Our CEO Louis hosted an “Ask Me Anything” session on Reddit recently, and in addition to the great questions we highlighted last week on student debt, personal finance and the changing finance industry, he also fielded questions on the ins and outs of how Earnest works and his own journey towards founding the company. We thought we’d pull out some of our favorite answers that aren’t on our website and post them here. Let us know what you think and any other questions that come up!
Any thoughts about getting into home loans? If so, how would you be able to make it cheaper than current banks/lenders?
At Earnest, we are focused on building lifelong relationships with our clients, so eventually, we hope to offer all products that any consumer would want during their life, including a lot of the products banks and lenders offer today … and some they haven’t thought of. In terms of how we would do it better, we are first and foremost a technology company that builds all our tools ourselves (vs. outsourcing), which allows us to simultaneously reduce our infrastructure costs vs. competitors while also allowing us to make better and faster decisions. We also build tools that better serve clients over their lives and can implement really interesting and novel product features that no other non-technology focused lender can. Overall this reduces our costs versus current incumbents.
How long do you think it will be until the data models Earnest employs are commonplace in the industry?
We’re going to be there a lot sooner than we all think. Smart uses of data are quickly becoming so common that models like Earnest’s will set a new standard. The big value of our business is that we’re prioritizing what a customer should pay and experience, rather than trying to maximize what they would pay for a product to increase profits. We think this level of transparency — along with developing products that use data to help people make their financial lives better — is a really important step forward.
How does Earnest’s vision differ from that of other companies who, at a broad level, have the same goal of bringing banking into the 21st century?
We see three main differences between Earnest and other players in the fintech and alternative lending spaces:
- We use data more effectively to better price individuals and give clients better rates.
- The software we’ve built to redesign underwriting means we pass on lower costs and extremely flexible features to clients, which are core values at Earnest.
- We service the entire life of the loan — meaning we don’t just service you during the application process, and you’re never handed off to a third party if you have questions about your loan or need to change any aspect of your loan or payment process. This also helps us get to know our clients so we can accommodate life’s needs — like skipping a payment or helping in a time of unemployment.
What was your major in college?
I majored in Operations Research and really loved it. I spent a lot of time working on problems like how FedEx gets all their packages delivered on time.
So how does someone in Operations Research found a [fintech company]?
I don’t think it is about your major. I think it is about looking at any problem and thinking about how you would start over from scratch and build something new and better.
What is your biggest regret/achievement in life?
Founding Earnest is definitely my biggest achievement and by that I mean actually leaving my job at [venture capital firm] Andreessen Horowitz to take the risk and go out on my own. Having the guts to do that was a big step for me. I don’t really have regrets. I have a wife and daughter who I love more than anything — I wouldn’t change a single day in my life up to now.
This isn’t related to Earnest, but what are the most important lessons you learned from your time at Andreessen-Horowitz?
I learned a ton. It was an amazing experience all around, but here are the top two lessons: First, I learned the importance of great teams. Great companies are built by people, markets are competitive and constantly changing and great teams respond quickly and dynamically. Second, I was advising some of the world’s best entrepreneurs every day and I gained confidence in myself that I was actually ready to go out on my own and found Earnest.