would say, well, it kind of depends. If you
Speaker 1: have a good strategy, then you're totally right. But if
Speaker 1: you're really executing well on a poor strategy, it doesn't
Speaker 1: really make much difference. In my view. Is no, you
Speaker 1: got to get the strategy right, and yes, that's definitely
Speaker 1: not all you got to execute. And how do you
Speaker 1: execute well? First you get the leadership team in place,
Speaker 1: because if if you're as a CEO of your people
Speaker 1: aren't good, you can't go and hire everybody else. I mean,
Speaker 1: you've got to really get the talent and the tone
Speaker 1: from the top, starting with that core group is really important.
Speaker 1: And then that just reflects across them. That's where the
Speaker 1: culture come exactly. And then what you do is you
Speaker 1: kind of say, and of course you want to be
Speaker 1: explicit about the types of people you're bringing into that
Speaker 1: you can reinforce a certain kind of culture. There's certain
Speaker 1: people who might have the talent, but they just don't
Speaker 1: have the personality or sort of the the way you
Speaker 1: want it to feel working with them and say you say,
Speaker 1: you know, you're not really consistent with our culture. You
Speaker 1: don't say it out loud, but you started your screening
Speaker 1: people as you interview and you're like, this is this
Speaker 1: is not gonna be uh, this is not having you
Speaker 1: as an exact might not set the kind of tone
Speaker 1: that we want to um. And culture is really tricky,
Speaker 1: largely because it is such an outgrowth of the earlier people,
Speaker 1: and and and the senior people and and so um.
Speaker 1: You know, I never I did not get it perfect,
Speaker 1: for sure, and with something I was always trying to
Speaker 1: learn more about, but at least intentionally being aware of
Speaker 1: what your culture is and your what your culture is
Speaker 1: is what your people basically say that it is you.
Speaker 1: You can't say, as a CEO, this is my culture.
Speaker 1: You ask your people what's it like to work here?
Speaker 1: They'll tell you what the culture is. And then if
Speaker 1: you want it to be different, you guys say, well,
Speaker 1: how do we have to change as leaders to create
Speaker 1: a different environment for the for the company. So you
Speaker 1: said you made a lot of mistakes you learned on
Speaker 1: the job, but when you look at this company, you
Speaker 1: were there for a CEO or co founder or I
Speaker 1: don't know if you actually had any of the titles
Speaker 1: other than I. Well, when you're the first employee, you
Speaker 1: can call yourself what I said, I'll be the president CEO.
Speaker 1: But basically, the three co founders or co investors said,
Speaker 1: you get a business model together, you get vcs to invest,
Speaker 1: you can become CEO and let's see where it goes.
Speaker 1: At what point did you realize, hey, this is working
Speaker 1: this this business model. We're attracting assets, we're winning business,
Speaker 1: We're heading in the right direction. When did you first
Speaker 1: get that glimmer? Well, the glimmer kind of came and
Speaker 1: went and came and went and came and went a
Speaker 1: lot of times before I really knew, knew and well,
Speaker 1: in the beginning, you have to be saying, well, I'm
Speaker 1: working with Bill Sharp, this is an amazing idea. I
Speaker 1: love the concept. Let's see what happens. But at what
Speaker 1: point did you say, Hey, we have a billion dollars,
Speaker 1: we have ten billion, Hey we have like where did?
Speaker 1: How long did it take from start? I'm asking this
Speaker 1: for my own personal selfish questions because I'm fascinated by this.
Speaker 1: It's a startup, it's got no real assets other than
Speaker 1: the people in the until actual capital and then at
Speaker 1: some point down the road it's a multibillion dollar asset manager.
Speaker 1: How long did it take from it was from A
Speaker 1: to B. We started in nineties six, and I would
Speaker 1: say that I had a very very strong conviction that
Speaker 1: we were going to be very successful in December of
Speaker 1: two thousand four, So eight years that's that's a long time.
Speaker 1: So by two thousand you managing assets at that point,
Speaker 1: so you still know we're offering the online tool. In
Speaker 1: two thousand and two, two thousand three, we had like
Speaker 1: a thirty million dollar business. We were cash flow break
Speaker 1: even by many accounts. You'd say, this company is doing
Speaker 1: pretty well. But you know, I was like, we're not
Speaker 1: growing fast enough and it's just too hard. So Jeff,
Speaker 1: if people want to find you or your writings, how
Speaker 1: do they track you down? I would just say, don't
Speaker 1: worry about my writing, go to Financial Engines, all right,
Speaker 1: I'm not the CEO. I I stepped down in January
Speaker 1: of this year of this year, after grooming a successor
Speaker 1: over the course of two years. Yeah. Well, I and
Speaker 1: I had hired Larry from Fidelity is one of the
Speaker 1: top guys on the r I A space, and I
Speaker 1: has been that. He had been there for thirteen years,
Speaker 1: so he knows financial Engines inside and out. Um, but
Speaker 1: I would say, you know, and by the way, with
Speaker 1: the robo advisors, there's so much advice that is so
Speaker 1: much better and so much less expensive than what's been
Speaker 1: out there. I mean, consumers have a huge number of choices.
Speaker 1: You know. I love financial Engines partly because I know
Speaker 1: how it's built, and you know that's that's what's managing
Speaker 1: my money right now personally. UM, but a lot of
Speaker 1: a lot of integrity into that. I think there are
Speaker 1: a lot of other firms. Vanguard's doing something great. Schwab's
Speaker 1: got some good portfolios that are being managed at low cost.
