The Path from The Soviet Union to Building Multi-Billion Dollar Companies — Max Levchin

I was asking myself actually a question like why is our relationship as good as it is, and it is really good, and is there anything to learn about co-founding companies? Like you're co-founding a family when you marry someone, you get together with someone. I've had many co-founders over the years and some were amazing relationships and others didn't work out, and it's always tempting to sort of blame yourself, but you obviously have to examine it through the lens of like what fell apart as a relationship between two co-founders. And I realized that the secret for my marriage is I'm still trying to impress this girl. Every day I roll out of bed thinking like, one, like how did I get this? This is definitely better than I should have gotten. So the attempt to impress your mate on a daily basis is the secret to the best marriage.

So good. The next line in the movie, that's the first thing they teach you. I'm only showing off because I love that quote so much, too.

It's the first thing they teach you. It's a great quote. Encapsulates so many different flavors, right? It's like don't doubt yourself. The real meaning here is you know the answer. You may be too scared, too embarrassed, too unprepared to sort of embrace the fact that you know the answer, but you know the answer. So like let's not mess around. You know the answer. So that's layer one. Layer two is make a decision already. Layer three is even if it's unpleasant, you're going to have to do it anyway. So don't delay. There's just like so many flavors of the same idea over and over again encapsulated beautifully in just a few words. I think it's a great succinct line. The other thing, I'm a huge fan of studying leadership. Fan of leadership sounded weird. So I love leadership-related lessons. And there are two movies where leadership I think is, or I'm sure there are more than two, but like two of the movies that I fall back on for leadership content is Ronin and Seven Samurai. And Seven Samurai is hard to quote because it's in Japanese and you can't really translate unless you're a native speaker, which I'm not. But Ronin is in English and so it's great to quote. There's a lot of other great lines, but that's the best one.

It's always I should have done that a lot sooner, at least in my very limited experience. You have infinitely more experience with that. So, thank you for that. And on the Japanophile angle of things, having lived there, I'm still very close to my host family who I stayed with when I was 15. I am no longer 15, I think some people will realize. But I was wondering, have you ever seen the movie Paprika? This is an old anime. It's from 2006, I believe.

If you haven't, it might be interesting. It will not be too much of a spoiler because there's so much around it, but here's the basic premise. Psychiatrists invent a device called the DC Mini that allows therapists to enter and record patients' dreams. And then when the prototypes are stolen by an unknown dream terrorist, A, B, and C starts to happen. What's crazy about this is that there are actually researchers in Kyoto in Japan who have been using fMRI and waking dream subjects to try to use machine learning to then correlate brain activity to content. And they've made some surprising progress with being able to do that. It's still very, very low resolution, but I don't know how far away we are from being able to do something like is depicted in Paprika, which is pretty crazy. I used to be a voracious consumer of both manga and anime and then it turns out that time is still a zero-sum game for most things and so I've drifted off my weekly supply of Japanese content production, but I will definitely make room for that one. The thing with fMRI and brain modeling,

at least last I looked and before I sort of picked to do the thing that I'm doing now with Affirm, I actually looked pretty seriously into, I'm a huge sort of closet fan of brain-computer interface and all sort of surrounding ideas and opportunities. So I've looked on and off at fMRI and all the other sort of stuff in that domain and it just seems that your cranium is too dense. It's hard to get signal other than like very superficial, you know, connectivity from, and you have to like shave your head, which you know you've done, but I'm not yet prepared. Of course you have to experiment on yourself otherwise what's the point? But I'm actually pretty excited about some of the newer things happening in brain-computer interface, specifically in things like ultrasound. I think we're finally looking at penetrating, is a scary term. I don't mean that like physically penetrating. But getting a few inches into your brain versus just scanning the current of the top of the skull is exciting.

It's a great book.

So that was one of the weirder dual-track, like am I in a dream? Is this a simulation? experiences of my life. So full context. So Luke and I were classmates. I think he was ahead of me by a year in school, but we were at University of Illinois together and worked on a couple of failed startups together there. So we go way back. We're really close friends. And as we all made our way to Silicon Valley, I hung around campus because I actually really wanted to do research in cryptography, which back then crypto meant cryptography, not cryptocurrency. But I've always thought that there's interesting opportunities in currency to be invented powered by cryptography. So I was obsessed with things like, you know, David Chaum's work in anonymizing signatures and DigiCash was a thing back in prehistoric times.

