October 10, 2022 • 39 mins
Many employees, managers, and even leaders are disconnected from who their customers are and how they live their lives. What if you infused a passion for the customer – and an understanding of the customer – into your business? A triple threat leader will ensure that customers are served with intelligent solutions that are designed for them, and that do right by the customer, the company, the employees, and society as a whole. In this episode we discuss customer centricity with Ken Rees, innovator, founder, and customer advocate about how he infuses customer centricity into the culture at his companies.
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Jason Goldberg (00:01):
No matter what field you work in, you
undoubtedly serve some type ofcustomer. Many employees,
managers and even leaders aredisconnected from who their
customers are and how they livetheir lives. What if you infused
a passion for the customer andan understanding of the customer
into your business? Can youthink of a business or brand
that has a culture that ispassionate and empathetic about
(00:24):
the customer that is innovative,and that is service oriented. A
triple threat leader will ensurethat customers are served with
intelligent solutions that aredesigned for them. And they do
right by the customer, thecompany, the employees, the
shareholders, and society as awhole.
(00:45):
Welcome to the leadersperspective podcast
where we talk to Triple Threatleaders about the people
products, trends and experiencesthat influence business. I'm now
pleased to introduce your host,Jason Goldberg.
(01:09):
Welcome back to the leadersperspective podcast where we
engage with Triple Threatleaders to learn about their
lives, careers and leadershipphilosophies and chat with our
guests about a hot topic insociety. As a reminder, a Triple
Threat leader is one whoembodies the very best of
leadership and who has strong IQEQ and DQ intelligence quotient,
(01:29):
emotional quotient and thedecency quotient. My guest today
is a true innovator who isbeyond passionate about the
customers he serves. Ken Reesehas founded and grown three
financial technology companies,all serving millions of
customers that he calls tightropers. He is currently founder
and CEO of covered a disruptiveFinTech dedicated to providing
(01:51):
affordable health care financingto people who struggle with less
than prime credit scores. Priorto covered Ken was founder and
CEO of elevate a leading onlinelender that he took public on
the New York Stock Exchange.
Additionally, he was the founderand CEO of cash works, a
financial technology companyacquired by GE. Earlier in his
career, Ken ran CSE indexes,West Coast financial services
(02:15):
consulting practice. Ken is agraduate of Reed College with a
degree in mathematics. And heearned his MBA in finance and
statistics from the Universityof Chicago. In 2012, Ken was
selected by Ernst and Young asan entrepreneur of the year and
was named a 2017 innovator towatch by bank innovation. He is
also the author of teetering whyso many live on a financial
(02:39):
tightrope and what to do aboutit, and avid cyclist and eat a
file Ken lives in San Francisco,California with his wife and
dog. Welcome, Ken, to theleaders perspective. Thanks for
joining us today.
Ken Rees (02:53):
Thanks for having me.
So, tell us about yourself. Youknow, where are you from? What
are your hobbies? How do you howdo you keep busy?
Oh, well, I grew up splitting mytime between Palo Alto and
Minneapolis, met my wife inMinneapolis and eventually ended
up being an entrepreneur focusedon nonprime customers. That's
(03:17):
been sort of my passion for thepast, gosh, almost, almost 30
years now.
Jason Goldberg (03:24):
And currently living in Dallas. Awesome. So
let's talk about your journey.
You know, you you started atleast three companies that I
know of.
Ken Rees (03:35):
How did you how did you come to be an entrepreneur?
I think you know, you're aconsultant before your first
before your firstentrepreneurial venture. Yeah,
I've always sort of viewedconsulting as sort of
postgraduate education, it wasjust a way to learn a little bit
more get closer to seniormanagement issues. Always wanted
(03:57):
to start a business but butactually was consulting that
kind of gave me the direction Iwanted to hit. Really, it
started with a project I hadwith a large bank, I was doing,
you know, a study around kind ofbranch optimization. So how to
make the branches moreproductive. But when I was in
(04:18):
one of the branches, I kepthearing the staff complaining
about the lobby trash, and I wasso we talking about lobby trash?
Well, it turns out, they'retalking about people who are in
their branch that weren'tcustomers, but were in there to
cash their their payroll checks.
And, you know, I'd never heardof this before I first off, I
had to sort of wrap my headaround the idea that there are
(04:38):
people that you know, actuallythey're making money on that the
employees regularly referred toas lobby trash. But also just
that, you know, the basicbusiness opportunity seemed
really unusual to me. I didn'tunderstand it at the time and,
and ultimately, it made me thinkmore and more about the
underserved consumers andfinancial services, how banking
doesn't do a great job.
(05:00):
with them. And then as I becamean entrepreneur, I saw there was
so much innovation happening infinancial services of just kind
of the early days of financialtechnology businesses. But none
of that innovation was tricklingdown to the people I thought
needed it most, you know, thepeople who have a lower credit
score, lack of savings, morefinancial fragility, and that
(05:24):
really kind of gotten mefocused, started my first
business, serving these checkcashing customers then moved
into the lending space and hadbeen there ever since. That's
awesome.
Jason Goldberg (05:37):
So you call them tight robbers? You know, can you
just help us define what what'sthe tight roper? And how do they
get there?
Ken Rees (05:47):
Yeah, yeah, I mean, we all hear about income
inequality. But I don't thinkit's income inequality, as much
as, as the you know, in equallevels of stability and
financial stability, you know,you've got a percentage of the
country that if they have anunexpected bill, or something
comes up, it's no big deal.
However, the people that I servewith the ad that I call type
(06:11):
rovers, are living paycheck topaycheck, that's about half the
US, now, they have very limitedsavings. And when something
comes up, that may not seem likea big deal, you know, flat tire,
even, it can sort of lead to asort of snowballing effect with
our financial lives, where badthings happen. And that's really
(06:36):
why, you know, getting into thelending space serving this
customer is so appealing,because even, you know, a few
$100 can make a very, very bigdifference to get a tight Roper
through a rough patch in theirlife and get them back
Jason Goldberg (06:55):
on track. And they're not necessarily low
income.
Ken Rees (06:59):
That's yeah, that's correct. So it's one of the
fascinating things, you know,certainly, depending on where
you live, you know, live in SanFrancisco, you know, you can
have a pretty high income andstill be a tight, right.
Jason Goldberg (07:10):
It's amazing.
And, and I think what mostpeople don't realize, and
honestly, I didn't realize untiluntil we work together years
ago, that they're not, you know,it, you're you're filling a gap,
right, we use the wordunderserved. And it's true,
because the traditionalfinancial services, larger
(07:32):
financial institutions in thecountry are not serving this
population. So if they need thatfew $100 loan or line of credit,
or ability to pay a medicalbill, they're not there to serve
that customer for two reasons.
(07:54):
One, they don't have the productto serve them. And two, they
don't have the credit appetite.
Ken Rees (07:59):
Right? What you know, I actually remember we, at my
previous company, we set up aresearch and advocacy group
called the Center for the newmiddle class to, you know,
provide a lot of studies intotheir needs, and then really try
to advocate for, for gettingmore services. And we oftentimes
(08:21):
would go to conferences, andsometimes we would sponsor
these, these working sessionswhere we bring type represent
our customers, and have themtalk to large audiences,
typically of bankers. And Istill remember one time when the
one of the people, there's kindof a do gooder type, if you
will, you know, ask the personon the stage and said, Well, if
(08:43):
you you know, need a loan, whydon't you just go to a credit
union credit units are great,aren't they? And the guy you
could tell it took him a fewseconds to even process because
he thought that was such aludicrous question. They finally
said, I don't go there becausethey won't give me a loan. And
it sort of threw her back. Shewas like, Well, why wouldn't
(09:04):
they give you a loan? Well, ofcourse, because if you don't
have pristine credit, you're notgoing to get a loan from a
financial institution, you know,whether it's a big bank or
credit union. So I think that isreally the issue that, you know,
we still have our majorfinancial institutions in this
country are focused on the oldAmerica, you know, all of
(09:27):
America defined as stableincomes and savings, and they
haven't really course correctedto the New America, which is
much more fast paced, wherethere's much more income and
stability and savings, even ifyou have it can erode really
quickly. And of course, that'seven more so today, with rising
(09:47):
inflation, gas prices are surethings like we're back to a
period where people can veryquickly get underwater.