Speaker 1: I think the newer advisors are good. There's just a
Speaker 1: lot of good advice out there. We've been speaking with
Speaker 1: Jeff Nanjian Kalda, the co founder and former CEO of
Speaker 1: Financial Engines. If you enjoy this conversation, be sure check
Speaker 1: out our podcast extras, where we keep the tape rolling
Speaker 1: and continue chatting about also of fascinating stuff. Be sure
Speaker 1: and check out my daily column on Bloomberg View dot com.
Speaker 1: Follow me on Twitter at rid Halts. I'm Barry rid Halts.
Speaker 1: You've been listening to Masters in Business on Bloomberg Radio.
Speaker 1: All right, this is the podcast portion and and that's
Speaker 1: the part of the show where I throw my arms
Speaker 1: out and say let's uh, let's let's roll up with
Speaker 1: sleeves and go over the questions we missed and talk about, um,
Speaker 1: some other interesting stuff. By the way, Jeff, I've been
Speaker 1: really looking forward to having this conversation because I followed
Speaker 1: financial engines at least for the past five years or so. UM,
Speaker 1: we never got to talk about when taking them public
Speaker 1: with that experience was like and we never There's a
Speaker 1: whole run of stuff we haven't gotten to. So so
Speaker 1: let's jump right into that. UM first, let's see what
Speaker 1: questions I missed. We know about that. UM So, the
Speaker 1: pivot to four on one case, the to running the assets,
Speaker 1: it was two thousand walk that was two thousand four.
Speaker 1: Now it took us. We were working on it a
Speaker 1: year before we launched it, and we had done it
Speaker 1: was that before or after the customer surveys when they
Speaker 1: said you guys do it? It was after, so it
Speaker 1: was like, Wow, there might be a totally new type
Speaker 1: of business opportunity. And and then we created a little
Speaker 1: prototype and we did a fake survey. One of our
Speaker 1: cust o our corporate customers was really great because we
Speaker 1: needed to figure out what people really sign up for this,
Speaker 1: but we didn't want to build it until we knew.
Speaker 1: And they let us do a survey where basically said
Speaker 1: do you want to sign up for this? And little
Speaker 1: tiny print on the back of it said, by the way,
Speaker 1: you know it's not yet available. Then they signed up,
Speaker 1: and then we called them and big numbers, and then
Speaker 1: and then we called them back, and we literally called
Speaker 1: each one and said, thank you very much for your interest,
Speaker 1: and we're working on it and we'll let you know
Speaker 1: when it's ready. But we already kind of knew from
Speaker 1: a pretty big test that people wanted this. And I
Speaker 1: went to the board. We had about fifteen million dollars left.
Speaker 1: Have that hundred million I talked about. I said, guys,
Speaker 1: we let's go all in here. This is it. We've
Speaker 1: got enough evidence that we've shown a prototype. People seem
Speaker 1: to want it. They're responding to sort of direct mail enrollment.
Speaker 1: Our our our corporate distribution partners want their employees to
Speaker 1: have this. This is it, Let's go. It was It
Speaker 1: was sort of it was about the company and a
Speaker 1: freaking work. Sometimes you have to bet the company. Sometimes
Speaker 1: you have to say, hey, what we've been doing isn't
Speaker 1: generating the revenue, or it's not the business model that
Speaker 1: we think the idea is worthy of. Here's something that
Speaker 1: we can actually monetize in a way that's that's both
Speaker 1: true to the underlying philosophy and productive as a company. Yeah,
Speaker 1: and and and a big part of it too, is
Speaker 1: we we felt that we've done enough tests to make
Speaker 1: it a smart bet. It wasn't a sure bet, but
Speaker 1: it was a smart bet because we we've shown the prototype,
Speaker 1: we talked to customers, We've done this or enrollment test
Speaker 1: to fairit with the acquisition costs would be. So we
Speaker 1: kind of had a lot of indications that this was
Speaker 1: gonna work. What was your degree of confidence in that?
Speaker 1: I mean, honestly, it was okay. So this wasn't like, hey,
Speaker 1: we're rolling the dice. Let's let's hope that snake eyes
Speaker 1: doesn't coming up. It's like, hey, this is really based
Speaker 1: on all the evidence in front of us, based on
Speaker 1: the success of the prior business model, which was so so,
Speaker 1: based on what our clients are telling us, both the
Speaker 1: corporate clients and their employees, this looks like really the
Speaker 1: way to go when nobody else is really yeah. And
Speaker 1: now what was tough is I had I had a
Speaker 1: company where we had very low turnover. So the employees
Speaker 1: had been with me and the other senior management team
Speaker 1: for the journey, and after your fourth or fifth pivot,
Speaker 1: they're like yeah, right, yeah, here we go again. And
Speaker 1: so it was a little bit tough, and I had
Speaker 1: we had an all hands meeting where I said, look, yeah,
Speaker 1: this is what we're doing. A lot of people are
Speaker 1: very enthusiastic. I showed the data. We kind of we went,
Speaker 1: we talked to our customers, etcetera. Listen, if you could
Speaker 1: sell your employees, you can sell anybody. There were a
Speaker 1: lot of people with their arms crossed, basically saying I'll
Speaker 1: believe it when I see it. And I said, I said, guys,
Speaker 1: if you're on the sideline, I'll give you like a
Speaker 1: week and and no, no fault. I mean, if you
Speaker 1: decide you don't believe, then you should find something else,
Speaker 1: because this is what we're doing. And I totally get
Speaker 1: why you wouldn't believe because we tried so many. Things
Speaker 1: that happened were the really five previous significant pivots, the
Speaker 1: different business there there was. There was There was the
