The Personal Finance Podcast - The Patient Investor's Playbook with Noah Kerner - CEO of Acorns

Starting point is 00:00:00 It just means that there's no such thing as a get-rich quick scheme. And so we're not about hype or shiny objects or quick fixes. We're about the reality of what it takes to grow your money, which is decades, not days. Certainly the normalization of spending money that you don't have is problematic. I am very concerned about this idea that I keep hearing that the American dream is dead. And I think there's like real reasons for why people think that. But what's not dead is the fact that you can invest small amounts of money every day in a diversified portfolio. and stick with it for 10, 20, 30, 40 years.

Starting point is 00:00:33 It's not far from 100% of people who gamble lose money online. I think it's 96%. And trading is gambling. I think an investing app with a prediction market is like a bank with a blackjack table. That's the reality. The best investor is a dead investor. Turn it on, set it and forget it. Cash is not safe, actually, because you're losing money to inflation every year.

Starting point is 00:00:55 On this episode of the Personal Finance Podcast, How to Build Wealthy, Slow and Steady Way with Noah Kerner. What's up, everybody, and welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of MasterMoney.com. And today on the Personal Finance Podcast, we're going to be diving into some trends I do not like in the fintech space, but also we're going to dive into a conversation with Noah Kerner, who is the CEO of Acorns, and we're going to talk through why slow and steady is going to help you build wealth. guys have any questions, make sure you join the Master Money Newsletter by going to

Starting point is 00:01:38 Mastermoney.com slash newsletter. And don't forget to follow us on Apple Podcasts, Spotify, YouTube, or whatever your favorite podcast player is. And if you want to hop out the show, consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite podcast player. Now today, we're going to be talking through some of the disturbing trends that are happening within the fintech space. And we're going to talk to Noah Kerner, who is the CEO of Acorns, who is going to help walk us through why he believes there are a lot of problematic things in the fintech space. We're also going to dive into the slow and steady way to build wealth and some of the

Starting point is 00:02:14 things that he is seeing in the finance space that are really important for most of you to hear about. So this is an action-packed episode. So without further ado, let's get into it. All right. So before we dive into our interview with Noah, I want to go into some of the things that I am seeing across the board when it comes to disturbing trends with a lot of brokerages out there. And I want a lot of people to understand why there are certain brokerages out there that we tend to criticize a lot more than others.

Starting point is 00:02:43 So one of the big things that I am seeing up front is prediction markets. Now, prediction markets can give you some decent data, especially when you are looking into trading in individual stocks or if you are looking at IPOs, things like that. But prediction markets are getting out of hand and they are being dressed up as investing. In fact, I think if you were utilizing prediction markets as investments, instead of using them as data points, it can be one of those things that can be problematic for a lot of people. Now, what do I mean by utilizing a prediction market as a data point? Well, let's say, for example, a prediction market right now says that SpaceX has an 80% chance of IPOing in 2006.

Starting point is 00:03:21 Well, a lot of times this is a good indicator that this potentially could happen over the course of the next year. So if you're waiting for a SpaceX IPO and you wanted to ensure that you got in on that IPO or you had some funds ready to invest in that IPO, this could be a great indicator. But if you are utilizing prediction markets to bet on if it's going to rain tomorrow, I think that's a major problem. I think it is one of those things that is built into a lot of fintech apps that are supposed to help promote wealth building, but instead it is getting somewhat out of hand.

Starting point is 00:03:50 In addition, it is also a way to just cover gambling. It is one of those things that Noah and I will talk about later on on this episode as well. Number two is I think gamification that targets the dopamine loop. See, dopamine is a problem that a lot of us have to deal with. You utilize dopamine every time you're scrolling on TikTok or Instagram, and a lot of different brokerage apps are also trying to target your dopamine. So, for example, Robin Hood used to use confetti every single time you made a trade. Now, that was not something that was an unconscious thing that they did.

Starting point is 00:04:18 They did that very specifically. And in fact, Robin Hood had to remove confetti only after the state of Massachusetts sued and the SEC published a report on gamification. There was a report that came out that showed that this was gamification and this was a behavior that rewarded frequent trading. So this was one of those things where we are. seeing gamification come out even more. You know here, we are long-term investors here on the personal finance podcast. And so gamification to promote more trading is not something I am interested in.

