Jackie Reses: The Most Powerful Woman in Finance; Making $50BN for Yahoo on Alibaba | E996

1. 0:00 – 0:34

   Intro

   1. JRJackie Reses0:00

      We built the bank we wanted to see in the world, full stop. We built the bank we wanted to see.

   2. HSHarry Stebbings0:06

      (instrumental music) Jackie, I am so excited for this. I loved it when I asked you for people that we had mutual friendships with. You know, you mentioned Mickey, you mentioned Guillaume, you mentioned David Vélez. I- I obviously did my homework. So first, thank you so much for joining me today.

   3. JRJackie Reses0:21

      Oh, I'm so happy to be here. I know it's a long time in coming, but I'm happy to be here.

   4. HSHarry Stebbings0:27

      (laughs) We made it happen in the end. But I wanna start with a little bit of an unconventional start, to be honest. Think back to when you were a child.

2. 0:34 – 7:38

   Who is Jackie Reses?

   1. HSHarry Stebbings0:34

      What did you wanna be when you were growing up?

   2. JRJackie Reses0:36

      All right, now this sounds terrible because it's so trite, but one of my first memories of playing as a kid is playing bank teller Barbie. I had this pink Barbie convertible and David Cassidy, I'm like a '70s kid so this is like 1976, David Cassidy would, uh, pull up as a customer and I was the bank teller. And so I know that sounds totally ridiculous, but it's in fact true. And so I come from an incredibly entrepreneurial family. Everyone in my family started their own companies. I'm like the only person to have worked for anyone. And so, um, you know, I got lucky in that I knew enough to know I didn't know anything, and so I started my career at Goldman Sachs. But then evolved to pretty entrepreneurial components of any company that I worked at where I was building a team, building a company, building new products. And so I always stuck with financial services because I loved math, I loved the idea of inventing in a really old industry, and I loved building businesses. And so that's the theme that always exists in my life, and- and total entrepreneurialism.

   3. HSHarry Stebbings1:50

      It's funny you say about kind of the- the dreams of being a bank teller there. When I was younger, I always saw like the vaults in movies and they'd open them up and there's like wads of cash. I wanted to be the bank robber. So I- I... we kind of share... I mean, yours is slightly more legitimate than mine, uh, and yours actually became true. Sadly, I haven't had that moment of cash just like hitting me from a vault. But, you know, we'll- we'll get to vaults later. Um-

   4. JRJackie Reses2:13

      Well, to be honest, if you, if you come to one of our banks in Kansas City, so I- I run a bank, and we actually have physical locations that are pretty gorgeous in Kansas City, and there is a vault in our Lee's Summit, Missouri location that is absolutely stunning. And so you look at it and say, like, "There should be a movie that happens inside this vault." Because it's pretty cool looking. The door is gigantic and it's old school looking and it's- it's super cool looking. It makes you feel like you're grounded in a lot of history when you go there.

   5. HSHarry Stebbings2:47

      How do you know when you were part of the creator economy when you go, "This would be the best TikTok ever if you let me go into the vault."?

   6. JRJackie Reses2:55

      You can come into the vault. You can come into the vault. We'll put a s- we'll put a special place for you in the vault. (laughs)

   7. HSHarry Stebbings3:03

      (laughs) And listen, I- I- I always believe that we're a function of our histories and I'm, you know, secretly an armchair psychologist without the degree. We're all running from something. What do you think you're running from, Jackie?

   8. JRJackie Reses3:13

      Oh, now we're gonna go deep in psychology because I am absolutely running from my childhood. So I had a very unusual childhood in the sense that I ended up moving out of my house when I was 14. I sent myself to boarding school and I got myself out of a household of chaos. And so when you're in that kind of environment, you have to stand up for yourself and be independent on your own. And so I was always involved in entrepreneurial endeavors and making sure I could support myself and get myself to a different place in the world. And so I saw the dreams of building businesses that my parents established, but then also knew that I had to survive on my own, and in order to improve my own life, I was just gonna have to do it on my own. And so I, you know, got lucky. I only went to three years of high school because I needed the work, I needed to put myself through school, and I left high school as a junior. I went to college, and then when I was in college, I ran a bunch of businesses that helped put myself through college. And so when you're stuck in that kind of environment as a kid, you learn what grit is and you learn what entrepreneurialism is, and I ended up having a drive to succeed, to get myself out of that environment that I think is unending. I, you know, I wanted to be successful, I wanted to be independent, I wanted to have a lot of things that didn't exist in my family. And so to this day, my e- my entire career is built off of that foundation.

   9. HSHarry Stebbings4:49

      What do you think grit is?

   10. JRJackie Reses4:51

       Oh, grit is like an intensity around needing to be independent and needing to drive yourself forward and pick yourself up and brush yourself off and get back on the train and go. And it- it's one of those things that I try to teach my kids. There is unfortunately a curse of kids growing up in a level of comfort. I try to make sure my kids understand like, "You gotta work. You are independent, you are putting yourself through school, you are gonna have your own jobs, you are, you know, you gotta work to have extra money." And so they've gotta learn that they've gotta build their own career without the benefits of their parents providing so much comfort that they lose their own self-esteem.

   11. HSHarry Stebbings5:35

       I- I totally agree with you. I'm just... when you're 14, it's so young, um, my mother ... when I was like 11, it made me grow up very fast, much faster than I anticipated (laughs) , I think much faster than anyone anticipates. But how did you deal with the weight of expectation as a 14-year-old? It's- it's quite unusual.

   12. JRJackie Reses5:52

       The only expectation I recall from my parents is that around education. They were very education focused and, uh, the only place I remember my parents ever talking about was University of Pennsylvania. "You're gonna go to Wharton." "We-"... and I was a very entrepreneurial kid, as I mentioned, and my parents just drilled into me that I was gonna go to Penn. So I only wanted to go to one school. I went to that school. I applied to that one school. I love that school. I think I owe that school my entire life for what it taught me, for who it introduced me to, and for the connections that I've had throughout my entire career that are all driven back to going to Penn. That was really the only expectation they had for me. I think everything else I had to build on my own around what I wanted to achieve in my life and who I wanted to spend time with. You know, the other thing that happened to me really young, and again, I think it's a function of reacting to my childhood, was that I met my husband when I was 18. And my husband came from one of these super classy families, and he's a very generous family, and they're- they were all so erudite and wonderful. His mom studied Shakespeare and his father was, like, an old school lawyer. And he taught me about longevity in relationships and good people. Like, you wanna spend time with good people, and that is a great foundation and a great reaction to my childhood where I met people who had really high integrity and I just wanted to spend time with them and live in a world of excellence. And that's what I saw from him that was a total reaction from my childhood, which was the exact

3. 7:38 – 12:39

   What is high performance?

   1. JRJackie Reses7:38

      opposite.

   2. HSHarry Stebbings7:39

      How do you think about what high performance means in leadership to you?

   3. JRJackie Reses7:43

      I think there can be a bunch of different dimensions around that where people have incredible raw intelligence and they're, they're able to actually create outcomes that matter and make a difference to a company. And so, I focus on, not the work they're doing, but the outcomes they drive and how they drive it as a vehicle for looking at who's an absolute killer. Who has good instinct? Who has good judgment? And what do they deliver for us? And so, I love spending time with those people and I have all day long for them regardless of what level they are in a company.

   4. HSHarry Stebbings8:20

      Now, Jackie, you, you mentioned the kind of outcomes that people drive. You mentioned like being trusting of people. I suck at hiring. I think one of the reasons the show has been successful is because I'm very open. Not good at hiring, um, and I spoke to Mickey before the show and he was like, "You've got to talk to her about hiring." And so, I'm just gonna ask a very broad question of like, what have been some of your biggest lessons on hiring and building the best teams?

