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One of the biggest battles in the business world over the past few decades has been between established global companies versus relatively unknown startups. Think about Amazon taking on retailers, or Tesla taking on the automotive industry, or Revolut taking on established banks.
So what can these two very different species learn from each other? ‘When David Met Goliath’ pits startups alongside global giants, digging into how each plays the same game very differently.
In one episode, we sit down with a Goliath. A heavyweight leader from an established global giant. In the next, we bring on a David, a founder from a leading startup in the same space, same industry, same problems, but very different solutions, different playbooks, different styles, and often very different instincts.
The aim is simple: To show that real breakthroughs come when startup hustle meets corporate muscle.
Anders Jones (00:03):
I sat in some rooms with some real Goliaths that 23-year-old probably should never have been in, but only got us sued twice along the way, I think investigated by the federal government only once, but learned a lot in the process.
Narry Singh (00:19):
Welcome to When David Met Goliath, a podcast from AlixPartners. I'm Narry Singh, and this is a business and leadership podcast unlike any you've heard before. Our episodes are divided into pairs, each covering an industry.
(00:32):
In the first, I sit down with a Goliath, a heavyweight, world-recognized leader from an established global giant. In the next, I bring on a David, a founder from a leading startup in the same space and put the ideas of one guest to the other. We're here to explore the idea that the real breakthroughs don't just come from size or just from speed or innovation. They come when startup hustle meets corporate muscle.
(00:57):
Last week, we began a journey into the world of finance with our Goliath, former HSBC COO, John Hinshaw. Do go back and listen to that episode once you've finished this one. Today, we're exploring wealth management with our David, CEO and founder of Facet Wealth Management, Anders Jones. Anders, welcome to David Met Goliath.
Anders Jones (01:25):
Narry, thank you for having me. I'm excited for the discussion today.
Narry Singh (01:28):
Globally, financial wealth has hit about 200 trillion in 2024, and by some estimates, there could be between 50 to 100 million US households, literally, a third or more of all US households that are chronically underserved.
(01:43):
Meanwhile, the demand is rising fast, many experts suggest that AI and AI-driven tools could be a primary source of advice for retail investors in the next decade. That's the backdrop for Facet, who have made a very simple bet, make real financial planning accessible to the mass affluent for a flat subscription.
(02:01):
Anders, let's start with the beginning, you and I have known each other for a few years. Tell us a little bit about yourself, a little bit about where the idea of Facet came from.
Anders Jones (02:09):
Sure. So I think my personal story is also a little bit of a David Meets Goliath. I grew up in Boston and my mom worked in financial services. She had a big job at Fidelity Investments for most of her career. And so my plan was always to go work on Wall Street and follow the very sure path to success that is very well-trodden.
(02:33):
And for better or worse, I graduated from university in 2009. And so the job that I had lined up disappeared very quickly, and I was left trying to figure out what to do. Fortunately, I went to college at Stanford, so I was already in Silicon Valley, and this was right around the time of the Web 2.0 era. Mobile was the big thing that everyone was talking about then.
(02:56):
And I ended up on the early team of a company called LiveRamp, which is in the advertising technology space. And we eventually sold that company in 2014. And I was very fortunate to work in an environment where, as a 23-year-old, I had unlimited responsibility and ability to go do anything I wanted to try and figure out how to make money for this company.
(03:17):
And so I learned a tremendous amount. I sat in some rooms with some real Goliaths that a 23-year-old probably should never have been in, but only got us sued twice along the way, I think investigated by the federal government only once, but learned a lot in the process. I joke, I'm now in my late 30s and I have never actually worked for a profitable company before.
Narry Singh (03:39):
I'm sure your investors love hearing that.
Anders Jones (03:41):
I know. I know. Well, ask me next quarter, actually, that will change. That'll be a big relief. But after getting that taste of entrepreneurship, I think you've probably felt this yourself. It's hard to go back. And so the idea for Facet came together in late 2015, early 2016.
Narry Singh (03:59):
Talk about that.
Anders Jones (04:00):
Yeah. So to give you a little bit of backdrop, so there's an interesting regulatory rule that was proposed in mid 2015 by the Obama administration. It was called the fiduciary rule. And the general idea of it was that if you were a financial advisor, you would be legally obligated to act in the best interests of your clients.
(04:20):
And so it's crazy that in 2015, that wasn't actually a rule. There's this thing called the suitability rule, which is if I give you advice, is it suitable for you? It might not be the best for you, but at least it meets a certain standard of suitability. What's even crazier is that that rule didn't actually pass.