Starting point is 00:04:45 Number three is zero commissions are not always free. And this is one of those things where a lot of brokerages out there will make you feel as though it's free. But many times, their business model is payment for order flow or your trade is the product that is sold to a lot of different market movers. Companies like Citadel Securities or Virtue or a handful of others pay brokerages, per year to route retail orders. And so this is something that you need to note. It is not always completely free. Now, there's a conflict here, and that conflict is obvious because the broker gets paid, the more that you trade, which is why a lot of these companies want you to trade more because they get paid more. And so this is a back-end portion of how data gets sold with a lot of different

Starting point is 00:05:24 brokerages out there. Number four is that options are being promoted for everyone. So options are a complicated thing to invest in, especially if you are new to investing. They are something that you really need to know what you're doing before you actually start to trade options. But they are becoming much more accessible for a lot of folks out there with a lot of these trading apps. And I think it is much more of an advanced strategy that it is something for beginners. Number five is that sports betting and brokerages are now the same product. I think this is a troubling thing that most people agree. Hey, your bookie and your brokerage should not be on the same app.

Starting point is 00:05:57 And if you have to scroll through sports predictions or sports betting every single time you want to make an investment, I think that is a. huge problem. Sports betting is not something that is good for your finance. It is not something that is in your best interest. And if you were the type of person who says to yourself, actually, I make some pretty decent money sports betting, it is going to catch up to you at some point in time. Listen to me right now. The house always wins. And if you feel as though sports betting is something where you can make a little money, it is not going to happen. Unless you make it one, two, or three times and then you stop, then it's one of those things that it is not going to happen. Now, if you want to have a little

Starting point is 00:06:35 fun with sports betting, nothing wrong with that whatsoever. You would have put 5, 10, 20 bucks on a game. I don't see any issues with that whatsoever, as long as you can control it. But if it is one of those things that is causing you to think that you're investing when you're not, that is a major problem. Number six is crypto, specifically meme coin promotion inside a lot of real brokerages. So a lot of brokerages out there are starting to promote meme coins, which I think is one of the most speculative assets that are out there. Sure, if you want to invest a small portion of your portfolio and meme coins, more power to you if that's something you're interested in. But for me specifically, there are not many crypto assets that are true assets.

Starting point is 00:07:09 Bitcoin being one of them that I invest in. But outside of that, there's not a ton of other assets inside of the crypto space that I would be interested in. Number seven is leverage is being normalized. Charlie Munger had this great quote, and I'm probably going to butcher it. But he said, there are three ways that men go broke. It's liquor, ladies, and leverage. And leverage is something that is being promoted more and more inside of a lot of different trading apps. I have seen it in places like Coinbase, I have seen it in places like Robin Hood, where you can now have leverage in place to be able to trade.

Starting point is 00:07:38 A first-time investor having the ability to 3x the amount of money they are investing by borrowing money or leveraging money is a problem in my opinion and should not be something that is so easily acceptable. The next one is AI as the new stock tip machine. So I have seen some brokerages adding AI LLMs into their brokerage account and it's giving personalized stock. stock picks as an AI advisor. I think that is something that you need to be cautious about, you need to be careful about. The model does not think through your tax situation. It does not think through your personal finances. It does not think through your risk tolerance completely. And so we want to make sure that we are careful when we have AI giving us personalized advice, especially inside brokerages, because these can be programmed in a very specific way to make you do

Starting point is 00:08:24 very specific things. And so you want to be cautious if you are seeing that across the board when you are investing your dollars. And the last one is social trading in public portfolios. Now, there's nothing wrong with social trading if you, it makes you invest more. If you see your friends or your family out there and it motivates you to invest more dollars and get more dollars invested, I think that's a positive thing. But if it motivates you to buy the same exact stock that they are buying and they're making the wrong move and or their stock that they are buying does not fit your risk tolerance or your financial plan, that's where I think this could become a problem. So social trading, I think, can be something that's good. There's

Starting point is 00:08:58 apps out there like Blossom in public that I think are very cool. But if you are utilizing some of those in a way that doesn't make sense for your own risk tolerance or if it makes you invest in a specific way, I think that can also be an issue. So these are just some of the trends that I do not like in a lot of different fintech apps or brokerage apps. Again, if you have the willpower to get past these and you like some of those specific apps, more power to you. But one of the things that I just want to point out up front is that these are some of the troubling trends that we are seeing across support. Now, today, we have the ACORN CEO, Noah Kerner, coming on the show. And what I love about Noah is he is promoting one of the most important and timeless ways to invest. It is long-term investing.