   5. JRJackie Reses8:45

      I focus on what I think the person's innate skills are as a human, not what jobs they've had in the past. And so, someone could be amazing at people skills and you could pull someone from sales and get them to be a recruiter. And so, it doesn't matter that they had a totally different function. That, that function has a certain level of underlying experiences that attach to it, and that, that often attaches to where someone's true spike is and who they are. That may have nothing to do with their resume. I remember when I was at Square, I ran HR. People used to look at my background, which was extremely financial, right? I worked in private equity for 20 years. I've always created esoteric financial products. And then I ran HR for a decade at two tech companies. I used to say my best skill was that around understanding the good in people and what they might be good at in their jobs. That had nothing to do with finance. But like, if you really abstract what private equity is, private equity is judgments about people, where you need to place them in their jobs, and what levers of growth you give them in order to help them grow a business. That is recruiting, and that is leadership, and that is HR. And so as much as someone might look at my background and say, "Oh, you'd be an amazing CFO," I was like, "No, no, no. If you truly understand what I'm good at, I'd be an amazing head of HR." And so, I think the most important thing you can do is just understand everything outside of someone's resume. What are they truly good at and what do they suck at? And if you focus them then on a job, that's what matters.

   6. HSHarry Stebbings10:35

      How do you do that? Because I think sometimes people don't know actually some of, s- sometimes their biggest strength or their biggest weakness or where their spikes are. How do you detect their spike and do that in reality?

   7. JRJackie Reses10:47

      So you spend a lot of time with people, both in a personal setting as well as in an interview setting, and then you also go through... I like to go through case studies with people, uh, and see how they operate in like a real world experience. And so, um, I think that helps you understand how they operate on the fly and what they're good at and not good at. And then I also spend a lot of time on things that have nothing to do with their resume. And I often start with a question of like, tell me what your life goals are. Like when you look back at your life, you know, 50 years from now, what do you want to have achieved? And then what do you think you're truly amazing at? Please don't give me anything that shows up on your resume. And what do you think you suck at? And I, I disarm people in an interview by, by saying like, "Let me tell you what I suck at." You might look at what I've done and say, "Amazing finance," but in reality, I'm terrible at like accounting and math on the fly. I- I can't do it in my head. And so, that has never been my skill, but when it comes to like m- intrinsically understanding what motivates people, I love to just have these questions of curiosity and get to know people and, and understand what drives them so that I know what job to give them, where to put them in a company. And that's how I spend the time in interviews, not tell me about how you led compliance at XYZ Company.... and I just don't want to know anything that shows up on their resume.

   8. HSHarry Stebbings12:20

      I think in hiring, you learn a lot from mistakes. Um, when I look at my... (laughs) I'm j- I'm learning from you already. When you look at my mistakes, I always looked at the CV, went, "Oh, they were at Tier 1 Fund before, they are a good investor." Wrong. Li- lean too much on CV, often a common mistake

4. 12:39 – 20:51

   Hiring Mistakes

   1. HSHarry Stebbings12:39

      of young founders, I find. When you review your hiring mistakes, what do you think is the most prominent one and how did you change your approach having made it?

   2. JRJackie Reses12:48

      I made a lot of mistakes when building some of the functions at Square around hiring for domain knowledge. You know, when we were building out banking and lending at Square, it was a pretty new concept, and we were trying to find particular expertise in a product set that really hadn't been done before, which... So, fundamental mistake there. And in reality, I think I have indexed away from domain knowledge than I ever did because a lot of what we're creating hasn't been done before or you want first principles thinking, and I would rather focus on things like raw intelligence, judgment, curiosity, grit, ability to manage ambiguity, rather than looking for things like domain knowledge or operators with prior scale experience. You know, that's another big mistake, where you assume because someone had a lot of zeros around the output that they created at a big company that that means something, and I f- I would rather look for people who are scrappier and have an ability to just manage an ambiguity than I would someone who's been an operator at a high profile company at scale. You know, I, I ran HR at Yahoo! and one of the observations from Yahoo!, because there's an incredible diaspora at Yahoo!, is that anyone who went to Yahoo! was grittier than a lot of the people who worked at higher profile companies that were just minting money, and when you came to Yahoo!, you had to work a little harder. And so I find places like that are incredible places to go hire, where people might have a little bit of a chip on their shoulder, they might have to work harder, they might have to be scrappier than places where gold falls from the sky.

   3. HSHarry Stebbings14:34

      I get in trouble for this, Jackie, and, uh, but I'm gonna sound like a real boomer. I- I- I feel like our generation is afraid to do the work. The rise of COVID means they don't want to go in in the office at all, uh, they, they have Friday afternoons off, Monday mornings slower, they don't work past 6:00 PM. They all want wellness retreats and kombucha. Like, what happened to the hard work that, you know, you did in the '90s where you remember? Tha- What was a personal life? Like y- but you were achieving, like, we, we are afraid to do the work today.

   4. JRJackie Reses15:04

      Yeah. Well, I'm a pretty intense, 24/7 kinda person. Um, you will get emails and Slacks from me, uh, at any hour, including in the middle of the night sometimes when I wake up and I'm, and there's something on my mind that I can't get rid of, and I'll get up at 3:00 in the morning and need to just work on it in the middle of the night and start sending out notes to people on my team. Thankfully, people are in all different time zones so in many cases, I get (laughs) responses back. But, uh, you know, I think it depends on the kinda culture you're building, and this is really important for founders. You have to set up a culture where you don't build entitlements into the way that you operate, and I think that's really important from the first 20 people that you hire to lay out the foundations for the focus, the intensity, and the inspiration of what you're trying to build, and you don't want an entitled culture to creep into your environment. And so, you know, I try to look for people who have the passion, the grit, and are inspired by what we're doing, and just try to push as much as possible. Sometimes that works, sometimes it, it doesn't. But, you know, you have to be pretty disciplined about your team, weed out people who are not hitting the goals, and, and you as a manager have to be honest to set, you know, goals and OKRs that, that drive the team forward. Um, and so, you know, I wanna have an environment where people are pretty inspired by a high performance culture, and getting pushed and learning, and that's at least what I, what I try to drive to versus, you know, trying to have people be comfortable and... You know, I, that worries me. I, I want people to be pushed to their, to their limits, and, uh, you know, I had this experience in, uh, COVID in developing PPP, and, and we developed PPP, this is at Square, in a crisis, and we ended up with a core team of people working on it, and then we literally got the entire company of Square to volunteer for us to be, you know, loan reviewers, uh, 24/7, uh, during that period of time, and people were inspired by the mission. And when I go back to the thank you parties and, like, the, the retros on what happened during PPP, I'll never forget the discussions with people all over the company and how they were motivated to wanna kill themselves in ways that I find incredibly inspiring because they knew that they were attached to the mission. They, they, they just wanted to change the world, they wanted to see outcomes that were incredible, and so people were willing to roll up their sleeves and do the work. It was incredible. It was a pretty surreal experience for me.

   5. HSHarry Stebbings17:53

      I think when hiring people, often people say, "The best people have people who will follow them." They have a list of people they've worked with before who would join them wherever they move to. I spoke to many of our mutual friends and your old colleagues, and they said, "Her followership is amazing. Everyone would leave wherever they are to do whatever she's doing." What do you think you do to create that loyalty and followership with the people you've worked with?

