With great power comes… a great misunderstanding

I don’t have the time to write an assay about the topic, but the growing disconnection between legality and morality in Silicon Valley is alarming. I’m going to just put this thing here so I’m on the record.

(Disclaimer: I don’t know Daniel Pearson and he may be the best guy on earth. I’m simply referring to the opinion he expresses here)

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Companies like Zenefits are a problem not only because they broke the law. That’s meaningful, but is not the only issue. They are meaningful because they enshrined abuse of power and misrepresentations as a way of doing business. They mixed inexperienced employees with power hungry inexperienced executives in a business that was growing too fast for its own good.

Zenefits is not alone, they are just the tip of the iceberg and they got caught because they also broke the law. The abuse of power is the much bigger issue. One, because it is prevalent. Two, because it is not often discussed. Three, because it is the result of people conflating financial success with moral superiority. The latter isn’t a new idea and was introduced by Max Weber in the start of the 20th century. The latest turn is using financial success to justify immoral behavior, and flaunting social norms because they aren’t the law. Yes, including with the elected President.

What’s abuse of power? It’s cashing out from your anonymous-abuse-enabling app that is only growing thanks to the abuse before it crashes and burns. It’s creating an excessive drinking culture in the workplace that may pressure inexperienced employees into acts they may not be interested in. It’s self dealing in office. It’s hiring managers who focus on rating employees by their looks. It’s founders buying back stock from employees at a discount because they know a valuation-popping event is coming up. All of these may not be illegal or provable in court. They’re still wrong. The fact that people (let’s face it – men) in SV express that they matter less because someone is rich or created business value is preposterous. Dollars are not the only way to measure value; they’re not even the most important way. We just lost our compass, as a subculture, because we got flush with too much money. It’s a sad realization.

Why I Can’t Get Behind John Oliver’s Latest Debt Collection Piece

We started TrueAccord in 2013 because we wanted to crowd out the “bad guys” in the debt collection space. Every dollar that will be paid through our system, we figured, is a dollar not paid through them. We will get involved in the messy world of debt collection, get our hands dirty, actually deal with those in debt instead of providing technology and hoping for the best. And we will emerge the winners.

Three years later, we still believe that. Those in debt who choose to work with us get flexible payment plans, where every dollar pays for their debt – principal first. Their interest is frozen. We don’t charge fees. More and more banks, issuers and large companies work with us, and they care so much about their customers’ experience that they push us to be even more lenient than we ever thought we could be.

Looks like we did it; we’re the good guys. And when John Oliver bashes debt collectors and debt buyers on his show, I should be thrilled. I should be one of those who stand on the sidelines and point and laugh and cheer at the tremendous feat of forgiving almost $15 million of old debt. But I don’t. I’m actually quite pissed.

Why is that? What’s in this piece that gets on my nerves?

Don’t get me wrong, I like the show. Who doesn’t like getting the news shouted at them with a British accent? I also get that he’s not a journalist, he’s an entertainer, and the video was indeed entertaining. It had another problem, though: it absolutely, completely, utterly managed to miss the point.

If you’re chasing clicks and eyeballs, debt collection is a great story. Being in debt is scary, it’s confusing, and being repeatedly asked to pay back adds another layer of stress. People in debt often have really sad life stories, and are in constant crisis mode, not always of their own making. The thing is, John Oliver did nothing more than to put them on display, and offer a hocus-pocus solution for their woes. He pretended all it takes is buying their debt for less than half-a-cent on the dollar, as though he didn’t buy extremely old medical debt that no serious business would collect on. Much like in his PayDay lending episode, which ended with Sarah Silverman suggesting that people steal instead of take a loan, Oliver isn’t about offering solutions. He’s about big gestures and laughs. None of these, unfortunately, pays the bills; what it does do is create false hope, confusion, and yet another reason to blame the collector instead of taking responsibility and getting yourself out of debt.

At TrueAccord, we often ask ourselves: what are we to those in debt, and especially to those who are chronically in debt? Are we the gym teacher, shouting at the short-breathed kid to keep his pace up? Are we a doctor, waving our finger at the diabetic who wants another bite of a doughnut? Are we the policeman, giving them a ticket for speeding? Can we be to each what they need, using our targeting technology? As our technology gets better, we get closer to tailoring the right solution to each individual.

