Transcript

Rapid Response: What the pandemic has cost women, w/Ellevest's Sallie Krawcheck

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Going into March We were pulling together an investment round. The investor pulled away, and so I am looking

This uncertainty. knowing that we have a limited amount of runway. Having discussions and debates with a leadership team. Saying the business may be imploding. Should we lay off twenty five percent of the

company or thirty percent of the company. I don't think I've ever been lonelier in my life. We ended up. In the course of the year taking things back up and avoiding What

In hindsight, would have been a fatal error for the business. One thing I just can't believe we're not talking about. Every minute of every day sitting here. Looking at twenty twenty. Is it one in five women have left the workforce this year?

What? Women are recognizing they're getting disproportionately hit. Women are recognizing No one's coming to save us. We've got a long way to go.

in terms of getting past venture funding and being a profitable company. But the impact we're having today, given the size of the community and the message we've got, is something. Mani's women's number one source of stress. Taking action around us the number one drive of their confidence in their future. What we're doing is so much bigger than just money. It's really life changing. That's Sally Crawchek.

CEO of Elvest, a fin tech platform dedicated to serving women investors. Twenty twenty was harrowing for her, even though her business ultimately performed strongly. I'm Bob Safian. Former editor of Fast Company, founder of The Flux Group, and host of Masters of Scale Rapid Response. I wanted to talk with Sally because women have been hit particularly hard by the financial fallout of the pandemic, and no one has a better perspective than her on what it will take to recover from that pain.

Sally used to work at the very top of Wall Street Behemoths like City and Bank of America and Merrill Lynch. So she has a deep understanding of stock market dynamics and the advantages that big players have over little ones. But she also believes in the agility of startups. And it's demonstrating the impact that entrepreneurship can have. For all of us.

I'm Bob Safian and I'm here with Sally Krawczyk, the CEO of Elvest. Sally is coming to us. from her home in Manhattan as I asked my questions from my home in nearby Brooklyn. Sally, thanks for joining us. Yeah, good good to be here. Wish we were in person.

Yeah, wow, what a year. Uh It's almost hard to look ahead with all of the Challenges and the traumas behind us.

We'll get to the future, but first I wanna Ask you to take us back. How did twenty twenty open for you and when did you realize it was gonna be a different sort of year? Yeah.

I remember standing in my kitchen. In February. Saturday morning, I was the only one awake in my home. I was sipping that first cup of coffee. And I remember thinking Things feel really good.

And I swear to you, Bob, I stopped myself. And I thought the last time I had this thought. was two thousand and seven. right before the financial crisis and I Sort of stopped in my tracks and thought, ah, you know, that's not gonna happen again. And for several months after that,

It was All down hill. Every day. And there were days in which I missed two thousand seven and two thousand eight. They felt like such a cakewalk compared to what was happening. as a startup CEO

In twenty twenty. So what was harder about this Period. Then back in Two thousand seven, two thousand eight.

A lot. First of all. Two thousand and seven, two thousand eight, we weren't worried about Our health, our children's health, our parents health, our spouse's health. The people in our Companies, health.

Our friend's health. The stock market correction. Which was Plenty scary. And plenty unprecedented.

was just the beginning, and so it was Everything that was terrible about two thousand seven, two thousand eight, plus the health. And then the part that I'm really still processing. Is that in two thousand eight I was at City. And so you could be with people physically, catch somebody in the hall.

I was part of a team there. of senior leaders where we were in it together. And so when you lagged a little bit, there was somebody who would sort of pick you up and dust you off and put you back in. And so this one was not only the health fear. But as a startup CEO The

Overriding All encompassing loneliness. of the experience. Most organizations Had a really hard time

At the beginning of the pandemic. And then It's split. You've got your airlines and your hotels still losing a ton of money, and then you've got other businesses that are thriving, big tech firms and target and Cleaning products like Clorox, right?

So Where did L of its business fit in that continuum? Well The issue was it wasn't clear for a period of time, and maybe for another day. I will tell you about all the ways.

Potential investors, venture capitalists, Told me that Elvest would not work. And so they wouldn't invest. One of the reasons for saying no. Wow. You have a lot of millennial women who

And so You can grow when it's a good market. But when it's a bad market, it's gonna be bad. If things get bad. They're gonna freak out. And yes, Bob, there was the underlying women get hysterical message.

