#544 Brian Barnes on the Finance Super App

Brian Barnes is the founder and CEO of M1 Finance, a free automated brokerage offering a modern approach to managing an investment portfolio. In this conversation, we discuss building a finance super app, long term investing trends, generational differences, legacy finance platforms, and how M1 has grown so fast over the last year. ======================= Polymarket is the world’s leading information markets platform where you can trade on the most pressing global questions. Choose from a variety of markets to trade: Will Trump launch a new social media platform? Will NFT trading volume continue to skyrocket? With over 100 million dollars traded in the last 6 months, Polymarket is the go-to platform to trade on the odds of future events. Think you know more than the market? Trade on your beliefs and earn a return if you’re right. Want tomorrow’s news today? Use Polymarket to see real-time data on what the market thinks will happen. No fake news, no pundits without skin in the game. So, head over to polymarket.com and make an account today with the referral code “Pomp.” Every Monday until May 10th, you can win $500 by participating in the #PolyWhale Twitter giveaway. Click on the link for more info: polymarket.co/PolyWhale ======================= OKEx is a leading crypto exchange known for providing the most options for crypto traders and investors. Whether you want to trade spot, futures, options or swaps, OKEx gives you institutional-grade tools and a best-in-class trading engine. The platform offers credit and debit card funding options and supports 40 different fiat currencies, including EUR, CAD, GBP, TRY, INR and RUB, to name just a few. You can invest, trade, and earn yield, all within one place at okex.com. OKEx is not available to customers in the United States. ======================= Exodus is an absolute game changer in the crypto wallet space, and we’ve teamed up to offer an exclusive discount for you, as listeners of the podcast. Sign up for Exodus today using my promo code Exodus.com/pomp. This is a no brainer for both newcomers and crypto heavyweights - go sign up today. =======================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Brian Barnes is the founder and CEO of M1 Finance, a free automated brokerage offering a modern approach to managing an investment portfolio. In this conversation, we discuss building a finance super app, long-term investing trends, generational differences, legacy finance platforms, and how M1 has grown so fast over the last year. I really enjoyed this conversation with Brian, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is Polymarket.

• 0:46Anthony Pompliano?

  They're the world's leading information markets platform where you can trade on the most pressing global questions. You can choose from a variety of markets to trade. Will Trump launch a new social media platform? Will NFT trading volume continue to skyrocket? With over $100 million traded in the last six months, Polymarket is the go-to platform to trade on the odds of future events. Think you know more than the market? Trade on your beliefs and earn a return if you're right. Do you want tomorrow's news today? Use Polymarket to see real-time data on what the market thinks will happen. No fake news, no pundits without skin in the game. So head over to polymarket.com and make an account today with the referral code POMP. Every Monday until May 10, you can also win $500 by participating

• 1:30Anthony Pompliano?

  in the Polymale Twitter giveaway. You can go to the description and click on the link for more information. Again, polymarket.co, and if you use code POMP, you'll go, I'm sorry, polymarket.com, co, whoa, what was I thinking? Polymarket.com, and make an account today and use referral code POMP. Go do it. Now that I said polymarket.com, you guys are all going to remember it. So go sign up today. Next up, remember that crypto moves fast and many crypto-focused companies can't keep up. Crypto exchanges that cut through the noise are the ones that give you access, wherever you are in the world, to the cutting-edge projects emerging in the new asset class. If you're looking for an industry leader that gives you access to a huge variety of crypto assets, tools and services, I'd recommend OKEX.

• 2:15Anthony Pompliano?

  OKEX. As we all know, Bitcoin and other crypto prices can be volatile. If riding these price waves ain't your thing, OKEX also lets you earn passive income with your crypto. You can check out the latest high-yield crypto earning options on OKEX Earn. Go open an account today at OKEX.com/pomp. OKEX.com/pomp. Go get in on that crypto exchange. OKEX.com/pomp. Go check it out. Last but not least is Exodus. They're leading the world out of the traditional financial system by building beautiful and user-friendly blockchain products. With their focus on design and user experience, Exodus has become one of the most popular and loved cryptocurrency apps.

• 3:01Anthony Pompliano?

  It's supported on both desktop and mobile, allowing you to sync your wallet from multiple devices. So you can have access to your funds anywhere. You can instantly exchange around 100 different cryptocurrencies straight from your wallet. Interactive charts let you view an asset's price history and your portfolio's performance over time. And maybe the best part, Exodus is integrated with the Treasure Hardware Wallet, making advanced security easy for everyone. Visit exodus.com for your free download or search Exodus on the App Store or the Play Store. Again, Exodus, probably the most beautiful user interface that I've seen in all of crypto. Go to exodus.com for your free download or search Exodus on the App Store or the Play Store. All right, let's get into this episode with Brian. I really hope you enjoy this.

