Max Levchin: “The Net IQ of the World Is About to Go Up 50 Points”

21:31Here. One time we needed to onboard 800 ,000 merchants in a week. Oh. Because we signed a deal with Shopify and they told us, oh yeah, we're ready to go. Are you guys ready to go? And we're like, oh yeah, we're definitely ready to go. And we're like, okay, cool. Well, we have 800 ,000 merchants that need to be reviewed and taken live. And we have to take our merchant risk policy very seriously. it means like someone like a human back in the day now AI probably but the human has to look at a merchant like they're not selling prohibited items they're not fraudulent they're not based in a country we can't support and but we're gonna like explain any of that to Shopify they just just signed his giant deal with us like all right so we have 1200 employees 800 ,000 merchants I'm just going to give everyone 700 and something merchants to review manually.

22:24And so for like a week with no sleep, people are just like manually reviewing merchants. And Shopify people asked us like, are you guys going to be ready? Oh yeah, definitely. And meanwhile, we're like scrambling. And then we're ready a day early. Oh. So like we turn it into like a huge thing where if you reviewed at least 300 merchants before the deadline. You got like a t-shirt with 300 embroidered on it. And if you read more, you got like a water bottle. And so it was like a people who joined after that, sadly missed out on the craziness of having to like stay up all night and read merchants.

23:01Wait, so I also heard you're a big Lebowski fan. Is it true you have the entire script written out on your desk and you read it every day? I don't read it every day. But it is true that majority of our shareholder letters contain subtle or not so subtle references to the big Lebowski and because it's been public for 20-ish quarters and at some point all the stuff that I've memorized has been used so now I need to continuously find new quotes that I haven't used before because you don't want to repeat so I do have a copy of the movie corrected Lebowski script on my desktop, not on my desk, but on my computer.

23:41So as I draft my shareholder letters, I just conveniently have a window with a big Lebowski for inspiration and or quote finding. What are your favorite quotes? You can repeat them. Majority of them are, I guess Kaz dropped a lot of F-bombs in your show. He did. You're obviously okay with that. Let's see. what's a great Lebowski quote but too many I just watched Big Lebowski with my daughter for the first time in her life I've seen it a lot of times but she's 14 so it's about time to start introducing her introducing her yes I've inducted my 16 year old son into Lebowski when did this happen and why

24:31I think I saw it possibly in the movie theater. So I've definitely been in the Lebowski lore for a long time. It's one of these cult movies where you're watching and you're like, this is amazing. And you watch it again, like, no, it's better than amazing. You watch it again, like, it's getting better. Keep on finding these gems. It's a great cast. Philip Seymour Hoffman, very young folks and he's kind of funny and spastic. Jeff Bridges is not so bad. Their young John Turturro playing a deranged bowler named Jesus. Doesn't sound like you've seen it at the best. I saw it when I was very young. You need to immediately remedy that problem.

25:18You should see it at least once in every half year. We're going to have to cut this interview short. I got to go watch the Big Lebowski.

25:27Quoting any part of it is insulting the fact that every part of it is like extremely quotable majority of the quotes that come to mind right now are totally not printable like for more than just having f-bombs in them but um

25:44great scene where

25:50the dude is trying to explain to walter what's going on and Walter says, oh, it's like Lenin, or the baby says, it's like Lenin always said, and Donnie pops in and says, I'm the Walrus. He keeps on continuing popping in because he thinks Lenin being referred to, it's actually John Lennon. At some point in the Walter, he goes, Donnie, see I Lenin, Vladimir Ilyich Ilyanov. He tries to explain that. anyway so just like the fact that there's these super deep cultural cuts that have like very little to do with the movie and yet they're so obviously well to me anyway are very funny have you found like any new movies have that kind of writing in it i'm sure there are the the real litmus test of a great beautifully written movie or well-written anything is it survived the test of time so i will know but it'll take another 10 years so So I'm sure there's some amazing scripts that are going to be discovered as the great cult classic of 2026 that are in theaters right now, but we won't know until 2036.

27:00Like part of Lebowski came out in 1998, I think. The fact that it's like a thing right now. It's true for anything. That's why people love vintage. Yeah. This is our game. a very modestly sized game station and a map that shows where Affirmers are from. Oh my gosh, look at this. Not all of it is true though. It's not all true? I don't think we have anyone from Antarctica. I'm not sure. That one I could neither confirm nor deny, but the Antarctica one is very suspect. It's very suspect. This is great. Where do you go most? Well, we have lots of employees here and here. and here and here and here.

27:47And obviously... That's a big cluster. Yeah. Yeah. That's what some people call this company. No. No. Yeah. So I primarily travel to the coasts of the US. And then we have a big contingent in Poland, a sizable one in the UK, a small one in Madrid. So I tend to be in three parts of Europe. Poland is one of the fastest growing countries, GDP wise, in Europe. Yep. What is it about their culture that makes them one of the best places to work with that talent? I think it's one of the several, but certainly the largest and maybe most cohesive place where the former Eastern Bloc country embraced capitalism in all the constructive ways.

