Support for this episode comes from AWS. AWS Generative AI gives you the tools to power your business forward with the security and speed of the world's most experienced cloud. You're probably familiar with QuickIn and QuickBooks, which are incredibly well known as Personal Finance and Small Business Accounting Software, but nearly everything else, TurboTax, MailChimp Credit Karma, Loads More, or Acquisitions of some kind along the way.
That leads to a lot of challenging structure questions that Sasan and I really got into, integrating all of those companies and their different approaches to software requires big decisions, and Intuit made a big decision of handling it all by betting on interoperability that I found fascinating. So far, that sounds like normal decoder stuff, right? Here's where it got weird. I couldn't have the CEO of Intuit on the show without asking about tax reform in the United States.
Individual income taxes are more complicated in the US than in almost any other developed economy, and Intuit has been lobbying hard since the 1990s to keep it that way in order to protect TurboTax. The company spent nearly $3.8 million lobbying in 2023 alone. There's extensive reporting about all this, well, going to it in the show notes.
That lobbying has had mixed results. Truly free online direct filing with the IRS began as a pilot program this year, and it's expanding to be available for more than half of the US population in 2025. But it's not just lobbying. In 2022, a coalition of all 50 states got into it to agree to a $141 million settlement that required the company to refund low-income Americans who were eligible for free filing, but were redirected to into its paid products.
And in 2023, the FTC found that TurboTax's quote, free marketing was willfully deceptive, and after the agency won an appeal early this year, Intuit was ordered to stop doing it. So I asked about taxes, and Cesson disagreed with me, and we went back and forth for a few minutes on it. It's decoder. We have exchanges like this on the show all the time, and in the moment I didn't think anything of it.
But then I got a note from Rick Heineman, the chief communications officer, Intuit, who called that line of questioning and my tone, inappropriate, egregious, and disappointing, and demanded that we delete that entire section of the recording. I mean, literally, he wrote a long email that ended with, quote, at the very least, the end portion of your interview should be deleted.
We don't do that here at the verge. As many of our listeners and readers know, we have a very explicit and very strict ethics policy. Well, linked to it in the show notes. The most important thing here is that we never allow anyone to preview or approve our interview questions, and we certainly do not allow anyone to review or alter the work that we publish.
I told this to Rick, and he came back and asked that we quote, delete that which takes away from the conversation, which he defined as raised voices, or us speaking over each other. So quote, listeners can understand your question and the answer Cesson gave. I gotta be honest with you, that is one of the weirdest requests I've ever gotten.
So here's what we're gonna do in the spirit of fairness. We're gonna run that whole part of the interview first, unedited, so you all can tell me, it's about five minutes long, and you can decide for yourself. Then we'll come out of it, and we'll run the rest of the interview, which, like I said, is an otherwise fascinating episode of Decoder. Okay, so here I am talking about taxes with Cesson Gdarsi, the CEO of Intuit.
Intuit is legendary for an Inturbotax, also legendary for lobbying against free direct federal e-filing. How much of your budget is allocated to lobbyists? Fundamentally, that's a wrong premise, and it's not accurate. In our lobbying, we spend a couple of million dollars fighting for simplified taxes.
We don't lobby against free. And by the way, free is available to all Americans now, which is, if you choose to do your taxes for free, if every American chooses to do their taxes for free, it's available today through private industry. We have heavily been focused on making taxes simpler. Just tens of millions of lines of tax code makes it very difficult for a customer to understand taxes, much less companies like us that are trying to create a lot more.
Wait, the simplest version of taxes is the government just sends you a return and it's done. And Intuit has lobbied against that. Would you support the government just doing the taxes for people? At the end of the day, sending the refunds? At the end of the day, the change. Many countries in the world do that. But you have to change the tax system. It's not about software. So if we change the tax system, we're going to be...
So you're going to lobby to change the tax system, to let the government do the final thing for you and some people to check? I'm going to want to change the tax system. But I'm asking you, you're spending the dollars, would you lobby for it? Would lobby for the government, changing the taxes? The simplest version of the tax system would be to just have the government do it and send people their refunds or ask people for money.
I have more important things to do than to lobby the government to send a tax bill. But you have lobbied against that, that's what I'm saying. That reporting is clear. You've lobbied against... Not you, Intuit is lobbied against that, very specifically. I am Intuit, right? And so it's okay to put me into it in the same verse. We have very much focused on simplifying taxes. That's what we lobbied for. Simplified the tax code. That's simply what we lobbied for.
When you see free direct federal e-filing arrive, literally today, just before we started speaking, the government had to be available in half the states, which is about 60 percent of the population. Does that have a revenue impact on you? Do you get an email saying we project TurboTax revenue will go down by X? We do not. Free is available to all consumers today. And so it really is not relevant to our business.
And in fact, proof points are always important. In the last five years, two pretty formidable companies got into providing free tax software. One was Credit Karma before we acquired them. 100 million members. They provided free tax software. No impact in the tax industry. And then we sold that to another formidable company. And there's really been no formidable impact to the structure of the tax industry because free is already available.
