How He Built the World’s Largest Digital Bank with 140 Million Customers

1. 0:00 – 1:25

   Intro

   1. DVDavid Vélez0:00

      For 10 years, all we heard again and again and again was that it was impossible to compete with any bank, that we were gonna get crushed, and that we had no shot at being successful. Today, we have 140 million customers with 10,000 employees. Our competitors have 100 million customers with 100,000 employees and 6,000 branches. So our cost to serve a customer is about 3% of what a traditional incumbent bank is. That's pre-AI.

   2. POPatrick O'Shaughnessy0:44

      So the last time we did this, I think you had 35 million customers. Now you have 140 million customers, so well done, well done. [laughs]

   3. DVDavid Vélez0:51

      Busy five years.

   4. POPatrick O'Shaughnessy0:52

      Yeah, busy five years. One would be tempted to think that with that kind of growth, that we've sort of saturated the potential of fintech as a category to, uh, create a new platform, digital, mobile first, this sort of thing, and that we're maybe in the later innings of the fintech technology transformation. I know that you think it's sort of the exact opposite.

   5. DVDavid Vélez1:14

      Yeah.

   6. POPatrick O'Shaughnessy1:15

      And I'd love you to detail exactly why and what, what you think we can expect in the next five years, not just for Nubank for, but for, you know, digital financial services

2. 1:25 – 5:54

   Banking's $10 Trillion Disruption

   1. POPatrick O'Shaughnessy1:25

      globally.

   2. DVDavid Vélez1:26

      If you look at global consumer financial services overall, it's, uh, it's about a $10 trillion industry, and still something like 90% of that industry goes through banking branches.

   3. POPatrick O'Shaughnessy1:36

      Yeah.

   4. DVDavid Vélez1:36

      And it's owned by incumbent banks. So while there is a lot of neobanks and fintechs a- across the world in a number of different areas, we are, you are, all of those fintechs and all these neobanks together, and we're less than 10% of that entire market.

   5. POPatrick O'Shaughnessy1:49

      Mm.

   6. DVDavid Vélez1:49

      So it's, it's still, in financial serv- services, it's still almost as if 90% of the world was going to Blockbuster to get VHS and DVDs.

   7. POPatrick O'Shaughnessy2:00

      Mm.

   8. DVDavid Vélez2:00

      And Netflix-like services still had something like 10% of that industry. So that transformation, that migration that you've seen in other industries, in media with Netflix, in retail with Amazon, with the Barnes & Nobles, in transportation with companies like Uber, that migration from incumbents to digitally native companies is still very, very early in financial services.

   9. POPatrick O'Shaughnessy2:23

      Mm.

   10. DVDavid Vélez2:23

       I think Nubank is very unique, specifically in Brazil and Latin America, because we are really the only neobank in the world where we've fully surpassed the biggest incumbent bank.

   11. POPatrick O'Shaughnessy2:33

       Mm.

   12. DVDavid Vélez2:33

       In terms of scale, we now have in Brazil close to 120 million customers, so upwards of 65% of the Brazilian adult population is a customer of us.

   13. POPatrick O'Shaughnessy2:42

       Wow.

   14. DVDavid Vélez2:43

       So in terms of sheer scale is, is very large, but even more than that, we've become the primary bank account of the entire country. So about 60% of our customer use us as their primary bank account. We replaced the incumbent bank. We're not a secondary wallet. We're not some money that you leave there. We, we are the primary institution where people are really banking day to day, and that is very unique to Nubank in Brazil, and increasingly we're doing that also in Mexico and Colombia. We think that this is a little bit of seeing the future of what will happen around the world over the next 10 to 20 years, where you would expect a lot of shift from market share from the, from the still incumbent banks to the digitally native companies, and that is just migration of market share, but also you'll see a significant increase in market size as billions of people across the world enter the, the banking system. You still have three billion people that are completely outside the banking system, don't have access to credit.

   15. POPatrick O'Shaughnessy3:35

       I, I'd love to break this into two components. You could imagine if you froze the product today and just worked on getting it in more people's hands, that could be one dimension of expansion.

   16. DVDavid Vélez3:44

       Mm.

   17. POPatrick O'Shaughnessy3:44

       But then, of course, I'm sure you're thinking carefully about all the wonderful things that AI will allow you to do and technology will allow you to do for customers that you don't yet do today. Can you talk through each, each of those levers-

   18. DVDavid Vélez3:56

       Yeah

   19. POPatrick O'Shaughnessy3:56

       ... to, to achieve this, you know, Blockbuster to Netflix transition?

   20. DVDavid Vélez3:59

       The first phase of transformation that enabled a lot of the migration in other industries was the smartphone and, and this is sort of the, the, the same thesis you see repeating through the smartphone is the moment that we get to serve consumers without all that physical infrastructure, we have such a gigantic cost structure advantage that we could pass that efficiency to the end customer via lower fees and better product. Just to give you a data point, we have 140 million customers with 10,000 employees. Our competitors have 100 million customers with 100,000 employees and 6,000 branches, and you start thinking about why the cost of real estate of the branches is gigantic. So our cost to serve a customer is about 3% of what a traditional incumbent bank is. That means we have so much margin to give back to the customer-

   21. POPatrick O'Shaughnessy4:49

       Mm

   22. DVDavid Vélez4:49

       ... via no fees, better experience, better interest rates, and overall a better product. That's pre-AI. We're still here in phase one of what a smartphone enabled. AI will be an additional d- multiplication on that efficiency to, to that because then, well, you get, you get to choose whether you wanna have much more efficiency, and you could automatize a lot of areas of the bank. You could imagine banks that have 500, a billion customers with 5,000 employees, like that, that's totally within, within sight, or you can just decide to increase your level of ambition. And for somebody like us, especially when we look at how early it is in the transformation, for us it is, "Why don't we go to 100 countries and try to accelerate this transformation by Nubank being one of the leading digital financial services firm in the world?"

   23. POPatrick O'Shaughnessy5:34

       What are the craziest things that you can imagine the product or a bank like yours doing for the customer in three or five years because technology has made new things possible that, that weren't before? Just like mobile did, made a lot of new things possible.

   24. DVDavid Vélez5:47

       Yeah.

   25. POPatrick O'Shaughnessy5:47

       We've got an even bigger, much bigger wave now. Like if you really dreamed about what could be possible, what, what are some of those ideas?

3. 5:54 – 14:40

   AI's Impact on Banking

   1. DVDavid Vélez5:54

      Yeah. We like to categorize the problems that we see in financial services in three buckets. One is access, second is cost, and the third is intelligence. On the access side- Again, you still have 3 billion in the w- 3 billion people in the world that don't have access to a, to a credit product. It's, it's crazy. It's almost half of the world does not have access to credit. You- even, even countries like Mexico or Colombia, 13% credit card penetration. Why hasn't that happened yet? Because you needed the creation of a lot of data, you needed sophistication in credit underwriting, you needed the digitalization of the systems to happen, and this is happening. Cash goes away, disappears. Enter a number of real-time payment systems, as you've seen in Brazil with Pix or India with UPI. So there is a lot of transformation and catalysts that are accelerating the rails on which you increase access to consumer banking for the world, and this is gonna be a massive, massive opportunity. So 10, 20 year from now, 100% of the population has access to banking services, 100% of the world population have access to credit, 100% of small business have access to credit. This is an insane push to, to global GDP. I mean, I don't think it's really, uh, understood how big of a model this could be for every single economy as you get half of your entire population, in some areas, access to banking. So that's access side. Cost. Cost is the one that it's, it tends to be more hidden, especially in developed economies. US is generally a well-served banking services, especially if you're a high-income consumer. But when you look at the cost of that banking system, it's, it's pretty significant in ways that are not readily apparent. So for example, there's about $15 trillion of retail deposits in the US banking system, but banks pay on average about 40 basis point on yield a year. In a world where your interest rates are 4.5, 5%, you look at the calculation of those 15 trillion, that's more or less $600 billion that are going to banks to pay for banking branches-

   2. POPatrick O'Shaughnessy7:56

      Mm-hmm

   3. DVDavid Vélez7:56

      ... that in a digital banking environment would actually stay in consumers' pockets, right? So this is a massive wealth tax, the fact that banks don't pay any yield. If you're high income, you do. If you're- the lower your income, the less you get paid. That's a huge tax, and that's a huge cost. And then you look at, you know, remittances, for example, in the US, $100 billion go out of the US. People pay 5 to 10% per transaction.

   4. POPatrick O'Shaughnessy8:19

      Yeah.