(04:35):
And so the pushback from the industry was, if you do this, you're going to end up in a situation where about eight million households lose their advisor relationship because the advisor can't afford to both service them and act in their best interest at the same time, which blew my mind.
(04:51):
In my mind, that was a very public admission of, yes, we're screwing eight million of our clients, but it's better for them to be screwed a little bit than totally ignored. And so that was the big light bulb moment. And when you sort of peel back the layers of the onion, what we found is that there's two major issues with financial advice. One is the cost structure is too high. So the actual cost of providing the advice from an expert human is way too high.
(05:17):
And secondly, the business model doesn't work for the vast majority of Americans. So most advisors in the US charge a percentage of assets. So they manage money for you and they take usually around 1%. And the conventional wisdom is, well, if you do better as a client, I do better as an advisor. And so interests are aligned.
(05:35):
The reality is that advisors actually add very little value on the investment management side. They stick you in Vanguard funds, they put you in BlackRock funds, and you're just in the market. And I would argue that if an average advisor comes to you and says, "I'm going to try and beat the market, you should run the other way."
(05:50):
And so when you combine those two things, there's these structural issues with the industry where, yes, the investment management and the wealth management industry make a ton of money right now, but they are making a ton of money serving the top of the pyramid.
(06:03):
And in our view, there's about a hundred million households that either want advice and can afford it but just not in the current structure, or want advice but can't afford it because the cost of advice is too high. So that was the genesis of Facet. And we put all those pieces together in mid 2016 and started the company soon thereafter.
Narry Singh (06:25):
It blows my mind that there is a distinction between suitable and best interest. I mean, imagine if that happened in healthcare. I mean, it just absolutely blows me away. So the larger established companies going after this, are they going after the market you're going after or are they going after it poorly or both?
Anders Jones (06:43):
I think that if you speak with any large company CEO or executive, they will say that they very much want to go after that market, but at the same time, they're not willing to change their business model to do so.
(06:58):
And I think you're caught in a little bit of a lot of the innovators' dilemma here where the large wealth management firms are all charging a percentage of assets. The average margins in the wealth management industry are in the mid to high 40s. It is an extremely lucrative business.
(07:14):
And where no one seems willing to go in any meaningful way is downmarket and say, "Okay, how do we really put our nose to the grindstone on cost structure? How do we change our business model and how do we actually meet these people in a place where our service matches what they need?" But there's that Jeff Bezos saying that's like, "Your margin is my market share." And that's the path that we're following.
Narry Singh (07:38):
That willingness and ability to go down market can be a real superpower of a David. They can move where the Goliaths won't or structurally can't because of inefficiencies or incumbent baggage. Low overhead and fast decision making let them serve segments that the incumbents are sometimes forced to ignore.
(07:58):
Think of Uber, which made ride hailing cheaper and far more accessible by going after the customers taxi companies overlooked. Of course, they also added incredibly compelling features like the location of your driver, but fundamentally, their cost curve was significantly different.
(08:14):
Or look at the wave of low cost EVs coming from China. They've opened up an entirely new slice of the market that even giants like Tesla can't touch because their cost structure simply won't allow it. When big players can't make money at the mid or even the bottom of the market, they leave a wide open lane that an efficient, innovative, hungry David can usually run through.
(08:36):
But once those few Davids scale, they don't stay small for long. When they succeed, which is absolutely not a given, they do come back as Goliaths of their own, reshaping industries in the process. Just ask the legacy airlines what happened when Ryanair first showed up.
(08:54):
It sounds absolutely fantastic, Anders. The question that I think most of the audience will have is how? How are you pulling this off? Because there's a business model conflict that some of the larger companies have, but surely you've probably figured out a way to reduce or increase advisor capacity or surely, you're running a much more efficient operation. Are there some stats or numbers you have in terms of how you've managed to crack this nut?
Anders Jones (09:16):
Sure. So there are three main things that we have changed. Number one, first and foremost, is the actual business model. So we charge a flat annual subscription. We've essentially created a financial planning membership. So we charge a flat annual membership fee.
(09:35):
And included in that, we do full financial planning. You work with a dedicated advisor that's an employee of Facet. So we have firm control over the process and the philosophy. We manage money. We don't charge anything extra for that, but it's also not a requirement to work with us.
