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Invest Like the Best with Patrick O'Shaughnessy
Micky Malka - Building Ribbit - [Invest Like the Best, EP.401]
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- [00:01]
Patrick O'Shaughnessy
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- [03:30]
Mickey Malka
Hello and welcome everyone.
- [03:31]
Patrick O'Shaughnessy
I'm Patrick O'Shaughnessy and this is Invest like the Best. This show is an open ended exploration of markets, ideas, stories and strategies that will help you better invest both your time and your money. Invest like the Best is part of the Colossus family of podcasts and you can access all our podcasts including edited transcripts, show notes and other resources to keep learning@joincolossus.com Patrick O'Shaughnessy is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit Psum VC.
- [04:24]
Mickey Malka
My.
- [04:24]
Patrick O'Shaughnessy
Guest today is Mickey Malka. Mickey is the founder of Ribbit Capital, one of Fintech's most influential investing firms. Ribbit's mission is to change the world of finance through financial innovation rather than through financial engineering. Through Ribbit, Mickey has backed transformative companies like Coinbase, Robinhood and nubank from their earliest days. We discuss his perspective on Fintech's evolution, including his provocative declaration that Fintech is dead, and explore his theory of the grid, how knowledge, wealth and power are being transformed by technology. We also dive into his deep interest in digital art, which he sees as an early indication of broader cultural and technological shifts. You'll soon Hear how he is taking a truly generative approach on all fronts. A final note, for me, the world just needs more people like Mickey. He's one of the kindest, most alive people that I've met in this business. There just aren't many people like him. Please enjoy this in depth conversation with Mickey Malka.
- [05:16]
Mickey Malka
So, Mickey, I know this is a hard question, but I'm going to ask it anyway.
- [05:19]
Patrick O'Shaughnessy
I want to just have you describe what Ribbit is. It's one of these firms that's if you know, you know, type firm. But there's basically no information of any kind about Ribbit anywhere. You can learn if you ask. Lots of great founders out there, but that's kind of how the word on Ribbit has spread. It's through founders, not through normal channels. Can you just describe what it is today and what it was when it started? We'll ask about the origin story, but I know it's a hard question to answer because it's an amorphous entity, but what is Ribbit to you? How would you describe it?
- [05:49]
C
That's the hardest question I think you're going to ask me today until probably the next one. We are a bunch of rebels. Let's start there. And from an inception, we always use Star wars as our motive and our decks and our presentations. And we're a bunch of rebels. And the way that we describe it is wherever the status quo grows bloated, wherever there's not enough innovation, wherever there's nothing new that benefits the customer, you're going to find us there as rebels trying to find the rebels who are going to change the status quo. And that's who we are. And there's no bigger status quo in the last 20 years than financial services. And that's where we started. It wasn't innovating, it wasn't bringing new services to the customers, it wasn't bringing anything new to the businesses. And we were like, this cannot be. Where are the people that are going to change this? So we dedicated the first decade of our lives just to do that.
- [06:46]
Patrick O'Shaughnessy
How did it start? What was the first couple months? Who did you raise money from? How much did you raise? How did you think about it? The firm has structured it in a very unique way. And I know you've been super intentional about the structure of the firm dictating what it will then do. What was the first moments like?
- [07:01]
C
The first were like thinking, if we're going to be rebels, what's the right structure to be a rebel? We spent like a year figuring out, hey, is that fun? The right structure? Really? Is that rebel enough? That feels like cookie cutter and having a fun. It's not. We struggle with the structure until we said, you know what, let's start here and we'll figure it out where it goes in the future. And that was in 2012. And then we raised the money from a bunch of entrepreneurs that know me because I was an entrepreneur for a long time. And they were like, yeah, this guy seems like he has an idea on what to do. Let's give him some money. It wasn't until a friend once told me, if you want to take this serious, you got to go really think about institutional money. Also, it wasn't obvious on day one.
- [07:44]
Patrick O'Shaughnessy
Question on the institutional partners. Having been through this process myself, I know that there's a wide range of types of people. What attributes did you select for? Like, what kinds of institutions can back a rebel alliance?
- [07:57]
C
Our first deck had more Star wars analogies than anything. I had no investor track record. I had a bunch of records as an entrepreneur. And so if the conversation started by saying, but wait, who else is here and what's your track record? And I will say, you know what, this is not meant for you. So they would look at me and say, wow, you're willing to say that? I'm like, yes, that's who we are. We say what we think. So it took a while until we found the right people that understood and were confident that if I had hired thousands of people in my life and I had fired thousands of people in my life, we were going to be able to build a team that we were proud of.
- [08:33]
Mickey Malka
Can we talk about the foundations of Ribbit and specifically the founding principles that you've talked to me about before that make all this possible? Because it seems that most investing firms, in order to raise money, define a strategy, and then many times they become enslaved to that strategy. And Ribbit's been the total opposite. The funds look so different from each other and we can walk through that history, but it seems like they're really grounded in those core founding principles. Can you describe each of them to us and how you came to them?
- [09:03]
C
So in 2011, I was finishing my fourth startup with my co founder, which we had done all together around the world in financial services. We're here in Silicon Valley and we decided that that one in particular called Lemon, it was the first wallet on the App Store. It didn't need the two of us to be full time CEO. So we've played this role multiple times. So we agreed he will be the CEO and I'll be the chairman. So I get to fire him. Fun job to your co founder. And I spent the whole year just traveling the world and talking to everybody, all the entrepreneurs that we have met or people that we had interacted with or worked with. And one thing was clear, I didn't want to be a VC and I didn't want to be called an investor because until then, the whole life was entrepreneurial. I had started four companies, I had lived in four different countries, all of these things. And yet I think the foundational mindset was one of saying, where is the passion driving you and where can you be the best version of yourself? So working through that, we wrote some commandments of life on how we wanted to operate. I don't want to be boxed. As somebody who didn't grow up in America, one of the things that I've learned is that everybody here has a label. They put labels on you. You went to this school, you went through this career, you are a good student, you are good at math. And I did not grow up like that. We had no labels. It was as fun and social and it was a lot more melting pot kind of Latin American vibe than it had been labels. So the first rule for me was no labels. And hence why from day one, some of the principals were we're not a venture firm. That's why it was called Rivet Capital, not Revit Ventures or whatever. I did not know if we were going to be early stage investor or late stage investor or public Investor. Actually in 2012 when we started, I think we were the only fund that in their documents allow for buying crypto. No one else could do it because they didn't have permission to do it. We could, we could do anything. We had it structured like that. I looked around Silicon Valley and around the world to all these firms and they behaved like firms. They were a bunch of partners working together. But were they truly working together or are they all together because combined they can do other stuff that they couldn't do by themselves? Did they really love each other? Were they really engaged in a different way? So for us it was much more about, let's build a company that happens to be in the business of deploying capital. Let's behave like a startup, let's build systems, let's open. Anybody in Rivet can read anybody else's inbox email. From day one, everybody at Rivet has access to the same data when you align. And as an entrepreneur, anytime you start a company, you put a lot of your set equity and your capital equity to your startup because you fund it. So when we did that and put a lot of bunch of my capital into our first fund, we aligned incentives. The incentive structure of charging fees just to manage capital to me seemed completely broken. It didn't align long term with your partners the same way. So we changed that. We had a budget system. Anybody that joins a team, no matter when they join, they have retroactive looking because you have just one team. So no matter if you join us in 2023 or 2015, you will have exposure to all of it. So it's a bunch of rules around what to invest in, what stage, how do you want to be known. We have no brand. People don't find. There's barely a website, you cannot even contact us on the website. So all of those things were by design from the beginning. They were not accidents. Some of them were, but a lot of them were by design.
