Assaf Wand - Innovation in Static Industries [Founders Field Guide, EP. 36]
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It also splits your bed in half so your partner can choose a totally different temperature. I was so impressed. After using eight. Sleep that i became an investor to embrace the future of sleep and get one hundred and fifty dollars off your new mattress go to aid sleep dot com slash patrick or use the code patrick alone. Welcome everyone. i'm patrick shaughnessy. And this is founders. Field founders field guide is a series of conversations with founders ceos and operators building great businesses. I believe we are all builders. Our own way in this series is dedicated to stories and lessons. From builders of all types founders. Field guide is part of the colossus family. Podcasts and you can access all of our podcasts including edited transcripts show notes and resources to keep learning at join colossus dot com. Patrick o'shaughnessy is the ceo of o'shaughnessy asset management. All opinions expressed by patrick and podcast. Guests are solely their own opinions and do not reflect the opinion of o'shaughnessy asset management. This podcast is for informational purposes. Only and should not be relied upon as a basis for investment decisions clients shaughnessy asset management may maintain positions in the securities discussed in this podcast. I guess today is asaf want. Ceo and co founder of hippo the homeowner insurance startup founded in two thousand fifteen in march. Two thousand twenty one hippo announced a merger valuing the business at over five billion dollars in our discussion we cover. How hippo approached innovation in highly regulated insurance industry unique strategies for building brand and trust and how direct relationships with homeowners has opened up the hippos business model to a wide range of opportunities. I was excited to speak to a soft given his experience as a serial entrepreneur and he did not disappoint. Please enjoy this great conversation with soft one. Maybe we could begin with what. I'll call your philosophy of business and ayla building things you built a lot of things. Just talk us through your high level view and entrepreneurship and business. Wow that's heavy stoute's not that have had my philosophy for business. But i'll give you what. I usually tell knows an excuse my french. I might chris a bit in this discussion. Join us. I think that enterpreneurship is hard. It's shit it's crap it's trenched wolf him but the good thing about them domino sheep basically three things. You choose what you're going to work on so it's your choice. You didn't join someone else to do whatever they wanted. You can wake up every morning and choose. What you're working on you can choose. We work with because you have a choice. If you'll hiring personnel not hiring a person it's up to you not always of the options but it's up to you and you can build a culture that you want. It's kind of like the epic thing of independence to carve for what you wanna do. You pursue what you want with the people that you want in That you want dots. The biggest benefit of indonesia in my mind because you need to find a good reason why you wake up in the morning every day as i told you it's trench warfare. Always tell the team. This week is going to be a week. That just going to put the helmet and put the storm and we're going to start being bombarded. What was your first taste of entrepreneurship. And how did that contrast with what you had done up until that point in your life. I was born to end panel and the reason i was born to being banou is because i'm the worst employee you can find. I'm the worst in politics of an organization. I don't understand him. I would always blake award. If something doesn't make sense. I believe in me talk with me in kindergarten in. Someone say something doesn't make any sense. I'm gonna fight it. It's an embedded thing. I cannot accept that someone above me doesn't do a good enough job but because his senior senior like that doesn't make any sense. I'm not set up floyd which the wheel this thing is. Because he's rayleigh was also in the military so you say fine okay fine. You didn't like this company and your shift to another company. Didn't like this fine but you'll in the middle. It's kind of an ira kind of organization so you can't really go to the generous. That's the dumbest thing. It just doesn't work like that but the good thing is that they easily military is a lot less article than a lot of other places. That's one and even within dat rigid organization little specific units that a lot. More meritocratic hands. Why is it's actually enforcing full enterpreneurship to say what you think about the mindset of lawyers versus entrepreneurs as a contrast. Yeah the span of your life. You kind of find. There is a linear line of different kind of mindset. I'm gonna give you another remark afterwards about another like mice found very interesting for me. I think indochino sheep isabelle you wake up every morning and you owe building something that you think are going to have an impact and changed the world and be a force of positiveness or it can be of economic whatever you want and then you have on the other side loyals in lawyers mindset is about only bringing up all of the negative in the world against the optimism of the contract worse but what if an outcomes a list of six hundred different things that they need to be saying. Now is the rule. I always tried to stick away from talking to lawyers which is very interesting because they only bring to the negative mindset and then constantly has ended up and will be positive so i'm trying to avoid that will in the process of going public which fires lots of lawyers host. I take over your life while you talk is accountants and lawyers and that kind of stuff. So i think it's very very different in the last two three years i found another really really interesting kind of mindset. That was very different to meet. So i work in insurance because he plays an insurance company. Any insurance there is a specific kind of pilsen which is actuaries. So enterpreneur restate you'll by sokcho and the most risk averse individuals on the face of the planet. Continue that once in one hundred fiftieth. There is a scenario. Isn't actually so. I think the company people that actuaries which is the most fallen mindset. I've ever met in my life. I'm like yeah we can do it because in one seventy seven years. I'm like what are you talking about the discussions. How many companies. Even last seventeen years that you'll even bringing this topic and what such an interesting mindset. What was the most interesting experience of risk taking the entrepreneurial sense sabi forest telecom. Those are two companies that you started prior to hippo. Talk us through the major lessons that you learned at those two companies that you brought forward with you or left behind. When starting about sabi was a company that was started with. The premise of the world is maturing and aging and people over the age of fifty half ninety one percent of the networth and sixty seventy percents of the consumptions priscilla of income usually. Oh parents more wealthy than you've been even if not making more salary. Finish painful for the home. So they have more of a net in the so. The thought was that people have more worth. The world is maturing