Max Levchin: “The Net IQ of the World Is About to Go Up 50 Points”

[00:00] Have you ever thought about opening up a coffee shop? If I didn't do what I do for a ring, I would just open a coffee shop. [00:07] Enjoying my coffee. How did you get into this? It's one of these self-fulfilling prophecies. So I grew up in Ukraine, and there's a culture of coffee drinking, and my dad was really into drinking espresso. So when I was five years old, he would buy a shot of espresso at a coffee shop. So I'd have this visual, like a bag and a shot of espresso. I'd be drinking it right alongside my dad. For drinking espressos at five years old? What? There's no prohibition on drinking espresso. [00:30] at any end. I recently had Keith Raboyan last fall and he said that you were a first-rate technologist and also a first-rate business strategist. So how did that combo develop? I sort of walked in thinking I'm going to get a computer science PhD and just be a professor and walked out thinking I can't wait to start more companies. Majority of American banks derive a disproportionate percentage of their income from late fees. A firm was founded in many ways to [01:00] credit will do north of 47, $40 billion of loans this fiscal year alone. And yet that's a drop in the bucket. We've been public for five years and every single letter has a Big Lebowski quote. Have people picked up on that? Until very recently, no one caught it. And then finally, one of the analysts wrote a note on us saying, cue to a fiscal 25 quarter that really, really tied the room together. They finally got it.

[01:30] you [01:35] Walk us through your daily espresso. Sounds good. [01:41] Um... [01:45] For first I need to learn how to turn on this scale. [01:48] - Shh. [01:49] All right. [01:50] - Are we timing this too? Do we need a timer? - It's going to be a timer. - Really? - You have to time it. - Really? - Oh yeah. - Okay. [01:59] All right. [02:00] Um, [02:02] This is a [02:03] Venerable classic, La Marzocco, made... [02:06] in [02:06] So these days, I think, made primarily in the US, but born and raised in Italy. [02:13] I'm a huge fan of this brand. I own several of these. [02:16] Before we do anything, got to... [02:18] warm up the group and flush a little bit of water. [02:23] *clap* [02:24] Thank you. [02:25] How many espressos do you think you've made? [02:29] in your lifetime. [02:31] That is a [02:33] I could try to estimate it, but it'll be a large number. [02:36] I mean. [02:38] nine. [02:38] Tell us today. [02:40] What? Not all of them were for me. [02:43] How many do you drink a day? [02:46] five, six, [02:47] Five? [02:48] Bye. [02:49] All right, first things first, we got a-- [02:52] weigh out our beans. So I did prep the grinder so the grinder is already [02:59] does not need any more adjusting. So the grinder is set. What kind of beams are these?

[03:11] Shhh. [03:12] Shhh. [03:14] Shhh. [03:15] This is actually-- I just clipped a little bit of that. It's not good. [03:20] *punch* [03:21] a little bit over 20 grams that's okay um this is a local roaster [03:29] Their name is Wrecking Ball. [03:32] And, um, [03:34] The name of the actual espresso blend is Pillow Fight, which I think is a cool name. They're roasted very close to where I live in San Francisco, or at least they're sold very close to where [03:45] Um. [03:46] What I'm doing now is... [03:48] declumping [03:49] This is called-- [03:52] WDT tool or Weiss distribution technique. [03:55] Okay. [03:56] And I am... [03:58] trying to break up any of the clumps of the [04:01] grinds that were [04:03] um, [04:04] caused by static electricity as I ground them. [04:08] This is, I'm making sure they're evenly distributed. [04:13] tamping my... [04:16] Thank you. [04:17] Puck, as they call it. [04:19] flush the group. You can never flush the group too many times. [04:24] *punch* [04:25] - [04:26] Okay. [04:27] Lock it in to make sure the pressure is there we go. Probably want to edit that out. You want your [04:36] surface dry so your scale does not get water on it. [04:39] Thank you. [04:40] Why is it important to measure it?

[04:42] So, [04:44] The perfect, I mean, it's all a matter of taste, obviously, but a... [04:49] A good espresso should be [04:53] just a little bit over two to one. [04:56] two grams for actual drink [04:58] for each gram of the beans that you put into the basket. So that's why I [05:02] weighed out. So it's just over 20 grams. So I want this to be just over 40 grams. I happen to like my espresso [05:09] on a slightly shorter side, and so I'll probably go for 40. [05:13] Some people... [05:14] the modern [05:16] Thinking around espresso is probably you want to actually pull longer shots. [05:19] And so [05:21] most professions will probably pull like a 40, [05:23] 243 gram shot for you but stick to my [05:28] old school ways. Let's see, I'm pulling a manual one. [05:33] Because I have [05:37] dialed in the machine before. I don't actually need the timer anymore. I know it'll take me about 25, 27 seconds to get a 40... [05:44] grams of drink out. That's a good-looking mousetail. [05:47] It's the professional term for what is a mouse tail? You want your espresso [05:52] to [05:53] call us into a [05:56] single [05:58] Thank you. [05:59] - Thank you. [06:00] *bop* [06:02] There you go. [06:03] Oh wow. [06:04] If you want a spoon to stir the crema, you can or you can just drink the crema. What is the crema? The fat layer at the very top, the thing that sort of looks glossy, that's crema. Some people like to stir it in, some people like to just drink it as is.

[06:18] Thank you. [06:22] Pretty good. [06:23] Wow. [06:24] It's the best we in the barista business can hope for. - No, it's pretty good. You should open up, have you ever thought about opening up a coffee shop? - Totally. [06:32] If I didn't do what I do for a living, I would just open a coffee shop. [06:39] Where would you open it? [06:41] Um... [06:44] somewhere where there isn't a great espresso available. How did you get into this? [06:49] Um, [06:53] It's sort of one of these self-fulfilling prophecies. So I grew up in Ukraine and there is a [06:59] I haven't been back in a long, long time, but [07:01] There's a culture of coffee drinking and espresso drinking in particular in Kyiv. [07:06] and my dad was really into drinking espresso and so when i was like [07:09] five years old. [07:11] he would buy a shot of espresso at a coffee shop [07:14] and the way they sold it there it was this [07:17] to [07:19] layer, sort of a stand-up table. So you'd walk up to it and he would put his bag [07:23] on the [07:25] second level like a thing from the bags and he would nurse his espresso with his pinky out. And then when I got like four or five years old, he'd buy me a shot of espresso and put my cup of espresso [07:35] the thing that was, I was just tall enough to sort of see the bag. So I'd have this visual, like a bag and a shot of espresso. I'd be drinking it right alongside my dad. [07:44] And so you were drinking espressos at five years old. Oh, yeah. [07:48] There's no prohibition on drinking espresso at any age.

[07:53] Anyway, so I got into it when I was really little. [07:57] And then [08:00] just over the years sort of got more and more i tend to get very deep into stuff so i [08:03] It's not weird that at some point I decided I'm going to learn how to make [08:07] good coffee and then [08:08] I got sort of better and better at it. [08:12] Why do people get obsessed with beans? [08:15] Why does that matter? It's similar to people who get obsessed with grapes or wine or... [08:21] the right kind of [08:23] water for whiskey. It's just a [08:27] It's like, [08:28] infinite complexity in the simple so you decide that you're really into something you start asking the question like all right so [08:33] "How can I refine it?" And this thing, the patent that describes how this thing is called the group head, you can't see most of it, but [08:43] out of the [08:45] like inside like the big steely thing in the center that's the group head [08:50] And, uh, [08:52] It's responsible for the actual production of coffee. [08:56] And [08:57] And... [09:00] Mm-hmm. [09:01] it's been around for a long time. It's the patent that describes the one [09:06] pretty similar to this one, is from 1961. [09:08] And so, [09:09] the machine is sort of the machine. Then you realize that basically you can vary [09:14] the beans and [09:16] the beans are [09:18] can be single origin, can be from... [09:21] a variety of plantations and farms. You can

[09:25] there's multiple ways of converting the green beans into [09:29] The beans actually, [09:30] It's a fruit and the seed inside the bean, inside the fruit is this thing. So first you need to get the green off so you can either ferment it and you can ferment it in [09:40] in the sun, you can ferment it in other scenarios, then you can wash off or shell off the green and then [09:47] You roast it and then you grind it and every one of those [09:51] processes, every one of those steps can be refined and refined and refined. And of course, there's no right answer. So everybody kind of slowly gets [09:57] into [09:59] Not everybody. Everybody who's into it gets... [10:01] into a set of preferences they really love. [10:04] Most of the time, it's not. [10:06] realistic to roast these things at home. Although I know people who do, I don't. [10:11] And so you find your favorite [10:13] bean producer, roast chair, [10:16] and get into that. [10:18] the uh wrecking ball the shop where i got these beans first their own and they have their own story and sort of their own sourcing and [10:25] approaches they favor. [10:27] It's just like anything else. It's really simple and therefore people will make it very complicated. [10:30] Who makes the worst coffee? The worst coffee? What's the worst coffee you've ever had? [10:36] Let's not trash anyone on camera here. Was it at a conference? Was it at an airport? I mean, there's so many different directions. You know, it's actually... [10:47] Airplanes. You can... Airplane coffee is definitely very bad. Yeah. [10:51] You can make exceptionally good coffee...

