How to bet on yourself (without venture capital)

Key Takeaway

William Hockey, founder of Column (a software company that owns a bank), shares how he built a massive fintech business without raising venture capital. His key insight: constraint breeds creativity. He travels to emerging markets like Kinshasa to escape Silicon Valley's consensus thinking, discovering that the most innovative financial services often emerge in the world's most constrained environments. By owning 100% of his company and growing through earnings, he can make 10-year bets that VC-backed companies can't afford—like buying a regulated bank and investing in it for 2-3 years before taking on clients.

Episode Overview

William Hockey discusses building Column, a software company that owns a bank, serving major fintech companies like Built, Wise, Ramp, and Brex. Unlike typical startups, Column is entirely self-funded and employee-owned, allowing for long-term strategic decisions that VC-backed companies cannot make. Hockey emphasizes the importance of escaping Silicon Valley's consensus thinking by traveling to emerging markets, where constraints drive innovation. He explains how operating profitably while maintaining aggressive growth creates unique advantages in talent retention and product development.

Full Transcript

Transcript of How to bet on yourself (without venture capital) from Invest Like The Best. Auto-generated from episode audio; may contain minor errors.

My guest today is William Hockey, the founder of Column. William was also the co-founder of Plat, one of the more famous fintech 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 in Japan and found one idea buried in the 2,000 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 Hockey. Usually I don't start with a description of the company that someone's building, but in your case uh one I don't think a lot of people are yet familiar with column and I want to fix that and it's such an interesting beast in and of itself that it 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. We have a bank that most other people don't have, and we're going to build just incredible software behind it that nobody else can build because 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 back-end 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.

And then we also expand that to anybody want to do things with the global dollar. So that could be international fintex, that could be a lot of times global banks or banks in emerging markets that need to transact hold things in the dollar. So in the US you have you know vertical software people building business software. This is an area that is you know probably going to get changed as AI kind of rolls through. So people need to go deeper down into the business. Just building software for software sake is not the case.

And so now people actually need to control the underlying finances of business. The bre ramps of kind of the world have proven that you can actually build enterprise software that also touches the money. But in order to do that you actually have to control the dollar. you have to control the money whether it be lending, money, holding, credit, etc. 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 like really nail it home?

So maybe I'll use a a company out here that recently relaunched company called Built, which is made a lot of New Yorkers have, a lot of people in the cities have. If you look at the card on the back, it says like, you know, like issued by column. And so we're the one that is actually connecting with the networks, managing the networks, and we're actually the regulated entity behind that. And then when you need to go pay your rent or your landlord is going to detect money from your built account, if you look at like, oh, the account and routing number there, oh, that's actually a column account routing number.

So they build the application, they build the website, they build the consumer marketing, and we're going to handle everything kind of behind the scenes that has to deal with the Federal Reserve or TCH or the card 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 90 plus% of our money off of software. And so similar to a any kind of SAS company, it's a per API call.

It's a pure play tech business. And then we pass most of the economics from the actual bank side of the business down to all of our customers. customers. 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 going to Kenshasa very often. Why are you so often in interesting kind of bizarre local around the world? This is my second company and I started Plaid back in 2012.

It's very easy to stay in Silicon Valley. It's like quality 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 your listeners read Dan Wang's last letter on China and he has this like great and I think accurate but somewhat harsh criticism where he says the two the two most consensus societies he's ever been to is San Francisco and Beijing.

And I think that's like quite accurate actually. Um where San Francisco is probably the most consensus place I've ever been to. And I think that is both a huge clutch for us, but it's also probably our most valuable asset because as a founder, if you're building in like, I don't know, like AI or like stable coins or something that San Francisco believes is very consensus, but the world does not believe yet, that's actually a great operating environment because you can go and you can have these like outlandish ideas that other people are going to believe in that nobody across the world would believe in.

And you can build this in a very like safe way. I think that's why Silicon Valley in San Francisco is so 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 or even like everyday American operates. And you've probably seen this kind of smack us in the face over the past of 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 build 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. Like if you go to talk to people in London or Vienna or Mexico City or San Francisco, whatever, like people are living in to an extent in a world of abundance and that causes a very like specific creation cycle.

Why? If you go to Kinasha, which is a capital democratic republic of Congo, it's going to be the largest city in the world than in probably 5 to 10 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 Kasha is a capital of. But like, you know, just tens of millions of people that live in an 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. I think second for my business like 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 emerging 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 like 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 you know UK and the GBP is pretty strong or you know France those places don't need American financial services as much as maybe some parts of the emerging world do so sticking with Kinshasa as an example so you go there what are you doing there what are you discovering say more about like this con the constraints you encounter there like teach us a bit about I've never been to Kinasa they operate in a world where there's actually like relatively large markets you know DRC that's an example is you know one of the largest exporters if not the largest exporter of some critical minerals in the world right so there is a lot of money flowing through there it's a massive exporter it's a place where um it's a lot of Chinese investment you know 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 why they maybe you know 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 kind of talk about that in a second and so you just I talk to them I meet a ton of people I'm meeting CEOs of largest like multinational companies there I'm meeting kind of 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 American financial services like how can we be helpful and you're just honestly I spend a lot of my time just like walking around kind of ideulating just like taking in the scenes and sometimes you know quarter of the time I come up with like a really interesting idea that ends up building us like a cool product or just a good market.

It's an example of that. I probably have 90% of my ideas either in the shower or like walking around like a random emerging markets country. It kind of expands your senses a little bit. If I'm like walking down the Marina Green, I'm like walking through the mission in San Francisco. Like kind of the only thing I'm thinking about is like oh my gosh like how is AI going to change things? Because you can't walk around San Francisco and just not get like completely hit with AI FOMO 24/7.

But there's other stuff we need to do in order to get people up to like mobile penetration. Like take DRC like mobile phone penetration is still less than 25%. Banking penetration is like still less than 5%. That's crazy. That's crazy. That's crazy. There's like stuff we need to do before we think about like embedding an LLM in everybody's brain. everybody's brain. 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?

Like is that how you think about some of these opportunities where it's much lower hanging and just no one's paying attention? attention? attention? The leaprogging that happened in Asia is obviously quite well known, right? Like China skipped the laptop, went straight to the mobile phone. Most famously, uh you know, we strip we we we shipped, you know, online e-commerce and like went straight to straight to social commerce in China. Like there's going to be leaprogging as well. And you're going to see the same thing in financial services.

