John Collison

Matt and Katie talk with their first guest, John Collison, the co-founder and president of Stripe, about the financial services business, why payments are hard, what's good about crypto, why IPOs don't matter and how to fly planes.

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Episode Transcript

Speaker 1 (00:03):
Bloomberg Audio Studios, podcasts, radio news. So my idea for
you guys is you guys just have like regular normal,
boring ads on the podcast. I think you need to
do the post red ads for yeah, say a lot
that everything in securities, frauds is having a bad night
sleep securities for us.

Speaker 2 (00:25):
Well, like I could do like the men's shaving club
ads or something that could be fun too.

Speaker 1 (00:29):
When buying short data out of the money called out right, Yeah,
I think we good.

Speaker 3 (00:35):
Hello and welcome to The Money Stuff Podcast. I'm Matt Levine,
I read The Money Stuff Colm at Bloomberg.

Speaker 2 (00:40):
Opinion, and I'm Katie Greifeld, a reporter for Bloomberg News
and an anchor for Bloomberg Television.

Speaker 1 (00:45):
Katy.

Speaker 3 (00:46):
Today we're doing something new. We're doing our first interview
on The Money Stuff Podcast.

Speaker 2 (00:50):
Are you nervous, I'm pretty nervous. I'm a little bit
nervous too.

Speaker 3 (00:53):
We're recording this after it happens, and we're not really nervous.

Speaker 2 (00:56):
I'm still stressed out.

Speaker 1 (00:57):
To speak for yourself, I'm pretty nervous.

Speaker 3 (00:59):
I haven't listened to it yet. Today our guest is
John Collinson. Stripe is a payments and financial technology company,
and John and his brother and co founder Patrick are
kind of tech industry celebrities.

Speaker 2 (01:11):
Yeah, he's an Irish billionaire. He's from Limerick. That's cool.

Speaker 3 (01:16):
Katy's wearing her Limerick jacket, but we'll probably get into
that during the podcast.

Speaker 2 (01:19):
That's true. It's a little embarrassing.

Speaker 3 (01:21):
That I wore this medium amount of embarrassing.

Speaker 2 (01:24):
I truly didn't mean to, but as I said to
you in our office, it was forty seven degrees when
I left my apartment this morning, pre dawn, and I
needed a top. And this is my favorite medium weight jacket.

Speaker 3 (01:37):
This is the behind the scenes content that my stuff
podcast listener is really grave. Yeah, let's jump right back
into that Internet failed it should I do like a
crashing transition to talking about striper?

Speaker 1 (01:50):
Yeah, so how do you guys usually start these? How
do you one? I guess you haven't done that, You
haven't done that, you could invent the forduct. Yes, start
by review of the advertisements I've heard the podcast.

Speaker 3 (01:59):
We start the podcas us with much like this. We
walk into the room and bullshit a bit and then
record that. Yeah, and then we eventually say hello and
welcome to the Money Stuff Podcast. Then we talk about
whatever the thing we're talking about today. So now we're
talking about stribe, capital markets, Yeah, destiny tech. Okay, So
listens in podcasts with you, you talk a lot about

(02:21):
your interest in business history and like you've learned from
the tech companies of the past and the conglomerates of
the conglomerate wave. I have not heard you talk about
the lessons you've learned from financial services companies. And I
write about finance and think of Stripe in many ways
as like a financial services esque company here, like some
evolution to a financial services company. So I'm curious, like,

(02:42):
I don't know we you think about financial services.

Speaker 1 (02:45):
Yeah, in general, we try to learn a lot from
other businesses. And Okay, one things I really like is
we live in a golden age of learning about other
businesses right now. And one of the reasons I like
this is because I think learning about other businesses at
some level learning about the world or certainly the economy,
because you know, you're getting sense for how all the

(03:07):
various entities work together. With financial services in particular, you
came up with the framing that you know, Stripe is
in a way kind of a new kind of scaled
investment bank. Was it you're framing I think?

Speaker 3 (03:18):
I said, yeah, yeah, but I would love for you
to tell me that's right, but I'm assuming you'll tell
me it's wrong.

Speaker 1 (03:23):
No. I actually kind of like it because if you
think about what are the potential source of funding for
a business, Like, if you want to scale off a business,
how can you fund it? There's three ways you can
fund a business. You can do it through debt, equity,
or retain earnings. And so if you just tick through
each one of those on the earning side, maybe that's
the place where a Stripe is kind of the most
directly doing this, where we're making it easier for businesses

(03:45):
to self fund their growth. And we see tons of
bootstrapped or kind of certainly airly monetizing businesses on the Stripe,
like with this customer and Stripe Photo Room, and they
do online kind of GENI powered photo editing. They're based
in France, and you know, maybe ten years ago they
would have you know, raised a whole bunch of VC
and scaled up that way. They're actually profitable within a
year and they've just kind of scaled up profitably since then.

(04:07):
Ninety eight percent of their business comes from outside France
and so they're kind of selling this product to a
global audience and stripes making it easy to do that.
And we've seen that in general, I guess the AI
companies in particular, where you know, during the social media boom,
maybe companies scaled up first with raising lots of VC
dollars and then later on figured out monetization. With a
lot of the AI companies, you know, open the eye

(04:27):
perplexity clause, you know, the photo room who I was mentioning,
they actually monetized from pretty early on using stripe, and
so that's one source of funding.

Speaker 3 (04:35):
Stripe allows early stage companies to monetize so efficiently that
like there is less need for data and equity in
the world because companies can sell fund like you're putting
vcs out of business.

Speaker 1 (04:46):
Yeah, and obviously we think it's a more slightly more
healthy dynamic for the businesses. A classic trap that early
stage companies fall into is you know, and why combinators
say tries to get their companies to avoid falling into
this failure mode is kind of they raise money and
then they think kind of valuation milestones or any kind
of financial or investor milestones are the milestones that matter

(05:08):
for the business, whereas obviously that's not the case. It's
are you building something of value in the world which
will generally be measured by does anyone want to buy it?
And so I think maybe it gets people on the
right leaderboard earlier on, where a revenue leader board is
just a much healthier leaderboard to be thinking about than
a fundraising valuation leaderboard. But we also play in the
other parts of the capital stack, where on the debt side.
I mean, you guys have probably watched this, but banks

(05:30):
have kind of gotten out of the SMB lending space
since the financial crisis, as just the compliance costs have
gone up, Like people do not go to a bank
for a five thousand dollars loan anymore, and so we
now lend through our lending partners billions of dollars to startups.
We do that entirely programmatically through amount models, you know,
cash flow based lending. So we're not looking at the
balance sheet, We're not trying to do credit checks on

(05:52):
the individual or something like that. We're looking at the
stream of cash flows. Is it a healthy, reliable stream
of cash flows that can support some debt?

