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Scott Cook - Founder and Chairman of the Executive Committee, Intuit

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Sal: All right, I think we're ready to start. Anyone else wants to join us for the talk with Scott Cook, founder of Intuit? I'll just start. For everyone here at Khan Academy who doesn't know, both Scott and Signe Cook were some of the earliest believers in Khan Academy and supporters, and to a large degree, Khan Academy wouldn't be where it is right now without a lot of their help, and so I just feel like I owe you guys. But with that out of the way ... Scott: We're just fans. We cheer from the stands. The players who win the game are in the room. Sal: Very nice. Thank you. (laughter) But the point of having you here, and whenever we have people of your stature come to the office, we think it's just a valuable learning experience to have a conversation with you and then to see what's going on in your mind. The place I like to start, before we open it up to the rest of the team, is you see a lot of folks who've done big things, like start Intuit. When I was a kid, I always wondered, how does that happen? How do you go from being, having a normal job and one day you start a company and that company becomes a really big company? Tell us a little bit about that story. How did Intuit get started? Scott: I think for you, it was your niece, was it? Sal: My cousin. Scott: Cousin? Sal: Cousin, yes. Scott: For me, it was my wife. Sal: Very good. Scott: She was struggling with her math problem, no. (laughter) She does our joint checkbook, and she was complaining about doing it. She's very good at it. She is diligent and mathematical. But it was a hassle because she had to pay the bills and had to rewrite in the check register, reconcile, and she complained, and I thought, "Hah." This was in 1982, when PCs were just starting to explode. I said, wait a minute. This sounds like the kind of problem everybody might have because everyone's got to have a checkbook. Everyone has to pay bills. And PCs are now going into homes, and this is very solvable on a computer. This is the kind of task that computers are very good at. And so I thought, "Oh, maybe I'll write this software just for fun." But I hadn't programmed in a decade, so I figured maybe I should get somebody who actually knew what they were doing, and so I found a student at Stanford, Tom Proulx, and he and I co-founded the company with the goal of building a simple piece of software that will allow people to eliminate the hassles of managing their daily, monthly finances. Sal: How do you go from that? Because what you see a lot of in Silicon Valley and other places is you saw a need, you were able to build a prototype to do it, but then there is a big jump between that and actually getting traction, actually people using it. How did you make that leap? Scott: For us, that leap between launching it and actually getting a lot of users was not a leap. It was a chasm. (Sal laughs) It was a crevasse. (laughter) Software that time was sold in stores in boxes, and you took money, and we tried to get VCs to invest $2 million to give us the marketing money to convince stores to carry it and then convince people to buy it, and no VC said yes. They all said no, including VC firms run by classmates, which shows you how unpopular this ideas was. So, that was a big problem. We borrowed some money. We got a little bit of seed money from some relatives. We stumbled along. We spent that. We ran out of money. We had to give back the rented furniture and rented computers. We stopped paying salaries. It was pretty ugly. Sal: And why didn't you just ... I mean it was stressful. Scott: Yeah, our marriage almost broke up. Sal: I mean given that, why didn't you just cut your losses and ...? Scott: I think cutting losses would have been the rational thing actually. It did look so hopeless. But I felt I was kind of boxed in because we borrowed this money from some people. I'd taken my father's retirement money, most of it. We had the two relatives who invested equity. It was kind of angel money, but I felt I had to pay that back. And you looked at the amount of money I'd had to pay back through honest work if I had quit the business, so I felt trapped that I can't give up because then I got to pay all this stuff back, so we just kept working. We just kept working at it. Sal: And at some point, how were you living? I mean how were you paying your bills? Scott: Fortunately, Signe had a very good job. In fact, in either this building or in one of the adjacent ones, Sal: [unintelligible] Scott: Yeah. She worked in a software company, Software Publishing Corp., that had a bunch of these buildings. She in VP Marketing, so she had a very good job, and so it was her income that paid the bills. Sal: How long did this, I guess, this crevasse, how long was this period, and then what was the moment where actually, all of a sudden, you saw the light at the end of the tunnel? Scott: It was actually even worse than one crevasse. There were two. Something we tried started to work, and then it crapped out, so that's even worse when you get let down. Let's see. We launched the product with great hope in October of '84. And it was