William Hockey - Building the Operating System for the Dollar and Silicon Valley Heresy - [Invest Like the Best, EP.463]

Transcript from https://podmenti.com/t/dc2d94b2567f4e8f

Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money.
If you enjoy these conversations and want to go deeper, check out Colossus, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus along with all of our podcasts at Colossus.com.
Mm-hmm.
Chick O'Shaughnessy is the CEO of Positive Sum.
All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Some.
This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc.
Mm.
My guest today is William Hockey, the founder of Colum. William was also the co-founder of Plat, one of the more famous fin tech businesses from the last decade.
Column is his second business, which he's built.
From scratch and funding it entirely himself.
And building it his way.
I think you will find this conversation utterly fascinating, not just because of the incredible quality of the business that he's built.
But how maniacal he is about studying and implementing ideas in this specific field.
This is a great example of a founder that is winning because he is willing to do everything. My favorite example from our conversation today is that he went and found some obscure book about some ancient bank and found one idea buried in the two thousand pages that gave him a simple idea for his product.
He's willing to do that over and over again. And he explains his very different, maybe even heretical views on a lot of what's happening in the world of startups and technology today.
He offers a very different way of building.
That I think will be inspiring and interesting to those that want to build a company.
Please enjoy my conversation with William Hawke.
Usually I don't start with a description of the company that someone's building.
But in your case, one, I don't think a lot of people are yet familiar with column.
And I wanna fix that.
And it's such an interesting beast in and of itself that it'll be our excuse to talk about many fascinating things in the world.
Can you just start by explaining what the business is and does?
at a high level, we are a software company that also owns a bank.
And what we do
is we say, Okay, we have this interesting regulatory mode with a bank that
Most other people don't have.
And we're gonna build just incredible software behind it.
that nobody else can build'cause they're not a bank.
We started out by serving
A lot of software companies that want to get into financial services in the US. So with a backend infrastructure that powers the payments, deposits, credit of
Amazing companies like Built, Wise, Ramp, Brex, Mercury, these type of companies, they run on our software than our regulatory rails.
Then we also expand that to anybody want to do things with the global dollar. So that could be international fin techs, that could be a lot of times global banks or banks in emerging markets that need to transact whole banks in the dollar.
So in the US, you have
Vertical software, people building business software.
This is an area that
It's probably gonna get
changed as AI kind of rolls through. So people need to go deeper down into the business. Just building software for software's sake is not the case. And so now people actually need to
control the underlying finances of business. If the Brecht's ramps of the world have proven that you can actually build enterprise software that also touches the money.
In order to do that.
You actually have to control the dollar. You have to control the money, whether it's lending money, holding credit, et cetera. And so we just expose a set of primitives and APIs.
to allow anybody to do that super easily.
Could you maybe like pick a customer that people might recognize and describe literally what services or products they use and then how they pay you for those products or services just to really nail it home.
So maybe we'll use a company out here that recently we launched company called Built.
Which is a lot of New Yorkers have a lot of people in the cities have if you look at the card in the back, it says issued by Colin. So we're the one that is actually connecting with the networks, managing the networks, and with actually the regular entity behind that. And then when you need to go pay your rent or
Your landlord is gonna detect money from your built account.
you look at like oh the account a routing number there, oh that's actually a common account of routing number.
And so they build the
Application, they build the website, they build the consumer marketing, and we're going to handle everything behind the scenes that has to deal with the Federal Reserve.
Or TCH.
the car networks or Swift, we're the ones that kind of build the software for that and handle all that complexity.
We are technically a bank, but unlike banks, we make ninety plus percent of our money off of software. And so similar to any SaaS company, it's a per API call.
It's a
Pure play tech business.
And then we passed most of the economics from the actual bank side of the business.
Down to all of our customers. One of the things I love whenever we talk is you've always been somewhere strange and interesting. Kinshasa, I think was the last time we were together. I don't know a lot of founders go to Kinshasa very often. Why are you so often in
Interesting bizarre locales around the world.
So this is my second company.
I started apply back in two thousand twelve.
And it's very easy.
Just stay in Silicon Valley.
Quality of life is amazing. There's a lot of money to be had. There's a lot of super smart people. But you can start to get.
Quite isolated.
And you can start to get very consensus focused.
probably a lot of you listeners read Dan Wang's last letter on China.
He has this great and I think accurate but somewhat harsh criticism.
Where he says the two most consensus societies he's ever been to is San Francisco and Beijing.
And I think that's quite accurate, actually.
Where San Francisco is.
Probably the most consensus place I've ever been to.
Anity?
That is
Both a huge clutch for us, but
It's also probably your most valuable asset.
Because as a founder
If you're building an AI or like stablecoins or something that
San Francisco believes there's very consensus, but the world does not believe yet. That's actually a great operating environment.
You can go and you can have these outlandish ideas that other people are gonna believe in that nobody across the water believe in. And you can build this in a very like safe way. And that's why Silicon Valley in San Francisco is so dynamic and we're so a front of the curve. But we also have completely lost touch with how the rest of the world operates. So I don't think every American operates. And you've probably seen this.
Smack us in the face over the past decade or two.
And so I think it's very important to go to places
That
don't have that same bias. And I think if you think about emerging markets specifically,
the founders who built there, there's the everyday people, they live in this constrained society.
The constraint in a way that like San Francisco and New York isn't.
And that breeds a different type of creativity, it breeds a different type of innovation that you really can't get anywhere else.
If you go to talk to people in London or Vienna or
Mexico City or San Francisco, whatever.
People are living in in to an extent in a world of abundance. And that causes a very specific
creation cycle.
Why, if you go to Kinsasha, which is the capital Democratic Republic of Congo, it's gonna be the largest city in the world then in probably five to ten years.
I think it's already larger than most of the mega cities. Wow.
Probably 95% of people in Silicon Valley couldn't tell you what Kinsash was the capital of, but tens of millions of people.
That live in a highly, highly constrained society. And so that breeds
a sense of creativity that breeds ideas, that breeds stuff that you can't really get anywhere else outside of emerging markets. So that's one second for my business, the dollar is fundamentally global.
And the dollar
tends to be strongest in places that we could imagine are relatively dollarized.
places that are dollarized tend to be more emergent markets where they are using the dollar
as their main currency, either unofficially or officially.
Because maybe they can't trust their central bank. Maybe they have a history of super bad inflation and the country got implicitly dollarized.
And so
Those places tend to actually need US financial services more than
I don't know. UK and the G V P is pretty strong, or France.
those places don't need American financial services as much as maybe some parts of the emerging world if
So sticking with Kinshasa as the example.
So you go there, what are you doing there? What are you discovering? Say more about the constraints you encounter there.
Teach us a bit about I've never been to Kinshasa.
They operate
in a world where there's actually like relatively large markets.
DRC to take that as an example is one of the largest exporters, not the largest exporter of some critical metals in the world. So there is a lot of money flowing through there. It's a massive exporter. It's a place where
It's a lot of Chinese investment.
Africa broadly has had more Chinese investment than anywhere else in the world outside of Pakistan.
And so there is money and there's a lot of people doing things and the population growth is absolutely bananas. I mean the population growth in Africa is probably larger than Western Europe, North America, and parts of Asia combined.
And so
Why they may be GDP per capita quite small, there's still a lot of going on. Where there is there are founders that are building super cool things.
the large companies actually tend to be quite innovative. And I can talk about that in a second.