28:47And so there's lots of, it's big enough. So it has great education, a lot of very smart people, a lot of people that have trained in the West and came back and want to work in Poland. So there's kind of a natural scale effects of just a lot of great supply. And then also the economy growing as well as it does teaches people that building interesting things is a great way to improve your life and improve your country. So it's a flywheel of capitalism working really well. Yeah. Short answer. All right. We can stare at this map for a while. Okay. I love maps. So yeah, I like maps myself. Let's talk about the growth.

29:33Speaking of another great movie from the 90s, a play that comes to mind, Conspiracy of Cartographers is a great quote from Rosencrantz. And Guildenstern are dead. Say more. If you've not seen that, that is a worthwhile, very young Tim Roth, very young Gary Oldman playing Rosencrantz and Guildenstern from Hamlet. But it's a Tom Starper play that basically retells the story of Hamlet entirely through the point of view of Rosencrantz and Guildenstern, who are in the original play are these two bumbling characters that are someone to entertain Hamlet and sort of lure him out of his funk, but in the end you get sort of tossed to the side and off was their next sort of thing and uh so the whole play is kind of build all here's what how they experienced hamlet and they're it's very funny what what is like your typical reading and information and media diet like oh you know the occasional blog sorry now that you like got my mind into hubowski yeah the occasional asset flashback comes to mind.

30:39That's a quote from Wabowski. I have not in fact had any acid flashbacks that I can think of. What do I read? I try to, I mean these days I mostly read research papers unfortunately, maybe fortunately, but it's such an amazing time in computer science that if you're like not keeping up with research you kind of feel like you're missing out. I read a bunch of, I try to read at least one good fiction book a month. I try to read some classic business books here and there, although it's very dangerous because a lot of them are terrible. Why? Why are they terrible? They're just profoundly, profoundly vacuous, like books about how to run a business written by people who have never run a business.

31:26Always very dangerous. Have you heard of this book called Zero to One? I have heard of this book. Have you read it? I have. What do you think? Sorry, Peter. No, just kidding. It's actually quite good. So Zero to One is a bunch of lecture notes from lectures that Peter gave at Stanford. And unlike many bad business books, his is very good because he's built multiple companies. But when he wrote that, he was primarily drawing on the experience of building PayPal, which I think was formative for both of us. And what he wrote rings true to those of us who were there.

32:11Yeah, it's a good book. I highly recommend it. What were the biggest business lessons you learned from PayPal that you carry into a firm? The most important lesson is always the team. It is sort of the alpha and omega of success or failure of a company is the team. And there's an art form to building a company with the corollary to the team or maybe the countercorollary, if you will, is the fact that just having a bunch of brilliant people is not actually enough. You need to organize them. You need to sort of give them a mission. You need to give them a way to pursue that mission that feels true to them, but also aligns them all together, which is kind of what leadership is all about.

33:00And if you don't have the people, you're definitely going to fail. But even if you do have the people and you don't harness their unique skills and kind of don't correctly combine them, you might fail anyway. Like in general, startups are, I think the typical rate of a startup failure in the U.S. is like 85%. So it's easy to fail. It's hard to succeed. Yeah. You founded a couple of companies when you were in college and they failed. They all failed. They failed. What do you think the biggest takeaway from that was and how does that apply? Why did you keep on going? I kept on going because I realized I liked the journey as much, if not more than a destination.

33:46I think the day my co-founders and I declared our first company dead, I found myself thinking, what will be the next one? I took exactly zero hours or minutes contemplating, is this the right thing for me to do? Did I just throw away a couple of years? I was like, oh, I'm definitely going to do this again. Definitely going to do better this time, even though the next one failed. But I also got like there's nothing else to do other than start companies for me. And so I think I kept going because I wasn't going to do anything else in my life. But starting companies is amazing. If you're into that sort of thing, it's the best thing in the world.

34:35Also, dude, having an amphibious rodent as a, you know, domestic, that ain't legal either. What are you, a fucking punk rager now? That's what I'm going to say. I'm going to clip all of these into one. You should. I can go on. I'll do side by side with the actual movie. Every bit of stupefying. Some great one-liners. Just too good. Many learned men. But in 15th century Rambam, a lot of Lebowski has these great sentence fragments where you have no idea where the character is coming or going to just like cuts into this like yeah like and you just naturally drop it throughout the day yeah you said it man nobody fucks with the jesus so i recently had keith boy actually it wasn't really recent at this point the year is just flying by but i keith boy on last fall and he was stringing out this rare combination of talent that he's very, like, obviously rarely, never seen before and has come across.

