- Hello everybody, it's Sam from the Financial Samurai Podcast, and in this episode I have a special guest with me, Roger Lee, who founded a company called Human Interest, and he's also the founders of layoffs.fyi. Welcome to the podcast, Roger. - Thanks for having me. - So I'd love to hear about your journey from college to entrepreneurship, because your background is you went to Harvard and you studied applied mathematics, and then you went to Y Combinator, and you started a company that turns out was a success.

So how does one go about that? And first of all, how did you get into Harvard, and why did you decide to study applied mathematics in the first place? - Oh, let's see. So, you know, I've been really interested in the internet ever since I was a teenager. This was sort of the height of the dot-com boom, you know, 1909, 2000s, and I had a couple friends and I that were just interested in learning how to program for the web and build websites that were, you know, gonna be fun and enjoyable that we thought my friends and I would find useful.

And so I've been tinkering around building websites with the internet, you know, from a teenager, and so I think I'd always had it in my mind that that was something I wanted to do full-time once I graduated college and, you know, was gonna be working. And it was just, you know, magical when I was doing this in high school how much of an impact one could have with the internet's existence.

You know, we made some websites that reached people all around the country, you know, millions of users on these sites. At one point, we owned three of the top 10 most visited sites by teenagers on the internet. - In high school? - Yeah, yeah, yeah. This was in 2002, 2003.

And it was just surreal how, you know, a 13, 14, 15-year-old living with his parents could reach so many people because of the internet. And, you know, when you're in school, you kind of tend to think of your community as just who you know in school, and your life's borders don't really extend beyond the school walls.

But with the internet, that's totally different. You can reach people all across the country, all around the world, have a bigger impact and reach more people than, you know, you could have ever imagined. And so I was always obsessed with that, having had that experience in high school. And that's what led me down the path of entrepreneurship when I graduated from Harvard.

- Got it. So do you, I mean, I guess that's pretty unique for a high schooler to create websites that actually attracts a lot of people, you know, not just, you know, 50 people, your friends and your parents. So do you feel that that was a big weighting for how you got into Harvard?

Because now, you know, we talk about, you know, we have kids now, and we're thinking about secondary education and college education, and you saw that affirmative action ruling. How, what were the components for you to get into Harvard? Like grades, like how did that work? - Yeah, you know, it's tough to say.

I don't know how much of the internet experience ended up helping me. I was probably naive about it, and I don't even know if I ended up writing about it or putting it on my essays. I probably should have. You know, to me, you know, the website stuff that I was doing in high school was just for fun, and, you know, I didn't do it kind of, you know, thinking that it was gonna help me get into college, and I don't even think I realized it could have potentially helped me get into college.

So maybe it helped, maybe it didn't. It's tough to say. In hindsight, I probably should have emphasized it more in my essays. You know, I was a good student, you know, so good grades. - Everybody's a good student. - Good SAT score, so no doubt, the kind of academics helped me get into college.

You know, it's obviously harder now than it was when I applied to enter a college in 2004, so who knows if I'd get in today, but was certainly lucky to have a good outcome back then. - Okay, so it wasn't like you cured malaria or, you know, you invented something at 16 that wasn't in the Science Magazine or something?

- I did not do any of those things. - Okay, 'cause I'm always wondering, I'm like, what is, I mean, 'cause if you look at the percentage acceptance rates, it's like 5%. You know, back then it was like maybe 8%. It's still really low, and it feels like it's almost like winning the lottery because everybody has those high academic standards.

- Yeah, that's right, and also, you know, I went to a public school growing up and was also kind of naive in sort of now realizing, oh, you know, it seems like there's maybe an advantage potentially if you go to private school or certain private schools, and there's all these things that I hear about, you know, kids doing these days to join this activity or do this extracurricular or play this sport and essentially kind of, you know, maximize their chances to get into college based on what they think is gonna help, and I feel so lucky that I didn't know any of that growing up, 'cause I feel like it would have really been a lot of pressure to, you know, think about all of these optimizations that I was gonna have to do to get into a good college, and, you know, it worked out in the end, and so, that was, you know, really fortunate, and I'm glad that it worked out without having to, you know, go through what it seems like a lot of kids are going through these days in terms of feeling like they have to check off these 10 boxes to, you know, have a chance at going to a good college.

I can't imagine growing up in that environment today. - Right, right. So, okay, so after college, you got your degree in applied mathematics, what did you do? What was your goal? And what did you do? - So, you asked before why I picked applied math and, as my major, and the reason I chose that was because I looked at the course catalog and found the classes that I was most interested in taking, and chose the major that would allow me to get credit for the most number of those classes.

So, it turned out I was interested in taking some math classes, some economics classes, some computer science classes, and applied math ended up letting me count all those classes as credits. And so that's why I picked it. And, you know, to be honest, I was a good student in college but I didn't spend a ton of time in class or studying.

I really enjoyed the social experience of kind of being in college, especially with, you know, students of a really high caliber at Harvard. And so I don't know if I had any kind of goal in mind when I graduated. You know, I kind of applied to sort of the standard jobs that other applied math majors did, which, you know, in 2008 when I graduated, tended to be kind of finance and management consulting.

