00:00hi welcome to the a 16z podcast we're
00:01recording from Capitol Hill on the
00:04Senate side this time over in the
00:06Russell Senate building I'm here with
00:08Senator Todd young of Indiana along with
00:11Jimmy Chen who is the CEO of propel
00:14these days when people talk about
00:15government and tech they think about
00:17modernizing data systems they think
00:21about modernizing IT some of the
00:22infrastructure a lot of the issues that
00:24the two of you have chosen to focus on
00:26don't get a lot of attention
00:27senator young so when you were in the
00:29house last term you sponsored this bill
00:31to modernize the interstate placement of
00:33children in foster care what motivated
00:34you to take on this problem well
00:36starting at a high level I represented
00:37in my congressional district Scott
00:39County Indiana this is ground zero for
00:41the opioid crisis and what has happened
00:45is so many children of opiate addicts
00:49find themselves in our foster care
00:51system it's overloaded Indiana's foster
00:54care system and it got me to looking
00:55into how that system was managed and so
00:58let's just say our existing foster care
01:01system is suboptimal in that regard so
01:04it was designed to serve people in a
01:06given state when really an interstate
01:08solution was needed some of the problems
01:10just a very quickly itemize them it's a
01:12paper-based system so it's really slow
01:14extra costs are associated with looking
01:17through the paper or for staffing and
01:19for equipment and supplies and
01:21maintenance of all the records and then
01:23it's opaque as well I mean you don't
01:25have the ability to log into a system
01:27and figure out the disposition of a
01:28particular case so I knew we could do
01:30better I discovered that there was a
01:32system rolled out in 2014 that needed to
01:34be scaled up and and so we got involved
01:36in this whole thing with our legislation
01:38so the bill itself this was part of the
01:40innovation initiative hard to imagine
01:42that people were against modernizing the
01:43foster care system but what was the
01:45reaction that you got it almost always
01:47in today's environment takes a bit of
01:49persuasion tell people to spend money
01:51right you need to identify a serious
01:54need here we've got an incredible need
01:56that is impacting so much of our country
01:58and in the end we're gonna save money
02:00and improve lives at the same time so it
02:02wasn't that tough of a sell it just took
02:04a little time to normalize people to
02:06this idea that maybe their states had
02:08they been doing things for generations
02:10wasn't quite working so Jimmy how did
02:12you become interested in the Food Stamp
02:13grew up in a loving and supportive
02:15household that sometimes had trouble
02:16putting food on the table ended up
02:18getting a full ride scholarship to
02:19Stanford and then working at Facebook
02:21where I built a lot of consumer software
02:23I left Facebook to apply the best
02:25practices of Silicon Valley to build
02:27really engaging really crisply designed
02:30consumer software to solve social issues
02:32around poverty we learned about food
02:33stamps through a non-profit program
02:35called Blue Ridge labs that's based in
02:36Brooklyn that helps entrepreneurs
02:38identify challenges faced by low-income
02:40Americans can you explain why you
02:42decided to do this as a company start
02:44your own private corporation private
02:46company rather than going into
02:47government say joining the US Department
02:49of Agriculture and trying to address the
02:52SNAP program from the inside I think the
02:53experience of the safety net and 20:17
02:55really encompasses the public sector the
02:57private sector and the nonprofit sector
02:59and someone who is experiencing a
03:01financial chakras going through a tough
03:02time uses services from a variety of
03:04those different sectors and so a single
03:05sector approach I think is a little bit
03:06short-sighted and incomplete and as part
03:08of the reason we run the company that
03:10can go in between these three sectors
03:11regardless of whether they're a
03:12government-run service or whether it's a
03:14private company offering a better type
03:16of kind of financial service product
03:18these days our focus is on a public
03:21sector service called the SNAP program
03:22formerly called the food stamps program
03:24it's used by about 44 million Americans
03:27currently so about one in seven families
03:30in the United States it's currently
03:31relying on these benefits to purchase
03:32food every state is operating in its own
03:35stovepipe which we find not just in our
03:37foster care system but you know across
03:40government I find this challenge though
03:43to particularly afflict you know our
03:45efforts to serve people who are poor who
03:47are vulnerable who are at risk our