I graduated UIUC in 1997. DigiCash, which was the granddaddy of all cryptocurrencies. I hope I'm not offending anyone's prior art, but I believe it was probably the very first attempt to make a real digital currency using cryptography. I believe it went bankrupt in the summer of '98, the year I moved to Silicon Valley. I actually went to the pouring one out on the curb party held on kind of somewhat less explicably on one of the picnic grounds at Stanford University. I happened to be there. There's actually a really good lesson, like sort of took that away with me to PayPal where there was a bunch of people, some people you know today, people who are very active in cryptocurrencies now, but also just like interesting famous people, famous today, we're all very young back then and the conversation was around this idea like how the world is not ready for this yet, like DigiCash and digital currency, like people aren't ready. '98, you know, this is like 10 years before the Bitcoin paper, so I'm sure they were right, but the conversation was really around how like it's obviously the right thing to do, the right way to do it. People just don't get it yet. And as a sort of naive, freshly minted computer science graduate, I was like, well, the user interface sucks. It's really hard to have this very, very slow RSA computation happening on your crappy laptop if you're trying to pay for a cup of coffee. Like, it's just too slow. And people are like, ah, heathen, you don't understand what are you talking about. Like, no time too long to wait for a digital signature. Non-repudiation. I'm like, okay, great. But seriously, you know, like I just want a cup of coffee. So, it was kind of an early moment like I feel like some of these things are not like the others. Anyway, I had literally within days of that event, I met Peter Thiel at Stanford. He was giving a lecture. I was hanging around Stanford campus. Luke was actually the connective tissue. He knew Peter and he went to school with me. And so he was kind of like, oh yeah, like you guys should know each other. This was great that you ran into one another. So the origins of PayPal story were literally being made that summer. And I was still like, sure, I'm going to start a company in Silicon Valley doing something. I don't know what, but I was still going to like scientific conferences. So there was this one conference called Financial Cryptography. It was held in Anguilla, which is a kind of a small island off the sort of British West Indies. And there's all sorts of interesting characters. It probably deserves its own podcast one day. But it's an interesting, hilarious, bizarre story. I'm 99% confident whoever Satoshi is was probably going to the same conference at the same time as we were. But Luke and I were there and then another year Peter and I went there and after PayPal was already a thing I presented something basically saying, hey, so we built this thing. It has a great user interface and I was there when DigiCash failed. And like I think it failed because of user interface and this was now a couple of years into PayPal and we were definitely doing well and DigiCash was definitely dead and people were in the audience going like boo, you totally don't get it. They're like, okay, clearly maybe there's a reason why we're succeeding. Anyway, as we were doing all this stuff, Neal Stephenson publishes the first 100 pages of Cryptonomicon. And so as we're coding and like I'm literally coding 24/7. Steam comes out of my ears every day because like I don't eat, I don't sleep. Like the six of us are just in the office together and three of us are basically just typing code as quickly as we can because we have this thing we have to build. And the only thing we take breaks for is we're trying to read Cryptonomicon. And like the more we read, the more like we think he's writing about us. The first few chapters of Cryptonomicon is like this development of digital currency using cryptography. And he's like literally talking about, I think he actually references DigiCash and he's referencing like user interface sucks and somebody needs to build something more user friendly. So like am I in a dream? Is this real? I remember sitting next to Russ, one of our earliest engineers who I also went to college with, another Luke Nosek friend, and I'm like, if we didn't know any better, this is all just like a big brain and a bad experiment. We just don't know whose brain it is because it's being described to us in a book that's being published online. And then we ran out of pages and like it wasn't published for a little while longer. Like, how will we know what to build next? We don't have the book anymore. That's like the extended Cryptonomicon story.

This one is only 4,000.

It's a great book.

It's so good. It is so good. My college life was shaped by Snow Crash, which was probably the thing that really put him on the map. And I read that there was like a dog-eared version of it hanging around one of the offices that I sort of hung out in college and I was like this is the most amazing thing ever. Like this book sort of shaped my at least software engineering life and then Cryptonomicon was the next one. I was like all I need to do is just read more Neal Stephenson and he'll show me the way. There were some really long books after which sort of were quite challenging to get through. But then we got to Reamde which was another gift. So I'm reviewing my preferences here.

Totally.

He coined Metaverse.

So, Stephenson basically presented an alternative to Neuromancer. Neuromancer was this dark dystopian. Also, by the way, first book I read when I came to the US.