So, you know, I interned at J.P. Morgan my sophomore summer. I, you know, applied and got accepted to join McKinsey full-time in New York City after college. But I ended up not going into either of those fields and decided to start a startup instead and try to, you know, do that in a quote unquote real way.

You know, the stuff I did in high school, it ended up being a business, but we didn't have any employees, we didn't have any funding, there was no business school behind the websites. It was just for fun. But when I graduated college, I thought, you know, I enjoyed creating those websites so much that if I could do that full-time and support myself, you know, there's no better job that I could imagine than one that I enjoyed so much already.

And so I really wanted to see if I could make that work as a career. And so I started my, you know, first quote unquote startup out of college. - Well, that's interesting because I think a lot of people, the stat is about 58% of Harvard graduates go into tech, management consulting, and finance.

And that's really different from, you know, the people when they were in high school, when they were applying and they're saying they want to save the world and do non-profits and all that. And I think there's a strong financial component, a return on education component. So given you went to Harvard, was it necessary to go to college to start your startup?

Because you didn't end up going into that route that, you know, would secure you a six-figure and eventually maybe a seven-figure income. - No, that's right. I mean, when I started that startup out of college, I think I paid myself 20K or 30K. So it was by no means a lucrative job.

And certainly if I went into management consulting or finance, my salary would have been much higher than that. And so you're right that I, you know, maybe didn't need to go to Harvard in order to start a company. Anybody can do that. You don't need permission to do it.

You know, I still feel like my college experience was so positive, maybe from a non-financial perspective. You know, the friends I made, you know, how I grew as a person, the experiences and activities that I was a part of. I look back at that time and it was just sort of this magical four years.

And I don't know if it's possible to kind of put a price tag on it. So you might be right that, you know, financially speaking, unless you're, you know, you're looking to go into one of those high-paying jobs after college, it might not be worth going to a high-priced university.

For me, I look at more at the intangibles of attending college like Harvard as it being worthwhile, even if it's unclear whether the financial returns were there. - Got it. But you did go through the interview process with finance and management consulting, and you got the offers, and obviously the salaries are pretty decent.

They're definitely decent now. So how did you decide, okay, you got the offer and you said, nope, I'm not gonna do this. Why not take the job, it's like a sure thing, build your finances, and then work on your startup on the side? - Yeah, I think that would have been a totally viable route, and certainly I have classmates who did just that and ended up starting a company later when they felt more secure.

I think for me, I just really knew I loved to create websites and build technology, and I had that experience from a young age. And so if I knew that was my passion and that was my calling and that was what I enjoyed doing and I liked, why do something else for a few years and defer what I knew was ultimately gonna be the path I wanted to pursue?

Why not just start now? And in fact, the younger you are, you have less responsibilities, no family, no kids, no dependents. You can live on 25K a year. And I think I maybe feared, and maybe irrationally so, that if I took one of those high-paying jobs, I would get sucked in and never end up leaving to pursue my own path, and I would've looked back on my life and my career and felt maybe some regret that I didn't take the leap.

Again, who knows if that's how it would've worked out. I think it was a little bit more of just an irrational fear in my head, but it was a factor in my decision to forego the more stable jobs and instead just pursue my startup from the get-go. So I could never experience the, maybe, quote-unquote comforts of having a safe job.

And in fact, to this day, I've still never had a stable job. And so maybe that has helped me get more comfortable with the uncertainty that comes with going the startup route. - Right. I do think it's unique, though, to be able to decide with confidence what you wanna do by age 22, 23, and then just go for it.

I mean, what kind of, did you have any kind of safety net if you failed? What was the safety net you thought about? - Yeah, it's a good point. And confidence is one way to put it. That's a generous way to put it. I think at that age, maybe hubris was maybe more like it when I was 22, maybe a bit naive in that regard.

I did have, to be candid, did have some safety net because of the websites in high school that I made with my friend. We did end up monetizing those and attracting advertisers because we had amassed such a large audience. And so did end up making money from those websites over the years that we were in high school and college, even sold one of those websites.

So did have a financial safety net in a way that other college graduates didn't. And I'd be remiss if I didn't mention that that did play a role in being comfortable, taking the plunge. - Got it. So you started early, had some recurring revenue. Of course you have your parents.

And you live cheaply, 20, 25 grand, no problem, right? Worst case, you can kind of move back in with your parents, I guess. - Yeah, and just, I live in San Francisco now, but back then I lived in New Haven, Connecticut because I started that startup out of college with some Yale friends.

And so cost of living was pretty low. - Okay. And so after college, you started your startup. When did Y Combinator start? And was that the start of Captain 401k, which is now Human Interest? - Yeah, that's right. So a few years into my first startup, which is called Thunder, I got the idea for what is now Human Interest, which is a digital 401k provider for small and medium-sized businesses.

And that idea came out of my own experience trying to set up a 401k for Thunder. Where we were hiring, this is the first startup out of college, we were hiring experienced engineers out of big companies like Microsoft, and 401k was one of their top requests. And we thought, yeah, that makes sense.

It's already hard enough for a no-name startup to hire great engineers and attract them for bigger companies because the pay is a lot lower from a salary perspective. It's gonna hurt us even more if we don't even have basic benefits like a 401k. And so I thought, okay, we should certainly set one up.