   5. DVDavid Vélez8:19

      That will go to zero. Remittances, moving money is you're moving bits. That will trend towards zero in a, in a more competitive environment-

   6. POPatrick O'Shaughnessy8:25

      Yeah

   7. DVDavid Vélez8:25

      ... right? Um, monthly account, people are paying 5 to 10, $15 per month in the US banking system for, for a bank account. And you look at Europe or developed economies, Japan, same thing. You, you see a huge amount of cost that, that consumers are paying that will eventually, with models such as ours, uh, that come to compete, will also compete away. And then finally, intelligence. I think this is also the one that is, that is less understood and is beginning to be discussed with the advent of intelligence. If you are in the top 1% of income, you have access to the best financial advice, right? You probably will have a private banker. That private banker is understanding all the bank accounts that you have, is optimizing your deposits, is thinking about what is the right tax-efficient structure. If you need a loan, they're gonna go and compete a bunch of different banks with each other and get you the best yield. But if you're in the lower 99%, especially the more you go in the bottom, you have access to nothing. Historically, there's been a lot of conversation about, like, education is the answer. You just gotta educate people. People don't have financial education. That never worked. People don't sit down to, to, to, like, do classes. You're not gonna solve this problem of intelligence through education.

   8. POPatrick O'Shaughnessy9:36

      Yeah.

   9. DVDavid Vélez9:36

      You're gonna solve it through AI, and that's where I think AI is really be transformational in financial services because it's almost providing every single person around the world super intelligence to be able to optimize their financial life on their behalf and remove a lot of these profit pools that exist today in banking that in an environment with intelligence will be competed away.

   10. POPatrick O'Shaughnessy10:00

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   11. DVDavid Vélez11:46

       Yeah

   12. POPatrick O'Shaughnessy11:46

       ... which, which comes to mind. Like, okay, I've got some money. Either I don't have it in the banking system, which is the worst, so I come into the banking system. I'm earning 40 basis points instead of 4%, so I'm in a lousy starting position, but I certainly don't have investments or tax loss harvesting or all this other fancy stuff. What do you think that ends up being for the average person in a couple of years because of this intelligence bucket?

   13. DVDavid Vélez12:05

       The first obvious rearrangement is those 600 billion, uh- That banks are keeping in their balance sheet to pay for banking branches get rearranged, get, get forwarded to all the banking consumers.

   14. POPatrick O'Shaughnessy12:19

       Yeah.

   15. DVDavid Vélez12:19

       Right? Because suddenly they realize, "What am I doing with my money, leaving it at zero?"

   16. POPatrick O'Shaughnessy12:23

       Yeah.

   17. DVDavid Vélez12:23

       Right? Like, especially when you think about compounding, what that means for savings and compounding interest. This is a lot of money being sent ultimately to pay banking branches.

   18. POPatrick O'Shaughnessy12:31

       Yeah.

   19. DVDavid Vélez12:32

       You look at really any country around the world, any structure, you look at Me- Mexican ba- uh, banking, uh, balance sheets, for example, or, or Brazilians, where it's exactly the same thing. The big incumbent banks, about 70% of their deposits, they pay zero, and 30%, they pay some, some yield, generally to the highest income population or, or the corporates. Then the second one, one of the things that you see in banking is in a perfectly competitive environment, the best product should win, right? If you're charging no fees, if you have the best experience. Banking is a commodity product ultimately, so you should be able to get 100% of the market share. That doesn't happen because there is a lot of inertia in the system. With the combination, the multiplication of intelligence with open banking, for example, Pleiad, Pleiad can connect 120 million accounts, and you put intelligence on top of that. You're effectively allowing each customer to know w- how to optimize their financial life and what are the fees coming. So I'll give you an example. We're doing this in Brazil today, where about 50 million of our customers, every day we're telling them, "Hey, your bank account, your credit card in that other bank is due tomorrow. You don't have any money there, and they're gonna charge you a 15% interest rate per day. Let us give you some money so you can... You pay that credit card." Or refinance, "You have this loan in, at 10% interest. Let us refinance that at 5% interest." So it's, it's, it's ultimately a drive towards optimizing and, and removing a lot of those profit pools on behalf of the consumer. In some products, like small businesses, do wanna sit down with a banker and in human, with a human and have that conversation. If you have millions of dollars to invest, you still probably wanna see a human on the other side of the table and have that conversation. So for, for certain consumer segments and for certain products, if you wanna get a mortgage or certain sophisticated products, there is value in having a physical space. But that might be 5% of the cases today versus if you have a savings account, a credit card, or a loan, you just don't need that anymore. So I think the rationale would be effectively, "Yeah, we're trying to serve these customers," but it's ignoring that for the majority of people, especially the mass market, increasingly you just don't need it, and you don't go to that physical infrastructure anymore.

   20. POPatrick O'Shaughnessy14:39

       Yeah.

4. 14:40 – 23:29

   Building Moats in the AI Era

   1. POPatrick O'Shaughnessy14:40

      One of the questions that I think lots of investors and founders are wrestling with is what will be the best competitive advantages or moats in this new AI era when the cost to build new stuff digitally is much, much lower? If you had to imagine it like you're some new founder, I strip everything away from you, and your only goal is to kill Nubank, is to, like, build a new company to attack Nubank, let's say in Brazil or, or in Latin America, what, what do you think you would do? Like, what would be the vector of attack on your own business?

   2. DVDavid Vélez15:05

      Which in a way was what we did to the incumbent banks-

   3. POPatrick O'Shaughnessy15:08

      Right. Yeah, of course

   4. DVDavid Vélez15:08

      ... 15 years ago, right?

   5. POPatrick O'Shaughnessy15:09

      Yeah. [laughs]

   6. DVDavid Vélez15:09

      We were that, we were the disruptor going after incumbent banks.

   7. POPatrick O'Shaughnessy15:11

      Yeah.

   8. DVDavid Vélez15:12

      So I think that the, the early-stage startup today that is AI native, their detail, their biggest advantage will be the speed, right? The ability to move extremely quickly and launch a number of different products, especially if you're big... If you're born unregulated, then you're gonna be able to move fast. By now we are fully regulated. We have banking licenses in a number of different countries, and so we have to go at a certain pace. We have to be checking with regulators. Now, I think specifically in financial services, specifically banking, that will only get you up to a certain point because eventually you're gonna need to be regulated as well. And it's, and so I think in some areas there's been a lot of conversation about how AI disrupts software and that, you know, you can ask ChatGPT or C- Codex to, to, to rebuild an entire software strategy, but you still cannot really get ChatGPT to get you a banking license.

   9. POPatrick O'Shaughnessy15:58

      Mm.

   10. DVDavid Vélez15:58

       Right? And you still cannot really get them to have regulators give you a license in, in six months instead of two, three years. Specifically on credit or in certain products that we operate in, the amount of data that we have is, is pretty significant, right? So we have a, about 140 million customers. Uh, for each customer we have something like 20 to 30,000 data points across 13 different years. So this is a huge, massive amount of information that allowed us to build our own foundation model. We build our own foundation model for financial services, for credit, and this gives us a significant advantage in under, in making credit decisions, for example, or collection decisions. The early-stage startup entrepreneur, while they would have the speed, they would have a much harder time getting to that level of data. And so data becomes a significant moat now for more the incumbents. And I think we, companies like us, we're sort of in the, in the sweet spot of benefiting the most from AI because in one way we already have the scale and the data and the brand and the trust and the licenses that will be hard for the ear- early native, uh, s- startup to move. But also we still have the technology angle and technology infrastructure to allow us to benefit from AI and what AI is creating and move even faster than we were moving before.

   11. POPatrick O'Shaughnessy17:11

       Can you build a pretty detailed timeline of maybe when you first had the thought, like, "Wow, AI is a thing that we need to take really seriously," and then as the leader of the business, how you have thought about rolling it out and being more aggressive with it over time? Um, and I'm interested in the details. Like you said, you have your own foundation model. Like, how is that built? Is it open source that you've, you know, tuned your, based on your own data? Like, who do you work with? How did you think about it? I'm really interested in your personal timeline, like how far back it goes and what the major hash marks have been.

   12. DVDavid Vélez17:40

       Yeah. We started using machine learning since we started-

   13. POPatrick O'Shaughnessy17:43

       Sure

   14. DVDavid Vélez17:43

       ... the organization, right?

   15. POPatrick O'Shaughnessy17:44

       Yeah.

   16. DVDavid Vélez17:44

       So, so we were... We, since the beginning, since 2013, and we looked at Brazilian interest rates for consumers paying 500 and 600% a year, we said, "There's an opportunity here to use better data and analytics and machine learning to price credit risk." And different than a lot of fintechs, we decided to take balance sheet, to take credit risk, and to be capital intensive-

   17. POPatrick O'Shaughnessy18:05

       Yeah

   18. DVDavid Vélez18:05

       ... by default. And so we, we had already an organization that was very optimized for making decisions based on, on models and, and, and data. When the kind of the ChatGPT moment came about, what, three, four years ago, we started paying significant attention around how technology was going to facilitate some of the decisions. And we acquired a company, uh, called Hyperplane in, in, in Palo Alto that was already working on doing foundation models for financial services. They were having such a hard time selling to the big incumbent banks. Sale cycles were two years that they were not really able to move while the technology itself was, was fairly, um, forward-looking. So we bought that company. We integrated the team. We think we were the first financial services firm in the world to build their own foundation model with its own proprietary data to do credit, uh, decisions specifically. We even published all of our own research. In this area, we developed a, a kind of an early advantage. By now we've use- we're now using our foundation model for, for fraud decisions, for Mexico, for Colombia. As we launch the US and our international markets, we can day one already come in with our own foundation model-

   19. POPatrick O'Shaughnessy19:16

       Yeah

   20. DVDavid Vélez19:16

       ... and understand how to use that data, uh, for making basic decisions. This should accelerate our ability to come in.