   6. JRJackie Reses18:17

      That's super nice of people. You know, I... First, I focus on the long game with people.I really care about their career, and it could be someone who is multiple levels down from me, I don't care. If I've built a relationship with someone and I wanna help them and, you know, I will take a 20-year view of how to build their career and know that they'll show up over time. The second thing I do is I focus on them to my own detriment, and I will send people to business school, I'll send them to other companies, I will want them to go learn something, even if it gets in the way of our road map, I'll move them to other departments if I think it's better for their career, and I genuinely believe that's the way to kind of build that kind of followership where people trust that you have their best interests at heart. And I have so many examples of this where, you know, I've sent someone, you know, to business school even though they were my best person in a particular field. Um, and then I pay attention to, you know, true, just genuine principles of, like, being a good human around the understanding, uh, of who they are, being honest with them, listening to them, um, I spend a lot of time listening to people I work with. Sometimes they just wanna vent, and sometimes they need a little bit of a smack where I'll say like, "Yeah, I gotta call bullshit on you." It's just not... I- I don't see it that way, and I think people appreciate that honesty and the relationship that that drives because I think they know that I- I want them to be better as a professional. And then finally, I guess I'd say I hope that I inspire people, you know, I work hard myself, I try to do best for people, I, you know, I put my heart and head into everything I do, and so hopefully that means something to people and that I'm not just phoning it in. You know, I clean the coffee pot in our office in Sunnyvale because it's dirty, and when I see it's dirty, I- I, you know, I'm not above it all. And so I could do that and then move from that to a, you know, meeting at the Federal Reserve, and I have no issues going from one end of that spectrum to the other, I, you know, I just try to do whatever needs to get done.

   7. HSHarry Stebbings20:36

      You mentioned calling bullshit and being direct. I heard that you're one of the master deal makers and negotiators. I think this is like one of the most fascinating topics actually, and, like, there's not enough discussed about deal making itself. Like,

5. 20:51 – 25:05

   Successful Deal Making

   1. HSHarry Stebbings20:51

      if (laughs) weird question, but, like, what have been the biggest lessons on what successful deal making actually is?

   2. JRJackie Reses20:59

      I don't think of it as a zero-sum game. I think there's always ways to be creative in getting an outcome that enables both parties to feel good about something, and that doesn't mean that every point is gonna be a love fest where everyone is super happy, but it means that you can make trade-offs in what's absolutely the most important things to you and what can you give up. And I think, um, you know, I try to focus on understanding what someone needs and truly understand, like, what's the outcome that they need. Do they need to look good? Do they need a certain economic outcome? When do they need certain economic outcomes? And I think if you're really creative in first understanding what's driving their decision-making process, it could yield a lot of optionality in what you negotiate for, and so I don't see things as black and white as an outcome, and I think it yields good long-term relationships, and I think it yields great economic outcomes.

   3. HSHarry Stebbings21:59

      What do you think many people get wrong in deal making and negotiating?

   4. JRJackie Reses22:04

      Oh, they can be jerks. They think, like, it's their way or the highway, there, only, there's only one way to get to the right answer, and, you know, I think sometimes people overplay their hand around leverage, and you may have all the leverage in the world, but you gotta decide, like, do you need to have an operating relationship with this person? So having that negotiating leverage is only gonna burn the relationship, and so, you know, I think there are just so many per- interpersonal relationships in the way that you need to manage these things, and, uh, you know, and so I think you have to draw that into the components of the discussions you're having. You know, I'll give you an example. W- I have investors, and this is in Lead Bank, and I wanted these investors because I thought they'd make us more disciplined as a group of founders, and I thought the smarter and better they were, I wanted their brain power, I wanted their advice, and I wanted them to kick us in the ass. We had a lot of leverage when setting up this company because I was also willing to fund it myself, and the, the only reason I was taking folks was because I wanted their brain, and when we set the terms for our investing round, I was very comfortable letting our investors get a lot of their way on a lot of different components of the transaction because I knew I needed certain things. I needed a structure that was appropriate for a bank holding company, I needed something that was gonna get us approved by the Federal Reserve, and that was... and speed mattered. That was more important to me than the last percent of economics that I could derive from our investors, and I also didn't want economics to drive the outcome of our deal, and so it's an upside-down way of investing and bringing in investors to a round, but I knew what was important to me, and then I understood what was important to them, and I was focused on something very different than them from an outcome point of view, and we were able to negotiate quite easily because I was willing to give them things that they cared about because I wasn't willing to budge on things that were going to make the long-term operations of my business more successful.And so like, I didn't, I didn't want them to have terms that were gonna make a bank more complicated to operate over the long duration of, of our business. And so, you know, that's the way I negotiated it, um, and it, to, to great effect. I, you know, I have a great relationship with our investors. I, I love them. They truly hold me accountable, they, they're tough on me in all the right ways, and I genuin- genuinely appreciate their feedback.

   5. HSHarry Stebbings25:00

      I mean, they are awesome. I, I think the world of them. Um, so I totally agree with you

6. 25:05 – 31:16

   Best and Worst Investments

   1. HSHarry Stebbings25:05

      in terms of the great humans around the table there. On Review, I'm just too interested, which is the best deal you've ever made and what's the worst?

   2. JRJackie Reses25:12

      Economically some of the best deals I ever made were around Alibaba, and that's a situation where we had no leverage. It probably generated $50 billion worth of economics to Yahoo shareholders. And Yahoo, this was while I was at Yah- at Yahoo. We, I was on the board of Alibaba, and there unfortunately was a deal that was struck that was selling half of Yahoo's economics, um, uh, back to Alibaba at the IPO. And this is, I mean massive economics. And I had the goal of trying to get some of those economics back even though, uh, a, a written transaction was executed and the economics were contractually obligated to be given up at the IPO. And I went on a singular mission to get equity back, and I would always say to the Yahoo board, "Equity is good. Equity is good. Equity is good. I have one goal. Equity is good." And so I went and worked with the Alibaba team, there were pretty bad relationships before my arrival between Yahoo and the Alibaba board and shareholders, and I went to rebuild those relationships, that we had a foundation for trust in order to renegotiate some of those deals. I worked really hard at that. I spent every other week in China for several years. And I showed the shareholders of Alibaba that I was gonna put their interests first so that when I went to negotiate and get equity back, they trusted that I had done right by them for their business. I had let them, um, uh, even with veto rights do things that they felt I didn't have to let them do, and as a result, they were willing to give me back some of the economics on behalf of Yahoo shareholders. And so the economic yield of those transactions where we had absolutely zero leverage were kind of extraordinary, and I will forever be proud of it and forever be proud of the relationships that me and the team built in order to kind of create something out of nothing. It was, it was amazing, a fun and incredible experience.

   3. HSHarry Stebbings27:29

      Oh Jackie, that is so cool. I mean, normally I'm used to like, "Oh, you know, I did this," you know, but it's like Alibaba when I was at Yahoo, zero leverage. I'm like, "Wow, that's impressive." Um...

   4. JRJackie Reses27:41

      Yeah, no-

   5. HSHarry Stebbings27:41

      What was the...

   6. JRJackie Reses27:42

      It was amazing. You know, I, I was involved in, uh, dealing with a lot of the financial assets and managing 'em between Alibaba and Alipay, and the banking licenses at Alipay. And as an American who grew up in Atlantic City, New Jersey, I have to say it was a pretty surreal career experience, and the people at Alibaba are extraordinary. And as I was watching what was happening in China, there was a lot to learn as an American company with regard to the velocity of invention, their creativity that they had, the way that they were able to deploy financial assets against transactional data, and I know we drew a lot of inspiration from that in what we built at Square because we had seen what was being built at Alipay, uh, with firsthand insight and were able to look at that, uh, and draw inspiration from it. And so it was, it was an unusual career experience, um, and an unusual insider's view in being able to draw, uh, experiences from Chinese financial services into US products.

   7. HSHarry Stebbings28:50

      What do you think is the worst deal you've done?

   8. JRJackie Reses28:53

      Oh, personal deals that I've done. Uh, probably in the last year I've made some pretty disastrous trades with the changes in the financial market, and I can say that I've done best for myself because I've been... uh, you know, I think it's probably around issues of, um, not selling quick enough, and I think, uh, you know, people usually are great in investing and terrible at selling, and I think I'm guilty of that myself.

