Sawa Money - A Communal Response to Building Financial Health Transcript

More Elephant Intro

Welcome to the latest More Elephant podcast. As I was thinking about narratives that I want to explore, one of them is something that is, I would say, incredibly personal to me, and that is this notion of how we help people lead a better financial life and build generational wealth, particularly amongst underrepresented and underappreciated communities.

And, if you look at latest stats, we, in America particularly, still have a lot of issues. I pulled up payroll.org's annual Getting Paid in America survey that they just completed. 40,000 respondents – 78% of them are living paycheck-to-paycheck. The Federal Reserve's 2022 data on U. S. households indicates that at least a third of households do not have $400 in emergency savings for when something goes wrong.

So, with that as a backdrop, I'm really delighted to welcome Charles Phillips to the More Elephant podcast as the CEO and co-founder of SAWA Money. Charles, welcome. I know we're going to have a great conversation. I know you're incredibly passionate about this space.

[00:01:42] Charles Phillips: It's a pleasure. I'm really grateful to be here. I am very passionate about this space. I struggle sometimes because I do have a latent need to evangelize, and not everyone wants to hear what I have to say about it, but your lead-in was a perfect intro because the facts are what they are. 

[00:01:56] Jason Rudman: The facts are what they are. And this is a platform for you to evangelize for sure. This is about great ideas and change agents, changing the way that we think about the world to enable us to live better. Us being communities. I actually want to go broad to start with. For those people who are listening that, Charles Phillips, I don't know who Charles Phillips is – what’s your history and what would you highlight as seminal More Elephant moments that have informed your desire to change the world? 

[00:02:24] Charles Phillips: I think it's fair to say that the most seminal moment for me was my birth and the circumstances in which I was born. So, I was born in Bangkok, Thailand. My dad was in the U. S. Army. My mother is not Thai. She's American, and he had somehow convinced her to move there around my birth. And she subsequently moved back with me, which precipitated his moving back to the States. And so me living there for less than seven (7) months should not be significant, except for we move back to Mississippi, which is where I'm nominally from.

So, when I talk to people about it, that's where I'm from. It helped me tremendously to not be from that state and still live in that state. So I had in my head, if you looked at my birth certificate, I wasn't from there. And the fact that I wasn't from there was significant in terms of me saying, okay, I think there's a different scope to the world. I'm from someplace else, and I don't know that I would have had the natural curiosity to explore had I just been from Hattiesburg, Mississippi, born at Forrest General Hospital, etc. I know it seems like a very esoteric thing, but that was probably the first step to me trying to be a little bit different and color outside the lines a little bit more.

[00:03:30] Jason Rudman: And coloring outside of the lines again, because of what Mississippi represents, what Mississippi represents for a person of color. When you say, hey, I have the benefit of Thailand to Mississippi and not being bound by those lines. Could you explain that just a little bit more? 

[00:03:48] Charles Phillips: Yeah, it has to do with sort of understanding that there was a world outside of the world that I was in. You know, you and I have had a little bit of a conversation about how England is a nation of shopkeepers that ended up running the world, but fundamentally it's still a nation of shopkeepers. And the U.S. is a nation of farmers and, to a lesser extent, shopkeepers, who have ended up running the world, but we pretend like we don't.

What I wanted to understand was two things. I wanted to understand what the rest of the world looked like and how they felt about us. And then I wanted to understand how this country can be a better steward of the economic and political power that it has. And I think that I was able to do that because I was able to see things through the lens of the military. My dad was retired Army. We went to military bases all the time because that's where you got your health care. That's where you went shopping, etc.

And then it was being able to relate the things that I was reading and to further my reading toward the goal of understanding the world better, as opposed to just being able to manipulate my local environment.

[00:04:44] Jason Rudman: Understood. Understood. So that spirits you to Harvard, Stanford, and then, I think you pick, my words, one of the most trying journeys, which is you're a serial entrepreneur. If you take that lens of Mississippi coloring outside of the lines, this lived experience of military base exposure and that informs how you see the world and you want to change it, and then you pick one of the most uncertain routes in order to have impact… How did you pick the life of an entrepreneur? 

[00:05:18] Charles Phillips: I picked the life of an entrepreneur probably when I was thirteen (13). And so the reason that I picked it was because I decided I wanted to go to college out of state. And so, where I'm from, that is a form of entrepreneurship at its most insane, because it didn't really happen. Most of my friends growing up didn't go to college. And then of the ones who did, most of them went to Mississippi State, Ole Miss, they went to school in-state community colleges, etc. And so, when people talk about where I went to college, folks focus on the end goal, which is, I did end up going to a really, really good college, but to go to any college to me took the same amount of effort as it took to get into Harvard. For instance, I wouldn't have told you as a 10th grader that it wouldn't have taken that same amount of effort for me to go to Louisiana State University. I just didn't know any better.