Like financial services tend to be most innovative and most progressive in like their worst countries. You can see this in Argentina. You can see this in Iran. You can see this in other places. Like the Iranian financial system, like say what you will, like 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, you know, a little bit differently.

And that's actually quite interesting. If you look at these emerging markets, take, you know, like Africa for example, they were the first ones to do mobile payments and empa like decades ago, well before like, you know, Venmo. If you talk to them, they are actually like quite a bit more open and they are quite more like they are used to this their their category being somewhat disruptive. They also have a like an interesting thing is they have a a bit of an access to differentiated capital which is if differentiated talent if you are in if you're in the US like you know pardon pardon the banks I'll kind of [ __ ] on here but you do not have access to the top talent the top talent's going to they're going to anthropic they're going to Google etc but if you believe that you know brains are distributed equally you go to Congo and equally you go to Congo and there's going to be like some proportion of like equally smart people as there are in France there are like there's no like anthropic to go to.

They don't have the ability to move to move to London and go to Deep Mind, but there's a still like a pretty decent talent pool there. They're going to go to where there is job safety and where there is money. That tends to be in a lot of emerging markets. What like the breweries and the banks, that's where the money is. And so the talent, I'd say at the middle level and top can actually be like quite a bit higher than people than people think. I'd say you take your like emerging markets bank executive team, they're hands down is way better than I think probably what you see in the western world.

They also have the ability to 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 developed countries like everybody has like a bank account. Well, a lot of the people who have a phone have a bank account so they can actually cross-ell there effectively. And you and I talked about this before, but I think one of the most interesting companies out there is Caspby in Kazakhstan. Fascinating. Can you explain it?

They started out by by buying a bank and then they just kind of built did everything. did everything. did everything. Did everything like they're like the just like e-commerce company, the largest bank like you pay your taxes on Caspie. You like renew your driver's license. It's on Caspby. Because what they realize is like where people start is people okay maybe people start in social media but they also start in financial services. And so if we require financial services, we can cross-ell and we can distribute products there.

The largest bank in in Congo is bank called Raw Bank. Highly sophisticated. You download the mobile app. It's way better than we have here in the US. You can like upgrade like your TV subscription on it. Imagine like JP Morgan doing that or Bank of America doing that or Wells Fargo doing that or Candle even like US FinTech 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 all these countries the main currency is is a dollar.

Um and so our ability to kind of innovate with them is is much more akin to what a fintech 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 and fintech is so developed and and I do think you know like one of our thesis is like fintech is probably going to be like the last area that is somewhat maybe disrupted by AI.

I think what you'll see is you'll see a collapsing of like domestic fintech and enterprise software and you already seeing this with like the ramps and stuff of the world as they go kind of deeper into the workflow management side. Good thing for us like some of our customers are growing just like so quickly but the rest of the world is also it's 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? Like as you trapes 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. Uh you're able to kind of get outside perspective despite being kind of that place originally. What would you say is like stands out as the strangest elements of it and its culture today? today? today? I'm a product of Silicon Valley, right?

I I I've been there since I was 21. Started kind of like some of the top companies in Silicon Valley. I am like a 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. SF and Silicon Valley like it's an elite dominated society whether we like it or not. It's probably more akin to Wall Street in the 1990s than it is to what we want it to be which is like you know a research lab in Cambridge in like the 1950s.

Like maybe that was Silicon Valley in the '90s but it's not anymore. And what that happens is like you know elites end up building software for elites. And I think that has somewhat made sense because if you look at like 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 like 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, like our research labs are are doing fantastic. Because that's like a consensusoriented problem. It's you take a bunch of people that are super smart and you like pretty much like blind off everything from 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. But as you think about like applicability to people's like 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 other people outside the world. And so our ability to think actually build software or have ideas or perspectives that really resonate is probably at the low point in the entire time I've been here. Like Silicon Valley is not a popular place and I think we we tend to forget that. Like 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, you know, I at least try to focus on a lot because I have to build software. I have to build products are applicable to like outside the walls of of of San Francisco and New York. But that's probably less and less the case. the case. the case. Most software companies try to maximize your time on their app to juice engagement. RAMP does the exact opposite. RAMP understands that no one wants to spend hours chasing receipts, reviewing expense reports, and checking for policy violations.

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Work OS is the fastest way to become enterprise ready and stay focused on what matters most, your product. Visit works.com to get started. One of the things that you've done that's so unique is not raise money, uh, but but built at a a pace and a scale that looks as though you raised a ton of money. So I say it's huge. Talk about that decision. What what building a company where you and the employees basically own the whole thing feels like relative to having built, you know, a marquee company that was venturebacked.

and just like I want to go into all the various lessons that you've learned. We spent a lot of time in this section, but at a high level like why did you choose to do it this way uh in the first place? I started applaud and I kind of did like the the standard Silicon Valley playbook where like you have to like ideate, you have to build stuff and then you like put a deck together and you go to like these like 80 venture capital firms and like hopefully one of them gets you money and then like every year you like move up the alphabet and I think that worked and you know Plaza a very successful company.

I'm very lucky to have started it. But the things that Silicon Valley sometimes gets confused by is they're like, "Okay, you're either like a venture funded company." And if that's the case, you're like ambitious and you're going to build amazing software and you can like amaz like amazing products or you're like a like a bootstrapper and you're going to like write like thought pieces on Twitter, but you're going to like hire like subscale people and you're going to like grow small amounts. It's like a cute lifestyle business.

And I think you can actually be highly ambitious. I think you can hire like the world's best talent. you can build like a massive doubling company without actually being being able to be addicted to to venture money. What we do is we say okay like we are going to grow by our earnings. We're going to make sure that 100% of employees and myself like like own the company for foreseeable future. It makes it a lot harder. It does definitely put some constraints on your business, but not only for, you know, the net worth of like myself and my employees, but also culturally, it's actually quite a bit more effective because, you know, being long-termism is is probably a little like a trit saying.