in a fast paced in regular goals. So what i mean is. There was a certain point of time because of baby males which you can think about it is a python away too big and pig keeps on going through the belly of the bhutan and now they're all fifty five and above but he used to be twenty and thirty and forty so now they'll just maturing this massive population that basically created almost all of the worst in the world these other people that actually captured dot side of the worth but only five percent of the marketing budget is to them. So you have population ninety nine percent of the net worth but only five percent of the marketing budget. He's actually catering to them even in that five percent. I don't know my guess is north of eighty percent is always negative. All advertise to people above fifty four company. You don't have any friends you'll impotent. You will whatever it's always negative all the other side of it it's like. Have you saved enough money for your retirement. Do you have enough i. It's always on the negative side. And i thought that's ridiculous because people live the life very differently. My parents are like i know. Sixty six seventy old super healthy active travelling and stuff like that then. They shouldn't be catered like that. They should be a lot more positive. So i thought there is a place for a brand that celebrates that catered to them and not kato to the caregiver. All just the issues and the challenges. And that's what we started sobbing. Which is a japanese word which is part of this Wabi sabi kind of thing. So is a japanese quonsett about the beauty and aging that the patine passing of time over an object able to hardwood floors. That's what brings it cocktail. We started a company that the idea is. Let's create products the more geared toward these individuals. So it can be separate surfaces in the house and grab bars and things of that sold every once in a while. You go to the australian and you get up and it feels bad and feels bad because he was utilitarian which is horrible because nobody thought on the end customer now day feel just take mark that this is something regulatory that they need to do. And then you start to do some research and you see that. We worked with some of the best designers world. Redesigning and focusing on poor dots are a lot smarter and create new bosnia on this stipulate service new canes pill boxes which assoc shameful can they be which slightly more whimsical kind of stuffing a so. That's what we did. So if i'll come back to the point before what did they learn the maniacal customer focus in actually thinking of what the customer wants is a dissenting everything as opposed to. Let's start with will need these and stuff. No let's talk and talk and talk to customers and put any physical goods as much as i hate it then. It would never do physical goods in my life but there is so much joy in seeing someone actually using poured in you can actually follow up photo a person on his day to day with dean and see hundreds of different touch points that you never thought important that you can incorporate into the product to make a porta smarter better. You know something. The drains you joy is opposed to shame. You mentioned the. You'll never do hardware again or anything physical again. Talk about speed in business. The importance of speed. What you've learned about how you deploy it. So how do the has limitations on speed because if we want to come up with a quarter of that we want to launch it to more patrick and seven tomorrow so we need to design. Maybe that can be fast. We need to raise the engineer. It okay not so fast and then comes post this which is the most magical thing and hardwood Tooling so you need to basically find a block of metal the laser in scattered. It takes six to eight weeks in older to plug this block into a machine. The basically manufacturer on scape so no matter. What you in the middle of the sports. it's gonna take you to free. Months need to believe And then what about cheating. Y'all gonna if everything because he was going to kill all of your margins so now we need to ship shipping from china now within the world where they can't even find contain those. Let's say you find it contains that's gonna take six to eight weeks and cut stem and shipping and so on into more morning. It's like it's going to take forever and steichen. It takes a long time. The interesting thing is that fintech in insurance specifically also takes a long time. There is no. Mvp there is no. I'm going to start selling insurance to patrick. You need a department that you need to five eight and you need to approve it with department of insurance ended insurance takes time and by the way those fifty departments of insurance in the uso. The fact that i'm live in california doesn't mean i'm i can be live in oregon zone. Which are like around the same vicinity. Even that takes away any awfully the first four duct. If i ever leave insurance. I kind of need to have a quarter center because maybe you have a question and i need to awfully claims because maybe you bought the insurance the following day. You've been advocating. So i need to take care of you. So there is no mvp which changed how investments should look at anything on specifically the insurance in many fintech as well pens if it's loan payments and stuff like that it just takes a while and you'll managing in fintech. It's people's money it's not a whimsically tiktok it works. It doesn't work it's live. it's not like i'm not saying it's it has its own merit and it's unplaced but picked is not working to mole. They did a problem. Find those going to be. People are going to lose money because their livelihood is on that but it's not going to actively hurt a lot of people. But if i charge you and it's your money and you're going to something's gonna happen. God forbid you have a thought fire in your home and you to ensure properly so now. I can't really make you hold for that. That's a way more important problem soon. I fade out. You need to make sure that it's working hands white. It's not fast on the dockside. What's fast is that. Eat rations afterwards. On how you bring the market value focus on the customer value today do ab testing. I believe that sense of urgency is one of the core strength of a stout i of an ongoing fight to maintain it. It's a lot easier when you have thirty people now with the five hundred people. It's a struggle in a fight. We used to jump on everything that was going and fix whatever there is now southern does process and those this and we should really make sure that it's located as we have on the prioritization. This is part of the fight of a growth. Seal wants to push the company in maintain what i believe that the company to the fact that we have hundreds of thousands of customers and we need to maintain a system and we need to add horses and some standardization. So does this ongoing fight. That's going on. I believe that time to market speed iteration and things of that. So what would negate us from being incumbent and you bringing more people that are more seasoned bush to the other side in. That's the inherent fighter. I have frank now in the company. How do you personally act to increase maintain inject urgency into the business even at the stage. Where you as the leader doing actively to try to keep that up you lead by example. Oh you do things is