EP 109: Sebastian Siemiatkowski (CEO, Klarna) on the Future of Klarna, Valuation Changes and AI in Finance

Klarna CEO Sebastian Siemiatkowski led the rise from a profitable business to their peak $50 billion valuation, in which they were burning $150 million a month. In my latest episode, Sebastian shares how he turned Klarna back to profitability and discusses Klarna’s ongoing pursuit of creating a digital financial assistant. He also reflects on their recent boardroom drama with Sequoia and outlines the operating principles and the repaired mistakes that have made Klarna the company it is today. (00:00) Intro (01:45) Personal Reflections on Alcohol and Family (03:03) The Journey to Sobriety (05:57) Milestones and Achievements (07:59) Understanding Company Success (10:54) Challenges and Pivots in Business (16:50) Building and Maintaining Company Culture (26:16) Leadership and Motivation (32:42) What Klarna Does (41:33) Reflecting on Leadership and Self-Development (41:48) Promoting Young Talent and Internal Growth (44:52) Balancing Autonomy and Standardization (46:29) Adopting Agile and Toyota's Influence (55:05) Navigating Regulatory Challenges (01:00:11) Klarna's Financial Journey and Market Expansion (01:10:38) Handling Valuation Resets and Layoffs (01:23:57) Evaluating Individuals in Business Relationships (01:24:22) Stability of Institutions and Individuals (01:25:40) Perverse Incentives in VC Firms (01:26:50) Hands-On Leadership in VC Firms (01:28:54) The Impact of Michael Moritz (01:34:52) Leadership Evolution and Self-Reflection (01:39:11) Facing Challenges and Finding Solitude (01:42:19) AI Integration at Klarna (01:52:03) Balancing Capitalism and Societal Impact (02:00:53) Creativity and Constraints in Problem Solving (02:05:41) Conclusion and Final Thoughts Executive Producer: Rashad Assir Producer: Leah Clapper Mixing and editing: Justin Hrabovsky Check out Unsupervised Learning, Redpoint's AI Podcast: https://www.youtube.com/@UCUl-s_Vp-Kkk_XVyDylNwLA 🎥 Subscribe on YouTube: https://www.youtube.com/channel/UCugS0jD5IAdoqzjaNYzns7w?sub_confirmation=1 Follow on Socials 📸 Instagram - https://www.instagram.com/theloganbartlettshow 📱 X - https://twitter.com/loganbartshow 🎬 Clips on TikTok - https://www.tiktok.com/@theloganbartlettshow About the Show Logan Bartlett is a Software Investor at Redpoint Ventures - a Silicon Valley-based VC with $6B AUM and investments in Snowflake, DraftKings, Twilio, and Netflix. In each episode of The Logan Bartlett Show, we sit down with the people behind today’s most important startups and extract the tactics, lessons, and frameworks they’ve learned the hard way. Conversations span hiring to GTM, product, growth, fundraising and everything in between - collectively forming the ultimate playbook to make you a better CEO, investor or board member. Tap follow and enable notifications to stay ahead of the game.

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

• 0:05Logan Bartlett?

  Welcome to the Logan Bartlett Show. On this episode, what you're going to hear is a conversation I had with co-founder and CEO of Klarna, Sebastian Shymiakowski. We talk about a number of different things in this episode, including Klarna's rise from a profitable business throughout most of its lifetime to a $50 billion valuation in which they were burning $150 million a month. We talk about what it was like resetting employee expectations internally. We also talk about some of the drama that Klarna has been in the news for recently, including with Sequoia and what it's been like working with Mike Moritz for the last 15 years. Finally, we talk about Klarna's desire to push into artificial intelligence, which has led Klarna to being, as Sebastian described, OpenAI's favorite guinea pig,

• 0:49Logan Bartlett?

  to do the work of what would have been done by 700 customer support reps and a number of the different frontiers that they're pushing with AI going forward. Really fun conversation that you'll hear with Sebastian now.

• 1:01Speaker 01

  A lot of different topics. I'm happy to carry.

• 1:03Logan Bartlett?

  We'll see how long we can, we'll see how long we can go. I think there's some interesting stuff in there. I appreciated your, in listening to all the stuff in advance of doing this, I'll listen to a lot of the different things that you'll, you've done in the past. And the level of like openness, I would say that you've had, just maybe I asked a question about it, but just about family and, you know, like leaving your kids money or not, and your father and, you know, drinking and your grandfather and immigrating from Poland and all that stuff. It's a, it's, it's refreshing to hear someone be so cerebral and thoughtful about all that stuff.

• 1:45Speaker 01

  I mean, we live in a society where people have a lot of opinions about what's spoken about in the public and not, and you know, woke or not woke and all that stuff. But there are still two topics that, for whatever reason, are kind of taboo to spoke about. And one of them is if you had issues with alcohol. And the other one is that most of us, or a lot of people, have issues getting babies, right? Like, and those two topics are still very personal. And I feel that, like, obviously, every individual have to choose for themselves. But at least when it comes to alcohol thing, I feel like, you know, if I can at least the slightest help with making it more like a thing that's okay to talk about, then I think that that's a good thing. So that kind of was a little bit the choice why I wanted to talk about.

• 2:25Logan Bartlett?

  So is there a specific point that led you there? Or was it kind of just a gradual, like, was there a day that you were like, all right, I'm not gonna drink anymore? It was, okay, so there was something.

• 2:37Speaker 01

  For sure. No, no, no, but like, no, but it was like, it's very easy. I, you know, I'm happy to talk about this. Like, I mean, again, my grandpa had issues and died out of that. My father died in things related to alcohol abuse and other drug abuse potentially. It's not entirely clear.

• 2:54Logan Bartlett?

  But it wasn't your childhood, right? I thought that was interesting. It sort of exposed itself later in life?

• 2:59Speaker 01

  Yeah, exactly. I mean, when we, when I was a kid, he was actually, I think, partially because of grandpa. Dad was very careful. So like, you know, we, we, many other families had like, you know, the parents had wine for dinner, whatever. That didn't happen in our house. Like, there was no alcohol visible. And then it changed when he got a bit older. But like, I think that the, but the other thing that happened, like, despite these things, I was just partying hard, right? Like, I, I didn't, I think most of my friends would say, no, no, no, he didn't have any issues. He's just partying hard, right? Like, but at some point in time, my wife told me, like, you know, my, my nowadays wife, but then girlfriend said, look, if you're gonna continue partying this hard, like, I'm out. And at that point in time, I was like, okay, but I really wanna be with her. So it was very clear for me, it was just a choice of love.

• 3:44Speaker 01

  I like, I wanna be with her, so I gotta drop this thing. And, but then, you know, the interesting thing is just one note on this is that I met this doctor who was specializing in alcoholism. And he said to me, which I don't know if it's true or, you know, scientifically proven, but that there has been studies that suggest that your brain is physically altered by drinking, if, especially if you have kind of the genes for it. And then when you stop, it takes about 12 months for it to heal. And consequentially, if you off it for 12 months. Then you're much more likely to kind of prevail than if you are not capable to keep up for the first twelve months. And the interesting experience I had, just quickly on this, is

• 4:29Speaker 01

  that if you would have asked me like for the first twelve months after I stopped, like, you know, have you stopped? Can you drink? And I'll be like, no, I cannot. But inside my head, there was still a voice that said, but really, you know, at some point in time, I'm gonna have a glass of wine and, you know, maybe at some point in time I'll be fine. And I'm gonna do it again. And then after twelve months, it was just miraculous, strange thing. Like, somebody turned a thing around in my head. And suddenly, it was just like, wow, I would have ended up as my father and grandpa. Like, eventually, I would have wasted my life. And then you just got this like cancer survival feeling where you're just like, I survived death, you know, like I'm, I'm, I'm a survivor. And I've just been celebrating

• 5:11Speaker 01

  the fact that I'm not gonna fall into that trap ever since. So since then, it's just been pure joy and happiness over not being drinking anymore.

• 5:19Logan Bartlett?

  Isn't it amazing how I, I know you've talked about like, setting the six month milestone of, of, hey, we're, we're not quitting our, you know, jobs or whatever. We're just gonna set six months, we're gonna go start this Clorina thing. And if it doesn't go anywhere, then, you know, whatever, we'll go back to our other, the rest of our life. And there's, there's something about like, just putting one foot in front of the other and setting some realistic milestone. I remember when I was starting to do this, I was like, ah, I'll do four episodes. And if that goes well, I'll do twelve episodes. And if that goes well, I'll do six months. And like, that was my, if I had said, hey, I'm gonna do, I don't know, it's a hundred and ten or something. There's no way I would have committed to do a hundred and ten. But when you set these little incremental milestones, and for you,

• 6:03Logan Bartlett?