Um, but I think it does actually help us do that. I think yes, Silicon Valley companies are probably like more long-term oriented than your average business in the US, but I think the hamster wheel of VC 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 you're burning a rate of you have to raise every like year, year and a half, you end up optimizing for that next fund raise and you say, "Okay, stable coins are like cool this year, so I need a stable coin strategy.

Okay, AI is cool this year because like I need an AI strategy. And so your business maybe it's like kind of going 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 going to be the straightest line to your goal. I sometimes make this joke, maybe not appropriate, but like like VC money is kind of like heroin. It like feels good. It's amazing, but like you got to keep shooting up.

Like it's very challenging to get off. Like I I know very few people that have like tried heroin once. Yeah. Like I tried to hear her 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 $100 million series A and then like I'm done. It just doesn't happen. And and I kind of think that man like if you raise $100 million, you should be able to raise like you should be able to build a couple billion dollar business after that.

Why why do you need to keep raising it? And there's a lot of structural reasons for that. And in the fact that San Francisco is a bit like a factory like is by design and I think that is it can be like quite effective. But I think for like the ambitious founder, I actually don't think it's it's it's the right thing. And for us, you know, I can I can I can invest in things that I think are going to have like a 10-year payback, I'm like totally fine with it.

If we grow 80% versus like 110%. Like it doesn't really matter that much. Like as long as we're profitable, 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 an long-term investment in that you think you wouldn't have done if you had been venturebacked? venturebacked? venturebacked? I mean, like like we bought a regulated bank when we were early.

I think that's like, you know, it'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 like not grow or like not focus on revenue for like 2 three years and do a bunch of stuff that inherently didn't scale. Like it's not like buying a bank is not a software defined problem. that's not like a great use of like venture capital dollars that you expect to grow. And that was a relatively non-conensus bet at the time.

Like I there's just no way that could have happened. There's no way somebody would have been like, "Oh, we want to company, right? We want you to do stable coins. We want to do AI." That's just not a that's not a fundable thing. So I think and and then able to just kind of invest behind that for a multi-year period before we actually take on clients. Like people think they're long-term focus, but it's just not. I think we're able to also do like weird stuff with employees that doesn't scale.

like what we like pay employees like you here's $2,000 a month to go to a rent or mortgage if you live two miles with the office. Oh, like that doesn't inherently scale, but it's like 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 like all of their housing stipen in San Francisco subsidized. But like I don't know, is that going to like is that going to be a good use of like venture capital money?

Like probably not. So we can just do all this stuff from an employee perspective, from retention perspective. You know what we do every single year, we take 25% of our earnings and we just buy back our shares with employees. So we used to 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 like hey believe that we're like in this venture grow business. But if you're if you know you're in a VC business you're like hey you should be using like a 100% of that money for growth.

we say, well actually we don't necessarily think that like 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 maybe just to pull it apart a bit more. Are you vest are you granting equity to people in a similar way that a normal startup would vesting over some period of time and then just every year saying we'll buy back some portion of that to provide that's how that's how it works literally.

literally. literally. Yeah. I mean like structurally we look exactly the same as like a high growth startup right we go after the same people we have like all the same perks if not more. So we operate very much like a high growth Silicon Valley startup. we happen to also be like quite profitable. So I what I kind of tell people is okay like our profits every year it's like imagine that's like our funding round like each year like on January 1st we like raise a massive round each year.

That's how we view it. There's part of it that's going to be used as like a tender that we're going to like buy back company shares and the rest of it we're going to put to growth. Oh by the way you also haven't diluted at all. By the way you also don't have any prep 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 going to be diluted. I think what sometimes people kind of forget is if you're an early stage founder, like you're going to lose probably 50 to 75% of your equity value due to dilution alone.

You may lose 10 to 80% 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 5 6 7 8 9 10 years or seen an exit. Like with us, we say, "Hey, like just don't worry about that stuff. like what I give you is what you're going to have. And by the way, you have liquidity. You have liquidity on a yearly basis going forward. That's like super compelling to people. people. 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 like this is the, you know, this is the valuation and if it goes to this valuation, I can just do the mult I can do the math." But that's not actually the math of what like they'll take home. So, how do you frame it to So, how do you frame it to people? people? people?

We're far from perfect. Um, I think one of the things we do is we target people that this is their second company. like we are um like we are not we're probably like not the best place for a new grad to land because new grad to land they're going to go through going to they're going to go through this calculation of where are all of my friends going what is the like what is the number one company in hacker news I read all the time what's all like the thought influencers talking about on Twitter and 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 some of this kind of nuance and it's honestly not as like hard as you as you think it's actually like quite refreshing we go to people and we're like, "Hey, we like are super fast growing, but we provide you yearly liquidity.

Oh, by the way, here's like 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 a 21-year-old. It's actually a pretty easy story for a 25-year-old that's been through like six rounds and four pivots at their previous company and don't have anything to show for it. Does this empirically show up in employee retention numbers versus like Silicon Valley norms? we have almost almost close to no no regretted attrition which means kind of people that we like to stay end up end up staying.

I think there's probably a couple there's a couple reasons for that. I think one is second time around it's a lot easier you know like I think I learned from a lot of mistakes at BL and I I know where to spend time and where not to. And so I think generally like a it's like a a probably more mature company than your average Silicon Valley startup. So I think a that helpful. We're probably better at picking talent but also I think we know what matters to people.

I think sometimes as like founders or VCs like we think that people join companies because they want to become billionaires and I think maybe that's true up to a point but a majority of people join companies because you know they hit into like their late 20s or their early 30s and like what are they optimizing for? They're like okay I want to like send my kid to like a good school and private school. I want to like maybe not live with roommates and like a one-bedroom apartment up until like I'm 35.

Like how is it in education that's super important? You can't feed that on illquid stock. So how do you think about optimizing for that? Think about like basic things like team culture, all that stuff. Like people want to work for somebody who feels like they are taken care of. Not just over like a 20-year period or like here's your path to being like a deca millionaire. They'll say like do people 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 like too long-term oriented sometimes. Say hey yes of course come with me. We'll work on this for 20 years. and you're going to be like a decade million 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 for every single point of an employes journey and employees 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?