I talk to them, I meet a ton of people, I'm meeting CEOs of the largest multinational companies there. I'm meeting founders on the ground and I'm talking them through like what are you building?
What is your perception of America? What is your perception of America financial services? How can we be helpful? Honestly, I spent a lot of my time walking around.
I did in.
Just taking in the scenes.
And sometimes quote of the time I come up with a really interesting idea that ends up
building us a cool product or is it a good market? What's an example of that? I've had ninety percent of my ideas either in the shower.
Or like walking around random immersion markets country.
It kind of expands your senses a little bit. If I'm walking down the Marina Green, I'm walking to the mission in San Francisco.
The only thing I'm thinking about is oh my gosh, how is AI gonna change things? Because you can't walk around San Francisco and just not get like,
completely hit with AI FOMO twenty four seven. But there's other stuff we need to do in order to get people up to like mobile penetration. Take DRC like
Mobile phone penetration is still less than twenty five percent.
banking penetration is still less than five percent.
There's stuff we need to do.
before we think about embedding LM in everybody's brain.
If that penetration is that low.
Will you and your business naturally benefit from that going up based on the products that you're building? Is that how you think about some of these opportunities where it's much lower hanging and just no one's paying attention?
the leapfrogging that happened in Asia is obviously quite well known.
China skipped the laptop went straight to the mobile phone. Most famously, we shipped you know online e commerce and went straight to social commerce in China.
There's gonna be leapfrogging as well. You're gonna see the same thing in financial services.
Financial services tend to be most innovative and most progressive.
in the worst countries. You can see this in Argentina, you can see this in Iran, you can see this in other places.
The Iranian financial system, suit you well, it's complicated. They have to deal with
A lot of incredible constraints. And thus they've built a lot of bespoke stuff just for themselves because they do not have access to global financial markets.
And when you get to design things from scratch, you end up actually building things a little bit differently. And that's actually quite interesting. If you look at these emerging markets, Africa, for example, they were the first ones to do mobile payments and pay still decades ago, well before Venmo.
If you talk to them
They are actually quite a bit more open
They are used to this their category being somewhat disrupted.
An interesting thing is they have a bit of an access to differentiated capital.
Which is
Different talent.
If you're in the US.
Part of the bank. So I should on here.
But you don't have access to the top talent. The top talents go into
Anthropic. They're going to Google, et cetera.
But
If you believe that
brains are distributed equally, you're congo and there's some proportion of equally smarter people as there are in France.
There's no anthropic to go to.
They don't have the ability to
move to London and go to D Mind.
But there's still like a pretty decent talent pool there.
They're gonna go to where there is job safety and where there is money. That tends to be in a lot of emerging markets.
Like the breweries in the banks.
That's what the money is. And so the talent
Say the middle level on top.
can actually be quite a bit higher.
than people that
I'd say you take you like emergent markets bank executive team.
Hands down is way better than
I think probably what you see in the Western world.
They also have the ability to
Verticalize much better.
than they do in the US.
Because we already have amazing software.
Amazing retail experiences down the entire stack.
In most emerging markets or in developed countries, everybody has a bank account. A lot of the people who have a phone have a bank account. So they can actually cross sell there effectively. You and I talked about this before. I think one of the most interesting companies out there.
It's Caspi.
In Kazakhstan.
Fascinating.
Can you explain it?
They started out by by the bank.
And then they just built Did everything. Did everything.
Yeah.
Or just
E-commerce company, the largest bank, you pay your taxes on Caspi. You're like renew your driver's license, it's on Caspi. Because what they realize is where people start.
is people okay, maybe people start in social media, but they also start in financial services. And so if we acquire financial services,
we can cross zone, we can distribute products there.
The largest bank and Congo's bank called Rank.
highly sophisticated download the mobile app. It's way better than we have here in the US. You can upgrade your TV subscription on it.
Imagine JP Morgan doing that, a Bank of America doing that, a Wals Fargo doing that, or Kendall, even like US FinTechs doing that. Even if they could build that, there's no market for that.
And so their ability to land and expand.
is fundamentally different.
And you know, the good thing for us is, you know, these countries
The main currency is.
And so our ability to kinda innovate with them is much more akin.
to what a FinTe looks like in the US than maybe a large traditional bank.
Do you end up
earning similar amounts of revenue from outside the US as you do inside because of these potential relationships.
The US market is so good and fintech is so developed. One of our theses is fintech is probably gonna be like the last area that is somewhat maybe disrupted by AI. I think what you'll see is you'll see a collapse in a domestic fintech and enterprise software. And you're already seeing this with the RAMs and stuff of the world as they go deeper into the workflow management said. Good thing for us, some of our customers are growing just so quickly.
But the rest of the world is also it's a big part of our revenue. It's something that we're super excited about as well. It could be both like Western Europe or emerging markets. Can you say more about this comment that the Silicon Valley along with Beijing is the most consensus place? Because you trap around
California.
What strikes you as the strangest? Like you're building something so different. You spend so much more of your time away from there.
You're able to get outside perspective despite being of that place originally.
What would you say stands out as the strangest elements of it in its culture today?
I'm a product of Silicon Valley.
I've been there since I was twenty one, started some of the top companies in Silicon Valley. I am the product of that, but I think
As you get older and as you travel more.
you think you have the ability to probably look back and be more retrospective on the society you grew up in. And
SF and Silicon Valley, it's an elite dominated society, whether we like it or not.
It's probably more akin to Wall Street in the nineteen nineties than it is to what we want it to be, which is
research lab in Cambridge in like the 1950s. Maybe that was still looking about in the nineties, but it's not anymore.
And what that happens is elites end up building software for elite.
And I think that has somewhat made sense because if you look at consumer buying patterns, people buy something that's aspirational and then it moves down market. But when you do that, you can start to drink your own Kool Aid a little bit too much.
And I think
that has probably happened in Silicon Valley because we
Talk to each other, we build for each other, and we think that
the market is each other, but we don't actually look broader than that. And the companies that figure that out.
They do really well.
If you look at AI, our research labs are doing fantastic.
Because that's a consensus oriented problem. If you take a bunch of people that are super smart
And you pretty much lined off everything from the you.
And you can all talk and you can all share ideas, and that's like a fantastic research place. And we are going to win on that.
Alone.
As you think about like applicability to people's everyday lives.
People in Silicon Valley don't live everybody else's lives. They don't live the lives of like Americans. They don't live the lives of like outside the world. And so our ability to actually build software or have ideas or perspectives that resonate.
is probably like at the low point in the entire time I've been here.
Silicon Valley is not a popular place. I think we tend to forget that. We think we're on the top of the world.
But I don't know what our approval ratings are, but I think they're probably
Pretty dang low. And I think that's for good reason.
I think it's something that I at least try to focus on a lot because I have to build software and I have to build products applicable to like outside the walls of San Francisco, New York.
But that's probably less and less the case. Mm-hmm.
One of the things that you've done that's so unique is not raise money.
But built.
at a pace and a scale that looks as though you raised a ton of money.
Five stays is huge.
Talk about that decision.
What building a company where you and the employees own the whole thing feels like relative to having built a marquee company that was venture backed.
I wanna go into all the various lessons that you've learned. We've spent a lot of time in this section.
But at a high level, why did you choose to do it this way?
In the first place.
I started Plaud and I did the standard Silk and Valley playbook.
You have to like ID, you have to build stuff and then put a debt together and you go to like
These eighty venture capital firms and hopefully one of them gives you money and then every year you move up the alphabet.
And I think that worked in Posit, a very successful company. I'm very lucky to have started it.