Our view, by the way, very strongly, and we've been on the record, this is a solution looking for a problem. Free already exists. And by the way, what the government is providing is not free, you're paying your tax dollars are going towards building a software that already exists for Americans. So that's something that we've been on the record that from our perspective and private industry has been on the record. It doesn't make sense. Free already exists. So why build another one?
I'm going to ask you this question. I can already tell you that you're going to tell me you disagree with my premise. When I ask it anyway, broadly speaking, I would say the criticism of into its free products when it comes to taxes is that it says it's free. And then somewhere along the line, they slide you into paying the government has complained about this. That is a reputation damageer for the company.
Again, I get the emails from Dakota listeners asking me what questions to ask you. And it's that. It's that sort of dark pattern feeling inside of in particular, the free tax product. Is that something you want to fix? Do you worry about that damage to the reputation?
I love your question. Let me let me answer it in two ways. One is there are over a hundred million customers that we've served for completely free. It's more than the entire industry combined. So we're very, very sort of intentional about making sure that we are a big player when it comes to free tax software.
On the other hand, any time we see something that needs to be improved, we take it very seriously. We take our reputation very seriously. So I can tell you, you know, in the last several years, we've been very, very intentional about going through our advertising all the way through the product top to bottom to really improve where we need to improve to ensure that customers really understand what they're eligible for.
And what they're not eligible for. In fact, last year, we, one of our advertisements that we ran on TV, we said, hey, 37% of the population is eligible for free. And this, these are the qualifications just so we can be very clear and transparent. And that's from what we've learned where we can improve.
Although I'm proud of the number of customers that we've served for free, to me, there's always something you can learn and always something you can get better at. And this has been an area where we've improved our end-to-end experience from advertising all the way to check out to make sure customers are very, very clear what they're eligible for. That's very important to me, very important to the company because our reputation matters.
Alright, so what do you think? Was that contentious? Should we have deleted it? You let me know. I'm open to the feedback. Right now, I'm mostly just amused and a little befuddled. Here's the rest of that episode, which, as I keep saying, was a good episode of Dakota, with some very interesting ideas about how to integrate big acquisitions into a single tech platform inside of it.
Also, I asked why Sasan shut down Mint, which honestly is a thing I should have been the most outraged about. Okay, Sasan Gaddafi, the CEO of Intuit. So Sasan Gaddafi, you're the CEO of Intuit. Welcome to Dakota. Thank you for having me. I am very excited to talk to you. Just to not say a bunch of AI products that are interesting, you've been changing the company around.
Let's start at the very beginning. Intuit is 40 years old. A lot of people are familiar with your various products like TurboTax or MailChimp. What is Intuit now? What do you think of the company as? Yeah, well, first of all, you know, with our 40 years young, I've been with the company for half of that time. And when I stepped into this role, the decision we made was to play a far more meaningful role in the lives of consumers and businesses.
So we really started on a path to shift the company from attacks and accounting platform to a platform company that, you know, businesses and essence can rely on us to be able to grow and run their business and consumers can power their financial prosperity.
So that's the path that we started down about five plus years ago. But most importantly, I would say that we said, hey, we have to create experiences that in essence are done for customers rather than creating workflows where people have to do the work to run their business and manage their cash flow or manage their personal financial life. Wouldn't it create done for you experiences where we deliver benefits and insights like marketing is done for you?
We manage your cash flow quote to cash for you. Books accounting taxes are done for you. And really in order to do that, you know, we bet very early, almost six years ago on data and AI.
And frankly, we did it for very practical reasons because in order to do what I just articulated, which is we focus on your bottom line, your revenue and profitability as a business or your financial household savings as a consumer, we have to actually leverage data, your data and leverage AI to deliver these insights and experience.
So today to answer your question, we have become a platform company and what that means from the lens of a consumer and a business is consumers can use our platform all in one place to be able to build their credit, be able to manage their money, get financial products that they need like credit cards, loans, insurance, a mortgage for their homes and also be able to get their taxes done.
And then we help them with what should you do with your refund. So we now do all of that gamut because we wanted to play a meaningful role in the lives of consumers and for businesses now in one place you can in essence manage your customers market to your customers, be able to really manage your quote to cash your cash flow and make sure your books are right for tax time.
So now we have all those capabilities and really the future for us is now how do we create everything in a way that it's done for you versus you having to do the work. That's really interesting. The mention he started with AI six years ago, obviously transformers only really burst on the scene a couple years ago in the way that they are now and that's really accelerating all this stuff.
So I want to spend some time talking with the differences between the AI technologies you were betting on before and what's happening now before you to that. I just want to talk about how the company is structured and built. This is a company that is kind of built through acquisitions, maybe entirely built through acquisitions, starting with buying turbo tax in 1993.
And then it's a combined I think $19 billion on MailChimp and credit karma just in the last four years. How do you think about integrating all those disreports with the example of turbo tax for me is particular interesting that became the company you acquired a company that sort of became the company. Are you thinking that way with MailChimp and credit karma as well.