Jason Goldberg (09:54):
And you know, you mentioned income
instability. There's also alsounpredictability with a lot of
gig economy workers workingmultiple jobs. And so their
their income is fluctuating,it's coming in at different
times of the month at atdifferent amounts, so they can't
(10:15):
rely upon that steady, stablepaycheck that Americans what's
happening.
Ken Rees (10:20):
Right? Well, and then of course, what's sort of
interesting is, you know, incomebecomes more in stable, but
actually expenses have becomemore and more stable. Because
you know, subscriptions, right,for sure. What have you,
absolutely, you're locked in forX dollars a month, no matter
what's happening with yourincome, and, you know, cell
phones and things like that. Soit is it is tough oftentimes to
(10:42):
match up inflows and outflows.
And I think that's why having ahealthy, you know, lending
products that serve everythingfrom the most pristine credit
levels to the lowest creditlevels is so important for a,
you know, to keep our society asstable as humanly possible.
Jason Goldberg (11:02):
So let's talk about covered your most recent
adventure. It is offering creditsolutions to less than Prime
customers in the healthcarespace. How's it different from
other, you know, BNPL, or creditcard providers?
Ken Rees (11:23):
Yeah, well, when I was looking into starting a
business, you know, new business2019 years, there was a lot of
focus on Buy now pay later,companies affirm and others, but
I saw them doing sort of thesame thing that happens
everywhere in financialservices, it was everybody was
(11:44):
chasing down the same customerat the top of the credit
spectrum. And it was leading to,obviously, frustration from the
customers, but also frustrationfor the merchants, you know,
they want to get everybody whowants to buy their products, or
use their services, access tofinancing, yet the approval
rates were, you know, 40 45%. SoI figured there's got to be an
(12:09):
opportunity to take what I thinkI know pretty well, which is how
to serve the underservedconsumers in this country, and
take that into the Buy Now paylater space. And in particular,
we focused on health care, youknow, part of it, you know, in a
way was, you know, a missionbased aspect, what better thing
to be able to help Americans getthe health care they need. And,
(12:31):
and what's so fascinating aboutthis business is, you know, we
kind of actually make everybodyhappy, you know, the doctors are
happy because they, they're ableto serve more patients. The
customers, patients, obviouslyare happy, but actually the
prime lenders that the peoplethat are currently in those
doctor's offices are happy too,because the doctor stopped
beating up on them about notapproving more, you know, when
(12:53):
we get integrated into thewaterfall, a doctor's office can
approve 90% of the patients thatcome in the door, prime lender
may only approve 40 45%, weapprove 85% of their declines
out on off, you've got asolution for just about
everybody that needs credit.
Jason Goldberg (13:13):
So what's the issue with health care
providers? And the fact thatpeople need to have you know,
where's the gap here, right? Sosomebody needs health care.
There's, there's clearly a gapbecause in our current system,
(13:34):
they either have a copay orcoinsurance or they might be
under uninsured. And they'releft with a bill. Right. And we
I think we've all had, you know,shocking bills from, you know,
either ers or I needed a CATscan or a dental procedure. What
(13:56):
creates the need for yourproduct?
Ken Rees (13:59):
Well, you know, and actually be clear that the
segments that we're serving areprimarily elective that's so his
hearing aids. dental work. clearaligners is big business. Yes.
Cosmetic LASIK, all of thosesorts of Okay. And, and, you
(14:23):
know, this is where it's, youdon't really have all that sort
of crazy, traditional healthcare thing where you walk in the
door, you've got no idea howmuch it's gonna cost until you
finally get the bill. Right.
That's a whole different issue.
And I'm not sure I'm, in fact,I'm certain I'm not smart enough
to figure that. But what I'mreally dealing with is, you
(14:45):
know, somebody who, whoactually, you know, is on Zoom
calls all the day sees you know,their teeth are really a problem
wants to get them straightened,but it's going to cost $1,500 or
$2,000. You know, we can Find away to help that that patient,
even if they have a 500 creditscore, the dental work they want
(15:08):
to need at a fixed paymentamount that's affordable for
them.
Jason Goldberg (15:13):
So let's pivot I want to, you know, the
obviously, the topic I wanted tochat with you about is customer
centricity. And, you know, in mycareer I've worked for, you
know, when I count up thecompanies that I've worked with,
and for their, for that, I'd saywe're incredibly passionate
about their customers orclients, and in each one in
(15:34):
different ways. You know, your,your former company, where we
work together, it was, it wasdifferent, it hit different, in
my mind, it was completelyembedded within the culture. And
from everything that Iunderstood, you started that
(15:54):
from day one, and employees,when they were hired into the
company, were really embeddedinto this, you know, from
orientation, till, you know,till the very last day, they
were embedded in this culture ofunderstanding who the customer
is, how they live, whatchallenges do they face? How do
(16:15):
they earn money? What worriesthem? How did you go about
creating that?
Ken Rees (16:22):
You know, first off, I'm really glad that that came
through that that way to us,nothing can be more rewarding to
a CEO, then to see the culturalattributes you try to create,
actually make it through to 10employees. But, you know, for,
for me, a lot of it was, youknow, as a company grew, when
(16:44):
you, when you start our company,you know, everybody's
essentially, you come in one bigroom, right? Even with Zoom
calls, and everybody can payattention to everything, you
know, I hear the customercomplaints, I hear that the
technology team battling overthe latest specifications, it's
really easy to get what's goingon. But as you grow, it becomes
(17:05):
harder and harder. So thatbecame a big focus of me, is,
you know, how do you stayconnected to that customer
that's having a problem withmaking a payment or is
frustrated about, you know, someaspect of the product. So, you
know, we started in touchsessions, so every employee had
to spend time, you know, in thecall center, listening to calls
(17:27):
and listening to the customersalso gave everybody a real
sensitivity for the kinds ofissues that our customer service
reps had to deal with. And thenalso, we spent a lot of time on,
you know, little things thatnight, I, as you recall, the I
did something I called cookieswith Ken, you know, we bring in
people from all levels of thecompany, and we'd sort of just
(17:49):
talk, you know, every couple ofweeks, you know, it'd be maybe a
dozen 15 people, and we just,you know, listen to people talk
about their frustrations, whatthey thought the company could
do better, we talk about how ourproducts could be better, I
think, you know, you sort of getthat together, you know, keep
people connected with customers,keep people connected, cross
(18:09):
functionally and cross hierarchywith everybody, you got a chance
to evolve, you got a chance toinnovate and, and, you know,
ultimately, I think he got achance to build an interesting
company. And
Jason Goldberg (18:21):
I think, I agree with all of that. I think one of
the key differentiators, though,I've worked with companies, and
when they say they want toinnovate, they're going off and
creating something either thatdoesn't exist, or they're
enhancing a product or aservice, perhaps to improve
profitability. But as you lead,you did it from the lens of with
(18:47):
the overarching theme of how dowe make the lives of these
tightrope errs better. So,
Ken Rees (18:55):
I think you've maybe given me a little bit too much
credit, because I had my morethan my fair share of innovation
disasters. I mean, we launchedone product that we were so
excited about, because it wasessentially kind of a supposed
to be a viral paymentinstrument, that product and I'm
(19:18):
walking into the details of it.
