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Intuit’s CEO on $7.1 billion Credit Karma acquisition, reorienting toward A.I., and reskilling workers

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Intuit's CEO on $7.1 billion Credit Karma acquisition, reorienting toward A.I., and reskilling workers


Sasan Goodarzi didn’t like doing what he did last June, but he felt he had to. 

As CEO of Intuit, maker of TurboTax, QuickBooks, and other finance software for consumers and small business owners, he oversees a longtime stalwart on Fortune’s ranking of America’s 100 Best Companies to Work For, currently No. 11. But in June he laid off 715 employees, an unprecedented event in the company’s 37-year history. “It is with a heavy heart that I communicate these changes,” he told employees in a long blog post. His reasons and what he’s doing now are worth a close look because companies across the economy are facing the same issues that Goodarzi faces and will likely confront some of the same decisions.

Intuit isn’t laying off hundreds because of crushed demand or cost cutting; business is booming, and the stock is hitting all-time highs. The challenge is keeping the company ahead of disruption by disrupting itself. That’s a core competency at Intuit, which has stayed independent by disrupting itself over the decades to meet the advent of the Windows operating system, the Internet, mobile devices, and cloud computing. In recent years the company has created new business models in which it connects its traditional customers with accountants and bookkeepers, with all parties using Intuit software.

Now, in the era of artificial intelligence, it’s time to self-disrupt again. “With customer needs rapidly evolving and competitors aiming to disrupt us, we need to act now and with urgency,” Goodarzi told employees. That meant eliminating jobs that were “not aligned to where we are investing for the future” and hiring over 700 new employees “to build the capabilities needed as we look ahead.” 

The broader issue is reskilling, a hot topic for companies in every industry as the pandemic accelerates technology trends. Is training a realistic option, or does today’s urgency require hiring the needed skills? Intuit does both under chief data officer Ashok Srivistava. The company offers employees a rigorous six-month course in A.I. in which students “go through it from the definition of A.I. all the way to algorithms,” he says. A one-day course is available for those who want “a glimpse of A.I.,” and Srivistava teaches a five-part course that he created for product managers, executives, and others who are less tech-focused. 

But that isn’t enough, so Srivistava also oversees the hiring of the specialized software engineers Intuit needs right away. His description of how he chooses them is a valuable guide for anyone hiring or looking to be hired for the new skills a company needs, whatever they may be. “Obviously [candidates] should have the right technical credentials,” he says. “That goes without saying. But I can tell you what I’m really looking for. I’m looking for people who are flexible thinkers, who are mission oriented, people who can communicate and collaborate very effectively with others, who can see the world from another person’s point of view, who can represent diverse ideas, diverse ways of thinking about things. That’s what I’m looking for.”

Goodarzi, 52, became Intuit’s CEO in January 2019 after leading each of its major businesses. Born in Tehran, he came to the U.S. at age 9; he worked at Honeywell and Invensys before joining Intuit 14 years ago. He spoke recently with Fortune about Intuit’s latest reinvention, the recent acquisition of Credit Karma, a Federal Trade Commission investigation of TurboTax marketing, and more. Edited excerpts:

Many companies are using A.I., but you’re doing more—putting it at the center of Intuit’s reinvention. How come?

Goodarzi: There have been two platforms that have ignited global innovation. One was electricity, which was long before our time. The second was the Internet – it ignited an incredible amount of innovation, and we’re still innovating based on that. And to me, the third one is A.I. We’re going to look back at A.I. in five to 10 years and, undisputed, it will be as powerful as the impact of electricity and the Internet. 

That’s why it’s core to our strategy. We spent quite a bit of time describing what we mean by A.I., because everybody’s uses the word A.I. – it’s a fancy word to use. We defined A.I. as machine learning, knowledge engineering, and natural language processing. Those three elements we believe fundamentally can accelerate innovation. 

When you look at our strategy, it is about being an A.I.-driven expert platform. It’s all about technology solving massive customer problems and digitizing services. 