(09:52):
We'll do your estate plan. We'll advise on your tax strategy and also actually file your taxes for you. We'll help you with insurance. And the goal is to be the one-stop financial hub for someone's financial life. And at the high end, we charge $7,500 a year and we're essentially giving you a family office service for that level.
(10:13):
And at the low end, we charge $2,100 a year, which is an entry point that no other company has, really. So the business model and the subscription pricing, that's innovation number one. Innovation number two is we have really focused on thinking about how to maximize an advisor's utilization with things that only a human advisor can do.
(10:35):
So to put some numbers around it, the average advisor in the industry works with about 75 clients. Ours work with 450. But the catch on that is that our members actually get more time per year with their advisor than a traditional client does with their advisor.
(10:51):
And the way that we've gone about that is anything that's not human-facing, building a relationship, building trust, anything that is at all quantitative, we've automated that. So we have, in our customer journey, we have two to three meetings in the first 45 days. So that's the onboarding, get to know you, figure out what your goals are and give you our core deliverables, this thing called a roadmap.
(11:12):
In the past, if you look at a traditional advisor, what they would do is they would spend the first two or three meetings literally gathering data. That's all automated on our end. So we have a very sort of slick onboarding process that captures all that data. So our advisor spends five minutes before the first meeting reviewing all of that and then they're ready to go.
(11:31):
And so it's a very, very different experience than spending 10 to 20 hours of just data grinding. And we have hit the timing just right with generative AI and some of what we're able to do just from an AI standpoint and create those efficiencies.
Narry Singh (11:48):
Got it. Got it. So business model innovation and advisor effectiveness and efficiency in terms of just the number of people they can serve, right?
Anders Jones (11:56):
Yeah. And then the last piece is really thinking about what does financial planning mean for the mass affluent? There is a fundamental difference in how a high net worth person views their financial life versus a mass affluent. What I mean by that is if you're wealthy, you are probably thinking about your cashflow on an annual basis.
(12:15):
Our members, they're not living hand to mouth, but they are making trade-off decisions on a monthly basis. They earn a couple of hundred thousand dollars a year. They might have some assets sitting in a retirement plan somewhere that they can't really touch for another few years.
(12:29):
Typically, someone comes to us when they're making their first set of adult financial decisions. So they're getting married, they're buying a house, they're having their first kid, and there's a whole bunch of stuff that comes with that that's really stressful. And you can make very bad financial decisions that hurt you for the next several years.
(12:45):
And so what we think about is, okay, how do we help people through those periods of time? They need to pay a larger credit card bill they need to pay off, and so therefore they need to dial back how much they're putting in a savings account. And so we designed our whole process and really designed our whole technology stack to think about on a much more frequent basis, how are we helping our members think about trade-offs in a much more holistic way?
Narry Singh (13:10):
This is a fascinating concept because money is as much a psychological creation as a financial one. There's many studies that show that financial wellbeing is right at the top with your health and your happiness and your sense of self-worth. Financial literacy is at the core of a lot of mental health wellness that we don't seem to talk about as a society.
(13:33):
For most of us, there is not a single class in most schools in the world that teach financial literacy. As a result of that, I think there is a lot of uncertainty, fear, embarrassment, confusion around financial literacy.
(13:47):
Having your financials laid out in front of you drives more informed spending habits, should improve consumer confidence, creates generational financial literacy, and improves even health and wellbeing.
(13:59):
Now, that's all great from the perspective of doing social good, but it also plays out into the fact that customers who feel smarter, better informed, and more confident using your product are commercially more likely to stick around in the long term, not just because they like the product, but because they need it. That's a hugely powerful competitive advantage. So why aren't the bigger players in wealth management doing more of this?
Anders Jones (14:26):
They certainly could. I think there's no reason why they couldn't. I think there's a couple of things to consider. One is that they would, for sure, cannibalize more of their client base than they would want to. We actually started this business really focused on people with less than $500,000 of overall net worth.
(14:45):
We have a very high number of single digit millionaires who work with us, and that wasn't by design. And we actually put a cap on it. If you have more than $5 million, we won't work with you because at that point, you've got more complexity in your tax and estate and investment management needs than what we're really set to do.
(15:01):
Then I think there's also a sort of capabilities question. You think about a company like Vanguard, I talked a lot about our AI capabilities and sort of how it's something that we've invested in. And from day one, we've been architected to take advantage of that.
(15:15):
As you know, the biggest asset that you have in an AI world is your own proprietary data. And we've been at this for seven years. We've got tens of thousands of members that we work with. So we have, I would say, just enough data to build meaningful and impactful AI models.
