The Prof G Pod with Scott Galloway - Banking the Unbanked — with Pierpaolo Barbieri

Episode Date: July 1, 2021

Pierpaolo Barbieri, the CEO and founder of Ualá, tells us about the booming fintech space, incumbent banks, and crypto. Ualá is an Argentine fintech company that is working to bring Latin Americans the necessary financial tools they need to run a business, pay their bills, and participate in the economy. Follow Pierpaolo on Twitter, @pbarbieri. Scott opens with his thoughts on wealth inequality, the record number of startups that have come out of this recession, and the latest on antitrust.  Learn more about your ad choices. Visit podcastchoices.com/adchoices

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NMLS 1617539. Episode 80, the atomic number of Mercury. The Empire Strikes Back was released in 1980 i could be darth vader except i am absolutely debilitated with anxiety call me panicking skywalker i hate that joke but my producer wouldn't let me go with having sex with a darth vader mask and being diagnosed with syphilis i think that's better syphilis get it search your's better. Syphilis, get it? Search your emotions. You know this to be true. Go, go, go! Welcome to the 80th episode of the Prop G Pod. My voice, when I drink and when I'm at altitude, my voice gets deeper.

So another reason I can't afford not to be an alcoholic at high altitudes, because let's be honest, everything I say will have more credibility now that my voice is just a wee bit deeper. In today's episode, we speak with Pierpaolo Barbieri, the founder of Walla, an Argentine fintech company that offers a financial ecosystem through an app and is linked to a free international MasterCard card. Free international MasterCard card. There you go. He is also the executive director at Green Mantle, a macroeconomic and geopolitical consulting firm. I was introduced to Pierpaolo

through Neil Ferguson. Pierpaolo is one of these like crazy, ridiculously fucking impressive, you know, guys who at the age of 14 was writing books on economic history, Harvard scholarship, and then it's now started a, a unicorn in Argentina banking the unbanked, but he's this, you know, incredibly thoughtful young man slash kid. Also seems like a nice guy. Seems like a nice guy. Anyways, what's happening? Let's take a look at a few data points floating around in the news. The Wall Street Journal reported that US households added 13 and a half trillion in wealth last year, the biggest increase in the past 30 years. For context, US households lost $8 trillion during the 2008 recession. What makes the 2020 recovery different

compared to previous economic downturns? Well, here's a clue, $7 trillion. Specifically, the government pumped $7 trillion worth of stimulus into the economy, which turned into champagne and cocaine for the stock market. Again, we have thrown some loaves of bread in some circuses for the poor such that two- thirds of our economic stimulus can end up in the markets, which juices the equity and real estate markets, which are vastly or over 90% of which are owned by the top 1%. Anyways, you've heard that before here. You've heard that before. And who owns stocks?

Who owns stocks? Let's revisit it. Let's beat this dead income inequality bitch horse to death. The top 20% of income earners accounted for more than 70% of the increase in household wealth. About a third of that increase went to the top 1%. That's right. The top 1% got 33% of the spoils of this increase in wealth. While you can make the argument that some of the money went to those who actually needed it, especially this latest round of stimulus. The stimulus checks and bailouts don't necessarily address the structural changes the US needs in order to close the wealth gap. So we solved the short-term problem, hopefully,

but have we really addressed structural change to try and arrest what is, I would argue, the greatest threat to our democracy? And as the greatest democracy in the world that has kept the peace, loosely speaking, around the world, the greatest threat to global stability, and that is income inequality in the U.S. Anyways, what else is happening? Entrepreneurship. Entrepreneurship in the U.S. is booming. Who said six months ago that this was the best time to start a business? That's right. That's right.

First name D, first letter D, last letter G, A to the W in the middle. That's right. That's right. First name D, first letter D, last letter G, A to the W in the middle. That's right. Why? Because during periods of crisis, during recessions, if you can call this, I don't know, it was a recession for about 48 hours, companies are much more open to doing business differently. There is tremendous opportunities to rethink every industry just wait just wait and see the kind of innovation we're going to see in health care in education and what pierre powell is here to talk about in fintech you're going to see more funding more startups well i'm talking future tense i should be talking present tense the u.s saw a 24 increase in startup activity last year compared to 2019.

That 24% increase brought the number of new businesses in the US to 4.4 million in 2020. I think that's a record. One of the report's authors told the New York Times, the one reason we might be seeing this boom is because this is the first recession in the last 50 years where the supply of money is larger than before the crisis. Okay. That kind of blows my mind. And by the way, I gotta be honest, that scares the shit out of me. I just don't, one thing I have learned in life and in our economy is there's no free lunch. So the notion that we can throw a shit ton of money at the crisis, flood the market with new dollars and Hey, it's good for everybody. And there's not a popper to be paid here. I just don't buy it. I've started nine businesses. The best predictive signal for their

success has turned out to be the phase of the economic cycle in which I started the firm. Put simply, the best time to start a business is on the heels of a recession. Again, stuff is usually cheaper. It's not coming out of this crisis, so that doesn't hold. But again, clients or potential vendors in B2B or consumers just rethink how they will spend money and are much more open to change. And it's also easier to get human capital because they see the opportunity and there's all sorts of financial capital coming into the space. Anyway, I love startups. And while pandemic economics haven't resulted in a garden variety recession in either its short duration or its case-shaped recovery, there are factors that make this the best time

to start a business in over a decade, specifically, specifically unprecedented stimulus and savings resulting in a Nazare-like wave of consumer spending. Nazare is that place in Portugal that is this total topographical anomaly where it has this weird canyon that shoots like a funnel and the water, several billion tons of water come through and the natural cadence or velocity of the ocean hitting the shore. And because of this weird shoot in the topography or the shape of the shoot, it results in these super waves. Oh my God, that was fascinating. I come here for the economics and the profanity. I leave with information on how big waves are formed,

unprecedented stimulus, and then a gestalt among consumers and enterprises to question the status quo and be open to new products and services. Question the status quo. Quote of the status. This makes no fucking sense for me. Let's do it differently.