Starting point is 00:09:38 And as most of you know out there, we hear on the Personal Finance podcast, we are long-term investors. And so in this episode, Noah and I discuss a number of different things. We talk through some of the troubling things that we are seeing in the fintech space and some of the things that he would love to see change when it comes to the fintech space. And so he would be in the fintech space. and in regulation. In addition, we are diving into Noah's portfolio and how he invests his money and how he thinks about that. He's going to give us actionable tips that you can use to take away and actually take action on building wealth and building your portfolio over time. And newsflash, slow and steady is the way that he loves to invest. But the cool thing about Noah is that he is building

Starting point is 00:10:16 acorns the same exact way. He is building it the slow and steady way because that is his approach to almost everything in life. And so this is a really eye-opening and great interview. I'm excited for you all to hear this, so let's welcome Noah to the Personal Finance Podcast. Workplace chaos. You know the feeling. Deadlines are stacking up, emails are flying, and then someone on your team gives notice. That's when you think this is a job for sponsored jobs. When you need the right hire fast, indeed sponsor jobs helps your post stand out and reach quality candidates. Instead of hoping the right people see your listing, sponsored and search results so you can match with candidates who meets your specific criteria, like skills, certifications, or locations,

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Starting point is 00:12:59 So, Noah, welcome to the Personal Finance podcast. Good to be here. We are so excited to have you here, and I want to kind of talk through some of the really cool stuff that you guys are doing at Acorns, but one of the things that I love most about you is that you are promoting this financial education. You are promoting, you know, compound interest and long-term investing, which I think is one of the most powerful lessons for most people out there. So you've kind of described yourself as the anti-hype CEO.

Starting point is 00:13:23 So what does that actually mean to you? And why did you decide to plant your flag there? It just means that there's no such thing as a get-rich-quick scheme. And so we're not about hype or shiny objects or quick fixes. We're about the reality of what it takes to grow your money, which is decades, not days, consistency, patience, benefiting from compounding, small amounts invested regularly into a diversified portfolio. So I guess I would say the idea of anti-hype is just about what is really. and what are the real tools of wealth making and what is the realistic situation for everybody out there. So it's not like, ironically, I don't think about it as some unconventional stance,

Starting point is 00:14:06 but I guess against the backdrop of what's happening, it is unfortunately unconventional. It is unfortunate because I think the financial industry is an industry that you have seen time and time again. It just runs on noise. If you go into one of the financial media outlets right now, a lot of them will have doom and gloom or they'll say, hey, the market is exploding right. now or they'll just kind of give all these clickbait titles that really cause a ton of fear for a lot of people. I know anytime there is some sort of market pullback, we get our email flooded, our DMs are flooded from people like, what do I do? What am I supposed to do here? And we talk through just long-term investing in how important that can be, which is why I think this is really,

Starting point is 00:14:41 really important. And so most of this industry does run on this noise. So what made you kind of go in the other direction from what most of the financial industry does? It's honestly, for me, it's a funny question because it's just what is the reality of what people are supposed to do. And we put the customer's money first, ours next. And again, I guess that's unconventional too. But that's the central premise of acorns is your money first, ours next. And the business logic, we consider ourselves a mission. And of course, we're a business and we are building a business. But the business logic is that by giving people the real tools of wealth making, by putting people in the right products, by teaching people the right things that over the long term, we will win as a business. And it's a much

Starting point is 00:15:25 more durable, sustainable relationship, you know, and I do believe 20, 30 years from now look back on this time and people will say, you know, I hope they'll say, oh, is that like acorns really, that's the right way to do it. Because we're just applying the basic fundamental principles of good investing. Exactly. And I'm sure you and your team have had a lot of conversations with a lot of investors out there and kind of talk to some of your customers out there who are, you know, working with acorns and kind of doing, they're investing there and a lot of different cool things there. But when you look at the landscape of a lot of the average American's relationship with money, are there things out there that are worrying you right now? Are there things that you see

Starting point is 00:16:07 that could be toxic or detrimental to their finances? Certainly the normalization of spending money that you don't have is problematic. I am very concerned about this idea that I keep hearing that the American dream is dead. And I think there's like real reasons for why people think that. But what's not dead is the fact that you can invest small amounts of money every day in a diversified portfolio and stick with it for 10, 20, 30, 40 years. And if you do that, $5 a day, you actually can retire with a really significant amount of money. So the American dream, while a lot of things are compromised and the cost of living is really high and there's obviously a lot of painful issues going on, like the American dream is in. in your hands to take advantage of.

Starting point is 00:16:52 I'm super concerned about the fact that the conflation between trading, gambling, prediction, and investing. And I think that there's nothing wrong with playing around. But I think, unfortunately, the way that it's marketed and sometimes the way that it's misperceived is that this is a substitute. And it's just not, you know, sorry to curse, but fuck around with 10% of your money. I do. Great.

