The Exchanges

Q So take us back, you know, in the Starbucks prehistory before you arrived, how did the company start?

A Well, since I wasn't there, this is what I know. There were three founders, Jerry Baldwin, Zev Siegel, and Gordon Belker. And the story that was told to me is that one or both of them were going to school in California, in the Bay Area, and they became enamored with Pete's Coffee Company, uh, which- Alfred Pete? Yeah, and Alfred Pete was, you know, more than anyone else In the history of coffee in America was the true pioneer. He brought specialty coffee, Arabica coffee, to Northern California. And Jerry Baldwin and Zev became so interested and intrigued with what Pete's was doing, and given the fact that they were from Seattle, decided they would try and bring Starbucks coffee in the form of Starbucks to Seattle, Washington. Now what is not known is that when Starbucks opened in the Pike Place Market in 1971, they were using Pete's Coffee.

AI assessment note: “There were three founders, Jerry Baldwin, Zev Siegel, and Gordon Belker.”

Q Why do you think Walmart hasn't been successful once they saw Costco in competing?

A They were too wedded by the ideas they already had. That's everybody's trouble. They just can't accept a new idea because the space is occupied by an old idea. They got in the habit of getting the real estate practically even nothing because they went in little towns where nothing was valuable. So they're always, their occupancy costs are like zero, and they knew how to make big division stores. That was their formula. So it offended them to go against the rich suburbs and to have to pay up for the good locations, and Costco just specialized in the good locations where the rich people live. And Walmart just let them do it year after year. It was a terrible mistake.

AI assessment note: “They were too wedded by the ideas they already had.”

Q What of today's strategy was in your pitch to the board when you were joining as CEO, and what is an emergent thing that's happened while you're in the seat?

A So the pitch to the board was really different in that it wasn't about strategy. It was about operations and how you take the business to break even and profitability, et cetera, right? It was, it was presenting myself as a mature operator and my track record at Expedia. I think now things have changed, which is we have become much more focused on those, on those three segments. And if you look at rides, We have a number of growth bets, which is there's this base business UberX, which is like going to be 50% of our growth. Then about 15% of our growth are international countries where the business model as we had it wasn't legal. So the attitude at the time was, well, if our business model isn't legal, then like we're not coming in until we're invited in. And we took a different tack, which is, well, what business model is legal? And let's adjust our business model to the country versus have the country adjust to the business model. And once you're in you and you build trust within a country and you build a voice, et cetera, maybe then the business model can change over a period to benefit, you know, drivers, couriers, et cetera. So like we're in Germany, we're in Spain, we're in Japan, we're in Korea, we're in Turkey. There's a bunch of countries that we're expanding into with tweaks to the business model to make sure that we're Expanding into, into those countries the right w…

AI assessment note: “the pitch to the board was really different in that it wasn't about strategy.”

Q We're growing to 2.4 million people. I know we're in early 2022, so it has to be in a year or less. Definitely the proof is in the pudding there on people being attracted to its ease of use. I know it's built on Solana. How did you make the call to build in that ecosystem?

A Actually from 2017 to 2021, before we started Phantom, the co-founders and myself all worked at this previous crypto startup called ZeroX, which was focusing on building DeFi technology on Ethereum. And so we actually have a very deep Ethereum background and worked in that space for a while. And while we were working there, we, we noticed that wallets were in general pretty hard to use and are mostly geared towards developers. We realized that in order to really bring crypto to the mainstream, We needed to develop an experience that was much more user-friendly. At the same time, the underlying Ethereum platform was becoming more and more expensive and less usable and approachable to the average consumer, so we decided we needed a faster and cheaper platform, and that platform ended up being Solana.

AI assessment note: “we decided we needed a faster and cheaper platform, and that platform ended up being Solana.”

Q inside of Netscape at AOL had sort of lost the fire. AOL at first thought this was a strategic asset, now realized it wasn't going anywhere. And so you had this sort of moment to seize if you had the right team where there was no legitimate challenger anymore to IE, and so you could make a real run at it. Is that sort of how you think about it?