• 3:48Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 4:19Anthony Pompliano?

  All right, guys. Bang, bang. I've got Brian here with me. Thank you so much for doing this.

• 4:23Speaker 02

  Yeah, thanks for having me on.

• 4:24Anthony Pompliano?

  For sure. Let's just jump right into it. M1 Finance. There's a ton of people have heard about it. What do you guys do?

• 4:32Speaker 02

  Yeah, so we are a holistic and modern personal finance platform. We combine the best of digital investing, digital borrowing and digital banking into one seamless application. Our investing platform is free investing in a custom stock and ETF portfolio. Our borrow platform is a low-cost line of credit securitized against your investment portfolio. So you can borrow at 2% against your investment portfolio. And then we have a high-yield checking account. So a checking account that provides you 1% interest on your checking account, as well as 1% cash back through an M1 issued debit card. And everything works together in a very seamless, intuitive fashion. So you can set up automated rules. So every dollar is intelligently allocated to your personalized plan.

• 5:11Anthony Pompliano?

  Many people who are listening to this have probably heard of super apps, especially coming out of the East. And you guys have described M1 as kind of a finance super app. Talk a little bit about the just philosophical kind of approach to building this. You name some of the products you already have, but why think of it as a super app? And kind of how does that drive the product development or the product suite that you create?

• 5:34Speaker 02

  Yeah, so I think, you know, if you look at how people manage their money now, they'll probably have a finance folder on their phone. And it's, I don't know, 15, 20 different applications and you're trying to like do every single money movement manually. You have to do the trades. You have to wait for things to settle. And it's just become a little bit of a mess. And there's a benefit to having all your money in one place that, you know, I think from the ideal perspective, the user goes to a application, a platform, and they say, I use this to manage my money. I use it to manage my finances. And the notion of a checking account, a brokerage account, that's very like legal in nature. And it shouldn't really matter to the end consumer. It's just, you know, I have to manage my individual finances. I think historically, the banks have done that. They just did a pretty mediocre job of it.

• 6:16Speaker 02

  You know, they would have a checking account. They'd have an auto loan. They'd have a brokerage account. But they felt like pretty distinct products, just under the same brand umbrella. M1 really tries to think of it as how can you manage? Your money holistically, how can you view your assets and your liabilities or your investments and your borrowing? How can you manage your cash flow, how you spend and receive money? And how does each one of those enhance one another? And so the perfect example of that is we have a free investing platform. So you can invest in exactly what you want to invest in. And because of that, we can offer you cheaper and lower cost borrowing rates than you can get anywhere else. So it's not something that you can put together with sort of point solutions out there and put it together in your finance folder. It's only when you bring everything under the same platform that you're able to have these synergistic effects in managing your money.

• 6:57Anthony Pompliano?

  It's it's basically you get an efficiency of scale to some degree, right?

• 7:01Speaker 02

  Efficiency of scale and it's, you know, if I'm trying to loan you money and I don't have your assets, I'm looking at your credit score. I'm looking at your income, I'm trying to verify that versus a if I know you have, you know, X amount of dollars invested with me and I have the, you know, ability to see into that at any given basis. I just have more information on you. And so it's a efficiency of scale, it's a, you know, like more information spectrum. And so the ability to, and it's a, it's a moving money internally on the M1 platform is instantaneous. Moving it to Chase Bank takes a day, you know, moving it to Wells Fargo takes a day, moving it to Schwab, you know. So there's just like synergistic effects to managing everything cohesively rather than putting together a bunch of solutions out there.

• 7:44Anthony Pompliano?

  So this idea of a finance super app has been very well received by the market. I literally had to write this down to make sure that I got it all right. You did a $33 million Series B in June of 2020, $45 million Series C in October of 2020. And then you just did a $75 million Series D in March of this year. Why is it growing so fast and where's that growth coming from?