Practically, what will be the role of A.I.? What can it do that couldn’t be done before, and how will it add value?

If you’re in New York or California and you’re engaging with an expert, the expert can be anywhere. They can be in Boise, Idaho. A.I. instantly helps that bookkeeper in Boise understand your tax situation based on everything we know about you. It will lay out the three insights the bookkeeper needs to share with you. It’s all about building your confidence and building a relationship. A.I. will help the bookkeeper deliver insights that will save you money. It can do the same thing with a small business. Based on all the data we see, we think you can go buy inventory. And by the way, based on what we know about you and your creditworthiness, you’re eligible for taking out a $100,000 loan. A.I. does all that rather than the bookkeeper having to crunch all the work. And based on what it knows about you and people like you, it also knows how to skip a bunch of stuff that’s not relevant for you.

Intuit has never laid off as many employees as you laid off in June. Why was that the right way to go?

To manage these complex distributed A.I. models in the cloud, we need systems engineers, full-stack engineers, engineers who have a lot of experience with native computing and mobile computing in the cloud. We need a lot of workforce analysts and process engineers. This requires training our folks, but it also requires bringing skills in from the outside. The training side is really hard. It’s really hard. It’s much easier to go hire someone with these skills versus training, but there aren’t actually too many people like this. So you have to invest the time doing both. 

We’re investing in our training capability because we do have people who understand systems engineering, for example, or full-stack engineering, but we need to build the capability to provide the training. So the approach we’re taking is to build out our educational capabilities and teach internally while also using partners like Amazon – we’re very close partners with them since we’ve shifted everything to Amazon Web Services – to teach these capabilities.

And in the past 18 months we’ve made three acquihires where we’ve brought in skills in this area – Applatix [a maker of cloud software], Origami Logic [marketing analytics], and we just acquired TradeGecko [software to help small businesses manage inventory and orders].

The U.S. Justice Department recently cleared your $7.1-billion acquisition of Credit Karma after the company agreed to sell its tax preparation business to Square. Why this deal?

We have 57 million customers; Credit Karma has 100 million-plus customers. They have all your spending and credit history. We have all your income information. With your permission, we’re going to give you the power of that data so you can get access to the best financial products that are right for you at the lowest rates – credit cards, personal loans, home loans, auto loans, home and auto insurance. Right now when you go get a credit card, you don’t know if it’s the best rate you can get based on your credit score. We can now make that happen. 

Last year 23 million people went to get payday loans and paid exorbitant amounts of money. We can give you early access to your tax refund and your paycheck based on what we know about you. And by the way, we can give you live expertise if you need it, because it’s just a service that will plug into Credit Karma.

Intuit’s mission is “powering prosperity around the world,” but the business is still mostly in the U.S. When will it become truly global?

We are getting traction. We now have almost 30% of all of our cloud QuickBooks customers international, and revenue is growing at 52%. We studied our own history to understand, when we went into a country, how did we make that decision? What choices did we make? We also studied companies that were born international or have been successful internationally. So we studied one of our competitors, Xero [a New Zealand-based tax and accounting software company that operates globally]. We studied Airbnb and PayPal to understand how they approach building a global company. All of that informed a global playbook, and because of that playbook we’ve been able to accelerate in countries that we’re in and make decisions to back off of certain countries. We just announced in September that we’re backing off from India because financial management is not a strong category in India. A lot of other things are, but not financial management. 

You’ll probably be talking about the success of international with the next CEO, because it’s going to take us another 10 to 15 years to really have it be a substantial part of the company. But I like our progress. That’s essential to our future.

The Federal Trade Commission has been investigating Intuit over allegations that it deceived users of TurboTax into paying for the service when they could have filed for free through the IRS Free File program. This all arose out of reporting by ProPublica. Where does the matter stand?

