318: Phaedra Ellis-Lamkins On Criminal Justice Reform

Phaedra Ellis-Lamkins is an American social justice advocate and the co-founder and CEO of Promise, a California-based company reworking the bail system. In this conversation, we discuss the devaluing of content, radical honesty, criminal justice reform, bail reform, and how technology can solve society's problems in a for-profit model. =============================== The Helium Hotspot is a new product that enables the people, not the telcos, to own and operate a wireless network in their city for Internet of Things devices. You can literally earn crypto for helping to build the network and providing connectivity to Internet of Things devices sending small bits of data. Join the movement and get your Helium Hotspot today with $50 off using the code POMP at helium.com. =============================== Pomp writes a daily letter to over 50,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at pompletter.com

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast. Simply the best podcast out there. Let's kick this thing off.

• 0:11Anthony Pompliano?

  Phaedra Ellis Lampkins is an American social justice advocate and the co-founder and CEO of Promise, a California-based company reworking the bail system. In this conversation, we discuss the devaluing of content, radical honesty, criminal justice reform, bail reform, and how technology can solve society's problems in a for-profit model. I really enjoyed this conversation with Phaedra, and I hope you do as well. But before we get into the episode, I want to quickly talk about our sponsors. The first is Helium. The world should be more connected, but it isn't. We should be living in one of the ages of the Jetsons, yet it feels like we're still in the age of the Flintstones. The only way to connect to the internet outdoors is by using cellular technologies.

• 0:56Anthony Pompliano?

  It just makes no sense. Wouldn't it make way more sense if all these things had a network that worked just for them anywhere and anytime? Well, now they do. That's what the Helium Hotspot does. The Helium Hotspot is a new product that enables the people, not the telcos, to own and operate a wireless network in their city for Internet of Things devices. That's right, it democratizes the ownership of a wireless network. So you can literally earn crypto for helping to build the network and providing connectivity to the Internet of Things devices by sending small bits of data. Join the movement and get the Helium Hotspot today with $50 off using the code POMP at helium.com. H E L I U M dot com. I've got one set up, and you should too.

• 1:41Anthony Pompliano?

  Helium Hotspot, help democratize access and ownership of a wireless network today. Helium.com. Also, don't forget that I write a daily letter to over 50,000 investors about business technology and finance. I break down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at pompletter.com. Again, pompletter.com. Alright, let's get into this episode with Phaedra. I hope you guys enjoy it.

• 2:09Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 2:34Anthony Pompliano?

  All right, guys. Bang, bang. Super excited about this conversation. We're going to do a lot of learning today. Feeder, thank you so much for doing this.

• 2:43Speaker 02

  I'm happy to be here. I mean, happy to be in anything that starts with bang, bang. It's like, okay, I'm ready.

• 2:52Anthony Pompliano?

  All right. So let's start with your background. You're doing awesome work now, but you've had a bunch of cool things you've done in your past. Let's start there and then we can get into some of the bail reform stuff.

• 3:01Speaker 02

  Sure. So I started in the labor movement. I was an organizer and really focused on how did you improve the lives of low wage workers? And then ended up running a labor federation. In addition, we had a nonprofit policy organization that worked to leverage the political power of the labor movement for moral policies. So things like how do you create living wage for service sector workers? How do you have healthcare benefits for kids regardless of documentation? And so spent 13 years really trying to just figure out how did you improve the lives of working people? And from there was became really interested in the kind of dichotomy between the labor

• 3:42Speaker 02

  movement and the environmental movement and was struck by the fact that people, we often made choices in the labor movement. We were faced with like good jobs or pollution, like we didn't have great choices. And so it just, I wanted to understand what would good choices look like? Could you create an economy that was sustainable for working people? And so I went and ran an organization called Green for All. And it had been founded by my friend Ben Jones, who had gone on to the White House. And so I spent a couple of years doing that work and learned a lot. It was the last nonprofit I was in. So I learned a lot about kind of what worked and what didn't. And then ended up working in music. I worked for the musician Prince after that. And then after I worked for Prince, I became very interested in how technology was impacting

• 4:27Speaker 02

  music and especially artists of color. And what was fascinating to me is that technology had not been a positive force from my perspective in the labor movement, specifically low-wage workers, the kind of who was core to the firm changed. And all of a sudden, service sector workers were making lower wages, they no longer were employees. And what I observed in music is that basically the devaluing of content meant that kind of legacy artists or artists of color, the content was worthless. And so I wanted to understand what worked, and I didn't want to go back to school. So I went to work at a company called Honor. And I went and ran, I went there to run operations and then ended up running operations and

• 5:09Speaker 02

  revenue. And I was there for a couple of years and enjoyed it a lot. I learned a lot, a lot there. And then decided to start my own company because I learned a lot from Seth, who was a CEO, both raising money with him. I had this idea that raising money was not complicated. And it was very, and that really that technology allowed you to figure out, like you could do anything. And I wanted our folks to have technology.