  I mean, probably making it twelve months, was, you know, that's reasonable. You can do twelve months of a lot of things, right? But if you set, hey, the rest of my life, the next sixty years of my life, I'm not gonna consume alcohol. That's so daunting in such a way that like, it almost feels insurmountable. But doing these little goals, I'm sure twelve steps and all that stuff, you know, plays into that. But it's impressive setting these realistic milestones.

• 6:27Speaker 01

  No, you're totally right. But you know what, like, I actually have never made that connection before. So I thought it was really nice that you did it. I've never thought about the connection, but you're obviously entirely right that like it was the same thing when we started a company. It was when we could derive it down to such a, you know, shorter term decision and not try to, because these like life shifting decisions, I mean, maybe with the exception of when you get married, right? Like that's a bit different there. You're actually making that decision, but in general, you try to, you should probably try to avoid it and try to split it down like that instead, right? So that's probably very good advice. I've never thought about that. You're right.

• 7:00Logan Bartlett?

  Yeah, well, that's one of the things that comes when you, uh, when you try to synthesize someone's entire professional existence into prep for a podcast. You get a very meta zoomed out point of your life versus you're just living it, right? So, uh, I guess one of the questions for you, uh, I, just to start, um, there was an interesting thing you had said. I had never really heard anyone articulate in this way before, but that there's like three different barometers of a company's success. One is like the internal momentum that you're feeling within the business. And then there's the, that might be the most leading indicator, which flows down into the P and L of the business, right? Which then flows down into the public perception.

• 7:43Logan Bartlett?

  And in the fullness of time, I think those things are pretty directly correlated or they flow into one another. But, uh, at any moment in time, they could be disconnected, right? I'm sure when you were $50 billion valuation, but you're trying to figure out what to do. You might have felt one was off versus the other. And then when you lowered your valuation, you might have felt that, you know, the momentum was there versus not. I guess, can you speak about that concept? How you think about those three different barometers and then where Klarna is today on each of them?

• 8:15Speaker 01

  It started off as, you know, probably more like of an observation of mine that I just realized that, you know, I could come to work every day and I could feel that, you know, when I looked at what we were doing and what people were accomplishing and the work. And, you know, the culture and the speed of decision making, or if we were shipping good or bad products and all these things that you kind of observe on a day to day basis. That, you know, you could be very proud of it and feel very excited about it and you can feel more depressed. And, you know, feel like, oh, my God, nothing's really going like the way I wanted it to. And that doesn't necessarily, you know, to your point, instantly translate into the P and L results.

• 8:56Speaker 01

  Or the perception in the market of the company's success, but that over time, it always correlates a hundred percent, obviously. And I think that like, I think that that experience grew over time. To me, it played an additional important role because in my opinion, when I look at the company as such, between oh, five and 10, when we kind of started it and the first startup years and started getting some momentum in what people have to remember was a small market, right, Sweden, 10 million inhabitants. So it was, you know, great success on a Swedish market basis, but fairly, maybe, you know, small from a US perspective. But we, there was a lot of, I mean, there was obviously a lot of bad decisions. You know, things that didn't work out and whatever, but in general, still,

• 9:39Speaker 01

  like, I remember, like, on a whiteboard, we let's sign, like, here's the list of the merchants we need to sign. And then like, and then we were like, what if we sign only one of them? It's gonna, you know, accelerate the business like amazingly. And then like, a few months later, we signed all of them and you were celebrating like, how did we do that's amazing, you know, like. And so you had this like, great momentum, right? And you realize that that's gonna eventually show up in the P and L. But then it takes time to go live, to make sure that the product works as intended, you know, and all that kind of stuff. So, but it's gonna show up. And I think then, however, when we got to like, oh, nine and 10, I feel that like, we got, we went from a hundred million dollar valuation when Sequoia invested in oh, nine to a billion, a unicorn status a year after.

• 10:24Speaker 01

  And that's when the like, perception of the company suddenly was slightly ahead of where we were as an organization, the ability to execute. And then you start feeling that like, there's pressure, there's expectations. At the same point of time, there's a lot of opinions, you know, you need to hire more senior executives. You need to have 20% of creative time like Google. You need to, you know, whatever is the latest thing written about in the management press. You know, or whatever, or good to great tells you that you should hire the best. So please go and do that, right? Like, whatever it is. And you, I just felt very. Um, you know, confused personally in in that space and I felt like, wow, you know.

• 11:08Speaker 01

  And as I then started hiring, you know, senior executives and doing all these things. I kind of found myself looking around and I was like, I don't know, like, I'm not impressed anymore. Like, I don't like the pace of that, or I don't like the pace of the product development, or I don't like what's going on. I feel we're sitting so many meetings and just talking and I just didn't see things that impressed me. You, there's two fun ways in which that articulated. One was very clearly because in in oh nine and ten, we shifted the strategy. We pivoted towards what we today call the checkout strategy. Which is funny since we they announced that we're actually selling that part of the business away.

• 11:49Speaker 01

  But at that point in time was just when we launched it and it was a pivot because up until that time, we were a simple payment method. And now we wanted to do a full PSP, a full acquiring offering. And I had this board presentation when I was like, there's this huge opportunity to build a global PSP business. There's just two small startups, you know, there's this, these Irish guys, the Colson Brothers. They have some real good understanding of building great APIs for developers. And then there's these Peter and his gang in in Netherlands, the Adyen guys, and they're doing something really good in this. And they're smaller than us, they're not as big as us, so we should just go and nail this. But two, three years down the road, as much as we had some success with it.

• 12:31Speaker 01

  Adyen launched fifty payment methods in Asia and we were struggling to add one in Sweden or in Germany, sorry. And like, it just became, that was a typical moment momentum question where like, my investors started believing in this. A lot of investors were coming to us and say, oh, you're building like an Adyen. There's a huge opportunity, like, that's great. And like, they would probably even give us a premium on the valuation because they believed that like, we were just another Adyen or Stripe. But to me, looking at it, I was like, no, we're falling behind. I mean, we can pretend to be an Adyen or Stripe, but we're not moving at the pace that they are. Within Nordics, we did well and that product worked really well in this context, but it was not at their level on an international basis. And so like, those are good example.

• 13:17Speaker 01

  I think another fun example was also like. At one point in time, we talked a lot about that company culture and like, you know, how to build a great company culture. And we tried so many different things in this area. Like, I still sometimes laugh about all the stuff that we've done. But one of the things we did was we brought these consultants in. They were going to help us establish what the Klarna company culture was. And the way it was done, very Swedish, was that we took the whole company at that point in time, a few hundred people, and divided them in small groups of 10 people. And they were all supposed to sit in a, in a, in a group and discuss, what is Klarna culture? And then they were supposed to select like three words or three sentences that described it. And then they had to decide and agree in that group. And then each of the group had a leader who they met.

• 14:01Speaker 01

  And then they negotiated. And then at the end, you know, everyone negotiated with each other until we at the end had like three statements that should represent the Klarna culture. And this was the consensus decision of 300 people of what Klarna culture should stand for. And the funny thing is like, when I got that in front of me and I looked at it, I remember thinking to myself like, you know what? This is probably the most fair and still like nice, probably a little bit too nice description of our culture, but it's still probably a very fair description of what it is. And the only problem is, I don't want to work here. I don't want to work in that environment. So like, so I just like, it gave me two options.

• 14:42Speaker 01

  Okay, this means two things, like either I go and try to, either I leave, right, and let these guys continue in this culture, or I try to make this culture into what I believe it should be and what I want it to be, and push in that direction. I obviously choose the latter. But it's a good example of when you feel like, mm-mm, the momentum here is not what it's supposed to be. This is not like what I actually believe to be.

• 15:06Logan Bartlett?

  What, what, what were the cultural things that they were espousing at an employee level that you, you didn't think was what you wanted to run a business as? Like, what are the types of things?

• 15:17Speaker 01

  Well, I think most, you know, most people for good reasons are they want things to be nice and they want things to be friendly. Uh, you know, and, and that's nice. I get it, but this is a competition. And if you would be presenting such values in a soccer team, people would say, well, then you're not playing Champions League. Then you're playing, you know, with your friends and soccer and that's a different thing and you can do that. That's fine. You can enjoy it, but it's not the same thing as, you know, you know, um, and, and people will have different expectations. Like maybe if you're playing with your friends on a Sunday, it's okay if you, you know, show up a little bit, you know, uh, with a hangover.

