Klarna's IPO CEO Sebastian Siemiatkowski

28:43And I think the interesting thing will be people who can solve that problem, who can find the balance between an LLM and other ways of storing and accessing information. So you really get the combination of what's great about an LLM with, you know, just data and facts is going to obviously create the next generation of AI, in my opinion. One of the companies that Sorcery works with is Turing. Yeah. They help train models. They're an AI research accelerator. Are you training any models? Are we going to get anything out of this? No, we do. Yeah? We do try to train a little bit as well, and we do some of that.

29:21But there are also other things I'm more excited about. Like one of the things that I think Klana stands for is aesthetics. And a chat interface is a freaking boring way to interact with a computer. So I'm also very interested in like how can we use AI to create a more user-friendly, aesthetically pleasing way to interact with a computer. So there's a lot of other things than just training the models itself. In today's high-speed business world, staying ahead means using the smartest tools possible, including the powerful capabilities of artificial intelligence. Meet Turing Intelligence. Turing builds customizable AI systems designed to solve your mission-critical challenges, no matter your industry.

29:58From expert guidance to tailored projects, Turing helps top companies realize AI that's more capable, more adaptable, and more effective. With Turing, discover how AI can accelerate your business growth. To learn more, visit Turing.com slash sorcery. Spelt S-O-U-R-C-E-R-Y. That's Turing.com slash sorcery. Aesthetics is a big thing about KORNA. I mean, I'm wearing a pink sweater because you guys, okay. So recently, Paki McCormick wrote this like beautiful piece on the great differentiation. It has to do with how tech companies are now like embracing differentiation, their uniqueness, their own personality.

30:39And I was thinking about this as I was preparing to talk with you. And I was like, Klarna did this from the beginning. Like who ever thought to make a tech company pink? Yep. Branding is pink. I know who that was. who was it well the funny thing is that like it's actually um you know i don't want to steal all the thunder from our amazing chief marketing officer because he's done a fantastic job david uh sandstrom but it really started with my wife and she's a nina is amazing she's fantastic and when she was 15 years old she started working in a local like boutique that was selling all the the best brands you know the the products of the world the gucci locally in stockholm and she would you know she would be taught by um by gabby who was running the store she was be taught about aesthetics and quality of fabrics and she would go on uh purchase trips to milan to meet all the big houses and you know this was pre them having their own stores and it was a very different world back then and she's really my wife is fantastic in aesthetics and interest she's been a photographer herself and um so we were we would be sitting and having dinners and at that point of time clown i was blue it was in classic looked like any other fintech and nina would tell me like you need a brand and i was like what do you mean we have a logo type what are you talking about like we have a brand yeah like nina's like no you you really need a brand and i was like so i was just getting very tired of listening to this and at this point in time the the thing that happened as well was that we had unfortunately been a little bit unlucky with some chief marketing officer hires it didn't work out and again we had to shift and there was a small marketing department with about 40 people and this point in time you have to remember like at that point time i've been a ceo my whole life it's a very strange thing i'm 23 years i've become a ceo i've never had any other position i've not climbed the career ladder i haven't done a smaller responsibility at the time so when that cmo left i was like okay i'll do the job myself i'm going to be both CEO and CMO for a period of time, which was extremely helpful for me because I had to step down from my high horse of being CEO.