   21. POPatrick O'Shaughnessy19:23

       The data thing is, is such a good example of scale, the scale advantage.

   22. DVDavid Vélez19:27

       Mm-hmm.

   23. POPatrick O'Shaughnessy19:27

       And you're an investor obviously before, before starting Nubank, and so I'm sure you've thought about this endlessly. It sounds like scale is maybe the most important thing that will make Nubank so competitively advantaged for the next 10 years or something. Is that right? Like, does that, does that feel like the right one to pick?

   24. DVDavid Vélez19:42

       I think scale is important, but you need it also in with the right culture and the right systems. So one of the things we heard a lot in the early days was, "Well, how are you gonna compete with the banks? The banks have scale."

   25. POPatrick O'Shaughnessy19:50

       Yeah.

   26. DVDavid Vélez19:51

       Right? "They have 100-year history with 100 million customers. How can you replicate that data?" And, you know, and, and going back to the analogy of Blockbuster, my answer was always, "Well, Blockbuster had a huge amount of data." Right? Imagine the amount of people coming in into the Blockbuster and seeing if they were looking at that VHS or the DVD or not or renting. Did that data help them build a better, uh, search algorithm? No, because they were not capturing the data. They did not have the right systems to capture data. They didn't write... They didn't have the right culture, data culture, to be making decisions based on data or based on models. And somebody like Netflix was able to come in with no data and build a better algorithm and ultimately, uh, use that. Scale and data is important, but, but equally important is your systems and your culture, your, your ultimately being a culture that is using a lot of this data to make the right decisions. And this, I think, what differentiates neobanks or, or more digitally native, uh, organizations like us versus the more traditional incumbent banks that are still operating with 15 different systems as a result of a huge amount of acquisitions that they did over the years. And they're still, if you look at it, the, a lot of the AI applications is how do we transform, how we use AI to transform COBOL? How do we get away from the mainframe? You're talking about 10, 15-year histories of, of going to the cloud. They're still in that process of going and putting systems on the cloud.

   27. POPatrick O'Shaughnessy21:12

       How do you run that, like tactically in the culture to make sure you don't fall in the same trap that like all the big players before you have fallen into, which is that you're suboptimally using your advantages and not ha- you don't have a good algorithm? Like how, what, what is the tactics of you making sure the team doesn't mess that up and actually, you know, d- g- does the opposite?

   28. DVDavid Vélez21:33

       I think the, the biggest difference is that historically a lot of traditional banks saw their basis of competition as a lot of banking branches. That, that's literally how consumers used to pick a bank is, "I'm gonna pick a bank that has a banking branch very close." And so that's why there was a huge amount of effort and energy into real estate and, and physical infrastructure, and obviously a lot of focus on building brands and building trust with consumers. Banks as a, in financial services especially, you need to protect that trust with consumer. That's, that's very critical. So when we began the company, we did not have to s- spend energy or focus on an offline world. It's more of an online world, and we saw technology and data as a way to build comparative advantage. And so since the beginning, we saw ourselves as a technology company, not a bank. Technology company that happens to be in financial services, and therefore, the culture itself has a culture that uses data and analytics consistently for every single decision. And what our own foundation model has enabled us is the cost of crea- of putting a feature into a model has gone down significantly. Pre-AI, you had to spend six months adding a new feature. If you wanted to test a new feature in a model, you had to be spend, you know, several weeks' work testing this feature, putting in the model, testing it around. With our foundation model, you can test a number of different approaches much faster. And then the cost of creating a model. Do you have, uh, an email that has purple letters or yellow letters? The cost of doing an specific experiment has gone down significantly. And so every decision in the organization can now be automatized and be done by model versus a human. That's what AI is also enabling. So for us, an A- AI is w- it, it kind of let us do what we were already doing at a much more significant scale, but the culture itself already existed since we saw this as a way to differentiate ourselves since the very beginning.

5. 23:29 – 36:01

   The Future of Money

   1. POPatrick O'Shaughnessy23:29

      How do you think the global financial system will change the most or needs to change the most in the next five years, totally away from your business? Like, what are the exogenous changes that you're most carefully watching that you think matter?

   2. DVDavid Vélez23:41

      One of the most transformational technologies in the world in financial services gonna be the first one is kind of the end of cash, and this is happening really everywhere. Uh, there is a lot of c- big cash-heavy economies like Mexico, for example, or Indonesia or a lot of African countries. Brazil used to be like that, where that cash will go away and will digitalize mostly through real-time payment systems. And I think the implications of this are, uh, some of them are obvious, just you don't need banking branches or you need less. Some of them are less obvious, which is what happens to the economy, for example. The, the efficiency of banks that when they don't need banking branches. The speed at which money moves in the economy. The amount of data that gets created in an economy that then can be used, for example, to provide access to credit. So that's a big catalyst. The second one- Is open finance and open banking across the world. This is basically the concept that you as a consumer own all the data that you have across all institutions and you're able to grab that data and share it with anybody else. So one of the biggest sources of inertia in financial services, but also, let's call it telecom for example or utilities, is that you, you have a history with a specific company and you cannot transfer that history with somebody else that comes new. And incumbents have benefited a lot from that inertia of data. The moment that you can connect all your history from all your services and pass it to somebody else, you're reducing that inertia and you're enabling more competition for your data. And you can monetize that data as a consumer. You can grab your historical information with a, with a, with a bank and, and, and offer it to somebody else that is willing to pay for that if you decide, if you decide to do so. Right now, social media does that without you deciding to do that. Uh, increasing, you're gonna be able to do that a- as a, as a decision. And the reason open banking is important is because then it will decrease that inertia globally and will increase significant competition in banking. Banking today globally really is still very much an oligopoly structure. You have five, six banks in the US that own 60, 70% of all the assets. Same in Europe, same in Asia, same in Latin America. So that will mean a, a less concentrated banking industry, much more fragmented, much more competition, less... Obviously, that translates into less fees and, and, and less cost. The other big trend is, that, that has a couple decades, is, is the role of crypto and stablecoins around the world. And what will effect- effect- eventually happen with, with people, with increasingly people that are much more mobile in nature, is that you operate in a, in a combination of the fiat system in, in your country-

   3. POPatrick O'Shaughnessy26:23

      Yeah

   4. DVDavid Vélez26:23

      ... with a global offshore system. Your lives kind of go in between without you even realizing this. For a lot of countries around the world, it's really important. You've seen with the usage of access to Bitcoin, for example, stablecoins. Uh, increasingly they wanna bank in the offshore system. They don't trust their banking system. They don't trust their fiat currency. I would say today there's, what? About 190 currencies around the world. Or my view is that 10, 20 year from now, those 190 will be maybe 10 because the fiscal situation in so many countries around the world is so dire-

   5. POPatrick O'Shaughnessy26:59

      Yeah

   6. DVDavid Vélez26:59

      ... that a lot of that fiat money is not real money. It's, it's tokens. It's basically crypto tokens. And so increasingly, billions of people are going to be banking on the offshore world, US stablecoin, but also Bitcoin and other type of assets. And so you'll, you see these two parallel systems interrelating with each other across the world.

   7. POPatrick O'Shaughnessy27:18

      If you had to think about the US dollar and its importance in this, you know, if it goes from 190 to 10 or something, do you think the US dollar is, is the reserve currency 10 years from now? Is it one of a few? Like, what do, what do you think its role will be in the world?

   8. DVDavid Vélez27:33

      There are two sides of that argument, right? You can make the case. Um, I think the, the, the US stablecoins ultimately will be the big savior or one of the biggest saviors of the US dollar because it democratizes access to the US dollar. And while the fiscal situation in the US is not, is, is not great and is deteriorating fast, still better than the fiscal situation for the other 100 and plus countries around the world, right? You look at the balance sheets of a lot of the central banks or, or countries in, in emerging markets in Latin America, it's way scarier.

   9. POPatrick O'Shaughnessy28:07

      Yeah.

   10. DVDavid Vélez28:07

       And you don't have the, the, the sovereign capabilities. At least there is a lot of demand for the US stablecoin. There's very little for the Brazilian stablecoin, unfortunately. So I think the fact that stablecoin exists for US dollar will ultimately mean that the US dollar maintains its power as a reserve currency for a very long time, but it will be, it won't be unique. I think you'll have other maybe five, six fiat currencies that will, that will, people will be saving in, and then a few crypto tokens where you'll also be diversifying and, um, I've been al- I've always been a Bitcoin, uh, uh, a Bitcoin fan and, uh, and I think it has, it plays a role in that, in a, in a diversified investment portfolio.

