David Velez: How AI Changes The Future of Finance | E1059

1. 0:00 – 0:29

   Intro

   1. DVDavid Vélez0:00

      We're getting to a point where almost 50% of the Brazilian adult population is a customer of Nubank. I don't think JP Morgan can say that about customers of theirs in the US.

   2. HSHarry Stebbings0:10

      David, I am so excited for this. We did our first one a while ago, but thank you so much for joining me again today.

   3. DVDavid Vélez0:17

      No, thank you, Harry. Great to be talking to you again. It's exciting.

   4. HSHarry Stebbings0:20

      Now, I would love to start, we were talking about Doug before the show. Doug told me that I had to start with the Sequoia interview process, which I haven't heard about before.

2. 0:29 – 12:03

   Sequoia and Its Influence

   1. HSHarry Stebbings0:29

      He said you gotta ask him, like, "How did we run it? What was the process like?" And what was it like from your perspective? Can we start there?

   2. DVDavid Vélez0:36

      It's a great question. I getting introduced to Doug via mutual friend. And so I go meet... I go to Sequoia and meet Doug. And from that moment on, everything was different about that interview process, and given the interview process was different, just made me realize how different Sequoia is as a firm ultimately. But I'll just give you a couple data points. So the first thing that came to mind was the first interview was with the head of the firm, not with the youngest analyst. In most firms, you start from the bottom and then you go up. At Sequoia, it's the opposite, you go, you go from the top and then you go down and you start meeting there. If you think about it, it makes a lot of sense because that first impression of meeting the head of the firm from a candidate, it's a, it's a, it's, uh, like, "Hey, this is important." A lot of firms say that talent and people are important, but they n- they just spend a lot of time interviewing a lot of people that, that, that are just beginning to understand the firm. So speaking with the f- the head of the firm made a lot of difference. Then all the questions that I had with Doug were very, very different questions, questions that nobody had ever asked me in any interview before. There was very little questions around your CV or your experience, there, maybe there were about five minutes of that. Everything else was about me a- is trying to get, uh, to know me as a person, and so a lot of questions around personality, character, questions like, "Tell me about your dad. What does he do? Uh, how is your mom? How's your relationship with your mother? Is she pretty strict?" You know, you, you just get asked, you just got to answer it be- there's no way to game those questions, right? There's no way to game those answers. There's not a right answer.

   3. HSHarry Stebbings2:12

      (laughs) .

   4. DVDavid Vélez2:12

      But somehow Doug has developed an entire philosophy around what different answers to those questions actually mean and how those questions will lead you into, uh, into the right kinda answer. I'll give you one final data point. I finish e- the interview with Doug and say, "Hey," and he tells me, "I would love for you to meet more people at Sequoia." I leave Sequoia, and from the time that I went from leaving the office to getting to my car, which was ab- about a minute, um, I turned on the car and I had already an inbox from Mike Moritz asking me to go back and meet with him. So it took Doug about a minute to go talk to Mike, Mike to want to interview me, to send me an email, and to be ready to talk to me again. That just tells you so much about the firm in so little details that I was, that was just kind of the beginning of understanding how different Sequoia was as a culture firm, but, but I thought, I thought I was... all, all of those elements made it a very interesting interviewing experience and, and, and in, in, in hindsight, makes a lot of sense to, to structure it that way.

   5. HSHarry Stebbings3:19

      It's so funny listening to you. I remember when I met with him and he dug in deep on my relationship with my brother.

   6. DVDavid Vélez3:24

      (laughs) .

   7. HSHarry Stebbings3:24

      And he told me that it's one of the most revealing traits, which is how you describe your relationship with your siblings. I always remember that and I love that on Mike. Uh, I, I, he told me that you had crazy trips, uh, in LATAM when you were building out Sequoia LATAM. What one sticks out most in your mind?

   8. DVDavid Vélez3:41

      That entire experience is, is a bit, was, was a bit crazy. I was in business school. I was about to start my two-year vacation as sometimes they call business school, and about a month in, uh, I go meet Doug, and three months in, I find myself working again, doing both things, doing business school and, uh, working for Sequoia. Since I was looking at investing in opportunities in Brazil, I had to wake up at 4:00 in the morning to be in the office at 4:30, do, uh, prospecting calls to Brazil firms. Brazil is about four to six hours ahead than California. Working for Sequoia from, you know, 4:00 or 5:00 AM to 8:00 AM then going to business school, then back in the office at 2:00 PM, working until 7:00, 8:00, then go home to do homework. It was an insanely... it was super intense, but it was very s- incredibly stimulating because I was almost, like, living these two lives w- with really amazing people. And then there were these trips where Stanford Business School doesn't have classes on a Wednesday. At about 3:00 PM on Tuesdays, Doug would pick me up at business school. I felt like a little bit like dad was picking me up from school. We would drive to San Francisco airport, get into Doug's plane, and fly to Sao Paolo, uh, about 14 hours. And I remember just waking up f- uh, almost, like, lost where I was and I was find myself l- like, flying to Brazil, about landing in Sao Paolo, pinching myself like, "What is going on here? What is this experience? I'm in business school." And then that Wednesday, meeting about seven firms, I just, I remember specifically one trip where we signed three term sheets. We went and it was boom, boom, boom. We felt like, like cowboys, meeting all these companies, signing term sheets, flying back so that I could be on time Thursday at 8:00 AM back at Stanford. So the entire thing was, was just amazing and having been able to spend time with Doug and, and getting to know him so, so well was an amazing just, just opportunity a- and, and experience that I, that I cherish a lot.

   9. HSHarry Stebbings5:43

      That one-on-one time is so unique and so rare, and so few people have had that chance with your Dougs of the world, with your Mike Moritz of the world, but specifically with Doug. When you reflect on that, what are one or two of your biggest takeaways and how did they impact how you think?