32:47And I could suddenly sit and be running a 40 people team and focus on the marketing. And at this point in time, I started listening to Nina. I was like, maybe she's right. And so I decided we would bring her in as an advisor pro bono, which obviously can imagine the like reaction in the company where like he's bringing his wife. Oh my God. what does it mean you know like are you even allowed to do that um but she came in she didn't get paid for it and at this point in time we were just there was an equivalent of venmo that had started getting some tractions in sweden so the only thing i was like we need a tv we need a tv ad we need to build a brand we need a tv ad and so nina was like let's go and find and let's do the best but we really wanted to do something different and then nina no agency in stock wanted to touch us like everyone's like oh it's boring you know clana by now like blah you know none were interested but there was one guy david sandstrom our current cmo who was running one of the local agencies and he said no this is interesting let's do something and they brought in some creators the funny thing is i feel like we were in a it felt like we were in mad you know what's it called mad mad men mad men yeah because we come into this room all the other agencies were super boring had super boring ideas but this one agency ddb comes into the room and they're like we this one idea like close your eyes imagine there's this fish and it's climbing up the ladder and then it goes down this ladder and she's just like beautiful and then you hear like that was smooth klana smooth payments and we're just sitting there it's like this is the most ridiculous thing we have ever heard in our lives me and nina and we're looking at this but like david and the others like super convinced and then we come home we start talking about it over dinner was like but there's something amazing about that just this idea of smooth smooth is like silk like it's something that is nice it's friendly it has a lot of fun to it you can do a lot of fun things with smooth and so we were just like let's do it um and then we started changing then we changed the color we changed the brand so nina helped out for a while and then david stepped in as chief marketing officer and you know since then we've done a lot of things but it just felt like the absolute right thing to do something differentiating and do something very, very different.

35:02And also connect to our audience. And, you know, it's something that connects on an emotional level. And I think to some degree, it's so much harder when you have a physical product. If you are actually Louis Vuitton or Prada or whatever, you have a physical product. There's something to relate to. But it's such a bigger challenge when all you have is a small icon in your iPhone app and you want to build a brand. So that's such a fascinating challenge also. Like how do you create an emotional connection to something that is payments, which is maybe the most utilistic and boring thing people can imagine, right?

35:31I think that is probably one of the most iconic marketing campaigns ever. I was rewatching it and like I had this sound all the way up and you just hear this like gross, like slithering, smooth sound and you're like, what is going on? But it's like, it is like, it's provocative. it like gets you an emotional response and you think about the brand from it yeah and it has nothing to do with payments but now all of a sudden that's clarino yeah and i think you know the other thing is interesting there wasn't because we actually had to hire at that point in time those were the best digital animation study studio they were in canada it was phenomenal the sloth one too that was crazy yeah cool in the pool exactly because that's the hardest thing to anime apparently it's like hair in water yeah and that guy's swimming and it became actually a meme in the uk it just it went viral right we also had one where they sliced the cheese yes i saw that became viral on youtube so we had to make like a 12-hour version where you could just watch it and never finish you made a 12-hour version yeah it was like a 12-hour version there's some people were just watching it it's like that's so rewarding um this is early days asmr yeah exactly no but it was really i you know i think it was um it was amazing and then david when he took on the job came with his next idea which was you know he came in and pitched like we should do something with snoop dog right and it was also like such a funny it was just like look we're gonna they we have convinced snoop dog is gonna change names and he's gonna call himself smooth dog you know oh my god yeah and and the thing is that like and we got him on board with this he's a shareholder company so i hope he's going to celebrate our ipo shout out to snoop dog exactly i mean i actually had the challenge you know the privilege to go and see him in la which was very very cool um and um and you know and then and then but the thing is so he suddenly announces he's changing names the whole internet goes like why is snoop dog changing name to smooth dog what's this all about you know and then three days later it was like oh it's because of he's becoming a shareholder in clown and we made this beautiful video that unfortunately we lost the rights to but you can still find it on youtube it's just a beautiful video how he crowns himself smooth dog and uh no and it became viral right and then we've done really cool stuff with lady gaga and with asap rocky and with paris hilton and and so forth and it's been it's been fun it's been fun to also allow yourself a little bit of a smile right and i actually think that that's one thing that people have underestimated that we are from a banking industry and trust in banking meant people in suits in marble offices with ties shaking hands and for whatever reason bank still thinks that this emits trust but for our generation that grew up with 07 and see our parents struggle through the financial crisis that's everything but yeah trust right occupy wall street for god's Like, you know, it's just like the opposite.

38:34What you're looking for is what you want to be looking for is somebody who doesn't pretend, doesn't try to look like, oh, you know, I'm pretend I'm important. But somebody that's relaxed, that's friendly, that's forthcoming. And that's what we've been trying to do. And we even talk to people when they say like, yeah, what about the youth and how they and we say, look, if you want to talk to young people about your economy, do you think that guy in the suit is going to make it work or Snoop Dogg? Who do you think they're going to listen to? Or Lady Gaga or Paris Hilton? Who are they going to listen to, right?