our everybody's gonna do things as close to that. When i got married a friend of mine came and said listen. I'm going to give you two teams for the wedding tip number one is you'll know the host so don't worry you paid a lot of people to be the whole so you don't need to make sure the patrick is eating and stuff is fine. Chill on the second thing and this is the point. I wanted to make on that. One is will ever you going to be. That's where the guests are going to be. So if you want everybody to dance so you need to be on the dance floor. You won't ever between just going needs you. Want everybody to mingle and being the bar being developed. You can't expect everybody to be in place. You're not done deals you like the you'll the point yielded the weights and you will will basically the the force of gravity. So if i'm as a seal. I want to have a sense of urgency on sales now. I need to focus on sales in the gravity is going to lean towards dot side and i think my job is to constantly see will stuff is needed and changed mutation in being dot area. And that's what's basically gonna push to focus on that side. And i need to constantly think of well. Is the problem right. Now move the gravity. Unlock all of all kinds of riddles differ favorite example within hippos history of you doing this where you recognize something that needed movement or momentum and you led the charge as the first person in. It's almost a daily thing so when we when we're willing to world of of insurance which basically means that of view is that a reason to being company is to take care of your. When shit happens. I don't know how to explain it in every once in a while she'd happened. There was a catastrophic losses in texas will. There was a massive free recently. So i need to work. Twenty seven and take care of customers and employees is an old. I'll claim and court center is in austin where which the model ship epicenter. Yeah yeah and we had so. I had to take a little thirty two people to find them homes my employers. I because we have people with kids that didn't have you know with a two year old. The didn't have heat. So i was on the phone with temporary housing talking to a friend who have no tail if he minds pudding the otell online and bring it in so i can put my employees after that. Let's stop taking care of our customers. I old what was it. Like a thousand lasagna's but it was my credit card because there was an issue at the beginning to basic go and handle ville to customers. That didn't have heat and this is just one example. It happens on an ongoing basis. We have a problem with basically selves levels deteriorating. All of a sudden why we shift of leadership we have a new crm system until they learn until not and this is unacceptable to me like we're supposed to be the best thing customers period and if something doesn't happen so let's let's acknowledge it that's one instead of giving excuses and stuff like that. Let's acknowledge it. Let's do something which is even would force. Let's let's take the party. Let's put all of our people over time and just take care of it any the back. Make sure that all of the systems are going live so every week. There's a new thing that happen. Every insurance review requires my time. Now it's about going public. So i'm somewhat of the face of the company so i need to be shown more with specific investors. Sometimes it's the. It's always like the i used to tell. My chief product officer was one of the first employees. That is not the first that i worked with in the company. It was a point. Well it took me to discussion and said listen. I don't get the love anymore because we used to talk all the time and all of a sudden hardy seal and i told him that's the best thing that can happen to you if you're gonna often then it's probably something is wrong and it's not a good thing so as long as you don't see me it's really really good. Sign for you. I love to rewind the clock. Twenty fifteen and the bounding moments or insights of the business. What did the industry the insurance industry look like and feel like to you right at the start of hippo and then i wanna use that ground setting as a great excuse to talk about how the business has evolved feel like at the start until the magic of insurance at twenty fifteen eight looked exactly like it looked to me at two thousand and five and friday exactly like it looks ninety ninety five so it's that's the magic of insurance. That's why i think it's an amazing place to south eventual. So of the idea was when i was working with mckinsey new york in the financial institution And amount of the customer disturbed of insurance companies. And you serve them and they can't you realize that they can hardly implement anything. There's politics does regulation. There is lack of systems. There's just a lot of issues like there's no lack of speed you know. We talked before about speed. This is still kind of industry. I've ever seen in my life. People are very content and happy to go with four percentage in you can actually do it by increasing some of basically the premiums which is fine. Because they're going up. I'll than inflation anyway so everybody's contempt and happy so i looked at starting to business in two thousand and five and it was the same kind of business that basically set up at twenty fifteen difference is actually not the industry change. Is that the world change around the locker more so in two thousand and five the reason i felt like it's not a good time to start. The company was the three things one is. You couldn't build a back end so if we're talking about starting an insurance company i would've done the research and then i would have said okay. Fine it's gonna cost me three to four hundred million dollars and it's gonna take three to four years and i would need to bring a company like duck creek or guide while to build it back. In and these services company knocked rate the company. Especially at that point of time. I would need to bring to by oracle database nine. I would need to bring essential to build everything they would ask me a question of how many customers you think you're going to have at seven and i'm going to say i think two hundred and fifty thousand customers and because they find you're gonna pay us pill customer in seven and that's how it was wired. I'm like okay. I guess that's not the number one venture to stop. His second thing is was the lack of data. So whenever you wanted to sell something you would have asked. How can you compete with state. They have ten million households the showing they've been in business for one hundred and fifteen years. How can you compete with him and the answer would have been. I probably can't and then the third one was the was in a different place of trusts over new brand insurance game of trust dinner. They you want to know that. If god forbid something happens to you the council side is going to be able to take care of you and pay you and all of that kind of stuff. That's basic insurance. You'll buying a promise does know poor that is the wheel the sport in the world. It's a product that you as a customer one of us in the people that sell you the product don't want you to ever use. It's kind of what you'll buy is rights to file a claim. If god forbid something happened in you will in fraudulent. that's what you'll bind. The rightfully claim in thought people would not