Invest Like the Best with Patrick O'Shaughnessy
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.
00:59:52 · Patrick O'Shaughnessy, Micky Malka
[00:59:52] S0: I'd love to talk about how you see skill and talent in other investors and specifically on the people on the Ribbit team. Your style is so big and sort of in the flow of the world as it's changing, as the money is seeking its new spots. I've gotten emails from Nick, your partner, on a company that are more analytical and rigorous and thorough. Stunning emails, honestly. I can't think of other people that have written emails like he's written. [01:00:20] S2: He's an amazing writer. Yes. [01:00:21] S0: And his style is totally different than yours. [01:00:23] S2: Oh, yes. [01:00:24] S0: How do you think about complementarity of skill? When you're recruiting investors, what are you looking for? Just say a bit more about the team and how you've built it.
01:00:33 · Micky Malka
[01:00:33] S2: I never believed in titles and never believed in job descriptions or, hey, I'm looking for this and here's a job description. I thought it was... Again, that's... Those are labels. And in the mindset of labels, I think you gotta start backwards. Start just finding amazing people. No assholes. Nick is one of the smartest persons I've met in my life. By the way, he's the only Ivy League guy we have in the entire Ribbit team, so that tells you. There's a lot of joy I'm sure. In that story. He's ten years younger than me. He's much smarter, much more thoughtful. And from day one, there was one thing that I remember from our first conversation was I gave him a case study to go look at. It was a company in Europe that was one of the first big fintechs. I said, go study it and we'll have breakfast and chat about it. And he came back and talked about this company, but talked about the founders by name. And that was the moment where I said, he gets people. He didn't start by talking about the numbers or the market. He just said, x name and x name, they came from this company. This is what they be... My guess is this is their behavior. This is the way I read the way they speak, and this is what they're saying. And it was just so human. So I think fundamentally from the beginning... Then we added Nikolay a little bit later from Bulgaria, and he was from Morgan Stanley. But we've just added people that had grit, had passion for the space, and had this ability to truly be humans first. Literally just good people. And after that, you just work on the skills. So our culture has been bring them young, train them in our ways, grow them in an organization that has no titles, no job descriptions. You will change your role multiple times on any given day, week or month or year. We will shift. You gotta be able to be good at self expressing yourself because you have to teach. Every moment you come back from a meeting, gotta teach back everybody else. We are only as good as the knowledge that you transfer to the rest of us. If the knowledge stays with one person, you're fried. It's a dead end street that has no output. So that by itself drives a different kind of people. We don't bring stars. Everybody has become a star being here. There was nobody, oh, he was great there. We brought him here. No. They don't gel because the team wins as a whole.