153: An Honest Conversation w/ Affirm CEO Max Levchin

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22:01Robert Croak:We are super proud of the Rich Habits Money Map, what we've built in partnership with GetSequence.io. So please go check it out. Go use it. It is going to be a game changer for you. All right, Robert, back to our interview with Max.

22:14Austin Hankwitz:So that's a great lead into my next question. One of a firm's biggest differentiators is that every transaction is underwritten individually rather than extending an open-ended revolving line of credit like legacy banks do with their credit card purchases. So why was it so important to take the harder path, specifically underwriting every purchase instead of relying on late fees and hidden charges to drive revenue like the credit card companies do today? A couple of different reasons, actually. So one of the things I realized at the very beginning is a lot of the fees and a lot of kind of the stuff that we all have come to hate about credit cards is actually there because the provider doesn't get a chance to say to a consumer, hey, wait a second, that's a bad idea.

22:58You're borrowing money. Maybe you really won this couch or this bicycle or whatever it is you borrow money for, but it's just a dumb financial move. You're making a mistake. Put that card down. Let's rethink this. In part because these cards are so convenient. Like I touched on, you just swipe the plastic and it happens. There's nothing to sign, nothing to really sort of upfront, nothing to think about. That creates for a wonderful engine of the economy, if you will. But it sure allows you to overspend. So one of the key early design criteria was what if we made purchasing conscious? What if we made you ask yourself, is this a good idea?

23:29And what if we gave ourselves a voice? That would allow us to make it cheaper for both sides. If you get into debt, if you get into a purchase that you shouldn't have, we should lower things like return rates because you might not be trying to get out of a thing you shouldn't have bought in the first place. We will definitely lower defaults and delinquencies because we would tell you we understand a financial situation reasonably well. This seems like a dumb move. Like, at least let us ask you more questions. So sometimes if you use a firm, like, really extensively, you'll see we won't just say, oh, cool, okay, you know, let's go with this transaction.

23:58We'll say things like, hmm, this seems like something we need to learn more about. Can you please tell us your income? Or can you please let us see into your bank account so that we can understand your cash flow better so that we can tell you whether it's a good idea or a bad idea? None of this is available in credit cards because the transactions are literally one touch and you go. And so we wanted this interaction to give ourselves the right to communicate with you and to ask you sort of like, is this a good call? That is also why our delinquencies and defaults are so much lower than the standard credit card world, because we do have a chance to tell you, wait a second, this is a bad move.

24:33We're going to say no. If you want to do this thing, you should make a bigger down payment. You should maybe save up. Maybe you just shouldn't do it at all. And it seems like a exactly kind of thing a consumer product designer would be like, oh my God, you're telling someone no. It turns out that people love this. They really enjoy the interaction of, no one likes to be told no, but if you're like, sorry, it's a hard no, your card's been declined versus, hey, here's kind of why you should reconsider. By the way, there's probably a way to come into this item that you want, but you should save up and make a bigger down payment because then you can afford the monthly payments.

25:06And so that was a key design criteria. As we thought of this, we realized that we wouldn't need late fees. We wouldn't need all the crutches because they really primarily exist to cover up for the, oh man, we should have never given you a line of credit that long. And that's why it works as well as it does.

25:22Robert Croak:That is fascinating. I mean, I've never used a firm. I've never done the buy I now pay later stuff, but I very much understand installment loans. I understand how you guys, right? So, but I've never had to like, you know, do some sort of an installment loan to buy a refrigerator or something. I normally just pay cash for stuff like that, right? So like hearing for the first time right now that that's the way you guys approach it. I know you underwrite every purchase like that, but it's, how have you been able to scale that? You mentioned 40 million. I mean, is this just AI on steroids that you guys are sort of underwriting transaction by transaction?

25:52Robert Croak:That's right. And every transaction is underwritten by machines. No humans are involved. we actually find that we are much better as software engineers in terms of underwriting. And by we here, I mean the industry. And so the throwback to the 1950s where a fat banker shakes your hand and says, you sort of look like a good risk because you look just like me. Like that's where all the discrimination came from. People are like, oh, you know, I don't want to lend to someone who doesn't look like it's from this neighborhood. It's like that was a great thing that we left all of that behind. Machines are really, really good.

