PayPal President and CEO Dan Schulman has been recognized as one of Fortune’s top 20 business people of the year for three consecutive years. He has received visionary awards from the Council for Economic Education in 2017 and the Financial Health Network in 2018 for his promotion of economic and financial literacy to create a better-informed society. Dan is committed to building a world where everyone has access to economic opportunity, which he advances through his work as a lifelong member of the Council on Foreign Relations and co-chair of the World Economic Forum Steering Committee to promote global financial inclusion.
Welcome to Emerge Everywhere. I’m Jennifer Tescher, journalist-turned-financial health champion. As founder and CEO of the Financial Health Network, I’ve spent my career breaking down silos by engaging with innovators across industries. And now, I’m sharing those conversations with you. Meet the forward thinking leaders challenging the status quo and unleashing creative, new ways of improving financial health by seeing their customers, employees, and communities in 3D.
When I think about visionary leaders tearing down silos, the person who immediately comes to my mind is Dan Schulman. Dan has been the president and CEO of PayPal since 2014, where he has led the company to reimagine how people move and manage money. I met Dan eight years ago, shortly after Walmart announced a prepaid card with American Express called Bluebird. I was so surprised to see these two brands come together that I wanted to learn more, and so I managed to get a meeting with Dan.
I remember entering his office overlooking the Statue of Liberty, and there he was in a blue V-neck sweater, jeans, and cowboy boots. We started talking about prepaid cards and democratizing access to financial services. And he said, “I’m here to transform an exclusive brand into an inclusive brand.” That one statement explained it all. The Walmart deal, the cowboy boots, and as I would come to understand over time, the man himself. Dan is not only one of the most genuine leaders. I know he is also a black belt silo buster. Welcome to Emerge Everywhere, Dan.
Thanks so much for having me, Jen. It’s so good to see you again.
Yeah, even over video it counts, I think. I really wanted to have you on as the very first guest of this podcast because you and I have been exploring the contours of financial health for nearly a decade now. But whether you call it financial health or financial inclusion or democratizing access, this has been an animating theme of your whole life. And I want to start by finding out where does that passion come from for you? What really informs that?
I think my dad once told me that the one thing you can’t choose is your parents, but I’m really happy about that because I had two great parents who were inspirational for me and role models. Not that they didn’t discipline me every once in a while, but certainly, when it came to social justice and thinking about the way our world works and how we can make it a better place, they were incredibly involved in that. My dad was worried that I would be the youngest person to ever have an FBI file because my mom was pushing me in my baby carriage in civil rights marches.
And my dad, who worked his way up out of college on the GI Bill to become the manager of a chemical plant down in Mississippi, and one day, one of the Black workers was fired by the white foreman there who did not report to my dad, for drinking at the wrong water fountain. And my dad told my mom that he would need to travel down to Mississippi right in the middle of the 1960s, pretty even dangerous time. My mom was quite fearful for what would happen to my dad, and my dad went down there and reversed that decision. And I still remember that vividly to this day. And so that idea of thinking about underserved communities, what we can do for them, how we can work together, where we can make a difference, has been a motivating force for me for as long as I can remember.
And it sounds like, really, this concept of empathy was just a given in your household.
I think you can’t really understand somebody else, maybe even yourself, if you don’t have a large degree of empathy, of putting yourself in somebody else’s shoes. Another thing my dad always told me was we’re born with two ears and one mouth, and we should use them proportionately. And that was really his way of saying that you never know it all. You can always learn more. And the way to learn is through listening and putting yourself in somebody’s shoes.
And the other thing I would say, Jen, is you can’t separate yourself. Like you can’t have an intellectual part and an emotional or a part of you that’s driven by your heart. A complete person has to have both of those things working in harmony. And you can really only start to, for instance, satisfy a customer’s need or understand a friend or a colleague if you can really listen to them and have that degree of empathy. Not just intellectualize what they’re thinking or the issues of the day, but actually go through them, walk a mile in their shoes. And then you can really speak with an authenticity and an authority as a result of that.