A Yes. And the way you described it was almost like fractal structure because the core team was like a pirate ship Kind of sassing Netscape management for their foolish bloated suite, and also making great tools and things that Hewitt worked on, Firebug and the autocomplete stuff, and that led to early adopters loving it so much more than all the other browsers, so that when Firefox was at 0.8 in early, I think it was early 2004, and then 0.9 especially, when we could see the rocket ready to launch, the whole lead user cohort of the web was just charged up. And at that point, we, I'd made contact with Sergey Brin through somebody he sent my way named Fritz Schneider, and we'd gotten the search deal going in 0.9, but we'd also gotten Fritz's team, the gin team at Google helping Firefox. So they were working on browsers before Chrome, and the browser to work on was Firefox. Nobody thought it could be done. The conventional wisdom still was that you're never going to take back market share, even though Firefox already had a few million users and was growing rapidly. Uh, and this did convince some people who worked with us at the time, like Bart DeCreme, to go try a commercial fork of Firefox. That was Flock. Didn't work. Raised a bunch of EC.

AI assessment note: “Yes. And the way you described it was almost like fractal structure”

Q What are some of the examples of the things that you put in place to actually make this work? Because I'm imagining you probably talked to, like, 50 people a day for 15 years.

A Well, you're off by about a factor of five. So an average agent at our place would run 200 to 250 phone calls a day. Remember, some were, some were 15 or 20 seconds. So you gotta bifurcate this into pre-internet and post-internet. So pre-email, we had a system that we developed that was fail-safe. One, return all internal clients first. Two, you don't go home at night without Returning every call, and three, we had a, what's called a buck slip system, which was, everyone had buck slips, which were these pieces of kind of heavy paper that had your name on it, and you'd write a note to an associate, and I would say Ben spoke to Scorsese, recommended Goodfellas, Call me if questions. That would get sent from my office to that person's office, to your office, in real time. It was our form of email. Then he had to answer me that he had read it. So he'd strike it out and answer it. Send it right back to me. So when Scorsese called him, which he did, He'd say, fantastic, Marty. I heard that Michael talked to you about good fellows. Couldn't be happier about the decision. And then Marty goes, wow, these guys are on their business.

AI assessment note: “pre-email, we had a system that we developed that was fail-safe.”

Q If the Universal job had worked out, if you had gone to Universal, do you think things would have played out differently? I mean, Universal is a very different company than Disney, much more pure play focused on, on content at the time, uh, than, than Disney was. Uh, would that have been Better or different?

A You know, David, I'm going to tell you two things that both conflict with each other, because you asked a really smart question. Part of me thinks that I would have done an amazing job at building that business, because when I went to Disney, I put together seven initiatives. That I wrote about in the book that would have made Disney a fortune, starting with buying Yahoo, buying CBS records for two billion dollars, which is worth 10 times, 20 times that right now. Buying a publishing company instead of throwing money at a crappy publishing company that they had. I had a chance to buy from Universal, um, Penguin, Putnam, which is now the biggest publishing company in the world. I would have done that at MCA. Those other part of me said I would have failed at MCA too, because the Bronfman family would have never given me a free reign, and I'm just not, frankly, I'm not a very good employee.

AI assessment note: “Part of me thinks that I would have done an amazing job... other part of me said I would have failed”

Q What do you think makes for a more resilient company? Being, uh, playing at multiple spots in the value chain such that you compete with your customers and have optionality, or being super pure play so that you have no strategy conflicts?

A I mean, I think it depends. I mean, if you're talking about something in, in semiconductors, and I mean, like, Intel's the classic example of this where they're more vertically integrated. I mean, the hard thing about doing that is you have to fight multiple fronts, um, or battles on multiple fronts, right? Like, Intel has to fight TSMC on process technology, which, like, in itself is one of the hardest things, you know, any technology companies had to do over the last 20 years, and that's why Intel has been surpassed by TSMC, right? But they also have to fight AMD, um, in their core, kind of, like, chip design market, where AMD, enabled by TSMC, is, um, innovating, you know, faster than they have in the last 20 years, and, and, like, really delighting customers and, and, um, you know, taking share from, from Intel. Kind of real time or, you know, Nvidia where they were trying to just basically marginalize the CPU and make the CPU less relevant. So Intel is less relevant. So I think that's the hard thing about being vertically integrated in semis versus being more of just like a horizontal pure play is the, the needs of Moore's law are just so difficult that like, it's hard enough to just do one of these things well and doing multiple of them well, um, makes it, um, makes it harder. So I, I generally, I think Britain's point on, on just like the business model difference betwee…

AI assessment note: “hard thing about being vertically integrated in semis versus being more of just like a horizontal pure play”

Q two of the partners in the fund, if we could grab some voices from the founders themselves, they were like, of course, So today we are joined by Gabriel Braga, the co-founder and CEO of Quinto Andar, the five billion dollar real estate tech company founded in 2012 in Brazil. Can you explain how the platform works and what your journey to start and grow the company has been like?

