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- [00:01]
Tom Blomfield
Humans are not economically useful anymore. I think income tax will go away pretty soon. No, being a senior lawyer or a senior doctor will seem like a joke. We started in 2015 and by 2019 we'd grown from a team of 10 to a team of 2000.
- [00:16]
Robert Peston
This is Monzo we're talking about. This is Monzo.
- [00:18]
Tom Blomfield
We were losing about 100 million a year under attack from the press.
- [00:21]
Robert Peston
You were at Starling. You fell out with your partner, Ann boden.
- [00:25]
Tom Blomfield
There were 14 people at Starling and 13 of us started Monzo.
- [00:28]
Robert Peston
And you haven't spoken to her since. Hello and welcome to the Rest Is Money with me, Robert Peston. No Steph today, which presumably means she's out fighting crime again. Today I will be talking to Tom Blomfield. He is one of the most successful entrepreneurs that Britain has produced over the last 20 odd years as a founder and creator of Monzo. He now is a partner at Y Combinator, which is one of Silicon Valley's most successful incubators of tech businesses. The beginning of our conversation is going to focus on this AI industrial revolution we are living through, because his views in terms of how all of us have to adapt, but in particular, governments have now got to massively think about how they fund the welfare state and how they provide decent incomes to people as we go through this massive jobs upheaval. What he has to say is very challenging. So here is my interview with Tom Blomfield. Tom, I want to start actually with where we are in terms of how AI is changing working and business practices. As somebody who is really at the sharp end of sponsoring young tech businesses, just talk me through how big a moment you feel this is.
- [02:01]
Tom Blomfield
I struggle to find words to answer that. And this is going to sound hyperbolic. I think this is undoubtedly a sort of technological and industrial revolution on par with anything we have ever seen in human history. And as the words leave my mouth, I can hear your sort of audience sighing and shrugging in the background in the uk and I'm giving you this story from Silicon Valley. The breakthroughs that have happened and it will continue to happen over the next months and years feel easily bigger than the Internet and I think will reshape the economy and society. It's quite unprecedented.
- [02:41]
Robert Peston
So one of the things that I have experienced, because I've obviously not with the sort of granular details that you have, but I've been observing these astonishing technological changes that will have are already having profound economic and social changes and I've been talking about it very loudly, very publicly for Two or three years now. And one of the things, though, that I observe is whenever I say the kind of things you just say, people sort of. They don't exactly glaze over, but their brains freeze and they try and change the subject. So, for example, I mean, I've talked to incredibly senior people in the British government about this, and I've been doing it now for about three years. And they don't want to hear. They genuinely don't want to hear. So what would be really helpful is just give us two or three recent practical examples of what's going on in your world that maybe, you know, those for whom this all feels too big can sort of connect with, if you see what I mean.
- [03:50]
Tom Blomfield
We're talking basically about large language models, about these very expensive AI models that are trained on basically all of the data that they can get their hands on, all of humanity's recorded data, that's books and the Internet, and they're now paying experts to produce more data at the frontier of these subjects. And the output is very generalized intelligence that is able to do narrow human tasks currently better than any human, more or less. I think we're at that level where for narrow domains, these AI tools are performing beyond PhD level, beyond sort of university professor level. They are actually beating humans in narrow domains. They're not yet generalizable. When you cross domains, they might seem a bit stupid, if that makes sense. So they're sort of very narrow geniuses. But the progress is going so quickly that by the end of this year, I think by the end of 2026, they will be generalizable. And a specific domain that I'm very close to is coding. A year ago, Dario, the CEO of Anthropic, and Sam and other people very close to the industry, leading the industry, made warnings like, in software engineering, humans are not going to be writing code in a year. And they were basically laughed at. Like a lot of software engineers said, that's impossible, it'll never happen. And it's happened. There was a big leap forward in the coding models in about late November, early December of last year. So this is only four months ago. And for people who are on the cutting edge of this, they are no longer writing code. And that doesn't mean all software engineers worldwide are no longer writing code. In fact, probably 98% of them are not using these tools to their full extent. But the people who are living at the edge, the cutting edge, are not writing code. So I work at Y Combinator, an early stage investor. We did a survey yesterday of 200 of our founders who we just invested in so very, very early stage companies. A lot of caveats, small code bases and this is not a 10 year old leg code base, but our founders, out of 200 there were about five or 10 who said that the AI is only writing 75% of their code and the remainder said the AI is writing 99 or 100% of their code. Now that was not true a year ago.
- [06:12]
Robert Peston
Tom, so much more I need to ask you. We'll be back with you after a quick break.
- [06:21]
Greg Jackson
We're proud to say that the rest is Money is powered by Octopus Energy this year. Greg Jackson is back to answer another question. Now this is something that we see a lot that I wanted to ask you about. When you're starting something new, how do you think about risk and momentum?
- [06:38]
I think people think entrepreneurs love risk, but I'm not sure they do. I hate it. I never buy individual stocks and shares on the stock market. I don't gamble. I think the thing about an entrepreneur for me is I've got more control. When you're working for a company every day, you're at risk of what that company chooses to do with you. If you're an entrepreneur, actually, you've got far more say in what happens tomorrow and next year than when you're at the mercy of your bosses.