   9. HSHarry Stebbings29:24

      Well, I, I think this is the biggest lie actually that we permeate in venture which is like everyone says, "Oh, lean into your winners," and it's like, no, bullshit actually. The majority of the best returns are from strategically leaning out of your winners over time in increments and being very thoughtful and deliberate around it, but lean out is also a very successful strategy. Like...

   10. JRJackie Reses29:43

       Yeah, well there's a risk, there's an entire game theory of risk management around exiting, and I think some people are incredible at it, some people are not, and I think that drives returns in venture and private equity. And there are, uh, you know, some folks who are absolutely incredible. Like I think Co2 is an investor of mine, and I look at Philippe Laffont, Thomas Laffont, and the way that Co2 manages risk, and I am mesmerized by their ability to understand market dynamics and react to it in really smart ways. They aren't enamored by the companies that they invest in, and they're very smart risk managers. There's a lot to be learned-

   11. HSHarry Stebbings30:26

       W- w- w- what-

   12. JRJackie Reses30:26

       ... around watching people like that.

   13. HSHarry Stebbings30:28

       What do you think they do to manage risk so well? Like, w- why are they good in that way? I'm... You have a much better purview than me. Sorry, I'm learning.

   14. JRJackie Reses30:36

       I think they're great at following trends, understanding when they see breakages in the market, and not being emotional about the need to sell or the need to make different trades. I think, you know, they have an intuition and an data science-driven expertise that very few people in the world have. I think, you know, you see that with incredible money managers and r- and, and risk managers, and I think there's a real skill around it.

   15. HSHarry Stebbings31:02

       You mentioned that their ability to follow trends. We saw over the last few years the unprecedented investing trend of obviously investing in, uh, fintech as a- an ecosystem in space. I'm gonna ask the terribly broad question of... and hopefully

7. 31:16 – 38:46

   Fintech Winners and Losers of the Future

   1. HSHarry Stebbings31:16

      helping me as an investor, uh, who will be the big winners and the big losers in the next 10 years of fintech do you think? Really unfair and broad.

   2. JRJackie Reses31:23

      You know, fintech is an industry that's driven off of financial service as a whole. And, and thankfully from a fintech point of view most of the market cap in fintech is over 50 years old. I mean, it's kind of incredible when you look at the industry and banking as a whole how old it is, and how concentrated it is. There's $23 trillion of assets in the banking system, the top five banks hold 41% of that, and so there's so much room for invention in fintech starting with that level of control, centralization, and age around the financial products that drive our markets. And so when I look at winners and losers, I think about it from an in- from an industry point of view and like a subgrouping within fintech, I think we've spent the last 10 years iterating on revenue within fintech. We've been incredible at top-line revenue. You could look at companies like Adyen, Square, Stripe, say, "Wow, they have taken the idea of the inbound of a transaction and made it incredibly frictionless. They've abstracted away all of the pain associated with collecting revenue." The place where we haven't invented nearly as deeply is that around expenses. It's much harder because the fractionalization of that market is much deeper, and so I see the next 10 years of interesting companies being developed around expenses, expense management, and then infrastructure as the second component.

   3. HSHarry Stebbings33:00

      What have we not done... Sorry, I'm naive, what have we not done in expense management? 'Cause as a VC I get expense management every single day. Like, what do you mean by the fractionalization of expense management and where does that go? Help me. (laughs)

   4. JRJackie Reses33:14

      So within expense management right now when you want to manage your entire P&L all of the components of how things get paid go out in very different ways. You track it in different ways, you pay it in different ways, you get invoices, you get, um, instant bills, you have to manage it differently, you have to pay out people differently, you have to pay out people in different countries, you have to pay out in, uh, different companies, you have to pay out people. Again, people are in different countries, different states, and so the complexity around every component of that stack is extraordinary and there really aren't companies that have made it easy that are operating at scale today. And so if you think about a company like Square, all of the innovation has been around taking in the inbound transaction, right? We've made the actual transaction at the countertop super easy. Great. That's revenue. Everything below that in how you manage your P&L is still a hot mess, and so there isn't an organized way to do that. You might think of accounting software, but accounting software is the tip of the iceberg on a ledger. It's not the management of, like, are you sending out checks, are you sending out invoices, are you sending out credit cards, and you have the same amount inbound. And so all of that is gonna get abstracted away by companies who are able to streamline how that P&L is managed from an expense point of view. That's what I mean by expense management.

   5. HSHarry Stebbings34:56

      Why has that... So (laughs) why has that not been done? That seems like given the size of the problem and the magnitude an obvious problem to go after, there is incredible talent looking for i- why has no one done that?

   6. JRJackie Reses35:09

      Well, if you think back to fintech, it's not that old of an industry. Really, you know, when Jack created Square was 2009, so we are, we are not in a market that is decades old, we're in a market that is 15 years old. And so I think the first batch of invention was really around, um, the f- the first and easiest part to tackle around revenue, and, and in the last few years companies are starting to build creativity around expense management. Like Melio is one of these companies that I love, Tipalti is one of these companies that I love that are really just starting to invent around that, that market. And then I think there's also more, uh, investment around infrastructure and you needed the infrastructure to be more sophisticated in order to really get to these underlying components that are now getting more and more sophisticated. And so both of those markets are things that I think will be really interesting in the next 10 years.

   7. HSHarry Stebbings36:09

      Why do incumbents not do it? Why is Square not going, "Hey, we can integrate this into a future product suite"? Why is it startup-

   8. JRJackie Reses36:15

      You know, you can ask that question to every bank in the United States and in the world, why didn't JP Morgan create Square? I don't know. I... You know, I think in some ways they have so much embedded infrastructure and benefits associated with the system that they run that in many cases they don't decide to disrupt themselves, and I think these companies will be incredibly disruptive.... to lots of incumbent players who have lots of tentacles into the ecosystem of how money is paid out.

   9. HSHarry Stebbings36:47

      Who will be the losers in the next 10 years?

   10. JRJackie Reses36:51

       Old school infrastructure companies. You know, I, I do think large financial services companies have understood that they need to innovate, and you see that, uh, very intensively around some of the biggest banks and financial services companies in the United States. I think the question is, can they do it? And they all need to disrupt their own products and set up teams around their own disruption, and I think if you're willing to do that, they have the chance at being able to build the next stage of products that are inventive. If they decide that they just wanna manage their business for cash flow, they will die a, a long term death.

   11. HSHarry Stebbings37:33

       Who do you think does it best, incumbents embracing disruption internally, innovation externally?

   12. JRJackie Reses37:40

       Well now interestingly, I think, uh, companies like PayPal, Square, Adyen, and Stripe are kind of incumbents. Like, you can't say that these companies at the scale they operate in aren't incumbents. And I do think you see different levels of invention at companies like Square that still manages to build many multibillion dollar products within its own organic infrastructure. Stripe as well. And I think there's a magic to the way that they do that, that I think is very important to learn, and I think those kinds of companies will continue to innovate.

   13. HSHarry Stebbings38:13

       Do, like, JP Morgan do it well? We see them with, I, theirs is Marcus, I think it is, which is that product, and then they also-

   14. JRJackie Reses38:19

       No, that's Goldman.

   15. HSHarry Stebbings38:21

       That's Goldman, okay.

   16. JRJackie Reses38:22

       I think-

   17. HSHarry Stebbings38:23

       Do they d-

   18. JRJackie Reses38:23

       I think Goldman tried to disrupt themselves, but they did it in a market that they weren't good at, which is consumer finance.

   19. HSHarry Stebbings38:28

       Mm-hmm.

   20. JRJackie Reses38:29

       And so, uh, they just had to restructure that business, and I think they're learning some important lessons about focusing on things you know, and don't focus on, on something that you have no insight into. So, they're-

   21. HSHarry Stebbings38:43

       I th-

   22. JRJackie Reses38:43

       ... they're learning some tough lessons right now.