[10:55] out of a lot of things like it's the standard [10:58] truism is so these beans were roasted on the 20th of march so they're 10 days [11:04] off. [11:05] the roasting date, which is kind of the perfect time. Like you actually, you don't want them to be so fresh because there's still a lot of CO2 trapped in the beans. And so there'll be [11:14] to [11:15] gassy as they call it. [11:17] and the sort of a trusement in the coffee world is [11:20] the beans are too old, it's just really hard to get the flavor out of them because they're too dry, the oils are dried out, and it's actually not really true. There are plenty of people now who will show you how to fine tune. [11:31] an espresso shot with very old beans and they'll still taste pretty great. So you can take [11:37] the least exciting beans and [11:40] It takes a little bit of work, but you can absolutely get them to taste. [11:43] better than vast majority of coffee. [11:46] from a specialty coffee shop that prides themselves on being good at it. So it's just a matter of skill. [11:50] Obviously, it was like [11:52] five years old and it lived in a can that's been opened [11:55] and it's been pre-ground and like it had some mold. It probably won't taste right. But other than that, you can make some pretty great coffee out of [12:03] Right. [12:04] sauce beans [12:05] So you like Wrecking Ball here. Are there any other favorite shops? So there's a lot of really good roasters that are excellent. [12:13] for, so Wrecking Ball is probably slightly [12:16] on a [12:17] medium dark side, which I'm a big fan of. [12:20] It also pairs really well with milk. So if you want to have a milk-based drink with your espresso, [12:25] You want darker...

[12:26] At least I like darker. If you want slightly lighter, you can go to [12:31] In San Francisco, four barrels, which is a fantastic local roaster. [12:35] Blue Bottle came out of San Francisco, came out of Oakland, became a San Francisco institution. [12:39] Some of their blends are excellent. [12:42] Thank you. [12:44] I can rattle off a bunch more, so I try to patronize all the local ones. [12:50] a great recent find [12:53] is a Boston-based roast chur called George Howell, which I'm a huge fan of. So it's on a darker side, so it's great for lattes, but also just makes really good espresso. [13:02] Um, [13:03] and so on. We can take up the rest of this hour by just riling off. I know. I have so many. I've never talked to someone about coffee before. I haven't. [13:12] every now and again, it's like, Max, what is your view on pumpkin spice lattes? [13:17] Mm-hmm. [13:18] *laughter* [13:21] It's no man's land. Can't go there. [13:24] I [13:25] if I allow myself. Have you ever had a lot like a like one of those kind of like [13:30] celebratory lattes before? [13:32] I make my own lattes, and so I refuse to let... [13:36] pumped flavors into them. [13:38] - Okay. - It's a bad thing. No lavender. [13:42] It's great for baths. I understand. I've been told it's great for baths. Not in my coffee. I'm kind of a purist. [13:50] Okay. So we joked a little bit about this earlier, but you're also a major cyclist. Is it true you are number one on Strava?

[14:00] No. [14:00] Not even close. There's some very, very good cyclists that are number one on Strava. I am not one of them. I am... [14:12] I am on Strava. You are. I'm on in, in, in, um, [14:18] I'm a committed cyclist, but I've also... [14:22] For a long time, Strava was... [14:25] a place where people like me would show off to each other and then pros discovered Strava and then all of us moved down to like many screens below the [14:33] So yeah. [14:35] Number one is long. [14:37] past its sell-by date. [14:39] When did you get into that? [14:41] Are you going to have one? [14:42] Uh, yeah, I can. [14:44] I gotta have a caffeinated companion. I did spend like... [14:51] four or five shots just [14:53] making sure the machine is dialed into my exacting preferences. You know, I did shots with, uh, [14:59] Alfred Lin before the Upfront Summit. Now we're doing espresso shots. [15:03] uh that alfred shoots with you on on camera yep very bold of him then like any sort of normal person posted it on x [15:18] But yeah, it was fun. [15:19] I have known Alfred Lin, [15:23] longer than [15:26] Anyone I know to bury, I think. Really? Yeah. [15:29] Fun fact. How?

[15:31] When I was in college, one of my many failed startups [15:35] didn't fail completely. [15:38] And... [15:39] It ended up [15:42] parts of it ended up being sold to a link exchange. [15:45] Mm-hmm. [15:46] which Alfred and Tony [15:49] and a bunch of other people I'm still good friends with. [15:52] were [15:54] founders slash very early [15:57] employees off. And so when I was [16:00] helping them [16:04] integrate the thing that [16:07] be wanted from my college projects, I got to come out here [16:12] I was still [16:14] Probably [16:16] Okay. [16:17] Probably a senior in college, or possibly junior. [16:20] So it was extremely... [16:22] I'm starved physically, frequently hungry. So I came out to... [16:28] help them get this thing going. [16:30] It was like maybe for a second trip to San Francisco. [16:34] And they're like, oh yeah, come to this apartment. It'll be like, we'll meet you there. Like apartment, sure, why not? [16:40] And I show up there and it's Tony Hsieh and Alfred and a bunch of other people playing poker. [16:44] And I was like, all right, well, [16:46] It's cool, I'm not gonna play poker. Oh, you look hungry, are you hungry? [16:50] Sure, I'm hungry. Well, there's a bunch of Chinese food. [16:53] go feed yourself. So I just fed myself and watched Alfred. [16:57] Tony and a bunch of other people play poker. [16:59] That was my introduction to the Bay Area.

[17:03] Wow. [17:09] All right, let's see. [17:12] But we're also... [17:13] Still very different. [17:15] All that. [17:16] Is he an investor? [17:18] He is not an investor in a firm. [17:20] Um, [17:24] You're also... [17:25] He's a pretty active investor. You've invested in hundreds of companies. Have you invested alongside him? [17:30] Yeah. [17:32] Definitely, we definitely have some shared interests. [17:35] Whoa. [17:37] I see no spoon. I'm gonna... [17:38] slurp my crema just like you did. Normally I would [17:42] stir up my [17:44] my crema to make sure. [17:47] Is there proper etiquette? Like, is that proper etiquette? That did not turn off correctly. Proper etiquette for... [17:55] -Scritto? -Drinking us. -Oh, yeah. [17:57] uh [17:58] There's definitely... [18:00] proper etiquette for any any subculture always ends up with these like [18:05] *clap* [18:05] insider rules and sort of the right way and the not so right way and all that [18:10] Um, [18:13] *clap* [18:15] that's [18:17] That's it. [18:23] It's good. [18:24] It's very good. [18:31] Oh.

[18:36] Shh. [18:37] Tastes pretty good to me. [18:38] Um, [18:41] I think the [18:43] You had a good for tasting coffee if you wanted a sort of full experience, which... [18:47] I should probably be apologizing for, is you want a... [18:51] sort of glass of sparkling water to go with your espresso to cleanse the palate. And then you want a spoon to allow you to stir it if you wanted to stir it. [19:00] If you're in a really fancy restaurant, they might give you a very small biscotti to kind [19:04] give you [19:06] kick of [19:07] sweetness at the end, but [19:09] Most people will not eat it because it's [19:11] there for decoration only. [19:16] to drink as much coffee as I do. It's a lot of steps to [19:21] Are you ever late to meetings because [19:23] Yes. You're making coffee? [19:26] Ha ha ha. [19:27] Not only that, I make people late to meetings because they are... [19:31] to busy tasting coffee with me. [19:32] - Mm-hmm. [19:33] Hopefully not too much. [19:38] All right, I finished mine. [19:39] Where should I put this? Thank you. [19:43] Sorcery is brought to you by Brex, the financial stack trusted by more than 30,000 companies, including one in three venture-backed startups in the U.S. Nearly 40% of startups fail because they run out of cash. Brex is literally built to help founders avoid that. Unlike traditional banks that let your money sit idle, shipping away at it with fees, Brex is designed to help you spend smarter and move faster.

[20:13] powerful account. You can send and receive money globally at lightning speeds, get 20 times the standard FDIC coverage through their partner banks, and even high yield from day one. With same day and even same hour liquidity, access your funds anytime. Companies like Scale AI, DoorDash, Service Titan, HIMSS, Anthropic, Flexport, Robinhood, and Plaid trust and use Brex. [20:43] Turing is training the next generation of AI with tasks that require real expertise and real world judgment. That's why companies like NVIDIA, Anthropic, Salesforce, and Gemini partner with Turing. Turing builds realistic reinforcement learning environments and data systems based on real operational traces. The kind of infrastructure Frontier Labs need to train superintelligence. Visit Turing.com slash S-O-U-R-C-E-R-Y. [21:13] Right, coffee has been consumed. [21:16] Now we're going to do a lap around... [21:19] the office. [21:19] So, [21:21] First, [21:22] Tell me the biggest Affirm lore. What is the craziest story that's happened here? [21:28] Here. [21:31] One time we needed to onboard 800,000 merchants [21:37] in a week. [21:37] Oh. [21:39] because we signed a deal with Shopify and they told us, oh yeah, [21:42] "We're ready to go, are you guys ready to go?" And we're like, "Oh yeah, we're definitely ready to go."