But I love actually where you started because most people don't know what you just articulated, which is this whole company has been in essence has started with Scott Cook our founder creating quick and and realize the way people are using it. Their small businesses trying to manage their money and that that's what gave birth to what today is our QuickBooks platform, but turbo tax even our payroll offering MailChimp credit karma. They're all acquisitions.
To answer your question, particularly in the last five years, a lot of our platform play and where we are today has been based on a lot of organic innovation and investment.
But also we bought these two sort of big brands, two number ones in their space, credit karma MailChimp because one, they come with a lot of data and a lot of sort of AI capabilities, particularly credit karma has a lot of machine learning and really AI capabilities that we coin as light box, which I can get into at some point down the road if you're interested.
And really the intent of all of this is to create one platform. It's to really integrate the products customer back so that customers in one place can grow their business, run their business and as a consumer be able to manage your personal life.
So I think five years from now we're going to look back and go, wow, the addition of all the things you had plus what you did with credit karma and MailChimp were just really the key to ignite the next chapter of the company, but the answer to your question is yes, we're stitching it all together to create one seamless platform.
So let me ask you about that for a little bit, everyone says they can do that. Most companies, they succeed and they fail, right, that's an inconsistent process MailChimp in particular was a big company had its own culture, that integration was a little messy. We had the new CEO of MailChimp Rania on a while back, we talked about that integration, how's it going, how she's changing the culture because she's into its CEO, she's not the founder CEO that they had before.
You're the CEO of the umbrella corporation, how do you think about having all these companies and all of their CEOs under you? Yeah, well, first of all, the way we run the company, we're very intentional about goal setting, the sort of the three or four things that really are key artifacts that create who we are today, it's our true North goals, which is how we set goals for the company to its our mission.
And third, it's our values, and then last but not least, the sort of our strategy in the five bets of the company. Those four things are the way we run the company, and the reason I started there is we have very specific leaders that lead parts of the company, but the expectation the goals are about how we are creating a platform.
And so for instance, in the case of MailChimp, the charter of MailChimp is not to be run standalone, it has two charters, just like payments payroll are accounting team, the charter is one, it's about how we integrate across the platform because we win as a platform. That's a lot of what's ignited our growth over the years.
But then two, on a standalone basis, whether it's MailChimp, whether it's payments, whether it's payroll, whether it's TurboTax, they have to be good products, and they have to perform on a standalone basis. So the expectations are such that we win as a platform and how we integrate our products to be able to win.
And that's how I measure every leader. And so if you were to spend a week in the company, what you'd really get a sense for is what we're trying to do to win with our business platform, what we're trying to do with our win with our consumers. Our win with our consumer platform versus there's a bunch of pieces and parts and everybody is working towards their own true north. There's really one true north that we really work towards.
And that's how we run the company. It's our leadership expectations. It's the mechanisms of the company and how we measure success. So one other thing that's really interesting there is these component platforms are still divisions, MailChimp has a CEO. Credit Karma was a big company that you acquired usually when companies like into it acquire some credit karma. You promise the people who work there are a measure of independence.
But you're talking about stitching it together into a platform. There's some technical stuff there that I definitely want to talk about. But there is just the operational side of saying, okay, now you're part of a bigger thing while still keeping the walls up and still saying, okay, we have different CEOs. That's very different than most other tech companies. How have you made that choice and is that durable over the long term?
Let me be clear. Ronnie is no longer the CEO of MailChimp. She is the the segment leader senior vice president that runs our growth segment. MailChimp is as a part of it. And we did that very intentionally at the beginning just from a cultural integration. But we don't have CEOs within the company, even Joe Kaufman that runs our credit karma business.
He is reporting now to Mark Noir Torani that owns our consumer business. And he is the head of credit karma senior vice president that runs credit karma. So the first thing I wanted to sort of start with is that CEO element was just a cultural transition. We had leaders that at the end of the day when they look at their paycheck, it's into it. And their expectation is to serve our customers.
And it goes back to the why I answered the question earlier. If you were within the company, what you'd get a sense for is really two things. One, we have mission-based teams because in order for teams to have a cause to fight for, they have to know they're fighting for creating the best sort of payments capabilities, bill pay capability, accounting capability. And that's what we term mission-based teams. They have a mission and their focus is that mission.
Payments, meltchamp, turbo tax, whatever it may be. But the other element is the leader's job is the mission is the platform and to win as a platform. And so it's really our discipline and our rigor and how we run the company is actually our strength. And from the outside looking in, it may seem like they are sort of parts and pieces. But within, we're all solving for the same thing, which is how do you win as a platform?
Ronnie hinted that that change was coming when she was on the show. So I wanted to ask you about it. Tell me about that. One of the things I always ask everybody is how they make decisions. Tell me about that decision. Obviously she knew it was coming when she was on the show. You've since made that call. What does that look like to walk up to someone and say, hey, you were the CEO, we're changing it. We're not doing this anymore. How do that unfold for you?
So when we make an acquisition, whether it's credit, karma, and or meltchamp, before we make the acquisition, we create jointly with the founder of the company, but really our broad leadership team that's informed of the potential acquisition. We create a six-pager. And this six-pager really lays out, what are we going to do together? Why are we buying in this case a meltchamp?