- [07:04]
Nice one Greg. Well, thanks to Octopus Energy for powering this episode of the Rest Is Money.
- [07:13]
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- [07:48]
Robert Peston
where there will be significant numbers of humans employed in writing code over the Next, let's say 18 months out, something like that?
- [07:57]
Tom Blomfield
No. But I think those humans will still be useful, but I think their jobs will change very dramatically. I don't think we will. There'll be holdouts, there'll be legacy industries where they can't adopt these tools. Banks and nuclear power plants perhaps where they will still insist that humans write and review every line of code. But in 18 months, no, I don't think humans will be Economically useful in writing code. I still think those humans who used to write code will be employed to solve business problems. They'll talk to non technical people and translate the requirements into. They'll instruct the AI to build the systems and they will still be useful and productive. And I think the demand for code will go up dramatically. I think this is a really important concept, sort of the elasticity of demand. So as the cost to produce code goes down, the demand for it I think will skyrocket.
- [08:52]
Robert Peston
I hate any phrase with Vibe in it, but it's what's known as Vibe coding. It's where basically we instruct something like Cowork to do all the code, which is anthropics service. We instruct something like Cowork to do the coding for us.
- [09:08]
Tom Blomfield
Yes. And for our personal use or primarily for our business use, actually. I think many people who will go to their job and say I used to do this thing repetitively, it's very tedious, I will build myself a quick little program to automate most of my job. And so the elasticity of demand in software I think is very, very high. As the price goes down, the demand for SOFTW goes dramatically higher.
- [09:30]
Robert Peston
One of the things I'm obviously fascinated by are the economic implications of all of this. I think I'm currently paying Claude for the sort of medium tier service. I think I'm paying them something like £180 a year, something like that. I mean, just on a personal level that's going to put us, you know, if I happen to want to employ a coder, I'm not going to be paying more than £180, am I? So the implications for anybody who is still a human coder in terms of what they might be able to earn are pretty depressing.
- [10:08]
Tom Blomfield
I think for maybe for the median coder or like the bottom 50%, it's very bad. I think for the top coders I think they just become dramatically more productive. So I work with Gary Tan at yc. He's been coding for the last, more or less constantly for the last 60 days and produced a piece of work that he estimates would have taken him about five years previously. And he has spent about $40,000 now on coding tokens on, you know, on paying anthropic and OpenAI for their coding tools in about a month or two. So Gary, who is a good coder plus these tools, is able to do the work of a software team over five years, but deliver it in a month or two.
- [10:51]
Robert Peston
So there's the productivity which is incredible. But also the, you know, we're talking about potentially save savings of millions of dollars there.
- [11:01]
Tom Blomfield
Absolutely, yes.
- [11:02]
Robert Peston
All right, so I'm now going to put to you your own. You know, I don't know whether you felt it was a sort of bit of a comedy classic when it happened, but you did a bit of vibe coding. You got a bit of attention for, I think was called Recipe Ninja. Quite a lot of people poked fun at you when they were able to make, I think it was cyanide ice cream or. And then there were some. There were some. One or two. There were. So there were one or two other recipes which for a family audience, I probably won't repe now. Now I think you thought, and I absolutely get why, given that you were able to fix these errors very fast, that actually you'd proved your point. But what did you learn, as it were, from this experience? So I built.
- [11:44]
Tom Blomfield
I mean, it was a toy project. This was not a company that I was trying to build. It was not an economic endeavor. I built this over about a week or two. And this was a year ago.
- [11:53]
Robert Peston
So this was really before the great breakthroughs we've had recently.
- [11:56]
Tom Blomfield
Yeah, but still there were breakthroughs. So I used these tools in about two weeks to build a fully voice controlled recipe app with AI built in just to see if I could. And before AI, I would not have been able to build this. I'm an okay coder, I'm a reasonably good engineer, but this would have taken me. I don't think I'd have been able to do it. It required so many different technologies I wasn't familiar with. I simply wouldn't have been able to do it. And in about two weeks I was able to put this site online. And of course people have joked around with it and I mean, who cares? It was a side project, but it was eye opening for me because I was able to produce this thing that was so dramatically beyond what I ever could have done before. And that was a year ago. And my guess is if I did that today, I could do it in one hour. And I sort of proved that to myself because I've been building a project for the last week or so which is basically a new form of Google Docs with AI built in, sort of AI, native document editor and book writer, sort of. I'm in the middle of writing a book. A mountain quality of software I can now build today, even compared to a year ago, is an order of magnitude higher, which in itself was beyond anything I could have done manually. And it's just left me sort of astounded, honestly.
- [13:09]
Robert Peston
I mean, one of the things though that is obviously also hugely important is not just how AI is replacing this important book, Narrow Task coding. But as somebody now who has been playing around with cowork for a few weeks, you know, there are all sorts of professions where I am genuinely wondering whether in a year or two there will indeed be opportunities to go in at the ground floor. Because so much of what junior people in, let's say accounting or consulting or law are paid to do can now be done by an agent that more or less anybody can build and instruct. It feels, as you said at the beginning, like a very profound moment of job displacement for the kinds of professions that we regarded as pretty secure, you know, white collar, middle class jobs.