• 16:02Speaker 01

  But if you're, you know, showing up to practice in the morning in a Champions League team and you're not fit for fight, I think your, your colleagues, your com- comrades in your team will have opinions about that.

• 16:12Logan Bartlett?

  Yeah, it's interesting. I mean, I've heard you talk about like expectation settings with founders, but then also, uh, I guess early stage employees. And one of the things that feels, um, a little taboo or it became a little taboo, certainly with different generations of employees. And I get yelled at anytime we, we splice something and it goes on Tik Tok or Instagram and we, we espouse the virtues of long hours and working hard. And, uh, and I always get yelled at for it. And I feel like one of the things, uh, you guys did, or I've heard you be pretty explicit about in the early days was that you were in, I don't know if it was in at seven and out at 11 for the first six months and building that.

• 16:57Speaker 01

  I was longer than six months, my friend.

• 16:59Logan Bartlett?

  Oh, was it? Okay. For the early days. What, what, how, how long was it that you guys were actually maintaining the culture? I mean, I think it's an important lesson because we've, we've, we've lionized the founder experience. And also we've lionized work-life balance. The two were often, maybe always very much at odds with one another. So could you just speak to that, like early days of setting the culture and expectations among the, the early employees, um, it from a work, work product standpoint?

• 17:29Speaker 01

  Obviously, it started with us as founders and with us as founders. It was actually a kind of a funny thing. So it started with this thing that like we were three co-founders. We had all committed to doing this, right? But we got a little bit suspicious against each other sometimes of whether the other one was working as hard as the others. And so this started some fights was like, but you weren't here. You haven't done that, you know, whatever, like three, three friends sitting in a room and like, you know, and fighting with each other over these things like, oh, I did show up yesterday. No, you did not. You were on that call with, you know, whatever. And so we just said, okay, how do we solve it? We don't want to have these fights like. And so we just decided like one thing was we decided that at that point in time, we had put the computers in the office so that as you would naturally do,

• 18:14Speaker 01

  you each sit facing each other with the computer screen facing backwards. So I wouldn't see the other screen. I would just see their faces. But at this point in time, we were like, the problem with that is that like then when I passed by Victor, my co-founder was like, but he's always on Facebook like, you know, and I was like annoyed. And then he got annoyed with me because I was always doing something else, whatever. So we just created this idea that like, we were like, what if we put the computer screens? So that we can always see each other's computer screens. And it was like a self-control system. But the funny thing is after doing that, we all like a month later had to like sit down and say, you know what? Actually, I'll admit that since I turned my screen like this, I um, I tend to work a little bit more. Because like I am a little bit embarrassed if my colleagues saw me like on Facebook too long, right?

• 18:58Speaker 01

  So I felt like, so it was a little bit like some of these like self-discipline things. And you know, they work in a founder, you're just at that point, I was just the founders in the room, right? Then you start growing and the company becomes more. And we used to call this like the open screen policy. It's like, it helps you to be disciplined, right? Like, I mean, you do this when you go to the gym, you know, you have things like your, you know, your personal trainer that you hire. You don't expect him to say, hey, here's my target for you, your KPI to set. See you in six months. Good luck, mate. Like you're actually expecting them to stand there next to you and like, come on, do another wave. You can do one more, you know, like you're paying for that, right? But in the work environment, we have come to the conclusion that that, no, that that's bad. Like your manager is not supposed to tell you that.

• 19:41Speaker 01

  You're not supposed to like, you're not supposed, it should just give you a, a big goal and then you should go and do it, right? But I actually think if you really wanna, you know, if on the soccer field again, somebody's running, your coach is coming, come on, one more lap, one more lap, right? Like there's something to that. And again,

• 19:59Speaker 01

  It comes back to what you want. I'm not saying or suggesting you cannot build a successful business. You can build a totally fine business without doing that. You don't need to work that much. There, some people are successful working less. Some people are not successful working less. But I do believe you really want to build a great business, then you need to put the effort in. Otherwise, it's just not going to happen. So I always say like, look, there's activity does not equal productivity. But without activity, there is no productivity, right? Let's just be honest about it. So to us, that was one thing. I think the, on the working hours, yes, to answer your question. So the other thing that we did was we were also like always suspicious of each other.

• 20:43Speaker 01

  Like, have you actually worked as much as you say you work? So we said, look, let's, to stop these conflicts, let's start doing like a stamp. Like, you know, you know how it was to be in the factories when you have to like stamp in and stamp out when you came into the factory.

• 20:54Logan Bartlett?

  Punch cards or whatever.

• 20:56Speaker 01

  Yeah, yeah, yeah. So we started doing that. We started writing up exactly how much we were working. And we, and then we compared the hours so that it would be equal. It was just about avoiding the fights. We were just tired of like, because we, we quickly understood this is self-serving bias. I will always believe that I work more than everyone else like, and unfortunately, it's just like how we humans work. We always have this self-serving biases. So like, let's avoid that and just put it on the table. Like, how many hours have you actually pulled in, right? And so we started doing that and we did that for the first seven years. And we tracked, we tracked the, the number of hours for the first seven years.

• 21:31Logan Bartlett?

  Among just the founders or for all, all employees?

• 21:34Speaker 01

  No, just for the founders. We have the open screen policy. We tried for everyone, but we didn't do this for the others. I think the others that came in in the early days, they obviously to some degree saw like, okay, here's some guys that are working really hard. They started doing that as well, right? Like, and it wasn't an outspoken expectation or anything. We never said it. We talked about like, again, this concept of talking about the fact that hours actually makes a difference. And I feel sometimes I meet like more senior founders or people that I've done an exit or two. And then they're coming to me, yeah, when I was a kid, I thought it was all about hours. But now I'm grown wiser and I realize it's much more about what I do with my hours and I don't need to do many hours anymore.

• 22:18Speaker 01

  And I feel that's a little bit like, that's also not entirely true. Because the truth is like, yes, I am definitely today, you know, 20 years into it, much better about using my hours than I was 20 years ago. But if I add one more well-used hour, it's still a little bit more. So like, and that doesn't mean again, there's time for reflection, there's time sometimes to go for a walk and think about things. But I do think that this has become some odd thing that people are not okay with talking about. And I feel it's, I feel sad because like I tell people sometimes like people, oh, how I'm concerned about you burning out or whatever. And I'm like, look, I feel like I'm an artist. Look, if I would be a painter and I would be, you know, drinking absinthe and, you know, hanging out.

• 23:03Speaker 01

  And I would be like, last night I was painting until 4 a.m. because I was excited about this piece of art. Then you'd be like, oh, my God, he's so amazing. What a fantastic guy. But if I'm a CEO sitting at 4 a.m. like, oh, thinking about my finance sheet, then people go, my, oh, my God, relax, man. You're like work-life balance. It's a choice. I understand that I'm sacrificing other things. I understand that it has implications. And I'm not expecting the whole organization to work like that because that would be silly and it's not going to happen. But I also feel that I have the right to work the way I like and the way it works for me. As long as I'm mindful of making sure in the organization, especially with junior people, that they don't misunderstand this as an expectation.

• 23:46Speaker 01

  But that I try to attract and encourage people.

• 23:51Speaker 01

  To the organization that do this purely because of their passion and interest. And that's always, that's sometimes hard, obviously, to distinguish. And there's always risks that I'm recognizing those risks. You have to be a bit mindful about it, but I still think you can do that. Like I, for example, tell everyone Slack, just so you know, guys, I will hit you on Slack any time of the day, but I never expect you to answer until you're back to office. If I need you, I'll call you. And I'm very specific about that. I publish it on my internal like Wiki page. So people know what to expect of me. Like I'm trying to make it very clear, like this is the thing, but it should also be allowed for me to ping, because I'm writing something down. I want to like send a message or something. I should be able to do that, right? So we tried to make that very explicit.

• 24:31Logan Bartlett?

  I've heard you reference, or there was some point along the journey, you mentioned the cultural thing when everyone was espousing the values and that it wasn't totally the company that you wanted to run. I also have heard you reference that at some point you realized that you just weren't going to be all things to all people as a business. And it wasn't going to be the employer that everyone wanted to work at. And I guess if a lot of our founders are currently thinking about putting the truth face back in the tube a little bit within office culture, or maybe they're managing rifts and trying to reset the expectations internally on, hey, guys, what? In the Zerp era, in the 2021 work from home era,

• 25:15Logan Bartlett?

  there were some sloppy policies we let slide and now we can't. Was there anything that you did operationally to really shift the mindset of the company? That it's not going to be this soft place for everyone and we're going to espouse niceness and all of that. But instead we're a soccer team, to use your analogy, and we're working to win here.