What's the vision of what we're trying to create and the vision is integrate to create one platform? What are the key priorities? And particularly, we focus on acceleration, not integration. Although everything we do in the product is integration. In a company of our scale and size, clarity matters a lot. And so even basic things like what we will do in the first 90 days, what we will do in the first six months.
And clearly as important, what we're not going to do is all part not only the six-pager, but sort of the playbook. So the answer to your question, part of the playbook all along was, we're going to create one platform. And when I spoke to Rania years ago to take on this role, it was very clear at the end of the day, she would take on the CEO role, and that would be the title for really an interim period for my cultural transformation, but her charter is the same.
And at one point, that title, it's more about the SVP of the category. And so it's important to have those conversations upfront. We're very big on, we're not interested in leaders that are pursuing titles. Even when we recruit from the outside, we're interested in folks that want to really fight for the same cause that are in love with our mission.
And of course, everybody has to be thoughtful about what's right for me as an individual. So we take all those things into consideration, but we have these conversations upfront, and it was just sort of part of the transition. Yeah, tell me how into a structured data and how is the company broadly organized? So we're really structured as a platform. And that means is we have a leader that runs our consumer platform. We have a leader that runs our business platform.
We actually have a leader that looks at the network effect and the ecosystem effect between consumer and businesses. And then we have a CTO that is really responsible for all of our technology in the company, all of the spend in technology, and the segment leaders, the consumer segment leader, the business segment leader, they decide what's most important to drive growth and deliver for customers.
It's our CTO that owns all the technology that then decides, how do I need to ensure that I allocate the dollars, the people to achieve what we want to achieve across the platform. And then we have a customer success platform leader that owns all of customer success across the company. And of course, then really very important roles around M&A, people in places, legal and finance.
But we run the company as a platform and the leaders in the case of the consumer and the business leader, the business segment leader, they're responsible for the outcomes of the segment. But I also hold them accountable for how the company performs because I want to make sure we're making trade-offs to win as a company for customers and not just have a, you know, blinders on in our segment. But we're in essence organized around being a platform.
If you've got the two platform leaders, I'm assuming they report to you, and then you've got CTO who's making technology decisions, I'm assuming you tie break a lot there. Right? If you're responsible for the success of the consumer platform, for example, and you really think you need some technology built or built in a different way than the company currently has, and the answer is no, I'm guessing that comes to you.
I don't tie break enough, and sometimes I talked to the team about is enough stuff getting to me. So I don't play a huge tie breaker role. It's actually even better today than it was three to four years ago, and the reason is, Mariana and Mark, Mariana runs our business segment, Mark runs our consumer segment.
Mariana used to be our CTO. She was heading up all of technology for the company before this role, and Mark was actually leading all of our customer success before stepping into running the consumer platform. We, in essence, promoted both of their approaches. And so my point is, there is a very, I would say thoughtful collaboration between the team, because we're very clear about our strategy.
We're very clear about the deliverables for both the year and the next three years out, and a lot of the discussions and tie breaking happens between the team. Of course, I get involved particularly very deeply in our one and three year mechanism. That's a mechanism where not only do we review priorities, but we actually review very specific, what are the deliverables for this year?
What are the deliverables for the next three years? And what's resource, what's not, and why? And Sandip and I, our CFO and I will get involved if we feel like there are certain areas where the team has made all of the resource allocation trade-offs. But we're still, we have an opportunity to fund, you know, even more opportunities, and we'll get involved in those types of decisions.
So I have a lot of gratitude for my team because of the mobility that we've had. They've seen all parts of the company. There's a lot of just natural debate and sort of trade-off decisions that's made within the team without an escalation to me. But once in a while, maybe once every couple of months, there's something I have to get involved with, just a break at tie or make a resource decision. We need to pause here for a quick break. We'll be right back.
Support for this episode comes from AWS. With the power of AWS Generative AI, teams can get relevant, fast answers to pressing questions and use data to drive real results. Power your business and generate real impact with the most experienced cloud. Welcome back. I'm talking to Intuit CEO Susangadarsi about the big Dakota question, how he makes decisions. When we left off, he was talking about building a company through acquisitions.
The other challenge of building a company through acquisitions that you don't have to integrate is the technical foundations of all those companies are different, the data storage requirements of those companies are different, the databases, the customer databases, all that stuff has to be integrated at a technical level.
How are you managing that? I mean, that seems like the biggest problem you have to buy a company the size of MailChimp and say, okay, we're plugging you into QuickBooks. Those are very different products. How does that work? We do a lot of diligence before we make an acquisition. And let me be clear, no matter how good you are at due diligence, there are things you're going to get surprised with on the upside once it's done and there are things you're going to get surprised with to the downside.
But the three areas where we spend a lot of time on due diligence is one just cultural fit because I have a very strong belief that no matter how great of a strategic fit something is, if you got two cultures that make clash, it's just not going to work.