(15:34):
If you think about a company like Vanguard, they generate more data in a day than we have in the seven years of our existence. And so in the event that they ever got their act together and pulled all of the data across the hundreds of different systems that it lives in, they could blow us out of the water. I just don't think that we live in a reality where that's actually possible.
Narry Singh (16:01):
This gives a great outsider's perspective to something that John Hinshaw mentioned in our last episode. Goliaths have scale and they have the data, but they see that mostly as a driver for efficiency or traditional growth, not disruptive innovation.
(16:14):
The fact is, it's much easier to do more better of what you've always done. Different things from a different perspective is a much harder mindset, which larger corporates typically don't seem to have. Here's a clip from John.
John Hinshaw (16:29):
The mindset there is efficiency versus innovation and efficiency is only going to get you incremental cost takeout, incremental productivity, but innovation's going to be what actually transforms, revolutionizes, creates new industries, new companies.
(16:47):
And I think it's hard for the incumbents to do that. I think they see, okay, I'm spending a dollar today. If I employ this technology, I'll spend 90 cents or maybe 80 cents. And they love that. It's huge margin accretion versus, wait a minute, I can actually create new products, new markets. It's harder for them to think that way than it is, let me just get some efficiency.
Narry Singh (17:10):
That's not, of course, to say that Facet isn't driving hard for efficiencies as well. In fact, Anders has already outlined the inherent inefficiencies in the industry. As a result, a laser-focus and efficiency and things like improving unit economics have been at the core of their business model.
Anders Jones (17:28):
From day one, we have always focused on profitable unit economics. When we first started the company, I sat at my kitchen table with one of my co-founders who is a CFP, an advisor, and went through line by line every single activity that he did for a client and how much time it took and then figured-
Narry Singh (17:48):
Activity-based costing, literally.
Anders Jones (17:50):
Oh, exactly. Yeah. No, it's like a time and motion study. And basically said, "Okay, this takes you 30 minutes. I think we can get it down to five." And so we actually, when we very first started the company, we had this spreadsheet of all these different things. Our contribution margin from our fully scaled advisors today is 87%.
(18:07):
So we look actually much more like a software business than a services business. And by the way, I think the world is headed in that direction where tech enabled services is going to be the new SaaS from a unit economics standpoint. And so the unit economics have always been good, but then it's just a question of building the company around it. And I think that's where we made plenty of mistakes along the way.
Narry Singh (18:29):
Well, talking about mistakes, because one of the things that we've spoken about a little bit is, especially amongst startups, maybe especially in the Bay Area, there is such a de facto setting of incumbents don't get it, and they will therefore suffer.
(18:46):
You gave me some wonderful examples where the idea of slaying some sacred cows is so inherent in the founder mindset. But I think you also realize that there might be a few that are sacred for a reason.
Anders Jones (18:59):
A hundred percent, yeah. No, I'm glad you're bringing this up because I think there is a sort of ultimate hubris in entrepreneurs, which on the one hand you need, because you're thinking about taking on the Goliaths and if you don't think that you know better than them, why bother? But at the same time, there is conventional wisdom out there that is conventional and wise, for good reason.
(19:22):
So I'll give you one very specific example from our world. So the core value prop for financial advisors for a long time has been, "I'm going to manage your money and I'll do it for you. You don't have to worry about it." I always thought that that was a very misaligned value prop with the value that the client is actually getting.
(19:42):
When we sit down with our members, the places where you actually can see the relief on their faces when you watch the video recordings is when you say things like, "Your cashflow is going to be okay for the next three years." Or, "You are going to achieve this goal." It actually has nothing to do with the money management, has to do with the actual financial planning.
(20:02):
And so I took that to the logical conclusion, which was money management is actually not important and people are going to see the value in financial planning. It turns out that I was 100% wrong. Just to give you a sense of some numbers, when we manage money for someone, they retain with us in the high 80s, low 90s percent annually, which is pretty standard, that's industry average.
(20:25):
When we just do financial planning for someone, they retain at 30% annually. And when we go and interview customers who leave, who we only give financial planning advice to, it's a, "Hey, I got what I needed and I'm going to go do it myself."
(20:40):
And that's something that the industry figured out a long time ago and we just walked into a buzz saw of our own making, unfortunately.
Narry Singh (20:48):
It's such a good example because you think you're doing the right thing and no matter what people tell you, how they behave and what they tell you is sometimes quite different, isn't it?