[21:46] We're like, "Okay, cool. Well, we have 800,000 merchants that need to be reviewed and taken live and we have [21:51] take our merchant risk policy very seriously. It means like someone like a human back in the day now, AI, probably, [21:58] But [21:59] A human has to look at a merchant and be like, "All right, they're not selling prohibited items. They're not fraudulent. [22:04] based in a country we can't support. But I weren't going to explain any of that to Shopify. They just signed his giant deal with us. [22:12] All right, so we have [22:14] 1,200 employees. [22:16] 800,000 merchants. [22:19] I'm just going to give-- [22:20] everyone. [22:22] 700 and something merchants to review manually. [22:24] And so for like a week with no sleep, people are just like manually reviewing versions. [22:29] people asked us like, "Hey, you guys gonna be ready?" We're like, "Oh yeah, definitely." And meanwhile, we're like scrambling. [22:35] And then we're ready a day early. [22:37] Oh. So we turn it into a huge... [22:41] thing where if you reviewed at least 300 merchants before the deadline, [22:45] you got like a t-shirt with 300 embroidered on it and if you read more you got like [22:50] a water bottle. And so it was [22:51] It's like a-- [22:53] people who joined after that, [22:55] sadly missed out on the craziness of having to stay up on library merchants. [22:59] And yeah. [23:01] Wait, so I also heard you're a big Lebowski fan? [23:04] Is it true you have the entire script? [23:06] written out on your desk and you read it every day? [23:09] I don't read it every day. But it is true that... [23:13] Majority of our shareholder letters contain subtle or not so subtle references to the Big Lebowski.

[23:20] And because it's been public for [23:22] 20-ish quarters. [23:24] And [23:26] at some point all the stuff that I've memorized has been used. So now I need to continuously find new quotes that I haven't used before because you don't want to repeat. So I do have a copy of the movie corrected Lebowski script on my [23:38] desktop, not on my desk, but on my computer. So as I draft my shareholder letters, I just [23:44] a window with a big Lebowski for inspiration and their [23:48] code finding. [23:49] What are your favorite quotes? [23:51] You can repeat them. [23:55] majority of them are [23:57] I guess Kaz dropped a lot of F-bombs in your show. So you can-- He did. I think you're obviously OK with that. [24:04] Let's see. [24:05] Okay. [24:06] That's a great Lebowski quote. [24:09] There are too many. I just watched Big Lebowski with my daughter. [24:13] for the first time in her life. I've seen it a lot of times, but she's 14. [24:17] It's about time to start introducing her. - Introducing her. Yes, I've inducted my 16-year-old son into Lebowski. When did this happen and why? [24:28] Um... [24:30] Thank you. [24:31] I think I saw it... [24:34] possibly in the movie theater so i've definitely been in the lebowski lore [24:41] for a long time. [24:44] It's a... [24:45] 20... [24:46] cult movies where you're watching like this is amazing and you watch again like no it's better than amazing you watch it again like it's

[24:51] Keeps them getting better. [24:52] keep on finding these gems. [24:54] um [24:55] It's a great cast. [24:56] Philip Seymour Hoffman, very young Philip Seymour Hoffman. [24:59] Kind of funny. [25:01] spastic [25:03] Jeff Bridges is not so bad. [25:05] their young John Turturro. [25:07] playing [25:08] a deranged [25:10] bowler named Jesus. [25:11] It doesn't sound like you've seen the bigger dust. [25:13] - I saw it when I was very young. [25:16] You need to immediately remedy that problem. Like you should see it at least once every half of year. We're going to have to cut this interview short. I got to go watch the Big Lebowski. [25:25] Yeah. [25:27] Yeah, quoting any part of it is like... [25:29] insulting the fact that every part of it is like [25:31] extremely quotable. [25:33] majority of the quotes that come to mind right now are totally not printable. Like for more than just having F-bombs. [25:40] But... [25:43] Thank you. [25:44] great scene where [25:50] the dude is trying to explain to Walter [25:54] what's going on [25:55] And [25:57] Walter says, oh, it's like Lennon, or the baby says, it's like Lennon always said. And Donnie pops in and says, I'm the walrus. I'm the walrus. [26:03] He keeps on continuing popping in because he thinks Lennon being referred to is actually John Lennon. [26:08] at some point in the wall drift. [26:09] - Yeah. [26:10] Donnie? [26:11] "V.I. Lenin, Vladimir Ilyich Ilyanov!" - Streicher explains that [26:16] Anyway, so just like the fact that there's these super deep cultural cuts. [26:20] that have like

[26:21] very little to do with the movie and yet they're so obviously [26:25] well, to me anyway, are very fun. [26:27] Have you found like any new movies have that kind of writing in it? [26:33] I'm sure there are. [26:35] the real litmus test of a great [26:38] beautifully written movie or well written anything [26:41] is it survived the test of time. So I will know, but it'll take another 10 years. So I'm sure there's some amazing scripts that are [26:50] going to be. [26:52] discovered as the Greek cult classic of [26:55] 2026. [26:56] that are in theaters right now. [26:58] but we won't know until 2036. Like part of Lebowski came out in 1998, I think. [27:04] to the fact that it's like, [27:05] a thing right now. [27:07] It's referred with anything. [27:09] That's why people love Vintage. [27:11] Yeah. [27:12] This is our [27:14] game, a very modestly sized game station and [27:17] a map that shows where Affirmers are from. Oh my gosh, look at this. Not all of it is true though. It's not all true? I don't think we have anyone from Antarctica. What about this one? I'm not sure. That one I could neither confirm nor deny, but the Antarctica one is very suspect. It's very suspect. This is great. Where do you go most? [27:37] - Well, we have lots of employees [27:42] here. [27:43] and here. [27:45] and here and here and here. [27:47] Obviously. That's a big cluster. Yeah. Yeah. [27:51] That's what some people call this company. No. Yeah, so I primarily travel

[27:56] to the [27:58] coasts of the US and then [28:01] we have a [28:02] big contingent in Poland, [28:05] sizable one and [28:07] the UK. [28:08] small one in Madrid. [28:11] tend to be in three parts of Europe. [28:14] Poland is one of the fastest growing countries [28:18] GDP wise in Europe. [28:20] what is it about their culture that makes them [28:24] one of the best places to work with that talent. [28:29] I think it's a... [28:32] one of the [28:34] several, but certainly the largest and maybe most [28:40] cohesive [28:41] place where the former Eastern Bloc country embraced capitalism. [28:46] in all the constructive ways. So there's lots of [28:50] It's big enough, so it has great education, [28:53] a lot of very smart people, a lot of people that have [28:57] trained in the West and came back and wanted to work in Poland. So there's kind of a [29:01] natural scale effects of just [29:05] a lot of great supply. And then [29:08] also the economy growing as well as it does teaches people that building interesting things is a [29:14] a great way to improve your life and improve your country. [29:18] So it's the flywheel of capitalism working really well. Yeah. Short answer. [29:25] We can stare at this map for a while. I love maps. So do I. I like maps myself.

[29:30] Thank you. [29:31] So let's talk about the growth. Another great movie from the '90s, or play. [29:37] comes to mind, conspiracy of cartographers is a great quote. [29:42] from Rosencrantz and Guildenstern are dead. [29:44] Say more. [29:45] It's, if you've not seen that, that is a worthwhile [29:50] very young Tim Roth, very young Gary Oldman playing Rosencrantz and Gildenstern from Hamlet. But it's a Tom Stopper play that basically retells the story of Hamlet entirely through [30:00] the point of view of Rosencrantz and Guildenstern who are [30:03] in the original play are these two [30:06] bumbling characters that are summoned to entertain Hamlet and sort of [30:10] Lerm out of a spunk. [30:11] But [30:12] in the end. [30:13] get sort of tossed to the side and [30:15] off with their next sort of thing. So the whole play is kind of built over. Here's how they experienced Hamlet. [30:21] And there. [30:22] It's very funny. [30:23] What is your typical reading and information and media diet like? [30:29] Oh, you know. [30:31] I see. [30:31] the occasional blog, [30:34] Sorry, now that you got my mind into Hubowski. [30:37] the occasional asset flashback comes to mind. That's a quote from Lebowski. [30:41] I have not, in fact. [30:42] had any acid flashbacks that I can think of. What do I read? I try to, I mean, these days, I mostly read research papers, unfortunately. Maybe fortunately, but it's such a [30:52] amazing time in computer science that if you're like [30:54] not keeping up with research, you're kind of [30:56] feel like you're missing out. [30:58] I read a bunch of... I try to read...