So we do a culture deep culture assessment and I personally get involved depending on the size of the deal to really assess the culture for myself as well. We of course do a very deep strategic assessment. Then we do a very deep capability assessment. So this goes to your question, you know, we will assess what's their compensation schemes, what are the systems they have. But most importantly, we really thoroughly assess both their data and technology capabilities.
And we have come a long ways and so has technology in terms of integration to specifically answer your question. One of the wonderful things about credit karma and Melchim, but I'll just use credit karma in this case as an example is the amount of consumer data that they have and the amount of consumer data that we have with interbotax.
And the reason is very attractive acquisition is then what we can do with customers consent to use their data to deliver benefits to them that otherwise nobody else can because we know a 360 view of their information. But rather than having to take their data lake and our data lake and the cloud that they sit on, which is Google Cloud, the rest of the company is on AWS rather than integrating.
We actually innovated across the technologies where we built a data pipe where data is shared without all the data having to be all integrated for instance. We've actually built bridges in terms of how Google Cloud and AWS work together. So a lot of our technology innovation because we're API oriented services base is actually about connection versus integration.
And that's really what has propelled, you know, what's possible because credit karma is great platform data platform AI platform. We didn't have to replace it or create, you know, sort of one integration of a platform. But we built an essence pipes where we can achieve the product innovation for our customers. So that's the approach that we've been taken.
And that's what we do in the due diligence just to make sure that we can in fact do that because of a platform of this scale. If you have to rewrite the entire code or integrate the stacks. It just becomes too much work and not worth it. Yeah, that is a strategy, right? That is an acquisition strategy. We're going to depend on technical interoperability. We can build data pipes between different cloud providers. It seems like that strategy is when working.
There have to be downsides of that strategy. What are the downsides? The big downsides is what I mentioned earlier, which is anytime you do due diligence, there's things you're going to be surprised to the upside. There's going to be things that you are, you know, surprised on the downside. And, you know, the devil is in the details, you know, for instance, in one of the acquisitions, it wasn't on any cloud. And we've been working on getting all of it on AWS.
And that's taken about six months longer than what we thought. And so that's an element of an example of where you get surprised where you assume it's going to take a six months period to do something, but it takes a year. And, you know, what we sort of bake that into our thinking that we're going to be wrong in certain instances. There are things that's okay to be wrong in and there are things that's not okay to be wrong in.
So the areas where it's not okay to be wrong is the assumption that you can actually build a data bridge and a data pipe between the platforms. If you're wrong about that, that sort of blows up the whole premise of what you thought you'd do in what time frame. And now the great news is knock on wood. We've proved that out across our acquisitions.
The things that is okay to get wrong and most of the time you're not going to get perfectly right is how long is going to take to do something. And the example I just articulated earlier in the case of, you know, transforming one of the acquisitions to be entirely cloud based. It's taking six months about six months longer than what we thought. Those are, that's okay because that's a, it's just an element of time versus an element of dual ability.
Do you ever have broader questions about this strategy overall? Do you ever have I'm guessing the person who goes and negotiates with AWS would love a little bit more demand from whatever son Google Cloud to say, look, we've got more scale lower the rate. Right. I mean, those are the kinds of trade-offs that are made. Do you ever those conversations where actually increasing scale or concentrating further would be the benefit versus interoperability?
We do have those conversations. You know, first of all, I had the pleasure of being our CIO for a couple of years and I was deeply involved in shifting the company from all of our own data centers to shifting the company at that time to AWS. So I worked very closely with the Amazon team and Andy to really drive their road back but get us prepared to go to the cloud. And one of the reasons I started there is.
One of the decisions that we made very, very early on is to build our capabilities, our apps and the way we built sort of cloud-ready apps was so we would never get married to or stuck only with one platform. We wanted the interoperability. And we actually like the fact that we're on multiple clouds because and with the age of AI, we've built our own large language models but we also experiment using about 9, 10 other large models.
I mean, 10 other large language models externally and I actually think that's very healthy to understand what works and what situation, what doesn't work and multiple clouds in this case, multiple LLMs is actually quite healthy because you learn faster, you pivot faster.
And I think this conversation is all the time. We believe and I would just tell you that probably the most heated debate that we had five years ago when I stepped into this role with my staff was whether or not we would bet on AI. Because AI wasn't popular then, it wasn't the buzzword that it is today. And I bring that up as an example of we debate technology bets, we debate interoperability versus you go all in with a partner all the time.
And actually critical, their critical force in the road and critical decisions for the future. So I definitely involved in those key discussions. Interoperability is really interesting, especially for a company built through acquisition regulators around the world right now, not so hot on acquisitions and assuming you have some thoughts about that.
But the other thing they're really into is interoperability right there, they are saying to various companies you have to make your products and services interoperable each other so you can lower switching costs so consumers and businesses can go have a vibrant market to pick and choose their vendors from.
If you've built the company through acquisition and interoperability, do you think some regulators going to come to you and say okay all of the interoperability you built for credit karma and quick books, you got to open that up to another financial accounting vendor.