• 5:40Anthony Pompliano?

  So I got to ask, the working with Prince isn't exactly what most people get to spend a part of their career doing. What was that like? And kind of what did you do there?

• 5:49Speaker 02

  So I acted as kind of, I made sure that his world work, my first job was to negotiate with a lawyer to get his master's back. And I actually did it during my maternity leave. And so I didn't intend to work for him. Amanda was like, oh, Phaedra can do anything. And so we did that. And then we got his master's back. And he just basically was like, you shall never leave. And so then I ended up working for him, very oddly. I think that's really interesting. One, I didn't know a lot about music. And so I learned a lot about music. I learned a lot from him about really what it takes, I think, to be excellent.

• 6:30Speaker 02

  And he practiced every day, even though as amazing musician as he was, he practiced every day. And that for me was very impressive. Um, and I learned a lot about just commitment to art. And I think he's probably the most radical political person I know. And so also just watching how he used music for leverage in the public space. Um, so I just learned a lot. Um, and my favorite part about music is I felt like people were much more honest. Um, I had a meeting with a president of a record company and he said, "We want to talk about exploitation and how to exploit your music." And I was like, "This is the most honest discussion." Like they call using something exploitation in music. And so I was like, "Oh, like this I can deal with. You want to exploit the music? Got it. Okay, check."

• 7:14Speaker 02

  Like I liked that level of transparency. That it's like, "We just want to exploit you." So there's no pretense, like, "Let's be friends." It's like, "We're going to exploit your music." So I was like, "This is the cleanest terms I've ever learned and used." So obviously, he was brilliant and amazing. Um, and I learned a lot. Um, and also made some, uh, just learned a lot about the way the world worked.

• 7:34Anthony Pompliano?

  The world would be a much better place if radical honesty like that was used everywhere, right?

• 7:39Speaker 02

  We're going to exploit it. I was like, "Wait, okay, that's what, okay, cool, like, got it." We've established the norm for how we talk about things, which I thought that was the most transparent communication I've seen in a long time.

• 7:49Anthony Pompliano?

  Yeah, I, I, um, I didn't know very little about the music industry, but I recently watched, uh, there's a two-part documentary on Netflix, uh, about Garth Brooks. And they go through a lot of the early days and kind of all of the nuances around, you know, the songwriter, who has rights? And then who chooses to perform the songs? And how the money gets, uh, divvied up from concerts and all stuff? And, and you realize very quickly, like, this is, one, a massive business, but two is, uh, the longevity, uh, in terms of revenue for a lot of these artists. Uh, it sounds like things like the, you know, the masters is super important over long periods of time. Uh, and most people are young and they do get exploited, right? And then they kind of just get taken advantage of and, and they end up not being in a good spot.

• 8:28Speaker 02

  Yeah, I know. It's funny, we would see people, they'd be like, "Oh, my gosh, I got a million dollar deal." And you'd say like, "Oh, that sounds so great." But then you would realize is they got a three album deal, that they had to sell X amount, and they got a $10,000 advance. And it wasn't actually as great as they thought. So that was one thing I learned a lot about.

• 8:46Anthony Pompliano?

  I don't know if you've ever heard Bill Burr, the comedian, talk about Hollywood accounting is a term that he uses. And he basically says Hollywood accounting is something like, we do a deal, you get 60% of profits, I get 40%. But then there's a bunch of clauses in there that say that I pay for everything. So it's not really profits, it's actually a revenue split, but after I pay for everything. And so it ends up being more like 90/10 rather than the 60/40 I thought I was getting. And he calls that Hollywood.

• 9:16Speaker 02

  Yeah, it's definitely Hollywood accounting.

• 9:19Anthony Pompliano?

  And so how do you go from that, you go to honor, right, you learn a ton there. That's actually, Ruben Harris worked with you there and who so kindly introduced us. But then how do you start to understand a lot of the criminal justice reform issues and bail reform?

• 9:36Speaker 02

  I'm lucky that Van Jones, who was a friend, and a woman named Diana Frappier, who I started Promise with, we'd all worked together in different ways for about 12 years. Diana and Van founded the Ella Baker Center. And it was focused on criminal justice reform. And so, and then became very interested in it, really related to my observations around kind of what was happening. And I think it's one of those things where if you don't, we all, I think, have people we love who've been impacted by the criminal justice system. And what I was struck by is just the numbers.

• 10:17Speaker 02

  And so the fact like that two thirds of the people that were incarcerated were there, in jails, like mostly county jails, were there and that they hadn't been convicted of the crime that they were arrested for. I think you know, like you feel like your family, I always say like when it's your family member, you're like, this is someone who's dealing with addiction or mental health issues and you see it. But oftentimes people don't see it for other people's family members. And I think when I saw the statistics and I start to have felt them in my own life, through my own personal family's experience, I just was like, this is, it's such a corrupt, broken system. And the more I'm in it, the more corrupt I believe it is.