Let's do this differently and put a horn on the zebra and call it a unicorn. The emergence of new fields and the capital to disrupt traditional industries as immunities kick in and monopolies are broken up. Let's break that shit up. Crunchbase found that during the first quarter of 2021, global venture investments reached $125 billion. That's a 94% increase year over year. We're even seeing innovation in search for the first time since Google rose to dominance with Neva and Brave launching this year. Think about this. It's just the scrutiny, just the threat of antitrust where all of a sudden when they get in their rooms to redraw maps or go into a conference room called

good news only. And they talk about which firms they're going to acquire and or which competitors they're going to kill, perform infanticide on, or if they survive or get out of the crib, we're going to buy them. Now they're much more sensitive to, okay, what kind of antitrust red flags is this going to raise? And I think you're already starting to see more innovation as evidenced by the fact, by the number of new startups. We are going to see the antitrust scrutiny before these guys are even broken up, because it's going to take a decade. And I don't know if the courts are going to go along with this, given all the Republican nominees who are absolutely infatuated and have this gross idolatry of innovators. huge boom in tech startups, FinTech, health tech, ed tech, the field I'm in, our firm, Section 4, which is trying to democratize business education. I can't get over just in the last 12 months, the amount of people and the amount of investors that have contacted us.

It's clear that the entire economy, I mean, look at healthcare, $3 trillion. Look at education, $750 billion, right? Look at fintech, a lot, a lot of billions. And we're talking about $5 to $8 trillion of the economy that is sort of up for grabs, or it's going to be a deck of cards thrown in the air, and we're going to see where it all lands. Anyways, back to trying to break up these monopolies. Earlier this week, a federal trial judge dismissed one of the antitrust lawsuits filed against Facebook. So the FTC, distinctive bringing in Professors Wu and Lena Kahn, is going to run up, I think, against some friction in the District of Columbia and Guam. Guam. Guam's pissed off at Facebook. It alleged that Facebook suppressed or suppresses competition. Well, no shit. And most notably by buying Instagram and WhatsApp. I think that is arguably one of the greatest failures in antitrust to let that shit go through. The judge ruled that the plaintiffs had not properly defined the market

or Facebook's supposed power within it. And he held that the plaintiffs had waited too long to complain about the Instagram and WhatsApp acquisition. They waited too long, which the government approved back in 2012 and 2014. The FTC and the states can appeal or they can refile, but they have a difficult road ahead. Why? Why, you ask? Why is it difficult? Why is the road? Why is that cahier difficile? I think that is road hard, hard road. Though the swiftness and thoroughness of the trial court's rejection of the lawsuit was a surprise. Most observers believe this was always going to be a difficult case. Why? Because for decades, the courts have made it harder and harder for antitrust challenges

to succeed under existing law. To change that will require either one, dramatic action by the Supreme Court, not likely with this court, or action by Congress, more likely, more likely. Which brings us to the other significant development. The House passed a package of five antitrust bills. It's not likely that any of them will pass the Senate in their current form, except for the kind of the layup, which is the one that increases the fees paid by companies seeking merger approvals. That's a big fucking yawn. But legislation progresses in stages and our hyper-partisan environment, antitrust action appears to be at least against big tech, bipartisan. Now they hate big tech for different reasons. Conservatives think that they're biased

and suppressing speech. They're not. As a matter of fact, if they have any bias, it's towards that crazy whack job, right-wing conspiracy shit because the algorithms love it. Because when you say that there's a basement in a pizza place that is drinking the blood of children, then Facebook loves that. It loves to spread that misinformation regardless of the damage it does. Anyways, my enemy's enemy is my friend. So if you're fucking out to lunch and think that Facebook has a conservative bias and you'll help me pass antitrust, then you do you, my friend. Republican Congressman Kim Buck from Colorado co-sponsored the bills in the House and made a statement immediately after the Facebook case was dismissed, saying the court ruling

just highlighted the need for additional tools and resources to our antitrust enforcers to go after big tech companies engaging in anti-competitive conduct. Go, go representative Buck from Colorado. Get the sense that guy'd be like, you go, I don't know, hunting with guy. I went hunting with rep Buck from Colorado or fly fishing, whatever. Anyways, let's hope that the buck doesn't stop there. That's some humor from the incredible geniuses that write this copy. Memo to self, fire their asses. Stay with us. We'll be right back for our conversation on FinTech and Wallah with Pierpalo Barbieri. Mike Gitlin. Through the words and experiences of investment professionals, you'll discover what differentiates their investment approach, what learnings have shifted their career trajectories,