And I'm like you, I'm also a strong believer in personal finance, and so I just thought it was the right thing to do. And so I go online and assume, okay, I can just look up online 401k, click a few buttons, and voila, we'd have a 401k for our small business.

And it turned out to be nowhere near as easy as that to get a 401k. I soon found myself in this whole world of brokers and humans and paperwork and complex financial jargon about 401ks. And companies like Fidelity wouldn't even talk to us because we were too small for them.

And everybody else like John Hancock and so on required a bunch of calls and meetings and paperwork and wading through lots of financial jargon to make all these decisions. And it was just really painful even to get a 401k off the ground, let alone all the ongoing administrative and compliance work that I learned we were gonna have to do even once we set up a 401k.

And so despite 401k being the top employee request that we got at the time, we never got one. For years, we did not get a 401k, we didn't have an HR team or finance team to do all the administration. And me and my co-founders, we were too busy trying to get the company off the ground to spend time on 401k setup.

And that always made me feel kind of embarrassed that we were trying to be this legitimate business and we couldn't offer such a common, important benefit to our employees. And then it turned out that, I realized later that we were not alone. In fact, even though we think of 401ks as very common, and it is common across large businesses, for companies under 100 employees, only something like only 20% of those businesses have a 401k.

And meaning 80% of small businesses don't have a 401k. And that stat was shocking to me when I learned it because how could it be that this is the way that Americans are supposed to save for retirement, yet you have tens of millions of people who don't even have access to a 401k because they work for a small business that doesn't offer one.

- Got it. I mean, that's a great problem to solve. - Yeah, and it also, as a technologist, it also frustrated me that it didn't feel like these barriers need to exist. Since 2015, there's no reason it felt that I needed to wade through all this paperwork to set up a 401k.

There seemed to be no reason why I had to talk and have meetings and calls with these brokers to get one going. Why couldn't I just do it online? Everything was possible online at that point in time. And so it just seemed to me like if there was a way that we could automate and digitize the 401k experience, then more small businesses like my own would be able to offer that really meaningful benefit to their employees, and we'd be better off and maybe make a small dent in this looming retirement crisis that we face as a country.

- Sure, sure. Can you explain to the listeners who are the players in the 401k and how they make money, including human interest? - Yes, so there's two ways that 401k providers make money. One is that they charge the company fees, monthly fees, annual fees, kind of like a software as a service model.

- Got it, so Fidelity would charge a big company a certain fee based on what? Assets under management, number of employees? How does it work? - Yeah, usually number of employees, but assets do take into account as well. And that's the second way that 401k providers make money is off of the assets.

And it's this kind of shady thing where they will put investment options, mutual funds in the 401ks that they get kickbacks from. - Like high fee actively run funds with high expense. - High fee actively managed mutual funds that often kick back revenue share to the 401k provider or the broker or the advisor.

And so that's another revenue stream. And that of course, we always thought was really bad because it's a conflict of interest and ends up hurting the employees who are saving their hard earned money in the 401k because they're just getting these fees siphoned off from the assets that the employees put in because of this conflict of interest where there's this kickback revenue share going on.

- Right, right, right. So if I was Fidelity, would it not be wise for me to offer the 401k plan to all of Microsoft and then load the options only as Fidelity actively run funds? - Absolutely, absolutely. - Double revenue? - Absolutely, yep. So Fidelity, and I don't wanna speak for any specific company, but one of these companies might say to Microsoft, okay, we'll charge less to the company because we know we can make more money off of the assets, especially for someone like Microsoft who has lots of assets in their 401k plan.

- Right, like huge. - Yeah, and then try to make money off of the assets. Now, Microsoft's big enough that they're wise enough to try to negotiate the investment funds that they're not gonna put in really high, or I hope they don't put in really high, expensive mutual funds that don't make sense to be there.

But a small business doesn't know any better. And small businesses don't have investment committees the way that Microsoft does. And so if you look at the average asset fee for a small business, it's way higher, 1%, 2% on average compared to a large, well-run enterprise like Microsoft, which often is able to get the asset fees to just a fraction of a percent.

- I see, so the small business would pay 1% to 2% to the 401k provider every month or year, ongoing forever. - Exactly, exactly. Whereas the bigger businesses like Microsoft, they have the bargaining power, they have the know-how and investment committees to be able to negotiate that down. - Got it.

And given we all know that fees are not as good as no fees and actively run money managers tend to underperform over the long term versus index funds, wouldn't it be logical to assume that all companies would say, well, give us some variety of index funds, passively run, low-cost index funds as part of your portfolio of all funds available?

- Absolutely. And we are seeing, thankfully, some pressure moving in that direction where now most 401k plans do at least have index funds in the mix, in the menu lined up. So it's not all actively managed mutual funds the way that it used to be. That said, some of these 401k providers are still pretty sneaky about it.

They'll offer a couple of index funds in there, but they kind of count on the employee to know about them and to choose them. And the default option is still not the index fund or the index funds are only one or two out of the 20. And so you have to really know to look for the expense ratio to identify the index funds as a participant to be able to take advantage of that.