But you know, we've done allthis customer research and talk
to people, they're like, We wantthis this is gonna be so great.
And so we were kind of highfiving ourselves in the early
research was so great. We builtthe product, we launched it,
absolute dud and went nowhere.
And so, you know, you just can'talways, always tell but, you
(19:41):
know, I think, you know, I'mgonna give you a lot of credit
here.
Jason Goldberg (19:47):
You still have it. That's great,
Ken Rees (19:49):
Jason Goldberg innovation right here than you
did at my previous company. It'sa credit card focused on the
needs of, you know, sort of nonPrime customers. And what I like
about what you did is you Thisis different, you know, it could
have been very, you know,generic card, it could have
been, you know, a lot of peopledo almost certain demeaning
things where you put like dollarbills all over it, because you
(20:10):
think, well, if it's a non Primecustomer, they want to see
dollar bills or, or gold glitteror something like this. And, you
know, you probably can't tellfrom the camera, but you know,
it's an orange card, it's, it'sa vertical card, as opposed to
personal cards, it's got thislittle yellow band around it,
it's distinctive, and it shows alot of respect for our
(20:31):
customers, and treats them asyou know, adults as as deserving
of innovation and, you know,products that are tuned to their
needs. And I think that's reallywhat I liked about the way that
you built this is you didn't cutany corners, you didn't just
say, Oh, well, a nonprimecustomer, they'll take any car,
they can get, you know, youreally thought about every
(20:54):
aspect of how to tune thatexperience from the card itself
to the interactions in the callcenter, to the way that it was
marketed to be distinctive andnot end up just like everybody
else. Yeah,
Jason Goldberg (21:09):
we are certainly we certainly had our share speed
bumps, for sure, along the way.
But I think we we constantlylooked to listen to the
customer. And I think probablythe perfect example with that
product was how, you know, inthe, in the very beginning, we
we obviously needed an annualfee on the product to make it to
make it profitable. And in thevery beginning, our loss rates
(21:35):
were higher than we would haveliked. And we drill down and
figured out that it was becauseof the annual fee and, and these
customers were unable to pay theannual fee and their first
payment in one sum. So went tothe drawing board and said, you
know, what can we do tomaintain, you know, positivity
(21:56):
for the company profitabilityfor the company, but also
something that is better for thecustomer and different from the
market. And that's where we wentout, we were actually the very
first credit card in the countryto charge a monthly fee, which
the customer absolutely loved.
(22:18):
And could could, you know, thatwas great for a tight rope or
who who has this income, youknow, they have the tighter
income, or I should say tighter,you know, flexible spending. And
so this allowed them to, tocover that that need on a
monthly basis. So yeah, that wasdefinitely, you know, part of
(22:39):
that that culture of customercentric innovation is what what
drove what drove that?
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Ken Rees (23:08):
Yeah, no, I, you know, and I was not allowed to use the
card as as the CEO, but I stillkeep it with me, because I
really do think this is sort ofwhat I like about innovating to
this customer base by, you know,kind of tearing up the old rule
set and, you know, in our space,you know, a lot of the rules on
(23:31):
how do you serve theunderbanked, or the lower
income, you know, it's or lowercredit scores, it's typically
about how aggressively can youcollect? You know, you know,
even, you know, a lot of you suepeople, because they're not,
they're not paying off or you,you, you know, take their car
back or what have you. And, andI think that isn't the answer. I
(23:56):
think people will try to pay youif they can, you still have to
charge enough that you can makemake money, but instead of
trying to, you know, make moneyby punitive methods, you know,
make money with transparency andrespect and providing a product
that's distinctive and useful.
Definitely.
Jason Goldberg (24:14):
So how have you brought the same passionate to
covered?
Ken Rees (24:18):
Well, I think a lot of it is the same, you know, when
and actually there's atremendous number of advantages
to our business over traditionallending businesses because we
don't really have fraud. I mean,that's sort of an amazing thing.
You know, customers aren't goingto defraud us to straighten
their teeth, you know, it's weknow they are who they say they
(24:39):
are, we take it down payment, sowe get some sense of
affordability. Our downpaymentis typically, you know, two
monthly payments, so that givesus a sense, okay, well, they
have enough savings to getstarted. We get a valid payment
instrument and about 93 4% setupwith auto pay off with that done
(25:00):
If the typically a Bank Debitcard, and also the the merchants
or the or the doctors, you know,want to serve the underserved as
well. So they actually accept adiscount. So if it's $1,000
procedure, we pay them less than$1,000 to make that loan, so, so
(25:21):
the economics are reallyinteresting, we don't have
customer acquisition costs, wewe do have higher losses,
because we're serving a lesscredit worthy customer, but we
don't have fraud losses. Andbecause there's a discount on
the procedure, you know, we cancharge, you know, typically
credit card rates to a customer,that is not credit card worthy
(25:45):
from from a credit score. What'son my mind, because the
economics,
Jason Goldberg (25:48):
but that's their expectation and their desire,
right there, they're willing todo it, they have a need for it.
And, and it's serving that need.
Ken Rees (25:57):
Yeah, and right, and it isn't like, we're just, you
know, sort of pushing money intothe bank, we're helping them get
a medical procedure that theyneed. So that also, you know,
sets up a relationship betweenthem and us, it's different from
just a lender relationship, theyequate us with the health care
treatments that they needed.
What would be
Jason Goldberg (26:18):
your advice for other leaders? in improving
their company's focus andunderstanding of a customer?
Ken Rees (26:29):
Well, you know, I, I think every See, I think, senior
leaders all get, right. I mean,you can't run a business and be
divorced from your customer. Youknow, I think a lot of ways the
question is, how do you build itthroughout the business? Because
it is so easy for people who arein a, you know, functional job,
(26:51):
maybe to lose that connection?
Well, I'm just a coder. Youknow, or, or I'm in accounting?
You know, why should Iunderstand about the customer.
So I, that's why I thought this,in touch sessions of having
everybody have some sort of aconnection is important. And I
think most companies, there's away to get people out of their
(27:12):
job, and give them some accessto customer that could be, you
know, whether it's as we didlistening to calls, or Skype
visits, and, and I think everytime that I've always done that,
you know, people have called meup afterwards and said, Oh, I'm
really glad we did. I didn'tthink this would be useful. But
(27:34):
now I get it, but I really havea better sense of why I'm here
at work. And I think, you know,we all are dealing with this
situation of, you know, what arewe? It's not conscious
uncoupling. What's the trigger?
For quitting on the job?
Jason Goldberg (27:51):
Oh, unconscious.
Unconscious quitting is? No, no,no, no, no. It's conscious
quitting. It's consciousquitting, isn't it? There? Yeah.
Right. Right. No, quiet, quiet,quitting, quiet, quiet. And that
was.
Ken Rees (28:05):
So I mean, you know, so many people are losing their
connection with their job, youknow, we're on Zoom calls, we're
not seeing each other, we're notconnecting directly, those
obvious ways that force you tostay engaged, aren't there
anymore. So it is harder to keeppeople engaged and keep people
passionate and keep peopleconnected. And I think this is
(28:27):
all part of it. You know, my,my, my wife has been, you know,
on our vacation over Labor Day,it was her birthday. And, and as
usual, I was spending all mytime on Zoom calls. So she spent
a lot of time listening in andshe says, Oh, I can quite get
what you do. Now I get it, yourwhole job seems to be about
(28:48):
getting people to be excitedabout what they're doing, and
sort of do the best they can.
