Jeremy Quittner: Welcome to Teach Me How To Money. I’m your host, Jeremy. On this week’s episode we’ll be talking with Stash founder Brandon Krieg, but before we get to the interview, our jargon hack this week is volatility. Volatility is the tendency for the returns of stocks, bonds, and markets to fluctuate up and down and it’s a measure of how risky investments could be and volatility is a normal part of investing. A high volatility stock, for example, has more risk and while it may provide an opportunity for you to make more money than a low volatility stock, you could also lose more money. In contrast, a stock with lower volatility generally involves less risk, so your gains or losses on that stock might also be lower. As a general rule, stocks tend to be more volatile than bonds. Here’s something else to keep in mind. Markets themselves can be volatile. That means due to any number of forces from inflation to global conflict, trade wars and currency fluctuations, markets can move up and down a lot over a short period of time. If you have a high tolerance for risk, you might choose more volatile investments. And if you have a low tolerance for risk, you might choose less volatile investments. You have to decide how much stomach you have for volatility and invest accordingly. So high volatility investments might include gas and oil stocks, junk bonds, and alternative investments such as cryptocurrency. During periods when markets are volatile, it’s possible to choose safer investments, which could include cash, bonds and stocks that pay dividends. Since dividend paying companies tend to be older and more established. Remember, volatility is part of investing, so that was our jargon hack for the week, now let’s get to the interview.
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So do you have a dream of starting your own business, maybe breaking out of cubicle culture or the nine to five game, essentially changing things up so you work for yourself? Today we’ll be speaking with Stash founder and chief executive officer Brandon Krieg. He’ll tell us his own story about how he decided to leave his day job working on Wall Street and founded his current company, Stash. He’ll also take some time later in the show to answer a number of listener questions about money and investing. Welcome Brandon!
Brandon Krieg: Hey, thanks for having me!
Jeremy: It’s great to have you here. So I come to work every day at this place called Stash along with a couple of hundred other people. And I always think before this company created jobs for us, it started out as an idea for you and your co-founder Ed Robinson and I think it would be really inspiring for people to understand what the founding story is or was for you and how things went from an idea to realizing this idea. And I think maybe a great place to start would be if you could tell us a little bit about yourself, coming to New York and kind of what your dreams were when you came to the city and what you were doing when you first came here.
Brandon: Yeah, cool. When I came to New York, my dreams were, I have no idea what I want to do, to be honest. And I ended up finding a job at a very early company called Edge Trade. And I think I was there for like 17-18 years.
Jeremy: And what was the company?
Brandon: So in the beginning it was a trading firm and we started building technology to make trading more efficient in the capital markets. And what that really means is, back in the day, in the old days, and you can really now see it in movies. You’d see these people on the floor of the New York Stock Exchange yelling and screaming and waving their hands around. And that was a very inefficient system when you were an institutional investor and had an order that you wanted to route there. It was rife with information leakage and people knowing what your true intentions were. You know, if you needed to buy a few million shares of a stock, once you started doing it, word would spread pretty quickly of what you’re up to. And then prices can change and people have information about what you’re up to. When I first started on Wall Street and my career, electronic trading was just getting going.
Jeremy: And tell people who might not know what is electronic trading, what does that mean?
Brandon: Yes. So the same example I just gave about the people waving their hands around on the floor. What we enabled people to do, is to be able to route an order through a computer to the floor anonymously. And what that evolved ultimately into is that you can hide your true intentions. Let’s say you had an order to buy a million shares of stock, you could break that order up into little tiny pieces and as more and more places, more venues became available that allowed for electronic trading of stock or more exchanges, we wouldn’t send to all of your order to one place, but we would send your order to multiple exchanges to number one, get you the best price, but two, to break up your intentions so that no one knew what you were doing. One of my old customers, Macquarie, who is a really awesome global firm based out of Australia, but has a very big presence in most countries across the world, recruited me to come there to build a new type of electronic trading business. So I went there and, won’t spend too much time on it, but I’ll tell you that it was a good experience for me. One of the best things that happened to me there is I met Eddie, my co founder.
Jeremy: Ed Robinson.
Brandon: Ed Robinson. So Ed, aka Eddie, we worked together there for a bit over two years and really got to know each other and understand that, we actually shared the same values. But we also shared the same question…
Jeremy: Can you tell us what some of your values and your questions?