   11. POPatrick O'Shaughnessy28:47

       What's the most surprising thing, do you think, about the move away from cash? What would I not appreciate about, like, the implications of that or how long it would take? Like, what, what's surprising about going cashless?

   12. DVDavid Vélez28:57

       The main one is what this means for credit markets. For the majority of the world and the majority of the world economy, still economies are very much offline. And just think about this situation where you're selling, you have a taco stand in a corner in Mexico City and you're buying and you're selling through cash. That transaction is not being recorded anywhere, right? That's a transaction that you're selling, you, that, that you're selling to somebody and, and it goes away, and that taco stand cannot get credit today. Now, that person has a, a history where every day they go and sell tacos and they get, there is a cash flow that is being recorded, but nobody can underwrite on top of that. The moment that that transaction gets, goes into a digital ledger, that transaction happens digitally, then suddenly that taco seller can take that information to a bank and says, "Hey, look at my cash flow. Give me access to credit. And if you give me access to credit, I can now have two taco stands, or I can have five taco stands." Digitalization of the economy and what that enables for credit for a significant percentage of the world population is something that is not very well, uh, uh, understood today and is a huge accelerant. And again, you look at economies like Brazil, for example, uh, something like 70% of all the employment in the country is still in small businesses. It's not the big corporate. It's small businesses. The same thing happens in India, for example, or Southeast Asia. And a lot of these small businesses historically also dealt with cash. Now they're digitalizing. So this is trillions of dollars of credit being Enabled for billions of people around the world. This could be a significant economic shift, uh, for economic mobility across the world. In these eyes, a very exciting opportunity.

   13. POPatrick O'Shaughnessy30:41

       Do you think that you can create creditworthiness versus just predict or measure it once you have all this data? Like, is that one of the goals to, like, help people become more creditworthy somehow?

   14. DVDavid Vélez30:52

       Yes, absolutely. I mean, the first thing you have to do is kind of measure or record a lot of those transactions into a ledger, and that's, that's what the utilization of cash enables. And then with better algorithms, and this is where an AI plays a role here, and then also with better products, you can enable people to start building that credit history. So I'll give you an example. We, we were the first credit card for 30 million people in Latin America, and, uh, when we used to ask banks why so many people... why so many banks didn't give access to credit, they-- what we heard is people don't want credit. People don't want a credit card. They are, are scared about paying taxes, and so they're never gonna use the product. But what really matter is when w- what we realized is what they were l- really lacking was a product that really matched their needs. And so we started for a lot of people with a product that had a-- the first line was l- was $20. A $20 credit line. When banks saw the product, they, they thought it was absurd. But in reality, people really appreciated that, that $20 worth better than zero, and those $20 became 100, and the 100 became 1,000 over a period of time. And so you enable them to create a credit history through the right product. And then you en- enable, uh, an AI, uh, copilot for that customer that tells them all the different moves and what they need to do in terms of spending and investing and savings to, to buy, gain points and get it and become more creditworthiness. And that's, again, the, the concept of you providing a coach to somebody to improve their ability to access credit and, and improve their, their financial picture. So absolutely, I think that that's gonna be a big enabler.

   15. POPatrick O'Shaughnessy32:30

       How siloed are the individual countries in terms of how useful what you learn in one is helpful in another? Like, when you went to Mexico from Brazil, how much of the learning from Brazil was portable versus something about Mexico that's just distinctive about that country? And then how do you think about all the countries you've learned in so far and exporting that and those learnings to, to other geographies?

   16. DVDavid Vélez32:50

       It's more exportable than you, than we would have expected. And the part that was less exportable, the biggest difference between at least a country like Brazil, Brazil was actually much more banked than unbanked. And so when we went to Mexico, a lot of the conversations that we heard is like, "Well, but people in Mexico like cash. They don't believe in digital payments or credit cards or debit cards." And that was initially in the early years of Mexico, that was the biggest difference. When you go from a banked customer or banked country to an unbanked country, it's harder to compete. Where w- I always say that we are a, we're a shark in digital waters. When we are forced to compete in the offline world with banking branches, we're much less competitive. We don't have banking branches. We don't have ATMs. And so for a couple of years, it was harder for us to compete, even though we became the second-largest bank in Mexico by now and the largest digital bank there. But as these countries digitalize also, including Mexico, then the walls start looking closer to each other. And that's ultimately what you actually you see across any other industry, right? You look at social media across the world, it's the same product. You look at Netflix, the same product. You look at Spotify, the same product. You look at Uber, the same product. Amazon, generally the same product. So I would say historically there were a lot of particularities, and the cash part was, was a specific one. The future looks much more homogeneous than the past for f- even for financial services.

   17. POPatrick O'Shaughnessy34:17

       If I force you to put your investor hat on, thinking about fintech kind of writ large and, and where there might be o- other opportunities beyond the ones that you're focused on addressing, you know, if I were to, uh, adopt the phrase of our great mutual friend Mickey Malca, who said a couple years ago, like, "Fintech is dead." You know, maybe he's the best fintech investor ever, and now he's doing less of that and, and more things in AI and, and power and data and things like this. How would you frame the global opportunity to invest in fintech businesses of new companies, of startups versus companies like yours that, you know, have the scale, can go take advantage of a lot of this thing? Like, if I think about that battle between if I want to invest in fintech, should I do it in the incumbents, you're, you're a new incumbent, let's call you, and to pure, pure startups? Like, what do you think the landscape, the opportunity set looks like?

   18. DVDavid Vélez35:02

       I actually asked this question Mickey last week 'cause I saw him. He, he, I mean, he spent a lot of time in AI and investing in AI companies. So I was like, "What, are you done with, with fintech really?" And-

   19. POPatrick O'Shaughnessy35:11

       Yeah.

   20. DVDavid Vélez35:11

       I like his answer, which is, "No, we're not. We are just doubling down on the larger, uh, in neobanks or neofintechs-"

   21. POPatrick O'Shaughnessy35:20

       Yeah

   22. DVDavid Vélez35:20

       "... that are now riding the sweet spot between maintaining the ability to transform themselves-"

   23. POPatrick O'Shaughnessy35:26

       Yeah

   24. DVDavid Vélez35:26

       "... through AI, but now have access to these modes of scale and data and, and brand and licenses."

   25. POPatrick O'Shaughnessy35:33

       Mm-hmm.

   26. DVDavid Vélez35:33

       And so he continues to be an investor of ours. He continues to be an investor of, of a number of other startups. And so for the early entrant, I think it's gonna be in, in areas that are less, um, potentially less obvious as, as, as an entry path. It becomes a little bit harder and you probably are applications on top of AI models that you do. So there'll be specific applications I think of, of an entry path, but I think building a consumer brand with hundreds of million of customers at this stage, unless you come up with something completely fundamentally different, it's gonna be, it's gonna be harder.

6. 36:01 – 41:53

   Nubank's Global Expansion

   1. POPatrick O'Shaughnessy36:01

      Can you talk about this big announcement that you just made and why you're so excited about it, kind of what it means for the business?

   2. DVDavid Vélez36:06

      I think most people still identify Nubank as a, as a, you know, Brazil neobank or Latin America neobank, which, which is what we are. But when you go back in time and look at our seed deck in 2013 and the way we thought about the opportunity is there's nothing specific about Brazil or Latin America around the thesis. The thesis really is that global retail banking will be transformed by digitally native companies. And, and this is because digitally native companies can solve the problems that financial services have better. And these are the problems, the cost, the access, and the intelligence. And so we're excited about this announcement as we launch the US as a market, and we also announced launching to our, uh, upwards of 35 different countries a stablecoin-backed account. 'Cause it, this is the beginning of, of continuing to playing this thesis that is a global thesis in nature. We think about our past 13 years as proving this model in Latin America, in the countries that we operate, and I think we did. We're now the largest private financial institution in the entire continent. We have the highest net promoter score. From a profitability perspective, we have the highest return of equity in, in a country like Brazil. So we kind of did all the checks, and now is the moment to continue executing this multi-decade vision of, of, of taking this model global. So we're very excited. US is a, obviously a very competitive market. It, it is the biggest mar- market in the world. There is a lot of very strong neobanks and fintechs in the US that we'll, we'll be coming to, to, to compete with. But in reality, it's a market that's still dominated by big incumbent banks. So while there is a lot of fintechs, you look at where is the market, the market's still dominated by a few incumbent banks and some community banks. Most of the banking in the US is still happening through banking branches, as if most of the video and media were, were happening through blockbusters. They still need a lot of... to charge a lot and, and, and they need to pay zero yield effectively to be able to fund this physical infrastructure. And there is a lot of comparative advantages that we bring to bear, like our ability to, to, to credit for the mass market, our ability to do payments globally, and that's something that we, that we also announced with the feature, and, um, ability to really make customer love fanatically, build a consumer-obsessed, bring a consumer-obsessed culture in an environment and industry where customers just don't really care about their banking relationships, uh, especially for the, for the US mass market.

   3. POPatrick O'Shaughnessy38:34

      What do you think is gonna be the hardest part about competing in the US?