   10. DVDavid Vélez5:57

       Uh, I don't think I have the people radar that Doug...... Has. He has an un- uncanny ability to read people. I think his si- that's his single biggest superpower. And if you think about it, that is one of the most valuable superpowers, uh, for any type of business. Either you're running a business, running a business about hiring and managing the right type of people. In the investing business, it is the ultimate superpower because ultimately you're, especially in the early stage, you're, you're investing in people. I don't think I have quite a great radar as he does. He's a student of people, but w- working with him, I understood how important that is, how develop- how, how important it is to develop that radar. And so I, I do as much as I can. My interviews today, uh, are not interviews about career, uh, experience. They all, the interviews, when I interview somebody at Sequoia, uh, uh, at Nubank, it's all about character traits. I don't really wanna spend time asking you about what school did you go to. It's, it's about what is really driving that person. It's also valuing a lot those type... There are certain type of people that have very strong strengths in certain areas and also very strong weaknesses in certain areas. Valuing those type of people over the people that are simply just good at everything has been a really interesting insight and has been a combination of kind of that Sequoia experience with Nubank experience around how do you build teams. I rather have the people that have the, this incredible strengths than the weaknesses than the people that are okay in just certain areas. Those t- those tend to be, if you manage them adequately, those are much more powerful type of hires. That entire read about people and asking the right questions and valuing the right character has, was a great learning from, from Doug. I was an intern at Sequoia, and, and since the very beginning, as I mentioned in the interview, I was treated as a partner. I was treated, uh, as an equal. I sat down in the investment committee at Sequoia next to Doug, and Doug asked me, "What do you think, David, of this investment?" And the first time he caught me off guard, and I didn't know, I didn't know that I needed to even speak. I was ready to get my, my, you know, just listen in and, and keep my mouth quiet. The second time, I was informed. I had read, I had done my homework, and I had a point of view. And that level of treating me like partnership of s- of having a seat on the table I think was ultimately what pushed me to get a level of motivation that I hadn't felt anywhere else in any, any, any previous career that I had. That was an insight that I took to Nubank, and that was a foundational insight around the culture that we have today where we wanna treat everybody as a partner. Everybody needs to feel that they have a seat at the table. The youngest, the oldest, the person that has joined, the engineer, the data analyst. Everybody will be asked what do they think, and they have to have an important point of view. And it's important because then that means there's skin in the game, and we want prepared people. And that ultimately means that motivates the right type of people. It's a lot of work, but the just understanding of what partnership really means, even in a big organization, was a great insight I, I got from Doug and from Sequoia as a whole.

   11. HSHarry Stebbings9:07

       I mean, my word, that must have been a really nerve-racking moment though when you were asked by Doug, "What are you thinking?" You're like, "I haven't prepped shit." (laughs) Um, but, uh-

   12. DVDavid Vélez9:16

       Yeah.

   13. HSHarry Stebbings9:16

       ... I do want to ask you, post that amazing experience, flying in the jet to, to Sao Paolo, m- doing deals, Sequoia then decided to pull away from LATAM and not open up the office. That's an "Oh, shit" moment for you personally in your career. Talk to me about that moment for you. Most would be freaking out. How, how did you handle that?

   14. DVDavid Vélez9:37

       Yeah, it was a big, it was a big shock. So I b- uh, I was work- I had been working for Sequoia about almost two years setting up what would have been, would be the basis of Sequoia Brazil, Sequoia Latin America. Had ha- had rented a small office, had started interviewing people for the team. And then I remember very specifically the day before my birthday in October 2012, uh, I was preparing this big trip. Doug was coming to Brazil with a number of our partners of Sequoia. And Doug calls me, and, you know Doug, no BS, no time for chitchat. He straight up said, "We had a conversation, and we had decided there won't be any office in Latin America." Straight up. It was a big bucket of ice water at that moment. And still I say, "Okay, I understand, Doug," and he gave me reasons. I thought, but, uh, let me, let me digest this a little bit, and I hung up the phone, and I, and I thought a lot about it. And I understood completely. I understood the reason, and I agreed with the reason. It was unfortunate. We had spent 18 months looking at a bunch of startup opportunities and entrepreneurs, and honestly, there were just not that much anything that got anybody excited. And it was a far away place, 16 hours away from San Francisco. Why would Sequoia, who had access to the best entrepreneurs in the world in Silicon Valley spend time just going and, and investing in some of these businesses that in a way were, just wanted to be clones of Silicon Valley businesses? They were not really shooting that high. They were not really thinking that high. So after a da- a bit of digestion, I understood it. I, I was so appreciative of Doug of just giving me, give it to me straight. No, "Ah, let's think about it. Let's wait another month. Let's wait six months." I think most people would wanna kind of like sugarcoat it. By him just giving it to me straight, made it very clear, crystal clear to me what I needed to do. I had two options. I could continue working for Sequoia, but I needed to go move, move to California. I was gonna be an investing partner in their growth fund. Phenomenal, phenomenal opportunity. I think it was a great opportunity for me, but for me, this was also the moment where I finally got to pursue what I had been trying to pursue for 15 years, which was starting a business. Uh, that was what I always wanted to do. I always wanted to start a business, and in a way, he made it very easy for me.This is it. This is the moment. Just go do and, and start it. And, and after some time thinking about it, said, "This is it. Let's go for it. Let's go, let's go start

3. 12:03 – 19:29

   Venture Business in Latin America

   1. DVDavid Vélez12:03

      business."

   2. HSHarry Stebbings12:03

      Now, David, when we last did our show, I was very placid as an interviewer, and I kind of just went along with a lot of things. I actually had Marcelo on the show from Bicycle recently, and I disagreed with him in the show, which was a little bit, um, uh, courageous, I think, of me.

   3. DVDavid Vélez12:19

      Yeah.

   4. HSHarry Stebbings12:19

      Um, but I said, "No, there's not enough depth in the LATAM market for a growth fund." Because when you look at the liquidity environments, respectfully, Nubank alone is really the only one that's generated true, true venture scale returns. When you look at your other D locals of the world, they're good, but they're not, they're not true, true venture, and you can't have a portfolio alone on that. Am I wrong?

   5. DVDavid Vélez12:45

      I think you're wrong now. I think things have changed a ton since 2012, 2013. I think from a very high level, and this is, this is the analysis that's according in 2012. Like, from a, from a very macro perspective, this region has to be really important. Latin America as a region is the third-largest GDP in the world. It's a, it's a busy, it's, it's a region that has 650 million people, very large GDP, a GDP per capita that is three to five X India. It has, uh, already significant internet penetration, smartphone penetration, and lot of really big problems that need to be solved and I think where technology could move the needle. Now, when we went back to 20, 2012 and were looking around, I think the problem was entrepreneurs were not looking at solving the main issues. The entrepreneurs were looking at solving the California engineer issue. The California engineer issue is, "Oh, that, you know, I, I, I, I, I don't, I, I wanna, somebody to bring the food to my, to my house." That's not really the issue in Latin America. There are bigger issues. There are problems in financial services, people don't have access to healthcare, people don't have access to education. There was a disconnect between what the entrepreneurs were doing versus where the market opportunities w- uh, were. We were one of the first ones that said, "Hey, guess what? Like, financial service is the single biggest market cap in the region. That is one of the oppor- There's got to be an opportunity there." The overall conventional wisdom when we started was, "Impossible. You're gonna get crushed. The, you can't compete with the biggest companies in Latin America. The big banks will crush you." So it was interesting to see a bit of a ... There was a cultural, uh, barrier that we had to break through to create Nubank, that hopefully today, as we've broken through that barrier, more entrepreneurs are starting to questioning the conventional wisdom in other big, big markets. And the market today, I think, is at a point where those big market cap opportunities exist. If you look at the biggest companies in Latin America today, they're mainly still very much incumbent companies. They're not digital native. If you look at the NASDAQ, about 25, 30% of companies in the NASDAQ today didn't exist 23 or 30 years ago. If you look at the Bovespa in Brazil and Mexico, they're still incumbents that existed 100 years ago, so the opportunity for disruption in a lot of these markets b- exists today. The culture has changed. The capital exists. I do think now the, the, the, the, the kind of the, the setup for more Nubanks in the region exists, uh, and, and you'll see them over the next five to 10 years.