Brandon: Well, the question was, we’re doing this, business looking after rich people. And we were looking after, wealthy funds and professional investing firms for both of our entire careers collectively over 30 years. However, what about everybody else? And we would always ask ourselves, what about the people that don’t understand this stuff? And we became obsessed with that. Those were the big questions we had. We didn’t have any idea at all when we worked in Macquarie about, okay, what would we do if we were going to build a new type of financial services company or how would we do it? We did know though that there was enough passion in both of us to one, leave the big bank and go be an entrepreneur again. And two, that we actually want to help people. That was enough for both of us to resign from Macquarie, we resigned as friends.
Jeremy: So those are big steps though. I’m thinking in terms of any listener who thinking like I want to start my own business. I don’t know what steps to take to do that. So can you just like walk us through like you have the confidence obviously to go and do this and confidence in an idea to start a new financial services firm. So did you come up with a business plan? Did you do research? I know for a fact that you walked around on some of the streets of Manhattan and just asked people what their biggest gripes were or problems were with financial services companies. And so can you just tell us a little bit about your process to get there?
Brandon: Sure. So I mean, one of the things that started bubbling up when I worked at Macquarie was that for my entire career, people in my life, most of my friends and none of my friends work in financial services, or most of them don’t, would say to me, “hey, what should I buy?” “I want to invest. What should I do? Should I sell? Should I buy? What do you think about the market? What do you think about money? What should I be doing with my money?” And I was in electronic trading, so I wasn’t a financial advisor to start giving them advice on where they should spend. However, it never stopped. And no matter where I’d go, I’d say, “yeah, I work on Wall Street.” The first question right out the gate was, “what should I do?” And so same thing was happening to Eddie. And the same thing that was happening to me and it turned out that even people I work with would ask the same question to me and Eddie. And so that’s a big thing, right? So I’m a big subscriber to the lean philosophy or lean startup philosophy, which is basically if you find a big, big problem, then it should be fairly simple to find a painkiller to that problem. So I didn’t know what the painkiller would be, but I did know that the problem was big. The problem was, is that most people in this country do not understand investing. They are not saving and they have very little financial education. And you know, now fast forward till today we realize that almost 80% of people in America live paycheck to paycheck. So you talk about a problem. That’s a really, really big problem, right? So what do you do about this problem? And that’s the question that, a lot of startups will fail because you don’t put the time into find a really good painkiller, you use your ego. And just decide, all right, we’re going to do it this way and we’re going to send it to customers. So when I started looking at the market, I started seeing, wow, there are a lot of different competitors starting in the market, but I’m not sure that, if I was going to do it, I would do it exactly that way. But boy, I wish I knew what the customer would want. Cause for me and for Eddie, it’s always been about how do you solve the pain of the customer. It’s not really about the tactics or the methods you use until you figure out what the pain is and how to solve it. Then you can invent tactics and methods.
Jeremy: So we have this new thing called the smartphone, which enables all kinds of different cool apps and things to allow you to do everything from order dinner to manage your bank accounts. How has technology changed to enable a company like Stash to exist?
Brandon: Yeah, it’s a great question. I mean it really goes to the founding story. We had left our jobs and we started digging into what is the solution to a problem. One of the things that we realized really quickly is that digital advice is more powerful for the mass market than phone advising. And everyone, or most everyone in America now is carrying a supercomputer around in their pocket so we can make investing and financial services a platform accessible on the phone and give advice and financial education. That’s a big part of the solution to what we heard from customers and I think, if you went back in a time machine, you know, 10-15 years ago, I don’t think it would be possible to build a Stash. The computing power in the pocket wasn’t there to support this, but also the behaviors of people across the world now wasn’t there.
Jeremy: Tell me what it was like when you got your first 10-100 customers. Were you guys surprised? Was it exciting? Like an “oh my God” moment now we really have to deliver. Can you just talk about what it was like in the process of building a company just to get your first few customers, people who are interested in what you’re doing?