Speaker 1: education at first, the quick pivot to become an online
Speaker 1: advisor within the workplace. I raised all that money. We
Speaker 1: had a big deal with A O. L to go
Speaker 1: B two C. There was this. We were one of
Speaker 1: the first freemium models. You could get your forecast for free,
Speaker 1: but then pay for advice that didn't work. Uh, then
Speaker 1: we did this uh, this business, which was we called
Speaker 1: the enterprise business, was trying to create a workstation for
Speaker 1: our as to use. Then we had something we call
Speaker 1: the Advice Server where we were going to sell it
Speaker 1: to the big wirehouses and say, look, here's a servert
Speaker 1: that's gonna give automated advice within your firm. And then
Speaker 1: finally we did manage accounts, and manage accounts was the
Speaker 1: one was the magic button. That's that's amazing. UM. I'm
Speaker 1: gonna save the conversation about target date funds and fiduciaries later,
Speaker 1: but I definitely, uh, I definitely want to come back
Speaker 1: to that. We're done with this question. UM. We briefly
Speaker 1: touched upon Vanguard before. So there are the non Silicon
Speaker 1: Valley startups like Schwab and Vanguard who are rolling out
Speaker 1: their own UM robo advisor. Schwab Vanguard is really fascinating
Speaker 1: because they launched it with essentially no fanfare and they
Speaker 1: took a bunch of older UM advisory accounts and basically said, okay,
Speaker 1: you guys are now I'll go automatic driven. And it
Speaker 1: was five billion, and then it was fifteen billion, and
Speaker 1: now it's like thirty billion plus. UM. I've spoken with them, UM,
Speaker 1: including Bill McNab was on the show. But that's gonna
Speaker 1: be a hundred billion dollars and in no time at all,
Speaker 1: no doubt about it. What what are your thoughts so
Speaker 1: within financial engines, UM, portfolios, what asset classes, what sort
Speaker 1: of UM is it? Vanguard d f A, like, who
Speaker 1: are you? Who you holding in those accounts? Yeah, well,
Speaker 1: so we're managing the last quarter I think it was
Speaker 1: like a hundred fifteen billion. We only use the investments
Speaker 1: that are available in four O wind K plans, so
Speaker 1: it tends to be mutual funds and a handful of ets. Well,
Speaker 1: what's interesting is that the large part of the market,
Speaker 1: it's it's not many mutual funds and and no E
Speaker 1: t f s. They're almost all separately managed accounts. And
Speaker 1: when you start working with ibm s and forwards, UH
Speaker 1: and hallmarks, you're talking single digit basis points in many cases.
Speaker 1: So here's what's kind of amazing. The meaning you're charging
Speaker 1: us less than a fifth of a percent, less than
Speaker 1: So if you look at the economics of that hundred
Speaker 1: fifteen billion that we're managing, what you find is that
Speaker 1: the underlying fund fee. So that kind of the expense
Speaker 1: ratio of those funds that we're managing, it's about fifteen
Speaker 1: basis points considered fairly low, considered low. That's Vanguard territory.
Speaker 1: And if you look at the cost of our services,
Speaker 1: after all the A discounts and everything, this is this
Speaker 1: is not the cost of financial engines. Is what the
Speaker 1: employee actually ends up paying. It's about thirty seven basis points.
Speaker 1: So seven plus fifteen is for the for the whole
Speaker 1: innch a lot of talk to an advisor retirement planning.
Speaker 1: Not a terrible price at all, and that's actually much
Speaker 1: cheaper than what we see from a lot of places
Speaker 1: we see. So whenever we we run an st management firm,
Speaker 1: whenever we look at a four oh one K comes
Speaker 1: in and I'm talking about some pretty big entities that
Speaker 1: are fairly famous that you would think would have access
Speaker 1: to whoever they want. We look at these portfolios just
Speaker 1: festooned with active, high fee funds that have all underperformed
Speaker 1: their benchmark. And then there's the Custonian fee and the
Speaker 1: reporting fee and the advisor fee and all in it's
Speaker 1: three d basis points. It's astonishingly ridiculous and it's a
Speaker 1: terrible drag on long term returns totally. The good news
Speaker 1: is is if you look at the kind of weighted
Speaker 1: average expense ratio of four O n K assets, given
Speaker 1: that over six of the assets are held in the
Speaker 1: top point four percent of companies, so the found Fortune
Speaker 1: one thousand, that's where almost over half the assets are.
Speaker 1: Those guys do a really good job of getting nice,
Speaker 1: well managed, low cost funds um so, so at least
Speaker 1: on average dollar weighted, most of the four on K
Speaker 1: money is is sort of is sort of good investment options.
Speaker 1: And what you find is the d O L and
Speaker 1: the regulators are really pushing that down market. So it's
Speaker 1: it's gonna be a while till you get to the
Speaker 1: smaller plans, but there's definitely gonna be a trickled down.
Speaker 1: And I think Americans need to know if you work
Speaker 1: for a Fortune one thou company, your four o wn
Speaker 1: K options are probably your four o w K plans
Speaker 1: like the best investment. You're getting a match, you're getting
Speaker 1: all kinds of advice for very low costs, and your
Speaker 1: funds are probably the cheapest you're going to see anywhere. Plus,
Speaker 1: so for you guys, what does that mean? You're filled
Speaker 1: with guard or dimensional or fidelity? Like who's in your
Speaker 1: I know it varies from company to company does, but
Speaker 1: I'm gonna bet there's a bias towards a handful of
Speaker 1: it's about half actively managed, half indexed. And if you
Speaker 1: look at the actively managed guys, they're not very expensive.
Speaker 1: They're they're they're really good lower cost actively managed funds.
