Invest Like the Best with Patrick O'Shaughnessy
· Patrick O'Shaughnessy
[00:00:00] S0: My guest today is William Hockey, the founder of Column. William was also the co-founder of Plaid, one of the more famous fintech businesses of 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 only because of the incredible quality of the business that he’s built, but how maniacal he is about studying and implementing ideas in this specific field. This is a great example of a founder that is winning because he is willing to do everything. My favorite example from our conversation today is that he went and found some obscure book about some ancient bank and found one idea buried in the 2,000 pages that gave him a simple idea for his product. He is 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 – 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'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?
· William Hockey
[00:00:00] S1: 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 moat. We’re the bank that most other people don't have, and we're going to build this 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 backend infrastructure that powers the payments, deposits, credit of amazing companies like Bilt, Wise, Ramp, Brex, Mercury, these types of companies. They run on our software and our regulatory rails. And we also expand that to anybody who wants to do things with the global dollar. So that could be international fintechs, that could be a lot of times global banks or banks in emerging markets that need to transact holdings in the dollar. So in the US, you have vertical software, people building business software. This is an area that is 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's sake is not the case. And so now people actually need to control the underlying finances of business. As the Brexes, Ramps, Bilts of the world have proven, 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, et cetera. And so we just expose a set of primitives and APIs to allow anybody to do that super easily.
· Patrick O'Shaughnessy, William Hockey
[00:00:00] S0: Could you maybe pick a customer that people might recognize and describe literally what services or products they use and then how they pay you for those products or services, just to really nail it home? [00:00:00] S1: So maybe I'll use a company out here that recently relaunched, a company called Bilt. Which is maybe a lot of New Yorkers have, a lot of people in cities have. If you look at the card on the back, it says "Issued by Column." So we're the one that is actually connecting with the networks, managing the networks, and we're actually the regulatory identity behind that. And then when you need to go pay your rent or your landlord is gonna deduct money from your Bilt account, if you look at the account routing number there, that's actually a column account routing number. And so they build the application, they build the website, they build the consumer marketing, and we're gonna handle everything behind the scenes that has to deal with the Federal Reserve or TCH or the card networks or Swift. We're the one 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 percent of our money off of software. And so, similar to any SaaS company, it's a per API call, it's a pure play tech business. And then we pass most of the economics from the actual bank side of the business down to all of our customers.
· William Hockey, Patrick O'Shaughnessy
[00:00:00] S1: So maybe I'll use a company out here that recently relaunched, a company called Bilt. Which is maybe a lot of New Yorkers have, a lot of people in cities have. If you look at the card on the back, it says "Issued by Column." So we're the one that is actually connecting with the networks, managing the networks, and we're actually the regulatory identity behind that. And then when you need to go pay your rent or your landlord is gonna deduct money from your Bilt account, if you look at the account routing number there, that's actually a column account routing number. And so they build the application, they build the website, they build the consumer marketing, and we're gonna handle everything behind the scenes that has to deal with the Federal Reserve or TCH or the card networks or Swift. We're the one 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 percent of our money off of software. And so, similar to any SaaS company, it's a per API call, it's a pure play tech business. And then we pass most of the economics from the actual bank side of the business down to all of our customers. [00:00:00] S0: One of the things I love whenever we talk is you've always been somewhere strange and interesting. Kinshasa, I think it was the last time we talked. I don't know a lot of founders going to Kinshasa very often. Why are you so often in interesting kind of bizarre locales around the world?
· William Hockey
[00:00:00] S1: So this is my second company. And I started Plaid back in 2012. And it's very easy to stay in Silicon Valley. Quality of life is amazing. There's a lot of money to be had. There's a lot of super smart people. But you can start to get quite isolated and you can start to get very consensus focused. Probably a lot of your listeners read Dan Wang's last letter on China. And he has this great, and I think accurate, but somewhat harsh criticism. Where he says the two most consensus societies he's ever been to is San Francisco and Beijing. And I think that's quite accurate, actually. 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 the most valuable asset. Because as a founder, if you're building in AI or stablecoins 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 outlandish ideas that other people are gonna believe in, that nobody across the world would believe in. You can build this in a very safe way. And that's why Silicon Valley and San Francisco are so dynamic and we're so in front of the curve. But we also have completely lost touch with how the rest of the world operates. Even how the everyday American operates. And you've probably seen this smack us in the face over the past decade or two. And so I think it's very important to go to places that don't have that same bias. And I think if you think about emerging markets specifically – the founders who build there, there's the everyday people, they live in this constrained society. They're constrained in a way that San Francisco and New York isn't. And that breeds a different type of creativity, it breeds a different type of innovation that you really can't get anywhere else. If you go to talk to people in London or Vienna or Mexico City or San Francisco or whatever, people are living to an extent in a world of abundance. And that causes a very specific creation cycle. Where if you go to Kinshasa, which is the capital of Democratic Republic of Congo, it's gonna be the largest city in the world then in probably five to 10 years. I think it's already larger than most of the mega cities.
· Patrick O'Shaughnessy, William Hockey
[00:00:00] S0: Wow. [00:00:00] S1: Probably 95% of people in Silicon Valley couldn't tell you what Kinshasa is the capital of. But, tens of millions of people that live in a highly, highly constrained society. And so that breeds a sense of creativity, that breeds ideas, that breeds stuff that you can't really get anywhere else outside of emerging markets. So that's one. I think second for my business, the dollar is fundamentally global. And the dollar tends to be strongest in places that we could imagine are relatively dollarized. Places that are dollarized tend to be more 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 super bad inflation and the country got implicitly dollarized. And so those places tend to actually need US financial services more than, I don't know, UK and the GBP is pretty strong or France. Those places don't need American financial services as much as maybe some parts of the emerging world do. [00:00:00] S0: So, sticking with Kinshasa as the example. So you go there, what are you doing there? What are you discovering? Say more about the constraints you encounter there. Teach us a bit about – I've never been to Kinshasa.