Yeah. Yeah. So, two things. So, actually this is extremely, are we in a simulation? So, I come to the US July 16th, 1991, six weeks, I think, before Soviet Union fails. But I leave Soviet Union and I come into this dreamland of America. And then six weeks later, my passport is a passport that doesn't have a country anymore. And so I become a man with no state and etc., etc. Makes for an interesting travel existence. But I'm like an ultra, ultra nerd. And I was like the king of the nerds, you know, in my prior life. And this is a summer, so I don't know how and where I'm going to find my people. But like six weeks go by, so a union fails, and I start a public high school in Chicago. And I'm sort of like casting around for my people. And I run into these guys who are still really good friends of mine and they're like, oh, you're one of us. We have a word for this. You're a nerd. It's great. You like science fiction? Great. You love science fiction. Have you read Neuromancer? Have you seen Akira? And they're like, no. Hasn't made it to Soviet Union yet. I was fluent in English. This was not a difficult conversation to have. But they're like, okay, here's a VHS of Akira. Here's a copy of Neuromancer. Go home. Don't come back until you've been completely filled with these things. And I was like, okay, like one, these are going to be my friends for life, which turned out to be true. It's been 30 odd years, and we're still talking to each other every day. And it's the beginnings of a completely different science fiction consumption experience. That said, for the next few years, I was like, Neuromancer and everything that came after Neuromancer is the dark sort of plug your brain in future. And Snow Crash offers this hilarious, completely different, consumerist, satirical version of the plug your brain in versus this dark corporations rule the world ninjas in skin suits and kill you while you're plugged into a deck trying to hack your way into some corporations. Anyway, you're like walking me down the memory lane to some fun recesses.

I'm on it.

You're missing out.

I do.

It's a great book. It is well translated by a couple of different translator teams. So, you can almost not go wrong buying one of the last three translations. There's about six that I remember exist in English anyway. I would not bother with the first three.

Pevear and Volokhonsky is the kind of canonical, like, great translation into English. Book is obviously in Russian originally. There's now a new one, but Pevear and Volokhonsky is a fantastic, very, very, very good translation. Anyway, it was written by Mikhail Bulgakov, who is arguably the greatest Russian language writer of the 20th century in my biased opinion. There's a lot of great Russian language writers, so it's a bit of a fish in a barrel type situation, like who's a great Russian author, and there's some fantastic science fiction Russian authors, incidentally. But he wrote many books, and all of them are really good. The premise for The Master and Margarita is, so it's set in kind of an early 1920s Moscow. Soviet revolution happened. The Russian civil war ended. The place is now socialist and sort of slipping into the socialist bureaucracy building mode. And yet it's kind of, you know, it's a socialist paradise in the making. And so the devil, like the prince of darkness, visits socialist Moscow in a summer of 1925, let's say, with a coterie of characters from what you would expect the devil to hang out with and wreaks absolute havoc on the socialist paradise. So first of all, it's a book within a book, which is like one of my favorite sort of plot devices. The main character, the anonymous master, is a writer who wrote a book about the last days of Christ. It's a book about crucifixion and it's beautifully, so a lot of it is in the book. It's interspersed with the chapters of the original and obviously Bulgakov wrote both, but he is very much referencing himself. So he was in Moscow during the revolution and very quickly ran afoul of Stalin and was also, because he was such a prolific and brilliant author, was Stalin's favorite author, was persecuted, ultimately asked for permission to leave the country because he couldn't be himself, he couldn't write. Stalin apparently permitted it, but then he died before this could happen. So this is a little autobiographical story of the writer himself. It's a story of the devil mocking, making a mockery of socialist paradise. It's a story of Christ and his last days on earth told by an amazing writer, both the author of the book and the book's author, also known as the master. It would take many hours and at some point I'd be like, you know, well, you should go read the book because it's so amazing. But it is one of the best portrayals, certainly the earliest brilliant portrayal of homo sovieticus. What happens to the human mind when exposed to rampant socialism? And it is funny as hell because having grown up there, spent 16 years there, the insanity of living in a socialist paradise and yet you don't have enough to eat. It's tragic obviously, but it's also very funny and the book does it amazing justice and it's like super duper supernatural sort of science fictiony in what's possible. There are flights, there are witches, there is a devil's sabbath, there's all kinds of crazy stuff that happens there. It's amazing.

It's an amazing book.

It's like a quarter length or a fifth of a short Neal Stephenson product. So it's definitely very accessible. It's also incidentally, not to overshare, it is the reason I am married to the woman I am.

We met completely randomly through like a sheer accident and both were predisposed to be like, who is this weird person? Why am I talking to whoever this girl is, whoever this guy is? And then I thought she was quoting The Master and Margarita and I was like, before I bow my way out of this conversation, I'm going to find out. It's my favorite book. It's always been my favorite book. Like how can I, you know, not, so because I know the book as well as I do because we're speaking in Russian. I quoted the next line and she's like, oh my god, The Master and Margarita. That's my favorite book. Like no, it's my favorite book. And it's been 27 years and two children and a very happy life together.

Full circle. Oh, boy. Yeah. The brain in the vat question just keeps popping up.