But the things that Silicon Valley sometimes gets confused by is okay, you're like a venture funded company, and if that's the case, you're like ambitious and you're gonna build amazing software and you can like need like amazing products.
Or
You're like a bootstrapper and you're gonna or like thought pieces on Twitter, but you're gonna subscale people and you're gonna grow small amounts. It's gonna make a cute lifestyle business.
And I think you can actually be highly ambitious, and you can hire like the world's best talent. You can build like a massive Dublin company without actually being able to be addicted.
To venture money.
What we do
Is we say, Okay.
We are going to grow by our earnings. We're gonna make sure that a hundred percent of employees and myself own the company for the foreseeable future.
It makes it a lot harder. It does definitely put some constraints on your business, but not only for the net worth of myself and my employees.
But also culturally.
It's actually quite a bit more effective.
Because
Being longtermism is it probably a little like a trite saying.
But I think it
does actually help us do that.
Yes, Silicon Valley companies are probably more long term oriented than your average business in the US.
But I think the hamster wheel of V C
doesn't actually allow us to be long term.
Because if you are having to spend a lot of money for employees and you're burning a rate of you have to raise every year a year and a half.
You end up optimizing for that next fundraise.
And you say, okay, stablecoins are like cool this year, spending stable coin strategy. Okay, AI is cool this year.
Because I need an AI strategy. And so your business, maybe it's to go in the general direction, but it's definitely taken a pretty windy way to get there because
You need capital, and so I think it's very rational what you are doing.
But
That's not gonna be the straightest line to your goal.
I sometimes make this joke like these money's kinda heroin.
Feels good.
It's amazing.
But like you gotta keep shooting now.
It's very challenging at all.
I know very few people that have like tried her and once. Yeah. Once and they're like, Wow, that was awesome. I'm off. Right. It's like how many people you know have like raised like a hundred million dollar series A and then they're like, I'm done.
It just doesn't happen and
I kinda think that man, you raise a hundred million dollars, you should be able to build a couple of billion dollar business after that.
Why do you need to keep raising it? And there's a lot of structural reasons for that and
the fact that San Francisco is a bit like a factory, like is by design and I think they can be like quite effective. But I think for the the ambitious
I actually don't think it's the right thing.
And for us, I can invest in things that I think are gonna have like a 10 year payback. I'm totally fine with it. If we grow
Eighty percent versus like a hundred and ten percent.
It doesn't really matter that much. As long as we're profitable, as long as we're building the software we want, and as long as we're growing at the rate that we want.
I just don't have the same constraints and that is
I think freeing in a way.
that most companies can't operate.
What's an example of something that you've done?
Or made a long term investment in that you think you wouldn't have done
If you had been venture backed?
We bought a regulated bank when we were early. That's probably like a little bit cooler now in this new administration, but we bought a regulated bank during the first Biden administration. And that required us to not grow or like not focus on revenue for two, three years and do a bunch of stuff that inherently didn't scale. Buying a bank is not a software defined problem. That's not like a great use of
venture capital dollars that you expect to grow. The relatively non consensus bet at the time.
There's just no way that could have happened. There's no way somebody would have been like, Oh, we want to lose money to everybody, right? We want you to do stablecoins. We want to do AI. That's just not a fundable bang. So I think and then able to just invest behind that for a multi year period before we actually take on clients, people think they're long term focus, but it's just not.

Weird stuff with employees that doesn't scale.
Like what?
We pay pay employees like here's two thousand dollars a month to go to a rent or mortgage if you live two miles of the office.
Like that doesn't r inherently scale.
But it's massive because now I can get people who live close to the office.
They feel great.
Because they're getting like a huge part of all of their housing and stipend.
In San Francisco subsidized. But like is that gonna be like a good use of venture capital? Probably not. So we can just do all this stuff from an employee perspective, from a retention perspective. What we do every single year, we take twenty five percent of our earnings and we just
buy back our shares with employees.
We just run our own tender every single year.
It's been great for retention, able to actually get liquidity to employees when they need it.
And it allows people to believe that we're like in this venture grand business. But
If you're in a VC business, you're like, hey, you should be using like a hundred percent of that money for growth.
We say, Well, actually we don't necessarily think that.
we're quite profitable, so we can afford it. So we can invest in growth, but we can also invest in employees.
That's a really good example. So maybe just to pull it apart a bit more.
Are you granting equity to people in a similar way that a normal startup would investing over some period of time and then just every year saying we'll buy back some portion of that to provide
That's how it works, literally.
Structurally, we look exactly the same as like a high growth startup, right? We go after the same people, we have all the same perks, if not more. So we operate very much like a high growth of startup. We're happy to also be like quite profitable. But I can tell people is our profits every year. Imagine that's like our funding round.
Each year like
On January first, we raise a massive amount each year.
That's how we view it. There's part of it that's gonna be as a contender that we're gonna buy back company shares and the rest of it we're gonna put to growth.
Oh, by the way.
You also haven't diluted at all.
By the way, you also don't have any Press Stack.
By the way, like we get to make our own decisions. That's super compelling. So I can hire someone to say over a 10 year period.
you're not gonna be deluded.
I think what sometimes people forget is if you're early stage founder
You're gonna lose probably fifty to seventy five percent of your equity value.
Due to dilution alone.
You may lose ten tips.
Eighty percent of your upside.
By the preference stack.
These are like weird economic things that people don't really understand until they've been doing this for like five, six, seven, eight, nine, ten years, or seen an exit.
I think with us, we say, Hey.
Don't worry about that stuff. What I give you is what you're gonna have.
And by the way, you have liquidity on it.
yearly basis going forward. That's like super compelling to people. How have you honed the communication of that idea to a new employee so that they get it? Because
I think so often people just say, Oh, I got this many shares and there's the valuation. And if it goes to this valuation, I can just be the math, but that's not actually the math of what they'll take home.
How do you frame it to people?
We're far from perfect.
I think one of the things we do is we target people that this is their second company. We are probably not the best place for a new grad to land. New grad to land are gonna go through this calculation of
Where are all of my friends going?
What is the number one company in hacker news I read all the time? What's all like the thought fluencers talking about on Twitter? It's like actually like not a bad strategy. Like if you're new grad, that's probably relatively fair, but you aren't really going to be thinking about some of this kind of nuance.
And it's obviously not as hard as you think. It's actually like quite refreshing. We go to people and are like, hey, we like are super fast growing, but we provide you the liquidity.
Oh, by the way, here's some very basic math on preference and dilution. And here's why you can actually make way more money.
For the same equity value.
It's a hard story for twenty one year old. It's actually a pretty easy story for a
twenty five year old that's been through six rounds and four pivots at their previous company and don't have anything to show for it.
Does this empirically show up in employer retention numbers versus Silicon Valley norms?
We have almost close to no regretted.
Attrition.
People that
We like to stay, end up staying.
There's a couple of reasons for that. I think one is
Second time around.
It's a lot easier. I think I learned from a lot of mistakes at Black and I know where to spend time and where not to. And so I think generally it's probably a more mature company than your average talking about the startup. So I think A, that helpful.
We're probably better at picking talent, but also I think we know what matters people.
I think sometimes as like founders or VCs
We think that people join companies because they want to become billionaires.
Maybe that's true up to a point.
But a majority of people join companies because they hit into like their late twenties or the early thirties, and like what are they optimizing for? I don't send my kids like a good school and private school.
I want to not live with roommates in like a one bedroom apartment up until like I'm thirty five. Housing education, that's super important.