And the 401k provider is betting that the vast majority of employees aren't gonna realize that and will just put their money in higher fee funds. - Got it. So I guess all listeners listening, it's important to have a good HR person explain to you and it's good to review those funds and x-ray your portfolio for excessive fees and look at their performance.

I mean, maybe the fees are warranted if they have a huge, awesome, outperforming track record over the past 10 years. So human interest is not, you guys don't create mutual funds, you don't offer funds, but you set up 401k plans. So how do you bring those funds into, those options into a small business and then how do you guys make money?

- Yeah, so our primary revenue stream comes from the monthly fees that the company pays. We do make a small percentage of revenue off of the assets, but it's much, much less than what's typical in the industry. And the reason for that is because we can bring in any fund that's available.

So we don't have our own funds, we don't make money off the funds, which means that the vast majority of the funds that our customers choose are index funds from places like Vanguard. And so there are lower fee index funds coming from Vanguard and others. We let the company choose, so if they wanted to use Fidelity funds, they can, if they wanna use BlackRock funds, they can.

So we have access to pretty much every fund that's out there and we buy us and encourage our customers use index funds because that's going to be the better approach for their employees in terms of lower fees. - Okay, so do those fund creators, do they try to pitch you guys and say, "Hey, can you include our funds "in the plans that you set up?" Or no, how does that work?

- Yeah, initially no, because we were so small that nobody really cared. That might be changing as we grow, as we get more assets, maybe funds do care. And I remember in the early days, we did have a couple of companies pitch us, but we always said no because they were trying to get their high fee funds in there and we didn't think that made sense for our customers.

- Okay, so things are changing a little bit now. And so when you package, is it a package where you say, "Here is a 401k product that we set up, "we do the administration and everything, "and here's the portfolio funds you can choose." And where does the fund actually, I guess, sit?

- Ah, yes. We don't actually custody the assets ourselves, so we do the software part in terms of automating the setup, automating the administration and compliance, integrating with the company's payroll system, having an account for employees and administrators to access. But it's not our funds and we don't hold the money.

The funds are held through a third party custodian, kind of like a brokerage house or a third party custodian. - Got it. So if I was a small business, one of the 80% of small businesses with no 401k, how do I, do I just go to humaninterest.com and fill out the contact form?

- Yep, exactly. Yeah, you can go to humaninterest.com and then click get started. And you should be able to get up and running pretty quickly. - Got it. And so just shifting gears a little bit, so let's say I was working at Human Interest. What would be, right now, the most important job at Human Interest?

Is it business development to get more businesses? What is that job that would be the most lucrative job and beneficial job to the company of Human Interest? - That's a great question. You know, I think there's two, you know, kind of core areas of priority that I can think of that we're, you know, working hard on and the team is working hard on.

One is, of course, getting more customers. So we now have, I think something's like 15,000 small business customers on Human Interest, which has, you know, grown a lot over the years, but is still a tiny, tiny sliver of the millions of small businesses that could and should have a 401k.

And so certainly any efforts to get the word out to make it more known that, you know, small businesses now have a better way to get a 401k and it's not possible for them to get a 401k, that's certainly very important to us. And then we're also making a ton of investments to improve the technology experience.

The whole model behind Human Interest is that by automating every part of the 401k stack, we can lower the cost for the business, lower the time it takes for a business to run a 401k and get more employees to save for retirement. But there's a reason why it hadn't been done before.

It's because it's really, really hard. There's a lot of different aspects of a 401k and to automate every single one is a pretty big undertaking. And, you know, we made a lot of progress on that and there's even more we can do. And the more we can do of that, the better experience it's gonna be for customers and for their employees and the more small businesses that will be able to offer a 401k.

So those are the two, you know, two of the main things that the company's working on. There's definitely other initiatives and projects that are important as well, but those are the two that come to mind for me. - Right. How important is regulation of the 401k? And do you foresee any regulatory changes in the retirement plan of America?

Because I think most of us would prefer pensions for life, but we have our 401k and it's like 22,500 max to contribute. And I don't know if that's enough for most people. - Yeah, regulations do play a key role with 401ks. You know, they govern everything from how much an employee is allowed to contribute and get tax advantages of.

They govern, you know, things like what investments can be made available and who's responsible for those. Even now, there's certain locations and states that are making a retirement plan mandatory for small businesses to offer. And so some of the-- - That's good for you guys. - Yeah, yeah. And many of the recent regulations have been very favorable to human interest because they promote small businesses to get a retirement plan.

So for example, there are now these state mandates, for example, in California, companies are now required to offer a retirement plan to their employees and the same is true in other areas as well. And then there's been federal legislation that passed recently, the Secure Act 2.0, that also provides financial incentives for small businesses to offer a 401k.

And so essentially, via tax credits, the small business can offset a huge portion, if not all of the cost of getting a 401k. And so the government, you know, is aware that we have a looming retirement crisis. They're aware that a big challenge is getting small businesses to offer a 401k plan.

And so via these state mandates or financial incentives, they are trying to encourage, and in some cases require, more small businesses to offer a 401k, which we hope, you know, combined with technology like ours that makes it easy for them to do so, will make it possible for more small businesses to offer a 401k.