And I think that one of the main things that happens is there's two artifacts that I think I can point to. The first artifact is if most of us knew how long it was going to take or how hard it was going to be to actually do anything, we wouldn't start doing anything. I think that's the first thing.

I also think that it's worthwhile to everyone to have a large goal that they try to hit. And either succeed or fail, but at least be willing to put that goal out there. And so, what I'm doing right now is more certain of success than me being able to get out of high school and go to a college out of state. 

[00:06:35] Jason Rudman: I love the two things that you said, which boiled down to, I think, the desire to change and to create change within ourselves, to be part of something bigger. And then, this abundant need to continue to experiment, which I think feeds the curiosity of the brain, and that's where great ideas and change actually come from.

It's a, it's a path of experimentation. You have mentioned you're more sure today on Sawa Money, which we're about to get to, than you were about going to high school, but that path, I'm sure, you told me, riddled with a lot of experimentation, a lot of things that were lots of ups, lots of downs. The path to an entrepreneur is not a straight line. 

[00:07:14] Charles Phillips: It isn't. I will say that it is straighter than most, and this is what we're going to end up talking about when we talk about Sawa. It depends on what your access to capital is. So, I am blessed and fortunate, as many people who will probably be on your podcast who have an outsized access to the resources that I need in order to fuel my dreams and my ideas. I will mention that it takes a long time to get there in certain situations and that many of us are jaundiced by what we see in terms of very quick successes. That is unusual, although it is mostly celebrated. And so, I think a lot of people give up for those reasons.

I will say that for me, it's been a big thing to try to continue to better myself. And that is what gets me out of bed in the morning is having big problems to try to solve. And what sort of keeps me awake at night is the fear that I will not be able to solve any of these problems. And that's the juxtaposition. 

[00:08:07] Jason Rudman: I love it. So, as an aside, I wrote a post about fear and the crippling nature of fear, and you know, every conversation I have with you makes me smile because of what you just reiterated for me; when I feel like fear is telling me I've got to be small or it's making me small, the opposite of that is go big. 

[00:08:25] Charles Phillips: Yes.

[00:08:26] Jason Rudman: So go big to try to break out of it. Look, we're riddled with fear; I think the path of entrepreneurship is one of fear.

[00:08:31] Charles Phillips: Yes.

[00:08:32] Jason Rudman: Fear I'm not good enough, fear that I don't make it, fear that so many other people are depending on me and my idea in order to have an impact in their life. So, for those of the listeners tuned in, What is Sawa Money? What is it attempting to do? How does it work and who or what is it solving for? 

[00:08:48] Charles Phillips: So Sawa. Sawa in Swahili means it's all good. And we're trying to solve the wealth gap problem, which we view as a problem. Thomas Piketty tells us that 50% of Americans own 98% of the wealth. So, if there's 370 million people in the country, I wish I hadn't done that math because I might get it wrong, but there's roughly 185 million of them who don't have any wealth, which means that they are in a position where they may have their own property, they don't own stocks, they are living more or less month-to-month. They may have some cash in reserve, but not many.

So, let's loop it all the way back to what you said at the beginning and those numbers from the Fed. We spent the last two years really trying to figure out how best to solve that and we want to solve it in a reasonable way.

I was just on the phone with someone who is working at Disney and Disney is really amazing to me because it does have a lot of quirks and it does have some downsides as a company. But if you go to Orlando, Florida, to the Disney World Resort what Disney has done is they've surrounded you with a number of stimuli, with a number of rewards, with a number of sort of stipulations, with a number of rules that are not detracting from your experience of feeling joy if you're the average American, but it's still getting you to act in a certain way. We are directed this way all the time by various companies.

And so, what Sawa Money was designed to do is how do we activate those sorts of stimuli to be able to get people to save money, to be able to get people to raise their credit scores, to be able to get people to plan toward long-term things which are not fleeting, but things which actually can provide them wealth. That's really what we're trying to do. To that end, we started as a mortgage company, and what we were trying to do was get people through the mortgage process a little easier because of that group that I told you that has wealth. A good chunk of them have that wealth locked up in homeownership. 

So, we started there but found out we were having difficulty getting people through that system because of a trust issue. So, the folks who have things trust that they can get things. And if they have families who have things, they trust that they can get things. And if you don't, the notion of going to someone and saying, ‘Hey, I want you to put $5,000 up and you're going to buy a $200 000 house and you're going to pay for it monthly for 30 years.’ It’s very daunting for someone who's never come from any property. Just a daunting experience.