You can't feed that on illiquid stock.
So how do you think about optimizing for that?
Basic things like team, culture, all that stuff, like people
What?
To work for somebody who feels like
They are taken care of.
Not just a 20 year period or like here's your path to being a decadent millionaire.
Do they understand my short term needs?
Can you take care of me in the short, medium, and long term? And I think sometimes we are
maybe too long term oriented sometimes they hey yes, of course, come with me.
We work on this for twenty years.
And you're going to be the decuman after that.
That resonates with a certain type of person, but it doesn't resonate with everybody. And so building a company, building a culture that actually optimizes it for every single point of an employee's journey, an employee's life.
That's actually quite unique and that actually can lead to really good numbers.
How much of this was just possible because you were already
Rich at the start and had
money to fund something like this.
Is this portable advice?
could someone else that hadn't had the experience you had with Clad
do something like this without taking outside money?
I think it's hard. I think it was definitely successful at first, but what I would say is
Now into much detail.
Yeah, so I started a very large company. I think I was probably less liquid and less rich than probably everybody thought at the time. When I started this Plaza Funny Story, we attempted to sell it to Visa for like five billion dollars. And that's the point where I left to go start something.
It didn't go through. We got blocked by the DOJ.
And
I did not sell my company.
Pass.
I did not have any money. And so my liquidity versus paper wealth was pretty extreme. And so I think I got a lot of credibility from people being like, Oh, this guy's for this guy to say. Yeah, he's a yeah, but I did not have any money. Not gonna go too much of the details of it. Like I pretty much funded the entire company with dead.
To went to a bunch of banks.
And I said, here's much of plow chairs.
Please give me money.
And the best I got was like a sofa plus ten percent loan at five percent LTV. And so I pledged over a billion dollars of stock to get seventy million dollars.
Wow.
And I bought the bag for seventy million dollars.
I haven't had a lot of money in my bank account for a long period of time. And yes, and I ended up business became profitable. I got to pay off that loan in a period of time, but in the process I probably got margin called three times and almost went bankrupt multiple times.
Talk about that stress but it's in the room. I mean the first three years were definitely the most stress of my life because I had a fundamental thesis that we could pull this off and we could build a business that a hundred percent of employees and myself owned. But to do that in a world where you need to invest.
and not make money for multiple years is very, very challenging. And if the regulatory climate of the time and the building came
It was intense, and you have this loan I have to pay off.
It was probably the most intense period of my life. And as a founder, you have to shelter that from everybody.
You need to be transparent, you need to bring people in, but you also need to like not bring people all the way in.
I had pretty extreme conviction myself and
I thought I knew a hundred percent.
Over multi decade period.
I can pull this off. But there's that quasi croat of markets can stay irrational longer than you can stay solvent. And it's
True. And then I'd look at that quote and I'm like, which side of that equation am I on my day?
Yeah, we ended up making it through and I got an amazing place now. We have a big company that I own, but I think the idea of like, oh, like, you know, billionaire buys thing and stuff on it, it's probably a little further from the truth than people die. What's it like getting margin called?
What is the literal thing happening? How do you manage through that?
Surface to say.
You have a bank a million dollars.
They are you?
Like you on them. Like I think that's a little bit same. I mean, there's a reason that like margin lending in private companies is not a great business. Yeah. Because
When you want to take collateral that stock.
That's usually the exact time when you
Do not want to hold that private stock.
I have like immense appreciation for the people that did it for me. I'm not quite sure they got like a great deal out of it.
And I'm not quite sure I would definitely be in that business.
Reason I feel the story is important to tell is that it's these things where so much of the value gets created, the extreme entrepreneurial risks.
The act itself, but also the psychology behind it.
And I'd love you to just rift one bit more what the psychology was like and how your mind is different.
after that three year experience than it was before, even though you I know you'd already been through the entrepreneurial ringer with Plaid.
What changed about your mind, your perspective on the world? How did that experience affect you?
I think that
The good founders
Bet on themselves.
And take an extreme amount of risk to do that.
And I think the extreme amount of risk.
Heart.
is something that we no longer have.
But when there's
literally only one door in front of you.
You don't have a choice. You have to go in. And that fear and that innate desire creates.
Another part of you. It creates creativity. It creates inspiration. It's extremely valuable part of the founder journey. And in many ways, I think in Silicon Valley, we've actually removed that.
Do you think about most founders these days? Yeah, I talk all the time, like, hey, you talk to a 23. I'm like, you know what, I'm thinking about
Going to be like the twelfth employee at this company.
or start a company for myself. And I don't know, I'm kinda like next.
And we've created this incredible environment in Silicon Valley that it's really safe to start a company.
And there's like a playbook, and you go through Y C, and assuming you're moderately competent and went to the right high school and college, you're gonna get like a three million dollar seed round.
And worst case scenario, you can go work at a great company as an engineer, you'll have a founder and a resume. Life is good.
And that has created a lot of value.
But I'm not quite sure it's created
a lot of great founders and a lot of great companies because there is no risk in that proposition. And if you go back to even pre-2008 or something like that, you're on the edge of the knife.
And I think that creates just so much intensity and creativity.
In fear.
That is such a critical part of the founder journey.
And I don't know why we don't talk about it more.
We don't create environments where a founder has to bet themselves. And I think if we did that.
I think we'd actually be in a slightly different place. I always am somewhat perplexed by
I'm a second time founder, but I'm not alone. Like there's a lot of
great founders I shall not name that you know have made a bunch of money.
And you go dig oh here's my second company or third company and you dig into that.
Of the hundred million dollars they've made, they're putting like a million dollars of the capital risk and they've raised five hundred million dollars. And I'm always like, Why? If you believe in this so much, if you're gonna dedicate your life to it, why the fuck aren't you going all in? And if I'm an employee, I look at them, I'm like,
You asking me to go all in, but you can't go on. Because the weird thing is
An early stage employee
takes way more risk than an early stage founder.
Explain that.
So let's talk to example here. So I'm a twenty four year old.
I'm making
TTC perspective, four hundred K, five hundred K at Google and Meta, or something like that. Okay.
And I'm gonna go to a early stage company.
And I'm gonna go get one percent of this company and I'm gonna make ninety thousand dollars. Well, I've now changed the trajectory of my life.
I can no longer buy a house.
I can no longer go on the vacations I want. So I'm making like a four to five year trade off where I'm saying I'm gonna make pretty much no money over the next four or five years, but
Maybe in five, six years I'm gonna make like millions of dollars that I couldn't make at Google and Meta.
That's actually a lot of risk.
Say I'm gonna live with my friends instead of living by myself. Like I'm making massive
Massive changes to my life, but as a founder.
You're not.
it's a much higher likely that if the next round, regardless of your company, you'll be able to sell some secondary.
You know that if it shuts down, you can go get employed a great company, you have a C on your resume. That first employee.
they have first employee like a failing company, that's actually not a great resume line item.
And so we've de risked the founder.
We haven't de risked the only station ploy.
And I don't think we should actually de risk the early stage employee for what it's worth. I just think we need to
increase the risk for founders. I think we need to make failure much more expensive. I think we need to say, hey, you're a second time founding of liquidity.
Put all of your money into that.
If you're gonna be asking this if employees just ask it for yourself. And I don't think we're having that conversation enough. And I think starting companies are just too fucking safe.
And it's caused a lot of
companies to be just super safe companies, like hey, we're gonna pivot to AI, wrap open AI, wrap anthropic, whatever. Like that's not bold. That's not ambitious. And it's because we're attracting founders
That actually maybe
Gonna be employees.
