Invest Like the Best with Patrick O'Shaughnessy – Episode 400: Micky Malka on Building Ribbit

Release Date: December 10, 2024

Introduction

In Episode 400 of "Invest Like the Best," host Patrick O'Shaughnessy engages in an insightful conversation with Mickey Malka, the founder of Ribbit Capital. Ribbit Capital is renowned as one of fintech's most influential investment firms, with a mission to transform the world of finance through innovation rather than mere financial engineering. Over the course of their discussion, Malka delves into Ribbit's origin, investment strategies, foundational principles, and his visionary concepts shaping the future of finance and technology.

1. Founding Ribbit Capital

Timestamp: [05:31]

Patrick opens the discussion by highlighting Ribbit Capital's unique presence in the fintech investment space, noting its reputation primarily spread through founder endorsements rather than traditional channels.

Mickey Malka responds, emphasizing Ribbit's rebellious spirit:

"We are a bunch of rebels. Wherever the status quo grows bloated, Ribbit is there trying to change it."

Malka underscores the firm's commitment to challenging stagnant areas, particularly financial services, which he identifies as the "biggest status quo in the last 20 years." This rebellious ethos shaped the firm's first decade, focusing on innovation over existing norms.

2. Origin Story and Founding Principles

Timestamp: [09:02]

Patrick probes into the foundational principles that differentiate Ribbit from typical investment firms. Malka recounts his entrepreneurial journey, culminating in the decision to pivot from traditional VC models to a more flexible, mission-driven approach.

Malka outlines key principles:

• No Labels: Rejecting conventional titles and job descriptions to foster a more dynamic and collaborative environment.
• Alignment of Incentives: Investing personal capital alongside the firm to ensure long-term alignment with partners and founders.
• Startup Mentality: Treating the investment firm as a startup, promoting openness and shared knowledge among team members.

He elaborates:

"We behave like a startup, build systems, and ensure that everyone can access the same data to foster alignment."

3. Investment Thesis and Early Fintech Investments

Timestamp: [13:00]

Dissecting Ribbit's early investment thesis, Malka explains how the aftermath of the 2008-2009 financial crisis created a fertile ground for fintech innovation. Ribbit targeted companies addressing the "last mile" inefficiencies in financial services, connecting consumers directly through digital platforms.

His personal experiences in Venezuela and Argentina with hyperinflation and banking collapses fueled his belief in the transformative power of cryptocurrencies. Early investments included pioneers like Coinbase, aiming to bridge fiat and crypto rails.

"Our thesis was to find teams building the last mile that will touch consumers and businesses with financial services."

4. Declaring Fintech "Dead"

Timestamp: [15:57]

In a bold move, Malka revealed to investors that Ribbit considered fintech "dead" in their annual meeting, symbolizing a shift in strategy rather than an actual end. This declaration was rooted in the belief that fintech had accomplished its foundational goals over the past decade, necessitating new rules and innovations to continue advancing.

"To play an infinite game... you have to change the rules of the game so you fall behind again."

5. The Grid Concept: Integrating Knowledge, Wealth, and Power

Timestamp: [28:14]

Malka introduces "the grid," Ribbit's conceptual framework integrating the Internet, financial systems, and the electric grid into a unified model. This convergence, he argues, creates unprecedented opportunities by interlinking knowledge, money, and power.

"The grid is our version of the matrix of that interconnectivity... it's the most exciting opportunity set that I've seen in my life."

He envisions a future where AI agents and decentralized financial systems interact seamlessly within this integrated grid, enabling innovative use cases previously unimaginable.

6. Digital Identity and Tokenization

Timestamp: [35:38]

A crucial component of the grid is digital identity. Malka stresses that tokenizing identity is essential for connecting individuals to various data sources and financial systems.

Drawing parallels with India's Aadhaar system, he highlights the importance of robust digital identities in enabling efficient financial transactions and services.

"If you don't tokenize your identity, you will not be able to connect to the grid of knowledge and to the grid of wealth in the same way."

7. Evolution of Crypto and Stablecoins

Timestamp: [40:18]

Reflecting on Ribbit's early involvement in crypto, Malka shares his observations on its evolution. He acknowledges initial skepticism surrounding cryptocurrencies but notes their significant strides, such as becoming part of national reserve strategies and the introduction of Bitcoin ETFs.