- It sounds structurally you guys are in the right direction. It's kind of like 68% of Americans own homes and the government wants more home ownership with through the tax incentives, the tax-free profit gains of 250,000 to 500,000. So it sounds like you're in the right spot long-term. So when you created your pitch deck for YC, was that part of the main pitch?

How did, 'cause I know like YC doesn't accept anybody, it's just like really small percentage as well. So how did you come up with pitch deck and how many founders did you have? How did you go about that scenario? - Yeah, I had one co-founder, Paul, who was our CTO.

And the main pitch to YC was what I had said earlier. The thesis of the company was that 80% of small businesses don't offer 401k and as a result, tens of millions of Americans don't have access to a retirement plan. And that both of those numbers could be improved if we digitize and automated a 401k and Human Interest was gonna be the company to do that.

- Right, and then obviously they saw your background and experience, education and experience building websites before. How did you find your co-founder? - Oh, I met him through a mutual friend. So we hadn't really worked together or known each other before, but we were both kind of in a place where we were both looking to start our next company.

- Okay. - And Paul, I am very interested and passionate about personal finance. Paul was not, but had encountered the 401k problem firsthand as an employee at Mozilla, where we looked at his 401k account and it turned out that all of his 401k savings through his Mozilla 401k were just in cash.

And it turned out he was not invested at all despite being a young person and because cash was the default option in Mozilla's 401k plan. And as your listeners probably know, he should be taking a lot more risk for his retirement plan, especially given his age. So we realized that there was actually sort of a twofold problem in 401k.

One was my own experience as a business owner failing to be able to set up a 401k because it was too complicated. And the second challenge was Paul as an employee who did have access to a 401k, but was still making some optimal decisions in it. And we thought that there would be opportunity for software to help with both of those problems.

- Got it. So if he was the CTO, you know, building the technology, what were you doing? - Yeah, I was the CEO and in charge of the business side, I guess, you know, trying to get customers, trying to get funding. And kind of playing the role of a product manager and helping, you know, figure out what we should build, especially given my knowledge of a 401k is dating from my previous experience.

- Got it. And when you applied to YC, what were the conditions of the investment? How much did you get and what equity stake did they take? - Oh, that's a good question. I can't remember the specifics. I know it's evolved a bit over the years, but I wanna say, you know, we gave up 7% of the company or something around that maybe it was six or eight.

I can't remember the exact number. And I think the investment amount was somewhere around 100k or 200k. - Yeah. - But again, can't remember the exact specifics. - Got it. - I know they've changed the terms, you know, over the years. This was in 2015. - Right. And so 7% and 150k, obviously now that your company is a success, when you look at that number, 100k or 150k that you gave up, do you find it was worth it?

- Yeah, I thought YC was worth it. Not for the investment dollars per se. You know, I think if you look at that particular deal, it's pretty clear that that's very favorable for YC from a, you know, just dollars invested versus ownership obtained perspective. And so most of the value in YC is not the actual dollars, but just sort of the experience that you get from going through YC.

Everything from the mentorship and advice that you get, the access to the other YC companies and alumni companies that could be your first few customers, the access to investors that you get at the end of the program during demo day. There's obviously some brand value, which helps with early recruiting, trying to attract your initial few hires that may, you know, be skeptical otherwise.

Among other reasons, I think those are the reasons why companies should do YC, not for the actual investment amount. - Although the investment amount, if you have zero dollars, I mean, that's-- - It doesn't hurt, for sure. It helps you get through the first few months of, you know, when it's just the founding team.

- Right, right. Now, so you guys have two founders, and then so one of the big challenges is to find people, right, to convince people to join you, but also to take a lot of risks, because as you said, joining startups, your pay is much lower than a standard established company pay for the hopes that your equity will turn into something great.

But I know that it seems kind of risky, right? Like your first 10 employees, you're taking a huge amount of risk at the angel round or series A round, and then the equity percentage is like a percent, maybe 2%. Like how would you recommend employees who wanna join startups think about that calculation?

- I think there's the financial aspect, and then the non-financial aspect. With the financial aspect, the deal is, yeah, your salary is lower, it's a less stable job, and hopefully the equity becomes worth a lot, and so it's sort of a high risk, high reward situation. But I always caution our employees and our hires, I can't promise you that the equity would be worth anything.

It could work out great and be very financially rewarding, and certainly there's been many cases of companies where that's happened to the early employees, and we hope the same is true for human interest employees. But at the same time, it is very risky, and I never wanna mislead folks into thinking that it's gonna be sort of a sure jackpot, right?

But I think that there are very significant, for the right person, non-financial benefits to joining a startup. The level of ownership that they get, the ability to make an impact, the experience they get, being able to wear different hats and get exposure throughout the business, and of course, for folks that are aspiring to become founders in the future, that front row seat to the early stages of a growing startup that can help shape their future entrepreneurial endeavor.

And so I feel like, and for some people, it's just more fun to be part of an early stage startup, and they don't like being at a big company. Yeah, the reason why I decided to go down entrepreneurship is not because I thought it was gonna be necessarily more financially rewarding than taking a big company job, but just because I knew I enjoyed it more, and that's what I was passionate about.

And so I think for an early employee to make sense at an early stage startup, there has to be some element of that as well. It can't be a pure sort of dollars and cents calculation. Oftentimes, the ones who get the most out of it end up getting value because it helps them with their career path down the road because of the experience that they got when at an early stage startup.