• 10:57Speaker 02

  And um, and so it's just been, so I just became interested just based on the statistics of what and who was happening. And um, and that just became very interesting to me. And then working in it and realizing that if you are poor, black or brown, the system is just designed to incarcerate you. And it works hard. I mean, the fact that people are in jail for parking tickets, like, to me, that is just, it is only because you are poor.

• 11:20Anthony Pompliano?

  Okay, so I really want to kind of drill into this because this is the, to me, the meat of the issue is most people, some of the things you just said, they don't even know exist, right? So, simple things, uh, some of the data I've seen you share before is, uh, 2 million prisoners are nonviolent and awaiting trial. 70% of people in county jails have not yet been convicted of a crime. There are example after example after example all across the country where people do, uh, things that you and I would think of as fairly petty, uh, really rule breaking. I don't even think of, you know, a parking ticket as a crime necessarily, right?

• 11:54Speaker 02

  Right.

• 11:55Anthony Pompliano?

  Yeah, and, and, and they end up basically, uh, in jail. So, let's start just with, how do we get from, uh, something that is, uh, not considered a violent crime or something that is, you know, quote unquote, "serious"? How do we end up putting people in jail? Like, how do they get there versus somebody who gets a parking ticket, they pay it, and, you know, they could never even imagine going to jail for something like that?

• 12:18Speaker 02

  Yeah, I mean, I think, one is you start with overpolicing, right? Which is, who's most likely to get a ticket, right? And the reality is, the poorer, the blacker, the browder, the neighborhood, the more likely you are to get a ticket in it, the more likely you are. I mean, I, I did, uh, something with an organization called The Five, which is where you go volunteer in a prison, and then it's mostly tech folks. And it was so interesting because, for all these tech folks, uh, folks who are in jail, and I said, "I'm in jail for seven years, I did this," and all the tech folks are like, "I did that, I did that." And, um, and so just the stark reality that someone in America experiences the exact same thing, does the exact same thing, and they, there are no consequences because they have the resources to stop the consequences. So, one is, just starts with the overpolicing. And so, the likelihood that you're more likely to get a ticket, the more likelihood you're

• 13:02Speaker 02

  like, more likely to be arrested. Um, and then, I think, uh, the way it works, we've seen it, is you might get a parking ticket. And this, in some states, it doesn't work like this. In some states, you can't go to jail for having a parking ticket, which is great. Um, you might get a parking ticket. And then usually what happens is that you can't afford to pay it. And so either the fee increases or the consequence happens. So it might be you lose your driver's license. And then you're driving on a driver's license and you get arrested for a suspended driver's license. And so one thing is, we were sitting in Michigan and we were talking with some folks about our software. And we were looking at who are the people most likely to not show up for court? And what we saw is it was people who were driving on suspended driver's licenses.

• 13:45Speaker 02

  And so you thought they were, we were talking about what should, they were saying, oh, bail should probably be high. And the idea that it's mostly working people who have kids, who have jobs, who are trying to drive their kids to school. And that those folks are the people that pay the consequences or face jail because they're broke. It is, is not, I think, what the system is designed to do. And I think you're seeing a lot of that. Right now, where people are saying, look, the, the police are not acting in a way that's consistent with trying to uphold law. It's more about kind of the oppression of some versus the oppression of others. And, um, and so that's it. So you, you end up in, in jail. Basically, you can't pay something. The consequences increase. And we look at it like, we, uh, just, uh, started a new software. And the reason we did is because we found payments were really difficult.

• 14:28Speaker 02

  And so we launched a second software, a second product called Promise Pay. And the reason is, is because we were looking at parking tickets. How do people end up in trouble? And we looked at one city and we said, how could I, like, if I wanted to put myself on a payment plan? And the requirement was you have to owe over like $500. So you have to wait until it's so expensive. Then you have to pay 50% upfront. Then you have to bring your tax returns to prove that you deserve to put yourself on a pay plan. And you have to go down to this office downtown during the work week. Like, it's just, the system isn't designed to make someone successful. And so part of we thought about is how do you build kind of products that actually are designed for people to succeed? Could you imagine if I call my cable bill and I said, I can't pay it? And they said, well, bring your tax returns. Come down.

• 15:14Speaker 02

  Pay half upfront. Like, this is not, it's not reasonable.

• 15:17Anthony Pompliano?

  Yeah, and it feels like some of this is intentional. And then some of it is just frankly, you've got bureaucratic organizations that have no clue the realities on the ground, right? So something as simple as, you know, a quote unquote, "good intentioned" rule is, "Hey, bring your tax plan, we'd love to get you on a payment plan." Sounds like we're helping people, but for all the reasons you're explaining, actually end up causing more and more of a problem, right?