- [14:23]
Tom Blomfield
I fully agree. I think coding is just the canary in the coal mine. The good thing for coding is I think there is huge elasticity of demand. And I think coding is actually the way you automate all of these other jobs, if that makes sense. So by being able to, because the AI can write software, it can go into a legal job or an accounting job and write its own software to automate those jobs as well. But I think if you think about the elasticity of demand in let's say tax accounting, let's say tax accounting becomes 10 times cheaper. Do people want to do 100 times more tax accounting? No, they don't. Once their accounts are done, they're done. So I think there are just some professions will get dramatically compressed and almost no humans will be required at all. And I think, as you say, the implications for society will be enormous.
- [15:10]
Robert Peston
The one sort of, I don't know, sort of paradox in all of this. And I just wondered if you've given any thought to, to it, because it is something that I'm sort of quite exercised at the moment is I do think that experience, human experience still counts for something. And so if I had an incredibly complex legal or financial challenge, yeah, I would definitely trust the AI to do the original, sort of the basic groundwork for me. But I almost certainly would want to have a conversation with a senior partner or just somebody who'd been in this space for decades, know the sort of, some of the decision makers and the pitfalls and all of that. And so I think one of the sort of almost tragedies for young people today is, you know, quite difficult to see these firms hiring the same numbers of young people to rise through the ranks. But equally, there are still things that I think humans will continue to sort of, in a sense be better at is not quite the right way phrase, but will have an advantage in. But it requires sort of decades of working and accumulated knowledge. A question I'm really posing is if all these jobs are wiped out, how do we get the humans who acquire the decades of knowledge who will nonetheless be useful, if you see what I mean? Because once those people are dead, they're dead.
- [16:52]
Tom Blomfield
I think there are three or four things in there that I kind of want to unpack. Yeah, I agree that the professional service firm will used to be a pyramid and will go to a structure that's more like a pillow. I don't think it needs many junior people. I think for now the senior people on very complex subjects are. People will expect that. I think that's going to change in a year or two. I don't think it will take 10 years.
- [17:18]
Robert Peston
So does that mean that you think you'll be out of a job?
- [17:20]
Tom Blomfield
I think we'll all be out of jobs.
- [17:21]
Robert Peston
Don't blame me. Okay, that's quite.
- [17:25]
Tom Blomfield
I don't think humans will be economically useful in the medium term. And I think that claim is the only hard part about that claim is what is that timeframe? So I think knowledge work. I think we will be very surprised very, very soon at how bad humans are at knowledge work. Actually. I think we're basically primates who are evolved to make very quick gut based decisions and deep analysis. I think we will realise we're extraordinarily bad at deep analysis, thinking about second and third order impacts. And I think when the superintelligent AI comes around, and it will come around very quickly, it will be laughable to think back and assume that we were like the smartest thing on the planet.
- [18:15]
Robert Peston
You're basically saying, although we are very good at heuristics, rules of thumb, you know, we learn by experience and then we apply what we've learned almost automatically a lot of the time, you know, broadly, what you're saying is the machine will do that, though with a level of sophistication and foresight that we're incapable of?
- [18:38]
Tom Blomfield
Yes. And the ability to ingest lifetime's worth of human information at once and reason over it in a way that is superhuman and come to conclusions that we are just incapable of. And in that world, being a senior lawyer or a senior doctor will seem like a joke. I think it'll take humans a little while to adapt to that. But we're seeing it already in medicine where you go to a medical professional and get a piece of advice and then get a chatgpt and it solves the thing that the human couldn't. And I think once you've experienced that three or four times, you're not going to go back to the doctor or the lawyer anymore. And so I think knowledge work is the first thing that falls. I don't think humans are economically useful for knowledge work in the future, not right now, but I think that time frame is probably four to five years maybe. And then I think humans will be economically valuable for moving physical things around. Still being an electrician and a plumber and a bricklayer until robotics come, and robotics is probably on a 7 to 10 year time frame in my mind the rollout will be slower because you need to manufacture the things and atoms are harder than bits. But I think once you have super intelligent AI and pervasive robotics, humans are not economically useful anymore. And I think that will happen in our lifetime and I think that will upend the social and economic structures of at least the western world. How do we decide who? I think we have to. I think this is an easy prediction. I think income tax will go away pretty soon, sort of five to six year time horizon. I don't think we will tax human labor. I think we will tax compute, I think we'll tax data centers, inference tokens, whatever you want to call it. And then we will use the proceeds of that to pay for stuff to pay for the government.
- [20:25]
Robert Peston
Some people talk about the world that you describe as the world of plenty, where the marginal cost of production is basically nil. The problem, as you have very astutely pointed out with the world of plenty is in that world nobody is working for money. So essentially the funding for the welfare state just vanishes, goes down to zero. And therefore you've got to be clinically insane not to take what you say seriously. Governments should be actively involved now in debating and preparing for how they extract the income. That means that, you know, public services, health services, schools and all the rest of it are funded and also that people don't starve because, you know, it's, you know, in the end it'll be a world where there will have to be transfers essentially of income from the machines to people. Otherwise, you know, we all starve. How do we make essentially elected governments sit up and take notice that even if, right, even if this is a so called long tail risk that doesn't materialize the history of long tail. I mean, one of the things I keep saying to these people is you didn't think there was going to be a global pandemic. There was, you didn't think there was going to be a global financial crisis in 2007. Eight, there was, you didn't think global climate change was real. It is now. You know, at what point, you know, one says, you know, one says to elected people, when people are saying to you, this is a, this is a clear and present danger and even if you don't believe yourself, it's a more than 50% probability, you know, you are literally insane not to be preparing for these outcomes. So how do we get people to sit up and take notice?