the time when I finally felt the thing was doing well enough that I could buy something that wasn't a necessity, something optional that I could splurge on, which turned out to be a CD player. When I finally could afford a CD player was in late '87. Sal: Wow. This was a story, but still, it wasn't like a hockey stick at this point. It was still a- Scott: No. Sal: Slow and steady ... Scott: The question you asked, let me answer directly the question you asked. What actually did turn the business around? It turns out it was word of mouth. Because the way we built the product was different than others had. Nobody up to that point ... Software was an industrial product sold to corporations. The big software success was [Visa Cal], which was sold to finance people in corporations. And the UI sucked. You couldn't figure it out without training or reading a book. But that's the way software was. We were the first people to do consumer testing. usability ... we didn't call it that, but usability testing. We brought housewives in from the Junior League because at the time, there were all these women who didn't work during the day, and they didn't use computers. We put them in front of computers. We gave them our stuff and said, "OK, use it to pay a bill." And they'd fumble and goof, and we'd look at it and say, "Oh shit. "Oh, oh, yeah, now I see." We go back and redesign it, and we tried again and refined it and have people who didn't know the product, no manual, try it by hand. We had done more cycles of usability refinement. Nobody had ever done that before. So our product was actually usable and fast compared to the ... and we're selling to people at homes, no executives telling them to use it. They got to want it. And so people started using it from earlier and feeble marketing, and then they'd start telling their friends, and they'd start telling their friends, and there started to be demand, pull, and it was the word of mouth that ultimately took off. Sal: And then the rest is [unintelligible] Scott: Yeah, and we started tripling. Every year, we tripled in size, Sal: And then you went to the most obvious adjacent spaces, taxes and ... Scott: I've learned something about surprise. In fact, the first question we talked about today was, "What's been surprising?" Sal: I told him about our burglary situation Scott: Yeah, yeah, yeah. (laughter) [crosstalk] (laughter) There's learning and surprises. We had, when we were in our first ... We launched Quicken, and even before it took off, it was just failing and bumbling along, we did a little survey of the few users we had, and we asked all these questions. One question made no sense. At the end of the questions where we're asking about how do they use it, what did they like, not like, et cetera, at the end, it was a demographic set, so you asked age, location, income, and we asked that question, "Where are you using the product, "home, office, or both?" And half the people claimed to using it in office. Now this is a home product, so we thought maybe they don't have a home computer. I mean this was 1984, 1985. Maybe they're taking their stuff to work and doing it there, so we ignored it. Every subsequent survey, the same answer, half the people were using it in an office. We ignored it. It didn't make any sense. Finally, it started bugging me. Why are people answering this question wrong? (laughter) So I said, "Well, let's go ask those people "what they're doing, instead of ignoring it." This was years later. So we went and actually called someone up and asked them to interview them, went to visit them, see what they were doing, and by God, a lot of them weren't doing their home stuff. They were running a business on it. We built this as a checkbook manager, not business accounting, and the mindset everyone had is that business accounting ... Talk to any ... Who took accounting? Who is an accountant here? Any accountants? OK. Very good. What's the system by which you keep books for business in accounting? Sal: Double entry. Scott: Double entry accounting, with debits and credits and journals and ledgers. Any expert will tell you that is the only way, and we assumed that. So here we found these businesses using a tool that had none of that, no debits, no credits, no double entry of anything. What? But they're using it. They are running their business on it. It's where all the expenses and income flow, so it's their accounting system. And then we tried to find out why. Why are they doing this unexpected thing? Now it's obvious in hindsight, but of those of you who took accounting in school, raise your hand if you took accounting in school. OK. How many of you liked accounting in school? (laughter) Sal: I actually did like it. Scott: Yeah, yeah. (laughter) You and I, we're both weird. (laughter) But the rest of you are normal. Most people hate accounting, and the people who keep the books in a small business tend to be the owner, the owner's spouse, an unlucky clerk or assistant, office manager. Nine times out of 10, they do not know accounting, and they do not want to learn. To them, general ledger, which is a feature of all accounting systems, is a World War II hero. (laughter) That's why they're using our product because we were in English and they didn't have to