And I was like, Yeah, that's apretty good way to put it. And
now more so than ever. So Ithink, you know, it's easy for
leaders to think about kind ofthe economics and, you know,
raising money and all thisstuff, but but you still have to
(29:09):
keep that, you know, how do youhow do you get people connected
to the customer and feelingpassionate and wanting to step
up to make a difference in thelives of
Jason Goldberg (29:19):
people. It's not always easy to understand the
customer I call it the the ivorytower syndrome, right? Where,
you know, we we sit in a niceoffice, and we don't necessarily
live the life that our customerlives, right. We don't face the
same challenges. And so on aprevious episode, I spoke about
the opportunity, where we wentout. And actually it was a just
(29:44):
like a non prime scavenger hunt,where we had to, you know, we
had to go into a, you know, atitle lending store, go get a
loan from a traditional bank, wehad to go to a pawn shop, all
things that non prime consumersmight might be doing. And, and
(30:04):
for me, that was one of thebiggest eye openers. And that's
what drives, I think, really thein touch sessions 100%, like
hearing your customers, hearingthe tone, their concerns, and
hearing how they interact, andhow they make decisions, but,
(30:25):
but absolutely going out anddoing some of the activities
that they're trying to do inyour own space, is something
that I recommend highly, becauseit will open your eyes.
Ken Rees (30:36):
A lot of ways, that's why I, you know, I wrote my book
here, you know, was because, youknow, innovators, you know, for
better or worse, we're prettyprivileged group, you know, and
there's not a whole lot of usthat, you know, have lived
paycheck to paycheck and reallyget it and, and I think that's
(30:58):
why I tried to write this tosay, let's get the stories out
there, let's people, let's,let's have have more
understanding about the painthat our customers face, whether
it's early in life, as they're,you know, going into college, or
the kind of midlife challengeswith kids, or they, you know,
going into retirementchallenges, because that's one
thing innovators do really,really well, they understand
(31:18):
pain, they can come up withsolution to that pain, but the
pain that you saw, when youtried to go to get a Title Loan,
or get a check cashed. Mostpeople, you know, in business
don't get that they don'tunderstand that a large
percentage of this country dealswith that every day. And once
you can circulate, and surfacethose, those pain points, you
(31:39):
know, innovators are really goodat getting a Ha, I've got a
salute, right, and we'll go inthere and they, you know,
ultimately, hopefully make a lotof money. So that's sort of what
I was trying to deal with, let'slet's almost have a source book
for, you know, here's the 20pain points that are really
impacting this customer base,somebody's going to figure out
how to go after at least.
Jason Goldberg (32:00):
So in your businesses, because you've
worked in, in lending andfinancial technology, there are
obviously regulatory andpolitical pressures that come
from the outside. And and, youknow, I found undoubtedly, you
know, it's similar to this WhiteTower syndrome, you often have
(32:23):
people who look at banks,fintechs, lending companies of
all types. And they don't fullyunderstand the products and the
customers, and so they try toregulate something that they
don't understand. And thatcreates significant pressure
issues for companies that thatyou found. So how do you think
(32:45):
about that? How do you? How doyou deal with that, and, and
innovates through a highlyregulated environment?
Ken Rees (32:54):
Yeah, that's definitely the challenge, you
know, and just gets a lot ofways worse and worse each year,
as far as, you know, politicalgridlock and sort of, you know,
that the parties moving furtherand further apart from each
other, you know, makes it hardto have those conversations with
(33:14):
with regulators around, what'sthis customer facing? And how do
we come up with products that,you know, are maybe not perfect,
but make a positive difference?
And, you know, we all know theexpression, right, you know,
perfect is the enemy of good. Imean, that's definitely the case
in politics, where somebody maywant to make a sort of a
(33:34):
political point about highinterest products. And what does
that do? It just leads to nocredit being available at all
my, my favorite story was, therewas a big ag actually the Ag of
West Virginia. We were talkingto one time, and this was
somebody who made his entirecareer on shutting down, you
know, higher interest products.
(33:56):
And we sit through it, and weget it that you're not a fan of
high interest products. But whatdo you expect people to do? If
they their car breaks down, andthey need access to credit if
it's not available? And I said,Well, West Virginia, we have
something we call the boot, buthe didn't really have an accent.
But you know, he's talking aboutthe boot and we're like, What
(34:18):
are you talking about? He says,Well, you know, the boot you
they stand on a street corner,and with a boot and people put
money in the boot. So that washis answer was panhandle. And
we're like, Well, you know, Ithink you know, we may not like
hierarchies products, but you'vegot to admit hierarchies
products is a better solutionthan ham for sure. But, you
(34:40):
know, that wasn't the way hethought so, but you know, at the
end of the day, you have toengage you have to tell your
story may not, you know, get awin. You know, I still remember
a board member, you know,brought me in to meet with
Elizabeth Warren one time andyou know, I'm pretty sure I
didn't change Elizabeth Warren'smind on the you know, financial
issues facing nonprimeAmericans, but you got to do it,
(35:02):
you got to be out there. And,you know, there is a temptation
to just keep your head down. ButI think you have to be willing
to advocate strongly for yourproducts that you know, even in
situations where you may not winanybody, and advocate
Jason Goldberg (35:17):
for the customer, because oftentimes
they don't understand thecustomer. So at the end of every
session of all the episodes, Ilike to ask a question about,
you know, who are who are one totwo leaders, who you've learned,
learn from along the way, whohave influenced you, either in a
good or bad way? And, you know,what did they teach you?
Ken Rees (35:41):
Well, you know, I mentioned my my visit to
ELIZABETH WARREN Well, that wasdue to a really incredible
mentor, Bob Johnson, Bob Johnsonfounded BT billionaire. But what
he always taught me is, youknow, not to, to accept limits,
(36:01):
and to get yourself out there.
So he was one who said, youknow, what, your, you need to
tell the story of this customerbase, and I'm going to take you
in to see Elizabeth Warren. AndI was like, What's crazy, but
but he did, and, you know, he's,he's very well connected. And
DC, partly because he knows soimportant, you know, you know,
he doesn't think about what onedoes is, as an executive, it's
(36:23):
just about kind of making money,but it is making a societal
impact and being connected ityou know, with the, you know,
with the sort of VCs as well aswith, with, with DC, as well. So
he's great. And then I thinkanother person, another Johnson,
Blake Johnson, he founded acompany called bite was actually
(36:46):
our first customer at cover.
This guy is the savviestentrepreneur I've ever come
across, he started number ofbusinesses, and he thinks about
it, like a process. He's themost process or most people and
I, and this way, you start abusiness, and you sort of react
(37:09):
to what happens. And hopefully,if you're, you're good and
lucky, you end up in a placethat kind of works. In fact, we
started this business, just theweek before the pandemic hit. I
mean, literally, it washorrible. And so we did a fair
amount, of course, corrections,but this guy thinks it all the
way through. And from day one,he's thinking about what it's
(37:29):
going to take to build a companythat you can sell. And I like I
said, I've never seen a guythat's this specific and orderly
about starting a business,growing a business, not getting
distracted by the temptations ofhaving people throw money at
you. And that's been somethingthat has happened to so many
(37:52):
great businesses, they get sortof sucked up in all of the, you
know, we need to have a reallyhuge team. So let's really hire
a lot of people, because that'simportant. And, you know, let's
have really fancy office space.
And, you know, let's not worryabout profitability, let's just
grow a big business, right? Andthen all of a sudden, that blows
up. And he very disciplined, youknow, with all of his
(38:14):
businesses, and I really triedto take that into cover, to not
get ahead of myself, and bevery, very disciplined in how to
grow the business. So those arethe two people that I think
about quite a bit.
Jason Goldberg (38:31):
That's great advice. Appreciate it. Well,
Ken, thank you so much forjoining us today. I think we
learned a lot about customercentricity. We certainly learned
a lot about about tight ropersand all that you've done in your
career to support half of theAmerican population. So thanks
(38:51):
again. No, thank you, Jason.