Speaker 3 (05:59):
You're doing the cash flows you can see exactly.

Speaker 1 (06:02):
We see the cash flows and people repay out of
the stripe cash flows, and so that is a new
kind of lending product that exists in the market. That
now again is you know, in the billions of dollars
in terms of the debt we're providing. It's kind of
ironic in a way. If you want to raise one
hundred million dollars of debt, that is a very competitive market.
Lots of people are playing in that. If you want
to raise five thousand dollars of debt for your company,

(06:22):
it's actually much harder to get that than it was,
say twenty or thirty years ago. We've gone backwards there.
And then on the equity side, I think stripeatless has
actually helped make more companies investable because what a lot
of people don't realize is stripeatlists are in corporation product.
But it lets companies where the founders might be in

(06:44):
Israel or might be you know, in Singapore or something
like that, create a US Delaware company and that makes
it much more investable. And so we've seen a lot
of foreign founders kind of virtually creating a US company,
which it just turns out foreign companies investors fanan too scary.

Speaker 3 (07:00):
So I guess I'm responsible for the framing that you're
sort of in somebody's a substitute for an investment back.
So like your framing is like increase the GDP of
the Internet. But like you know, you have these businesses
like incorporating companies, like what is the principle? And like
that was like a real investment banker I was doing,
like corporate derivatives. I'm like, I assume you would never
get into that business, But am I wrong?

Speaker 1 (07:21):
We're certainly not planning on us. We build products that
are scalable in some way through tech and so you know,
Stripe itself. This past year we did trillion dollars in
payment through the strip platform. That's still growing in a
pretty healthy clip. The number of businesses served is millions
of dollars. And so if there's something that is solved
by just throwing an army of people at it, I mean,
you know, all the investment banking firms are exceptional ash

(07:41):
recruiting armies of people, and that is a very competitive space,
whereas the space of you know, like I was saying,
with the lending side of things, that was just an
underserved marketers where we came at it by talking to
our customers and they said, we really need growth capital
as actually very annoying for us to get us and
so I guess we try to find the underserved spaces,
and investment banking, for you know, certainly on the larger side,

(08:02):
does not seem underserved right now.

Speaker 2 (08:04):
I've listened to a lot of podcasts you've been on
in the past several weeks, so sorry, no, no, it's
been really interesting. You interviewed Charlie Munger, which was I.

Speaker 1 (08:13):
Much prefer interviewing to being interviewed. So we'll come back
for the second round of this where you guys are
put on the spot.

Speaker 2 (08:18):
That'll be a lot of fun. We'll put that on
the calendar. But at one point Charlie Munger started talking
about like banks and they're selling these sleazy products, and
of course I couldn't see if you were nodding along
and I were talking about, you know, whether you would chafe.
It's sort of the comparison to you know, an investment bank,
for example, but it sounds like you don't, No, I don't.

Speaker 1 (08:35):
Investment banking provides a useful set of services in the
world and Okay, one things I really like about the
Money Stuff newsletter is a studied detachment from what's going
on where there are people and people respond to incentives
and that creates behaviors in the world. I like Matt
does have views and you know, just like crypto and
you know, all sorts of things, and you can kind
of the views that occasionally come out, but it's mostly

(08:58):
this very detached view of what's going on in the world.
But the way we think about it, like, for example,
we think, you know, stripes, scale and revenue are actually
pretty decent proxies for the value stripe is providing in
the world. That's not always the case with the business.
You could have an extract of business somewhere, or monopolies
or rent extraction or something like that. But in our
case we have very INFORGMNED buyers and a very competitive market.

(09:21):
There are lots of other places people could go for
payment acceptance or billing software or something like that, and
so generally, if customers are choosing you and paying you
money for a service, it's because you're providing something of
value that you can't get elsewhere. And similar with investment banks,
I think if people are going to investment banks for
a thing, that's probably because they're providing some value to them.
And so that's the frame of guy I tend to take.
I think Charlie rest in Peace generally took a lot

(09:43):
of offense as where he saw people hyping things, principal
agent problems. You know, there's a set of things that
bothered him, Crypto Robinhood, mutual fund advisors, and you know,
you could understand I could construct the Steelman for those cases.

Speaker 3 (09:58):
I think there's a lot of opacity and pricing and
value in financial services that there's probably a lot less
of in your business, right, Like you're kind of charging
a transparent feed to people.

Speaker 1 (10:09):
Yeah, and certain the more scaled something is, the more
price comparison they'll be, the more efficient the pricing will be. Whereas, yeah,
there's more room for extracting price in the when you
get into bespoke deals.

Speaker 3 (10:19):
So one thing I think of when I give investment
banking is just serving as an advisor to CEOs and
sort of giving them general advice on their business. And
we were talking before about you know, you are now
interacting with a lot of big companies, and you had
some views on like the ability of a big company
to CEO to sort of understand her company, and I'm

(10:39):
I'd love for you to talk about them.

Speaker 1 (10:41):
Yeah, I think people think that CEOs are able to
drive change in their organizations. I'm talking about organizations in general.
I'm not talking about the Stripe. People think that a CEO
lands in a new job, they take over a company,
and they're able to just whip everything into shape and
change everything. And I think the general experience of CEOs

(11:02):
and in new jobs is that is not the case.
And organizations are pretty hard to change. And in fact,
one of the things that we believe strongly at STRIPE
is it's very important for people to get close to
the work or you will not be able to drive
any meaningful, useful change. And so like a bunch of
different ways in which we do that. It actually reminds

(11:23):
me of the lean manufacturing principle, you know. And they
have all these very nice esthetic Japanese terms for things,
and so you know, there's the English equivalent per much
for the Japanese terms, but in them is gemba, which
is this idea that managers should you know, walk the
factory floor and solicit ideas from the people who are
on the production line and things like that, and all companies,
like a tech company like Stripe has its equivalents. And
so we very much encourage engineering managers to actually write

(11:50):
code at Stripe to get the experience of what is
it like working in their corner of the code baselat
problems our engineers running into. I really enjoyed being a
CFO last year when we were between CFOs, and the
reasons I really enjoyed that again was getting closer to
the actual numbers, the processes by which we drive the business,
Like we're going to hold Stripe to a budget regardless,
and aren't you interested in how that process is actually

(12:11):
set and how those numbers are set and everything like that.
So you know, I say that I think every founder
should be CFO of their business for at some point
during its lifespan. It's it's a very educational experience.