learn anything, where all the others, it was a massive learning curve. So we finally said, oh, what would happen if we actually built a product for businesses but made it on the same promise, no debits, no credits, no journals, no ledgers, put it in plain English, you see an invoice, you fill it in, you see a check, you fill it in? So we worked for that, on that, launched that. It all came because of a surprise. Today, that business, which is QuickBooks, is in total about 10 times larger than the Quicken business. So that surprise, which we ignored for years, has created a business, and if you add all of our small business stuff, we've added payroll and payments and all that, it's about 15 times the size of the Quicken business. I didn't recognize it at the time, but there is a pattern about when there are surprises, big upside or downside, savor the surprise. "What's really going ... "what explains it? "That's not what we expected." Stop and savor. It's too easy to just keep going. But anyway, that's ... I've learned multiple times. That's the story on some of our subsequent businesses. Sal: So now I know, when you ask me questions, that there is an underpinning philosophy [unintelligible] Scott: They're not random. Sal: They're not random? That's very good. [unintelligible] (Scott laughs) And now, before I open it up, where do you see Intuit going? I mean it's a much larger company now. How do you, as the leader or the manager, how do you try to navigate that, and where do you see is the big opportunities and the pitfalls? Scott: Oh, the pitfalls are clear. It is amazing how success and scale make you dumb in an organization. It is just stunning the degree to which the creative inspiring innovation, invention suddenly starts disappearing as you grow, you add layers, decision-makers, managers, try to get rigorous, and do all the stuff that you have to do to be both efficient and to be reliable. People don't want their ... I mean we did launch a version of QuickBooks where your data disappeared (Sal laughs) randomly after. All your data disappeared. (laughter) Yeah, this is a problem. You don't really want to do this. (laughter) Don't try this at home, kids. So you got to get rigorous. But something happens to ... Without continued innovation, without continued ... how do we make the current thing better? How do we find the next problem to solve? You eventually get stale and die. So how do you be both rigorous and inventive? And most importantly, how do you free your most inventive people who are often quite new to the company, could be quite young, likely are renegades, how do you free them to invent without the borg, the organization borging them? And so we're redoing how we work along the lines of lean experimentation. The thing I've learned is if you allow normal hierarchical decisions, all the problems happen. Well-meaning middle managers, it just slows down. But what if you tell the middle managers, "Your job isn't to make that decision. "We'll let the experience, experiments make the decision." Your goal is to put in systems and allow your teams and your brand new employees to be able to take their best idea, to solve your mission, and run it as an experiment, fast and cheap. The Internet now allows us to run these fast, cheap experiments, so there's this whole wave of change called the Lean Startup that Eric Ries has founded. I've not seen any idea enter the common parlance of business as fast as the Lean Startup. His concept of pivot went from novel to trite in two years. I've never seen it. It's been absorbed, at least as language, so fast. But he wrote the book about startups. I believe there's two groups who need the Lean Startup even more than startups, this concept of lean experimentation, and those are large companies and nonprofits, will benefit even more than startups. We are trying to operate as a network of startups inside where people can try their ideas, and we've got coaches, teams, systems. We put people through a two-day experience where people just sign up, and by the end of the first day, they have their idea up and running in some sort of test to test their leap of faith assumption, all to uncork that inventive power that is what has created all great enterprises in Silicon Valley. If we do that right, then I won't have to pick a direction. Our people will invent the directions far better than I can. Sal: Yeah, absolutely. On that note, I'd love to take questions. Anyone have questions? I have a bunch more, if anyone ... Scott: We started the company with a bunch of surveys. I had described one that helped us get the surprise on that led to QuickBooks. But I have become a skeptic on surveys, so I actually don't guide teams to run surveys. I tell them, "Avoid the survey." We found there is not a high correlation, particularly if you're looking at inventing new ideas and new businesses, new products, there is not much of a correlation between what people say they will do and what they actually do. What they say they will do, they'll do about half the time. What I mean is it's a coin flip. We did a product in India which we have which we surveyed users and we're trying to figure out how to monetize it, so we surveyed. We expected 20% would pay for it, because we've been giving it