One thing is certain, though: the relationship between collectors and those they collect from is a long and complex process. However we position ourselves, our job is to chaperone people through the winding road to getting back on their feet and planning their cash flow. We build tools to give them maximum flexibility with their payout plan, and to easily change it when the unexpected happens (and it usually does). We hope to never see them again in our system, and we feel disappointed when we do, or when they promise something and then change their mind. Above all, instead of distancing ourselves from the situation or turning it into a joke, we get deeply involved because we care – because we want to make a tangible difference. And we do. Day by day. Dollar by dollar.

To see This Week Tonight diminish all this work, to see them repackage the human suffering and complex emotion into several minute tidbits so they can compete with Oprah for biggest giveaway for the poor… I find it demeaning and disrespectful. Almost cynical. And no matter how much truth there is on the show (and there is!), I can’t bring myself to support a simplistic representation of such an issue. That is why I can’t get behind TV’s biggest “giveaway” ever.


Why Start a Company in a Regulated Industry?

This post was originally posted on the TrueAccord blog.

We are nearing the end of the sales pitch, and the exec I’m speaking to is almost convinced. I feel it: he likes the product and likes the innovation but he has to ask; he can’t let me off the hook.

He leans forward and looks me right in the eyes. And then it comes. The question.

“Tell me more about your Compliance Management System.”

Without a word, I reach into my bag, and grab a folder. It’s massive with hundreds of pages, all properly categorized: FDCPA, TCPA, FCRA, ECOA, GLBA, you-name-it. Here are the results of hundreds, maybe thousands of work hours. I slap it on the table, and it makes a loud noise even in this cavernous conference room.

We both smile. I passed the test.

I confess, my dreams have been weird lately. This is what being a founder in hard-core financial services feels like. You should be ready for prodding questions, a lot of upfront investment, and heavy oversight. We aren’t alone: companies like Standard API, LendUp, Even, Vouch, Blend Labs and others all operate in highly regulated industries. So why take on a challenge like this, instead of building a messaging app, or a video-streaming app? Why work on “boring” problems, when you can build something that bloggers will muse about and any angel investor can love?

For my co-founders and me, and for others like us, the answer is three-fold: 1) solving real problems, 2) solving hard problems, and 3) unlocking huge opportunities. A heavily regulated market is a clear signal for all three.

1. Solving real problems

77 million Americans have a debt collection related item on their credit report. 106 million are unbanked or under-banked. 5.5% of adults nationwide have used a Payday Loan in the past 5 years. Think about these numbers: these are real people with real financial problems. They struggle daily.

I don’t know if there’s a financial bubble in tech, but there’s definitely a cultural one; many of us build meta-startups that help other startups get built or are plain me-too’s. We sometimes work on cool ideas that aren’t too meaningful. I once had an engineer decline an offer to fix debt collection, only to work for a mobile gaming company and promote modern day gambling.

I want my work to touch real problems because that’s how you make a difference outside of our echo chamber. Increased regulatory scrutiny comes on the heels of unscrupulous business tactics that exploit human suffering – real problems that need solving.

2. Solving hard problems

Did I mention we spent thousands of hours on our compliance policies? It didn’t stop there. Replacing dial-for-dollars call centers with a machine learning system takes time and dedication. So does underwriting mortgages or short terms loans. These industries require an understanding of human psychology, risk management, data science, predictive analytics, customer care – and all has to be delivered to pass intense regulatory scrutiny. Lending, collections and similar processes have been done manually for decades because building a machine to make nuanced decisions is hard. It’s hard to accumulate the data required to optimize them. It’s also hard to convince investors to be patient; the pool of funders and founders they are willing to support, is surprisingly small. That’s a worthy challenge. Again, regulated markets tend to create entrenched incumbents with little incentive to change – exactly where disruption is needed.