26:21They're also very good at saying things like, I will not consider race. I will not find out what race you are. I'm not going to guess what race you are because it's an illegal basis. Shouldn't use that. Can't use that. And so it's much easier, actually, if you have the capacity to build these models and train them to build a really good, very fair model that will pass your fair lending exams and all the sort of usual regulatory hurdles that you have to clear if you lend. So we have a giant infrastructure that does. We've been an AI company for a lot longer than AI companies were cool. And for a little while, I was bothered by the AI revolution.

26:51I've been on the forefront of this thing forever. And it's obviously, you know, this particular tide is lifting all the boats and has been lifting us for a very long time. But it's all entirely machine driven. We have a large group of AI and machine learning engineers that are extraordinary. We continue building completely different kind of models that the industry has never seen before and deploying them. And we do it responsibly. So we run it right alongside older models and make sure that the new model approves more people with better financial results and doesn't discriminate and all that good stuff.

27:23And so it's probably the very core of what's happening at a firm is just a bunch of math nerds who are obsessed with credit and also have this like extremely clear point of view on what isn't isn't moral. And that's allowed us to build a pretty, pretty great company.

27:38Robert Croak:That's incredible. And, you know, it really kind of bodes to your own experience as an immigrant. Right. You were talking about how specifically you thought that the legacy credit systems might have failed you in the past, despite being financially responsible, didn't fit this perfect mold of being from the right neighborhood or looking or firm handshake, whatever, right? So like, let's just maybe zoom out. Can you tell us about that story and how it ultimately led you to founding Affirm? So before Affirm, before the current thing, my current thing was PayPal, which I co-founded basically straight out of college.

28:10I got to the U.S. just a year and a half before college. So I was completely sort of fresh immigrant. I came from USSR at the time. And so my exposure to capitalism or American credit system was, let's say, non-existent. So if I got to college, I got my first credit card on campus. That was great. I didn't make my minimum payments because I didn't read the fine print, but who does? You know, you're busy doing homework. And 90 days into not making any payments, I got an extremely nasty notice saying, hey, like one of your credit cards, not going to work anymore. Two, you owe us$600. so get on it.

28:44And by the way, your credit score is trashed. I'm like, well, I can go earn$600, which I didn't pay it often. Didn't think of it twice. Fast forward six years. We just took PayPal public. I was independently wealthy and I decided that it's time to upgrade my Honda to a Mercedes. So I flew to LA with my then girlfriend, now wife, went to a car dealership and said, I'd like to buy this really cool looking Mercedes convertible. And I said, great. We're going to talk to the finance department. They're going to get your car loans. It's going to be great. Five minutes later, said, actually, you can't buy this car.

29:13In fact, young man, you should get out of here. And I was like, wait a second, what's going on? So, well, we looked up your credit score. And even though we know your name, because PayPal just made the rounds of news in LA Times that this big spread on, you know, PayPal founders made good, yada, yada, yada, your credit score basically says you're a deadbeat. We don't know what you did to yourself back in the day, but with a FICO score of 600 or 500 something, you can't buy this car. Like, you know, maybe you can go rent one. And so I was embarrassed to like the color of my face was several shades darker for a couple hours.

29:47And I eventually had to figure out a way to pay cash for the car. And that stuck with me where the unfairness, the fact that the mistake I made in college, which I rectified very quickly, was six years ago. And my credit score hadn't recovered. And I look like a total idiot in front of a girl I was trying to impress at the time. And anyway, so that sticks with you for a lot longer than you might expect. Another five or six years went by and I would still look up my credit score, which I became very conscious of. And it would still not update. And it would still be like, yeah, you know, you've never been late in the last 10 years, but yeah, you're not that good of a risk.

30:23And so after PayPal, I was hanging out with one of my earliest compatriots there. And he and I just got into this long debate of like how he was very aware of the embarrassing car purchase story. And so we sort of got talking about like, why didn't we bring the kind of math expertise and willingness to go the extra mile and figuring out human behavior through AI and modeling, which we did at PayPal, by the way, plenty. Why don't we bring that to credit? And we're sort of like, we don't really have a good answer. Maybe we were too young, didn't understand credit at the time. We were just too focused on payments.

30:56And one thing led to another, he and I co-founded this company. So that's the full story of a firm. There's no better story and no better motivation than the personal thing that sits in the back of your head and still embarrasses you.

31:06Austin Hankwitz:That's just an incredible backstory because you think about it from the experiences I've had as an entrepreneur for 35 years. I can have a great year, make all this money, and they're like, where's your W-2s when I go for a loan? Where's this? Where's that? I'm like, I own my own companies. I make money. It's not traditional income. And they frown on you because the credit system to me has been kind of broken for a very, very long time. So I love that story and the fact that you took a problem, your own personal problem, and then you made this great company to help so many other people deal with the same issue.