   23. HSHarry Stebbings38:45

       Y- you said,

8. 38:46 – 43:01

   Defensibility in Banking

   1. HSHarry Stebbings38:46

      like, focus on something you have, you know, insight into. I always believed really in investing that defensibility is bluntly a bit of BS, and that actually anyone can copy your product. Uh, and this is very specific on Segment, so it will have a caveat. But, um, like actually, you know, bluntly, it's speed of execution, quality of thought, quality of team that determines, you know, outcome and ability. Um, that's not actually true with banks. How do you think about, bluntly, the importance of defensibility, and how that plays out in buying banks?

   2. JRJackie Reses39:17

      There's always room for someone to innovate on what you're doing, and if you are not disrupting yourself, someone else will. I think no matter who you are, there's always room for your product to be disruptive. Like, I look at what's happening right now with AI, and a company like Google, which I consider to be one of the most interesting scientific companies ever created. And, you know, out of the blue comes ChatGBD. You know, like, it's incredible. And I, um, you know, I think you always have to be willing to disrupt yourself. And so, there are lots of different ways to do that and lots of different ways to set up your culture so that you can do that. Like, two of the things I like to do that are really important in a culture of disruption is, um, making sure that you have ICs who are well-regarded and someone is a star and the highest performer can be an IC. You don't have to be a manager in order to be considered amazing. That's super, super important, because this idea that you need to, like, keep growing teams in order to become more powerful in a company is, like, a culture killer on invention. You could have people who are incredible, who are just incredible operators in their own, and they need to be rewarded as such. The second thing that you need to do is to take people out of jobs that they have succeeded in and give them an idea. And if you can do that in a company and a person is rewarded for coming out of this huge job and starting over, that is incredibly powerful, because there's this historic convention that power grows with the number of headcount that you have underneath you, and that absolutely is a cancer in a company. And so when people are rewarded for invention and creation and starting small and being entrepreneurial around teams, that is absolutely magic in a culture or a company no matter how big it is.

   3. HSHarry Stebbings41:22

      I just had Toby from Shopify on this show, and we had a little nice debate. He said that micromanagement is absolutely a productive way to manage teams, um, and actually that you are always involved in processes as a founder, that you shouldn't extrapolate yourself from. I vehemently disagreed, um, obviously with absolutely no credentials to back up my disagreement. (laughs)

   4. JRJackie Reses41:44

      (laughs)

   5. HSHarry Stebbings41:45

      But, but, uh, do you agree with him on that aspect of the importance of micromanagement?

   6. JRJackie Reses41:52

      I don't agree with micromanaging at all, unless there is someone who needs to be micromanaged because there's a particular performance issue. Um, I, you know, I am a believer in setting direction, providing goals, and then focusing on outcomes, as a leader. And you hope that you're hiring the right people who know how to get the job done in their own way. I think everyone has such different work styles and they go about things in a different way. I don't focus on the inputs of how they do it, I focus on the outputs of what gets done. And so, um, I am not a micromanager, maybe to a, a fault. Uh, the people I work with, I absolutely trust, I adore, I believe in who they are. It doesn't mean that I don't push 'em in profound ways. I think they push me as well in many cases.... but I like to hire certain kinds of entrepreneurial people and let them run.

   7. HSHarry Stebbings42:53

      You mentioned kind of pu- pushing people, uh, and, like, in positive ways. Uh, you mentioned also earlier about taking investors that push you in positive ways.

9. 43:01 – 47:29

   Crypto Winter and Central Banking

   1. HSHarry Stebbings43:01

      Mickey asked the question before, "How does the entire crypto winter affect you? And, and how do you assess it?" I thought this was a really interesting one that I wanted to give Mickey credit for.

   2. JRJackie Reses43:13

      Yeah. Well, uh, what's happening in the crypto market has been an important moment because I think it's causing everyone to step back and take, um, take a moment to think about what real models are in the business that are gonna drive real businesses and real outcomes, and what is a product of a bull market. And I think we're gonna revisit on first principles businesses that are gonna change the way financial services take place. And so, I do like these moments when the air comes out of the balloon and you go back to first principles thinking, you go back to constraint, and you get disciplined about what you're gonna operate. I think we've had to look at where crypto can make a difference in the value chain of financial services, and that is really, really important. There are some components for us as a bank that are also interesting because we understand how to assess risk in the crypto market and we have been able to onboard those crypto companies that are super high quality companies that are getting unbanked by those in the banking value chain that don't understand how to assess a company that is strong, highly compliant, operates with a high level of integrity, and we have benefited out of the de-risking in the market. And so, you know, we have been a net beneficiary of the scrutiny in crypto. And fundamentally, I'm a long-term believer that we will find use cases that have benefit over the long term. I don't think we're there yet on any use case, frankly, that I think will have longevity in the market, but I do think the underlying technology is super important to experiment with and to explore new ways of building financial rails. And so, I think it's worth the investment, but again, I, I have to revisit all these business models and decide what I believe is gonna be important for the long term and, and what I think is just nonsense.

   3. HSHarry Stebbings45:23

      I'm naive, and so I, I learn from great people like you. I just don't understand how, you know, central banks give up fiscal and monetary controls with the rise of crypto in mainstream consumer finance. Like, it seems, uh, completely impossible to me that they would let it become what many believe it will become because of the lack of controls around it. Am I-

   4. JRJackie Reses45:45

      Well-

   5. HSHarry Stebbings45:46

      ... ............................ you agree?

   6. JRJackie Reses45:46

      ... I think we're suffering as a r- we're absolutely suffering in the United States a r- as a result of that, and I... You know, you have heard the leaders of the largest crypto companies call for more regulatory oversight because the, the place that we're in today is really challenging. You don't know whether you are going to be governed by the SEC or another regulatory body coming in and saying, "Oh, you can't do that. Sorry we didn't have a rule for it, but we're gonna stop you right now." And that kind of compliance doesn't work for companies that are trying to build within guardrails and rules. And so, I do think regulatory clarity is probably the most important thing for the crypto industry today, and what we're seeing is the politics amongst the multiple regulatory bodies that operate in the financial services system trying to figure out, first, what the genuine nature of what each of these products are, and then second, who should regulate it, and then how? And so, I do think they let it get to the, to a scale that was unhealthy with no regulation, and I am eagerly looking forward to regulatory oversight that provides clarity to the industry.

   7. HSHarry Stebbings47:01

      The thing that most concerns me today, whether it's in crypto or AI, is the inequality of, like, knowledge distribution between public and private. You know, private obviously being private companies, and then public being kind of government and regulation. When you go into UK government and talk about AI, A, I'd say it's like explaining it to your mother, um, (laughs) or my mother. Um, and, uh, how on earth are these institutions meant to set any form of meaningful or efficient regulation when their

10. 47:29 – 50:48

    Jackie’s Insight into the Fed

    1. HSHarry Stebbings47:29

       knowledge levels are none?

