Invest Like the Best with Patrick O'Shaughnessy
00:26:19 · Patrick O'Shaughnessy, David Vélez
[00:26:19] S0: If you had to think about the US dollar and its importance, if it goes from $1.90 to 10 or something, do you think the US dollar is the reserve currency ten years from now? Is it one of a few? What do you think its role will be in the world? [00:26:32] S1: There are two sides of that argument. You can make the case. US stablecoins ultimately will be the big savior or one of the biggest saviors of the US dollar because it democratizes access to the US dollar. And while the fiscal situation in The US is not great and it's deteriorating fast, it's still better than the fiscal situation for the other 100 and plus countries around the world. You look at the balance sheets of all of the central banks or countries in emerging markets in Latin America, it's way scarier. And you don't have the sovereign capabilities. At least there is a lot of demand for The US stablecoin. There's very little for the Brazilian stablecoin, unfortunately. So the fact that a stablecoin exists for US dollar will ultimately mean that the US dollar maintains its power as a reserve currency for a very long time. But it won't be unique. I think you'll have other five, six fiat currencies that people will be saving in, and a few crypto tokens where you'll also be diversifying. And I've always been a Bitcoin fan, it plays a role in a diversified investment portfolio. [00:27:32] S0: What's the most surprising thing do you think about the move away from cash? What would I not appreciate about the implications of that or how long it would take? What's surprising about going cashless?
00:27:42 · David Vélez
[00:27:42] S1: The main one is what this means for credit markets. For the majority of the world, and the majority of the world economy, still economies are very much offline. Just think about this situation where you have a taco stand in a corner in Mexico City and you're selling through cash. That transaction is not being recorded anywhere. That's a transaction that you're selling to somebody and it goes away. And that taco stand cannot get credit today. Now, that person has a history where every day they go and sell tacos and they get cash flow that's being recorded, But nobody can underwrite on top of that. The moment that that transaction goes into a digital ledger, that transaction happens digitally, then suddenly that taco seller can take that information to a bank and says, Hey, look at my cash flow. Give me access to credit. And if you give me access to credit, I can now have two taco stands, or I can have five taco stands. The utilization of the economy and what that enables for credit for a significant percentage of the world population is something that is not very well understood today and is a huge accelerant. Again, you look at economies like Brazil, for example, something like 70% of all the employment in the country is still in small businesses. It's not a big corporate small business. The same thing happens in India, for example, or Southeast Asia. A lot of these small businesses historically also dealt with cash. Now they're digitalizing. So this is trillions of dollars of credit being enabled for billions of people around the world. This could be a significant economic shift for economic mobility across the world. His eyes, a very exciting opportunity.
00:29:15 · Patrick O'Shaughnessy
[00:29:15] S0: Do you think that you can create creditworthiness versus just predict or measure it once you have all this data? Is that one of the goals to help people become more creditworthy somehow?
00:29:26 · David Vélez
[00:29:26] S1: Yes, absolutely. I mean, the first thing you have to do is measure or record a lot of those transactions into a ledger. And that's what the utilization of cash enables. And then with better algorithms, and AI plays a role here. And then also with better products, you can enable people to start building that credit history. So I'll give you an example. We were the first credit card for 30,000,000 people in Latin America. When we used to ask banks why so many banks didn't give access to credit, what we heard is people don't want credit. People don't want a credit card. They are scared about paying taxes. And so they're never going to use the product. But what really matters is when we realized is what they were really lacking was a product that really matched their needs. And so we started for a lot of people with a product that the first line was $20 a 20 credit line. When banks saw the product, they thought it was absurd. But in reality, people really appreciated that the $20 was better than zero. And those $20 became a 100 and the 100 became a thousand over a period of time. And so you enable them to create a credit history through the right product. And then you enable an AI Copilot for that customer that tells them all the different moves and what they need to do in terms of spending and investing and savings to gain points and become more credit worthy. And that's, again, the concept of you providing a coach to somebody to improve their ability to access credit and improve their financial picture. So absolutely, I think that that's going to be a big enabler.
00:30:51 · Patrick O'Shaughnessy
[00:30:51] S0: How siloed are the individual countries in terms of how useful what you learn in one is helpful in another? Like when you went to Mexico from Brazil, how much of the learning from Brazil was portable versus something about Mexico that's just distinctive about that country? And then how do you think about all the countries you've learned in so far and exporting that and those learnings to other geographies?
00:31:10 · David Vélez
[00:31:10] S1: It's more exportable than we would have expected. The part that was less exportable, the biggest difference between at least a country like Brazil, Brazil was actually much more banked than unbanked. And so when we went to Mexico, a lot the conversations that we heard is like, well, but people in Mexico like cash. They don't believe in digital payments or credit cards or debit cards. In the early years of Mexico, that was the biggest difference. When you go from a banked customer or banked country to an unbanked country, it's harder to compete. I always say that we are a shark in digital waters. When we are forced to compete in the offline world with banking branches, we're much less competitive. We don't have banking branches, don't have ATMs. And so for a couple of years, it was harder for us to compete, even though we became the second largest bank in Mexico by now, and the largest digital bank there. But as these countries digitalize also including Mexico, then the world's looking closer to each other. And that's ultimately what you actually see across any other industry. You look at social media across the world is the same product. You look at Netflix, the same product. You look at Spotify, the same product. You look at Uber, the same product. Amazon, generally the same product. So I would say historically there were a lot of particularities and the cash part was a specific one. The future looks much more homogeneous than the past, even for financial services.