Starting point is 00:17:15 But 90% of your money should be in diversified portfolio, ETFs, stay long, slow and steady wins the race. Exactly. And I think that is one of the things that we talk about all the time in this podcast is a small amounts of money over time can grow to very large amounts of money. And once people understand that, it'll drastically change their perspective when it comes to investing in how they manage their dollars. It's not hard. It is one of those things that is very simple, but it is difficult to execute for some people. And so overall, your message is, hey, patience is the core message here. Patience and investing these small amount of money over time can really be, a big difference maker. And I have found that it is one of those hardest cells that we've kind of had out there, is trying to teach people to be patient because there's so much noise out there. Why do you think that is the hardest cell out there? Why do you think it is one of those things that we really have to push for people to actually understand how this works? I think we all fall prey to our impulses. And that's just the sort of reality of dopamine and the human mind. Everybody has some form of addictive behavior. And so when we're served up opportunities to pursue addictive

Starting point is 00:18:19 behavior, that's how the brain works. And so we're sort of captive to our dopaminergic system. One thing I was going to say before, when you look at a business, you always have to follow the money and you always have to follow the industrial logic of a business and how it operates and how the business generates revenue. The fundamental thing to understand about acorns in that sense also is we have a slow and steady wins the race philosophy about our business. So it maps to the philosophy that we're espousing you pursue. Like we want to be a generational company. You know, We want to be a company that's around forever and that grows in lockstep with our customers. I think that alignment is really important to understand.

Starting point is 00:18:57 I think when you're monetizing transactions, follow the money, right? So when you look at the business and you understand how the business makes money, you can understand whether the business is aligned to your best interest or not. Absolutely. I think that's where the big overarching thing that you guys are doing is really, really cool because overall, it's the math of patience and it's kind of thinking through, okay, we can take these small dollars and we can start to invest these dollars over time. We can see the compounding here. And the same thing goes for a business. If you can make sure that you are

Starting point is 00:19:23 growing in a way that is conservative, but also a way that really does have lasting power, that is going to be really, really important. Is there any math behind this? When you guys look at kind of the patients, you know, the way that people are investing over time, they invest these small amounts of money over time, or these, you know, $5 a day, $10 a day, whatever else that is. Is there a math that you guys use behind the scenes where people's money can actually grow to these large amounts of money? My favorite screen in the Acorns app is called The Potential Screen. And it's really just, I think, an elegant visual way to show the power of compounding and how it works over 40 years. If you're a kid and you're using or your parent and you're using Acorns early and you start investing in your kid as early as birth, you can see how that money compounds over 65 years. So if you do $5 a day invested consistently over that time period, you will retire a millionaire. You know, if you start your kid at birth at $5 a day. And of course, it's really those outer years, which is why time is so important that, you know, sometimes it may feel like a long slog, because it's really those outer years.

Starting point is 00:20:23 Like if you enter into a compounding calculator, you can, you can see once you get to 40 years, 41, 42, 43, 45, because of course the money's growing on a bigger principle balance. That's the magic of compounding. What I see with our customers is as soon as you understand that, you're locked in. You know, we have a really good retention. that's the tipping point moment is once you understand the magical power of compounding, the way that the S&P works, the concept of diversification, and that you can contribute small amounts and dollar cost average through, you know, especially through choppy periods,

Starting point is 00:20:57 that's when you're locked in. And I get the thought of even one customer being locked in that way, because it's transformative for that person's life and probably their kids and their kids' kids. And so we as a company, you know, get very proud every time one, customer. I mean, we, and, you know, we've got obviously millions of customers, but every one customer. And that person becomes a beacon also for other people. We use this, we use the phrase, share the wealth. It was like, my hope is, as soon as you figured out compounding, tell everyone you know, because if everyone in America is doing this, America becomes a very different country.

Starting point is 00:21:33 Absolutely. I think that's the most powerful thing, is learning how to share this and sharing this message is so important. Overall, I think a lot of people, when they get started investing, Maybe they start to see compound interest working a little bit for them. But all of a sudden, it kind of feels like a slog. And for most people, I kind of tell them, hey, your first 100K is pretty tough. The reason why is because most of it is your contributions. So your contributions are a big proponent to you investing your first 100,000. But after you get to your first 100,000, then your money starts to grow more and more and it compounds more.