[31:02] at least one good fiction book a month. [31:04] I try to read... [31:08] Some... [31:09] classic business books here and there, although it's very dangerous because a lot of them are terrible. So if you start reading them and you're like, oh my god. Why are they terrible? [31:17] They're just profoundly... [31:20] profoundly vacuous, like books about how to run a business written by people who have never run a business. [31:26] always very dangerous. [31:27] Have you heard of this book called Zero to One? [31:30] I have heard of this book. [31:32] Have you read it? [31:33] I have. [31:34] What do you think? [31:36] Sorry, Peter. [31:36] No, just kidding. It's actually quite good. So 0 to 1 is [31:42] a bunch of [31:44] lecture notes from lectures that Peter gave at Stanford and [31:48] unlike many bad business books, [31:50] His is very good because [31:53] he's built multiple companies, but when he [31:55] wrote that [31:56] He was primarily drawing on the experience of building payout, which [32:00] I think it was [32:01] formative for both of us and [32:05] what he wrote rings true to those of us who were there. [32:08] Um, [32:11] Yeah, it's a good book. I highly recommend it. [32:14] What were the biggest business lessons you learned from PayPal that you carry into a firm? [32:18] the most important lesson is always the team. [32:20] it is. [32:21] is sort of the alpha and omega successor failure of a company is the team and [32:26] there's [32:28] an art form [32:30] to

[32:32] building a company [32:35] with the corollary to the team or the maybe the [32:39] the counter corner, if you will, [32:41] is the fact that [32:43] just having a bunch of brilliant people is not actually enough you need to [32:47] organize them, you need to give them a mission, you need to [32:50] give them [32:51] a way to pursue that mission that feels true to them, but also [32:55] aligns them all together. [32:58] which is [32:58] kind of what leadership is all about. [33:01] If you don't have the people, you're definitely going to fail. [33:04] But even if you do have the people and you don't harness their unique skills and kind of don't correctly [33:10] combine them, you might fail anyway. In general, startups are [33:14] I think the typical rate of a star of failure in the US is like 85%. So it's easy to fail. It's hard to succeed. [33:19] Yeah, you founded a couple of companies when you were in college and they failed. They all failed. They failed. [33:27] What do you think the biggest takeaway from that was? [33:30] And how does that apply? [33:33] Why did you keep on going? [33:36] I kept on going because I realized I liked the journey. [33:43] as much, if not more, than a destination. [33:49] Mm-hmm. [33:50] the day... [33:52] my co-founders and I declared our first company dead. [33:56] I found myself thinking, [33:59] what will be the next one? Like I took exactly zero

[34:03] hours or minutes. [34:05] contemplating is this the right thing for me to do? Like, did I just like throw away a couple of years? [34:10] It's like, oh, I'm definitely going to do this again. [34:12] definitely going to do better this time. [34:14] even though the next one failed. [34:17] But I also got like, there's nothing else to do other than start companies for me. [34:20] And so, [34:23] I think I [34:24] I kept going because I wasn't going to do anything else in my life. [34:28] Right. [34:29] But starting companies is amazing. If you're into that sort of thing, [34:33] it's the best thing in the world. [34:35] Also, dude... [34:38] Having an amphibious rodent? [34:40] as a, you know, [34:41] Domestic. [34:42] That ain't legal either. [34:44] What are you, a fucking punk rager now? [34:47] That's what I'm gonna say. I'm gonna clip all of these into one. You should I can I can go on. I'll do side by side with the actual movie. [34:55] - [34:56] Every bit of stupefying. [35:00] Some great one-liners. [35:02] That's too good. Many learned men. But in 15th century, Rambam [35:08] So a lot of Lebowski has these great sentence fragments where you have no idea where [35:13] the characters coming or going to, which is like, [35:15] cuts into this like [35:17] We'll just... [35:17] Yeah. [35:19] And you just naturally drop it throughout the day. [35:22] Yeah. You said it, man. [35:23] Nobody fucks with Jesus. [35:27] So I recently had Keith Roy. Actually, it wasn't really recent at this point. The year is just flying by. But I had Keith Roy on last fall. And he was stringing out this rare combination of talent that he's...

[35:42] very, like, obviously rarely, never seen before and have come across. [35:47] You were one of those people. He said that you are a first rate technologist and also a first rate [35:53] business strategist. So how did that [35:55] combo develop. Where does that come from? [35:58] I mean, I grew up in Soviet Union, so obviously, you know, [36:04] compensating for some lack of early business education right there. [36:07] I don't know. Keith is too kind. I think the... [36:12] I, I love computer science. Like I've, I was [36:16] sort of smitten by... [36:18] some very early programming experiences as a [36:23] either a teen or maybe even a preteen, so I was like, I was [36:28] like 11 or 12 when I sort of first got access to [36:31] very basic programming tech and [36:33] It was like one of these things where I'm definitely going to do this for the rest of my life. [36:37] And I was on track to do [36:41] computer science as kind of [36:44] the final destination. My plan was to get a doctorate and teach [36:48] And. [36:50] couple of [36:51] Kids at school recruited me to go start a company with them, which failed. [36:56] But I got bitten by a startup bug. [36:58] And. [36:59] as I kind of [37:00] went through life, starting more companies and failing at them. So I go at some point you have to learn [37:06] business. Otherwise, they're going to keep on failing. [37:09] Because I was sure that they're obviously not failing for any software related reasons. So it could only be the non-software reasons. Yeah.

[37:17] Internet businesses are basically some business strategy and some technology and [37:21] I was very confident in my ability to produce the latter and so... [37:24] Must have been the former. [37:25] But I'm... [37:28] Not sure where Keith got his... [37:30] assessment. [37:32] Yeah. [37:33] We... [37:35] I've known each other a long, long time. It was at PayPal. [37:39] We got two up. [37:40] got to become friends there. [37:44] I asked him if there was a PayPal group chat and he said no. [37:48] That's what he knows. There's not a PayPal group chat. Not that I'm invited to either. So if he's not invited, I'm not invited either. [37:57] I'm really curious. [37:59] You have... [38:00] been an engineer throughout [38:02] many different cycles now. [38:05] What is it different now to be a technologist, to be an engineer, to be a [38:11] in this, I mean, you mentioned earlier, you're spending most of your time reading research papers. So like, what does it take to be a leader in AI and [38:21] also a CEO in this era. [38:24] The cool thing about this moment in time [38:28] There's a lot of things about this moment in time. We're definitely living through [38:33] an extremely uncharted [38:35] territory again like that [38:38] I think. [38:39] It's possible that [38:42] I am the luckiest boy in the world in a sense that I got to come of age [38:46] when

[38:48] the internet went from being [38:50] largely green screens to being the web. [38:52] which happened to be on my campus. So Mosaic was launched at University of Illinois the year I matriculated. So I sort of walked in thinking I'm going to, [39:00] get a computer science PG and just be a professor and walked out thinking. [39:04] Can't wait to start more companies, basically because of the first graphical browser. [39:09] And. [39:10] Then I got to watch... [39:13] mobile and cloud. [39:15] and now AI, which is kind of [39:19] I'm not sure what else comes after, but it's already more than a lifetime worth of amazing experiences. [39:26] It is the moment in time to be a CEO [39:28] with a computer science degree. The, the, [39:32] unfair advantage for a long time has been [39:35] If you know how to build software and you have product ideas, you can build some amazing things. [39:40] the thing that's happened with [39:42] B. [39:43] LLM. [39:44] powered models [39:46] is you can now go from, I have an inkling in my head to, I'm going to build a prototype to, I'm going to, not necessarily always on your own, but with a [39:56] bunch of co-conspirators to build something that's production ready [39:59] in a record short time. And if you do know what you're doing, [40:03] somebody with a [40:05] sense for how to build software well. [40:08] You don't need to vibe code yourself to a prototype and then hand it off to somebody who knows what they're doing. You can actually build something amazing. [40:15] just ship it. And so the [40:17] The moment is...

[40:20] Quite... [40:22] quite unique. [40:26] the reason to read the papers and the reason to sort of keep track of what's happening on the ground of [40:31] The research is... [40:33] Every morning something... [40:35] launches, that's nothing like you've seen before. The pace of innovation is accelerating. The [40:40] at least has been for [40:42] six maybe 12 months now. [40:44] And, uh, [40:46] If you blink, you miss. [40:47] Something. Just kind of stay, stay close to it. [40:50] What are you looking for in these research papers? Has it gotten redundant at this point? Like what is new? [40:57] Um, [40:58] a lot of it is i just look for inspiration i think the thing that's happening right now across the [41:03] computer science or large [41:06] is there these glimpses of what the future will look like. And for a long time, [41:11] in my... [41:12] professional career, [41:13] academia was always... [41:17] either too abstract or too far into the future. You'd read a paper. So I spent a lot of my [41:21] younger years looking at [41:24] things like cryptography, which was sort of the first love that I that I've had in CS and [41:30] You'd look at like homomorphic encryption and be like, wow, that's a fantastically interesting concept. But we don't really have nearly the computes like it's not going to be. [41:38] a thing in my immediate professional future or [41:41] You'd look at [41:44] quantum computing and like quantum attacks and post quantum encryption. And you're like, [41:48] That's cool, but like, this is really gonna happen in my lifetime. Will they have enough qubits to be dangerous?

