555 Killing It Again With Bill Harris

Welcome to Breaking Banks. The number one. Killing it, killing it.

Today’s show has a special place in my heart because Bill Harris was part of my killing it journey. For those who haven’t listened from the beginning, killing it chronicles the entrepreneurial journey of reinvention, whether startup fails, the entrepreneur in the company they founded part ways, or they simply changed directions. When the potential acquisition of Perk Street fell through, it was clear we were going to need to crash land the company.

Dan and I would joke when people asked how it was going, we’d say, we’re killing it. I was fortunate to have Bill Harris as a mentor. He’s had great success as an entrepreneur, as well as many of those, well, let’s call them learning opportunities.

Today is about his journey and why he’s at it again with the new startup Evergreen Money. Bill, I don’t know if you remember this part of the story when we were first introduced. The intersection goes back to the Perk Street days.

We were originally, the name of Bill Harris was brought up to us and said, oh, would you want to meet Bill Harris? We’re like, the Bill Harris? Dan and I had these super high expectations. Then we fly out to the West Coast to sit down with you and your office is in Redwood City. I got to be honest, you were the most humble, down to earth person.

It was almost disappointing that this godlike figure in financial services, Bill Harris, was the simple man in sackcloth willing to sit down and chat with us and talk to us about making margaritas, what were they called? Smash margaritas, where you hit the line with a mallet. We’re like, my mind was blown. Well, thank you.

I think what you’re saying is you expected someone impressive and you didn’t find them. Well, no. You found the person who was wise and was oh so helpful in my own career path.

I want to start with, I don’t think, you’re well known in your latest accomplishments and personal capital, but I don’t think people really realize how far back you go, starting with the tax side of the business and being CEO of Intuit in some of the earliest days. So I want to hear the story of how did you go from being in media with Time and U.S. News & World Report to suddenly you’re in tax prep software and how that rolled in to Intuit? Well, you’re one of the few people who knows my history that far back. But yes, I spent the 80s in media.

And the fact that I even talk about being in business, in the business world in the 80s, tells you how old I am. I’m 68, but that’s only 18 Celsius. So I’ve been around a long time.

As a matter of fact, how do you have a bunch of successes? Get old. And then you’ve had enough at-bats that some of them are bound to work. At any rate, I spent the 80s in media, and I was the first kid on my block to spend a whole bunch of time with the very early personal computers, the Apple II and then the IBM PC and then the early Mac.

And I really got into it, and it felt to me like the information business that I was in and the interactivity business, which was the software that was starting to come up, those two things were on a collision course. And eventually, we would have interactive information. And that, I wanted a piece of that.

I wanted to be someone who had a foot in both camps when the collision occurred. And so I was on the board. A friend of mine asked me to join the board of a company called Chipsoft, which was very tiny at that point, but it made tax preparation software.

And after about six months, they were having some difficulty, but there was clear promise. So they said, why don’t you come be the CEO? And I said, wow, that sounds exciting. And so now I had to go to my friends on Madison Avenue and tell them I was at that point running one of the national news weeklies, which at the time, magazines were a big thing.

And I told them, well, I’m leaving. And they said, okay, where are you going? I said, well, San Diego. And now, do you remember the New Yorker magazine cover where it had sort of Central Park and then Columbia and then Harlem and then California and Japan? I mean, that was the view from New York, was that there was nothing beyond the Hudson River.

And so they’d say, San Diego? Is that even in the United States? And I said, yes, yes. It’s close to the edge, but yes, it’s in the United States. And they said, okay, what are you going to do? And I said, personal computer software.

And in the day, these things were tinker toys. And they said, what? What are you doing? I mean, you’re running one of the biggest magazines in the country. And okay, what kind of software? I said, well, tax preparation software.

And they fell off their stools. I said, what? How could you possibly pick something as the most boring thing that I can think of? Why? Well, the reason was, this was probably the first and best example of the combination of interactivity, software, and information. Tax forms, calcs, and explanations.

I mean, most of the software you had then was interactivity. It was a word processor or a spreadsheet or something like that. It had no information in it.

And so we had twice as many domain experts as we had coders. And so this was just a marvelous place to be at the vanguard of this collaboration. Now, what happened, remember I talked about anticipating a collision.

What was that collision? It was the internet. And now, everything, all the information was there. All of the interactivity was there.

And it has been what obviously should have happened. And it has changed our world. Now, an amazing piece of software that I think has penetrated maybe one of the most used pieces of software out there of the days when you were still shipping around floppy disks.

And then you stepped into it. As if that weren’t interesting enough, you were there at the founding of PayPal. Yes.