03:49safety net needs to encompass our public
03:52our private our not-for-profits I
03:54couldn't agree more I really think we're
03:56under utilizing all the expertise out
03:59there and our government programs
04:00typically they don't measure outcomes
04:04they may measure inputs if we're able to
04:07tear down walls between organizations
04:10and programs and connect the data dots
04:12about particular outcomes then suddenly
04:16we're able to get a holistic picture of
04:18the needs of a particular individual of
04:20the outcomes of populations then we can
04:23iteratively improve government programs
04:25not-for-profit program
04:27in private program so to the extent we
04:30can define outcomes and identify how
04:33much money were really spending by
04:36either addressing a challenge or
04:38immediately for prevention purposes or
04:40addressing it later on that gives us a
04:42much clearer picture about what sort of
04:44interesting partnerships can be brought
04:47to bear to treat individuals who need
04:49help well it's really just because that
04:50sort of gets back to this age-old debate
04:52about whether it's better to be an
04:53innovator inside of government or
04:55outside of government it sounds like
04:56both of you guys are saying is that
04:57those are not mutually exclusive the
04:59sphere of the public sector means that
05:01we shouldn't try as a private sector
05:02company to do better for our users I
05:05think is the wrong approach we think
05:07about ourselves a little bit like how
05:09TurboTax works for the tax process and
05:11that here's a private sector company
05:12that's able to take the UI of a
05:14particular program and make it
05:16significantly better such that people
05:17save time and money and I think that's
05:19ultimately you know that's really what
05:20we are the same type of ethos that we
05:22were trying to drive for a program like
05:23the food stamps program yeah I you know
05:26I would welcome the efforts of the
05:28private sector or not-for-profits or
05:31perhaps innovative individuals within
05:33government that might for example help
05:37those from more humble circumstance
05:40stances navigate our constellation of
05:44social services programs it's unclear to
05:46the single father of three children
05:48who's been offered a job of $12 an hour
05:52whether or not that person is going to
05:54be better off taking said job or if
05:57instead they should stay home take care
05:58of their own kids cut some grass on the
06:01side I certainly couldn't fault that
06:03individual if if they made either
06:06decision right but policymakers have a
06:09difficult time determining whether or
06:11not somebody would be better off under
06:13those circumstances so we need to try
06:16and create some order out of this
06:19confusing constellation of programs that
06:21exist and I think some of that can be
06:23done by leveraging technology having on
06:26your smartphone access to valuable
06:28information which is increasingly how
06:31we're getting our information I think
06:33can benefit policymakers in in program
06:36recipients alike I think for
06:38as deep and as significant as poverty
06:40it's got to be a team effort and I think
06:42we can all do a little better I think
06:43there's more that the public sector can
06:45do there's more the private sector can
06:46do this more than nonprofits can do what
06:48we were trying to build is one of
06:50multitude of efforts that are really
06:51trying to address this very complicated
06:53and very deep problem currently you
06:55would have to call a 1-800 number to get
06:57you the balance of your EBT card yeah
06:59that's right in the late 90s the food
07:02stamp program transitioned from actual
07:04paper stamps onto a debit card called
07:07the EBT card that is how food stamp
07:09benefits are now distributed to these 44
07:11million Americans across the country
07:12there's about 70 billion dollars spent
07:15each year through the food stamp program
07:17at grocery stores actually composes a
07:18huge amount of revenue for the grocery
07:20industry in an earlier version of
07:21propelled we were actually building
07:22software to help people enroll in food
07:24stamps and in late 2015 we transitioned
07:26away to building what we do now which is
07:28really focus on building financial
07:30management software for people who are
07:31already on the program my business
07:33partner I work in a grocery store in
07:34Philadelphia trying to get people to
07:36enroll in this benefit and on this
07:37particular day lots of people told us
07:39that they were already enrolled and they
07:41were there to spend their benefits this
07:42person that we were speaking to you know
07:44we ultimately just asked ok how do you
07:46spend your food stamps at a grocery
07:47store what does it like to purchase
07:48groceries on food stamps and she said
07:50the first thing that I do is I called