35:47You were one of those people. He said that you were a first-rate technologist and also a first-rate business strategist. So how did that combo develop? Where does that come from? I mean, I grew up in Soviet Union, so obviously, you know, compensating for some lack of early business education right there. Keith is too kind. And I think the, I love computer science. Like I was sort of smitten by some very early programming experiences as a, either a teen or maybe even a preteen. So I was like, I was like 11 or 12 when I sort of first got access to the very basic programming tech. And it was like one of these things where I'm definitely going to do this for the rest of my life.

36:37and I was on track to do computer science as kind of the final destination. My plan was to get a doctorate and teach. And a couple of kids at school recruited me to go start a company with them, which failed. But I got bitten by the startup bug. And as I kind of went through life starting more companies and failing at them, So I go, at some point you have to learn business. Otherwise they're going to keep on failing. Cause I was sure that they're obviously not failing for any software related reasons. So it could only be the non-software reasons. Internet businesses are basically some business strategy and some technology.

37:20And I was very confident in my ability to produce the latter. And so it must've been the former, but I'm not sure where Keith got his assessment.

37:34we have known each other a long long time it was at paypal we got to got to become friends there i asked him if there was a paypal group chat and he said no that's that's what he knows there's not a paypal group chat not that i'm invited to either so if If he's not invited, I'm not invited either. Okay. I'm really curious. You have been an engineer throughout many different cycles now. What is it different now to be a technologist, to be an engineer in this? I mean, you mentioned earlier, you're spending most of your time reading research papers. So what does it take to be a leader in AI and also a CEO in this era?

38:24The cool thing about this moment in time, there's a lot of very cool things about this moment in time. We're definitely living through an extremely uncharted territory again. I think it's possible that I am the luckiest boy in the world in a sense that I got to come of age when the internet went from being largely green screens to being the web, which happened to be on my campus. So Mosaic was launched at the University of Illinois the year I matriculated. So I sort of walked in thinking I'm going to get a computer science PhD and just be a professor and walked out thinking, can't wait to start more companies basically because of the first graphical browser.

39:10And then I got to watch mobile and cloud and now AI, which is kind of, I'm not sure what else comes after, but it's already more than a lifetime worth of amazing experiences. It is the moment in time to be a CEO with a computer science degree. The unfair advantage for a long time has been, if you know how to build software and you have product ideas, you can build some amazing things. The thing that's happened with the LLM powered models is you can now go from, I have an inkling in my head to I'm going to build a prototype to I'm going to not necessarily always on your own, but with a bunch of co-conspirators to build something that's production ready in a record short time.

40:01And if you do know what you're doing as somebody with a sense for how to build software well, you don't need to vibe code yourself to a prototype and then hand it off to somebody who knows what they're doing. You can actually build something amazing and just ship it. And so the moment is quite unique.

40:25the reason to read the papers and the reason to sort of keep track of what's happening on the ground of the research is every morning something launches that's nothing like you've seen before. The pace of innovation is accelerating, at least has been for six, maybe 12 months now. And if you blink, you miss something. Just kind of stay close to it. What are you looking for in these research papers? Has it gotten redundant at this point? What is new? A lot of it is I just look for inspiration. I think the thing that's happening right now across computer science through at large is these glimpses of what the future will look like.

41:09And for a long time in my professional career, academia was always either too abstract or too far into the future. you'd read a paper so i spent a lot of my younger years looking at things like cryptography which was sort of the first love that i that i've had in ncs and you'd look at like homomorphic encryption be like wow that's a fantastically interesting concept but we don't really have nearly the computes like it's not going to be a thing in my immediate professional future or you'd look at quantum computing and like quantum attacks and post-quantum encryption and you're like that's cool but like this is really gonna happen in my lifetime will they have enough qubits to be dangerous and with the eye it's different where you're literally reading a paper like yeah somebody's gonna implement it tomorrow and it's gonna be available and then everyone's gonna take advantage of it and so you read the papers like what what might come next what what will be the important news of tomorrow so it's you have to stay current i heard you used to write out code by hand And so now I'm assuming you're writing code through LLMs.

42:20No, I just tell Claude code to write out my code for me by hand. Send it right to Claude code. Do you think it's important for engineers to even learn the basic principles of coding now? Like learn to code was like the key kind of skill to go after for a while. Do you think that's still important even at a basic level? I think so. I think the software engineering is kind of an interesting combination. I'm obviously biased, but it's a science. Computer science is a science, although Peter likes to point out that no science that is a real science needs to have its name include the word science. Like we don't say math science, we just say math.

43:03But as a computer science graduate, I have a lot of affinity for the science of computer science. It's also an art form. Like if you read code or maybe we used to read code for for fun, some code is more elegant than other. And you you would readily see it like that. That's a beautifully written piece of software. And like, that's kind of garbage, but, you know, it does the job. And so there's a matter of taste and elegance in programming. And it's also a craft when you actually look at well-made production grade code. So not like a project you built on your desktop, but something that you deployed on thousands of servers, you can identify if you know what you're doing, like that's a well-crafted piece of software.