Like is this is this portable advice? like could someone else that hadn't had the experience you had with Plaid do something like this without taking outside money? I think it's hard. I think I was definitely successful at first, but what I would say is, you know, I without kind of going too much details, like I yes, I started a very large company. I think I was probably less liquid and less rich than probably everybody everybody thought at the time. Um, you know, when I started this plaza a funny story, you know, we we attempted to sell to Visa for like $5 billion and that's kind of the point I left to go start something.

It didn't go through. we got blocked by the DOJ and I did not sell my company thus I did not have any money and so I had like you know maybe like my liquidity versus paper wealth was you know pretty pretty extreme and so I think I got a lot of credibility from people like oh this guy's like this guy yeah easy yeah but like I did not have any money without kind of going too much details of it like I pretty much funded the entire company with debt I went to a bunch of banks and I said here's a bunch of plaid shares like please give me money.

You know, I got like a the best I got was like a sofur plus 10% loan at like 5% LTV. And so, you know, I pledged over a billion dollars of stock to get $70 million. I bought the bank for $70 million. I haven't had a lot of money in my bank account for a long period of time. And um and yes, and I ended up, you know, the business became profitable. I got to pay off that loan 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. Like, you got to like let us in the room on that. The first three years were definitely the most stress of my life because I I had a fundamental thesis that we could pull this off and we could build a business at 100% 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 at the regulatory climate of the time and the build come like that it was it was intense and you know I have this loan I have to pay off.

It was 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 ways in. I had like pretty extreme conviction myself and I thought I like knew 100% over a multi-deade period I can I can pull this off. But there's that quasi quote of, you know, markets markets can stay, you know, irrational longer than you can stay solvent.

And it's it's kind of true. And, you know, I look at that quote and I'm like, which side of that equation am I on every day? And um you know we ended up making it through but I think the the idea of like oh like you know billionaire buys thing and selfunds it is probably a little further from the truth than people think. think. think. What's it like getting margin called in that like what do you like what is the literal thing happening? How do you manage through that surface to say you know you own a you know you owe a bank a million dollars like you know they owe you you bank a billion dollars like you own them.

Like I think that's a little bit I think that's a little bit true. I mean, there's a reason that like margin lending in private companies is not um is is like not a great business 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. Uh 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.

The reason I feel the the story is important to tell is that it's these things where so much of the value gets created like the the extreme entrepreneurial risks, the act itself, but also the psychology behind it. And I'd love you to just riff like one bit more what the psychology was like and how your mind is different after that through your 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?

like how did that experience affect you? affect you? affect you? I think that the good founders bet on themselves themselves themselves and take an extreme amount of risk to do that. And I think the extreme amount of risk part is something that we no longer have. But when like when there's like literally only one door in front of you, you don't have a choice. You have to go in. And that in that fear and that like in innate desire creates like another part of you. It creates creativity.

It creates inspiration. Like it's extremely valuable part of the founder journey. And in many ways I think in Silicon Valley we've actually removed that. If you think about most founders these days like like I talk all the time like hey you talk to a 23-year-old. I'm like you know what I'm thinking about go going to be like the 12th employee at this company or starting a company between for myself. And I don't know, I'm like kind of like mixed. And we've created this like incredible environment in Silicon Valley that it's really safe to start a company and there's like a playbook and you go through YC and assuming you're like moderately competent and went to the right high school in college, you're going to get like a $3 million seed round and worst case scenario, you can like, you know, you can go work at like a great company as an engineer and like you'll be like have a founder on your resume and like life is good.

And that has created a lot of value, of value, 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 like, you know, pre208 or something like that, like you're like on you're on the edge of the knife. And I think that creates just so much intensity and creativity and fear that is such a critical part of the founder journey. And I don't know why we don't talk about it more.

like we don't create environments where a founder has to bet themselves. And I think if we did that, like I think we'd actually be in a slightly different place. I always am somewhat perplexed by, you know, like 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 into like, oh, here's my like second company or third company. And you dig into that and like of the $und00 million they've made, they're putting like a million dollars to their capital risk and they've raised like $500 million.

And I'm always like, why? like if you believe in this, if you believe in this so much, if you're going to dedicate your life to it, like why the [ __ ] aren't you going all in? And if I'm an employee, I look at them, I'm like, you're 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 early stage founder. Explain that. Explain that. Explain that. Kind of messed up. Yeah. So, let's talk to an example here.

So, I'm a I'm a 24y old. I'm making TTC perspective 400K, 500K at Google or Meta or something like that. Okay. and I'm going to go to an early stage company and I'm going to go get 1% of this company and I'm going to make like $90,000. 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 said I'm going to make pretty much no money over the next four or five years, but maybe in five, six years, I'm going to make like millions of dollars that I couldn't make at Google and Meta.

That's like that's actually a lot of risk. I'm now going to now like say I'm going to live with my my friends instead of living by myself. Like I'm making massive massive changes to my life. But as a founder like you're not like you know like it's a much higher likelihood at the next round regardless of your company you'll be able to sell some secondary. You know that you'll be able to like if it if it shuts down you can go be an employee at a great company.

You have a CEO on your resume. That first employee they have like first employee like a failing company. That's actually not a great resume line item. And so we've derisked the founder, but we haven't d-risked the early stage employee. And I don't think we should actually derisk the early stage employee for what it's worth. I just think we need to I think we need to increase the the 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 founder.

You have liquidity. Like put all of your money into that. Like if you're going to be asking this of employees, you just ask it for yourself. And don't think we're having that conversation enough. And I think starting companies just it's too it's too [ __ ] safe. Yeah. And it's caused a lot of companies to be just super safe companies like hey we're going to like pivot to AI and like 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 just like want to be employees they don't actually think about the long term they actually don't think say hey if I don't pull this off like I'm going to become bankrupt my life is over.

Um and I think that's that's pretty healthy. That's when you bring out like the raw the rawness of humanity and I don't see that very much anymore. How have you felt that in yourself? Like 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, you know, extreme three-year period. You know, I am not the most diversified person on the planet. I own two things. I own column and plaid.

That's it. Like I don't even own a majority of my house. Um that is that is truly it that those are the only two things and and that's and that's that's motivating to me like yeah like at at some point in my life you know I I have a six-month you know I I have a six-month old son and um I I I do need to probably diversify and so that like is you know a a a goal for me at some point as a 36-year-old.