• 15:43Speaker 02

  Yeah, you know, it's weird. Until I was in the system, I thought it was just like racism or other folks. When you're in it, you realize the system is actually designed that way. And the more I'm in it, the more I see it. I joke that being in the system, I've become a conspiracy theorist. And for me, it was made clear when someone said to me, I said, "Oh, this product will work this way, it'll be great." And the person who runs the system said, "Oh, that's, this is a difference. I don't care about people in the system." And I was like, that level of clarity of just, "We don't care about people in the system," was very important for me to understand. I remember someone saying about a prison system that we talked to, and they said, "You know, we wouldn't let our dogs be in this prison."

• 16:26Speaker 02

  And so the idea that the people who might be operating a system don't think that dog, their own dog should be in that system, or have no care, speaks to how the system works. And, you know, so I think I've definitely become more, I think the system is working the way it was designed to work.

• 16:42Anthony Pompliano?

  So explain that a little bit more. When you say "designed this way," do you mean designed to imprison people? And this is more of like the private prison type, you know, issues? Or is this more of just putting as many obstacles in place as possible? And then therefore that either leads to more revenue for the government and possibly jail time? Or kind of just clarify that a little bit?

• 17:05Speaker 02

  To me, I think there's a dehumanization of Black and Brown people and, and poor people. And then I think there is just the reality of the consequences. Like, no system that punishes people for not having money is, when it's government. It's one thing, right? If I get a product and I'm doing something and then I don't pay for it, that's very different. Different than the assumption that you're going to pay for something that the government provides or that the consequences like. I realized where I live, they have, they turn you into collections for library fees. And which is, you know, not, does it make any sense to me? So I, I think the system just works in the way and not it criminalizes things like poverty.

• 17:48Speaker 02

  It criminalizes and the consequences are very different if you have good representation as an example. One of, what's been great about our work is we have people volunteer to help us. And we have had a number of people who have had issues with the SEC try to come to us and say, hey, we get this system stinks and how it's awful. And when you have good representation, you face, the consequences are very different than someone who has bad representation. And where we see it is, we see it in someone, let's say you are waiting in court. You're, you have a, you know, you go to court, you have some type of thing you've been charged with. Then you end up waiting in jail because remember you can't afford bail, so you're sitting in jail. So then you take a plea deal and the plea deal has no time associated with it.

• 18:34Speaker 02

  But you can go back to jail with a technical violation. A technical violation could be you miss a meeting with your probation officer. You go to what we saw an example, someone got married outside of the county, so they technically left the county. And so people end up in jail a lot for technical violations. And often because due process goes away with a technical violation. So you don't have a right to a trial in the same way anymore. And so that's, I think, how the system doesn't work is I can't afford to get out. So I take a plea deal that might not make sense for me. And then I end up in trouble with a technical violation that takes away due process.

• 19:06Anthony Pompliano?

  And so one of the things it sounds like is when you gave the example of you can get on these payment plans, but you have to actually go down. You've got to bring tax forms, all that kind of stuff. There's almost like an education component to this, right? If you know the rules and you understand the correct path to pursue. You may be able to deal with a system that is already rigged against you, right? And it sounds like that's what you guys are doing at prom is you guys have kind of the muscle memory. You understand the system and you're building products to try to solve and make that easier for people to interface with the system. Is that, is that accurate?

• 19:36Speaker 02

  Yeah, I think what we've discovered is we want to work in places that people's incentives are aligned. So for example, what we like about payments is no one wants to face the consequences of not having money. And the government wants to get money as quickly and easy as possible because often what it does is it sells its debt as distressed debt to folks and gets 20 cents on the dollar or it pays to track folks down and then they face those consequences. And so we said, look, one thing that's good is when those incentives are aligned because as a company, we don't want to be in a place where the incentives are to incarcerate people. You know, like that's the, the part of kind of our values of companies. So where are those incentives aligned? So then what we think about is things like payments is how do you make it as easy as possible? One, there's already programs that people that exist. So people should know you can qualify for something and not have to figure out how

• 20:20Speaker 02

  to go somewhere and register and do stuff. And I think COVID presents a lot of opportunities for us because all of a sudden people can't go into offices. Um, and so, so anyway, so it allows someone to, the software we currently done is called Promise Pay. You can go on, you can self identify and say, this is my income. Then you qualify for a program. We put you on a payment plan. We do things like subscriptions because it doesn't make sense that every month you have to remember, we do reminders by text, use Cash App, Venmo and other ways, not the assumption is you're going to have a check um, or a credit card that is secured. And so just trying to make it as easy as possible for people to pay.

• 20:58Anthony Pompliano?

  Got it. And then I guess as part of this, uh, there's all the work that you can do to keep people from being incarcerated, right? So this is everything from help them pay to uh, prevent kind of the escalation of consequences or uh, the fines, get them better representation, all that. At some point though, some portion of the population is going to go to jail. And, and so there's kind of two components is the way I think about that. There's jail and there's prison, right? Jail is uh, the 70% of people who have uh, not even been convicted yet. We need to figure out how do we get them out of jail, especially when they're nonviolent offenders, all that kind of stuff. And so, uh, that's one piece. The prison component, I don't want to spend a lot of time on that. I feel like I could record a whole nother episode on, on what happens once somebody's actually convicted.