Starting point is 00:22:01 And even your first million, like you were saying, I think it's one of those areas where you start to see a big, big difference. But when people are in those early stages, when people are maybe even in those middle stages and it feels like that money is not really compounding. How can they stay motivated to kind of move forward? Is it looking at something like the potential screen? Is it looking at something that kind of helps them, you know, visualize this? Or how do you think they should stay motivated throughout that timeframe? It's absolutely looking at the potential screen, which is why we designed it. And one of the things we're going to do in the near future is merge our home screen and the potential screen. A philosophical tenet at Acorns is that we've executed this at many places in the product, but you should never see your current

Starting point is 00:22:39 present balance without seeing your future potential. I think that's because that's the motivator. Because you're absolutely right. There's a long period in there. It's a little bit like the sort of middle age or being in middle age or the sort of midlife crisis years. That kind of thing. It's a funny analogy. But you can't see as much of that happening for you every day. But if you bring yourself back to the potential screen and understand that the long arc of compounding is always working for you and just staying committed and staying centered in that and staying patient, you know, you'll, you'll win and history obviously plays that over and over. Now, there's a big thing that's happening right now that it's really bothering me.

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Starting point is 00:28:36 you know, the way that they are trying to get them to trade in and out of these investments? I mean, it's not quite 100 percent, of course, but it's not far from 100. 100% of people who gamble lose money online. I think it's 96%. And trading is is gambling. And again, I hate preachiness. So I don't know sit here and like sound preachy to tell people like, don't do this. People are going to do what they're going to do. And I think it's, I think it's fun to play with a little bit of your money and take some bets, you know, but take some bets on things, test your skills, you know, challenge yourself to, but keep in the context of, of course, your broader life, your family, all the stuff that, you know, that, you know,

Starting point is 00:29:13 really matters to you in the long run and make sure that 90% of the money is in, you know, in a diversified portfolio. I do think it's really alluring. It's sort of preying on people's natural conviction and belief in their confidence. We all have a bit of overconfidence in our own confidence. And so that's what the stuff around trading and gambling really, you know, really praise upon. And it all loops back to what is the business model. When it's free, I love this expression. You are the product. That's a great experience. because I think that's really what it comes down to. You see this and it's one of those areas where you know, you're enticing people to start to trade. And I agree with you. I think this is one of those

Starting point is 00:29:51 things where we talk through, hey, 10% or less of your portfolio, if you want to utilize that for things you're interested in, some fun money, some play money to be able to invest in, you know, certain things. And I think that's really, really cool. I do this all the time. I do it for, for very specific things that I think is fun to invest in. But anything outside of that, if it's causing you to really do your financial freedom and your wealth building strategy is going into some of this stuff, I think it can be problematic. And we've seen this across the board. It's getting worse, in my opinion, with some of the things like prediction markets, where I've seen people in the past say, hey, your bookie and your broker should not be on the same exact app. And this is one of those

Starting point is 00:30:25 things that we're seeing happen more and more with a lot of different fintech apps. And so what do you think about this? And is this something that, you know, could cause a problem for the next generation of investors? I think an investing app with a prediction market is like a bank with a blackjack table. that's the that's the reality i grew up with a very kind of clear philosophy of shut up and let the work speak this was like taught to me you know as a as a child so we walk that walk as a company at acorns but i think one of the you know one of the things we've just firmly decided now is that like with everything that's happening is sort of enough is enough so we plan to just be louder about this stuff and while while we will always let the work speak and let the products and the coms and the and the

Starting point is 00:31:08 things we put out into the world, which we always put the customer's best interest first, speak for themselves. We decided to sort of make what we're going to call the Acorns Pledge. And I think this is a really important thing for a company like ours to just come out and state, right? So we have, let's call it tenets of the Acorns Pledge. One, we will never play games with your money. And that's back to the, an investment app with a predictions market is like a bank with a blackjack table. If you walked into your bank branch and before you got to the tell her there was a blackjack table right there you'd probably be like this doesn't uh feel right something something's wrong i'm going to get out of here right right there's a pit boss in in the in the

Starting point is 00:31:50 branch like and chips flying and like you'd probably be like i'm probably going to go to the branch across the street that's one uh we'll never hide how we make money this is and by the way these are principles and acorns in the way we move but we're sort of stating them more loudly now we'll never hide how we make money. We're a very simple business. We're a subscription business. That's how we make money. We don't monetize your transactions and, you know, and we think it's really important for people to understand. Here's what we charge. Here's what you get. Here's how we make money. That's it. We'll never push products that create bad habits. I would say if you were thinking about where to do your investing or banking or whatever, to know that the company behind it has made a pledge to never

Starting point is 00:32:30 push products that create bad habits, it's pretty obvious. I mean, but should should be the pledge, but actually state it, like, and live that and be about it. So that's, that's three. We'll never stop working to put your money to work. That's a really important one. And we'll never talk over your head. When you look at the history of this stuff with the footnotes and the caveats and the corporate speak and the jargon and the acronym, you know, it's, it's like money shouldn't

Starting point is 00:32:56 be complex. Why is it so complex? It was because there's an industry that monetizes complexity. So we want to keep it simple, treat people with respect, be fair. That's it. I love those. And I think those are some of the core principles that I think most people would really want to see in a brokerage that's out there.