I’ve always thought of you as incredibly authentic, but I’ve also seen you as a creative person, as an innovator. And as I’ve been thinking about this idea about silos and how they constrain our thinking, what I realized is that you’re actually a silo buster. You were early in your thinking about the cell phone as a computer in your pocket, and the prepaid card as a bank account. Those were both ideas of busting silos.
And American Express, you caused the company to think differently about its customer segments and who actually might their customers be. And at PayPal, you joined a technology company just as it was spinning off from eBay and realized it needed to become a consumer and small business payments company. I want to explore this idea with you and help our listeners understand how you do what you do, how you bust these silos.
Let’s actually start with your PayPal experience. Tell us how you realized that PayPal needed to shift really its entire conception of itself. And how did you go about making that happen, shifting it from a technology company to a consumer company?
The very first question I got asked when I joined PayPal, like day one, John Donahoe was next to me. We’re on stage in front of multiple thousands of PayPal employees. And I was coming from American Express, from Wall Street, even though I was never really a Wall Street type of person.
The clothes alone, they probably didn’t let you in, right?
There’s a lot to that story that someday we’ll talk about. But somebody asked from the audience, do you consider us, PayPal, to be a technology company or a financial services company? And I knew what they were getting at because PayPal’s heritage is in software and is in technology, and they were worried I was coming from Wall Street and it was going to be all around compliance and regulatory oversight. And you really need to blend all those things together.
And I said, I understand why you would ask that question, but I hope that in a couple of years, what we’re going to be known as is a customer champion company, where it’s not that we’re a technology company or financial services company, but we are a company that obsesses about doing the right things for customers. And that is easy kind of to say, but the truth of the matter is it’s actually quite hard to go do because normally what it really means to be customer-obsessive is to challenge your own business model and the way you organize, because the big issues are always end-to-end issues. It isn’t one function. You can do something like, if you have a risk organization and their whole idea is to lower losses, then that runs counter to maybe you have a very high-value customer segment and on the benefit of the doubt you want that transaction to go through because over the lifetime value of that-
…Transaction to go through, because over the lifetime value of that customer it’s much more important. So, you really need to have end to end accountability across organizations to solve really hard problems. And my view is if you want to have an expansive vision, that expansive vision needs to be something that inspires your employees first and foremost. They need to think about being more than just a checkout button, or being more than, I work on technology. It needs to be something that, when you go to work every day, you think to yourself, I’m so proud to work at PayPal because we are addressing some of the biggest issues that face vulnerable populations, and we are uniquely positioned to be able to do something about that. And that is a privilege for us. That is a thing we should never take for granted, because to be in our position, to have that ability to make a difference is a gift to all of us. And so, that requires one team thinking, it requires end to end, it requires we bust down those silos, because silos thinking sub optimizes the whole, always.
And so, it sounds like you started with painting a vision for your new employees, if you will, and once the company went public. And you set out to create an organization that created end to end accountabilities. What else do you have to do in an organization that has never really thought of itself in that way before? What do you have to do to start changing hearts and minds? I assume the hearts part might be easier, because I think younger people in particular these days, tend to be looking for purpose in their work. But this goes to everything, including what data you gather, what data you even have about your customer, how you make decisions. Talk to us a little bit more about that transformation.
Yeah. Well, as I was saying before, I think to make a cultural transformation, or to make a business model transformation, you have to believe it intellectually. And there are tons of facts that you can always put out into any argument that intellectually you get it. For instance, intellectually you get that at least 70 million people in the US or outside of the… Are underserved by the traditional financial system, at least 150 million of them struggle to make ends meet at the end of the month. And intellectually you get how difficult that must be. But really you get it is when you walk a mile in their shoes. And one of the exercises that’s required for all PayPal employees is to basically spend a day without any financial instrument. Basically having to go to a cash checking store and cash a check, wait in line for 30 minutes. See whether or not the name on that check matches the name exactly of your government ID.