Brandon: And it was scary as hell. I can tell you that. The lead up to that was we worked really hard. I mean we built a lot of different prototypes of what we thought would solve a lot of the problems that people were having. The first versions of the prototype people hated. So, we didn’t go to code until we found a visual prototype that really help people solve the problem we were trying to solve. And we did that for months. We kept showing people in the street prototypes and doing a lot of testing and user research around, did this thing that we built help you or it didn’t? And we eventually got to, yes. And I think one of the things that helped us be a little less scared when we launched is all of the work we did before we launched. Because we tested prototypes heavily to understand, okay, when we do deliver this piece of software on the phone, people will like it and want it. That helped ease the pain of launch. The thing that was really interesting, I think for Eddie and I is that we underestimated how many people would want Stash and so when we launched we thought we’d get, you know, a few people on the first day. We got thousands of people just on the first day.
Jeremy: Wow! How did they hear about you? Was there a marketing campaign or just kind of how did they know that you existed?
Brandon: Yeah, we did and the lead up to the launch, we had picked a launch day, we started iterating a website and started to spread the message on social media. And we did a waiting list where people can get early access to Stash if they invited friends to the waiting list. That was a good helper to getting going. But at the end of the day, once you launch, you launch, and so we launched with a few thousand people and then things slowed down pretty drastically. I think that lesson to me, as a startup founder was, you can get people to sign up for a product but to really get a product to start going, you have to keep refining it and ultimately find product market fit. So we didn’t have product market fit when we launched. It took a little time to find that, to create this amazing experience where someone would download the app, quickly sign up for Stash, open an account, and then start actively using the product. Because the best way to grow a product like Stash is to create a product where friends tell friends about it so it can grow not just with paid marketing but also with people feeling proud of what they’re doing. And it took a few months to start figuring that out. And then when we did figure it out, which we did, we started growing properly.
Jeremy: And of course a lot of the technology is very intuitive to you, isn’t it? For a user, you may not know how much work goes into creating a process like that. And I was just trying to compare that to say like a typical bank app, which is, you know, they are still kind of clunky, but some of the newer investing apps really get this sort of user experience down very carefully and just wonder, that that must’ve been hard to, to sort of program all of that and make sure that the technology behind this experience was all in place.
Brandon: Yeah. It was hard, but it wasn’t that hard. And, and I think there’s a really important reason for that. If you think about an incumbent legacy incumbent, financial company, they’ll have embedded people, processes, systems. A lot of technology that’s just being reused for repurposed, for phones and web. With Stash, one of the things that we did is we created a new blueprint, right? And so we sat down and said, when we were thinking about what to build and how to build it is we can’t take the blueprint from an incumbent and reuse that. We have to rethink and reshape all of financial services the way that Stash is going to do it. And so it really looks the same way. If you’re going to build a really big building, you need an architect and an engineer to make your blueprints and you need a plan. So when the contractors and builders start coming, they know exactly what to build. Stash is constructed pretty much the same way from the beginning, which is we have a customer who has a pain, a problem. There happens to be more than a hundred million people in America that share this pain, what is the solution to that pain? And then let’s get customers to give us feedback on it. Then let’s launch it and let’s have our engineers understand exactly what we need to build and why, and then we can start iterating on it. So that process, it sounds really simple. It’s really hard. It’s messy doing it, but if you do it right, what you end up putting out to your customer is an amazing product that people ultimately will share and feel good about. So it’s a lot of work, but good planning and good engagement with your customers will really help you build a really good product.
Jeremy: When I hear automating it’s like I don’t know, it’s also one of those triggers for me where I sort of tend to shut off and say, I don’t somehow believe that automating can help you come up with the amount of money that you need to put aside into your emergency fund. Or you know, just to come up with this amount of $400 but I hear it again and again. So what does automating do that helps you sort of collect this amount of money? I think a lot of people have this idea that I just don’t make enough money to save anything. So how does automating help with that? Short circuit that idea that you’re not making enough to put money away.
Brandon: There’s a practical reality, right? If you have $400 saved in total and you come to me and say, look, I need $100,000 I need it by tomorrow. I can’t help you with that. There’s nothing I can do. But what Stash has done for a lot of people, for millions of people now, is to help you create a positive habit. So I think a lot of the problems go back to, look at all these calculators on the internet. You’ll say, I need x dollars, and you’ll put in all the numbers and the outputs, unfortunately for most people look unachievable. And so what do you do? You feel defeated and you move on and you forget about it.
Jeremy: So I actually want to get into the idea of expectations around investing because a lot of times I hear, either you need to be really rich to invest and so I can’t do it. Or I’m expecting to line my retirement account with my investing returns over the next few years. People have outlandish expectations about what they’re going to make in the market. So is there an in-between somehow that people should, this is part of where financial education comes in, but what are your thoughts about that? Like not to have outlandish expectations about what you’ll make, but also, you know, not to be so freaked out that it’s too complicated and you know, only the rich can invest.