• 21:40Anthony Pompliano?

  But specifically around the jail, uh, and bail, I think that's probably the one thing that as I learned more and more about it was the most shocking to me was this whole idea that literally because you do not have enough money, you now have to go sit in jail. Whereas if you had as little as 500 bucks, right? All the way up to a couple of thousand dollars, you could have your freedom and go and, and make a living, do whatever you want while you're awaiting your trial. So maybe kind of just talk through like how you've, you know, kind of understood this and the problems you've seen specifically around that bail and, and the issues there.

• 22:16Speaker 02

  Yeah, I mean, the biggest issue that we see around bail is it's it's basically poor people being in jail because they can't afford to get out, right? The reality is, we're not assessing whether someone is dangerous or not, because if I can pay a hundred dollars, it's not as though I'm less dangerous because I can afford to pay, right? And just as a reminder how bail works, is there's usually a schedule of bail, and it's based on usually what you're charged with, which is usually determined by the cop. So, a cop brings you in and says, "Hey, I've arrested someone." So it's one person they can look at and say, "Okay, I'm arresting you for a DUI." A second person they can arrest and say, "I'm arresting you for excessive speed." And those all have different consequences. So, one is it's important to know, where does that charging happen, right?

• 23:01Speaker 02

  They're not formally charged, they've just been arrested, and it's based on the decision of the arresting officer usually, for bail at least. So, then there's a bail schedule, and that determines the specific things. So you already are now kind of in a system where we know racism exists, and we're stuck based on whatever the cop thinks is what's appropriate. Then you get to the system, and then you have a bail schedule, so based on what you're arrested for, that you can pay. And usually, there's a bail agency that is like, you pay 10%, and sometimes people don't have that 10%, so if you don't have the 10%, you stay in jail. And so that system, for us, is very broken. And I will say, one thing, I think to your point about, I think we use this language of also folks who are not violent, but it's important to know what does violence look like in the criminal justice system?

• 23:46Speaker 02

  So, when we first started working, we're like, "Oh, we're gonna work with non-violent offenders." And then we, one of our clients walked us through, and we said, "Okay." I said, "Like, what's the most violent offense, just so I can understand most likely to happen?" And it was people stealing cell phones. And it's a violent offense if I take it off a person, it's not, and they feel threatened, it's not if I take it off of a stand. So I was like, "No one's telling, this is where kids don't know." Like, and it's mostly people that are young, under 21, that get arrested for it. So all of a sudden, you have a violent, like, so when we think about who we work with, that's who a violent criminal might be, according to what your arrest is. And so that's why I think it's important for us to make the case that, the idea that

• 24:30Speaker 02

  you're innocent until proven guilty, and really, bail should be a way for folks to determine, like, it's supposed to be risk level, instead of what it is right now, which is finances.

• 24:40Anthony Pompliano?

  Yeah, and my understanding, and you are by far an expert compared to me, is around these bail bondsman, right, is there's a lot of kind of, I'll call it malicious nefarious activity where they literally, as close to the county jail as they can get, they've got their number plastered everywhere. I've literally seen bail bondsman's in colleges that are like, you know, if you get arrested with our shirt on and use it in the, you know, in basically the photo, you get 10% off, like, I mean, all kinds of crazy, crazy stuff. They actually are helping, or are they kind of making the situation worse because the terms of the bail that they help with is so bad?

• 25:18Speaker 02

  Yeah, I think one thing to remember for folks who don't know is that bail is basically a surety or an insurance business. So what happens is if I'm a local bail bonds person, I'm probably paying an insurance product 1% to 3%. But most of actually bail bonds are done by a couple of big insurance companies, and there might be a local franchise. And so I think what's what's bad about it is, one, it's the best financial product for those insurance providers, because very few people don't show up for court. And if they do, the court has to make sure that you pay something. So one is, someone's paying a lot of stuff. Like, we talked to a startup where they think we could charge 1% to 3% easily and make money. So one is, there's a lot of profit

• 25:59Speaker 02

  driven in there. And I think it's not awful. Like, from my perspective, it's not as though people shouldn't make profit. The idea is when the consequences are severe, and it's the poorest folks that are paying the most, that system is broken. And so I think what's broken is you have a system that's built on people's poverty and pain. And I don't think that's how we should build systems. And so, and you are often paying a higher bail amount because you don't have a lot of, like, you don't have a house, you don't have something else. So it's like, it's just a self perpetuating system. So you look at, like, should people pay bail if they're innocent? And we know many people are likely to not be charged. And then it's like, should the system be determined by how much you can pay?

• 26:38Anthony Pompliano?

  So the problems are pretty obvious once you start looking and learning, right? And I think that you've obviously spent a lot of time doing that. At some point, you decided, I want to go solve some of this. Maybe talk me through just like, what was the impetus for actually starting a company, building software? And then what do you think those solutions look like? Both what you've built already and then kind of where you you think opportunity exists for you guys moving forward?