- Right, right, right. You know, I think a lot about opportunity at financialsamurai.com, and I feel like not everybody has the same opportunity. I feel that one of the ways to increase your opportunity is to live in a city where there are more opportunities. So if you wanna do AI, maybe you come to San Francisco.

If you wanna do banking, you go to New York City. If you wanna do media, you go to Los Angeles. But I remember when I was in finance, and I was thinking in 2012, I was like, I wanna do this startup thing, this tech thing. But I applied everywhere, and I couldn't get a job anywhere.

Like I saw Airbnb valued at 2.8 billion, and I was like, this is a no-brainer. I wanna join. I couldn't get a job there. I saw Uber. I was like, this is a no-brainer. It wasn't as early stage, but I couldn't get in. So how do people get in?

Like what is one of the paths to get in? Because applying to YC is hard, getting into Harvard's hard. What about the rest of us? - Yeah, I think one is to go for a company that is not gonna be as competitive on talent, right? You probably weren't the only one looking to join Airbnb at the time.

They were a hot company, and a very interesting place to work, and so had probably no shortage of options. But if you apply to Human Interest back then, or any of the other sort of companies that are kind of no-name at the time startups, I'm sure that the reception could have been a little bit different, because they don't have access to the best people, the top talent, the way that the Airbnbs do.

So I think kind of taking a flyer on a less competitive startup is certainly one way. And then looking for companies that have a unique match to your skill set and experience. So if you have a finance background, then maybe looking at a financial technology company, a FinTech startup might make more sense than an Airbnb, for example, just because maybe there's certain skills that you developed when you were in finance that a finance company, a FinTech company, will find valuable in a way that Airbnb might not.

So those are kind of the two things I could think of. Obviously, it's not easy, though. And there's no shortage of people looking to get into tech, especially during the boom times. That might have changed in more recent years, so maybe this is a better time to look for a tech job, in the sense that not as many people are looking to get into tech, although also there's fewer jobs in tech given the current downturn.

So TBD on that. - Let's, 'cause we met maybe in 2015 or 2016, and so yeah, you had a company, Captain 401K, you're probably looking for exposure. I had Financial Samurai, it's been around since 2009. But yeah, so for me, I was like, I never thought, oh, I'm gonna join your company back then.

But I said, I guess in retrospect, if I said, you know what, that's a great idea, I wish you had pitched me the story in terms of that clarity, I'd be like, oh yeah, that makes a lot of sense. I would like to join you as, I don't know, lead business development guy.

So let's say I got 1% equity, right? It sounds kind of standard. And I had my, I don't know, 125, $150,000 salary. And now it's worth a billion, let's say. So it was worth nothing, now it's worth a billion. So 1% of a billion is 10 million. But over those years, let's say eight years, how much dilution would I have experienced?

Maybe it doesn't have to be specifically your company, just on average, where what would I actually have with a billion dollar valuation eight years later at 1% eight years ago? - Yeah, it's tough to say. I mean, I think dilution is important to consider that the 1% is not gonna stay 1% over time because companies do need to raise funding to keep going and they can either grow and expand.

You know, there are kind of dilution calculators or estimators that you can kind of search out there to get a rough sense. You know, I think sort of standard rule of thumb is that companies will give up somewhere around 20% in their earlier rounds and that kind of goes down over time.

So you can kind of make some assumptions about, you know, how many rounds they're gonna raise over what period of time to get to, you know, a certain sort of exit outcome. It's gonna vary a lot from business to business, from industry to industry, and of course, from year to year, just given kind of fundraising environments and so on.

So, you know, unfortunately, just tough to really ballpark estimate just because it can vary so much, but if you wanna get some idea, you know, companies will typically give up around 20% in their earlier rounds. You know, that can go down to 10% or lower in later rounds. And you can kind of use that to get a sense.

- So maybe my 1% in 2015 would turn into 0.5%? - I haven't done the math on it, so. - Come on, you're an applied mathematician. - Yeah, yeah. - But I would say, yeah, 20% dilution, 10%, four rounds, ah, 50%. You get 50%. - Sure, yeah, again, it'll vary a lot from business to business, but yeah, you can make different assumptions and kind of see what it turns out to in different scenarios.

- So I wanna rewind time again, back to 2015, we're at a meetup. I was like, Roger, this is such a great idea. You know, I have this platform, I have my background in finance for 13 years. Could I have joined human interest then? - Ah, I don't know, I can't remember.

- Well, 2015, 2016. - Yeah, I mean, I'm sure I would've loved to have you. You know, at that point, you know, we were probably only a handful of employees, so, and obviously, you know, had a great background and knew a lot about personal finance, so I'm sure we would've found you valuable in some capacities, so yeah.

- Well, I say this because I think it's fun to look at things in retrospect, because there's a lot of opportunity that's just staring you in the face that people just don't think to seize or connect the dots or anything, and so I think people need to really slow down, kind of maybe take analysis of who they met, what are they doing, what you really wanna do, and be a little bit more intentional instead of just going on autopilot, doing the same thing over and over again for the next 20, 30 years, 'cause I think that's what happens.