Totally. I mean, you got to marry right otherwise it's hard to work. Uh, no. Well, what are your thoughts on marrying right? If you have thoughts on that. I do actually. I've spent a lot of time thinking, I mean, I spent a lot of time thinking about all kinds of random stuff and this is no exception. The line marry up is a line people use all the time and I think that's cute and I agree with it. I just think it deserves unpacking. I was asking myself actually a question like why is our relationship as good as it is and it is really good and is there anything to learn about co-founding companies like you're co-founding a family when you marry someone, you know, you get together with someone and are there parallels? And I was contemplating all this stuff and I sort of realized that, I mean, I've had many co-founders over the years and some were amazing relationships and others didn't work out and it's always tempting to sort of blame yourself but you obviously have to examine it through the lens of like what fell apart as a relationship between two co-founders. And I realized that the secret for my marriage is I'm still trying to impress this girl. Every day I roll out of bed thinking like, one, like how did I get this? This is definitely better than I should have gotten. So clearly I got to work on this. Like I can't let her find out that she married down. And so the attempt to impress your mate on a daily basis is the secret to the best marriage. And I think that the good ones are where both sides are kind of secretly thinking, I definitely lucked out. Like this is so much better than I should have gotten. And so if the feeling is mutual, you're going to go very far together just constantly trying to grow. And you know, come up with new tricks, new ideas, new, you know, you don't let yourself be stale because you're watching the person next to you grow and become more well-rounded, more intelligent, more successful, etc., etc. So that's sort of the secret to our relationship and everything I've accomplished in my life since we've met has been modulated by her. We keep on referring to this her. So her name is Nelly. I suspect many of our mutual connections refer to her as the sort of actual reason behind anything that I've done successfully in my life. So, and it is true. She's been extraordinary at both calling my BS out when there is some and pushing me at the, you know, things like whenever there's doubt, there's no doubt situation saying like, hey, trust your gut, make a decision, this isn't the right person, this isn't the right idea, etc. And so on. One fun fact, after PayPal, so we met in the very early days of PayPal, so that same summer of '98 is when the seeds were in the ground for PayPal, early '99 when we started. My wife and I met in mid-'99, so exactly a year after I moved to Silicon Valley. And so she witnessed the entire PayPal saga from a front row seat. After PayPal, I was like, anything but financial services. I'm going to go build some other stuff. But like, I can't allow my sophomore act to be in the shadow of my freshman act. And she sort of said, you know, do whatever you want. Like obviously you have a right to come up with anything, but I'm just going to tell you, man, that's clearly what you're meant for. And so like, you know, you go on. So, seven years later, after I've been meandering through the desert, she's like, you know, I think I said it before, but I just want you to know, like, you were really good. Like, that's still true. Maybe you should go do what you're good at. And Affirm is very much a product of that conversation. I was like, I think she's right. I think I'm a one-trick pony. And the trick is a good trick, though. So, here it is. Anyway, but trying to impress your mate, trying to impress your co-founder every day because you can see the other person progressing in front of you and get better and smarter and more intimidating by way of just being so much sharper, so much more interesting than they were when you met is a great motivator. It keeps you on your toes, makes you work harder at improving yourself.

It can definitely get hairy, for lack of a better term, if you're not thoughtful about it. So, you have to think through, you have to talk through kind of what makes sense, what doesn't. We're well matched because I am quite technical, have lots of interest in sort of the technical depths of matters that we work on together where she works on, I work on, etc. And she has an extremely strong finance background and understands business models and kind of the sort of philosopher of business these days. And so our conversations are very rarely about checking each other's work, which is where I think you could really end up with like why are you nitpicking, checking my homework, right? Micromanaging. Yeah. Don't micromanage what I'm good at. And also, she's an incredible empath and I'm not like, I frequently be like, so I'm dealing with this in my day job. Why is this person unhappy? Can you explain to me? And she's incredibly good at that. And so I think because we are such kind of non-overlapping areas of strength, we end up being very complementary. If anything, we tend to be like, wait a second, we're on your stuff. Why are you bouncing to mine? We need to finish that thread. And both of us have pretty active professional lives. And so we are constantly discussing them, but we don't, I think, ever run into or step on each other's toes. She doesn't ask me what's your token budget anymore than I ask her, how did you make this hiring decision? Like I know she's very good at, or how did you decide that this was a bad investment opportunity? I'm pretty sure she looked at it with all the tools she's gotten, they're better than mine. But you have to be prepared to communicate and it does not hurt to be direct with one another. And so you have to be able to take on directness without sort of like hurt feelings. And a great one-liner, another gift from my wife. She didn't come up with it, but she read it somewhere and she's like, here's a new motto for our family unit. Don't go to bed angry. Stay up and fight.

