Don't let your legacy I T systems cost you money, innovation, and a place at the digital table of the future. You can change your systems and the economics of it with software from red Hat See how at red hat dot com. Today's episode is about a guy called Mitch al Lee. He runs a startup called Penny in San Francisco. We'll tell you later about what Penny does. For now, what you need to know is Penny is almost two years old and it's really small. It's Mitch, his co founder, Alex,
and two employees. They're all software engineers, and big surprise, they're all guys. A few months ago, Mitch started looking for a fifth employee, and he wanted that fifth person to be different from him and the rest of the team. And since this is a podcast and we can't just show you a picture of Mitch, we asked Mitch's sister Christina to describe what he looks like. He's always got some like really soft hoodie or T shirt on and jeans or corduroys. If he was walking down the street,
you probably wouldn't necessarily notice. He blends in pretty well. Basically, Mitch looks just like a lot of other people in Silicon Valley. He's young, he's white, he's straight, and he went to a top college. Yeah, he even has this neatly trimmed beard, and perhaps because he's a cyclist like the rest of San Francisco, he has a nice tan too. In Silicon Valley, most programmers are white and Asian men
who have computer science degrees from elite universities. But for Mitch's next higher he's committed to looking outside that pool of people. That's pretty unusual for a company of penny size. Some people would call it affirmative action hiring, because Mitch is going to be actively considering the candidates background when he's deciding who to hire. And it's a very touchy topic.
As we'll find out, not everyone agrees that it's the right thing to do him Ako and I'm Ellen Hewitt, and this week Undecrypted, we're going to be talking about something that every technology company says they want to do something about, which is diversity in the workforce. Well, they want to talk about it in these lofty slogans, but when you actually drill into the specifics, things start to
get uncomfortable. We found one of the few guys in the industry, willing to speak completely openly, willing to get really uncomfortable with us. Someone who's trying to do something to fix the lack of diversity and tech from within his own tiny startup. Oh cool, I look at this giant chess board. The guy's penny work in a small coworking space in downtown San Francisco. They're on a shoestring budget.
It's really not a glamorous place. They don't have free snacks, there isn't very good natural light, and their office is about the size of the bedroom room, A spacious, lovely I was telling her, I'm excited for her to see how like the other half of startups live, this is the don't spend a lot of money half of stars. Inside this tiny office, there are four guys sitting side by side. My name's Mitch. I grew up in San Jose. I'm a mid twenties white guy. I'm alex and Stanford
is American. My name's Andrew Donnas. I'm half black, half white. Um I'm married, and I'm my dad. I am Jonathan, and I was born in Taiwan and I grew up in Maryland. All four of them believe it's the right move for their company to be prioritizing diversity now. Not just because it's the right thing to do, they also believe it will help their product. Yeah, Penny is this app that links to your bank accounts and can give you financial advice based on your spending patterns. Here's Mitch.
As we were working on that core product, we were realizing, we're both two software engineers that grew up in the Bay Area. How are we going to get a product that does well in Montana and Kansas and Maine. And our answer to that was, we should be solving this by building out a diverse team that can empathize with people from different parts of the country, from different genders or different ethnicities. And you use the app by messaging this chap bot, this computer program that texts back and
forth with you. The chat bot is called Penny, and Penny has a female face. But at the beginning, everything Penny said was written by two guys, Alex and Mitch. Here's Mitch's fiance, Lizzie Wagner, explaining one way that went awry. So they started to use a little bit of like a snarky tone, you know when you use like a winky emoji, it can also be considered flirty. So I told him I just read this conversation and I think Penny was flirting with me. And he was like, no way,
it's a computer. It can't flirt, and I was like, no, it's a flirty conversation. He's like, this is exactly why we need more diverse perspectives, because Alex and I never even thought about that comment being taken that way. And building a relatable chatbot is super important when you're guiding customers through something as personal and sensitive and daunting as your finances. When a user writes in and says, I
overdraft a lot, how do you respond? And some people will respond with, well, they should stop spending that much money. Other people will put themselves in their shoes and say that really sucks. That level of empathy doesn't come if everyone thinks and acts the same in a room. They're all just gonna confirm each other's opinions of like, well,
that person shouldn't be spending money they don't have. And Penny stands out from the rest of startups and Silk on Valley because it's focusing on hiring for diversity so early in the company's history. I think the default for early stage companies is not necessarily in aversion to diversity. It's not an active process of saying we are only going to hire people that look and sound just like us. It's the idea that we want to move fast, and the fastest way to hire people is to pull from
our network. They get this big paycheck from a venture capital firm and they say, great, we're going to spend it immediately. They expand their team from two or four people to eight or twelve. If you punt the issue of diversity down the line, it becomes much harder because when you have eleven men on your team on a twelve person team, it becomes a hostile work environment for
women trying to enter into that team. When you have a group of all white or all Asian people sitting in the same room together, it makes it hostile for other minority groups to join that environment. These kinds of companies really do exist. We talked to Jennifer Barbattini, as software engineer who interviewed with Penny in September, though she didn't get the job. I remember there was one company that I interviewed with. It was a smallish company like
fifteen to twenty. They had ten engineers, all ten were male, and all ten were from Stanford, And I was like, I don't know if I'm a good fit here, like, and the hiring person was telling me we're we're trying to be diverse, and I'm like, well, okay, but still like this is a little intimidating. I don't have a Stanford eventual, Um, I'm I'm definitely not. I can't brow talk. If it's a problem at a startup with twenty people, imagine what it's like at a Google or Facebook or Twitter.