Then what do you do when you get cash? And see how much it costs to go and do that. And then, you’ve got to pay a bill, but you don’t have a checking account, so what do you do? You’ve got to walk to another place, stand in line again, and then pay another fee just to send a bill. And if you want to go send money to somebody you love overseas, you stand in line again, and you’ve got to go through all the password and stuff that you need to do standing in line, and that costs eight to 12% of the remittance that you’ve done. And after a day of doing that, it’s only a day, you realize that managing and moving money is practically a part time job if you’re outside the financial system.
It takes away your humanity when you do that, the dignity of just what you want to go do and where you want to be and how you want to go do it, it takes away your hard earned money. And that’s segments of the population who can least afford for that hard earned money to be taken away. And going through that personally is what really changes people’s mindsets. It can’t just be intellectual. It needs to be personal. And then once that happens, then you can really talk about it with that authenticity we’ve talked about, but a sense of passion and purpose as well.
Did you do the same exercise, Dan, yourself?
No. I’ve done it now twice. I did once at American Express because I did that for all of the people at American Express, and I’ve done it at least once at PayPal as well. And you learn something every single time. When I was at Virgin Mobile, when I was running Virgin Mobile, we were supporting homeless youth, and I spent, and it was only 24 hours, but people seem to think it was some very, very difficult thing. It was hard, but it was only 24 hours. But I spent 24 hours out in the street, begging for money, finding a place to sleep on the streets of New York City, trying to find a cup of coffee for under 25 cents, because that’s all I could raise after 24 hours.
And just have that stripped away from your dignity, from your sense of self. And it was only after that, that I could really be an advocate for homeless youth. And so, I think that, again, you bring your whole self to work, and if you can feel passionate about it, and if you have values that back that vision, then you really can attract the very best and brightest to your company. And if you can do that, nobody can serve customers better than a passionate workforce.
Yeah. Well, that couldn’t be a better example of how you learn to see your own customers in three dimensions. But it sounds like you’ve also recently started to try to understand your own workforce in three dimensions, even maybe four dimensions because I know you were trying even before that. But tell us a little bit more about that part of the journey, which I think began pre pandemic, right? This is last year.
Well, it really started even before that. One of our top values as a company is inclusion, and we started almost within a month or two of my getting there, looking at were we paying equitably across both gender and ethnicity in the United States? We found out we weren’t. And then the next question was, well, it’s going to cost millions and millions of dollars, shouldn’t we do that over a couple of years? And my response to that is we should do it within a week. Make it this equal and fair pay. And that was how we started because you really need to have a workforce that is diverse, if you’re going to be competitive. And it’s that simple. And I really can’t understand how we don’t pay equally all these years later. I mean, it makes no sense to me. So, maybe we’ll get into that later. So, then as you and I both know, so much of the country struggles to make ends meet at the end of the month and they’re financially distressed.
They spend a disproportionate amount of time just thinking about their finances and it’s really quite mentally exhausting and destructive in many ways. And I figured that this was not the case with PayPal employees, because we pay at or above market, everywhere. So, I decided to do a market research study, talking to our employees. Actually, I thought the results were going to be great and I was going to talk about them at an all employee meeting. And they actually turned out to be quite disturbing that, of our call center employees and our entry level employees, it’s about 10,000 people inside PayPal. The same was true about 66%, 70% struggled to make ends meet at the end of the month. They were stressed. And we decided, how are we going to address this? Because we paid at market, the market obviously wasn’t working, and we came up with a new metric called net disposable income, which is how much income does an employee have…which is how much income does an employee have after they pay taxes and essential living expenses. And you need to do that location by location across the world, is very different. And what we found in the US is that our employees had between something like 4 to 6% NDI. So no wonder they were struggling to make ends meet. That’s like anything outside of essential living, they had almost nothing saved. And we decided that we were going to set a target of 20% NDI as a minimum for any employee of PayPal.
And so we lowered the cost of healthcare benefits by 60%. So people wouldn’t have to trade off getting healthcare or having food on the table. We gave every single employee in PayPal equity in the company, so they could share in our success. We raised salaries where we needed to, and we surrounded all of it in a financial education program, because as you know, if you’ve never had equity before, you’ve never had the wherewithal to save before, understanding that is so crucial.