We don't fight too often. Yeah, but we definitely don't let things fester, curfew prevent us from hashing out whatever it is our differences are at the moment. But yeah, we try very hard not to let things fester and that works really well. If you're going to overlap familiarly and professionally, you better deal with conflict or disagreement quickly because you're accruing areas of negative overlap faster than most people do. Like, I hate the way you chew, but I love you all the other ways. Like, we got to talk about that, but it's not an important thing. It's like, I hate the way you chew, and by the way, you've belittled me by checking on my token budget. It's like you're compounding frustrations and marriages fail because people just don't say out loud like here's a thing that I'm not sure I'm prepared to put up with.

It sounds like a weirdo, but I like, that's all true, man.

I've definitely gotten much better at deciding what matters, what doesn't. So, when this article was written, I'm sure no metric looked dumb. No metric looked superfluous. I was like, great. Counting the number of times I trimmed my fingernails. Huh, was there signal in that? As you age, you replace raw compute and willingness to engage in raw compute with pattern recognition and old paths that you don't need to travel down because you know there's nothing there. Like there's absolutely no value in tracking your fingernail clippings or rate they're off. So I've become more focused on tracking sleep because there's more and more science showing that that's really important. Even that I sort of used to obsess over a bunch of metrics and I think at this point the sort of reasonably cutting edge, and you know better than I do, I think these days resting heart rate and heart rate variability are the two really good anchors. Like if you keep one down, keep the other one up, you know that predicts your recovery, predicts your intellectual capacity for the day really well. So I track that pretty obsessively. I try to stay in bed some number of hours. I'm a lot less obsessed with I don't need to sleep more than X, so better be, you know, booted out of bed by X plus one second. I'm also not precious about, you know what, I don't feel like I need any more sleep. I'm just going to go and tool around and do more stuff. So I've relaxed a bunch on things that I found to be less impactful to my own life, but I have the benefit of spending a bunch of years obsessing over everything and deciding, well, it doesn't seem to matter that much what I eat, for example. So for a long time I was obsessed with the exact sort of caloric and macro targets and then at some point I had to travel a lot more than I used to. And obviously that goes out the window because you can't bring your favorite yogurt with you everywhere you go. And so you end up like, well, I'm just going to have to have some fermented foods from the assortment available in this geography. And it turns out that basically your gut health is like going to be okay as long as

You're having enough fermented foods versus like the fermented food you've selected for yourself. So you relax some constraints and move on to spending less time thinking about them. I track sleep. I'm still an obsessive cyclist, so I track every metric you can imagine. I become more obsessive as a cyclist. Actually bothers me a little bit, but because I'm unwilling to believe that I'm ever going to age properly, I keep on looking for marginal gains by obsessing over the exact crank length adjustments I can put myself through just to return some of you marginal watts that I lose with age. I've gone from believing that all you need is cycling to widening my physical training routine too. So it's maybe slightly more brain allocated to like what's the right day to lift heavy weights versus the right day to not do that.

True story.

Also there's an interesting origin story that actually kind of intertwines Ukraine and clarinet and everything. So, I did have some fairly gnarly respiratory stuff when I was a kid. And I think my parents probably were scared into kind of throwing everything in the kitchen sink into it. As a nice Jewish boy from Ukraine, I probably should have played the violin, but clarinet is a reasonable close second. They're like, 'Oh, but lung capacity, great, let's do that.' So, that's how I got into clarinet. There was like literally something that will, you know, feed the stereotype, but also help with the lung capacity development. And so I think my VO2 max at the time must have been like in the single digits or something cuz like I remember just like trying to open up my lungs and breathe in like it didn't work. And then like everything else I do like ah well I can just obsess in measuring it. And VO2 max is definitely not a thing Soviet Ukraine really measured but they did have like the basic approximation like blow into a tube and see how far you can push the ball like all the physics equivalents of lung capacity measurements. So, I was already looking at quantifying myself from a lung capacity perspective as like a 7-year-old kid or something. All of this while living in an apartment complex that overlooked Kiev's only outdoor velodrome. And so my platonic ideal of a manly man who was like a sports phenom was these dudes who would like get on the boards of a Kiev velodrome and just put their watts down and like go for an hour or two just ripping through this thing. I was like wow like one day when I'm not a scrawny little kid with a clarinet I'm going to be like that. So, I used to sneak into the velodrome when it was closed and try to ride my bike there except the cranks would touch the wood boards. Like, one of the worst accidents of my childhood was I had a giant wood splinter in my butt because I crashed at the top of the drum trying to do loops and slid down. Of course, these weren't well finished boards and it was outdoors, so like the elements rained on it. Probably not PG-13 after this, but anyway. So, I didn't grow up with a ton of sport in my life. Like soccer is prevalent obviously in Eastern Europe, but like cycling was right there on display every day. Like if I wanted to see someone who looked like just full of life and vigor, I would see a cyclist. And so I always rode a bike as a kid and always rode a bike in college. And sort of as I got into sort of busier and busier where this notion of how do you stay sane became an important part of the consideration like if you're going to work for 3 days straight without sleep like you got to offset it somehow.