- [22:22]
Tom Blomfield
So I think the first problem is the time horizons are probably like just over the edge of the election cycle. So this is like, this is, I mean it's terrible, but it's probably the next government's problem. Not this government, but hoping we have elected officials who care about the future of the country, not just their sort of tenure in Parliament. I think the thing that I would push very heavily for is domestic data centers. I think at the moment the world leading models are coming out of Silicon Valley and China. They're really the only two credible people who have these frontier models. There's some open source stuff. Taxing a Silicon Valley company to pay for British welfare state I think is difficult. But I think if you have domestic data centers it becomes much easier to say we are taxing the compute or the tokens or the inference, whatever you want to call it in these domestic data centers in the uk.
- [23:18]
Robert Peston
And it's not too late in your view? Because one of the things I constantly hear from both people in your world and indeed people in government is we've just lost that race.
- [23:30]
Tom Blomfield
No, it's not too late. The build out of data centers is happening right now and it's slow everywhere. And this is a question of planning permission and political will. But we need to 100x the building of data centers in the UK and then to support that we need to dramatically increase energy production in every way we can. Nuclear and renewables and whatever we can do because these things draw quite a lot of energy. And so I think if we can do those two things very quickly over the next five years, I think we might be in quite a reasonable spot to extract the compute tax to then pay for all the people who need supporting. But we need to act now.
- [24:12]
Robert Peston
I'm sorry, just to sort of ask the dumb question, right? But let's just say we do, you know, build a sort of so called sovereign compute and data center capability, right? What is to stop, you know, Dario Amade, Anthropic or chatgpt or, you know, Alphabet and Gemini from simply running all their AI services, as it were, through, you know, data centers that Elon Musk will put into orbit around the Earth. It'll be totally, it'll be extraterrestrial, not just extraterritorial, as it were. So what the hell do we tax in a world where even though we built the data centers, nobody uses them because they don't want to be taxed?
- [25:07]
Tom Blomfield
Yeah, I think the data center space one is a harder one and I'm an investor in StarCloud that just raised a very large Series A to put data centers in space. I think this is going to happen. I think the timescales are probably five to seven years before they're truly industrial scale in space. And yeah, at that point you just try to have, I think governments have to pass a law which is if you are providing services in our country, you must pay the tax on the compute, wherever the compute lives, whether it's in space or in the Sahara or whatever.
- [25:37]
Robert Peston
If essentially we're being replaced by AI powered. And they're all robots in different. Some, you know, some of them are physical robots, some of them are dematerialized robots, but it's all basically robots, as it were. You know, why is it just impossible to essentially tax the robots, tax the services, you know, in the country in which they use. In the end, that's presumably what you've got to do, isn't it? I mean, you've got to attribute some revenue, you just got to attribute the tax, you know, HMRC will have to attribute the revenue that's being generated and then say X percent of that, I don't know, 40% or something has to accrue to the British government, otherwise you can't do it. We go back to being manual labor.
- [26:20]
Tom Blomfield
Yes, but if you look at our track record of trying to do that to companies like Meta and Amazon and Google, we have been spectacularly unsuccessful at that so far.
- [26:30]
Robert Peston
No, no, look, I agree the presidents aren't great, but if we don't start working on it now, and presumably in partnership with the rest of the European Union, it would help a bit because it does also seem to me that one of the lessons of this kind of global, these sort of global changes is you need cross border cooperation between different governments. The more the governments are united on this, the harder it is for the providers to dodge tax unless they move to Mars.
- [26:56]
Tom Blomfield
I agree with you, but I think we would have more political leverage to levy those taxes. If the companies had substantial data center installations in the uk, I think we just, in the negotiation, I think we just have more arms to twist. If they're really running a lot of compute out of the uk, the thing we can do as a nation is authorize the construction. We don't even have to pay for it, right? We're like, there's enough money out there, there's enough people who want to build them. We just have to identify the site and say, you may build data centers here and we probably have to authorize the building of a bunch of power plants to power them. If we do those two things, I think they will be built. We just need the compute capacity. Even if they're running American models, I don't think it matters. I don't think it's realistic that we have a, a British frontier model. And I think, honestly, open source will also be a big part of this. So right now the open Source models are 6 to 12 months behind the frontier models. And I think what we will see is the frontier models will accelerate through to superintelligence. But we actually don't need super intelligence for most of the work we're doing. Normal clerical work probably needs average intelligence, and the open source models will provide average intelligence. And we can host those open source models in our data centers and we can tax them and we can get revenue for the government and we'll all be happy.
- [28:16]
Robert Peston
Tom, there's tons more I need to ask you in particular about the business and indeed mental health challenges you faced when you were creating Monzo, and we'll pick all that up after the break.