And the results have been amazing as we’ve gotten closer and closer to 20%, in many parts of the world, we’re over 20%. Hopefully by the end of this year, we’ll be over 20% for all employees. That has made a radical difference in their lives. And to me, moving from being a good company, which I think PayPal is today, but we’re not a great company.
But one of the foundational elements of moving from good to great is having a passionate workforce that believes in your mission, embraces your values, but also has at its foundation that they’re financially secure and financially healthy because that unleashes that passion. So yeah, I’ve spent a lot of time on thinking about employees as my number one constituency to serve.
Well. And the common theme through this conversation is really about measurement and empathy building, because you don’t know until you ask or until you experience it for yourself. And I’ve seen that time and time again, you go into an institution or a company to talk about financial health and they say, “Oh, my customers, I know what the national data tells me. My customers are in better shape than that. Or my employees are in better shape than that.” And averages work for a reason.
In general, people kind of hit the average, which in this country isn’t so good. So the notion of when you can experience it yourself, experience it yourself. When you need to seek the data, seek the data. It seems like that’s really been a common part of your playbook as you’ve been trying to bust these silos and really make sure that you’re seeing people in their full self.
Yeah. And by the way, if you think about it, Jen, what you just mentioned is this combination of data, which is your head, your mind, intellectualizing it, and then your heart on the other side, tapping into that passion piece of it and that empathy. And that’s where you really unleash, I think, the full potential of people when they can tap into both sides of themselves.
Yeah. Mary Daly, the president of the San Francisco Fed was supposed to speak at South by Southwest earlier this year, which of course got canceled. And so she turned her speech into a podcast, and I think you would really enjoy it. It’s also about seeing people in 3D, and she tells her personal story of her journey from being an economist whose knee jerk response was what good are emotions anyway to recognizing, “Hey, there’s this whole personal side of myself. That I’m not able to show that I’m not able to have other people experience.”
And so she’s on this journey with the entire staff of the San Francisco Fed to have people bring both their head and their heart to work simultaneously. It’s really an incredible story that she tells. So, silos at the end of the day are human nature.
They’re how we make sense of this increasingly complex world we live in. But that doesn’t necessarily mean they’re a good thing. And I think about the history of systemic racism in this country, it’s about a lot of things, right? It’s about power, it’s about money, it’s about politics, but it’s also a history of silos.
And now after the killings of George Floyd, Breonna Taylor, Ahmaud Arbery, and so many other black people, and after hundreds of peaceful protests around the world, it feels like we’re at a real moment of reckoning. So tell us a little bit about what you’re doing both personally and at PayPal to be part of the process of tearing that silo down.
Well, as I mentioned before, the idea of inclusion is nothing new to us at PayPal. We’ve stood up, whether it be LGBTQ rights out of North Carolina, with a House Bill 2, whether it be the Immigration Bill, whether it be hate groups like the KKK or other Nazi sites, where that we’ve taken down. This idea of diversity is a fact, but inclusion is a choice, something that we’ve embraced, but all of a sudden you have COVID-19 hit.
I think it forces people to be a little more reflective maybe than they’ve been before. Think a little bit more deeply about what’s important in life. And then you have a tragic and senseless killing of George Floyd and so many others before. And it awakens something that I’ve rarely seen. And there was a tremendous amount of angst and despair and determination throughout PayPal, but that was most acutely felt by our black colleagues.
And one of the things I did is that I tried to spend the first couple of weeks listening to black leaders, black employees inside of PayPal. I spoke to black leaders across the country. And one of the things that came out of that is I felt that for PayPal and for myself. But for PayPal, that it was not enough to condemn racism, that we had to be anti-racist.
And anti-racist, means that you’re willing to be part of the fight, that you’re willing to stand up and do the work, not just over the short term, not just make a $500,000 donation to a number of charities who are doing great work, by the way. I don’t minimize that in the least, but you want to be sure that this isn’t a moment, but a movement that is occurring.