I sort of naturally looked at cycling and then back to Nelly. When I left PayPal after we got acquired by eBay, I definitely hit like a very low point where there's nothing going on in my life that was worth staying up all night for. And she pointed out that I have this amazing bike hanging on the wall that you know had since I think before we met. She like why don't you like get back on the bike and you know see if you can find joy in that. And she knew my stories of rolling around the Kiev velodrome. And so I got on a bike and it was one of these moments where I went for a ride with a bunch of people and they were all like very serious road jewelry as the saying goes.

If you're buying more of a bike than you deserve to ride like that's nice road jewelry you got there. I was on like a beater bike relatively speaking. I think I brought it from college actually and I sort of dropped everybody on the first hill and I was like oh yeah I know how to ride a bike. I have big lungs. That clarinet really paid off. And so that was like I should really invest some time into getting better at this thing. And that's how I got into it. But I am exactly what they call a hammerhead. So you know it's a if I see a road I can't not go fast or at least try to go fast.

A couple of different things. So it's definitely great. I mean it's a low impact sport. So you can ride a bike for 6 hours and no part of your body will be like in absolute shreds the day after if you at least somewhat know what you're doing. So it's a great just if you have the time and if you're interested in it, it's not a self-destructive sport, which some sports are more and others are less. This is definitely one of the less self-destructive on the actual physiology. Part of why I like to go hard on the bike is it actually allows me at least to clear my head. It's one of the few times when I'm not constantly playing with some work-related concept or thinking through some future ideas or you know whatever. It's a moment where sort of everything gets tuned out and it's just me and the pain in the legs and sort of you're telling yourself go harder or manage your energy but there's not enough time or cycles left and like also what if we went to this market now? So it's a moment to go into like a pure moment of flushing whatever's left in the head and it does keep you healthy. It's a great way to stay alive and be healthy. And then more and more these days, it is a lifestyle sport of CEOs and leaders and people who sort of read the same kind of books. And it's another form of a community where if you don't have the time to sort of join clubs and you know, I'm not a big foodie. I'm not a big drinker. I don't have a ton of time for these protracted social events. I try not to go to too many conferences and yet I'm human. I enjoy human company and so riding with a pack of people who are interested in similar things is another form of staying engaged.

Part of the trick is if you can still talk and they cannot.

Cycling takes place over hours and so you can spend some time talking. There's also an important part of cycling culture is the coffee shop ride where you sort of you hammer to a coffee shop and then everybody falls in their chairs and gets their pinkies out and sips espresso. And I love coffee almost as much as I like bikes.

I think it's Yens.

I think he's East German. Jens V.

One of my proudest moments on the bike is I rode with Jens a few years ago now, but he used to hang around Northern California. He has a lot of fans actually. He's transcended the very specific sport of cycling into having a fan base worldwide because he's such a character. The shut up legs. I own multiple pieces of clothing with shut up legs that I did not personally produce. He's famous for that line, but he's very funny. He's now primarily a commentator in bike races, but he is a great embodiment of this culture of endurance. You know, pain with a smile, if you will. Pain with a smile.

