Broken Isn’t Always Bad

I’m broken. Broken with a capital B. The type of broken that can’t be fixed. Humpty Dumpty had it easy compared to my type of broken. I’m FUBAR broken (look it up) and it’s taken me decades to come to terms that there’s nothing I can do about it.

But instead of starting with the conclusion, I’ll do my best to explain what led me to accept my brokenness by sharing how I discovered I was broken in the first place.

Evidence: School

When I was a kid, it was pretty clear to my parents and teachers that I was pretty bright.  On the smart/not-smart scale, I definitely fell on the smart side of the distribution. In fact, in a variety of subjects, the teachers didn’t know what to do with me because I took it upon myself to learn the subjects on my own (I think I consumed the entire 3rd grade math textbook in about a week which frustrated my teacher). But, I wasn’t uniformly good at school. In fact, there were times it was clear to me that our homework assignments were near impossible and I didn’t understand how my friends were able to cruise by with no problems whatsoever.

For instance, in 7th grade History class, over a series of weeks, continent by continent we had to memorize the names of all the countries and their capitals and be able to write them on a blank map when tested. I can’t even describe the painful hours of study I put in only to wake up the day of the test only to have forgotten everything I thought I had learned the night before. Week after week when a blank map was put in front of me and the teacher said “begin”, my heart started to race and on a good day I would write down about half the required information. If it hadn’t been for a deal I cut with the teacher to do extra-credit work I would have failed the class. Instead, I pulled out a “B”.

Memorizing lists of vocabulary words in 9th grade English – the same.

3 years of French class – even worse. In fact, I wanted to die every time I walked into French class for fear of being called upon to go to the board and show my ineptitude in front of all my friends.

But Math was different. I completed 3 years of calculus and linear algebra before graduating high school and ended up helping the advanced math teacher teach the other students.

And 11th and 12th grade English was also different. We read books and wrote papers and I found myself writing papers at such an advanced level that one of my teachers accused me of plagiarism which turned into a big stink with my dad (he was an English teacher that put 33 years into the school system and turned me into a reader). He backed me of course and chastised the teacher for not doing her job. Yay dad!

Why the differences? At the time I didn’t understand but now it all makes sense.

Evidence: Directions

Anyone who knows me quickly learns that everywhere I go I’m completely lost. And by lost, I mean LOST. Like most teenagers, I went shopping at the local mall, but what amazed my friends was that I’d get very confused when I walked out of a store. I didn’t know which direction we had come from or where the next store that we wanted to go to was in the mall. And it’s not like we only went there occasionally. I worked there for a while selling pianos, keyboards and organs.

I also only knew one way to get from my house to the high school. I only knew one way to get from my house to my best friend’s house. And I couldn’t figure out how to get from the school to my best friend’s house without going back to my house and using it as a starting point. My best friend called me Monopoly Boy because I had to “pass Go” in order to get anywhere. I couldn’t connect the dots.

Evidence: College

Even with all the typical distractions of college somehow I never lost my thirst for reading. In fact, there was a period where I’m pretty certain I read a book every other day for the entire school year (which was possible because I only slept 4 hours a night). My choice in books was always topic driven, and there was one period in particular that I just couldn’t get enough of the beat writers. The beat writers led me from the 50s into the 60s and naturally I found myself reading books about or by Timothy Leary, The Merry Pranksters, Neal Cassidy, Alan Watts and Ken Kesey among others. They described their drug fueled lives and escapades in many ways, but I recall reading a description that stuck with me because it made no sense. Ken Kesey said that he was happiest when he was “living in a waking dream”. And given the amazing things he saw and places he went and experiences he had I couldn’t help but fixate on his description of pure joy. I thought about those five words a lot because it occurred to me that I couldn’t recall the last time I remembered a dream. I knew what dreams were, but I couldn’t recall one. None. This realization actually shattered me and made me want to do something about it.

Broken is Broken

The above stories might be amusing to you (especially those of you who know me well) but they made my childhood difficult. I can truly say that I obsessed over my situation until I finally figured out what was wrong with me. The epiphany came late in my college career with the help of one of my Professors (an AI teacher) who pointed me in the right direction and helped me come to grips with what I discovered. What I figured out was that I definitively have a condition called aphantasia (it was only named recently which made my research tricky). Simply put, if you have aphantasia you don’t possess a functioning mind’s eye and cannot voluntarily visualize imagery. It’s been around and described in psychological texts and journals for quite some time (it was first described by Francis Galton in 1880) but it’s been mostly ignored for the past 100+ years until Professor Adam Zeman renewed interest in the topic with a series of scientific studies that are still ongoing today. In 2005, Professor Adam Zeman developed a test that he named the Vividness of Visual Imagery Questionnaire (VVIQ) which has since become the most commonly used evaluation tool regarding a person’s quality of mental imagery. The questionnaire invites the test taker to visualize a series of images and rank how vivid the images are, from “Perfectly clear and lively as real seeing” (5 points) to “No image at all, you only know that you are thinking of the object” (1 point). A person is categorized as having aphantasia if they total 30 or fewer points after being asked 16 questions. I’ve taken the test twice and scored precisely 16 each time. Basically, I’m visual-memory blind as a bat.