• 8:11Speaker 02

  It's fun hearing those numbers, but so I think it's, you know, we were talking about like the, the banks out there haven't done that great of a job. And it's something that your finances are so incredibly important. It's something that every single person has to manage their money. How you manage it has like a drastic effect on the quality of your life, what you're able to do, what you're able to afford. And the tools are just pretty bad. And so, you know, it's something that when I was started in one. We started in mid 2015. I looked at it and every consumer application outside of finance had been improved in spades. You know, it was sort of unrecognizable to what you could do 10, 15 years ago. And the brokerage platforms, the banking platforms have not changed at all. And so I think it's, there is now a lot of innovation. There's a lot of, you know,

• 8:56Speaker 02

  consumerization going into the finance space, much like the rest of the world. And it's bringing to par what people should expect with their money. And it's just, there's a lot of people out there with lots of money to manage and they're just looking for the best tool. The nice thing is, you know, M1 has ridden a wave of, you know, what we're doing as well as some of the other fintech innovators as sort of pushing the, the boundaries of what's possible with money management.

• 9:18Anthony Pompliano?

  Yeah. So obviously, as you continue to improve kind of the technology product and then incorporate that philosophical approach, it's like a finance super app, you're really targeting retail investors here, right? Or kind of retail asset owners. And so as you do that, it happens to be coinciding with this like rise of the retail trader. So there's all this talk, whether it's GameStop, Dogecoin, or name your other asset, where folks are essentially just day trading, right? Or, or kind of short-term investing. You seem to be much more geared towards long-term investing and less about the day trading type kind of approach. Talk a little bit just about the difference between those two and why focus on the long-term investing rather than that short-term investing that everyone else seems to be profiting off of right now?

• 10:02Speaker 02

  Yeah, for sure. So, you know, M1 is definitely oriented towards long-term wealth building and wealth management. So we, we think of things, you know, you're saving for your retirement, your kid's education, your second vacation home. It's, you know, these very like substantive things where you're trying to save bulk of money rather than, you know, make money on Thursday. And so I think that there, you can be successful in both. And, you know, the traders have done incredibly well, you know, year to date or the last 12 months, whatever it may be. I think there, there are two different mentalities. Trading, you're trying to play off the price movements, you know, it's like the, the market says something is worth X on, you know, Tuesday at 10 a.m. And then it's X plus 5% at Tuesday at 2 p.m.

• 10:45Speaker 02

  That happens, I think, we take a mentality that that's actually relatively rough to predict. There are going to be random fluctuations and there is a little bit of a, you know, flip of the coin aspect of whether you're going to be right and wrong. It's exhilarating, it's fun, but it's probably not the best strategy. And you get this, you know, aspect of it's incredibly taxing efficient. Even if you make money one time, you know, you, you have to continually do it over and over again. Versus long-term investing is buying in, buying ownership stakes and the ownership stakes of, you know, the companies, the asset class, they have an intrinsic value. And what you're trying to do is benefit by the intrinsic value increasing over long periods of time. And so if you're buying into a company, I actually think it's easier to say this company is going to produce more, it's going to, you know, improve margins, it's going to grow revenue and be a more valuable company in five, 10 years than it's saying, you know,

• 11:30Speaker 02

  this price movement is going to move on, you know, in the next three days and I'm going to play earnings and, you know, try to guess better than the street. And so it's really just a different mentality of, you know, playing price movements versus buying ownership stakes and benefiting by the ownership stake. And M1 has just been always oriented and geared towards that. And so we, we say that for investing, you're actually making relatively infrequent decisions. It's what, where do I want my money to be held at any given time? And you're trying to hold it for, you know, months, years, decades. And so what actually becomes tough is you have incremental money with your paycheck every two weeks. And how do you put that to work? And so M1 is much more geared about you tell the platform, here's how I want my money managed. And then anytime you have incremental dollars, it just is automated according to your custom plan.

• 12:13Speaker 02

  And so it's the sort of routine administrative nature that is automated rather than the, you know, short-term fun trading aspect of things that, uh, that has, you know, been, been on CNBC a lot lately.

• 12:23Anthony Pompliano?

  Well, it almost feels like in some way, you're really building technology to help humans avoid the pitfalls of being human, right? So all the emotional decision-making, all the short-term kind of optimizations. Uh, and really what it gets at is this idea of discipline around being an investor, right? And kind of sticking to a long-term thesis or a long-term view. Talk a little bit about maybe some things that you guys have done in the product itself, uh, to adhere to that idea of discipline and the long-term nature. There are specific things that maybe you do that others in the market don't do that you think kind of pushes people to, to be more long-term oriented?