and how do they find their next great idea? Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc. What software do you use at work? The answer to that question is probably more complicated Published by Capital Client Group, Inc. So what is enterprise software anyway? What is productivity software? How will AI affect both? And how are these tools changing the way we use our computers to make stuff, communicate, and plan for the future? In this three-part special series, Decoder is surveying the IT landscape presented by AWS. Check it out wherever you get your podcasts. welcome back here's our conversation with pierre paulo barbieri the founder and ceo of wallah pierre paulo where does this podcast find you i'm in fr France, in Paris, visiting family members here. Wow. So international man of mystery, an Italian name, working in Argentina, in France right now. You have family

in Paris? Well, I have a godson. One of my best friends in college had the terrible idea of naming me as the godfather to her first son. So I'm here visiting them after many, many months of not being able to see them because of the pandemic. And what's the mood like in Paris right now? It's improving, but everybody is concerned about a Delta variant. And of course, the mRNA vaccines are better. And a lot of people in Europe got the AstraZeneca shots. So the UK growth in cases is worrying. Yeah. Yeah, it is. It is frightening. So let's try and elegantly segue to the world of fintech. So break down Uwala for us. I had never heard of Uwala until about two months ago. Now I feel like I'm seeing it every 48 hours. Break it down for us. What is Walla? Walla is a startup that we began working on in 2015. We started coding in 16 and we launched

the public in 17 based in Buenos Aires, Argentina, where I'm originally from. That's where I grew up. But as you said, from Italian parents. And Walla is basically a financial solution for everyone in Latin America. And why do we need that? Because over 50% of adults in Latin America don't have access to a bank account. They've never paid for anything with any means that is not cash.

And therefore they're completely left out of the digital economy. So we started Walla with a simple premise of having one account that is inclusive so everybody can have it. It's completely free and universal. So we don't turn you away. And then we give you a debit card. And then with that debit card, you start building a credit history. And over time, we've added everything from bill payment to cell phone top ups, to lending, to savings and investments, and now insurance and merchant

acquiring. But at the core, it is the way to include people in a continent that has been served badly for very few institutions for a long time into the digital economy and modern financial services. So, and it sounds like an obvious question, but I run out of explanation pretty quickly. Why is it so important? And what are the advantages of citizens being banked versus unbanked? Yeah, absolutely. As the economy digitizes, which is something that we're seeing everywhere in the world, now almost 50% of transactions in the United States are going to be done digitally. In China, that number is even higher. Europe is going higher.

Problems arise when you have continents like Africa and Latin America where people don't have access to accounts. Because if you live in cash, you can only transact in whatever businesses are within your short physical distance. So within your immediate distance or whatever public transportation can take you. And so when we launched Walla, I'll give you a clear example. Somebody in one of the oil producing provinces in Argentina wrote me an email because everybody that gets a Walla gets my email. And she said to me before Walla, every time I wanted to visit a financial institution, a bank,

I had to go to a branch and I had to take the day off of work. And the banks didn't really want me as a client. And I had to take the day off of work. Whereas with Walla, everything's digital. It's in your app. Everybody has a smartphone in Latin America, but the banks have never added them to the system. And so this person cannot have a savings product, cannot invest her savings, cannot have a credit history.

So she cannot get a real loan. She doesn't have insurance. And all these things perpetuate a cycle where you have some people in one end of the spectrum who have great financial services, namely the rich, and there's everyone else who's completely out of the system. But that hurts the economies, even if it benefits the very few banks that as a cartel chose to bank some people and not the rest. And it seems to me, I mean, as evidenced by the valuation you're raising money at, there's a lot of stakeholder value to be created through banking the unbanked. Why did the traditional banking ecosystem in Argentina and Latin America

ignore these individuals? Because they're not profitable? Because there's technology hurdles? Why have they not done this? Well, that's a great question. I think that over the last 50 years, we've seen a great move toward universal banking in most geographies, like the United States and Europe. And regulators in those places basically told the banks, which are all licensed, well, if you want to bank the rich and give those people services, and those people are very profitable because you give them a mortgage and a credit card and insurance products and all these wonderful things, well, you have to provide a service to everyone. And there's been a lot more competition. There's over 5,000 banks in the United States. By contrast, in Mexico, a country of 130 million people, there's only 52 licensed banks.

In Colombia, it's even less. There's around 30. In Argentina, there's only 70. And's around 30. In Argentina, there's only 70. And so they've acted as a cartel. And so they've chosen to bank whoever was profitable with their structure of analog businesses, which are based on papers and on branches and on horrible tech systems. And then come us, like challengers that are saying, well, we can do everything digitally. We don't need a branch anymore. And we don't need your structure of costs that leaves half the population literally

outside of the system. Because ever more, there are all these services that you often talk about, companies like Spotify or DoorDash or Netflix that want to give services that are priced universally. Netflix in Latin America is only $4 a month. And guess what? That's less than one ticket to the movies. You can have entertainment for your whole family for less than one ticket to the movies.

So there's a lot of people that want that access, that service, but they cannot pay for it because they don't have a debit card. And these banks never gave it to them. And so if you think about it, when we launched Walla, believe it or not, there were people that were selling on Mercado Libre, which is our Amazon, subscriptions to Netflix at double the cost. So the poor had to pay double the cost to access the service because they didn't have a card to pay for it. And so we partnered with one of the card companies, with MasterCard, to provide these cards.