All of our decisions are based on delivering for our customers and winning in the marketplace and driving growth for the future. We don't we don't make decisions that really are in the context of what will, what will a regulator think about something. We have you know very solid governance in the company we have data privacy and security principles, which we abide by all focused on on our customers.
And so to your question, I don't spend and we don't spend a lot of time worrying about will now that we built the company in this way to win and deliver for customers. What could a regulator do because at the end of the day, a regulator generally they want to do the right thing. Generally, it's not politically driven sometimes it is.
But our view is that they always want to do the right thing and we always want to do the right thing and you know we would always have a conversation in the construct of if there's any areas they have questions on but our focus is our compass is very clear. Would you let your competitors use the interoperability hooks that you've built for your own company to interface with theirs.
We live in a world of competition only because when we think about our especially our businesses that we serve. What we really care about is our businesses are transacting on our platform, you know, but sometimes they will use square payments sometimes they will use paypal sometimes they will use other payroll providers.
And we provide the capability to integrate those capabilities on our platform because we want the customer to be able to serve their customer the way they want. And so that's sort of when you look at our AI driven expert platform strategy. Yeah, a very important element of it is that it's open and it's open because it helps us deliver for our customers and win.
Let me ask you the key to code our question which we have been circling around this whole time. How do you make decisions? You've been there a long time, you've grown with the company, you've made a bunch of big decisions. What's your framework? Well, one of our largest advantages in the company is what we term our Intuit Operating System. It's the mechanisms in which we run the company. And this is important context to answer your question.
You know, if you look at our mechanisms, we have a set of mechanisms around how we set expectations and set strategy. We have a set of mechanisms in terms of execution. And then we have a set of mechanisms in terms of how we galvanize the leaders at all levels and all of our employees. And so therefore we have mechanisms like six year plan. And it's not a financial plan.
It's actually just looking way into the future and looking back to consider what has to change. We have three and one year plan mechanisms. I won't bore you with all the mechanisms, but that's important context to answer your question.
Our six year mechanism is really structured, such that we question everything that we do. One of the things that we believe in strongly, I believe in strongly, is never to fall in love with what you declared. And always fall in love with the customer and sort of the trends and how the world is moving.
So our mechanisms are set up for certain outcomes and decisions. Our six year mechanism, the decision is, does anything change in our strategy and bets? And if so, what is it? So the output of it, the decision is what changed and why.
Our three and one year plan mechanism is all structured around not only the key priorities, but the actual deliverables, what we call input goals, which is a best practice we borrowed from Amazon, where every input goal has a leader assigned to it has success measures.
And we ensure that it's resource and we also know what's below the line. Those are all decisions that our teams make, but the decisions that I make are capital allocation, because not everything is created equal and where do we put our dollars and capital.
And then the last one is we spend a lot of time on culture and people. And those are decisions I'm involved with, like just last week, we had an all day, which we have it four times a year, all day session focused on people and succession planning. Those are decisions, right, whose potential successor for key roles and a principle that we have is teams can propose who the successors are, but if it's a direct report to the CEO one day, I decide if they're actual successors those are decisions.
So every mechanism is set up for an output and a set of decisions and we're generally pretty clear, are those decisions I get to make, are there decisions the team gets to make. But net that we try to push as many decisions as we can into the org, because most decisions are there two way doors, you can always reverse them, but that's the structure and framework that we use is our into an operating system.
There's one key decision I have to ask you about since we're here and you mentioned things fitting into the into it operating system. I was a very loyal mint user, you decided to shut that whole service down, what was your thinking there. There was a very small cohort of customers that were using mint. We decided that in order truly to have a platform that we can serve millions of customers that we would port most not all of the capabilities in the credit karma.
I can't remember the exact percentage, but I think 30 to 40% of the mint customers are now on credit karma, by the way, happier than before. And I think there's 20% of customers that we can't serve today with credit karma. But we're okay with that because there's a very small cohort of customers that we could serve on mint and we had the we ultimately made the decision to be one platform.
So by the way, if there's anything we can do to help you send me an email, my email address is available on our website. Anything I can do to help you, we will, but we can't replace mint exactly the way it was. We need to stop for another quick break. We'll be back in just a minute. Support for this episode comes from AWS. With the power of AWS Generative AI, teams can get relevant, fast answers to pressing questions and use data to drive real results.
Power your business and generate real impact with the most experienced cloud. Welcome back. I'm talking with Intuit CEO, Sassan Gudarsi. Before the break, we started to get into one of the harder decisions that CEOs have to make. Layoffs. When Intuit fired 10% of its workforce earlier this year, Sassan sent a memo saying the majority of the folks let go were underperforming. So I really wanted to know how did he measure that? How many people work it into it today?
We're about 17,000 strong and growing and growing. So the interesting thing about growing is you just laid off about 10% of your folks this year, 1800 people, you said you're going to hire another 1800 people to focus on AI inside of that decision. And this is the one I really want to to press on inside of that decision. I think the company announced a thousand plus of those 1800 people were low performers. How did you decide which one of 18 people was a low performer?
