20VC Wealthfront's Adam Nash on What Makes Great CEO's & Why Humans Suck At Investing

In this episode of Founders Friday on the 20 Minutes VC, host Harry Stebbings interviews Adam Nash, president and CEO of Wealthfront, discussing his journey from a Wealthfront client to leading the company. Nash, who previously contributed to product management at LinkedIn and held roles at eBay and Apple, shares his insights on the transition from product management to CEO, emphasizing the importance of clear leadership, strategy, and empowering cross-functional teams. He also delves into Wealthfront's mission to democratize sophisticated financial advice through automation, arguing that software can provide better, more consistent investment strategies over time compared to emotional human decisions. Nash predicts significant advancements in automated financial services, offering personalized and objective advice that reshapes consumer expectations and industry standards.

• Harry Stebbings hosts a special episode of Founders Friday on the 20 Minutes VC podcast.
• Previous guest Andy Ratcliffe, founder of Benchmark Capital and Wealthfront, introduced Adam Nash, the current guest.
• Adam Nash is the president and CEO of Wealthfront.
• Nash's background includes roles at Greylock Partners, LinkedIn, eBay, Atlas Venture, Preview Systems, and Apple.
• The host emphasizes the importance of preparation and a good start to the day, promoting Eve mattresses.

Hello and welcome to a very special episode of Founders Friday here on the 20 Minutes VC with your host Harry Stebbings at H Stepbings on Snapchat.

This quote introduces the podcast episode, the host, and sets the tone for the conversation.

That's why Eve make only one type of mattress, the very best, with three layer next generation memory foam and open cell technology.

The host uses this quote to promote Eve mattresses, emphasizing the quality of sleep and its importance for a productive day.

• Adam Nash joined Wealthfront after being a client and believing in the service.
• He transitioned from VP of Product at LinkedIn to an executive in residence at Greylock Partners.
• Nash was influenced by Wealthfront's potential impact on the world and joined as COO, later becoming CEO.
• His hiring was part of a generational transition strategy, influenced by business history and transitions like at LinkedIn.

In some ways, it's a relatively simple story. I was actually a client of wealthfront before I joined the company Wealthfront.

Adam Nash explains his personal connection to Wealthfront and his journey from client to CEO.

Andy's an incredible student of business history and technology history, not just in his accomplished career, but I think in the history of Silicon Valley.

This quote highlights Andy Ratcliffe's deep understanding of business and technology history, which influenced the transition strategy at Wealthfront.

• The role of product management has evolved with the changing nature of software and technology businesses.
• Product managers must integrate strategy, technology, design, and customer focus.
• The best product managers lead by defining the objectives clearly and establishing metrics for success.
• Product management requires detail orientation and a balance between simplicity and complexity.

The product management role has really evolved in my career the last 20 years in software.

Adam Nash reflects on how the role of product management has changed over time due to advancements in the industry.

The best product manager, I think exhibit the traits that you see in great leader.

Nash equates the traits of successful product managers with those of great leaders, emphasizing the importance of vision and measurement in leadership.

• Some suggest product managers are like mini-CEOs of their products, but Nash doesn't fully agree.
• Great product managers have a strong attention to detail and always question design decisions.
• Product managers should strive for simplicity in their products, as exemplified by the original iPhone's design.

There are some things that are in common, and there actually have been some leaders through Silicon Valley who have spoken about product managers being many ceos of their products.

Adam Nash acknowledges similarities between product managers and CEOs but suggests the comparison is not entirely accurate.

They went to all this effort to reduce the number of buttons t

Although the quote is incomplete, it suggests that Nash admires the effort put into simplifying the design of products like the iPhone, which is a principle he values in product management.### Detailed Orientation in Product Management

• Great product managers focus on details, exemplified by decisions like Apple leaving one physical button on the iPhone.
• Product managers consider why certain features, like a sound switch, are added despite a minimalist design approach.
• Detail orientation contrasts with the CEO role, which involves organizing a team and strategic long-term vision.

"And you find that great product managers have a detailed orientation."

This quote emphasizes the importance of attention to detail for product managers, highlighting that successful ones pay close attention to the specifics of product features.

"I think as a CEO, I think it's much more important that you are able to organize a team of experts that you trust with all the different elements of the business."

The quote suggests that a CEO's role is more about team organization and trust in experts rather than focusing on product details.

"Very often you're responsible for being the one at the 50,000 foot view who's looking ahead 3510 years to make sure that the company is still going to the right place in the long term."

This quote underlines the CEO's responsibility for the company's long-term strategic direction, contrasting with the product manager's detailed focus.