trust the new grant. That was kind of the three things so lack of ability to build a back end lack of data. And i'm not sure people trust in your brain fast forward to twenty fifteen. You realize that you can everything escape using aws filled out in tokyo for that full that and Intercom for the chad. The so much stuff that you can actually build on scale and you don't need to commit for many customers because many customers are going to have the customer they're going to have and you don't have one of the legacy because i don't need to commit up for something that's going to be legacy by the time it's actually going live and i can build a stack myself. And it's a lot more cost effective so dot hurdle basically dropped second thing is a point that you realize it's the complete opposite side of data within the world with an abundance of data. You have unlimited data so you in a world where it's a benefit to be a newcomer because the snow legacy you can build them. Scale and data is an advantage as opposed to disadvantage and the third one which was brandon to trust. And all of that. There was a point where i realized that you know assad is doing everything online. I'm getting my student loans from sulfide managing my money with what foreign trading in whatever it was. You know each right now. We'll be nude etcetera fine influence one more thing so it came to that and then on top of all of it. I'm going out one more. Random thought that i realized is that the world is moving to specialization as opposed to bucking things together. Because i got this questioned by law how can you compete with thumbnails and travels because daylight saving bundling in what we realized. Is that two things one. The world is moving to specialization in have specific for the way better for what you want to do. So it's actually going in that direction and insurance it's still somewhat set up his bundle but it keeps on being this mitigated and we have a saying the company that if you tie to walks together don't float but you rang a crappy insurance crop insurance and connect. It doesn't make it a better border. It's still too crappy poor that's connected to get so you should buy the right auto insurance and the right home insurance and it's way better for you as the customer and it's moving in that direction so i'm just adding into the three points that i said about insurance is that i also had this conviction that being a malign company that is a militant it's interesting how in the internet era it does seem to be easier to build a brand quickly bootstrap that trust if you're incredibly focused on one narrow thing because then people just assume all your effort is going into that thing and they're used to using a lot of products what were the most important things you did to bootstrap trust. It still is an insurance business. It's not a dvd brand or something where you can spin up a brand story. You still need people even if they think you're so focuses home insurance and that's good. You're still brand new. So what worked when it came to bootstrapping trust quickly. We will lending someone else's brand. That's the best example that i find so there was a point. Will you realize following thing which is most actually. Don't buy insurance what you buy you buy a home if you buy home you need a mortgage and if you need a mortgage insurance so you are a sideboard act of home-buying and because of that we realized that it started with distribution but it's actually has to do with brands in although that i wanna work with everybody has to do with on purchasing so we work with companies like bell mortgage and blend on the mortgage side. We work with domo on the title side. We work with banks. We work with mortgage services companies like own point. We work with comparison. Relay g on the real estate side with lena. In toll brothers on homebuilders' sides we work with everybody that has to do with it. So it's really good distribution but to your point from before out you build trust and what you do with that. You're basically lending the brand of chase if you're getting mortgage from chase and chase his saint. Patrick do you wanna have insurance. Okay you just doing it. I'm basically rioting chases brand because if chased it and they like means. Then i'm probably good enough. I have the halo effect of the chase france. And that was part of the thought of audi. We increase customer satisfaction. Until we're going to have scaling-up in word of mouth renting and marketing and enough people that have claims which was a positive experience and people are a net promoter score which is whatever seventy five in claims one these things thanks to a wine so we will using other channels brand to basically gain a quoted. Trust by folksy obviously begs the question. I think i've seen utah elsewhere about one of your top strengths being distribution and maybe even partnerships more specifically. How did you convince them so same problem. One degree removed. So what was the key. They're relentless when i was a young business development prison so my vp was talking to me about how you build business development and there is a. It's a bottom up kind of thing. Which is we're gonna get three full small customers in once we're going to get three full small customers then we're going to try and get one medium one and then we're going to take us two years and we're going to bring through to a three one and then you're gonna try and hit your way i. It's kind of like you go into that. I'm not patient enough for that. It never works well for me. I'm starting from the top. So we bought comcast cast and we both line out and we bought an you know the interesting thing is is probably not a high each racial but once you find that. The ceo of the now gets what you'll try to do. The entire organization is busy on online. And then all of a sudden you actually start with the way in this case the close of us and one aboard et cetera in you get recognition in the other. People in industry are looking at you instead of like heights. A nice step. What did these guys got the order. The like we have to do as well see actually top down which is a lot more effective but it requires my job to be. I don't know fifty percent time chasing these these people. I think that you bill relationship by being very honest transparent and not overselling because it's never gonna fly and basically started with a partnership becomes a friendship or something that all of our partners our friends in in some ways in those many times what we need to make choices that are not for the benefits of hippo but for the benefit of the partners. Because he'll taking a long-term view over the wind you bill. What the nation. This is what you do and you'll start winning. It begs yet another question in the chain. Which is you mentioned earlier. There's no mvp here like there's a lot you actually have to build and do regulation fifty states all this stuff. I guess i'd be cures. Hear more about what the original building blocks of a business like this were but when you show up for these partnerships what stage are you at. What have you already built. It seems like you always need to be a little bit ahead of where you actually are right. Talk through that. Like what had you built when you were talking to. These people always a lot less than what i thought they built up. And then detecting. No no crazy