You should probably not be this concentrated. Um but it's also like that's that's what makes building companies unique. like yes like there's probably a lot of people that look at me and they're like oh man like you know billionaire amazing maybe California will look at me and be like oh yeah billionaire amazing but it's probably a little little little liquid equity liquid equity liquid equity but I think that's what makes it special I think that's what that's what drives me every day which is if you don't have something you are driving towards so such as for me like you know like solveny that is it it's really hard to be motivated every day the other thing though too is that um very often the thing you own and control and are building might be your best investment and and getting money out of something is costly from a tax standpoint and other things.

So in some ways you're just like continue to be allin on what you're building. you're building. you're building. I mean I you know it's like bet on yourself. I'm sure like every like you know fancy executive has probably told you that but I I think it is it is somewhat true. Compounding on yourself is probably the best investment they make. Like I like I'm not a generalist. Like I'm a specialist. I'm like probably the best in the world at like a couple small boring stuff. I I'm like really good at creating really confusing, boring sounding companies.

That's really hard to explain on podcasts. And I think that's like that's like my expertise. That's like my niche. I feel pretty confident in my business because I do not think in my business you want to compete with me. I'm like I'm mean. I'm hungry. And I know my little niche space better than anybody in the entire world. And if I'm like investing or doing something else, I'm like there's like a me on the other side of that trade. like like I don't want to do that.

I'm a builder. And I think sometimes there's a trap where builders think they're investors and investors think they're builders. And there are rare cases when you can do both. Um but in a world where it's increasingly competitive, um I do think the world for builders is going to is is the world of specialists. Um and you have to go extremely extremely deep into your area. And that's where you find value. And find that's where you find value. And like I I probably have read more about just like the history of my space, the history of financial services like like like I studied, you know, I studied banks in Japan in like the 1800s.

I, you know, read like a very boring 2000page book on the history of like banking in China in the 19th century and there's stuff I 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 in a 20,000page book. And so it's probably like not efficient unless you own a thing that happens to be in that leverage. And that like one little thing can create like millions of dollars of value to the creates like hundreds of millions of dollars of value.

And so without kind of going too much into detail on it, like like that is like that's where you find your leverage. Um and you 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. Totally. Totally. And there's such a high rate uh and ease of comparison. of comparison. of comparison. Um which is certainly the thief of joy.

Yeah. Yeah. Yeah. Um but but it's really hard to ignore people doing other stuff, spending a 30-year day reading about anthropic or or whatever. It's exciting. Totally. So, what have you learned about how to become apart from reading, you know, obscure 19th century Chinese banking books? Like, 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 like that mission or that idea? So, 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-deade period? Like who doesn't find like AI interesting? Like yes, geopolitics fantastically interesting. There's all these like general topics that are quite broad that is very like mass market interesting. And that's what makes Twitter so fascinating. That's why podcast so fascinating is because people like to feel that they are they are like really smart across a broad swath of categories. Um but that that doesn't really align to company building. Um 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 like be the next like serum.

These are like generalist topics that I can probably find a thousand people that have like pretty like 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 be like can generate billions of dollars forever over time but the problem is is those places are really boring like the fun ones like food and like surfing in Thailand or whatever like those are solved categories like yes I would also love to be an expert on like hospitality in like Thailand and Southeast Asia like that's a fun problem I could imagine one going niche on that for like a multi-deade 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 like Gemini deep research your way through, that's where value is, but it's [ __ ] boring for a lot of people. Like you have to like you have to suffer in silence for a huge amount of time. And if you can find that, you know, if you can find that like super fascinating, you can like love to learn that, then I think you'll be successful.

But I think it's a it's a it's a minority of people like like like my partner kind of gives me [ __ ] all the time, but like how on earth do you find that book interesting? Like what is wrong with you? Um I was like wow like if I don't like you and I are going to be super poor. You you said earlier that building a company for the second time is a lot easier than the first time. Yeah. What are the most uh extreme ways that that's true?

Like what what are the things that you've done the most differently this time than the first time? Yeah, experience is valuable. I started uh I started Plaid right out of college and I think um Zach who was my absolutely incredible incredible co-founder we both kind of said like man if we would have just like worked at a company for like 9 months we would have learned a lot like we probably would have saved like 3 years because the amazing thing about working at a company an early stage company is you just like you just get like fail forward all the time and that's like incredible that's incredible lesson but like when you fail 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.

Now I think it's like a little bit easier cuz like everybody's YouTube videos on like you know YC startup school and there's like a playbook there's like some PDF for everything and you can probably like Gemini your way through like the early stage part of a company but experiences matter a lot. What about picking talent? Like how how what things do you optimize for now that uh have been honed because of your prior experience? I experience? I experience? I mean people always think about employees and it's like like a missionary mercenary framework, right?

which is like like you have to look into employee and like what like what do you want to do? There's like the mercenary type which is okay super smart probably super pedigreed and like and really what they're doing is they are using your company as a launch pad for something else. They are using they're using their company to like collect a bunch of like two-year vested options from like the top five companies and like hoping one of them goes up. that can be a valuable employee, but you have to have a very like specific type of company that is used to like that churn and burn in order to take advantage of them.

Then you have like the missionaries, right, which is um hey, like this person is very mission focused. They're very like 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 you know 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 like societal unrest inside of your company right and then there's like the third category of employees which are um you know generally what I think are probably like the best which is like there's a kind of a combination of everything but really what they care about is they care about yeah we want a ton of upside but we also want like we want some stability we also want people that hey like I get I like to be friends with my cooworkers ers.

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 kind of have to figure out what is right for your business. But I think it's very challenging to tell that on LinkedIn. Like everybody's like, "Okay, cool. Like you went to the right New York prep school, thus you went to like the right like Ivy League school that happens at like this good engineering program." And then you have like, you know, these these couple like LinkedIn things that are like good for me and like boom, done.

that can be super successful, but that is also that's also not the right for everything. And so just I think getting that kind of hone for talent is is super important. How much do you care about mission? It's like such an interesting part of the equation. equation. equation. You need a mission, right? Otherwise people just go work at hedge funds. Like you need to say like hey we are building something bigger and I think we absolutely are. Um but I think mission can actually be a little bit distracting.