- [13:00]
Mickey Malka
Maybe say a little bit about the first fund or two and what you were seeing and what you were doing because you were extremely early to this big world trend, both crypto and fintech. What did you see in the world that demanded your interest in these solutions that you then backed?
- [13:19]
C
We had this thesis back then, super early. You walk back a few years before that, 2009 financial crisis, 0809 financial crisis, the trust for incumbent brands or for established brands goes to negative. Nobody trusts them, nobody likes them, nobody feels identified with them. They get overly regulated and what happens is their innovation disappears. And in the late 90s and early 2000s, they were building this entire tech stack to run their back ends because before then they were paper. You walk to a branch, bank branch in the 90s was still paper based, completely paper based. So they had modernized the back end. But 0-8089 came in a moment where they never built the last mile. And when the app store shows up in 2010 11, it's a perfect storm of a mobile device with an app store which allows you to compete as a new channel to acquire attention and customers that the incumbents were way behind on. And that infrastructure that they had built in the 90s and 2000s was good enough to find bridges to connect to it and offer the last mile. So our whole thesis in the early days was let's go around the world finding the teams and the companies that are building that last mile that will touch consumers and businesses with financial services. The crypto angle came as somebody who grew up in Venezuela, as somebody who experienced over max inflation of triple digits in Any given year in your teenage years. As somebody who as my first startup, I was 17 in financial services in Venezuela and when I was 20 or 21, half of the banking system collapsed and disappeared. As somebody who saw the dollar devaluate and saw what happened in Argentina and was in Argentina doing business when the Coralito happened, when they took the peso out of the peg of the one to one or the real in Brazil, because I also was there. I didn't need to go to school. I already had a life lesson on macro and governments and currencies, more than people have in a lifetime. So when we saw Bitcoin early 2011, before even starting Rivet, it was super obvious that this was something really big. So the first businesses there that we were investing in those early funds were who's going to connect the fiat Rails to the crypto rails? And one of the first ones was Coinbase and Brian and Fred had that team there. And so we did all of these things that were in the early days of connecting the last mile of financial services to consumers and businesses.
- [15:58]
Mickey Malka
You're probably the most famous private fintech investor and yet last year you told the world that would listen to you that FinTech maybe was dead. Can you explain just that moment in time and what led you to say that?
- [16:11]
C
We had a slide in our annual meeting. It had this cemetery and it said FinTech and it had a Tom and it said FinTech 2012, 2020 23. And it was dead. And you could see people's faces were like, what is this team just telling me? And the reality is, I think to play an infinite game, to play a game that you get to reinvent yourself, to play a game that you enjoy, there's no winning or losing. And once you're ahead, you have to change the rules of the game so you fall behind. And we were seeing slowly and slowly that there was every other day somebody else was trying to do something else in the same space and we looked at each other and said, what is this? Should we keep doing this? Or should we just say, you know what, it's dead. It's done everything that needed to get started in these last 12 years. Did it. So the nice thing about that mentality is to say, yes, we were ahead for a long, long time, but let's change the rules of the game so we fall behind again. Because the game is better play when you're trying to get ahead, not when you are ahead and trying to avoid people from being ahead of you. So changing the rules is the best thing in life.
- [17:30]
Mickey Malka
It's so interesting that you're allowed to range around public businesses, private, late stage, early stage. How do you know where to focus at any given point in time, as you think, across all the funds which themselves have been so different, and when is it more common for a very late stage, let's say higher valuation opportunity to get you more excited than an earlier stage, one that by definition is a lower price, maybe a higher potential upside, what draws you around that range that you're allowed to move through?
- [17:59]
C
I think it's this combination of finding amazing people that you can see through their soul, through their motivation, and you can see that they will do whatever it takes to win and to build that mission that they find themselves to at the beginning. When you start backing them super early, you don't know. You just don't know. But you try to see signals and follow through them. Before we said to our investors, hey, Fintech is dead. It didn't come out of the blue a year before or 18 months before we presented this pyramid and said, there's 3,000 companies I got backed in the last decade in financial services around the world. We think there's 50 winners. There'll be 50 companies that are going to compound for the next 15 years. They have asymmetric brand knowledge, they know how to use time people, they know how to deploy capital in ways that they will just be compounders for a very long time. The kind of services that the Berkshire Hathaway that the world would love to have, which in many ways, if you look back at Berkshire, that's what they did in the 70s and 80s when they started to buy American Express and Geico and the Wells Fargo. They looked at compounders when it was not obvious that they were going to compound for that long. And they hit the macro, right? And then we said there'll be 200 companies that own an asset, a license, a software, a customer base, a product that will be acquired by this compound. So they'll be taken out one way or the other through M and A. There was going to be another 500 companies that are going to get to profitability because liquidity was drying up. The market was starting to get out of favor for this space, moving more to AI and those companies will get profitable and they will trade at a multiple of earnings and just do fine and private equities will buy them or they'll live in a cash flow business. And there was 1500 that should not exist and they will disappear over the next number of years. So that thesis put all of our attention to look at. All right, who are the compounders? Are they public? Are they private? Are they both? Do we know which market? Who? And we spend over a year and a half just studying that and placing bets all over the world around that.
- [20:16]
Mickey Malka
What's an example of one of a compounder just to make it, bring it to life.
- [20:19]
C
The first one that comes to mind is probably Robinhood. I'm on the board, so I gotta be careful with what I said. But it's a company that every time they have time, the millennial customer, in a way, that they're growing with them. So think about it. Vlad and Baiju started a company when they're 26, the oldest of the millennials. They're now 37, 38. They're the oldest, probably exactly are 40. So they've time. And they started to offer first trading account when you needed one, when no one gave you one. And now they added retirement, because guess what? The generation has kids and they're thinking about it, and they're adding all of these products that they have a chance to wake up in 20 years and be the Schwab of that generation, because they grew with their customers for a very long time. That power of compounding, generational wise, doesn't happen overnight. It takes a long time to build. But you can see where they're going. And they're growing with their generation. And every generation, if you look in history, has one of those, or at least one of those. Very few will cover very generations, but at least there's one winner per generation. E Trade had that chance for my generation, but E Trade got into mortgages too early with a very weak balance sheet and blew up and they became a sleepy company. They had a window, they lost it because they use their capital base wrongly. I think Robinhood is doing a much better job.
- [21:46]
Mickey Malka
Vlad told me this story, and it's an incredible story, and it speaks to the sort of relationship that Ribbit has with its companies and the founders that it backs. Can you tell the story of that crucible moment when things were going sideways for Robinhood and you were a huge part of getting them through that?
- [22:01]
C
Yeah, that January of 2020, 21. I think the story starts nine months before there was a moment in, I think, April or May, right, when lockdowns were happening and where their growth, because people were starting to trade and open accounts and get into the markets because of all the subsidies and incentives, that their system went down for two days or one day of trading because they collapsed. They were just opening Too many accounts they had anybody remote. It was bad and they had a lot of bad press. And I remember having a call with Vlad that afternoon and saying, hey, is this going to happen against us? I don't think so. I think we have a solution. Okay, you're growing way too fast. What else do we need to. We always think about this framework, about brand, how do you communicate about people, how do you talk to them about how you invest your time and capital? So we went through it and in the capital piece we said, how is your capital base right now to sustain this level of growth? He says, we're fine, but it could get stressed if this keeps going. So nine months before, we sat with Jason and Shiv, which is part of the finance team. Jason, the CFO and Shiva works with him and our team here. And we put together a term sheet that had all the terms with brackets ready on what it will take to put emergency capital in. We thought about it, we wrote it, we discussed it, we went back and forth. We didn't need it and we both agreed it was perfect and we put it in a drawer. We never knew why we could need it, but it was a good thing to just know that we had it there. So you fast forward to January and GameStop happens and all these meme stocks happen and the regulators come with this super crazy unheard rule out of the blue, saying you have to put all your customers exposure that they have put on in the last day from your balance sheet in collateral while the trade settles. It's unheard of. So the request was for $3 billion at 5 in the morning before market opens. Exactly. It's insane. So I get the phone call and Vlad tells me this. I'm like, no, Says, what do you mean no? No. You call back and you say, no, that's crazy. That's unheard of. They're doing the math wrong. This cannot be. I mean, the customer's money was in the bank, but you can attach it. It's their customers money. You can only attach it the day of settlement. So understanding this business, because I had built a brokerage dealer when I was 17, I built an online broker dealer. We understood everybody here understood the business model. So we knew there was no capital risk. It was all requirement of some liquidity risk. There was no liquidity risk. It was capital constraints. So he calls me back and says, we're going to talk to them, but I need the money. So I said, okay, give me half an hour, give me an hour. And I wake up the CEO of Silicon Valley bank back then, Greg Becker and I said, have I ever asked you a favor from you? And he says, yes, once. And it was very painful. And this favor was helping Coinbase get bank accounts in 2013 because no one will open the account to them.