cannot do that. You just told me it's okay. There's a significant slack in business development. These i have failed to see a business development deal that is you know less than six months. It's like work. Speed needs to be an organization of being to say. Listen we can put it needs to be careful and never going to work in full because they have another. The good thing is that you're actually buying time in business development. You'll selling a facade. Will behind it. It's it's it's does nothing in it. It's like a movie set in. You know that you'll also even if you're going live it's not gonna be unscathed. It's fine to have people moving papers around in the back and you'll buying you'll sell more capabilities over time what you also realize in silicon valley is filipino. Don't catch me on the number. I would say eighty percent of business development. You don't work but raise money on business development so you come to the pitch with a v. c. n. we just got but is don and this is gonna like and they have fifty million pixels into the twenty one out of every day that's awesome. He'd never worked nafta. But you raise money on dot which enables you to build some other stuff to scale into the next thing never works not because of strategy because of implementation because the person that deal just move to another company and nobody cares about you and you become an old fashioned kind of porject on. There's another biology and difficult. Wasn't doing well so that about increasing margins and play. There's always reasons it's not bad though. It will be legitimate reasons. Just a business. Development is usually doesn't work so one of the things that we did is we doubled down on the business development so the people that led our be round concussed and the people that are around will now so daiwa on our board. They have the silt level of incentives. We'd like some warrants. Which will only if doing your hundreds of thousands of customers and stuff like that up to a point where it's like. I'm happy to give you. If patrick gives me a million customers i'll give you five percent of the company because when you're doing ten thousand custom of other happy give you that because their appreciation in the value of the company is a lot more than five percent. I'm going to give patrick. So you'll doing kind of incentives you're bringing them to the bold you'll investing in this relationship which improved the chance of business development into work basically one hundred or whatever it is. The tough stuff is willing. Silicon valley and silicon valley worshiped name-brand. Vc's because that's what they built. This is the neighborhood as with the brand so every time you will announcing around early so he took comcast. What the hell is that. And then i need to start explaining. I don't know if you know. But congress have twenty eight million households that basically serving the when a move to smartone and they wanna do some stuff so i can target twenty million customers which is quite a lot for a company that had one hundred customers can have a deeper discussion. And then it makes sense but it's not trivial and you find yourself explaining why you did that. Instead of raising money flowing sequoias and excel and stuff like that so we took a route of strategic but only if they bring us distribution at any given point and. I think it's actually one of the things that will the most successful for the company took a bit about the lessons. You've learned on. Innovators dilemma by building in the insurance space. Because you've already mentioned how in most ways the product was the same in ninety five and five fifteen like the doesn't seem to be a lot of product innovation. What are your thoughts. Innovators dilemma on. How has that influenced what you've built. Try to address it in civil ways. One nobody's insurance is not an internet ordered. Its regulatory four. Duct penn state. Everything needs to be approved in admitted. It's not something that these allow so by stuctural. You have a lot less than ovation. Now on the flip side we think of still a vast amount of innovation that can happen. It just not disrupting it's about evolution and so usually what happened is when i'm sitting in a room with investors then. I'm asking them guys okay. I'm gonna ask you a question. Well do you guys insured and he takes them a couple of minutes. And usually i get an answer like oh no. Let me all stake. No stay song. Salmon's that's so. They know the name of the company or does not show it still company in the second question. And he's like okay. What's the difference between allstate and farmers and then travels. I don't know. I have no idea. And what we try to do. Because we're competing in a feel. The competitors competitor spending north of a billion dollars. Ill on creating brand names. You know them because you like you can't open a tv and not see commercials eh. Five second after you the commission. I'm gonna ask you. What was the commission for. And you have no idea but it was one of them found this list it one of them and one of the team one and these guys have caught on quarterback to which one is which you know the brand. You don't know what they are in does no differentiation on the border. So he ple will differentiate on the duct and the main differentiation is to focus back when patrick Because this is an industry that the main point that you realize that they've forgotten the customer. The customer for this industry for one hundred was the agent. So there's gotta be just a million ways to create a business model around the home when you have a trusted relationship with the homeowner. So what is your vision for the firm. Are you an insurance company or are you something different if we come back in five years and you've been successful in your vision. What does that meet. I think the on the head vision of the company is we call it. Protecting the joy of ownership it's about homeowners about focusing on them and what you see is that there is this massive gap between dilomatic view of patrick buying a home. And you're going with your partner and you're like oh let's look at his home in you all you have is this really is. This is going to be magic. It kids roam around the yard and going to ride the bike. And i'm gonna watch the plants in the back and i'm going to drink coffee and read my new york times over the weekend. You have this. Like whoa manic view of what homeownership is and then you moved the house in three months late you have a what the s kind of moment is like ho god. The plumbing doesn't work with and we have a problem on that side in. I need to fix this thing. The window is ricky into the back. Door doesn't lock and you'll find those damn. I thought i have a fulltime job. All sudden they have another full time job which is taking care of the home and you know what it's not fun so we'll shine to help people basically be the best owners they can and help them take everything. I view it as we're going to be the one eight hundred number of every that happens in you all brawn. It can be locked out of your home and you need a locksmith. Call us. don't go to yelp and find random quotas. Were going to send a locksmith. You install a shelf. We're going to help you with that gut. Fulbe does a water leak. We're gonna take that you'll fridge is going to be not working anymore. We can help with that. Maybe have