39:05Or ask them, Rocky for that sake. So the point is, if you want to talk to people about finances, you need to be able to make it a little bit relaxed, a little bit fun, and have something you can't just believe that you're going to sit there and be boring. It's just not going to work, right? Same as your podcast. Yeah, you're going to make it fun. A little bit more fun than just like, you know. Serious topics, but like a little giggle every now and again. It's not going to hurt anyone. Exactly. So as you think about seriousness with very playful personalities and branding, what do you think the shift is going to be next?

39:42What comes next after that? You've done CGI. You've done celebrities. How do you extend this creativity? And what can I steal from you? That's exactly the question I ask our chief marketing officer every day. What are you going to do next? I hope that you know what I what I try to challenge the team on now is I would like to see a little bit of coming back to the roots of the fish yes bring the fish back yeah you should bring the fish back I think so I think there's something to a little bit more edgy and aesthetically crazy somehow right because I also feel there's a risk like when we did our Super Bowl commercial it's like yeah it's nice but like it starts feeling a little bit commercial and I just wanted to I hope that we can bring some of that edginess and aesthetics to it.

40:29You know, do some unexpected thing. Even the smallest thing that we're like sponsoring the opera in Sweden right now. Like even just things that are a little bit like unexpected, a little bit edgy, a little bit artsy. I would like to see more of that. That's cool. Maybe we could put Klarna on the side of like a rocket ship. Yeah, exactly. Talk to Elon about that. Go talk to Elon. Be hard. He's the one who makes the X into a financial services company. That's true. Yeah. He might start financing burritos. That's true. Which is another one of your memes. You're a meme factory. Yeah, I know. Have you thought about this?

41:02Yes. So you're the original, what did we talk about earlier? You're the original meme factory. Yeah. Okay, how did that happen? Was that just like by chance, accident? Why does this keep on happening to you? That's a good question. I ask myself every morning. No, but look, I think it is, I don't know why. It was just, I guess, you know, there's been a lot of drama with Klana, right? So to some degree, we've also had this like everything from board drama, you know, the boardroom fights to like, you know, the buy now, pay later to the high valuations, low valuations, like, you know, all that stuff.

41:40So there's been a lot of drama around Klana, which helps, you know, not necessarily something we are aspiring for, but like it hasn't necessarily been bad from a meme perspective. But I think also, you know, on the meme side, I think that the burritos thing is a good example. Like to some degree, Binappolator for us is a blessing because it opened up the market. It made people familiar with us. It made us available in so many places. But it's also a little bit of a curse in the sense that people think it's only Binappolator. And, you know, we didn't launch with DoorDash to finance burritos. It's really funny, but that's unfortunately not the case.

42:23But I don't think you can plan these things entirely. It just also partially is what happens, right? And, you know, we get more of that. So I think there will, I'm sure there will be more coming as well. As you think about expanding cuisines. Okay, so you've done burritos. What if we get into heroes and, you know, really start to approach the Greek market? Right. And even maybe after that, I've heard Gnocchi is up and coming. Have you at all thought about pasta and like the Italians? Those are good options. There could even be like a premium tier. That's true. Maybe sushi. Yeah, exactly. Go to Tokyo, get some fresh sushi.

43:03Split that on installments. Split it on installments. Could work. It could work. So another one of the things that I looked at in researching is the global expansion and how much you've been able to reach. Yeah. So on the website, it says that you can finance up to 13.4 million products. Wow. Can you name all those products? I wish that was the case. Yeah, but I think you can like, there is definitely, I think still that the key thing to all of this, right, is that obviously financing has been around. And I think that's what people forget. Credit cards have been around. These products have been around.

43:48But the challenge with how they were constructed historically is that the banks somewhere along the long, you know, installment loans, I think actually was launched like 150 years ago in the US with the people who invented the first sewing machine. They want to sell more of the sewing machines. So they let people buy them on installments. And that was kind of the beginning of the industry. And that even eventually became the credit card industry and all that. But the problem is along that line, that was a little bit forgotten. And these banks get a little bit too greedy and started trying to make too much money.

