Sarah Kirshbaum Levy on the Value of Marketing

This is Master's in Business with Barry rid Hoolds on Bloomberg Radio. This week on the podcast, I have an extra special guest. Sarah Kirschbaum Levy, CEO of Betterment, has a fascinating background in media, brand building, marketing as well as finance. She started out as an intern at Goldman Sachs. She had stints at Disney before going on to be chief operating officer at Nickelodeon and then eventually the Viacom

Thank you so much, Barry for having me.

Thank you for coming. I've been looking forward to this since we started chatting. Was that at future Proof in September? Right, So it's been a couple of months. So so let's talk a little bit about your early career, which is kind of fascinating. You work as an analyst at Disney and then you're a summer intern at Goldman Sachs. What was the career plan?

So, I don't know if it was so much a plan. I was just out of college and I loved the media business, you know, thinking about why did I land at Disney as my first job. I always looked to my parents and their careers in terms of what they loved. And I had a belief early on that if you loved what you were doing, you were going to give your all and you were going to excel, and you were going to want to make it, you know, a

From Goldman Sachs as a summer associate to Nickelodeon. I guess you made the decision that it was media over banking.

I did. That's exactly right.

And how did it go when you began as an early employee at Nickelodeon.

Well, the thing that I was attracted to at Nickelodeon really harkened back to my Disney start, which was it was a great brand and they had a great mission, which which was what's good for kids is good for business and or I don't know if that's a mission so much as a a.

Good good slogan anyway, good tagline.

Good tagline, but I think it's it was really what kind of powered our thinking about our products and our services was how, you know, how can we enrich the content we were making for kids? And if you told people you worked for Nickelodeon, sort of like if you told them you worked for Disney, they would smile. And I, you know, I really loved that, and I thought working for a brand that everybody loves is a really powerful idea.

I can imagine that was a lot of fun. So from strategy, tell us about the rest of the career path you took at Nickelodeon, and eventually we'll get to Viacom.

Yes, so Nickelodeon, in fact, is a division of Viacom, And so at the time, each of the brands were run as their own distinct business units.

How siloed was that, because as I was looking through your resume and you start looking at Viacom, it's MTV, it's Nickelodeon, it's Comedy Central, it's bt. There's like a dozen or more brands. I wasn't sure these will run independently or are they run as part of a big conglomerate or a little bit of each.

So over my two plus decades at the company, the answer is yes and yes. Right, So, there was a lot of organizational change. But in the early days when we were growing really fast, the organizational design principle was really around audiences, right, and what audience you served, and so each of the brand groups, so to speak, were designed around really understanding your customer segment and super serving them.

So as you're moving up the ladder at Nickelodeon, you end up as COO at Nickelodeon. That's it, right, How long did you do that for and what was that? Like?

I did that for over a decade.

I think, oh really, that's yeah, and that was that the springboard to COO at parent company Viacom.

That was the springboard. So what happened was to your organizational design changes point is basically we started to merge different pieces of the business and realized that we needed to be a more efficient platform. Right. Obviously, the pressure of streaming started and we started to see, you know, a lot more pressure on the AD business. So you had a top line that was challenged and you had

Does anything at Viacom today, what's their streaming business?

Like, Well, now it's they've renamed the company and so now it's called Paramount Global, right, and so they have Paramount Plus, which is a okay, there you go. And they also have Pluto TV, which we bought while I was there, which is and AD supported. I think they now call them fast Channels but ad supported streaming.

Channels, free ad supported television. There you go, huh, that's really interesting. So you're there, really in an amazing transition. You're there as we as the Internet explodes. Like when I was growing up with the Internet in the nineties, it was kind of pokey and dial up. It wasn't until a little later that there was any real bandwidth post dot com implosion. You're there as streaming ramps up, as video games become substantial. How do you think about

Look, I think one of the reasons I made the career pivot i did is because it's really hard to be the analog incumbent who needs to you know, fight a fight in a digital war when the newbies so to speak, have cheap capital, right and have the ability to candidly to invest and lose money in ways that the incumbents can't. So I think, you know, definitionally we were risk averse.