And everybody gets an account from which to create a credit history, to start saving. Now we do, you know, we have a money market fund that is now over 30% of the savings market or the investment market in the country of Argentina. And it grows from there. But at the core, it's an account so that everybody can participate in the digital economy, which, you know, is the future. So I'm just trying to put on my banking hat here, because traditionally, you kind of, we look at incumbents as stupid and lazy and what you find out is they're not. And that they're smart people. And I'm trying to figure out why smart people decided not to offer these services to the unbanked. And I would guess, at least initially, that they did an analysis and said that they weren't profitable, that right out of the gates, they couldn't make a lot of money or margin off of unbanked people who are probably tend to cluster more lower middle class or lower income.

How does your firm make money? Is it like a traditional credit card company where the MasterCard or the underlying infrastructure takes two or 3% and you take a piece of that? How does Walla make money? That's a great question, but let me start with the previous premise. Absolutely, these people are not dumb. They're very, very smart. And guess what? Some of the most profitable banking services are provided in Mexico, Brazil, and Argentina. And so, you know, there's a company in Brazil that has over 30 million credit cards called Nubank, a company that we greatly admire. There's us in Argentina. We're now in Mexico. There's obviously Mercado Libre doing this. They're all digital companies, right? So the structure of costs is lower. And so my break

even for a customer is a lot lower than some of these banks that had to rely on, you know, credit reports that were done on paper and on branches around the country. And yet, some of the most profitable banks in the world are Mexican and Brazilian and Argentine banks in ROE. And these banks sometimes in the European crisis, I remember that some of the banks were more eager to sell their home operations in European countries than they were to give up the Mexican franchises because there is little competition. You took money at 2% and you lent at 11%. And in the US, margins for banking are a lot lower than that. So

these people could optimize that and have great financial return without having to bother with middle class and lower middle class people. And so how do we make money? Well, we come in, we have radically lower cost structure. So we cut the cost of providing that universal account by 80%. And then we fully digitize the experience at a time when almost 90% of these countries have a smartphone. And then I argue that it's actually more human to have an experience on the phone

because it doesn't rely on a branch that in big countries like Mexico or Argentina are not accessible to everyone. And so we, around 25% of our revenue comes from interchange, which is the part of the transaction that comes from MasterCard that they take from the merchant. And then we have 25% of it that comes from credit because we build people's credit history and then we offer them the first formal loan that they've ever had access to. And we've built a revolutionary product because it's very transparent. And

we're not afraid to tell people how much we charge for the loan. And we explain every step of the way in a way that the incumbents cannot because they usually want to hide how much they charge lower middle class people. And then we do merchant acquiring, which is now we're helping like Square provide POSs because guess what? Like there are more people that have cards, the more merchants want to take cards. But in Argentina, unsurprisingly, the people that do merchant acquiring take huge, sometimes three times or four times

what it costs in the United States to process that transaction. So Square takes 2.2% of a transaction. Our competitors take 6% in Argentina. And so we are providing that service for 40% cheaper. And finally, we also now offer investment services. So as people digitize their spending, the final 25% of our revenue comes from the fees that we charge on a money market accounts and soon other investment products that we're going to launch. But realistically, we charge much lower fees for

even money market accounts than the incumbents because the digital structure allows for that. And only three years into our operations, three and a half years, we already cover 75% of our costs with the accounts that we have and the transactions that we have. So we're not that far from breaking. You started in Argentina and your next big market is Mexico? Yes, because 70% of Mexico, believe it or not, has never had access to a card. So on the border of the United States is a country that is young and its economy is growing. It's very integrated with the United States. And yet 70% of Mexicans have never had a visa or a MasterCard. So they cannot buy something on Amazon.

There is Amazon, but they cannot buy something there. And so believe it or not, in Mexico, there are all these places where people have to go physically there to pay their water bill or their electricity bill. And they have to pay an extra dollar on that bill just to pay it. So we do away with that. We fully digitize that experience so that you can pay directly from your cell phone without an added charge. Give me total numbers. How many people is Wallace serving right now? So we have over 3 million clients in Argentina, which is around 9%

of the country. And over 25% of 18 to 25-year-olds have a wallet. And in Mexico, we launched six months ago, and we have around 170,000 users. And we add between 1,000 and 3,000 people every day. And Pierre Paolo, when you look at a market, you strike me as a very analytical person. What boxes do you look for? What criteria? Is it the percentage of the population that's unbanked? Is it how concentrated or monopolistic or cartel-esque the incumbents are? But why did you skip up to Mexico and what do you look for in a market?

Well, first of all, is the percentage of people that have a smartphone. Second of all, is the relative use of the population and how many people feel comfortable trusting financial services that are delivered directly on the phone. Thirdly, is obviously how many people are banked. And that's why Mexico was our key first international market. We worked on it for two years. And so in Brazil, where people have had financial inclusion policies since the 80s, you know, 80 to 90% of people, one way or another, have a credit history. But in Mexico, 70% of the population is completely unbanked. And so that creates a very unequal world where there's actually a lot of fintechs in Brazil that are amazingly successful and yet very few in Mexico.