They don't actually think.
about the long term they actually don't think say hey if I don't call this off
I'm gonna become bankrupt. My life is over.
And I think that's pretty healthy. That's when you bring out the rawness of humanity. And I don't see that very much anymore.
How have you felt that in yourself? So how has your behavior changed or your perspective changed or like just the ways that you show up?
That are different now than prior to this pretty extreme three year period.
I am not the most diversified person on the planet. I own
Two things. I own
Column and plot.
That's it.
I don't have an own majority of my house.
That is truly it.
Those are the only two things. And that's motivating to me. At some point in my life, I have a six month old son and I do need to probably diversify. And so that is a goal for me at some point.
As a thirty six year old, you should probably not be this concentrated.
But it's also that's what makes building companies unique. There's probably a lot of people that look at me and they're like, Oh man, billionaire, amazing. I think that's what makes it special. I think that's what drives me every day, which is if you don't have something you are driving towards, such as for me, like solvency, it's really hard to be motivated every day.
The other thing though, too, is that very often the thing you own and control in our building might be your best investment. And getting money out of something is costly from a tax standpoint and another thing. So you're in some ways you're just continued to be all in.

Better on yourself.
I'm sure every fancy executive has probably told you that, but I think it is somewhat true.
compounding on yourself is probably the best investment to make.
I'm not a journalist.
I'm a specialist. I'm probably the best in the world at a couple small boring stuff.
I'm really good at
creating really confusing boring sounding companies. That's really hard to explain on podcasts. And I think that's like my expertise. That's like my leash. I feel pretty confident in my business because
I do not think in my business you want to compete with me.
I mean
I'm hungry and I know my little niche space better than anybody in the entire world.
And if I'm investing or doing something else, there's gonna be on the other side of that trade.
I don't wanna do that.
I'm a building. I think sometimes it's a trap.
Where
Builders think they're investors and investors think they're builders.
There were cases when you can do both.
But in a world where it's increasingly competitive.
I do think the world for builders is the world of specialists.
And you have to go extremely, extremely deep into your area. And that's where you find value. I probably have read more about
the history of my space, the history of financial services.
I studied banks in Japan in like the eighteen hundreds.
I read like a very buoyancy page book.
on the history of banki in in China in the nineteenth century. And
There's definitely got out of that.
What's something not necessarily that book, but like what's something you get out of that degree of extreme study?
The hard part about this is you probably get like one small thing and a two thousand page book. Yeah. And so it's probably not efficient unless you own a thing that happens to be that crazy leverage on and that like one little thing can create millions of dollars of value.
to these next case like hundreds of millions of dollars of value. And so without kind of going too much into detail on it.
That's where you find your leverage. And I'm pretty good at that.
This notion of being the best in the world at the thing you do is really interesting to me.
It seems
the environment today makes that harder than ever because there's so much distraction.
Totally. And there's such a high rate and ease of comparison, which is certainly the thief of joy.
But it's really hard to ignore
People doing other stuff.
Spending a third of your day reading about anthropic or whatever. It's exciting.
What have you learned about how to become apart from reading obscure nineteenth century Chinese banking books?
What else have you learned about how to become the best in the world at what you do?
Assuming that there's less people interested in that mission or that idea.
I think one of the
Best determiners for success of founders.
Is can they find the most boring thing?
humanly possible.
Interesting.
And can they find that interesting over a multi decade period?
Who doesn't find AI interesting?
Yes, geopolitics.
Fantastically interesting.
There's all these like general topics that are quite broad that is very mass market interesting. And that's what makes Twitter so fascinating. That's why podcasts are fascinating, is because people like to feel that they are really smart across a broad swath of categories, but that doesn't really align to company building. So many people right now
are thinking about and are have a lot of knowledge around.
How AI is going to disrupt software, how AI is going to disrupt vertical software. How AI is going to be the next XCR. These are like generalist topics that I can probably find a thousand people that have interesting, compelling ideas and can go pretty deep on that. But you can't create value there. You can create value if you're like, I'm the number one person in the entire world.
at this little niche thing. And I think this niche thing can generate billions of dollars from ever over time.
But the problem is
Is those places are really boring.
The fun ones like food and like surfing in Thailand or whatever. Like those are solved categories. Yes. I would also love to be an expert on hospitality in Thailand and Southeast Asia. Like that's a fun problem. I could imagine one going niche on that for him with a decade period, but that's solved problems. But I think finding the extremely
Boring thing that requires you to read hundreds of thousands of pages that you cannot Gemini deep research your way through, that's where value is. But
It's fucking boring.
For a lot of people.
You have to suffer in silence for a huge amount of time. And if you can find that
super fascinating. You can like love to learn that.
then I think you'll be successful. But I think it's a minority of people.
My partner gives me shit all the time, but like
How on earth do you find that book interesting? What is wrong with you? And I was like, well, like if I don't, you and I are gonna be super poor.
You said earlier that building a company for the second time is a lot easier than the first time. Yeah. What are the most extreme ways that that's true?
What are the things that you've done the most differently this time than the first time?
Experience is valuable.
I started Plaud right out of college. And I think Zach, who was my absolutely incredible co founder, we both said, like, man, if we would have just worked at a company for like nine months, we would have learned a lot. We probably stayed like three years. Because the amazing thing about working at a company, such an early stage company, is you just fail forward all the time.
And that's incredible. That's an incredible lesson. But like when you feel forward as a founder, that's a lot of dilution. That's a lot of time. That's a lot of like wasted resources. And if you could do that on somebody else's dime.
Amazing. No, I think it's like a little bit easier because everybody's YouTube videos of I see startup school and there's some PDF for everything and you can probably like Gemini your way through the early stage part of a company.
But experiences matter a lot. What about picking talent?
What things do you optimize for now?
That
Have been honed because of your prior experience.
I mean, people always think about employees and it's like a kind of missionary mercenary framework.
You have to look into employee, like what do you want to do? There's like the mercenary type, which is okay, super smart, probably super pedigree.
And really what they're doing is they are using your company as a launch pad for something else. They're using their company to like collect a bunch of two year invested options from like the top five companies and hoping one of them goes up.
That can be a valuable employee, but you have to have a very specific type of company that is used to that shurn and burn.
In order to take advantage of them.
Then you have the missionaries, which is
This person is very mission focused.
inspiration is super important to them. And if you get that right.
They will go to like the ends of the earth for you.
regardless of like their short term benefits.
People also have
Some downsides as well, which is the moment maybe you want to be a little bit more commercially oriented and the moment you have to maybe make trade-offs on your mission or something like that, that can cause a lot of societal unrest inside of your company. And there's like the third category of employees, which are generally what I think are probably like the best, which is like the combination of everything, but really what they care about.
is they care about, yeah, we want a ton of upside, but we also want stability. We also want people that hey, I like to be friends with my coworkers. I like to be in an environment that is like warm and welcoming, but also gives me like the near term and long term financial value. And I'm willing to like work really hard to get there.
Everybody has personality types, everybody has different styles and you have to figure out what is right.
For your business.
But I think it's very challenging to tell them in LinkedIn. Yeah, but it's like okay, cool. You went to the right New York prep school. Thus you went to like the right I school that happens at like this good engineering program. And then you have these couple of LinkedIn things that are like good for me and boom, done.
That can be super successful, but that is also not
the right for everything. And so just getting that hone for talent.
It's super important.