A Definitely. Uh, we enable seamless housing experience from, from searching for a home Towards the transaction and after the transaction during the leaving, as long as you live in that property. So we started, uh, back in. Focused on long-term rentals. And we chose that segment because it was the, the most neglected part of the market was particularly painful in Brazil. And in addition to all the inefficiencies in, in find your home, I mean, duplicate listings, pool photos, incomplete info online. Tenants were required in Brazil to provide a very cumbersome and expensive rent guarantee, while the landlords were afraid of not receiving the rent on time and having headaches with delinquent tenants and, and evictions. And we fixed the transaction by eliminating the need of those rent guarantees from the tenant side, but guaranteeing the rent on time for the landlord, no matter what happened. So right now we are about 10 times bigger than our closest competitor. We are the largest platform in Brazil, one of the largest in the world. We have more than a 120,000 ongoing rentals that we manage on a monthly basis. But just like we did in rentals where we kind of reinvented the transaction itself, how it's done, we, we intend to do this in, in, in the home buying segment. Um, and in a bit more than a year of operation, we have more than 10,000 for sale transactions, uh, rent rate right n…

AI assessment note: “we fixed the transaction by eliminating the need of those rent guarantees”

Q so great. Now, over to our conversation with Pilot co-founders Waseem Dahir and Jessica McKellar. So for nearly every technology startup, finance and accounting is not one of the things that matter and that you should do in-house. So this is not a new idea. Startups have been outsourcing their finance and accounting for decades. What changed that enabled you to actually build Pilot as a technology company around this?

A So I think there are really two trends that enable Pilot to exist now, sort of at this unique moment in time. The first is really the rise of fintech, the rise of SaaS, the rise of the cloud, and this back office stuff. Meaning, even 10 years ago, if you look at the landscape, Stripe didn't really exist, Expensify didn't really exist, Gusto didn't exist, your bank statement was literally a thing that arrived In an envelope at your home or your office. So the fact there are these best of breed electronic systems that you can use to help you run your back office, and that they all have APIs, is what enables a key portion of what we do, which is the ability to programmatically ingest and transform data from a variety of data sources. The second thing, though, I think is really a shift in the consumer's behavior. Which is that again, you know, even 10 years ago, probably what the business owner wanted to do was to go downtown with a shoebox of receipts to visit their accountant in person and, you know, talk to them in a office with a lot of mahogany or whatever. And actually what the business owner wants now is the convenience of it being done electronically, of being done well, of being able to take care of this stuff, you know, at Saturday at 11 p.m. in their pajamas.

AI assessment note: “there are really two trends that enable Pilot to exist now”

Q What, okay, two questions. One, what would have happened if it, if it, if it went down? Two, afterwards, did you think it was over?

A No. Uh, so we already had, so that was March. Uh, you know, what happened with Lehman, it was an uncontrolled failure. There was money locked up everywhere. People panicked. They started pulling money up everything. That would have happened with Bayer. So it did stop that, and I would have thought that it gave other people other time to clean up their act. So literally six months later, I would have thought some of these other firms were much, had more liquidity, more capital, and were a little bit more prepared for what might be happening. We already had the stress in the system Was, you saw it already. It was going to mount. It wasn't going to go away. There were tremendous losses coming. Uh, uh, so we bought it and, you know, it probably did help. In hindsight, it didn't stop, you know, it didn't stop the crisis from unfolding. We bought it, and then like a couple, like a week later, we changed to 10 dollars a share. It had been at one 20. And the way to think of it is, it was three hundred billion of assets and a twelve billion dollar book, tangible book value. We wrote off the whole tangible book value in the, when we bought the company to pay, we had to liquidate the loans. We had a hedge stuff. We had severance costs, lawsuit costs, and we basically used all that. So we paid, we paid a billion dollars for a company that had been worth, uh, twenty billion dollars recently…

AI assessment note: “No. Uh, so we already had... what happened with Lehman... That would have happened”

Q So this fortress balance sheet strategy and raising this equity capital and, you know, having additional margin of safety and conservative accounting, in retrospect, it seems like the obvious right strategy for running a large financial institution. Why wasn't everyone else copying it? Have people changed and does everyone else run their banks like this now?

