Invest Like the Best with Patrick O'Shaughnessy
00:51:19 · Patrick O'Shaughnessy, Micky Malka
[00:51:19] S0: Where do your personal dreams come from? What are the source materials, the ingredients? [00:51:25] S2: This concept of making money better. And that has driven me since I was five or six years old, and it will probably drive me until my last day in this planet, which this concept of every time money becomes better, people live better lives. Doesn't mean more money. It means better money. It means it's easier to access, it's easier to save, it's easier to get a loan, it's easier to do aspects with it that you couldn't do before so you can build your vision and your life. So the metrics that I care the most at Ribbit, it's more the number of people that we touch every year in trying to make their lives better because that will probably drive the output of what investors want, which is returns and impact and all of those measures. But right now, we touch 900,000,000 people every year with financial services that we make their life better. I would like that number to be couple billion.
00:52:23 · Patrick O'Shaughnessy
[00:52:23] S0: Maybe it's a great excuse to talk about an investment that you made, a very big one, that was very creative and very different, which was a partnership with Walmart. Maybe tell us the story, but use it as an example of how you and your team at Ribbit work. Where did it come from? What was the process that happened behind the scenes for you to get excited about it and shape it, the things that you cared about as investors. I want a couple excuses like this to ask you about the process. Like, once you find something, what then happens? But this one was so unique and different, and I know you've done one or two others like it, but maybe can you tell us the story of the joint venture that you did with Walmart?
00:53:00 · Micky Malka
[00:53:00] S2: This goes to that point we were discussing about during the COVID era. You had FinTech or financial services blowing up around the world, growing up to the right, everything was becoming digital. People were stuck in their homes, they were using more and more financial products, but also the cost to acquire customers, the way to get the attention of them, the way to build a brand that they trusted was becoming more and more difficult. So we sat on a whiteboard right before COVID and saying, who could be a great partner to build a financial services company with a brand that people already trust, that we could go and do something completely different, but digital from inception. And Walmart was one of the top two brands that we had on the list. So I had through Sarah Fryer, I had a chance to meet Doug McMillon, the CEO of Walmart, and he had left me an offer that, Hey, if you're ever in Bentonville, drop me a line. I don't know why would I go to Bentonville except to see him. I texted him in January and say, Hey, I'm gonna go to Bentonville. Can I stop by? So we went to see him. Before that, we had walked the Walmart stores. We have transacted every single financial product that you can imagine from the money center to the prepaid cards, to the remittances. We had tried everything. And we had all of the user flows and all of the things, and we had found two bugs in their systems. So when we show up in their office, I sit down in the room with Doug and I say, Hey, listen, before we start, wanna tell you that we tried a new product. And we found two bugs and here they are. And I show it to them. And he literally gets out of the room, leaves me alone in his conference room and comes back five minutes later with a $20 bill. And he says, here, 20. He says, what is this? This is a bug bounty we pay at Walmart. And he gives me $20 And what I learned from that experience was they are playing an infinite game. They're here to serve hundreds of millions of customers, and they really, really care about making their lives better.
00:55:02 · Micky Malka
And we sat down and we sort of structured with Doug and John Furner, the CEO of The US, this idea of building a new company from scratch with the right team led by Omar and David that we convinced to join from inception from the beginning to go build a company that was gonna serve their hundreds of millions of customers with digital financial products and shut down all of the services that they had been built since 1990, that had never accrued more than 1% of their sales. And so we did that, it's a company called OneApp. It's on their second or third year of existence. It's actually quite big inside the Walmart stores. If you wanna pay inside Walmart with your phone, the only way to do it is through One, the OneApp. And the beauty of working with them, we got to understand what it was to work with a big company from inception. What are their datasets? What are their concerns on privacy? What are their concerns about regulatory? How to build these kinds of ideas? And it's very unique in the sense that you have the trust of their millions of users from inception to go build something. So that was what we were doing during COVID versus trying to do a lot of other investments later stage and pay higher multiples. We were building from scratch something that right now we're starting to see the joy of it.
00:56:20 · Patrick O'Shaughnessy, Micky Malka
[00:56:20] S0: Do you think there's more opportunity for big companies like that, that have these huge advantages to work with nimble technologists that have a very different perspective and build something that big from scratch, like it was capitalized to be very big and it's a huge customer base. The degree of difficulty is probably pretty high. But do you think there's more opportunity to do things like that? [00:56:40] S2: I think there is. We're just starting to see the CEOs of these companies are all people that now grew up with the internet one way or the other. So they're much more native digitally than if you had to have this conversation ten or fifteen years ago. So their appetite to understand what are the limitations they have inside that they cannot replicate versus what they can do with technologies and build something that has a independent life, but tied to the mothership one way or the other, it's much better now than any other time in the last forty years. [00:57:12] S0: You were an early investor in Nubank, and David Velez is one of the most incredible entrepreneurs of this generation for sure. What did you learn watching him build a digital first bank? What are the key lessons that you take away as you think about something like one?
00:57:28 · Micky Malka
[00:57:28] S2: I agree with you. He's one of the best in the world by far. From inception, the talent of people he convinced to move to Sao Paulo, they had no Portuguese, they had not even ever been there, and yet they were moving from day one from his Stanford Business Class and other friends he had. It's just insane. So differentiated talent was number one, way he always thought about it. And he has kept that high bar even to date. They are known for having some of the best talent worldwide, and they're loyal and they wanna stay there and wanna build brands. So that culture that he did was very unique. The second thing was he kept his head low for as long as he could. If you went to Brazil in those first five, seven years, they will laugh at Nubank. No one knew a number. No one knew a technology stack they were building. No one knew anything about them. And the less they gave out, the better. So they had no distractions. David was super focused on not getting distracted with any external metrics or validation. And you see it on the way he built that cap table. Same investors were there all the way from the beginning, the way to the end. You didn't have a bunch of people coming in or coming out or changing. He just wanted to maintain discipline on how he did what he did. And on the digital side, he just truly understood always what was the customer's pain and was willing to address it directly. I remember when he started and if you were transacting with your credit card and they saw that you were paying for a vet, they will send you cookies to your house because it meant that the animal was sick. They were just really thoughtful about how to build that trust and that brand loyalty, which is so critical for the success. And even today, you hear his earnings call, you fast forward fifteen years now, or fourteen years, and you hear his earning calls and you leave the earnings call, it's exactly the same thing he was saying ten years ago or fourteen years ago. So our joy to be able to be there on those first conversations and to be as an investor still in those earnings calls because we bought more shares in the public market or whatever, it's just consistency. We look at our notes from David from our first board meeting when I was there in 2016 or '17 to now, it's the same.