So you know, also, a giant legacy infrastructure with.

Great economics, right, a giant legacy infrastructure that had dual revenue streams and that had incredible margins. And you know, it's always hard to compare a dollar invested in the core business that's going to return you know, sixty cents versus a dollar invested in the new business, which you know is your future, but that's going to lose money out of the gate.

Right, But classic innovator's dilemma.

There you go. So so I think, you know, again, this is sort of the catalyst for my career pivot later. But I think the reality is, how did we do? You know, the streaming businesses ate our lunch, but they had a structural advantage and we were not brave. Huh.

That's really interesting, by the way, it's easy to eat people's lunch when you're willing to lose billions of dollars a year to establish a brand and capture market.

Share, and when capital is largely free or cheap, right. So I think the combination of those things just put us at a disadvantage. And it's interesting to watch now actually because one of the insights, right, the insights that the streamers had were all about the customer experience. They were about you know, ads being you know, interruptive to the content and consumers didn't like that, right, so they went at it and said, we're gonna We're going to

They've all raised their prices dramatically. Although I would push back on the phrase delightful because if you've ever gone and this is true for everybody from Netflix to Amazon to HBO, if you've ever tried to surface content, Hey, I like these movies. Show me that, Show me what else I might like. They're not especially good at that. I don't think anyone's been good at that since back in the days of the Netflix of DVD by mail.

I agree with that. I mean, I think the sort of you know, the algorithmic recommendation was sort of the holy grail, and I think it hasn't It hasn't worked as well. Not that good, it's not that good. But again, if you think again, think back to the cable days, what our brands did is our brand's organized content around audiences and interests, right, and so you sort of had an advantage.

Right.

What Netflix is trying to do is serve everybody, and so you have this sea of content and how do you sift through it? So it's a difficult challenge.

Yeah, that recommendation engine that people who liked ABC should also like one, two three. I'm surprised that hasn't gotten better. But last subject before we pivot. So you're at Viacom and you're driving a lot of change. You're spearheading new segments. You're pushing into retail, digital gaming, consumer products, even broadway shows,

Well, I think that wasn't about fighting off the streamers so much as about expanding the business. If you think about really the kids intellectual property. More so, when I joined Nickelodeon. It was really about joining a kid's brand because I understood the power from my experience at Disney of kids love and passion for characters and stories and how you could deepen their engagement with your brand through

To say the very least, we discussed Nickelodeon's entrance into gamings and products and other things. How did you come away from that experience? Was it just about maximizing revenue or was it really about building out the brand?

I think for me, it was about building out the brand, and it was also about scaling and optimizing an operation.

So I just picture a big boardroom when you're going in to make the pitch. Hey, we have to go beyond just doing shows for kids. There's a whole universe of ways we can monetize our intellectual property. What was that pitch? Like? Am I remotely close to you know? That stereotypical image? And how difficult was it to get a big, giant and already successful company to embrace a whole new set of revenue streams?

So I just shivered when you put the image of the big board room back in my mind? Right? That No, that's accurate for sure. I think, you know, the pitch, the way in which we entered the business. And again back to my comment earlier that you know, I don't think we were brave. We were. We licensed the content so it didn't require an enormous investment, right, So we would work with toy companies, We worked with a hotel business, We worked with cruise ships and basically len them our

It's it's great because they are not eighteen, so they could walk away from the debt, right or did their parents have to coast?

I think the what's good for kids is good for business really prevailed on that one. So in any event, we considered all sorts of things and people would pitch us.

So I SpongeBob, bow and Arrow didn't didn't, it didn't.

It didn't make the cut now, not at all. But I will say that we did have a few times when we had some sort of braver ideas around, you know, investing more deeply in some of these segments, and those did require pitches you know, exactly as you exactly as you say, and we ultimately didn't decide to go forward with bigger investments, right, buying a part of a theme park, you know, franchise, for example. So we never we never

It's interesting to see that the more successful a company is, the more risk averse they tend to be. They don't want to you know, don't kill the goose that lays the golden eggs.