43:44It's like a thing that, you know, someone could like stamp their brand or whatever, whatever the term craftsman of yesteryear would use for this. And so because it's such a combination of these three things, I don't think the LMs are going to naturally always deliver beautifully crafted, elegant, and yet scientifically correct code. And so you'll still need some degree of taste, even so much as to converse with the LM to steer towards the right outcome. And for that, you have to understand what you're doing. Like we may not spend a lot of time, maybe soon enough, we'll spend zero time learning the exact minutia of syntactic decisions of each programming language, but the conversation with the machine around what you as a software sculptor would consider to be elegant, I think will remain.

44:37And that's certainly important to me as a programmer. And I think without having a solid foundation in computer science, I wouldn't be able to have that conversation. Have you started on any side quests? I have lots of side quests. I've always had lots of side quests. So the thing that's actually what's so amazing about this moment in time for engineering, for those of us who just know how to write code and take pride in being able to write a lot of code, unless you're current, and even if you are current, there's always a thing you've never done that, like, I've never built an iOS app. Like, I know how they work.

45:15I understand the frameworks that exist. I've seen the tools. I know people who are very good at building great iOS apps, but sort of the ramp up to like, I got to set up Xcode and all the infrastructure to build a really good iOS app. So that's a lot of work. Maybe I'll do it next weekend. With LLMs, the barrier to entry into an area of programming that you've never done before is nil. So I was annoyed at some remote control functionality that I have at my home, in my home AV system. So I decided I'm just going to build an iOS app to completely get rid of my stupid remote and have a remote on my phone.

45:56And normally, a year ago, I have to learn how to build iOS apps. I have to learn how to interface with this audio video system that I have. That's a lot of work, maybe next weekend. This time around, like, well, I can just ask my favorite agent to go research this stuff and set it up for me. And then I can just focus on exactly the functionality that I want and the implementation quirks that I'm interested in. And now I have a remote that I haven't touched my physical remote in quite some time. It works really well. So that's a side quest that manifested itself as a new app on my phone. It's also the first app I've ever built.

46:27I've since built a bunch more apps because it seems fun and easy now. Like what? Did you build your own DoorDash like everyone with OpenClaw? No, I think that that's the silliest thing people have said. DoorDash is not important by way of having a great app. It's important because it integrates with all your favorite restaurants. So until OpenClaw can also do things like call every restaurant and negotiate with the owner and install the right kind of tablet and software and extract the menus and all the things that DoorDash did, I think DoorDash is actually quite safe in their business. Well, what companies do you think are most vulnerable because of this?

47:02I think companies that have built software poorly and just sell that software are very vulnerable. Like the bar for quality of software is going up rapidly. The, yeah, it kind of sucks and has bad interface, but it really serves an important function and I can't be bothered to hire engineers or build the same thing myself. Like that excuse is gone. Like if you really hate some piece of software that you're using and it's just software, doesn't have some deep sort of proprietary data, proprietary source of value, it will get replaced. There's no reason why not. So I think that part is, but that's sort of the, it's long overdue to get rid of bad software.

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49:18Founders ship faster on Deal. Set up payroll for any country in minutes, hire anyone anywhere, and get visas handled fast so you stay focused on scaling. Deal takes care of onboarding, HR, IT, ER, benefits, and compliance, so your team can grow without borders. It's why more than 37 ,000 fast-growing companies trust Deal to move fast. Visit deel.com slash sorcery. That's deel.com slash S-O-U-R-C-E-R-Y. What are the largest changes that you've made in this new era of AI to a firm? How has this changed the way that you're either leading or engineering? I think most of what we've done has actually been fairly organic.

50:00We've definitely focused our engineering teams more and more on mastery of the tools that are available. So for a while, we'd sort of had this point of view of like, you're writing code, you're writing code, do whatever you like and have whatever tools you want. And as the tools improved, we had come more and more sure of what works for us and what we don't like. And so we've been switching the from all comers welcomes as far as tooling is concerned to some fairly prescriptive ideas and what works well for us as a company.

50:39I think more than anything, the expectation of how much can we ship and what quality we are willing to allow has increased. And that's good. These tools are fundamentally about productivity gains, and those have been amazing. How do you think it affects commerce? How do you think commerce gets impacted? I think commerce is a very broad topic. There are many different kinds of things people buy. And some of them are already agentic. Like DoorDash is agentic commerce. When you tell DoorDash, you're not speaking to a human. You're not discussing your basket with a person. You're telling an app, I need more bananas.

51:24Like you can tell your app or soon you'll be able to tell your app, I need bananas every week. Like my potassium got a bananas. And so that's agentic. It's just out there replenishing bananas for me. Can't have any cramps while you're biking. No, very important. Um, but I think some parts of shopping are inherently entertainment. Like when I'm picking a gift for my wife or I'm trying to find something that will amuse my children, I don't want to outsource that. Like my taste is, you know, just the right amount of personal and quirky that outsourcing it to a robot, no matter how good it is at being me, won't feel authentic, or at least I wouldn't believe that it will feel authentic to the recipient.

