Visa, every mention
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every year 2023 anyone Ben Gilbert 174David Rosenthal 152Jason Calacanis 1
Verbatim, from the transcripts: the passages where Visa comes up
Holiday Special 2023 (Audio) · Acquired
- ▶ 1:47 Ben Gilbert If you count Visa, it's six.
- ▶ 2:22 Ben Gilbert We're just gonna do a lot of LVMH, NFL, uh, Visa, Costco, Nike, and the, you know, mixed in there.
- ▶ 16:03 David Rosenthal And we did the Visa episode that we finished the year with was like the NFL coda part two.
- ▶ 16:14 David Rosenthal Nintendo, Lockheed, Porsche, Nike, Costco, Nvidia part three, and then Visa.
- ▶ 16:46 Ben Gilbert I think the most interesting businesses, or businesses that sort of tickle me, are Costco and Visa because there's a purity to them.
- ▶ 17:19 Ben Gilbert Visa, on the other hand, is like the best operating leverage business.
- ▶ 17:35 Ben Gilbert It's probably Visa to do this sort of, uh, least work for the most free cash flow.
- ▶ 17:46 Ben Gilbert It's almost like the complete opposite over in Visa land.
- ▶ 22:38 David Rosenthal I think our best episodes this year were LVMH, Costco, and Visa.
- ▶ 30:32 David Rosenthal But I think, um, the other part of the coin question of what was our best episode, I think Visa was our best episode.
- ▶ 30:49 David Rosenthal But Visa, I think, was the perfect blend of, like, an NFL Sunday gone extremely right.
- ▶ 31:13 David Rosenthal Which for me were LVMH, Costco, and Visa.
- ▶ 33:28 Ben Gilbert If you look at the Visa numbers, I just pulled up my Visa notes, Visa does 8600 transactions per second.
- ▶ 33:36 Ben Gilbert So that's, what, 200 times as much throughput at Statsig than at Visa?
- ▶ 2:24:55 Ben Gilbert So thanks to, uh, the two listeners who recently wrote in correcting me on Visa
- ▶ 2:25:10 Ben Gilbert So we'll be including probably, I don't know, we've got three or four more Visa tidbits that we'll toss in the email for that.
- ▶ 2:25:23 Ben Gilbert We just did this awesome Visa follow-up.
Visa (Audio) · Acquired
- ▶ 0:57 Ben Gilbert And Visa, along with just one other competitor, MasterCard, has tirelessly spent decades stitching together all the banks, merchants, and the relationships with consumers to make this possible.
- ▶ 1:09 Ben Gilbert Now, this is just the rosy side of the story, and merchants may harbor far less rosy feelings about Visa given how much of their profits go to interchange fees, but the duality of the story is what makes it so interesting to understand.
- ▶ 1:36 Ben Gilbert So here are some astonishing stats on Visa.
- ▶ 1:39 Ben Gilbert It is the 11th most valuable company in the world.
- ▶ 1:43 Ben Gilbert It is worth more than any bank in the world, including every bank involved in creating it.
- ▶ 1:49 Ben Gilbert Visa's brand is among the very most trusted in the world associated with reliability and security.
- ▶ 1:55 Ben Gilbert But that said, if you asked most people what Visa does, they could not actually articulate it.
- ▶ 2:01 Ben Gilbert Visa does not extend credit.
- ▶ 2:03 Ben Gilbert They do not issue cards.
- ▶ 2:05 Ben Gilbert They do not work directly with merchants.
- ▶ 2:07 Ben Gilbert They do not work directly with consumers.
- ▶ 2:10 Ben Gilbert They are not a bank or a financial institution.
- ▶ 2:12 Ben Gilbert They don't ever bear any risk.
- ▶ 2:14 Ben Gilbert They are merely a network connecting banks to other banks.
- ▶ 2:22 David Rosenthal I can't believe we're all the way in season 13, and we haven't talked about this company yet.
- ▶ 2:26 David Rosenthal But as we will get into, it's always been overlooked and underrated.
- ▶ 3:29 David Rosenthal Well, we are starting actually with a big thank you to Dave Stearns, author of what is undeniably the very best book on Visa and its history, Electronic Value Exchange.
- ▶ 3:59 David Rosenthal So, Dee Hock, the founder of Visa, who we will talk a lot about as we go along here, he told this great story of how after his time at Visa in his kind of older age, he would start his speaking engagements with a little thought exercise…
- ▶ 4:16 David Rosenthal He would get up on stage, he'd hold up his Visa card, and he would ask, how many of you recognize this?