Brandon: The reality is that it was the case that only the rich can invest for a really long time. That was the reality in the past, that you needed to be rich to invest. Because the reality is that stocks are expensive. Most people in the country don’t have a lot of money and the system and the people that give financial advice don’t want to spend their time on someone who has $5. They want to spend it on someone who has millions of dollars. And I’ve done this exercise before. I’ve asked financial advisors for help, saying I only had a hundred bucks and I could tell you they wanted nothing to do with me. Go back to them and say, you inherited $10 million from Uncle Freddy. They have time for you. Oh my goodness. They’ll be all over you. So, there is a reality that its total bullshit that you had to be rich to invest now in 2019. Stash allows you to start with $5 and I believe that everyone should start because there’s a lot of things that come along with it. Stash is not a trading firm. We’re not sitting here telling you to day trade, buy and sell and buy and sell. There’s plenty of good companies that do that. We are here as long term investors. So you build a portfolio of companies that you know and take the advice about how to diversify the portfolio and do it for 5, 10, 15, 20 years. That is really, really powerful. And along the way, you’re learning about why you’re doing it and about the companies that you’re investing in and getting really good advice.
Jeremy: I’d like to get to some listener questions in just a bit, but in terms of wrapping up around this idea of starting your own company and your vision for Stash, you have millions of customers now. How has your sense of mission changed or your original idea, how are things different? How do you see the company today? It’s a force for change and just tell us a little bit about that.
Brandon: I have never been more excited and happy about this company than I am right now. Seeing how our customers are really open to doing this. And we have over three and a half million customers now, which is really, really amazing. But it’s also driving me to want to get to 10 million customers, to 20 million customers because I see the force of that change can bring, positive change to our customers. Stash is a mission driven company. And the other thing that I’m really excited about, it’s not just Eddie and I anymore. We have over 200 people at Stash now that work here that believe in our customer and believe in the power of the 80% of America. And it’s really, really cool to see 200 other people that are speaking the same way about this company that I am. And at the end of the day, this company is built for our customers. The customer comes first and it’s, it’s nice to be able to say that and I’m so excited and proud and we take our sense of mission very seriously and we take our role in our customer’s life very seriously. And we will continue to do that.
Jeremy: Right. And so just to go back to some of the things we were talking about at the beginning, for listeners who have this itch to start their own company, if there’s one thing that you could leave them with, what would it be? Is there like a question that they have to answer for themselves? Like they need to get very clear about that or just what would the word of advice or words of advice be for someone who’s thinking of jumping off into starting their own?
Brandon: Any startup that you’re going to do has to be a solution to a pain. The problem is that a lot of people invent the pain or the problem. So if you want to make widgets and you think that widgets will sell, who’s going to buy them? Why would they buy them? Why don’t they buy someone else’s? Why are yours better? It’s really important to get rid of any ego and be open to listening and asking a lot of questions.
Jeremy: What’s the problem with ego? Cause it seems like ego, you need a certain amount of it just to listen to people telling you, “ah, that idea is no good, don’t do it, don’t do it.” You need a little bit of it, right?
Brandon: Well a lot of people will tell you, well a lot of people told me this wasn’t a good idea in the beginning, but at the end of the day the data spoke very loudly that it was a great idea. No ones ever attacked this problem before.
Jeremy: But you need to listen is what you’re saying?
Brandon: You have to listen and ego is, you know, I can give you a lot of examples of where ego got in my way especially in the beginning, coming from financial services on the other side, serving businesses, not consumers. I definitely am an expert in electronic trading and trading on Wall Street. And I came into this consumer side, Stash side with a lot of preconceived notions. People will definitely know this stuff. People will know what that is. People will know what that role is. Of course they will. And then when you ask yourself, wait, are they really going to know what this is? And you say, actually no, no they won’t. And so you have to be open to change and you have to almost free your mind to accept that not everyone, especially in this business that we’re in, you know, offering banking and investing services to the masses. We have to realize that there is a reality to the way that people live their lives and what people know and understand about financial services and how we’re going to solve that problem and just have to be open minded and listen. Listening is really important.