And I’m curious, like back to the X.com before it was formally known as Twitter, Peter Thiel’s Confinity. How did that come about? Well, first of all, why would I even consider leaving? Turns out that Intuit was the best desktop financial software publisher in the world. They were on the top of their game.

We were really strong. Growing, profitable, powerful, dominated the field. And because of that, and this is not at all unusual, because of that, we were frozen.

We were the best desktop software publisher in the world. 10 years later, we were the best desktop software publisher in the world. And the couple of years before I left, I was trying to drag that company into the Internet, onto the web.

And it was, even as CEO, it was an impossible task because the board didn’t see it, the employees didn’t see it, and even the customers didn’t see it. And it’s not that they didn’t see that the Internet was really taking fire. They didn’t believe that this would be the way that people would want to do their finances.

Because remember, at the time, you had all your data on your own computer, and you owned it, you kept it. Now, this notion of, oh, I’m going to take this information, I’m going to put it up someplace, who knows where, someplace where other people have it, I mean, it was, and here’s the issue. Not only was Intuit doing extremely well, so why change? But also, when we asked, we were very, very good at customer research.

There are Harvard Business School cases written about Intuit’s pioneering role in customer research and follow me homes and all the rest. And when we talked to the customers and asked them about whether they wanted something like that, they said no. Not only no, they said hell no.

Are you kidding? My data someplace else? And so there was no way to take that company and its products and move it rapidly to the web. And that’s what we called it in those days. We didn’t call it the cloud or anything like that.

And so I established a couple of those programs. I worked on getting TurboTax on the web and Quicken on the web and QuickBooks on the web, and we started Intuit Mortgage, which then became Intuit Loans, Dan Gilbert, now Rocket Mortgage, and insurance and all the rest. But there was not the culture in the company to really progress those and to put assets or resources behind them.

So I had an opportunity to go join Elon at X and start this online payment application. And we did it. We got the thing going.

It was very nascent, but it was growing very quickly. And we were, ironically, immediately next door to Confinity, which was doing a similar thing, and that was Peter Thiel and Max Levchin. And we didn’t even know each other were there, but we were competing in the marketplace.

And then all of a sudden realized we were right beside each other. And so I knocked on the door and proposed that we get together. And it was tough making that happen, but it did.

And together we had tremendous growth. So what was the original thesis on why bring it together? I mean, startups at that stage, it can be so hard and so competitive, and especially in that era, it felt particularly cutthroat in terms of sharp elbows to keep people out. So we were building a network, which is different than building software.

And the dynamics of a network are, are you familiar with Bob Metcalfe? Oh yeah, like Metcalfe’s law, power of the network going up based on the number of nodes. Absolutely. And so what we were most concerned about is scale and not absolute scale, but relative scale.

We wanted to always be at least 5X the next player because that way, because of Metcalfe’s law, that way we would have tremendously greater power. And particularly in a payments network, you have to have both payors and payees. If you don’t have both, no one will come.

Well, I mean, this is always the danger of a two-sided marketplace, right? Like when you need the both nodes, you can’t wait for a chicken or an egg, you need the chicken and the egg. Exactly. And so by putting the two of us together, we were relatively small, we were both growing very quickly and by putting the two of us together and then spending a lot of money, and I can talk about that, but we pretty quickly achieved 5X and then even higher relative scale.

And so let’s talk about that because the growth was pretty phenomenal that acquiring a million customers is quite a big deal when you think about how much did you guys raise at that point? Well, we got to a million customers pretty quickly in six months. Towards the end of that six months, we had not raised a whole lot at that point. I’m, well, I’m sorry.

It was the internet bubble. So yes, we raised a lot. It didn’t seem like a prodigious amount at the time.

We had raised, I’m guessing, $40 million in the early stages. As we approached that million customer level, we had such growth and such rapid growth that we were able to raise another $150 million at that point, and that was really a stroke of luck because we raised it a week or two before the internet bubble of 1999 cracked. And so, first of all, we would have been in a more difficult situation had we been trying to raise a month or two later, but we were then well-equipped to make it through the tough times in 2000 and 2001.

It’s absolutely amazing, the timing of that, right, and the stroke of luck because it also served pretty much as a moat for you that you weren’t going to see a lot of new entrants come after you. But when you think about the neobanks and some of the fintechs out there, $20 million, that’s a good-sized Series A these days, sometimes even a seed round, let alone where you guys got with a seed, with Sequoia from the early days to be even approaching a million customers. Phenomenal.

Yes. Oh, it was a remarkable thing. And on that score, we invented the notion of viral marketing.