Anders Jones (20:56):
Yeah.
Narry Singh (20:57):
Well, it's funny because some of the sacred cows I thought you were going to mention were things like underappreciating regulation or not getting a few things right for compliance. But what you're talking about is things around product market fit and the behavior of people when it comes to financial planning, which is more psychology and less process and regulation perhaps.
Anders Jones (21:17):
100%. Yeah. It's really all about getting into the customer mindset and understanding how they're thinking about things. And frankly, I made some judgment calls without talking to customers and look at where that got us.
(21:31):
Fortunately, I have a great team that actually does talk to customers and reverse that quickly enough. But no, look, I think from a compliance and regulatory standpoint, the swim lanes are very clear and the guardrails are very clear and that's not... You don't want to be a compliance innovator, I've learned.
Narry Singh (21:49):
Exactly. You don't want to have great innovation in legal.
Anders Jones (21:52):
Yeah, exactly. What I will say is, we're regulated by the SEC, but our regulators have never really seen a flat fee for financial advice model before. And so it has actually taken some work on our part to educate them on how to think about that relative to acting in the customer's best interests.
Narry Singh (22:14):
Well, I mean, in many ways, I mean, it's been a pretty consistent tech story, right? Airbnb trying to convince people what's a hotel versus an accommodation or Uber trying to convince people what's a taxi versus a ride-share. Many of these business models allow regulators to look at things very differently.
(22:33):
The ability to make mistakes, fail upwards, and learn from it in order to foster innovation is something of a privilege that startups enjoy even in regulated industries like financial services. For the Vanguards of this world, this kind of business risk that Anders is taking wouldn't just be bruising, it might be catastrophic.
(22:53):
However, that's not to say that innovation can't happen at large organizations. In fact, they may not have a choice. That actually was the message from John Hinshaw in the last episode.
John Hinshaw (23:03):
I got a chance just after I left Boeing, I was at Hewlett-Packard to visit SpaceX and every single rocket, every single product was different than the last one because they wanted to continue to innovate, innovate, innovate, innovate. As long as a person's life wasn't at stake. If it was just a rocket taking up a satellite or taking up a testament, they didn't mind failing.
Narry Singh (23:23):
If you've been completely honest, would you have been as zen about somebody failing badly at HSBC or Boeing?
John Hinshaw (23:29):
Yeah. Look, no, candidly, in both of those companies, you want to protect and risk manage effectively and you want to implement innovation, but thoughtfully and being sure you've tested the right models, you've thought about risk management.
(23:44):
I think that's really important in big, especially and regulated companies as well, because it's not just what you want to do as a company, you're also regulated and you want-
Narry Singh (23:52):
It's a big one.
John Hinshaw (23:53):
... to be sure that the conversations and communications and expectations are all lined up. Whereas when smaller companies don't often have that issue until they get to scale, and then when they get to scale, they do. And they act very surprised by it. Yeah.
Narry Singh (24:06):
But if you look at banking today, and if you look at space, where do you think those two industries are the most vulnerable from startups?
John Hinshaw (24:15):
Look, I think both financial services and space, the technology has come so far in just the last really decade or so, that all products are vulnerable. There used to be a moat around things like satellites, not anymore. In banks, there used to be moats around retail products, not anymore. There used to be moats around investing, not anymore. Wealth management, not anymore.
Narry Singh (24:44):
Yeah, they're debundling. They're debundling.
John Hinshaw (24:46):
And that's why those partnerships are so important, because if the larger banks don't partner with some of the startups, then they will eventually get taken out.
Narry Singh (24:55):
Yeah. This is a fascinating point, and it really comes down to the gist of what this podcast is all about. Anders let's switch gears a little bit to what the Davids could and should be doing with the Goliaths. I've always held this belief as both a founder and now advising a lot of Goliaths that there is some real harmony and synergy between these two.
(25:17):
And if you can find a way to have a tank dance with a ballerina, something good really happens. Have you thought about what might look like if you could partner with one of your large Goliaths in your industry? Would they be open to it? Is there an inherent risk appetite? Just paint a picture what that could look like if it did work.
Anders Jones (25:40):
Sure, sure. So I think there's a couple of approaches here. There's a partnering with the "direct" competitors, so the Vanguards or the Fidelitys of the Schwabs of the world. In my mind, that's probably a tough sled, mostly because they want to do it themselves. They're probably not interested in letting someone else sort of service their clients.