   6. HSHarry Stebbings15:20

      Where do you think liquidity comes from? Does it come from going to the US like you did and IPOing in the US? Does it come from local markets? Is it M&A? How do you solve that core question of, "Okay, but where does liquidity actually come from?"

   7. DVDavid Vélez15:34

      There is a fair of liquidity in the Br- in the Bovespa, in the Brazilian Stock Exchange, but don't have the, the number of IPO. Remember specifically, for example, 2000, when we're looking at this, 2007, '8, there were 45 different IPOs in just the Brazilian market. About 2018, 2019, you had a lot of different exits. So these are exits that are meaningful for the companies in their market caps, let's say, between 300 to a billion dollars of exit type of market cap businesses, so you have liquidity locally. If you go above the billion dollar market cap, then obviously New York, uh, IPO becomes a real entry, uh, as an opportunity of liquidity. And then you have a very active M&A environment. Uh, you have, uh, there was, there's recently a, a very big exit. Visa bought out this fintech called Pismo. That was a billion dollar plus exit, and, and that's one out of many. So I think there is fair amount of liquidity locally in Brazil. Mexico should have more. Colombia, Peru, Chile. I think you run a little bit into more of the liquidity constraints when you see the businesses just building for Chile or building just for Colombia. Those tend to have much, uh, much harder exit opportunity. But when you really get Brazil and Mexico, you'll find enough market cap to find liquidity.

   8. HSHarry Stebbings16:48

      I felt a bit guilty writing this question, if I'm gonna be honest, but I'm gonna go for it anyway.

   9. DVDavid Vélez16:53

      Oh.

   10. HSHarry Stebbings16:53

       When you reflect with the benefit of hindsight, Nubank is kind of unwaveringly the winner, not just of the fintech space, but also of the region. If we think about kind of specifically of the space, with the knowledge that you have now, why do you think Nubank has been as successful as it has been? Why did Nubank win where so many others didn't?

   11. DVDavid Vélez17:13

       I don't think we've won. Uh, the first thing I wanna leave very clear is I, I, I get nervous when anybody says, "We are the winner," or, "We have won." We still have so much to prove. We say internally we are obviously always using the, the, the soccer analogy. You gotta use always, go back to soccer in Latin America. We're still very much playing the first minute of the, of the first half of the game. We're proud of, of where we've gotten the business today, especially because of the m- the, the kind of the scale and the impact of the business, just to give you one data point. We're getting to a point where almost 50% of the Brazilian adult population is a customer of Nubank. That's a level of, of, of, of access. I don't think JP Morgan can say that about customers of theirs in the US.

   12. HSHarry Stebbings18:01

       Why is the other 50% not, do you think?

   13. DVDavid Vélez18:03

       It's because we still have a long way to go. That's why I say we haven't won. Uh, we, we still have another 50% going. We're missing product, uh, still for a lot of different segments, but the point where you got, where you get to a certain age, uh, a certain size-Your product is good for certain sub-segments, but then your product is really bad for a sub-segment. So as we get to half of the population, then there are the high income consumer in Brazil that looks at our product and says, "You know what? There's some things that I like, but you're missing a lot of different products." So we have to build much more for that product, for high income. There are customers above 60 years old. We have a lot of customers in, like customers in their 80s, customers in their 90s, that use the product sometimes because a track that, you know, their nephew or their son told them to open an account so they don't charge any fees. But they say, "You know, your product is okay. It's, it's still not clear enough, has a lot of complexity." We have to invest a lot to make it the be- the very best digital banking experience for people in their 60s, 70s, 80s. People in their te- people who are 10, we just launched an account for kids, uh, o- above 10 years old.

   14. HSHarry Stebbings19:10

       (laughs)

   15. DVDavid Vélez19:10

       It's, it's still a bit of an iteration of, of the, of the account that our 18 plus has, it's now product. So once you start attacking so many different sub-segments, you have to customize the product almost to N equals one eventually. That's almost like the goal, N equals one, your product is fully segmented

4. 19:29 – 39:51

   Nubank's Success and Challenges

   1. DVDavid Vélez19:29

      to that customer.

   2. HSHarry Stebbings19:29

      How do you think about that difficult decision of customization to different segments versus copying the product for different geographies? If you are great for middle to affluent segments of like mass market, you can just take that to Chile, to Columbia, to Mexico and expand geographically where the product is relatively the same. Versus creating entirely new products for children, for old people, for super rich people. How do you think about that decision between product expansion versus geo expansion?

   3. DVDavid Vélez19:57

      So one of the sort of product principles or strategy principles that we've went after since the very beginning is, we've always seek to be the primary bank account of our customers. We want to replace the bank. We want to be the primary bank. We don't want to be just a little side wallet where you leave some cash to make some payments or to buy some stuff in e-commerce or, or pay, uh, your ride hailing bill. We want to be your primary account. That's, that's what we're going, going after. Once you make that decision, there are a bunch of other, uh, downstream decisions you need to make. One of them is you need a banking license. You cannot build this by just having a banking partner, by trying to do like a bank without being a bank. We've embraced the bank, all the pros, pros and cons of being a bank since the very beginning. And, uh, and once you have a banking license, this means your business becomes less internationalizabile. It becomes much more localized. You have to go, you, you start executing a strategy of going very deep in fewer markets. It's a diff- I don't think there is necessarily a better strategy, is a better strategy versus other FinTechs, global FinTechs that have a thin layer in 50 markets. It's just a different strategy. We want to go very deep in few markets. That also meant, that has meant that in about 10 years, we've only done three countries, but when we go to these three countries, Brazil, Mexico, and Colombia, we go after big markets where we see a path to be probably the largest financial institution in each one of these countries eventually, because we are the primary bank account and we become the primary financial relationships of these consumers. And so once you make that decision, then it's very much about customization and also very much about segmenting your product to the different sub-segments versus trying to do 10, 15, 20 countries very quickly.

   4. HSHarry Stebbings21:48

      Can I ask you a really hard question? And your team are probably gonna kill me for most of these questions, but editing is a real thing.

   5. DVDavid Vélez21:54

      (laughs)

   6. HSHarry Stebbings21:55

      Um, of the 50% of, you know, bank accounts that you have in Brazil today, how many are primary accounts of those 50%?

   7. DVDavid Vélez22:02

      About 60% of that 50% are primary bank account.

   8. HSHarry Stebbings22:08

      Wow, so one in four, essentially.

   9. DVDavid Vélez22:10

      So if we have 50% of that population is 60% are primary bank account, we have already close to, we have the primary bank account for close to 30% of adult Brazilians. Which, by the way, is now the highest among any bank in Brazil. We are now the most, the most offered, most frequent primary bank account above incumbent banks. In a way, we think it's one of the biggest successes that we've been able to accomplish, because this is what traditional incumbent banks have said it's impossible for FinTechs to do. They've always seen these FinTechs a- adjacencies or ancillary wallets as, as, you know, things aside, side products that you have. Given the strategy we pursued, we have gone in the middle of, of, of what we think is the most valuable place to be, which is primary banking relationship.