Speaker 1: But what happens is if you have a fund, uh,
Speaker 1: in a lineup of funds that maybe cost fifteen basis points,
Speaker 1: if one cost sev in the scheme of things, it's
Speaker 1: not it's not going to make the cut. Uh, you
Speaker 1: guys carve that out. Well, they're still is in the plan,
Speaker 1: but we just don't put in any of our portfolios.
Speaker 1: Got it? The differential price is cost too much? Thumb. Also,
Speaker 1: you know, there was a great morning Star research note
Speaker 1: which I'm sure they rude the day they put this out,
Speaker 1: which is so morning Star came to fame for by
Speaker 1: the way, their second behind you in terms of managing
Speaker 1: four oh one k properties. Because everyone thinks they're the
Speaker 1: mutual fund expert, but their claim to fame is their
Speaker 1: five star fund rating system and then one of the
Speaker 1: researchers put out a piece that said, if you don't
Speaker 1: know anything about a company of fund, or a mutual fund,
Speaker 1: or even whatever type of fund it is, if you
Speaker 1: did nothing else but pick the cheapest funds over the
Speaker 1: long haul, that's gonna outperform everything else, which sort of
Speaker 1: was a problem because they're selling, hey, our five star
Speaker 1: rating system is great, and their own research is essentially saying, yeah, yeah,
Speaker 1: the rating system is great, just by the cheapest fund.
Speaker 1: So I I don't blame you guys for saying, hey,
Speaker 1: we're not gonna put one of these expensive now every
Speaker 1: now and then. There's an asset class, the actively managed
Speaker 1: mortgage back um fixed income funds. There are no inexpensive
Speaker 1: versions of those, and you can't do it passively. You
Speaker 1: have to have some degree of active due to quality
Speaker 1: concerns and how that turns over. But for just about
Speaker 1: everything else, cheapest is invariably the best, which is really
Speaker 1: a difficult message for people to wrap their heads around.
Speaker 1: You would think that would be really easy to grasp,
Speaker 1: but people use price as a as a quality signal
Speaker 1: when it isn't always a quality signal. I totally agree
Speaker 1: with you, all right, so that's the end of my diatribe.
Speaker 1: Let's um, let's talk a little bit about your gap year.
Speaker 1: This is your gap year. So you you stepped down
Speaker 1: officially in January after grooming a success sor um and
Speaker 1: that successor is now running the shop. And you said
Speaker 1: you're gonna do nothing for a year, because you were
Speaker 1: there for what eighteen years? So you said You're just
Speaker 1: gonna kick back for a year. And I stayed on
Speaker 1: as an an advisor to the company for six months,
Speaker 1: so that officially finished on June. But you're right. I said,
Speaker 1: I'm going to take a year and just pull pull,
Speaker 1: pull back. And you know, a lot of what I
Speaker 1: was interested in doing was a combination of learning and
Speaker 1: having fun, and so I thought one of the things
Speaker 1: I'd like to learn that I just haven't had time
Speaker 1: to learn. I always wanted to sail in the ocean.
Speaker 1: I sailed on lakes as a kid. I wanted to
Speaker 1: sail on the ocean, so I didn't I've been doing
Speaker 1: a lot of sailing and getting certified as as a sailor.
Speaker 1: I want to always want to learn, not just how
Speaker 1: to play the piano. I wanted to learn music. I
Speaker 1: want to say, I learned music like I believed, and
Speaker 1: I'm just super excited into it. I mean, here I
Speaker 1: am at forty six like learning about the basic patterns
Speaker 1: and structures that underlying music. This is pitch and harmonics
Speaker 1: and residents and rhythmic patterns and things, and so music
Speaker 1: theory is really interesting. And and now when I listen
Speaker 1: to songs, it's like, oh, you know, there there are
Speaker 1: some deep patterns that once you kind of understand how
Speaker 1: these things are built, it's almost like a puzzle that
Speaker 1: you can unlock to say, what's that corporate? What key
Speaker 1: is it? And what's the core progression? What are some
Speaker 1: of the surprises the way there, the way they're breaking
Speaker 1: the rules are are refraining a chorus? And so it's
Speaker 1: like a way, a new way for me at least
Speaker 1: to understand music, which has been really fun. I have
Speaker 1: a book for you. I'm sure you've either read it
Speaker 1: or heard of it, and if you haven't, I'm gonna
Speaker 1: rock your world. Good godal escher bach Um. Essentially, it's
Speaker 1: about the concept of repeating patterns showing up in mathematics,
Speaker 1: art and music. And it's not just fractals. It's just
Speaker 1: when you look at a box um piano concerto. It's
Speaker 1: a series of and if you've ever heard like kat
Speaker 1: tun still do something with the you know, the the
Speaker 1: recording box whereh will play and loop it over and
Speaker 1: over again. It's the same basic concept in a symphony.
Speaker 1: It's just explosive. I recall reading that in college and
Speaker 1: just pulling my hair on my head, going, it can't
Speaker 1: be just that everything is a pattern? Is that? Is
Speaker 1: that true? Everything is just repeating fractal forever And it
Speaker 1: turns out some things are some things aren't. But if
Speaker 1: you like that idea of of the concept Um Douglas Hofstatter,
Speaker 1: I think is the is the I'm pulling these names
Speaker 1: out is a hard years ago. He wrote one other
Speaker 1: book that I think UM did really well, and I
Speaker 1: um that I can't access, but this if you like
Speaker 1: that sort of thing. I just remember saying, wow, this
Speaker 1: book is amazing. Oh yeah. I mean I like to
Speaker 1: understand how things work, and music is such a part
Speaker 1: of culture. I just I love music too, but I
Speaker 1: never really understand, like, how does this stuff really work?