31:39Austin Hankwitz:Because I know I've dealt with it in the past, not in many years, but it's definitely an incredible journey. And thank you for sharing that before we go into the next question. One sort of asterisk or a postscript into this thing. Part of why it took me so long is when you're young, you don't have the empathy for others as much as you do 10 years later. A firm started when I was in my late 30s. And in my early 20s, when this happened, it's like, it's just me. This sucks. Like, this was so embarrassing. But obviously, I'm the only person to ever happen to. In my late 30s, I knew enough people who had a version of the story because I would get triggered when somebody would say, I got declined for this.

32:14Or I was told my rate's going to be that. I'm like, oh, let me tell you my story. I was so angry. So by the time I got to it, I was like, oh, my God. Like, I know all these people. And this is a terrible, broken system. I got to do something.

32:25Robert Croak:That was Max's villain arc. and that's why you got the arc on the Affirm logo, huh? Actually, the arc and the Affirm logo was not my idea. For years, I was designing Affirm logos and it turns out that I'm a bad designer. I think I'm an okay product designer, but visually, I got nothing. And at some point we hired someone who's really good and he said, you know, Affirm is like a warm rainbow cover that keeps you safe and makes you feel good about money. That sounds great. Like, I'm going to add a rainbow. Sounds good to me. So would you say, Max, that that experience is what still energizes you today about a firm's mission?

32:59Robert Croak:Or is it maybe the future of what a firm could turn into in 10 years' time? We've got AI, you know, a couple years now into this, several years into it from your perspective. But what's making you wake up every morning, say, I need to go turn our 40 million customers into 400 million? I think the core mission is still very energizing. You can probably tell I get fired up thinking about it. This isn't fake. I get out of bed and think about top 10 things I need to get done that day. and get stressed out. And they're like, wait, I know why I'm doing this. This is really important. Like it was important to young me.

33:31It's important to old me. And I think it's important to a lot of people worldwide. So that motivates me. And that's just in and of itself, great fuel. The other thing, and I think it's really true about old businesses and particularly true about payments businesses. It's sort of truly fractal. Like every time you look into a thing, an opportunity or a problem and you start solving it, you make lists of like, oh my God, if I ever have the time, I'll get to that other thing because that's even more embarrassing or even more horrifying. And so the motivation, just from the entrepreneurial perspective, like I have this long list of things we're supposed to fix in this industry that we just got around to fixing credit cards, but not even that fully.

34:07There's all these other things credit cards are used for that we're not being used for. And so the list, the to-do list of things, products to build, things to ship is only growing. Like I have no shortage of, oh man, I just had a little bit more time or a few more engineers. And so this AI productivity age we're hitting now is actually an incredible boom because I can imagine shipping more stuff faster. That's what motivates me. And it's exciting to be alive. It's exciting to be able to build software with plain English instead of having to train people how to write code. And all of that is very powerful.

34:39But the core mission is really the thing. And it's definitely not limited to credit card better alternatives, not limited to purchasing. Financial products are stressful. I was trying to find a way to come up with a tagline for Affirm over the years. And I sort of settled in on this notion that you use Affirm when it matters to you. And of course, money just matters all the time. And for rich or poor, and apropos of the name of the podcast, people don't like thinking about money because it feels stressful. If you have a lot, you need to put it to work and you don't know where to go. You don't want to lose it.

35:11If you have very little, you're stressed. We're going to get the next paycheck. How are you going to afford the next thing? How are you going to feed your family? But there's not a happy zen moment thinking about money for just about anyone. And that isn't how it should be. You should be able to say, I feel great. I feel abundant. I feel like my goals are being met. I know how I'm going to plan my next financial move. I will get where I need to go with my financial goals in time. I'm not going to run out of money. I'm not going to feel like I'm under deploying my money. And that is sort of the happy vision for the long-term firm.

35:42We want to be there for you, making you feel great about your money. instead of stressed.

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36:47Austin Hankwitz:Paid for by public investing, full disclosure in the podcast description.

36:51Robert Croak:All right, Robert, let's now wrap up our interview with Max.