[41:53] And with AI, it's different where you're literally reading a paper like, yeah, somebody's going to implement it tomorrow. [41:58] and it's going to be available and then everyone's going to take advantage of it. And so you read the papers like what might come next? What will be the important news of tomorrow? [42:07] So it's... [42:08] you have to stay current. [42:10] I heard you used to write [42:13] out code by hand. [42:15] And so now I'm assuming [42:17] You're writing code through LLM. No, I just don't cloud code to write out my code for me by hand. [42:23] send it right to Claude Code. Do you think it's important for [42:26] engineers to even learn the basic principles of coding now? Learn to code was the key skill to go after for a while. Do you think that's still important even at a basic level? [42:36] I think so. [42:37] I think the [42:39] Software engineering [42:40] is... [42:42] kind of an interesting combination [42:45] I'm obviously biased, but... [42:48] it's [42:50] a science like computer science is a science although [42:54] Peter likes to point out that no science that is a real science needs to have its name [42:58] include the word science. Like we don't say math science, we just say math. And so, but as a computer science graduate, I [43:05] I have a lot of affinity for [43:08] the science of computer science. [43:11] It's also an art form. Like if you read code or... [43:14] Maybe we used to read code for fun. [43:17] some code is more elegant than other. And you would readily see it. That's a beautifully written piece of software. I'm like, that's kind of garbage, but it does the job. And so there's a matter of taste and elegance in...

[43:28] programming. [43:29] And... [43:30] It's also a craft when you actually look at well-made [43:34] production grade codes and not like a [43:36] project you built on your desktop, but something that you deployed on thousands of servers. [43:40] You can... [43:41] Identify if you know what you're doing. Like that's a well-crafted piece of software. It's like a thing that, you know, someone could like stamp their... [43:48] brand or whatever the term craftsman of yesteryear would use for this. And so [43:54] because it's such a combination of these three things [43:59] I don't think... [44:00] the LMs are going to naturally always deliver beautifully crafted, elegant, [44:06] and yet scientifically correct code. And so you'll still need some degree of taste, even so much to converse with the LM to steer towards the right outcome. [44:15] And for that, you have to understand what you're doing. Like we may not spend a lot of time, maybe soon enough, we'll spend zero time [44:22] learning [44:24] the exact minutiae of [44:26] syntactic [44:27] decisions of each programming language, but the conversation with the machine around [44:31] what you as a software [44:34] sculptor [44:35] would consider to be elegant, I think will remain. And that that's certainly important to me as a [44:40] as a programmer and [44:42] I think without having [44:44] a solid foundation in computer science. [44:46] I wouldn't be able to have that conversation. [44:48] Have you started on any side quests? [44:51] I have lots of side quests. I've always had lots of side quests. So the thing that's actually [44:55] What's so amazing about this moment in time for engineering

[44:59] for those of us who just [45:00] know how to write code and take pride in being able to write a lot of code. [45:04] the [45:05] unless you're current, and even if you are current, [45:09] There's always a thing you've never done that. [45:11] Like I've never built. [45:13] an iOS app like I know how they work. I understand [45:16] the frameworks that exist. I've seen the tools. I know people who are very good at building great iOS apps, but sort of the [45:23] The ramp up to like, oh, I got to set up Xcode and all the infrastructure to build a really good [45:30] iOS app. [45:31] It's a lot of work. Maybe I'll do it next weekend. [45:34] With LMS, the barrier to entry into an area of [45:38] programming that you've never done before is nil. [45:41] So I was annoyed at some [45:44] remote control functionality that I have at my home in my home AV system. So I decided I'm just going to build an iOS app to completely get rid of my stupid remote and have a remote on my phone. [45:54] And [45:56] Normally a year ago, I have to learn how to build iOS apps. I have to learn how to interface with this audio video system that I have. That's a lot of work. Maybe next weekend. [46:05] this time around, like, well, I can just ask my favorite agents to go research this stuff and [46:10] set it up for me and then I can just focus on exactly the functionality that I want and the [46:14] implementation quirks that I'm interested in. [46:16] And now I have a remote that I haven't touched my physical remote in quite some time. It works really well. [46:20] So that's a side quest that [46:23] manifested itself as a as a new app on my phone. It's also the first app I've ever built. I've since built a bunch more apps because

[46:29] Seems fun and easy now. [46:30] Like what? Did you build your own DoorDash like everyone with OpenClaw? No, I think that that's the silliest thing people have said. DoorDash is not important by way of having a great app. It's important because it integrates with all your favorite restaurants. So until OpenClaw can also do [46:46] Things like [46:47] call every restaurant and negotiate with the owner and install the right kind of tablet and software. [46:54] extract the menus and all the things that DoorDash did. I think DoorDash is actually quite safe in their business. [46:58] Well, what companies do you think are most vulnerable because of this? [47:02] I think companies that... [47:04] have built [47:05] software [47:06] Orly. [47:07] and just sell that software. [47:09] are very vulnerable. The bar for quality of software is going up rapidly. [47:14] the [47:15] "Yeah, it kind of sucks and has bad interface." [47:18] But it really serves an important function, and I can't be bothered to [47:22] hire engineers or [47:23] build the same thing myself, like that excuse is gone. Like if you really hate some pieces of software that [47:30] you're using. [47:32] and it's just software doesn't have some deep sort of proprietary data, proprietary source of value, [47:38] it will get replaced. Like there's no reason why not. So I think that part is, but that's sort of the, [47:45] It's long overdue to get rid of bad software. [47:49] VCX by Fundrise, the public ticker for private tech, allowing investors of all sizes to invest in venture capital. View the portfolio at GetVCX.com. That's GetVCX.com. Some of you may not have heard this yet, but our sponsor Public just launched something called Generated Assets, and it brings AI into investing in a way I've honestly never seen before. Here's how it works. You type in an idea like AI-powered supply chain companies

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[49:56] I think most of what we've done has actually been fairly organic. We've definitely [50:02] focused. [50:03] our engineering teams more and more on [50:07] mastery of the tools that are available. So for a while, we'd sort of had this point of view of like your writing code, your writing code, do whatever you like and have whatever tools you want and [50:16] as the tools improved, we had [50:19] become more and more [50:21] sure of what works for us and what we don't like. And so we've we've been [50:25] sort of switching the [50:27] from [50:29] all comers welcome as far as tooling is concerned to some fairly prescriptive ideas on what works well for us as a company. [50:36] Um, [50:39] I think more than anything, the expectation of how much can we ship and what quality we are willing to, uh, [50:45] allow [50:47] has increased and that's good. We know. [50:50] These tools are fundamentally about productivity gains and that [50:53] Those have been amazing. [50:54] How do you think it affects commerce? How do you think commerce gets impacted? [50:59] um i think [51:01] Commerce is a very [51:03] broad topic. There are many different kinds of things people buy. [51:08] And, [51:09] some of them are already agentic. Like DoorDash is agentic commerce. When you tell DoorDash, you're not speaking to a human, you're not, [51:17] discussing your basket with a [51:21] person, you're telling an app, I need more bananas. Like you can [51:24] tell your app or soon you'll be able to tell your app, I need bananas every week, like my potassium got a bananas. And so

[51:30] That's a gentic. It's just out there replenishing bananas for me. Can't have any cramps while you're biking. No, very important. [51:37] Um, but [51:39] I think... [51:40] Some parts of shopping are inherently entertainment. Like when I'm picking a gift for my wife or I'm trying to find something that will amuse my children. [51:49] I don't want to outsource that. Like my taste is... [51:52] you know just the right amount of personal and quirky that [51:56] outsourcing into a robot, no matter how good it is at [51:58] being me [52:00] won't feel authentic or at least i wouldn't believe that it will feel authentic to the recipient so forms of shopping that are pure entertainment [52:06] are never going to go entirely [52:08] Robotic. [52:09] And then there's everything in between. There's things like price discovery. There's things like [52:14] deal hunting and [52:16] all of that sort of [52:18] Fairly easy to imagine if you're [52:22] whenever you caught yourself thinking, I wish I had an assistant to do this for me, you will now. Like that's where it's all going. [52:28] You've set that credit... [52:30] has devolved what do you mean by that [52:32] So look at the history of credit, it kind of began [52:36] as [52:37] a form of [52:39] sustainability, [52:40] measure for farmers. So it goes all the way back to [52:44] Roughly. [52:46] 2000 plus or minus BC, where... [52:49] businesses, farmers that would go through these periods of abundance once they harvest and sell their grains and [52:56] need capital to seed and [52:59] process their crops, they needed to borrow money. And so that kind of emerged as a means of like, I know you're growing something. I know you're going to have access to revenue later. I'll give you money now and you can pay me back later. And sort of buy now, pay later is a fairly old concept.