• 27:02Speaker 02

  Yeah, and I would say, I think the question is still out, right? Because part of what we're trying to understand is can capitalism not be extractive? And I don't know, right? I think we're building good products, we have clients, but I think there's a question of scale, right? And so what I wanted to do is I wanted to start a venture company. And the reason is because I thought scale was important. I didn't want to be like in a nonprofit, and there's amazing nonprofits, but for my models, we would help like 10 people, 1,000 people. And I wanted to think about how did you help large groups of people? So I wanted to think about what could you do that had large scale? And then I wanted to understand how could you use technology for good? Which is, could technology be designed by people who are thinking about solving problems for poor, black and brown people? Would it, would you come with different solutions?

• 27:47Speaker 02

  Because oftentimes, technology was harmful. And so, so I wanted to understand that. And so then we just looked at what are the spaces and places that that provided the most opportunity? And I think the criminal justice system was it. Now, sometimes I wish we hadn't chosen the criminal justice system because it's such a mess. And, and there's so many moral, like questions of morality that there normally isn't. Because like, should you make any money in the criminal justice system? Should you? And the system is so flawed. So we just thought, I was, I wanted to be able to know that we built technology with people I thought who needed it the most, with the ability to grow with the most impact. And so that was what I looked for. And, and I thought it was very rare.

• 28:33Speaker 02

  We knew, we raised 12 million in our basically seed round. And I knew that was unusual for someone who wanted to do good and to raise capital from traditional venture capital investors.

• 28:46Anthony Pompliano?

  So I gotta ask, how the hell did you raise 12 million dollars for a seed round?

• 28:50Speaker 02

  Well, we, one is we did it like, we did one, uh, we, we were, we raised money before we had product or team. And, and then raised like three months, maybe later, the second, like we raised it like four and then I think seven point something. Um, uh, I, because I ran revenue and a lot of our investors were investors in the company that I ran revenue. I think that people said, oh, you get how to make money, you get how systems work. I mean, that's what I've discovered is that it's, it is in some ways it's pattern recognition, which is they go, oh, you ran revenue from zero to one of a company that's making money and that has large systems. You should be able to do that again.

• 29:31Speaker 02

  And so that's one thing. So I think because I ran revenue and I think people invested and a lot of our investors were investors in honor. Um, and then I think the problem is big enough and mostly the software is on the policing side. So I think people are like, there's a market that no one has conquered yet. And then I think we had investors who felt like if, if there were a solution that we would, that they had, I think a lot of our investors are very wealthy and felt like that this was an important problem for the world to solve. One of our investors was like, you should raise 40 million, be also because the problems are so big that there's a question, can you even figure it out with 12 million, right? And, um, and I was, and I, and I didn't think it made sense to raise that much, but I think there's a real question of like, when you're

• 30:16Speaker 02

  working with systems this big, how much do you need?

• 30:19Anthony Pompliano?

  And what was the first product that you guys built at Promise?

• 30:22Speaker 02

  Yeah, the first product we built was a way for people to be able to, um, provide support to people who were getting out of jail without bail.

• 30:33Speaker 02

  And so it's often was called pre-trial software. And originally we thought we would be able to work with people who did like electronic monitoring or other things. And then we just discovered some of those businesses were so horrific that you could not work with them. So, uh, the way that you should think about it is almost like a virtual assistant for someone. So we give them reminders about when their court dates are. We let them, they make sure they have an ability to communicate. We can do virtual meetings instead of having to go in, you can upload a photo, like whatever you need. So you don't have to go in, the goal is to keep someone in their home.

• 31:04Anthony Pompliano?

  And is that reliant on, maybe like, I'll call it government buy-in? Like, do you have to integrate with the government's systems on a county or state level?

• 31:14Speaker 02

  Yes, yes. So, we do have to integrate with their systems. And something like when we first started, we had to integrate with FileMaker Pro. A government was using FileMaker Pro. And so, it's, you know, like, people, where people are is very different levels of technology and software. Um, and, but I would say, I think that product requires that someone wants to get people out of jail. And I don't think there's a venture market of people who want to get people out of jail in the system. I think the reason we did the payments software is because I think we could do something where incentives aligned. I don't think our incentives are aligned. And part of why we've been very purposeful about where we sell is because I think even good software in the hands of not great people can end up being harmful.

• 31:57Anthony Pompliano?

  I tend to agree with you. So, I think you're on to something there. And then, how do you think about that question of like, making money, not making money around criminal justice? Obviously, you're running a for-profit business that's got equity investors. So, at some point, you've got to, you know, figure that out. What's the kind of the current thought process or iteration?