• 25:39Speaker 01

  I think it's a very, again, it's difficult because it can be misinterpreted and it can go the wrong way. With that said, though, I do believe that, in my opinion, Among the best leaders are people like I always think about this. People will be motivated by a number of different things, right? So people are motivated by making a career, by making money, by being great colleagues and friends, by being, you know, when I think about the work-related part of our lives, right? And then, and then they will also be motivated by curiosity and learning things and accomplishing things and so forth, right? So you'll have all of these. And for each individuals, however, it will vary a little bit. What's more important, right?

• 26:21Speaker 01

  And so, for example, I used to have a very senior member of my management team, who was good in all this, super smart guy, I think was at Stanford, like in top class, everything. But over time, I realized that like his main driver was being liked by his colleagues. And the problem with that is just that like, you know, that's obviously great. But if it's your main driver, it will sometimes stop you from taking the necessary important decisions that are necessary for the business. And, and that's not great, right? And I think people forget about that, that like, okay, let's say, for example, that our head of customer service a few years ago wasn't doing a great job, like from other angles and wasn't tough enough, like, you know, we can internally say, yeah, but we want to be nice to that person and so forth.

• 27:05Speaker 01

  But like, my customers won't care. My customers don't care if, you know, I'm being nice or whatever. My customers expect great customer service. And if they don't get it, they will go elsewhere, right? Like, that's just the way it works. And I, and I think it works like that for a good reason, because otherwise we'll get into a society that doesn't deliver value to its, you know, and, and usually those societies tends to fail over time. So I think it's an important concept that obviously you have to be mindful of the implications on the individual basis and how you deal with those situations. You have to be empathetic about it. But so that comes in. So I think that like, and I think, but then to talk about the great people that are great leaders, if you think about what drives them, I think it is curiosity. I think it is about accomplishing things. And I think also one thing that I feel is very, very.

• 27:50Speaker 01

  Clear with most of the greatest leaders that I worked with is service mindedness. They care about serving others. There's this great movie about this Indian guy who came to like the Queen of Britain like a hundred years ago. And she's like depressed and he was like her guru. And she and he says it's in one of the scenes like your purpose in life is to serve others. And I think that's true, like people are really great leaders have as one of their primary drivers that to serve others. However, if you have that as a primary driver, then you also see a lot of, I see a lot of talented leaders. Who then, you know, feel conflicted because they want to serve others. That's why, you know, they're there and that's why they're great leaders because they're empathetic.

• 28:34Speaker 01

  I mean, service, being service minded to a large degree is about empathy. You have to be able to understand and put yourself in the position of your customer, of your employee, of these people. In order to understand their perspectives, that's allows you to be very service minded because you can, you know, come ahead of their expectations. Or whatever they want of you and you can deliver amazing service. But the downside of being service minded is sometimes it goes too far. Sometimes you actually have to be able to say no in a good way. And I remember first time we hired a senior executive that was really good was our head of customer service called Karin. This is like, I mean, 15 years ago, whatever. But at that point of time, I remember me and Nicholas, we were so service minded. So whenever an employee would come and say, I'm unhappy about this or this doesn't make sense or whatever.

• 29:19Speaker 01

  Our gut reaction would always be to try to go and fix it, like try to go and fix it immediately, right? Because like we were service minded and we just wanted to fix everything and want to make everyone happy all the time. We were just running around like. And then at some point of time, there was a, and we were, you know, we were stressed out about this. We were running around trying to serve everyone to the maximum. And then at one point of time, this fairly like junior customer service agent comes in to speak to Karin. And, you know, service agent says something like, you know, this is not good and that is not good and so forth. And then Karin looks, looks at this employee and says, yeah, life sucks. And that was it, you know, that was the end of conversation. And then the employee was like, yeah, you're right. And then goes out and that's fine, right? And I was like, whoa, me and Nicholas, what?

• 30:04Speaker 01

  Can you do that? Are you allowed to say that? Like, can you actually say like, no to somebody? And so I hope you can. And for other people, this is much more natural in their characteristics that they feel that. But I actually think a lot of great leaders don't at first are not capable of saying no, because they become good leaders and they, because they're empathetic and they care. And so they want to serve everyone. And that's actually easy to burn out based on that requirement. But then you have to find a balance because unfortunately you do realize that like, sometimes you have to say no. And, and also sometimes people don't really want you to fix their problem. They just want somebody to listen. And that's okay. And if you just listen empathetically and say, I hear what you say, but you know, this is the situation, that's fine, right? And so I think that that was a, to your point.

• 30:49Speaker 01

  So that's when we started saying, you know, Klarna is not for everyone. We're not here, you know, we're not a family. I mean, the key to me, difference between a family and a team is in a family, you can't, you know, you usually don't at least, sometimes unfortunately you have to. I mean, Oprah and Dr. Phil will say that your responsibility is to surround yourself with people that make you happy and feel good in life. But in general, we would mostly in society agree that you don't kick people out of your family because it's hard to do that, right? But if you look at like a team, part of the coach's job is to assess that like maybe this one player on the team doesn't have the prerequisites to make the team successful or doesn't have the motivation or isn't in the right place or whatever it might be. And that's part of the job. So it is different.

• 31:32Speaker 01

  And then I think it's rather something you want to be able to express and, and you know, and say in a good and empathetic way, right? That like, it's not, and I rather make sure that people know that when they join us as a company, rather than find that out later, right? I want people, I think this may also be a little bit where like in Europe, due to the difference in labor laws, these topics were earlier at Klarna, maybe something that came up to the top. And I think now in the U S they become more, you know, something that's discussed at a greater level nowadays. But like to us, it's just been something that we had to talk about a little bit earlier because the situation here is different in that sense.

• 32:05Logan Bartlett?

  Now, we've gotten a while into this without actually describing what Klarna does. And I, it's funny, a lot of people I talked to when I said we were doing it, doing this podcast. Everyone in the US, I think, like knows what Klarna is, at least as a brand. Everyone's like, oh, I know Klarna. No one can fully, that I've talked to, can fully articulate what Klarna is. They're always like, oh, I've seen it. Yeah, I know that. And then when I describe it, I think it's like, oh, yes, now I know what it is. How do you articulate? Cause I've done it the last couple of days and I don't have the pithy version down quite as well. How do you articulate what Klarna is in kind of an elevator pitch?

• 32:50Speaker 01

  Well, I think this is coming back to the, you know, the artist, because like people talk, always want me to do the 30 second pitch. And I feel a bit like you would ask an artist to like, express all of your art in 20 seconds. Like, I was like, I don't know. Yeah, like I think about all the complexity I've lived to in the last 20 years.

• 33:07Logan Bartlett?

  I'll take your answer, by the way, whatever you say here, I'll put it in chat GPT, say synthesize and then that'll be the output of it, so.

• 33:14Speaker 01

  That would be the output. No, but I think that like, look, I mean, obviously at the core of it, we're a payments company. We offer an ability to pay online debit or credit. We're mostly famous for this buy now, pay later, where you can split things into installments. You will see us on websites, online, but also in physical stores. But I mean, nowadays we're also a neo-bank. We offer card services, we offer full banking, we're a fully licensed bank. So it's kind of evolved beyond that. I think, so that's kind of that. But I think going forward, you know, this comes back to the whole AI thing. And this is actually, it ties back to what I said about the, the Klarna checkout. When we launched at 2010, we basically tried to, you know, play in this PSP stripe, add-in type of business.

• 33:59Speaker 01

  We concluded in 15, when Adyen signed with Spotify, which was like our neighbor here. We were like, okay, you know, your, your worst competitor, you know, your, your closest neighbor is signing with your worst competitor. Like, that's a pretty good sign that you're gonna, you know, you're losing out. And not a lot of investors didn't see that at that point in time. Our P and L didn't say that at that point in time, but we said that and we said it's time to pivot. And at that point in time, we asked ourselves, okay, what did we learn from those five years? And the one thing that we learned was that we were right. We were right about where the market was going, that these global payment solutions would make sense, that people like Stripe and Adyen and like this, that directionally we were right, we just didn't execute.