3. Unlocking huge opportunities

Payday lenders’ annual revenues are estimated at $11B. Debt collectors’ are at $15B. Thousands of companies pop-up in both markets due to surprisingly low barriers to entry, and disappear due to the complexity of continuous operations. Increased regulation favors organized, well funded market participants that can consolidate that activity in a way that is demonstrably better than the incumbents’ approach. Technology can help us solve these problems at scale, with convincing economics, and a compelling case for compliance and information security. Here, too, regulation signals the amount of money that flows through these markets – and the size of opportunity for those who can play.

Bottom line

Regulated industries present unique challenges, and require a mindset that combines technical daring and innovation with respect to the legal framework. When you do engage, though, they can present interesting, challenging problems that have huge impact and many opportunities. This, for me, is worth the hassle.

– Ohad

I really want Apple Pay to fail. So much.

Let’s start with qualifications. I am not a payments industry pundit, and whatever payments experience I’ve had, it’s always been more on the risk and data side. I’m also a bit out of touch because I’m focused on my company, TrueAccord.

I’m also not an Apple fanboy or hater. I own a great 2 year old Macbook Pro and a Nexus 5; I don’t wake up at 3am to buy the latest model but if it’s good, I’m going to get it.

Still, I want Apple Pay to fail. So much. Why, you ask? WHY?


(tough choice: Platoon or the Reddit “why” meme? ugh)

Here’s why.

First, it’s been just a few weeks and already I hear VCs who previously didn’t care about payments, random entrepreneurs, and journalists talking about Apple Pay like it’s the third coming. The data! What they could do with it! I didn’t hear these people talk this way when previous installments of phone + NFC wallets were introduced, and for a good reason – they are not that interesting, and I think Apple Pay is not interesting in exactly the same way[1].

Second, the talk about Apple now disintermediating banks. Anyone who makes the jump from storing credit cards in a “wallet” to going after issuers or retail banks in one sentence should be awarded a gold medal in mind-athletics. These are completely different activities and mind sets. Most infuriating is the suggestion that disintermediating banks is a corollary to what Apple did with iTunes. You don’t just unbundle banks and sell services through a clunky iInterface. The regulatory and operational impacts are incredibly complicated and Apple, if it ever does anything in the space, will likely partner rather than reinvent. This will further demonstrate what Apple Pay is for me: putting lipstick on a pig.

To further this point, I don’t believe Apple has real payments chops. I didn’t believe that in 2011 and I don’t believe it now. Like Google Wallet, I think Apple will use Pay to do what it knows best; in its case, sell hardware. This isn’t a new sentiment, but it’s still true; I don’t believe the commotion around Apple Pay because I don’t think Apple believes it either. They’re not here to reinvent payments.

Finally, going back to my first point, I don’t think Apple Pay is solving a real problem. That’s the main reason that other wallet providers failed to gain traction. While I understand the idea of Nash Equilibriums and accept that a huge investment in marketing could buy a stake in the market, I’d be surprised (and disappointed, if you couldn’t tell) to discover that consumer behavior was just a marketing campaign away. I don’t believe that, though – I still don’t think Apple Pay solves a problem, I don’t think using it does any good to anyone other than Apple, and I’d rather all that energy put into fitting Apple Pay would be spent on something else.

And that is why I really want Apple Pay to fail.

[1] I guess that makes me a reverse hipster. I hated the idea before it was cool.

Hiring inexperienced employees helps me beat the talent wars. Here’s how I do it.

Building a stellar team is one of the key activities for a new company. I’ve noticed that hiring dynamics (who gets hired or courted) and success stories (how CEOs discuss their hires) often focus on credentials: which school new hires went to, companies they were a part of, and roles they filled. Conversely, one of my competitive advantages in hiring is hiring the less experienced based on their aptitude and attitude, and helping them grow. This has worked well in FraudSciences, where all the analytics team (including me) had very little experience before coming on board; in Klarna, where the Risk team’s leadership is still comprised of talented people whose first job out of school was at Klarna; and even today, at TrueAccord. Experience is important when you have a specific problem to solve and limited time to solve it. At any other time, hiring inexperienced people is a competitive advantage when everyone else focuses on experience. Why, then, isn’t that a more common practice?