A I think people, the people are more conservative today. I think regulators are more conservative today. But again, I go back to people get involved in aggressive accounting. Uh, they don't look at stressing their own bank in a real way. Uh, you know, you saw people take too much interest rate risk, too much credit exposure, too much optionality risk, and, and, or, or sometimes it's new products. So if you look at the financial services, very often it's the new products that blow up. It takes a while. They haven't been through a cycle. And you, you had that with equities way back in 1929. You had it with options. You had it with Equity derivatives, you had it with mortgages, you had it with Ginny, even Ginny Mays at one point blew up, even though they're government guaranteed.

AI assessment note: “I think people, the people are more conservative today. I think regulators are more conservative”

Q When you got to bank one, I think this is where you first started putting into practice the culture around risk. What was the risk culture at BankOne, and how did you change it?

A Yeah, I, you know, I've always been very risk conscious. And risk conscious does not mean getting rid of risk. It means properly pricing it and understanding the potential outcomes. Uh, uh, and so when I got there, you know, I just started meeting people and going through. I quickly realized that BankOne had more U.S. corporate credit risk Than Citibank did. And they, the way they accounted for it was unbelievably aggressive. And, you know, so they had less capital, less reserves, less this. They, they were calling these things profitable. They were basically losing money. And, you know, loans in a lot of business, you got to be very careful about the credit business. And once I found out that, I kind of panicked a little bit. And I went through every single loan in the books. I marked them all down, put up more reserves, told the board, Uh, about it, and then wanted to earn more revenues per dollar of risk. So, for example, in the middle market business, we had for every loan NII, we had like 80 cents and 20 cents.

AI assessment note: “I marked them all down, put up more reserves, told the board”

Q Three times the average or something like that?

A Something like that. Why? It's about basketball. Get out and get back into your seat. Don't miss the action. We, we started out with a lot more concession stands, and then we said, no, no, let's just do this completely frictionless. So if you register your face, you just walk in, grab what you want, and leave. If not, you can just tap your phone on the way in, grab your stuff and leave. Uh, there's no checkout. We don't serve eclectic food, little everything, same thing everywhere. Why? We don't want you walking around having to look for your favorite food. No, you're going to get the same great stuff everywhere. Turns out, 85% of what gets bought is in five items anyway. It's a hamburger, it's a hot dog, it's, uh, nachos, uh, chicken tenders, and I don't know. I'm not remembering off the top of my head.

AI assessment note: “Something like that. Why? It's about basketball. Get out and get back into your seat.”

Q We thought as a fun way to start things off would actually be to talk about the man who introduced us. Could you tell us a little bit in your words about your relationship with Jensen and TSMC's special relationship with NVIDIA?

A Yeah, it started, um, my relationship with Jensen started with a letter that he sent to me. Uh, I think it was 1997, and the letter was sent through the post office, and I received it in Xinxu. Uh, uh, and the letter said that, um, they were NVIDIA, the company that, uh, Jensen was the CEO of, It was a small company, but they had developed, uh, some really, uh, promising, uh, chips, but, uh, they were looking for a foundry, and, uh, they had approached the TSMC's, uh, San Jose office, but, uh, they really Uh, got no answer from San Jose office. Would I please contact Jensen? Because NVIDIA really wanted to do business with, uh, PSMC. So, uh, I was going to the U.S. in the next week anyway. So the letter, uh, frankly, uh, raised my, uh, Curiosity and also, uh, uh, irritated me a little bit because, uh, you know, I had always, uh, told our salespeople that, uh, that we should never be, um, Uh, negligent in, um, talking to future customers, even if, uh, the customer seems to be a very small one.

AI assessment note: “my relationship with Jensen started with a letter that he sent to me.”

Q was kind of a bad business. Fabless was not a thing yet, and so all of your initial customers were the integrated device manufacturers, the Intels of the world, and you were taking their worst, you know, excess, You were their second source supplier for manufacturing on the stuff that they didn't want to make on their own. Did you see Fabless coming, or was that a very lucky thing?