Starting point is 00:33:17 And I think this is a really important thing that most people need to understand. There are so many different apps that are out there that are just utilizing you, like you said, as the product. And when you're the product, there are going to be things that they could present to you that may not be in your best interest. And so you have to understand, you know, how some of this, works in how some of this operates, which is why financial education is so important. And I think that's one of the biggest things that we need to kind of continue to keep pushing here.

Starting point is 00:33:40 So if you could ban anything when it came to like the fintech industry or any other financial trend that you see out there right now, what would be the biggest thing that you wish would just go away? False advertising. Because, by the way, and the regulations are supposed to do this, but I would ban false advertising. The problem for people is not that these products exist. It's that they're communicated as something other than they are. or maybe misunderstood as something other than they are.

Starting point is 00:34:08 So, you know, if a tree falls in the woods and nobody heard it, did it really happen? I guess you could say the problem is not that the product exists. It's that there's so much misinformation about what is the right way to do these things. And a lot of that comes from the communication and packaging of this stuff. And ultimately, as a result, as consumers, which makes sense because how the hell are we supposed to know? predicting is investing. Well, no, it's not. Trading is investing. No, it's trading. Again, just call it what it is. So I would ban false advertising. And the regulators are obviously supposed to make sure that things aren't promissory and this kind of thing. But I think a lot of it, a lot of it still happens. I love that. And I think that's something that most people don't even realize it's happening and it's right in front of them, which is a big, big deal. I want to shift to behavior and habits here. I'm going to talk through some of the things that people can actually put into place and some action. steps that they can take from listening to this episode. So obviously we've talked about the beginning

Starting point is 00:35:03 of the episode. One of the biggest edge that we have in place is patience. And time is one of those things that can really absolutely change your life. So if you're a 20 year old out there, you have one of the most valuable assets of all, which is time. What are some of these small everyday decisions that actually compound into real wealth? What are some of the things that you want people to know that they can do to really compound into real wealth here? There's an expression the best investor is a dead investor. Do you know this expression? Yes. So turn it on, set it and forget it. If you're going to come back, I mean, you know, if you're going to come to the product,

Starting point is 00:35:37 keep those principles in mind that it's all about time in the market, slow and steady, wins the race. I always have to remind myself of this mantra. This was actually, this one, this one is mine. Every downturn in history has ended in an upturn. You know, those are the small things you have to remember, but it's really set it and forget it. Play dead. I love that. I think that's where there's, you know, there's been studies that have come out in the past where, like,

Starting point is 00:35:59 companies have looked at some of their best customers and they look at it and it's folks who have actually passed away that just kind of left their portfolio going and combating over time. I think that's a really cool thing. And it's a really cool concept to think through this. Now, one of the things you guys do is you're utilizing automation as a secret weapon. It is one of those things where automation has become one of the best forms of firepower that your investors have when they are looking at, you know, building up their portfolio. Why is automation so powerful?

Starting point is 00:36:26 And why is that something that you guys kind of started with or one of the things that you kind of thought through when you started to build out your platform. It's the application of set it and forget it. So the automation is we're doing this work for you to help you make sure you set it and forget it and play dead. Automatic portfolio construction, it is really fundamental. When you think about the things that we all have trouble with, doing, like constructing our own portfolios is very difficult. So we do that. We automate that for the customer.

Starting point is 00:36:54 Understanding how to how much to invest, how to invest. We automate that for the customer. So $5 a day, turn it on, let it ride, you know, that. So automation is literally just the solution to set it and forget it. And, you know, that's how we constructed the Acorns product. Now, there's a whole generation of investors who may have kind of learned about investing from the meme stock era. And we saw this kind of happen over the course of COVID in 2020, when we saw a big shift

Starting point is 00:37:21 in a lot of these investors. Well, a lot of these investors are still out there kind of investing. Some of them are investing that way or maybe they're investing in crypto. Do you see this as a dangerous way for people to learn how to invest? Or do you see this as a positive because at least people are getting into the market? There's definitely not a one-size-fits-all answer to that. I think ultimately it's, you know, time will tell for each person, whether playing around during that period or messing around with some of these assets

Starting point is 00:37:44 is a good thing for you or a bad thing. I think back to the, you know, thing I always say, it's okay if you're doing it with a small percentage of your money. And I'd probably argue it's not just okay. It's probably a good thing because everything, you learn is useful. And I think if we're synthesizing all of these experiences and all of these learnings together as we go, then we become better stewards of our own money. But it is certainly a problem if with the large majority of your money, you're gambling and buying risky volatile assets.