07:51the phone number on the back of my EBT
07:53card to see how much I can spend and so
07:55she did that for us and before listening
07:57to the automated voice prompts she typed
07:59in 1 and then three and then typed in
08:02her entire card number purely from
08:03memory Wow and when we asked her how she
08:06was able to do that she told us that you
08:09know it's because this is how much she
08:10knows she can buy for her kids and this
08:12is how how close she is to really be
08:13needing Siri serious help to put food on
08:16the table and so she has to do this
08:17every day so we thought that was a
08:19little bit crazy I come from a consumer
08:22technology background so my experience
08:23has always been building consumer facing
08:25software products previously at Facebook
08:27and you know this particular challenge
08:30is one that's been solved by the private
08:31sector for years right every major
08:34consumer bank has had a free smartphone
08:35application you can use to check your
08:37balance and see your transaction history
08:38for years but for some reason that
08:40didn't exist for these 44 million
08:41americans spending seventy billion
08:43dollars per year through the bt card so
08:45that's what fresh EBT really is this
08:47supposed to be a modern software layer
08:48on top of EBT so I know both of you
08:52process of building propel and then you
08:53senator in the process of you know
08:55designing this bill last term and talked
08:57to a lot of people that were on food
08:58stamps met with a lot of folks at foster
09:00care centers what was the main takeaway
09:01in terms of best ways to design these
09:03programs moving forward what is still
09:06lacking I think we need to make sure
09:08that our foster care system is tailored
09:11to the needs of its particular
09:13population which is not confined to the
09:15state of Indiana it's not confined to
09:17the state of of California this is a
09:20national challenge of trying to match
09:23needy children to loving parents or
09:26relatives or another set of foster
09:29parent foster parents whatever might be
09:30in the best interest of the child
09:31irrespective of state lines now in the
09:35private sector are even in the
09:37not-for-profit realm you tend to respond
09:39more to the needs of your customers they
09:42are the ones who put together pilot
09:44programs that need to be scaled up
09:45ultimately by governments we don't do
09:47enough of this in government in fact we
09:50don't even measure success there are
09:51roughly depending upon one how one
09:54counts the different social support
09:56programs 80 federal social support
09:59programs only ten have ever been
10:02rigorously studied using the gold
10:05standard randomized controlled trials
10:06across multiple sites can you imagine a
10:09business continuing to operate 70
10:13programs that they weren't even sure
10:15where money makers or not right I mean
10:17in and so out of those 10 studied only
10:20one has been found to meet its defined
10:23purpose so this is where we need some
10:25help you recently introduced I think
10:27with Senator Booker and senator Bennett
10:29this bill to is right basically you know
10:31build in evidence-based assessments for
10:34these different agencies or programs
10:36yeah this is a trans partisan issue in
10:39the sense that everyone recognizes we
10:41need to improve these programs whether
10:42you want to better spend taxpayer money
10:44or you care deeply about the targeted
10:47populations we all recognize that
10:49improvements need to be made the
10:50legislation you're alluding to is
10:52legislation that would allow private
10:54investors to scale up things that are
10:57working either on account of private
11:00business or and our not-for-profit
11:01sector and if you improve lives based on
11:06Penant evaluator determining that lives
11:08were significantly improved then we pay
11:10back the investors all that they put in
11:12to scale up that that intervention plus
11:16a positive return on investment that's
11:18the the model we call them social impact
11:21partnerships and the legislation passed
11:24unanimously out of the House of
11:25Representatives last Congress I think it
11:28will pass out of the Senate this
11:29Congress and will sign it in the law I
11:31got literal duh that's right Russell
11:34Senate building would that's interesting
11:36so but at the end of the day you know
11:37evidence isn't always neutral so how do
11:39we ensure that these measurements are
11:41actually rigorous particularly when
11:43you're building a company and you know a
11:45lot of the evidence is tied to profit
11:48we've tried to build a business model
11:49that doesn't conflict from the social
11:51impact we're trying to create but
11:52actually complements I think that's the
11:53strongest type of social impact and most
11:55sustainable type that we can build so as