36:54Austin Hankwitz:You've spent your career at the intersection of computer science, mathematics, and consumer finance. So what advances in those specific fields are enabling the next evolution of consumer financial products that simply weren't possible before now that we have AI and what's being built right now that's blowing your mind? So I think the, obviously AI sort of, it's almost impossible to overlook at this point. And AI, by the way, is a very squishy term. I enjoy beating up on the various squishiness parts of it because, you know, it used to mean one thing and now it means another, but sort of slightly more formally statistical learning, which is what Affirm was built on with our superior underwriting system, is what allowed us to very quickly, without human involvement, make decisions on whether something's a good financial decision or a bad financial decision, make it cheaper for you, make it easier to access, all of that.

37:46And so that's been our go-to for a very long time. And we continue to see incredible results. The ability to put that into human language with large language models and kind of the newer flavor of what people are now calling artificial intelligence is really powerful because it takes a lot of the, but I still don't understand or help me navigate this change or what do I do next out of the hands of humans who are busy and sometimes have bad days and sometimes can be frustrated or not understand you and puts it in the hands of a machine that can be designed to always be thoughtful. And there's always going to be human in the very core of the system because we're not yet at a place where AI will develop its own personality and its own sense of taste and fairness.

38:32And so you have to have humans involved, but being able to just give access to easy to understand, easy to communicate in language of your choice with a metaphor of your choice for every human on earth as they access money, I think is going to be very, very powerful. And so I'm very excited about LLMs and natural interfaces. And we're probably going to go through a bunch of iterations on that and we'll be there for it. But just being able to talk to your money is a profoundly important idea that just wasn't possible five years ago and is now absolutely possible.

39:01Robert Croak:That is fascinating. And I'm so grateful that there are people on this earth like you who are building and doing the good work of like helping people understand and have that healthy relationship with money, right? Have that, I don't understand this. Why did I not have the ability to make this? You know, why can't I do like, well, here's why. Here's the cashflow. Here's your pay, like all this stuff. I think that's so, so powerful. Max, again, incredible conversation, my friend. Thank you so much for joining us. Your focus on transparency, incentive alignment, and responsible credit really challenges how people think about money.

39:35Robert Croak:And we all know our audience is going to walk away from this episode seeing credit through a much more thoughtful lens. So if people want to learn more about Affirm, follow you specifically, probably recommend LinkedIn. But where can people learn about Affirm and what you're up to and the products that you're shipping on what's probably a weekly basis at this point? It's all accelerating. Definitely find me on LinkedIn. I'm there. with sort of longer form disquisitions on what I think matters. I'm fairly active on Twitter, although in my copious spare time, I have at least two other passions that I'm constantly talking about, and that's road cycling and coffee.

40:10So be ready for some unhealthy dose of those two topics right next to consumer finance and computer science. But I'm left in on Twitter. I think I'm left in on LinkedIn. At Affirm on Twitter is the official channel. That's where we talk about. But just today, we announced that we are adding more than 10 % more approvals, we think, with a deeper cut at cash flow underwriting using AI. Like super excited about that one. And so you heard it here, but you could have heard it there first. So follow us on social media. We're just as transparent there as we are in our business.

40:41Robert Croak:Thank you so much, Max. We really appreciate your time. Can't wait to have you back. Thank you. Robert, that was our third conversation with a billionaire on the Rich Habits podcast, which is mind boggling to think, right? Harley Finkelstein, then we had Reid Hoffman, and now we've had Max Levchin, which Reid and Max both co-founded PayPal. And now they're on the Rich Habits podcast, which is so fun. But, dude, I just, I feel like talking to billionaires and people that are building businesses, I mean, a firm right now is a$25 billion business. It was probably$50 ,000,$60 ,000,$100 billion back when it IPO'd.

41:12Robert Croak:But it's just, I feel like I get so excited, right? It's so inspiring to see how one thing, one instance in this man's life, not being able to buy that Mercedes-Benz after selling PayPal, getting probably 30, 50, 100 million dollars deposited to whatever investment accounts he had after the acquisition of PayPal to eBay and being like, wait, what? I can't do this. Okay, cool. I'm just going to go disrupt the legacy credit card system in response. Like, it's just it's so cool how these people think. And I'm so grateful to be able to have incredible people like Max Lubchin on the Rich Habits podcast.