And so, what we set out to do was to create a trusted engine that would allow people to be able to go through those sorts of experiences, commitments, changes, while feeling supported. The main sort of mechanism that we use is something that we call a ‘savings wheel.’ And the savings wheel is known as many, many things in many, many cultures – a susu, it's called a tanda.

The thing that's going on is that in the developed world, you know, Europe and the U.S., it's not really used because we have all of these different ways that finances us. We all have credit scores. We all have various incendiary things that set us apart individually because that's the most efficient way to market to people. We feel like if folks can connect around a goal, connect around each other that they will be more likely to be successful.

The way the savings wheel works is that if there are ten people in a group, everybody puts in X amount of dollars per week. So, we'll just start out at $10. Everybody puts in $10 a week, and then on a schedule, everyone gets $100 a week because 10 times 10 is 100. So, that schedule is like a magic trick. It's almost like getting to cut the line at Disney in certain situations because if you're in a situation where you're the 2nd person who's on that list, you will have paid $20 and we will still give you $100.

And that $100 comes from the rest of the group and people understand that they have an obligation to keep paying because if they don't keep paying, no one else gets paid. We do this for people for free. We don't charge a fee for it. But what we do is then offer services that are linked to that.

We can help you get a mortgage. We can help you raise your credit score. We can help you qualify for an auto loan. We can help you with your insurance needs. We may ultimately be able to help you with your brokerage needs, but all of this is designed to get some chunk of that bottom 50% closer to where they should be and have the security that you can have as an American if you have access to wealth.

[00:12:50] Jason Rudman: So I think let's delve a little deeper into the savings wheel, because I, again, I think part of this is you started with a $10 entry fee.

The point is this can expand and grow because the path to, and you, you know, to your point, the two levers at least in, I would say, in the developed world, the two levers you mentioned, one, which is buying a home, buying and owning a home and being able to stay in the home and home price appreciation. And the other is starting a business. Those are really the two levers. Charles, you and I have talked about this, your ability to influence a minimum wage role or the fact that you're making $35 an hour, your ability to double that over a period of time, depending on what your educational experience is, your living situation, that's actually really, really hard.

The data would suggest your ability to get a force multiplier in your salary for most Americans is incredibly difficult. Those two levers that you and I have talked about, about home ownership, building a business, that's a force multiplier effect.

So, how does the savings wheel graduate or propel the community from a $10 per month to a $50 or a $100. How does that path work? And the reason I ask is how do I get you a down payment that's reasonable enough, or how do I give you enough money to incubate a small business?

[00:14:17]Charles Phillips: So there are multiple tiers of Americans. So if you were to say, A is the top 25% of money earners, B is the next 25%, C is the next 25%, and all the way down to D. If we're talking about people in that D tranche, there's a different sort of generational shift that will happen with them.

If we're talking about people in that C tranche, many of them should qualify to get into these instruments, but they don't trust the instruments or the institutions that are providing those instruments enough to get into those instruments. So that's the problem 1st.

So one of the problems we're solving is if you are in a situation where you are making $85-$100,000 a year, and you live in Birmingham, Alabama, or Columbus, Ohio, or San Antonio, Texas, or Albany, New York. You probably can get into some sort of property, but there are lots of people who won't do it cause they just don't trust the system. So the first thing we're trying to do is get those people to trust the system.

I will however say that I think that there's a bias against those people who are earning minimum wage because the challenge, and I will take it all the way back to my college experience, my high school experience, actually middle school, why did I try to get A’s? And I tried to get A's because someone told me that if I got A's that I could get out of the state and go somewhere that was pretty good. And then someone showed me enough of a path that I believed it. If no one had shown me a path that I believed in, I would have been a C student because there would have been no point.

And so, one of the things we believe is if someone's earning minimum wage, that's one job, they can probably work a 9-5 and 10-6 if they were really trying to do something. But right now, we're telling this person, you've got horrible credit and we don't tell them how to improve it. We tell this person, you don't earn enough money that we trust to do this thing. And if you don't have a W-2 from a company we've heard of before, we will not give you a loan. And we tell this person that homeownership, as an example, or starting a business, isn't for you because you don't fit those criteria. And we will not tell you how to get there. Once you do that, that person is a C student. 

[00:16:13]Jason Rudman: So again, that's, let's pull that apart. What Sawa Money on some level, is about ultimate transparency

[00:16:21]Charles Phillips: Yes.