They have thousands, sometimes tens of thousands of employees, only about thirty are women, and only about six percent are black or Latino. These companies can hire only people from those groups for the next year and their numbers would barely move. So it makes sense to start early. But the problem for startups is a pressure they're under in
the very early days. You have maybe a year of funding in the bank, you have a bunch of competitors, and if you can't hire quickly to build quickly your toast. The consensus opinion is start worrying about it. When your product is successful enough that you know that you're going to be building out a team for the long run. Even someone like Mitch who's really determined to focus on this, he's run into a lot of obstacle. Remember, Mitch isn't
this diversity or HR expert. He's just a programmer trying to figure it out as he goes along. From a macro perspective of actively pursuing diversity, I'm almost but implementation wise, I'm i am just throwing darts on board and and hoping that we'll learn enough from those to get better. Every Monday, Mitch logs onto recruiting sites like angel Lists, Hired, and triple Bite. He's looking for candidates or approach, and
he'll spend one or two hours on each platform. He said it takes him maybe six hours on Monday to do that outreach, and then the follow up throughout the week brings his time to about fifteen hours every week just to fill one role. We spent one such Monday with Mitch. As you look through a fresh batch of candidates, these ones he found and hired this week, there were
forty two that match to search criteria. The very first candidate has real experience, which is great, comes from a university, I've never heard of also great and then has experience in different areas, and you see the person's photos, and you see the person's photo and their name, UM, and actually what salary they're interested in, which is pretty interesting.
So I will start looking through this. Fortunately, when you have forty two people every week on this platform, plus the hundreds across, a lot of startups look at these sites when they're trying to hire. But after a while Mitch realized that these job sites, they're only good for finding a certain kind of candidate. Angel List is great, UM, but not a good place to look for diversity. Same with many of the hiring platforms that we tried. I've asked them about that in the past, and the typical
answer is, sorry, this is just what's available. This is the pool of candidates. It's predominantly male, it's predominantly white origin. So Mitch started to look for ways to find people with more varied profiles, things like newsletters and meet ups for women and engineering. He also looked for new graduates from coding boot camps, which teach you how to code in a short period of time. These people tend to come from unusual backgrounds, but boot camps didn't turn out
to be particularly helpful for Mitch. He found that a lot of these graduates didn't have enough experience to start contributing right away, and Penny, as a young startup, doesn't
have the resources to train them. To apply to Penny, you have to complete a coding questionnaire, kind of like a take home test, and Mitch found that some people who started it weren't finishing, and a lot of the people who were dropping out were people who didn't have computer science degrees, or were women, or were programmers of color. And it was often these candidates that Mitch was most
interested in. Mid suspected it might have something to do with a lack of confidence, like these people with non traditional backgrounds are taking themselves out of the running before they even tried. Maybe the job description will say you have to have at least three years of experience, and let's say often the men with two years of experience will apply anyway, but the women wouldn't. Submitch, he tried
something new, but first a word from our sponsor. Inside the most successful organizations, i T has gone from supporting the business to driving the business. But the costs of legacy infrastructure can impede this progress. Budgets can't stretch enough to pay for digital innovation at the speed required. No one gets a blank check. The answer is to change the economics of your I T by shifting from ownership to use, from licenses to subscriptions, from proprietary to open.