And so we go into March and April and the markets are crashing and and now we sit here and it's hard to remember it, but it was terrifying. And even for me, I've been through many of these downturns, and so it wasn't clear. for a period of time. And in fact I'll tell you, I didn't even look at our

Numbers. What was I gonna do if If the cliє base The user base was panicking and taking their money out. There was really nothing different I could do. And so all that I could do

was turn the whole company over to A pledge to our community of will answer any money question you've got. Ask it on Instagram. Email us. Send us a note. We'll do Instagram lives, we'll do LinkedIn lives. Of course there was a complete delusion.

Um Did the panic In the questions translate into panic in the business. Nope. So the concerns that

The women investors are I'll take it one step further. We had net inflows every week this year. So not only do they not pull their money out. you know, part of the way we invest ill investors or advise people is a little bit out of every paycheck. And of course there were people who said, Uh I lost my job, I need to buh but we also tell them it's gotta be long term money. This isn't playing around, right? You should invest

with us that which you can have for the long term. And so Yeah, we saw a little bit of an uptick. In outflows. But we continue to see the inflows. Such that we never missed a beep.

So are there things then about the business that you run differently now? We changed the entire business model, Bob, in June. Change the entire model. We took a step back and we said, All right, now let's Catch our breath for half a second. Now that we've answered most questions that people can think of.

What should be different? I I remember calling my head a product the terrific Alex Street. And said, What should we do differently in our product plan? Going forward. And over the next couple of months we changed. Almost everything. We went in our digital side.

From being investment management only. to adding savings and banking. To adding, interestingly, coaching. And learning.

Within the newer investors, the digital business, we said she is asking us for a lot more. And so let's break the mold. Let's Not be just a financial products company. Let's bring that learning and coaching. Let's change our pricing to a subscription model. Instead of an asset based model in order to support these additional capabilities.

And provide additional value for her. As you described this shift you made, it reminds me of all the discussion during twenty twenty about how important it was to be agile. You know, making the move like what you did with your business to do that at City would have taken Months, years, right?

No. But Couldn't have done it. Couldn't have done. Well let's add another one, Bob, which is That as we got into June into May June and there was a renewed

Impetus for racial justice. We at Elvis we've always enabled our Investor, our users to invest in advancing women.

But we can't be about Advancing women investments for those who choose to do so without also being anti racist. So let's Ад на атирацист проз. users and clients who are looking for it. And we did that within

Two or three weeks. It was lightning fast. The advantage startups have is they can move fast. They may have other advantages. May have great ideas. They may have great people Great investors, a lot of things, but one thing for sure. that we have over the big guys is we can move fast.

And yet so many smaller organizations really Really had a hard time. During twenty twenty. Well, we didn't have an easy time, so let's let's go back to March.

Because I'm talking about this like there was some great clarity. I mean There was the fog of war and An advantage big companies have over Startups is many of them make a profit. And a lot of degrees of freedom come with making a profit.

But as a startup We're investing in the business and so we are cash flow negative. And so going into March. We were pulling together an investment round. We had uh

lead for it. We had some number of existing investors lined up for it, and then understandably The investor pulled away, as you and I would have done. And so I am looking This uncertainty.

Knowing that we have a limited amount of runway. And so March was easily the longest month of my life. How do you extend the runway? And so

The hardest conversations in my life were with my co founder. Who brought a proposal for reducing the headcount of the company by a third. and having discussions and debates with the leadership team

saying the business may be imploding. Should we lay off twenty five percent of the Company or thirty percent of the company? And I don't think I've ever been lonelier in my life. And by the way, Bob, I've laid off more people than anybody you even know.

I worked in big Wall Street firms. He'd be like, Oh, we gotta lay off a thousand people. We have a hundred employees. Around about. The thought of Laying off thirty of them.

And into a pandemic. And an uncertain environment? People who had bought into My dream. Bobby, you know.

If you could see me, the wrinkles on my face that didn't exist the last time we were together are a direct result of that. So How did your workforce and recovery plan unfold then during the year? You remember that horrible weekend in Manhattan?

