My Epiphany at Lehman Brothers
This is taken from Chapter 1 of “ Explosive Growth — A Few Things I Learned Growing To 100 Million Users & Losing $78 Million” by Cliff Lerner available on Amazon.
Chapter 1: My Epiphany at Lehman Brothers
“In the end, it’s not the things we did that we regret, it’s the things we didn’t do.” — Unknown
Fresh out graduating from Cornell University, I was presented with an opportunity to work in a brand new group in the equities division at Lehman Brothers — the hottest investment bank in the country at the time. Everyone wanted a job there. On the surface, this seemed like a big break for a kid just graduating college and trying to find his way in the corporate world.
Lehman Brothers wanted me to start immediately. Perfect, right? Not for me; I had planned a two-week trip to Europe with my friends after graduation. I was really looking forward to this once-in-a-lifetime opportunity to see the world, experience different cultures, and visit breathtaking locales. So, full of Ivy League confidence and naive optimism, I asked Lehman Brothers if I could have a two-week break between graduation and my start date. It seemed like an easy enough request to grant, because every other new hire in the analyst training program wasn’t going to start for another month anyway.
Unfortunately, Lehman Brothers didn’t see it the same way. They said something like, “You need to be here tomorrow or we’re giving your job to someone else.” The problem was that they had just created a brand new department with only one person in it so far, and they thought I was a perfect fit to complement him. They wanted me there right away. Suddenly, that Ivy League confidence and naive optimism was replaced with professional bitterness and forlorn disenchantment.
Eight-Hundred Pages That Definitely Could Have Waited
Initially, I figured I was going to Europe anyway, but my parents set me straight on that pretty quickly. A bit humbled, but entirely ready to put it all behind me, I showed up for work on day one just as they asked. When I got there, however, I had no chair to sit in, no desk to work at, and no computer to login to. The bitterness and disenchantment quickly resumed and intensified.
Fortunately, they got me a chair rather quickly, but the computer and the desk took about two weeks. Really? Could I not have been carefully searching the streets of Rome for the best trattoria in the world, or experiencing the majestic beauty of the Eiffel Tower in Paris, during those weeks? Instead, I was told to read the 800-page manual for Microsoft Excel (not exactly my ideas of a great business book), word-for-word until they set up a computer for me. They must have known it was going to take a while to get me situated.
Although I was understandably a little perturbed at the inflexibility of my start date, I soldiered on and made the best of my early time in that group. I grew to become grateful for that slow ramp-up, because being able to make Excel sing, and learning the ins and outs of the business served me well going forward. In fact, I garnered a reputation for being a whiz at Excel, which helped me to automate tasks that previously took hours, and that ability helped me stand out from the pack. So, I suppose it ended up being a worthwhile two weeks after all.
I was part of the product management group, and my responsibilities included supporting all the senior product managers, pitching my own trading ideas, and running the afternoon research call, which I actually loved doing. I got to talk to different analysts from many different industries while learning and observing what made certain companies perform well for several years while others underwhelmed. That turned out to be a great fit for me, because a long time ago, my grandfather was a very prominent presence on Wall Street, and he even had Warren Buffet subscribe to his investment service. When I was much younger, he got me started in stock trading. It would have been an even better fit if it had started two weeks later, but that was all in the past. Or, was it?
Sad Scenes
In 2005, Lehman Brothers promoted me to a very prominent role, where I would run the morning research call as well as the afternoon one. Because the morning research call was televised to all the bank branches throughout the organization, my position was the most visible one in the entire firm. The problem with that visibility was that it was a lot like being a doctor on-call. I had to keep my eyes on the breaking news all night to know which stocks needed to be discussed during the next morning’s call. Therefore, not only was I at work at 5:30 every morning to get a jump on things, but I was also on-call throughout the night.
Although I enjoyed the job a lot and liked the people around me, this wasn’t the kind of lifestyle that a twenty-seven-year-old bachelor in New York considered ideal. The metaphorical sand that got kicked in my face came from living across the street from a popular nightclub on 13th Street and 4th Avenue. I remember battling the club goers there at 5:00 every morning for a taxi; except they were fighting — rather vociferously, from moderate inebriation and God only knows what else — for a cab to go home in, and I was fighting — rather dejectedly from moderate depression (not clinically, but you get the point) — for a cab to go to work in.
Another sad scene I remember was going on dates and looking at my watch around 8:30 to 9:00 at night and saying, “All right, (yawn) it’s been fun, but I have to get to bed now, because I need to be up in a few hours.” Of course, contributing to this emotional turmoil was the fact that I was still a junior employee, and perhaps a little more bitter than I initially realized about not getting my trip to Europe.