(26:00):
And maybe taking a step back, one thing that we were very clear about from day one is that we are going to be a full stack financial services company, meaning we're not going to sell software into other financial services companies. We want to own the end client relationship and we want to own all of the servicing.
(26:16):
And so we get asked all the time, "Well, can we license your technology?" And the answer is philosophically, no, but also practically the tech that we've built really only works for someone who's using our process and our philosophy to focus on our market. And so actually, I don't think it would work that well.
(26:33):
But then aside, I think what's interesting is sort of the ancillary product companies. So if you think about financial services writ large, wealth management is just a tiny sliver of that. And you've also got insurance, you've got retirement, you've got banking, there are so many other sectors within financial services.
(26:49):
And I think about financial advice as the quarterback. Your advisor is advising you on all these different aspects of your financial life that have products and services that you need to bring in under this umbrella of your full financial picture. Maybe said another way, your estate planning attorney is good at one thing and they're not going to opine on what you should be doing with your high yield savings account whereas if your financial advisor can manage all of it.
(27:19):
So I see the partnership opportunities actually with these ancillary product companies where bringing financial advice in will actually increase the utilization of their products, but also provide a much better service to their customers. So it's not a threatening, "Hey, we're going to pull money away from you or we're going to cannibalize your customer base." It's very much a yes and approach.
Narry Singh (27:45):
Got it. So almost as like a compliment to what they're already selling and by you providing that, it increases their basket size or whatever, if you want to call it that.
Anders Jones (27:54):
I'll give you like a very specific example. So there are about 15,000 plus or minus individual banks in the United States. And some of them are the big Citibank and things like that. They have their own wealth management arms. But then you get into the Iowa Farmers Credit Union, which has maybe 50,000 customers and something like 75% of banks don't have any kind of wealth management or financial advice associated with it.
(28:22):
And gee, wouldn't it be nice for a customer who has $500,000 in that credit union to be able to talk to an advisor? And I think we, meaning Facet, are uniquely set up for that because we're actually not going to say, "Yeah, well, we'll work with you, but you need to pull that money out of your bank account and invest it with us."
(28:42):
We'll say, "Hey, great. Why don't we talk about what products your bank offers? Oh, you don't have any money in a high yield savings account? Great. Let's put $100,000 there." So it's really a win-win-win where the client's getting better advice. The bank is getting basically help increasing their product utilization and we're obviously getting a new member. So those are the kinds of partnerships that I'm spending a lot of time thinking about right now.
Narry Singh (29:05):
And what response are you getting?
Anders Jones (29:08):
I'd say on paper, everything sounds great, but as you're well aware, when you go up against the Goliath, speed is not the secret weapon there.
Narry Singh (29:20):
This ability to offer new services to established organizations at a fraction of the cost of building them in house is incredibly powerful, and it's not just smaller banks or building societies looking for help.
(29:33):
Even the world's largest banks are turning to startups to solve problems they can't crack internally or can't crack cost efficiently, whether it's because of their culture, the speed, the sheer organizational inertia or legacy systems. Here's how John Hinshaw described it.
John Hinshaw (29:50):
Certainly HSBC, we partnered with a lot of these smaller startups. They could get access to our customer base, we could get access to their technology, and it was a good partnership.
Narry Singh (30:01):
Did those partnerships work?
John Hinshaw (30:02):
They did. And in fact, the best example of that would be a company called Nova Credit. Nova Credit was a startup that realized that there were country-specific credit agencies. So in the US, Equifax, Experian, et cetera. And then UK has theirs and Singapore has theirs, Australia has theirs, but there really wasn't a truly global version of that. And so if you or I move to Singapore tomorrow and-
Narry Singh (30:28):
Your credit score doesn't translate.
John Hinshaw (30:29):
No, it doesn't. It doesn't. So you have to get letters from banks, you have to get all kinds of documentation. It's a long process. It's very paper-intensive. And candidly, I remember when I first moved here to the UK, even though I was an HSBC executive, because my credit history didn't transfer when I got my first credit card, it had a $7,000 limit on it.
(30:48):
So what Nova Credit did is they said, "Hey, why don't we buy the data from all these credit agencies around the world and then aggregate it and then sell it in a service back to the banks?" And they've done that. And so we partnered with them early on at HSBC and Singapore was our first market.
(31:05):
And all of a sudden, we saw expat approvals from two weeks down to less than a day. The customer satisfaction went way up. It was just a game changer by partnering with Nova Credit.