March the thirteenth. You remember that weekend, Bob, it just felt like everything was crumbling in on each other. What Tom Hanks has COVID and what March Madness is canceled. And I mean it was like one thing after another. And I remember that weekend. And my co founder trying to reach me because he'd had the plan and saying we got to start laying these people off and I gotta start working with the people over the weekend. And I remember Bob not answering the phone. Quite frankly. And just feeling like I just need

Two minutes to breathe. Because yes, I see the math here. I just need to breathe. And Told him that we weren't gonna make any decisions for some number of days.

And then began calling business people who I've worked with or know or trust People were outside of Alabast. Investors in Elvest. And asking them their advice.

And I remember getting on the phone with Joe Mansueto, who is the Founder of Morningstar and one of the Alabest investors. And I was really expecting him given his Wall Street background. to say something that a lot of people were saying at the time, we just cut once, cut deep.

He's like no. Nobody knows what's gonna happen. We have no idea. And so you want to buy time, and if you cut people Now

You're a weaker company on the other side of this. I mean, there's no doubt, right? The only people Who it's worse for when you do a layoff than the people who you laid off or the people who are left. And so we would have taken away our ability to achieve our product plan.

directly impacted our ability to raise the next round. directly impacted our results. You broken The social covenant with your workforce. And so I got off a couple of those phone calls and said we just we gotta buy some time here without damaging the company. So we're going to lay out

The financials, the roadmap, the situation The environment. You know, Bob, I'm a former research analyst. Let's lay out where the S P was, where it is, where the VIX was, where it is, where the long rates were and where they are. Right. Give context.

Show business. And then request that people were making below X amount, no pay cut. People who are not on the leadership team. X pay cut. People on the leadership team.

Three X pay cut. Me one hundred percent. Cut me one hundred percent. And promise to then update them every single month about what are the metrics before we take the salaries back up. What do we need to see? What do we need to accomplish? And so just being super clear with everybody and super vulnerable. of this is where we are, this is what we have to see, this is how we're tracking. And we ended up

in the course of the year taking things back up, as it turned out, and really avoiding what In hindsight, but even at the time, would have been a fatal error for the business. And th this was not a course that everyone in your leadership team agreed with. Yeah. No.

It wasn't. And that's okay. And that was its own challenge, right? Yeah, but I'm a CEO, so I laid it out for them too. And I remember my co founder saying it's not what I would do, but I'm on board and let's go. So we went and not everybody in the company agreed.

If I'm gonna be completely honest with you. There were a few people who were like I don't want my pay cut. Why don't you lay off Would say.

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Learn more at creative planning dot com slash masters of scale. Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show. Because every Friday we release a second rapid response exclusively in the Rapid Response feed. The guests and topics are just as compelling and timely from Ford CEO to NASA's administrator to the lessons from The Devil Wears Prada. It takes about 10 seconds to find, just search rapid response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there.

Humans will never be more intelligent than AI. There can be two types of companies. Those are great at AI and those that went out of business because they weren't. How do we build a future? That is human centered.

I'm Rana El Calyubi. On my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future. And we take you behind the scenes of the AI that's transforming our lives. Find pioneers of AI wherever you tune in. So you mentioned your background as a research analyst.

When you look at the state of things today. I'm curious What data you look at today. There are The numbers I look at on the business every morning.

What is the number of New People were bringing in How much are they paying us? How much did it cost us to bring in? When I look at the broader

World. Well let me back up for a second. One thing I just can't believe we're not talking about Every minute of every day. Sitting here.

looking at twenty twenty, is it one in five women have left the workforce this year? What? We are losing our jobs. Women are losing their jobs at a disproportionate rate. Women, by the way, have been risking their lives at a disproportionate rate because they're a greater share of service and online workers. Those women who have stayed have been privileged enough to work from the home, have lost productivity. Men have gained productivity. Men are like, Oh my gosh, I'm working out more and I'm getting more done. There's research that shows that male academics their productivity is soaring. We've all been on a Zoom call where the woman has the kids Climbing all over her.

is we've gone into the homes Their traditional gender roles have been reinforced. Big time. Money is women's number one source of stress. Even before the pandemic.

Women had wealth of thirty cents to a man's dollar. We're always talking about the gender pay gap eighty two cents. Ah Ah That's how much comes in. The gender wealth gap is how much we keep. It's thirty cents. And for black women one penny, for brown women one penny, and going backwards before the pandemic.