Speaker 1: And now I'm starting, I'm starting to discover it, and
Speaker 1: I have ideas about how it changes your brain and
Speaker 1: and and how even when you have these patterns, you know,
Speaker 1: a lot of what it is I think is is
Speaker 1: the song and also the antecedents of the song, songs
Speaker 1: that sound like that song, the genre that came from
Speaker 1: it primes your brain to expect patterns, and the early
Speaker 1: part of a song that sets up patterns. And then
Speaker 1: there's this dance between rewarding you with the familiar, recurring
Speaker 1: pattern but then surprising you by breaking the pattern a
Speaker 1: little bit. And there's this there's this dance of like
Speaker 1: giving you the pattern and then not giving you the
Speaker 1: pattern that I think sucks you winto the music. That's
Speaker 1: that's fascinating. There was the other book if you like music.
Speaker 1: David Byrne, former frontman of The Talking has a new
Speaker 1: book on I think it's called How Music Works or
Speaker 1: something like that, and it's he you're these are both
Speaker 1: right in exactly what you're talking about. So so other
Speaker 1: things that My my wife, you know, when she knew
Speaker 1: that I was going to be stepping down, she said,
Speaker 1: I gotta get you to a Buddhist retreat. Okay, I said, okay,
Speaker 1: she excuse she's done. These are these silent retreats that
Speaker 1: that one goes on and how long are you silent?
Speaker 1: I was silent for three days and it was you know,
Speaker 1: it was it was, it was definitely. You know. My
Speaker 1: view of it is sort of a form of brain management.
Speaker 1: It's like, can you get your brain in a certain
Speaker 1: mode where it's it's not worrying about the past, and
Speaker 1: it's not worrying about the future. It's just kind of
Speaker 1: tuned in. And it's not like metaphysical or anything. It's
Speaker 1: actually quite basic. It's like, can you just be noticing
Speaker 1: the things that are happening here, now here and now?
Speaker 1: And what's kind of amazing about it? With some pretty
Speaker 1: simple little practices, your brain gets into a different state
Speaker 1: and you do you kind of feel this sense sense
Speaker 1: of freedom and and it creates it sort of creates
Speaker 1: a lightness that that is sometimes hard to find in
Speaker 1: a busy life. You know, there's a tendency, especially in
Speaker 1: today's between Twitter and email and everything else, that people
Speaker 1: are just playing tennis and hitting the ball back constantly,
Speaker 1: and sometimes you have to step back and say, I
Speaker 1: just want to exist and and be a little I
Speaker 1: hate to turn mindful or mindfulness, but sometimes you can't
Speaker 1: just be. Stimulus response stimulus response. Sometimes you have to
Speaker 1: let me think about stuff for a minute and not
Speaker 1: be wrapped up in that world. That sounds like that
Speaker 1: was a fun experience, And that's kind of what I'm
Speaker 1: trying to do with this whole gap year. It's just
Speaker 1: is have a year filled with experiences that can that
Speaker 1: can kind of break my brain, like I haven't seen
Speaker 1: this before. This is a new way to think about
Speaker 1: the world. This is a new way to think about myself.
Speaker 1: This is a new way to think about my marriage,
Speaker 1: This is a new way to think about you know,
Speaker 1: team depression. We're having a lot of problems out in
Speaker 1: Palo Alto with with kids under a lot of pressure,
Speaker 1: getting depressed and committing suicide. There was just a big
Speaker 1: article in any of the Times, the Worlster Regeneral about
Speaker 1: it's not the big urban areas, it's small town suburbia
Speaker 1: and rural areas that have seen suicide rate spike. So
Speaker 1: so you know, this has been happening close to our community,
Speaker 1: and and I wanted to understand because you know, when
Speaker 1: this happens, clearly the community reacts and there are a
Speaker 1: lot of people who say, uh, it's it's this thing,
Speaker 1: It's this one thing that's doing it, and it's never
Speaker 1: just one thing. There's never one thing. But then there
Speaker 1: are people say it's kind of everything, which means it's
Speaker 1: almost kind of nothing, because like, what are you gonna
Speaker 1: do about everything? I'm like, no, no, it's not one
Speaker 1: thing and it's not everything. There's there's got to be
Speaker 1: some system of effects that are causing this to happen
Speaker 1: at an unusual rate here in this community. And I
Speaker 1: don't know if I have the answer, but I kind
Speaker 1: of developed a model for how to think about it. Right, Well,
Speaker 1: if you want to be rational, you have no future
Speaker 1: in politics, So forget about that. Um so let's talk
Speaker 1: a little bit about going public. Yes, alright, that was
Speaker 1: on my list. We didn't get to so oh four
Speaker 1: or five oh six. You're ramping up a Um what
Speaker 1: point does someone say, hey, we could use some more
Speaker 1: uh use some more capital. I know, let's let's make
Speaker 1: our vcs happy and take the company uh to Wall Street. Well,
Speaker 1: at first, the first time people said that was in
Speaker 1: when we had five thousand dollars of revenue. Uh so
Speaker 1: you would have been worth nine or ten billion dollars exactly.
Speaker 1: That's it's all about eyeballs. I raised around. It wasn't
Speaker 1: we didn't go public, but it was gonna get the
Speaker 1: idea was. We raised around in Novembers. Our series is
Speaker 1: eighty five million. We had five hundred thousand dollars of revenue.