• 12:57Speaker 02

  Yeah, so I 100% agree with that. We talk a lot about financial wellbeing and, you know, doing beneficial habits and automating those habits so that you don't have to consistently remake the decision. And so it's, you know, the exact same as working out or eating well. It's, it's whether you do that like somewhat well over long periods of time versus, you know, you hit the gym really hard, you know, next week. And so for M1, you actually can't trade on the platform. So buying and selling intraday is just something that isn't supported. And so, you know, if you do want to make the trade, there are better platforms out there. We're not that good at it. M1 is all about a portfolio allocation. So you're designing, hey, this is how I want my portfolio allocated as a whole. Then what we're doing is anytime

• 13:40Speaker 02

  money is distributed into that and you can set up recurring deposits. So, you know, $500 with your paycheck every two weeks, we survey how your portfolio has done relative to your allocation and we intelligently direct the money. And the, the way that we do it is basically enforcing a buy low, sell high. So, you know, if you want something to be 10% of your portfolio and it's only seven, we're going to buy more of it. We're going to dynamically rebalance your portfolio. And we're going to say, you know, we're going to, with that sort of control risk tolerance, we're going to systematically buy low and sell high. And then we have a lot of other products on the platform, you know, we have IRA accounts and free IRA accounts. So, you know, thinking systematically about how do I like invest and save for, in a tax advantaged way for long periods of time. We have our borrow product,

• 14:23Speaker 02

  which lets you tap into the liquidity of your portfolio at incredibly low interest rates, which does a lot of things. It allows you to invest more. So you don't have to sort of like sit on the sidelines with this cash buildup, sort of having a rainy day fund. And so you can always feel comfortable putting it to work, having it work for you, and you still have access to the liquidity. It is also like a huge tool for minimizing taxes. So you never have to, you know, if you want to tap into the liquidity of your portfolio, you don't have to sell incur taxable events. And so it's, it's sort of the culmination of all of those things that just automate the beneficial behaviors of personal financial management and do it over long periods of time.

• 15:00Anthony Pompliano?

  Yeah. What happens to the incumbents here? Like all these legacy banks, all of this legacy infrastructure, brokerage accounts, et cetera. Do they just get completely wiped out by kind of fintechs in general and this idea of a finance super app and kind of what you guys are doing? Or is there coexistence? Do they have to evolve? Like just walk me through how you think that plays out.

• 15:20Speaker 02

  I think it's a coexistence and I actually think it's somewhat generational and so M1 actually looks, you know, and thinks incredibly highly of Charles Schwab and Vanguard. And we, we talk about it as M1 wants to create the 2020 version of those companies. They were created in the 1970s. And if you look at Vanguard, it was a better product, better pricing than the mutual funds. And Charles Schwab was a better product, better pricing than the wirehouse brokerages. And so over incredibly long periods of time, they compounded at incredibly high rates. And now they're, you know, $100 billion behemoths Vanguard custodies on six trillion bucks or whatever it may be. And, you know, really just reinforce better product, better pricing. And I think it's, it's not like Morgan Stanley or Merrill Lynch, I guess Merrill Lynch went away,

• 16:03Speaker 02

  but Morgan's, you know, they're in Bank of America now, but you know, it's not like Morgan Stanley's away. It's just, you know, it, it has a demographic, it like, it's almost people who are, you know, 60 plus are comfortable overpaying for their financial services. You know, people who are 40 to 60 are currently on the, the Schwabs of the world. They're comfortable overpaying and it, it's something that these new generations of platforms, whether it's, you know, ourselves, Robin Hood, the, the Robos, the, the Bitcoin platforms out there are going to get a disproportionate share of this new generation. And I think they're going to hold on to them and be that generational player for 10, 20 years. And at that point, they're going to hold the mass affluent audience. And then you're going to have your new fintech players, you know, coming in and, and getting the uh, new 20 and 30 year olds to, to sign up for the platform. So I think it's, it's more generational.

• 16:47Speaker 02

  I do think the banks, you know, the, the nice thing is they have like brand name and profits and you know, all, all that kind of stuff. Having a like legacy code base, all the retail branches, all that, that would be a massive hindrance. And I think it's, you know, very difficult to sort of compete with that as like an anchor dragging along. Whereas the, the world as a whole, not just financial services, is digitizing everything. And, and having your expertise be in that realm just massively benefits you versus the, these old incumbent players.

• 17:18Anthony Pompliano?

  Yeah, what's so fascinating to me is, I think this is still true. When ATMs first came out, everyone yelled and screamed and said, "Oh, my God, they're going to kill the bank branches." Right? Bank tellers, they're going to be no longer needed, and so you're going to put all the bank tellers out of business. But what ended up happening is there's now more bank tellers than ever before. Right? Why? Well, because the ATMs actually increased the usage of the banking system, which therefore drove more people in. And so I always think a lot about like, yeah, sure, theoretically, the world should work where better technology or new companies come and disrupt the incumbents. But actually, what is more likely is the user base that you guys are onboarding were folks who probably weren't doing that much investing previously. Right? It's a younger generation, and so you're actually bringing more and more people into kind of these investing platforms, which is a net positive and kind of grows the overall pie.