[00:16:22]Jason Rudman: It's about ultimate transparency. And you and I have talked about this – using you’re a, b, c, d levels – there here is a penalty to having a low income in this country. And we don't talk about it enough. I go back to when I was working at American Express and we created Bluebird with Walmart. And one of the things that we had to do from a human-centered design perspective was to spend 48 hours understanding what it means to be under-banked. Neither you nor I really have lived that experience, and those penalties are huge, right?

If you a minimum wage earner, then the financial system, typically it costs you to have a bank account, or if you're living in a, in a cash job, you're then having to go into a convenience store or a drug store to buy a money pack to put on a card in order to shop online for something that we don't necessarily pay a penalty for. That penalty for having a low income is real.

I want to connect it as well to what you wrote a couple of pieces recently available on LinkedIn, we'll make sure people have access to them, and one of the articles was titled “The Expense of Bad Credit and Living in a Land of No Second Chances.” I do believe that's part of what drives you because Sawa Money is that we can't live in a land where there are no second chances for some. Then, this whole concept of vulnerable borrower.

So, could you bring those two things together and then again just expound a little bit what the reality is out there in terms of what you see with whom you're trying to help? 

[00:17:50]Charles Phillips: Yeah, so really, what happens is that I think our country has an obsession with predatory products. And there's this notion that there's a lot of products out here that are taking advantage of people. And that's, there's a lot of hand waving. And it's like, what does it mean to be predatory? And we can't decide on that.

The flip side of that is that we've just decided that a lot of Americans don't deserve credit. To say that someone doesn't deserve credit means that you fundamentally do not believe they will be able to pay the money back. No matter what they tell you.

Credit is a reflection of character. It is not necessarily a reflection of who the person is, but it's our perception of who that person is. So when you talk about vulnerable borrowers, for instance, people are still dealing with the same things they would have dealt with if they were in Oliver Twist or they were in a Mark Twain book.

You know, when we talk about vulnerable borrowers, they're vulnerable because they can't get access to the normal credit system and the banks are talking about being underbanked. The real under-banking problem is not that you can't get a bank account. It is that that bank account doesn't do anything for you, and the bank doesn't demonstrate any trust in you. And, as a matter of fact, frequently demonstrates distrust in you. It charges you fees that you don't quite understand. You have to have minimums. There's a lot of things the bank is saying to you about what makes you a good or bad customer.

So, people would want a bank, they can't, and so then they are turning to sort of an alternate financial reality that is actually very well developed. So, the world that's going on out there that we don't see – there’s a book that we swear by called The Unbanking of America by Lisa Servon. That book talks about all of the different things that people go through, and they are still banked, they're just not banked in a way that we look at them as being banked.

And they are also participating in a world where they're paying really high-interest rates that reflect the level of risk that goes on with them, but they're also paying those loans back. So, there's a mishmash of problems that are really, really hard to unwind.

However, we think one of the darts that we can throw at this particular board is we're saying, listen, we're going to give people an opportunity to come together in a mechanism that is somewhat novel, and we're going to do what we can to eliminate a lot of the personal risks while still demonstrating faith in these people.

And so, what we're filtering for is folks who are not currently in the traditional system, but still can be trusted. And we know definitively that the banks are not looking for those people right now. So, I'm not sure I answered the question. I want to check in to see if I did. If I missed something, let me know because it was a complex question and I did the best I could. 

[00:20:20]Jason Rudman: You did. You were great. A couple of points. So we're not talking enough about vulnerable borrowers. You and I agree that while we've spent a little time talking about minimum-wage earners, you can also look at the data. I mentioned the 78% of Americans in a recent survey are living paycheck-to-paycheck. These are, these are households making $100, $120, $150, 180,000 a year. When 78% of America's living paycheck to paycheck based on that sample, we're not just talking about the most vulnerable or the, or those that are making minimum wage, we're talking about people that when you put that number up, you would say, well, that's a healthy salary.

How is it, to your point, that you can't get on the housing ladder or you don't have access to reasonably priced credit because the system is set up in a way that you're making that amount of salary, you've got other commitments and you, by definition, vulnerable, you're vulnerable to high-interest rates, you're vulnerable to a series of no's. And I think your point is you're trying to create. with Sawa. an opportunity to say yes. 

[00:21:27]Charles Phillips: Well, not just that, we're also trying to create actionable intelligence. So, if you want to go get a house, we are going to show you how that works and not just give you a presentation. We're going to give you a tool that will get you there, and it will get you there in an alliance with other people. 

One of my stories that I don't tell as often as I should is when I started Sawa two years ago, my credit score was 740. Maybe 730. My credit score right now, and this is almost like telling someone your weight or, I mean, Mississippi, we never ask how many acres someone has because you can get in trouble. I'm going to tell you what my credit score is. My credit score right now is 835.