Maybe because hiring inexperienced people early is difficult: they’re, well, inexperienced. Often they won’t come up with unique insights early on because they are unfamiliar with the domain. They will make rookie mistakes. They will be too much or little action driven. They definitely won’t help you hire them by signaling how or where they can help. But following just a few rules will allow you to define where inexperienced people can fit in your organization, make the best of them, and enjoy the advantages: a strong drive, a unique type of creativity sparked by zero pre- and misconceptions, and a much easier supply and demand dynamic. Here are a few pointers for succeeding in hiring inexperienced people.

First, know your domain and how to hire for it. I wouldn’t be able to hire inexperienced engineers, but for data science and operations roles it takes me roughly 20 minutes to know whether an interviewee is a right fit. Knowing the type of skills and mindset you’re looking for is imperative.

Second, you must have an initial mental model for the problem they need to work on, and some kind of onboarding plan (even if that only means a few hours of your time). You can’t just say “here’s a problem, solve it for me” – that’s setting your new hire to fail. The good news are that if you maintain proper documentation and involve every hire in a newer hire’s training, soon they will be able to do the onboarding themselves.

Third, invest a lot of time in mentoring. Identify when they need to “level up” and what that “leveling up” means, then guide them through the process. I learned that the ability to translate a perfect mental model to reality and deliver an MVP is a key capability. I’m ruthless in forcing team members to deliver when I feel they’re ready, even at the cost of their extreme discomfort. Once they’ve leveled up and understand the lesson, you’ll get constant improvement. Bonus: plan ahead and let them take on new roles in your team as they evolve. In the best-case scenario, inexperienced people are like stem cells. Having no previous experience, they’ll immerse themselves in your product, and become ideal candidates for product, marketing and customer success roles.

Fourth, teach them how to say no. By definition, being their manager and an experienced operator means that your opinion will be over-weighted. You won’t identify all of your mistakes in advance, and if the whole team follows you blindly, they’ll exacerbate the situation. You can hire opinionated people, but it’s also crucial to make them aware of your mistakes when you make them, so they don’t delude themselves that you’re perfect. Properly voicing your opinion is an acquired skill, and they need to learn to disagree.

Last, be prepared for mistakes. They will happen, and you’ll need to help them identify, analyze and correct them. Don’t just let them fail. However, know that hiring this way can definitely yield false positives, and be prepared to identify them fast. In the long run, no one likes being stuck in a role they clearly don’t fit.

Are inexperienced candidates the answer to all your hiring woes? Of course not. Experience still plays a huge role in leadership and specialist roles. Still, they represent an incredible talent pool. Especially nowadays, when talent is scarce in many tech hubs, hiring and growing them can fuel the growth you need to make your company successful.

My answer to “How are you doing?” and hacking the startup CEO game

Wow, I haven’t posted in a while. TrueAccord is my main focus.

I once read a great piece – in PandoDaily, I think, but can’t find it – about how every startup CEO fears the “How are you doing?” question. How we all need to pretend all the time that everything’s going great. How we should continue to pitch, show the world how awesome we are, even when all is going badly.

I don’t like thinking that this is true since I learn my best lessons from other startup CEOs, as long as they’re willing to share. I learn from their stories about how awesome their company is, sure, but the best discussions revolve around difficulties and how we can overcome them. I also know that “all is going badly” is a typical, and temporary, entrepreneur mindset that can change in minutes. So even if people are defensive, I’m constantly looking for conversation starters that will get folks to tell me more, not less.

I found a good hack for overcoming this barrier and getting good conversations going. When I get asked the question, I say: “You know how startups are: one day you wake up and everything’s terrible, the next day everything’s great. Today’s great. Yesterday was pretty terrible.” I adapt the “terrible” and “great” based on stuff that I feel I can share – difficult time with a contract, a great hire, whatever makes sense.

If said in the right environment and with the right tone, I’ll get some nods approval. Someone might even say “Yeah, today is bad for me”. That’s my in to start a meaningful talk. That’s when I learn my best lessons. You should do that too.

Nobody’s doing great all the time. A little bit of vulnerability goes a long way in getting important exchanges going. Who knows, you might make a friend. Try it!



This was originally posted on Swedish Startup Space.