Clearly, what I was doing wasn’t satisfying my inherent drive to innovate, my passion for making a difference in the world, and my love for travel. Inspiration comes from strange places sometimes. For me, it came from watching the cult classic and comic masterpiece Office Space, one fateful night. If you haven’t seen it, Office Space is a brilliant movie from the late 90s about soul-sucking corporate office culture.
Office Space as Inspiration
My epiphany came from the scene in which the lead character, Peter, is talking to his therapist and his wife (who he secretly hates) — although the hatred has much more to do with his job than with her behavior.
He says something like, “Ever since the day I started working, every day has been worse than the one before it.” Then, the therapist asks him, “What about today? Are you saying today is the worst day of your life?”Peter calmly replies that yes, today is the worst day of his life.
Although I never reached Peter’s level of desperation, I found myself drawing way too many parallels between his situation and mine. I wanted to be my own boss, and God knows I wanted to travel. I wasn’t getting any younger, and the pressure to change things was mounting every day as I saw the years roll past me. Ultimately, I wanted to control my own destiny, but I needed an idea to make it happen.
At the time, my office location (complete with desk, chair, and computer at this point) was between two attractive females, who, as part of their job, would meet with clients after work to share strategy and stock ideas with salespeople. The women were both single, and I noticed they were also both on Match.com a lot during the day.
When they had client meetings, they showed up for work in their best dresses, ready to impress. However, their client meetings would frequently get cancelled, so they would log on to Match.com and attempt to find dates for the night. Unfortunately, the site’s functionality didn’t support that. It was a long and tedious process to get an online date in those days. Here’s what it usually looked like:
1. Browse a seemingly infinite set of profiles that meet the search criteria.
2. Send an email to someone who seems like a good match.
3. With any luck, a reply to the email is received. This is the online dating equivalent of the Golden Ticket in a Wonka Bar.
4. Over the course of the next several days, a few emails get sent back and forth.
5. If everything goes well, and nobody says anything stupid or shares any inappropriate images (which guys do far more often than most people realize) a phone call might be scheduled.
6. A few days later, the phone rings, and after an hour-long phone conversation to determine similar interests, a date might be arranged for the following weekend.
It was a long process just to have a cup of coffee or go to the putt-putt course with someone. All things considered, the process of getting a date usually lasted several days — more than likely, a couple of weeks. From this harsh reality of the industry’s shortcomings, the wheels of innovation began to churn in my head.
Parting Isn’t Always Such Sweet Sorrow
If these two very attractive, smart, professional women were looking to find dates at the last minute and couldn’t, there had to be an addressable need there. That’s when my idea came to me!
I could build an online dating site that catered to busy professionals, who didn’t have the time to spend days or weeks emailing back and forth to get a date.
#ExplosiveGrowthTip: Find something that people are doing inefficiently and create a solution that makes it substantially easier (ten times easier) to achieve the same result. Does your product accomplish this?
I walked into my boss’s office the next morning after my epiphany and told him I was leaving. He started ranting, “Are you crazy? We just offered you a promotion!” I handed him my two-week notice and walked out. He didn’t talk to me until my last day, when he completely freaked out on me. “You’re fucking serious! You can’t actually go! What about showing us some shred of goddamned loyalty?”
For some reason (maybe it was out of fear of his blood pressure hitting upwards of 300 over a million, causing his head to explode in a vicious spray of blood and grey shrapnel), I agreed to stay on for a few more weeks to train some new people for him.
He berated me throughout my extended departure process, incessantly asking why I wanted to leave. I told him I wanted to start a business, but also wanted some time off to travel (big surprise, eh?). After being asked the same question for the umpteenth time, I finally told him I needed six months off before I could even think about working for him again. Truthfully, I thought six months off would give me just enough time to pursue my own business and see how far I got, but I wasn’t going to tell him that.
A couple weeks later, it was my last day — again. I said my goodbyes, hugged it out with all my coworkers, cleaned out my desk and was about to leave when he made his last-ditch effort to keep me.
“Fine,” he said. “I’ve spoken to some people, and I’m not letting you leave. Here’s a piece of paper. Write down whatever it is you want.” I calmly wrote down, “Six months off.” I even spelled it out for him in big, plain, easy-to-read letters. Commence freak-out number two.
He read it, cursed (rather loudly), and threw his phone against the wall, while screaming at me, “Get the #uck out of here! I had the authority to pay you a lot more money. I’m personally going to make sure you never work on Wall Street again!”
Alas, that was the end of my tenure at Lehman Brothers, and I never spoke to him again. Shortly thereafter, I was on a plane to Europe, where I vacationed for several weeks.
Double Down
After reaching out to other entrepreneurs and friends, I learned a lot about starting a business. It became clear to me that one of the most common mistakes people make is massively underestimating the amount of money they need to start a business and get traction.