   10. HSHarry Stebbings22:55

       Can I ask you, what do you think is the biggest threat to NewBank today?

   11. DVDavid Vélez22:59

       Thinking that we have won. Your question. (laughs) Thinking that we made it, thinking that, uh, we're, we're good, because the opportunity ahead is so big, um, and, and just to give you a couple data points, we have a large customer base, but when w- when we actually look at the market share we have in every single one vertical, in credit cards we have about 15% market share, but in personal loans we have 5% market share, in investments we have about 2%, in insurance we have 1%. We're in the early days of using this 85 million digitally only consumer base to build a marketplace to go beyond financial services and enable our customers to access non-financial services products. So this is, uh, almost a redefined of what NewBank is, more a consumer platform than a bank. There will be more countries. Uh, I'm, I'm saying we'll, we'll go slowly, but there will be more countries over the next five, 10 years. And we're still in the early, even earlier days in Mexico and Colombia. So again, we're in the first minute of the first half, and, and if for one second we sit down and we give, you know, a lot of, a lot of, uh, hands to ourselves and, and as we call it internally at NewBank, we rest on the laurels, that is, that is the first day of the last day. That is the first minute of the second half of the game, and we just lose the opportunity of building something that will be an amazing, amazing type of company for, for the region.

   12. HSHarry Stebbings24:26

       I agree. How do you instill that in a team? The team reads the newspapers, the team have families that go, "Wow, you work at Nubank." The team see the cards everywhere. How do you instill that startup mentality now that you're an incumbent?

   13. DVDavid Vélez24:40

       It's a really... It's a, it's a challenge. It's a really hard question. I don't think there is a single silver bullet. And it's a number of different small things. It begins from going back to Doug's interview questions. It begins by finding the right type of people that come in, having the right filter. We work very hard to try to identify the people that wanna come to Nubank because they wanna have Nubank in their CV, because they wanna be here for two years and then go and do something else. Versus the people that wanna come here attracted by the opportunity to build something transformational. And you find this, these very types of DNA. I always tell the story when we started the business. We started the business in a, in a very small house in Sao Paolo. Uh, we paid... You remember the partner at Sequoia, Michael Abramson was there. His mind was blown when I told him we paid $500 per month in rent and we had 20 people working out of the house. And it was a house that from the outside you would say, like, "This is crazy. This is, this is the last thing that will look like a bank." And, and they said that that was the best interview filter because the people that wanted, that was very much focused on their career, on their CV, on all the... On, on collecting LinkedIn accolades would see this house and would run away. They wouldn't even come in and have an interview with us. And then you would have a different type of people that would see the house, they would come in, they'd sit on the floor because we didn't have a chair. We would tell them we wanted to build a... The largest financial institution at America and then they, after a while they would say, "We'll be here on Monday. I'll be here on Monday." So in the early days it was easy to do that filtering, today it's harder. We have a nicer office, but we have a bunch of questions using Doug's psychological profiling to try to, to try to capture data at, at, at, at the interview process. And then there is the culture itself around how do you instill certain values that enable people to realize that this is the beginning and that there's so much work ahead. That there's so much that we need to build. We, we under celebrate, some people complain that we don't celebrate enough and they're probably f- they're probably right but you know what? That's probably a feature at the end of the day, not a bug. And, you know, it's uncomfortable at times because we celebrate very quickly a, a, a, a victory but then 30 seconds after we are asking, "What's next? What is the... What is the next challenge? What is the next milestone that we need to do?" And there are a number of other cultural kind of attributes in way we do things that at least try to maintain the level of sense of urgency, uh, that at least we had in the very beginning regardless of how many, uh, you know, newspapers or, or, or sort of positive mentions we get in the news, in, in, in, in social media.

   14. HSHarry Stebbings27:22

       You mentioned the different products that you haven't really touched on or haven't penetrated as much as you'd like to. You mentioned the different geographies where you haven't... What do you think is the most non-obvious but biggest opportunity that Nubank has?

   15. DVDavid Vélez27:34

       I think it's expansion beyond financial services is, is, is probably the more, the most non-obvious. You've seen a lot of examples globally of large probably commerce businesses going into financial services, or large social media businesses going into financial services, so Alibaba is a great example. Tencent, it's a, it's a, it's a very strong example. Southeast Asia you, you, you see opportunity, you see ride hailing apps or some of the commerce businesses going into financial services. You haven't seen that much the opposite direction. Financial services going into, into broader commerce businesses, but if you think about it from first principles, there isn't a reason why that trans- that, that, that reverse migration cannot happen. In fact, I would, I would claim there is a bigger case to be made that is better or easier for financial service firms to go beyond financial services for a number of different reasons. The first one is trust and brand. In financial services when you're the primary bank of a customer, you have to work 24/7 every single time. You're not simply just delivering somebody's, uh, shoes faster. If you fail on a transaction, it's not simply you delayed a transaction. You are handling people's life savings. The importance or the need to be operationally effective 24/7 is very, very high. You cannot get this wrong and that means a higher necessity to build a stronger brand and trust with consumers. So financial firms that have become primary bank accounts have generally higher net promoter scores and have generally high trust, uh, with their consumers. And we see today, especially, especially net promoter score, guess what is the highest net promoter score of any consumer product in the world today? This is gonna be surprising to you. It's not the Tesla, it's not the iPhone. The best highest rated NPS consumer product in the world in any category is our purple... Is Nubank's purple credit card in Mexico. It's a 94 NPS.

   16. HSHarry Stebbings29:40

       Wow.

   17. DVDavid Vélez29:40

       It's strange that that is the case, but that just tells you two things. That tells you something about the market and the problem and it tells you something about the, the solution and the strategy that we've chosen to build this consumer brand. So very quickly go back to your question, in financial service you need to build brand, you need to build trust, you need to build very strong, uh, uh, technology and platforms. By now we have one of the largest digitally native consumer plat- uh, consumer bases in Latin America with 85 million customers, and we have a lot of data that we need to use to give people trust, which is credit. Once you add a lot of these, uh, assets.And you put them under one roof, a very large base, a very strong brand, a high NPS, there is no reason why this consumer platform cannot offer other financial, other products beyond financial services to its consumers.

   18. HSHarry Stebbings30:31

       What are some examples of those services o-outside of financial services that you think are most available?

   19. DVDavid Vélez30:36

       We're in the early days, but our marketplace is up and running today. We have several million daily active users today on, on our marketplace where our customers are consuming or buying goods or services from over 180 different partners. Could be e-commerce businesses, could be ride-hailing apps, could be, uh, you know, gift cards, could be a number of different products. They go into a marketplace, they buy there because not only we use our scale to give them better products, to give them discounts, but also we use our data capabilities to give them access to credit so they can purchase more. And if you know anything about retail in, in Latin America, one of the key issues around selling is providing credit. And this is an area where we've built probably the best, uh, infrastructure in Latin America. We're the best at, at pricing credit and providing credit for a number of different capabilities. So this million of consumers would, would decide to shop in our marketplace. We're not the e-commerce. We don't want to be the e-commerce. We don't want to get into logistics. But we are a platform that cross-sells other products to these consumers. We give them better, better products and services, better discounts. And then for the merchants, we tell them, "Stop spending money with Google or Facebook. Stop spending a lot of marketing investments. We bring you 85 million consumers to your doorstep. And by the way, we help you sell faster and better within this marketplace." So this is the very beginning of building that business.