I'm pretty worried, not to sort of go all dark immediately, but I think people without the questionable benefit of growing up in the collectivist paradise to quote the current mayor of New York don't understand just how corrupting it is. The ideas of socialism are amazing. This, you know, me for my fellow men and share and share alike and do the right thing because it's the right thing to do, not because there's a financial incentive to do it. All those things sound amazing and so it's seductive. The idea of a workers' paradise without the greedy lenders, capitalists, bankers, sort of all the sort of things we were fed as children or I was fed as a child in the Soviet Union. At first blush you're like, 'Yeah, it makes sense. People who work hard should have more. And people who are great even though they're not capable of producing valuable things in society because they're good people should have everything that I have even though I am working harder than they are.' And those things sound pretty good, but they inevitably require a bunch of structural change that just does not work thanks to human nature and many obvious things like it. For example, one of the greatest kind of mental images I have from growing up in the Soviet Union is if you went to a government-owned store, and every store was of course owned by the government, you would very quickly notice that the people whose job was to sell you things from behind the counter were always very fat while everyone you knew in your life was always very skinny. And you sort of like this doesn't make any sense. Like how do these people who happen to work in food stores are always really well fed? It's like, well, because they're stealing, like they get access to the food. And it expands that notion of this idea of everybody just pulls all their work product into one big pool and then someone's in charge of fairly distributing it to everyone who needs it from each according to their abilities to each according to their need. Is kind of the socialist/communist motto. And it works great except people who are doing the actual redistribution get to keep a lot for themselves. And doesn't matter how honest they begin that journey, by the time they get to real power, they become profoundly corrupt and steal and keep and redistribute primarily to themselves. And so that alone is just like an indictment of socialism that you cannot get around. It gets worse because markets, free markets, capitalism, you know, whatever term you want to use, inherently forces competition. If you believe you have a thing that you can sell at a lower price than the other guy, you get the market's attention. You get the business that's available to you because the thing is worth buying by someone, you're going to work on creating a margin for yourself by lowering the cost of production, finding efficiencies, finding some ways of making the thing cheaper for you and cheaper for the buyer so you can compete on price. So all those things do not exist in socialism because it's all centrally planned. We're going to make this many widgets and then we're going to have someone redistribute them to all the right people full stop. And what happens is there's never the pressure to improve and so you always make stuff at the government-mandated cost and the government-mandated price is what's being used to sell it. And so you have natural stagnation. You have a system that rewards graft, gives power to people who are most likely to become graft-driven and prevents anyone else talented or otherwise from trying to innovate and improve the efficiency of the system itself. And so it just does not work. And the thing that worries me in the US and the world, this isn't unique to us here is the headlines that make you feel like, 'Wow, I would love to live in the world where everyone is fed and everyone gets more or less the baseline of good living' is very compelling. Like it is easy to agree with. The recipe for that remains the best recipe we know, the best recipe we've discovered as humanity is capitalism. A force for constant creative destruction where you build the next thing better than the other guy. And yes, his business may be put out because your business thrives, but the beneficiary is the buyer or the user of the product, the buyer of the widget because you're constantly working to make the whole thing more efficient. If you eliminate the ability to or you eliminate the need to create efficiencies, you just stagnate. And the death of the Soviet Union was a surprise to exactly zero people because we knew as people who lived there more than most that nothing ever changed for the better. Like everything was the same price, the government-mandated price. And we were still using phones that looked like they were made in the 1950s. And when I moved to the US like, 'Oh, you have buttons on your phones? That's amazing.' Like we still did the clickity rotary.

Yeah. And so anyway, I can't say enough how the seductive story of socialism really appeals and I can understand why. But you know, if I didn't have my day job, I'd spend a lot of time screaming from every street corner, don't fall for the trap. It's a surefire way of getting to no progress at all.

I'm confident I don't know every strand of this particular disease. So, it's a complicated issue and I think it is definitely the case that the brochure looks great. The storytelling of do you know someone who's poor? Do you know someone who deserves better? Do you know someone who's been laid off? It is the case that capitalism can be profoundly unfair at least to an individual as a system as a way of improving the world. It works amazingly well. We've not created anything better. But you get thrown off the bus if you build something that gets outmoded or out-competed by another participant in the market. And it can hurt. And for the entrepreneur, it looks like failure, which we are wired to accept, but it still hurts. For a worker, it looks like being laid off, which could be catastrophic for a family. For people who sort of misinvested their money or something went wrong, it doesn't taste good. And so, the idea of social safety net, the idea of welfare is natural. You hate seeing your fellow men and women starve or not do well. So I understand the definition of the problem and the notion of income inequality and like all the things that we see in Silicon Valley firsthand is very real. It's not like how are you complaining like there's a lot of people who are not doing well and every new disruptive change from you know the industrial revolution to the AI revolution there's always someone on the receiving end of the efficiency because their work is no longer required or their products or their ideas are no longer relevant. And so socialism is a compelling story of how to protect those people, how to prevent them from suddenly being on the outskirts of society or worse. And I think there's definitely a lot to do to make sure we don't leave our fellow humans behind. Certainly my love of capitalism and free market does not obviate my humanity. I care about people just because I am also human and I see it as part of my job to ask the question, can we do better? Can we provide the social safety net for everyone? We're creating more and more efficiency. We're creating more and more value. There have to be ways of helping people who are thrown off the bus to make sure they don't end up in the gutter. And I happen to have some solutions that I love and solutions that I think are worthless. The idea of let's concentrate it all in the hands of the government, give a handful of people the right to redistribute it all and we'll do better doesn't work and I lived to tell the tale. I do think that things like philanthropy is profoundly important and the more disruption we're going through as a society the more important philanthropy becomes. And I think in that sense I'm not especially outwardly religious but I think religion provides a really useful set of frameworks around how to think about it. You know, every organized religion has a version of what it means to be philanthropic. And the older I get, the more I start respecting the thought that's sort of been aggregated over the thousands of years that most religions existed. So I think that's super interesting and important and worth participating in. On the other side of it is I think capitalism in particular has created opportunities for products to develop where the sort of optimizing up and to the right of the most profit at lowest cost ends up building products that are actually devolved from not just their economic platonic ideal but societal ideal. And I don't think we have to compromise by saying well you know what I don't actually care that this is harmful to someone because it's the most profitable market-efficient thing to do. And my theory for a long time has been that you can build products certainly financial services that are optimal not just from the lens of most profitable but also most society beneficial. And that's not uniformly distributed. There are plenty of products that look like predatory lending and all the other things or just sort of make money because the underlying customer doesn't understand what's going on, doesn't have the capacity to deal with the complexity of the math involved. Affirm is the answer to that question. In some ways, what we are doing here is trying to say, look, you can optimize a product beyond just making the most money. In fact, it's okay to make a little bit less money if you are able to create something that's society more successful, more important because in the long term, I think you will have retention that consumers will not go to a cheaper product or a product that is less profitable for shareholders because it's so societally important. And so I am to at least some extent embracing the ideas of pro-social product and engineering. I just choose to do it strictly through the lens of capitalism.