And to make matters worse, while some people with aphantasia can “see” involuntary imagery in their mind’s eye (i.e. – dreams), I can’t. I don’t recall ever having a dream in my life, so I’m dream blind as well. Joy to the world!

It explains my schoolhood failures because they all required visualization skills that I didn’t possess. When I close my eyes I see blackness. The big nothing. But for most people memorization is a visual act. And recall is highly visual as well so even when I jammed something into my memory, getting it out wasn’t a trivial act. I don’t have a map in my head. I can’t close my eyes and just “see” or “replay” something from my past. And I can’t count sheep to go to sleep unless they’re black sheep covered in ink swimming in oil in the middle of the night with no stars in the sky.

So why am I telling this story about myself and how does it relate to building businesses? I’m telling my personal story because I don’t think most Investors realize that sometimes there are aspects of people that are broken and can’t be fixed. I can’t tell you how many times I was told “study harder” or “you’re not paying attention”. And I did study harder and I did pay attention more and it didn’t make a difference.

Many of the Founders we invest in are highly functioning broken people (I’m one) and the last thing we should do as investors is insist on some form of “try harder”. Instead, we should focus on figuring out their strengths and surrounding them with people who can expertly fill in their gaps. If a Founder is brilliant on certain dimensions but falls short on others, the first thing that you as a coach and mentor need to determine is whether or not the Founder has the ability to fix his or her shortcomings. I’m of the personal belief that it’s OK for the answer to be “no”. It might be possible to help them improve a little or a lot, but there are times when there is a true inability to change. And in these cases, the worst thing to do is to insist on change that won’t manifest no matter the effort. There’s no reason to declare the Founder incompetent without finding other people who can be complementary and create a collective win.

It’s also critical to realize that when you give feedback to a Founder all you’re trying to do is turn them into you. You project yourself into their shoes and through feedback outline what you would have done if you had been faced with the situations that they had encountered in the past. But you aren’t them and they aren’t you. And if they’re fundamentally broken on a dimension then your feedback might be inactionable. Don’t try to turn them into you. Instead, help them become the best version of themselves that they can be. But doing this requires putting in the time and effort needed to build a strong relationship grounded in trust. It requires being empathic to others’ shortcomings. And above all it requires believing that it will all be worth it in the end.

I’m a highly functioning broken person because I have GPS in my car and on my phone. For what it’s worth, I’d make a lousy tour guide and an even worse crime scene witness. But fortunately I have people around me who understand my short comings and aren’t asking me to change. I’m broken but haven’t lost sight of the fact that things have worked out just fine for me (even though dreaming sounds fun……)

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Yesterday Bad. Today Good!

Please don’t laugh at me. I’m about to share an embarrassing secret and would like to do so without the fear of judgment or ridicule. Want to know my secret?

I have a long and sad history of trying to solve problems with the wrong technology.

And guess what happened each and every time? I failed just about as badly as is humanly possible. Crash and burn doesn’t even begin to describe these disasters.

For instance, let’s go back to 1995 when I was working on the Account Management team at Capital One. My mission in life at that time was to dream up products, services and programs that would improve the profitability of our existing credit card portfolio. I worked on everything from Credit Limit Increase programs to Collections strategies and overall did a decent job.

One day I had a killer idea: What if we built functionality that allowed customers to pay their recurring bills using their credit cards? Utility bills, rent, lawn services, etc. We’d pay them all. We’d make their Capital One credit card more useful which would theoretically drive up utilization, improve satisfaction and drive down attrition. I smelled profit!

This was a time before the internet was a real thing to most people. It was a time before online account servicing existed in any form or fashion. It was a time before moving money was easy. And this is precisely why I thought it was a good idea. Nobody was doing it so we should!

So what did I do? I cobbled together a hacked together version of the service with the help of one of my co-workers (thanks Kathy!). Here’s how it worked:

Customers would register their bills by calling a number and interacting with an interactive voice response unit (an IVR). They had an option to enter a new biller as well as an option to edit or delete an old biller. They could set a bill up as a recurring payment for a fixed amount on a fixed schedule or store the biller’s name and address and their account number in the system and then each month call in and enter the desired payment amount.

Once the customer was set up, every time a bill approached its due date we’d manually print an envelope and stuff it with a buck slip with the relevant payment information and a physical check for the payment amount. To ensure the bills were paid on time, we’d mail our checks 3-5 days in advance of the bill’s due date depending on when the weekend fell. Simple!

And since we didn’t know how much people would be willing to pay for the service or what the effect would be on important drivers like utilization and attrition, we decided to test a variety of price points from $1 a bill to free.

Guess what happened? It was a colossal disaster on every dimension.

First, customers were very price sensitive with the only real response coming from the “free” test cells. This didn’t kill the program outright but it was discouraging.