away for free. We surveyed users, and 40% said they'd pay. And then we actually did the test and took existing users and added a charge, and two percent paid. There is another example. A team working in Payroll Division had a new way for a business to start a payroll. They mocked it up in screens, showed it to 20 payroll customers. These are employers. Someone here runs a system to write your paychecks, so it would be that person. Zero of the 20 said they'd use it. Zero. Amazingly, they didn't stop. Thank God they didn't stop there. But because of our system of experimentation, they then got coached. We actually got Eric Ries in coaching to say, and he figured out a way where you could run an experiment in 24 hours to actually see what people would do, not what they say they would do. They ran the experiment, and 58% of real customers did it. If they listened to survey, we never would have done this thing. Because they could take it to a test, a test of just a slice of it, they then learned that customers would. We fleshed out and built the rest of it, and we got the fastest customer growth in 10 years in that business. So what I've learned is trust behaviors. Don't trust surveys. Measure and monitor their behaviors, and then right after behavior, you can ask somebody, "Why did you do that?" or "Why not?" and then you might get something close to truth and do it more as an in-depth interview of the people who just did something or in a test just didn't do something, and then you might learn something useful from the interview. When we go out and talk to customers and interview and observe, one thing we'll do is go and watch customers because I find it's much more reliable to watch people in what they do. And you've got an opportunity. You've got people at home studying or whatever, where you go watch and see actual behaviors. And don't say anything. Just watch, and you'll see things they would never comment about. I'm on the board of the Procter & Gamble Company. They make soap, Tide and Pampers and other things. In trying to figure out how to improve Tide, they'd run surveys. Other than anything else, you got many things you ask about, one of which was the box, the packaging, and they ask, "Is it easy?" and the answers in survey were, "Yeah, it's easy to open." Years later, they did some in-home observation, and they followed some homemakers around, watching what they did, and they then did observe a few people opening a brand new box of Tide, and they found it was easy if you kept a knife or a screwdriver next to your ... (laughter) and because women have nails, and they couldn't open those things, so they were hacking at it. But it had never come up in a survey, but they could see it. The one, the most, the thing I'd recommend is to understand customers deeply, go out and watch them. We call it "follow me home testing" because we used to follow customers home from the store. Not exactly. We'd ask their permission (laughter) so we could watch them start up. Let me answer that in two parts, one, the story of how we got into payments, and then the crystal ball-gazing. There was actually one guy, an engineer, African immigrant, who, looking at our QuickBooks users, said, "Hah, they really could use payments. "In fact, what they need is different "than what everyone else is selling." So he got our product manager, worked with him, and the two of them cooked up this scheme and inserted it into the product, and by God, it took off because they'd found a problem for businesses who accept payments when there's no card present. Because QuickBooks is typically used in the back office, around invoices, and some customers wanted to pay with a credit card like over the phone, but there was no card present. The whole payments industry had been rooted around that card being the key, so they invented different economics and different approach and embedded it in QuickBooks. So now we have a payments business that's $400 million in revenue sizable, all because they found a problem nobody else had solved and figured out how we could solve it. Now, on gazing about the future, right now, you're seeing a hotbed of innovation around payments, and things are becoming dramatically easier, to send money person to person, to send money for businesses, for business to set up and accept payments. It's long been, payment's a kind of monopolized or cartelized business with a few major payment utilities, such as Visa and MasterCard, or one central bank-run system called the Automated Clearing House. And now you have these rampant innovations happening around, so it's so much innovation. In most of it, I can't tell you how it's going to turn out, but it's going to get a lot easier and cheaper for everyone. The place we're focused on is still in the back office because everyone else tends to be focused heavily on the point of sale, but the place that's still being ignored is that business that sends bills or invoices out. For example, in rent payments here, how many of you pay rent? Raise your hand. OK. How many of you pay that electronically? Most of the hands went ... Right, yeah. Especially small landlords are not set up to accept electronic payments, and it's a royal pain for you and for them. They got to hang around the mailbox