[53:14] for a very long time until [53:18] Middle Ages. [53:19] you had a fairly... [53:21] well... [53:24] self-governing incidentally, there were no consumer protections. Although Code of Hammurabi apparently has [53:29] parts of it that describe things like don't screw your borrower don't overcharge them and obviously there's both um [53:35] Biblical and Quranic prohibition on [53:38] excessive interest or in some cases, pure interest. And so it's the idea of like, don't screw your customer is has been with us for a while. [53:45] And like in the last hundred years or so, we've rapidly left the whole don't screw your customer idea. [53:51] as like a footnote of history where you now have you've gone from interest. That's easy to estimate because it's simple, doesn't compound to only really doing compounding interest. [54:01] I never looked in a little while, but majority of American banks, [54:04] derive a disproportionate percentage of their income from late fees, which is sort of like. So that's actually like a really good example of devolution of credit. [54:14] So a leafy was obviously conceived as a means of slapping your wrist and saying, like, if you're going to be late, I'm going to remind you, like, it's not going to be a lot of money, but it's going to be enough. I wish I were on late. [54:25] It should be better next time. At some point, someone said, wait a second, that's 100% gross margin product. When I charge you a late fee, you just pay me more money. There's no cost. [54:34] other than like sending you a nasty gram, you're like, of course, of course, I'll pay you a late fee. [54:38] So it's better if you're late a lot because then I'll make more money. And it cost me nothing to create that revenue line. So over time, credit just

[54:47] started skewing more and more into this bucket of let's do things that are [54:52] not at all pro-borrowers, [54:54] They're just great for revenue. A firm was founded in many ways to... [54:59] fight all of that and [55:01] destroy the [55:04] ridiculous and the exploitive. [55:06] What do you think the biggest misconceptions you're still receiving... [55:10] about Buy Now Pay Litter. [55:13] What were the biggest hurdles even starting? [55:16] The starting actually wasn't all that hard. And initially, [55:21] People didn't believe that... [55:24] For a long time, we would tell people we don't charge late fees. Never have, never will. And they're like, yeah, sure. You say that and would say, all right, well, [55:31] this interest rate is zero. So a lot of our loans have no interest. And people are so used to this idea of like, it's a zero percent rate, but there's a tiny asterisk. And if you read the fine print, it's like, it's not really zero, zero for now. And then it changes. And so [55:45] We've. [55:46] build a company [55:47] to fight all of that. Like we, we are [55:51] fastidiously [55:52] precise about the cost of credit. We don't compound [55:56] interest specifically [55:58] to make sure that we can pre-price every loan and say you're borrowing $500 and your total interest charges will be [56:04] $25 or $0 if somebody else or merchant is paying your interest for you. [56:09] And for a long time, consumers, [56:11] or sort of like, [56:12] Yeah, you say that. [56:13] But there's got to be something in a fine print. One of our core values is no fine print.

[56:17] to remind ourselves and the rest of the world that we're not hiding our business model in there. So that was kind of the early stages, probably the hardest thing to persuade people of. [56:26] These days, [56:28] the perception is actually [56:30] shifted our customers know exactly what we're offering and why we're here and they love us for it. I look like a [56:39] logo carrier 24/7 [56:41] because [56:43] I love getting stopped in like flights or [56:46] coffee shops be like oh you work for a firm that's so cool like i love your company [56:51] And it happens to all of us, not just me. Like a lot of people here love the experience of like having our logos on because people like the product so much. People who don't use Affirm. [57:00] sometimes will trot out [57:02] objections along the lines of, well, somebody's borrowing money. [57:06] Doesn't that mean they don't have their own? Shouldn't they just be like, [57:09] buying, [57:10] with the money they have, like, [57:12] Newsflash, half the country revolves on their credit cards. [57:15] which means that they're paying interest [57:17] over and above what they could pay back to their credit card issuer that month. [57:23] If you're going to borrow money and pay interest, you should not be paying compounding interest. You should definitely not be paying deferred interest. [57:29] you should generally speaking not be subject to late fees or snooze fees or any other kind of fees. And so [57:34] building a better system, [57:35] takes time, but [57:37] People who use us know exactly. [57:39] how good we are and appreciate it for it. [57:43] What is it like being a public company... [57:46] and going through these cycles and and like i guess what is the biggest pushback in from

[57:53] institutions. [57:54] retail. [57:56] most [57:59] people [58:00] who understand [58:03] who we are and what we're here to do and how long term we're thinking. [58:09] don't really have a lot of pushback. If you look at our performance, certainly over the last [58:13] few years that we've been in public, [58:14] we've consistently [58:16] under-promised and over-delivered over and over and over again. And [58:20] As much as [58:22] The whole quarterly system is a little bit silly. Like, why is it a three month boundary that you need to get a letter grade for your performance? It's, you know, it's a... [58:31] performance reporting system like any other [58:34] We've been very, very good. [58:36] with the actual metrics that we're graded on, that we want to be graded on. [58:42] And as far as sort of shareholder feedback is concerned, there are two groups. [58:46] for any company, not just us, [58:48] people who are [58:50] inherently interested in the short term performance, people who are inherently interested in the long term performance. [58:54] I have absolutely zero time for the former group. I only care about people who are here [58:59] to ride along. [59:01] with us for the mission. [59:02] which, [59:04] We said, well, [59:05] We'll take a few more years. [59:08] just starting to get close to a couple percent of e-commerce and maybe in some foreseeable future we'll get to one percent of total commerce in the us alone so we're very very small on a [59:22] 47, 48 billion dollars of

[59:24] loans. [59:25] this fiscal year alone, and yet that's a drop in a bucket. So before [59:30] Before the final grade is issued, we gotta... [59:32] probably a few decades to go, but [59:34] those who are willing to [59:36] come with us on the journey. [59:38] I think are seeing that we are [59:40] excellent at executing on this mission. [59:42] Yeah. [59:43] How do you measure performance through all of this? One of our, not one of our, [59:48] our key sponsor our favorite sponsor brex who i think you're an investor in i am we have some merch for you by the way [59:55] It is a limited edition hat. It's beautiful. [59:58] We'll give it to you. But so with Brex, they're all about performance, spending smarter, moving faster. [1:00:04] How do you measure performance for a firm? And what are the different benchmarks you're trying to hit each year? Is it qualitative, quantitative? How do you determine that? [1:00:13] very [1:00:14] quantitatively driven company. [1:00:17] We measure a bunch of different metrics. [1:00:19] about the company [1:00:22] Bye. [1:00:23] like, like any [1:00:25] fairly sizable enterprise at this point. We care about... [1:00:29] Revenue. [1:00:30] And we've committed. [1:00:32] a few years ago now to get to profitability. [1:00:35] and did. [1:00:36] And so just measuring profit, [1:00:39] and growth of profit is important. [1:00:41] And then... [1:00:45] the sort of quantitative, qualitative thing that we care about [1:00:49] is what we call building a high performance culture. So we really care about [1:00:54] making sure that we're not just

[1:00:58] hitting some numbers, but are doing so efficiently. We're doing that with [1:01:05] minimum necessary [1:01:07] team growth, [1:01:09] In other words, [1:01:10] acquiring more operating leverage and and so on. So we [1:01:14] Those are kind of the three major [1:01:17] areas that we measure for ourselves. [1:01:19] keep on trying to find a way to [1:01:21] embed a way to have fun in our metrics. We have a lot of fun here. That's for sure. Probably sometimes more than... [1:01:29] Too much fun. [1:01:31] There's something that's too much fun, but maybe more than... [1:01:35] some of our [1:01:37] commentators expect us to have. But I'm [1:01:40] You can't take yourself too seriously. In fact, the more [1:01:44] Long in a tooth, he becomes a publicly traded company. [1:01:47] the more you have to find ways to [1:01:50] Goof off. [1:01:51] So we do that, but trying to embed [1:01:55] sort of a fun metric is a unfinished project. [1:01:59] - Interesting. [1:02:00] Number of Big Lebowski quotes per shareholder letter. [1:02:05] is a good fun metric. [1:02:07] And. [1:02:08] Have people picked up on that? [1:02:10] Yes. So it, we've been probably for five years and every single letter, but one, [1:02:15] has a big Lebowski quote or five. Like it's plentiful. Like it really doesn't take a lot to find him. [1:02:21] And, um, [1:02:23] So there's like 19 letters or something like that. That actually it's not true. The first year we didn't write letters, we just recorded

[1:02:30] Um, [1:02:31] speeches, which was terrible. So. [1:02:32] We've switched, so maybe... [1:02:35] 16, 18 letters. Each one has a Lebowski reference. [1:02:40] And until very recently, no one caught it. And it was like a way for us to amuse ourselves entirely kind of in our own echo chamber. And then finally, one of the analysts, I think like three quarters ago, [1:02:52] one of the analysts wrote a little, [1:02:53] A note on us saying... [1:02:56] affirm [1:02:57] And it was like, [1:02:58] Q2 fiscal 25. [1:03:00] A quarter that really tied the room together. Flash up skis. They finally got it. Now there's definitely... [1:03:09] There's definitely... [1:03:11] analyst. [1:03:12] Not all of them write it, but definitely many of them will reference some Lubowski as like a secret language. [1:03:18] I feel like I've interviewed a handful of public company CEOs at this point, and I can tell that they're bored by quarterly reporting, and they're all trying to do different things, like keep it fun. So I guess with yours, it's big Lebowski quotes. Some of them are doing live streaming. Some of them are doing different kinds of theatrical shows, that kind of thing. [1:03:42] How was it? What is it like? [1:03:44] Borders is not exactly right. It's an important thing. Like you don't want to take... [1:03:51] to [1:03:53] the moment where you're [1:03:54] disclosing everything that happened in the last 90 days. [1:03:59] You can't make mistakes. You might might be shareholder fraud if you do that and so on. So you have to be pretty careful.

