In the long run and in the short run, culture is the only competitive advantage that any human organization has. So there are certain things that will change with scale but they're not necessarily culture dependent. I remember the early days putting a million customers in five years as a goal thinking it was the most absurd impossible goal and we got a million in two years and then we put 10 million as a goal, 100 million customers that said it's impossible, it's impossible and here we are.
Hello and welcome to new videocast. My name is Gilead Milo, the CFO of Nubank and I'm very pleased to introduce you to David Velez, our founder and CEO. Today we will be talking about corporate culture and the long-term plans of Nubank. David, welcome.
Thank you, Lago. Thank you for inviting me.
So, the first question is, look, academic research indicates that corporate culture drives business performance, but culture is very hard to quantify and to measure. So it may be one of the attributes of a company that is most overlooked by all of our external stakeholders. Do you agree on the importance of culture and how do you describe the culture at Nubank?
Yes, I totally agree the importance of culture. We are big believers that in the long run and in the short run culture is the only competitive advantage that any human organization has. It could be a country. It could be a sports team. It could be a family. Culture is the group of formal and informal behaviors and beliefs that enables a group of people to work together, collaborate, create, build, and innovate. And so we have been big believers that ultimately especially in an environment like this one, customers actually consume culture. Ultimately it goes beyond customers buying products or customers consuming whatever the company does. Culture brings people. People create products and products bring customers. So at the end of the day, everything that consumers and bring consumers to a company and everything that allows a company to win is a manifestation of all of those beliefs and all of those different elements that create a strong culture in Nubank.
And how would you define the Nubank culture? What are the main elements of our culture?
So we define our culture based on five big elements. The first one is we want customers to love us fanatically. That first element is the why we exist as a company and it's also our business strategy. When we think about how we win in a market that is extremely competitive, we think that we win in the long run when we make customers love us fanatically. And then we have another four elements that then explain how we execute the strategy which is we're hungry and challenge the status quo is a value around challenging conventional wisdom. Challenging consensus both consensus externally and internally. Companies that grow and have some success become very entrenched in the way they do things. So we need to become continuously flexible to external challenges realizing that we don't have all the answers realizing that problems require humility and being willing to be wrong. And so we actively ask our team members to challenge the outside knowledge but also the inside way. So that's hungry and challenge the status quo. We're owners, not renters. It's a value around how we want to operate as a company. We want to see everybody being part of the same team. We don't like those divisions of the owners and the employees that in a lot of the companies create a certain level of combativeness where it generally is a view of a zero sum game if the owners make more money the employees make less money. This is such a big opportunity that there is opportunity for everybody to win and we exercise that value of ownership through both actions as well as compensation where a big part of our compensation is through long-term restricted stock units. We're smart and efficient. We see ourselves fundamentally as a technology company at heart. We have a mandate to be efficient with the resources that we have. The scarce resources are our capital, our energy, our time or our share of mind. And so we have to be efficient about how to use those resources so that we can pass that to the end consumer and make consumers love us fanatically grow by charging less from consumers not grow to charge more and we build strong and diverse teams. This is a value around we're a company of teams of strong teams. We're not a company necessarily of big individuals. There's nothing really you can do inside Nubank by being by yourself. You need to be able to collaborate with people and you also need to embrace diversity. Diversity of experiences, of point of views. We seek to create an environment where a lot of very different people get together on a table are able to debate are able to vehemently disagree and ultimately there's a meritocracy of ideas where the best idea wins. So those are the values of the culture and I think ultimately those are kind of the basis for the way we make decisions, the way we build products, the way we talk to customers.
And David, it's super interesting to see about those five elements of Nubank culture. But you often see in many industries large and small companies displaying very different performance in the long term. And some people argue that culture is the number one reason why performance deviates across similar companies in the long term. Do you think that those five elements of our culture are long-term moats that we can defend sustainably?