• 34:43Speaker 01

  And in 15, then we said, okay, what if we would try to formulate a new big hairy goal like that, as they use that term for it? And that was actually, funny enough, was AI already then, that we said, okay, in the future, at some point in time, you wake up in the morning, your computer will say, your financial, digital financial system tells you, hey, I'm gonna save 10 bucks on your mortgage, Logan, by moving from Bank A to Bank B, and I'll do all the paperwork for you. The only thing you need to do is say yes, right? It's like, okay, that's eventually gonna happen, just like self-driving cars is gonna eventually happen, we just don't know how fast. But if that is the direction of financial services, what do we want to be? And then it became clear to us, the digital financial system, like, we want to be that, we want to advise you on those decisions to help you save time, save money, make you

• 35:28Speaker 01

  feel less, more in control of your finances. And like, I think that the, and less worried about them, but, so I think that that's the, like, big vision goal, right, as much as like, and then these services, the payment services are amazing, because we are over 100 million users and we, you know, acquiring them ourselves would have been very expensive. And now we have these merchants who like our services and see that they help them grow their business, and as a consequence, they're advertising our brand and, and people see us online on Macy's or Uber or Airbnb, and then they try us and they're like, hmm, I like this, and then they start using us for more things. And in Europe, sometimes people drop their credit card and explain, you know, and, and replace it with ours, or they drop their bank relationship and, you know, replace it with ours.

• 36:10Speaker 01

  But it's a, it's not like your bank used to be, where you have to sign up and, you know, and please, please, please make me a customer and, you know, go through 55 forms and, you know, beg with your local banking guy. It's different. It's more that like, you try us for something, and then you like us, and then you try us for something else, and then eventually that becomes like a full, full relationship like that. So I think, you know, that was not the 30 second, but at least I did it in four, five minutes.

• 36:34Logan Bartlett?

  Yeah, no, no, you, you cut it down. As you reflect on the Adyen, Spotify thing, or the, you know, Stripe.

• 36:42Logan Bartlett?

  You were doing more things at once around that time where I think Adyen and Stripe were sort of singularly focused on that part of the business, if I recall correctly. Do you attribute them succeeding in that arena? And as you reflect on your guys now selling off part of that and not winning Spotify accounts or whatever, was it a focus thing in your mind? Was it just execution, hand-to-hand combat, and Peter and those folks just did a great job? What do you sort of, as you self-flagellate and say, oh, what could have been, what do you attribute it to?

• 37:24Speaker 01

  Look, I think both the Colson Brothers and Peter are fantastic entrepreneurs. And I think it would be very like, you know, you would not have understood the world correctly if you believed it would be an easy thing to compete with them. So I don't think it's that simple. I think they did an amazing job. The question to me is not necessarily the commercial outcome, like, could we have one more commercially or less? But from a product perspective, could we have built a product that was great with the bandwidth and capacity? Or would that have required more focus or less? I think the point is that we had the focus, in my opinion. At that point in time, this was the main focus of the company. It was mine and at that

• 38:06Speaker 01

  point in time, management teams and the company's ability to turn that vision and understand, how do you turn a vision into a working product? You know, like, from this big grandiose idea of direction into something that actually delivers value on a day-to-day basis. And we were simply not doing that right. And I think I cannot promise that we would have a different commercial outcome. But I think with my experience today of how to turn vision into an actual product outcome, I could have had a better chance at at least coming out with a product that would have been more competitive going back with the same amount of resources and focus. So I do think that like, we learned a lot

• 38:49Speaker 01

  from that. And the people who were involved learned a lot from that. So there's tons of learnings that I would have done differently.

• 38:58Logan Bartlett?

  As you're an entrepreneur or someone's listening to this, is there a specific staffing? Thing or is there, is there any salient point? I'm sure you have a million of them, but like as you reflect on that and you were to distill it down to one or two things that now you would do in retrospect that you didn't do at that time and you're an entrepreneur listening and trying to get, you know, the, the, the wisdom of those five years executing on this. Uh, is there something that stands out?

• 39:27Speaker 01

  Well, there are a few things. I mean, one is obviously we did hire too many senior executives from the outside. Um, that had great CVs, but not really. And one of the major things that I did in 15, when we decided, because 15 to us was such a pivoting time, we realized the clone of checkout was not going to become a Stripe or an Adyen. It was going to do well, but it was not going to come to like a hundred billion dollar outcome. And so as a consequence of that, you know, we had to pivot, but it was also the time when my co-founder Nicholas uh, departed the company and which was good from the perspective that like over the last years, we had become a little bit like a married old couple. So like when he was saying something, I was like, I already know what he's going to say in the next sentence.

• 40:09Speaker 01

  Like I know where that's going and we weren't really listening to each other anymore. And to some degree, some people internally, some troublemakers were basically using that to their advantage to create political infighting. Um, and that was not good. And when he left, it wasn't really about who was right or wrong, but it was about the ability that it created clarity suddenly. Suddenly it was like me and I think the biggest actually to me benefit of that was that before he left, if something went wrong, I could always say in my brain like, yeah, but I listened a little bit too much to Nicholas. If I would have done it my way, we would have been like, you know, whatever. And you don't learn, you don't learn anything thinking like that. The benefit like after he left, it was like, we screwed up.

• 40:51Speaker 01

  It's only me, man. Like it was me and like, there's nobody else to blame. So let's figure out what the hell I did wrong. Right? Because that did not turn out well. So I think it like, it forces this. I think that's the funnest part of being a CEO. Like there's nobody else to blame. Like there's a lot of other people to give credit for great things, but there's nobody else to blame. So like, um, so I think that just accelerates your self-development. But I think that the, from the learning cycle, so definitely so in 15, when Nicholas left. I wanted to form a new management team. And one of the things, at that point in time, the company was 10 years old. So it allowed me to actually promote some people from within and bring them up to management level. When everyone had advised me, oh, people are too young for that.

• 41:34Speaker 01

  They're not going to be, you know, more typical startup advice. And it was the opposite. It was the right thing. These were proven individuals. Like, there's a reason why if you go to very traditional industry companies, like industrial companies or these things, they almost never hire senior executives from outside. You always, like, I was talking to, like, the guy Volvo trucks, running Volvo trucks, right? Like, they don't hire some senior guy of the street and just like, hey, come on in and fix our Volvo trucks, right? Like, you have to work there for 20 years. Like, there's a reason for that, right? Like, it's not, it's not, you know, so, so like, to me, actually being willing to, you know, to bet more, even if they're junior and even if they're learning, but like, allow these people the same development and learning

• 42:19Speaker 01

  that I myself had had, because I was a CEO at a young age, right? So that's very critical. I think the other thing that I probably think it's a lot is just like, you know, just stay very focused and close to product development and the actual, like, today, we spent, I spent so much more teams, like even today, my work week, if I look at it today. I, I really enjoyed when, you know, Nvidia was talking about, you know, 60 direct reports. I don't have 60 direct reports or whatever, but I do have four days out of five spent very deeply with specific teams at Klarna, doing specific things, interacting with them, working with them. I feel like I'm a team member. That's what I want them to feel, you know, sometimes they do, sometimes they don't.

• 43:04Speaker 01

  But like, I'm trying to engagement and we're reviewing exactly how we're doing the product, how the code looks. I mean, the amount of code I've been reviewing, like, we're into the thesis and we're discussing, you know, how does this? Execute a reality and people often feel that like, how am I going to scale if I do that? You will scale better than ever. If you nail something with a team and really understand how to do things together. And then you move on to the next team. If you do that on a, you know, over and over again, you'll have a fantastic organization that can execute amazing things. But you need to be close and you need to help these teams succeed because there are so many blockers, so many things in the organization. Oh, I'm dependent on that team and I didn't get an answer and I'm not sure, but because they said this and they said that.

• 43:47Speaker 01

  Like just helping them resolve these things. These teams want to be successful. These people want to be successful. But many times they're, they're stuck in a larger organizations in, in abilities to take decisions. Or having senior leaders who don't understand the product and the nitty gritty, you know, importance of the nitty gritty. These is enough to be able to advise their teams and support their teams on what's really important. I think those things was, was that more a critical?

• 44:13Logan Bartlett?

  Yeah, no, that's super helpful. I, I guess, I guess one question on that is, um, as you think about the tension that exists, they're sort of the, there, there's a spectrum between autonomy and empowerment and centralization and standardization, right? And they sort of live at extremes. And if you go all the way to centralization and standardization, you're not empowering people to make their own decisions. But you get some shared frameworks and design consistency and hey, here's how we do things. If you go on the other side, you're empowering people to be nimble and move in quickly. But you could end up with 50 different businesses or, or little autonomous units operating within an organization.

• 44:57Logan Bartlett?