Voiceover (38:55):
Thanks for listening to the leaders perspective
podcast brought to you by a celladvisors. Visit a cell dash
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turnaround, optimization, riskand HR advisory services and is
(39:18):
available on YouTube, Apple andSpotify.
No matter what field you work in, you
undoubtedly serve some type ofcustomer. Many employees,
managers and even leaders aredisconnected from who their
customers are and how they livetheir lives. What if you infused
a passion for the customer andan understanding of the customer
into your business? Can youthink of a business or brand
that has a culture that ispassionate and empathetic about
(00:24):
the customer that is innovative,and that is service oriented. A
triple threat leader will ensurethat customers are served with
intelligent solutions that aredesigned for them. And they do
right by the customer, thecompany, the employees, the
shareholders, and society as awhole.
(00:45):
Welcome to the leadersperspective podcast
where we talk to Triple Threatleaders about the people
products, trends and experiencesthat influence business. I'm now
pleased to introduce your host,Jason Goldberg.
(01:09):
Welcome back to the leadersperspective podcast where we
engage with Triple Threatleaders to learn about their
lives, careers and leadershipphilosophies and chat with our
guests about a hot topic insociety. As a reminder, a Triple
Threat leader is one whoembodies the very best of
leadership and who has strong IQEQ and DQ intelligence quotient,
(01:29):
emotional quotient and thedecency quotient. My guest today
is a true innovator who isbeyond passionate about the
customers he serves. Ken Reesehas founded and grown three
financial technology companies,all serving millions of
customers that he calls tightropers. He is currently founder
and CEO of covered a disruptiveFinTech dedicated to providing
(01:51):
affordable health care financingto people who struggle with less
than prime credit scores. Priorto covered Ken was founder and
CEO of elevate a leading onlinelender that he took public on
the New York Stock Exchange.
Additionally, he was the founderand CEO of cash works, a
financial technology companyacquired by GE. Earlier in his
career, Ken ran CSE indexes,West Coast financial services
(02:15):
consulting practice. Ken is agraduate of Reed College with a
degree in mathematics. And heearned his MBA in finance and
statistics from the Universityof Chicago. In 2012, Ken was
selected by Ernst and Young asan entrepreneur of the year and
was named a 2017 innovator towatch by bank innovation. He is
also the author of teetering whyso many live on a financial
(02:39):
tightrope and what to do aboutit, and avid cyclist and eat a
file Ken lives in San Francisco,California with his wife and
dog. Welcome, Ken, to theleaders perspective. Thanks for
joining us today.
Ken Rees (02:53):
Thanks for having me.
So, tell us about yourself. Youknow, where are you from? What
are your hobbies? How do you howdo you keep busy?
Oh, well, I grew up splitting mytime between Palo Alto and
Minneapolis, met my wife inMinneapolis and eventually ended
up being an entrepreneur focusedon nonprime customers. That's
(03:17):
been sort of my passion for thepast, gosh, almost, almost 30
years now.
Jason Goldberg (03:24):
And currently living in Dallas. Awesome. So
let's talk about your journey.
You know, you you started atleast three companies that I
know of.
Ken Rees (03:35):
How did you how did you come to be an entrepreneur?
I think you know, you're aconsultant before your first
before your firstentrepreneurial venture. Yeah,
I've always sort of viewedconsulting as sort of
postgraduate education, it wasjust a way to learn a little bit
more get closer to seniormanagement issues. Always wanted
(03:57):
to start a business but butactually was consulting that
kind of gave me the direction Iwanted to hit. Really, it
started with a project I hadwith a large bank, I was doing,
you know, a study around kind ofbranch optimization. So how to
make the branches moreproductive. But when I was in
(04:18):
one of the branches, I kepthearing the staff complaining
about the lobby trash, and I wasso we talking about lobby trash?
Well, it turns out, they'retalking about people who are in
their branch that weren'tcustomers, but were in there to
cash their their payroll checks.
And, you know, I'd never heardof this before I first off, I
had to sort of wrap my headaround the idea that there are
(04:38):
people that you know, actuallythey're making money on that the
employees regularly referred toas lobby trash. But also just
that, you know, the basicbusiness opportunity seemed
really unusual to me. I didn'tunderstand it at the time and,
and ultimately, it made me thinkmore and more about the
underserved consumers andfinancial services, how banking
doesn't do a great job.
(05:00):
with them. And then as I becamean entrepreneur, I saw there was
so much innovation happening infinancial services of just kind
of the early days of financialtechnology businesses. But none
of that innovation was tricklingdown to the people I thought
needed it most, you know, thepeople who have a lower credit
score, lack of savings, morefinancial fragility, and that
(05:24):
really kind of gotten mefocused, started my first
business, serving these checkcashing customers then moved
into the lending space and hadbeen there ever since. That's
awesome.
Jason Goldberg (05:37):
So you call them tight robbers? You know, can you
just help us define what what'sthe tight roper? And how do they
get there?
Ken Rees (05:47):
Yeah, yeah, I mean, we all hear about income
inequality. But I don't thinkit's income inequality, as much
as, as the you know, in equallevels of stability and
financial stability, you know,you've got a percentage of the
country that if they have anunexpected bill, or something
comes up, it's no big deal.
However, the people that I servewith the ad that I call type
(06:11):
rovers, are living paycheck topaycheck, that's about half the
US, now, they have very limitedsavings. And when something
comes up, that may not seem likea big deal, you know, flat tire,
even, it can sort of lead to asort of snowballing effect with
our financial lives, where badthings happen. And that's really
(06:36):
why, you know, getting into thelending space serving this
customer is so appealing,because even, you know, a few
$100 can make a very, very bigdifference to get a tight Roper
through a rough patch in theirlife and get them back
Jason Goldberg (06:55):
on track. And they're not necessarily low
income.
Ken Rees (06:59):
That's yeah, that's correct. So it's one of the
fascinating things, you know,certainly, depending on where
you live, you know, live in SanFrancisco, you know, you can
have a pretty high income andstill be a tight, right.
Jason Goldberg (07:10):
It's amazing.
And, and I think what mostpeople don't realize, and
honestly, I didn't realize untiluntil we work together years
ago, that they're not, you know,it, you're you're filling a gap,
right, we use the wordunderserved. And it's true,
because the traditionalfinancial services, larger
(07:32):
financial institutions in thecountry are not serving this
population. So if they need thatfew $100 loan or line of credit,
or ability to pay a medicalbill, they're not there to serve
that customer for two reasons.
(07:54):
One, they don't have the productto serve them. And two, they
don't have the credit appetite.
Ken Rees (07:59):
Right? What you know, I actually remember we, at my
previous company, we set up aresearch and advocacy group
called the Center for the newmiddle class to, you know,
provide a lot of studies intotheir needs, and then really try
to advocate for, for gettingmore services. And we oftentimes
(08:21):
would go to conferences, andsometimes we would sponsor
these, these working sessionswhere we bring type represent
our customers, and have themtalk to large audiences,
typically of bankers. And Istill remember one time when the
one of the people, there's kindof a do gooder type, if you
will, you know, ask the personon the stage and said, Well, if
(08:43):
you you know, need a loan, whydon't you just go to a credit
union credit units are great,aren't they? And the guy you
could tell it took him a fewseconds to even process because
he thought that was such aludicrous question. They finally
said, I don't go there becausethey won't give me a loan. And
it sort of threw her back. Shewas like, Well, why wouldn't
(09:04):
they give you a loan? Well, ofcourse, because if you don't
have pristine credit, you're notgoing to get a loan from a
financial institution, you know,whether it's a big bank or
credit union. So I think that isreally the issue that, you know,
we still have our majorfinancial institutions in this
country are focused on the oldAmerica, you know, all of
(09:27):
America defined as stableincomes and savings, and they
haven't really course correctedto the New America, which is
much more fast paced, wherethere's much more income and
stability and savings, even ifyou have it can erode really
quickly. And of course, that'seven more so today, with rising
(09:47):
inflation, gas prices are surethings like we're back to a
period where people can veryquickly get underwater.