    2. JRJackie Reses47:32

       So I've been involved with the Federal Reserve for eight years, and I was recently the chairman in San Francisco of their economic advisory council for the last two years. My term ended, I guess, in October. But as a result of that, I've had a lot of experiences in working with the Federal Reserve in a way that most people in financial services have not. And one of the things I've been most impressed with at the Fed is their willingness to roll up their sleeves and meet industry insiders and CEOs in a very deep way such that they gain the experiences from these CEOs and they ask good questions and they're able to actually learn about these products. And so, I have seen in the last few years, a willingness to dig into crypto in a way that is profoundly different than in the past, where regulators might have had a more limited interaction with companies. I think they truly understood that they needed to understand it better, and they went and sought that experience from those that are the leaders in the space. And so, I actually think the Fed has done a very good job in trying to gain that expertise. Now, I have a lot of empathy for people who've worked in the federal government and have to learn some of these modern technologies...... in a way that enables them to have the skills to understand what red flags look like. Like, that is a really hard thing to do. As someone who operates a bank, one of the things I've tried to do at Lead is when we invite our regulators into our operations, we are very open in understanding the technologies that we have as a, as a product line. We work with crypto companies, we've been very open with our regulators that we work with crypto companies. We've been extremely upfront about explaining the products in a way that they can understand them and give them comfort, and even say things like, "If I were to worry, this is what I would worry about, and here's the way that we've tackled those worries." But at least we've been upfront in showing them where we think the risks are and how we were thoughtful about some of the existential risks associated with them. And I think they've, uh, uh, they've appreciated that approach because they're trying to learn how to regulate us. Um, and so, you know, I think if you're very open with regulators and you're willing to roll up your sleeves and both teach them about the business and listen to their questions, you know, I think there's a great knowledge transfer that can happen between the two parties that will make everyone smarter in the business. And frankly, we need the regulators to be good at this. Like, as someone who operates in financial services, we need these people to be experts, and so I think it's incumbent upon all of the founders in this industry to make sure that those we deal with in the regulated world that touches our business are smart about what we do. And so that's the approach we've taken, and, you know, I, I certainly think it's earned us a lot of credibility in this space, that we're very open, we're open about the risks that are, um, uh, embedded in a lot of these products, and, you know, I, you know, I

11. 50:48 – 56:56

    Wave of M&As in Fintech?

    1. JRJackie Reses50:48

       think it's super important for them to know.

    2. HSHarry Stebbings50:50

       Speaking of regulators, I think one aspect where we're gonna see a, a lot of reduction more broadly is M&A activity, with, uh, I think increased scrutiny and regulation around a lot of potential M&A, uh, transactions. When, uh, some people say we're gonna see this kind of consolidation or, like, wave of MM- M, M&A in fintech. Uh, you mentioned a return to first principles earlier. Do you think we will see this kind of consolidation wave of M&A, or will we just see shutdowns and companies going bust?

    3. JRJackie Reses51:19

       So I think we see it already. You know, companies that were funded in 2020, 2021 have done everything they can to streamline their cash flow burn, and they have used 2022 to try to achieve product market fit. They are now suffering the consequences in many cases of upside down cap tables. And so where you have environments where they've raised more than their company is worth, they need to do another round that is upside down for current investors. In many cases, they will choose to pursue M&A exits and try to yield an outcome to investors that can be positive. And a positive outcome in some cases can be a shutdown, it could be a sale, it could be, you know, a, a multiple money type of positive return, but all of those yield a rationalizing of the market in, uh, fintech. And given the increase in funding that happened, I think there's a 10X increase in funding over the last few years, you will see the rationalizing of this market with companies that just haven't achieved product market fit. I know we look at a lot of M&A opportunities for Lead Bank. Um, we'd love to buy some technologies that we haven't built yet, and where we can find that in companies that haven't been able to succeed, we would love to bring those founders into our company. We'd love to find entrepreneu- entrepreneurial people to work with, you know, so we're always opportunistic to look at it, and I don't think we're alone as someone who is a well-funded, highly profitable company in fintech. Um, it's a, it's a really interesting market to be able to, to look at startups like that that, that just haven't been successful.

    4. HSHarry Stebbings53:03

       Now, I think you are entirely unique to be a highly profitable company in fintech, Jackie. I don't know if you've seen most fintechs. (laughs) I have done. Um, i- i- really quite, quite unique. Um, so I, I, I totally get you there. Can I ask you, in terms of, um, like, you mentioned the increase in funding going from ventured to obviously, you know, new fintech startups. Like, what trend in terms of investor hype did you go, "Oh, no," over the last few years? Was it... Uh, it could be debit cards, it could be verticalization of neobanks, it could be, uh, uh, a- anything that you wanna name, B2B expenses, you name where you're like, "Oh, no, this is ridiculous"?

    5. JRJackie Reses53:40

       Well, I do think it's really hard to build a consumer-facing neobank if you don't truly have an advantage or a use case that is differentiated. You know, like, today, debit cards are a dime a dozen. They are table stakes for any fintech at this point, and there are only so many beautiful designs that will win you customers. I think, uh, that is a, that is a really tough business model to try to gain users, particularly after Apple changed their ad models. I think winning, uh, you know, if you're solely operating in the digital ad market, you really need to have a unique product that stands out amongst your peers, and so I do think there are many consumer fintechs where I just don't see the differentiation in the product to truly stand the time, or they're, they're features, they're not companies, um, and they should be integrated into other products that can help build LTV, 'cause I, I do think we ended up where people built companies out of features.... um, and I, and I think those will disappear over time. Um-

    6. HSHarry Stebbings54:54

       What do you, what do you think is the difference? Because it's such a fine line, and it su- I mean it, and I see it such a VC di- IC, in Sandhill regards of, into feature, not a product. Um, and, uh, you know, I see the unbundling of actually consumer banks into student banks, into, like, immigrant-centric banks, into, uh, I don't know, construction worker banks, 'cause we all have such specific and individual needs that actually lending facilities are very different, product expectations are very different, service requirements are very different. And actually, for you at Lead to, like, cater to this homogenous group of people is so difficult. What I want is so different to what my mother wants and what, you know, m- my brother wants. And I don't know. Do we see that as the unbundling of consumer banking?

    7. JRJackie Reses55:37

       Well, I think we go through these cycles of bundling and then unbundling, right? Like, you attack a horizontal, and I'll use Square as an example. Um, you know, Square t- attacked a horizontal, right? Point of sale. It went all the way across every industry, and they were gonna serve customers with the same product set. And then from that grew a whole series of verticalized solutions. Shopify is one. Stripe is one. Toast is one. And you started to get verticalized products that went after the horizontals, even like B2B marketplaces are other ways of coming at that market. You could take Uber and say they took away the transportation market for horizontal point of sale providers, right? You, you take away all these verticals. But then you find that the verticals aren't broad enough from an LTV point of view in order to serve a market, and again, you start to go into this, this bundling phase, where now as you see people talking about killer apps, like, we're gonna have one consumer app is, like, many people's obsession. And they're obsessed because they're trying to build LTV, particularly in a rising interest rate market where the cost of a lot of products in financial services has got more expensive. So you have this idea, well, once we get a customer in, we're gonna sell 'em a whole series of product and build this super

12. 56:56 – 1:09:02

    Fintech Superapp

    1. JRJackie Reses56:56

       app. And so, you know, you go through these movements.

    2. HSHarry Stebbings57:00

       Is the super app idea bullshit? 'Cause I have so many founders come on the show and they're like, "Super app of travel expenses, super app of..." I'm like, "Mm, sounds very good, yeah, very, very nice." (laughs)

    3. JRJackie Reses57:10

       I think... I, first of all, I think you have to start in a place where you have the right to have those products. Not every verticalized solution has the right to be a broad-based financial services ecosystem. And so depending on where you start, I think you'll have an easier or harder time building out multiple products that your customer base wants to use. And so I don't see a broad market for super apps. I think there are a few players out there who have shown that they could build multiple use cases around their product. Again, I gotta go back to Square 'cause I know it so well. Cash App is, to me, the most brilliant example of that. Cash App at least has shown that they have multiple verticals that people wanna use with a broad-based consumer ecosystem. Nubank in Brazil is another one. Broad-based ecosystem of products that consumers wanna use. And so I do think there are certain companies who have shown an ability to do this, but they're few and far between. And I am not betting on many of these companies starting up today from very narrow vertical solutions to be able to achieve that.

    4. HSHarry Stebbings58:22

       What are the... Sorry. I, I'm, uh, what are the characteristics of those that enable those to versus those that don't? Is it purely David and Jack and you name the great, great people, or is it the market themselves, the intricacies of the m-... Like, what is it that enables those to expand versus those not to?