i don't relationship with the soothing expert You know kind of thing that can give you the backyard gloss and whatever it is. It's i want to be the place that takes care of your home and focus back on the customer. We also have a belief that bitter maintained home going to have less losses unless losses is going to be beneficial for me on the loss ratio is well as happy. Customers going to recommend differentiate him as we talked about before because what's the difference between farmers at travelers. i don't know. But what's the difference in equal because they constantly helped me take off my home. I'm actually trying to have multi touch point with my customers in an industry. They're trying to release that. I think you build the brand by the value to the customer and focusing back on them. I've obsessed with this idea of static business models changing what i call streaming business models and this is a great example of that where rather than just one and done policy never. It's this ongoing relationship they're able to build because of data because of the orientation of the business model etc in every example that you've given us that's kind of fun and interesting about what you're building. There's this commonality which is sort of like a first principles approach. You're just looking at the situation and wondering all right. What's best for the customer like. Let's just do that rather than do things how it's been done in the past. So i'd love to do to sequential series of questions on different parts of company building and product building. And just hear you're sort of unique first principles take on them. Maybe starting with culture so you've built several businesses now. How do you think about culture how important it is how you can be intentional about building it. And the reason that it's worth investing effort into it. I think it's key super important. I'm going to add a couple of things first. Culture is about what you do what you say. The number one principal of of the company. Is you say what you do what you see. Dot component itself is people all the time. If you're telling me you're doing something something. But i need to basically make sure that i'm doing it. You build culture by constant feat delivering what you do. And the biggest enforcer over the country is actually the dna. It's about hiring people that have the same kind of level of kutcher talking about it all the time and then they're going to be the ambassador to keep on trickling down and feed it into the organization because there's a certain point you can't do it and why okay i can go and talk once a week to all of the people that that's not what bring customers how you behave when something happens. These eldest stories that basic trickle down. This is what people see. This is what people watch you need to be very consistent with without. I want to say one more thing is so he plays the collection to all of my previous fuck ups. I had civil companies. I have different beliefs. I believe that you need to work harder than anybody else. You need to work twenty four seven and you know how can you compete with the big guys you. I'm going to compete with it. I'm gonna actually work and then you realize that you actually make me stay aches. And he's not the right thing and it's on and not a sprint and you're going to bring everybody down and it's okay that i'm going to work in a southern way. Much not expecting people to work in a way. I think the so he but since dot com i also have two kids and i think it's really important and you know for me personally to be present dad into trying to have dinner with him and said i'm not talking the entire equilibrium changing the world. The tollikson like my my kids sick of seeing me. I mean like before that on a regular basis. But i want to have that company. That's people are happy to go to work. Work the ninety six or whatever. They need to work but he's also immature organization. So what i mean is. There's no facetime i don't wanna see you have your job so just do it and if you need to go to recital go to the recital of your kid. It's completely fine but you manage your on time afterwards to do the work. I don't care whether you're with. I kill that you'll doing the job that you need to do. And you raise a flag if you don't do it in the ability to constantly deliver on the act and act in a way that's what builds the country. It's becoming harder. Bill in covert and when the company becomes dick. One of the things i don't like about covid is that it makes all of these things to be allow people to be more medicines than missionaries. You try to our mission to the company and to build mission hill is kind of thing you need to have ongoing touch when we'd be in when half of the company the company's going like crazy half of the people are less than year in the company yet. Now add to never step the day in the office never saw another employee never a lot how into instill culture into them when he's older mode is very very difficult and something that i don't think anybody cracked deal now but it becomes a lot one of the challenges of of covid hence while you constantly need to deliver on what you're saying. Hopefully it would trickle into everybody. What have you learned about the importance. Internally and externally building stories and narrative in bolton storytelling is basically communicate. You don't communicate with like bullets and points and stuff like that. People remember a story people. It's vivid when something happened i. I'm okay that i'm not that good. If i'm telling a story. I need to deliver on it. I'm not telling a story because it's really nice. I'm telling a story that i mean it. You can test me on that you can check out and if we failed. Please call me on that. Which is the other ways we can improve. What have you learned about managing a product roadmap so a lot of the story of hippo. Is that. you're really building what it needs to be an insurance product. There's a lot of elements to that that you've walked us through above all that is managing it. So what have you learned about that part of the business. Probably one of my biggest goal failures now that the company is a lot more bigger in stable. There is a road roadmap. we have monthly. We have a quarterly eerily would showing not to change too much became realistic. That we actually give twenty five percent of the capacity for one of the craziness that we're going to change anyway. So the political. Mike is only for sixty seventy five percent just acknowledge that we can do one hundred because we know that we're going to change it so let's just college it and keep a twenty five percent location in the they'll ideals that we're going to come up with an extra capacity bills so much as asian in the company. I'll give an example. Usually running sprints in the two weeks kind of increments and we started adding one out of like false francis. Stuff like not is equality sprint. We never had quantities. We will you'll just sprinting but then realizing that you'll starting to carry bogs and all kinds of stuff like not so you had to stop and say guys know. This frame is equality spring. All we do is fix up all of the bug because he started realized that the of bugs that you knew about for the last three and a half years and then he's like the hell avenue we fixed it. We haven't fixed this because it's not that