Speaker 3 (12:21):
Did like product ideas? Did you do that and come
away with like we need to do accounting software? No? No?

Speaker 4 (12:28):
Or or?

Speaker 1 (12:29):
I mean I mean maybe in an abstract way, but again,
Stripes finance needs are are maybe a little different from
the broader ones. But again, I just think for getting
close to how the business actually runs that's maybe the
thing that's hard for CEOs to do, and you know,
we tried to do it from a customer perspective a
huge amount of Even some of the products we're talking about,
like Stripe Capital, they basically come from us trying to

(12:52):
spend more time with our customers than our competitors do.
And so you know, we'll start every leadership team meeting
at am Monday morning with hearing from a customer. We
just asked them to come and give us kind of
feedback on the product. If you were to sit in
on those meetings, it's not an A plus report card
that we're getting. You know, there are things they want
us to fix. But I find that it's easy for

(13:13):
like product managers to overcomplicate things, and you know, you
can get in your own heads and construct some really
convolutioned castle in the sky, and there's nothing quite as
grounding as hearing directly from a customer talk about what
is not working for them in the product. And you know,
we do the same on Fridays with like an all
company thing, bring customers to talk to that. But anyway,
I think the essence of this for CEOs is getting
close to the actual production function. And that is sometimes

(13:35):
hard for them.

Speaker 2 (13:36):
So I have two points. It's interesting to hear you
say that. First of all, my brain immediately goes to
Elon Musk, like on the factory floor at SpaceX and Tesla.
But it was interesting. We had Home Depot this week
announced that they were going to require corporate employees to
work eight hour factory shifts, which is interesting, like retail shifts.

Speaker 1 (13:54):
So Starbucks did something similar.

Speaker 2 (13:55):
Right, Yeah, which makes a lot of sense, I mean,
especially in brutal jobs. Is that one and then the
other thing? I mean, given that you do know so
much about his business history and you know, just love
looking at companies, but those eight am meetings where you're
just talking to your different companies, like, you see so
many different types of companies, which is interesting.

Speaker 1 (14:15):
Yeah, And it's definitely a pretty interesting time. I think
the behavior we observe is that tech has been very
well covered, and so I think everyone knows broadly kind
of what's going on in the tech world. What we
find interesting is the businesses that are the Sherwin Williams
of the world, you know, the businesses that are ten,
twenty fifty, one hundred and two hundred years old, and
how they are adapting to the modern world. And generally,

(14:36):
what we find is that COVID provided a useful long
term change to those businesses because those kinds of businesses
all employed a chief Digital Innovation officer prior to Covid,
and that person had a team to ten people, and
they produced all these slides and ideas, and the ideas
were pretty good, and the company just ignored all them
and just didn't do any of them. And so they

(14:56):
had the kind of idea generation part and nothing happened.
And then it happened, and it was this oh moment
where people they were forced to adapt because you know,
obviously the stories were locked down or we're not open,
and so you maybe had gym companies moving to virtual
training or something like that. But that created a mandate
for actually getting serious about the digital stuff. And we

(15:17):
see much higher quality digital execution coming out of that.
And there's kind of a few common patterns in what
everyone's trying to do. I think everyone is questioning their middlemen.
I don't think middlemen are going away, but they're questioning
the middlemen and do middlemen add value? And they are
starting to do much more direct customer relationship stuff. Part

(15:39):
of that is the product experience where you know, Hershey's
using Stripe to sell candy directly online, and the customization
and things like that, and then everyone's just trying to
build some kind of recurring revenue. And so, you know,
we think there's two kinds of business in the world.
There's those who have recurring revenue and those who want
recurring revenue. And people talk about the engine, you know,
the airplane engineers with power by the hour. You know,

(16:01):
you actually don't buy an engine, you buy you know,
specially exactly. You might trust, you know, the by the minute.
But that is actually was all companies are moving towards
because it's kind of better on both sides of the equation.
And obviously that's pretty complex from an implementation point of view.

Speaker 4 (16:14):
And so the intercomanent Stripe.

Speaker 3 (16:30):
I did like the Stripe fire side a while back,
and You're like, what should we do? And I was like,
you should fix paywalls. Have you done it?

Speaker 1 (16:37):
We're getting there because one of us hard. Why is
it hard? Okay, it's hard for a few reasons. One,
I think people confuse paywalls with micropayments, and I think
more consumers want micropayments than publishers. For the publishers want macropayments.

Speaker 3 (16:54):
I think nobody wants micropayments and ever wants to talk
about it wrong.

Speaker 1 (16:57):
Okay, yeah, yeah. So anyway, once we move past the
micropayments thing, then it's hard because you ultimately need to
smooth the onboarding friction and you probably need some cross
publisher network and you know, publishers are not competing, they're
maybe not inclined to work together, and then it's just
a bunch of tech upgrades which are actually kind of

(17:19):
somewhat prosaic long running projects, but you know, you need
to be able to have the patients to work with
the media company to spend a year or year and
a half upgrade in their stack. The way we've ended
up doing this is with our product link, which is
very simple but is really starting to work. It just
remember you guys, maybe run into it on the internet.
It just remembers your credentials across websites, and so if
you've bought on websites A with stripe and you have
the box checked to remember your payment details, then you'll

(17:41):
be able to buy on site B without entering your
payment details again and you might think it will lead
to a big increase in conversion if a lot of
consumers have their payment credentials remembered so they don't have
to type any extra data in they can just click buy.
And turns out it does. And there's obviously a virtuous
cycle here where you know, the more people sign up
for it, but denser the network gets. So that's where
it's starting to work. And so we have some media

(18:02):
properties starting to use that. And so what it means
is they get lots of people coming with credentials all
pre filled and they just need to hit by and
then the commercial proposition just needs to work.