I had never heard of an 835 credit score before I got one. The reason I have an 835 credit score is that, in the process of forming this company, I learned exactly how to raise my credit score. And it was counterintuitive in so many ways, but it's also very necessary in order for me to be a credit-worthy American.

And I have too much, my credit score right now is too high. Like, there's no reason I need to have anything higher than that. But I would love to talk to people and explain to them how this works and then give them a tool where they can track it, and they're doing stuff that actually makes it work. So, for instance, there's a lot of people who do credit counseling, credit counseling, a design to call it a win if you get somebody from a 630 to a 670. That's not really a win, but no one knows what a win is. And so, because it's poorly defined, you can talk up anything as a win and people will pay for that. 

And one of the insights that we're trying to get out there, and we may never make it, you want to talk about the failure, this will be the failure. We believe that if we come in and we tell you that you need to save money and you need to work on your credit score, it needs to be because there's a goal that we can provide to you that you want. It should not just be because we're just trying to help you solve that particular problem, but good luck to you. And so, if we were just a mortgage company, we would look at people and say, you don't qualify. Sorry. Off you go. If we were just a credit counseling company, we would look at people and say, this is how to get your credit better and hopefully, when you get to a bank, they'll love you.

And what we're trying to do is provide a fully functioning link between those two states where we think that we can't drop people off at the church door and hope somebody is going to adopt them. We have to get people all the way through if they join us. And that's what we're working really hard to build.

And it's not going to be for everybody. But if we can get a million people in this way, now, suddenly you're talking about a million people who can build generational wealth, and that wealth does flow down to the rest of the family, because the other piece that I'll tell you is I think strongly one of the reasons why I went to college, and Henry Louis Gates talks about this because he's done a lot of the research. Basically what separates specifically African Americans, Black people who go to college or not, is with the ownership of property at some point in their family.

So, my grandfather somehow cobbled together 300 acres in Mississippi in the teens. How he did it, what crime he had to commit, we don't know, but that land was very significant in terms of us standing out from the rest of the people around us who didn't have it, and it served as a wealth base for us. It served as a wealth base going on five generations now. 

[00:24:27] Jason Rudman: I think as you and I have gotten to know each other, we're very transparent with each other that there are some things that don't, they're understood, they don't have to be said, but I think it's really, really important that we're also talking about financial health across every stripe of America. Yeah, this is not a person of color thing. It's not a, you know, it's not a Midwest, old manufacturing base. We're, we're talking about it an ill and an inability to cure something that affects any and every part of, of the United States. 

[00:24:58] Charles Phillips: Yeah. I mean, it's, you know, when we look at the metrics, we've got about 1,800 people using our platform now and the metrics are all over the place. I mean, they're not uniformly found in any one distribution. From a racial perspective, it's every race you could imagine. Not quite a normal distribution, but it is definitely a distribution. From a geographic perspective, it's pretty much every state in the union. I mean, we, we've gotten people coming to us from every direction and I knew this… none of this is surprising to me.

It's surprising to some of the people that we talk about because when people think about these problems, it is very easy for us to lump people into buckets based upon schematics that have been given to us.

So, you have more Republicans or Democrats? Okay. Do you have more left-handers or right-handers? Well, one of those sounds like more of a natural disconnect than the other one. And I'm not going to say which one, but, you know, listeners will understand one of those two seems like a more natural divide.

Our argument is that they're not natural divides, that these are unnatural divides that are actually obfuscating problems that can be solved if we did not create unnecessary divisions. So, I think it would be ludicrous to say that a person from Arkansas is more likely to save money on a global basis than a person from Louisiana. I just don't think that's the case, but I think that they share certain similarities underneath within the stratifications that are in that state, those stratifications extend from coast to coast. And so, we're targeting the stratifications more than we are targeting some of the more esoteric signifiers of who people are. 

[00:26:28] Jason Rudman: So I want to pull the thread on, on the homeownership piece. Yeah. So again, I'm a member of the wheel – to me, when I go for a mortgage, I don't get an experience, right? I get a product thing. It's like, Oh, you're buying a home. Here's a mortgage. We're done. Fill out all of this paperwork and done. Right.

You've talked about taking a product lens and essentially making it an experience play because there's so much to understand, not just about the process of filling out the paperwork on the mortgage, but ultimately to your point, its role in creating that unlock that is generational wealth. Could you talk a little bit then about the experience that you're building around buying a first home for the SAWA Money users? 

[00:27:14] Charles Phillips: We have it partially built, but we are building it. I think the way to describe it is..I was fortunate enough to be able to do home ownership seminars on the South side of Chicago a couple of years ago. We started with masks, we ended without masks.