waiting for the money to come in because if it doesn't, they got to bug you. So a small team, how many people? [Yumi], how many people was that team when they started? Yumi: About two or three. Scott: Two or three? Two or three folks that, "We can fix that problem." And so they invented a system called SparkRent, which allows the merchant to ... not the merchant, the landlord to sign up, and then the tenants, they can pay electronically really quickly. The landlord can be anywhere on vacation, and they know everything. It sends reminders out. It's cheap. It's had some hiccups, but it's now the most popular way that small landlords can get paid electronically and tenants can pay electronically. That's just the beginning of the kind of innovation. From that, what we want to do is develop a way so that our system will know that you pay your rent on time, so when you try to get that next apartment in San Francisco and there's five people trying to get that apartment, you've got a track record that you can say that, "You can trust me. "Here's my SparkRent track record." So we think we can then take the data and make it useful to both sides. When we're at our best, yes, we can pull that off, but I'll admit, we're far from perfect on that. In our Payments group, again, we've had a group that came at a much lower price point. Within our Tax group, a group was working on ... Right now, you go to TurboTax and you got to pay your taxes on a computer, but this group said, "Why don't we use the phone, "and why don't we use the phone to snap pictures "of those tax documents "so you don't have to type it in?" Management thought this idea wouldn't work, and outside experts said it wouldn't work. But they kept at it, and they built something called SnapTax that works as an app on your phone, and you snap pictures of your W-2s, and it asks if your taxes are simple, and a lot of you guys are. It asks nine more questions and you're done. Nothing we have done in ... and it's at a lower price point. It's easier. Nothing we've done in our company's history has gotten as high ratings from customers. It's five stars in the app stores, and we get reviews like you can't believe. One person wrote in that she was in the recovery room after surgery doing her taxes and so happy about it. (laughter) Another guy wrote in the review in the app store that it was February 14th. He just finished his taxes in bed with his girlfriend, and she's so stoked she might even wear the gift he just gave her. (laughter) But again, it was a small team who had the freedom to experiment and invent something which is just, that the mother ship wasn't working on. So at our best, we do that. There's other times when I wish we were better. This is the eternal priority-setting question, (laughter) no matter what size you're in. Before we launched, we had more features we wanted to put in than we could fit in. After we launched and now, as a $4.5 billion company, there's much more stuff we want to get to and that people want to get to than we can. I have two thoughts on that, and they are kind of opposing thoughts. One is make it fast and cheap to run experiments so you can try more things. If it's big and expensive to try something, then you've got to be choosy. If you can make it fast and cheap to test the leap of faith assumption on which a decision depends, then you can try a lot more things. Eric Ries' Lean Startup, we were already running experimentation, and then I discovered Eric Ries on an online video and said, "My God, that's our idea, "but he explains it a lot better, "and he took it a lot farther!" So I'd circulate the Lean Startup and look at some of his videos. It's really, it makes sense. So that increases your capacity to try new things and to try new radical things. Because if it's fast and cheap, it can be radical. The other, the principle is that the actual important things is a small subset of all the things you're working on, what's truly important. Here's an example. I learned this technique from another CEO to run a thing called a town hall meeting. We'll get a group of important customers together, let's say accountants because we saw a lot of things through accountants, and we'll get a group of 12 of them together in a room. And I'll stand up at the white board, and I'll ask them two main questions. "What do you love about dealing with Intuit? "And each person, write down, private, silent work, "write down a list about what you love "about working with Intuit." Second question, "What do you hate about working with Intuit? "What's wrong? "Where do we piss you off? "Where are we just missing our boat? "OK, silently, each person, write your own list." OK, then once they have those lists, I stand up in front and say, "OK, let's read off list number one." And everyone read their list one, and I'm up at the white board and I fill out the white board with all the great stuff. And I say, "Thank you. "That's great. "That's awesome. "Now let's go to question two. "Everyone tell me the lousy stuff," and I write all those ideas down. And people will have real passion about the stuff that's wrong, that needs to be fixed, that needs to be changed. And you'll get 30 items up there, real passion from folks. And then I'll say, "OK, let's forget list