Raoul Pal: The Journey Man
00:12:55 · Raoul Pal, Micky Malka
[00:12:55] S0: We're still... Yeah. We are still early. So when does blockchain come into all of this? [00:13:00] S1: It came around 2010 when in... We... When we were working on that startup that I was talking to you about, it was called Blink Nation and The Lemon. We had some developers in Argentina, and they were, asking us to send some money through Bitcoins. And we're like, what is this? Early two thousand ten. And so we went into this rabbit hole to understand what it was and read as much as we could that there was not much to read, to be honest, but just spent time understanding it. So when we started Ribbit, we decided that I didn't want to start a venture firm because I don't think great investors need to be labeled. I hate being labeled. You're this or you're that. You're early stage or late stage. You do one thing. You do the other. Actually, we just are intellectually curious about the world and find opportunities where they where they have to be. So we are super early as a fund buying Bitcoins into the fund. And the problem was we didn't know where to store them. We had them on our phone. So let's... We should build a custody business, and that was the beginning of Xapo. And all of these things that started to come were the outputs of what... It was hard to buy. You needed bridges into the fiat money. So all of these companies that we backed was a lot of the pain of ourselves at Ribbit trying to trying to buy and hold Bitcoins.
00:14:25 · Raoul Pal, Micky Malka
[00:14:25] S0: That's a really intelligent way of going about a thesis is to solve problems that you've got yourself or that you deeply understand as opposed to, oh, that company looks interesting. It might make money. It's not based around that at all. It's like, how does this specifically evolve, and what do we have to do to make it work? [00:14:42] S1: That's been an art thesis all along. We sort of don't follow the trends as much as others. We try to spend time understanding a problem in every company that we backed. I would say not every, but almost everyone has one of those pain points that we suffer ourselves that we were trying to solve for. [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?
00:14:58 · 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.