   20. HSHarry Stebbings32:09

       My question to you is prioritization and resource allocation. Someone once said on the show, "The number one role of a CEO is to be the best resource allocator in the business." There are so many different things that you could do from insurance to mortgages to student loans to financial products which have very high margins and are very accessible to you. Why, why do this?

   21. DVDavid Vélez32:30

       So I think the fir- the first point is we're not doing all of these different verticals, right? We're not doing ride-hailing. We're not doing e-commerce. We're a platform that connects with the right architecture to providers of this service. That's one point I think to leave pretty clear because if we were to actually go on the other end and actually start trying to build all of this, then I completely agree with your concern for r- around pro- prioritization. But then to your main question, why do this? We think this is the next 10 years of growth for us, and this is the opportunity to really solve complexity for c- for consumers as, as the mission of the company since the very beginning has been to fight complexity to empower people. We found initially a lot of complexity in financial services, and financial services continues to dedicate. We allocate today about 80% of all resources and energy to financial services, so that core continues to have most of the allocation of resources. By the way, we think about the next five years and we think about the opportunity what we can do to fight that complexity and pursue that mission, we think there's a bigger, uh, opportunity to increase the concentric circles and provide more products and services to our consumers by fighting that complexity. So it is thinking about the big opportunities that we have ahead, and also diversifying away from credit, diversiwa- diversifying away from financial services, providing ano- another types of revenue sources to the business, and ultimately making it a much more resilient model beyond the ups and downs of financial services in Latin America, which, as you might know, is historically very cyclical.

   22. HSHarry Stebbings34:00

       I, I totally do. Um, I, I do have to ask you, when we look at the success of Nubank, the things that I find striking is actually something that you said to me beforehand when we were going back and forth, which is actually that the US and Europe can learn a lot from India, from China, from Brazil when it comes to kind of financial services in particular. What do you think Europe and the US can learn in particular when you reflect on your own journey?

   23. DVDavid Vélez34:23

       Uh, what I perceive a bit, and especially in financial services in the US and Europe, is a bit what we were discussing about what is the, what is the biggest landmine or the biggest challenge for Nubank is there is a sense that they have won, that it's just, uh, it's a problem that is solved. US seems to think that. Europe seems to think that, that there is no need to really try more. And as a result, you end up with a regulatory environment that seems pretty averse to innovation, be it crypto, be it FinTech. We need, when I talk to colleagues or, or founders of FinTechs in the US and Europe, it just feels like they're always going against, uh, the regulatories, always this headwind that they're trying to consistently fight against, and somehow they got to figure out how to break it. When you look at India, China, Brazil, it's the exact opposite. The, all these countries, they, they, there was no sense that they have won, right? It was clearly that they hadn't. Their lack of access was significant. In Latin America, you added 250 million people completely unbanked, 60 million people in Brazil, Brazil charging one of the highest interest rates in the world, charging one of the highest fees in the world. So for regulators, it was clear that they needed to do something, and the concentration of the system, the fact that you have five banks in the hands of 85, 90, 90, uh, uh, about 85, 90% of the entire market in the hands of banks, was something to be solved. And so then it created an environment for FinTechs like us to actually go and compete, and ultimately the consumer won because you had incumbents, you had FinTechs, everybody actively fighting for better products to consumers, and consumer having a lot of alternatives. And, and because of that you've, you've seen a lot of leapfrog. Today, when you see Brazil, how Brazil payments operate, uh, it's, it's, is, that was the future, right? You, you go to Sao Paulo today and you see how people are transecting, it feels a bit like when I first went to China in 2017 and people were transecting, it's like that felt like the future. You don't see...... cash anymore. You don't see checks anymore. You, you see 24/7 transactions, free, all around, all around the country. Same thing's happening in UPI in India. Everybody transacting cash. It's the beginning of the end of cash. Um, that brings a lot of inclusion, that brings interest rate down, that brings access to credit. That's not what you see in Europe or US today. I think the level of complacency in these industries, in these big countries, s- has stopped innovation and have permitted that a lot of these emerging markets, a lot of these technologies have leapfrogged to a place today where, where Brazil, China, India are ahead of US and Europe. And this is just the beginning. You'll see this, this, uh, this trend just accelerating, I think, over the next five, 10 years when you start thinking about open banking, when you start thinking about the uses of crypto, when you start thinking about how, what AI could do in financial services.

   24. HSHarry Stebbings37:19

       So, my question to you is, before we get on to AI and financial services, what would you advise then? What would you advise founders who are in these more regulated markets, who agree with you, but are going, "What the fuck can I do?" And then what would you advise regulators who are going, "Ha ha, we have our stronghold"?

   25. DVDavid Vélez37:35

       It's a hard problem. I don't think I, I have (laughs) I, I have the answer, especially because I'm not a, I'm not local. But I guess two, maybe two small insights. The first one is, in the early days of FinTech in 2012, 2013, 2014, when, when us and a lot of people were starting globally around this idea of the future of financial services is of technology companies, we made a very different d- decision than a lot of businesses in some developed economies. As I said to you earlier, we embraced the financial s- the banking space, uh, with all the pros and the cons. We went and wanted that banking license. The sense is that in a lot of our geographies, it's entrepreneurs try to almost do everything except embracing the space, except becoming a bank, because of some arguments that if you became a bank, then your valuation multiple was going to be lower and you're going to be valued less. We remembered... I remember discussing that argument and saying, "Who cares? First, we have to build this business, and then we don't care. We will care about valuation. It doesn't, doesn't really matter." And I think that has partly one- been one of the reason why a lot of these businesses have become in backlash, because regulators having... have seen businesses doing financial services that really look like banks and not are, and not are banks. And in reality, they should have just embraced this space since the very beginning. That's one specific decision, I think, that we made that a lot of people didn't make. From the regulators' perspective, I just think that it's, it's un- it's not visible today, even for the big regulators, how much empty space and opportunities there is to improve efficiency in financial services, even in markets as sophisticated as the US. US is, is 50% of the world's financial services space, but when you look at the sub-segments, you find a lot of lack of access to good financial services. There's a lot of niches, a lot of sub-segments that are not getting good access to products. They don't have good access to credit. There are not simple products. And so I wish regulators realized that FinTech could provide a lot of solutions, and that they were readier to embrace new entrants as a way to close some of those gaps, versus the existing status quo, which almost seems as if they were protecting and benefiting the traditional incumbents.

5. 39:51 – 51:25

   The Future of AI in Financial Services

   1. DVDavid Vélez39:52

   2. HSHarry Stebbings39:52

      I'm, I'm throwing a grenade in here. Uh, you, you, you notice the style's changed over the years. Will NewBank, or will any startup bank be able to disrupt the truly high net worth banking segment? When we look at the Goldmans, the Pictets, the true ultra high net worth, will they ever be displaced?