- [25:03]
Mickey Malka
Oh, interesting.
- [25:04]
C
And it was the first bank account that Coinbase had for the first three years. I said, well, I need one. And he says, what's up? He says, I need to overdraft every line that rivet has for $500 million. He says, what by when? I said, by 9 in the morning. And he says, what happened? So I explained what happened. He said, let me call my team. And our team here we were multitasking with Robinhood team on the term. She already had it done. We were just filling the brackets at the same time, talking to Silicon Valley bank, defining how to do this and by their credit. By 9:30 in the morning, we were wiring $500 million to Robinhood.
- [25:49]
Mickey Malka
Wow.
- [25:49]
C
And with that term sheet, a lot of capital followed later that day and later that weekend.
- [25:54]
Mickey Malka
What an incredible day. Where does that rank in the craziest days of your career?
- [26:01]
C
You know, there are those days that you remember where you were.
- [26:04]
Mickey Malka
Yeah, you can picture.
- [26:05]
C
You can picture everything. I tend to walk when I'm on the phone, when I speak. I'm not good seating. I will tell you that. That day I looked at my watch. I had done a full marathon walking on the phone. I had done almost 24 miles of walking in a room, in an office, just walking, because I needed to think and react and call. So I will never forget that day.
- [26:27]
Mickey Malka
Thinking back on it, what lesson do you take from it?
- [26:29]
Patrick O'Shaughnessy
What did you learn that you didn't.
- [26:31]
Mickey Malka
Know prior to going through that experience?
- [26:33]
C
A lot of different aspects. Number one, you always forget, because I was there for a long time in that seat. It's very lonely to be the CEO and to be there when that happens. That call doesn't happen if you are not spending time for the previous seven or eight years, since we were investors, getting to know him, getting to know his family, getting to know his team, getting to know the company, because those solutions don't come out of the blue. And if they do, they're mercenary and they try to kill you, number one. Number two is the mindset and the culture of being flexible, of taking asymmetric, informed risk. When you understand the variables, you sleep better at night and you're comfortable with your skin. When you do it like that, when you truly, deeply know what you're doing versus guessing, we truly understood what we're doing. We made one mistake in that day. We didn't spend enough time understanding the brand consequences that will be so long lasting for something that the entire market did wrong for one day. And Robin Hood became the child star of the Gamestop saga to the point of having movies. Now, there's a saying that says it doesn't matter what they say about you as long as they talk about you. So you could take that argument, but on the other hand, it took Vlad and Bayou and it took the team and it took the market almost two and a half years to get out of that ptsd. And I think the biggest lesson is not that day. The biggest lesson is being there for those next two and a half years as they navigate out of that cycle.
- [28:12]
Mickey Malka
I'd love to zoom to the present now.
- [28:14]
Patrick O'Shaughnessy
You focused a lot on money in the first chapter of Ribbit's Existence. And I think the grid concept, the sort of global digital grid is something that you're focused very carefully on today. Can you just describe how you came to this idea and what you mean by it?
- [28:29]
C
The grid is our version of the matrix of that interconnectivity of, of different aspects that make us who we are and how we transact and live in this world. And you could think about the grid as if you think about the Internet. It's a grid of itself. It's a grid full of data and knowledge. If you think about money and wealth, there's been grids for the last 50 years that allow you to move money in real time, in delay time, in slow times. You got Visa networks, MasterCard, pet wires, ACH UPI pics. They're all financial design grids. And then if you think about electricity, we think about the electric grid and we think about towers and power meters and transformers and high voltage and all of those things. What will happen if you actually thought that they were all combined into one, they actually need each other. There is no knowledge grid without power and there is no power without money. And if you combine them all together and you think about them as just one single grid that has to connect all of these things at the same time, it's quite rare and unique because it hasn't happened in a long time. These grids have been independent forever. The financial grid has been independent for 5, 600 years. The Internet, the data grid has been independent for 25 years. The electric grid has been evolving for just 140 years. But now we hit a moment in time when the three of them are converging in a way that we have not seen in almost 500 years. And the last time we've seen that was probably in the late 14 1500s with a printing press. What people have to understand is that the printing press by itself was not the event the printing press, what it did was it allowed you to print all the knowledge that was written three, 400 years, thousands of years before that. The same way AI right now is the printing press moment. But it's only possible because we have digitized every single piece of content for the last 30 years. So what took hundreds of years of human scriptures to write history and contents back then for the printing press to print has taken 35 years now or 40 years to digitize. So now the AI engines can actually work on it and tokenize. And so you have knowledge in ways that we've never had being tokenized. You have money getting tokenized in ways that we've never seen. From crypto rails, token existing rails, to the way all of these aspects of smart contracts are working. And you have electrons which are becoming more and more decentralized, which are powering all of those at the same time. So this moment is probably the most interesting moment of the last hundred years in terms of the opportunity sets that is going to come from it. So when you take those things and you put them all together, you say, okay, what does it mean? It means that knowledge, money and power are interconnected in ways that allows you to create use cases that we've never seen. AI agents are going to need access to money. AI agents are going to need access to the crypto rails to do that. So when we think about the grid as a concept, we look at it and say, oh my God, how do we invest into this? How do we think about if you buy that vision of the world which we have bought ourselves into. And then you start to ask a question. How do you deploy capital in it? How do you think about the opportunity sets? What needs to come first, what needs to come second? What are the use cases that we should expect to see in 10 years, in five years, in one year that will show that this is going the right direction? That's what we mean with the grid. It's probably the most exciting opportunity set that I've seen in my life.
- [32:17]
Mickey Malka
How do you dig into aspects of that? I mean, it seems correct that everything you just laid out means that the world is already different and changing so quickly around these dimensions. How do you go from that insight down to tangible opportunity?
- [32:34]
C
So I don't have a great Answer. There's no light bulb that I can tell you, hey, this is what we're doing. But. There's always a but. First you go from the macro and then you look at the micro. The most smaller aspect where I can see this happening, it's actually in art. So to me, artists are called artists because they are always ahead of society in many ways. Artists always tell you where the world is going. That's what they did. The best sci fi films when we were kids shaped where we are going. Mars the way we think about Lens. I was talking to Matt Vaughn the other day with the Kingsman. He was saying I had the meta lenses of my movies 10 years ago. Like all of these things, they'll tell you where these things are going. And if you follow art today and you see how they're using all of those aspects at the same time, you're seeing artists using AI in different ways than the Silicon Valley engineers are using it. You're seeing how they are using NFTs as a method of distribution, of ownership. People will read in the media, NFTs are dead. I think they're wrong. When you really look at how they use artists are using it, it's just different. And the way they're using power and knowledge to express dynamic aspects of the world. So if they can do it in art and they can express it visually like that, where will it take off in businesses? So then we sort of appeal that and say, okay, what next? What are the first variables that we need? Do we need to figure out identity? Is identity a big component of society solving a lot of these things? Because right now we have ideas, but we don't have an identity that allows us to connect our knowledge to ourselves, ourselves, to our money, ourselves, to the grid. So can we go and find stuff happening there? Can we find the grid on financial services that will be decentralized? What will be the way it will operate? How will AI agents speak on your behalf and move money on your behalf and sign contracts? Because a piece of nft, a piece of art that lies on nft, it's a smart contract. Now imagine an AI agent using that on your behalf to do something. What would it look like? So when you start to go down that path, we try to figure it out. What are the use cases?