• 18:03Anthony Pompliano?

  And so is that what you're seeing in the actual data? Is this mostly young people, especially over the last year or so with the pandemic and kind of the macro environment? Or is it pretty spread out across demographics and geographies and kind of all these things that people are talking about?

• 18:17Speaker 02

  I actually think it's probably more spread out than than people anticipate, especially with the M1 user base. I do think in a lot of the other fintechs, it is introducing a net new, you know, investor to to invest for the first time. And, you know, when when things go up into the right, it's it's exciting, it's exhilarating, and so people are having a lot of fun with it. For for M1, I think we gear a little bit more to a slightly more affluent crowd than the the some of the other fintechs. And as a result, you know, just affluence is almost like directly proportional to age, and so we're a little bit older than than that. And so, you know, our average account balance is in the tens of thousands. We have, you know, $4 billion on the platform that has 5x over the last year. And it's people bringing over $50,000 accounts, quarter million dollar accounts, low, single-digit million dollar accounts

• 19:01Speaker 02

  from the incumbent players, which is really booing the AUM. And so for for M1, our growth is more driven by a, what we call like mass affluent, five, six, low, seven figures of investable assets, really looking for a better tool. I think they're they're a little frustrated that the Schwabs of the world, the Fidelities of the world, the Ameritrades, E-Trade- They haven't innovated in 20 years and the only change that they made was going free due to fintech pressures pushing them that way. And so I think it's the innovation and the better product experience is led by the new entrance into the space, the fintech peers. It depends whether people are sort of more comfortable, you know, having a like truthfully worse user experience, but just having the credibility of a established brand name that

• 19:45Speaker 02

  has been there for decades and decades.

• 19:48Anthony Pompliano?

  Yeah, you've talked a couple of times about various products or kind of this idea of free. What's your business model? How do you make money? And then how do you think about that kind of aligning interest with the user?

• 20:00Speaker 02

  Yeah, so we have three main products and one invest, and one borrow, and one spend. We also have an annual paid subscription. So all of those are free by default, but we have a paid subscription. That's sort of like an Amazon prime. It's if you want the best of M1, you can pay in to get that. So that's the easiest to understand. That being said, we make money on all three of our products. So M1 invest, we can monetize the cash that people hold on the platform. We actually do a lot of securities lending. So there's a big marketplace to borrow securities out there. We can lend the securities out, much like a bank takes in deposits, lends out deposits. We can take in securities, lend out securities. And then we do get that boogeyman of payment for order flow, which I, you know, we can go into as much depth as you want. It's not as bad as people think. We

• 20:43Speaker 02

  M1 borrow, we charge a rate and our cost of capital is less than that. So we're earning a spread. And then on the spend side of the world, it's much like a bank. So we make money on the deposit as well as anytime someone swipes the card of interchange. And so you have really, I mean, M1 makes money on the assets held on the platform, the borrowings through the platform and the transactions. And it's really just if we become someone's primary financial institution, it's a very vibrant and healthy business. In terms of being free and sort of aligning with the interests of our consumer, I think, you know, Financial services has been like, a lot of aspects of it have been free for a long time. I mean, you know, the, the, like, very few people pay for a checking account and they're taking in the, the cash and the bank,

• 21:24Speaker 02

  like monetizes the cash balances, but they provide you a service to, to sort of have that like double sided marketplace. A credit card, you know, there might be an annual fee, but oftentimes they pay you to use it, you know, you, you swipe and they pay you one, one and a half percent. And I think it's really just the, the dynamics of how the money is exchanged and where money can flow. I do think the not having an explicit charge for the, the services is, does align interest. And I think those revenue streams sort of exist, whether you charge or not. And I think it's just, you know, M1 and the companies like it are saying, we can survive solely on that. We don't have to charge in addition to these backend revenue streams.

• 21:59Anthony Pompliano?

  Yeah. Talk a little bit about the payment for order folks. I think people don't understand actually how that works and then why platforms choose to do it and kind of what the benefits are. Um, I think they've heard a lot about the downsides, but maybe just explain real quickly how that works and then what the benefits are.