Jeremy: Great. So with that in mind, I’d like to get into some listener questions, this person wrote in to say, “I want to be financially well, but I don’t know where to start, can you help me?” There’s a lot there to unpack.
Brandon: There’s a lot there, but it’s a great question. I would tell you there is only one way to start the process of becoming financially well, which is to start putting money away for yourself. My father used to tell me, one important thing is to pay yourself first. You have to find a way every month, or every week, whenever you get paid, to find a little bit of money to put money away for yourself. Money doesn’t fix problems, or all problems, but it certainly makes some problems easier to deal with. So, if you could build a little cushion for yourself. Start putting away $5-$10 whatever you can afford, just get it away. Once you do that, you’ve made the first step. Budgeting and investing and thinking about retirement can feel overwhelming and daunting, it does for a lot of people. So do it bite-sized pieces. Learn as you do, that’s the most important thing.
Jeremy: Great! So this next listener writes in and says, “I’m new to investing and want to start putting money in the stock market. What should I do first?”
Brandon: It’s a great question, it’s going to get a very similar answer to the last question, which is, start. If you want to do it, then do it. There’s no reason why with Stash that you can’t start. And the best thing about this, is once you start, you’re going to start learning. And you’re going to feel so empowered. We find this with millions of people, your thirst for knowledge is going to increase because your confidence level is increasing and you can start thinking about the different companies that you know about, and learn about new companies. One of the coolest things, again I talked about this before, with Stock-Back®, is that when you move your bank account over to Stash, you start spending, and you start becoming a shareholder everywhere you spend. That teaches you so much about the way you live your life and the companies that you’re investing in. So, Wall Street is approachable, and accessible to you now, so start.
Jeremy: Great. So the next listener writes in and says, “I feel like the stock market has made all the gains it’s ever going to and it would be dumb to start investing now because it can only go down from here. What do you recommend?”
Brandon: Oh my younger self. I said this to myself. That’s a great question. I said it to myself so many times over the last almost 20 years. I stopped saying it to myself, turn of the great recession in ’08. I asked myself, and I had a lot of time to think about this, is the market going to zero? Well, if the market goes to zero and the world’s going to end, I got a lot of other problems, I’m gonna have to deal with than worrying about the stock market. And so if you’re taking a long view, then I think if you can afford to put a little extra money away, then you should not be timing the market.
Jeremy: Can you tell people what timing the market is? Does that mean the market’s up, so I’m not going to put money in here, I’m going to wait for it to go down. You think you could have a logical approach to when the best time is to put money in. Is that what timing the market is? But, that’s always been proven wrong basically.
Brandon: I don’t think it’s always been proven wrong, at the same time, I haven’t met anyone in my career that could do it. I can tell you, that if you can do it, and you have a crystal ball you can reach me and my cofounder at email@example.com. It’s just, it’s not real. I don’t think, that considering that no one can time the market, and if anyone tells you they can, I would run away from them, is that you have to take a long term view. Practicing dollar-cost averaging, and getting a diversified portfolio, and learning about what you’re investing in, that is time tested. Again, I said this before, there are no guarantees that the market is just going to go up. The only thing I can guarantee you is that the market will go up and down, and sometimes it won’t go anywhere at all.
Jeremy: But for this listener, it doesn’t matter whether the market is at an all-time high, or at an all-time low. It’s just basically getting started right now?
Brandon: You just start. At the end of the day, how do you know the market is going to go down tomorrow? How do you know what’s going to happen next week? Or next month? Or next year? You don’t. So, you could sit there, you’re whole life and wait, and wait and wait. You’ll miss opportunity after opportunity. So again, if you could afford it, I think you start, and you start putting money away slowly. Don’t take your entire nest egg and put it in at one time, that would be a terrible idea. Especially if you don’t have a lot of money. Start investing, get in a cadence of creating that really positive habit, because I’ll tell you what, if the market does go down, you should continuously be putting money away as the market’s going down, just as much as you should when the market is going up.
Jeremy: Great. We’ve been talking with Brandon Krieg, he’s the co-founder of Stash Invest. Thanks so much for coming on the show, Brandon!
Brandon: Thanks Jeremy! I have to say again to everyone, you know, all of our Stash customers listening, we’re really, really proud of you. To see so many of you take this super positive step and some of you have now been with us for going on four years now. We’re really proud of you and we’re so excited about all the great things coming. So thanks a lot. And thanks for doing this with me!
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