- [34:56]
Mickey Malka
It's funny that we're having this conversation. Behind us is this piece of art that is radically changing on the fly generative art based on what we're saying. So literally, it's so fun for me to have this conversation literally behind you, I can see the topics visually on the screen in this remarkable way. And it does feel sort of like seeing the future. It does feel like everything is going to be a version of this that reflects back on the individual and that ID digital identity is a key linchpin of that. Why don't we have it yet? What do we need it for? Why is somebody that nails digital identity and what that means to you so important for what might be possible in the future?
- [35:38]
C
If you listen to OpenAI when they do their presentations, or you listen to the earnings calls of Visa, the payment rail network, or you listen to Mark Zuckerberg and Meta, everybody's using an analogy called tokenization or tokenizing data so they can compute. They're tokenizing payments, they're tokenizing other aspects. I think tokenization is still misunderstood. What it truly will become. And if we don't tokenize your identity, you will not be able to connect to all of these data sources. You will just not be able. It will mean a lot less. The iPhone is a token instrument. It has all of those entities sitting there, but they don't talk to each other. They're siloed. What would happen if Apple allows you to really use it as an identity, not as an idiot? What will that do? It has the most knowledge that you need to do. Will they win? Will they be allowed to win? Will it be somebody else? Will there be multiple players? So I think that if you don't have this, you're not going to be able to connect to the grid of knowledge and to the grid of wealth in the same way because you will not be able to augment yourself the best you can. So that tokenization aspect is number one. And a proxy to this, Patrick, is what happened in India. We're very active in India. We've been there for a decade. We've done a lot of investments. And when we got there in 2013 and 14, the first thing that they built was the Adhar system. It was an ID national system. It was the first time ever a country, even at that scale created fingerprint to 1.2 billion people. Identification, like you needed just your finger to do anything. In India, when that was put together, their identity system now has otp. It has multiple ways to connect to it. Then they turn on the payment grid called upi and then they turn out the E commerce grid, and then they turn out another grid in transactions between physical stores and B2B. It is all logarithmically growing. If they hadn't solved the first piece it wouldn't happen.
- [37:51]
Mickey Malka
If you think all the way back to your original investments in the crypto ecosystem, you're probably the earliest of the well known investment firms that was involved in bitcoin very early and in tons of businesses in that space. What has surprised you about how crypto has evolved based on your early expectations in 2011, 2012 and how do you think about it?
- [38:15]
C
Today we started doing this, people looked at me and said, what are you doing? The only people using this are drug lords and money laundering. But yes, if you read history, money always starts with those use cases. It always finds low hanging fruits. But then over time it just gets better and it gets clean and bad actors move on to something else. And I think that's what's happened here. What is blown away if you ask me in 2011 or 12, that in 2024 in the presidential election of the USA, the topic of bitcoin as a reserve for the country will be a debatable aspect that candidates will be talking about. I will say no f way. Or that we had a listed ETF in the same year that the SEC chairman said never, never. Or that countries around the world have bought it as a reserve currency in their balance sheets. It's been only 14 years or 15. It's insane. I mean gold has been here for thousands of years and yet this instrument, this technology, this aspect is doing it in 15. I cannot imagine what the next 15 look like. It's just I'm more energized. When I grew up in Venezuela, my mother gave me a little note that I wrote when I was 8 or 9 asking the tooth fairy to give me dollars because I didn't trust my currency. This is before the first maxi devaluation the country had in 30 years. And when my kids were losing their tooth, I was giving them bitcoins and it was $20. So my oldest kid has like 2 or 3 bitcoins just from her tooth and my other one has less and the third one has much less. And for them it was automatic and you can see it. So when you see young people understand concepts, our role as we get older is to see through their eyes, use our knowledge, but see through their eyes. And that's what excites me about where this is going. I think we're super early still.
- [40:18]
Mickey Malka
Can you explain the importance and just like general concept of stablecoins as you see it and the role that they play in the world that's unfolding?
- [40:26]
C
So growing up in the early 80s and mid-80s in Venezuela, we were having max seed evaluations. Like the dollar was 4.3 bolivars to the dollar for like 30 years. And by 1983 it started to devalue. By 1989 it was probably almost 10,000 bolivars to the $1. So the only way you could save my family safe and there were doctors and middle class family was we were buying American Express travel checks. Every week I walked with my mom to the bank branch, we did a line and whatever bolivares we had in his private practice, in the private practice we will buy travel checks and we will store travel checks. And once a year, once every couple years, we'll go to the US and deposit them in a savings and loan institute. That's how we saved.
- [41:20]
Mickey Malka
Isn't that insane?
- [41:21]
C
It's insane. But what was it about the travel check that gave you the safety? It had the American Express logo, it was dollars, it had a serial number. You kept it, you didn't sign it both times. It was yours. Stablecoins are travel checks in today's world. It is instant dollars anywhere in the world that you can control and move anytime at a cost of zero. And they're backed by guess what? Dollars in Treasuries. Actually to the point that when you think about the size of stablecoin market right now there's almost $200 billion of stablecoin. People are willing to forfeit making 4% or 4 1/2% of yield in order to have it at least saved in dollars. So imagine the opportunity cost where they're willing to sacrifice their yield just to be able to have access to dollars. So the use case of the stablecoin first it starts with consumers. Always all these cases start with consumers. Consumers, real time, anywhere in the world, not for Americans. So we can get dollars on our checking account, on our Robinhood account, on our Venmo, on our square cash. We have dollars everywhere. But if you're outside the US and you don't trust your currency or you want to diversify, you will love stablecoins as a way. And that was a low hanging fruit. That was the minimum use case. Funny enough, that's when it started. They started because there were exchanges, crypto exchanges all over the world. And it was so hard to get into the Fiat rails and come back that somebody said we're going to put a stablecoin and people can just move it around. And that was the true case. It was trading and moving dollars from one exchange to the other. Consumers took it over. What we're starting to see now is companies and treasury management of companies using it, it lowers their cost of capital. It's instant. There's less resistance. They have a lot more control. So the volume of stablecoins movement on any given month is now you can graph it against Visa Network's payment volume and it's not crazy off anymore. And that's only with 200 billion. Imagine when there's a trillion dollar sitting there and 2 trillion it will get there.
- [43:29]
Mickey Malka
What will this mean for Visa and MasterCard and some of the big important incumbent financial institutions that have also been some of the best stocks to own with some of the best business models?
- [43:41]
C
I think for them it's a problem. And people like Visa led by Ryan understand this and they're probably doing an amazing job on trying to be present in the crypto rails and make the network connect efficiently and tokenize dollars and be part of this and make sure not to lose that business. Time will tell, but they get it. He gets it. But when you listen to the other extreme, to Jamie Dimon saying, this is all evil, this doesn't work. I do it myself. I have our own JPM coin. I can do it on my own system. Well, they're defending the castle. The castle, which they have to do. It's their mandate. He's doing what he needs to do. There's nothing wrong with what he says, but that's the battle between the established nation states or to the new network states.