In 2008 I was the Head of Fraud Analytics for FraudSciences, an Israeli startup developing fraud prevention solutions for eCommerce. One evening in January of that year, we convened to talk about our annual plans. Our COO, a quiet guy in his 50s, said: “First thing’s first: the PayPal test results are in. They want to work with us. But they want us to bear their logo”. Then he let out a small smile, and went silent.

The room was completely silent, too. We’ve never contemplated an acquisition. Everything was going great. Last summer, we ran our system on PayPal’s data as part of due diligence for our impending C round. We were geared for war, and we felt like we were going to win. Nothing was going to stop us.

Other than a $169,000,000 acquisition offer from PayPal, that is.


Fast forward to 2011. I was the VP of Analytics for Analyzd, a predictive analytics shop I started with my brother, Yuval, after leaving PayPal in 2010. Our staff of four flew in to Stockholm from Israel, San Francisco and Berlin and we were running full speed with Klarna’s Risk team, trying to rethink strategy for Klarna’s European expansion as part of a consulting project. It’s been a few good months since we started working and spirits were high – the home team was open to our suggestions, and making a lot of progress. At the same time, Yuval was pitching VCs on an innovative merchant risk product Analyzd was working on. When Sebastian, Klarna’s CEO, asked me to join him in a meeting room, I was preparing for a status report.

If you ever saw Sebastian, you know what his selling technique is. More than 190 cm tall, bright blue eyes, he stares directly at you as he makes his proposition. Now he was staring at me. And he was basically asking, “how much for the whole team?”

Were we planning to get acquired? Not really. We had a lot of incoming opportunities, and a brewing funding round. We knew that high growth startups are almost never valued the same way by founders and potential acquirers. We also knew that this wasn’t our last venture, and Klarna was a rocket ship destined for greatness. So we gave an audacious number; Klarna had to want us bad enough to agree, but wouldn’t feel ripped off if we delivered.

For better or worse, Sebastian accepted.


I get asked this question every few months, interestingly, never by people in the Bay area. The large number of talent acquisitions by Facebook, Google and Yahoo, driven by an incredible competition for talent, is misleading. A group of engineers getting acquired before releasing anything isn’t the norm, but rather the exception, and if you’re looking to flip a company before creating value, I can’t help you. This post discusses getting the offer and deciding whether to sell or not.


Tired founders are one of the most common reasons for selling. At FraudSciences, our team of 3 years was interested in fighting, but the founders had a 4 years’ lead on us, having started working on the technology as early as 2001. They were tired, and they wanted to cash in, and it was their right to do so.

If you’re tired and want to rest and vest, take the offer. Enjoy the short-lived fame of an acquired founder. Recharge, rethink, and then move on to your next thing. Leaving to start something new becomes much easier after some liquidity.

Before you sell, though, consider why you’re tired. Is the company doing well, but you’re tired of your role as CEO or CPO? Maybe getting a strong operator to help you can take some load off. Are you financially strained? VCs have become much more sophisticated in providing liquidity to founders and executives. Neither are reasons to sell if you don’t really want to.


Why did you start this company? For many of us, the answer is that there’s a problem we’re passionate about and want to solve. When the acquirer is the right one, joining forces with them can supercharge your business. PayPal with eBay, Android with Google, there are many incredible examples.

In Analyzd, though a much smaller team, we wanted to build a think tank for risk management that will change the way the industry thinks about itself, its goals, and the way it operates. Driven by Klarna’s tremendous growth, we reached amazing achievements in two years, while Yuval built the company’s Product organization from scratch. Would we have reached the same goal going at it alone? I want to believe so. But we made it so much faster with Klarna, and were also able to participate in its amazing success. That’s an all-around win.


If you’re not tired, don’t view an acquisition as supporting your long-term goals and generally tend towards not selling, make sure you make the most out of it. A good acquisition offer effectively gives you a price. It may be a good opportunity to raise your next round and end up with a bigger war chest, with lower dilution than you would have otherwise. Money competes with money. Use the offer to jack up your price, stuff your coffers, and grow your business.