  And there's no cultural consistency. There's no design consistency, you know, but maybe this is on GCP, that's on AWS. This is written in Java, that's written. How do you think about the, the balance of, of empowerment? With, uh, consistency or centralization and the tension that exists within an organization?

• 45:19Speaker 01

  You know, it's a very good question. And actually in 15, the first thing that we concluded after feeling that we had failed was that we need to change like, okay, we now have this big hairy goal of becoming this digital financial assistant. If we're lucky, it's a hundred billion or even bigger kind of opportunity ahead of ourselves. So. What's going to be different this time around? And then the only difference, if we're lucky and the vision is right, then it has to be that our execution is different. So that we actually deliver on this and we become that Adidas Stripe success. And so then it was, what do we do differently? And the first thing we did was to change to the operating model. We had a very typical functional setup with like marketing, product, engineering, et cetera, et cetera.

• 46:01Speaker 01

  We moved into these autonomous, small teams that we called startups. We decided everyone in the company would be organized with eight people, the two pizza slice team, Amazon influenced. Um, they were all going to act as startups. They were all going to write a post, a press release of what they're going to accomplish in a few years. And we were poor, I think a little bit, I feel now sad because a lot of these teams like made so much effort in these amazing press releases. And today I realize they maybe are of some limited value, but that part now we were crafting them to death. All of us together, we're just like, we're going to have a perfect press release and what this product is going to, or this team is going to achieve in a few years. But there were some things of that were great, but the downside of that was we created this

• 46:42Speaker 01

  500 teams that were rowing in totally different directions, to your point, applying different standards, working in different patterns. So it was, it was a great uplift in productivity already then, in my opinion. We managed to get much more done than the kind of traditional functional organization. Um, and the agility and I, I'm very influenced by agile and agile is partially coming from the Toyota way. That in itself is coming from, uh, the Americans who were preparing for the war, uh, World War Two and stuff like, so these, these, you know, these methodologies have been around for a long bit of time, but, but the point is that like they were part of it. But to your point, there's a downside to it, uh, that there is something about standardization and doing things in a consistent, coherent fashion in the organization.

• 47:24Speaker 01

  I think about it today a little bit more also that like, you know, if you go to, my kids go to Taekwondo class, right? When they come in, in Taekwondo class and they have white belt, the first thing they do is not start to discuss if you should hit like that or stand like this or whatever, you're kind of expecting your coach to come and tell you like, move like this. No, no, not like that. Move like this. No, no, no. Move like that. And then maybe if you.

• 47:49Speaker 01

  Showcase that by hard practice and learning, swipe off, swipe on, right? Like care of the kid. If you, if you at some point in time reach a level where you're black belt and so forth, maybe you will suggest the new movement. Maybe you'll create a move in Taekwondo nobody had done before. Maybe you'll do something, right? But it has to build on the amazing work and you know, you have to work, you have to build on top of the giants that come ahead of you, right? So like today with the teams, it's awesome that you know, we have this amazing passion, energy, people coming in and wanting to do things new. But like, let's make sure that we actually build on what we have done and like, let's find a balance between that.

• 48:29Speaker 01

  And there is, Logan, what you're describing is to, still today, one of my biggest challenges when I go in and I speak to teams and I'm like, hmm, did I like, am I pushing them too much on how to do things right now? And am I like stopping their own creativity and their own independent thinking? Or you know, or the opposite, am I getting them too loose? Like, and I think it's like to me, almost like it should be a consistent evaluation of a leader. There is a nice leadership program in Sweden called situational leadership. It basically speaks to the fact that like each situation is different. So you would apply different methodologies depending on, you know, the situation.

• 49:08Speaker 01

  And if I assess, maybe this person right now needs clarity and I just need to, you know, make sure to develop their skills. But maybe right now what they need is to go and, you know, and do something on their own and learn something and make some of their own mistakes. And I think you, and then you have to obviously weigh that versus how important is this for the company? Is it okay if they fail? You know, or is this like a mission critical thing that I need to be a little bit like? I think it's more of something dynamic where you, you have to apply it slightly differently from a situation to situation basis. And I think the, the best leaders, the best managers I see at Klarna are doing that. They're, they're very thoughtful about like, maybe now like this, may push a little bit more and you know, move back, let them, you know, et cetera.

• 49:49Logan Bartlett?

  You referenced Toyota there and I, I've heard you espouse or celebrate Toyota's culture and, or some of the things that they've done from a process standpoint, I guess. What? Why do you take inspiration from them? What stood out about the way that they've operated historically that you've maybe tried to bring into Klarna's culture?

• 50:09Speaker 01

  I mean, as you know, you get, I get a lot of management books pushed my way and then you try to read some and some you're just like, oh, you know, I guess. But and then I just at some point in time, it's like, I'm stopping with this in my life. I'm only going to read, read like Kafka and Dostoevsky from now on, I'm not going to do this anymore. And then you start reading, but the problem is then you, as a CEO, you start reading Dostoevsky, you're like, there's management ideas in here, like, you know, there's like things to do. But anyways, um, what I liked about Toyota, I liked when I read the book, but it was not close to what it meant. When we finally, after many years talking about it, we booked a session to go to the

• 50:49Speaker 01

  factory in the UK, we went to the factory, we brought our 50 top managers and we brought them to the Toyota factory outside, I can't remember, somewhere north of London. And we got there and they walked us around on the factory floor and they explained to us in practice, how does it work in the factory? And they showed how they did the Gemba and the Kaizen and that, you know, all the different methodologies that they have developed. And you just look at that and you're my God, this is freaking impressive, you know? And I, I think to me like, you know, I mean, obviously Elon with his management technology has also been able to establish himself in that industry.

• 51:31Speaker 01

  And he has shown that even the Toyota way has its flaws because there's some other benefits to the way he does things, but there's also downsides to how he does things, right? So like, there are always, there's many ways to be successful. But the point is that like, it just inspired me. And one of the things I really loved, which I think was really cool, and I know it's going to sound a little bit like maybe Voke or whatever, I actually think it's genuinely true from the heart, from my heart, is that Toyota has this fantastic capability of bringing in people that don't have academical backgrounds, that aren't, you know, trained at amazing universities and actually encourage and involve them into a continuous

• 52:10Speaker 01

  Improvement of how to build and manufacture trucks in a way that or and cars that is simply, you know, um, that just improves and, you know, Toyota as a manufacturer has beaten the profitability and growth of basically virtually any other car manufacturer in the world for decades, right? And it was quite inspiring to see these people really being part of that. And I, I just, I found it very, very, very interesting. I really recommend it for people to book one of those. The fun, nice thing is they give away the money from that to a charity as well. So you book that and you get to walk around the factory and really reflect on this. And the one thing that I really loved about that is the Gamba Walk, right? So the Gamba Walk

• 52:54Speaker 01

  is the fact that the senior manager has to walk the factory floor. And I found that very difficult to do in a digital company until we started being a little bit more disciplined talking about your standardization. Today with Inklona, we're a little bit more tougher on the expectation that every team in Klarna has a Slack channel. And that that Slack channel is actually the one that is public and that is genuinely used for the day-to-day work conversations and so forth. And the amazing thing about that, it allows me to do virtual Gamba Walks. I can walk around, I can read these Slack channels and I can see directly like, okay, here's a team struggling with something and I can jump in and support them

• 53:36Speaker 01

  and, you know, resolve a creel matter, things that will not come up in meetings. Because people maybe, you know, feel, you know, shy to ask for help or they don't feel that it's a matter for the CEO or whatever. And here, these things come up and I can come in and say like, hey, you should talk to that team. And like, you know, you sort it out or here's an idea, this is how we solved it. And it, it's such a nice to me, that's the same as I see the coach of my kids on Taekwondo. He's walking around and saying like, you can hit like this instead. And then if you do that, you get a different outcome and, you know, I, I'm, that's an amazing type of leisure. That's the way I would like it to work. Um, and I don't, you know, you know, obviously sometimes people can feel afraid of that, oh my God, the CEO wrote something

• 54:17Speaker 01

  in our Slack channel, whatever. I get it, but it still must be the way that we do, right? We support each other and we're like engaging in people's work. I think it's amazing.

• 54:27Logan Bartlett?

  One of the interesting things I heard you say is just it was something to the extent of like leaning into regulation and you have a bank license now and that I think the point you said was doing hard things is the way that businesses create value, which which I hadn't heard articulated in that way. And in the US, we have a lot of people doing these, what do they call the the bank lending licenses or maybe cut corners in pursuit of the end customer? And then maybe they'll go back and do some of the regulation or some of the harder things. It seems like you guys have leaned into doing the hard stuff from a regulatory standpoint.