41:47Austin Hankwitz:Yeah, I mean, let's look at it from the audience perspective. We bring on these absolute rock stars, these billionaires and multi-billionaires and people that have built meaningful household name companies. And that's what makes the Rich Habits podcast so special and different is, you know, a lot of people bring on famous people to their podcast, but we're here to bring as much financial and business value as possible. So having these conversations to me is just the coolest thing I've ever gotten to do in my career to do this with you each and every week. So what a great episode. And I feel like I could just run through a wall right now.

42:24Austin Hankwitz:It's so crazy.

42:25Robert Croak:I will say, too, and after having an honest conversation with Max about how a firm works and what they don't do and what they do and like how just how they're underwriting these transactions one by one like that. It's just, I'm, of course, I'm never going to encourage someone to take on, you know, high interest debt. And I guess theoretically, a firm, I guess it depends on the implied interest rate of your loan, right? But it's like, after this conversation, I'm no longer bucketing buy now, pay later, specifically a firm. I can't talk toward Klarna or these other ones, because, right, they talked about, you know, no late fees and 0 % and all this stuff.

43:00Robert Croak:But I'm no longer going to be bucketing a firm in the same conversation with credit card debt. They're just they're doing something completely different. And I really think they're fighting the good fight and they're trying to provide credit and assistance to people that need credit whenever they can in a very non predatory manner. I think credit cards are predatory. I agree. Like, you know, he signed up for his first credit card. He probably got a slice of pizza. Hey, sign up for this credit card. Give me some free pizza. Right. It's like and then he got bamboozled and owed 600 bucks because they weren't transparent.

43:32Robert Croak:And so it seems like Affirm's fighting the good fight. And I really want to encourage our audience to think about Affirm. Again, I can't talk to these other buy now, pay later companies because I don't know. I think he mentioned that they started with the no late fees, no interest, and other people have kind of followed suit. So again, Affirm specifically, I'm no longer looking at them as any sort of like predatory credit card anything. And they're fighting the good fight. And I want to encourage our audience to think the same.

43:55Austin Hankwitz:Definitely. I am of the same ilk now after that conversation and a totally different world and totally different opinion from me as well on Affirm moving forward.

44:05Robert Croak:And again, Affirm's not paying us a dime to say that. Affirm, like we literally, like this was a, hey, I wonder if we can get the CEO of Affirm on our show. And we did. Like that's how this is. So I don't want you guys to think we're over here just getting bought and sold by anyone that's throwing us cash to be on the show or whatever. It's like this was our doing because we've had so much headline news and interest and phantom debt by now, like whatever's going on. And I think this was a really cool way for us to better understand how companies specifically a firm in the buy now pay later space are operating and what they do differently than the legacy credit card issuers.

44:39Robert Croak:So Robert, let's now jump into the Q &A section of the show. Our first question comes from Sanjay P on Instagram. Sanjay says, Hi, Robert Nostin, a longtime listener from Canada. I love your show and I've been sharing it with my friends and family. Sanjay, thank you so much for sharing the episodes with your friends and family. That's what we ask everyone to do if you enjoy the show. Sanjay says, I got a quick question. My spouse and I are 40 years old. $700 ,000 in a self-managed retirement investment accounts, RRSPs and TSFAs. We have$800 ,000 in equity in our principal residence. We also have an investment property that is positive cash flow and about$500 ,000 of equity in that investment property.

45:22Robert Croak:Oh my goodness. Sanjay says, my question is, we have three young kids and life is getting expensive. To help with monthly cash flow from extracurriculars and trips, what do you think about taking$100 ,000 of the TFSA money, investing it into Canadian dividend ETFs so I can start generating$1 ,000 per month? I'm trying to balance living in the moment while the kids are young versus retirement. This is a really good question. How I understand this is like you're trying to take money out of a retirement account to then invest it in such a way, call it NEOS funds, that it's going to spit off$1 ,000 a month in distributions so that you can then support these extracurricular activities and trips you want to take with your family.

46:06Robert Croak:In my humble opinion, I would not cash out a retirement account. Instead, I would consider selling the investment property that has$500 ,000 of equity in it. If you sold that investment property, let's say that$500 ,000 of equity now is yours, and you took maybe$100 ,000,$200 ,000, or$300 ,000 of that, parked it into NEOs funds or some sort of high-income, tax-efficient, dividend-focused ETF in Canada, spit out$1 ,000 to$3 ,000 a month in distributions. I think that is a much better approach. Now you've got this$200 ,000 that you can invest into the self. Yeah, why don't you do this? Why don't you take$300 ,000 of this$500 ,000, put it in a taxable brokerage account.