Jason Goldberg (09:54):
And you know, you mentioned income
instability. There's also alsounpredictability with a lot of
gig economy workers workingmultiple jobs. And so their
their income is fluctuating,it's coming in at different
times of the month at atdifferent amounts, so they can't
(10:15):
rely upon that steady, stablepaycheck that Americans what's
happening.
Ken Rees (10:20):
Right? Well, and then of course, what's sort of
interesting is, you know, incomebecomes more in stable, but
actually expenses have becomemore and more stable. Because
you know, subscriptions, right,for sure. What have you,
absolutely, you're locked in forX dollars a month, no matter
what's happening with yourincome, and, you know, cell
phones and things like that. Soit is it is tough oftentimes to
(10:42):
match up inflows and outflows.
And I think that's why having ahealthy, you know, lending
products that serve everythingfrom the most pristine credit
levels to the lowest creditlevels is so important for a,
you know, to keep our society asstable as humanly possible.
Jason Goldberg (11:02):
So let's talk about covered your most recent
adventure. It is offering creditsolutions to less than Prime
customers in the healthcarespace. How's it different from
other, you know, BNPL, or creditcard providers?
Ken Rees (11:23):
Yeah, well, when I was looking into starting a
business, you know, new business2019 years, there was a lot of
focus on Buy now pay later,companies affirm and others, but
I saw them doing sort of thesame thing that happens
everywhere in financialservices, it was everybody was
(11:44):
chasing down the same customerat the top of the credit
spectrum. And it was leading to,obviously, frustration from the
customers, but also frustrationfor the merchants, you know,
they want to get everybody whowants to buy their products, or
use their services, access tofinancing, yet the approval
rates were, you know, 40 45%. SoI figured there's got to be an
(12:09):
opportunity to take what I thinkI know pretty well, which is how
to serve the underservedconsumers in this country, and
take that into the Buy Now paylater space. And in particular,
we focused on health care, youknow, part of it, you know, in a
way was, you know, a missionbased aspect, what better thing
to be able to help Americans getthe health care they need. And,
(12:31):
and what's so fascinating aboutthis business is, you know, we
kind of actually make everybodyhappy, you know, the doctors are
happy because they, they're ableto serve more patients. The
customers, patients, obviouslyare happy, but actually the
prime lenders that the peoplethat are currently in those
doctor's offices are happy too,because the doctor stopped
beating up on them about notapproving more, you know, when
(12:53):
we get integrated into thewaterfall, a doctor's office can
approve 90% of the patients thatcome in the door, prime lender
may only approve 40 45%, weapprove 85% of their declines
out on off, you've got asolution for just about
everybody that needs credit.
Jason Goldberg (13:13):
So what's the issue with health care
providers? And the fact thatpeople need to have you know,
where's the gap here, right? Sosomebody needs health care.
There's, there's clearly a gapbecause in our current system,
(13:34):
they either have a copay orcoinsurance or they might be
under uninsured. And they'releft with a bill. Right. And we
I think we've all had, you know,shocking bills from, you know,
either ers or I needed a CATscan or a dental procedure. What
(13:56):
creates the need for yourproduct?
Ken Rees (13:59):
Well, you know, and actually be clear that the
segments that we're serving areprimarily elective that's so his
hearing aids. dental work. clearaligners is big business. Yes.
Cosmetic LASIK, all of thosesorts of Okay. And, and, you
(14:23):
know, this is where it's, youdon't really have all that sort
of crazy, traditional healthcare thing where you walk in the
door, you've got no idea howmuch it's gonna cost until you
finally get the bill. Right.
That's a whole different issue.
And I'm not sure I'm, in fact,I'm certain I'm not smart enough
to figure that. But what I'mreally dealing with is, you
(14:45):
know, somebody who, whoactually, you know, is on Zoom
calls all the day sees you know,their teeth are really a problem
wants to get them straightened,but it's going to cost $1,500 or
$2,000. You know, we can Find away to help that that patient,
even if they have a 500 creditscore, the dental work they want
(15:08):
to need at a fixed paymentamount that's affordable for
them.
Jason Goldberg (15:13):
So let's pivot I want to, you know, the
obviously, the topic I wanted tochat with you about is customer
centricity. And, you know, in mycareer I've worked for, you
know, when I count up thecompanies that I've worked with,
and for their, for that, I'd saywe're incredibly passionate
about their customers orclients, and in each one in
(15:34):
different ways. You know, your,your former company, where we
work together, it was, it wasdifferent, it hit different, in
my mind, it was completelyembedded within the culture. And
from everything that Iunderstood, you started that
(15:54):
from day one, and employees,when they were hired into the
company, were really embeddedinto this, you know, from
orientation, till, you know,till the very last day, they
were embedded in this culture ofunderstanding who the customer
is, how they live, whatchallenges do they face? How do
(16:15):
they earn money? What worriesthem? How did you go about
creating that?
Ken Rees (16:22):
You know, first off, I'm really glad that that came
through that that way to us,nothing can be more rewarding to
a CEO, then to see the culturalattributes you try to create,
actually make it through to 10employees. But, you know, for,
for me, a lot of it was, youknow, as a company grew, when
(16:44):
you, when you start our company,you know, everybody's
essentially, you come in one bigroom, right? Even with Zoom
calls, and everybody can payattention to everything, you
know, I hear the customercomplaints, I hear that the
technology team battling overthe latest specifications, it's
really easy to get what's goingon. But as you grow, it becomes
(17:05):
harder and harder. So thatbecame a big focus of me, is,
you know, how do you stayconnected to that customer
that's having a problem withmaking a payment or is
frustrated about, you know, someaspect of the product. So, you
know, we started in touchsessions, so every employee had
to spend time, you know, in thecall center, listening to calls
(17:27):
and listening to the customersalso gave everybody a real
sensitivity for the kinds ofissues that our customer service
reps had to deal with. And thenalso, we spent a lot of time on,
you know, little things thatnight, I, as you recall, the I
did something I called cookieswith Ken, you know, we bring in
people from all levels of thecompany, and we'd sort of just
(17:49):
talk, you know, every couple ofweeks, you know, it'd be maybe a
dozen 15 people, and we just,you know, listen to people talk
about their frustrations, whatthey thought the company could
do better, we talk about how ourproducts could be better, I
think, you know, you sort of getthat together, you know, keep
people connected with customers,keep people connected, cross
(18:09):
functionally and cross hierarchywith everybody, you got a chance
to evolve, you got a chance toinnovate and, and, you know,
ultimately, I think he got achance to build an interesting
company. And
Jason Goldberg (18:21):
I think, I agree with all of that. I think one of
the key differentiators, though,I've worked with companies, and
when they say they want toinnovate, they're going off and
creating something either thatdoesn't exist, or they're
enhancing a product or aservice, perhaps to improve
profitability. But as you lead,you did it from the lens of with
(18:47):
the overarching theme of how dowe make the lives of these
tightrope errs better. So,
Ken Rees (18:55):
I think you've maybe given me a little bit too much
credit, because I had my morethan my fair share of innovation
disasters. I mean, we launchedone product that we were so
excited about, because it wasessentially kind of a supposed
to be a viral paymentinstrument, that product and I'm
(19:18):
walking into the details of it.
But you know, we've done allthis customer research and talk
to people, they're like, We wantthis this is gonna be so great.
And so we were kind of highfiving ourselves in the early
research was so great. We builtthe product, we launched it,
absolute dud and went nowhere.
And so, you know, you just can'talways, always tell but, you
(19:41):
know, I think, you know, I'mgonna give you a lot of credit
here.
