Invest Like the Best with Patrick O'Shaughnessy
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.
01:03:03 · Micky Malka, Patrick O'Shaughnessy
So that joy that comes from working together only comes when you have that. Once you put something different to the inside of the model, it can break. Or the inertia just expels it off. So it's very different. And we tell that with companies, like companies said, hey, but am I gonna talk to you? Am I gonna talk to Nick or Nikolay or Justin or Eva or someone says, no, you don't talk to everybody. You will find that you will call Justin for something and you will call Zach for something else and you'll call Eva and you'll call Cindy. And then typically, typically, when the shit hits a fan, that's when they call me. That's a call I get when something goes really wrong. The other calls, everybody else gets. But that's how it works. [01:03:49] S0: How much do you think about returns? [01:03:51] S2: I don't. I don't think about returns. I think returns is an output metric, and I focus a lot more on the input and I let the output take care of itself. Now, one thing that a friend of mine, a dear friend told me early on in this journey, Ribbit was, great work, you got your first fund raised, but guess what? You only truly win your stars on your shoulder when you return capital. So that stuck with me. It stuck with me in so many ways that from early on, was always thinking about it instead of trying to build an empire of AUM. And I always looked up at Berkshire since I was a kid, how they compounded and compounded and compounded the balance sheet, I understood that I was playing a different kind of game than that and just the differences on that.
01:03:51 · Micky Malka, Patrick O'Shaughnessy
[01:03:51] S2: I don't. I don't think about returns. I think returns is an output metric, and I focus a lot more on the input and I let the output take care of itself. Now, one thing that a friend of mine, a dear friend told me early on in this journey, Ribbit was, great work, you got your first fund raised, but guess what? You only truly win your stars on your shoulder when you return capital. So that stuck with me. It stuck with me in so many ways that from early on, was always thinking about it instead of trying to build an empire of AUM. And I always looked up at Berkshire since I was a kid, how they compounded and compounded and compounded the balance sheet, I understood that I was playing a different kind of game than that and just the differences on that. [01:04:43] S0: So how does that manifest in something like price? We were talking before about a company that has all the trappings of an incredible founder opportunity at the edge of what's possible, and the price is to say nosebleeds would be understating it. How do you think about a situation like that? [01:05:03] S2: Warren Buffett used to say that if you graduated from business school or college and they give you a scar with like ten [01:05:11] S0: Twenty punches on it, that one, yeah.