- [44:29]
Mickey Malka
So if we get, we have this grid that's changing on the bottom layer above that is identity and the incredible important role of data. And then you've talked about compounders as well as a key area of focus for your investing discipline today. What else in that middle piece is most exciting to you? What does it feel like the world needs in terms of technology or companies or products or infrastructure? You and I've talked about a couple companies attacking the identity piece specifically. What else has you most excited about? Like people that are serving the world's, you know, technical mass and giving it what it wants.
- [45:03]
C
Oh, there's so much. It's such an exciting time to be doing this. I think there's an intersection between AI and crypto that is really exciting to us, how those worlds collide. AI will need crypto. Crypto definitely needs AI to really build the future because AI in many ways generates so much more content and so much more tokens that you have to be able to regulate and tokenize and use and apply into smart contracts. And there's no tech better than the crypto rails to do that. That intersection is super powerful to us. We're spending a lot of time trying to understand who and how and where. And funny enough, follow the young minds. A lot of the young engineers that started with crypto when they were in college are now moving to AI because it's where the attention goes. But both of them combined have the knowledge now, and you're starting to see people that understand both worlds and starting to interact in those.
- [46:00]
Mickey Malka
What sort of thing could that unlock?
- [46:03]
C
So imagine, let's say, Tesla's robotaxis. The car needs to interact with third parties. The car needs to get paid, collect, define hours of work, all of those things. Now, their software can do it, but if they're going to interact with the third world, there's nothing better than a blockchain smart contract to figure this out, because at scale, you cannot do it any other way. Can the card directly talk to the Visa Rails? Not yet. Is Visa trying to do this? Yes. But what are they using? They're using crypto Rails to get it done. That's why they're partnering with Solana and trying to tokenize tokens on Solana, because those networks are better than the traditional Rails to do this. Those other networks are pool networks. This is push. So all of those aspects will come into this world in ways that we just don't imagine.
- [46:49]
Mickey Malka
And so the way to think about it is we're going to need streaming data and money everywhere to enable these automated services. And it's the people that understand the two fields and the intersection of them that can build things to solve that problem.
- [47:01]
C
You said it better than me.
- [47:02]
Mickey Malka
It's really exciting to think about.
- [47:04]
Patrick O'Shaughnessy
One of the things that is amazing.
- [47:05]
Mickey Malka
Is this little napkin at your office.
- [47:08]
Patrick O'Shaughnessy
It says the eye of the tiger on it. You're holding it up right now, and it's sort of this cheat sheet for what to look for in people. I think, I'm sure both people on your team, people you back early stage, late stage, whatever. And I'd love to apply some of the ideas actually to you, you personally, and to people in Ribbit itself to gain an even deeper understanding of you and the business and what drives you. And so the five that I want to ask about are energy, conviction, heart, dreams, and obsession. You say the energy of a scientist, the conviction of a missionary, the heart of a partner, the dreams of an athlete, and the obsession of an owner. I just love this list. At what point in Ribbit's history did you feel the need to inject that energy the most?
- [47:48]
C
Every day. This is a Daily, daily thing in this world. If you believe that energy doesn't get created, it just gets transformed. And the amount of energy that exists is always the same. It just gets moved around. The best way to capture as much as you can and recharge as much as you can is to have a purpose in a mission that you are very identified with. So when you meet people who are islet tiger and you're one, Patrick, you are an islet tiger. Somebody had to say, what do you say about Patrick? There's a lot of things I would say, but you fit this bill. You have that energy, you have that conviction, the heart. You have the dream. You love to travel. You have the conviction of a missionary because you love to travel. So when you start to think like that, it's something that you don't have to give it on a particular day versus another day. You give it every day. And you don't live by these principles or you don't meet somebody that does it. It's a day that you lost. That's the way we think about it. And not only it applies to the founders that we want to partner with, that we get the good fortune to partner with or the people in our team. It also applies to who do we take money from. A partner is a partner, and we think of all of them in the same way. They cannot fit this napkin. They shouldn't be our partners on any capacity.
- [49:02]
Mickey Malka
I'd love to learn how that same idea has applied to you because you're the founder of Ribbit and it's a business. You treat it like a business. It has adapted like crazy. I mean, we won't say the returns, but they've been spectacular. And those returns have come across wildly different styles of investing and different portfolio concentrations across the different funds. What has been the hardest part about being able to continually grow and adapt and not get sucked into. Oh, Ribbit's a firm that's had success doing this thing and they're going to keep doing this thing. That's nice to say. I think everyone listening would agree, like, yeah, I want to do that too. I want to grow in that way. I want to be adaptable. But it's hard, obviously, otherwise more people would do it. So what have been the hardest parts about keeping that in your DNA?
- [49:47]
C
It's being willing to kill the things that got you here. This concept about. Personally, I always go back to this idea. I grew up in an amazing community in Caracas, in an amazing high school. My class could not have been better in everything. Our teachers Our school, my classmates, it was literally. I cannot even explain to you how good it was, how good we had it. And I always think about going back to our reunions and looking at somebody and saying, oh my God, that guy picked in high school or that guy picked in their five year unit. That concept in my mind does not allow me to even I want to peek the day I'm in the cemetery, the day I die, that day, I want to say, this guy peaked today. So that mindset, it forces this behavior that we have here that we've worked so hard to have, which is burn the bridge that got you here. Whatever got you here will not get you to the next phase. What got me to come to the US in 2007 is not what will make me be happy. 2024. Just be willing to change and change and change and don't look back one day of what you did in the past. Just don't forget where you came from. Don't ever forget where you came from, but always be looking where you're going.
- [51:06]
Patrick O'Shaughnessy
One of the great joys of this business for me is picking sides, deciding that you're going to throw your conviction behind somebody who's going after something. What does conviction feel like to you? Like, if you had to describe the feeling of conviction when you get it and have it, how would you describe it?
- [51:24]
C
As a team here, we have the conviction. We just don't listen to anybody else. We just don't listen. And people will say no, but this and that, I'm like, yeah, thank you. Conviction is one of the most important traits I think, for any human. If you don't have conviction, you end up diversifying. And diversifying is lack of conviction. It's not an investment philosophy. It's just lack of conviction. So most people that are successful in life and find joy in life is because they found a handful of things in their lives that makes them very happy. You need 50, you need diversification. You don't think of that. You don't have more kids to diversify. You have more kids because you have conviction that you can be a good parent. All of those examples are just the ways we sort of think about it.
- [52:13]
Patrick O'Shaughnessy
I think heart pairs incredibly well with conviction. You're one of the biggest hearted people that I've met in this business. What is the role that heart plays in Ribbit's story?
- [52:24]
C
It's core and center. It's central. It's the central system of everything. First and foremost, we're all humans and we all have flaws and we all have attributes. If you're not willing to embrace those, both of them, then you're in the wrong business. We have had a share of founders that have found themselves in controversies that have not been fun for them or their families. And we end up going out, reaching out to them, calling them, meeting them in person, and then even backing them for their next venture when that occurs in their lives and being there from early days. Why? Because we had conviction. We got to know them, we saw them, we did our work. And no matter what you read out there, no matter what people say, if you really understand them as humans and they recognize that there was a mistake made, and we're all humans, we all make mistakes. I wouldn't be here if a lot of people allow me to make mistakes and keep leaving. But there's times in society where when that's not allowed, but we should not forget that that's hard.
- [53:30]
Patrick O'Shaughnessy
Where do your personal dreams come from? What are the source materials, the ingredients?
- [53:36]
C
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 metric that I care the most at Rivet, it's more than 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 million people every year with financial services that we make their life better. I would like that number to be a couple billion.
- [54:35]
Patrick O'Shaughnessy
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. 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 could you Tell us the story of the joint venture that you did with Walmart.