- ▶ 4:28 David Rosenthal Then he would say, okay, now how many of you can tell me who owns this company?
- ▶ 4:34 David Rosenthal And every single hand in the room would always go down, and they would say, how did this company start?
- ▶ 4:45 David Rosenthal It's just wild, as we were saying in the intro, how important this company is, and yet still to this day, I think, you know, maybe a few more people than in Dee's time know the answer to these questions, but not many.
- ▶ 16:20 David Rosenthal So this comes to be kind of post-depression in the 19 thirties, 19 forties in the U.S., and this really is starting to sound a lot like Visa.
- ▶ 24:02 David Rosenthal This is a version of D Hawk holding up the Visa card.
- ▶ 38:50 David Rosenthal And this is the seed of Visa.
- ▶ 38:53 Ben Gilbert But listeners, before we talk about how the Bank AmeriCard Licensing Association morphs into Visa, now is the perfect time to tell you about one of our favorite companies, Blinkist, and their new parent company, GoOne, where David and I…
- ▶ 41:12 Ben Gilbert Okay, David, so how do we get to Visa?
- ▶ 41:15 Ben Gilbert You have been telling me about the Bank AmeriCard from Bank of America, and I opened this show saying Visa's not a bank, and Visa doesn't have direct relationships.
- ▶ 41:24 Ben Gilbert It's this big indirect thing where they work with other banks.
- ▶ 41:39 David Rosenthal In this second chapter, there is also only one person in the world that could have taken Bank AmeriCard and turned it into Visa, and that is D-Hawk.
- ▶ 45:58 David Rosenthal So B of A has no distinction between what ultimately now in the Visa network and MasterCard and others is called issuing banks.
- ▶ 46:39 David Rosenthal Fees are obviously what Visa does today.
- ▶ 47:04 Ben Gilbert This new Bank of AmeriCard licensee system that they're starting to sort of develop here that would become Visa, it's an open loop system.
- ▶ 51:37 David Rosenthal So what are the colors of Visa?
- ▶ 52:37 David Rosenthal Visa.
- ▶ 57:01 David Rosenthal This is where the birth of Visa happens.
- ▶ 59:36 David Rosenthal And I think you could really say on this day, the founder of Visa.
- ▶ 1:01:36 David Rosenthal But D kinda thinks he just got authorization to go create Visa.
- ▶ 1:02:03 David Rosenthal Today, right in theme with Visa, we are talking about reliability and some of those details of Crusoe's infrastructure.
- ▶ 1:12:21 David Rosenthal And that's that he's about as far from the man and image of JP Morgan as you could imagine.
- ▶ 1:18:30 David Rosenthal There's a myth out there that Visa was originally a non-profit and then was converted to a for-profit before the IPO in 2008.
- ▶ 1:19:30 Ben Gilbert That's actually probably the best analogy for Visa is the NFL league organization.
- ▶ 1:21:33 Ben Gilbert Whatever the heck Visa's predecessor name is.
- ▶ 1:26:08 David Rosenthal Visa was global from basically day one.
- ▶ 1:26:46 David Rosenthal Do I want to buy Dee's pitch of it's worth it to me to be a proportional owner of Visa, or I could be the singular dominant credit card network in my own country, which is more valuable.
- ▶ 1:27:29 David Rosenthal They're gonna vote the next morning, final vote, on who's gonna join the soon-to-be visa network, and who's gonna go it on their own.
- ▶ 1:29:44 David Rosenthal So the other thing along these lines that he does, which is just hilarious, once this is all set up, this, the international part of Visa becomes first IBANCO, I-B-A,
- ▶ 1:29:55 David Rosenthal Shortly after this, they rebrand the whole thing into Visa, which we'll talk about in a minute.
- ▶ 1:31:11 Ben Gilbert Okay, so how does the name Visa come about?
- ▶ 1:31:16 David Rosenthal Okay, Visa is so important.
- ▶ 1:31:35 David Rosenthal The soon-to-be Visa knows if we're really gonna
- ▶ 1:32:01 David Rosenthal And as legend goes, there are so many submissions of the name Visa that
- ▶ 1:32:17 David Rosenthal But then they change the name to Visa.