Our very strong belief is that the notion of making free taxes available to customers is an important part of what we do as a company and actually an important part of our strategy. The work that we’ve done with the IRS around the Free File program has all been philanthropic. It has all been around doing good, and the matter has just been very much twisted by a certain outlet. So far in every engagement we’ve had with the FTC and attorneys general, their feedback has been, “Now that we understand the data, we’re not actually sure what the fuss is about.” So we have a lot of confidence in terms of how this will play out, because we have not only a track record, but documentation that everything we’ve done is philanthropic. 

The biggest learning we’ve had, and I’ve shared this with the company, is that even when you’re doing something that’s good and philanthropic, if you have a hard time explaining it, then it’s time to step back and say, well, is this the right place for us to be investing philanthropic efforts? That’s what we’re evaluating now more than ever. It’s proceeding, and I would say the facts are on our side, and that will reveal itself very soon.

More must-read tech coverage from Fortune:

  • How hackers could undermine a successful vaccine rollout
  • Why investors jumped on board the SPAC “gravy train”
  • GitHub CEO: We’re nuking all tracking “cookies” and you should too
  • Innovation just isn’t happening over Zoom
  • Upstart CEO talks major IPO ‘pop,’ A.I. racial bias, and Google

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Coinbase’s near-term outlook is ‘still grim’, JPMorgan says, while BofA is more positive about firm’s ability to face crypto winter

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Coinbase's near-term outlook is 'still grim', JPMorgan says, while BofA is more positive about firm's ability to face crypto winter

Coinbase is well positioned to successfully navigate this crypto winter and take market share, Bank of America said in a research report Tuesday. It maintained its buy recommendation following the exchange’s second-quarter results.

The results warrant “a muted stock reaction,” the report said. Net revenue of $803 million was below the bank’s and consensus estimates, while its adjusted $151 million loss before interest, tax, depreciation and amortization was better than the street expected. Importantly, the company remains “cautiously optimistic” it can reach its goal of no more than $500 million of adjusted EBITDA loss for the full year, the report added.

Coinbase shares fell almost 8% in premarket trading to $80.74.

Bank of America notes that Coinbase had no counterparty exposure to the crypto insolvencies witnessed in the second quarter. The company also has a “history of no credit losses from financing activities, holds customer assets 1:1, and any lending activity of customer crypto is at the discretion of the customer, with 100%+ collateral required.” These rigorous risk-management practices will be a “positive long-term differentiator” for the stock, the bank said.

JPMorgan said Coinbase had endured another challenging quarter, while noting some positives.

Trading volume and revenue were down materially. Subscription revenue was also lower, but would have been much worse were it not for higher interest rates, it said in a research report Wednesday.

The company is taking steps on expense management, and in addition to the June headcount reductions, is scaling back marketing and pausing some product investments, the note said.

The bank says the company’s near-term outlook is “still grim,” noting that the exchange expects a continued decline in 3Q 2022 monthly transacting users (MTUs) and trading volumes, but says Coinbase could take more “cost actions” if crypto prices fall further.

JPMorgan is less optimistic than Bank of America about the company in the near term, saying pressure on revenue from falling crypto markets will have a negative impact on the stock price. Still, it sees positives including higher interest rates, from which the firm will generate revenue. It also sees opportunities for the exchange to grow its user base, leveraging almost $6 billion of cash. The surge in crypto prices in July, and the forthcoming Ethereum Merge are also seen as positive catalysts, it added.

The bank maintained its neutral rating on the stock and raised its price target to $64 from $61.

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Elon Musk sold $6.9B in Tesla stock in case he’s forced to buy Twitter

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Elon Musk sold $6.9B in Tesla stock in case he's forced to buy Twitter

Elon Musk sold $6.9 billion of his shares in Tesla Inc., the billionaire’s biggest sale on record, saying he needed cash in case he is forced to go ahead with his aborted deal to buy Twitter Inc.

“In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock,” Musk tweeted late Tuesday after the sales were disclosed in a series of regulatory filings. 

Asked by followers if he was done selling and would buy Tesla stock again if the $44 billion deal doesn’t close, Musk responded: “Yes.”