- [28:29]
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- [30:17]
Robert Peston
We definitely have certainly compared to the rest of Europe a pretty impressive number of small, medium sized, cutting edge, whether it's tech and AI or life sciences. But you know we have, sometimes it's a miracle but we have absolutely world class universities in the UK and they are producing very brainy people and more of those people than I don't know, 50 years ago are trying to do commercial things with their knowledge. Now the slight tragedy for the UK and this has been a problem, I mean literally for as long as I've been alive is you know, we get the business gets to a certain stage and a certain size and then finds it impossible to scale up, to become sort of a world leader while staying in the UK and they very often sell out to you know, Silicon Valley or to some big Japanese giant or a big American giant. So I suppose the question is you work for this fascinating incubator business like Ominator, which you've just been talking about and you're really at the early stage and its track record is sort of amazing since it was set up in terms of the sheer number of very impressive tech businesses that it has sort of spawned. Are you an optimist that with the right kind of will from the government that we can help British young, British cutting edge, fast growing businesses to remain British and to put more back into the British economy?
- [31:56]
Tom Blomfield
Yes, I am. And I think the idea that our companies sell early to American companies is a bit outdated. I mean DeepMind was a big example of that happening. I think an amazing thing for Britain was that Demis insisted that DeepMind remain headquartered in London. And then if you looked at all of the AI professors at all of the Oxford, Cambridge and the London universities, many of them were DeepMind researchers. So I think that decision about 10 years ago to keep DeepMind in the UK has been phenomenal but there's still
- [32:29]
Robert Peston
been an enormous amount of value creation that in the end, given that it is owned by Alphabet and given that the value is what's hundreds of billions of DeepMind's value would be hundreds of millions. Some of that could have accrued more to the UK and it's a shame
- [32:42]
Tom Blomfield
that it didn't happen, it is a shame. But I think that has changed for more recent companies. So if you look at, I mean Monzo Mile company is I would say a medium sized success in the, in the scheme of global tech stories. Revolut I would say is a big success and that is still UK headquartered.
- [33:02]
Robert Peston
I mean you left Monzo in 221, is that right?
- [33:08]
Tom Blomfield
I stepped back from the CEO role in the summer of 2020. I think I formally left in 21. Yeah.
- [33:14]
Robert Peston
And if I think back then I wouldn't necessarily have predicted the value gap between Revolut and Monzo that there is today. Where, you know, Revolut is worth probably more than 10 times what Monzo is, is valued at. Does it surprise you, I mean, would you when you left? Because obviously Monzo at the time was thought of as this great success. Are you surprised at how far Revolut has powered ahead? And can you explain it?
- [33:44]
Tom Blomfield
I think Revolut have done a great job. I think Monzo have done a. I mean I left Monzo and it was doing about 100 million a year of revenue and now it is doing over a billion a year of revenue. So a 10x growth in 5 years. I think the team did an amazing job. But you're right, Revolut is probably worth 10 times what Monzo is and they have been able to go international and I think Monzo is the winner in the UK over Revolut. I think, I think that's fair to say. But revolut is in 20 or 25 countries and Monzo is in one country basically. And I think that explains the valuation gap.
- [34:15]
Robert Peston
And was it just simply a strategic decision made by the people who took over from you?
- [34:23]
Tom Blomfield
I think it was probably our decision to get a banking license and be regulated by the FCA and Bank of England. That meant that we spent all of our time battling regulation, frankly. And Revolut did not get directly regulated and they just got directly regulated actually as a bank.
- [34:39]
Robert Peston
Yes, I know that was very recent though.
- [34:42]
Tom Blomfield
Exactly. So for the first 10 years they operated in a. I want to choose
- [34:46]
Robert Peston
a less regulated world.
- [34:47]
Tom Blomfield
Yes. Unconstrained way, played a little bit fast and loose and were able to dramatically expand and sort of pick up the pieces afterwards and, you know, make amends for the rules they had broken.
- [34:59]
Robert Peston
That was my assumption that it was Monzo's decision to become an authorized bank that made it harder to grow. And so again, a sort of slightly subsidiary question is when one looks at the relative value gap between Revolut and Monzo, does that tell us that banking regulation in the UK is too constraining when it comes to the needs, wealth creation and the needs of the British economy?
- [35:33]
Tom Blomfield
I've not been running Monzo for six years now, but I think I would basically agree with that. If I think back to my time in 2019 and 2020 and my interactions with the regulators, there were multiple occasions where we were launching products that we thought great for customers, customers thought were great for customers and the regulator told us were incredibly unfair and we absolutely could not launch them despite everyone being happy about it except the regulator. It's just the regulation was overbearing, frankly. And I think it did slow down our growth and as a result, like the UK has less tax revenue off what could have been a bigger success
- [36:09]
Robert Peston
because we were, I mean, one of the things that's, you know, and it stems from the success of the City of London, you know, the uk. One area where the UK has absolutely been a world leader is Fintech. And there are some great British success stories, but some of those have relocated to other domiciles, other countries where regulation is not quite as onerous. And so, you know, it does seem to me that we haven't reached, you know, regulation has been, you know, in a sense, growth suppressing in the UK to an extent.