So we are attracted by the size of that opportunity and the true social impact that you can have when people can start creating a history and accessing services. And so this is a positive cycle that has a great positive externality for the rest of society, which is the ability of getting all those people that were outside of the system and bringing them in. And so actually it's good for the incumbent banks because then in the future, they'll be able to compete against me and offer services to all these people that now have a credit history that we've helped them build. Yeah. I'm not sure they'd agree that you're good for them. Maybe they tell their shareholders that. No, they don't like us very much. That's

why they really argue with the regulators that we're dangerous. And I always say the same thing. You know, we ask people to believe in democracy and capitalism, but then we don't give them a card. You know, we don't let them pay their services. We pay, so the poor have to pay extra to pay their water bill when the rich have, you know, automatic debit. Well, that's an interesting point. So let's talk about a little bit of regulation. The U.S. is seen as a country that appreciates innovators and disruptors and probably errors on the side, I would argue, of a lack of regulation, because we have this sort of idolatry of innovators and disruptors. Have you found that Argentina and Mexico have embraced the idea of a disruptor that might be providing value or banking the unbanked, or has the government, if you will, I don't want to say

weaponized, but have an unnatural bias towards the incumbents? Well, I mean, it depends on the situation, right? And so actually, Argentina has some pre-revolutionary regulations when it comes to accessing the financial system, because in 2016 and 2017, the government said, well, you guys haven't innovated and they haven't added people. And so 50 percent of the country is out of the system. So they came up with an instant transfer system like what the Fed wanted to do with Fed now. But the banks in the U.S. lobbied against very successfully. And so you can send from any account in a traditional bank to any fintech interchangeably without real costs.

It's like what India did and now Brazil is doing and Mexico has something like that. But Argentina was a pioneer back in 2017, pushing that kind of system. But the truth is that the incumbents want to lobby against this kind of innovation because it eats into their margins. And obviously, at first, it's only the embank that sign up for Wallah, because it's just a card and an account. But then when there's investment products and a better money market experience and merchant acquiring products and insurance products, then wealthier people say, wait, why am I paying this incumbent bank an opening fee, a maintenance fee, a renewal

fee for my card that doesn't give me any benefits, whereas these guys are doing it faster, cheaper, better, and my kids have access to Wallah, why don't I? And then they sign up. And so we've seen a lot of lobbying from the incumbents saying, oh, these fintechs are unsafe when we actually don't lend out our deposits. We operate with 100% of our deposits. And so we're actually safer than a bank because a bank lends the financial crisis 95%, but right now, 85% of everything that you deposit in it. And whereas we are what in the economic jargon is called a narrow bank. We don't lend out our deposits and yet the banks and sometimes the bank unions have argued against allowing us to grow. But I think that governments, both

from the left wing and the right wing in emerging markets are realizing that within 10 years, every part of the economy will be digitized. And so if you don't give people access, how are they going to be participants in the economy? And so, you know, you see the government of López Obrador in Mexico, it's a left-wing government and their government of Duque in Colombia is a right-wing government. And they all talk about financial inclusion. So I think financial inclusion itself is a very revolutionary idea. And even in the U.S., there's a lot of people working on financial inclusion because in the U.S., even with 5,000 banks, there's 20 to 30 million people, mostly immigrants, that don't have good services and they cannot build a good credit

history. And you don't need me to tell you how much a payday loan is in the United States. And the fact that those things are completely out of the system means that a lot of the less well off are kept in this cycle of poverty because of what others charge them to access the same things that you and I can access for free. And who do you see as your competition? Is it the incumbents or is it a MercadoLibre that similar to Alibaba's getting, my understanding is, is going vertical into payments? Who do you think is the biggest, the threat, the big and sort of the lazy that are already there? Is it MasterCard and Visa? Is it Square? Is it other disruptors? When you look at what you're doing, you think this is who poses the biggest threat to our growth?

No, I mean, MasterCard and to some extent Visa are our allies. Square is our inspiration in the merchant acquiring business, at least. And obviously, Cash App is an awesome innovation that they brought in. And so our biggest competitor, I would say, is cash. And it's a great competitor to have because cash isn't innovating. And more widely conceived, I think that obviously MercadoLibre is a competitor.

They're rolling out their verticalized payments infrastructure and they were a first mover in many of these markets. And the same as Nubank, which is expanding outside of Brazil into other markets. We compete against them in Brazil, even though they do a credit card and we do a debit card. You could construe that as competition. But I would say, first and foremost, it's cash and it's the incumbents who are all rushing to digitize thanks to an army of consultants that want to help them develop digital services. But funnily enough, it's the same people that two years ago were saying to the regulators, oh, Walla shouldn't be legal, that today are trying to come up with the Walla killer product, at least in Argentina.

And I find that funny. But but when people are trying to copy you, it shows that we're doing something good. And as I always say, at the end of this road, the incumbents win, but they do a product that they should have done 50 years ago. Great. Then let there be competition. Let there be creative destruction. And if we're not the best ones, then we should not win. Does Argentina have a disproportionate number of unicorns? Yeah, Argentina created some of the best sort of early tech companies, including Mercado Libre. But don't forget about Patagon.com, which was the first kind of digital banking platform that Wenceslas Cazares started. It created, you know, Despegar and OLX and Globant, which is an amazing company that has grown exponentially in the last few years.