First of all, when I look back at the last five years, there are big decisions that I've made and then there are really, really tough decisions that we've made that I've made. And this is one of them because at the end of the day, everyone we have in the company, we believe is very talented. And when you make a decision like this, you're impacting people's lives. And so one, these decisions never come easy.
The second is we were very clear across five areas, particularly our five bets. We've seen so much progress that as we thought about, this is part of our six year and three year mechanism, as we thought about the next two years, three years and five years, we felt that it was important to accelerate investments in five key areas.
And we also felt that in order to do that, there was an opportunity to reallocate dollars from within while we, by the way, continue to add to our overall investment portfolio. So this was all driven by acceleration, momentum and growth. To answer your question in terms of how we picked those folks, it was all bottoms up.
And we had a performance management system where in essence, managers will go in and they will rate their employees. Generally, 10% of the company is what we call trajectory changing. About 20% is exceeds expectations. So about 30% of the company is exceeds or trajectory changing. And generally about 60 to 65% are achieved expectations, which is, by the way, we have very bold goals.
And so achieve expectations is actually really strong performance. And generally five to 10% that are does not meet expectations. And that's a process that we go through once a year where managers will put into the system, their ratings. And so this was done bottoms up at every layer of the organization. It was not a topstown decision. But the decision that we made this year was that in order to move with the velocity that we need to move to reallocate the resources and the dollars.
Is that we would in essence lay off the 10% that fell into it was actually more like 8% that fell into the bucket of does not meet expectations. So that's the very bottoms up, very disciplined and rigorous, although very tough in terms of how we made the decision. I feel like a lot, a lot of people spend some time every year using enterprise software to rate their employees. I certainly do it. My bosses do it to me.
Do you feel like that data is good? Do you feel like that data was actually telling you something because various companies that I've worked with I can tell you that data meant nothing and it's some companies it means a lot. Yeah, for us, it's everything. And what I mean by everything is for us, it's about first of all goal setting because goal setting is about what does great look like and performance management for us is performance management at all levels.
We need the performance manage our trajectory changing so that they can become a better version of themselves and we need to performance management that does not meet expectations performance management for us is about. It's like coaching a basketball team right you're focused on making every person, you know, on the team great. There's somebody that never comes off the bench. There's somebody that's the you know the star of the team. That's what we try to become great at.
So sort of goal setting for us discussions on a monthly basis and then the rating at the end of the year. It's about the system. And I would say the system for us is very, very important. And I want to also tell you that you know it's a conversation I had with the whole company this year.
We need to up our game in this area when I look at the last several years we have not been as great as we need to be in terms of really being great at setting goals for every individual that's meaningful goal with very clear success measures and then having conversations because it's a two way street in terms of how you become a better version of yourself. And so we actually take the end and approach to goal setting to performance management very, very seriously.
Do you think that shows up in the products I will tell you a lot of Dakota listeners have asked to have you on the show basically for feature requests and bug reports and then there's other stuff that a lot of people ask us to ask you about but in particular right the software isn't as good as it should be. You're you're moving me from my desktop client to a web client because that's where the platform is and the web client is not nearly feature complete for things like keyboard commands.
Do you think that this process is going to make the products better. Everything that we do around goal setting performance management is about delivering for customers. I mean that's the sole purpose of why I exist why our team exists is all about the product. So the short answer is yes, I would also separate what I just said from the sort of premise of your question, which is desktop to the cloud.
I mean that the reality is we were born 40 years ago, we were born in the era of DOS and we were born as a desktop company and frankly our desktop customers both on the consumer side and on the business side built you know who we are today. At the same time the workflows the features the functionality of desktop is not intended to be translated to the cloud if we did that we would not be able to continue to grow with most of our customers or acquire new customers.
Particularly as we're trying to create done for you experiences versus features so I would say a lot of our focus is how do we make the transition for our desktop customers as easy as possible to the cloud.
With that said if you look at any company that's had to go from server to cloud or desktop to cloud or on premise to cloud there's always a lot of growing pains because cloud platforms are not a replication of desktop platforms and so we're really solving for as much as possible the ease of migration for our desktop customers but we're truly building a cloud platform that's built for new customers and customers that have embraced the cloud platform from 10 years ago.
And I say all that just to say we aim to make our desktop customers as happy as possible but really it's impossible to replicate what they want in the cloud because then our cloud offering would be very old aged and a workflow based which is not what customers of today want. Do you anticipate supporting the desk up clients forever.
I mean we have for many many years and many of our desktop services are actually now on the cloud and we've built it in such a way where there will be a seamless transition to the cloud one day at this point we've not declared your goal is to move everybody to the cloud. The goal is eventually move everybody to the cloud we're not going to force customers that like for instance the workflow is not going to be the same in the cloud.
But if you have a need for a particular module that we absolutely don't have in the cloud we're not going to force you to move to the cloud eventually that could be two years from now five years from now I think everybody's going to end up being in the cloud. Let's talk about AI and then I'm not going to let you get out here unless we talk about text filing you know it's coming or the AI features going to be in the cloud only are they going to come to the desktop platform.