- [36:40]
Tom Blomfield
Yes, I agree, but I want to
- [36:41]
Robert Peston
take you back to. Because this was a, you know, slightly, you know, it was a slight digression from this question of why you are sort of more optimistic that maybe, you know, who knows whether there'll be another deep mind in our lifetimes. Because it's a remarkable, it's, you know, that is a remarkable business to have created. But, you know, if there were another deep mind, I think you're saying it would stay British for longer, is that right?
- [37:10]
Tom Blomfield
I think that is right. I think that is right.
- [37:13]
Robert Peston
Why are you more optimistic about that?
- [37:15]
Tom Blomfield
There are two or three reasons. One, I think, I think this is true of Europe as a whole, not just the uk. I think we have a university system that is producing world class technical talent and the density in southeast England, frankly is incredible. We have, I think three or four of the top 10 worldwide universities. So the one big change is I think graduates are realizing that they can take more risk, that they don't have to go and get the safe job and indeed that the safe job that they were told about no longer probably exists. Actually this is a positive aspect of people are more ambitious and more risk taking and a negative aspect which is they're terrified that the Safe job in McKinsey or Goldman Sachs is no longer that safe. And then I think the second thing is the availability of capital. Growth stage capital is absolutely global now. It was not 10 years ago people would not invest 100 million or a billion dollars into a London based company. They'd ask you to move to Silicon Valley. We have seen multiple examples now British companies raising extraordinary amounts of money.
- [38:21]
Robert Peston
Quite a lot of that extraordinary amount of money is nonetheless being provided by non British financial institutions. But you don't think that matters.
- [38:31]
Tom Blomfield
I would take it rather not having the money at all.
- [38:33]
Robert Peston
No, no, of course. But it still means ultimately if your owner is from Singapore or from, you know, America, ultimately those owners can say actually we don't want you in Britain anymore, you got to move.
- [38:46]
Tom Blomfield
But they then empirically, they're not doing that.
- [38:49]
Robert Peston
Okay.
- [38:50]
Tom Blomfield
They tend to not have full control of the company. They tend to be minority investors. The founders and early employees still own a lot of stock and they are mostly living in the UK and they'll pay income tax, they'll pay capital gains tax when they sell the shares. So yes, it'll be spread, it will be lovely if Britain were able to put up this growth stage investment itself. But even with external growth stage investment, a lot of the economic benefits still accrues to the uk. So I would take it over not having it.
- [39:15]
Robert Peston
Now I want to go back a little bit back to Monzo because the other thing that you've been very, I think impressively open and honest about, partly because I think you feel there's a sort of public service, public interest in doing this. I mean you is you left Monzo because of what you describe as mental health challenges. And you have been somebody who has talked very publicly about, about how many people you know, whether they're business creators or business leaders, you know, you, the pressures are enormous and sometimes people aren't understanding and they don't get the support they need. How did your mental health challenges manifest themselves and how did you have the courage in a way to walk away? Because lots of people don't.
- [40:04]
Tom Blomfield
I'm in the late stages of writing an autobiography where I go into more detail on this and I'm very excited to get out, hopefully sometime next year.
- [40:12]
Robert Peston
Can you see a connection between your desire to create businesses and then the mental health challenge, the mental health problems that you suffered, Are they connected?
- [40:26]
Tom Blomfield
Oh, inevitably.
- [40:27]
Robert Peston
So could you talk to me a bit about that? Because I think people would be very interested.
- [40:30]
Tom Blomfield
We started in 2015 and by 2019 we'd grown from a team of 10 to a team of 2000.
- [40:36]
Robert Peston
This is Monza we're talking about, this is Monzo.
- [40:38]
Tom Blomfield
And we, our customer base in 2019 went from a million to 4 million customers. We were growing very, very rapidly. We were losing quite a lot of money because we weren't charging sufficiently for the service we provide. I think we were very idealistic. We wanted to make customers as happy as we could, frankly, and we believed over the long term we would monetize. And that actually has turned out to be true. But we were very reliant on external capital, so we were losing about 100 million a year, which meant I had to go out and Ra 100 million every single year. And we put a lot of our pressure on ourselves to, to succeed and to do a great job by customers.
- [41:21]
Robert Peston
You're the chief executive of this, this very fast growing business. How old are you at the time?
- [41:26]
Tom Blomfield
I started when we were 29 and by 2019 I'd have been 34, 35, something like that.
- [41:33]
Robert Peston
So you're young, right?
- [41:34]
Tom Blomfield
I mean, very young. Yeah.
- [41:35]
Robert Peston
And are you a lone wolf? Are you somebody who, who basically sort of operates on their own, or did you have, do you have a network of people who support you? How does it, how does you know?
- [41:49]
Tom Blomfield
We had a board of directors, we had a set of investors who were supportive. We had an executive team. The problem was, in one year we tripled our headcount and almost quadrupled our customer base. And the people we'd hired to run a team of, of 100, suddenly they're running a team of many more hundreds. And so that growth just put a lot of pressure on everything. And simultaneously, the UK press went from. We were the darling of the UK press in 2016, 2017. If you look at the press articles, they were euphoric. And then something changed. We got big enough, we were suddenly a national brand and it sold more newspapers to tear us down than to build us up. And so overnight we just could do nothing. Right. It was incredible. And so it just felt like we were under attack from the press. At the same time, when we were losing 100 million a year, our executive team was struggling under the weight, like Every single member of the executive team was struggling with stress and burnout and.