And so we looked hard inside ourselves and said, “Is this going to be about saying something or is this going to be something that we demonstrate through our actions that we’re very serious about this being a movement. And that, is there something that we can distinctively do as PayPal?” And what we felt we could distinctively make a difference is in addressing the racial wealth gap, that really is not closed at all since the last civil rights movement back in the 1960s.
And so we decided that we were going to demonstrate in a large way how committed we were, and we hope that it would also inspire others. And so we said that we were going to commit $530 million in a variety of programs over both the short and medium term to help black owned businesses, to help black communities and minority communities in terms of giving cash to black-owned businesses that especially need it now in the time of COVID-19, where two times the amount of black businesses are closing than other businesses.
… the amount black businesses are closing than other businesses that we would immediately give $10 million of grants. They’re not loans, grants. And by the way, within two days we had 55,000 applicants for that money that we would give $5 million to nonprofits who are working on the ground to help black owned businesses. And that we would also spend money inside our company because we have a long ways to go before we feel like we can claim to be representative. We’ve made great progress, but we have a long way to go, yet. And then we put aside a $500 million fund to invest in entrepreneurs, into black and minority young venture capitalist, the black minority on community banks, just to be a part of this over the long term as well. And there’s a lot of pride that, that unleashed inside PayPal. I think it made a difference in terms of how companies started to think about how they can react and help drive social justice. And the work is just beginning.
So Dan, clearly you’re a person of action. Before COVID and before George Floyd, there’s been a lot of talk about the role of capitalism, the role of the corporation, given these massive inequities we have. Are you seeing anyone else take the kind of action you’re trying to take? Because like we need more Dan’s out there. And so my real question is, do you scale? How do we scale you? And how are you …
Not much more.
Right. What are you doing to influence other leaders? And are you seeing the business community really, truly change or just make nice statements?
Well, I think it’s a combination of actions. Some have been statements and others have clearly done more, I think Doug McMillon at Walmart, Satya Nadella at Microsoft, Marc Benioff at Salesforce. They’re inspirations to me, and role models to me. And you know, Jen, the other thing is, I think it’s … until you walk in somebody else’s shoes, it’s hard to moralize or to just say, somebody should do more or less. But I do fundamentally believe that businesses have an obligation to step up. They have an obligation to be a force for good, that CEOs need to take stands of sometimes difficult. Like I’ve received a lot of death threats as a result of the stands we’ve made. But take stands that are consistent with the values of their company so that the values aren’t propaganda on a wall, but they’re real actions that are taken because when you do that, employees are inspired.
It’s why they come to work for PayPal. And it’s why they stay at PayPal. And it’s why they’re so committed to what we do and why something like 94% of all employees at PayPal are proud to work at PayPal. And it’s because we really do think about multi-stakeholder capitalism. And it’s just a fancy way for saying that we, as CEOs must serve multiple constituencies.
We need to stand for more than just making money. We have to have a purpose behind our company. And ironically, when you do that, I think you serve shareholders better than those who’re just focused on serving shareholders because you have employees that want to do the most they can for customers. And when you’re doing the most you can for customers, regulators are happy because you’re doing the right things for customers. And when you do the right things for customers, inevitably, that accrues to the company and to shareholders as well. And so, I just think more and more companies are going to do this, if not, because it’s a moral imperative to do it, but because it’s a competitive imperative to do it. And I think, I’m a little [inaudible 00:04:27], about this. It doesn’t matter to me why somebody is doing it, as long as they’re doing it.
Yeah, no, exactly. I think that’s the perfect place to end our discussion. Dan Schulman, thank you so much for joining us on Emerge Everywhere.
Thank you so much, Jen. It’s been a pleasure.
This has been Emerge Everywhere, a Financial Health Network production. I’m Jennifer Tescher, and I’d love to hear your ideas for future guests and your reactions to the show. You can connect with me on Twitter @jentescher. If you liked this episode, please review the show and subscribe wherever you get your podcasts. To learn more about the work and research we do, please visit emerge.finhealthnetwork.org. See you next time.