How much do you care about mission?
This is an interesting thing.
Part of the equation.
You need a mission. Otherwise people just go work at headphones. You need to say, like, hey, we are building something bigger. And I think we absolutely are. But I think mission can actually be a little bit distracting. I think a lot of times people focus a ton on, okay, what are like the values of my company?
What good are we doing? I think that's like an important part of the equation, but I think it's on a list of five things most important. I think it's probably on the bottom end of that five list. And I think a lot of times we can be kind of distracted by that. That's because when you're pitching investors.
Investors want to feel like they are part of something. They want to feel that, man, I'm not just we're cycling pension fund money into other capitalists. And that's what we do. Like we want to feel like it's bigger than that. And so I think we've taught people that man, you need to focus on the millennia journey. You need to focus on the impact that we're doing. And like yes, numbers go up.
But like numbers go up as only one part of the equation.
And I think that's important for employees, but I think it's sometimes not the best. Like in the end, what do you want to do? You want to convince somebody to buy your product and like you deliver them enough of an experience that they can't build it themselves, and they're gonna pay a lot of their hard earned money to you. That's the goal. And that person doesn't give a flying fuck about what your mission is. They just care about
Does this product create value for me and am I willing to pay for it?
That's it.
And if you start to like drink your own Kool Aid too much, you kind of forget that.
It makes me smile to think about
your earnings and cash flows. It's such a novelty that a company like yours would have a bunch of this so young in its life.
And at this scale.
How do you pick your margins?
How do you think about
how profitable to be and why.
You mentioned earlier that's like having a funding round every year. Does that imply that you're actually spending it? So you're not paying taxes so that you can spend it on growth.
How do you think about
Earnings in a high growth.
technology business.
Our customers pay us for safety and our companies pay us for longevity. It's a unique thing around financial services where I'm gonna look at you as a customer like I'm gonna be your best partner over like a 10 to 15 year period. Switching costs are really high and they are putting a lot of your customer trust gonna risk in you.
So I am playing a longevity and risk game just as much for me.
As my customers.
I take that extraordinarily seriously.
And I think earnings and being profitable and sustainable and not relying on somebody else's decision making framework.
is extremely critical for our customers.
And that's
Extremely important to me as well. I tell people the risk falls on me.
I can't pass my risk to some other venture fund or like their LPs or something like that.
I want you to be successful. I want you to be successful if we're not like I'm the one who takes the pain here. That's quite unique in Silicon Valley.
Because at some point your critical vendor could get like acquired, or maybe the founder could get like a twenty million dollar offer from Anthropic. It's the rational decision for them to do that.
In many ways, we aren't competing with other Silicon Valley companies. We're competing against maybe them doing it themselves or maybe competing with them trying to like build a patchwork of software vendors on top of a legacy bank or something like that. And so I have to show that I am more sustainable than you. And I think that earnings is a critical part of that. And I think people are like, Oh, like your margin is my opportunity type thing.
And my argument would be like
You run this business at a lot lower margins.
You're gonna be dependent on somebody else.
that you probably don't want to be dependent on.
You also have to be
Introspective about your business.
Is my business.
The type of business that
If I raise a bunch of money or I have a ton of earnings, I can throw all of that back on growth.
And I think
a lot of times enterprise software companies
They cannot ingest like a huge amount of capital. Like if you give me like a billion dollars right now, I don't know if I grow it a thousand times faster than I am right now. And I don't necessarily think I should. And so what we do is we say, Okay.
Of this earnings, what goes for employees.
What's gonna go to growth and what's gonna go to capital, which is pretty much
In case something goes wrong or we have a bad couple of years.
NBD, we good.
Let's keep moving.
down to the extent of now we're like, hey, if something goes wrong for ten years.
How we like
We're good.
There's a lot of societal change going on. There's a lot of crazy stuff going on in the environment.
I can totally paint you a picture where like the markets gets insane for the next ten years.
How do I make sure I can survive that?
Even if a lot of our companies go up or the economies changes.
That goes back to that orchest because markets go like this. Sometimes like yes, the line through it.
goes like this. You forget it when you have one of the good ones. Yes, exactly. And we look at slope.
But a lot of times like we have down here.
And you need to be able to weather through those down there. And there's so many companies.
That just couldn't survive a couple of bad periods. And you really want to make sure you're not one of those. If you were in a classroom setting
And it was a bunch of founders or would be founders.
And it was uh Chatham House rules off the record session teaching them about
Working with investors and what investors care about, how they behave.
Things to look out for. What would you tell them?
I actually feel pretty lucky where I apply it in the early days, it should have pretty hard time understand.
First of all, I think we probably chatted with like eighty or ninety investors and we got rejected.
Sometimes I think I have a reputation of being, oh, like we have like someone anti-VC. It's actually like not for this for the truth. Cloud would not exist without VCs, straight up. I just don't necessarily think the VC model is perfect for every single type of company.
Or maybe the DC owns like ten percent of your company or twenty percent of your company, and maybe the employees yourself on like eighty percent.
There are different cuts of this you can make.
But I think for me
Picking investors is important. I don't think there's a lot of transparency in the environment on like when investors are seven year timelines, which ones are 10 year timelines, and which ones are actually truly super long term oriented. So I think figuring that out. But I think the most important thing you should do is say, Okay.
Realistically.
What does my margin profile look like? What is my revenue growth over time? How should I find a capital structure?
That matches that.
And am I actually going to grow?
At a consistent enough period.
Do I want liquidity in 10 years that the venture model makes sense for me?
Because the thing that people forget is yes, growing a hundred percent.
On a ten million dollar base or twenty million dollar base or thirty million dollar base. It's not like that hard. Everybody likes Jersey's graphs on LinkedIn like we're the fastest company to get to a hundred million dollars of all time. That's awesome. But you know what's like much harder?
Above thirty percent a year off of a billion dollar revenue base.
That is 99 times harder.
Than going to zero and hundred million in three years.
However.
The venture model only works.
That you can grow above thirty percent.
off of a billion two billion dollar base.
And you have to like really look inside yourself and be like, does my model make sense for that?
And can I do that in a way that I can ingest.
Hundreds of millions.
If not billions of dollars of capital on the way, and put really good use to that.
Because sometimes
Businesses grow
at the rate of the market or businesses grow
differently than just dollar and dollar out.
And the venture model is built off of fact of
you can make a company like an ATM.
Which is you put in a dollar, you get a dollar thirty back.
That's not the case with most markets.
And so I think you have to look really intensely at yourself and your business to make sure that works. And there's so many amazing tech companies that works for. And that's why that venture is a really good asset class, and Silicon Valley is probably like the best place to accumulate capital of anywhere in the entire world, probably throughout all history.
But that's not every single business.
And you have to look really intensely yourself in order to do that.
Given your unique perch.
What have you learned about how the world works through the lens of this dollar focus, this demand for dollars being the operating system for the global dollar system?
Through the lens of the dollar.
What are your takes on the ways the world works or interests you that might surprise people?
What the dollar does. It connects countries.
Very interesting ways.
then I think in the US when you could pretty much just go to
Incredible company by the US alone.
You
lose that perspective. If you look at the official stats, most economies spend less than 10% of their GDP
Trading with their neighbors.
And that's been a big focus point.
of the OECD over the while, but then actually dig into it, the unofficial trade.
that's going on over government rails. It's actually closer to ninety percent.
Just shows like how trade and how money and how that's like really connects these cultures and connects these societies. And I find that like super fascinating.