Change the economics of it with open software from red hat. Learn more at red hat dot com. Before the break, Mitch had a realization that the very candidates he was interested in were taking themselves out of the running, maybe because they didn't think they would get the job. Anyway,
Here's what he decided to do about it. When we get the sense that somebody has either a confidence issue, like just doesn't think they're a good fit for the position or doesn't think they have the skill set required, we will have a lot more contact with that person to assuage their fears. That may mean a phone screen much earlier in the process. It may mean more checking emails. That helped him shepherd more people through the whole process,
not just the ultra confident ones. And that was a small success, but it all came at a real cost in the form of mid just time, the fifteen hours a week that Mitch was spending on recruiting. That's fifteen hours he's not coding or troubleshooting or mentoring his team. Mitch said it was worth it, but you can see why a lot of other founders in his position wouldn't really have the time to do this. And that brings us to the most controversial part. When you get to
that final stage. Would you pick one person or another because they're a minority candidate? What would you do? I talked to Jay Schweney Vassan. He's the CEO of Spoke, which is a nine person enterprise startup in San Francisco. Like Mitch, Ja says he wants a diverse team, but he said he's not comfortable with making someone's ethnicity or gender one of the reasons why he's hiring them. He explicitly did not factor that into the final decision because I think that's unfair to us as well as the
person being hired. Um at the end of the day, we want to have the best people possible for each role in our company, and this makes sense right. Picking someone in part because of what they look like can even be seen as employment discrimination, or it can feel patronizing to the person who was hired. These are the kind of counter arguments you hear a lot in Silicon
Valley and elsewhere. But we asked, Mitch, here are two hypothetical candidates equally strong encoding and other important values at Penny, but one's a white guy and the other has a less typical background. Who would you hire? You just said
that they're equally qualified. What we're saying is that the the people that were interested in hiring were weighing them across all these factors, and so somebody with a diverse background and a totally different perspective, in our opinion, is more qualified for the position that we're trying to fill. Giving us a perspective that we've never considered helps the product more than somebody that has our same perspective but as good at engineering. Did you have put back from
people who felt like, what's unfair? I should I be punished for going to Stanford's exactly that should I be punished for going to Stanford? It's it's something that I don't have a good answer to, other than the entire playing field is leaning in your direction. I know that it can feel like in that specific instance, you're being discriminated against or you're somehow unfairly disadvantaged, but you are
unfairly advantaged everywhere else in your life. So it's just, uh, it's just a slight tilt of the playing field, a little less in your favor, um, which I'm okay with. I can. I can sleep easy at night knowing that, knowing that if you graduated from Stanford you're going to be fine. I'm not worried about you. And we just heard Mitch laughing there. But you can tell just how carefully and deliberately Mitch has been choosing his words through
this whole interview. His face was flushed. You could really tell that he was nervous. And I don't blame him. Here we are shoving a mic in his face, asking him to talk about gender and race and all these other things that are so touchy. The things going on in my mind are I need to be careful about this. I know that people are going to look at me and say, you're just some white dude rattling off about diversity, but you have no idea what you're talking about. That
may be true. I may not know what I'm talking about, but I want to get that conversation going so that I can learn, so that the rest of our team can learn, and so that um, we do better moving forward. We'd basically just saying, you know, Allen, I really can't remember the last time I was this nervous trying to come up with the most delicate way to pose these questions to me too. And Aki, you and I are
both women of color, you're also gay. It really makes you think back to every time you've ever been offered a new job. Yeah, and I guess until now this has all been theoretical. But when we went in to interview the Penny team, they were in the final stages with one candidate. They were talking to a woman and she's of Indian descent. While we were in the Penny office, we got the team altogether in a room and asked
them what they thought of her. Yeah, they all thought she would work well with the team, but she lacks some technical experience. Specifically, she wasn't fluent in the main programming language that Penny is written in. On top of that, the company was about to enter a really busy period. Great culture fit. It's somebody that we would all gladly having the room working with us, because she's articulate and
