Raoul Pal: The Journey Man
00:14:58 · Raoul Pal, Micky Malka
[00:14:58] S0: And when you saw blockchain, did you just think immediately this fits into the whole fintech thesis of where this is all going? You saw the whole idea of digital money and smart contracts and all of that as it started developing? [00:15:13] S1: At the beginning, no. Beginning, what I saw was... I remember the only reason why I'm lucky enough to be able to grow out, leave Venezuela, do well is because my parents happened to save a lot of their money in travel checks in the seventies and eighties. And at the beginning, I thought of Bitcoin as travel checks. They had a hash code. They were... They had a serial number. You had them. If you lose them, it was cash, but it was not there. Like, and so it wasn't obvious to me that there was a whole ledger, an open ended ledger that you could write a lot of more stuff than just the the token itself. It took us a few years, I will say, because we were super early investors into Coinbase. They were one of the first ones. The team at Coinbase, the people inside were working. The founder of Litecoin was inside the team at Coinbase early on. Vitalik had worked on color coins for Bitcoin early on. We've known them from that era. So when he launched Ethereum. So we were... It came later as we started to spend time with them, all of these ideas that were just a general ledger system. So I think it was around 2018 or '19 when we actually told our LPs for the first time, we think these worlds are gonna converge. [00:16:27] S0: Right.
00:16:27 · Raoul Pal, Micky Malka
[00:16:27] S0: Right. [00:16:28] S1: You're not gonna talk about crypto or fintech separately. They're all gonna be just infrastructure power in this. And and that's when we started to do a lot more in the infrastructure side. [00:16:40] S0: And what about... What did you see in Robinhood in the early days as well? Because you're a famous investor in Robinhood. What what was that story? Because that was also very clever to see the... You know, don't forget, before COVID, the millennial generation hadn't been financialized. They didn't trade stocks. They weren't interested. And suddenly, we financialized an entire generation in the period of a year.
00:17:04 · Micky Malka
[00:17:04] S1: It's it's it's one of those beautiful stories. At the beginning when we met Vlad and Baiju, they hadn't even launched the app. They were just working five guys in a in a small office in Redwood City in Silicon Valley. And... But what we saw in them was three things that we really, really loved. The first one was they were the customer. It was their age. They were 26, 27. They were two, three years out of college. They had seen Occupy Wall Street movement. They saw their generation feeding that, and they wanted to do something about it. Because they had worked in high frequency trading software, because they were both mathematicians and and physics, they understood how to design and reverse engineer the the flow of funds, again, to to reverse the revenue streams the way people were doing it. So they had an easy... An understanding of the complexity of the infrastructure. And the third thing, they had this... They had taste. They had design. And I know we're gonna talk about taste and design and the and the beauty of of of how difficult it is to design later, but they had it. They really care about every magic moment. And finding that at that age is very rare. So those were the three things that we saw. We had a bet. When we looked at them, they had a waiting list of 100,000 people, even before they launched the app, six, seven months before. And I remember saying to them, you're not gonna convert more than 2%. And and they said, we're gonna convert 60%. I'm like, I've never seen it. They were right. They converted 70% of their waiting list into customers when they released the app.
00:18:49 · Raoul Pal, Micky Malka
[00:18:49] S0: And, you know, that trend... Because I've all... I've followed that trend that occupy Wall Street then became over COVID financializing this new generation saying, you don't need the middlemen involved. That was the rise of crypto in most people's heads as well. But then the whole thing actually flips on its head, but they suddenly became the bad guys at the middle of all of this with the GameStop thing. You know, it's it's been a fascinating story of where this is going, but that superpower of kind of decentralized ownership over what we do in our financial world is not going away. It's only accelerating. [00:19:27] S1: That's correct. Well, we're seeing it everywhere in the world. It's not just Robinhood or a company here or there. It is definitely. There's a whole generation of people that the way they think about their money, it's not like the generations before. They don't think it's like... The banks used to think that it's their money. This generation thinks it's their money, and that statement alone is very different. [00:19:50] S0: So what is left to come out of fintech? Because we're still, as you said, early in that journey, we're starting to revolutionize money savings, but I I just feel like it's going to go a lot further. And that's before we... We'll we'll come into AI and stuff in a minute, but I just wanna see where your vision is for where this is going now.
00:20:09 · Micky Malka
[00:20:09] S1: So we... Because of all these investments and bets that we did over the last twelve years, we we were known as the fintech guy or the crypto fintech guy, investors, Ribbit. Two... Three years ago, next month, we went to our investors and we... On our Investor Day every year, 2022. And our first slide was our ten year anniversary. And the second slide was milestone that said fintech is dead twenty eleven, twenty twenty two. And what we were trying to say is that all the things that were started in the last decade, the ones that are going to win are already out there. And it's going to be really hard to win because the opportunity sets, the macro opportunity sets that were open with the App Store, with the financial crisis, and with unstructured data had been completely normalized. Those windows have been shut down. So what we think is gonna happen, our thesis was three years ago, was there'll be a handful of companies, 20, 15, 25, 30, that are going to compound. And now that they have a life of their own, they're gonna become the biggest companies in the world in financial services. It will be another decade for that to happen. And this is three years back. I mean, Coinbase, Robinhood, North Square were part of the S and P 500 back then. And now three of them are. And I know there will be a few more. So they are gonna... What's gonna happen with them is that they're gonna... The ones that are founder led still in building tech, they're gonna go now and take market share from the incumbents. So far, they haven't taken market share. They're taking a little bit here or there, but now they're seriously gonna go and threaten the ecosystem of incumbents. And the regulation is in their favor now. So that's what's gonna happen with them. And trying to repeat that window with mobile apps or trying to repeat that window with a crypto wallet from scratch ain't gonna work anymore.
00:22:11 · Raoul Pal, Micky Malka
[00:22:11] S0: So, I mean, it's a genius idea to say, okay. We used our platform at first to use the power law to to find the investments that are gonna work, these big companies. Yes. And just say, regardless of whether they're public or private, we're just going to just concentrate into these names. [00:22:29] S1: That's correct. [00:22:30] S0: And let that thesis play out. [00:22:32] S1: And let it play out. And it will take a decade to play out. And it doesn't matter if they're public or private, if they're late stage or early or they have a mode. But we know if they can... If they have control of their time, their brand, their people, and their money, we will... We were backing them, and we have been backing them in in those cycles. [00:22:54] S0: And as part of, Ribbit, you also have a a crypto group as well that does straightforward crypto investing both in VC and liquid markets. Why did you have those two things running alongside each other, or is it just the thesis that they're merging into the same thing anyway?