Speaker 1: We were valued at three five million, which at the
Speaker 1: time was a massive valuation. Right now nowadays it's kind
Speaker 1: of like, well that's that's a And we were planning
Speaker 1: on going public within six months, and we didn't. We
Speaker 1: didn't have a good revenue, we didn't have a good
Speaker 1: business moment. You were lucky that the dot com crash happened. You.
Speaker 1: We drafted the S one and just never filed it.
Speaker 1: Really we had we had a draft that would have
Speaker 1: been a disaster. It would it would have been we
Speaker 1: we had a draft written in We created another draft
Speaker 1: in November two thousand seven into two thousand eight. So
Speaker 1: your timing is phenomenally freaking precipitate market crash. I was
Speaker 1: gonna say, every S one, let me know, let me
Speaker 1: know the next S one you're doing, so I could
Speaker 1: get Then the third time was okay. We had managed accounts,
Speaker 1: we had weather two thousand and eight. Really well, we
Speaker 1: kind of grew right through it, and we were like,
Speaker 1: now now we really this is good. You won public.
Speaker 1: So what was the valuation when you went public? You know,
Speaker 1: we were valued at seven are millions something like. Okay,
Speaker 1: so fairly modest. What was the process like going public?
Speaker 1: Who were the underwrite the underwrise Goldman Sachs and then
Speaker 1: a handful of others, but Goldman kind of lad the deal. Um.
Speaker 1: I frankly loved it really well. You had a good
Speaker 1: experience across the board in the bell with the New
Speaker 1: York I did all that stuff, and you know, we
Speaker 1: had been working on this model with enough pivots that
Speaker 1: my board was always saying and I didn't really heat
Speaker 1: heat them well enough. Luckily I was prevented from doing it.
Speaker 1: But they're like, you gotta have a predictable business model
Speaker 1: before you go public. Gotta I'm like, yeah, yeah, yeah,
Speaker 1: thats okay. Whatever makes sense. Well, predictable, predictable revenue streaming totally,
Speaker 1: because when we finally went out, we had an incredibly stable,
Speaker 1: predictable business model. And so I wrote our first kind
Speaker 1: of earnings announcement, kind of the quarterly call, in kind
Speaker 1: of almost mad libs format. I wrote the story with
Speaker 1: a bunch of blanks, and I said, we're just gonna
Speaker 1: fill in the blank every quarter. And because this is
Speaker 1: a long term demographic bet this is not zig zags.
Speaker 1: We're done with our ziggig and zag. And we think
Speaker 1: we found something that should last for quite should create
Speaker 1: growth and profitability for many, many years. And so every
Speaker 1: quarter we pop in the new numbers, we tell the
Speaker 1: same story with a little bit of nuance, but not
Speaker 1: a lot and and and I think that's what a
Speaker 1: great business can do, is is have periods of sustained, predictable,
Speaker 1: scalable revenue growth and profitability punctuated by whoop's got a
Speaker 1: zig zagagan because the world changes, right, I've meant to
Speaker 1: ask you before I forgot. I love the name financial engines.
Speaker 1: Who came up with that? I think it was either
Speaker 1: Joe or Bill? It was named before I got there.
Speaker 1: It's it's a terrific name. And if if you if
Speaker 1: you hear it, you kind of scratch your head and
Speaker 1: then as you look under the hood, no pun intended you. Oh,
Speaker 1: of course, this makes perfect sense. This is the engine
Speaker 1: that drives the allocation. And yeah, that makes that makes
Speaker 1: perfect sense. Um, I only have you for another ten
Speaker 1: or fifteen minutes. So let me get to some of
Speaker 1: my favorite questions that I asked all of my guests. Um,
Speaker 1: and this is right here. I did the gap question,
Speaker 1: so we'll get rid of that. Oh, before we do that,
Speaker 1: I have to just ask your opinion on on my
Speaker 1: So you've experienced vcs, you know it's like to raise money.
Speaker 1: I have a pet theory that the current group of
Speaker 1: robo advisers have pulled off one of the greatest scams
Speaker 1: on vcs ever, because essentially they created this business that
Speaker 1: has there's nothing proprietary, there's nothing unique, there's no barriers
Speaker 1: to entry, and existing players can basically say, yeah, we'll
Speaker 1: do the exact same thing. But they've raised a couple
Speaker 1: of hundred million dollars in VC cash in order to
Speaker 1: generate three or four million dollars a year in revenue,
Speaker 1: and essentially said, all I need is ninety million dollars
Speaker 1: to fund on our I A and I'll charge twenty
Speaker 1: five bases points and if we never go public or
Speaker 1: we never get brought out, that's the VC's headache. How
Speaker 1: wildly wrong is that statement? How cynical and incorrect is that? Well?
Speaker 1: So um uh so My view is we raised a
Speaker 1: hundred and fifty million, and you know, every time I did,
Speaker 1: I really believed that even though the last zigg and
Speaker 1: zag didn't quite work, we were going to get the
Speaker 1: one and you eventually did and we eventually did, and
Speaker 1: so so it's it's really hard to say and this
Speaker 1: is what they was. It's easy to say, oh, yeah,
Speaker 1: it's all about the two. There's zigs and zags coming
Speaker 1: with these guys and to justify it or not or not.
Speaker 1: And so I wouldn't totally rule it out. But but
Speaker 1: you but you have to ask yourself a question, which
Speaker 1: is how well are you on track to discovering how
Speaker 1: to see the big opportunity? And is the big opportunity
Speaker 1: getting bigger or is it receiving or getting more crowded.