• 55:13Logan Bartlett?

  Can you speak to that? Is that a philosophical thing? Is that just happenstance of what you needed to do for your business?

• 55:22Speaker 01

  Yeah, I think, look, well, first, I think I stole it from Martin Lawrence on the co-founder of Spotify. That's less known than Daniel. But I think he said at some point in time that, and he probably stole it from somebody else. It's always with these things. But still, he said at some point in time that, like, you know, the value of a business is the sum of all the, you know, tough problems you solve or something like that. And I think that's like, it's pretty, you know, it comes back to that internal momentum as well. Like, I mean, the P and L is something, you know, the investor perception is something. But still, you have to go around and look around and ask yourself, like, are we creating true value? Is it really working? Right? Like, I think the and to me, you know, people were always warning us about like, oh, my God, it's going to be difficult to launch in Germany. It's going to be, oh, my God, it's going to be difficult to launch in the US. Oh, my

• 56:07Speaker 01

  God, it's going to be like, and at some point, I mean, like, yeah, you know, it's probably true. It's not going to be easy. But like, again, if you don't do it right, you're not going to create real value. And the same goes for the product and regulation and so forth. I think is, I mean, it's just a long rulebook of things that you need to do. And if you allow it to be this, you know, scary big thing, you're just not going to learn anything. But if you embrace it and start learning it and understanding it and what it is and how it can be used. I feel, for example, that the funny thing about bank regulation, right, is that when you really read it, and you get into the nitty gritty details, most of it makes tons of sense. Like, some of it is like, let's take an example. Banking regulation requires us to do new product approval process,

• 56:51Speaker 01

  which means that when we launch a new product, we need to actually have some kind of assessment of whether this is a good idea or whether we're going to blow the things up. And like, that's a pretty good thing to do. And a lot of tech companies may at the beginning like, just ignore that and run, but then eventually they're going to blow something up. And then they're going to say, hey, you know what? We put some, a little bit of like order and just like a few. Like, and if we commit code, maybe we have at least a four I principle before we put it into production. You know, like, these things are going to happen. So like, it's not actually that. What unfortunately happens though, is a lot of these things, the language is different. Okay, I, more and more, the longer I work, the more I see that like lawyers are thinking and doing things in a similar way, but the engineers are doing it

• 57:36Speaker 01

  and then the marketeers are doing it. They all call it slightly different things. They use different terminology. And as a consequence, companies put layers of layers of administrative process on top of each other that really is there to basically do very similar things, right? A new product approval process, not that different from committing code and having code review. It is very, very similar. But because it's not described with the same language, people believe it's something new. And then you create additional layers. And those layers of administration, the problem with them is they instead increase the risk of errors and increase the silo thinking, which in itself creates more risks, right? So it's, the critical thing is to recognize

• 58:21Speaker 01

  that these things are the same and try to harmonize and fight, you know? And, and, and then like when we talk to regulators, we sometimes have a translation box where we kind of translate it into terminology that they would recognize. Because we internally may use slightly different because we want more of the different competences that are, you know, working at Klarna to recognize the terminology. And then sometimes we need to like, you know, apply it in a more banking-ish language, right? In order to feel, regulators feel more comfortable recognizing it, but it is the same stuff. Um. So yeah, so I think that like to me, solving these problems, solving the difficult stuff is like, and it's also more, I think partially that's why I love being in banking and fintech is that like, it's freaking difficult. There's so much complexity in this. You have

• 59:05Speaker 01

  the regulators and the customers and, you know, it's not like, I'm not just doing some gaming apps so that if it's like, if it breaks down and stops working, you know, people will be a bit sad and you'll be angry and your investors will complain your revenue dropped. But like, if we drop like payments doesn't work, like I'll have, you know, the CEOs of Nike and Macy's calling me and saying, what the hell is going on? Like, you know, like, and there will be like, pretty big disruptive things going on. So like, and that's fun. It's difficult, right? It's very, very hard. It makes it more interesting.

• 59:33Logan Bartlett?

  I think, and I, I might be a little wrong on the years here, but uh, it seems like for maybe 90% of Klarna's history, you guys have been profitable, plus or minus, and the money you raised. Uh, I know there's, there's some funky stories in the early days of, you're not technical, your co-founders weren't technical, you had to hire engineers to come in, and then ultimately there's a lot of secondary buying, buying folks out. But I, I sort of did the rough math, and I think it was about 90% of the, uh, what, are you 19 years now? How, how long have you been at it?

• 1:00:04Speaker 01

  Yeah, 20 years next year.

• 1:00:06Logan Bartlett?

  Yeah. So, so, so I think the vast majority of the time you've been profitable. Uh, you swung the pendulum at one point, very unprofitable, uh, 150 million, uh, in burn a month, um, which I realize on a dilution basis, based on your valuation, I realize it was nominal, it was 2% a year. Like, I totally get that. Um, in moving in that direction, did it, did it feel unnatural to the DNA that you had built for that amount of time? Or was it, hey, we're just going in the US and it takes, it's gonna, we need to be aggressive to do this? I guess, shifting from one side of the pendulum so far to the other, can you just take me through,

• 1:00:46Logan Bartlett?

  like, what that actually feels like as a business when you've been so frugal historically, and then all of a sudden so ambitious, if you will, uh, in terms of capital consumption?

• 1:00:58Speaker 01

  I do think, yeah, it's a, it's a tough question. And, um,

• 1:01:04Speaker 01

  I struggle a little bit because I feel some degree that's like, um, I wonder sometimes if, if it helps me to be that transparent. But I, I think that like, you know, but I, at that point, I can't stop. That's my problem. I'm just like very honest person. But, but like the, the, the problem is that I think the truth is right, is that when, what we had identified from our perspective was that Klarna got a hundred million dollar valuation, then a billion in 2010, and then we went down the Klarna checkout thing, which delivered, but didn't deliver growth at the pace we were hoping to. In 15, we got a $2 billion valuation, which was a hundred percent increase,

• 1:01:47Speaker 01

  but not necessarily what GA and DST who had come in at the billion were hoping for. And as a consequence, they wanted to sell.

• 1:01:52Logan Bartlett?

  Sequoia was, was oh eight, oh nine?

• 1:01:55Speaker 01

  Yeah. So Sequoia came in at a hundred million dollar in oh nine.

• 1:01:59Logan Bartlett?

  Oh nine, and then a billion later, uh, one year later.

• 1:02:02Speaker 01

  A year later.

• 1:02:03Logan Bartlett?

  Five years later.

• 1:02:04Speaker 01

  A year later.

• 1:02:05Logan Bartlett?

  Yeah.

• 1:02:05Speaker 01

  Just a year later. And then five years later was just two billion, right? Like, and so, and I think that, and, and Sequoia bought a 25% stake back in oh nine, right? Uh, of secondaries mostly because over these years, we were always profitable. So there wasn't much of primary being raised. Most of these investments were really secondaries that people were trading in like GA and DST. There was a little bit of primary, it was limited. Uh, which is also why, you know, Sequoia has been very little diluted over the years because they, there was never a big round until we hit very different valuations. And so, um, then GA DST wanted out. I think partially maybe because they started, you know, I think maybe

• 1:02:46Speaker 01

  since GA then invested in Adyen, maybe they were listening a little bit too much in the board meetings, me complaining about Adyen moving faster than Klarna. I don't know. I don't know. Maybe that was the reason. I have no clue. But anyways, um, they ended up basically selling Klarna and buying Adyen and stuff. But, um, and then DST wanted out. Nicholas, my co-founder, had quit and he wanted to give everything to charity. So, so actually 25% of the cap table was for sale and I was just like, Jesus, you know, it's going to be difficult to get the company's valuation to grow. I mean, some people wanted us to IPO back then, me and Michael of Sequoia felt that was much too early and wasn't the right time.

• 1:03:18Logan Bartlett?

  This is 15?