I mean, it's inevitable.

Right.

You're also your public company, You're living quarter to quarter, and the considerations are.

Different, to say the very least. So let's talk a little bit about media as so different than finance. But really does it all come down to these are consumer brands. And if you can build a brand and show its value proposition and present it in a smart way to an audience, it doesn't matter whether it's digital investing or kids programming. Branding is branding.

I mean, I think from a branding and marketing standpoint, yes, I do think it translates incredibly well. And I think ultimately your brand needs to meet a need or solve a pain point for a consumer, right, and so it all starts with the consumer and the consumer research. And that was something that we were incredibly good at at Viacom with all of these really really targeted niche brands. We really invested a lot in our research and in

Tell us a little bit about what that process is like, because you always picture a bunch of people in a room with the two way mirror and asked showing them clips or showing them toys. What was the consumer research like at Viacom?

So, I mean there's so many levels, you know, both quantitative and qualitative. So there were a lot of focus groups, there was a lot of instant feedback in the form of ratings and analysis sort of you know, post facto right after you air the programming. There was pilot testing. I mean we would sit with kids and show them pictures of characters, and you know, they would comment at every step of the way. We were basically bringing things to kids and watching them react. Do they laugh, you know,

So really, really really interesting how different is children's programming when you're doing that sort of research to adults, Because there are so many infamous stories about shows testing poorly and hanging on and that Seinfeld comes to mind to that really poorly goes on to become one of the most popular shows of all time, and things like Raiders of the Lost Arc couldn't get couldn't get made, or Star Wars had trouble finding a studio that nobody liked

Age Wise, we thought of everything as an input, right, and so I think you have to take everything with a grain of salt in the sense that let's say you're doing, you know, three or four focus groups, You've got ten or so people in each of those focus groups, you're trying to pull themes and insights. Sometimes one loud person in the focus group can impact everybody else, so you're watching for that. I think in kids, what you're

So authentic and organic. You don't have to worry. The words don't matter.

That's right, and and some stuff is again we do quantitative testing. Qualitative testing. Sometimes you would do dial testing right during you'd air an episode and you'd see, like, what are the places where they either laugh or turn up the dial or down the dial. So all sorts of different tactics and methods, but it's art and science. I think that's you know, the great creators have an instinct and it can't just be about you know, what happened in that focus group.

So now let's pivot to thinking about digital investing platforms and betterment. How transferable are these skills when you're looking into what does an online investor really want?

So I think there are transferable skills, and then there are there's a I had to learn. Right, So in terms of transferable skills, you know, we were talking earlier about branding and marketing, right, I think that media is particularly excellent at that, right, And we had not just a house of brands in terms of Nickelodeon and MTV and Comedy Central, but then each of our intellectual properties, each of our shows was effectively a brand, right you had to launch it, and you needed to have a

Fifteen years for SpongeBob, out ahead, out ahead, like let's plan on these kids who will be born in a decade.

That's right, Wow's right. You're thinking about movies, you're thinking about television series, you're thinking about how to you know, how to how to keep the excitement alive themes. So anyway, so all of that discipline is I think an incredibly good learning ground that then can apply to any brand building. I think similarly, as we were talking about all the platforms, right, the idea of how do you expose your brand? Where do you expose your brand? So all of that I

Right?

These are all concepts that travel across businesses. And then I think people management and organizational design is a really important part of any business, right is how do you build a team that works well together? And how do you put sort of the right structure around that team and the right organizational design. And I had a lot of learning there because you know, we reorganized every i don't know, twelve or eighteen months over my twenty years

Huh, really really intriguing. So let's talk a little bit about eight hundred thousand customers. That's a lot of customers, yes, it is. What is it like trying to stay on top of all of that? That seems like that's an immense number of users.

Well, we've been at it a long time, so you know when did Betterment launch. Betterment launched in twenty ten, So thirteen years strong.

Seems I mean, my farm is ten years old and it went by like that. Thirteen years seems not, you know, not, you guys are relatively new, not as new as we are, but still relatively young, right, Sure.