They do development for some of the world's biggest companies. And so, I mean, American Airlines hires there, JP Morgan, Google, Facebook. They all have dev teams. And so I think the talent point and the human capital point is a great one. But what these companies often want and their right to is macroeconomic stability, which is what Argentina hasn't had. But on the other side, you know, there's going to be a search for tech talent around the world. And places like Argentina have a great opportunity, as does Ukraine or Bulgaria or Romania, places that have good education, good developers at a radically lower cost. And so if I'm a CFO of a publicly traded, you know, big tech company in San Francisco, why argue with some of the, you know, cultural battles that you have to face in San Francisco

and not try to give an opportunity to people in other geographies? And that benefits these middle income countries because you suddenly have a lot of inflow of hard currency. Coming up after the break. Financial inclusion is one of the ways in which Latin America can create a middle class. And when you have a middle class, you have a better republic, you have better institutions, you have a more independent press because they don't need to be paid off by businessmen or the government. And I think that actually strengthens democracy.

Stay with us. We're answering all your questions. What should you use it for? What tools are right for you? And what privacy issues should you ultimately watch out for? And to help us out, we are joined by Kylie Robeson, the senior AI reporter for The Verge, to give you a primer on how to integrate AI into your life. So, tune into AI Basics, How and When to Use AI, a special series from Pivot sponsored by AWS, wherever you get your podcasts. Partners is dedicated to making sure your company knows what really matters when it comes to AI. As part of their 2024 Tech Sector Report, Alex Partners spoke with nearly 350 tech executives from across North America and Europe to dig deeper into how tech companies are responding to these changing headwinds. And in their 2024 Digital Disruption Report, Alex Partners found that 88% of executives report seeing potential for growth from digital disruption, with 37% seeing significant or even extremely high positive impact on revenue growth. You can read both reports and learn how to convert digital disruption into revenue growth at www.alexpartners.com. That's www.aleixpartners.com slash V-O-X. In the face of disruption, businesses trust Alex Partners to get straight to the point and deliver results when it really matters.

So let's talk a little bit about funding. How much capital have you raised to date? This strikes me as what would be a fairly capital intensive industry. But at the same time, it seems like fintech is so, so hot. Is it a easy, difficult time to raise money as a Latin American fintech company? I think that there's a boom in Latin America startups and you've seen a lot of unicorns being created in the last few weeks. It doesn't really matter if you're a unicorn or not. Nothing really changes about a company from $999 million evaluation to a billion. But from a PR perspective, there's a lot of great stories and we have more interest than we've ever had

we've ever seen from vcs trying to invest in the region and guess what the region is under invested there's an amazing talent in mexico brazil colombia it's great to see that but i also think that there is such a thing as too much money and and more money is not always the right answer and we've raised 190 million dollars0 million to date. We have, as I said, 3 million cards, and you have to print and send those cards. We don't charge for the shipping, and so you have to pay for that as well. And obviously, you have to build a lot of the infrastructure. It's a lot harder to do one card in a country. I worked for two years to issue a single card in Mexico, but then scaling

that is easier. So I can predict what I'm going to issue in the next month or the next two months. And so it is a capital intensive business, but it is less so as you go along because adding new parts to the ecosystem, like the day we launched insurance, it was a lot easier than launching the first card. Or if you add a new product to the money market solution that invests in foreign equities, that's a lot easier than doing the first account. And so we've raised 190. And to quote one of our best investors, we want you to have money, but we don't want you to have enough money that you start doing stupid

things. And so I think we've been very careful. We've also seen cycles. And so we don't want you to have enough money that you start doing stupid things. And so I think we've been very careful. We've also seen cycles. And so we don't want to over-raise because that's what sometimes makes you do stupid things. Talk about, you transitioned from a historian to the CEO of a fintech company. How has that informed your decision-making or your approach to business? Well, I think being careful with capital is the perfect answer to that from the previous question. And trying to understand the economic history of Argentina

led me to this realization that one of the big problems that countries like Argentina have is this bifurcated structure, right? 50% of the country has great financial services because they can afford it and the rest are completely out. And that's part of the inherent inequality in Latin America, which is something that has historically been with us for a long time. And I think financial inclusion is one of the ways in which Latin America can create a middle class. And when you have a middle class, you have a better republic, you have better institutions,

you have a more independent press because they don't need to be paid off by businessmen or the government. And I think that actually strengthens democracy. And the real reason, in my humble opinion, for the de-development of Argentina in the last century is the lack of institutions. And that was my working assumption as an economic historian. And so in that importance of institutions, I thought, you know, what's the best thing we can do? Well, bank the unbanked. Give those people a chance to have a credit history and build a nest egg.

And that way they'll be more invested in the institutions and they'll be more invested in our democracy because the interruption of democracy is frankly the worst thing that has happened over the region. And you know, we can argue about the Cold War, but the truth is that sometimes and oftentimes it was the locals that wanted to eliminate the institutions. And I think what's beautiful about America, the best thing about America, and one of the reasons why, you know, America has been exceptional in history is how, you know, above all, everyone that has played politically has preserved or tried to preserve the U.S. Constitution.

And that has never been put into question. And so I wish Latin America had that. I think if we had a stronger middle class, it would be easier to defend that. And so that's the segue between economic history and starting a fintech that provides financial services that are more open and transparent for more people. So I'd love to do a bit of a lightning round because you're a Harvard educated economic historian, but you're not cursed with age or the experience to start checking your, I don't know, observations or conclusions. So quickly tell me, what do you think in your view, top of mind, is the future and the greatest threat of the American economy right now?