There's this inertia that happens where people say, I'm just gonna do, I'm gonna write three posts a week for 10 years, and you have blinders on. - Yeah, that's true, although it sounds like you have a pretty good gig going yourself, so I don't know if it actually would've made sense for you to join even in 2015.

- Well, yeah, I don't know. It's always fun to think what if, right? We can only live one life, but it's always fun to dream and daydream. Oh, what if I did this, or all that stuff. So it sounds like Human Interests is a pretty big success based on where you guys were in 2015.

I saw a headline, you guys raised a couple hundred million at a billion dollar valuation. I don't know when that was. It was a couple years ago. So who knows now. And then you decided your job was done, and you stepped off, CEO, to do it. - Yeah, that's right.

So as we're hitting growth stage of the business, I brought in a CEO to run the business, and I transitioned to the board of Human Interest. The CEO, Jeff, was someone who had been on our board for a couple years of our company's early life, and who I had actually known socially even before that.

And as a board member, I noticed that he was super helpful in all the growth stage challenges that we were about to navigate, or are currently navigating, and thought that he was the perfect person to take Human Interest to the next level. I love building, and I love creating.

At the time, I was feeling pretty burnt out. We had our first child, Everett, during that process, and I had not yet adjusted my pace of work to take into account that we had a newborn. And that took a lot of toll on me. And so when I had the opportunity to bring Jeff in as CEO to run our business, it just made total sense as a win-win.

And under his leadership, the company has grown so much over the past few years. And I was able to take a full break and went on an external paternity leave when we had our second child, Ellis. And this was 2020 into 2021. And so really fortunate that I got to take a step back personally, be able to spend more time with Ellis, and then it turned out Everett too, because preschools were closed during COVID.

So thank God I was no longer working full-time. And meanwhile, felt like I could trust the company in Jeff's hands, and he's done a great job with it since. - Right. I'm sure some of the listeners thinking, oh wow, they raised money at a billion dollar valuation, lots of funding.

Definitely, it sounds like you guys have a long runway. I don't know about when you're gonna be operationally profitable and all that. But as only one of two co-founders, I think listeners will think, wow, so Roger's set for life. Sooner or later, there'll be a massive liquidity event. How do you think about that massive liquidity event?

And do you alter your lifestyle now? Or I mean, it's kind of like a mind boggling amount of potential money windfall that will happen. - We have tried not to. I think both my wife and I grew up in a very kind of immigrant frugality mindset. And we were always taught and raised to save money, to not overspend.

It's the immigrant mindset of frugality, and both my wife and I have it. And even though I took econ classes that said, hey, you should smooth your consumption, you only get to live once, you don't wanna die with a ton of money. We've tried to adapt accordingly, but I'd say a lot of our friends will laugh at us for not adapting nearly to the extent that they think we probably should.

For example, we still drive a 1998 Toyota Camry as our primary car. And we've just gotten used to just, I think, try to live the life that we wanted, not get too caught up in buying fancy things and whatever. And it's just sort of not what we grew up with, and so it's sort of hard to adapt to that, I guess.

Obviously, we do spend money where we feel like it's meaningful, so on our children, and with childcare, all those things. If we feel like, I'm a big proponent, for example, of trading money for time when you have money, but are short on time. So often pay for things that give me back time or are more convenient in some way.

But in terms of luxury spending, I don't think we'll ever do very much of that. - No, yeah, it's hard to change old habits, especially if you've grown up in a frugal household. I've had that mindset for a while as well. My parents were super frugal, but I'm kind of forcing myself to spend more.

And you start in baby steps, so one of the first steps I started was to spend more on food, like really great food from all around the world, 'cause it's not gonna crush your budget, but it's something that you can be a little bit more mindful of spending. That's interesting.

It's always interesting to see how, if money or a big windfall will change someone. And it seems like, I think money just amplifies who you already are, what do you think? - Yeah, money certainly makes things easier. It's certainly better to have more money than less money. Again, you can choose what's meaningful for you to spend the money on, and for different people that might mean different things.

But at the same time, I feel like I see these stories of how billionaires spend their money, and often think to myself, even if I had that much money, I don't think I'd ever wanna spend money on this kind of stuff. I'm not sure it would really give me much value at that point, and maybe better to give it away, or find a better cause for someone who might be able to get more value out of that money than for me, 'cause after a certain point, I feel like we've got what we need, and more isn't really gonna make a difference.

- Right. So you stepped off your CEO role, and you're still on the board. And then what happened? You decided to start another company? - Yeah, so as of 18 months ago, I've started now a new business called Comprehensive.io, which is in the field of compensation management. So we help companies decide, track, and communicate employee compensation, which came from my experience at Human Interest, where it was crazy to me that even though compensation was by far, and is still by far, our biggest expense category, and even though it's a key driver of recruiting and retention outcomes for our business, it's mind-boggling how compensation is still primarily done via spreadsheets and ad hoc processes, and is not nearly the rigorous discipline that you might think it is, given how important it is.

And as someone who really wanted to use my startups to help improve people's financial livelihoods, starting with Human Interest, I thought, what better way to make a positive impact on people's financial lives than helping companies make compensation decisions better? And hopefully by doing so, they can make their pay more competitive, they can get closer to pay equity, they can make pay more transparent to their employees.