- [42:52]
Robert Peston
Were you sleeping?
- [42:54]
Tom Blomfield
No, not really. Suffering from insomnia. Like, huge, huge anxiety. We had a set of a small number of disgruntled customers. If you imagine sort of one in 100,000 people is a murderous psychopath. We had 4 million people, 4 million customers. So we had a bunch of murderous psychopaths, frankly. And they took. Some people were threatening to come to our office and throw acid in our face. People were trying to find my address. I had to change my phone number, my email address. I had to get private security. That was not great.
- [43:25]
Robert Peston
What were people accusing you of? That they would behave like that.
- [43:29]
Tom Blomfield
So we have obligations under regulation to detect and prevent financial crime and money laundering, and that requires us to monitor people's accounts and if we suspect them of money laundering, we have to freeze their accounts. And there's a law that prevents tipping off. If you suspect someone of financial crime, you cannot tell them. So you, as a bank, shut their account. And then when they say, why have you shut my account? You say, I can't tell you.
- [43:51]
Robert Peston
Oh, my God.
- [43:52]
Tom Blomfield
And then they.
- [43:52]
Robert Peston
And much, they then go. They get quite angry.
- [43:56]
Tom Blomfield
They're crazy, right? And in some cases those are criminals and we prevented financial crime. And in other cases, very sadly, probably we got it wrong. And it's very, very, very hard to tell. And so that was the root of a lot of the angry. Some were criminals and some were legitimate people who had a complaint. And we just had our hands tied by regulation because we couldn't explain why we'd shut their accounts. And so they, yeah, they turned to social media, some turned to violence. It got pretty bad.
- [44:23]
Robert Peston
And you actually had to have. You had to have security protection.
- [44:26]
Tom Blomfield
Yeah, every time I stepped out of the office, someone would step out first to check if there was someone waiting to throw acid in my face and that. I mean, they were very brave. Right. These are security guards who are putting themselves in harm's way to prevent, to protect me.
- [44:41]
Robert Peston
So how long did you put up with this for?
- [44:44]
Tom Blomfield
That was a couple of years. And it built and built and built to March 2020, when we had a funding round lined up at a 2 billion valuation, £100 million, which was the latest money we needed to keep the company alive. And that was supposed to close, I think, on March 26. And on March 23, London went into lockdown and that funding line evaporated. It got called at the last second and that overnight our revenue halved because our customers could no longer Travel, they could no longer swipe their cards abroad. So we have 100 million funding line disappear, we have 50 million of revenue disappear overnight. The regulator phones us up and basically says, we think you're going to be out of money, so prepare to start winding the bank down. Like, we think this is game over. Yeah. So that was. That made the pressure even more.
- [45:37]
Robert Peston
How did you survive that? How did you survive that?
- [45:39]
Tom Blomfield
Barely, honestly, I wasn't sleeping very much. Our entire executive team, our entire team, frankly, was. We were working seven days a week round the clock. We had to lay off 500 people, which is. Which was horrendous. Horrendous. I mean, worse for them, obviously. And at the end of that, I sort of thought, I just physically can't do this anymore. This is no life.
- [46:01]
Robert Peston
But you managed, but you left, presumably after you'd shored up the finances, did you?
- [46:06]
Tom Blomfield
Yes. I got the existing investors to agree to put in a bridge round of funding of about 60 or 70 million at a down valuation. We had to take a reduction in valuation, we had to agree to a lot of cost cuts, but we had an agreement that that would come in. And then I appointed. I'd hired a guy called T.S. anil to run our US business. We were trying to expand to the US at the time and we put that on hold and we hired him as a CEO and he was a sort of perfect replacement. So he stepped in as CEO, a woman called Sujata Bhatia I just hired as COO. Jonas, my COO founder, was chief technology officer and together they, they pulled through. The revenue recovered from 50 to 100 as travel came back. Interestingly, it was the rising interest rates that really saved Monzo. So we had 2 or 3 or 4 billion of deposits which we stuck in the bank of England earning 0%. And then when interest rates went to 5%, we suddenly have a bunch of extra revenue. And that was really a lifesaver. Yeah, yeah, a lifesaver. And then over the next few years they developed the new product lines and revenue and now Monzo's profitable and making more than a billion of revenue a year. So it was a. I mean, a tough, tough journey.
- [47:18]
Robert Peston
It is very hard to stand back and learn lessons. With the elapse, the passage of time and writing this book, are there lessons? I mean.