   4. DVDavid Vélez38:37

      Building a very strong brand will be one of the hardest things. US consumers, uh, mention brand as one of the key attributes to choose banks, and it's not cheap, and we wanna do it in a way where we obviously have a lot of financial resources as a, as, as being a very profitable institution, but we wanna do it in a way that is smarter, not, and more capital efficient than simply come in and, and, and invest a ton of marketing all over the place. So building an organic brand in an environment where there's so many strong banking brands might be one of the most difficult challenges that, that, that we'll do. And that's critical to build trust with consumers because we wanna become their primary bank account. That's what we aspire to do.

   5. POPatrick O'Shaughnessy39:19

      If I had every, uh, buy side analyst that covers Nubank here, and you got to sort of convince them of how they should think about your business through financial metrics, you mentioned return on equity earlier. Is that, like, the metric that you would point them to as the barometer of how well you're doing? Are there other metrics that you would hope that investors would use to assess, like, how good a job you're doing that are financial? How do you think about that?

   6. DVDavid Vélez39:43

      Obviously growth of number of customers and net promoter score and the cost to acquire that customer. So when you look at figuring out have you, have you hit a vein, and are you growing in a way where you found an underserved market and you're able to offer a product that nobody else were able to offer, that is the key... That's one of the key metrics, number user count, NPS. But then are you doing it at a, at a, at a sustainable pace? Because you can buy your, your way into growth by spending a lot of money on marketing, so what is the equation there? What is your LTV to CAC or, and ultimately what is your return on equity? And the re- return on equity kind of exemplifies the advantages that the business model could have. When you compare us with the big incumbent banks in the countries that we operate, we don't charge a lot of fees. We literally charge no fee, so we have less revenue, but then we end up with a return on equity that is 2 to 3X their return on equity. And so that, that basically means that you found a cost structure advantage. You found a way to offer a product at better quality at a much lower cost. And if you find that, and generally it's through technology, then you found yourself a, a moat. You found yourself a comparative advantage, especially in markets like banking that are in ways commoditized. So I think it would be also looking at that combination of return on equity. Talking about the US, what's one, one of the most interesting, least appreciated aspect of it is that by now some of the US incumbent banks have higher return on equity, are more profitable than emerging banking banks. They're some of the emerging market banks that we compete. That means there is... The, your margin is my opportunity, right? A typical Amazon view or, or best view of that incredible ROE that even incumbent banks have, even on top of the huge amount of cost that you're using to provide your product, that means there is a significant opportunity to, to undercut.

   7. POPatrick O'Shaughnessy41:36

      Who are your biggest influences? Like, I, y- I know you've learned from some of the great entrepreneurs, some of the great investors out there. Like, when you think about your whole Nubank chapter of your life, who are the people that jump out that have most actually influenced how you think about something? Who are they and why did they influence you the way they did?

7. 41:53 – 48:24

   Lessons from Amazon and Disney

   1. DVDavid Vélez41:53

      We began the company as a reaction of a consumer pain, uh, of, of, of me realizing how bad consumer banking in Brazil was and how painful it was, and then realizing that this was a, a proxy for what the majority of the country was actually feeling. And so we've always been... We've always admire companies that are very consumer-obsessed, that know that to win they need to just be able to offer the better, the best product and best service at a way that creates almost fanaticism. And so from that perspective, we were very inspired by Amazon since the very beginning, Amazon being the more traditional consumer-obsessed company and how they built this consumer obsession and how they thought about that. We studied Disney very carefully because this is a company that wants to create magic experiences. Maybe it's not super obvious, but even in banking, a boring banking product, we wanna create a magical experience for, for customers.

   2. POPatrick O'Shaughnessy42:49

      What did you learn from Disney? That's an interesting one.

   3. DVDavid Vélez42:51

      I think it's the communication that you create with consumers and, and just simply the magic aspect of it. When you enter a Disney park, the- The way the, the kind of the setup of that entry path that you have, it's almost like you entry, you're entering into a kingdom. And how... The, the kind of the service that you get from everybody that works inside Disney, and how they treat, uh, the young children, the spectacles that they create, and the fireworks that they create, they're really thinking about how do you create a product that is magical in nature.

   4. POPatrick O'Shaughnessy43:23

      Mm.

   5. DVDavid Vélez43:24

      And that's something that we push our teams around, is like, how you... For something as boring as p- potentially sending money, how do you create a magic experience out of that? And the, the welcome kit that we're sending to our customers here in the US, when they receive that welcome kit of, of the first credit card or the first debit card, it is... We're trying to create a magical experience in that moment, and, and we're very inspired by that.

   6. POPatrick O'Shaughnessy43:46

      The customer obsession thing is something that's, like, sounds obvious now. Maybe Amazon kind of really pioneered this way of thinking. It- nothing's for free. What are the trade-offs associated with being cust- so customer-focused? It- it's become a popular thing to say, and so mu- the, the temptation is like, yeah, everyone's customer-focused, like, um, to varying degrees, but what does that actually mean? What is the hard part about being so customer-focused?

   7. DVDavid Vélez44:09

      I think the hard part is, as you, as, as with any cultural value, is to do what you say you do. Like, you see it in any company that has very nice-sounding values on the, on the wall. Then the question is, are they actually executing that? Especially when it's inconvenient, right? Most companies will be consumer-obsessed, but then when, when they are suddenly seeing themselves making more money because they invented a new fee, then, oh, well, maybe I'm less consumer-obsessed here, and I wanna make a little bit more money, and you start prioritizing the short term versus the long term. And actually, in the entire AI debate, you actually don't hear that much conversation about customers.

   8. POPatrick O'Shaughnessy44:48

      Mm.

   9. DVDavid Vélez44:48

      Because there is so much energy and focus around how do you use AI for efficiency and optimization, there is much less conversation about consumer obsession here, and this is where humans still are beating the AI. The biggest complexities is actually prioritizing this value, even when it's inconvenient to do so, especially from a financial perspective. But also, the AI bro, the tech bro, is much more enamored today with the technology-

   10. POPatrick O'Shaughnessy45:18

       Mm

   11. DVDavid Vélez45:18

       ... versus the consumer experience itself.

   12. POPatrick O'Shaughnessy45:20

       I'm really curious how you think about, um, your own product, like literally the thing I see on my phone, versus your own agent, versus new agents being introduced in the marketplace. Do you think there's a world where it actually matters that you're selling... Like, your marketing is to agents more than it is to humans? Like, how do you think about that world, or whether to provide your own agent, you know, your own, your own interactive agents versus a product that you're clicking around in on your phone?

   13. DVDavid Vélez45:44

       I think agents become a customer segment, uh, as, as, as important as consumers as a segment, and you have to provide a product for the agent, and you have to market to the agent, and you have to do SEO for the agent, right?

   14. POPatrick O'Shaughnessy45:55

       It's so weird, right? [laughs]

   15. DVDavid Vélez45:56

       It's, it's the same way we have, we have under 18 segment, and we have a small business segment. This is, uh, an entire segment, and we're treating it as a segment. We have a team dedicated to understanding that segment and understanding the needs of that consumer, which is the agent, right? So that will be equally important, but I don't think it's gonna be necessarily 100% of that decision, 'cause I think still, specifically in banking, and this might be different in other segments, for example, but in banking, you go back to trust and branding, and the human will wanna know where your life savings are, are deposited, and there is, uh, the human aspect of that. And so you're still marketing to the human, and you're still building that trust with the human. You gotta do both. Uh, and, and also for some products there'll be more delegation, and for some products there'll be less delegations. Uh, specifically for areas like, uh, in Brazil, where we have 65% of the entire country as a customer, we have the opportunity to be that agent to, to the consumer, and the customer is coming directly to our app and asking our agent for support, specifically with financial, with financial products. And we can do it in a way where it's actually an open agent. It even provides product from third-party banks and third-party financial institutions. So there'll be a mix of, of, of, of this happening at the same time.

   16. POPatrick O'Shaughnessy47:08

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8. 48:24 – 59:47

   Reinventing Nubank with AI

   1. POPatrick O'Shaughnessy48:24

      If I think back to our original conversation five years ago, and you just think about yourself, like how you've changed the most in five years, or what surpri- what surprised you the most in the past five years, what, what comes to mind?

   2. DVDavid Vélez48:34

      One big change has been this view. Around five years ago, everybody was working remotely, including us.

   3. POPatrick O'Shaughnessy48:39

      Yeah.