As we come through this year. Women are, you know, as we've surveyed our community and professional women more broadly Women are recognizing they're getting disproportionately hit. Women are recognizing No one's coming to save us.

we don't even have a mandated paid maternity leave in this country, for Christ's sake. Nobody's coming to save us. We're losing our jobs. And so it's how can I take care of the money? I've got. How can I save it better, get rid of debt, invest it better? When you're talking about stats, I look at It's what's happening to women.

in this country, there are subtle differences in what motivate women to engage with their money than men, and Elvis is the only one that has put in the thousands of hours to research that. And to build it. And then besides that I look at the stock market I'm like how's the stock market so high given how crappy the economy is. Like what's up with that? Yes, so what is up with that?

It is kind of counterintuitive, right? Honey, we've learned so many lessons from twenty twenty. One I hope we've learned is if you try to trade the stock market. Just look at twenty twenty. Who in the world would have guessed this? Right, that it did what it did in the spring. What exogenous event. Here this comes, and that has recovered so well. What are the reasons for it? The reasons for it are the stock market's forward looking.

The other reason is there is no stock market. I've got little air quotes, Bob, right now. There are individual companies, and there's a theme in the United States these days. The winners win more. The losers fall for back, the K shaped Recovery? Where

People with money. Have weathered this pandemic pretty well. People without are getting hurt very badly. Companies that were in strong positions. Where the trends were already in their favor have done much better. They happen to be big. The big got bigger. That swamps

The stock market And the little guys who already were sort of little and losing, the fact that they've gotten little, well, the big got bigger. By quite a bit. It's almost like In the long run

This coronavirus pandemic is just gonna be a blip. We're gonna forget. Or we're gonna move on and and we're just gonna keep going along the trajectory we were before. Do you think that's true?

Such his life. You and I can sit here all day and all night and talk about problems with capitalism. The stock market Is not one of them. the ability of companies in a capitalist society to find growth and have that translate

Into the stock market is not one of them. Will the coronavirus be a blip? Great depression was sort of a blip too. The great recession. Sort of a blip.

The crash of eighty seven that was a blip. Oh, World War One, World War Two. The pandemic of nineteen seventeen, stagflation, inflation. Electric a reality star for president. Impeached him. Selected a movie star for president.

If you and I were like saw the history of the United States, of the economy, of society. Since N Tінet Who

That stock market isn't gonna have Gone up much,'cause those are some really bad things. The stock market finds a way to go up. If you and I had nineteen hundred to put a thousand bucks in the stock, where it was a lot of money in nineteen hundred. All that bad stuff would have happened, we'd left it there. We allowed it to compound. You know how much it would have been worth in twenty twenty? Fifty eight million dollars.

This is what women have been missing out on. So the long term impact Of the pandemic. If you're an investor and you've stayed in it. Is

Gonna be noise like all of those other things that you mentioned. It's also sounds like there's gonna be long term impact From the pandemic on certain populations like those women who've lost their their jobs.

Absolutely. What we just talked about was wealth begets wealth. We hear that, right? Wealth begets wealth, and it's because of that compounding. The other side of it, Bob, is inequality begets inequality. We s Through the numbers again. What's that difference between that gender pay gap and that gender wealth gap? One women haven't invested as much as men, so they haven't had the power of that positive compounding.

If you're not earning as much, you lose your job. You more credit card debt that compounds. Women have more student loan debt than men do. Not the college. Cost us more?

Except that when you don't earn as much, you don't pay it off as quickly. And of course, if you lose your job. The debt increases But you're also not investing in your four oh one K, you know social security. I mean, all those things that's before the cascading negative effect to your children. You're not able to do for them. as you otherwise might have. That's why

the racial wealth gap and the gender Wealth gap. Are opening. Even as we close how much we're getting paid, because the head start. Of the compounding is just so much.

Given this rising Yeah. What's at stake? In this moment that we're in as we

Bridge to twenty twenty one and beyond. It's probably Not too dramatic to say everything. Well, I I feel like sometimes if we look back If we read

Some of these statistics in a history book of the wealth disparities. that we've got in this country. You'd say this can't sustain itself. This would Maybe cause the election of A populist

President. Perhaps. Who may be like F all of this, let's break this. We can say more people been pulled out of poverty. Than ever

Et cetera, et cetera. The macro numbers look good, but if you've lost your job. And you're seeing people around you becoming wealthier and wealthier. It hurts.