Speaker 3 (18:11):
I just feel like the media payoll problem for me
is not even the payment credentials. It's once you've paid
for a payoll, keeping you logged in, you're on your
phone to computers, you're like, you get something emailed to you.

Speaker 2 (18:24):
And just remember me. It's really frustrating.

Speaker 1 (18:26):
We should and may get to that as well. I agree,
that's that's part two of it. To me.

Speaker 3 (18:30):
That's related to like online identity and the stuff that
people are crypto people away talking about. So I also
have listened to you on podcasts. One thing that you've said,
is that when you started raising money for a shripe,
people are like, why isn't this assault problem pay exists?
Can you tell us why it's not right it wasn't
or why is it isn't? Like why is payments hard?

(18:50):
And like there were payments companies before you, like, what's
the thing that you're solving?

Speaker 4 (18:54):
They didn't.

Speaker 1 (18:55):
It wasn't solved for a few reasons. Payments requires you
to be good at two very different things that are
quite distinct skill sets. There's technology and there's financial services.
And so prior to Stripe, you had some payment companies
that just did the technology layer. You know, they said,
we're a nice API and we plug into you know,

(19:15):
whatever bank you use. But that wasn't a good payment
experience because you then try to sign up with the
bank and you know, it's spent week shuffling paperwork around
or something like that. And so a huge amount of
what we do is at the intersection of those things,
where you have AMLKYC considerations, where you know, a stripe
is essentially aiming to look at the activity going on

(19:37):
on its platform and ensure that it is lisit and
you know, acceptable activity that's happening on the platform, and
so we do lots of cool mL work. You know,
we don't talk about it really that much publicly because
it is just what goes into operating a skilled platform
like this, but it's a huge amount of the special
sauce that makes Stripe tick. At the same time, the
tech has to be really good and nice and usable,

(19:59):
and customers really care about latency, they really care about
how easy the API integration experiences, and so I would
say companies prior to Stripe tended to pick a lane
a bit where you had a few purely tech companies
where you know, they'd say, we're a payment s gateway
and we just don't think about anything. We just handle
off the transaction of something someone else or those banks,
and they actually just generally outsourced the tech. They didn't

(20:21):
even really do it themselves, or if they did themselves,
they did not do it particularly well, and so it
was a very crummy experience for the developers actually using it.
And of course, the tech changes Mobile was just coming
along as we were getting started. You know, the iPhone
App Store came out in two thousand and eight. We
started Stripe in two thousand and nine, so like we
were just in time for that, and so mobile was
a very relevant consideration. You know, even just the web

(20:42):
apps and SaaS and everything grew a huge amount, and
so I think the banks had not built for that
and did not build for that, and so there was
maybe a gap between the existing providers and there was
that sort of things that you had to be really
good at. There were huge number of things with Stripe
that we did buy intuitive feel they were not part
of a particularly deliberate tops down strategy that was written
down in the business plan, but ended up working out well.

(21:05):
And so one was our really early focus on developers,
where our go to market was through developers. We started
by selling to startups and there was this really i
would say, kind of bottoms up sort of adoption motion.
But again, ultimately the product we're selling is a technical
API product, and so of course you should be thinking
about what the developers want. We just had the developer
focus because we were software engineers ourselves. We just wanted

(21:26):
to build a product that we thought was a good product.
But I think it ended up being more strategic than
we maybe realized in the beginning.

Speaker 3 (21:32):
There's a lot of like mess in the legal and
like infrastructure of the payment system, and like your job
is to provide people a very clean abstraction to that mess,
and like that means handling all of the mess and
you know, actually going on figuring stuff out and then
being able to put that in the back end of
your API. So the API is like a very clean abstraction.

Speaker 1 (21:52):
Like is that burn Hobart had a line that I
liked in one of his newsletters that stripe makes the
financial system work the way people think it already does.
And that's I think is actually a pretty nice design
principle for us. And you know, maybe a good example
of this is.

Speaker 3 (22:06):
See when I hear that I want you to do
like equity derivatives, I want you to do more of
this stuff in my world.

Speaker 1 (22:12):
But I don't think we have a view on how improved.
No one has, sad maybe we just think about it more.

Speaker 2 (22:17):
I do want to talk about crypto. Yeah, we debated
this internally, but when it comes to the payments world,
I mean, the conversation tends to devolve into a crypto
conversation because I feel like crypto is trying to solve
a lot of payments problems, especially when it comes to
cross border payments and I'm not asking you about like

(22:37):
the price of bitcoin or whether you're bullish on you know,
number go up. But when it comes to crypto and
the problems that it's trying to solve, I mean, how
do you think about it?

Speaker 1 (22:45):
We're quite excited about crypto at the moment. I interpret
money stuff as the house position as moderately cryptoskeptical, and
so I guess what I would say to a moderately
cryptoskeptical audience, They'd be two things. One, there are just
a bunch of scams and dodgy characters and everything like that.
But it kind of reminds me of I at the
first I grew up in Ireland. The first time I

(23:07):
went to Vegas was for work conference there. It was
for a work conference, and you know, at the Venetian
or something like that, probably Money twenty twenty, and you're
going into the hotel past like all the people smoking
indoors and like the people just addicted to the slot machines,
just pressing them again and again again, and it's all
the blinking lights and you know the I guess, the
clatter of the coins paying out, and you have to

(23:27):
walk past this degenerate gambling area crazy scene. Yeah, it's
a grim scene to get to your serious industry conference,
and those very surprising to me. And I don't know,
there's something similar in crypto where you have the casino
dogecoin value speculating part of it, and then there's people
doing all the serious work over in say stable coins
or something like that, and those two things just exist.

(23:48):
But I think one cannot use the existence of the
slots in the Vegas casino to write off the work
atnomment stretching the analogy.

Speaker 3 (23:56):
No, this is good, so because like, yeah, yeah, you're
excited with there's like, well, your friend Patio eleven would
say it's a kyic avoidance mechanism. Basically, it's like a yeah.