46:48Robert Croak:So now you have $300 ,000 invested over here,$700 ,000 invested in your retirement accounts, totaling$1 million now invested in the stock market growing for you. Stock market went up 20%, right? NASDAQ was a 20 % return in 2025. The other$200 ,000 of the$500 ,000 can now go toward these dividend-focused ETFs to come up with another$1 ,000 or$2 ,000 a month depending on what you do. But it sounds to me, and Robert, this is what I want you to talk about. It sounds to me like you're trying to borrow from Peter to pay Paul in a sense that maybe if you did a really detailed budget or maybe you pulled back on the frivolous spending over here, maybe you're just a little bit more intentional with your money, you could find that extra$1 ,000 a month that you're trying to come up with.

47:39Austin Hankwitz:Yeah, to me, my brain automatically goes to when I hear a scenario like this, are you trying to decrease depletion or increase cash flow? That's where my brain goes. Because in this instance, you already have a lot of money working for you. And I don't know that taking money and possibly paying penalties from these TFSAs makes sense to then move into a dividend ETF that may not give you all the returns that you desire. So I think Austin's play is the best play because at this point, I feel like you're doing exactly that, robbing Peter to pay Paul. I would reevaluate, decide what you need. Do you want growth more or depletion less or both?

48:21Austin Hankwitz:And how to achieve that given what Austin laid out, I think is the best plan.

48:26Robert Croak:I mean, you're 40 years old, right? I'm assuming your spouse is likely staying at home with the kids and you are out doing your career, are earning money, putting money aside and making sure that you guys are kind of living life here. So maybe there's another career play, right? Maybe there's a path to earning more money as well as on top of these investments. So there's a couple of ways to think about this. But before you make any drastic changes, my biggest piece of advice for you is to really lay out that honest, detailed budget, understand where your money's going. And maybe you find$600 a month that was bleeding into other things.

49:01Robert Croak:Oh, I got this money now. I'm capturing it and being more intentional with my spending. And I really only need 400, which means maybe I just work one weekend at this job, or I drive Uber for three days a week. Maybe you don't have to do a drastic change, like selling an investment property, pulling money out of retirement, like doing the things that you're alluding to here, Sanjay. So really great situation to be in. I think you got some flexibility, you got some options, and we're rooting for you, my friend. Our next question comes from OT on On Instagram, OT says, hi, Robert and Austin. I'm a big follower and I've been following you guys since April of 2023.

49:32Robert Croak:I've done everything you've suggested. But with all of the headline news now that the U.S. is going to collapse because of debt, I'm concerned if it continues to make sense to keep putting money toward U.S. stocks and equities, or should I be thinking of something else? Huh. OK, Robert, what do you think about this one?

49:50Austin Hankwitz:I'm always going to be a buyer of U.S. equities. We talk about this all the time. I think I would not worry so much about the headlines. And if you haven't joined the Rich Habits Network and you're worried about this headline, now is the time to join. Because as we always say, if you're surprised by the stock market, we're not doing a good enough job. So for me, I'm always a player in the U.S. markets. Can you have some international flair? Yes. Do I see a world where we're going to have this big meltdown in the U.S. stock market and equity markets and maybe even real estate? I don't see that happening.

50:24Austin Hankwitz:So I'm not going to flee into cash anytime soon. But again, that's my opinion. And that's what I would do.

50:30Robert Croak:So what are your thoughts on the current, call it, debt situation with the U.S.?

50:35Austin Hankwitz:Yeah, we talked about this last night in the weekly live stream. And that is, you know, we have this K-shaped economy. So I think there is kind of two worlds here. There is the haves and the have-nots and the people that have all the wealth. They're not as affected by the debt as other people are that are living paycheck to paycheck. And so that's why this entire episode is so important. So for me, yes, there are definitely problems with debt, both from a consumer standpoint, but also the U.S. government. So I'm not as concerned with it on a day-to-day or any time soon in the next few months, but it's definitely something we need to keep an eye on.

51:11Austin Hankwitz:But I don't think we're at any situation right now where we have to worry about seeing a total collapse in the U.S. markets.

51:18Robert Croak:I don't think we are either. But I will caveat that with we are on an unsustainable path as a country of borrowing. And, you know, we just saw what's going on and being proposed in California with this like billionaires tax. And well, one, it's caused, I think, you know,$2 trillion or whatever dollars worth of wealth now to leave California because they don't want to go pay this tax, which takes from, I guess, a lot of other taxes that they probably were paying during that period of time. So it was kind of counterintuitive. But on the same token, it's like we've seen a lot of headlines and ideas on let's just tax more.

