I think there are a few things that are important for accumulating wealth. The first and perhaps least talked about, because I think every entrepreneur likes to have the hero's journey where they are the center of success. But I think when I look at my circle of friends, entrepreneurs, and we're just talking among ourselves, many of us recognize that we were very lucky to have surfed the right wave. I think building a company and making money has a lot to do with surfing. It's like, you can keep pedaling, rowing, rowing, rowing, but if there's no wave, it's not going to happen. But then you catch a wave and you paddle on it, you go very far. To give a very specific example, let's start with an example of Jorge Paulo Lemann, analyzing his story a bit. Jorge Paulo, as you know, is one of my mentors and we are very close. So among my mentors, the people I admire most in the world, I think a lot about what he did right and how he became so successful. I think there were two very important waves that Jorge and his partners surfed. The first was building Banco Garantia, which was the beginning of the financial market in Brazil. I can't speak for everyone, but many people who were there at that time and worked in the financial market at the very beginning made a lot of money. You had to work hard. I'm not saying everyone would succeed, but those who worked hard and surfed the wave of the early financial market built Banco Garantia and all that, and did very well. The second wave they surfed, and still surf today, is the wave of LBOs, these leveraged buyouts, which is the idea of buying companies using debt guaranteed by the company itself. What many people don't know about this market, which is now much more mature and hard to do from scratch, is that often when you buy a billion-dollar company, you don't actually need to put up a billion dollars. You can put up 300 million and have 700 million in debt. This is very common and started more or less in the 80s and 90s, and really took off. There's a guy named Mike Milken who created something called junk bonds in the US, which made this take off. So everyone who took advantage of this financial innovation of junk bonds, which were a type of debenture that paid higher interest for companies, did very well. Debenture is a loan to a company, issued in the public market, so you can buy a debenture from Gerdal, etc. Everyone who surfed that wave did very well. If I look at my own story, I also surfed some waves. The first wave I surfed was when we started Pagar.me, which was the first company that worked out. It was right at the beginning, when the Brazilian payment system was opening up. Before, it was only Cielo and Rede, nobody could enter the market.
Exactly. Actually, when this started, to accept Visa you had to go to Cielo, to accept Mastercard you had to go to Rede. So it wasn't even a duopoly, it was two monopolies. And then eventually both accepted each other's cards, and the Central Bank of Brazil said, 'No, stop this nonsense, we have to let more people compete to make it cheaper for merchants.' And without knowing it, and by a lot of luck, Pedro and I started Pagar.me right at that time. And because of that, the company ended up being much more successful. If we had started a few years earlier, it probably wouldn't have worked, and a few years later, it probably wouldn't have worked either.
André Street himself created Braspag, which was a kind of Pagar.me that came a bit before your time, maybe, or not?
Yes, but it was several years before. So if it were a few years earlier, Braspag already existed. If you were to do the same thing Braspag did, there wasn't much room. But Pagar.me was different. What did Braspag do? Exactly, man.
Braspag did the following: imagine that when they started, I'll release my podcast with André. I don't know if it will be out when you release this, but we recorded over 5 hours. It was the only podcast he ever did.
So I'll have the whole story in detail. But Braspag, imagine that when e-commerce started, Rede and Cielo didn't have an API. They had this thing where you had to plug a cable in and then process it. So for e-commerce businesses that wanted to process online payments, Cielo and Rede let some players, like Braspag, be the technology API front-end to connect to them before they had their own API. And because of that, they swept the e-commerce market and had, I don't know, 80% market share in e-commerce.
So Pagar.me was different, we were a much more integrated business. And it was because of the timing of this opening of the acquiring market in Brazil that the business worked out. Obviously we worked hard and had a good product, but the wave helped a lot. And when we arrived in the US with Brex, the fintech wave helped a lot too. Stripe and Square had started a few years before and were starting to do very well. So there were a lot of investors wanting to invest in fintech. We already had the experience. And there was another very interesting thing: there was a company called Plaid, which I also did a podcast with the founder, that started a bit before and allowed us to see our clients' bank accounts in real time. That wasn't possible before.
Which is like the open banking that happens in Brazil today.
Like open banking that happens in Brazil today. And that allowed us to give credit by monitoring their bank accounts. Before, you couldn't do that. Even American Express couldn't do it if they wanted to. And that was one of the things that opened up opportunities for us again. We did well, we did the right thing, we got many things right, but the fintech wave helped a lot. And today it seems cliché, but if you're not taking advantage of the AI wave, you're doing something wrong.