11:56an example in the early stages of the
11:58company we considered a model where we
12:00were going to build software for the
12:01food stamp program and then we were
12:03gonna build software to make it easier
12:04to get a visa or to get a driver's
12:06license we're gonna have all these
12:07different verticals one of the reasons
12:08we chose not to go down that path was
12:10that was a model where we were gonna not
12:11make money off of low-income consumers
12:13and instead to make money off of these
12:14other types of services we instead asked
12:16ourselves is there a better model where
12:18we can actually build a big interesting
12:20business while also still serving the
12:22same types of people that we started the
12:23company to serve and so that's why we
12:25have this free app that people who are
12:28on food stamps currently use to manage
12:29their benefits our business is selling
12:31advertising to grocery retailers and
12:32grocery brands people to attract the
12:35business of our shoppers at their stores
12:37often by providing coupons and discounts
12:40directly to our users so they actually
12:41save money by using our product yeah
12:43it's essential that we have safeguards
12:46in government to make sure that when we
12:48do partner with whether it's not for
12:50profits or for profit entities and
12:53there's money to be paid for those
12:54services that we are in fact improving
12:57lives and so the approach we've taken in
12:59our Social Impact partnership
13:00legislation is number one we make sure
13:03that all contracts very clearly
13:06delineate what outcomes you're trying to
13:09achieve by what date what milestones
13:11intermediate milestones you're supposed
13:13to hit and so forth then secondarily
13:15make those contracts public and make all
13:19valuations and I emphasize independent
13:22evaluations by a third party they have
13:25to be public as well you see there's
13:27this habit in government when you tend
13:28to do something you issue a press
13:30release you hold a press conference and
13:31then when things don't go so well you
13:34tend to hide it no this is exactly the
13:37opposite of what should happen we know
13:39that in our most vibrant sectors like
13:42the tech sector what you do is you learn
13:44from suboptimal results you don't even
13:46consider them failures right and then
13:47you iteratively improve upon them and so
13:49we wanted to replicate that sort of
13:51model in government there are a number
13:54of of competent evaluators who conduct
13:57either randomized controlled trials or
13:59longitudinal studies that can really
14:01rigorously assess whether or not we're
14:03paying for success or paying for
14:05something less than success how do we
14:07convince more young New Yorkers or young
14:10Hoosiers that come from these
14:11communities that understand these issues
14:14better than anybody else right because
14:16they've grown up faced confronting these
14:17issues how do we incentivize them to
14:19actually either go start companies or
14:22try and prove it from the inside I think
14:24the answer you would have heard from
14:25many Republicans say a generation ago
14:28and I don't say this critically it's
14:29just the standard Republican line is use
14:31economic incentives to bring them into
14:33this marketplace and that still applies
14:35right an unapologetic unabashed and
14:38proud capitalist and so to the extent we
14:43can create a profit incentive for people
14:45to actually help individuals as opposed
14:47to self indulgently funding 70 plus
14:50federal government programs where we you
14:53know we have some sense that perhaps on
14:55the margin some of these programs help
14:56but really don't don't have much clarity
15:00on that I prefer not to think in terms
15:02of programs but instead of treating
15:05individuals holistically before
15:07modernizing our social support system
15:10people would be part of meaningful work
15:12they want to be part of a cause greater
15:13than themselves that's something I
15:15learned in the Marine Corps right it's
15:17it's about leadership and motivation
15:19what was the moment when you realized I
15:21can actually take the kind of technical
15:23training that I have and the perspective
15:25that I bring from my own upbringing and
15:26actually turn that into a cup
15:28yes so a couple of things the first is
15:30we spend all of our time talking to
15:32people who are recipients of the SNAP
15:33program and of food stamps in United
15:35States and what we hear time and again
15:37is that the benefit is extremely
15:39critical to basic to being able to put
15:41food on the table and so for our users
15:43and the people that we work with it's
15:45very clear to us that this public
15:46benefit is a really critical part of the
15:49safety net and this is who we're trying
15:50to serve in terms of how we can inspire