Speaker 1 (24:08):
Well. The thing about crypto is there's been a lot
of hype on what crypto is useful for. And so
for example, if you go back and read the original
Bitcoin paper, which is a great read. It's a very readable
original paper, it actually used the word interchange in there
and talks about kind of the use of bitcoin as
a payment method. But bitcoin turned out to be certainly
stock bitcoin, you know, before lightning and everything like that

(24:29):
should have to be a horrible payment method, like slow expensive,
let's not do that. And now the technology has matured
through what has been kind of fourteen years of development.
I think the crypto haters used this argument that like, well,
you know, it is the Web in ninety three for
you know, many many years, whereas the actual web coming along.
But there's been fourteen years of lots of technical development
happening such that we've ended up with much more advanced technologies.

(24:50):
And so what you specifically have now with stable coins
is you have, firstly, something that's value doesn't change and
so there's none of the kind of speculation stuff that
we're talking about. You have something that's actually very technically scalable,
so with the current L two's there's no real scalability
issues with them, and you have a pretty sensible construct
where in a way, it's narrow banking. Right. We've been

(25:10):
talking about narrow banking in this country for decades, and
we have ended up with narrow banking through stable coins,
where let's say a good stable coin, you know that
like a PAXOS or a USDC. In the case of USDC,
it is fully backed by short term treasuries. And that
actually just seems like a pretty good construct to me.
And so you know, we now make it where you can,
you know, accept money and strive via crypto. You can

(25:32):
do some payouts things like that. And the obvious thing
that people say is true where in the US you
will be slightly too biased against crypto because the US
is the world's best currency. You know, the US has
the world's reserve currency where you get to spend and
might back exactly. And so of course people in the
US think the USD is awesome because it is an
awesome currency, whereas many people in many other countries have

(25:54):
a much more adversarial relationship with their own currency. And
I'm not even talking about Zimbabwe, though it is true.
I'm talking about Turkey, which is a very large country
and economy and population, but people there do not have
full faith in the lira, and they think about what's
a better place to keep money than lira.

Speaker 3 (26:13):
I thin guess the other like US bias is that
the US government really wants dollar payments to flow through
the KYCED banking system. And like there's some suspicion that.

Speaker 1 (26:24):
I think all the serious grown up crypto players today,
I mean they're subject to the fincent travel rule. They
are ky seeing the actors, and so if you go
through a crypto flow today, you will see the normal
frictions of dealing with a regulator financial product where you
are asked to provide your you know, last for your
social or upload a driver's license or things like that.
And so I think just in most of the crypto

(26:46):
use cases that are being tough. Obviously there's the sketchy
dark web stuff exists as well, but in most of
the use cases we are talking about where serious businesses
like stripe or serious merchants are using crypto, it is
the custodial lissis part of the crystals.

Speaker 3 (27:00):
On chain, like non costardical transfer.

Speaker 2 (27:02):
Like correct, I'm true. I mean, if you look into
your crystal ball and you know, it's been fourteen years
since bitcoin was created, as you said, we've seen a
ton of technology advancement since then. I mean, you said
you're quite excited about crypto, but I mean, how far
can we run that out? Do you think it's the future?
For example, would you go that far if you look

(27:22):
fifty one hundred years into the future.

Speaker 1 (27:25):
I don't think it's a singular future. And again there's
a bit of overpromising that's happened in the crypto world. Again,
I think that's what gets people's backed up. Actually, speaking
of bern Hobart, we just Stripe Press published this new book.
The title is Boom, and the pieces of the book
is that we generally view financial bubbles as societally net
negative because you know, they cause misallocation of resources and

(27:46):
they cause you know, ultimately people lose out. And he
makes the argument that bubbles provide a societally useful function
by essentially coordinating efforts. And you know, maybe the dot
com boom is incorrectly understood as a pets dot common webvan.
It was really like bit dollars put into it, as
you guys probably know, it was a telecoms boom, and
it was a fiber rollout boom. But it led to

(28:07):
the US having just amazing fiber overcapacity that then led
to the steady growth of the Internet for the decades
that followed. And so that's maybe an example of it
was a bubble, but it was a societally useful bubble
because then it led to this overcapacity that had lots
of positive externalities. And I think you make that argument
about crypto, that.

Speaker 3 (28:24):
Argument made as crypto led to a build out of
GPUs that led to the AI boomah.

Speaker 1 (28:29):
Oh interesting. I wasn't even making that case. You could
make that argument too, though obviously there was a lot
of GPU spent happening even even before crypto. No. I
was just making the argument that I think the speculative
side of crypto, you could make the argument pulled in
attention and resources that was then used to build the
very boring useful parts of crypto, like you know, ethereum
to or against stable coins or things like that.

Speaker 3 (28:52):
We could talk more about this. Do you want to
make sure are we talking about the things you don't
want to talk you about?

Speaker 2 (28:56):
Yeah? Great, which we do want to talk about.

Speaker 3 (29:00):
So another money stuff theme that we'll probably do on
our ad reads is that private markets are the new
public markets. You guys are among the poster children for that.
You're at the CFO. Tell me about what it's like
being private. I don't know, Like, I mean, how should
I think about like the idea that, like, you're an
enormous company and you've stayed private and have no enthusiasm

(29:24):
as far as we know, for going public or even
talking about this twenty years ago? Would you have been
able to do that?

Speaker 1 (29:31):
Yeah? We spend a lot of time internally at Stripe
thinking about the value of the Stripe business. I think
the external world spends a lot of time thinking about
the value of the Stripe stock price, which are related
plus different things. We have definitely stayed private longer than
some people expected. I think we'll continue to stay private
longer than maybe some people expect. But there's no complex answer.