It's the primarily only in the cloud only in the cloud in fact everything that we're building in the cloud and have building in the cloud is just powered by our data and AI platform capabilities. You just announced a bunch of AI features that you're investor day it's on the order of when people log into QuickBooks they're going to see a feed with new insights and cash flow and other opportunities to use AI.
Let me just ask you a threshold question that I'm asking every CEO about their AI products. Can the AI technology you have now do all the things you want it to do. Because I'm not 100% sure that the LLM technology can do all the things that everybody wants it to do. Let me say two things in context of your question the first one is we're not launching AI features.
Okay. The entire platform is fueled by data and AI and in fact our goal is not to ship a bunch of plugin features that do stuff for you but but to create a platform where marketing is done for you quote to cash is done for you books taxes are all done for you. And please so think about it from what we're trying to achieve as the whole platform is fueled by data and AI.
That's the first thing the second thing is when we declared AI corridor strategy our investments were in machine learning and knowledge engineering knowledge engineering is very particular to us we have patents around it it takes rules and the relationship of rules and code turns it into code. And the power of it is accuracy and a lot of what we do has to be accurate that's really been the premise of all of our AI investments has been machine learning knowledge engineering.
About three to four years ago we started investing in Gen AI and specifically in our own into it financial large language models are models are the only thing models that are trained by the customer data.
I set that context to say we're in to answer your question we're in a very very early days of what LLM's can do I mean I would tell you that we we work a lot with the majority of the companies that are out there and the progress that's being made month to month is incredible so in terms of will it do most of what we need sometime in the near future medium future absolutely.
And I believe AI will one day be as smart as humans if not smarter but I think humans are always going to be a critical part of the picture for us in our industry but it's still very early days I don't want to at all suggest that everything can be achieved with AI today. We're at the beginning of a very long journey it's nineteen ninety nine internet with Bernie we're in now. LLM's are some notoriously bad at math you run a financial platform for a lot of people do you trust it.
Not on its own that's why I mentioned you know when you look at our AI platform that sits on our data layer in our data platform it's the combination of machine learning knowledge engineering which is very good at math and our LLM's that work in concert to deliver experiences to
your taxes are done right to make sure accounting is done right so on its own no but in the combination of our other elements of our I platform absolutely are you getting economies of scale from other AI companies investing the space I think particularly about. Meta is doing a lot of open source models right in there they're pushing far ahead on generative AI. On knowledge engineering are you getting the same kind of economies of scale from the industry or is everyone focused on.
I you know we're getting a lot of economies of scale because of our own investments because we were so early and we did this for very very practical reasons but we actually. Test an experiment whether you know across the board with and tropic a WS Gemini llama open source. And part of the experimentation is how could it potentially be a leverage to our LLM's because our LLM's have the agency and the authority they're the brains of delivering the experiences that I articulated.
And so we're not getting economies of scale from other LLM's in fact I would say it's the reverse right now I think two years from now three years from now we're going to get economies of scale but today the economies of scale. And it's why we've been able to deliver platform leverage and margin leverages from all of our own investments over time I think it will help you've had a lot of small business owners using your products they're looking for insight.
They are probably not financial experts the LLM or whatever systems you build tells them something at solutionation it's wrong have you have you worried about the liability of that of giving bad financial advice just one business center. So I love by the way the premise of your question which is this is why we're focused on done for you experiences because a small business wants a lot of responsibility to accept we're going to do this for you.
That's right and that's by the way why the essence of our investments that started six plus years ago is one based on the customers data not ours everything that we provide is very specific and relevant to you and then two it's the combination of our machine learning capabilities.
Our knowledge engineering and our LLM's that really deliver the performance accuracy and cost that we would want and we have governance we have technology governance and human governance internally just to make sure what we are doing is accurate and I'll just end by saying there's a range of accuracy right we can't generally be right when it comes to accounting and taxes right we have to be you know 100% accurate but then there are elements of hey you can run this marketing campaign we've put it together for you we think it could deliver a range of.
50 to $100,000 and revenue the range was what matters not the exact number for customers so I think accuracy has a limit based on what it is you're talking about you got to get taxes exactly right a range of revenue and what's possible from a marketing campaign you can have a range and customers are totally okay with that.
Do you think over time is you integrate AI into more and more of the platform and that becomes something more customers are paying for the free into it turbo tax products will remain as big of a mix as you have today it's really you have to think about the cohort of customers there will always be customers that have a simple tax situation where free may be the right thing for them there's also a lot of customers that no matter what their tax situation is they actually want somebody else to do their taxes for them because of confidence they fear getting a lot of money.
They fear getting it wrong they want to make sure they're getting the largest refund if the IRS comes after them they want to make sure somebody is there to protect them and so they always want to have an expert do their taxes for them so we believe that over time we'll still have a mix of free we'll have a mix of paying customers and I think over time our largest growth will come from.
Disrupting what today is the assisted category well son I can keep talking to you forever I think as you can tell we got to wrap this up thank you so much for being on the coder yeah absolutely my pleasure great to see you talk to you soon. That's the episode I'd like to thanks to son Gdarsi for taking the time to join me on the coder and thank you for listening I hope you enjoyed it.
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