15:52other entrepreneurs to solve these types
15:54of problems I think people start
15:56companies that solve the problems they
15:58understand and I think that's why so
16:01many of the startups that come out of
16:02places like Silicon Valley are
16:04addressing the issues of 20-something
16:06males who live in cities because those
16:08are the types of issues the tech
16:09entrepreneurs as a demographic tend to
16:11understand better than the average there
16:13are 45 million Americans who are
16:14currently on food stamps they're
16:15probably not a lot of them starting
16:17software companies and so who's going to
16:18build a software that meets their needs
16:19I think there are two different ways we
16:21can address that the first is that
16:22actually you know you can have an
16:24understanding and a deeper empathy of
16:26someone else's challenges I think there
16:27are ways to start interesting companies
16:29whether they're for profits or
16:30nonprofits that address these types of
16:31challenges there is an opportunity in
16:33the coming years for people of all all
16:35income spectrum types to start their own
16:39companies and to solve their own
16:41challenges and so the question is
16:42tooling how do we provide the tools so
16:45that those 44 million Americans on food
16:47stamps can indeed start their own
16:48companies something you said that I
16:50thought was profound which is we do tend
16:52to solve or attempt to solve those
16:54challenges that we understand I think
16:57that the private sector can help
16:59government better understand its own
17:02problems by embedding predictive
17:04analytics into some of our programs we
17:08could do that in our social programs and
17:10then on the back end of it is rapid
17:12cycle evaluation to determine whether or
17:15not we're actually helping the people
17:18after slightly manipulating a program to
17:20tailor it to the unique needs of a
17:22particular population or individual what
17:25else I mean what other components of the
17:27support system do you think are most
17:28ripe for to use such an overused word
17:31disruption so you know you could imagine
17:33something like with Pell grants or short
17:36term low-income housing right every
17:38program we have needs to be rigorously
17:39and regularly evaluated so
17:42that we can optimize it or get rid of it
17:43and replace it with something else
17:44that's working you can do a randomized
17:46controlled trial for about you know a
17:48hundred grand now so we're gonna
17:50increasingly see our not-for-profits
17:52providing information showing what works
17:55and what does not work
17:56I've got legislation we've just passed
17:57into law that creates a clearinghouse of
17:59best practices that people can draw on
18:02these are some of the things that
18:05certainly we we ought to be doing and I
18:08think most importantly we just need to
18:10be thinking of people not as recipients
18:13of government programs but instead as as
18:17assets to be realized as opposed to
18:19liabilities to be written off we don't
18:22really think of ourselves as a disrupter
18:24we're not trying to disrupt the way that
18:26public benefits work in America we think
18:28there are actually lots of really
18:29committed people who are doing great
18:30work in the public benefits space we
18:32really want to enhance the efforts that
18:33they've that they are already committed
18:35to and to improve the lives of the
18:37people that they try to serve and for a
18:39lot of our users that's about navigating
18:41these public benefits and making sure
18:42that they have enough to spend and so
18:43they can actually go purchase purchase
18:45those groceries but I think that our our
18:47mission goes broader than just a public
18:49sector program it's really about the
18:51entire stack and what it's like to put
18:52food on the table when you're a
18:53low-income American so what are the
18:55stories you shop at how do you choose
18:56the right items how do you find savings
18:58and how do you manage the entire process
19:01I think in the longer term we're really
19:03an anti-poverty company so the extent
19:05that food in the table is an important
19:06part of fighting poverty that's why
19:08we're starting there but I think more
19:09broadly we see a huge opportunity to
19:11modernize the safety net and to fight
19:13poverty through Southwest it's terrific
19:14I'll just close by saying that a lot of
19:16these issues are either bipartisan or
19:17nonpartisan or trans partisan as you
19:19said senator and what's exciting from
19:21our perspective sitting out in Silicon
19:22Valley is actually watching industry and
19:24government start to work together on
19:25this there are some that are very easy
19:27fixes if only people started talking to
19:29each other more so absolutely thank you
19:31thanks for having us
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