• 22:14Speaker 02

  Yeah. So, um, we are a brokerage. So that's what we're regulated and that allows us to buy and sell stocks and ETFs for customers. When we go and buy and sell stocks and ETFs, we have the option to send it to an open exchange. So the New York Stock Exchange, NASDAQ, a few others, or there are execution venues. They're called wholesalers and that's the citadels, the virtues, the two signals of the world. In any one of those cases, there's going to be a different, uh, amount of what you pay versus like sell a security for. And the difference between that is the spread and on the open exchange, there is a, you know, spread. It may be a penny and maybe five pennies. And then there are also exchange fees. And so M1, we have the ability to send it to NIZI and, you know, pay the like spread equivalent and the exchange fees.

• 22:59Speaker 02

  What the wholesalers do is they actually compete and say, we will offer you better pricing than what you can get on the open exchange. So we will like execute between the spread. We will give you better prices for buys, better prices for sells, and we will make up for it in volume. That's their whole proposition. And so they're basically competing on efficiency and compressing the spreads and giving better pricing to the people who are executing. And to make up. For it in volume, they'll actually pay brokerages to send it there that, you know, they're making a fraction and they say, hey, we want as much volume as possible, we'll send it there. And so I do think it's an advantageous relationship where the customer, the end retail customer does get better pricing. If we were to send it to the open exchange, you would get worse pricing. And so, you know, it's something that we can advantage both the individual retail consumer by giving them better execution pricing.

• 23:44Speaker 02

  And we also get paid for it. And so that covers the cost of developing the product, developing the platform, you know, executing these trades on the customer's behalf. And so I actually do think it's a, it's a unique like business model. I actually think works incredibly well. There are downsides associated with it. I think, you know, it's not all not positive. The, the worry is if you have all of this operating in sort of this like opaque, you know, like off the open exchanges, you won't have as much pricing transparency. I buy the argument. I don't think we're there yet from just like how much gets executed on each, but those would be the arguments for both. I actually think it's, it's better pricing and, you know, the brokerage gets paid for it. The downside would be there'd be less pricing transparency if it took over the vast majority of the market.

• 24:30Anthony Pompliano?

  Got it. That all makes sense. What's next for you guys?

• 24:33Speaker 02

  So, I mean, you know, we, we, we talk about ourselves as the, the finance super app. And so we really do want to be anything and everything that people can do to manage their money. So we have the invest, borrow, spend. We think those are like pillars of M1 and that will be our pillars moving forward. But we'll move more into different types of lending. So we'll, you know, we, we have it against your liquid assets. We'll be able to, you know, lend against your hard assets of your home, whether that's a mortgage or HELOC unsecured. And really just say, hey, this is what is available to you. We're underwriting you as a person. We're going to give you the best rates, most flexible terms that you can borrow at will. On the spending side, we're coming out with a credit card and we're doing very unique things on the credit card where you get benefits based on what's in your investment portfolio. You can also pay off your credit card with that incredibly low line of credit.

• 25:16Speaker 02

  And so, you know, you're, you're never defaulted into, you know, 22% credit card debt. It's, it's 2%, you know, so it's better. And so, you know, we're, we're, we're just going to enhance sort of every pillar of M1, you know, invest, borrow, spend, and just go deeper in each and really focus on the, the automation and the synergies between all of them.

• 25:32Anthony Pompliano?

  Yeah, it's awesome. What's the number one thing you've learned? You've grown incredibly fast. You've had a lot of success, but you as a founder, what's the number one lesson you've learned since you started the company in 2015 that you think other founders could benefit from knowing?

• 25:44Speaker 02

  I mean, there's like a million lessons inside. I do think it's, it's, you, you start with a idea in that it matters. That being said, it more matters how you execute against that. And how you execute that is the, the people that you bring on to help you along the way. So, you know, having a okay idea or a good idea is, is helpful to start with. But it doesn't matter unless you bring incredible people along the way that, you know, the, the company is hundreds of thousands or millions of decisions made over the past five years. And you need really strong, capable people to do that. And so finding like people that believe in the mission, you know, have a similar mindset, work hard, have a, you know, just raw horsepower associated with them.

• 26:26Speaker 02

  I think that's, you know, 95 plus percent of the, the determinant of success.

• 26:32Anthony Pompliano?

  I think that you're probably more right than wrong on that one. I asked the same three questions to everyone before we wrap up and you'll get to ask me one. The first is, what is the most important book that you've ever read?

• 26:43Speaker 02

  Uh, most important book, um, Steven Pinker, How the Mind Works. I, I like geek out on economics and, you know, that side of things. And then, you know, like the behavioral economics type thing has sort of like taken over the, the econ field. And I think just like a intrinsic fundamental understanding of how humans and their biology dictate thought and, you know, creativity and then why you make decisions. I just, you know, it, it opens your eyes and it sort of informs, you know, how, how the world works generally. And so I absolutely love that book.