- [47:31]
Tom Blomfield
Yes, many. I made a lot of mistakes. I've tried to be very. In podcasts like this and in the book, I try to be very honest about what I think we did. Well, balloons, all the mistakes, you know, I'm Very like the mental health challenges, anxiety, depression, insomnia. The biggest mistake I think we made was we were too idealistic in terms of giving away too much stuff to customers for free. We were very, very good at building products people loved and very bad at charging for them. And Revolut were a lot better at that. So we shied away. For example, we shied away from cryptocurrency. I just didn't believe if putting cryptocurrency in the app felt like putting a roulette wheel in your bank account. And I just wasn't willing to do that. And Revolut did, and they made a lot of money out of crypto. And I'm not saying you should have done crypto, but I am saying the great user experience and customer service and all the functionality we developed, we should have been more willing to charge a fair price with fair value. And instead, we were just giving a lot of it away for free and believing that we'd monetize down the line. In retrospect, we did monetize down the line. It worked. But we were just so reliant on external funding. I think I raised $500 million when I was at Monzo, and since I've left, they've raised more than a billion more. So it's required a lot of capital funding. And when you're in that situation, a global pandemic can be really disruptive. So we were just too reliant on external funding. We didn't make enough revenue. That was the biggest mistake, I think. Yeah, that was a single one I'd
- [49:08]
Robert Peston
point to in going back and doing, you know, in a sense, both the history of, I suppose, entrepreneurship in Britain, but also your personal history. I mean, the other famous thing about you is you were at Starling. You fell out with, you know, your partner Ann Boden. Looking back on that, can you now see is. Was there a route where that split could have been avoided?
- [49:37]
Tom Blomfield
In no reality could that have been avoided. No. I mean, it's a very, very, very funny episode. I've talked about it a little bit on podcasts. It's a pivotal chapter in the book. No, Anne is not funny.
- [49:49]
Robert Peston
When you say funny, you mean comic. It's actually comic book.
- [49:51]
Tom Blomfield
Yeah. I mean, Ann Bowden's just not someone I would ever work with. I'd put it that bluntly. I mean, she fired me multiple times in six months and then begged me to come back the next day each time. And then I eventually quit because I couldn't cope with it anymore. I just didn't want to deal with her anymore. And on the spot she fired the entire company in a rage. There were 14 people at Starling and 13 of us started Monzo like it was as stark as that.
- [50:16]
Robert Peston
How did she. But how therefore was she able to keep Starling alive?
- [50:20]
Tom Blomfield
She hired a new team. And the crazy thing was I found out that we were the second team she had. She had a previous team she'd fired as well. It was remarkable. I mean, she's resilient, I'll give her that. She's able to her keep going and her self belief is great. I mean, he had many other flaws. But yeah, she hired a new team. She convinced this guy Harold pike to give her like a big chunk of money and she built a real company. I mean that's.
- [50:44]
Robert Peston
Yeah, it's a proper bank. I mean, let's be clear. Like Monzo, it's a proper bank. Right. I mean. And you haven't spoken to her since.
- [50:51]
Tom Blomfield
Very frosty kind of nod and a handshake, but that's about it.
- [50:54]
Robert Peston
Yeah, I thought we could sort of go back really where we started, which is the impact of this AI industrial economic revolution we're living through. If you talked about just now how you had this extraordinary period of expansion where you were hiring thousands of people, if you were starting Monzo today, given, as I say, the power of AI, how many people would a Monzo starting from scratch today with the same kind of scale that it's achieved, how many people would it need to employ 10
- [51:34]
Tom Blomfield
to 20% of its current headcount? For sure.
- [51:37]
Robert Peston
So literally a 10th or a fifth, you could, you know, so that is, that is amazing, isn't it? Yeah. And if you look at the businesses that you're backing at the moment, the kind of things they do, you know, I was talking to a friend of mine who. Very successful tech investor and he is saying we are moving into a world where companies that are going to be worth potentially tens of billions of dollars are going to employ a handful of people.
- [52:03]
Tom Blomfield
100% agree. And I can give you an example. There's a company called Onshore. They're doing tax accounting. The guy previously worked at Grant Thornton. The revenue per employee at somewhere like Grant Thornton or Deloitte or KPMG is about $100,000 per employee. Right. At Onshore, it's about a million dollars per employee and it's only improving. And they're doing the same work, just AI assisted. So it's 10 times more productive. Amazing. So companies are going to become more profitable and they will employ fewer people. I, I think it's easy to get sucked into all the doom and gloom. Like we're all going to be out of jobs. I do think there'll be new jobs, new types of jobs and I think there will be, I think we'll see so many breakthroughs in terms of like, like biotechnology, new drug discovery. I think we'll just, I was talking to a good friend last night who's in biotech and she was, she was absolutely certain that we, we're entering an era now for the next five years where we're going to have just breakthrough after breakthrough after breakthrough. I think everyone in the world will have access to a world class doctor, an oncologist, a lawyer, a personal tutor that you could own that would cost you a million dollars a year previously. So I think there is a real hope that we have kind of intellectual abundance, but we do need to figure out what the economic model is in the long term. That kind of gives dignity to most people.
- [53:27]
Robert Peston
Yeah, we've got to fix the tax system. I mean it's pretty straightforward.
- [53:31]
Tom Blomfield
Yeah.
- [53:31]
Robert Peston
Look, Tom, it's been terrific talking to you. I mean I found it absolutely fascinating and gripping and I'm sure our listeners do. So let's give it six months and let's see how this story unfolds. But thank you so much.
- [53:43]
Tom Blomfield
Thank you, Robert.
- [53:44]
Robert Peston
Goodbye.
- [53:50]
Ryan Reynolds
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