Narry Singh (31:21):
It's a really powerful concept. Facet is a compelling case study in how a startup can discover new opportunities in a market that the giants have competed in for decades. And not only that, they can find a way to serve them more cost efficiently, sometimes more creatively than an incumbent.
(31:38):
And in the case of Anders, that opportunity also comes with something very rare, an openness to cooperate and partner with a larger incumbents on mutually beneficial terms. He has the conviction to challenge the norms of the industry, and any bank willing to partner with him stands to unlock real potential benefit. This is such a fascinating point, but one way Anders offers a very fresh take, different from most Silicon Valley founders.
(32:09):
Key to what you guys are doing is intelligence and automation and AI, but you said a couple of things that I'd love to kind of go deeper on. One is you said tech-enabled services will blow traditional SaaS out of the water. And I'd love to unpick what you mean by tech-enabled services.
Anders Jones (32:28):
I might rephrase what I said, which is I think that third-party software versus first-party AI, I think first-party AI is going to blow third-party software out of the water.
Narry Singh (32:39):
And first-party AI being, I'm using these models and building something that's my own functional brain, whether it's in legal or supply chain or marketing or wealth management?
Anders Jones (32:50):
Correct. And so what I would say is that now more than any time before, Goliath actually has the advantage over David, which I think, you and I both came up in Silicon Valley and I think we would say that saying something like that is crazy in years past, but I actually think that switch has flipped.
(33:12):
If you think about it, take a typical SaaS business, an email marketing platform. If you're General Motors, you're not going to go build your own email marketing platform. You're going to buy whatever off the shelf thing, and then that company will charge enough professional services fees to customize it just to meet your thing.
(33:33):
But I think in an AI world, all of that moves back to the company. And I think there will be room for consultants and implementers. I think that will be a very robust industry, but I think you're not going to find these third party pure play AI companies that are then selling things to General Motors.
(33:51):
I think that General Motors is going to say, "Okay, we have all this data ourselves. We should own the models. We should own all the use cases, and then we'll bring in some people to help advise us, but that needs to live with us."
Narry Singh (34:03):
And I think the idea that you feel as a David, that the Goliaths have probably the best chance ever in this AI first data first world. Although I will say, Anders, over the last, even before Transformer, the paper and LLMs, we kept hearing that our data is our precious asset if you are a large, large Fortune company, Fortune 100, Global 2000.
(34:29):
And the truth is, all those promises of having this gold mine of data never really materialized in the past. And the two things that happened, well, there's more, but at least the way I saw it, the two things that happened is, one, is even though they had the data, the largest companies till then could never hire the best talent.
(34:50):
And if you're an amazing data scientist or an MLOPs person or somebody that does model refinement and tweaking, to be very honest, would you go join a large incumbent or would you much rather join an LLM and stay on top of your game?
(35:05):
Now, that has been a thread, which is if you can't attract the best talent, figure out how to or find partnerships with startups that actually have that talent and get the best of both. So that's been one constraint that I've seen over the last decade. The second constraint I've seen is something that you take for granted, I used to take for granted, which is just a startup way of working.
(35:31):
And you use an example of speed, that's one. Internal process, speed, risk management. I do think there's a very good chance that the large companies have this data and in many cases, despite not having the best talent, to be blunt, or having some very old school ways of working, they might still pull it off, but I don't think these two are small challenges.
Anders Jones (35:55):
I agree with that completely.
Narry Singh (35:58):
This is really a fascinating thought from Anders. The idea that Davids could actually be out competed by the Goliaths is normally not the narrative, but it is something that John Hinshaw has also alluded to in our interview. Here's a clip. When you think a little bit about scale and innovation, are these contradictory?
John Hinshaw (36:19):
No, they're not. They're different and you have to figure out how to make them work together. They can be contradictory if just left to their own demise, but if you can foster a culture of innovation in a scale oriented company, you can make a huge difference quite quickly. And I think if anything, with the way AI is making the whole world move faster, that's even more true today.
Narry Singh (36:40):
Yeah, exactly. I remember when I was a recovering founder, a large company CEO in California told me, "The bet that we're making is that we figure out innovation before you guys figure out scale." And it was such a wonderful way of putting it because if you're a large company and you've been at Boeing, you've been at HSBC, but they are starting to figure out innovation.