I was working with a wonderful organization called Self-Help Federal Credit Union. And they were trying to go out and improve home ownership on the South side. Well, to do that, we ended up putting ads on the radio, and then people came to seminars, and we sat them in those seminars, and the seminars were free. There was no cost. You had to go through a two-seminar program to complete the course. And we would say to them, here's why you need to buy a house. We would start there. 

So, the reason why you need to buy a house is, if you're currently paying rent, you're paying someone else's mortgage. While you may be afraid to step into this, this is why you should do it, because you can pay your own mortgage as opposed to someone else's mortgage.

And then, we had to explain to them the concept of home equity, how it could be unlocked, how it could be passed down, etc. So, that was something that wasn't commonly known. People know you need to buy a house. But then the next thing was, here are all the things that we're going to look at as we help you figure out how to buy the house.

And I'm a mortgage loan officer so I'm coming from a place of some degree of knowledge. Here are all the things that we're going to look at. We're going to help you assess where you are on those metrics. If you're already at a place where you can afford to spend 40% of your income on a mortgage and you have above a 670 credit score, assuming you want to do this, you're fine. Oh, wait a minute. You need a down payment. Okay.

If you're not in that place, you need to think about how to get to that place. And that was the place where there was breakage for me, and there's breakage in a lot of these processes because there's a few unknowns that I've already sprinkled in, that we need to help people with.

So, if you're already in a place where you can do it, we need to talk to you about how to get your down payment in. And there are all these crazy rules like, well, if my Mom gives me a down payment, okay, but I need to have a letter from her saying that it is non-refundable. Like, there's all of these things that are in there. 

And so, when we look at that process, that process is just opaque enough that it keeps people out of buying houses. And there are all sorts of historical reasons why that may be the case, but I'm not worried about that. What I'm much more concerned about is how do we solve the issue.

What occurred to me was if you walk someone through the process and it doesn't take very long, but if you said to them, if you come in the door, two things are going to happen: either you're going to get a mortgage or I'm going to put you on a path that you can understand how to get a mortgage and I'm going to check in with you regularly to help you get there. That would have been enough, I think, to get many more people into mortgages than we actually got into mortgages. And we didn't really do that well at either one of them, but we got a lot of people in the door and we educated a lot of folks.

And so our goal is to try to bridge that piece, but we're not going to not do the education. But to me, education is, and I'm going to always take it back – I’m like a bad comedian with callbacks – education is I had to understand in eighth grade that these were the things I needed to do to get into college. And then, I had to have teachers who laid it out for me.

I had to have people who checked in with me. It had to be a goal that was getting closer and more transparent, as opposed to a goal that was receding and getting more opaque.

[00:30:23] Jason Rudman: Education leads to literacy leads to impact and action. Makes total sense. And then what I'm excited about about your journey is how you can do that of scale, right?

You talked about how we get a million people into this experience. So you've been at it for a couple of years. And we touched on how you and I think about this as a universal problem, not to any particular segment, race, however, you want to cut it up. What have you learned that you didn't know going in in terms of what surprised you, or was there there was a hypothesis that was confirmed and then where are you today in terms of what's next? 

[00:31:06] Charles Phillips: What surprised me was people's faith in institutions. So, we're living in a world right now where everyone is willing to tell you that institutions are dead. They don't exist. People don't go to church. They don't do civic things, etc, etc. And I would argue that their faith in institutions has just moved.

I think their faith in institutions has moved probably more digitally than people are willing to acknowledge. But they still believe in institutions, and so, when we first started this, our suspicion for this wheel project that I'm telling you about was that we were going to have to go out and get individuals to recruit their friends and family to try to help them figure out how to do this.

So, it made sense to me that, you know, you'd go to a family reunion, you'd sign up 9 people. All of y'all could do it. You're all saving for the same trip to Disney, or you're all saving for the same barbecue place you want to open. Right. And that's amazing. And we're going to do it together. And that's not really how it goes. Like that's not how things have shaken out. What we found out is that people don't want to necessarily be in groups with people they really know because it gets really fraught.

So now suddenly you're in a position where your cousin, who you don't particularly like, knows that you just got a thousand dollar payment. What are you going to do? They're going to immediately hit you up. I mean, all of these dynamics don't exist when you are dealing with an institution as opposed to dealing with the people in your group. So there are limits, I already knew that, but it was surprising to see what we were able to accomplish.

So right now, we're doing this possibly the hardest possible way: we're going out and telling people, "We want you to subscribe to this service. You're going to give us a set amount of money over X amount of weeks. You're going to get it back maybe two weeks from now, maybe nine weeks from now, maybe ten weeks from now. And you just have to trust us!”