I mean in the if you think about the arc of the wealth management business, sure we're relatively young. But I think when you consider the digital wealth management space, we were early and I'm one of the ogs, if you will. Sure, but those eight hundred thousand customers actually are across three lines of business. So we are best known for our what was once called a robo advisor. I like to think of it as a digital wealth management platform.

I hate the name robo advisor.

I agree with you.

It's not a robot and it's not there to provide advice. It's a platform that you build on top of. That's at least that's how I think of it.

But well, I think that in the I think that's exactly right. I also think that in the early days, it was a simpler idea, right, which was fulfilling a simple promise of low cost and automation and bringing access to investors who previously didn't have access to great advice, bringing sort of the simplest and clearest advice to that group,

So you mentioned low cost and automation, and I wanted to circle back to that because the automation is what enables low cost in fact, so for again good what we do with liftoff is we have betterment power our day digital platform, but we attach a live human advisor to that, and that wouldn't be financially viable if you're doing everything the way a traditional ria does it, because that's pricy. There's a lot of people, there's a lot

Thank you. That's exactly right. I couldn't have said it better myself.

So what made you early on? Some of your competitors thought the RIN industry was very much there competitors, how did you guys look at And I know some of this predates your your tenure, but what made Bennerman say, hey, this is a part of the industry that we shouldn't ignore.

It does predate me. I think that's right. So I've been in the CEO seat for three years. So John Stein, our founder, he really saw around corners, right, And I think, you know, what was so great about him, and I think tends to be true of founders in general, is they're always innovating. They're always thinking about the next idea. And I think there were sort of two motivations for him. You know, One was, well, wait a minute, why don't the ri as, Why don't the human advisors like us?

And so one of your competitors, who I won't mention by name, was very adversarial with the RIA community. They have you know, a fraction of your ass but they also aren't really working with advisors recognizing the different market segments seem to have been a big win for you guys.

Yeah, I mean I think that it's a mistake to not embrace the whole market, right, and to not recognize that, Look, there are customers who feel comfortable. I've had a financial advisor myself personally for twenty years, right, and that provides, you know, peace of mind, and it provides and it's a relationship, right, This is a relationship. Technology is never going to replace a relationship. Technology can enhance the service that that relationship provider can give you, but it's never

Yeah. Absolutely. So you mentioned John Stein. You come in to CEO of Betterment following a founder. That's always a tough spot. Tell us a little bit what that was like.

Well, it's funny. So I came from such a different world, right, I came from the corporate world, and I didn't know from founders, and so I had no expectation. And in my experience, changes of leadership were somewhat commonplace. Right. Oh, you know, when you're at a big company, things change and so and so I met John through a actually

It's so funny you say that, because it's streaming and media. It's Tesla and the rest of the auto industry and evs, it's Amazon forcing everybody to have some online line retail. A technological disruptor comes in, and it's not just that one company. The entire industry has to take notice and say, either we adapt or we get left behind. That's right, and that's really really substantial. So from where you sit, coming from a media background, is it safe to say

I think so. I mean, I think that there's certainly you need some experts in the mix. Right. I'm not going to say that, you know, no industry experience needed here, right, But you can do that within the context of a balanced team. And so I think, you know, I happened

Huh. Really intriguing. So let's talk a little bit about the history of the digital investment platforms. These more or less launched after the financial crisis kind of twenty tens or so. There were some great expectations when some of the initial companies launched. Many of your competitors have not lived up to those lofty expectations. How do you look at the field and say, why have some of these companies just not gotten it done? So?

I think in general, there was a sort of a fear slash expectation right that digital was going to take over the business, right, and so that obviously had big dollar signs in people's eyes.

It was a gold rush for a while. People spent a lot of money buying digital platforms. Many of those purchases did not work out, but it was pretty It looked like, hey, these guys would come and eat on lunch.

Right, And I think, look, that's not unlike the sort of digital boom and bust in every industry, right, which is think about Amazon. Right, Amazon won, but there was there there was a lot of roadkill by the side of the road, right, whether it was e Toys or you know to right to remember just a brand name, right, there were a whole number of these firms.