• 27:16Anthony Pompliano?

  Yeah, that's a great answer. Uh, second question comes from our friends over at Eight Sleep. Uh, they've got this thermo, uh, kind of regulated bed where I used to sleep, you know, five, six hours. Now I sleep on this really cold mattress, uh, and sleep like a baby seven, eight, nine hours. Uh, and it completely changed the way that I thought about sleep. What's your sleep been like over the years? Uh, and kind of what is it today?

• 27:38Speaker 02

  So I recently purchased that they are having shipping delays because the product is is so popular and the likes. So you know, if you have an in for them to ship it quicker, it is getting delivered to me shortly. I so my mom and dad were like, they could survive on four or five hours of sleep and I felt like it was a superpower. I need like an eight and a half, nine hours. I am, I get grumpy. I get, you know, I am not a good sleeper generally. And so I sleep more than I would like. I am pretty like dogmatic and religious about getting good sleep because I do buy into that. Like how my day goes is pretty well determined by how I slept the night before.

• 28:17Anthony Pompliano?

  I, when we get off this, I'm going to introduce you to the CEO. I'm going to tell him rush deliver immediately to Brian. The third question, a little bit more fun. Aliens, are you a believer or a non believer?

• 28:30Speaker 02

  I think I exist. The universe is too big. It's, it's sort of just like a random, you know, I know, I like, I buy into the Fermi paradox of like, where are they if they're, they're so advanced, but it seems more unlikely than not that they are, they're not out there.

• 28:47Anthony Pompliano?

  I completely agree. I understand why people think that we should have seen them. Where are they? Whatever. Listen, if you think that we know everything that we're supposed to know, you are much more optimistic about our knowledge base than, than I am, right?

• 29:02Speaker 02

  For sure. You get into that, you know, the whole like speed of light thing. And you're, I mean, even humans just haven't had like radio waves going out for that far. So, you know, we, we haven't explored much of the, the universe. So it's, uh, the YouTube videos that I watch make the universe seem very, very large. And so I think it's reasonable that there are some far out there.

• 29:22Anthony Pompliano?

  I tend to think you're right. What one question you have for me to, to finish up?

• 29:26Speaker 02

  I would love for you to, I know you're the, the Bitcoin guy. Tell me on why we should add Bitcoin to the M1 platform.

• 29:34Anthony Pompliano?

  Listen, I always tell people like, open systems are going to win over closed systems. And the legacy financial system is a closed system, right? And what I mean by that is, when you have a open system like Bitcoin, anyone in the world with an internet connection could simply plug into it and now get all of the economic benefits of a store value, medium of exchange, and also kind of this payment application. So for you guys specifically, if I said to you, hey, I know a payment app, that payment app is growing 200% year over year compounded for a decade plus, and it has the ability to process and will this year process over $5 trillion of on-chain transaction volume,

• 30:16Anthony Pompliano?

  right? So it's bigger than Apple Pay, Venmo, or PayPal. What if I told you that you could strike a partnership with the application tomorrow, and you didn't have to do any of the legalese, you didn't have to do anything, all you had to do is build a little technology and plug into it. Most people I think say, hey, that's pretty interesting, right? How could we benefit from it? How could we onboard people, etc.? And so I think that's really the way that I think about it for kind of legacy fintech, right? And legacy being literally, there's legacy traditional finance, and there's like legacy fintech, and now there's just like crypto stuff. It's just simply that you've got this open network of kind of a payment system that has incredible volume, has literally 100-plus million users, and what it affords an opportunity for is for you simply just to plug into it, right? Now,

• 31:00Anthony Pompliano?

  that doesn't mean that all the users are going to go use it, right? There's plenty of fintech companies who said, hey, you can now buy and sell Bitcoin, or you can hold Bitcoin here, whatever. And so it's not kind of all just positive. You got to look at the regulatory framework, you got to look at, hey, does our user base want this? What are they going to do with it? Does our user base, if they're not going to trade it, would they hold it for a long period of time? Does it align with our mission and ethos? All of that kind of goes into the decision-making. But I think it's just more of one of these things where folks look at the speculative nature of it, right? Just the day trading and kind of all the things that we talked about that you guys don't do, that kind of gets all the headlines. But if you actually look at the underlying fundamentals of it as a financial asset, and the growth and adoption, it's pretty damn compelling. So I think that's pretty much the argument.

• 31:40Speaker 02

  Yeah, it's a good argument. Like, I may be able to do like a quick follow-up?

• 31:44Anthony Pompliano?

  Yeah, of course.