52:04So forms of shopping that are pure entertainment are never going to go entirely robotic. And then there's everything in between. There's things like price discovery. There's things like deal hunting and all of that is sort of fairly easy to imagine if you're... Whenever you caught yourself thinking, I wish I had an assistant to do this for me, you will now. That's where it's all going. You've said that credit has devolved. What do you mean by that? So look at the history of credit. It kind of began as a form of sustainability measure for farmers. So it goes all the way back to roughly 2000 plus or minus BC, where businesses, farmers that would go through these periods of abundance once they harvest and sell their grains and need capital to seed and process their crops.

53:01they needed to borrow money and so that kind of emerged as a means of like i know you're growing something i know you're gonna have access to revenue later i'll give you money now and you can pay me back later and sort of buy now pay later is a fairly old concept for a very long time until middle ages you had a fairly well self-governing incidentally there were no consumer protection. Although Code of Hammurabi apparently has parts of it that describe things like don't screw your borrower, don't overcharge them. And obviously there's both biblical and Quranic prohibition on excessive interest, or in some cases, pure interest.

53:40And so it's the idea of don't screw your customer has been with us for a while. And in the last hundred years or so, we've rapidly left the whole don't screw your customer idea as a footnote of history where you now have you've gone from interest that's easy to estimate because it's simple doesn't compound to only really doing compounding interest and have it looked in a little while but majority of american banks derive a disproportionate percentage of their income from late fees which is sort of like so that's actually like a really good example of devolution of credit so a leafy was obviously conceived as a means of slapping your wrist and saying like if you're going to be late i'm going to remind you like it's not going to be a lot of money but it's going to be enough.

54:23You're like, I wish I were on late. I should be better next time. At some point, someone said, wait a second, that's a hundred percent gross margin product. When I charge you a late fee, you just pay me more money. There's no cost other than like sending you a nasty gram. You're like, of course, of course I'll pay you a late fee. So it's better if you're late a lot because then I'll make more money and it cost me nothing to create that revenue line. So over time, credit just started skewing more and more into this bucket of let's do things that are not at all pro-borrow or they're just great for revenue.

54:55A firm was founded in many ways to fight all of that and destroy the ridiculous and the exploitive. What do you think the biggest misconceptions you're still receiving about Buy Now Pay Litter? What were the biggest hurdles even starting? The starting actually wasn't all that hard. And initially, people didn't believe that for a long time, we would tell people we don't charge late fees, never have, never will. And they're like, yeah, sure. You say that. And we'd say, all right, well, this interest rate is zero. So a lot of our loans have no interest. And people are so used to this idea of like, it's a 0 % rate, but there's a tiny asterisk.

55:41And if you read the fine print, it's like, it's not really zero, it's zero for now. And then it changes. And so we've built a company to fight all of that. Like we are fastidiously precise about the cost of credit. We don't compound interest specifically to make sure that we can pre-price every loan and say you're borrowing$500 and your total interest charges will be$25 or$0 if somebody else or merchant is paying your interest for you. And for a long time, consumers were sort of like, yeah, you say that, but there's got to be something in a fine print. One of our core values is no fine print to remind ourselves and the rest of the world that we're not hiding our business model in there.

56:22So that was kind of the early stages, probably the hardest thing to persuade people of. These days, the perception is actually shifted. Our customers know exactly what we're offering and why we're here and they they love us for it. I look like a logo carrier 24 seven because I love getting stopped in like flights or coffee shops. People like, oh, you work for a firm. That's so cool. I love your company. And it happens to all of us, not just me. Like a lot of people here love the experience of like having our logos on because people like the product so much. People who don't use a firm sometimes will trot out objections along the lines of, well, somebody's borrowing money.

57:06Doesn't that mean they don't have their own? Shouldn't they just be like buying with the money they have? Like newsflash, half the country revolves on their credit cards, which means that they're paying interest over and above what they could pay back to their credit card issuer that month. If you're going to borrow money and pay interest, you should not be paying compounding interest. You should definitely not be paying deferred interest. you should generally speaking not be subject to late fees or snooze fees or any other kind of fees and so building a better system takes time but people who use us know exactly how good we are and appreciate us for it what is it like being a public company and going through these cycles and and like i guess what is the biggest pushback been from institutions retail most

58:00people who understand who we are and what we're here to do and how long-term we're thinking don't really have a lot of pushback. If you look at our performance, certainly over the last few years that we've been in public, we've consistently under-promised and over-delivered over and over and over again. And as much as the whole quarterly system is a little bit silly, Like, why is it a three month boundary that you need to get a letter grade for your performance? It's, you know, it's a performance reporting system like any other. We've been very, very good with the actual metrics that we're graded on, that we want to be graded on.