one. "Thank you for that. "Let's focus on list two. "I'm going to give each of you five colored stickers. "Go up to this white board and put those colored stickers "by the things that you find most important. "You can put all five on one. "You can put one sticker on each of five. "You can split them up." What amazingly happens, out of the 30 or 35 items that will be on the board, most get no votes at all, not even from the person who was advocating it. The votes uniformly are incredibly lopsided. Now they're not collaborating to each other. They're not comparing notes. They're doing this as individual work. The votes, there's one always, every time I've done this, one big one, and then there will be a second that gets half as many votes, and then maybe a third that gets half as many, and then it's noise. Then what we do in the meeting is say, "OK, let's dive into number one. "OK, what's the problem? "What's the issue? "When does it happen? "How does it happen? "Tell us more. "What's the root cause?" Blah-blah-blah-blah. "How do we go about fixing it?" Dive into number one. Basically, you should work with most of your effort on number one, small effort on number two, and forget the rest. Organizations can't do that. Organizations will work on 12. "Oh, Suzy wants to work on this, "and boy, that's a good idea from them. "That customer was so passionate." So you'll get 12, and you'll underwhelm the important ones, and you'll spend much time on the stuff that just isn't. This is the best example I've ever seen how customers actually are much more focused on what's important than companies are. There's one big one. I tell folks, "What's the 1-1/2 things you should be working on?" (laughter) and then run cheap experiments. You keep the idea creation because you'll get surprise out of the cheap experiments. That's your safety valve, to get surprise. That might be helpful. Voiceover: I just want to make it easy [unintelligible]. Scott: Let's do a little show of hands. How many people want to understand all the words in the tax law? Raise your hand. (laughter) How many people just want to get their taxes filed and get their money? (laughter) Yeah. We're not in the education business. That's your business. (laughter) But we have found, at least when it comes to finance, most people are exactly like you. They just want to get it over and get the work done. If they occassionaly want to learn more, we've got a lot of what we call point of need help, where you can just click, there's a little blue underline thing saying, "What is this?" or "Tell me more," and people can click and learn more. When they do that, it's typically not because they want to learn. It's because they want to make the decision right. So even when they're "learning more," it's only to make the decision and then move on. What you're doing is noble and really important and crucial to the world, but it's not why people tend to buy or use our stuff. Why did we acquire Mint given our passion for internal innovation? We acquired Mint before we had ramped up a lot of the experimentation work, so we were ... We're not as good as we want now, but we were much less good then. But also, I'm very eclectic. We want innovation and innovative teams from both sources, so we both acquire and we teach and coach our internal and enable our internal entrepreneurs, so we do both. I think it was Bill Joy of Sun who once said, "Almost all the smart people in the world "don't work for your company." (laughter) We want to be where almost all the smart people are. We're only one slice of the smart people. In this case with Mint, we had an internal effort to do Quicken Online, and Mint and some other competitors were pursuing similar things, and Mint just outrun the whole field. They produced a better solution that had a different business model and was just better than what we were doing, so we said, "Why fight a losing battle? "Let's go get the top team and the top approach." Since we've acquired them, their business has tripled or quadrupled in size. Their ideas have infused much of the rest of Intuit. That was one thing we were hoping to have. Their ideas changed the direction of other businesses. We've had them run the Quicken business so we could take their learning, and we gave them the Quicken business to run. We really tried to maximize the wisdom transfer. Now we're building a Mint product for small businesses, figuring they have such a good thing for consumers, plus we're adding much more to the Mint data and what Mint can do for you. But we're also saying can we take that same magic and solve problems for small businesses as well? So, that's some of the story on Mint. Your premise is exactly right. When you do your finances with any system, it accumulates the data, so we got a very large repository of data on people's taxes, investments, spending, business at a transactional level. First thing to recognize is in my view, that's not our data. It's our customers' data. They allow us to be the stewards of their data only if we earn them. So we can only do things that the customer wants and gives us permission to do. And if we break that trust, people will run from us, and they deserve to. The next thing is Mint, another piece of the Mint DNA we wanted was they were