51:50Robert Croak:Let's let's do these things to generate more wealth for the U.S. government from a revenue perspective. But then we're sort of simultaneously ignoring that we're borrowing trillions of dollars a year. And there's I mean, we've seen what's going on with fraud and these sort of, you know, activist journalist investigations with fraud. Right. So it's like it's not even that we're borrowing so much, but also there's like clear instances of fraud for the money that is being taken in as revenue. So it's like this really weird catch 22 where I feel like the average American is explicitly trying to avoid to pay taxes because one, they think, well, I'm never going to see this again.

52:27Robert Croak:It's like Social Security, right? It's like never going to see this again. It's on a runaway train. And what I do get, you know, goes into the system as revenue for the for the U.S. government gets paid out to people in fraud, which doesn't make sense to me. So like they're kind of bucking the system in that sense. It's a really peculiar place to be, and it's not a healthy place to be as a country. And so, no, I don't think it's going to cause the big collapse that you might be thinking about, OT, but I certainly don't see it as a sustainable path. And we must, as a country, figure out how we're going to move forward.

52:56Robert Croak:And I will die on the hill that taxation, in my humble opinion, no matter if it's a billionaire, millionaire, whatever. ever remember. When federal income tax started, it was only taxing the top 1 % of earners. Now, every single person in America pays federal income tax, right? It might start in California with these billionaires with this private property seizure, but it just, you know, oh, now it's people with 100 million. Now it's people with 10 million. Well, now it's people with 5 million. Oh, if you have over 500K now, you got to pay your fair share. So it's like, it's just a slippery slope of taxation.

53:26Robert Croak:And I would much rather find a solution from the expenses side of it, going into so much debt, having all this money flow out of the U.S. on the balance sheet from the expenses side, then trying to solve for the revenue side, which is taxation.

53:39Austin Hankwitz:I think that's a great takeaway. And for me, it's all about, and it kind of got touched on some with the whole Doge thing and Elon Musk, is getting our government to be more accountable and efficient so then people can have more trust in why they're paying taxes and why we're in the boat that we're in, that's where I'd like to see it start. Because right now when we hear about all this fraud in Minnesota and other states where these people are getting millions and millions of dollars off of taxpayer money and they're not even performing what they claim they were performing as a service, to me it all starts with efficiency and really cracking down on the expenses more so than what the government's borrowing.

54:21Robert Croak:So our next question comes from Neha on Instagram. Neha says, Even with schedule flexibility, I'm exhausted juggling shift work in real estate. I have a government pension, a$40 ,000 car loan at 5.5%, and very little invested in the stock market, only about$6 ,000. My goal is to eventually quit one job, keep my other job, avoid burnout, and still be financially free. So my question is, have I overcomplicated my life by going all in on real estate too quickly? Should I pause and aggressively pay down debt or start diversifying into the stock market so I can build real freedom instead of just accumulating more properties.

54:58Robert Croak:Thank you. I would really appreciate your honest take. So you mentioned going all in on real estate. I don't see too much of like what that means in this situation, but I'm going to try and read between the lines here. So you're probably in your 30s or 40s. You've got a$40 ,000 car loan. You're working several jobs. You're juggling shift work and real estate. And you're just like, listen, I'm getting burnt out. In my humble opinion, I think there's like three milestones of building wealth. The first milestone is I'm going to get a job. I'm going to, you know, as to what we just talked about with Max, use credit to get a better education, transportation to my work, great things like that, owning a home, right?

55:40Robert Croak:I'm going to get a job and do the normal things that I'm supposed to do. Once that's done and you're implementing rich habits to ensure that you're not going into high interest credit card debt, you're investing consistently, you're trending in the right direction, then I think you hit milestone two. This kind of happens after you built your base. We kind of like make that the sort of the checkmark here, which is now I'm going to start to get a little bit fancier, right? And Robert talks about using this as an opportunity to diversify into real estate, small business ownership. Maybe there's other things you can do to speed up your wealth building process.

56:11Robert Croak:And then number three is like people like Max who just like make big businesses and they just scale in perpetuity and they're like huge billionaires, right? I'm very much a number two. Robert's very much a number two. And I think a lot of people can get to number two if they do it in order, right? One, two, three. It seems to me, Neha, that you just jumped to number two and you said, I'm going all in on real estate. I'm going to work as many jobs as I can. I'm going to take on this car loan. I'm going to go not invest in the stock market. I'm going to do whatever. It seems to me like you need to get back to basics, right?