   3. DVDavid Vélez40:12

      It's possible. I mean, I, I wouldn't, I wouldn't discard it. I don't think it happens overnight. I think it's, um, very small... You know, this is one of those, one of those developments of technology where it's first very slowly and then very fast. First, it will begin by the high income population, not necessarily the top 1%, but the top 5%. And it will begin in products that are very simple to manage, where you need less access to your private bankers. So credit cards, personal loans, investments access. Um, today, you don't n- really need a, a very sophisticated personal banker to tell you where to invest. If you realize that almost all returns comes from having a very well diversified investment portfolio in fixed income and equities, you should just do that yourself and start, and stop paying commissions to a lot of, uh, brokers or, or middlemen. That kind of evolution has begun in very simple products that can... that don't require middlemen. I think then AI, and this vision around AI, really private banker could become the catalyst for accelerating the migration towards a fully digitalized private banker. And at that point, then you really start attacking the 1%. You really start offering products to the wealthiest of the wealthiest because you have an algorithm that is 24/7 available that give you actually better advice than the human, that gives you access to products that the human is not giving you, and finally doesn't take a toll. Doesn't... It's not taking a lot of commissions in the middle, and has no conflicts of interest, which a lot of the time, some of the bankers that you mentioned do have conflict of interest embedded in the business model. So I wouldn't discard it that we will see this happening not in the next two years, but maybe in the next five to 10 years.

   4. HSHarry Stebbings42:05

      You ment- you mentioned that kind of AI touching on financial services and how it could disrupt. When you think through your hat with NewBank, how do you think AI changes financial services for you both short and long term?

   5. DVDavid Vélez42:16

      I think that the shift towards digital banking, uh, that we saw happen in 2012, 2013 got us very excited because in that...... platform shift towards the smartphone, we saw the opportunity, as we used to call it, putting a bank in everybody's pocket.

   6. HSHarry Stebbings42:32

      Mm-hmm.

   7. DVDavid Vélez42:32

      And that meant that we were really able to increase financial inclusion, because the moment we don't need to put a banking branch in every corner, the cost to serve a customer goes down by 20 to 50 X. The cost to serve somebody goes close to zero, and that means that today, we can serve customers that need a $50 loan profitably. We can serve customers that have $200 to invest profitably. So we created a model that is much more efficient than the incumbent, which means much more access and lower prices for everybody. However, this view around dem- fully democratization of financial access is not a... The, it has a limits through the smartphone as a platform. What we realize is that you still have a mass of, let's say, 50, 60% of population that fundamentally doesn't really understand how to invest. In an environment that is very complex, where you have very complex, uh, concepts like compound interest, where had very complex issues around what is the most tax-efficient investment fund? How do I invest much money? They don't really know how to do it today. And the response has always been, "Oh, financial education, financial education." But guess what? People just... There is a limit to financial education. I- this is very complex stuff. People don't necessarily wanna learn it, don't necessarily have the, the, the energy to learn it, and so there's been a limit in how much this democratization of financial access have happened. We think that AI is now the second platform shift that might actually be able to, to take it to its final conclusion. And so if the smartphone was the bank in every pocket, AI is the bank and the banker in every pocket. And that really is the catalyst to enable 100% of the population to invest, to get credit, and to the ri- do the right financial dece- uh, financial decisions, and in a way, allow the bottom half of the pyramid to bank the same way that the Pictet customer is today bank. It's really democratizing the access and the service of the 1% to the other 99%.

   8. HSHarry Stebbings44:42

      Can I ask, does AI change how you think about structuring your org in terms of functions, in terms of your product teams? Do you want to have a, a specific, like, science and research team? How do you think about AI impacting your org design?

   9. DVDavid Vélez44:56

      So I think we sh- uh, we are asking ourselves actively this question. So far, we haven't really needed, or we haven't really seen the need to any, uh, restructuring because of AI. We are structured in a way to follow our strategy, which is we want customer to love us fanatically. We win when customers love us fanatically. Our entire strategy is get customer to like us. It's as simple as that. And we are organized in a way that we can build products or services to get customers to like us. And so we think AI will be one more platform to help customer like us, either because we give them better products or services or because we charge them less, and we charge them less as a result of the efficiency that AI has provided us. So, don't think we need a r- a corporate reorganization. We just need to figure out how AI is embedded in everything we do, and that is something that we're doing actively. And then some cultural decisions. These actually have been a very interesting debate we've had over the past few months with our ca- with our, with our teams is, what is the purpose is AI? Is AI's purpose today to get to cross-sell? So you're gonna see AI, a private banker of Nubank, actively telling you, "Harry, get this loan. Harry, get this insurance product." And then become almost like the salesperson selling on behalf of Nubank, or we want to create an entity that will maintain almost a neutrality because we think that that neutrality will be the way to optimize loyalty for the consumer? An AI that will tell you, "Hey, Harry, guess what? Nubank's actually doesn't have the best product for you today. You should go get it from Itaú because they have a better product." And having Nubank recommend somebody else's product because they have a better product than we do.

   10. HSHarry Stebbings46:52

       How does AI deal with intense ambiguity of financial services? And what I mean by that is, if you have an AI banker, it could legitimately say to me, "Hey, you should place more trades because you're taking a clip, you're taking a transaction fee," even though it may be better for you, but worse for the customer. How does AI know who the boss is and where the incentives lie?

   11. DVDavid Vélez47:14

       That's, that's exactly, I think, the key debate, and is actually the same answer than your banker today, your human banker or your broker. What is the incentives of the broker? Is the incentive of the broker that is calling you to say, "Hey, you should buy this stock and then sell it at the end of the day" because he's, he's incentivized to make a lot of... to get it to do a lot of the trades 'cause he's getting a bonus at the end of the month based on the trades? Or is that broker really neutral and has aligned incentives with you in that if you make good deci- investment decisions, the broker will, will make a big bonus? The same right of incentives need to be programmed inside the AI, and so that is, I think, where we're spending a lot of time. And for us, it's very clear. We wanna optimize consumer satisfaction in the long run, and for us, any conflict of interest will be a detractor from building that, that loyalty with the consumer that we want to do over the long term.

   12. HSHarry Stebbings48:07

       Do you not have to own the models yourself then? Because if you think about relying on any, uh, existing, either closed or open models, whether it's your OpenAI or your LLaMAs or your Anthropics of the world, you won't be able to have that control. The only way you'll be able to have that control really is if you actually own the models yourself.How do you think about that debate?

   13. DVDavid Vélez48:26

       I see the existing LLMs, the OpenAIs, the Entropic as sort of the base infrastructure. They give you the data, they give you the model. But where you really create that type of incentive, where you actually desc- define the behavior of that AI is when you start programming the behavior of the, your AI private banker, right? If you're telling him, "Your objective function is to get consumers to get a lot of loans," that banker is gonna go and push you a bunch of notifications around, "Get that loan, get that loan at that very high interest rate," or, "Get that trade." Or if you tell that AI private banker, "Your objective function is to get the net promoter score of every single customer to be 100 ten year from now," then that's gonna be a complete different behavior. So I don't think you need to own the model, but I do think you need to own and be very thoughtful around how do, uh, what are the incentives and what is the objective function of that algorithm when you start pr- actually programming it?