making better use of the data than anything we've done. We've largely done nothing with big data. We've used the data to solve your immediate problem, but we have not then, the way Mint has said, "Oh, based on your data, "we can see that you'd be much better off "if you did X or Y." So that was another piece that we wanted to do to cross-pollinate from the Mint acquisition. We now have a data team with a new leader. We took one of our leaders who's very talented and added this challenge [to her]. The data team was focused on how they could help Intuit with data, and we said, "That's nice, but what we really want to do "is how do we help the customers with data? "How can we change their lives?" So we've re-oriented the data team on the mission that you described so that hopefully, in a year or two, we'll have more ways that we can help people. Here's just one that's already in action. It turns out most small businesses apply for a loan at some point. Seventy percent of our QuickBooks customers have applied for a business loan, and most small businesses get turned down, in a rather slow, long, ugly process, where they wind up giving a lot of data information in paper to some bank that ultimately turns them down. Plus, there's a lot of lenders who'd like to lend to customers they don't yet know. We think we can make that happen. Because of the rich data in QuickBooks, we can help figure out who is a good lender for you and then make it easy for you to apply with a push button instead of showing all this paper and then have a lender be able to rapidly approve and get higher confidence that they're lending to good people because we got deeper data on your business than anybody. We can only use it with your permission, but this is an area where businesses really want someone to take advantage of their data to give them a better loan at a better rate. So we've got a lending operation. We don't do the lending. We work with lenders, and we're trying to pioneer this lending marketplace using QuickBooks data as the unique asset to make it happen. So, that's an example. A number of lenders are playing with it. Our ultimate goal is to build a better credit score based on richer data so that more deserving businesses can get better loans. Sal: I'll just finish up. Obviously, you are known as one of the top managers in not only your industry but in Silicon Valley or more generally. You've known Khan Academy since really the beginning. What thoughts do you have about what we're doing? Where do you see the opportunities? Where do you see the pitfalls? What's your general thoughts and advice for us as a team? Scott: I bet some of you are better aware of the things to be afraid of. I'm not sure I'm close enough to give you a thoughtful assessment of that. But I think one thing that would, that I can't say is an issue here but has been an issue in other fast growth operations. You grew from about five to six million monthly actives to about 10 million over the last year, and you're doubling, and you're expecting a future like that. You're superstars, celebrities in the press. There is the curse of success, where things unroll, where everyone wants to talk to you, which somehow is a drug that causes people in other organizations to take their eye off the ball, to stop focusing on two things, one, what really solves the customer problem. Yeah, yeah, customers are using ... Things are great. We don't have to worry about that, but companies can persist in doing things that ultimately are second rate just because the second rate stuff was better than what was before, and they don't find out ... I mean think of, who then just got surpassed and crushed by Google, or by eBay. Or think of Yahoo!, which, gosh, they were the darling, huge, the Internet company, and then Google just went "Schwoom!" by them because they stopped focusing, "OK, what's the major problem to solve, "and how can we innovate and solve it "much, hugely better?" And Yahoo! always was a place people came to to go somewhere else, and their search was not good. Stick to the knitting of what's the fundamental problem we're trying to solve? What do people really want us to solve, and how are we the best in the world with that? From what I see, you're working on that, with the Dashboard and that. And the other curse of success can be the curse that Friendster had. Friendster was the social network before Facebook, and even before, what's the music one out of L.A.? Sal: MySpace. Scott: MySpace. And they had taken off as a social network. Kleiner Perkins, major VC, had invested. They asked me to go down and take a look. I went and talked to the entrepreneur and that was good. They talked about, at the end, talked about some technical problems, and I dove in to learn more. He wasn't getting along with his technical founder or technical guy at all, and the system's crashing. It just couldn't keep up with demand. It was collapsing. And ultimately, that killed Friendster. One of the things that Mark will say about why Facebook succeeded is he had seen the collapse of Friendster because of technical [bump]. They just couldn't scale with the volume. And he and Dustin Moskovitz were just determined that was not going to stand in their way. So they limited growth early on, and