58:42And as far as sort of shareholder feedback is concerned, there are two groups for any company, not just us, people who are inherently interested in the short term performance, people who are inherently interested in the long term performance. I have absolutely zero time for the former group. I only care about people who are here to ride along with us for the mission, which we said will take a few more years. We're just starting to get close to a couple percent of e-commerce, and maybe in some foreseeable future we'll get to 1 % of total commerce in the U.S. alone. So we're very, very small on a relative basis.

59:20We'll do north of 47,$48 billion of loans this fiscal year alone. And yet that's a drop in a bucket. So before the final grade is issued, we got probably a few decades to go. But those who are willing to come with us on the journey, I think are seeing that we are excellent at executing on this mission. How do you measure performance through all of this? One of our, not one of our, our key sponsor, our favorite sponsor, Brex, who I think you're an investor in. I am. We have some merch for you, by the way. It is a limited edition hat. It's beautiful. And we'll give it to you. But so with Brex, they're all about performance, spending smarter, moving faster.

1:00:04How do you measure performance for a firm? And like, what are the different benchmarks you're trying to hit each year? Is it qualitative, quantitative? How do you determine that? Very quantitatively driven company. We measure a bunch of different metrics about the company. Like any fairly sizable enterprise at this point, we care about revenue. We've committed a few years ago now to get to profitability and did. So just measuring profit and growth of profit is important. And then the sort of quantitative, qualitative thing that we care about is what we call building a high performance culture.

1:00:52We really care about making sure that we're not just hitting some numbers, but are doing so efficiently. We're doing that with minimum necessary team growth. with, in other words, acquiring more operating leverage and so on. So those are kind of the three major areas that we measure for ourselves. Keep on trying to find a way to embed a way to have fun in our metrics. We have a lot of fun here, that's for sure. Probably sometimes more than... Too much fun. So there's nothing as too much fun, but maybe more than some of our commentators expect us to have. But I'm can't take yourself too seriously.

1:01:42In fact, the more long and a tooth you become as a publicly traded company, the more you have to find ways to goof off. We do that. But trying to embed some sort of fun metric is a unfinished project. Interesting. number of big Lebowski quotes per shareholder letter is a good fun metric. And have people picked up on that? Yes. So we've been public for five years and every single letter but one has a big Lebowski quote or five. Like it's plentiful. Like it really doesn't take a lot to find them. And so there's like 19 letters or something like that. Actually, it's not true. The first year we didn't write letters.

1:02:28we just recorded speeches which was terrible so we've switched so maybe 16-18 letters each one has a Lebowski reference and until very recently no one caught it and it was like a way for us to amuse ourselves entirely kind of in our own echo chamber and then finally one of the analysts I think like three quarters ago one of the analysts wrote a note on us saying affirm and there was like Q2 fiscal 25, a quarter that really tied the room together. They finally got it. So now there's definitely analysts that, not all of them write it, but definitely many of them will reference some Lubowski as like a secret language.

1:03:18I feel like I've interviewed a handful of public company CEOs at this point, and I can tell that they're bored by quarterly reporting, and they're all trying to do different things, like keep it fun. So I guess with yours, it's big Lebowski quotes. Some of them are doing live streaming. Some of them are doing different kinds of theatrical shows, that kind of thing. What is it like? Bored is not exactly right. It's an important thing. You don't want to take to the moment where you're disclosing everything that happened in the last 90 days. You can't make mistakes. You might be shareholder fraud if you do that and so on.

1:04:05So you have to be pretty careful. And it is also a moment where all eyes, or at least the eyes of those who care, are on you. And so it's a momentous occasion. It's not a joke. In fact, it's so momentous that a lot of people become so wrapped around the axle of like, oh, the quarter's coming up. I know CEOs, used to know CEOs that would lock themselves in a conference room for a week at a time before the quarterly reporting and surround themselves with numbers and pour over the metrics and really take it very seriously, at which point it becomes more about the quarter than about the actual, more about the report than the quarter.

1:04:43And that's definitely a mistake. Like spending a week obsessing over something that happened that ended six weeks prior is clearly a huge waste of time. And so how do you balance the need to show up and speak and be intelligent, be interesting, sort of obviously get your analysts to sort of understand what you've done and write thoughtful notes to your shareholders, but also like you have a company to run. This is sort of a moment in time and, you know, it's one day and then it's over and to go back to work. And so the best I know how to do it is you just, you take it as seriously as you must and you prepare and you do the work, but you have to embed some fun.

1:05:24Otherwise you're just not going to enjoy the day and the market is unpredictable. So if you think you did great, the market sells you down or you did none, you're kind of bummed and the market buys you up. You're not going to be able to understand it anyway. So the only antidote I know is try to have fun. Is your mood impacted by stock race? Not really. It used to be at some point where I thought there was a, any correlation between our performance and the price action in the moment, I would sort of look to it to understand, Hey, what is, what is the market telling me now? And over time I realized that even like in a few days during and before and during and after or public reporting, there's so much going on in the market.