Discussing stablecoins, he likens them to modern travel checks, emphasizing their role in providing secure, dollar-equivalent transactions globally.

"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."

Malka foresees immense growth in stablecoins, predicting their integration into mainstream financial systems will challenge incumbents like Visa and MasterCard.

8. Strategic Partnerships: Ribbit and Walmart

Timestamp: [55:11]

One of Ribbit's standout initiatives is its partnership with Walmart to create "One App," a digital financial services platform. Malka narrates the serendipitous meeting with Walmart's CEO, Doug McMillon, which led to building a trusted, digital-first financial product from the ground up.

"We structured the idea of building a new company from scratch with the right team... leading to One App, now a significant presence in Walmart stores."

This collaboration exemplifies Ribbit's ability to blend large-scale operational expertise with innovative fintech solutions, ensuring high trust and seamless user experiences.

9. Team and Culture at Ribbit

Timestamp: [62:31]

Malka attributes Ribbit's success to its unique team culture, emphasizing human-centric values over traditional titles and rigid job descriptions. He highlights the complementarity of skills within the team, fostering an environment where knowledge is openly shared and collaboration thrives.

"Our culture has been to bring in amazing people, no assholes, and focus on being human first."

This approach ensures that Ribbit remains adaptable, with team members continuously evolving their roles to meet dynamic market demands and innovative challenges.

10. Personal Insights and Philosophy

Throughout the conversation, Malka shares profound personal philosophies that drive Ribbit's mission:

• Conviction: Strong belief in their investment thesis, even in the face of skepticism.

  "Conviction is one of the most important traits for any human. If you don't have conviction, you end up diversifying."

• Heart: Core human values are central to Ribbit's operations, fostering genuine relationships with founders and supporting them through challenges.

  "We reach out to founders during controversies because we understand them as humans."

• Dreams and Obsession: A relentless pursuit of improving financial systems to make money more accessible and beneficial for everyone.

  "Every time money becomes better, people live better lives."

Malka's personal anecdotes, such as his father's pivotal encouragement, further illustrate his commitment to impactful entrepreneurship.

11. Embracing Change and Movement

Malka's love for movement and change permeates both his personal life and Ribbit's strategy. Whether through dynamic art or constantly evolving investment theses, he believes in staying fluid to capitalize on emerging opportunities.

"Everything has to have movement. I cannot swim in a pool or a hot tub because the water is stale."

This mindset ensures Ribbit remains at the forefront of fintech innovation, continuously adapting to the rapidly changing technological landscape.

12. Closing Reflections

In concluding the episode, Malka reflects on the importance of integrity, joy, and continuous learning within both personal and professional realms. His approach to mentorship, team building, and investment underscores a blend of rigorous analysis and heartfelt support, setting a compelling example for investors and entrepreneurs alike.

"Never forget where we came from. Always remember less decisions is best. And be genuine to yourself and to everybody around you."

Notable Quotes

1. On Being Rebels:

   "We are a bunch of rebels trying to change the status quo wherever it's bloated." — Mickey Malka [05:48]

2. On The Grid Concept:

   "The grid is our version of the matrix of that interconnectivity... the most exciting opportunity set that I've seen in my life." — Mickey Malka [28:28]

3. On Conviction:

   "Conviction is one of the most important traits. If you don't have conviction, you end up diversifying." — Mickey Malka [51:23]

4. On Stablecoins:

   "Stablecoins are travel checks in today's world, instant dollars anywhere in the world." — Mickey Malka [40:26]

5. On Team Culture:

   "Our culture is to bring in amazing people, no assholes, and focus on being human first." — Mickey Malka [62:44]

6. On Personal Philosophy:

   "Every time money becomes better, people live better lives." — Mickey Malka [76:35]

Conclusion

Mickey Malka's journey with Ribbit Capital offers a compelling narrative of innovation, resilience, and visionary thinking in the fintech landscape. Through strategic investments, unwavering conviction, and a human-centric approach, Ribbit continues to shape the future of financial services. This episode provides invaluable insights for investors, entrepreneurs, and anyone interested in the transformative power of fintech.

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