A No, I saw it coming. Uh, and, uh, the, in fact, I just had dinner, oh, two months ago, at dinner with the first guy, Gordon Campbell, Gordy Campbell. Do you, have you heard his name? Anyway, Gordy Campbell came to see me in General Instruments in my final months at General Instruments. He came to see me. He did not know that I was leaving. Frankly, I did not know when I saw him that I was leaving yet. But the reason he came to see me at General Instrument was that he wanted the funding. He wanted investment from General Instrument. Fifty million dollars , he said. He wanted to start a new company. Fifty million dollars. So I said, do you have a business plan? No. It's all in my head. So I said, well, I, I need at least a business plan. I mean, I have to go to the board of journalism. So he said, all right, I'll send it to you within three weeks. Three weeks later, there was no business plan, and I was interested because I knew that he had a good reputation of starting companies. So I called him, and he said, ah, Morris, I'm sorry I didn't send you anything because I don't need you anymore. I said, how come? He said, I don't need fifty million dollars more, anymore. I need only five million dollars, and five million dollars, I can gather up very easily. I said, why do you need only five million dollars? He said, I'm not going to build a fab. See? That was the start for me. That …

AI assessment note: “No, I saw it coming.”

Q Well, welcome, guys. It is so great to have you here. Listeners have heard us talk about JPMorgan Morgan payments all year on Acquired, but could you start maybe just with a quick overview on the business, how big it is, and how important to the world it is?

A Yeah, hello everyone. Great to be here with you, and, you know, Dave and Ben, great to share the stage with you. It's been a fantastic partnership. You talk about so many successful companies. Look what you have created here. Now, JP Morgan Payments, in brief, we basically help companies receive money, hold money, send money, safeguard money against fraud, and take the insights from all of this to, to grow their business. That takes many different forms. We help the coffee shop around the corner have a A point of sale solution so they can take credit cards. We work with marketplaces or e-commerce platforms, and we work with many large multinational companies and even other banks. We're in 160 countries, and we move about 10 trillion dollars. 10 trillion dollars every day. That is, I think, one in every four dollars that moves. Around the globe.

AI assessment note: “We're in 160 countries, and we move about 10 trillion dollars.”

Q Yeah. Can you tell us about the people? This is such a huge pillar to our minds of building Starbucks.

A Again, we started this conversation talking about childhood. I really want to build a different kind of company, and, and how do I do that in a way that provides respect and dignity, because I was so imprinted with how my, my father felt disrespected, devalued, and kind of vilified as a uneducated Blue collar veteran working in a series of jobs that he just never made it and living through the dysfunction of, of a poor family, always under pressure with money. And so I wanted to kind of crack the code on how do we create Benefits that would, in a way, uh, take the company in direction no one's ever been in before. And so early on we started talking about exceeding the expectations of our people so they can exceed the expectations of the customer. And the first time we actually were able to manifest that was a year before the IPO. And, and that was an incredible struggle because I had on my board Two venture capitalists, and I was proposing something that had never been done before, and that was, I wanted to give equity in the form of stock options to every single employee in the company, and they just said, what? What are you talking about? We're not doing that. And so the fight became, ultimately we gave 14% of everyone's base pay in the form of stock options at the end of the year based on the strike price. And I had to do it the year before the IPO. Had to. So everyone would…

AI assessment note: “I wanted to give equity in the form of stock options to every single employee”

Q at the time, I, I think most people, even people in tech were like, What is this? Were you involved in it at all? Like, you know, because you were so connected to the researchers, to Ilya, taking that talent out of Google and Facebook, to be blunt, but reseeding the research community and opening it up, um, was such an important moment. Were you involved in it at all?

A I wasn't involved in the founding of it, but I knew a lot of the people there, and, um, uh, Elon, of course, uh, I knew, and, uh, uh, Peter Beal was there, and Ilya was there, and, Uh, we have, we have some great employees today that were there in the beginning, and I knew that they needed this amazing computer that we were building, and we're building the first version of the DGX, which, you know, today when you see a hopper, it's 70 pounds, 35,000 parts, 10,000 amps, but DGX, the first version that we built was, uh, used internally, and I delivered the first one to OpenAI, and that was a fun day, but most of our success was Aligned around, um, in the beginning, just about helping the researchers get to the next level. I knew it wasn't very useful in its current state, but I also believe that in a few clicks, it could be really remarkable, and that belief system came from the interactions with all these amazing researchers, and it came from just seeing the incremental progress. At first, the papers were coming out every three months, and then, then papers today are coming out every day, right? So you could just monitor the archive papers, and I took an interest in learning about the progress of deep learning, and, and, and to the best of my ability, read these papers, and you could just see the progress happening, you know, in real time, exponentially in real time.