(29:55):
It's just a simple answer, which is we don't think
companies should sleep walk into going public. We think they
should be deliberate about it. And why would Stripe run
out and go public. It could be if we wanted
to sell stock broadly to a retail audience. That's not
something that we've had that, you know, we just the
business is profitable, you know, we haven't needed to raise

(30:17):
very large amounts of capital. A traditional reason might be
return of capital, not just kind of a capital raise
for running the business, but return of capital to existing shareholders.
But again that's where you're maybe referencing the private markets
have gotten deeper, and you know, in our case, we've
run two unlimited employee tenders, you know, last year and
this year. You know, Sequoia just did an LP tender
where they gave liquidity to some of their LPs, but

(30:39):
liquidity is available to people in the private markets, and
so it's more I think the default spring where companies,
you know, a SaaS company would be started and you know,
go from zero to one hundred million ar R and
then just run out and go public. Default is being
questioned a little bit in Silicon Valley. Obviously lots of
companies are still going public, but the default is being questioned,
and the default is more of a Silicon Valley tech

(31:05):
default than maybe a broader global default. So like in
financial suit, we know exactly so as Bloomberg employees, you
may be familiar with it, but Bloomberg is the example
that everyone cites. But if you just quickly run through
financial services, you know, take the world's leading market maker,
Citadel Securities private company, take the world's leading prop trade.
I'm probably offending one of the world's leading in all

(31:25):
these cases. So don't defend anyone. But if you look
at Jane Street, you know, which it's been reported on
a lot these days, just how good a business it is.
You know, whether they're at a ten billion profits run
rate or something like that. Private company Fidelity, when the
world's leading brokerages, private company Goldban Sachs, your former employer.

Speaker 3 (31:41):
I assume that that a big difference is that a
lot like Chance Street writes very large checks. And the
Silicon Valley difference is not just that like you have vcs,
you might be hunger to get at whereas like said,
at all dozen, but like it's also you have employees
who are getting paid in equity and they're getting tender
as every Oh yeah, like is it tender every year
just as good as publicly traded stock?

Speaker 1 (31:59):
We think the tender every year is in nice solution.
And there are some things that will be different if
we're a public company for the better. There's some things
that'd be different as a public company for the worse.
And you get it, you know, trading windows and who's
an insider and things like that. But it's thus far
work quite nicely for a solution.

Speaker 2 (32:13):
So is that the model then? Like tender every year,
you've only done.

Speaker 1 (32:16):
Two, but we don't have forward looking plans to announce,
and so I'd come back to it at some stage with
you know, we could go do something that you don't expect,
and we're not announcing the plans because genuinely it's not
like there's a written down plan at stride that we're
going to do this, this and then this. We are
always reevaluating it. But again, up to this point, it

(32:36):
has made more sense for us to grow as a
capital efficient private company, then it's made sense for us
to be a public company.

Speaker 3 (32:43):
Sure, Like Chancer just makes money every year and they
don't need to raise capital, and so that.

Speaker 1 (32:47):
Just seems like great business has money to people. Right.

Speaker 3 (32:50):
I don't know what the economics that is, literally, but
they seem extremely good. But like, it does seem possible
that you could just make cash every year and fund
the business out of that, and out of that I.

Speaker 1 (33:00):
Never need to for twenty four, we're trying to make
a decision for twenty four, and for twenty five, we'll
try to make a decision for twenty five. So luckily,
it's not the case that you're faced with a you know,
a fork in the roads and you have to make
some kind of permanent decision. We do constantly re evaluated when.

Speaker 3 (33:12):
I write about this topic. One concern that people have
is that there are a lot of cool companies, like
an increasing number of them, like fast growing, profitable companies
that or sorry, I should say fast growing, not profitable
early stage companies, stage company companies, high growth companies that
don't go public, and that deprives like ordinary investors of
access to those companies, and therefore it should be like

(33:35):
made easier to go public or whatever. Right, So for you,
do you worry at all about that from like a
systemic perspective that you're depriving like American retirement savers of
access to the stripe And then two, you're not entirely
because there are people who are going around selling stripe
shares in a way that I believe you do not like.
And I don't know, like there's like a way around

(33:56):
of the barrier that you've set up. I guess.

Speaker 1 (33:58):
Yeah, Look, do you think the debate over who should
be allowed by private assets is a good debate? And
the accredited investor rule is it's kind of an odd rule,
like we're able to take it for granted that it's
been around for a long time, but basically we define
sophisticated investors as rich people, which is, you know, maybe

(34:19):
some a historic and in.

Speaker 3 (34:21):
Like a declining standard of rich where it's now like
sort of upper middle class people.

Speaker 1 (34:24):
Correct. Yeah, So I think debate on that is a
good thing in Stripes case. You know, most of the
non employee ownership is through essentially kind of VC funds,
and the underlying VC fund ownership the LPs there tend
to be pension funds, college endowments, people. I think we
feel quite good about making money for it, and so

(34:45):
I don't think it's the case that's kind of broader society,
it doesn't get to benefit from the appreciation. I think
we feel quite good about the LP base of the
investors that are behind Striping. Again, I think that's another
thing that has allowed us to stay private for as
long as we have, which is actually the very long
term vcs. I think if we had a different set
of vcs, we would have been less fortunate in being
able to grow Stripe as a private company because maybe

(35:05):
they would have felt the need for a win or
something like that. But I think luckily, you know, Sequahic
Capital is one of the best VC firms that there
is that don't quite need to prove themselves.

Speaker 3 (35:12):
They probably count you as a win anyway. Again, they
probably count you as a win exactly.

Speaker 2 (35:17):
Yeah.

Speaker 1 (35:17):
Yeah. And then on the I don't know what you
call them, but the firms out there at this market.

Speaker 3 (35:22):
We've taught on the podcast about Destiny Tech one hundred,
which has a private market. I was the fund situation
with like some Stripe forward contracts, and like there's like
a general there's like a market for forward contracts, which
all seemed to be not really approveiate this.

Speaker 1 (35:38):
It's not going to end well because generally hyping financial
assets has a bad history. It worked out badly with SPACs,
it worked out badly with icos, and it just tends
to work out badly, which is why it tends to
be regulated this. You know, financial regulators tried to in

(36:00):
the hyping of private assets. And so again Stripe is
not a public company. We do not enable broad retail
ownership of Stripe stock, and so if people try to
back into that by having private company stock in a
vehicle that that is then available to public mark investors,

(36:22):
we just think it's not a good construct. Like it's underdisclosed,
where people are buying an interest in things based on
name brand recognition but not based on going over the
financials or understanding what it actually is. They tend to
all be very high fees. I mean, it depends on
the vehicle, but they tend to be fairly distractive in
that way, and so we don't like it. We don't
we don't permit it, and I'm personally not a fan.

Speaker 2 (36:44):
Is there much that you can do about it? Like
in the case of a Destiny Tech, for example, that
says that you know they have stripe forwards zuchorrect. Yeah,
I mean, what can you do?