We also know that when these wealth gaps are closed, society it's just fairer. And the economy overall can be stronger as well. Yeah, it's such a confusing moment. In so many ways because there are things to be

Really hopeful about Vaccines coming? As you say the stock market in better shape, businesses like yours that are doing much better than We feared they were. And yet this sort of

underbelly of Continued Disparity. That could undercut all that progress.

And I guess. With Elvis, you're trying to address Some of these challenges for women. Is it frustrating to you that the scale of impact you can have compared to what you had when you were Uh

big Wall Street firms is so much more limited. I would argue the impact We're having is much greater. And can be much greater at a startup.

Back in the day. Oh, how do I get my message out? I don't know, we don't have the money to advertise on CBS or NBC or ABC. Oh Gosh we can't get the newspaper to write about us. Part of the power of Elvest

is the community that we've built. We have the largest social footprint in US financial services. We have the largest community. in US financial services. And I look back to when I was in Merrill. And you might say, Why didn't you Build it in Meryl.

Bob, no way I could have. This бізнес is a successful. vibrant business That does business in a certain way. And so our brand symbols a bull.

So not much feminine about that, Bob But let's go ahead and take a tech first approach. For a whole new market. We can deliver A high quality service for so much less money.

But the revenue is gonna be less, the profit's gonna be less. So if we are successful in completely changing our business model and our target market, we're gonna earn less. Not a lot of stockholders are like, sign me up for that. You know, obviously does Alley Innovator's Dilemma. So much Better. to do it from the position of a startup where you can move fast and where You can have an impact.

much more quickly and an impact that's much greater than it would have been even ten years ago, twenty years ago. We've got a long way to go. in terms of getting past venture funding and being a profitable company. But the impact we're having today, given the size of the community and the message we've got.

is something I stood in in the three and a half hour long early voting On the upper west side. And the woman behind me saw my elevus bag.

And shared with me What we had meant to her. And it actually it chokes me up because Again.

Money's women's number one source of stress. Taking action around us the number one drive of their confidence in their future. What we're doing is so much bigger than just money. It's really life changing. You like being an entrepreneur, don't you? I do. I love the creativity to it. I love how all encompassing it is. I love the impact we're having.

I'd say the the other thing, Bob. I was on the phone. Yesterday with a pretty successful Woman entrepreneur venture funded business.

You know, she had reached out to me and she's like, I'm trying to think through X and I'm trying to think through Y and I'm trying to think through Z She she was forced to make layoffs back. In the spring, and she was the second woman entrepreneur who's talked to me about Doing layoffs while having Covid.

Just listening to it just broke my heart. And the loneliness of having to make that kind of decision, which for her was exactly the right decision, and doing it while she was sick. And part of me Was like w why didn't you call me? And then the other part of me is like I'm so glad she didn't call me because

I was grappling with the same types of problems and issues. I proactively reached out to folks I was fortunate to have that kind of network. A lot of folks don't, and particularly for women.

CEOs. There are not very many of us. And so I wondered if we're all the guys talking the whole time and us women When women only get three four percent of venture funding

There's just not that many of us, and each of us was dealing with our own issues. Recently saw some research that said women over the past ten years got one percent of fintech venture funding. I don't have My fintech group of girls.

I don't. And maybe the guys are all like, Hey, I'm doing this, hey, what are you saying? One of the things that I just I'm really feeling right now. is the loneliness of the pandemic.

I could have been there for others could have been there for her, but when everybody's going through it. Then everybody's dealing with their own stuff, and so all of us are. Isolated. In some way. Yeah, and it's not easy to see a solution to that other than

Holding your breath and hoping you can get to the other side. Well, I keep saying that. back in the spring. It was every morning I would walk into my Little work area. At home.

And I felt like I was getting onto a roller coaster. And I would strap in. And then We'd turn upside down and then we'd go up and we go down. And then the end of the day, I'd get off the roller coaster and I'd say, Did I vomit on myself? Ah, I'm good, you know, back on tomorrow. In the sense of just get on the roller coaster every day and see if you can make some kind of little progress.

Well, it's good to see you continuing to make progress, continuing to get on that roller coaster. Hopefully it's not quite as harrowing a journey these days as it was back then, but Thank you so much for Taking the time to Talk with all of us. We really appreciate it. Thank you, Bob, for having me.

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