AI assessment note: “I wasn't involved in the founding of it, but I knew a lot of the people”

Q Okay, we've alluded to this amazing machine behind us. Like, what is this thing?

A The Carrera GT, in my mind, is the greatest driving car ever built. And a lot of people actually say that. It's not objective by any means, but a lot of people who have driven, you know, this and a lot of other cars feel that way about this car. It was a true analog supercar, which means manual transmission. There's very few driver aids in this car. Um, like you'd get in a modern car, stability control, traction control, that sort of stuff is either non-existent or heavily dialed down. Full carbon fiber body, like no expense was spared, basically. And the coolest part was that the powertrain, which is a big V-Ten, was shared with, initially it was developed for Formula One racing, and then it was evolved to Le Mans racing. And in neither cases did it ever actually see the light of day. They created a Formula One engine. It didn't work out.

AI assessment note: “The Carrera GT, in my mind, is the greatest driving car ever built.”

Q Ultimately, good for Uber the past couple years?

A Yeah, I, I think the pandemic was incredibly painful in that sitting together as a team, 85% of your mobility volume, which was the profit driver of the company falls off a cliff. And Other CEOs, you know, they lost a ton of business, but most of these businesses were profitable. We were losing two and a half billion dollars, and then it just got way worse. So it was a very tough situation to be in, and we, ah, had to cut a lot of overhead. We had to cut up businesses that we thought were core to the business. You really had to bet on what's core, what's non-core. But it was a huge accelerator as it relates to our Eats delivery business. And I think that discipline in hindsight has been great, but I wouldn't want that as, that shouldn't have been the- The precipitating factor.

AI assessment note: “And I think that discipline in hindsight has been great”

Q mean, it's a chat app. How the heck did they become successful in being, you know, the Tencent we know today, the most powerful video game distribution on the planet? Whereas you look at, like, Facebook has made 11 different runs at gaming, And is not Steam, is not Tencent. Why does sometimes a company have the right to leverage that relationship to be a publisher and other times not?

A I would rephrase it, right? Which is, my opinion is, is that why QQ was successful was that they didn't just decide that they're going to be a platform-based publisher. They embraced being a platform-based publisher. They went out and did deals. They own 49% of Epic. They owned 51% of Riot, now a hundred percent of Riot. They were one of the financiers of resort in the, in the games business for AAA titles. They aggregated products. They did, they aggregated third-party product from as a pathway into China because you needed a local partner because of government regulation in order to publish in China, and they just ran with that, right? They just embraced that, and instead of Facebook or some of these other American platforms that have treated games as kind of a bad smell over in the corner that they weren't too crazy about. Like, you know, okay, yeah, the Zynga thing they flirted with briefly, but ultimately that didn't go that well, and they decided now we're just going to become, you know, a customer acquisition vehicle for the games industry, and frankly, it's been a very lucrative piece of their business. But they really embraced it, Tencent, and, and invested deeply in it. And I think that's the difference, right? It's like they were credible as a platform-based publisher where Facebook never was.

AI assessment note: “why QQ was successful was that they didn't just decide that they're going to be”

Q It certainly seems from the, you know, mostly outside that a problem in the games industry right now is The amount of resources and capital required to make a great game. Would you agree with that? Uh, that it stifles innovation.

A I mean, again, as a former studio boss, I would say yes and no, right? In one sense, yes, because it doesn't fully democratize the ability to make games, right? And we're getting there. It's better than it used to be. It used to be you had to write your own engine in order to make a game work, right? And so you had, so you couldn't make games unless you were John Carmack or unless you were Tim Sweeney. That's no longer the case, right? Now you can go and license Tim Sweeney's engine, the Unreal Engine, and you can build a game on top of that. That's already somewhat democratized it, right? It's like we didn't, in the old days, we used to create bitmaps by hand to like, you know, try and wrap around three D characters. It's like now you've got, you know, incredible tech tools and technology Maya and advanced Photoshop tools and all of these other things that are just capable of sort of accelerating that process. They're a little bit expensive, but they're, but they're accessible to individuals in a way that, that you used to. When I started in the business, you needed literally a silicon graphics workstation. In fact, When I started, companies were being valued on the basis, on the number of silicon graphics workstations that they had available to them.