- [55:12]
C
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 on 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 that list. So I had, through Sarah Friar, I had a chance to meet Doug McMillan, 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 Ventonville except to see him? I texted him in January and said, hey, I'm going to go to Ventil. Can I stop by? So we went to cm. 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, I want to tell you that we tried every 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 on his conference room, and comes back five minutes later with a $20 bill. And he says, here, $20 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. And we sat down and we sort of structured with Doug and John Fernando, the CEO of the us this idea of building a new company from scratch with the right team, led by Omer and David, that we convinced to join from inception, from the beginning, to go build a company that was going to 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 One App. It's under second or third year of existence. It's actually quite big inside the Walmart stores. If you want to pay inside Walmart with your phone, the only way to do it is through One, the One App. 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 data sets, 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.
- [58:32]
Patrick O'Shaughnessy
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.
- [58:50]
Mickey Malka
To do things like that?
- [58:52]
C
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 10 or 15 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 40 years.
- [59:23]
Patrick O'Shaughnessy
You were an early investor in Nubank.
- [59:25]
Mickey Malka
And David Velez is one of the.
- [59:27]
Patrick O'Shaughnessy
Most incredible entrepreneurs of this generation for sure. What did you learn watching him build Digital First Bank? What are the key lessons that you take away as you think about something.
- [59:38]
Mickey Malka
Like one, I agree with you.
- [59:40]
C
He's one of the best in the world by far. From inception, the talent of people he convinced to move to. So Pablo, they had no Portuguese. They had not even ever been there. And yet they were moving. And from day one, from his Stanford Business class and other friends he had. It's just insane. So differentiated talent was number one. The 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 want to stay there and want to 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, all 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 home 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, when you hear his earnings call, you fast forward 15 years now or 14 years and you hear his earning calls and you leave the earnings call, it's exactly the same thing he was saying 10 years ago or 14 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.
- [62:03]
Mickey Malka
I'd love to talk about how you see skill and talent in other investors and specifically on the people on the Rivet 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 spot. 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 emails.
- [62:31]
C
He's an amazing writer. Yes.
- [62:33]
Mickey Malka
And his style is totally different than yours.
- [62:35]
C
Oh, yes.
- [62:36]
Mickey Malka
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.
- [62:45]
C
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, those are labels and 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 rigid team. So that tells you there's a lot of joy in that story. He's 10 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. And 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 and then we added Nikolai a little bit later from Bulgaria and he was a Morgan Stanley. Well, we've just added people that had grit, had passion for the space and have 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 got to be able to be good at self expressing yourself because you have to teach every moment you come back from a meeting, you 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. 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 going to talk to you? Am I going to talk to Nick or Nikolai or Justin or Eva? Or. You can 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.
- [66:01]
Mickey Malka
How much do you think about returns?
- [66:03]
C
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 I. A friend of mine, a dear friend, told me early on in this journey, Rivet was great work. You got your first fundraise, 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, I 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.
- [66:55]
Mickey Malka
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?
- [67:14]
C
Warren Buffett used to say that if you graduated from business school or college and they gave you a scar with.
- [67:21]
Mickey Malka
Like 10, 20 punches on it. That one, yeah.
- [67:24]
C
Yeah, exactly. That's all you should do in your life and be very careful. I think we each want to have one of those, to just pack amazing people, regardless of value. So you're not going to do that every day, you're not going to do that every year. But I put myself in your shoes and say, okay, Patrick, you have interviewed almost every smart person there is to interview in America, and eventually you will do this around the world. You have met them, you've seen them vulnerable, you've seen them speak, you've seen them interact, you talk to them online, offline, and then you find somebody who blows your mind away. What in your framework does not give you the right to punch that card? Why get stuck on value when you have array of exposure to people and as you get older, your gut overtakes your brain and you gotta trust it more. So that's the way I think of it. I said, am I going to build a business like that? Probably not, because it's not the right way. It's really hard to do it and you end up gambling a lot more than you are investing. But would you make an exception when you find somebody unique and just close your eyes and say, don't look at it for literally five years, 10 years and just see if this person became amazing and if not, learn why, definitely you should do it.
- [68:44]
Mickey Malka
It makes me think of other singular things and fintech for sure. With exceptions of course. Like Robinhood, I wouldn't say is an area that's associated with amazing brands. You and I spent some fascinating time together learning from some of the people that have built the most iconic brands in the world. How has your view on the importance of brand evolve? Like what does a great brand mean to you?
- [69:07]
C
It's the topic that I've been spending the most time the last two years outside of these trends and what we need to do here. You have some of the greatest podcasts on brand stories too. I think at the end brand is to under promise and over deliver on anything that you do. And that's how great brands get built. So if you can do that and you can be a great storyteller of that under promise and over deliver in no matter what area you are, you will win. Now what I find interesting is that most people are not trained to think about brands. No one taught them about this concept. They didn't study in college. They didn't grow up in an environment. Even though America's brands around the world are some of the best in everything. When we were building Rivet, I always said why are we not doing active speaking or marketing or Twitter? Because our brand need to come from the founders. Our brand need to come is when you ask any founder who is the first person you call will they say rivet? And if we win that battle, that's our brand. So what I've learned about it is that when you talk to entrepreneurs in our space, any space in around E commerce or digital financial services or crypto, crypto has a terrible brand. For the record, the crypto brands are just who came up with the bitcoin logo. There's no brand story there. And despite all of those things, look at what it has done. Imagine if it had a great brand. One day that will happen, but not yet. When you look at the best companies around the world, you took Sameer from Phone Pay or David from Nubank, or you talk to Nikolai at Revolut, how they build it, they never spend a lot of money on marketing. All they did was over deliver on what they promised. And that's what it takes.
- [71:04]
Mickey Malka
Such a simple and incredibly elegant concept. Thinking about visual parts of brands, making me think about art and your commitment to how art is changing is certainly the most interesting of anyone that I've met. You clearly love it. You mentioned it earlier as the way to see the future, that artists see the future. So you can piggyback on there experience. How have you approached this part of your life? And again, we're sitting around some of the most incredible beautiful art, but art that's very different from what you would see in a normal home or fancy art collection. It's new, it's interactive, it's unique. Why are you so interested in this and how have you approached this world?
- [71:47]
C
Growing up in Venezuela, my wife and I are both from there. Venezuela had some of the most amazing artists in the world when we were kids. So in the 50s and 60s, Venezuela had the highest GDP per capita in the world. It was Saudi Arabia before we were even born, but. And the Venezuelan artists were leading some of the best art movements worldwide. And it was present everywhere. It was present in the highways, in the universities, in the shopping centers, in the museums. You saw it everywhere. So we grew up seeing modern, beautiful artists and their concepts. And when we started on this journey, she's the one that got us back to that journey together in the last number of years. But then during the 2022 downturn, when things started to cool down a bit and we had more bandwidth and I had more free time, I had missed completely the NFT craziness of the first vintage of 19 to 20. Completely missed it. Like we were so busy with other stuff, I hadn't seen anything. I was like, what are these things people are trading, these tokens? I felt like it was like GameStop kind of meme stuff. But then in 2002 stumbled upon, as I had even more free time, a art piece that suddenly looked like something from the 1950s that we knew, but it was completely different. It was the same, but it was different. It was dynamic, it moved, it was the same kind of concept. And we were like, what is this? This looks like real. This doesn't look like a Meme Mania. This looks like something completely different. We went down that rabbit hole and then said, what are the cryptopunks? And, oh, wow, there's only 10,000 of them. And they're the first ever generative art ever put on chain. And what does it mean? And the community of cryptopunks is stronger than any other community. Literally. I think it's even stronger than the community of people that own a Ferrari around the world. On how they speak, how they relate, how they identify themselves. These are truly aspects that I have not seen. You are seeing network states. There's a lot of talk about network states. There are network states getting built around some of these movements. And you can see their movements now. They're not just one artist doing one thing. So we slowly started to get into this, and then we started to meet these artists. And guess what? These artists are the most amazing people to go hang out with. There's no prima donnas, there's no language I gotta maintain or way of speaking that I gotta say about DEI or some other. They're just genuinely people that were artists of their lives. So they had to study computer science because they had to get a job and they could never express themselves. And suddenly they can. So you just go, you meet people, or you go meet Sam Spratt, or you go meet MP Cos, which is a piece that you liked here, or Scott from the Dream Machine. And there are just amazing human beings and artists, and you can see what art looked like in Paris in the 1920s when they gathered over coffees, and it felt like going back to a bitcoin conference in 2013, when the first people were starting it. It's just that kind of energy that you cannot see. And then my wife and I start to look at the museums of today, the MoMA and others, and they feel like bank branches. Feel like, why would you go to a bank branch anymore? Really? A teller, a window. What is this? And the museums feel like that. They're white, they're sterile. They have these big walls with one piece of art and a little plaque that you gotta just bend over and read, or you listen on your headphones. The two things you can do is either take a photo. Good luck seeing it again on your phone. You will never again see it on your phone, or take a selfie of your cell phone. There's no immersive, there's no ownership. How would it feel if you go to a digital art museum that is born to be digital with physical, but the walls are digital. There's physical in the middle. You're immersed in the piece, in the way it was built, in the story that I was trying to say. It talks to you, it lives through you, and you can tap somewhere and leave with a piece of that art. How will that feel in your story, in your life? It definitely feels a lot more richer talking back to where people are heading. And so that to me is a proxy of where the world is going on everything. And art is just ahead. But that's how we're going to feel about a lot of our things. And all the podcasts that you've done around IoT AI engines and where money's flowing and how people are investing, all those things will show in these things in the next couple decades.