John Hinshaw (37:02):
Yeah. I think they can truly innovate if they have the right people running innovation. You can't take a traditional executive or traditional leader and say, "Hey, you're now in charge of innovation." You actually need somebody with that mindset, with that capability. Example, at HSBC, I pulled somebody out of Silicon Valley to run innovation at HSBC because I thought that was-
Narry Singh (37:25):
Who was already somewhat native?
John Hinshaw (37:26):
Exactly, exactly. Because while certainly you could have somebody with the right mindset, there's just a different way of operating at different cadence. There's a pattern match. It makes a big difference if you've done it already.
Narry Singh (37:40):
It's a really powerful concept. Let me switch topics right now and ask you a couple of things that we call rapid fire. Don't overthink these, just give me your initial reaction. Leaders you admire the most and why?
Anders Jones (37:58):
I would say broadly speaking, there's this concept of peacetime versus wartime CEOs. I think some of the best wartime CEOs, God, it's so cliche to say Elon Musk, but the thing that I love about him is that he creates war out of peace. I think there's a saying from Nietzsche that was like, "In times of plenty, the war-like man turns upon himself for something like that, which he seems to be a master of."
(38:27):
And what I've found in general is that we've gone through the ups and downs that I think every startup does and that the best work that we do is in times of extraordinary stress. And the sort of extreme value that we create is when we're about to run out of money. One of the things that I think about constantly is when we are cashflow positive, how do we keep that existential-
Narry Singh (38:49):
Keep the edge.
Anders Jones (38:50):
Yeah, exactly. And so I would say anyone who has figured out how to do that even if they are living in a time of peace.
Narry Singh (38:59):
Excellent. Given that you're right in the thick of it, what do you think is the most over-hyped buzz about AI and perhaps under-hyped?
Anders Jones (39:09):
So I am fairly bearish on this idea that AI is going to be an enormous job disruptor. I just don't see it. I mean, working with the technology every day and seeing its limitations, I think that, sure, will we get there eventually? Yeah, fine, but we're a long way away from that.
(39:27):
Another thing is that at a macro level, technology and innovation creates more economic opportunity than it destroys. The cotton gin, which when it was first invented, everyone thought, oh, we're going to need 80% less labor because it's automating all of this. Well, the result was there was actually a 25X increase in labor required because you created the textile industry, which didn't exist before. So I'm pretty bearish on that.
(39:55):
In terms of under-hyped, I think that AI is going to lead to a complete change in energy philosophy and policy. And I actually think that we are going to get to a world with unlimited power a lot faster because the electricity hunger is increasing exponentially.
(40:17):
If you look at Chinese power output versus US, one is linear, one is exponential. And I think that the US is waking up to that, but I think that we're moving to a world where cheap and abundant energy is going to be here a lot faster than we think.
Narry Singh (40:33):
Amazing. My last question for you, what we haven't spoken about a little bit is that I think you're almost a near professional show jumper. So what do you take away from show jumping and startups?
Anders Jones (40:49):
A minor correction. I'm very much a happy weekend warrior show jumper, but I've thought a lot about this. There's actually a lot of similarities between managing a team and riding a horse. And if any of my team listens to this, I'm not calling you all horses, just to be clear.
(41:08):
But what's interesting is that I think the most productive sessions you have when you're on a horse or when you figure out a give and take, being too prescriptive with your team is actually very much the wrong approach. And setting guidelines and guardrails and then letting them figure it out is actually how you unlock extreme value.
(41:26):
And the same is true for horses that giving them the guidance, but then letting them actually do the work is how you jump clear rounds.
Narry Singh (41:39):
There's a thriving business in filling the gaps the Goliaths have left behind, not disrupting just for disruption's sake, but complimenting the giants in a way they cannot match. Wealth Management being a sacred place where people don't want AI, I think is a fast-changing view.
(41:57):
The truth is that people are a lot more comfortable getting all sorts of data and intelligence online and the fact that it's about wealth management in a way that they can verify with their own data, their own facts, their own risk appetite seems like it's a question of not when, but if and how.
(42:14):
In addition to that, I think the market that Anders is going after has not been served poorly. It simply hasn't been served. And so if you are getting an offering that sounds logical and is affordable and is not connected to the advisor selling your data or brokering third party funds, you'd take it. And I think that's another reason why people are a lot more open to the Facet's of the world.
(42:44):
You've been listening to When David Met Goliath. I'm your host, Narry Singh. If this is your first time joining us, please subscribe on your podcast app of choice. And if you can, do leave us a review, it really helps. Until next time, thanks for listening.