We can talk about how that's impactful in a lot of ways, but that is something that we don't really
get in the US because the US has this very unique luxury.
Uh we can almost somewhat sustain ourselves, like you can sustain businesses.
Only building for yourself QS market is just so fantastic. I am so long the US, as I'm sure anybody building. You can sustain yourself. You become a billionaire by like never truly ever leaving America or never interact with anybody outside of America. And that's what makes America so unique.
I don't think we get like how much of a luxury that is.
But outside of the world.
It does not. And that comes down to trade. That comes to like financial connectivity.
That is so impactful and it's so important. I think you also forget.
how reliant the world is on the US financial system.
Let's take two insanely developed countries.
Let's take Qatar.
MLS take.
Switzerland. Okay.
You're shipping gas.
From Qatar to Switzerland.
I would argue right now.
But neither one of these countries love America like a ton.
That trade.
is the nominated in dollars.
The money that's moving from Switzerland to Qatar
Glencore to Qatar?
The Kotari Gas Company?
crosses the US financial institutions.
It's crazy about let's think about
Or maybe our two like quote unquote enemies, like China, Russia.
Okay.
China's a big importer of Russian gas and oil.
It's kinda crazy to think about.
That trade is still denominated for a vast majority.
In the US dollar.
That's mind boggling.
That's a luxury
And that's such an insane national security.
Strategy.
That nobody else has.
Russia doesn't want Chinese currency.
China definitely doesn't want the ruble.
They don't have access to it.
They almost like hate each other as much as they hate us.
And the fact that they then choose a dollar is still so critical. I mean, you could argue that like maybe like dollars eroding over time, stuff like that, but
Still in the vast majority of like like seventy five percent of global trade still is in the dollar.
That's crazy. And we don't recognize that. The soft power the American has, or even the hard power the American has with that.
Is so fundamental.
Two
our life in the fact that like we have such a strong economy.
Do you talk to your team as though this is part of the mission?
that almost like national security is part of the mission because of the importance of the dollar.
Hundred percent.
One of the best shifts I think Silicon Valley has done is we now are like
So can I like we take an active role in the national security of the country.
We didn't.
six, seven years ago, even though like American society, American GDP growth.
Yes.
even more than ever completely indexed on the success of Silicon Valley.
Probably too much. It's way too levered in that regard. But
Now something like whether it be social media, whether it be defense, whether it be software, whatever, we're starting to recognize our world in the world.
And financial services.
Is
probably the most important component of that.
Give us any general.
I have.
They want to use a sanction before they use a missile.
The great thing about a sanction, the great thing about the dollar, you can enforce American dominance.
Without putting boots on the ground.
That put anybody at risk.
And sometimes you're showing Venezuela. You kinda need both. The reason we were able to go to Venezuela
Is because we had fundamentally destroyed the economy before.
How?
Sanctions.
we had completely collapsed their ability to export oil.
We completely
collapse their ability to actually trade with other people. That friction.
Is real.
And so when we went in there
Venezuelan people were probably like
Yeah, okay. We good.
Well maybe not controlled shoot these helicopters from the sky.
We're pretty happy here. That is fundamentally so amazing.
If France wants to shut down another country in order to go like enforce their will.
They have an option. Well, they have two options, which is don't drink our wine and here's the missiles. Okay. The missiles can enforce their will. They have a strong military, the strong special forces, they can go do that. But their lives
The special force on the ground.
They're gonna have a much harder time.
Because they haven't
in many ways control that economy before. And that is
So so unique.
To the US.
And I think China's obviously developing this with trade and exports. One of the things that China can do is they can start to enforce their will by shutting down a country from exports. That is real. And so I think China has definitely this increasing might.
But
The strength of the doll in the show that is so fundamental for national security. And in many ways, we don't talk about it because it's a little bit uncomfortable truth. The global bank doesn't want to sit up and say, We're part of the national security strategy because if the government tells us to, we're going to collapse this economy.
That's not like a fun narrative that people want, but I think there's a way to tell that narrative that says we are a weapon that can be used, like when our citizens come to harm, when we need to do something that is like super important for the US interest, and we are part of that strategy, just in the same way that Palantir's part of that strategy, Lockheed Martin's part of that strategy, Boeing's part of that strategy.
And financial services is the key pillar.
You can argue that
Financial services is like the first end to war to our country.
We start with sanctions, we start cutting them off from the US trade. We start with that before we put boots on the ground.
What do you then hope is the future of global financial services? Obviously, you're actively building the technology backbone for it.
But if you think big picture
How do you hope the system changes what would be best for it?
I still hope it's very U S bound.
And I think we sometimes want to believe this world where there's a lot of people in Silicon Valley that I fundamentally disagree with that want to put the power
of financial services outside of the US.
And the US has a lot of problems that we can spend
hours talking about.
I still think we're the greatest country in the world. And we have change of power every four years. We change our mind on stuff. Yes, there's some problems, but
We're still the best place to be. And I think we are the ones that we should still have the nuclear weapons. We should still have the nuclear weapons of financial services, which is we control the world's
Trade.
And I hope that continues to exist.
And I think if we don't
I think if it just hands in the power of other people.
I think that's a scary place. And I don't think people have really thought through the ramifications of that. If you look at most countries
Fancial services is still power, but it ends up just accumulating.
Two government officials.
It ended up just accumulating in the power like a very small elite.
And say what you will about the US, and there's probably way too much power concentration in certain industries. Financial service is actually quite fragmented.
JP Morgan's the largest financial services country in the US, but like
It's not that dominant.
It's still pretty diversified.
Take Canada.
Ninety five percent of Canadians have four banks.
Take Australia, it's been more concentrated. You know, most countries have been more concentrated than that. We do have a little bit of financial services that are relatively decentralized.
financial services system. It should still keep fragmenting, right? We should still disperse the financial power throughout
Multiple US corporations, multiple US people. We need to do a better job there. But we're actually starting from a pretty good baseline.
The other thing I tell people is there's this near like oh financial services is fundamentally broken. Our institutions are actually
Pretty damn good.
There's this narrative sometimes people talk about US financial services. It's like built on like cobalt and stuff like this.
It's just not. It's like a fun talking point.
I rack my iron hard with the Federal Zer and all these like places. There's no cobalt in a lot of these places. It's actually pretty good. Go on the record talking about this. The Fed has a pretty good tech team. Their systems are actually like pretty good.
You think about the US right now.
To the fad.
Has the capability.
to move money into clear money throughout all these institutions twenty four seven.
Faster than stable coins, faster than crypto.
right now as we speak. We've had that.
For decades.
Systems are very good, extremely reliant.
They're fantastic. I think it's very challenging for Silicon Valley.
To build something better.
The problem isn't in the fundamental infrastructure.
It's in
Or implementation of it.
The reason why community banks
Can't send money for seven isn't because the technology doesn't exist at the Fed. It's because there are constraints in those business models that make it very challenging for them to do.
Give you an example. If you can send money
out of your community bank twenty four seven.
Well, that thing could run on a weekend.
I don't know if you guys have ever like been to a rural community, the community bank with fifty people.
You can't get people to work on the weekends.
If you're JP Morgan.
If you're stripe
Yeah, you can manage twenty four seven liquidity.
But if you're a small community bank
You can't have that.
It's more conflate.
We don't have something.
We don't have access to something with
We don't have the fundamental ability to do that. But actually the reason.
His implementation, not the analytic infrastructure.
I feel like because of your unique
setup as a business and your unique focus on the boring problem as you described.