I think a lot of times people focus a ton on like, hey, what are like the values of my company? What good are we doing? And I think that's like an important part of the equation, but I think it's like 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. And I think that's because when you're pitching investors, like investors want to feel like they are part to feel like they are part of something.

They want to feel that like man like I'm not just like recycling pension fund money into like other capitalists. Like even that's what we do. like we want to feel like it's it's bigger than that. And so I think we've taught people that like, man, you need to focus on like the millennia journey. You need to focus on like the impact that we're doing. And like yes, like you know, numbers go up, but like numbers go up as like only like one part of the equation.

Um, and I think that's like important for employees, but I think it's like it's sometimes not the best. Like in the end, like 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 going to pay a lot of their hard-earned money to you. Like that's the goal and that person doesn't give a flying [ __ ] 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 if you start to like you know 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 like such a novelty that a company like yours would have a bunch of this uh at this you know so young in its life and at this scale. How do you pick your margins? like how do you think about um how profitable to be and why you mentioned earlier that's like having a funding round every year.

Does that imply that you're you're actually spending it so you're not paying taxes so spending on growth? Like how do you think about think about think about earnings in a high growth technology business? business? 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 going to look at you as a customer like I'm going to be your best partner over like a 10 to 15 year period. switching costs are really high and they are putting a lot of like your customer trust and risk in you and and so I am playing like a longevity to 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 and not relying on somebody else's decision-m framework is extremely critical for our customers and and that's extremely important to me as well. I I I I tell people I'm like like the risk falls on me. Like I can't pass my risk to some other venture fund or like their LPs or something like that. Like I I want to be like 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 like quite that's like quite unique in Silicon Valley because you know at some point like this company could get like your critical vendor could get like acquired or maybe the the founder could get like a $20 million offer from Enthropic and like it's the rational decision for them to do that. In many ways like we aren't competing with other Silicon Valley companies. We're 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 like 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, you know, people like, oh, like, you know, like your margin is my opportunity type thing. And my argument would be like, you run this business at like a lot lower margins. You're going to 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 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 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 like you know a thousand times faster than I am right now. And I don't necessarily think I I I should. And so what we do is we say okay like of this earnings what goes to employees? What's going to go what's going to go to growth? and what's going to go to like capital which is pretty much like in case something goes wrong or like we have a couple bad couple years like NBD we good let's keep moving down to the extent of now we're like hey if something goes wrong for 10 years how are we like we're good like there's a lot of societal change going on there's a lot of like crazy stuff going on in the environment I can totally paint you a picture where like the markets gets insane for the next 10 years how do I make sure I can survive that even if a lot of our companies go up or you know the economy These are no changes.

That kind of goes back to that like that that war chest. Markets go like this. Like sometimes like Yes. Like the line through it goes like this. You forget it when you one of the good ones. ones. ones. Yes. Exactly. And you know and and we you know and we look at slope but a lot of times like we have down years and you need to be able to weather through those down years. And there's so many incredible companies that just like couldn't survive through like a couple bad periods.

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Schedule a demo at ridgeline.ai. ridgeline.ai. ridgeline.ai. If you were in a a classroom setting and it was a bunch of founders or would be founders. And it was a Chattam House rules off thereord uh session teaching them about working with investors and what investors care about, how they behave. Yeah. behave. Yeah. behave. Yeah. Uh things to look out for. What what would be what would you tell them? tell them? tell them? I actually feel pretty lucky where you know at Plaid in the early days we we actually had a pretty hard time fundraising.

But first of all, I think we probably chat with like 80 90 investors and we got rejected. And so I uh like sometimes I think I have a reputation being like, "Oh, like whims like someone anti-VC." It's actually like not further from the truth. I like Plaid would not exist without VCs straight up. I just don't necessarily think like the VC model is perfect for every single type of company. Um or like maybe like a VC owns like you know 10% of your company or 20% of your company.

Um and maybe the employees yourself own like 80% like like there are different cuts of this you can make. But I think for me, I think picking investors is important. I don't think there's a lot of transparency in the environment on like which investors are seven-year timelines, which ones are 10 year timelines, and which ones are like 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, like how like realistically, realistically, realistically, what does my margin profile look like?

What is my revenue growth over time? And 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 the venture model makes sense for me? Because the thing that people forget is yes, growing 100% on a $10 million base or $20 million base or $30 million base. You know, it's not like that hard. Everybody like shows these graphs on LinkedIn like we're the fastest company to get to $100 million like of all time.

Like that's awesome. But you know what's like much harder? going like above 30% a year off of a billion dollar revenue base. That is like 99 times harder than going to zero and 100 million in three years. However, the venture model on only works is if you can grow above 30% off of a billion2 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 I think sometimes businesses grow at the rate of the market or businesses grow businesses grow businesses grow differently than just dollar and dollar out. And the venture model is built off a fact of you can make a company like an ATM which is you put in a dollar, you get a$130 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 and there's like so many amazing tech companies that works for and that's why that venture is like a 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 at yourself in order to do that. Given your unique perch, what have you learned about how the world works through the lens of this like dollar, this dollar focus, this demand for dollars, being the operating system for the, you know, global dollar system like through the lens of the dollar? Yeah. Yeah. Yeah. What what are your takes on like the ways the world works or or interest you that might surprise people? what the dollar does in it connects countries in like very interesting ways that I think in the US when you can pretty much just build a incredible company by like the by the US alone you you kind of lose that perspective if you look at the official stats um like like most economies spend less than 10% of their GDP um trading with their neighbors um and that's like been a big focus point of um of the OECD over over the while But when you actually dig into it, like the unofficial trade that's going like not over like government rails, it's actually closer to 90%.

And it just shows like how trade and how money and how that stuff like really connects these cultures and connects these societies. And I find that like super fascinating, but it's it and we can talk about like 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 like very unique luxury of like we can almost somewhat sustain ourselves like you can sustain businesses only building for yourself. US market is just so fantastic.

Like I am so long in 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, like it is 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.

Like let's take let's take two like insanely developed countries. Let's take Qatar and let's take Switzerland. Okay. You're shipping gas from Qar to Switzerland. I would argue right now like you know probably neither one of these countries like love America like a ton. That trade is denominated in dollars that the the money that's moving from Switzerland to Qar from like Glenor to Qar the Qatari gas company crosses through US financial institutions. It's crazy to think about. Let's think about, you know, who are maybe our two like quoteunquote enemies like China, Russia.