Speaker 1 (36:55):
We prohibit forward, So we had a bit of a
about that people do them anyway?

Speaker 3 (37:01):
Can you then avoid them?

Speaker 1 (37:02):
And I don't know where this goes, Yeah, because right, I.

Speaker 3 (37:06):
Mean, it seems like they're prohibited and people do them.

Speaker 1 (37:09):
And yeah, we put it up on the website just
to make it abundantly clear, so everyone has the same information.
It's allowed, they're not allowed. So I don't know. There's
some areas where people have to read the tea leaves
or the body language. We tried to make it abundantly clear,
get out there with the semaphore flags. So this people
are not in any doubt.

Speaker 2 (37:25):
On the topic of going public. It doesn't sound like
you're in any rush, obviously, you said in June, and
I thought this was interesting that many companies make the
decision to go public too early. That you personally see
tons of opportunities to change and grow the business quite
a lot, and I think it's interesting that you want
to stay private to do that, and I think a

(37:45):
lot of founders would agree with you. But just the
fact that, you know, sort of like going public. You
see this as this sign of maturity and maybe that
you're not innovating as much as you would in the privates.

Speaker 1 (37:57):
I don't know.

Speaker 2 (37:57):
It kind of made me think of tech company is
like offering dividends. Like I remember when Metas started giving
out dividends earlier this year. Everyone was like, oh, well,
they're old news now and they're too mature.

Speaker 1 (38:09):
Well, I think Meta is the wrong example to use
for that argument, because they currently seem to be doing
extraordinarily well in the AI race. And I'm not making
the claim that you know, one cannot innovate as a
public company, because that is clearly an absurd claim and
you would just be kind of constantly slapped in the
face by counterexamples. And Meta would be the perfect one
where they just dem at the ring glasses and those
look amazing, and again they're just nailing it in the

(38:30):
AI race, and so they'll basically argument I do think
that on the margin, if you are developing large number
of new products, if you have a fast growing business,
if you're constantly reinventing how the business works. And again
in our case, we are transforming Stripe from not just
being a payments business to there are all these new
software lines of business that are much earlier, that are

(38:51):
harder to predict how they grow. Everything like this. You know,
we're changing out the underlying payment methods. You know, we
talked about crypto, we didn't talk about around the world,
there are all these interesting trends happening in new payment
methods where are basically bank transfers, and things like UPI
and picks in Brazil and things like that are becoming
much more relevant to anyway, the huge amount of change,
I think on the margin, the public company valuation apparatus

(39:13):
is set. You see it how people you know, the
quarter of the earnings and the miss and the beat
and everything like that. It is optimized for mature, predictable businesses.
And indeed people talk about kind of business predictability, whereas
you know, for a business that is still in the
you know, in the early stages like Stripe, and we
think about a lot of new products on a five
or ten year time horizon. Again, I think on the margin,

(39:35):
there are some benefits to doing that as a private
company because you get to kind of completely retool the
business as you go without necessarily wondering about, you know,
what will the reception be for this in you know,
the next quarter's earnings release.

Speaker 3 (39:47):
I know you're not in any phase of learning an IPO,
but I was a capital markets banker, and I know
you've had thoughts about like the IPO process, and like,
I don't know if you're doing an IPO, like would
you change about the process.

Speaker 1 (40:02):
I find all the debates about IPO mechanics really uninteresting
because it just doesn't matter. Like, if you have a
great business that's valuable for customers that millions of people
use and makes money as a result, you can do
whatever you want. Like, you know, I think Facebook would
say they botch the IPO, but they have like an
incredible business, so it doesn't matter and no one remembers it.
And then you can have like the world's best IPO
plan and if the business isn't good, it doesn't matter.

(40:23):
And so people get into all these debates about direct
listing versus regular IPO and then Bill Gurly complains that
the bankers are taking too many fees, and then it
just doesn't matter. Like, build a great business and you
could write your prospectus on a cocktail mapp and it'll
be fine.

Speaker 3 (40:37):
Really, this is like why Charliemker doesn't like financial services
business because you're like like, oh, this is around business.
It's true, but it's.

Speaker 1 (40:45):
True, right, Yeah. And the thing is investors are smart.
I think people try to do too much of a
song and a dance with investor relations and try to
you know, gin things up. And ultimately, when you meet
professional investors, you know they're really smart and they look
through and understand the fundamental dynamics of a business. And
so the secret to good investor relations is have a

(41:06):
good business that's growing and it is profitable.

Speaker 2 (41:08):
Where people should do that exactly. Ye, Well, oh you

(41:28):
have an airport. Do you want to talk about that?
Is that something?

Speaker 1 (41:31):
Okay?

Speaker 2 (41:32):
Why where did that come from?

Speaker 1 (41:35):
Well? I should not be listened to for any rational
financial investment advisor.

Speaker 2 (41:41):
I don't know. I don't have the pockets.

Speaker 1 (41:44):
Well, I'm a pilot and an aviation and I grew
up interested in US and I've been flying since I
was a teenager and you know, still really love to
do it, and I'm flying my spare time, and so
I would say it's not necessarily the most rational business
interest of mine. But the case the airport, so Dublin
basically is three airports. Doublin International, which you've been to Dublin,
that's the one you've been to. I guess three if

(42:05):
you count the military airport, Belt Donal, and then Western,
which is the general aviation airport. And so general aviation
is all the stuff that is not airlines. So it
could be public service flights like search and rescuer, air ambulance.
It could be flight training, you know, people getting their
pilot's licenses. It could be corporate jets, it could be
all this kind of stuff. And generally speaking, the appropriate
home for the general aviation stuff is not where all
the airlines are because they just don't mix that well.

(42:28):
And so most places will have you know, if someone's
doing flight training in New York, they'll not do it
at GfK. They'll do it you know, Westchester or something
like that. Yeah, Yeah, they really don't mix well. And
in the case of Dublin's Western Airport, I end up
buying it back in twenty twenty one, and it needed
a bunch of investment, and so A bought it and
we've been investing in giving it the facility that needs around,

(42:49):
you know, instrument landing capabilities and you know, redoing the
terminal and the capital stock and things like that, and
so it's partly I think it's a good I mean,
they are in the US, they're not for profit businesses.
They tend to be government owned and federally funded. Internationally
they are like he throws, a for profit business and
they just make money off landing fees. And so I
actually think it will, in the fullness of time, be

(43:09):
a good business once it's kind of come out on
the right side of the growth curve. But it's also
a passion.