Well, there's this acronym BNPL, buy now, pay later. We kind of invented the genre about 15 years ago. And the basic idea is at the point of sale, most of us pull out a debit card or a credit card. And those who pull out a debit card generally speaking, think themselves financially responsible and think, you know, if I can't afford it, I'm not going to pay for it. So, like, if I don't have enough in my bank account, just not going to buy right now. I'm going to save up or maybe buy something cheaper. If you pull out a credit card, the minority of us who are for all intents and purposes independently wealthy just say, 'I'm going to put it on my credit card because it's easy, and then I'm going to pay it off at the end of the month, and I'll get some free float on that, but I'm not going to pay interest or pay over time.' There's a huge percentage of Americans that pull out their credit card and say, 'I'm going to add it to the giant pile of revolving debt that I already have and I'm going to pay interest on it and I don't really know how to calculate that and I have no idea when I'm going to be out of debt, but I need that thing and I'm not disciplined enough to pay for it with cash or I just don't have the cash and I need the thing.' And sometimes the thing is like, well, I need a new bicycle which we can maybe postpone and sometimes the thing is like, I need a pram to put my baby in and yeah, I'm just going to have to buy it one way or the other. And so the idea of Affirm was and is and it's worked amazingly 15 years in that what if there was a third way where what if you could have the same transparency and responsibility and clarity of a financial decision with a pay-over-time product that you do have with a debit card. So, what if we added the idea of I want to pay for this over time, but I don't want it to revolve and I definitely don't want to be confused as to when I'll be out of debt. Essentially turning every transaction into a simple plan. Pay for my baby pram for over 6 months, let's say $100 at a time, doesn't break the bank. Exactly 6 months out, I'm done. That's it. Not revolving. I'm not paying any more interest or anything like that. And as we sort of described the idea sort of thought well like if you're going to do it right how about you build it so that there is no revolving possible there's a fixed schedule only that every transaction is pre-priced if you're paying interest you know exactly how many dollars of interest you'll ever pay even if you take longer that can't change that shouldn't change and if you're late there shouldn't be any late fees like you should just be motivated to pay us on time because if you take too long and you're late all the time maybe we won't lend you next time. So, it's sort of almost like a too simple, too black and white a way to lend money as an alternative to credit cards, which is a very long way of answering the question. But, it is available now at three-quarters of all e-commerce checkouts in the US and Canada and rapidly expanding into UK. And we've announced we're going to go to a bunch of European countries and there are plenty of competitors to do the same thing. But we were kind of the first I think there were some obviously logical and spiritual predecessors to this idea but we sort of purified it down to no fees, no revolving, simple schedule, everything is pre-priced, everything is super transparent and this year we'll do almost $50 billion of these transactions. So it's worked out.

It seems to be working. We publicly trade, quite profitable. Have been profitable for a bunch of time. The last 10 quarters we grew 30 plus percent year-over-year or faster. So, it's like it's both very big, growing really well, still never charged a penny of late fees, never charged a penny of revolving interest. So, we're still true to the idealistic nature. And so, as I was describing the product, I talked to a bunch of banking people who laughed at me like, 'Okay, dude, you don't get it. You've obviously never lent money for a living. Late fees is where the profit is. Half the profit comes from late fees. So, like, you just cut your profitability opportunity by half.' So, putting that aside, if you don't revolve, what are you going to do when people take too long to pay you back? You want them to take forever. You want them to make minimum payments so the principal keeps being big and then interest will compound into principal. Be amazing. Like, yeah, all that sounds crappy. Like, none of this sounds transparent. None of this makes any sense. And people in Silicon Valley who generally speaking don't need these services don't get just how significant the cost is on your regular consumer that doesn't have a seven-digit salary, etc. And so as I was sort of trying to raise money for this idea, I would talk to people, you know, VCs and they're like, I don't know why why can't they use their platinum AMEX? Like they don't have a platinum. Like, yeah, like why don't they get a platinum? I'm exaggerating, but only slightly.