Starting point is 00:38:17 So diversification is everything in terms of portfolio, construction, and management. And I think it's probably going to be different for every single person. But there are definitely those two categories people, which is people who played around, learned, got smarter, and then people who went all in and got themselves into a really tricky situation, which sucks. Absolutely. Now, I want to look at your personal lens on some of this stuff as well. What is a belief about money that you've completely changed your mind on in the last five years, if any? Because we're about diversification and maximizing returns and minimizing risk, you know, we don't just offer cryptocurrency investing. because if you were to do that with the lion's share of your money,

Starting point is 00:38:58 it's just like any other risky volatile asset class. That's not. So we actually didn't get into crypto at all. And where I completely changed my mind was to approach it from a different vantage point, which I don't know if it's been five years. I don't actually know the time horizon, but it's somewhere in that neighborhood, which was to say, actually, let's take this as a moment to do things the acorns way

Starting point is 00:39:22 and to spread knowledge. So we rolled out this campaign called Bits of Bitcoin, and basically what the product allowed you to do is get like a small allocation of Bitcoin in your diversified portfolio, 1 to 5% depending on whether you're in conservative all the way too aggressive. I flipped on the like we're not doing that at all because it's a risky volatile asset class. So let's do it the Acorns way. Let's spread education. And we did the Bits of Bitcoin campaign, which is to say, think of it as the sprinkles on top, the bits. You know what I'm saying? And all good.

Starting point is 00:39:53 And actually, by the way, it turns out that that portfolio is even stickier. There's something there that's really important about the combination of diversification with people's passions. Because people are super passionate about this stuff for various reasons. So I completely flipped. I had to look myself in the mirror and say, you're being too paternalistic with this. Like, don't be so unreasonable. So that was a flip. I think that's a good one.

Starting point is 00:40:19 And I think for a lot of us out there, we've seen just a shift in the way that crypto marketers work, the institutional investors have kind of gotten involved, and there's been a lot of different shifts in that market. And in reality, that's one of those areas where I kind of utilize crypto as a percentage of my portfolio in that 10% range that we kind of were talking about, where for me specifically, that's kind of the way I think about it. How do you invest your own money? Is this something where you kind of, you alluded to kind of using, you know, a small portion of your portfolio as some of your play money and then you have this other big chunk, this 90% as money that you're utilizing to build wealth? How do you invest those dollars? And what are some of your philosophies around that?

Starting point is 00:40:52 I invest my money as you would hope exactly as we espouse. So the vast majority of money is invested in diversified portfolios. I do invest in startups that I believe in that fit into certain criteria. Like, you know, there's things that I think are great for the country. And I try to invest in those things, obviously in the financial wellness category, medicine, education, that kind of thing. I invest some of my money into, when I was like 15 years ago, I developed a really bad vestibular migraine problem.

Starting point is 00:41:24 It was rough. And it's one of those silent, you know, problems where people are like, oh, you get headaches and you're like, no, no, it's not head. It's not, no, it's way worse than that. So I put some of my money into University of San Francisco, Department of Neurology to try to figure out what causes migraines. Have an art organization called Give Kids Art with my wife. And we, you know, I put money into that.

Starting point is 00:41:46 So, so, but, but, you know, but I think, I really think long term in terms of how do we make sure we have a stable future and we've put, you know, we're maximizing returns and minimizing risk with the rest of the money. I love that. I think that's just a powerful lesson in and of itself that most people need to kind of think through their portfolio and kind of utilize a huge chunk of it as long-term wealth building, you know, activities with those dollars. So that's awesome. So I want to shift gears to a couple of questions that we ask, a lot of our guests, you know, that are really fun. You can do these rapid fire. You can kind of expand on those however you want to do it. What part of your work or your life makes you come alive? You know, the part of my work

Starting point is 00:42:22 that makes me come alive is a lot of the stuff we're talking about, which is the fighting, this fight, standing for the right thing and using integrity as the central guiding force in business. And it makes me come alive to know that we have a culture, a team, a company that puts people first and moves with the philosophy of your money first, ours next. And if you talk to anybody at the company who works at the company,

Starting point is 00:42:53 and this includes people who want to come work at the company, there's a really, really strong glue that people feel because they know that the decisions that get made here, put the customer first, that we're not going to compromise on our integrity. That makes me come alive.