Okay. Um, China is a big importer of Russian gas and oil. It's kind of crazy to think about. That trade is still denominated for a vast majority in the US dollar. That's mindboggling. That's a luxury and that's such an insane national security strategy that like nobody else has. Russia doesn't want Chinese currency. China China China definitely doesn't want the ruble. They 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.

Then you could argue that like maybe the dollar is eroding over time and stuff like that. But like still in the vast majority like like 75% of global trade still lives in the dollar. That's that's that's crazy. And we don't recognize that like the soft power the American has or even the hard power with the American has with that is so is so fundamental to our life and the fact that like we have such a strong economy. strong economy. strong economy. Do you talk to your team as though this is part of the mission that that like almost like national security is part of the mission because of the importance of the dollar?

the dollar? the dollar? 100%. One of the best kind of shifts I think Silicon Valley has done is we now are like hey like Silicon Valley like we take an active role in the national security of the country. I we we didn't six seven years ago even though like like America like American society American GDP growth is even more than ever completely indexed on the success of Silicon Valley like probably too much and it's like way too levered in that in that regard. But now Silicon Valley whether it be social media whether it be defense or whether it be software whatever we're starting to recognize like our role in the world and financial services is probably the most important component of that you can ask like you ask any general and like I have it's like like they want to use a sanction before they use a missile.

The great thing about a sanction the great thing about the dollar is you can enforce American dominance without putting boots on the ground without putting anybody at risk. And sometimes you're showing Venezuela it's like hey like you kind of need both but like like the reason we were able to go to Venezuela is because we had fundamentally destroyed the economy before. How sanctions right like we had completely collapsed like their ability to export oil. We completely collapsed their ability to actually trade with other people. That those that those that friction is real.

And so when we went in there Venezuelan people were probably like yeah okay like we good like we're maybe not going to try to like shoot these helicopters from the sky. like we're pretty happy here. That is fundamentally so amazing. If France wants to like shut down another country in order to go like enforce their will, like they have like an option. Well, they have like two options which is like I don't know like don't drink our wine and like here's like some here's some missiles.

Okay. Like the missiles can enforce their will. Like they have a strong military, they have strong special forces, they can go do that. but their lives, the special forces on the ground, like they're going to have a much harder time because they haven't kind of 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. Like one of the things that China can do is they can start to enforce their will by shutting down a country from exports, right?

And so that that is real. So I think China has definitely this like increasing might but the strength of the dollar and that is so fundamental for national security and in many ways like we we don't talk about it because it's a little bit uncomfortable truth right like I don't think anybody wants to sit up there and say like like a a global bank doesn't want to sit up there and say like like we're part of the national security strategy because like if the government tells us to like we're going to collapse this economy right like that's not a that's not like a fun narrative that people want but I think there is a there's a way to tell that narrative that says like hey like 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 Palanceier is part of that strategy locked Martin's part of that strategy Boeing's part of that strategy and financial services is like is a key pillar like you can argue that financial services is like the first end to war to our country right like we start with sanctions we start on cutting them off from the US trade we start from the US trade we start with that before we put boots on the ground ground ground what do you then hope is the future of global financial services Like obviously you're bu 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 USbound and I think we sometimes want to believe this world where um 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 talking about talking about I still think we're the greatest country in the world and um we have change of power every four years like we change our mind on stuff.

Yes, there's like there's like some problems but we are still the best place to be still we are 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 the world's trade. Um 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 like thought through the ramifications of that. Um, if you look at most countries, financial services is still power, but it ends up just accumulating to 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. Um, like JP Morgan's the largest financial services country in the US, but like it's not that dominant.

It's like it's like it's still pretty diversified. Take take Canada. 95% of Canadians have four banks. Take Australia more concentrated. You would have most countries have been more concentrated than that. Like we do have a little bit in financial services today a relatively decentralized financial services system. You 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. And I think the other thing I tell people as well is like there's this nar like, oh, financial services is fundamentally broken.

Like our institutions are actually pretty damn good. There's this narrative sometimes people talk about it's like, oh, like US financial services, it's like built on like cobalt and stuff like this. It's just not. It's just like not true. It's like a fun talking point. But like like I like I rack my own hardware with the Federal Reserve and all these like places. Like there's no cobalt in a lot of these places. Like it's actually pretty good. pretty good. pretty good. like go on the record talking about this.

The Fed has a pretty good tech team. Like their systems are actually like pretty good. If you think about like the US right now through the Fed has a capability to move money and to clear money through all these institutions 24/7, 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 our implementation of it.

The reason why community banks can't send money 24/7 isn't because like the technology doesn't exist at the Fed. It's because there are constraints in those business models that make it very challenging of them to do. Give you an example. If you can send money out of your community bank 247, well, that bank could run on a weekend. I don't know if you guys have ever like been to a rural community with a community bank with 50 people. You can't get people to work on the weekends.

Who's going to go there? Sure, if you're JP Morgan, if you're Stripe, yeah, you can manage 24/7 liquidity, but if you're a small community bank, you can't have that. And so, I think like people conflate we don't have something, we don't have access to something with we don't have the fundamentally ability to do that. But actually the reason is implementation not the online infrastructure. infrastructure. infrastructure. I feel like because of your unique setup as a business and your unique focus on the boring problem as you describe um 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 um that you think is interesting that we've missed? One of the things that I think about is like okay like AI is here. we're probably like much closer to ASI than people would think and it's going to be on the title wave through the economy. You have to think about like okay like what's the implications of your business? And and I think in my perspective is like if you're not a researcher, if you're not a lab, how do you play?

And I think one of the things I think a lot about is okay like I actually don't think like quote unquote AI companies are very set up for success. That's actually probably not where value is going to acrue. The value is going to acrew like in two areas. In the most important area, I think do you have massive distribution? Because if you have massive distribution, if you have massive costs, AI is going to be a massive bon for you. And so the thing I think a lot about is okay like 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 like you know the railroads like like the value didn't like yes the value acrewed to the railroads.