Let’s say you think you’ll need $100,000 to keep your business afloat for twelve months. What happens if you’re not having immediate success just six months into your business’s infancy? You’re not giving yourself any cushion in that scenario to keep the business afloat in those last six months. You’ve also got the added pressure of spending that last six months in a balancing act. You’re trying to save your business and (potentially) finding your next job at the same time, which makes success in each endeavor that much harder. If you fail at both, you’re going to be out on the street.
I didn’t want to live with that fear of diverting my attention from the business so quickly, so whatever my estimate was to start operations, I doubled it. Luckily, my experience at Lehman Brothers taught me a lot about the stock market, and I came up with a system of trading stocks to support myself during the early years. It was a simple and automated quantitative-based trading system, but it worked well enough that I didn’t have to pay myself any salary for the first three-and-a-half years while I learned the new business.
#ExplosiveGrowthTip: Once you’ve figured out how much start-up capital you need, double it.
#ExplosiveGrowthTip: Make the unknown known by creating a worst-case scenario plan. You’ll discover that the situation is rarely as bad as you initially thought. Do you have a worst-case scenario plan?
Taking the Path Less Traveled
My brother Darrell Lerner and I cofounded the business, which ultimately became Snap Interactive. We were fortunate that our combined skill sets created some advantages for us. Darrell had a solid legal background, and I had the Wall Street experience, which afforded us the ability to go public through a process called self-registration. Very few companies do it, because it’s not actually an underwritten IPO — meaning you don’t raise significant money from institutions. You still need legal and accounting expertise to pull it off.
We hit the ground running once I got back from Europe: getting the site up and running, acquiring users, and generating revenue. All things considered, it took a total of about five months to go public.
IAmFreeTonight.com (IMFT)
The name of the original website was IAmFreeTonight.com, and the objective was to make getting a date ten times easier than it was on other online dating sites. Users didn’t need to send dozens of emails back and forth for several days or weeks to schedule a date. Instead, they answered a few questions about what they wanted to do, when, where, and with whom. Then, they could do a quick search for singles nearby who matched their desired availability and activity.
After users answered those few basic questions, we also sent them emails containing the profiles of people with similar interests and availability in the hopes of facilitating a date much quicker than any other platform. For example, I could say that I’m free this coming Saturday night, and I want to see live music at 8:00 p.m. with a woman who is somewhere between twenty-five to thirty-five years old and lives in Manhattan. Once I input that criteria into the system, the emails with profiles of potential matches for that date would flow to my email inbox.
Confidence in the product was never a problem for me. I had a pretty good feeling our product was unique enough to be a hit, due to our key differentiator of indicating when users were free to go on dates. After all, the main value proposition of a dating site was helping singles find dates, so if we could do that ten times faster than other sites, I thought we’d have a hit.
The Fear Factor and Embarrassment Stigma of Online Dating
This was 2006, and online dating was still a new concept with a lot of undiscovered territory to explore. There was a lot of growth in the industry, but there were also a lot of issues that presented big roadblocks. The two biggest were fear and embarrassment.
Due to safety concerns, people were terrified to meet strangers they only knew from a website. And since the whole online dating industry was seen as a little taboo, the embarrassment factor was high — nobody wanted to admit to online dating.
The safety concerns were completely irrational to me, because when people meet someone at a bar the old-fashioned way (without introducing themselves online first), they’re still meeting a total stranger. At least online dating includes a digital footprint, such as an IP address and email address. When people meet randomly at bars, there’s no way to track who they are.
Maybe it was similar to today’s public perception of ride-sharing drivers. Today, the media constantly throws stories at us about Uber or Lyft drivers who are not only wanted criminals in fifteen states, but also enjoy kicking puppies in their spare time. The truth is that there are probably just as many unsavory cab drivers in the world as there are Uber or Lyft drivers, potentially many more.
The alleged connection between ride sharing and physical violence doesn’t make any sense. Likewise, the paranoia and the negative public perception associated with online dating didn’t make any sense to me, but that didn’t matter — it was still a problem that we had to address. That’s when we introduced a new feature to battle the fear factor of online dating, which was called the “wingman.”
The Wingman & Wingwoman
The way the wingman feature worked was that the user added friends to their profile as the wingman or wingwoman, indicating they wanted to meet other singles as a group, and then they could search for other groups to go on a date. It was a simple idea, but it served well to alleviate one of the biggest pain points associated with online dating — fear — because there is safety in numbers. The wingman idea was a naturally viral feature since people needed to incorporate friends (who had to get an account) in order to get value out of it.