You have such interesting perspective on so many things.
Is there anything that we haven't covered either about company building?
Or the way that the world works.
That you think is interesting that we've missed.
One of the things that
I think about.
AI is here, but much closer to ASI than people think.
And it's gonna be on the tidal wave to the economy.
You have to think about what's the implications of your business. And I think
In my perspective, if you're not a researcher, if you're not a lab.
How do you play?
I actually don't think quote unquote AI companies.
Art.
very set up for success. That's actually probably not where value's gonna accrue. The value is gonna accrue like in two areas.
Most important area, I think, do you have massive distribution?
'Cause if you have massive distribution, if you have massive costs.
AI's gonna be a massive bam for you.
And so the thing I think a lot about is how do you think about not just from a software perspective, but from a distribution perspective and a brand perspective.
That you would best capture to utilize AI.
Because I think people talk a lot about the railroads.
Yes, the value accrue to the railroads. Yes, the value accrue to the ISPs.
Yes, the value accrue to the people like building the mobile phones, but the value actually accrue to the people.
That could harness that the best.
The value in railroads accrue to the oil companies.
It does get a little bit harder fundamentally understand.
The standard oil is the biggest beneficiary, biggest boon for railroads by an order of magnitude.
What is the equivalent area for AI? And I sometimes don't think we're focused on that enough.
Hot take here. I think like the biggest, fattest, most inefficient brands.
are gonna be the best beneficiary of AI because brands have a massive moat and man, there's a lot of cost to cut there.
How do you think AI will most affect financial services specifically, maybe even just your own products and services?
Financial services, especially large banks.
They suffer from the fact that the business model's too good.
Thing's pretty profitable.
Financial services, it's like be like on a bank and you aren't profitable, like that's a problem. You've cleared something wrong. Like the business model fundamentally is what I get.
That's made them laggards.
In a lot of ways.
But it also I think makes there a massive opportunity where I think financial services and legacy banks tend to be the largest inefficiencies out there. They also
are very hard to take over. There's not a lot of private equity activity in financial services because it's highly regulated.
And so I think the large banks that can actually effectively harness that are gonna be some of the largest.
beneficiaries because banks don't have a lot of physical assets.
Places have massive cap ac and physical assets. It's hard to tell a good AI story there.
How's AI gonna make railroads more efficient?
If ninety nine percent of your money is spent on fuel.
track maintenance and people like the human cost in railroads is like de minimis.
You get conductors down from a thousand to five hundred. Doesn't like change the equation at all. But if you think about a traditional bank,
It's pretty headcount focused and it's pretty technology focused. That's where the majority of the money goes to. The actual physical branch infrastructure is such a minority.
Of your balance sheet.
I do think they will be either
The most disrupted are probably actually like the largest beneficiaries. And so the banks that are like the most effectively run, have the largest distribution, have the largest cost structure are going to be the largest beneficiaries.
I think the UX of financial services will change a lot because
People would think, Oh my gosh, my bank is hard to use. My bank is hard to move money. It's like slow to move money.
That's actually a feature, not a bug.
I think what fintech sometimes start with is they start with, hey, we're gonna make it like super easy to like super free to move money all over the place.
It actually starts to slow down. The reason it slows down is because
Fraud is like super expensive.
If you make it like really easy if you're a grandma to send money to somebody in Nigeria, yes, that's great for remittances, but that's like really bad for romance scams. That's really bad for fraud. But I do think
with AI
We can actually
build those detection models like a lot better. And so it's probably less likely your grandma is gonna fall.
Prey to elder abuse. And if the banks don't have to optimize so much for that, and it comes a little bit for free, we can actually make the UX better for everybody else.
Because we have the technology right now.
To make financial services.
Almost entirely instant.
And like entirely friction free.
All the friction is actually built.
To protect
the five to ten percent of consumers that can get hurt. And people forget that. But I think if we can build
models that are just as good a human at detecting that stuff, and that can happen instantly, we can actually take that tail away and it actually is massively beneficiary for everybody else.
Do you think it's a good time to be a new entrepreneur?
In financial services.
Anybody who tells you that it's a bad time to be an entrepreneur, that probably means it's a good time to be an entrepreneur. If you look at there's all these stats on Twitter that I'm sure people have seen, where the best companies are created in the worst environments.
And I think that's generally true.
It is.
Cheaper than ever.
To be an entrepreneur?
It's probably the least risky time to be an entrepreneur.
It's also pretty crowded, but
You probably look at like the last Y C batch. I'm sure like my ninety plus percent of them were like AI related.
So yeah, I think it's actually probably a
pretty good time to be a founder in a non AI related place right now.
because there's less competition, less smart people.
If you want to be successful.
You can go look.
At every single industry.
And you can say okay.
Who is the dumbest people?
And
What makes the most money.
And if you go attack that area.
Probably pretty good space.
The problem is sometimes looking at Valley or founders, you look and say, like, hey
We're all the smartest people.
That's maybe like a cool space.
That's fine, like
the most crowded with the smartest people. And so your ability to compete, your competition's pretty intense.
Why C puts out this, um
Request for startups. My recommendation is like that should be a list of startups you should not start because by the time that it's so consensus that this is a good area or super interesting, the amount of capital and the amount of smart people is like moth delight.
I would almost go the opposite way. Hey, Y C, I love you guys. Please continue to fund our customers. You guys are amazing. But as a founder, I would maybe be a little bit skeptical.
Your perspective is so unique and interesting. I always love talking to you. I always find it very inspirational.
on the dimensions of just really going your own way.
But also just the willingness to fall in love with some part of the world and get devoted to it and just out learn everybody and stick with it.
I love your diversification strategy of illiquid plaid and the liquid column.
I think you know my traditional closing question, what is the kindest thing that anyone's ever done for you?
I've had a lot of
But
I think it's challenging to not look back and be like, Oh, like your mom and dad are like the kind of people.
My mom and dad do not have the most like straightforward life and not the easiest. And
My child could could have been a lot more difficult.
That it was.
They insulated me from a lot of things that were going on.
No, I have a lovely childhood.
And I feel super lucky for that. And I think
Maybe we talked about a little bit.
As a founder, you have to be willing to take on risk.
And if you grew up in an environment of fear.
If you grew up in an environment where like you are constantly de risking.
When you're a little kid, it's very challenging to feel comfortable going up to respect him as a young adult.
And I feel very lucky. My mom and dad did that.
They also taught us like
It's been kind of fall, it's like punch in the face, like see this?
Don't fake.
That time I got punched in the face and I've like lost teeth. It's honestly crazy. It's like embarrassing. But I'm like, you know,
pretty good at getting punched in the face. And you can only teach that as a little kid. You can only
have that childhood that makes that comfortable in a very specific environment. I have a six month old and as I look at my peers and look at everybody else, we are quite obsessed
With creating
This perfect environment for our children. We send them to the best schools.
They have the nicest people in their lives. And that is valuable, but we're maybe creating children that can do linear algebra at seven.
And I guess is like gonna be great AI researchers, but
Is that what we're gonna need?
In twenty years from now?
Or do we want kids that are gonna be pretty good at taking risks, that are gonna be pretty good at being punched in the face.
And I think my parents did a really good job at that and I feel very lucky for that. If I copy off my peers, I don't know if that's the path we're gonna go down.
And I think
The fact that I am
Pretty damn resilient.
is a complete product of my parents, and I think that's a huge gift. And I feel super lucky for them every day.
A beautiful place to close. Thank you for your time. Thank you.
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