AI assessment note: “I mean, again, as a former studio boss, I would say yes and no”

Q And Passport is the technology infrastructure you've built to enable other people to build Stratechery-like experiences if they're whitelisted by you. How's that work?

A No, it's just my stuff for now. I mean, obviously we would love to make it broadly available, but it's not all finished yet and there's customer support issues and things that would entail that, but something that I would like to do. But one of the things we did with that is I linked to myself a lot, which people make fun of and deservedly so, because it's kind of a running joke between me and my readers. But a way I think about strategy is it's a live thing. It's an ongoing sort of journal of my attempt to understand the world, understand technology. And sometimes I was right about something and it's always fun to point back and say I was right. Sometimes I was wrong. It's like, why was I wrong? What mistakes did I make? Sometimes there's a trend and it's like, well, this happened back then and this happened here. And then again, I think about it as being sort of a live thing. And so linking back to myself is a way to do that. It's also a great way to trigger that second article sensation where you read an article and then there's a link right there and you go read another article. Well, that was also really good. And then there's X, Y, Z. So one of the things that I want to do with passport was How can I really leverage email forwarding to accomplish this, especially when I'm linking to paid articles? So like one of the things we do there is every link to myself in a strategy…

AI assessment note: “No, it's just my stuff for now... every link to myself in a strategy email is tokenized”

Q I think people have loved throughout the season hearing the Fundrise story itself and how you guys raised a hundred and fifty-five million dollars from the retail investing public without actually going public yourself. Can you remind everyone how you did that, A, and then B, how you're now opening this up to every private company?

A When we started Fundrise in 2000 12, like the mission was to give individual investors direct access to real estate, because we saw when money's intermediated, problems happen. Intermediaries don't have the same interest as the owners. And so we scaled that business of democratizing real estate investing, having sort of a direct to consumer model. And then when we went to raise, we said, well, why Don't we walk around and talk? Why, why don't we raise money directly from the individual investors in the same way we do for real estate? And that was 2017. It was extremely uncertain. Like no one's ever done it before. We didn't know if it was going to work. And so we launched it. We think we raised seventeen million dollars in the first like 24 hours. It was like very successful. We said, okay, aha, this is the future. This is the way to do it. And we scaled up. Raise a hundred fifty-five million dollars for 35,000 investors for Fundrise itself, for the tech company, not just for the real estate. So we said, what's the next thing that we should do for other tech companies, and we should wrap it in a structure so that all the company has to do is what they normally do with an institutional investor, right? One company on your cap table, but behind it is like a mutual fund with millions of investors. And if you're a private company, you should want to have retail investment, From the…

AI assessment note: “we should wrap it in a structure so that all the company has to do”

Q Christina, we talked last time about the story of the tremendous round that Vanta raised in the end of April, even as the world was falling apart around you. But now that you've raised that round, how are you operating the company now in this environment that has changed quite a bit here in 2022? And what advice do you have for other founders who are in the same boat?

A Yeah, so I think at a high level, a lot of actually what's said on Twitter and the advice that's given out is really good. It's take the last round you've raised, presume it's your last, or at least you're not going to raise for maybe two to three years and operate the business accordingly. Also going to assume a bunch of your metrics are going to degrade. So whether it's you're going to spend more to acquire customers or the retention is going to dip, I think that's all really good. A few things we've done just super tactically, I tend to find tactical advice actually Helpful to take the platitudes down to what we're actually doing. So we have an operating plan for two and a half years that we are revisiting on a weekly basis, and then we'll make updates on a monthly basis, and it filters into hiring, it filters into marketing budget, and it's just designed so that we, again, have the runway we expect despite whatever changes might happen. We can just look at the plan, look at the actual results, diff them, be like, okay, Can we speed up hiring? Should we slow down hiring anywhere? What should we do based on what just happened and having those touch points? And also just a set of people responsible for looking at the data and making the decision every month. Super helpful. So another thing we do is we have napkin math for a bunch of different roles, and that's how we figure ou…

AI assessment note: “we have an operating plan for two and a half years that we are revisiting”

Q Well, you write in the memo about how this came to be of the two of you collaborating over the pandemic, but maybe here to recap on the podcast, how did this amazing thing happen of a father son writing this incredible piece of work together?