   14. HSHarry Stebbings49:23

       I have to ask you, uh, we, we speak about kind of how you're integrating AI into Nubank today. Nigel Morris told me that you're the single best listener, or one of the best listeners, that he's ever encountered.

   15. DVDavid Vélez49:33

       (laughs)

   16. HSHarry Stebbings49:33

       What does great listening mean to you? And how do you think about your approach to it?

   17. DVDavid Vélez49:38

       I tried to start a bank in Brazil without being Brazilian, without being a banker, without having ever, having ever worked for a credit card business, without having any network in Brazil, without knowing anything about regulatory in Brazil. I remember a conversation I had with, with another partner at Sequoia. He said, "Look, these are really interesting business opportunity, but you d- you're not an engineer, you don't, you're not Brazilian, you don't speak Portuguese, you don't know this, you don't know that. Like, you have all these, like, big gaps." And it was those type of feedback that, uh, that it felt a bit like a punch in the stomach at first, but made me realize that he was right, and that my job number one was to go find people that fill all the gaps in knowledge and experience that I had. That forces you to listen, to learn to be a good listener, because by default, you just do- you know that you don't know. That's even part of a foundational aspect of Nubank's culture, is, um, it's this concept of the beginner's mind, that we like to hire people that have this ability, that has more questions than answers, that are able to look at a problem with a bunch of questions versus the traditional experienced person that says, "I've been doing this for 30 years, and therefore I know the answer." For those people, there are no real alternatives. You, you know everything, so how can you even innovate? So Nubank has this view around having a lot of questions, which means you have to be a good listener. Me personally, given my background, I had to listen a lot. I had to ask a lot of questions, because there was a lot that I didn't know. And that has almost shaped the culture of how we think about building products, where we have this level of epistemic humility. We don't kn- we, we know that we don't know a bunch of stuff, and so we're actively seeking to find why we might be wrong or why we might be right.

6. 51:25 – 1:08:53

   Personal Insights and Quick-Fire Round

   1. DVDavid Vélez51:25

   2. HSHarry Stebbings51:25

      When you listen as deeply as you do, you, you seek out the truth, uh, to get to the best outcome. Final two questions, we'll do a quick fire. I just want a review of decisions. When you review the decisions that you've made, what has been the single best decision you think you've made in the Nubank journey? And how has that impacted your mindset first?

   3. DVDavid Vélez51:44

      Uh, one of the things I got, I remember getting from Sequoia, was how important the first 90 days of a business are. Those are like the i- initial set conditions, the first team, the first culture, the same value. We were very deliberate around the type of people that we attracted, my co-founders, and how we picked them, and how I spent a lot of time trying to find them, the values that we set up, the way we organize ourselves. We put all our values in a culture deck. That has allowed us to scale this culture again and again and again, because we have a lot of clarity around what we stand for and how we make decisions. And having focused a lot on that consumer obsession since the beginning, having created values around bringing diverse people, diverse from, from a mental perspective, div- diverse experiences, creating a, a, an idea meritocracy where the best idea wins, building that concept of partnership, of flatness in the organization. All of those elements, I think, have been the key core elements that had allowed us to ultimately make a lot of right decisions from a product perspective, from a strategy perspective, from a hiring perspective. Those are the type of decisions that kind of keep paying as we, even as we scale.

   4. HSHarry Stebbings52:53

      On the flip side, everyone makes bad decisions. What has been the single worst decision you've made in the Nubank journey, and how did that impact your mindset?

   5. DVDavid Vélez53:03

      I think the, perhaps the worst decision from a product and kind of strategy perspective has been entering investments, when we enter investments, via a, uh, big acquisitions. We enter via an acquisition versus organically, and I think we underestimated, or I underestimated, how hard was going to be the integration. We did everything we could to due diligence that, and I remember we'd been comfortable enough, but it ended up being harder than we expected. The other thing that, probably a mistake, the other mistake that we did, was we, it was a m- it was a decision that was made in a rushed environment that was very much momentum driven. Interest rates in Brazil in 2018 were coming down very fast, and so there was this massive movement towards equities. We saw a lot of people buying into equities, and we remember saying, "We have to be there in the market now with an equities product. Everybody's doing it. We cannot be late. We have to do it now, and therefore we have to do it via an a- via an acquisition." In hindsight, that was a bit of departure of the way we generally like to make decisions, which is, we're building a company for decades. We're running a marathon, not a sprint. We'd rather be a little bit slow to a market, but do it well, versus a company that tries to do too many things too fast and launch a bunch of stuff. And since it was a bit momentum driven, I think it was a little rushed. And so, in hindsight, I probably would have decided to be a little slow, build it organically. From now on, I think this means a bias, uh, even a bigger bias to build organically versus an M&A driven strategy, as we think about the next five to 10 years of, of growth in the business.

   6. HSHarry Stebbings54:41

      David, did you always know you'd be successful? I speak to some of the biggest founders in the world. Some have an innate feeling that they would be successful when they were younger, some don't. Did you always feel that you would be successful or not?

   7. DVDavid Vélez54:56

      I think it's a tricky question because I think it depends a lot on your definition of success. Especially in, you know, uh, in my career and as I started Nubank, I remember thinking ............................ what is success? Success was going to be having the journey and adventure of my lifetime. I- we were about to go against the biggest companies in Latin America. That was a great adventure. Uh, I- I recently re- read- reread, uh, The Odyssey and e- and- and The Iliad from Homer. That was a great adventure. Uh, and there's n- a lot of poetry around why... It was all about the journey, not the destination, right? For, uh, for me at Nubank, it was always about the journey, not the destination. And so success for me was having the journey of my lifetime, doing something hard, challenge myself, doing it with great people, and then if we failed, that was still success because we did a great journey. The journey was fun. I learned a lot. I challenged myself. So from that perspective, when we chose this idea of- of- of banking, which by the way at that point was, I remember thinking, "This is the single hardest thing I can possibly imagine myself doing." Building a bank from scratch in Brazil is the hardest thing I can do, and that's why I wanted to do it. From that perspective, I defined success that way. I thought I was gonna be successful because it was a- gonna be a great adventure no matter if we made it or if we didn't.

   8. HSHarry Stebbings56:16

      Uh, so final one, I promise, I promise. But one of my great friends, um, is a, you know, very successful hedge fund manager and billionaire. And he said to me the other day, "Harry, the thing with giving, it's harder to give money away efficiently than it is to make it." And the important word there is efficiently. Uh, it's harder to give money away efficiently than it is to make it. On the philan- philanthropy side, you're doing a lot. Talk to me about that, why you're doing it, and how you think about efficient giving versus giving.