• The transition to CEO involves shifting from a focus on product details to representing the company's vision and values.
• CEOs take on the responsibility of embodying what the company stands for.
• The role is rewarding when it aligns with personal beliefs and allows for industry transformation.

"The most rewarding part about being the CEO of, you know, one of the things I love about Silicon Valley and the equity culture is companies are naturally built for everyone to think like an owner."

Adam Nash explains that as CEO, he finds the equity culture in Silicon Valley rewarding because it encourages everyone to think and act like owners of the company.

"For me, that combination of the value we're providing to clients and being at a seat where we're transforming an industry and being the person who can represent that to the world has been amazingly rewarding for me."

Adam Nash describes his personal fulfillment in being able to provide value to clients and lead a company that is transforming an industry.

• Scaling involves empowering teams rather than establishing a rigid hierarchy.
• The growth of a company like Wealthfront from 17 to 140 employees requires balancing individual responsibilities with team collaboration.
• Silicon Valley's success is attributed to empowering small, cross-functional teams.

"Culture is one of those ephemeral things a lot of people like to talk about, but really turns out, in my opinion, to be the sum of a lot of dedicated efforts that you make over time as you build the company."

Adam Nash believes that company culture is shaped by consistent, dedicated efforts over time rather than being a static concept.

"It's been well proven that building software through some giant military like hierarchy of engineers just isn't nearly as effective as empowering small cross functional teams to really own the features and services they're building and drive the strategy."

This quote highlights Adam Nash's belief in the effectiveness of empowering small, cross-functional teams over traditional hierarchical structures in software development.

• Effective leadership involves finding talented leaders who can focus on specific areas, such as design.
• Building relationships with trusted and respected colleagues is key to successful collaboration in Silicon Valley.
• Providing opportunities for talented individuals to excel is a crucial aspect of leadership.

"Probably the single biggest gift I can give to the organization or to the team to empower designers to do their best work is to bring someone like Kate on board, because she can focus 100% of her time on that effort, where I'm divided a dozen different ways."

Adam Nash discusses the importance of hiring a dedicated leader, like Kate Aranowitz, to empower designers and focus solely on design excellence.

• Succession planning is vital for ensuring company continuity and putting the company first.
• Leaders in Silicon Valley prioritize the company's future by preparing for leadership transitions.
• Personal life experiences, such as being a parent, can influence the importance placed on succession planning.

"The best gift you could give an organization is a succession plan."

Adam Nash agrees with the sentiment of an article he shared, emphasizing the importance of preparing for future leadership transitions.

"I think the best leaders in Silicon Valley across different functions, really talented, know, put the company first."

The quote reflects Adam Nash's view that the best leaders prioritize the company's well-being and future, which includes having a succession plan in place.## Leadership and Succession Planning

• Great leaders ensure their organizations can thrive even in their absence.
• Insecurity can lead some to make themselves appear irreplaceable, but this is not beneficial for the organization.
• Building a strong team and empowering leaders within that team is key for long-term success.
• Adam Nash gives the example of Steve Johnson at LinkedIn, who took the user experience team to a higher level and planned his transition well.

"I think great leaders with companies, if you believe in what the company's building and what that organization needs for the long term, you have to ask the question of what happens if you're not there."

This quote underlines the importance of considering the future of the company and ensuring its resilience beyond the tenure of any single leader.

"And once we got the team to a certain point, it brought Steve Johnson in to really take that team to the next level."

Adam Nash discusses the strategic decision to bring in Steve Johnson to advance the user experience team at LinkedIn, highlighting the importance of leadership development and succession planning.

• Automation and AI are expected to take over tasks traditionally trusted to people across various sectors.
• This trend is not unique to financial services or investing, but these areas are not immune to it.
• Wealthfront believes in the benefits of automation for investing, particularly because humans are statistically poor at investing.

"I think that we're going to see over the next decade a combination of automation, artificial intelligence, real impressive services and systems take over more and more of the capabilities that previously we had to trust people with."

Adam Nash predicts a significant shift in the economy where automation and AI will assume roles previously held by humans, indicating a transformative change in how businesses operate.

• On average, humans, including professionals, underperform the market.
• Individual retail investors typically fare even worse than professionals.
• Automation and AI can add economic value by improving investment outcomes for a large population.

"Humans are terrible at investing, with a few notable exceptions."

This quote from Adam Nash highlights the general inefficiency of human investors, setting the stage for the argument in favor of automated investment solutions.

"Individuals underperform the market not by ten or 20 basis points, not by half a percent, but by four to four and a half percent, depending on the time period."

Adam Nash references Dalbar research to emphasize the significant underperformance of individual investors compared to the market, justifying the need for automated alternatives.