- [76:36]
Patrick O'Shaughnessy
I want to ask a little bit more about what you said earlier, that this deep dream and passion of yours is that every time money gets better, the world gets better. Can you just say a little bit more about the dimensions of that that you've learned? What are the mechanics of that? Like, why is that true? Why is that the foundational belief? Because I also want to ask a little bit more again about this grid of which money is a part and the way the world is shifting around. But what's behind this foundational observation of yours that if you improve money, everything else improves, why is that necessarily true?
- [77:09]
C
Because if you're sitting in Karachi or Bangalore or London or Caracas or Riyadh, and all of us have access to investing our money in the same product, the level of transparency on opportunities of investing are unique. Why does a customer only need to be at a private bank, super high end, to get the best products? So if you can save the same way anywhere in the world, and that's a promise of crypto in many ways. The crypto rails the grid, giving you access to the same product anywhere in the world, then people will have better risk return adjusted income, which will probably allow them to buy a better home or get their kids to go to a better college or pay for tuition or have less debt. And the same on the debt side, if you have to take a loan to expand yourself, to bet on yourself to buy a car, because you need to get a better job so you can drive there or buy a home closer to whatever, whatever kind of loan. You want to make sure they're not paying high out of market rates. You want to make sure they're not thinking about getting their knees Broken with a bat because they cannot pay the talk on their neighborhood. But they're getting it from somewhere institutional that has a process, an underwriting, a credit score system, a discipline of losses and gains. That's why money makes life better when you can access those things. Because suddenly if you can barely get a loan to pay until the next payroll, but now you can get a loan to buy a car, a mortgage, or build your own company, it will make life better.
- [78:44]
Patrick O'Shaughnessy
If you think back on Ribbit's whole history, the firm let's pretend that you had to go start ribbit 2.0. For whatever reason, Ribbit disappears. You got to start Ribbit too. What mistakes from your history at Ribbit would make you most prepared to do an even better job? Ribbit2 and I'm sure these are all.
- [79:02]
Mickey Malka
Things that you're doing anyway.
- [79:03]
Patrick O'Shaughnessy
But as a fun thought exercise.
- [79:05]
C
Wow. I thought you had asked me really hard questions. This is hard. I will say for as much as I told you about concentration, I will even be more concentrate, even more so.
- [79:19]
Patrick O'Shaughnessy
Wow.
- [79:19]
C
I try to correct that on a daily basis. Definitely a lot more concentrated. And the other mistakes that are probably correct on Rivet 2, I think we already are on Rivet 2. So maybe Rivet 3 is. It's probably the use of our time. The more time we spend in getting to know founders and spending time with them, like really getting to know them and become trusted, the more valuable and the more joy we have. So even though I feel really good that we have a bunch of friends and the best metric of that is that almost every founder that we've backed has later become an LP or an investor in our funds just because of that relationship. I will still double down and spend even more time with them.
- [80:08]
Patrick O'Shaughnessy
Say a little bit more about the conviction. 1. I think of you as a pretty concentrated investor. Why even more?
- [80:15]
C
Because the impact you can have is limited by the amount of people that you can touch. And the more concentrated you are there, the more impact you can have and the more present you can be. And I think, for example, if we do a good job on understanding the grid and we do thesis driven work on what needs to happen there, how do we solve identity first and how do we do this? And we find the one or two or three things that matter the most on identity, we should do that and not do anything else and then think about the second chapter of the grid and then do the same. But you don't have to do 50 things to express that opinion. And I think that's where it Gets diluted. It's not us, but I will even do less.
- [80:55]
Mickey Malka
What unexpected plot twist in the story turned out to be a great blessing.
- [81:01]
C
Oh my God. So many. For example, 2022, when everything started to blow up, the attention to this space died. 2020-22 was probably five years condensed into two because of COVID and lockdowns did so much to this space that accelerated everything. If we hadn't had air to breathe then and to take time to think, we would have made 100 mistakes. So the plot of actually the market slowing down dramatically was one of the best blessings we had because we saw that fintech was dying and if we hadn't stopped, we wouldn't have seen it, we will have missed it and make a lot of mistakes. So you have to bless market cycles when they give you time to think and embrace it as a moment to think versus trying to say, oh, the momentum is gone.
- [81:53]
Mickey Malka
I remember a conversation we had then. I think it was the first time we ever met. And you said, I'm not an investor right now, I'm a risk manager. And it's such an interesting time. That was the beginning of now of this new foundation that you're building on. So cool to think back on what makes you emotional in all of this.
- [82:10]
C
In a good way or a bad way?
- [82:11]
Mickey Malka
I'm curious about both.
- [82:12]
C
In a bad way, it's when somebody lies. I have no room for lying of any kind. My way of being the way we're at home with our kids, we embrace mistakes, we embrace multiple mistakes, but never lying. Lying is the one scene that really just gets me emotional. I always start by trusting everybody 100% and all you can do is lose the trust. There's people that are opposite, they give zero trust. And as they get to know you, you get to 100% or maybe 50%. I always start at 100. And that part emotionally drains me, takes away my energy when there's lying. What gives me energy and when do I get emotional is when I see people around me having joy. When you see that they're doing what they're meant to be doing. When you see that they wake up and they are asking and they're learning and they're interacting and they're building what they want to build, that gives me joy. And the younger they are, the more joy I get.
- [83:16]
Mickey Malka
We had an interview on the platform with Steve Young, the quarterback, recently, and he talked about this part of his life when he realized that he was part of the 49ers at the time, which was the first place he called it a platform he had ever been that allowed him to experiment with how good he could be and that supported him in that and taught him agency, which is basically what you're saying now. How do you do that? What are the literal things you do to create the environment for the young people here to have that experience of agency and what it might be like to find the thing they're meant to do? What are the things you do to promote that?