    5. JRJackie Reses58:41

       You know, you mention two great founders who have incredible consumer instinct, and I do think there, there is an, an instinct and an appreciation for understanding what consumers want in the future that exists within those two particular founders. I mean, they've, they've created extraordinary and legendary companies, and I think it's... I think their power is seeing what consumers want and maniacally focusing on it and going after it. You know, I remember in 2017, maybe... yeah, it was end of 2016 when Jack wanted to put Bitcoin into Cash App. And he, uh, two engineers sat, uh, on the sixth floor of 1455 Market and wouldn't leave the office until they were able to build that product, and it was inspiring to watch. Like, he had a point of view about what the future was going to look like with Bitcoin as a part of that and the power of what could, that could achieve for consumers. And no matter how many naysayers thought it was crazy at the time, he wasn't leaving the office, and I do mean that literally, until that product was built. And so I think there's a power to that kind of conviction, um, in having a hypothesis and building back to it. Um, you know, one of the things I, I love to do is take a point of view about, okay, so what will the future look like? Right? Like, you know, this is something that we did a lot of at Square. I have a hypothesis about what the future is. This is what I believe to be true. And if that is true, what does that mean today? And what does that mean that I need to build? And if you have that type of thinking embedded in your product development cycles, I think it helps you add conviction and execution to creative ideas around how you see the future unfolding. Super important to do, and I think, you know, you could live in a world where you're shoulda, coulda, woulda, or you take those ideas, and you actually put execution resources against them.

    6. HSHarry Stebbings1:00:57

       How do you know when an idea is a bad idea versus it just needs more time? It's always the hard one for me.

    7. JRJackie Reses1:01:03

       You know, um, in financial services, I think it's a hard problem for companies to pursue because the time to market can be so elongated relative to other types of products. I mean, the- the- the amount of work you need to do in order to connect to the value chain of financial services, test the product, get all the compliance and controls in place, and then, you know, see how product market fit is, it- it can be longer than- than typical products. And so, I think you've gotta have, um, multiple products in different phases of development within a company and let your tests and your experiments operate for years in many cases. And I do think you have to have a long-term point of view around planning that goes beyond a two-year, three-year cycle into four to seven-year cycles where you can let something that you think has promise run with a small team attached to it and see whether you think you could iterate on product market fit.

    8. HSHarry Stebbings1:02:08

       Can I ask, I always believe that the best companies are built on the back of insight development, seeing the world in a different way to how it currently is. What did you see with Lead that made you pursue it as the next chapter of your career and, you know, the really meaningful next segment in your life?

    9. JRJackie Reses1:02:24

       You know, when I was at Square, I saw how painful connecting into the financial services market was. I mean, I truly, truly understood the pain of the banking system. And at Square, we operated and worked with many different banks, and so I had the vantage point of being a customer to, uh, many different banks across the country, and then I started a bank. You know, oddly, I started a bank at Square because there was no provider in the market that I thought met the needs of what we needed to do across all the products. And so, you know, I first built a bank within a tech company, it's very unusual to do that, and I- I understood how to build it in the construct of a tech company and understood how different the culture of tech is to the culture of banking. And so, when we went to go build Lead, we built the bank we wanted to see in the world, full stop. We built the bank we wanted to see and we wanted to use. And that means building a high-quality bank platform that's scalable, that enables, um, product teams to have strong compliance and control so that they believe they're not at existential risk of having issues with the underlying rails of what they're working with. It means being creative and inventive around financial services products and understanding products. And I do think there's a place in the world for a bank that applies a lot of creativity and invention to a business that is thousands of years old. And so, I had this vision to- to reinvent banking and to change- and change the standards of the way banking is done in the United States.

    10. HSHarry Stebbings1:04:21

        Final one before a quick fire. What do you make of everyone who bought... (laughs) everyone, but a couple of players, uh, who bought banks in the last few years and are trying to reinvent in- in similar-ish ways?

    11. JRJackie Reses1:04:33

        So there are a bunch of different players who operate in our market, and I'd put 'em into a few buckets. There's banking as a service providers that don't have an underlying bank attached to them, and there are some that are really successful, um, that have very impressive products. And like, if I- if I would send companies to them, I'd probably send new startups and scaling companies.

    12. HSHarry Stebbings1:04:55

        This is like your Marketers of the world and your, um, rail- Railsbank or whatever it is in Europe, but that's it?

    13. JRJackie Reses1:05:02

        Well, yeah, they're banking, they do banking as a service. They have no underlying bank. They are like middleware players. And I think they're great for small startups that need to really quickly just get access to a bank so that they could test and experiment and go to market, and I think those companies are fundamentally in a- in a middle spot. They're not the final decision maker of a bank. And so, if you're a scaled fintech, that's not an optimal place to be from who you wanna work with because you can't actually control the decisions that the bank underneath them makes. There are companies that have been started by people who have incredible, um, software engineering skills. I think those companies have to show that they actually can operate banks in a highly regulated way without getting into trouble themselves. I think there's a lot to learn in substance around how you operate a bank. And unfortunately, your success or failure can have existential risk on your customers. And so, I think it's really important for companies that are- that are in that market to understand how important you are to the success and failure of your customers, and you cannot fail them. You absolutely cannot fail them. And then there's traditional banks that have operated in this, and there are some amazing ones, again, that I send people to all the time and- if I think we're not the right bank for them. And, you know, those companies have a lot of advantages. They don't have many of the advantages that we have around engineering prowess and intuition around product. And so, I think depending on what kind of company you are and what you need, any of those players can be right for you at any given time. So like, when pe- we have an overwhelming amount of demand for what we do. We can't take everyone who would like to work with us. It's an anti-network effects business, which I think is counterintuitive to people, but it's true.

    14. HSHarry Stebbings1:07:02

        What do you mean anti-network effects? Uh, this is a new one.

    15. JRJackie Reses1:07:05

        Well, any of our customers can harm another customer because regulators look at our customer base and can make decisions about the overall company that if we are not in compliance, they could limit how we operate. And I think you've seen that with some of the banks that operate in our space, where in the last six months, there have been all kinds of regulatory issues. And so, as a customer of a bank, you have to know who you're dealing with and what other customers they have. And so, if you're not dealing with A+ players, it could put your own business at existential risk. And so, I describe it as an anti-network effects business.

    16. HSHarry Stebbings1:07:45

        (laughs)

    17. JRJackie Reses1:07:45

        And so, I think there are a lot of learnings in the market and, and, and different companies are gonna need different issues from different banks. I think we're really unique because we have, you know, 30 years of financial services experience. We've built a bank before. We've, you know, operated in highly regulated spaces, have had hundreds of banking licenses attached to our names in multiple different country geographies. You know, our co- my co-founders are a lawyer, a head of data science and head of credit from Square, and, uh, one of the most senior engineers from Square. Like, it's a composition of experience that I think is really important from a banking point of view because the foundations of what we do is more than just technology. Like, there are three underpinning skills we have to be good at. We have to be amazing at technology, we have to be amazing at regulatory and compliance, and we have to be amazing at finance. If you're- have any of those pillars under or over-weighted relative to the other, you have to manage and, and rebalance your portfolio because they all have to work in tandem, and you need to be really good at all three.

    18. HSHarry Stebbings1:08:58

        Very upset that I never got to invest, Jackie.

    19. JRJackie Reses1:09:01

        (laughs)

13. 1:09:02 – 1:12:38

    Quick Fire Round

    1. JRJackie Reses1:09:02

    2. HSHarry Stebbings1:09:02

       (laughs) Uh, but anyway, I- it's absolutely fine. There's- and I could talk to you all day. I would love to move into a quickfire round, so I say a short statement, you give me your immediate thoughts. Does that sound okay?

    3. JRJackie Reses1:09:13

       Yeah, that sounds great.

    4. HSHarry Stebbings1:09:14

       We normally ask about a book that you read. I don't- fuck it, I don't wanna ask about the book. Why did you write your own book? Which I loved, by the way. Thank you so much for sending it.