And people are hungry enough for a solution to their problems that they will take a chance on this. That to me is a magic trick, and we are really, really grateful that people are trusting us thus far. We know we have to safeguard that trust. But writ large, it tells me that people are still thirsty for institutions and things that they can trust. And if we don't give them beneficial things they can trust, they will absolutely choose destructive things that they can trust because they don't understand necessarily the difference between the two outcomes. What matters to them is being part of something and being part of an institution. 

Now there's an enormous amount of offshoots that we can go into in this conversation about what that leads to, but I don't think that that's necessarily going to move the needle, but you understand where I'm coming from.

[00:33:26] Jason Rudman: We could have a lengthy conversation about the psychology of trust and what do you think informs people's willingness to your point to trust. 

So, so yeah, we, I don't know that we have enough time or maybe we come back and we talk about that when you're further along. So, so that, that's surprised you, which I think is reaffirming on some level the environment that we're in, our trust of institutions.

So how do you scale? Is it word of mouth? Is it a combination? Is it marketing? You had mentioned that you thought this was going to be a ‘I engage somebody who creates a referral network, and they bring nine people in, and we're all going to start the barbecue business.’ Your example, you've that that's kind of flipped itself on the head as you're actually pulling people, I would argue, to the Sawa experience.

So, then A, are you ready to expand? B, how will that work? 

[00:34:18] Charles Phillips: So, the referral piece is really interesting because we are getting lots of referrals. The insight is when you refer someone to us, are they in the same group with you or not? So, the actual insight is they want to do it with you. They just don't want to be in your group. 

So, we have gotten a tremendous number of referrals, and that is driven a good chunk of where we are right now. But having said that, we think that the better route to do it is we want to work to partner with other trusted institutions so that we can accelerate that trust. Now, there's another challenge, but another challenge is finding the right trusted institutions that can maintain the trust, independent of what we're doing. 

So, we are going to continue to add people organically. And I do get to say organically because once people find out about this, it is refer-a-friend as opposed to us having to do a ton of marketing, which we haven't done a ton of marketing yet, not that we're at huge numbers.

The other way we're going to do it is we're going to continue to work to find employers, civic institutions, groups, nonprofits. Etc., to help us spread the word on this and to get more of their members interested and we understand that for us, it's a constant trust process. We have to not just generate trust in the end users, we have to generate trust in each and every channel partner. I wouldn't necessarily want to call them channel partners, but they are channel partners that we are able to select and entice into what we're doing.

And I think that that is the thing that we have to reflect upon the hardest, which is there are ways for us to get a ton of people on this platform very quickly that are not conducive to long-term trust. 

[00:35:57] Jason Rudman: Understood. We've also talked about the specter of fraud within the context of this. This element of trust and then, the wheel – what happens to my money, and can I trust the wheel and the institution? And, you had shared with me that the team early on got some interesting insight into some fraud that either was not anticipated or was anticipated but then elevated. Talk us through that learning and that insight. 

[00:36:29] Charles Phillips: I will begin by saying that we've looked at this model all over the world. Like, we've talked to people who've done it in many, many places, but people forget this coming from a developed economy, is that the main perpetrator of fraud is usually the person taking the money in, not the people you're expecting to give the money to. So, I can not reiterate that enough. What ends up happening is that you would have to worry about the bank stealing the money. So, typically speaking, we have to first prove that Sawa itself is trustworthy.

And we think that one of the best ways to get people to do what you want them to do is to trust them. It's like, I think that you know, we start off from a place this is antithetical to what we talk about in financial services, but we trust everyone who comes in the door, and then we're able to verify that trust over time.

At the same time, we're trying to let them know they can trust us. So, for instance, the amount of money that you start with on a wheel is $10. If you look at buying a house, $10 on a wheel for ten weeks is not going to get you to a house. However, if we're in a situation where we want to engender mistrust in both directions, if we said it's a $5,000 wheel, well, that's going to attract all sorts of actors, and then what am I going to do if somebody puts in, you know, $50,000, can I be trusted to give it back? What if we have some sort of a shortfall in the company?

I mean, those are all things that we are cognizant of. So, the reason we start at a low level is it's a mutual trust exercise. We can understand you. You can understand us and then if you are able to get through 10 payments, which is a really quick feedback loop, then we can talk to you about graduating you up to different payments, etc.

However, if you are a person in one of these groups who's getting paid and you depend on other people in the group to contribute so that you can get your money, then you do want us to be worried about fraud.