• 32:15Speaker 02

  Yeah, I mean, the reason I thought we should be a for-profit instead of a nonprofit is, one, I was, I have, I have not seen many nonprofits scale. And so, the thing I was most interested in is scale. And the other thing that I was interested in is I think that capital, that government often aligns with capital more than it does like righteous morals. And so, one thing I was like is, could you drive government behavior better by being a for-profit or a nonprofit? And I think I still believe it's more likely to adapt to a for-profit. And so, I thought, you know, what's the, the best institution, how to use it? And, um, and also the skill set, like, is someone, I, I went to Cal State Northridge, right? I didn't go to Harvard, I didn't go to Stanford.

• 33:01Speaker 02

  And I think I'm grateful for my education, but I also, I don't know that I was trained to work in this environment. And I wanted to understand, how did you hire people based on a specific mission that were trained to work in an environment? So like, I love a street hustler. That's my favorite person to work with, which is how I identify. But I also knew I needed people who had an MBA and understood systems. And I think I've been able to attract those people much better in a for-profit world than I was in a nonprofit world. And so for me, it was, how do I have the greatest impact? And I think that staffing, resources, and vehicle, and that felt better in a for-profit. And I wish there was a way to do that in a non-pro. You know, I don't know how to do that. I think it's also, what I don't like is the assumption,

• 33:46Speaker 02

  also that like, people who want change should be broke. And people who don't want, the idea that it's like, we should tell all these people who want better systems for their family, you should be truthful in like, and your truth is living in poverty. Instead of your truth is like, building generational wealth, where you can take care of your family and take care of yourself. Like, I just, I think the idea that goodness is determined by poverty is just the, like, I feel like that's a bag of goods we sell to like, people who are already poor, and to tell them there's honor in it.

• 34:17Anthony Pompliano?

  Well, it's usually the rich people peddling that story, for sure.

• 34:21Speaker 02

  You're honorable.

• 34:24Anthony Pompliano?

  Yeah, let me keep the money, you keep the honor, right? I got it. So you've been at this for a while now, and you spent a lot of time really understanding the nuances of a lot of the issues. I'm gonna ask you two questions. One, what is the thing you've been most surprised by? And then what is the one thing that you've been the least surprised by that you've learned?

• 34:45Speaker 02

  I think I've been most surprised by how structured the system is to incarcerate people. That it's just, you know, like, you hear the intellectual stuff, like, where it's like, oh, bail reform and all these things. And I thought we were gonna go and the gates were gonna open up. And we would say, look, we figured out a way so poor people don't have to be incarcerated. And everyone could say, oh, I get it. The statistics show, here's why you go to jail. We're gonna automatically correct the system. And when people were just very transparent, like, we wanna keep those people in jail, that was surprising to me. Because it felt like only something I would have anticipated in a character on a like, movie, right? Like, it was just like, so blatant, that that was very surprising to me.

• 35:29Speaker 02

  What I have been least surprised by is...

• 35:36Speaker 02

  Yeah, I've been least surprised by the technology that exists, that it is exactly what I thought it would be. And, and I think, yeah, I'm least like, I mean, it's not, it was not surprising to me that we run into FileMaker Pro and Microsoft Access all the time.

• 35:57Anthony Pompliano?

  Yeah, it's pretty crazy. And then I guess the last piece here is as you think about the people that you are helping, right? Those that are kind of being screwed over by the system. How much is there around an obstacle of like, they just don't know how to use technology? They don't have a desire to use technology? Or is it something where if you give them the tools, they are able to use this? And you don't have to worry so much about like, well, I always talk about like the human technology interface, right? If you give a 90-year-old woman a great piece of technology, if she just doesn't have the desire to ever pick it up, it doesn't matter, right?

• 36:36Anthony Pompliano?

  Same thing here is there's a lot of things where I see people, when they're given the tools, they run with it and then they're highly successful. Do you find that is the case? Or do you see much more around where you guys are having to educate on, here's how the technology works? Here's why it's important that you continue to use it and really even build that into the product, maybe?

• 36:53Speaker 02

  Yeah, I think one is we do a lot of work about, you know, about design, like thinking about how the product is used. And, and we learned very quickly that training was a very important part of what we did. Like you couldn't just sell software and say, good luck, see you later. You had to like, spend a lot of time on training. So you definitely do, but I think part of it I get is there, we haven't run into a number of amazing products. So I get why if I'm a government employee, why I'm not impressed or inclined to go follow this? Because I haven't seen impressive results. Like if I'm using, trying to adapt FileMaker Pro to manage thousands of people in the criminal justices. And like, you think I want your new software to help connect to my FileMaker Pro that I can't use on my cellphone?

• 37:38Speaker 02

  Like, it's like, you know, so, so, so one I get, I think on that side, what we find is people. The thing I find consistently is most, I've not run into anyone who wanted to go to jail. And so when you give them a tool to stay out of it, it is not shocking that they use it. It is, what's been interesting is people started coming to us because they said your collection rate is so high. And so authorities, an agency came to us and said, hey, you don't do collections. And I said, it's really not brain surgery, which is if you make a system easy for people to pay and assume they want to pay, they actually pay. It is like, but if you think about government systems, like paying your taxes, like I gotta go, I gotta sign in,

• 38:23Speaker 02

  I gotta have this specific credit card, I gotta pay a fee to use it, I gotta find somewhere, it dies, you know, like, it's just good technology.