Speaker 1: That's fascinating And when we were there, there just weren't
Speaker 1: many players in the space known was in the four
Speaker 1: oh one k. We believe there was a way to
Speaker 1: reach a lot of people in assets. We believe that
Speaker 1: we could get very long. We had a lot of
Speaker 1: a lot of Uh, you had it easier than the
Speaker 1: current crop. It's much harder for them. It's it's more competitive,
Speaker 1: much more difficult, So I wouldn't I wouldn't rule it out,
Speaker 1: but it's it is not. This business is not easy,
Speaker 1: and I think it's only gotten far more difficult with
Speaker 1: the new competition and some of them, what is a
Speaker 1: personal capital was just bought by somebody I think black
Speaker 1: Future Advisor, Future Advisor, Black one and and for a number.
Speaker 1: I'm like, gee, I would have thought black Rock could
Speaker 1: have built their own for that, But obviously they saw
Speaker 1: something that that no one else did. And we talked
Speaker 1: earlier about the talent right there. There are a lot
Speaker 1: of companies with with so so or non existent business malls,
Speaker 1: but with talented people, we've got some pretty good technology
Speaker 1: where you know, it might be worth it for a
Speaker 1: year head start to market with the talented team, that
Speaker 1: might be able to move faster than you could higher
Speaker 1: is that phrase? Alright? Let me get to before they
Speaker 1: kick us out of the studios. Let me get to
Speaker 1: some of my favorite questions that we ask everybody. Um, So,
Speaker 1: your early mentors, aside from Nobel laureate Bill Black, Bill
Speaker 1: uh Sharp, who was your early mentors? You know? Uh?
Speaker 1: Before I started financial engines, I did consulting and I
Speaker 1: was a student and so it's all kind of you know,
Speaker 1: do it yourself, be a smart person and try to
Speaker 1: get the right answer. And that was that. What really
Speaker 1: became hard is managing people and figure out how do
Speaker 1: you build and work with a team of people. And
Speaker 1: I had some I had a lot of learning to do.
Speaker 1: I really think my biggest mentor in terms of like
Speaker 1: who gave me the most advice, it was actually my
Speaker 1: team telling me what I was doing wrong. They're like, look,
Speaker 1: I'm not sure exactly how to do it the right way,
Speaker 1: but I don't like what you're doing. This isn't really
Speaker 1: working for the company for me, And and a lot
Speaker 1: of it for me was like and I started this,
Speaker 1: I was like, look, I have so much to learn.
Speaker 1: I'm going to take feedback from anywhere I can get it.
Speaker 1: And my team was really candid with me about what
Speaker 1: we need to change in the business, what what I
Speaker 1: needed to change in my management style, you know, what
Speaker 1: we need to change in the product. That's got to
Speaker 1: be a challenging um way to to start out a company. Yeah,
Speaker 1: if if, I would say if if, if you're an
Speaker 1: entrepreneur and you don't like feedback, then you're in the
Speaker 1: wrong job. That's that's a that's a fair statement. Let
Speaker 1: I mentioned a couple of books earlier. What are are
Speaker 1: some of your favorite nonfiction books? Nonfiction books? You know.
Speaker 1: I'll just when I recently read is called Sapiens, which
Speaker 1: is sort of a history of Homo sapiens. I just
Speaker 1: got that as exult from somebody. It's so funny, it
Speaker 1: is worth reading, and it is it is an epic
Speaker 1: kind of view of literally, how do we compete against
Speaker 1: Homo or gaster and Homo fororensis? I mean, when there
Speaker 1: were multiple Homo species out there, you know, Holmo sapiens
Speaker 1: was only one of a few species nine or seven.
Speaker 1: So the book I just finished was called Last ape Standing,
Speaker 1: and it's the same. Hey, these are the twenty seven
Speaker 1: or twenty nine species that were contemporaries and competitors to
Speaker 1: Homo sapiens. And then and it goes and it goes
Speaker 1: through sort of cultivation of fire and technology. It goes
Speaker 1: through the spread of religion, the worle that religious place,
Speaker 1: wonderful treatment of polytheistic religions, monotheistic religions, naturalist religions, and
Speaker 1: then it moves forward to talk a bit about happiness,
Speaker 1: which is like was surprising to me, But I think
Speaker 1: it really goes like, why are what are we even
Speaker 1: trying to achieve here? And then it kind of goes
Speaker 1: through what's the future of the of the of the
Speaker 1: species Homo sapiens, and it talks about cyborgs and are
Speaker 1: jacking into people's brains and and there's gonna be some
Speaker 1: crazy stuff coming. It's is gonna be absolutely wild, so
Speaker 1: not quite dystopian, not quite the negative things we've see
Speaker 1: in some sci fi films, or does it do we
Speaker 1: have the potential for that if we're not, you know,
Speaker 1: I mean what I talked about, what's happening in Palo Alto.
Speaker 1: When you get kids, you're a teenagers jumping in front
Speaker 1: of trains, there's definitely something dystopian going on. And I
Speaker 1: think the technology. I I predict that in five or
Speaker 1: ten years, we're going to look back on our kids
Speaker 1: and their use of seven screens and social media as
Speaker 1: one of the most foolish, um hazardous thing that young
Speaker 1: people could be spending that much time doing, just like
Speaker 1: eating fast food every day or so we'll say, look,
Speaker 1: it's it's gonna be part of our culture. But but
Speaker 1: but it could be harmful if use the wrong way
Speaker 1: or too much, and so there's got to be more
Speaker 1: guidelines on what's healthy and what's not with the consumption.
Speaker 1: My wife's a teacher, and she he says, even about
Speaker 1: the kids who are she goes, they're not cooked yet.