[1:04:06] And, [1:04:07] It is also a moment where [1:04:10] all eyes, or at least the eyes of those who care are on you. And so it, [1:04:14] It's a momentous occasion. It's not a... [1:04:17] It's not a joke. In fact, it's so momentous that a lot of people become so wrapped around the axle of like, oh, the quarter's coming up, you know, like I know CEOs. [1:04:25] They used to know CEOs that would like lock themselves in a conference room for a week at a time. [1:04:30] before the quarterly reporting and surround themselves with numbers and pour over the metrics and like really take it very seriously. [1:04:37] At which point it becomes more about the quarter than about the actual quarter. [1:04:41] but more about the report than the quarter. And like, that's definitely a mistake. Like, spending a week obsessing over something that happened [1:04:48] that ended six weeks prior. [1:04:50] is clearly a huge waste of time. And so how do you balance the... [1:04:54] need to [1:04:56] show up and speak and be intelligent, be interesting, sort of [1:05:00] Obviously, [1:05:01] get your analysts to sort of understand what you've done and write [1:05:05] thoughtful notes to shareholders, [1:05:07] But also like you have a company to run this. This is sort of a. [1:05:11] a moment in time and you know it's one day and then [1:05:13] It's over and you go back to work. [1:05:15] And so the best I know how to do it is you just [1:05:17] you take it as seriously as you must and you prepare and you [1:05:21] do the work. [1:05:22] But you have to embed some fun. Otherwise, you're just [1:05:25] I'm not going to. [1:05:26] Enjoy the day and... [1:05:28] the market. [1:05:29] is unpredictable. So if you think you did great, the market sells you down or you did [1:05:34] and you're kind of bummed and the market buys you up.

[1:05:37] you're not going to be able to understand it anyway. So, [1:05:41] The only antidote I know is [1:05:42] Just try to have fun. Is your mood impacted by stock price? [1:05:47] Not really. It used to be at some point where I thought there was a [1:05:51] Yeah. [1:05:52] any correlation between [1:05:55] our performance and the Christ action in the moment. [1:05:59] I would sort of look to it to understand, hey, [1:06:02] what is what is the market telling me now? And over time, I realized that [1:06:07] even like in a few days, [1:06:09] during and before and during and after [1:06:13] all the reporting, there's so much going on in the market. [1:06:17] it's almost not worth paying attention to. So you can't not look, but you can't ascribe too much value. [1:06:24] too much signal value in what the price is doing. [1:06:27] during earnings or after earnings. And so [1:06:29] I think there's a famous quote. I think it's Graham, but it's [1:06:33] ascribed to Buffett and others for luminaries. [1:06:36] In the short term, the market is a voting machine. In the long term, it's a weighing machine. [1:06:40] And [1:06:41] I'm a big fan of [1:06:43] Sort of reminding myself if the price is going up a lot, [1:06:47] You can overlook that if price going down a lot, it's important to remember, but [1:06:50] Either way, [1:06:51] you're working for the long term. If you're willing to... [1:06:54] drop everything and look at the short term [1:06:56] You're joining the group of investors that I said I don't care about. [1:06:59] I certainly don't want to do that. [1:07:01] A lot of value is now stuck in the private markets, and there's pressure for those companies to go public or do something.

[1:07:10] What advice do you have for those CEOs that might be on the fence of going public or... [1:07:15] trying to time the markets with it. [1:07:18] Timing the market is always [1:07:21] a very tricky thing to do. I'm not sure I have any advice for those who are trying to time the market. [1:07:25] Uh, [1:07:28] See, there's only so many useful things you can say. I mean, going public... [1:07:31] Most people will tell you it's this long, protracted affair, and it's so hard, and it's... [1:07:36] It's actually not like we decided to go public in September. We were basically ready with everything by November. [1:07:42] in December of... [1:07:45] Um, [1:07:46] 2020, the SEC told us [1:07:48] Please... [1:07:49] Like don't come out. [1:07:50] this year. [1:07:52] We're so overwhelmed by all these companies trying to go public. Could you please hang on and like do it next year? And so we went public in early 21. But in reality, we could have been out. [1:08:01] less than three months after we decided like [1:08:03] literally rolled out of bed one morning and said [1:08:05] Let's go public. And what do you know? It takes less than three months. So I think the effort, [1:08:11] is [1:08:12] manageable. You have to have the team for it. You have to have the [1:08:16] degree of financial [1:08:21] metric keeping and ability to report [1:08:25] to to the level that public markets require and that's as he is [1:08:28] does not kid around with like what requirements are. So you, [1:08:31] You'll very quickly find out if you have it or don't, but [1:08:33] the sort of the writing of the S1 and the [1:08:36] the produced roadshow, all of that takes very little time.

[1:08:40] um, [1:08:42] In terms of whether it's good for their shareholders and sort of the actual cap table management, [1:08:50] Which company's [1:08:51] pretty unique. I don't know if there's a one size fits all [1:08:54] We were ready to go. It was the right thing for us to do. [1:08:58] I have no... [1:08:59] Yeah. [1:09:00] no regrets or or issues with it and you're signing out for a different kind of uh [1:09:07] conversations with your employees where sometimes they will look at the price of the stock and [1:09:12] opine on whether that they're being compensated well or not. And that that's an important new consideration you'll have to deal with. [1:09:18] You're also an investor in many companies. We mentioned this. [1:09:21] Thank you. [1:09:22] For the companies that you've invested in, [1:09:24] I'm, [1:09:25] I'm wondering, like, [1:09:27] because there's been so much [1:09:30] built up [1:09:31] valuation, inflation, [1:09:34] On the private side, [1:09:35] Are you worried at all for them? [1:09:37] to go public and get repriced? Would you recommend they get repriced or like, is it a momentum tail? Like, [1:09:43] There is a lot of tension there. So where do you think that lands? Do you think that a lot of companies are going to have to be repriced? [1:09:52] It's always super hard to tell these things are so... [1:09:55] I mean, [1:09:56] Yeah. [1:09:57] I am sure there are companies that are... [1:10:01] do some unpleasant news from their last private round to their IPO. But [1:10:06] Again, [1:10:08] I'd like to believe. [1:10:09] that the company's

[1:10:11] I have the privilege to be a part of. [1:10:14] as a shareholder, as an investor, [1:10:16] are doing it for the long term. [1:10:18] So the day of the IPO, [1:10:20] is the beginning of the public journey not the moment where i oh finally i can just [1:10:25] unload this thing. If that's how you're thinking, [1:10:28] You don't really care if it's getting repriced or not. You're just hoping for liquidity. [1:10:32] I think if you're [1:10:34] looking at something where [1:10:36] you're thinking like, wow, be amazing to have institutional shareholders and the brands. One of the positives of being a public company is, [1:10:43] People recognize it. People know who you are just through the news cycle, just, you know, tuning into CNBC every once in a while. We hear the company name mentioned. [1:10:51] So, [1:10:54] If you're prepared for that journey, if you're ready to take it through... [1:10:57] the next 10, 15, 20 years, then it's time to go public and [1:11:01] Doesn't matter if on day one you're [1:11:03] below your last private round. The question is, where do you end up [1:11:07] five years from now, 10 years from now. [1:11:09] Really wanted to ask this even before we started, but... [1:11:13] you're a very well-read person, clearly care a lot about finance and payments. And I [1:11:20] I just recently interviewed the CEO of Roblox and he created an entirely new digital economy. He created like a game to create entrepreneurs, which I think is like quite underrated, especially [1:11:31] for a generation of socialists. They're secretly capitalists. They don't even know it. But I'm curious from your standpoint, after studying... [1:11:39] finance and economies for so long, how would you construct your own economy? What would the payment system be like?