    5. JRJackie Reses1:09:23

       So, I wrote a book called Self-Made Boss with Lauren Weinberg. And interestingly, the book is not about me, which so many people write books about themselves, their leadership skills. Well, I did not do that. The book is for small businesses to help them start, run, and grow their companies. And what I saw in the pandemic was an absolute dearth of information for the tiniest companies, and this book is a pragmatic how-to on how to build a business. And I think of it as a love letter to the little guy because they really needed help, and I saw that in a crisis mode in the pandemic, and I really just wanted to help small businesses across the United States capture the wisdom of incredible leaders across the country in a pragmatic way and help get information out there to help them build their companies.

    6. HSHarry Stebbings1:10:17

       What's your biggest regret?

    7. JRJackie Reses1:10:19

       What is my biggest regret? I don't really have any regrets, to be honest. I look at everything I did wrong as a learning experience, and I know I made some terrible, terrible personal decisions (laughs) . And, you know, I just look at it as a battle scar, and I pick myself up, and I move on. And I really- you know, I could regret stupid things that I've done. Like, I can remember stupid things I did over my career where I'm embarrassed about my own behavior, and I pissed someone off, I said something dumb, I really did something misguided, and I think they're all really minor in the grand scheme of a life. And you have to look at the totality of your behavior and just make sure you get better every year. You know, 'cause there are so many things I've done with my kids that I regret. But like, fundamentally, do I believe I'm a good parent? Yes. And you know, I kinda just operate with oppor- optimism.

    8. HSHarry Stebbings1:11:22

       What have you changed your mind on in the last 12 months?

    9. JRJackie Reses1:11:26

       I've changed my mind on my willingness to try psychedelic drugs (laughs) . I am so squeaky clean, um, and I think my biggest vice is my obsession with carbohydrates. Um, and I read Michael Pollan's book, and I am truly inspired by his exploration of psychedelic drugs. And I have not gotten up the courage to really go out there in the way that he did, but I really would like to. Like, I look at what's happening with PTSD, with veterans, with people who have depression, and I really wanna learn more. And you know, as I said, I'm always someone who wants to learn and do something that's new, and that is something that I would really like to try. And because I've kinda lived in a very constrained, controlled way, you know, and not intentionally, but I have. I'm like a Girl Scout. That's the one area of my life that I really would like to explore.

    10. HSHarry Stebbings1:12:28

        Jackie, I'm with you. I'm j- I've never tried any form of drugs, ever. And I'm- everyone's like, "Oh, it's great, the creativity. It's like, better for you than booze and cigarettes." I'm like, "Uh,

14. 1:12:38 – 1:16:47

    Does Crypto do more harm than good?

    1. HSHarry Stebbings1:12:38

       Mom would still kill me." Uh, not that I'm a- not a mature adult, obviously. Uh (laughs) -

    2. JRJackie Reses1:12:43

       (laughs) .

    3. HSHarry Stebbings1:12:43

       ... uh, so tell me, crypto does more harm to income inequality than help. Agree or disagree?

    4. JRJackie Reses1:12:50

       I don't think we've seen any use case where it has benefited or created a detriment for income inequality. I mean, today, uh, the use case that you've seen, uh, most prevalent is that around investment speculation.And so, I have yet to see it really move the needle for societies. Even in places like El Salvador, where you've seen governments adopt it as a currency, it really has not created an environment where it is used day-in, day-out as a, as a core tender type. And so, um, I think what crypto means is that around access, and I do think access will create dynamics where it will reduce the number of under-banked people around the world. But access can be created in lots of different ways, even outside of the crypto market.

    5. HSHarry Stebbings1:13:46

       December 2024, will we be in a better or worse place, kind of macroeconomically?

    6. JRJackie Reses1:13:53

       By the end of 2024, I think we'll be in a better place. We're in a bit of a market of volatility and uncertainty, because we have this tale of inflation that has really plagued us for the last few years, and the Federal Reserve trying to control that with a dramatically different raise in interest rates than the way that they have ever done. I mean, the slope of the interest rate raise has been extraordinary. And interesting, though, we are at a, a 50-year mark on unemployment levels. And so, there is this odd moment of uncertainty where, you know, Larry Summers predicted that you needed to have, uh, unemployment being at, you know, 5 or 6% for a persistent number of years in order to bring down inflation. Yet, we're at this weird inflection point in the market where that's not happening, yet inflation is coming down. So I think 2023, we're still suffering through the uncertainty about whether there's gonna be a recession, how deep that recession will be. And once we get the uncertainty out of the market of the next few quarters around unemployment, around inflation levels, I think that will start to create a more even market, that there is less uncertainty out there for players in the market.

    7. HSHarry Stebbings1:15:18

       My management style is I ask incredibly smart people, "Are you worried? If you're worried, I'm worried. If you're not worried, I'm not worried." Are you worried?

    8. JRJackie Reses1:15:25

       I'm not worried, because I look at where unemployment is, and you see, um, how strong, um, the numbers are, and you can only... Well, let me rephrase that. I am not worried about the state of the economy today. I think unemployment is an incredibly successful marker today to watch, and we still have such strong numbers that that underpins the success of the economy. There are notes in the market that show weakness. It could be total credit card balances. It could be savings rate levels. It could be auto defaults, and things that are starting to mark, um, more debt and lack of consumer sustainabi- sustainability, um, in their own credit profiles. But I don't see widespread fear in the same way that I did a year ago when we were sitting, you know, last December, that I actually was truly worried about the state of the market because of the signals around inflation. You know, when the Fed was signaling that inflation was gonna be temporary, I think you had to sit there and look at what was going on in the economy and just scratch your head. Be like, "Really? I don't know how that could be." Um,

15. 1:16:47 – 1:19:13

    Biggest Lesson Working With Jack Dorsey

    1. JRJackie Reses1:16:47

       but I think we're in a much better place today.

    2. HSHarry Stebbings1:16:50

       Penultimate one, what's your biggest lesson from working with Jack for many years?

    3. JRJackie Reses1:16:55

       Uh, what I took away from Jack, um, was, uh, the power of listening. I mean, he is the most extraordinary listener I've ever seen, and he can sit through meetings and just listen, and then synthesize in his own way what he heard, or his own point of view in such a simple and powerful way, um, and I really appreciated that. Um, I think he also has such dignity in the way that he operates. I find it so impressive, the way he treats people, even that he disagrees with. Um, I think he's a truly remarkable person, and I will always be inspired by how he lives his life, you know, what he's built. And, um, I, I loved spending time with him.

    4. HSHarry Stebbings1:17:45

       I- I love that answer. Uh, final one, 2028, me and you sit down for another conversation, um, where are you then and where do you want Lead Bank to be then?

    5. JRJackie Reses1:17:56

       I think Lead Bank will be one of the biggest innovators in fintech infrastructure in the world. And I'm excited about what we're building across banking products. I'm excited about the customers that we work with. They are A plus, plus, plus players in the fintech and crypto market, and I think we're going to continue to change the way banking is operated in the United States. Um, I'd love to be multi-country. I'd love to be deep in, um, compliance products, even beyond core banking products, so that people could come to us for a full slate of banking services that, when they wanna onboard into the banking system in multiple countries, they could come to us and have it be really easy, and know that they are working with a partner who will help them build at scale in a way that is existentially safe and sound for their business.

    6. HSHarry Stebbings1:18:55

       Jackie, uh, uh, 20 Minute VC clearly, uh, lost my naming, uh, with this show. Uh, I so love doing this. Thank you so much for putting up with, uh, so many of my off-schedule questions. Uh, you've been amazing, so a huge thank you, Jackie.

    7. JRJackie Reses1:19:09

       Oh, thank you. Thank you. I'm so happy to be here.

Episode duration: 1:19:13