And there we turned the dynamics of a network into a positive. The fact that you have to have chicken and eggs so it’s difficult to get it going, we turned that into an advantage because when somebody wanted to be paid or then they had to convince their buyer to get a PayPal account. And so we turned the dynamics around.

The chickens were promoting the eggs. Yes. I mean, I still remember that.

I still remember the invite I got that one of my college roommates was trying to send me money for our reunion and I got the email saying, here’s your money via PayPal, sign up to get an account. I wanted the money. Yes.

And we think about the difficulty establishing trust on the web today. And it’s a difficult process. Think about it 25 years ago.

Nobody had any idea what this was all about. The only thing that was out there was brochureware. And now we’re saying, okay, we will take your money and send it, skittle it across the country and do it instantly.

Establishing that trust was quite a challenge and the virality of essentially a member get member scheme. We encouraged it by giving $10 to someone who referred another customer who signed on and then another $10 to that new customer. So it cost us $20 per new customer.

But that’s a relatively low cost for generating this kind of activity. So after a year, PayPal’s become the rocket ship. And again, you stepped off the bus.

How did your time come to an end? And I’m curious, do you ever look back and say, you know, I wish I had stayed? So there were too many senior folk at that stage. I mean, between Elon and Peter Thiel and myself and David Sachs and Max Levchin and Reid Hoffman, there were more senior people than we needed. And of course, we had difficulty sometimes agreeing on things.

And in particular, I was more conservative in terms of spending money. Some of the others were more aggressive in terms of spending money. And there were more people who wanted to be more aggressive than me.

And so in order to make way for a common view, I said, okay, I’ll head to my next thing. And so as you stepped off into that, I’m curious, like you’re now stepping out and saying, I’m going to go reinvent again. How did you go about exploring the next thing? Because I’ll be honest, your resume and the number of things you’ve been involved in is absolutely astounding.

And not only around FinTech, it’s everything from security to care.com. How did you amass such breadth of activities that you went through? And then I’d love to come out of that as like, how did you decide to focus again when personal capital came about? Yeah, well, first of all, remember, I’ve had 35 years in this business and it’s a business that is dominated by younger people who don’t have a sense of the timeframes. But in the 35 years, that’s a lot of time to do a lot of things. But at any rate, what was the turning point? The turning point for me, I went to good schools, got a business school degree, went into business with good companies, Time, Inc., and then Intuit.

And at that point, we had taken Intuit public and I was the CEO of a public company with 5,000 employees. And my whole existence, my business existence until that time, that’s what it was focused on. Go to good companies, work your way up and eventually lead a public company.

Well, it turned out I wasn’t very good at that. And I certainly didn’t enjoy it because what happens at that level is that the things you need to do are human resources planning and execution, who are the people that you’re going to put in place to run various divisions. We had 13 different products.

And then financial allocation, watching the budgets, figuring out where you’ve got the financial opportunity, where to put the resources. That was not what I was interested in doing and not what I was good at. And in fact, really at my heart, I’m a product manager.

And so I would sort of run into the product meetings and sort of helicopter in and then helicopter out and it wasn’t terribly productive. So that’s one of the reasons that I went to PayPal, that I was really, I wanted to get back to the ideation and product development. So since that time then, I’ve been starting companies.

And one of the most important things, it’s certainly important that I learned that that’s what I like. And I think that’s what I’m good at, ideas. I’m an idea person that’s got a heck of a lot of enthusiasm.

And sometimes enthusiasm is, that can roll through a whole series of things that somebody who was a little bit more rational about the prospects of something might jump on. But not only was it important for me to understand what I’m good at, it was also important for me to understand what I’m not good at. And as a, I mean, you talked earlier about someone’s identity.

My identity was that I was a business executive. And what I found out was that, no, I’m actually not. And that was a hard thing to realize.

In other words, I did not want to administer a large organization. And so that understanding that I do not want to do that, rather, I want to go build new things. That understanding of my own psyche was what powered me through the next 25 years of coming up with new ideas and giving them a try.

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Learn more at AlloyLabs.com. Alloy Labs, banking unbound. So the next idea, personal capital, successfully grew it up to, we’ll belabor that, merged with Empower, billion dollar transaction, great success. But then you decide to go back at it again, back to the idea stage and in some very turbulent times in FinTech.

So let’s talk a little bit about Nirvana, but I want to finish with, let’s talk about, you know, at 68, you’re back at it again in terms of the market needs. So what happened with Nirvana? And then let’s talk about Evergreen Money. Sure.

So after personal capital, it was one first, which was Neobank. Then it was Nirvana. Nirvana was, I thought, a great concept.