56:40Robert Croak:And so getting back to basics in this situation might mean getting rid of the$40 ,000 car because you can't afford an$892 a month payment. Maybe getting back to basis means you're working two jobs, but the second job you're working at, you're only making 12 bucks an hour. And that Chipotle is paying$18 an hour with the opportunity to make 24 as a manager. And so like, maybe there's a different way that you can optimize your earning, optimize your expenses. So you can find that true 12, 15, 18, 20 % of margin in your budget every single month to start paying down any high interest debt you might have to start building that emergency fund.

57:15Robert Croak:So there's a little bit of breathing you between you and life, maybe to start investing in the stock market, get that base built instead of going all around with these crazy things and the real estate. So for me, I would try and get back to basics if I were in your shoes. Maybe that means selling some of these. I don't know what properties you have. You didn't mention that, but maybe it means selling some properties.

57:33Austin Hankwitz:Yeah, I think that's a great breakdown. And always remember, Nihon, anyone else listening, when you turn in a question to us, always give us the details and at least include your age and a little bit more about each element of the question because then that way we can better answer. But Austin, I think your takeaway was great. Keep it simple, get moving forward and get more money invested, not necessarily in real estate, but just overall and then go from there.

57:59Robert Croak:So when do you think is the right time for someone who wants to start diversifying into real estate? We talked about the$100 ,000, like getting that base built, things like that. But what's things that need to get taken care of before you even think about diversifying into real estate?

58:15Austin Hankwitz:What an incredible question. I think too many people put the cart ahead of the horse. They want to go buy property right out of the gate because someone told them they're going to get rich in real estate. And I agree totally. I think people should have their Roth IRA set up and maxed out every year. I think people should build towards their base of that $100 ,000 we talk about first, because here's the scenario that happens time and time again. Someone gets their first$25 ,000 together. They go buy a house. They go buy a duplex. They're going to fix it up with a buddy, or they're going to fix it up with their boyfriend or their girlfriend.

58:49Austin Hankwitz:They go broke. It costs more. It takes too long. They end up losing money, and they're starting over at zero again. We do not want to see anyone go back to zero in the Rich Habits podcast or the Rich Habits Network. So to me, get the base built of the$100 ,000 saved and invested. Make sure that includes having your Roth IRA set up and fully maxed out, and make sure you don't have a ton of credit card debt sitting on the sideline while you're trying to maximize your earnings through real estate, but meanwhile you're losing money on these 25 % and 30 % credit card debts. That's what I would do. Those are the three steps before you ever think about signing for a piece of real estate.

59:31Robert Croak:Bingo, bango. Heard it here first, everybody. Thank you so much for joining us on this week's episode of the Rich Habits Podcast. And again, major shout out to Max Levchin for taking the time to chat with us today and educate us as to what he's building with a firm. If you like interviews like this, be sure to come back to the Rich Habits Podcast because we're going to have a ton more of them in 2026, as well as just the consistent, awesome content. Again, as a reminder, these are our Monday episodes. So if you're new around here, We have these Monday flagship evergreen financial concept interview episodes.

1:00:01Robert Croak:Thursdays are our Q &A episodes. If you want to ask us a question like the ones we just answered here, email us at richhabitspodcast at gmail.com or DM us on Instagram at richhabitspodcast. And finally, they're back. Those Friday episodes. We were gone for a couple weeks because of Christmas and New Year's here, but we're back. And they're every Friday morning bringing you the biggest headlines and happenings impacting you and your money. That's the weekly breakdown. We're so grateful that so many tens of thousands of you come back every single week to listen to the show. And as a reminder, too, don't forget to check out the Rich Habits Network, the Rich Habits newsletter, all of the tools and downloads in the show notes below.

1:00:36Robert Croak:And also we'll link out a couple of things that Max mentioned. I think we'll link out his Twitter, Affirm, stuff like that that he was talking about in the interview.

1:00:42Austin Hankwitz:And if you get a ton of value from these shows, make sure to share it with a family, friend, somebody at work maybe, and just really get the message out there because everyone needs a little nudge in the right direction when it comes to mindset, business, and finance. And we're here to provide that.

1:00:58Robert Croak:Thanks, everyone. And we'll see you on Thursday.

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