• 38:31Anthony Pompliano?

  It is shocking that that one of the breakthroughs is literally, hey, if they don't pay, they're gonna go to jail. So if you make it easier to pay, they'll actually pay you. Like that is, that to me is the biggest takeaway from our conversation so far of like just how absurd the other side of this looks at it.

• 38:47Speaker 02

  Right, because if we assume that people don't want to go to jail, then you assume they don't pay because they don't have the ability to, or they don't pay because it's not easy to pay. And when you correct for that, people perform better. It is not shocking. I mean, if I said to you Netflix or any other service, the way we're gonna run payments is you gotta come down to an office, you gotta prove you need the service, you gotta pay to park, you gotta wait, and then, and if you don't pay, then you gotta come back and you gotta pay cash during specific hours. It's like, who would collect money that way?

• 39:18Anthony Pompliano?

  Nobody. What about on the, what I'll call kind of customer acquisition channels? Like where do you guys see the channels that work for you?

• 39:26Speaker 02

  The channels that work best for us, one is because government is usually our client, people like we get a phone number, we can just reach out to you, which is much different. And what's great for us about government is usually, most of our business comes from government agencies recommending us to another government agency. By and large, we don't have a sales team right now. We have like, it is almost always, we just hired our first salesperson. And, but otherwise, all our growth has been from person to person.

• 39:52Anthony Pompliano?

  That's awesome. I love that. Before I wrap up, I ask the same two questions to everybody, and then you're gonna get to ask me one question to finish. The first is a little bit more serious. What is the most important book that you've ever read?

• 40:08Speaker 02

  What a great question. The most important book I've ever read. I feel like Maya Angelou, I Know Why the Caged Bird Sing. And I think because it gave me a vision of what my life could be and just in a boldness that I saw that I hadn't seen before.

• 40:25Anthony Pompliano?

  I love that. I researched something on a podcast who was talking all about exposure being one of the most powerful things in the world. Just exposing people to ideas and what's possible can really kind of drive them. It sounds like that book did that for you.

• 40:37Speaker 02

  Absolutely.

• 40:38Anthony Pompliano?

  All right, a fun one. Aliens, believer or non-believer?

• 40:43Speaker 02

  Oh, total believer.

• 40:44Anthony Pompliano?

  Why?

• 40:45Speaker 02

  Because I know that you don't know everything the government's doing.

• 40:51Anthony Pompliano?

  Almost everybody says they believe, but nobody has used that as the reason why.

• 40:57Anthony Pompliano?

  That is amazing. You think that there's a high probability that there has been contact?

• 41:02Speaker 02

  Oh, no question. I mean, how arrogant for us to think we're the only life.

• 41:07Anthony Pompliano?

  That's usually the logic that most people use, right? Is like, hey, the world's a big place. But saying that we don't know what the government's doing is pretty good. That might be up there.

• 41:15Speaker 02

  Yeah, it's like, who knows?

• 41:18Anthony Pompliano?

  What one question do you have for me to finish up?

• 41:20Speaker 02

  How could you be helpful to me? And that's what I want to know.

• 41:24Anthony Pompliano?

  Oh, uh, two things. Um, there's a lot of very well-connected people that come on the podcast, and many of them are incredibly receptive to generally being good humans. And as I told you before the podcast started, things like bail reform, criminal justice reform, I think they intellectually understand this is a problem, solutions can be created. I think a lot of them actually are in a position of like, I don't know what to do. So like, that's kind of a piece that you probably would have a great conversation with. And then the second is, you tell me whenever you want to come on and talk about issues, and we can absolutely do it. There's probably more people than I ever thought would listen

• 42:09Anthony Pompliano?

  to this. And so you can use this as your microphone whenever you want.

• 42:14Speaker 02

  Great. Okay, perfect. Do people not ask that? I'm like, okay, how can you help me grow my company?

• 42:21Anthony Pompliano?

  People are too scared. You know, you just did is you hit me with the music industry, hey, look, we're going to exploit this, right?

• 42:30Speaker 02

  How can you, I'm trying to grow a company, how can you help me grow my company?

• 42:33Anthony Pompliano?

  Look, it's, who is that? I think it's Mark Sustra from Upfront Ventures. One time wrote a blog post and he basically said, "You don't get if you don't ask." Right? Which is, I don't know why necessarily people need to read a whole blog post about it, but he did a great job laying it out and really explaining to people like, "Hey, if you don't ask people for help, you're not going to get help."

• 42:52Speaker 02

  Totally. Okay, cool.

• 42:54Anthony Pompliano?

  I love it. All right, you let me know when you're going to come back on and we'll talk about a couple of other things afterwards.

• 43:00Speaker 02

  Okay, thanks so much.