Jason Goldberg (19:47):
You still have it. That's great,
Ken Rees (19:49):
Jason Goldberg innovation right here than you
did at my previous company. It'sa credit card focused on the
needs of, you know, sort of nonPrime customers. And what I like
about what you did is you Thisis different, you know, it could
have been very, you know,generic card, it could have
been, you know, a lot of peopledo almost certain demeaning
things where you put like dollarbills all over it, because you
(20:10):
think, well, if it's a non Primecustomer, they want to see
dollar bills or, or gold glitteror something like this. And, you
know, you probably can't tellfrom the camera, but you know,
it's an orange card, it's, it'sa vertical card, as opposed to
personal cards, it's got thislittle yellow band around it,
it's distinctive, and it shows alot of respect for our
(20:31):
customers, and treats them asyou know, adults as as deserving
of innovation and, you know,products that are tuned to their
needs. And I think that's reallywhat I liked about the way that
you built this is you didn't cutany corners, you didn't just
say, Oh, well, a nonprimecustomer, they'll take any car,
they can get, you know, youreally thought about every
(20:54):
aspect of how to tune thatexperience from the card itself
to the interactions in the callcenter, to the way that it was
marketed to be distinctive andnot end up just like everybody
else. Yeah,
Jason Goldberg (21:09):
we are certainly we certainly had our share speed
bumps, for sure, along the way.
But I think we we constantlylooked to listen to the
customer. And I think probablythe perfect example with that
product was how, you know, inthe, in the very beginning, we
we obviously needed an annualfee on the product to make it to
make it profitable. And in thevery beginning, our loss rates
(21:35):
were higher than we would haveliked. And we drill down and
figured out that it was becauseof the annual fee and, and these
customers were unable to pay theannual fee and their first
payment in one sum. So went tothe drawing board and said, you
know, what can we do tomaintain, you know, positivity
(21:56):
for the company profitabilityfor the company, but also
something that is better for thecustomer and different from the
market. And that's where we wentout, we were actually the very
first credit card in the countryto charge a monthly fee, which
the customer absolutely loved.
(22:18):
And could could, you know, thatwas great for a tight rope or
who who has this income, youknow, they have the tighter
income, or I should say tighter,you know, flexible spending. And
so this allowed them to, tocover that that need on a
monthly basis. So yeah, that wasdefinitely, you know, part of
(22:39):
that that culture of customercentric innovation is what what
drove what drove that?
Voiceover (22:47):
A sell advisors, expert consultants, are all
veteran operators who bring realsolutions to your business
challenges, contact us at infoat a cell dash advisors.com To
reach our experts today.
Ken Rees (23:08):
Yeah, no, I, you know, and I was not allowed to use the
card as as the CEO, but I stillkeep it with me, because I
really do think this is sort ofwhat I like about innovating to
this customer base by, you know,kind of tearing up the old rule
set and, you know, in our space,you know, a lot of the rules on
(23:31):
how do you serve theunderbanked, or the lower
income, you know, it's or lowercredit scores, it's typically
about how aggressively can youcollect? You know, you know,
even, you know, a lot of you suepeople, because they're not,
they're not paying off or you,you, you know, take their car
back or what have you. And, andI think that isn't the answer. I
(23:56):
think people will try to pay youif they can, you still have to
charge enough that you can makemake money, but instead of
trying to, you know, make moneyby punitive methods, you know,
make money with transparency andrespect and providing a product
that's distinctive and useful.
Definitely.
Jason Goldberg (24:14):
So how have you brought the same passionate to
covered?
Ken Rees (24:18):
Well, I think a lot of it is the same, you know, when
and actually there's atremendous number of advantages
to our business over traditionallending businesses because we
don't really have fraud. I mean,that's sort of an amazing thing.
You know, customers aren't goingto defraud us to straighten
their teeth, you know, it's weknow they are who they say they
(24:39):
are, we take it down payment, sowe get some sense of
affordability. Our downpaymentis typically, you know, two
monthly payments, so that givesus a sense, okay, well, they
have enough savings to getstarted. We get a valid payment
instrument and about 93 4% setupwith auto pay off with that done
(25:00):
If the typically a Bank Debitcard, and also the the merchants
or the or the doctors, you know,want to serve the underserved as
well. So they actually accept adiscount. So if it's $1,000
procedure, we pay them less than$1,000 to make that loan, so, so
(25:21):
the economics are reallyinteresting, we don't have
customer acquisition costs, wewe do have higher losses,
because we're serving a lesscredit worthy customer, but we
don't have fraud losses. Andbecause there's a discount on
the procedure, you know, we cancharge, you know, typically
credit card rates to a customer,that is not credit card worthy
(25:45):
from from a credit score. What'son my mind, because the
economics,
Jason Goldberg (25:48):
but that's their expectation and their desire,
right there, they're willing todo it, they have a need for it.
And, and it's serving that need.
Ken Rees (25:57):
Yeah, and right, and it isn't like, we're just, you
know, sort of pushing money intothe bank, we're helping them get
a medical procedure that theyneed. So that also, you know,
sets up a relationship betweenthem and us, it's different from
just a lender relationship, theyequate us with the health care
treatments that they needed.
What would be
Jason Goldberg (26:18):
your advice for other leaders? in improving
their company's focus andunderstanding of a customer?
Ken Rees (26:29):
Well, you know, I, I think every See, I think, senior
leaders all get, right. I mean,you can't run a business and be
divorced from your customer. Youknow, I think a lot of ways the
question is, how do you build itthroughout the business? Because
it is so easy for people who arein a, you know, functional job,
(26:51):
maybe to lose that connection?
Well, I'm just a coder. Youknow, or, or I'm in accounting?
You know, why should Iunderstand about the customer.
So I, that's why I thought this,in touch sessions of having
everybody have some sort of aconnection is important. And I
think most companies, there's away to get people out of their
(27:12):
job, and give them some accessto customer that could be, you
know, whether it's as we didlistening to calls, or Skype
visits, and, and I think everytime that I've always done that,
you know, people have called meup afterwards and said, Oh, I'm
really glad we did. I didn'tthink this would be useful. But
(27:34):
now I get it, but I really havea better sense of why I'm here
at work. And I think, you know,we all are dealing with this
situation of, you know, what arewe? It's not conscious
uncoupling. What's the trigger?
For quitting on the job?
Jason Goldberg (27:51):
Oh, unconscious.
Unconscious quitting is? No, no,no, no, no. It's conscious
quitting. It's consciousquitting, isn't it? There? Yeah.
Right. Right. No, quiet, quiet,quitting, quiet, quiet. And that
was.
Ken Rees (28:05):
So I mean, you know, so many people are losing their
connection with their job, youknow, we're on Zoom calls, we're
not seeing each other, we're notconnecting directly, those
obvious ways that force you tostay engaged, aren't there
anymore. So it is harder to keeppeople engaged and keep people
passionate and keep peopleconnected. And I think this is
(28:27):
all part of it. You know, my,my, my wife has been, you know,
on our vacation over Labor Day,it was her birthday. And, and as
usual, I was spending all mytime on Zoom calls. So she spent
a lot of time listening in andshe says, Oh, I can quite get
what you do. Now I get it, yourwhole job seems to be about
(28:48):
getting people to be excitedabout what they're doing, and
sort of do the best they can.