Match.com and Yahoo! Personals were the two largest dating sites at that point, but there wasn’t anything unique about them. As a start-up, I knew we didn’t have a lot of capital to work with, but we needed a way to grow quicker, so we implemented a unique feature to inspire that growth. With the wingman feature, we were the first company to meaningfully address the perceived danger of online dating, a very hot topic at the time.
Shortly after its introduction, the wingman idea began to get us some big-time free press. There was a feature story in USA Today about us, an appearance on Mike and Juliet, (a popular morning show) and even an appearance on the Geraldo TV show, which was also extremely popular at the time. Geraldo’s producers found the concept of our dating site to be an interesting fit for business people who were traveling, lonely, and looking for love. So, they filmed the whole show in Union Square in New York City, and for their angle, they said we gave new meaning to the term, “layover.” It wasn’t quite the concept we were looking for, but it was still major publicity.
Although we did experience some success with the wingman concept and got a lot of media attention, the feature ultimately didn’t achieve the explosive viral growth that all startups aim for. Since the feature required users to invite their friends, it forced users to reveal they were using an online dating site, which most people just weren’t ready for due to the embarrassment factor of online dating at that time. This wouldn’t be our last ‘bad idea.’
Legendary entrepreneur and author Gary Vaynerchuk sums it up best by saying, “You can market your ass off, but if your product sucks, you’re dead.”
Tinder Social Aka the Wingman 2.0
Ten years after we implemented the wingman concept, Tinder introduced “Tinder Social” with success. It was a feature that was just about identical to the wingman concept, where users can switch back and forth between original Tinder mode (one person seeking another) to Social mode, where groups of friends can search for other groups of friends nearby to meet up with. It’s an outstanding idea — wish I’d thought of it. Oh, wait a second, I did! Although the Wingman feature is not how Tinder achieved explosive growth, it did teach me that Timing — not necessarily being first — is truly everything.
#ExplosiveGrowthTip: First-mover advantage is useless if the timing isn’t right. Have you thought about ideas, products, or features that failed in the past — simply due to being too early — that may work now?
Manhattan’s Got Talent
“Amazing people become increasingly amazing over time.” — Jayson Gaignard, Founder of MastermindTalks
Before we could start getting users and making money, we needed a developer who could take our specs, build a demo for us, and get the site up and running. We got some referrals and went with a firm that built websites, and they assigned a developer to our project. I remember the firm operated out of the basement of an old pasta factory, which was odd, but it worked out — not right away — but, eventually.
For whatever reason, there were numerous delays with our demo — we kept being told they were working on it. Naturally, we got a little anxious, but after three to four months, we finally got to see a demo, which was very exciting.
Finally, after all our careful planning, thoughtful execution, and serious investment of time and money, we had the chance to see what our website would look like — and they showed us someone logging in and logging out. That was it. It took them three to four months to show us how to log in and log out — nothing else. The login/logout experience was so good though, that they even demoed it for us a second time! So, we did what any thoughtful, forward-thinking entrepreneurial group would do at a time like that — we panicked.
We had a talk with the firm about our expectations, because frankly, we didn’t know if that was a good demo or not. We knew, however, if that was good, we were screwed. Fortunately, they came back to us and said, “Wait, we have someone who we think is much better.” That’s when they gave us a hidden gem — Mike Sherov, who single-handedly built IAmFreeTonight.com and later our first Facebook App. Mike was a key hire, playing an irreplaceable role for us in many ways. He eventually joined us full-time, and became our lead developer and head of technology. He stayed with us for another seven or eight years afterward.
Mike saved the day. If it weren’t for his leadership and development expertise, who knows what would have happened to the company at such a critical juncture? Team is everything, but a few extremely talented members of that team can make all the difference in the world. If you’re a sports fan, think about some of the following analogies:
-How good would the ’95-’96 Chicago Bulls have fared without Michael Jordan and Scottie Pippen?
-Would the New England Patriots have won five Super Bowls from 2001–2017 without Bill Belichick and Tom Brady?
-What about the Edmonton Oilers of the 1980s without players like Mark Messier, Paul Coffey, and of course, Wayne Gretzky?
A great team can take you a long way, but elite individual talent might be what you need to get over the hump. I’m not sure if any of the amazing things that happened later would have ever occurred if Jim and Mike weren’t onboard in those early days. In fact, I’m almost certain they wouldn’t have.
#ExplosiveGrowthTip: Your first few hires will set the tone for your culture. Secure elite talent ASAP and hire carefully. Are you confident your last few hires are the right cultural fit?
About the Author
Cliff Lerner is the Author of ‘Explosive Growth — The Ultimate Startup Playbook For Entrepreneurs To Grow To 1 Million Users”, which is available on Amazon. Follow Cliff Lerner to get more Startup Growth Tips and free chapters from Explosive Growth.