If you received an acquisition offer, congratulations! You already created value that someone is interested in. Startups don’t get sold, they get bought, and someone wants to buy you. Price negotiations aside, are you ready to sell? Should you sell? What are good reasons to sell? Don’t discuss an acquisition for the wrong reasons; negotiating the sale is much more than just the price, and it will wear you out and kill your business if it falls through at a too late stage. Consider your options, understand what you set out to achieve with your company, and go do it.

Dealing with Account Take Over? Here are my top tips (O’Reilly post)

Online payments and eCommerce have been targets for fraud ever since their inception. The availability of real monetary value coupled with the ability to scale an attack online attracted many users to fraud in order to make a quick buck. At first, fraudsters used stolen credit card details to make purchases online. As services became more widely used, a newer, sometimes easier alternative emerged: account takeover.

Account takeover (ATO) occurs when one user guesses, or has been given, the credentials to another’s value storing account. This can be your online wallet, but also your social networking profile or gaming account. The perpetrator is often someone you don’t know, but it can just as easily be your kid using an account you didn’t log out of. All fall under various flavors of ATO, and are easier than stealing one’s identity; all that’s needed is guessing or phishing a user’s credentials and you’re rewarded with all the value they’ve been able to create through their activity.

Read more on O’Reilly’s programming blog here.

Working on risk and fraud prevention? Don’t dig your career into a hole

I give this talk about Risk Management called The Top 8 Reasons You Have a Fraud Problem. I learn a lot from the way audiences respond to it, mostly from objections. Most commonly, objections tell me how risk managers paint themselves into a corner in day-to-day work, effectively limiting their ability to drive change or participate in key business decisions.

How do they do that?

First, they make losses their one and only benchmark. It’s easy to focus on reducing losses when the business is taking hits, it’s your job and it’s what’s expected of you. But overcompensating and focusing on aggressive loss reduction whenever possible, while rejecting troves of good customers, will not only limits your business’s growth prospects – it turns the risk manager into a single-issue player. Revenue enablement must be a core KPI for the risk team or it will lose relevance.

Second, risk managers focus on maintaining status quo. When one lacks tools and methods to control their environment, their first response is to try to make sure that nothing ever changes. It’s not the risk team’s job to say no to everything new; it’s their job to find a way to say yes. That’s where the technological and organizational edge is. Find ways to enable new business by shifting risk across your portfolio and finding detection and prevention solutions that support even the craziest marketing ideas. You may flail at first but long-term, you’re building an important muscle.

Last, they tend to distrust the customer. It makes sense – when faced mainly (and often solely) with the malfunctions of the operation, often caused by customers themselves, one tends to stop believing in people’s good intention. That starts becoming a problem when every product design process turns into a theoretical cat-and-mouse game where every possible abuse opportunity must be curbed in advance. You should let users be users, and that means that there will be breakage and there will be losses. Zero losses can easily be achieved by stopping all activity in your system; you should accept that some customers will be bad and find a way to detect these as they act in your system, rather than limit every customer’s ability to use your product.

As I often write, risk teams are multidisciplinary and must think about operations, data science, product design and more. Whenever one focuses on limiting risk instead of trusting users, challenging the status quo and enabling new business, they are contributing to turning risk into a control function, a technocratic add-on that doesn’t deserve a seat at the decision makers’ table. Make sure that’s not you.

(If you want to read some concrete advice on how to do that, take a look at my free eBook here)

Why did PayPal buy Braintree?

(Pasting my Quora answer here)

PayPal wants to be anywhere payments happen and it seems to be willing to pay a good price for that. Beyond the standard dynamic where the leader buys one of its most affordable up and coming competitors, PayPal acquired a few nice assets:

– The Braintree team is strong, with multiple highly talented folks that are both well known in the industry (= strong advocates) and generally capable.
– The product is superior to anything PayPal has in gateway tech. PayPal acquired Verisign’s gateway a long time back but that integration was not synergistic. With new PayPal management and Braintree’s product, they can get better access to a large and growing volume of gateway payments. This is a good and needed complement to PayPal’s portfolio.
– Last but not least, PayPal bought a foothold in the upmarket – medium and large merchants that usually do not use standard PayPal products due to lack of UX flexibility and integration, as well as strong presence in mobile payments.

So, bottom line, PayPal acquired a team, a product and a market. A smart move.