well thought out and it's very responsive to feedback. How do you weigh that with the fact that shifts no experience shipping production Ruby code, which is the language that we write in UM, but seems to have the aptitude to pick that up quickly. Well, the answer is we don't know, so ak. When we visited Mention his team, everything that they were saying seemed pretty reasonable to us. Yeah, I thought he was a really thoughtful guy. I was
just genuinely impressed. But we're not experts on this either, So we outlined Mitch's philosophy and tactics with my Von Hutchinson, a former labor lawyer who is now a consultant helping smaller startups on diversity and inclusion. You get an A for enthusiasm Mitch for this letter grade, I would give him a beat. Um. I think that he's doing some of the right things. Um, he's taking a couple of risks,
but he could take bigger risks. I think that he could definitely educate itself a little bit more, just comb through the resources and see what's out there. My Van said that in the long term, Penny should build relationships with organizations that are trying to bring more underrepresented groups into tech host dinners and meetups and that kind of thing. But she also gave Mitch some practical advice for right now, like put your pledge to diversity on your company's landing page,
not just on your job spage. Consider bringing in an expert to help guide you instead of trying to figure it out for yourself. And when you hire minority candidates, don't expect them to do the work of recruiting diverse candidates for you. I'm really happy there are guys out here like Mitch. I think, um, sometimes we see guys
like Mitch. Don't stay like Mitch for very long. I think it's going to be in the next few years is going to be really hard to hold those values and not to succumb to the temptations that are going to be abound in the industry when it comes to making the final call on who to hire. My Van said, Mitch is taking the right approach by focusing on the different perspectives that a candidate would bring to Penny. I don't think that you should hire someone just because they're
black or just because they're a woman. That will fill a short term goal. But that's not going to pay off in the long run. And I feel like so often we we equate identity with experience and it's not the same thing, although sometimes they're tied, right, So I think if you can figure out a way to really capture that, to capture the experience part of the identity as opposed to just the identity in a vacuum, like, that's when you're kind of like more set up for
a success, Which brings us to our climax. Did Mitch, Alexandrew, and Jonathan hire the female programmer? We followed up with them in late November, and even though they were approaching a busy time, they decided to give her an offer. Her name's Vertica Shrivastav, and we met her just a few days after she accepted Penny's offer. She told us that as she's met with all these different companies, she
knew she was likely going to be an outlier. I made it a point to ask Um how many female engineers they had, And after I started asking, I realized it made people uncomfortable. I didn't mean I didn't mean it as like a point of like superiority. I just wanted to know how many female engineers because it would affect me as someone joining their team, and it made people uncomfortable. UM. They kind of be like, you know, well, we had this engineer she left. UM, but she didn't
sense that same discomfort at Penny. I had asked them a question, UM, saying that companies always asked me why am I interested in them? I think it's only fair for me to ask why are you interested in me? And I liked that they didn't like tiptoe around the fact that I'm a female engineer. They're like, diversity is something that's really important to us, and you're clearly different because you're female, and then also listed like other things that were a little differ and about me then I
guess the average software engineer. So like that they're honest about that and they're not trying to just because I'm a girl come out of the team like they saw something more in me other than just that I'm a female. Vertica starts this week, but Mitch's work isn't over. Wi Bond, the diversity consultant, told us that it's not going to be enough to just hire candidates with minority backgrounds. The hardest part is making sure that the new hire feels like a real and necessary part of a team with
challenging work, but also the right amount of support. It's a difficult balance, Mitch just success in the long term ultimately depends on whether Vertica stays and thrives at Penny and down the road, whether the different people Mitch keeps hiring will make the app more useful and enjoyable to everyone, not just people in the Silicon Valley bubble. And that's it for this week's episode of Decrypted. Thanks for listening. You can subscribe to the show on iTunes or any
of your favorite podcast apps. While you're there, please leave us a rating and review. I read each and every one of these reviews. It helps us keep making the show better, and it also helps us find new listeners and tell us what do you think of the state of diversity in the tech industry. I'm on Twitter at Ellen Hewitt and I'm met aki its O seven. This episode was produced by Pierre ged Kari Magnus Hendrickson, and Liz Smith. Emily Buso edited Ellen's print story, which you
can find on Bloomberg dot com Slash Technology. Alec McCabe is head of Bloomberg Podcasts. We'll see you next week. Don't let your legacy I T systems cost you money, innovation, and a place at the digital table of the future. You can change your systems and the economics of it with software from red Hat. See how at red hat dot com.