• Wealthfront's core belief is that everyone deserves sophisticated financial advice.
• Traditional financial advisors, due to cost structures, often exclude most savers and investors.
• Automation in software allows investment strategies and advice, once exclusive to the ultra-wealthy, to be accessible to all.

"We believe that everyone deserves sophisticated financial advice."

Adam Nash states Wealthfront's core belief, which serves as the foundation for their mission to democratize financial advice through automation.

"By taking the investment strategies and the advice that previously was only available to the ultra wealthy and automating in software, we make it inexpensive enough that we can deliver it to anyone."

This quote outlines Wealthfront's approach to democratizing financial advice by leveraging technology to make what was once exclusive to the wealthy accessible to a broader audience.

• Humans are emotionally unsuited to make financial decisions consistently well.
• Good investing requires discipline, regular saving, diversification, and smart fee management, which can be boring and emotionally taxing for humans.
• Computers can manage investments without the emotional and psychological pitfalls humans face, potentially leading to better outcomes.

"Humans have a number of flaws when it comes to looking at money, and it's not about being professional or about being a hobbyist."

Adam Nash discusses the inherent flaws in human nature that lead to poor financial decision-making, highlighting the potential for computers to manage investments more effectively.

"Computers don't get excited, they don't get emotional, and they don't get bored."

This quote explains the advantages of computers over humans in managing investments, as they lack the emotional responses that often result in suboptimal investing decisions.## Great Investing Practices

• Great investing involves consistently doing small things right over a long period, not just weeks or months but decades.
• Tax loss harvesting on a random day can be part of these small but significant actions.
• Automation in investing can free up individuals to focus on other important areas of their lives.

If it turns out trading opens up an opportunity to harvest a tax loss on a random Thursday in August, they harvest that tax loss.

The quote emphasizes the importance of being attentive to investment opportunities at any time, suggesting that successful investing includes being ready to take advantage of situations like tax loss harvesting whenever they arise.

And great investing turns out to be about doing those little things right, not for a couple of weeks or a couple of months, but over decades.

This quote highlights the long-term nature of successful investing strategies, implying that consistency and attention to detail over many years are key to investment success.

I'd like to think that we're freeing up people to focus on the places in their life where they actually create more value, both for themselves and for society.

Adam Nash suggests that by automating investment processes, individuals can dedicate more time and energy to other valuable aspects of their lives, which can have a broader positive impact on society.

• Adam Nash is an avid reader and was deeply influenced by Isaac Asimov's Foundation series.
• The concept of psychohistory from Asimov's work, predicting the behavior of large groups, relates to Nash's interests in design and personal finance.
• His personal blog, psychohistory, is named after the fictional science of predicting group behavior.

The foundation series by Isaac Asimov... you could actually predict in the aggregate what's going to happen with groups of people, even if you can't predict them individually.

Adam Nash expresses his fascination with the idea that while individuals are unpredictable, group behaviors can be forecasted, which has relevance to his professional interests.

• As CEO, the biggest challenge is managing limited time amidst numerous tasks and opportunities.
• Prioritization is crucial to ensure important tasks are completed while also planning for long-term company growth.

The biggest challenge of being CEO is there's never enough time in the day.

The quote conveys the common challenge CEOs face of having more tasks than time available, necessitating effective time management and prioritization skills.

• Distinguishing between urgent tasks and those that require more thought is a key productivity strategy.
• Delegating tasks to qualified team members can be more effective than providing quick, potentially incorrect answers.

Making sure that you clearly can tell the difference between things that are urgent... versus items where it deserves a little bit of thought.

Adam Nash advises on the importance of discerning the urgency of tasks to enhance productivity, suggesting that not all tasks require immediate attention and some may benefit from more thoughtful responses.

• Adam Nash has shifted from traditional blogs and newsletters to curating content through his Twitter feed.
• He values direct access to thought leaders and experts without relying on intermediaries.

I probably get access to better article and post by making sure that if Mark Andreessen thinks something interesting, it might be worth reading.

This quote reflects Nash's approach to staying informed by following influential individuals on Twitter, suggesting that social media can be an effective tool for content curation.

• Wealthfront has seen significant growth and industry change, with more companies offering automated services.
• The next five years may bring advancements in automated financial advice, shifting from investment automation to more comprehensive financial guidance.
• Wealthfront aims to push the envelope of what technology can do for people in terms of financial services.

I think within the next three to five years, you're going to see phenomenal improvements in detailed, personalized relevant, objective advice coming from a relationship that people have not with another person, but with a service like wealthfront.

Adam Nash predicts significant developments in the quality and personalization of automated financial advice, indicating a future where technology plays a central role in financial planning and decision-making.