44:17And as a consequence, there's so many customers that we talk to and so many people we talk to who are like, yeah, I got a credit card. I thought it was a good thing. I want to improve my credit rating. But then suddenly I'm sitting with three, four thousand dollars of debt and I'm paying like 20, 30 percent interest of it. And I was like, this is the work of the devil. I want to get out of this. Right. There's an amazing documentary on Netflix called Credit Cards Explained. It just takes you through all the tricks. And I think this was also from a different time period. I don't think banks are evil, but this was from a time period in the 80s and 90s.

44:46you know, our parents, their business was very different than ours. They would have like cocktail parties, drink alcohol in the office. And then they would sit and say like, how do we make more money out of our customers? Like nobody was thinking like corporate social responsibility or whatever. It's just like, let's maximize profit guys. What is your best idea? How are we going to make more out of those consumers? Right. And that was particularly true in credit card industry where so much excess profit was created. It was like, oh, you know, here's your limit. If we show people the limit it looks like they have more to spend than they actually have and they're going to spend more if we don't put on installments but put them on revolving nobody understands when they're paying that back so they're just going to revolve forever but i was a kid i used to work at burking there used to be when you swiped your card at burking when i was 15 there was press one for debit press two for credit why did the bank stop doing that because if you put half of your purchases on debit you didn't have as big of a bill at the end of the month if you didn't have as big of a bill then you were less likely to revolve and they would make less money so there was so much of these things that happened and now there's a a number of people out there who's like i don't want to i don't want to have those products i want to have something that's a little bit more fair a little bit more easier to use and and then they can finance anything with it but you know i even get in these conversations where i hear like i was talking to a customer virus she was in their 30 you know early 30s and she was like yeah my mom had read in media that you know buying up later is bad for you and and then i asked her mom are you not using a career card it's like yes how much depth do you have on it four thousand dollars and it's like i own clona 100 bucks and i'm paying zero percent interest right who's financially responsible so like i think that there's just a shift going on and the financing thing has always happened i never when people tell me sometimes like yeah but i'm against all financing of consumption then i'm like okay i'm gonna lose debate like you know like that's fine i'm fighting we're fighting credit with credit we're fighting fire with fire so but it's a very effective way actually to fight fire with fire and this i think this is a healthier form of credit as you thought about building out this bank you have some competitors out there believe it or not really yes so there's chime there's jp morgan there's all these different kinds of banks out there how are you differentiating well i think that the it actually came back to that idea 10 years ago when we said okay fine the future of financial services is going to be this digital financial system wakes you up in the morning tells you i've analyzed your mortgage uh i can save you 50 pounds or 50 dollars and the only thing you need to do is say yes and i'll switch and do all the paperwork for it okay to me that's like that's gonna happen um that's where retail banking is going that's where digital financial services going and it was funny because i was at jamie diamond's conference in yellowstone i said this on stage when i was with eric with some saltman some some altman and um and the others and then you know eric schmidt was like how can you say that when you're at jp morgan's conference i was like i don't know sorry man i was just trying to share my what i think is the future um but the point is what does that mean that means that excess profits are going away because all these banks make so much money because they rely on our unwillingness to switch and if switching becomes very simple because you have a digital financial system that just says hey use this it's cheaper that is better then suddenly you can't compete that way and that's true for so many things that we use in life it's true for our carriers electricity you know tons of things and where companies to some degree rely on us not wanting to switch and or not have the energy to switch so i think that's that's the key and that's what we want to differentiate as to really put the customer first and say how do i save you time how do i save you money how do i make you feel more in control of your finances um and despite what media may report on buy an appy later it is a much cheaper way to finance a purchase and using a credit card without doubt so we're saving people a ton in interest and fees from consumers.

48:55And that's just the first part. Then I want to take all the AI learnings that we've had and I want to try together with the team at Klana to build that digital financial system for our customers to try to leapfrog the current JPMorgan Chase app or Amex app or Revolut app for that sake or whatever it might be and try to create an experience that is superior to people. And the truth is that mortgages, you'll think about once per decade, but your everyday purchases, your contact lenses, all these, there are so many things that you can help people in just making them worry less about finances, right?