   4. DVDavid Vélez48:40

      And over the five years, we've realized how important it is to be... at least spend some meaningful time in, in, in, in person, in an office. And that's a, I think, a bit counterintuitive even from where you were five years ago. And even with AI, AI also in a perhaps counterintuitive way increases the argument to spend- time in person more. Because increasingly, the work that AI can do is more or less the, the work that people at home individually could do. And so the individual at home will be competing with AIs, and we'll lose that, we'll lose that battle. But the work around collaboration and coordination in presence physically is something that, which is what humans needs to do, is what needs to be happening in, uh, inside, inside the office. We went from remote to hybrid, and we're spending significant much more time in the office. That has been one change. I think the second part is how the organization changes through AI specifically. We, as I, as I was saying earlier, we, we, we start paying attention in the technology, but when we tested it, it just didn't really work. We... Just to give you an example, a lot of- we use a lot of Clojure as a, as a, as a programming language. And through to 2025, we kept using a lot of the models for Clojure for programming specifically, and it, it wouldn't work. It was really awful. And so our most experienced engineer said, "Nah, that's-

   5. POPatrick O'Shaughnessy49:59

      Okay

   6. DVDavid Vélez49:59

      ... no, that doesn't, this, this is not gonna work." And so we were, like, testing, and Opus 4.6 came in in December of '25, and that was sort of the moment that a lot of people suddenly realized, "No, this actually works." And we, we didn't catch that moment, that switch moment in December. We only catched it 60 days after as, uh, a, a couple of my partners and I were in California, and we started meeting with a bunch of, uh, early-stage entrepreneurs, and we said, "Well, something fundamentally happened," and we went starting to test a lot of the new models, the new GPT models from Clojure, and said, "Holy shit, this is actually working out, and it can, it can, it can do Clojure very, very well." And it, and were 60 days where it made a huge amount of difference between us and best-in-class companies that were, that were using AI. And so we went back to Brazil, and we, we really, uh, we went kind of a code red around the entire organization. And we took a step back, and we're almost in the process of reinventing the entire organization. We mapped out 120 different workflows across the entire organization. Coding is one of them, but everything from how do you do product design, how do you do, uh, know-your-customer flows, internal audit, compliance, uh, regulatory capital management. Every part of the organization, 120 workflows were reinvented natively using AI tools. We had to create a lot of eval infrastructure to be able to measure at every single step how these workflows get reinvented. And I would say we are more advanced in some, we're less advanced in other ones, but the entire organization is being reinvented. That's what's so exciting about this moment, is we get to, uh, we get to reinvent the way we do, we do things with, with AI technology. And, and frankly, a lot of the times is that you, you see huge amount of productivity gains. It's not even because of AI. It's, like, simply there is always opportunity to be reinventing the way you do things actively, and if we were to do it now without AI, we would find productivity gains. But AI just augments the possibility to do that, and, um, and that, and that creates, uh, the opportunity, for example, for larger span of control, less manager, much more visibility. I personally went from having one direct report to 20 direct reports over that period-

   7. POPatrick O'Shaughnessy52:16

      Oh, wow

   8. DVDavid Vélez52:17

      ... uh, because it just increases your ability to, to operate horizontally. It's less layers on the organization. We went from 10 layers to five, so the organization went very horizontal. And this, this is a bolt of adrenaline to the organization as well in terms of our ability to execute.

   9. POPatrick O'Shaughnessy52:32

      Sorry, can you say more about h- what made that possible? So what was happening at one direct report and 10 layers, and, and then now what's happening at 20 and five? Like, what, what, just, like, l- I'm interested in literally, like, the day-to-day tactical thing. I'm sure most CEOs would rather have a flatter, you know, higher bandwidth of information organization or something.

   10. DVDavid Vélez52:52

       Yeah.

   11. POPatrick O'Shaughnessy52:53

       So how, how does it work? Like, what, what changed in that?

   12. DVDavid Vélez52:56

       Yeah. I mean, I think this is partly AI related, partly is the way we manage our organization, I think, for a period of time. As we start scaling significantly and we went from a million customers to 140, uh, we started adding... The organization just kind of takes a little bit of inertia of itself, and it starts adding layers. I think every fast-scaling organization goes through the same process because you see things breaking all over the place, right? You have all these scaling, uh, all these growth pains, and the easy answer when things are on fire-

   13. POPatrick O'Shaughnessy53:28

       Yeah

   14. DVDavid Vélez53:28

       ... is to just add managers to the, to the, to the, um, to, to solve the fire immediately. And, uh, and so by, by sort of a, by, by sort of a natural organic process, we ended up very verticalized, and we ended up with a structure that didn't give a lot of visibility. And partly what AI creates is, is allows you to take a step back and reinvent everything about your businesses, and this is, this was a catalyst, I think, for us to think about the way we were structured.

   15. POPatrick O'Shaughnessy53:58

       Toby Lutke has talked about this, how he can now basically just ask the company stuff, and it, because of AI, can tell him stuff. So the, the separation between him and ground truth based on data is gone.

   16. DVDavid Vélez54:09

       Yeah.

   17. POPatrick O'Shaughnessy54:09

       And that used to be this... I li- I like this idea of the dictator's dilemma, that as someone gets more powerful at the top of an organization, it's harder for them to know what is real and what is true. Uh, so how are you doing that? Like, how, how do you stay up to date on what ground truth is or what is happening inside the business when it's gotten so big?

   18. DVDavid Vélez54:27

       Every part of that chain, there is a possibility for a message to get distorted, and you get, have the distorted vision by the time it navigates 10 different layers. So just simply by removing a lot of those layers-

   19. POPatrick O'Shaughnessy54:39

       That's great

   20. DVDavid Vélez54:40

       ... you are much closer to the ground truth, and you reduce a lot of those layers by having information systems that have access to everything that's happening across the organization, a company brain that you can, that is proactive and reactive. It's, it's actively sending me information about what we're doing from changes in our AI transformation to how we're doing around launching certain products or, or metrics or features. You're, you get directly to the ground truth. Um, but then second, I think you also have to, there is more about a mentality of how do you actually act- a- also actively go directly to the, to, to the people doing the work. ... is very comfortable, I think, as you, as, as the or- organization takes its own shape to s- to respect the channels. You, you'll see this in bigger organizations. You cannot jump a manager and ask the question to somebody that is actually doing the work. There is a specific chain of command that needs to be respected. This is more related, I think, of traditional organizations. And, and here is more your approach of being a CEO, is like, "No, I wanna go talk to anybody that I have a question with", and there is no respecting of a chain of command. Literally, I'll go to whoever has access to the best information if I have a question, or we're gonna problem solve together if I see something that n- that is not moving. So I think it's partly technology, partly it's culture and, and, and attitude of you're willing to be deep dow- integrated into, into the organization.

   21. POPatrick O'Shaughnessy56:04

       How do you think all of this will affect, let's say, your, your company or any company's ability to, like, raise the overall average talent bar in the business? Like, how, how can you use this to see how good each person is and help them get better or move people on that, that aren't as good? Like, have you thought about the performance kind of culture management part of the data and the technology yet?

   22. DVDavid Vélez56:26

       I think it's gonna be transformational, and I think this is an area that I'm surprised so few people have discussed about how AI is going, is going to reinvent HR in the organizations. 'Cause if you look at it, uh, the way it is today or for most organization is you- your manager gives you feedback every six months, uh, tells you what you're doing well, what you're not doing well.

   23. POPatrick O'Shaughnessy56:48

       Yeah, crazy.

   24. DVDavid Vélez56:48

       It generally is... There's a lot of recency bias, so it's not really six months, it's like the last 30 days, what you did in the last 30 days that is good or not. Generally, it's not very actionable. It is, it is like, "You're doing this well, you're doing not. Maybe, maybe you should do better." So it's really... I- imagine that's the type of feedback you would be giving an Olympic athlete, right? Like, that would be crazy. You would never be able to, to, to, to succeed. Olympic athletes have somebody that literally every day is coaching them and providing, uh, potential feedback. That is the opportunity that ultimately AI is going to create for every single person in an organization, is you have Olympic athlete type of coaching. And so what we're building at Nubank in our HR operations system is literally every day, depending on where you are, if you're an engineer or a designer or product manager, daily you should be able to get feedback from the AI. If your AI copilot is telling you if your, if your coding is reviewing your pull requests and is telling you how... not only how you're, how you're using these tools, but how could you use them better. Uh, and it's very actionable, and it's very, uh, specific to what you're doing. If you're a designer, it's g- giving you feedback around how you're doing your job and how better you could do in your job. Uh, if you're a manager, managers right now have very little information, especially if you're managing a lot of people. That's the other thing about this large span of controls. You... There is this sense that you have to be having one-on-ones with every single person in your week. Like, those one-on-ones tends to be very low information density type of in- interchange. A manager that has access to all this information, this instrumentation, is now seeing real time how every person in the team is actually doing, and it's allowing them to, to improve what they're, what they're doing.

   25. POPatrick O'Shaughnessy58:28

       How do you stay up to speed on AI capabilities? Like, who are the people you rely on? What are the things you like to read? I feel like I need to time box it every day. Like, I get one hour to read the updates or something. It's like SportsCenter for business. How, how do you, how do you do it?