You look at the American economy and you say, this is what could take it down. I think too much concentration of very few businesses. And I think that creativity and competition are a great thing. And we need more of it, not less of it. To monopoly power. And so I think, yeah, I think monopoly power in big corporations that have better access to capital and better access to talent, those are some of the best companies in the world. But I think that when you have some of the best companies in the world, you need to make them compete.

And so I think that's a great threat. And I think that the greatest opportunity is actually the fact that no matter how difficult the immigration rules, a lot of the best talent in the world still wants to go to the United States. And I wouldn't trade my 13 years living in America for anything in the world. I greatly admire the promise of the American Republic and the structure of the American Republic. And there's something really beautiful about it. And there's this promise of coming as an immigrant to America and being able to fulfill your dreams. And I think that Americans sometimes under appreciate

how transformational that can be for the people that stay and for the people that leave. But guess what? If everybody opened the borders tomorrow and there were no limits, where would all the wannabe entrepreneurs wanna go? Where would all the people that wanna get the best education would go?

They would all try to go to the United States. And so I think historically, that's a great opportunity for America. It has been, and it is today, even if because of political battles, we don't see it. And so I think that that remains a great promise because a lot of countries try to shut the border so that people don't get out. And America shuts the border so that people don't get in, which I think is short-sighted.

Yeah, it's crazy that we would decide not to continue to embrace our superpower. What, talk crypto. Not to continue to embrace our superpower. Crypto. Do you think crypto's opportunities vastly outweigh its risk? Do you see any risk to crypto, to maybe the USD losing its role as a default currency? When you look at crypto, do you think, wow, there's some externalities and some unknown knowns here? Thoughts on crypto? Yeah, it's a great question. and some unknown knowns here. Thoughts on crypto?

Yeah, it's a great question. And we think a lot about it because our users ask us for crypto literally every day. Whenever you ask somebody about the dethroning of the dollar, the problem is what comes after the first yes or no, which is what's next. And the yuan is not convertible. The euro almost died 10 years ago, even if it didn't. And there's just no one else. And so I think that the United States, if it had a fast transfer protocol, would be unbeatable, which is why FedNow shouldn't be blocked. It should be

powered and furthered by Treasury. And I think an e-dollar is inevitable. And I think that that will reduce the desire for any other private currency. And so in terms of other cryptos, I think there is a role for them as adoption goes up, but it's definitely not safe. It's definitely not a currency in the traditional sense. It may be a sort of value, Bitcoin or potentially Ethereum. There's a lot of very cool things happening in the Ethereum world, but that doesn't mean it's going to replace the dollar. And what I'm most afraid of is that people that don't have a high net worth being encouraged to gamble on it because they think it's going to go up, because that's how bubbles are built. So I think that there is a role for it in the international financial architecture,

but there's a lot of risks for people who are not used to volatility trading crypto thinking that it's always going to go up. And I think the last few weeks have seen a big reckoning, not to mention a lot of regulators trying to, for lack of a better term, preserve the monopoly of states over the issuance of money. And so coordinated attacks from the UK and China, and there's a lot of rumors about what the US might do. There have been for six months, create a big potential unknown for crypto holders, even if I think that there is a future in this space, particularly in what's being created on ETH. to irrelevance or are they Apple and Microsoft that, you know, will be able to come back and fight off disruptors and come back stronger? Are you bullish or bearish on the incumbent

financial services institutions in the U.S.? Well, I would, I would differentiate that. I think there's a group of very large banks that are actually the most attuned to innovation. And I've had the opportunity to meet Jamie Dimon. And I think that I have never met a banker like that, right? Those are people that think about innovation every day and they're amazing leaders and inspirational leaders, but not every bank in the United States led by Jamie Dimon. And so I think that the United States

is eventually going to have a lot less banks and it's going to be a lot more concentrated. And big tech is coming for them as are a lot of challenger incumbents. And so I think there's going to be a bifurcation and you have to have a few that remain winners like JP Morgan and Goldman, full disclosure, an arm of Goldman invested in Wallah. But also you're going to have a lot of losers, which are people that are just too small to really have the digital size or the ability to invest in the digital innovation that is necessary to remain competitive when Google tries to get into your business. So just to wrap up here, Pierre-Paulo, you're one of these kind of freakishly successful young men. So I, it's, I usually ask people advice to their younger selves, but that's, you are your younger self and you've kind of, uh, I don't know, you're sort of in one of those, those crazy, um, superhuman built, built in a factory of lesser humans.

What's, what advice would you have for your 22 year old self now that you're at this age, old age of 30? God god i can't believe that um i'm actually i'm actually 34 i'm actually 30 oh wait i got that wrong oh you're old maybe you're old i thought you were 30 that makes me feel less bad to die young absolutely i'm sold yeah um that's uh but going back to your question, if I had to give advice to my 22-year-old self, I would say, find the right mentors and invest time in that because a great mentor can really change your life and can give you great advice at the moments when you need it. And so, Neil Ferguson, as you know, is a mentor of mine. Yeah, yeah. And Neil once gave me great advice about my career. He encouraged me to, I had gotten an offer from Goldman and an offer from somewhere else,

and it was the summer of 08, and the world was melting. And as a young college kid, I wanted to go do something else and something potentially more fun in the short term. And he said, are you crazy? You have an opportunity to go to Goldman while the financial crisis is ongoing. Go there. And that is just one example of the million times in which a great mentor gives you life-changing advice. And that creates opportunities in and of itself. And the other piece of advice I would give is try to fail early and learn from it. And so I think that when we started Wallah, I was overly worried about the first MVP.