[1:11:47] modulo recent years. [1:11:50] proposed perversions. [1:11:52] generation of socialists [1:11:55] I think we actually have a pretty good economy. [1:11:58] Take it from somebody who had spent his... [1:12:00] for 16 years. [1:12:02] under the [1:12:03] warm embrace of collectivism. [1:12:05] as a certain mayor recently put it. [1:12:08] Socialism sucks. [1:12:10] It is terrible. [1:12:12] The only people who... [1:12:14] do well [1:12:15] in [1:12:16] redistribution of wealth are the ones doing redistribution. Like it's fundamentally corrupt and not enough bad things I can say about socialism. [1:12:24] So. [1:12:24] I think capitalism works. [1:12:26] exceedingly well, especially when [1:12:29] the competition is encouraged and [1:12:32] allowed to, uh, [1:12:34] flourish. [1:12:38] I think the, I'm a huge fan of Roblox and I spent a fair amount of time before a firm studying these closed system economies. Roblox is awesome. [1:12:47] is one of them, but there are many more that came before Second Life as a sort of a [1:12:52] canonical example of [1:12:55] It's... [1:12:56] a an economy that was built whole cloth from nothing and people [1:13:00] We're able to find value. [1:13:02] in things that were made of pixels, which is kind of amazing because there's no utility that's just there [1:13:08] for aesthetic pleasure and [1:13:10] Ephemeral value. [1:13:13] I think... [1:13:15] Thank you. [1:13:16] It may be a lack of imagination, but...

[1:13:18] If you look at the success arcs of [1:13:21] these [1:13:22] systems. [1:13:24] Over time, they resemble [1:13:27] US economy more and more sort of like [1:13:30] They typically start out with a fixed money supply and like, [1:13:33] We'll figure out how to inject more money later. And then suddenly more people come in and you need more money. [1:13:39] liquidity and so they sort of start [1:13:41] pegging their currency to the dollar or floating it or it becomes more and more like the real world and so [1:13:48] We've had thousands of years to evolve. [1:13:50] a fairly good [1:13:52] economic model, then US is most certainly [1:13:56] 1A in the right way to do it. [1:13:59] So, [1:14:02] I don't know if it's [1:14:04] obvious how you'd improve on that. In fact, I would argue [1:14:08] probably can't like i'm a big believer in evolution and we [1:14:12] We've had all sorts of experiments. We went from [1:14:16] gold standard to um [1:14:19] floating money to all sorts of central banking policies and [1:14:23] ended up in a pretty decent place since I suspect [1:14:27] I don't know if I have a lot to contribute. Well, we do have $39 trillion in debt. [1:14:33] as long as we can produce enough value to compensate those that hold it. [1:14:38] We're going to be okay. I think people were like, [1:14:41] holding out and hoping that AI would help cover the difference with that. Do you think that's possible? Do you think that's still a narrative?

[1:14:49] It's hard to tell. It's a really good question, actually. And [1:14:52] The question is, [1:14:54] Where does value accrete in this new age? [1:14:58] On the one hand, it's very tempting to say, well, the country of our resources and our access to [1:15:04] physical [1:15:05] resources and [1:15:08] capability that we have to build and innovate and sort of create things out of atoms. Having this incredible boost of productivity expressed in bits is just going to be incredibly powerful and leapfrog anything and everyone that is remotely connected. [1:15:22] eyeing our supremacy [1:15:25] You could also make the argument that all these countries where... [1:15:29] there's precious little by way of resources are now boosted [1:15:33] tremendously by advanced in AI. [1:15:36] I tend to believe in the former just because I'm, [1:15:39] Being an American by choice, you sort of [1:15:41] Better be a patriot. Otherwise, what exactly were you thinking? And I am. So I tend to think that we will probably end up with just a [1:15:51] amplification of our advantage. [1:15:53] um that said we're not without rivals on the world stage and so [1:15:57] We'll, we'll have to compete, but I'm a big fan of competition. [1:16:00] Who do you learn most from? [1:16:03] I try to... [1:16:04] enter every conversation, [1:16:08] asking myself, what will I learn from this person? [1:16:11] in this [1:16:12] moment so [1:16:14] I like to believe I learn a lot from everyone I encounter. [1:16:18] Um,

[1:16:21] I really love learning from... [1:16:25] very technical CEOs these days. [1:16:28] because all of us are [1:16:31] trying to keep up and sort of do our day job and run it. [1:16:34] a company and set strategies or figure out what the future looks like. [1:16:37] But also by night, we're suddenly all back to writing code, which we thought we sort of did the last of. [1:16:43] five years ago or 10 years ago and like production environment, like all of us, [1:16:46] who loves. [1:16:47] Programming. [1:16:49] tinkered until recently and suddenly you don't have to tinker you can just [1:16:53] build and actually produce real products and kind of watch your work go live. And so [1:16:59] reconciling this opportunity and sort of amazing moment where coding is fun again and easy again [1:17:05] with the need to run a big company. [1:17:09] is [1:17:11] a lot of fun, but it's also a real challenge. And so talking to people who are in the same position recently has been [1:17:15] Breath of fresh air because I get to. [1:17:17] find out about their productivity hacks and sort of [1:17:20] share my own. [1:17:22] Um. [1:17:25] Yeah, it's really rare that I... [1:17:28] talk with someone and think like, wow, there's nothing to learn from this person. Okay. [1:17:33] We're surrounded by smart people. Yeah, it's part of why Silicon Valley and California, warts and all, is a pretty great place. There's such a concentration of really smart people. They're fun to learn from. [1:17:45] As we wrap up, [1:17:47] Max Lovechin, what is your hottest take right now? [1:17:51] I'm like the king of cold takes. Everything takes. I'm a very slow thinker. I'm a slow reader. I'm a slow thinker. Everything takes a long time. I go over these super long bike rides just to...

[1:18:01] think about thinking. [1:18:03] um let's see if i can come up with a hot take for you [1:18:06] If you look at the business models of lenders, [1:18:11] in the US for sure, probably worldwide. [1:18:13] a huge percentage of it is based on [1:18:17] sort of two unsightly practices. [1:18:20] It's, [1:18:20] Betting. [1:18:21] on the idea that [1:18:24] You'll scrub. [1:18:25] and won't notice in time and then I'll make some money. [1:18:29] and on the idea that [1:18:31] you're not really going to bother reading the terms and conditions. You're just going to [1:18:34] get your money and [1:18:35] go and then later on we'll pay for it. [1:18:38] And I think with AI as [1:18:42] AI actually [1:18:43] perforates all the way down to consumers like not Silicon Valley people, not like normal people in [1:18:49] middle America or middle of the world. [1:18:51] just using AI tools for [1:18:53] the most basic daily... [1:18:56] tasks with money. [1:18:59] this whole genre of let's make money when you least expect it or let's screw you and hope you don't notice or [1:19:05] Let's just charge you some fees because you won't be able to catch on quickly enough. Like all of that is going to get flushed out because no AI is ever going to be like, [1:19:13] "Oh, you've given me a task to find you a good loan. [1:19:16] I found one that's going to take advantage of you. Hooray. Like, like, absolutely not. Like, we're not going to let that happen to you. Like my job as a robot is to take good care of you. So I think [1:19:25] you'll find [1:19:27] And it's broader than... [1:19:28] finance, but I care a lot about consumer finance. But in general, I think

[1:19:33] the [1:19:35] NetIQ. [1:19:36] of the world. [1:19:37] is about to go up like 50 points. Like we're surrounded by people... [1:19:41] Not in Silicon Valley, of course. [1:19:44] to quote the big Lebowski not a nom of course right um [1:19:49] Yeah. [1:19:50] The average IQ is still 100. [1:19:53] I think the average IQ... [1:19:55] with AI in your ear at all times is about to go up to 150. [1:19:59] which is like north of the genius definition. So very, very soon [1:20:04] the willingness to put up with [1:20:07] random [1:20:08] obnoxious things like low quality or crappy terms or products that pretend to be something they're not like all of that is just going to get flushed out. [1:20:17] very quickly and companies that [1:20:20] have business models that are buried in a fine print of some kind are all in for a very rude awakening, which I'm very happy about. But I think that's a... [1:20:28] That's a reality most people have not fully contended with, which... [1:20:32] I'm excited to take advantage of that for now. [1:20:34] Amazing. Quite the optimist. [1:20:37] I'm an awesome person. [1:20:38] I'm an extreme optimist. [1:20:39] This is a perfect way to end the conversation. Thank you so much for having me here today at Affirm. I love the espresso. Love the tour of the office. It's kicked in. It's kicked in. [1:20:50] I'm about to go for a bike ride. [1:20:53] Definitely go for a bike ride. No, but thank you so much. This was a great conversation. Thank you. [1:20:57] Hey, it's Molly. If you enjoy our interviews, check out our newsletter, Sorcery.vc, where we deliver a once a week top deals and tech headlines email and also go deeper on our podcast interviews. Subscribe to Sorcery today and don't forget to subscribe to the podcast on YouTube, Spotify, Apple or wherever you listen. Link in description to sign up.