- [83:51]
C
I incentivize all of them to try different stuff and try different experiments and go meet different people. We incentivize them to go deep in an area of any kind of area that they want to go, as long as they come back and share the knowledge. And if they can articulate it, then they're learning. The other thing you do is you put them in positions to allow them to experience that. Most people are afraid of sending somebody who's 25 or 26 to a meeting because they're afraid what they're gonna say. You cannot be afraid. You gotta do it. And if they make a mistake, own it. Use it as a teaching moment. So we've had many teaching moments. We had great stories here of all kinds. We had great outcomes, but we had teaching moments. And we always talk about the teaching moments. And we have a wall with all of the moments that are like that where we stick these things and we leave them in prosperity. So people learn from it. There's a great story. Nick is going to love me to say. When we started, he had this passion for this idea of this business in the early days, and we were just starting and he was so convinced and he was enamored. He put so much time. He gave him a million dollar check to this company to start and do all these things. And I was never convinced from day one. And I don't know. It's not about being right or wrong. It was just. But you let them do Risk management is, can we afford that kind of bet? The answer is yes. That's a teaching moment. We'll see what it brings. Long story short, the company doesn't end up working, and we get a check back for 93 cents. So we never cash the check, but we frame the check. And it's framing this wall as a reminder of a story that works like that. It's not dissimilar than Berkshire Hathaway keeping the name of the two companies that he took bankrupt because that was his first business. It's just reminders of who you are like that. And so we embrace a lot of those.
- [85:47]
Mickey Malka
What has you just most generally interested and excited about the world today? You see so many parts of it. You're thinking big about these changes, forced to zoom in on something. What gets you the most excited?
- [86:01]
C
I feel that there's so much still to be done and build that I get excited in so many different directions. But more importantly, I'll tell you, is when you travel the world, it's what gets you more excited.
- [86:15]
Mickey Malka
Amen.
- [86:16]
C
When you spend time and you meet people anywhere in the world, on any country, on any situation, on a vacation, on a work trip, on an airport, and you just meet these people, all of them trying to build. 99% of people in the world are good people. And you get to meet them and you see their energy, and you get energized by that. I mean, I end up traveling a ton. Not because I like to get out of here, of Silicon Valley, but actually because the world is much bigger than Silicon Valley, and I get a lot more energy from outside that I bring back here when I'm home with my family, with my kids and at work. And that is what gets me excited when I meet these young people. I was at the crypto conference in Singapore a couple of weeks ago. Was my first time in a conference in 10 years. I've never been to one in 10 years. You know what got me excited? I heard over 35 languages being spoken in the booths. I counted them. That was so energizing. It's just a reminder that this is much bigger than one tends to. Than Gary Gensler, for example. Yeah. It's just those things got me really excited.
- [87:19]
Mickey Malka
You mentioned earlier that a call you always get is when something's breaking, when there's a crisis.
- [87:24]
Patrick O'Shaughnessy
Why?
- [87:24]
Mickey Malka
What is your method? You get a call right after this and something's gone horribly wrong. What do you do? How do you respond?
- [87:32]
C
So I'll probably say, okay, all right, let's go figure this one out. So we just start the conversation, right? And it always goes by asking a few questions, clarifying questions, and then it goes to this path that says, hey, what do you thought about your options? And double click on those a little bit. And typically they know the answer. They just haven't thought through it. So where I have the most joy when I get those challenge calls is that I can really help them figure out the first decision they need to make. Not all of them, just the first and the most immediate one. And when that happens, they can unlock the rest. But sometimes they're stuck in making Just the first simple decision. And it's not simple, but in many ways it's always easier from the outside.
- [88:18]
Mickey Malka
I'm realizing that so much about you and this story. Almost everything is about movement and change. Obviously growth is like good movement or something. Even the art, everything moves. Nothing stands still. Do you think that's a fair summary of you?
- [88:36]
C
Listen, I can swim in a river. I can swim in an ocean. I cannot swim in a pool or a hot tub or sit on one because the water is stale. It doesn't move. Everything that I enjoy has to have movement. I walk every day. Nothing is static.
- [88:52]
Mickey Malka
It's amazing.
- [88:54]
C
It's very cool. Good catch.
- [88:55]
Patrick O'Shaughnessy
If I had to give you a.
- [88:56]
Mickey Malka
Napkin here, in closing, you get one napkin to leave behind. You have to leave ribbit for two years or something. You're still a part of it, but you have to disappear for two years. And all you can leave behind for your team is one napkin. What do you write on it?
- [89:12]
C
Wow. I will write, never forget where we came from. Always remember less decisions is best. And be genuine to yourself and to everybody around you. I'm sure they will do great.
- [89:27]
Mickey Malka
I want to ask you about Rick Elias, and then I'll ask you my traditional closing question. Rick's one of the most unique and generous people that I've encountered in many years. I know you know him much better than I do. What have you learned from him?
- [89:42]
C
Oh, my God. We can do a whole podcast just on.
- [89:44]
Mickey Malka
That's why I saved it for now.
- [89:47]
C
First, the world was not ready to see Rick leave this planet. And that's why that U.S. air flight, amongst other people, had a reason to survive. What he brings in terms of value systems, in terms of motivating everybody around him. What he brings in his energy and his charisma to always say what he thinks, no matter the consequences. It's quite spectacular to watch. And he's only getting better as the years go by. I think what he's taught me the best is to live a life full of joy on how he can do it at all different levels. He's older than me, so I can always look up and see what it looks like in the different phases. I've learned how to manage the different cycles as one gets older. But more importantly, not to forget where you came from. And you can see the full loop on him now, embracing even more his roots to Puerto Rico. And I think that full life cycle of his family, his work, his community, his inner perspective and his roots. It's very unique to see beautiful anything.
- [90:57]
Mickey Malka
About Ribbit that we haven't covered or just like your philosophy of the world and how you operate that you think is really important for me and for.
- [91:06]
C
What this means is are we going to be around in five years or 10 years? The answer is, I don't know. Are we going to be doing what we do today or something completely different? The answer is, I don't know. Will we ever raise a fund again? I don't even know. What I know is when you put a group of people together that are passionate about meeting others and engaging and learning and the inputs into the machine are things that will make the world better, the output on the other side is magical.
- [91:42]
Mickey Malka
Beautiful soul of the business. My closing question for everyone's the same. What is the kindest thing that anyone's ever done for you?
- [91:50]
C
My father, who passed away a long time ago when I was 16 years old. I remember after being in high school, sitting in the couch watching TV at 4pm and he looks at me and said, you don't deserve to be in this couch. You should be active, you should be doing something because the world has big ambitions for you. And that was it. And he turned around and left. I started working the next day. I went and applied for a job and started working. I've never stopped. And he was right. That message, that moment, at that age, at that particular day, was what I needed to hear to get the confidence to get up and start. And something in him knew that it was there and I was just not willing to initiate it.
- [92:39]
Mickey Malka
The lesson that I've taken from getting to know you and Ribbit and the way you guys approach the business world, you are investors, you are deploying capital, you've done a very good job of it. Is the generative nature with which you do it, that yes, you're capitalists and you're trying to do well, but the way that you've done it is this creative generative, backing people who want to create new things and try new things in the world. I think that's an amazing lesson for all of us. And I know you don't do this very much or ever. And so I'm really appreciative of the example that you guys have set. Definitely impacted me in a major way. And I hope you know that it's done that for lots, not just founders, but other investors too. So thank you so much for your time.
- [93:19]
C
Thank you, Patrick. And what I've learned from this time together with you is that you have this amazing gift to know how to get to know people and you have this amazing gift to look at beyond what most people see. So keep it to whatever you're doing, because I think the best of Patrick is yet to come.
- [93:41]
Mickey Malka
I appreciate that, and that won't be a problem.
- [93:43]
C
Thanks, Vicky.
- [93:46]
Patrick O'Shaughnessy
If you enjoyed this episode, check out joincolossus.com there you'll find every episode of this podcast, complete with transcripts, show notes, and resources to keep learning. You can also sign up for our newsletter, Colossus Weekly, where we condense episodes to the big ideas, quotations and more, as well as share the best content we find on the Internet every week.