Starting point is 00:43:09 And I think that goes back to just, I grew up with two really ethical parents, you know? So that's a great one. And then what is your biggest fear when it comes to money? You know, no matter how much better I've gotten at this, when the markets go completely sideways, I think just it comes up from inside,

Starting point is 00:43:29 just like anybody else, like, no matter how much I've trained myself, that well of fear of this is it. It's never going to get better. This is it. We're at the end. The world's over. And that's just like this uncons, you know, but I've trained my brain to take over in that.

Starting point is 00:43:49 But I don't, I still experience that same fear that I think everybody experiences. I think it's one of those things too. I've kind of trade myself to always try to remember. There's a couple of things I go back and reference and read all the time. And it's one of those things that I stopped looking at my portfolio for a little while, especially when the market is down. It's just I won't look anymore. And it's one of those things.

Starting point is 00:44:07 I'll try to set it, forget it, just let it go and just look less when that's happening. So that's a big one. I think everyone kind of goes through that. And it's an important one to talk about. How do you plan to level up your finances this year if you're doing anything at all? I have no plan to level up my finances. I'm a long term. I'm slow and steady wins the race.

Starting point is 00:44:26 So my plans are locked. You know what I mean? And yeah, I think I have no plan to level up. It's just keep it completely level. I love that. And I think that's an awesome answer. What is the best money advice you've ever received? You know, I, this is not like a one-liner, but I was really conservative in my 20s and I lost a decade.

Starting point is 00:44:50 This comes back to why I think part of the motivation for doing what I do, but I really lost a decade. You know, and I, for me, it was a brave move to have a CD. I don't mean compact disc. It was a brave move. And then Muni Bonds was a brave move. and the best advice I ever got, and the thing I did was I got a money manager at that time and they really relayed to me the power of compounding

Starting point is 00:45:21 and showed me and helped me understand what I lost over that decade. So that will be the best advice because before that I was not taking advantage of the magic of compounding and, And like I said, I lost a decade due to the same fear that I think inhibits so many of us, you know. And it's that spread of that message. Look how many lives has changed from igniting that fire into you and you starting, you know, to do what you do now. I think it's just a really, really powerful lesson on why we need to spread this message even more. Can I say one more thing, Andrew?

Starting point is 00:45:56 Sure. This goes hand in hand with that. It's actually not investing is not safe. So having your money in cash or an instrument that's yielding 1% or 2% or even 5%. I was really struck by that period where it was like 5% high interest savings accounts and everybody's pushing them with no context. During that period, the market went up 30%. 18 month period.

Starting point is 00:46:19 It went up 30%. So while you're celebrating 5% returns, you lost 25 points. So hand in hand with that is that cash is not safe actually because you're losing money to inflation every year. And it's really important to understand that. Matcher's fun, not safe, not just because you could light it on fire if your house burned down, but it's not safe. Checking account, not safe.

Starting point is 00:46:43 Like, even high-yield savings account, if you're thinking about that for the majority, not safe because you're just losing immense amount of returns. It is one of the riskiest things you could do is avoid investing. And I think that's one of the areas where most people, we try to promote that as much as possible, we're like, hey, if you do not invest your dollars, you will not be able to retire unless you make a massive amount of cash and you have a massive amount of cash on hand. So it's one of those things for sure that I completely agree. I think it's one of those areas most people need to understand. Yeah. The last one is my favorite. And it's what does wealth mean to you?

Starting point is 00:47:16 I'm just going to say the first thing that came to my mind. So I, so to me it is to be fulfilled. I have never chased money as my primary objective. Sometimes people will say, yeah, but you, you, you started making a lot of money really early doing startups and things. And it's like, no, no, before I did. It was never the primary motivator. So to be wealthy is to be fulfilled. And I think, yeah, that's what I think of as wealth. I love that answer.

Starting point is 00:47:45 I think that's a great one. Well, Noah, thank you so much for coming on here. We truly appreciate it. Where can people find out more about you, acorns, and everything else? Acorns.com or obviously you could download the Acorns app in any app store. We also have acorns early. I don't really do social media. I am on LinkedIn,

Starting point is 00:48:00 but I'm not a big, like back to shut up and let the work speak. Yep. So I love that. So we'll link all those up down below in the show notes as well. Noah,

Starting point is 00:48:09 thank you so much for coming on here. Thanks for having me.

The Personal Finance Podcast - The Patient Investor's Playbook with Noah Kerner - CEO of Acorns

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