   26. DVDavid Vélez58:41

       I think people are... A- and I'll spend a lot of time on X. Uh, I think that's where you're seeing a lot of the development also. I have an agent that collates-

   27. POPatrick O'Shaughnessy58:49

       Yeah

   28. DVDavid Vélez58:49

       ... and summarizes a lot of the developments, uh, of, of what's going on, on, on details. I block specific time in my agenda to use these tools and to, um, to build products. This is something that I'd, that I hadn't done for a very long time. Uh, I... You know, there's conversation with teams around what we can do. I, I... Or, or an afternoon I, I coded a, um, non-custodial crypto app, for example.

   29. POPatrick O'Shaughnessy59:14

       Mm.

   30. DVDavid Vélez59:15

       And that's something that we've discussed at Nubank for a very long time to do, and, and I just kinda went in and did a project. We ask all of our senior managers to build products every quarter, or actual software and products, so that we are integrated, um, and, and, and very aware of what's going on. I don't think necessarily the answer is that I should be spending 70% coding. Like, there are better people that will be much more productive coding than I am. But I think it's important for everybody in the organization to be actually not only reading, but actually using the tools actively to understand how fast the technology

9. 59:47 – 1:13:18

   Founder Mindset and Leadership

   1. DVDavid Vélez59:47

      is going.

   2. POPatrick O'Shaughnessy59:47

      If you think really carefully about it, how has what motivates you to keep doing this and keep fighting and keep building changed over the course of the Nubank journey? Like, if you think back to the start, you, you and actually last time talked about this, like, what, what the original motivations were. And, and I mean not just, like, the business opportunity, but your personal, like, the reason, the personal sources of drive. How has that evolved, and what, what's it like today? Like, how would you define it today?

   3. DVDavid Vélez1:00:13

      Yeah, I mean, I think I, I, I'm motivated by, uh, impact, by, by making it count, by that, by doing something, we're investing time and energy in something that has a meaning and that has some kind of impact. And I went through, I went through a phase even with, um, Nubank, where I started thinking, "Is there more stuff that I should be doing beyond Nubank?" I think w- all founders kind of get started on the, on the, on the, on the company. The company then has a significant, uh, growth, and then you start asking your questions, "What else could I be doing?" And ultimately went through the other side of that, that analysis for, for, for ab- about a year or two years, realizing that there's nothing else that I can imagine myself doing that could have more impact than taking Nubank from where it is today to making it 10x, 10x larger, and going from three countries to 100 countries, or from 100 million customers to a billion customers. What, what this means in terms of, um, impacting financial services, impact for people around the world, for billions of people access to financial services. And with that impact out there, it's impact internally too. It's like how I can also- Uh, understand myself through bigger and, and newer challenges, and how I can develop better as a leader to motivate an organization that has big ambitions and with big technology shifts. Like AI can either decide to stay behind or stay in front, right? I think this technology shift forces every organization to think, "In which side of this disruption do I wanna be?" And, and, and, and this is an opportunity. Like, I just find my... I, I find that I'm more of a wartime general than a peacetime general, and so when a disruption, a change in the, in the, in the world happens, it suddenly is a f- source of motivation. I, I get more on the offense, and I get to... I get more energized to actually continue to execute that mission.

   4. POPatrick O'Shaughnessy1:02:05

      What's an example of understanding yourself better because of growth? Like, in what ways has that happened?

   5. DVDavid Vélez1:02:11

      I think it's, it's, uh... One of the questions that I even personally had as also as I, as I scaled the, the, the business is, will we need to bring much more professional managers at some point? Because I, I didn't manage anybody before starting Nubank. Uh, and then suddenly found myself being the CEO of one of the largest banks in Latin America and asking myself, "Well, what does the organization need right now? Do, do we need to go and hire much more experienced manager?" And we did. We went and, and hired a lot of, a lot of external talent because I, I, I kind of concluded or thought that I was gonna need that. But also then quickly realized that actually that's not what the organization needed. The, um... And what the organization needed was more of what I had already brought into the organization, which was this clear leadership, the motivation, the willingness to think really big and to dream very big, and get people excited about doing something that feels impossible at the beginning. And, and so once something clicks and says, "No, this is, this is the right answer for, for me and for the organization," then I can continue to do what I'm doing with much more confidence. And especially when there are ch- changes and shifts, there's al- there was always a little bit of a latent question, or am I pushing too hard? Am I asking too much from the team? Is, is this, uh, is this the right pace? And the answer after 13 years of doing this and being a little bit more confident is like, "Yes, it i- I, I'm pushing enough." It's my job to push very hard and to dream very big and to shoot very high, and, um, and then the organization will react and will, will push back if needed. But it's helpful to have somebody that is actively pushing the, the boundaries of what perhaps the company is ready to do.

   6. POPatrick O'Shaughnessy1:03:59

      What is the hardest part of doing that for a long period of time?

   7. DVDavid Vélez1:04:02

      The, the imposter syndrome, right? Like, it's fine to be a founder at the beginning, but then suddenly when you are... see yourself running a very large organization, it's like, "Am I the right person leading this organization?" And, uh, you have to, through some thinking and through some experiences and through some feedback, conclude, answer that question for you at some point, and answer it definitively on maybe for some reason you're not, but probably you are, right? That doesn't mean that necessarily the founder will have all the answers and will have all the skills. You will need to continue bringing people that add a lot of, a lot of complementary skills to you. But I think at least for me was surpassing that, that phase of, of having a voice in the head thinking, "Yeah, uh, are you the right, the CEO for the business?" And in making the shape between founder and CEO, because generally you will see founders having both titles. But they're very different functions. The founder and the CEO are very different functions. They don't, they don't necessarily fit with each other. Uh, and so-

   8. POPatrick O'Shaughnessy1:05:08

      What's the key energy of each?

   9. DVDavid Vélez1:05:09

      Well, the, the, the founder is impatient. The founder has huge amount of sense of urgency. The founder will wanna go run very, very fast, will move fast, extremely fast. The CEO will need to be more patient. The CEO will need to be more systematic in how he makes decisions, uh, will have to have... bring generally much more systems thinking into, into scaling the organization. Um, and, and sometimes those things collude. If you have to be impatient on one end, you have to be patient on the other end, there might be, there might be, uh, conflicts in, in, i- in that nature. Um, generally you would think that CEOs are better managers. Founders don't tend to be good managers. Founders don't have a lot of patience or willingness to do one-on-ones and sit down and provide coaching to a team. They just wanna run. They're more of... A lot of the time, they tend to be much more ICs, individual contributors than managers. CEOs tend to be better managers. CEOs tend... Because you have to build systems. You have to be thinking more from a system perspective. So, um, I think the key though for me, at least for me, has been to realize that the CEO title itself and the founder title you can redesign in different ways too, and it's being able to do both. It's being able to have a little bit more patient when you need to be more patient. But generally, you wanna maintain more the founder than the CEO. And I think that's why founder-led companies continue to outperform for decades because, uh, if you have to choose, you choose more the founder than the CEO mode, especially in environments where there are big technology shifts, where a lot of the advantages, the assets of the founder come, come to bear and are more obvious, uh, than, than the f- than necessarily the advantages of the CEO.

   10. POPatrick O'Shaughnessy1:06:57

       What was your lowest confidence moment personally in the entire history of the business? How'd you get through it?

   11. DVDavid Vélez1:07:03

       I mean, I think you go through a lot of different phases, and, and I think scaling a business is hard, uh, it's because, especially because you're consistently making decision about situations that you don't really know. Like for example, I wasn't... Uh, I wanted to build a technology company, but I was not an engineer myself, so I needed to go and hire great CTOs and build a technology, great technology organization. How do, how did I know how to pick a great CTO at that point if I didn't have the experience or credit, right? There is a lot of specific to financial services and credit expertise. So there was a lot of questioning, uh, in- inside internally, a lot of the decisions that I made about building the team that made me ask myself the question, like it's, do we need to bring somebody with a lot more experience from a big bank or from a big organization to run the organization? So I wouldn't, I wouldn't kind of highlight one specific moment. I would say for a period of time is, uh, is this imposter syndrome that is asking you make question is like, what, what... Are you, are you the right driver of the car as the car becomes more complex and goes faster and faster and faster and faster?

   12. POPatrick O'Shaughnessy1:08:07

       Hmm. What was the most emotional moment in the history of the business for you?

   13. DVDavid Vélez1:08:12

       I think passing a number of different incumbent banks in Brazil was very emotional because for 10 years, all we heard again and again and again, especially from the local, from the local experts, was that it was impossible to compete with any bank, that we were gonna get crushed, that, that we were gonna die, that these were the most trusted brands in the ecosystem, and that we had no shot at being successful. And so one day becoming bigger than some of the... Be- becoming the largest private bank in the entire country was, was something incredible, uh, uh, for us. And that was, that was emotional in terms of what we were able to, to, to, to achieve from a, from a point of scale. I think me personally, I, uh, was born in Colombia, and I had to leave Colombia when I was eight, uh, because of all the, the, the security situation in Colombia as we grew up, and I had to move to Costa Rica. And Colombia was then our country, country number three. The moment that I was able to launch Nubank in Colombia-

   14. POPatrick O'Shaughnessy1:09:15

       Hmm

   15. DVDavid Vélez1:09:15

       ... which we did in a big event with the president of the country at the same time, was very emotional as well because it was a bit of kind of coming back home and delivering a product and a service that I thought was gonna be very great for, for the country in an environment where I was being recepted by, by, by, by, by my, my, my people. And it was videocasted, and there were 100,000 people, uh, connected to the launch of Nubank in Colombia, and it was very emotional, too. It was very exciting. Uh, it was, it was very exciting, too.