- ▶ 1:32:19 David Rosenthal Visa, it's the most incredible name ever created.
- ▶ 1:33:31 David Rosenthal So, the Visa name, brand, everything, there's two more levels at which it becomes really important.
- ▶ 1:34:05 David Rosenthal So Visa says, okay, here's the operating regulations.
- ▶ 1:34:12 David Rosenthal In the middle white band, Visa logo goes there.
- ▶ 1:34:15 David Rosenthal Nothing but the Visa logo.
- ▶ 1:34:52 David Rosenthal Yep, and this is kind of the brilliance of the Visa model.
- ▶ 1:35:02 David Rosenthal The whole goal is just get more consumers and more merchants on the network, so anything that's gonna do that great while maintaining the universality of Visa
- ▶ 1:35:21 David Rosenthal Maybe the most important thing, though, for Visa really pulling away and becoming, at least for many decades, the dominant global payment card network,
- ▶ 1:35:34 David Rosenthal The name change ends up becoming this incredible growth hack because what happens is they're the new operating regulations now that mandate that all cards out there, all the previous Bank of America cards need to be migrated to Visa cards.
- ▶ 1:36:01 David Rosenthal So the competition within the network, obviously, this still exists, because consumers now, they know, and Visa runs a national advertising campaign, hey, your Bank of AmeriCard is going to switch to Visa.
- ▶ 1:36:13 David Rosenthal So some banks, in a version of the Fresno drop, they start sending unsolicited letters to consumers who are already Visa, Bank of AmeriCard customers with another bank.
- ▶ 1:36:24 David Rosenthal They're like, oh, hey, it's time to switch over to your Visa card.
- ▶ 1:36:44 David Rosenthal But because of this, a whole bunch of consumers start sort of unconsciously switching the bank that issues their Visa card.
- ▶ 1:37:05 David Rosenthal In the one year between when the visa name change first comes online and takes effect, which is in 1977, and the next year in 1978, the number of banks participating in the visa system grows by 20%, because everybody who's not in the…
- ▶ 1:37:24 Ben Gilbert That pushes Visa ahead of what was, I believe, then called Master Charge.
- ▶ 1:37:40 Ben Gilbert And at this point in history, Visa had about 7000 banks.
- ▶ 1:37:46 Ben Gilbert Thirty seven million versus Bank AmeriCard's thirty one million before they changed to Visa.
- ▶ 1:37:51 Ben Gilbert So this, despite all the deck chair rearranging between the member banks, it was great for Visa to leap ahead of MasterCard.
- ▶ 1:38:01 David Rosenthal The number of active cardholders in the Visa network in this one year grows by 45%.
- ▶ 1:38:57 Ben Gilbert And one of the answers of why this open loop system beat the closed loop system is Visa adopts this strategy of the network of networks.
- ▶ 1:39:46 Ben Gilbert In another country in order to expand to that country, whereas Visa just needs to go tap a few banks and say, why don't you go figure out how to grow for us there?
- ▶ 1:40:14 Ben Gilbert Anytime that you have something that's more distributed, you're going to be compromising a little bit on the user experience because you can't sort of rule by fiat when you want to make a change, but it does potentially come with much…
- ▶ 1:40:37 David Rosenthal I mentioned that the DOJ eventually came after both Visa and MasterCard and
- ▶ 1:40:45 David Rosenthal That does happen in 1975, and so this concept of duality takes hold for the bank's duality, meaning they can multi-home on both Visa and MasterCard.
- ▶ 1:41:23 David Rosenthal Because now there's no more competitive vector between Visa and MasterCard.
- ▶ 1:41:40 David Rosenthal Irony of ironies, later in 1988, the DOJ again sues Visa and MasterCard for being a duopoly and not competitive enough.
- ▶ 1:41:54 Ben Gilbert There have been many attempts that we'll talk about toward the end of this episode of displacing Visa and MasterCard or inventing new payment systems, and like, they never work, or they haven't worked yet.
- ▶ 1:42:42 Ben Gilbert But interestingly, Visa and MasterCard cried foul when, ah, you know, all of their banks were multi-homing, and Amex, with their virtue of a slightly different business model, was allowed to go and try to lock up merchants to be exclusive…
- ▶ 1:43:03 David Rosenthal So, this basically concludes the full Visa story.
- ▶ 1:43:45 David Rosenthal Something that is also true, and also I think really underappreciated about Visa,
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