What we would do is help people who struggled to get credit, but had a job, had a steady job, and then accept their direct deposit, based on the direct deposit, provide good, well-priced credit. These were people who otherwise might have no option except payday lending. And I thought it was a great notion.

We had a good team. But just as we were about to launch, rates spiked from about zero to 5%. And this was just not the time to then become a subprime lender.

And so we had a great idea, wrong timing. After so much success, was it hard, though? I don’t want to say it was a failure, but was it hard to admit it isn’t the right time? Intensely hard, particularly for two reasons. First of all, internally, as I mentioned, I’m someone of enthusiasms.

And it’s really hard to let go of something you think is an idea that should see the light of day. And this one I still think should see the light of day. Even more important, you’ve got a team, and you brought them together.

And it’s at least as much a disappointment to the team as it is to me. And so we worked really hard, making sure we placed people, that we gave very generous terms on the way out. And that actually was the hardest part.

However, from that Nirvana team, we recruited some of the best and created our next venture, Evergreen Money. So what is the insight behind Evergreen? There are a couple. At the highest level, it’s automation and optimization of your money.

Now, those are a couple lifeless words. What are we really talking about? Right now, people are, the average American household has 20 plus financial accounts, credit cards, and 401ks, and bank accounts, savings accounts, all the rest. And they’re living unexamined financial lives because how can you keep track? Your money’s, it’s got even worse because now you’ve got, you don’t just have PayPal, you’ve got PayPal and Venmo, and you’ve got accounts at all of these, and Cash App, and Zelle, and, and, and, and.

And now, oh my goodness, the BNPL. So I’ve got something at Affirm and something at Varna, and, and, and. And so you’ve got all your money sprinkled all over the place.

How can you, how can you track it? How can you figure out what’s going on? And it’s, for a long time, I’ve developed a couple of personal finance managers where through aggregation, you try and track all this stuff. But most people won’t do that. And even if they do it, it’s only consolidated information.

It’s not consolidated management, capability to do things. And so- Read-only. It’s read-only, yes.

And so what’s happened is the financial landscape has fragmented. And this is one of the downsides of the digitization of finance. I’m old enough to remember when you would go to a branch and most of the things you would do financially would be one way or another associated with that branch.

Now, we have some tremendous products. Most of them are point products. They do one thing.

And so now what you’re doing is you’re managing, you’re on your own. You’re managing all of your various relationships with all of these point products, each of which does a certain thing very well. But you end up with this fragmented mess.

So one of the things Evergreen is doing is trying to restitch that together, not through aggregation, but rather through an integrated platform that can manage your short-term money, your midterm money, and your long-term money, checking, saving, and investing, and then giving all of those four elements in one instant platform. So at the risk of sounding like a skeptic, I’m going to sound like a skeptic. Good.

That has long been a holy grail. And you know some of this. You are, I believe, on the board of Yodlee as they were pursuing this over two decades ago.

This use case, which seems so powerful, is littered with the bodies of those who have tried and failed to scale the mountain. Why is it going to be different this time? Because this definitely is a product, like you had said about Nirvana, this should exist, but it’s so damn hard. Yes.

Well, first of all, I differentiate Yodlee because Yodlee is aggregation, not integration. And so, however, many people have talked about being a one-stop shop. Everyone from, I remember the senior folk at Chase, when I was working with them, they would talk about everything being blue.

We want to have a Chase customer work with me, work with Chase for all of the financial activities. And of course, many of the fintech companies have the notion of a marketplace. But all of those, most of those, are a collection of unintegrated capabilities.

And so, in a regular fintech marketplace, oh, I can get insurance over here, I can get something over there, and most of it’s partner-based. And there is some notion that the sponsor of that marketplace probably has one of the major components, and that as a customer of that major component, then they’ll hang these other things off the edge. Or, you know, you can get investments and banking products at Chase or Wells or whatever.

But you might as well, they might as well be at different institutions because they’re completely separate with different apps and different statements and everything is different. And so, we really do believe that by integrating these things, not just assembling, but integrating these capabilities, we can create something that’s substantially better. We have to then prove it’s better, not only because it’s convenient and lets you understand what your money is and instant and all that, but also that we can help your bottom line.

And we do that in a number of ways, the most important of which is tax. We can, for someone who is a high-income taxpayer and particularly someone who is in a high-tax state, we can significantly improve the after-tax return on essentially the same assets. I love the concept.

I love to see where it’s going. I wanna come back to the subject of killing it, what you’ve learned over this career. There are a whole bunch of, call it nirvanas out there that are now in a drastically different environment than when they started.