Absolutely. I mean I think these five values we basically defined word by word since the very beginning of Nubank and in 11 years we have really not needed to change because these are values that are very philosophical in nature and that explain internally how we can operate. They have nothing to do with they're not scale dependent. A team of 20 people might have difficulty executing these values. A team of 8,000 people might have it easier if you have clarity. So I think they really very much scale with size. I think that the most important part needs to be ultimately that these values are real that they drive decision making. When we have difficult decisions to make that generally are inconvenient that we as managers of the company we go back to these values and we show the teams that these values are for real because the fastest way to lose those culture is when you say one thing and you do something completely different. Culture is what you do. Culture is not what you say. And so there's got to be a significant integrity between actions and words. And we're very very careful about making sure that the communications we have with customers, the products we define, the way we talk internally are consistent with those values. I'll give you one specific example. A couple years ago, we had an analyst that came and said, 'Hey, we're suddenly making more money per customer. Our cohorts were tilting up very fast.' And we went and took a look and see what was happening. And it turns out that there had been a bug in our system and we had stopped sending a reminder email to our customers since the beginning. Being we care about that value. We remind the consumer almost every day to pay on time. We don't want them to revolve unnecessarily. So we remind the consumers and only the ones that really need to revolve will end up revolving and pay a late fee. So for us having that consumer value was very easy to know what to do. Not only we had to go back and put that email immediately, but also go beyond and send an email to all our customers and say apologize for having stopped reminding them to pay on time and reimburse that fee. Now, here some people might ask, well, what are you? Are you a non-profit? You're not going to make that much money anymore. How is this consistent with long-term value creation? And our view is they're actually completely consistent in the long run. In the long run, that customer that has just received an email from Nubank apologizing for having done something that they didn't need to do and reimbursing their money will say, 'Wow, this is a fundamentally different experience.' And we have just earned a customer for the next 50 years. So that trust is extremely valuable and in the long run, sending that reminder email might make us make less money in the short term, but will help us have a customer working with us for a longer run. And that's how that value and that strategy are completely consistent with each other and with maximizing for shareholder value in the long run.
Now super interesting but I was very intrigued when I joined Nubank about five years ago when I learned from you that you and the founders of Nubank were very intentional in defining and contracting the culture of Nubank on the very first day on which Nubank was founded. It's something relatively atypical. Why have you done so?
Yeah, that was one of the key lessons I brought from my previous job at Sequoia when I got to see some of the best organizations in the world pitching Sequoia and I actually got to see Sequoia how to operate and it was such a different way to operate that it created a lot of curiosity around wow what is really driving the performance of an organization like Sequoia and a lot of the other startups and there was a saying inside Sequoia that the culture of a team is built by the first 10 and 15 employees in the first six to eight months. Those months are very magical because those sort of implicit or explicit ways to operate will get built and they get built either strategically proactively or they will get built reactively and almost without real design. So we had the opportunity to start with a white sheet of paper design the culture that we wanted to have as a company for the next 50 years. It was a collaborative enterprise where the first 10 15 employees participated actively and debated what is this culture that we should create. And I often say that a good example to explain why it's such an important part is I've heard often from some entrepreneurs that say well I'm just too busy running my company to worry about culture when we become our unicorn then I'll worry about that and it's almost as saying I'm too busy to educate my children by the time they turn 18 I'll worry about that. It's like it's too late right? They educated themselves. Somebody educated them for you. And so that's why in the early days or the early years in your family or the early days for a sports team are so critical because you get to define a lot of those behaviors and then changing behaviors become extremely hard. Human organizations have a lot of inertia and so that's why culture transformation is so hard. So anyway, I think that was something that we did very well that I'm proud that we took very seriously at the beginning and the benefits of that investment early on keeps paying off for us.
And those were the very five culture values that you've just described to us, right? They haven't changed over the past decade.
They haven't really needed to change. We tweaked a couple of words as we grew, but ultimately they are effectively the same thing.
Great. And David, you always mention that we are on day one. In fact, you often mention to us at Nubank that we are in the first minute of the first half of the game. Now, you've been telling this for us for a decade now, right? So, how do you make sure as we continue to scale throughout the next decade that we preserve and maintain the culture that we have?