49:29To be fair, you just have to recognize, I think, even if you're in this industry, most people don't want to think about you. Like most people just want to live their lives, enjoy them, do fun stuff, hang out with their family. They don't want to think about payments every morning. Like this is the last thing they want to think about. So if you can help them with that to actually make them think about this less and make them pay less for it, then they're going to be happy. To think more broader macro, I'm going to put some numbers against this. So Americans now owe$1.2 trillion on credit cards.

50:01And the US national debt is at$37 trillion and climbing. It's crazy. But the odds of a recession actually remain quite low. Caltech has odds right now at around 38 % before 2027. How does that feel to you? what do you think about the broader macro trends and where you're seeing consumer spend delinquencies default etc versus also the backdrop of national debt well i do think that the the i worry less you have to remember also that to some degree one of the benefits of china that's also you know that was very clear that finally i would say now on the roadshow investors have understood it or at least the investors that we were talking to had understood it that is that if you're a bank normally like with us and you have that outstanding credit card debt right the 1.3 trillion if you're sitting with that on your balance sheet and then you walk into a recession you can't just get out of that debt because you all these people owe you money and you can't just change your underwriting because they're already there so it will take you years which is what happened 07 to do years to heal that and fix that.

51:10The difference with Klana is people owe us on average$80,$100. And it's just outstanding for four weeks, six weeks. So when a recession comes, what we do is we change our underwriting models. We become a little bit more restrictive. And in only 60 days, half of our balance sheet is underwritten by the new standards. So it's a much more agile and robust model because you can adopt to what's happening in society in a very different way than the big banks can do. And this is often why, like, you know, again, now I saw some in preparation for the IPO, people were like, yeah, but I wonder how that business model will fare in a recession.

51:47And I was like, oh my God, I've been doing this for 20 years. Like, when am I going to start? Like, I've been going through, I went to 07 with this company. I went through other recessions with the company. I was just like, can I stop hearing that? Like, when am I going to, when have I graduated and proven that this is a better business model in the recession? but like um so i think that that's it but what i'm more concerned about obviously is the jobs i i unfortunately as much as you know again there's been so many of the ai people gone back and forth about this but i think that people aren't sincere i think that people ceos of many companies today recognize and see that when it comes to white collar jobs they won't need as many people as they have historically and there's going to be a major shift there and i even think about it like the other day again i saw one of the car manufacturers who was doing that truck manufacturers were doing downsizing when i was a kid it was people in the factories that lost their jobs while at the headquarters everyone was fine now every time i read about it it's like no no we're not touching the factories so unfortunately in the headquarters where we're removing 600 jobs, 700 jobs.

52:56And I also didn't, because Klana has gotten so much attention around our efficiency gains and we've gone from 7 ,400 people to 3 ,000 while our revenue has doubled since then. So our revenue per employee went from$450 ,000 per employee to over a million now. And because of that, I have so many emails in my inbox from CEOs of large companies who are like, hey, you know, we're kind of thinking about potentially, you know, a little bit of downsizing as a consequence of AI. And could we compare notes? And I was just like, Jesus, if I just round up the jobs at these companies in my inbox, that's a significant amount, right?

53:37So that's why I've been trying to hope to try to be one of the more transparent and honest people to say, look, society, I think we have a challenge. Like, it doesn't mean that we can't overcome this. It might in the end lead to something more positive for society. But I think it's going to be a little bit turbulent as we go through that change. And that it will have short-term implications. And it's easy to say there will always be new jobs. It's a little bit harder if you are a 55-year-old translator in Brussels. And the only thing you do is translate documents. And now suddenly AI can do that.

54:11It's like, yeah, but you're going to become a YouTube influencer. Like, I'm sorry, like, that's hard for that person. It's not true, right? It may be true for economy as a whole, but I think we need an answer for the people that lose their jobs in the short term. And that's maybe, you know, slightly different perspective than what you usually hear in the US. But from a European perspective, at least, the idea is like, maybe there's some way that you can support the people that are going to be affected by this. And I think there will be a lot of people affected by it. And that's more than also from a macroeconomical perspective and looking at clowns.