• 31:46Speaker 02

  How much of it do you think is like driven by it being a tech improvement and you know, sort of like the blockchain technology versus the regulatory stuff? Because, you know... Like I don't actually have that sort of position on it, but I question like, are some of those things possible with current technologies and it's just they're not allowed in the regulatory framework that we have, or is sort of crypto and blockchain sort of a net new thing that only because it's what it is allows for that openness and sort of all the the attributes that you mentioned?

• 32:16Anthony Pompliano?

  Yeah, so let's talk about Bitcoin specifically, maybe compared to like the legacy world, right? So like a simple thing would be if the stock market went 24/7/365, that would be then the kind of a feature parity with the Bitcoin market, right? Trades 24/7/365. So that to me feels like that's much more of a kind of regulatory and what I'll just call like business decision making. There's no reason why the stock market doesn't trade 24/7/365, other than they historically have not done that, and therefore they're not going to do it, you know, at any time soon. But there are some very, very significant technical advantages that can't be replicated by the legacy world, right? So when you think of kind of this decentralized open system, the last decentralized open system that we had was the internet. And so people did go and build kind of competition to that open system, right?

• 32:59Anthony Pompliano?

  They built Intranets or even companies like AOL, etc. But what you ultimately find is like, again, open systems beat the closed systems. And so what I think you're starting to see is you, I, and most people that we probably know have a very Western centric view of the world. But it's actually really, really hard for people outside the United States to get bank accounts and brokerage accounts, participate in the US market and kind of do all this stuff. Now with this idea of these kind of crypto markets, what you do is you just need an internet connection and you can simply go on, you can log in, it's probably very similar like logging into M1, right? It's just a much better experience than like Charles Schwab sending you a bunch of papers to sign up or whatever. And so I think when you start to drastically reduce friction and open the accessibility

• 33:41Anthony Pompliano?

  and then you've got this market that again, you know, trades 24/7/365 and the assets themselves have very specific kind of criteria to it. It just is a free market competition between the legacy system and this new system. And actually, the legacy system has a massive advantage, right? They've got brand names, they've got a lot of capital in it, they've got a regulatory regime that is more favorable to it, all that kind of stuff, but still people are moving to this new system. And some of it's generational, like you talked about earlier, right? Where you just got a lot of young people who they like this, they're digital native and they're going. But also, I think what you're getting is you're getting some decision making where people are looking at the macro environment that's pushing people to this new system, right? They're saying, hey, all the money printing and stuff, it doesn't really make sense to me. And then ultimately, like what you're going to get, I don't know, 30 years from now.

• 34:26Anthony Pompliano?

  It's just you're going to get a bunch of people that their first interaction with a financial system was not the legacy system, it was with the digital system, right? Or kind of this new system. And so I don't think it's a binary, like, hey, the legacy system dies and the new one wins. I think it's actually coexistence and some of the legacy players, you know, they adapt, they they'll thrive in this new world and some will be hurt by it. But I think a lot of actually the way that you look at M1 versus like the traditional financial platforms is similar to how I look at like crypto and fintech. And so, you know, the world's not binary, it's not black and white, it is very gray. And so I think that, you know, it's a thing where those who kind of empower their users to do it earlier probably benefit a little bit more. But even if you wait a year and do it later, like your users will still get some benefit out of it.

• 35:09Anthony Pompliano?

  It's just kind of, you know, how much kind of asymmetry is there? It all depends on what a company's goals and objectives are.

• 35:15Speaker 02

  Yep, makes sense and good argument.

• 35:18Anthony Pompliano?

  I've done it once or twice.

• 35:21Anthony Pompliano?

  Got a little bit of practice.

• 35:22Speaker 02

  You've had the probing and the rebuttals that are, you know, from people better informed than I am, so.

• 35:28Anthony Pompliano?

  No, where can we send people to learn more about M1 and learn more about you and find you on the internet? If they want to follow up or follow along with what you're doing?

• 35:37Speaker 02

  Yeah, so I mean, M1, we have web and mobile app. So M1finance.com or we're in the Play Store or App Store on, you know, iOS or Android. We have media profiles on sort of all the major social media sites. And so we have a big subreddit community, you know, tens of thousands of people talking about the good, bad and the ugly about M1. So there's a lot of places to find us online.

• 35:59Anthony Pompliano?

  Awesome. Well, listen, thank you so much for doing this. I really appreciate it. I'm fascinated with what you guys are building, cheering for you guys and please, we'll have to to get in the future.

• 36:08Speaker 02

  Yeah, absolutely. No, really a lot of fun and thanks for having me on.