the and we kept on developing other stuff and we're like no no. We need to bring it to brian kind of level so we started embedding that into the process of poor told mom is somewhat more rigid. I think it's very rigid compelled to buy. The team thinks it's not rigid enough. Which is fine. It's a balancing act sam. What do you think about the customer we started with the lesson you learn from early on was just respect the customer. What is it about the customer that you have to respect is at the better cheaper faster preference that they have. What does that mean to you to actually respect a customer. The main point in insurance is that you pay fairly and if you are honest and wearing fortunate. I'm gonna make you all if god forbid something happened and this is the promise. It's a very simple premise. You pay for something. God forbid something happened. We're going to make sure that we take your view in. That's the number one. Promise that we have with the festivals. And that's what i'm constantly basically pounding the team. That's what we need to. However this thing can tweak. I'll give you an example. If i'll pay everybody really really fast for whatever they say then all of a sudden they're going to be very very happy if you told me. Listen the damage fifty five thousand dollars. Say patrick you'll six. Of course you're going to be happy. But i'm going to do a disservice to myself as an insurance company because i can never make money out of that. So what basically saying is treat the customer like you wanna be treated yourself be very honest with him ton tell them bullshit. Tell them exactly. This is what cover. Let me explain to you. Treat them as adults be very honest with him be. Slt of but be attentive in being pathetic because people when they use the pool shit happened. You didn't buy a show and it's like oh that's going to be nice to be. There is a thoughtless file got four. You're not going to have a home for six months. Whatever it is. I need to. This is not the time to have in a serial kind of thing which is structured out. This is said. Can you be empathetic and explain and take the time. Accord center is not measured on time on court with the customer. I always tell the people on the phone that if patrick polls in they're going to ask him patrick all your wings with now he's going to say and they're going to ask you the questions you know you wanna walk me through leo crank potty seat it's a few. I'm completely fine that they're going to say at the end of the day patrick actually formulas covering very well. I think it's really and i'm telling you in the long-term game you'll not going to shut them. I don't care about your conversion. there's a good chance that panic is gonna fill five of his friends. Because they was so honest they checked it and they said it's fine and maybe in two will follow a gonna miss some think. There's a good chance you're going to move to us and you'll building something over long-term that's what it means for me. To focus on the customer will do the right thing on the long term and not just shoulder and most customers of appreciating dot overtime Honest if you will loyal if you took care of them if you treat them honestly you can be pissed at you. Were expecting something but at the end of the day at the bottom of your art. You do know that someone treated you fairly. You went from very fast. Startup attacking an industry which really hasn't changed much over a very long time and going public. So hopefully soon. you'll be the incumbent. Do you think about defensibility of the business. So insurance has got this regulatory aspect which we've talked about a little bit. It's got these huge brands that everyone could name but couldn't really tell you what that means. These are things which take time and are hard to attack and protect us businesses. How do you think about protecting your business as it matures if we keep on focusing on the customers and we're going to do well by them and going to take all of them and we're going to hit on our vision which is protecting the joy of all mental shape. I'm actually still very. It's fine so that's on the michael. We just need to keep on delivering on a promise to customers on the micro. It's really really interesting so home insurance. It's one hundred five billion dollar market in the us in premiums. It's actually going up at five to six billion dollars. You keep on going like that for a long time. They'll simple reason one. There's gonna be more homes in the us next year than this deal. It just is to labor and material have a tendency to always go up way faster than inflation. Just look at what happened with temple and stuff like that and in the last year it popped by like eighty percent so he has a tendency to go inflation which means that if you increased it by three to four percent out of one hundred and five. That's a billion dollar increase in the market in. The last component is a tendency to basically get more complicated and sophisticated over time. So when i go up. I used to brush my teeth into morning. Instant in line with my brothers for the one baffled that we had four of us and now everybody has an on suite and everybody has an open kitchen. A homes became more complicated in dot entails more risk to the home though so premiums and the point of making is the fine if you have more bathrooms and of course there's going to be more losses because we're gonna be more water damage but it also means that there's going to be more complexity in it now if you have a market that is dot big. And there's only one player that is north of ten percent in that state fall and then the second one is less than ten percent of the market. So it's very very fragmented. You can build a munster company by being the number sixteen enjoy. Which of course is not our goal. But the point of the making is that it's not a winner-take-all who so wild form. Vc's that the governor saying that by twenty twenty seven. This market is going to be two point. Seven billion dollars in fifteen companies chasing so he can be a really really big company can be less than one percent of the market in like three years and have one and a half billion dollars in premiums. That's not a bad outcome. And i actually think this is just the beginning so you have such a vast option to go up. It just uncapped. My portfolio rica castle was president. Always say that. We're not even into staged with collecting. the lowering. enforced was collecting. What's on the floor and my cmo with say and we're still hitting the watermelons in when we're walking. It's such a vast market. We are so early that it's not about competition does more than one way to skin a cat. I don't need to cater to every customer that just need to cater to the customers that we want and they think that this is what they want and mortaring take on insurance. That's going to help them. Take your the home in general. Think vast Unity in that. Let's go back to where we started which is trench warfare. That is entrepreneurship. There's a lot of people that listen that are just starting companies that are thinking about starting a company seems like hopefully. We'll be entering new golden era for entrepreneurship after. Maybe a long period. Where there weren't enough entrepreneurs the tooling you talked about as a big part of that etcetera. I'd love to close our conversation by spending ten