What advice do you have for FinTech entrepreneurs as they’re looking at the new landscape and facing some tough choices? I’d say this, when you’re starting a company, you need enthusiasm. And when you’re ending a company, you need realism. And so if you’re at the point where you’re just not making the traction that you anticipated, and it’s not a one-month thing or a six-month thing, but now it’s a 12-month thing or an 18-month thing, face the music.

It’s not working. And if you have a radically different idea and you believe in that radically different idea and you’ve got a team that believes in it and you’ve got enough resources, okay, hail Mary, you can go try that one. But if you don’t, if you don’t really have passion and a powerful plan to really reshape the business, then face facts and say, it’s time.

We’re not gonna use the productive resources of the team nor the assets of the investors to just prolong something that is clearly not going to work. And there’s no shame in that. You know, some people, there is no shame in it.

Some people say that it’s actually a good thing that, you know, fail fast, learn something, keep on going. It’s not a good thing. It’s hell on wheels.

It just destroys you to bring something apart. It destroys you, but you have to go, you have to look at it in a clear-eyed fashion and make the call. I mean, I think it’s one, the longer you delay the call, it doesn’t get any easier.

If anything, it gets worse. Yes, that’s true. Well, Bill, I have enjoyed this conversation, the catch up and, you know, hearing more about your journey.

You filled in some things that even I didn’t know, but really excited to see where Evergreen goes and glad you haven’t lost that enthusiasm. Great. And before we go, let me just tell you a little bit about our first product, Liquid Treasuries.

Great. Because I think it’s something that a large portion of the affluent audience should really consider. It’s simple.

It’s a checking account. And checking account, how incredibly boring can that be? I mean, there has, it’s a commodity. There has been no innovation in checking accounts for decades.

Absolutely not. but you need a checking account. And so we sweep the balance into treasury bills.

What does that do for you? You go from 0.01%, which is what you get at Chase and Bank America and Wells, 0.01%, which is essentially nothing. It’s actually an insult that they would give you one basis point. And all of a sudden now you’re at 5.35, 5.31 at this point.

That’s the most recent treasury yield. Wow. How much money is there? If all of the bank accounts in, sorry, all of the checking accounts in the United States paid 5%, that would be another $103 billion in consumers’ pockets.

That is about the same amount as consumers pay on interest on their credit cards. It’s a huge amount of money. And people are talking about junk fees, the overdraft fees or late fees.

Those are about 5 billion and about 10 billion. This is $103 billion hole in people’s pocket. And you know what? The average amount of money that is sitting in a checking account in this country, and this is Federal Reserve numbers, is $16,000.

That’s the average. If you go to the top 10% of the households, it is $79,000 is the average amount of money that’s sitting in checking accounts. And so really what you’re talking about is thousands of dollars for an individual to go from zero to 5% in their checking account.

So that’s the starting point. The second piece is that because we put it in Treasury bills, it is exempt from state and local taxes. If you’re someplace like California and you’re high income, the top California tax rate is 13.3%. So it’s a tremendous tax savings as well.

Nobody thinks about that. Nobody even realizes really that bank accounts are taxed. They are taxed at the highest level, federal and state.

It’s ordinary income. And so you can easily get to 50% tax on the money that’s sitting in a bank account, whether it’s savings or checking or CD. By putting it into T-bills, you’ve got the high rate plus the tax exemption on the state side.

And then the final thing I’ll say, and this is another piece that folks just don’t think about. People who are paying attention to their cash, they will take an online savings account. And it could be Marcus, could be Ally, could be American Express.

Marcus is 4.4, Ally is 4.2. So I’m at Marcus and I’m making 4.4% on my cash. That’s not much difference between 4.4 and 5.3. I’m making a high yield. What you’ve forgotten is that only half of your money is in the high yield savings account.

The other half is in your checking account, earning nothing. So you’re not making 4.4, you’re making 2.2. And then you’re paying 50% tax on that. So you’re really making 1.1. And so this product is something that I think many affluent households would benefit from.

And it is the first step towards doing two things. First of all, creating products that meld the banking world and the investing world. And secondly, it’s the first product that helps us use taxes to consider taxes in increasing the amount of money you keep.

It doesn’t matter how much you make. It’s all about how much you keep, your after-tax return. Fantastic.

Is the product available now? The product is available now at evergreenmoney.com. Fantastic. Well, I can tell you who’s going to be going through your account opening and onboarding process shortly after this recording. Terrific.

So great to talk with you. Great catching up, Bill. That’s it for another week of the world’s number one fintech podcast and radio show, Breaking Banks.

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