Speaker 2 (43:14):
Product in that's awesome. I mean this not as an insult,
but I feel like to enjoy being a pilot, like
casually you have to be like a little bit crazy,
like that seems like an insane proposition, but maybe I'm
just really risking.

Speaker 1 (43:27):
So no, it just it requires a lot of discipline,
you know, checklist discipline, and you know, recurrent training. I
just went through some recurrent training and it just I
actually find it more interesting because obviously aviation safety is
generally talked about correctly as one of the best examples
of process optimization over the last you know, five decades,

(43:51):
where we have taken a system and just improved the
crap out of it until it's like so good. If
they talk guys, how can go buy on Twitter recently
where the FA doesn't and date car seats on airplanes
because flying is so safe compared to driving that they're
worries that if they mandated car seats on airplanes, even
though like you have a tiny benefit, it would lead
to people choosing not to fly and choose to drive

(44:12):
instead and get into car accidents and therefore be net
less safe. But I find it funny that, you know, again,
flying an airplane feels like in principle it should be
like kind of hard to do, and driving car on
the ground should be easy to but permile. Obviously flying
wins out, And so again you have this decades and
decades and decades of history where we've taken the lessons
of you know, they say the rules and regulations they

(44:33):
are written in blood. You know, we take the lessons
of the previous accidents that have happened and then we
wrap them into future training. And you know, generally, when
you do pilot training, you're studying a lot of specific
accidents that happened and you know what the learnings were
for them. And so I think if you're interested in
systems design, engineering, process optimization, things like that, lessons.

Speaker 3 (44:51):
From piloting like inform your software engineering.

Speaker 1 (44:54):
I mean they're pretty separate, but I think the software
engineering brain tends to be a t to flying. And
you know, you got Palo Alto Airport was a little
general Afacian airport in the Barians when the busy general
aviation airports in the entire country. Because I think engineering minds,
of which there are lots in Palo Alta, tend to
enjoy it. And again you're mixing you know, a kinesthetic
skill and meteorology and you know, mechanical understanding of you know,

(45:18):
a combustion engine and all the attendance systems and you
know airspace and everything like that.

Speaker 2 (45:23):
So it wasn't like fueled by you being in an
adrenaline junkie like I want to go fast and I
want to fly in the sky.

Speaker 1 (45:30):
Adrenaline Like if you're feeling adrenaline while flying you're doing
something wrong.

Speaker 2 (45:33):
I feel it all the time when flying, like God,
I hope we stay in the air.

Speaker 1 (45:37):
There was that, you know, you read entron descentic Zuperie
and you know, flying in Africa during the b nineteen
twenties in his case, and you know, getting shot down
and all these kind of things. There clearly was a
that would make you feel something. Yeah, that exactly. I
think that kind of stuff would make you feel something.
But again in these days it has become much more
safety oriented and the cowboys stuff has been pulled out.

(45:57):
And again they actually describe one of the cultural challenges
that happened in the aviation industry underwent was that we
produced all these military pilots in you know, the World
War Two, in the Vietnam War, and those people then
went into you know, PanAm cockpits and they actually kind
of made bad captains in a certain way because it
was like very much shut up, this is my cockpit.
And so the CRM Crew Resource Management, I guess thing

(46:22):
basically was a multi decade efforts to get rid of
the the captain mindset and get towards a collaborative problem solving.

Speaker 3 (46:30):
A lot of like I'm going on a like seven
seven the pilot landed fourteen line carriers, Like that's got
to be the safest possible way to fly.

Speaker 2 (46:40):
But apparently not, No, he's gone rogue.

Speaker 3 (46:42):
Not listening to his second officer or whatever.

Speaker 1 (46:44):
Do European airlines have a different model than the US
airlines where they take pilots who have two hundred and
fifty hours only, which the US would consider very low,
and they put them in the right seat of airliners
and they have like a really strong safety record, and
so as you fly around an airliner in Europe, you
could have someone who only learned to fly a few
years ago. And the way they do that is a
huge amount of standardization, a huge amount of process orientation.

(47:08):
You know, people make fun of Ryanair for the hard landings,
you know, the Ryanair landing in europehere they really plunk
it on the runway. That is one of their safety
SOPs where they say a positive landing, as it's known
in the industry, is safer because it reduces the risk
of hydroplaning if it's wet, and so it reduces the
like very small risk that you run off the end
of the runway if the runway is wet, but we're
just going to every landing. We're going to plunk it
on and that's safer. But again, it's generally process orientation,

(47:32):
standards and a lot of that kind of stuff that's
driven to safety and not excessive piloting skill. And again,
if you're relying on incredible piloting skill, something has gone
wrong in your system. Because we should be able to
have a seven seven seven full of passengers be safe
even if the pilots are fatigued or something like that.

Speaker 2 (47:49):
That's wild. I did not know that about Ryanair. I
feel like they should put that fact out there. You
know that it's intentional that we're plunking down.

Speaker 1 (47:57):
That's true. Yeah, yeah, because you know it's quite Yeah,
that's question exactly. Yeah.

Speaker 3 (48:01):
Draw attention to.

Speaker 2 (48:02):
It being uncomfortable, Well, everyone knows.

Speaker 4 (48:06):
That's sure. That's true.

Speaker 1 (48:07):
That's true.

Speaker 3 (48:08):
John Colls and thanks for coming on the Money Stuff Podcast.

Speaker 1 (48:10):
Thank you guys, it's fun our first guests.

Speaker 3 (48:13):
Yeah, I'm honored, and that was the Money Stuff Podcast.

Speaker 2 (48:22):
I'm Matt Levian and I'm Katie Greifeld.

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The Money Stuff Podcast is produced by Annamsarakus and Moses
I'm Special thanks this week to Stacey wom.

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Our theme music was composed by Blake Maples.

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Brandon Francis Newnhim is our executive producer, and.

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Stage Ballman is Flimberg's head of podcasts.

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Thanks for listening to The Money Stuff Podcast. We'll be
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