   9. DVDavid Vélez56:46

      My mind is split on this debate right now. It's something that I'm actually thinking about. I understand the concept of efficient giving. I think p- a lot of what we've been doing on the philanthropy side is figuring out ... try to answer the question on how do you maximize impact per dollar spent? Where's the maximum point of leverage? You can give a lot of money, you can write a lot of checks, but are you really creating impact? And we've creating a strategy within our foundation, very focused on areas where we think there is a lot of leverage, spec- eh- specifically areas like education and building leadership, building leaders, public and private leaders, because we think if you educate somebody, you create a lot of impact. They're gonna go and build companies. They're gonna- you give them an opportunity to create, um, more wealth for them and for their society, and- and you create systemic impact. Now, I- I think that sometimes feels though almost contradictory- contradictory to the reality that you see in Latin America, where you actually see millions of people that are hungry today, millions of people that are waiting to get, uh, a surgery in a hospital. And so in a ways, like, yeah, fine, you want to create all these very sophisticated models around impact and leverage in- in society, and because of that, you're not giving enough, but at the same time, people need the money now. Like, if you wanna create impact, go buy somebody's food, go make it easy for them to get the surgery that they need for their friends, and stop overthinking this. You're overthinking this. The problem is now their sense of urgency. Just go do it. And if you make one person today directly better off, that might have actually more impact than coming up with, like, these systemic models that ultimately, as a philanthropist, you're not even touching people's lives. So it's a bit of a contradiction that I'm- that we are in the middle right now. And honestly, I don't... I think both are probably true, but I haven't... really figuring out how to- how to solve that contradiction.

   10. HSHarry Stebbings58:47

       Final, final one, and you're gonna cringe at this. But you are a billionaire now, on paper at least, with Nubank, um, and you also have four children. It's very hard to bring children up in any situation. It's also hard to bring them up with the same humility, hunger, work ethic when life is different financially. How do you bring children up with hunger and ambition when brought up in a very affluent environment?

   11. DVDavid Vélez59:11

       It's a challenge, and it's a question that- that I- that I think a lot about. Uh, Doug Leo, I've talked about it with Doug. We've talked two miles about Dougie. He has some very strong views.

   12. HSHarry Stebbings59:20

       (laughs)

   13. DVDavid Vélez59:20

       We go back to t- wh- we'll go back to one of the questions that you made. I think the most important thing is make sure that they don't realize they have won, right? If they think they have won, if the kids, if the children think they have won, which basically means they are complacent, they don't really have try hard to anything, they raise their hand and everything appears next to them, then you are stealing from them probably the single most valuable, um, asset that anybody can have, which is this need to, uh, to become a better person, this need to prove themselves and to everybody that they can- that they have something to prove. It's almost like a bit of inferiority complex. It's almost a bit of, uh, lack of self-confidence, where you have to go try. You have- there has to be some struggle, because they have to prove themselves that they can struggle, they can fight, and they can win. If there's nothing to struggle with, then there is no victory. There is no opportunity to build self-confidence at the end of the day. And so when my wife and I think actively, it's like, "How do we create a bit of a struggle for them?" How do we make... Uh, they cannot be too easy. They have to have responsibilities. They have to have chores. They need to make their bed every morning, and they need to clean up after themselves, and they need to wash the car every weekend, and they need to do a bunch of different things so that they can be, uh, uh, uh, a good...... person, a good participant of the family, a good participant of the community. And so we are still trying to figure out the right answer for that. But I think the core insight, I think is there's gotta be a little struggle. We cannot remove it, everything from them. They cannot be too comfortable because otherwise, they lose the need to, to, to better themselves and to prove themself, um, e- even more.

   14. HSHarry Stebbings1:01:11

       I mean, if you wanna give them struggle, you could just give them an incumbent Brazilian bank account. (laughs)

   15. DVDavid Vélez1:01:18

       (laughs) That's a great idea.

   16. HSHarry Stebbings1:01:19

       You know-

   17. DVDavid Vélez1:01:20

       They've not, they've not opened an account there, but maybe, maybe they-

   18. HSHarry Stebbings1:01:23

       (laughs)

   19. DVDavid Vélez1:01:23

       ... maybe they should start there once they get their first account.

   20. HSHarry Stebbings1:01:26

       Yeah, you want to struggle kids, here's customer service for an incumbent bank. (laughs)

   21. DVDavid Vélez1:01:29

       There you go.

   22. HSHarry Stebbings1:01:30

       Uh, listen, I wanna do a quick fire round. I say a short statement, you give me your immediate thoughts. Does that sound okay?

   23. DVDavid Vélez1:01:35

       Perfect, let's do it.

   24. HSHarry Stebbings1:01:36

       Okay, so what single things you know now that you wish you'd known when you started Nubank?

   25. DVDavid Vélez1:01:41

       Uh, the importance of bringing people with more experience sooner. I was a bit dogmatic in trying to get people that did not have experience that had their, their head with full of questions. It is also important to have head with full, with some answers. So I would have balanced it better.

   26. HSHarry Stebbings1:01:57

       What's the most vivid near-death experience you have with Nubank?

   27. DVDavid Vélez1:02:01

       In 2017, Friday morning, I wake up. I read the news that the government is about to change the liquidating, uh, timeline for credit cards, in, by Brazil, you have about 27 days to pay merchants as a credit card issuer. They were gonna do it to two. That meant we were gonna need to raise a billion reais overnight, and that was gonna be quickly the end. So it was a tough weekend. We rallied hard. We went talk to regulators. Monday morning, there were 15,000 customers on Twitter of the Central Bank of Brazil saying, "You cannot do this. Nubank is finally bringing competition." Then at 2:00 PM, we met with the president of the Central Bank of Brazil, and he tell us, to me and my co-founder, "Don't worry, you're good. This is not gonna happen." But that was very close. That was very close.

   28. HSHarry Stebbings1:02:48

       Whew. Um, tell me, what was the biggest lesson from taking Nubank public right before a big market correction?

   29. DVDavid Vélez1:02:54

       We could not see the market crash. Uh, we were a bit lu- lucky and a bit good in terms of the timeline. We... I remember debating with my partner saying, "This is a capital-intensive business. No matter how well we do it, we're gonna need capital, and the best way to get access to capital is in the public market." So, we're gonna have to be a public company soon, number one. And number two, around 2020, 2021, I remember having the conversation saying, "Everything is looking so good, e- and the entire environment is so positive. There is only downside from here, which means this is the perfect time to go public." And so we went public end of 2021, and then beginning of 2022, everything changed. So timing was good, preparation was good, and then I think kind of what, what inside, the one lesson we got from that was very quickly realizing that there were a lot of things that we could control from that reaction. Our stock took a hit very fast. That created a lot of internal stress, but we spent some time figuring out what could we control, which was our execution, what can now we control, which was US interest rates, US inflation, things that were affecting us that were outside of our control, and then quickly enough realized, let's just focus on what we can control.

   30. HSHarry Stebbings1:04:10

       You have four children, as we mentioned. You can call David Velez up the night before your wife gave birth to your first child and you can give one piece of advice. What would you call David up and say, "You should know this before your first"?

Episode duration: 1:08:53