Pets dot Com is the one that sticks out to me.

Right, like they all emerged, they all I mean Amazon was books, right, It wasn't the everything store, it was books. And I think you know, they they won because they were excellent, right, and they delivered, they had They were maniacal about the consumer, right, and they and they just continued to build off of super serving that consumer.

And regardless of profit, they were will want to post bone joy in order to do.

The reserve, right because they knew that referrals and customers who loved them was the holy grail, right, And so you know, they won. So I think the same can be said in any industry, right, I mean, Netflix has is is the clear leader in the streaming space, and I think, you know, I intend for Betterment to be the clear leader in the digital wealth management space.

So what does Betterment have to do to distinguish itself from the rest of the pack. And the rest of the pack includes Vanguard as well as a bunch of other much smaller clean sheet startups in the space.

So my aspiration is sort of what Amazon did for Walmart, right, which is it pushed them to be better, but ultimately there's room for both. I think that is very true in the wealth management space as well. So I think, you know, Schwab and Fidelity and Vanguard, like those are the great brands. Those are my parents' brands.

Right, and they all have their own in house digital platform.

That's right because they knew that that has to be part of the mix. And I think similarly, right if I think about those as brands, I think the technology is a start, but I think building a brand that understands the customer segment you serve is going to be critically important in terms of who wins and who loses. And so what I aspire to for Betterment is that we should become the millennial and gen Z Wealth Management brand the way Schwab or Fidelity serves our parents.

Huh. That's intriguing. So when you're doing the sort of customer analysis that you did back at Viacom at Betterment, what are you finding from both your existing clients and people who are potential clients. What is it that the consumer is looking for in advice from a digital platform.

So I think first and foremost, they are looking for great technology and great service.

So when you say great technology, I think of ease of use, user interface, those sorts of things.

That's exactly right, that's exactly right. And they've grown up right with a phone in their hand, so to speak, right, and so I think what worked for customers a generation to go? I think the expectations are just raised, right, And so in terms of what technology can deliver, it has to be on mobile. Not just ease of use, but ease of use on mobile. I want to be able to do everything on my phone. Don't make me sit down at the computer, for example, right, And that's

All right, So you started with an online platform, you go to mobile. If we're looking at the next great technology, it's almost a cliche to say AI is going to change all these things. How does a digital online investment platform use AI to make itself and its products more desirable to its clients.

So AI think of it as supercharging everything we do. Right, So it's causing us really to re litigate every process we have and say can we do it better, stronger, faster, and how can technology enable that? So we're starting really in the back office, and that's both internal and customer facing. So think about, you know, writing first drafts of marketing pieces, right, get you know, putting some inputs, giving an assignment to the AI and letting them draft something that you can

For so I love the term hallucination. You never worked at Roku and you never worked at ubs. But when I'm done with my research, I'll then run it through CHATCHBT four and perplexity, which are one as clawed and one as the I forgot the other driver, just to see what comes up and oh I missed? How did I miss Roku? How did I miss Ubs? Turns out I didn't. They were wrong and hallucinating, which is why

That's right, and you have to have guardrails, right, And so I think we're being very thoughtful in how we deploy AI. But I think we would be foolish not to be embracing the technology because you know, if we can speed everything up we do by ten percent or fifteen percent using the technology, then you know, better, stronger.

Faster, right, And we usually measure productivity gains in you know, single decimal points. Ten percent or fifteen percent is just immense. That's that's a game changing improvement.

Yeah. I mean you talk about do more with less, right, I mean this is the greatest example. Yeah.

Absolutely. So before we get to a favorite questions, I have a curveball question to throw at you. You are currently a board member for the Lucius and Littower Foundation, as well as Funko and Catalyite. Tell us a little bit about those organizations.