Yes, the value acrewed to the ISPs. Yes, the value acrewed to the people like building the mobile phones, but the value actually accrewed to the people that could like harness that the best. Like the value in railroads acrewed to the oil companies. That's like not like that's like a little bit like hard to fundamentally understand. The standard oil is the biggest beneficiary, biggest boom for railroads by by an order of magnitude. Um what is like the equivalent area for AI? And I sometimes don't think we're focused on that enough.

Like like hot take here. I think like the biggest, fattest, most inefficient brands are even 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 like your own products and services? services? services? Financial services especially like take like large banks um they suffer from the fact that the business model is too good. Um like banks are pretty profitable. financial services. It's like it's like if you like own a bank and you aren't profitable, like that's like that's a problem.

Like you've clearly done something wrong. Like the business model fundamentally is really good. And so that's that's that's made them lagards in a lot of ways. Um but that also I think makes their massive opportunity where I think financial services and like legacy banks tend to be like the largest inefficiencies out there. They also are very hard to take over. Like there's not a lot of private equity activity in financial services because it's highly regulated. And so I think the the large banks that can actually effectively harness that are going to be some of the largest beneficiaries because banks don't have a lot of like like physical assets.

Like places have like massive capex and physical assets. It's like hard to like tell a good AI story there. Like how's AI going to make railroads more efficient if 99% of your money is spent on like like fuel track maintenance and people like the human cost in railroads is like dimminimous. Like cool you take you take conductors down from like a,000 to 500. it doesn't doesn't like change the equation at all. But if you think about a traditional bank, it's pretty it's pretty headcount focused and it's pretty technology focused.

That's where a majority of the money goes to. Like the actual like physical branch infrastructure is like such a minority of your balance sheet. And so so I do think they will be either be the most disrupted or 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 uh the largest beneficiaries. I think also the I think the UX of financial services will change a lot because like people think like oh my gosh like my bank is hard to use.

My bank is hard to move money. It's like slow to move money. That's that's actually a feature not a bug. I think what fintech sometimes start with is they start with like hey we're going to 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. And if you make it like really easy, if you're a grandma to send money to somebody in Nigeria, like yes, that's like great for remittances, but that's like really bad for romance scams.

That's really bad for fraud. And so, but I do think with AI, we can actually like build actually we can actually like build those detection models like a lot better. And so, it's probably less likely your grandma is going to fall fall prey to elder abuse. And if the banks don't have to optimize so much for that and it's 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 to make financial services like almost entirely instant and like entirely friction free.

All the friction is actually built to protect the 5 to 10% of consumers that can't get hurt and people kind of forget that. But I think if we can build like models that are just as good at human at detecting that stuff and that can happen instantly, we can actually take that tail away and it actually is massively beneficial for everybody else. Do you think it's a good time to be an entrepreneur, a new entrepreneur in financial services? financial services? 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 um like there's all these like stats on Twitter that I'm sure people have seen where like the best companies are created in the worst environments um and I think that's generally true. It is cheaper than ever to be an entrepreneur and so it is as we talked about it's probably it's probably the least risky time to be an entrepreneur. It's also pretty crowded. Um, but here like like like like I don't know, you probably look at like the last YC batch. I'm sure like 90 plus% 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 like like less competition, less smart people. I I think if you want to be successful, you can go look at every single industry and you can say, "Okay, who has the dumbest people people people and what makes the most money?" And if you go like attack that area, it's probably pretty good space. The problem is sometimes Silicon Valley or founders, you look and say like, "Hey, we're all like the smartest people." Okay, that's like yeah, it's like maybe like a cool space, but that's probably like the most crowded with the smartest people.

And so your ability to compete is like like your competition is pretty intense. You know, YC puts out this um you know, request for startups. My recommendation is like that should be a list of startups you should not start because by the time like it's so consensus that this is a good area or super interesting, the amount of capital and the amount of smart people, it's like it's like, you know, like moth delight. I would almost go the opposite way like hey YC I love you guys.

Please stop like continue to fund like you know our customers. You guys are amazing. Um but as a founder I would maybe be a little bit skeptical. bit skeptical. bit skeptical. I think your perspective is so unique and interesting. I always love talking to you. I always find it very inspirational inspirational inspirational uh 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 and just outarn everybody and stick with it.

Uh, I love your diversification strategy of illquid 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 kind people in my life, but I think it's challenging to to not look back and be like, "Oh, like your mom and dad were like the kindest people." Um, my mom and dad did not have um have the most like straightforward life and not the easiest. and and my childhood could could have been a lot more difficult than it was because I think they they insulated me from a lot of things that were going on.

of a lot of things that were going on. Um, and you know, I had a lovely childhood and I feel super lucky for that. And I think we've talked about a little bit like as a founder, you have to be willing to take on risk. And and if you grew up in an environment of fear, if you grew up in an environment where like you constantly derisking when you're a little kid, it's very challenging to feel comfortable going up the risk spectrum as you go adult.

And my and I feel very lucky my mom and dad did that, you know. And they also kind of taught us like it's okay to fall. It's like okay to get punched in the face. Like see these they're all fake. that time I got punched in the face and I've like lost teeth is honestly kind of crazy. It's like kind of embarrassing. Um but I'm like, you know, I was pretty good at getting punched in the face and and like that you can only teach that as a little kid.

You can only like have that childhood that makes that comfortable in a very in a very specific environment. And I think, you know, I have I have a six-month old and as I look at my peers and look at everybody else, we are like quite obsessed with creating this like perfect environment for our children. We send them to like the best schools. They have the nicest people in their lives and and that is that is valuable, but we're maybe creating children that can do linear algebra at seven.

And I guess it's like going to be great. They're going to be like great AI researchers. But is that what we're going to need in 20 years from now? Um, or do we want kids that are going to be like pretty good at taking risks, that are going to be pretty good at being punched in the face? And and I think my parents did a really good job at that. I feel very lucky for that. If I copy off my peers, I don't know if that's like the that's the path we're going to go down.

And I think the fact that I am like pretty damn resilient um is a complete product of my parents. And I think that's a huge gift. and I I feel super lucky for them every day. every day. every day. A beautiful place to close. Thank you for your time. Thank you. Most software companies try to maximize your time on their app to juice engagement. Ramp does the exact opposite. RAMP understands that no one wants to spend hours chasing receipts, reviewing expense reports, and checking for policy violations.

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