And I was like, Yeah, that's apretty good way to put it. And
now more so than ever. So Ithink, you know, it's easy for
leaders to think about kind ofthe economics and, you know,
raising money and all thisstuff, but but you still have to
(29:09):
keep that, you know, how do youhow do you get people connected
to the customer and feelingpassionate and wanting to step
up to make a difference in thelives of
Jason Goldberg (29:19):
people. It's not always easy to understand the
customer I call it the the ivorytower syndrome, right? Where,
you know, we we sit in a niceoffice, and we don't necessarily
live the life that our customerlives, right. We don't face the
same challenges. And so on aprevious episode, I spoke about
the opportunity, where we wentout. And actually it was a just
(29:44):
like a non prime scavenger hunt,where we had to, you know, we
had to go into a, you know, atitle lending store, go get a
loan from a traditional bank, wehad to go to a pawn shop, all
things that non prime consumersmight might be doing. And, and
(30:04):
for me, that was one of thebiggest eye openers. And that's
what drives, I think, really thein touch sessions 100%, like
hearing your customers, hearingthe tone, their concerns, and
hearing how they interact, andhow they make decisions, but,
(30:25):
but absolutely going out anddoing some of the activities
that they're trying to do inyour own space, is something
that I recommend highly, becauseit will open your eyes.
Ken Rees (30:36):
A lot of ways, that's why I, you know, I wrote my book
here, you know, was because, youknow, innovators, you know, for
better or worse, we're prettyprivileged group, you know, and
there's not a whole lot of usthat, you know, have lived
paycheck to paycheck and reallyget it and, and I think that's
(30:58):
why I tried to write this tosay, let's get the stories out
there, let's people, let's,let's have have more
understanding about the painthat our customers face, whether
it's early in life, as they're,you know, going into college, or
the kind of midlife challengeswith kids, or they, you know,
going into retirementchallenges, because that's one
thing innovators do really,really well, they understand
(31:18):
pain, they can come up withsolution to that pain, but the
pain that you saw, when youtried to go to get a Title Loan,
or get a check cashed. Mostpeople, you know, in business
don't get that they don'tunderstand that a large
percentage of this country dealswith that every day. And once
you can circulate, and surfacethose, those pain points, you
(31:39):
know, innovators are really goodat getting a Ha, I've got a
salute, right, and we'll go inthere and they, you know,
ultimately, hopefully make a lotof money. So that's sort of what
I was trying to deal with, let'slet's almost have a source book
for, you know, here's the 20pain points that are really
impacting this customer base,somebody's going to figure out
how to go after at least.
Jason Goldberg (32:00):
So in your businesses, because you've
worked in, in lending andfinancial technology, there are
obviously regulatory andpolitical pressures that come
from the outside. And and, youknow, I found undoubtedly, you
know, it's similar to this WhiteTower syndrome, you often have
(32:23):
people who look at banks,fintechs, lending companies of
all types. And they don't fullyunderstand the products and the
customers, and so they try toregulate something that they
don't understand. And thatcreates significant pressure
issues for companies that thatyou found. So how do you think
(32:45):
about that? How do you? How doyou deal with that, and, and
innovates through a highlyregulated environment?
Ken Rees (32:54):
Yeah, that's definitely the challenge, you
know, and just gets a lot ofways worse and worse each year,
as far as, you know, politicalgridlock and sort of, you know,
that the parties moving furtherand further apart from each
other, you know, makes it hardto have those conversations with
(33:14):
with regulators around, what'sthis customer facing? And how do
we come up with products that,you know, are maybe not perfect,
but make a positive difference?
And, you know, we all know theexpression, right, you know,
perfect is the enemy of good. Imean, that's definitely the case
in politics, where somebody maywant to make a sort of a
(33:34):
political point about highinterest products. And what does
that do? It just leads to nocredit being available at all
my, my favorite story was, therewas a big ag actually the Ag of
West Virginia. We were talkingto one time, and this was
somebody who made his entirecareer on shutting down, you
know, higher interest products.
(33:56):
And we sit through it, and weget it that you're not a fan of
high interest products. But whatdo you expect people to do? If
they their car breaks down, andthey need access to credit if
it's not available? And I said,Well, West Virginia, we have
something we call the boot, buthe didn't really have an accent.
But you know, he's talking aboutthe boot and we're like, What
(34:18):
are you talking about? He says,Well, you know, the boot you
they stand on a street corner,and with a boot and people put
money in the boot. So that washis answer was panhandle. And
we're like, Well, you know, Ithink you know, we may not like
hierarchies products, but you'vegot to admit hierarchies
products is a better solutionthan ham for sure. But, you
(34:40):
know, that wasn't the way hethought so, but you know, at the
end of the day, you have toengage you have to tell your
story may not, you know, get awin. You know, I still remember
a board member, you know,brought me in to meet with
Elizabeth Warren one time andyou know, I'm pretty sure I
didn't change Elizabeth Warren'smind on the you know, financial
issues facing nonprimeAmericans, but you got to do it,
(35:02):
you got to be out there. And,you know, there is a temptation
to just keep your head down. ButI think you have to be willing
to advocate strongly for yourproducts that you know, even in
situations where you may not winanybody, and advocate
Jason Goldberg (35:17):
for the customer, because oftentimes
they don't understand thecustomer. So at the end of every
session of all the episodes, Ilike to ask a question about,
you know, who are who are one totwo leaders, who you've learned,
learn from along the way, whohave influenced you, either in a
good or bad way? And, you know,what did they teach you?
Ken Rees (35:41):
Well, you know, I mentioned my my visit to
ELIZABETH WARREN Well, that wasdue to a really incredible
mentor, Bob Johnson, Bob Johnsonfounded BT billionaire. But what
he always taught me is, youknow, not to, to accept limits,
(36:01):
and to get yourself out there.
So he was one who said, youknow, what, your, you need to
tell the story of this customerbase, and I'm going to take you
in to see Elizabeth Warren. AndI was like, What's crazy, but
but he did, and, you know, he's,he's very well connected. And
DC, partly because he knows soimportant, you know, you know,
he doesn't think about what onedoes is, as an executive, it's
(36:23):
just about kind of making money,but it is making a societal
impact and being connected ityou know, with the, you know,
with the sort of VCs as well aswith, with, with DC, as well. So
he's great. And then I thinkanother person, another Johnson,
Blake Johnson, he founded acompany called bite was actually
(36:46):
our first customer at cover.
This guy is the savviestentrepreneur I've ever come
across, he started number ofbusinesses, and he thinks about
it, like a process. He's themost process or most people and
I, and this way, you start abusiness, and you sort of react
(37:09):
to what happens. And hopefully,if you're, you're good and
lucky, you end up in a placethat kind of works. In fact, we
started this business, just theweek before the pandemic hit. I
mean, literally, it washorrible. And so we did a fair
amount, of course, corrections,but this guy thinks it all the
way through. And from day one,he's thinking about what it's
(37:29):
going to take to build a companythat you can sell. And I like I
said, I've never seen a guythat's this specific and orderly
about starting a business,growing a business, not getting
distracted by the temptations ofhaving people throw money at
you. And that's been somethingthat has happened to so many
(37:52):
great businesses, they get sortof sucked up in all of the, you
know, we need to have a reallyhuge team. So let's really hire
a lot of people, because that'simportant. And, you know, let's
have really fancy office space.
And, you know, let's not worryabout profitability, let's just
grow a big business, right? Andthen all of a sudden, that blows
up. And he very disciplined, youknow, with all of his
(38:14):
businesses, and I really triedto take that into cover, to not
get ahead of myself, and bevery, very disciplined in how to
grow the business. So those arethe two people that I think
about quite a bit.
Jason Goldberg (38:31):
That's great advice. Appreciate it. Well,
Ken, thank you so much forjoining us today. I think we
learned a lot about customercentricity. We certainly learned
a lot about about tight ropersand all that you've done in your
career to support half of theAmerican population. So thanks
(38:51):
again. No, thank you, Jason.
Voiceover (38:55):
Thanks for listening to the leaders perspective
podcast brought to you by a celladvisors. Visit a cell dash
advisors.com For moreinformation about our growth,
turnaround, optimization, riskand HR advisory services and is
(39:18):
available on YouTube, Apple andSpotify.
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