   16. POPatrick O'Shaughnessy1:09:45

       But with all this experience now running the business, how would you define great leadership? And I'm especially interested in, like, the subtle, you know, the subtle points of what defines, in your opinion, a, a great leader.

   17. DVDavid Vélez1:09:56

       I think first is vision, right? You, you, you, you have to be able to see something that few people see, right? A- a- and, and, and it's a vision of, of a world that is not as obvious right now. And I think with the massive information overload that we all live in, it's increasingly harder to have a differentiated point of view about something, about your industry, about your company, about how, how, how things are going to move. So you have to have some kind of vision about the future that is differentiated. But then you have to be able to sell that vision and, and, and, and, and selling is about inspiring people. And a lot of the time, that vision will be very hard or almost feel impossible, and the natural reaction of most people when they... you are presented with an impossible vision is to, to push back and to declare it non-realistic, right? This phrase, "It's not realistic that this is gonna happen." What is not realistic, right? I mean, look at every single, every single meaningful development in the history of the world. At some point, it was defined by somebody to be non-realistic, right? So... And, and, and what's funny is the, the amount of confidence that a lot of the experts or people use when they say, "It's not realistic." So you have to be able to sell that vision in a way that a lot of people get motivated by that. Uh, that drives following and motivation. But then you have to be able to be a good listener and understand that sometimes you're actually gonna be wrong. That vision that you have might not be fully complete, and you... There is, there are two different modes, right? You, you, there is a mode in which you are go against the consensus, and you completely declare consensus as wrong, and you are the, the, the, the complete revolutionary. Nothing about the consensus makes any sense, and you will reinvent absolutely everything. That is one mode. The other mode is you're consumed by consensus. You, you, you think about progress as being non-realistic and things will be the way they are today. What's hard, I think, about a great leader is you navigate in the middle. You... Consensus exists or status quo con- e- exists because if you think about it from a evolutionary perspective, that the vision of the world competed with other visions of the world, and it won. And so the world we see today was superior to, to other possible worlds that happened, and so there are elements of that status quo that, that, that, that, that exist because of a reason. And so you have to be able to understand what are those elements, and they will continue to be here. But also, uh, you have to be able to, to fight that conventional wisdom to see what are the elements will need to be changed. And I think leadership is about knowing what doesn't have to change and pushing to change the things that have to change. And, and, and that's a combination of conviction, but also active listening and humility, uh, to know that you might not have all the answers and that you, you're gonna need to change your mind actively when, when you do that. So that combining all those different factors is, is, is, is, I think is pretty critical for good leadership.

10. 1:13:18 – 1:20:33

    Nubank's Future and Entrepreneurship

    1. POPatrick O'Shaughnessy1:13:18

       If we think over the next five years for Nubank specifically, I'd love you to paint what you think is, like, the bear case for the business and what maybe the w- case you worry about and, and are actively making sure it doesn't happen, and then, like, the m- you know, if I think about with my rose-colored glasses on, like the best possible story for Nubank. Over the next five years. I'd, I'd love to hear the two, you know, the two ends of the spectrum from your perspective

    2. DVDavid Vélez1:13:39

       Yeah. Yeah, I mean, I think the bear case is we are in these three countries in Latin America. We've saturated them completely. Um, and growth declines. We haven't really been able to find any other growth alternatives from a customer perspective. We've... I mean, we have 65% of Brazil. Very soon we're gonna run out of Brazilians. Ideally, we would see, uh, the, the, the natality rate in Brazil increase, people having more children, but that's not happening. So we're gonna run out of Brazilians, and we us- we did not succeed internationalizing. We, we, we ended up being foc- uh, kind of restricted to these three countries and, um, and growth saturated. So that's, I would say that's the bear case. Partly of that would also mean that we could not take advantage of a lot of the AI opportunities that, that, that enables also, and so that's why we... That's one reason why we're not able to internationalize. The bull case is the opposite of that, is we truly took advantage of, of, of this thesis that we have around how much market share is going to be transferred, transferred from incumbent banks to detailing native companies over the next two to three decades, and, and how that is going to be accelerated by technology shifts, like real-time payment systems, open finance, and AI. And we, we kind of were able to ride those tailwinds from technology shifts, and we were able to execute through a multi-country platform, a global vision of Nubank taking us to 100-plus countries over the next few decades. And we were able to solve a lot of these big problems that we still think that will be solved, right? Again, three billion people don't have access to credit. Cash is becoming digital. More people need access to banking. If you, if we have this cost structure advantage versus our competitors, versus the, the, the industry players that still own 90% of the $10 trillion profit pool, if we have a cost structure that is 50X theirs, and this is pre-AI, then that meant we were able to pass a lot of the efficiency back to the customer via higher yields, lower fees, better experience, fully digitalized, integrating advice in our products, and truly taking advantage of these, these internationalization opportunities. So that, that is the bull case.

    3. POPatrick O'Shaughnessy1:15:51

       When I had you last time five years ago, I already asked you my traditional closing question, so I have a different one for you today.

    4. DVDavid Vélez1:15:56

       Yeah.

    5. POPatrick O'Shaughnessy1:15:57

       What... If you think, again, across Nubank and, and the incredible experience that you've had building it so far, what is the most interesting lesson that you've learned about entrepreneurship?

    6. DVDavid Vélez1:16:07

       Well, it's a, it's a, it's a great question. I would say how to quickly ignore the imposter syndrome and how the fact that you are the person that had the vision and the energy to build something out of nothing, to give birth, means that that already is giving you a level of care for that company so high that it will make you become the right leader for a very long time. So, and I think that's kind of, that's, that's a... I, I think that's an interesting insight, which is I don't think anybody in the world cares as much for this company as I do, right? To a level that is almost visceral. You're a father, right? You have children. Nobody will ever care so much about this company, about this company being successful than I will, and that will make you put so much energy and focus to make it successful-

    7. POPatrick O'Shaughnessy1:17:03

       Mm

    8. DVDavid Vélez1:17:04

       ... uh, to the point that that ultimately is what is going to make you be the right leader for the organization for a very long time. Independently or of your expertise or your knowledge or whether you have the right experience, just that insight, just that energy will make you the right person.

    9. POPatrick O'Shaughnessy1:17:20

       I find this so interesting, so I, I, I wanna break it into two pieces and see, see if I have it right. It seems like you could decompose that into have more faith in yourself and be really persnickety about the vision that you wanna go work on, because if it's not something that's, like, coming deep from your heart, from your gut, y- you won't get the benefit of this thing you just laid out. Do you think those are the right two, like, parts of that really interesting insight?

    10. DVDavid Vélez1:17:46

        Yeah. I think that's... I think especially the, the second part that you mentioned around, like, the, the, the mission. I think it's a, it's a luxury and a, and a blessing to find a mission that you truly are excited about, uh, because then that will really make you go the long way. Uh, and, and scaling a company won't be easy. It will be much more painful than anybody anticipates, and if you don't have the level of conviction for the mission, will be, will be just harder to go.

    11. POPatrick O'Shaughnessy1:18:13

        How do you f- How do you... How would you encourage other people to do a good job on that search? Like, if someone's searching for a mission where, you know, that's perfect for them, how... Yeah, any advice that, that you would give them, or any sign that they've got the right one?

    12. DVDavid Vélez1:18:26

        I mean, I think, I think there is a level of serendipity there and luck. There is a level of, of search, of listening carefully, of feeling that this is a project, this is a problem that you truly care about. This is something that if you really care about, you are not sleeping because you're thinking about it. You cannot imagine your life continuing if you do not decide to tackle it. And, um-

    13. POPatrick O'Shaughnessy1:18:50

        That's a good thought

    14. DVDavid Vélez1:18:50

        ... and I think, and I think it's hard just bec- I, I think AI makes it harder, not easier. Just because the, the bar to start a company is now so much easier than, um... You will simply, you will probably just go- gonna go and, and, like, like, pursue problems that, that, that, that are, that are easier to solve ultimately. So, and I think that's why some of the best founders that we're seeing right now are going for the impossible, truly, right? There is this shift now into hardware and space and things that seem completely impossible because, um, you're, you're looking actively to, to, for, for, for those opportunities that, that, um, that will be harder and unique to you, that you, you're gonna get to believe that only you can really solve.

    15. POPatrick O'Shaughnessy1:19:33

        Incredible place to close. What an awesome closing thought. Interesting lesson. Thank you, as always, so much for your time.

    16. DVDavid Vélez1:19:38

        Thank you so much, Patrick. It was awesome. [upbeat music]

    17. POPatrick O'Shaughnessy1:19:43

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Episode duration: 1:20:34