Sure, So I'll start with Lucia's Litower is a foundation and we support access to opportunity and we support a series of Jewish causes. There was a man named Lucius Littower and he passed away without any airs, and so we have a group of people who are entrusted to carry on his legacy. So that's been a great one for more than ten years. I've been doing that. Funko Inc. Is a pop culture company. It's a public company. You may have heard of Funko pop which are like little

It sounds really interesting, all right, So we only have you for a few more minutes. Let's jump to our favorite questions that we ask all of our guests, starting with you're the perfect person to ask this question. What are you streaming these days? Tell us about what you're watching on Netflix or Amazon or Hulu or Disney or Paramount Plus or anything you might be streaming.

So I binge constantly. The new season of Slow Horses Season three, right season three. That that's one that that I've recently streamed.

It's a really interesting shows.

It's a great show.

That's I love it.

That's on Apple Yep. I loved Also on Apple, I loved Lessons in Chemistry, which I read.

The book, really gotten to it.

That's a good one. I really liked it. But I also read the book. So so those are two of my I love them. Oh, I just watched The Pacific, which is an old which is a spin off of Band of Brothers. HBO must have recently sold a bunch of stuff to Netflix, so it surfaced in my algorithm, and it was a spinoff of Band of Brothers and it was about it's about World War Two.

Didn't Band of Brothers end up there also?

It did? It did, But I had seen that, and I had never heard of The Pacific, but it surfaced and I watched that. It was about the Pacific theater during World War Two.

Really interesting since you're mentioning wartime shows, have you seen all the light? You cannot see?

So not only have I seen it, but it's one of my favorite books.

Fantastic really and they did a great job.

They did.

They did. It's just what is it six episode something like that. I wanted it to be really Yeah, it was real. It was one of those things you're when you're said when a show ends, it's like, that's how you know it's a really good uh, a really good show. Tell us about your early mentors who helped shape your career.

My early mentors were were really my bosses. So I worked early on for a guy at Disney named Peter Murphy who was a great mentor to me. And then a woman named Dan Sarnoff who became ultimately was running the Warner Brothers studio. She she was my first job out of business school. And then a fellow who was the COO at Nickelodeon before I was, named Jeff Dunn, who went on to run Sesame Workshop. Those were probably my three.

Let's talk about books. What are some of your favorites. What are you reading right now? So?

I love historical fiction and I love a good beach read. So right now I am reading the Elon Musk biography, and I'm also reading Demon Copper Demon Copperhead, which is a Barbara Kinsolver, which is fantastic.

Demon Copperhead. What sort of book is that?

It's about a little boy who grows up in foster care. And I think it's going to be about the opioids crisis, but I haven't gotten to that. I haven't gotten to that part.

Yeah, you know we mentioned innovator's dilemma earlier. Did you ever read loon Shots?

I did not, so.

By a professor. I'm drawing a blank on his name at the moment. But it's how every company is really two companies. One is that small startup and the other is the company that has its own ongoing revenue source. And how do you balance the need to not eat your seed corn but at the same time take occasional moon shots. And it's a challenge for a lot of companies. Apple is an example of a company that is willing to cannibalize our own products in order to stay ahead

I always think the training, the investment banking training programs aren't a good way to start. They're sort of like boot camp for a couple of years where they, you know, teach you to understand p and ls and financial modeling, and I think that's a really transferable skill, so I think those are fantastic programs. I also think these days, you know, whether I'm a financial company or a technology company is sort of a question we ask ourselves every day,

And our final question, what do you know about the world of branding, marketing, or technology and investing today? You wish you knew twenty five or so years ago when you were really getting started.

Well the world of investing. I would say I did not fully appreciate the power of starting early and the power of you know, compounding, you know, save what you can. I think I also underappreciated, really until I got to betterment, I under appreciated how much costs and taxes can undermine investing. Returns and so to be to be a cognizant of

Well, well, thank you Sarah for being so generous with your time. We have been speaking with Sarah Kirshbaum Levy. She is the CEO of Betterment. If you enjoy this conversation, well, check out any of the previous five hundred we've had over the past nine years. You can find those at iTunes, Spotify, Bloomberg YouTube, wherever you find your favorite podcasts. Sign up for my daily reading list at rid halts dot com.