54:42I just want to be mindful that we might go towards a tougher time in number of employees or employment as a consequence of that. So we will rapid fire this. You answered one of my questions already. So one of Sorcery's sponsors is Brex. It's all about spending smarter, moving faster. And they love performance. And one of the questions was going to be, how do you think about that with employees? And I know you evaluate them against revenue. The revenue per employee is increasing. So an alternative question is, what is one of the biggest lessons that you learned as a CEO? Wow, that's what those always like so difficult.

55:21There are so many and I've done like every mistake in the book. I think more recently, you know, I used to hear there used to be this fantastic guy, Sir Ian, I think was his name. He was the CEO of Tesco for a while. And he turned Tesco, who was like on the ropes in the UK, and he made it a smashing success. And he said, everything is about customer obsession. he would even force his finance people the cfo like oh you're going to get a new accounting system how's that going to make life better for our customers and like i used to listen to that and we did some of that but in the last one year we have just gone all in on this the amount of time i now spend talking to customers on the phone calling customers talking to them reviewing people's sessions with how they use the clon app like i'm we're just changing that and it's it is so interesting so many times internally at clon people will sit and have opinions like yeah we need to do this or that or our customers want this and that we pick up the phone we call those customers totally different like totally like we're totally lost it right because you get so up like you get so caught up in your own views and clown and we know all the products we understand how they work you know all the stuff and then these people who you know they just use it and you know they we want to be mindful of like how do we work with them and i think like the customer obsession i've just so that's actually one thing i really appreciate with jamie diamond like that jamie spent so much time just going to the local offices shaking hands talking to customers i think that's one of the key things that i underestimated and what made him so successful with jp morgan chase and what he's done is just how extremely customer obsessed he is it's really really impressive to see now that the company is getting serious about growth we have to think about product expansion outside of just banking.

57:08I want to go back to buy now, pay later because I just think there's untapped potential there. I think we should get into, and I did this, I worked with chat GPT. It was great. I think we should get into buy now, pay later companies. Okay. So we can acquire open AI. Their valuations are around like 500 billion right now. This is like the perfect time to buy. This is the lowest they're ever going to be. What do you think? I think it's called M &A. Okay. What's that? So I think it's called, I don't know what is M &A. Merger and acquisitions. Thank you. All right. All right. We'll put that one to the side.

57:53What about stocks? We could buy now, pay later stocks. Palantir has been doing really well. So I've heard. We could pay for that now. No, we could buy that now, pay later. I saw people say, well, it's called short, unfortunately. And it's been done. All right. All right. We're zero for two. Anyways, more seriously, concert tickets. Done. It's done? We do it, actually, with Ticketmaster. Very successfully. You already do that. Okay. Maybe chat GPTs. We need to update. we've got to refresh that one i think i think um the five wasn't that much better i've been telling sam that like talk to sam about this they need a i think you need to up your partnership somehow and then um okay quickly last two college student loans that's a student loan all right i'm not sure what that is but i'll look it up um unfortunately i'm sure you do okay geez um This is the last one.

59:02I'm hoping we can at least get one product in here. I'd love to contribute to the business. Buy now, pay later. Homes. Mortgage. A mortgage? What's a mortgage? I see. You see my Swedish is mortgage, but it's actually mortgage. Is that a company? That is a house that you buy with borrowed money, yes. Borrowed money. Can I get that through Klarna? Not yet. Not yet. But I would love to do it someday. Okay. So we have an option. You think we got a product there? Which one? Oh, the mortgage. Yeah, yeah, yeah. We'll get mortgages? For sure. Let's do it. Okay, cool. That makes me happy. Well, Sebastian, thank you so much.

59:48This was so much fun. Thank you for having me. Hey, it's Molly. If you enjoy our interviews, check out our newsletter, Sorcery.vc, where we deliver a once a week top deals and tech headlines email and also go deeper on our podcast interviews. Subscribe to Sorcery today. And don't forget to subscribe to the podcast on YouTube, Spotify, Apple, or wherever you listen. Link in description to sign up.