Speaker 1: There's still still a work in progress, and you can't
Speaker 1: expect them to make the best decisions with all these
Speaker 1: terrible influences in there, not having the tools to know
Speaker 1: how to deal with that totally. So, so you're on
Speaker 1: the same same So we so we we shut down
Speaker 1: our WiFi every night from eleven to seven because I
Speaker 1: don't know how else to make sure that that my
Speaker 1: daughter gets at least has a chance to get eight
Speaker 1: hours of sleep. That that that's pretty interesting. Um, so
Speaker 1: what advice? Speaking of young people? So, what advice would
Speaker 1: you give to a millennial or a recent college graduate
Speaker 1: who was interested in finance, someone just coming out of school? Now,
Speaker 1: what what would you say to them? I would say,
Speaker 1: I'd say a couple of things. The more generic thing
Speaker 1: I'd say is, um, the world is changing at a
Speaker 1: faster and faster rate, and watch out because technology and
Speaker 1: kind of machine learning, artificial intelligence is going to totally
Speaker 1: change the landscape. So the best shot you have if
Speaker 1: you want to become become you know, financially independent, which
Speaker 1: just means like be able to put food on the
Speaker 1: table and have a house. I'm not talking about being
Speaker 1: like rich. You're gonna have to have some skills. They're
Speaker 1: gonna be able to survive lots of twists and turns
Speaker 1: in terms of how technology changes the way we create
Speaker 1: an ad value in society. So your ability to learn
Speaker 1: and keep learning, I say that's the number one thing.
Speaker 1: Stay agile, stay curious, and make sure that you're always
Speaker 1: investing in learning the next thing, because if you stay
Speaker 1: on one thing, the rug's gonna get pulled out from
Speaker 1: money world will pass you by. With respect to finance,
Speaker 1: I'd say be very wary before going into asset management,
Speaker 1: at least in terms of kind of large cap equities.
Speaker 1: It's the game is not the same as it used
Speaker 1: to be and the economics are fundamentally I think the
Speaker 1: change forever. We we had Mario ga Belly last week,
Speaker 1: he essentially said the same thing. Would not recommend kids
Speaker 1: jump into that unless they really felt they had no choice.
Speaker 1: Last question, So you've been an entrepreneur, You've been in
Speaker 1: the world to finance. You've been doing this for twenty years.
Speaker 1: What do you know today that you wish you knew
Speaker 1: when you began twenty years ago? Uh? You know, I
Speaker 1: guess partly because I expected to have no idea what
Speaker 1: I was doing. Uh, and I had to learn a lot.
Speaker 1: I was I was kind of a blank sheet. I
Speaker 1: didn't have a lot of preconceptions. Um. And I think,
Speaker 1: and I also think to myself, like, what would I
Speaker 1: do differently if I could do it again? You know,
Speaker 1: I'm glad I had kids when I was twenty two
Speaker 1: because one of the things you said, I think is
Speaker 1: really important. If you really want to solve a problem,
Speaker 1: I think that the best way to do it is
Speaker 1: to go deep, deep, deep, like really focus on it
Speaker 1: and bring as much talent to bearn as possible. But
Speaker 1: sometimes you don't solve it right away, and you need
Speaker 1: to pull back and let your mind work on the
Speaker 1: problem when you're not specifically thinking about the problem. But
Speaker 1: I think optimal problem solving is the ability to stay
Speaker 1: focused on a problem and recruit other people to work
Speaker 1: on the problem for a period of intense focus, then
Speaker 1: back off of it, then come back to it, then
Speaker 1: back off it. And sort of put the pieces together
Speaker 1: kind of don't always right. There's another book by the way,
Speaker 1: we're just thinking fast and slow, which which which I love.
Speaker 1: And it's not the blink your guts right, it's like no,
Speaker 1: in some things usually where there's an instinct to mate
Speaker 1: or survive, your instincts are quite good, right that they've
Speaker 1: done a good job keeping you alive on the savannah.
Speaker 1: But we're using them for to to borrow the pharmaceutical phrase,
Speaker 1: it's off label. It's what we're using our brains for
Speaker 1: is not what they would design for. And so trying
Speaker 1: to intentionally structure the way you think, I think it's valuable.
Speaker 1: So so I think I might have gone fast. I'm
Speaker 1: happy I had kids because they pulled me back away
Speaker 1: from the problem. Honestly, I kind of wish that I
Speaker 1: could have not been so worried about failing all the time.
Speaker 1: Maybe I would have failed if I weren't so worried
Speaker 1: about it. But it took it took a lot of
Speaker 1: the joy out of it, right. That's fascinating. Jeff, thank
Speaker 1: you so much for spending so much time with us.
Speaker 1: I think this was really fascinating, and it's an aspect
Speaker 1: of of investing in finance that I think most people
Speaker 1: are not familiar with. UM. For those of you who
Speaker 1: want more information, you could go to Financial Engines dot com. UM.
Speaker 1: You mentioned social you on Twitter at all? I'm actually
Speaker 1: I am not on Twitter, not on Twitter, and so
Speaker 1: this is a whole year of note Twitter. This is
Speaker 1: a whole decade of not Twitter good. I don't know
Speaker 1: how long this is gonna last, so we'll see what
Speaker 1: happens again. If you enjoy this conversations, be sure and
Speaker 1: look up an Inch or down an Inch on iTunes
Speaker 1: and you could see the rest of our interviews. Check
Speaker 1: out my daily blog at Dholtz dot com and on
Speaker 1: Bloomberg View dot com. I want to thank my head
Speaker 1: research Michael bat Nick and my engineer and producer Charlie Volmer.
Speaker 1: You've been listening to Masters in Business on Bloomberg Radio.