minutes on this topic. Just what you've learned about this trench warfare which is hard. It's really difficult but ultimately really rewarding. Maybe we'll start there with the rewarding part. What is so rewarding about it. Why should people contemplating this life do it. I think those too much when dubbing bengals in those because it's easy and you can get money. A lot of people are in it for the wrong reasons and people do not understand how tough it is does. A mental dole is the psychological toll it. It's not an easy thing it's like as said it's trench warfare and he's like fine to for a day or two but to do it for a long period of time it's it has a total people always think once you reach a certain scale it becomes easy. It's really really hard at the beginning but once it's like a big company to no it's not it's actually do. I need to deliver on numbers. I need to constantly i have. I have five hundred people. I need to kill. It's not getting easier. But i do think that within a world will doesn't abundance of tools abundance of capital now. This is pro two golden era to do something i'm talking more about technology ventures and things of that so i think technology save the world in the last year think about. What's the narrative for this craziness. I'm not talking. Just about the vaccination. You couldn't have got food on you couldn't have done course. You couldn't have done that if this event would have happened ten years ago to put them in a very different kind of scenario so within a world will technology actually came and save the world. You can actually see them. The public markets as well in the appreciation of what we basically people put on technology stocks. So i think we all getting into an era which is kind of like a golden age. But it's not for the faint of heart. It's not easy. People should know that if you're doing until doing this for the long term and you'll doing it because it's the right thing for you and it doesn't fit everybody. A lot of people are wired to someone. Tapped him in. The back of patrick was pretty good. Job does no. Nobody's going to give you a good job about it's all about. I think people needs to be very honest. One of the things that's It's a very weird euler. Bipolar kind of you'll talk into the outside. Like everything is amazing. And inside your it's gut wrenching that nothing works in very brutally honest and what doesn't work otherwise you can have a fix it and you have like these two on the outside. It's amazing the this guy's shit doesn't work ethic any needs to be done all the time. A lot of people that are not handling it very well and it's something that is important but it's always the saying that you've never goes up into the right. It always up and down and up and down. Eventually severely fragile Stopped obesity flavor. It'd be still so many things that can kill you over the time you know you become more resilient as less of these crushing moments but at the beginning the difference between a success not. It's it's super random. It's it has many times stuff that has nothing to you. People should just be aware of what they're getting into and have honest discussions with each other on. What does it entail imagined trying to dissuade people from doing it. It's magic for the people that wants to do it. As i said it's about choosing the team choosing what you work and choosing the show which if you care about these things than nothing is better than with a a world will wolf. Accumulation is becoming cindy fast it took centuries fulda oke officials or whatever and now in a span of four or five years. You have kids the twenty seven years old. It was becoming billionaires. It's the monetary price is also very very high for people that are highly successful on benicia. Wasn't the case before it seems like there's a perverse set expectations around the feeling of these rewards. Money is one reward. people that succeeded. This game tend to get very very wealthy. Talk about what. It's felt like to get very wealthy like has that ultimately been something that feels good. Is that what people should be aiming for. Or is this more about service and people and experience getting these not a bad outcome. Let's be honest. It's not a bad outcome. But i think there's a silken liberal which is almost immaterial and it's not about so for me. My biggest driving life is learning and it's about constant learning. I think the pace of learning that you do is a seal. Running a stealth up in these glowing is insane. Oh we can have a discussion on public markets ideals fac and stuff like that six months. Before i didn't have fricken clue what it means. People biking oh. I you know devices and systems and saints in you constantly have to reinvent yourself and learn which that's the biggest drive in my life but good any help for i think up to a certain scale does stilton point that i get a lot more. Every person in equal has equity into company. I mean every person quarter center for it. And every service person how equity and not negligible equity by the way so for me. There's more of a joy on the hundreds of people that we have on our core centers that some of them are going to be millionaires and ford other than they're going to make hundreds of thousands of dollars which is life changing money more than any giannini will made x. a wide and he's going to have sixteen other options later ability to influence an impact. People that will out of this world is something that i get a lot of joyful and metal semi and the fact that we're doing it as a team and not as a solo kind of justice off. He's doing it is something that really really is important to me. It's a wonderful place to end and turn to my traditional closing question. That i ask everybody. What is the kindest thing anyone's ever done for you or god. Well i have like five hundred. Different things thoughts that are popping in my mind. What's the meaning of kind. Is it like doing something. That was unexpected. That the difference between what you expected in what you got was so high. Was it something that a person that was above and beyond. It's very easy for a person that has a lot of stuff to do to be basically kind but people who couldn't engage so i don't have a good answer. I'm just telling you of the craziness of those in my mind now. The one thing that i have is that people choose to keep on working in april and work with me every morning. So i think that smart capable people always have an option and i want people that come to work at apple to make the positive choice that this is what they wanted to because they don't have any other option and they need to bring to the stuff because i think what are the people that we have any super talented and can work so for me does an act of kindness but people that every morning shoes that working in hebron working with me on this venture what choosing to actually do and i view into one of the things that drives me and motivates me south. I think if you looked up entrepreneur the dictionary or the encyclopedia. You might find your picture there. I think you're just of classic quintessential builder. This has been so much fun together. Been really looking forward to it. Did not disappoint. Thank you so much for your time. Now that was awesome. It is a big fan. So thank you so much for doing this with me. 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