1:06:17It's almost not worth paying attention to. So you can't not look, but you can't ascribe too much value, too much signal value in what the price is doing during earnings or after earnings. And so I think, and there's a famous quote, I think it's Graham, but it's ascribed to Buffett and other sort of luminaries. In the short term, the market is a voting machine and in the long term, it's a weighing machine. and I'm a big fan of sort of reminding myself if the price is going up a lot, you can overlook that if price is going down a lot. It's important to remember, but either way, you're working for the long-term.

1:06:52If you're willing to drop everything and look at the short-term, you're joining the group of investors that I said I don't care about. I certainly don't want to do that. A lot of value is now stuck in the private markets and there's pressure for those companies to go public or do something. what advice do you have for those CEOs that might be on the fence of going public or trying to time the markets with it? Timing the market is always a very tricky thing to do. I'm not sure I have any advice for those who are trying to time the markets.

1:07:28Let's see, there's only so many useful things you can say. I mean, going public, most people will tell you it's this long, protracted affair and it's so hard and it's actually not. Like we decided to go public in September. We were basically ready with everything by November. In December of 2020, the SEC told us, please, like, don't come out this year. We're so overwhelmed by all these companies trying to go public. Could you please hang on and like do it next year? And so we went public in early 21. But in reality, we could have been out less than three months after we decided, like, literally rolled out of bed one morning and said, let's go public.

1:08:06And what do you know, It takes less than three months. So I think the effort is manageable. You have to have the team for it. You have to have the degree of financial

1:08:21metric keeping and ability to report to to the level that public markets require. And that's as he is does not get around with like what requirements are. So you very quickly find out if you have it or don't. But this sort of the writing of the S1 and the the produced roadshow all of that takes very little time um in terms of whether it's good for their shareholders and sort of the actual cap table management which company's pretty unique i know if there's a one size fits all we were ready to go it was it was the right thing for us to do i have no no regrets or or issues with it and you're signing up for a different kind of conversations with your employees, where sometimes they will look at the price of the stock and opine on whether that they're being compensated well or not.

1:09:15And that's an important new consideration you'll have to deal with. You're also an investor in many companies. We mentioned this. For the companies that you've invested in, I'm wondering, because there's been so much built up valuation, inflation on the private side? Are you worried at all for them to go public and get repriced? Would you recommend they get repriced or like, is it a momentum tail? Like what, where's the 10, there's a lot of tension there. So like, where, where do you think that lands? Do you think that a lot of companies are going to have to be repriced? It's always super hard to tell these things are so I am sure there are companies that are do some unpleasant news from their last private round to their IPO but again I'd like to believe that the companies I have the privilege to be a part of as a shareholder as an investor are doing it for the long term so the day of the IPO is the beginning of the public journey not the moment where I finally I can just unload this thing.

1:10:26If that's how you're thinking, you don't really care if it's getting repriced or not. You're just hoping for liquidity. I think if you're looking at something where you're thinking like, wow, it'd be amazing to have institutional shareholders and the brands. One of the positives of being a public company is people recognize it. People know who you are just through the news cycle, just tuning into CNBC every once in a while. We hear the company name mentioned. And so if you're prepared for that journey, if you're ready to take it through the next 10, 15, 20 years, then it's time to go public. And it doesn't matter if on day one you're below your last private round.

1:11:05The question is where do you end up five years from now, 10 years from now? I really wanted to ask this even before we started, but you're a very well-read person. You clearly care a lot about finance and payments. and I just recently interviewed the CEO of Roblox and he created an entirely new digital economy. He created like a game to create entrepreneurs, which I think is like quite underrated, especially for a generation of socialists. They're secretly capitalists. They don't even know it. But I'm curious from your standpoint, after studying finance and economies for so long, how would you construct your own economy?

1:11:44What would the payment system be like? modulo recent proposed perversions as a generation of socialists. I think they actually have a pretty good economy. Take it from somebody who had spent his first 16 years under the warm embrace of collectivism, as a certain mayor recently put it. Socialism sucks. It is terrible. The only people who do well in redistribution of wealth are the ones doing redistribution like it's fundamentally corrupt and there's not enough bad things i can say about socialism so i think capitalism works exceedingly well especially when the competition is encouraged and allowed to uh flourish i think the i'm a huge fan of roblox and i spent a fair amount of time before a firm studying these closed system economies.

1:12:45Roblox is one of them, but there are many more that came before Second Life as a sort of a canonical example of an economy that was built whole cloth from nothing. And people were able to find value in things that were made of pixels, which is kind of amazing because there's no utility. It's just there for aesthetic pleasure and ephemeral value. I think it may be a lack of imagination, but if you look at the success arcs of these systems, over time, they resemble U.S. economy more and more. Sort of like they typically start out with a fixed money supply and like, well, we'll figure out how to inject more money later.