then they just piled the resources to make sure they were up and reliable. So, those are some of the things I've seen, other cases of companies running afoul. I'm seeing good stuff here. I don't know, don't suspect that's happening here, but those will be some watch-outs from the history of some companies, who, like you, have been shooting upward. Sal: Great. Thank you. That's - Scott: Let me just cover one more thing, which is the other half of your question. Sal: Yes, yes. Scott: Which was about how do I see the future. Maybe I'm not very good at seeing the future, but I can see today. Some of you may have seen this. There's an article that was in Harvard Magazine about a physics teacher there, a guy named Eric Mazur. Sal: Yup, he's familiar. Scott: The article was entitled something like "The Twilight of the Lecture." Eric Mazur was a well-respected teacher on the physics staff there. He'd been teaching physics for a decade, I believe. The tests that he gave showed the students learned the subject matter. He's all happy. Then he heard about the University of Arizona that had invented kind of a Capstone test that tested kind of like the Common Core, did people really get this stuff? Could they apply it? And the results out of University of Arizona was, after taking the semester of physics, that the physics students there just failed. Thus, can you actually apply it in real situations? So he looked at it and saw it's interesting. "Bah, those are University of Arizona students. "These are Harvard students." Almost all of his students, virtually all got a score of one or two in their AP Physics, so he, just as a lark, took the test and gave it to his Harvard students after they had finished his semester of physics. And by God, they failed it. He said it was monkey level. If you had monkeys guessing randomly, you would do as well as his students (laughter). Now, Eric is an unusual professor at a research institution because he actually cared. He didn't say, "Well, screw that," and back to the research. He actually said, "Wait a minute. "What does this say about me? "What am I doing wrong as a teacher? "I'm failing these students." So he dove in and tried to figure out what was happening. And he has evolved from that. One of my guys passed me the article, and then we reached out to him, and we actually spent some time with him learning. He basically found out that students don't learn from lectures. Even from highly rated professors, they just don't seem to learn from lectures, and these are Harvard students. I mean they learn to pass the basic test, but they don't learn to apply in a deep way. So he started trying alternative ideas, and he tried a very different way. He's basically flipped the classroom, and the students worked on problems, and then he can figure out through a system which students got it and which didn't, and then he had the students who got that section explain it to the students who didn't. And he said they are much better at it because the student has just tried it, didn't do it, and now they're hearing from someone who just learned it, who just is walking in their shoes. And he says now his students ace this test. I think there is a revolution in learning from something that was done to you, education was done to people, lectures are done to people, to turning education on its head, learning on its head, so people, now it's up to me. It now becomes something you do, and you learn at your speed, and you learn by doing yourself, not by being reliant on someone else to pour learning into your head. You learn by using. You learn by doing. That's the way real humans really learn fast. You guys are the vanguard of leading that globally, with the Internet, with the raw inventiveness of the Dashboard, the on-demand, the lectures, the understand how the students progress, creating a platform so that math and then physics and other subjects can be taught by learning and by doing. This will change learning and lifelong learning. This is the invention of printing by Gutenberg applied to a field that desperately needs it. And more than that, the sum total of IQ points in the world is fixed. It's what genes have delivered to us. But how you turn those IQ points into productive human potential and to skills to be able to solve problems, to be able to see problems, that is entirely a function of people's learning and can be dialed up or down dramatically by the learning method. Compare when you've been in some class which was boring and badly taught, or the great research professor didn't really know English, and just your learning rate is so slow. Your love of learning just goes into the toilet. And then compare that to a class where the teacher was fascinating, where you could move and learn and try things and they worked and you got this feeling of accomplishment. It's night and day. Igniting the fire of learning in billions of people is a force of power far greater than the printing press, and I believe you guys are the world leader in doing that. Sal: Well, that gives us a little bit of pressure, (laughter) but it's exciting at the same time, and so I'll just, on behalf of the whole team, I just really thank you. That was really a special conversation. Thank you. Scott: Thank you. (applause)