So this is a multi-level problem. And what we do is we make sure that that fraud doesn't happen, first by not asking you to contribute a bunch of money until you've been through a cycle and really understand what we're about. Then, we do many things on our side to make sure we know the customer. We understand exactly, you know, what's going on in terms of the potential fraudulent aspects.

But the main thing that can happen is that we can filter it such that you may not get paid week one. No one may get paid week one. No one may get paid until you put in five payments. Like, we can change that. If that happens, then you have a strong sense that the average fraudster is not going to put in $50 against the likelihood of getting $100 over 5 weeks. Like, there's lots of different things that we can do to help solve that problem. However, I will reiterate. Having said all of that, that the main concern I have is that people are able to trust us. 

[00:39:12] Jason Rudman: My final question before I want to make sure that people understand how they can learn more about you and more about Sawa Money was going to be what would be the one thing you would ‘foot stamp.’

I think you just said it, which is because it all comes back to trust, right? This community all comes back to the belief that if we ultimately work together, we can cure a universal problem. If we trust each other enough and we have faith in the institution, in this case, our money, then as you and I know, when you've got more than a half of Americans that are feeling financially vulnerable or would suggest that they're barely coping financially, then Sawa Money is a solution to help try to alleviate that over the long-term. 

[00:39:59] Charles Phillips: We want to be THE solution, but we'll be a solution. And what I will say is that it's all about us creating a trusted institution. We feel like, ultimately, we want to give this back to the people. So we've talked a lot about where we are right now. If you ask me five years from now, we do have these pods where people know each other, trust each other, can talk amongst themselves, can go recruit each other, etc.

It's hard because I'm struggling to find an institution to which I can compare us to. I can't compare us to the Boy Scouts, I can't compare us to the Catholic Church, but all of these groups have had, at various times in their history, the ability to not just do something at a global level, but also do something at a local level.

And we want to be global and local. So, in order for us to get there, we do feel like we have to have a set of rules that are universal you know, you can call it the rugby rules, that then allow people to riff on that. But ultimately, Sawa will not be…it'll almost be an open-source platform. Like, remember those 450 million people I talked about? We'll know we succeeded when a good chunk of them who were doing this already just feel like our tool is better for them to do what they want to do. And we can put a little extra sauce on top. 

[00:41:06] Jason Rudman: Well, I'm excited about the future and I would tell you. The rugby, you said the rugby rules, they're the SAWA rules.

[00:41:11] Charles Phillips: Yeah. Right. 

[00:41:12] Jason Rudman: They're the SAWA rules, right? Yes, they are the rules of engagement if you believe that one of the opportunities that we have, as a much larger community, is to help people, writ large, build a better financial life.

Because it is one of the ways that I think we lift communities universally, in this country and, to your point, around the world. And there are a few, you know, there's a number of examples, we could identify Grameen, Bangladesh, microloans. There are a number of examples that we can pull on where there's elements of this experimentation that have happened and have done particularly well, and I think Sawa is building on that heritage and then saying here's what we're here to solve.

So how do people find out more about what Sawa Money is doing and how do people find out more about Charles Phillips? 

[00:42:00] Charles Phillips: The second question is a little harder than the first one because I'm not a huge fan of talking about myself. But if people want to reach out to me, they can reach out to me at charles@sawa.money and I will answer as many questions as I can.

I'm delighted to hear from people. The other thing that I will say is that we have a website called www.sawa.money. There was a video that we created that explains in a cartoon fashion, exactly how this works, and I mean, literally a cartoon, and we are just delighted to be explaining this model to people. So, if someone wants to reach out to me, talk to me, talk to any member of the team, and ask them, we are evangelists for the model. We really think that this model is a game changer.

One of the things that incumbent folks in this country are always asking is how do people come here from Honduras, El Salvador, Benin, Hong Kong, from all of these places, and they are able to get to this country they're able to start businesses in a challenging environment where they cannot get credit. This is how they do it.

And once I figured out that this was how they do it, then we know that we have a duty to expose this model to as many people as we possibly can. And that's what drives everything and gets us out of bed in the morning. So www.sawa.money, but feel free to email me. 

[00:43:13] Jason Rudman: We will include links to the video. We'll promote it. We'll make sure people have easy access to it in terms of prerelease to this, so we'll make sure we take care of that. And there'll also be links in the liner notes.

So Charles, thanks for your time. I have the benefit that, this is not the first time that we've talked. I always come away from our conversations taking away the element that there's so much more for us to do together, collectively, in order to make this world a better place for more people.

And I think you, with Sawa Money, have a solution that will indeed help people live a better life. So, thanks for your time. 

[00:43:56] Charles Phillips: Thank you so much. I appreciate it. 

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