Tesla’s chief executive officer offloaded about 7.92 million shares on Aug. 5, according to the new filings. The sale comes just four months after the world’s richest person said he had no further plans to sell Tesla shares after disposing of $8.5 billion of stock in the wake of his initial offer to buy Twitter.  

Musk last month said he was terminating the agreement to buy the social network where he has more than 102 million followers and take it private, claiming the company has made “misleading representations” over the number of spam bots on the service. Twitter has since sued to force Musk to consummate the deal, and a trial in the Delaware Chancery Court has been set for October. 

In May, Musk dropped plans to partially fund the purchase with a margin loan tied to his Tesla stake and increased the size of the equity component of the deal to $33.5 billion. He had previously announced that he secured $7.1 billion of equity commitments from investors including billionaire Larry Ellison, Sequoia Capital, and Binance. 

“I’ll put the odds at 75% that he’s buying Twitter. I’m shocked,” said Gene Munster, a former technology analyst who’s now a managing partner at venture-capital firm Loup Ventures. “This is going to be a headwind for Tesla in the near term. In the long term, all that matters is deliveries and gross margin.”

At the weekend, Musk tweeted that if Twitter provided its method of sampling accounts to determine the number of bots and how they are confirmed to be real, “the deal should proceed on original terms.” 

Musk, 51, has now sold around $32 billion worth of stock in Tesla over the past 10 months. The disposals started in November after Musk, a prolific Twitter user, polled users of the platform on whether he should trim his stake. The purpose of the latest sales wasn’t immediately clear.  

Tesla shares have risen about 35% from recent lows reached in May, though are still down about 20% this year. 

With a $250.2 billion fortune, Musk is the world’s richest person, according to the Bloomberg Billionaires Index, but his wealth has fallen around $20 billion this year as Tesla shares declined.    

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The rent is too d*mn high for Gen Z: Younger generations are ‘squeezed the most’ by higher rents, BofA says

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The rent is too d*mn high for Gen Z: Younger generations are 'squeezed the most' by higher rents, BofA says

Most of Gen Z is too young to remember the 2010 New York gubernatorial candidate Jimmy McMillan.

But over a decade later, they would probably agree with his signature issue (and catchphrase): the rent is too damn high.

This July, median rent payments were 7.4% higher than during the same period last year, according to a Bank of America report released Tuesday. 

The national median price for a one-bedroom apartment has been hitting new highs nearly every month this summer. It was $1,450 for July, according to rental platform Zumper. In the country’s largest city, New York, average rent exceeded a shocking $5,000 a month for the first time ever in June. 

But inflation in the rental market hasn’t hit each generation equally, and no one is getting squeezed harder by the higher monthly payments as Gen Z. Those born after 1996 have seen their median rent payment go up 16% since last July, compared to just a 3% increase for Baby Boomers, BofA internal data shows. 
“Younger consumers are getting squeezed the most by higher rent inflation,” BofA wrote.

The great rent comeback

Early in the pandemic, landlords slashed rents and gave significant COVID discounts to entice tenants to stay instead of leaving urban areas. Once those deals started expiring in 2021, many landlords suddenly raised payments once again, sometimes asking for over double their pandemic value. 

Young people across the board have been hit hard, and rent burdens compared to age can be seen even within a single generation. Younger millennials had their median rent payment grow 11% from last year, while the median payment for older millennials rose 7%. Gen X experienced a 5% median rent increase, according to BofA. 

It’s not a surprise, then, that Gen Z feels so strapped for cash. The majority of young people, 61%, said they want to receive their wages daily instead of twice a week, a practice typically reserved for workers living paycheck to paycheck, according to a report from the Center for Generational Kinetics, which specializes in research across the generations. Rising rent inflation has even priced nearly a third of Gen Zers out of the apartment search altogether. Around 29% of them have resorted to living at home as a “long-term housing solution,” according to a June survey from personal finance company Credit Karma.

It’s no wonder—the rent really is too high.

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