A lot of these big themes that we started to see in the past couple of years that are very meaningful from a social perspective, we thought we could accelerate if we gave companies the tools and software technology to be able to make those better decisions. - And in this round, are you self-funding, or did you raise funds?

- I self-funded it initially, just to develop the prototype, get our first few early customers, just confirmed to myself that there was a need here and that it was worth me diving back in full-time and committing to. I wanted to do that before I brought on outside investors or hired employees because I wanted to be sure of myself first, but then once I was sure, then we did raise some outside funding and started hiring employees.

- How much of starting another company and funding this company, getting outside funding, is a desire to prove to yourself that you can do it again? - I wouldn't think of it like that. I think for me, for better or worse, I've just always been passionate about creating and building technology that can make a positive impact on people in some way.

And there's no better way I feel like I can contribute, and so it's very rewarding and fulfilling for me. And my wife's a doctor, I don't have the skillset or the composure to be able to do that job. And so I feel like for me, the best way for me to make an impact, given my personality and skillset, is by building technology that can improve people's lives in some way.

And so that's felt like it's been my calling. And so as long as I can do that, that's where I feel like I can most meaningfully apply my talents. - Got it. I do feel that there is, I think, an underlying core value in you to wanna keep on building, because then you started layoffs.fyi, which is not a company really, but it's just a tracker on the tech industry layoffs.

But I think random people who are, they've got their day job, they start a company, they're on the board. I don't know if random people or the average person just decides to start layoff.fyi, right? So I guess, is there this drive to keep on creating? What's going on inside you where you're like, I wanna create something else?

- I think so, yeah. The idea for layoffs.fyi came in March of 2020 when COVID first hit. And I realized then that because of the shutdown orders in San Francisco and elsewhere, likely that meant a lot of businesses in tech were gonna have to lay off employees because they weren't gonna be able to keep operating as usual.

Think kind of companies like Uber and Yelp and Airbnb and so on that rely on in-person business. If the economy shut down, they're not gonna have any customers anymore. And so I expected that there were gonna be an uptick in layoffs coming from companies like those. And meanwhile, I knew that there were other businesses like human interest that were still hiring and still looking to grow.

And so the idea for layoffs and FYI came by thinking, if I can get more visibility to those layoffs, then maybe companies who are still fortunate to be hiring could hire the employees that are being laid off. - So there's synergies there. - Help these laid off employees find a new role more quickly and at the same time, help these companies who are always struggling to find good talent, here was their opportunity to be able to fill those open roles.

I was in the early days of my paternity leave, Ellis was just born the month before. So I was not looking to start a new business by any means and kind of just created this website as a weekend project as sort of my way of trying to do some good in a very scary and uncertain environment that was early COVID.

But yeah, the intention was never to make any money off of it or to turn into a business. It was just something I thought would be helpful. And so I made it and unfortunately, I've continued to keep it running three years later because tech layoffs have continued to last beyond the pandemic.

And in fact, the past few quarters, they've been higher than they were even in the early pandemic. And so I've had to keep the site up and running and I continue to do so as long as it helps people, even if there's no monetary incentive behind it. - Yeah.

No, it's interesting. I think we try to look to the future. In San Francisco, in my experience has always bounced back. I was here for the 2000 dot-com bust and it was really dead for two, three years. So dead, it was crazy, 2001, 2002, 2003, but it roared back.

Do you believe that San Francisco will roar back with the hype of artificial intelligence? - I do think that the Bay Area will bounce back. The tech sector as a whole for sure will bounce back. I wasn't around here during the dot-com boom and crash, but I know that we have been through, this is now kind of a third boom and bust cycle, right?

If you think about sort of 2001 with the dot-com boom and bust, if you think about 2008, 2009 with the great recession, great financial crisis, and now kind of the current tech downturn, every time we've been through one of these, tech has actually come back stronger than ever before because there's so much long-term potential in tech to help improve society.

And I know there's places where technology may actually be harmful and there's certainly some downsides to technology, but overall, if you just look at kind of how technology has fundamentally changed society for the better, it's been very awe-inspiring to me. And there's still, I think, plenty of opportunity left, and whether it's AI or something else, for technology to keep improving productivity in people's lives.

And so I'm a strong believer in that, and I do believe that at some point we will emerge from the downturn and tech will once again become stronger than ever and hopefully the Bay Area with it. - Yeah, I hope so. I hope for both of our sakes, 'cause I plan to be here for another 10 years, and I'm assuming you will as well, right?

- Mm-hmm, yep. - All right, Roger, well, it's been a great hour chatting with you. I really appreciate your time, and congratulations for building such a successful company and trying to figure things out with your life and being a father and spending time with your family more. And also, best of luck with your new endeavor.

If people want to see what you're up to, where should they check out? - So you can visit comprehensive.io. That's the compensation site that's got actually some free data on what companies are paying their employees. And then layoffs.fyi if you're looking to track the layoff activity in the tech sector, or humaninterest.com if you're looking for a 401k for your business.

- That's awesome. Good job, Roger, and I'll see you around. - All right, appreciate it. Thanks for the kind words. - Take care.