A Well, Nancy and I came to California on March the sixth of 2020. Oaktree was scheduled to have a conference for its clients on the 11th. Although we canceled the conference, we did record it at the conference venue. For live streaming, and so we were in L.A., which of course is Oaktree's headquarters. Andrew and his family came out on the 13th and moved in with us, and we stayed that way for, I think, until June. So we were incarcerated together, and first of all, we have fun talking about what we do and kidding each other, and we have a lot of differences. We're not the same person. Andrew's business is different from mine, and his General mindset is different. What he learned 40 years after I learned what I learned initially, hopefully still learning, both of us. So there were a lot of instances of differences, and that made for a very spirited period, and I hope a spirited memo.

AI assessment note: “Andrew and his family came out on the 13th and moved in with us”

Q One thing I've certainly learned in my career is that being a great investor is a very challenging proposition and an activity that can easily be one's life work. Building a great investment firm is a very different challenge. It's very rare that people can be great at both of those, and it's also not a Second challenge to take on lightly. How did each of you think of this?

A Well, having spent my first 17 years at Citibank, which is a management intensive bureaucracy, I was pretty good at those things. I was not a guy who started in a garage, you know, and so processes and deliberateness were right up my alley. But on the other hand, we started Oak Tree at a time when the quest for alternative investments was extremely strong. The demand, I think, outstripped the supply. Most people kind of gave up on getting the returns they need from stocks and bonds. So we had a big tailwind, and what Bruce and I did for the most part is create a culture. We didn't ever have a macro managing, micro managing mentality. We were too busy. It was not our day job to run the company. We did that as a sideline and it wasn't management intensive. So we weren't great on the profit margins, but they kind of took care of themselves and we were haphazard about compensation. You know, we kind of respond to the last person to walk in the door, but the right culture at the right time With I think some exceptional people was enough to make the company a success, even though it was largely an unguided missile in terms of management.

AI assessment note: “what Bruce and I did for the most part is create a culture.”

Q You were with the Patriots at that point, right?

A No, I was with the Colts. I had the application finished, but I wasn't sure I was going to submit it. Uh, but it was like right before the deadline for the first round. So anyway, so submit it and got in and I still wasn't sure. So I'd signed with the Patriots. I went to new England was hurt again. I think I had three surgeries in like six weeks when I was there. And, uh, Bill Belichick actually was the one who Sarah unceremoniously fired me. He called me in and he said, he said, uh, Said, I like you, but you're hurt and I can't have hurt people. And I was like, that makes sense. So, um, he said, if you get healthy, have your agent call me. Uh, we would like to have you, but, and I was actually smiling when he was saying this. He's like, you're smiling. That doesn't normally happen. I said, well, I think I'm going to retire and go to business school. He said, where are you going? I said, I'm going to go to Stanford. He goes, it's a good school.

AI assessment note: “No, I was with the Colts.”

Q So what do you think the bite-sized early regulation will be sort of on the steps to getting a more complete regulatory framework?

A My view is stable coins are probably the, the most straightforward to figure out. And part of it, you know, comes from the Terra Luna issue, right? And I think what that did was Wanted awakened members of Congress to what can happen when things go wrong. Right. But, and this was a happy surprise. It also forced members to confront, okay, what is this algorithmic stable coin thing? And how is it different from a fiat backed stable coin? And what, if anything, should we do about that distinction? And so I've been really encouraged by how well members have. Articulated that distinction and have grasped that distinction. And so what I think you'll probably see is some sort of law that enshrines a quote payment stable coin. Uh, that language has been used in a couple of different bills. Um, a payment stable coin as essentially a fiat backed stable coin. And then my preference would be that we're silent on Algorithmic stable coins. And, you know, we'll figure out what exactly that is later. Is it a security? Is it something else? Is it a commodity? I don't, you know, I don't think there's actually a clear answer to that. Um, because they're all different, right? Um, and they all have different properties and they, they don't all work the same. I would say let's focus on fiat backed stable coins. Cause I think we all actually agree on that. And intellectually, that's not that difficul…

AI assessment note: “My view is stable coins are probably the, the most straightforward to figure out.”