Since its inception, Addepar– a wealth management consulting firm founded by Joe Lonsdale ’04 and currently led by Mike Paulus ’10 M.S. ’11– has been working to make strides in the area of data usage for financial analysis and management.
“After the crisis, there has been a recognition that investors need better technology,” Paulus, Addepar’s president, said, referencing the firm’s extensive use of data analysis. “They need tools to analyze what is going on in their portfolios, what is the risk, what are they holding and so on. That was really the genesis of Addepar– it was solving this problem.”
Banking on data
In 2009, Addepar was founded in a small house in the Marina area of San Francisco. After the first six months of work, according to Paulus, all that the firm had determined was the complexity of the financial system they sought to address.
“If you look at finance today, the core problem is that no one has their money in one place, especially after the financial crisis,” he said. “Until then, people never thought about where they put their money, but after that they did. Now everyone has money diversified and stored all over.”
The firm turned to data analysis as a means of addressing that disparate distribution of assets, integrating business acumen with technological savvy.
“What you need, if you’re managing a lot of money, like an endowment or a pension fund, is to have all that data in one format and an analysis report so that you can see your global exposures,” Paulus said.
“We aggressively seek out the best engineers in the world, and empower them to build beautiful, truly innovate platforms,” he added. “There is a partnership between the business and engineering side for that… We think it is really important to get the best group of people in a room.”
Paulus cited the integration of both market data and data on firms’ holdings as differentiating Addepar’s approach to consulting and allowing more complex analysis.
“Theoretically, you have the kind of data where you could predict the market and make a lot of money [for ourselves]”, he said. “We’re not going to do that, though– we’re the good guys.”
According to Paulus, that analysis– and the transparency it encourages– could play a role in preventing another financial crisis.
“One of the problems that cause the financial crisis was that people did not know what kind of and how much risk they were exposed to,” he said. “If you want to prevent the next financial crisis, part of it is regulatory, but the other part is giving the end wealth holder the power to understand what is going on.”
“We are very passionate about changing finance– if you want to change the world, finance is a huge lever,” he elaborated, commenting on the firm’s greater vision. “By helping a retirement plan for 200,000 or a million people get better returns, you are literally impacting a whole world of people. Really good investing can have unbelievable effects on millions of people.”
Fostered on the Farm
Paulus attributed much of his success with Addepar to his time at Stanford, both through academic coursework– in economics, computer science and management science and engineering– and through opportunities for entrepreneurship.
“I was very entrepreneurial at Stanford– in the 2008 election, everyone was going crazy about Barack Obama, and I made T-shirts with Barack Obama’s face wearing Kanye West’s sunglasses,” he said.
He also cited his experience selling real estate in the summer of 2008 as inspiring a desire to prevent future occurrences of financial turmoil.
“In the 2008 financial crisis, my brother and I worked in real estate,” he said. “We literally bought and sold houses on the courthouse steps… I was really passionate about trying to prevent another crisis like that from happening again.”