1:13:36And then suddenly more people come in and you need more liquidity. And so they sort of start pegging their currency to the dollar or floating it or it becomes more and more like the real world. And so we've had thousands of years to evolve a fairly good economic model. And U.S. is most certainly 1A in the right way to do it. So I don't know if it's obvious how you'd improve on that. In fact, I would argue probably can't. I'm a big believer in evolution and we've had all sorts of experiments. We went from gold standard to floating money to all sorts of central banking policies and ended up in a pretty decent place.

1:14:24And I suspect, I don't know if I have a lot to contribute. Well, we do have$39 trillion in debt. As long as we can produce enough value to compensate those that hold it, we're going to be okay. I think people were like holding out and hoping that AI would help cover the difference with that. Do you think that's possible? Do you think that's still a narrative? It's hard to tell. It's a really good question, actually. And the question is, where does value accrete in this new age? On the one hand, it's very tempting to say, well, or the country of our resources and our access to physical resources and.

1:15:08capability that we have to build and innovate and sort of create things out of atoms. Having this incredible boost of productivity expressed in bits is just going to be incredibly powerful and leapfrog anything and everyone that is remotely buying our supremacy. You could also make the argument that all these countries where there's precious little by way of resources are now boosted tremendously by advances in AI. I tend to believe in the former just because I'm being an American by choice. You sort of better be a patriot. Otherwise, what exactly were you thinking? And I am. So I tend to think that we will probably end up with just an amplification of our advantage.

1:15:53That said, we're not without rivals on the world stage. And so we'll have to compete. But I'm a big fan of competition. Who do you learn most from? I try to enter every conversation asking myself, what will I learn from this person in this moment? So I like to believe I learn a lot from everyone I encounter. Um,

1:16:22I really love learning from very technical CEOs these days because all of us are trying to keep up and sort of do our day job and run a company and set strategy and sort of figure out what the future looks like. But also by night, we're suddenly all back to writing code, which we thought we sort of did the last of five years ago or 10 years ago. And like production environment, all of us who loves programming tinkered until recently. And suddenly you don't have to tinker, you can just build and actually produce real products and kind of watch your work go live. And so reconciling this opportunity and sort of amazing moment where coding is fun again and easy again with the need to run a big company is a lot of fun, but it's also a real challenge.

1:17:12And so talking to people who are in the same position recently has been a breath of fresh air because I get to find out about their productivity hacks and sort of share my own.

1:17:24um yeah it's really rare that i've talked with someone and think like wow there's nothing to learn from this person okay we're surrounded by smart people part of why silicon valley and california warts and all is a pretty great place there's such a concentration of really smart people they're fun to learn from as we wrap up max lefchen what is your hottest take right now I'm like the king of cold takes. Everything takes. I'm a very slow thinker. I'm a slow reader. I'm a slow thinker. Everything takes a long time. I go with these super long bike rides just to think about thinking. Let's see if I can come up with a hot take for you.

1:18:06If you look at the business models of lenders in the U.S. for sure, probably worldwide, a huge percentage of it is based on sort of two unsightly practices. it's betting on the idea that you'll screw up and won't notice in time and then i'll make some money and on the idea that you're not really going to bother reading the terms and conditions you're just going to get your money and and go and and then later on we'll pay for it and i think with ai as ai actually perforates all the way down to consumers like not silicon valley people not like normal people in middle America or middle of the world, just using AI tools for the most basic daily tasks with money.

1:18:59This whole genre of let's make money when you least expect it, or let's screw you and hope you don't notice, or let's just charge you some fees because you won't be able to catch on quickly enough. Like all of that is going to get flushed out because no AI is ever going to be like, oh, you've given me a task to find you a good loan. I found one that's going to take advantage of you. Hooray. Like, absolutely not. Like, we're not going to let that happen to you. Like, my job as a robot is to take good care of you. So I think you'll find, and it's broader than finance, but I obviously care a lot about consumer finance.

1:19:31But in general, I think the net IQ of the world is about to go up like 50 points. Like, we're surrounded by people, not in Silicon Valley, of course. To quote the Big Lebowski, not a nom, of course. Right. The average IQ is still 100. I think the average IQ with AI in your ear at all times is about to go up to 150, which is like north of the genius definition. So very, very soon, And the willingness to put up with random obnoxious things like low quality or crappy terms or products that pretend to be something they're not like all of that is just going to get flushed out very quickly. And companies that have business models that are buried in a fine print of some kind are all in for a very rude awakening, which I'm very happy about.

1:20:26But I think that's a that's a reality. most people have not fully contended with, which I'm excited to take advantage of that for now. Amazing. Quite the optimist. I'm an optimist. I'm an extreme optimist. This is a perfect way to end the conversation. Thank you so much for having me here today at Affirm. I love the espresso. Love the tour of the office. It's kicked in. It's kicked in. I'm about to go for a bike ride. Definitely go for a bike ride. No, but thank you so much. This was a great conversation. Thank you. 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.

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