Second, the initial setup of a recurring bill using a phone as an input device didn’t work. Numbers weren’t difficult to enter using the phone but biller names and addresses were. So we basically ended up using the IVR as a recording device and then had someone manually transcribe the information into our system. Guess what our error rate was? Guess how many times we had to call customers back to clarify the billing information? Guess how many customer complaints we had?

Third, there was no easy way to inform a customer that a bill had been processed. Guess how many customers cared about this? Guess how many called to check on the status of their bills?

The result: We created an operationally intensive service that customers weren’t willing to pay for. To make matters worse, our complaint volume spiked (which is never a good thing). And to add insult to injury, we significantly increased the attrition rate among customers that tried the service.

Kathy and I tried to fix the program for a few months but eventually dug a big hole and buried it.

Fast forward to today and the majority of US consumers use one or more electronic bill payment services and many consumers are more than willing to pay a fee to have a bill paid using their credit card (i.e. – taxes). What changed? Technology.

We now have the right input devices (keyboards and smart phones) and the right interfaces (web portals and apps) and the right back-end infrastructure (electronic movement of money). This combination works brilliantly while the 1995 version of the service failed. Technology made the difference.

And this theme is precisely why I’m so excited about our recent investment in Current. For those of you not familiar with the company, Current offers a debit card for teenagers that’s nested under a parent’s core checking account. The product is chock full of functionality that includes various buckets to store money (spend, save and give), monitoring and controls around spending, and features that allow parents to administer allowance and track chores. It really is a fantastic product and if you have teenage kids you should check it out (www.current.com).

Would it surprise you to know that a platform was created by Visa to address this need almost two decades ago (Visa Buxx) and it’s barely used today? Would it surprise you to know that Current’s version of the same product is literally flying off the shelves?

How’s this for product/market fit: Current sat down with a room of parents and a full 75% ended up purchasing the product afterwards.  And as for the teenage children of these same parents, 100% of them wanted the card!

The difference?  Technology.

The problem has been around for decades but the right technological solution only emerged recently. Smart phones plus e-commerce is a recipe for success while desktop plus physical retailers makes for a clunky solution. Guess the average age that a teenager gets their first smart phone? Around 12. Guess where they like to spend money? Online.

Compare this to two decades ago and it’s a completely different story. Where was the majority of money spent? Physical retail stores. This meant that money was only useful in the context of mobility. Until semi-independence came with a driver’s license (at the age of 16 or 17), kids relied on their parents to unlock the value of money. Allowance only mattered in the context of “when can you take me to the mall” so being a few days late didn’t matter much. And while it was inconvenient, if parents didn’t have cash in their wallets they could swing by an ATM on the way to carting their kids to the mall. The system was clunky but it worked.

The right technological solution applied to the right problem at the right time is a thing of beauty and can ultimately be the catalyst for creating a very large company. Will Current onboard a few hundred thousand customers? No doubt. Will they onboard a million customers? It’s definitely possible. At the very least it will be a fun one to be part of. Let the accounts continue to fly off the shelf!

Down the Rabbit Hole

As a longtime fan of Alice and her Adventures in Wonderland, I can’t help but draw upon the well-known imagery from time to time.  And it just so happens that I find it appropriate to use for this post so feel free to smile like the Cheshire Cat and read on.

At QED, we pride ourselves on being operators disguised as investors with a keen focus on the FinTech sector.  From time-to-time we’ve found great businesses outside of FinTech that we thought we could guide, and (surprisingly) the entrepreneurs behind these companies seem to be happy with the advice and hands-on help we’ve provided.  Our experiences at building/managing businesses combined with our collective skills that range from customer origination to data analytics to managing complex, annuity oriented businesses have proven to be valuable to our non-FinTech companies.

So while it would be easy to stick to what we know best by taking the “blue pill”, we’ve gained the confidence that branching out into new sectors ripe for disruption was worth considering.  The result?  We’ve taken the “red pill” and started to learn as much as we can about two new verticals that are tangential to the FinTech space.  And what we’ve found is that the more we learn the more we like what we see.  It feels like we’re about to head down the rabbit hole which is scary and exiting at the same time.

MatrixBluePillRedPill

The first?  Insurance Tech.  It didn’t take much digging for the QED team to come to believe that the Insurance sector is ripe for innovation much like the banking side of FinTech was ten years ago.  You can check out an interview with my partner Caribou Honig on this topic here.

Insurance stats

And to do our part catalyzing the innovation, we’re pleased to be founding sponsors of an upcoming conference, www.InsureTechConnect.com.  It’s designed to bring together entrepreneurs, investors, and leaders from the industry incumbents.  I’ve procured discounted admission, $200 below the early-bird pricing, for the first twenty FinTech Junkie readers who register through this link.  Questions or sponsorship inquiries can be sent to Caribou Honig at: caribou@qedinvestors.com.

InsureTech Connect

The second?  I’m going to leave that for another post with additional detail. Those of you who know me probably can guess what my “second addiction” has become, but rest assured that my core focus is still and will always be the FinTech space.  But, once an addict always an addict….so stay tuned.