I was overly worried about the first reception and I didn't understand that the product iterates with time. And it's really not a cliche when people say, if you're proud of the first product that you ship, then you shipped it too late. And so that I think applies not just to apps, it applies to life. I think it's important to learn the lessons early so that you have the experience of failure and

what it teaches you when the stakes are higher. Pierre-Paulo Barbieri is the founder and CEO at Walla and the executive director at Green Mantle, a macroeconomic and geopolitical consulting firm. He's also a senior associate at the Applied History Center of Harvard's Kennedy School of Government. Pierpaolo has also served as chief strategist of the Brevin Howard Argentina Fund. He joins us from Paris where he is visiting his godson. Pierpaolo, stay safe. Thank you so much, Scott. Pleasure to be with you. Algebra of happiness, grandparents. I did not have grandparents in my life.

My, I have, you know, how everyone brags about their life expectancy, that everyone in their family is living to be 140. The average lifespan of my grandparents was about 53. They all kicked off. The majority of them didn't even make it to my age and I'm 44. Actually, that's not true. I'm older, but I've started lying about my age. I'm also on T-therapy and naked. I look 45 again. Anyways, probably too much information back to grandparents, back to grandparents. My kids, grandparents are in their lives and I can't express how rewarding it is. Uh, not so much for me, but how rewarding it is for them and the grandparents. I just, grandparents are just a gift from God. Uh, I mean, what, what it really highlights some

interesting things. And that first is for me, it's highlighted how much, how ageist we are. And that is when their grandparents, I see their grandparents and I'm with friends that are my age. My friends are polite, but effectively want nothing to do with them because they're older. And we treat older people with a certain amount. I don't call it disrespect. No one's mean to them or disrespectful to them, but they become invisible. And like, you're not in the workforce anymore. You're not good looking anymore. You just kind of lose your relevance in the eyes of younger people. I know how harsh that sounds, but I think it's true. I think people are polite to old people, but mostly they become

invisible. And when my kids see their grandparents, it's like Jesus Christ and LeBron and Beyonce walked in. They go so apeshit crazy at these nice people who want to hang out with them and play risk with them and bring presents for them. We were watching the Euro Cup yesterday and my oldest grandmother was literally sitting there feeding him white cheddar popcorn and clipping his toenails, grooming him. And he just looked like he was in heaven. But that gift, just observing that kind of just that unfiltered love, it's just so rewarding. And you got to think it provides the kid with that level of reassurance that these people just are so crazy about me. I must have some value. Anyways, where am I heading with this? One, I have tips on how to get along with your grandparents or your in-laws. This is going to piss some people off. One, I have a fantastic relationship with

my in-laws, mostly because Polish is their first language. German is their second language. And they speak competent English, but I wouldn't describe them as having great English. I'm going to catch shit about that. But we don't really communicate and it's a feature, not a benefit. And that is, I believe that relationships with your in-laws come off the tracks when you start communicating because you find out he supports Trump and you find out that she has real views on your parenting, none of which result in anything good. So the key is don't communicate a lot. They know I love them. I know they love me. That's enough. The other keys, buy him a Lexus every three years and send her and her daughter on a trip every once in a while.

Boom, you're a hero. They like you. You're done. And don't communicate. Anyway, also, that's not the real advice here. The real advice here is that if you are fortunate enough to have grandparents in your kids' lives, between the ages of kind of zero and 10, maybe even 12, oh my gosh, to not facilitate that, to not figure out a way to use your mileage, spend some money, plan some trips to give your kids and their grandparents some time together, you are punching the universe in the gut because that relationship is so pure. It's so wonderful. And it is fleeting. It is fleeting. Make an effort, really make an effort

to observe and give your kids an opportunity and your parents an opportunity to register what is really one of the most pure forms of love you will ever see. And that is the relationship between a kid and his grandma and his grandpa. Our producers are Caroline Chabron and Drew Burrows. Claire Miller is our assistant producer. Two producers and an assistant producer. Pretty soon we'll have a gaffer and a makeup artist. And if you see the camera, you will see we do not have a makeup artist yet. Oh my God. I look like I just walked out of fucking Fukushima. If you like what you heard, please follow, download and subscribe. Thank you for listening to the Prop G Show from the Vox Media Podcast Network. We will catch you next week. favorite brand really gets you? Deliver that feeling to your customers every time.

Klaviyo turns your customer data into real-time connections across AI-powered email, SMS, and more, making every moment count. Over 100,000 brands trust Klaviyo's unified data and marketing platform to build smarter digital relationships with their customers during Black Friday, Cyber Monday, and beyond. Make every moment count with Klaviyo. Learn more at klaviyo.com slash BFCM. Support for the show comes from Alex Partners. Did you know that almost 90% of executives see potential for growth from digital disruption? With 37% seeing significant or extremely high positive impact on revenue growth. In Alex Partners 2024 Digital Disruption Report, you can learn the best path to turning that disruption into growth for your business.

With a focus on clarity, direction, and effective implementation, Alex Partners provides essential Thank you. That's www.alixpartners.com. In the face of disruption, businesses trust Alex Partners to get straight to the point and deliver results when it really matters.