• 1:03:20Speaker 01

  Yeah, I was fifteen. And so finally, we got two new shareholders come in and split that twenty five percent on a twelve and a half each. And they invested at a two billion dollar valuation. And that was good because we got some new people that wanted to believe in the company. I mean, the funny thing, though, is that the private equity fund that invested Per Mira, they were kind of still hoping that we were going to do Klarna checkout and kind of go and compete with Adidas and Stripe. So there was a little bit of misalignment about the focus and, you know, whatever. But like, we managed to, you know, agree on that eventually. And they were also, you know, so that kind of changed. I think, though, at this point in time, we started having some success,

• 1:04:02Speaker 01

  which actually, you know, I don't want to credit to myself, which is funny, but in the UK, our UK team at that point in time, they said, look, this Klarna checkout thing, like, is not actually that interesting to us. This buy now, pay later thing that you've been doing in Sweden for a long period of time, like, we think that would make sense in the UK. And I was like, no, it's never going to work. People have credit cards. Forget about it. Like, so I actually told them not to do it. And talking about autonomy, they went and did it anyway. And then a year later, I was like, what are you guys doing? You promised you would not do this. Yeah, but you know, like, I was like, no, you have to stop. It doesn't make sense. And they still did it. And then they signed ASOS and then it just took off, right? Like, boom. And so in seventeen, we're like, wow, you know, this is really working.

• 1:04:45Speaker 01

  And then we started hearing about this company down in Australia having the same success. So now we're in the situation where also like the perception of Klarna is starting to change. This, you know, because Afterpay was listed, it became a phenomenon, buy now, pay later. And, you know, Afterpay had made a lot of private retail investors in Australia very wealthy. So that started spreading a lot of the rumors of this like growing new thing. And we just realized like, wow, you know, this is going to be a point in time where you should not be careful. Like, this is the time to double down, invest, you know. And so we started seeing that articulating our valuations, started growing like two, three and a half, five billion dollars.

• 1:05:27Speaker 01

  But and then basically Michael Morris calls me one day and says, look, Sebastian, like, we've talked about the US now for 10 years, like, but if you don't do it now, I think you're never gonna do it. And he was so right. It was like, he's right. So we started looking at the US market. At that point in time, we had been around, but we haven't really had any meaningful success. And, and you know, and then, you know, Nick out of Afterpay comes in, sounds Urban Outfitters, and starts creating this massive momentum around his business. And I'm just like, no, no, you know, this is unfair. It's a funny conversation. I, I think I've tell them one place or something, but it was funny. There's an amazing guy that I think is really great, Mahmood, who runs a business called Boohoo. And I was sitting and complaining

• 1:06:10Speaker 01

  in his office. I was like, and he's a very frank guy. And I was like, oh, you know, it feels like the Olympics, you know, it's my, it's the third Olympics for me. I'm the season guy. And now, like, finally, my Olympics to win the gold medal. And then this young Nick comes out of nowhere and like, you know, is about to win the gold medal. It's just like, it's so unfair. And then Mahmood just looks at me like, shut up. This is the best thing that ever happened to you. You know, competition is just gonna make you stronger, right? And that's obviously very true. I mean, the years competing with Afterpay in those early 19 and 20, they were amazing. We were both like so focused on just winning in the US market, but it did lead us to conclude that like, we need to raise money. So we started raising

• 1:06:52Speaker 01

  more money. We went into losses, right? Or like red numbers as a consequence, which also to us was like, okay, this is a US market. It's massive. And I think it's actually true that like, people don't fully understand that. In Europe, the concept of kind of creating a loss-making business in markets that are maximum 50, 60 million people, it does not make sense to the same degree it does in the US where you have 220 million people. It is a more viable business case to burn through cash, to reach scale and then win in the US. The European markets are smaller, and it just doesn't lend itself to the same degree to that idea. And So in our case, however, we realized, okay, when I was going into the US, we're gonna have to,

• 1:07:33Speaker 01

  you know, invest much more. And so we started investing more and our valuation, because also investors went from like, oh, there's this European buy now, pay later, we maybe give them five billion to like, Egon and Silver Lake coming in and saying, you know what, like, you know, this could actually be the winner in this space. And other investors as well. So like, we'll give it a $10 billion valuation. And then, you know, COVID happens and digitization goes nuts. And everyone's like, you know, bah bah. And suddenly the valuation is 30 billion. And you're seeing this heavy multiple expansion, right? The multiples, because the business is not growing from 10 to 30, like, you know, 3X in a year. Like, I'm sorry, as much as we were doing well, we weren't doing that well.

• 1:08:13Speaker 01

  And so you you start realizing that it's getting ahead of yourself. But the problem is, you're in this echo chamber. Every business around you, everyone's seeing growth. I mean, we had like 50, 60% growth in 2021 or something like that due to COVID, right? So you're seeing this, you're like, maybe this is a shift, you know, everyone is saying the same things around you. So you get caught into it to some degree. And I feel a little bit like, you know, looking back, I obviously can be self critical, like, I get caught into it a little bit too much, right? Like, I I wish that I was a little bit more careful going back now when I look at it. I would, and that's why I said about transparency, maybe I shouldn't say this, but like, I do, I'm not happy about that. I I feel a little bit like I got swept up, swooped up too much in that. But then again, I wasn't alone. There was a lot of other people, right? Everyone got swooped up in it. A lot of people got swooped up in it.

• 1:08:58Speaker 01

  And and I think the good thing is, we really doubled down and we spent a lot of money on building our success, which today, US is our largest markets, it's been profitable for five quarters, you know? It's a massive success for us as a company. And that would not have happened, would we not have doubled down? With that said, did we need to hire so many people, right? Like, was that necessary? Like, did it make sense? Could we have been a bit thoughtful? Yeah, of course. Like, looking back at it, I regret some of that. And I wish that we would have been a little bit more thoughtful about it. But, you know, it's unfortunately like everyone does mistakes, right? Like, so I think that like, There's a mix, and I do think that it changed the focus of the company where,

• 1:09:42Speaker 01

  you know, we weren't as thoughtful, we weren't as bootstrapped. We became a little bit excessive on some places and it wasn't good for the culture either. When there was like money everywhere, right? Cheap money everywhere, but I think it was true for a lot of other businesses as well.

• 1:09:56Logan Bartlett?

  One of the things that you were unique in was you reset valuations in the private markets, which I don't know, I could go look at the numbers, but like if I looked at a firm or PayPal or whatever, like I'm sure it was directionally proportional with what those businesses did, but you did it in the private markets, which makes it a little more anomalous. I think most businesses have been reticent to reset valuations and deal with all that. I guess as you internalized that with your employee base and sort of set expectations,

• 1:10:38Logan Bartlett?

  and I know there were some layoffs associated with it or not. Do you wish you had done it in the public markets? Because, hey, you know, that's normal for valuations to swing like this. And it's a little more anomalous to do it in the private markets? Or were you glad that you could do it with a little bit more, I don't know, discretion and less quarterly

• 1:11:02Logan Bartlett?

  increments in the way that probably a firm had to deal with it?

• 1:11:06Speaker 01

  I think that the few things, right? Like, since I've never been public, it's hard to compare. But one thing, like I remember at the point of time when COVID first came, and there was so much uncertainty what it was going to mean. One of my investors called and said, you have to throw that growth strategy out of the door. You have to start, you know, shutting down. And you may remember at the very early days of COVID, a lot of businesses started announcing that they were like shutting things down or closing or et cetera. And then the digital businesses realized like, oh, wow, the effect is the opposite. And I said at that point in time to the investors, I said, look, I'm a captain of a fairly big ship now, like I can't turn around like that, right? Like I have to wait a little bit more, get a little bit more information. When We were fundraising and we needed at some point in time to raise money.

• 1:11:52Speaker 01

  And you know, the latest valuation was fifty, you know, forty five billion or whatever, fifty billion. It's actually not entirely true because SoftBank actually got a blended deal. So the actual investment was, I think it was valuation was thirty three or something, but media reported it as forty five. And but but there were transactions happening even at fifty in the stock. Like when that shifted and to your point PayPal and everyone drops the same amount. Like to me, it was just like, okay, one, we're gonna have to raise money. But it was also clear that like, we're gonna have to change and take this. And I feel that like, to me at least, after being a CEO for so many years, it's like, once you conclude that this is my now current belief,

• 1:12:34Speaker 01

  that the markets are changing and it's going to require a different way of operating going forward. Then you just want to act as fast as you can and just like bite the bullet and just do it. As much as it's tough, empathetically speaking to your point about the implications. And I feel that like, you know, the odd thing was that like the whole the whole world hadn't necessarily woken up yet to the fact that things were changing to that degree, especially not the private market. And then we got a lot of publicity for like, oh, we're, you know, are we in trouble because we're, you know, laying off and and and stuff like that, right? And then only a few months later, other companies were doing the exact same thing and nobody really cared anymore because it became norm.

• 1:13:15Speaker 01

  And and there was even this like silly thing where like, you know, some of our employees had created a Google Sheet where they advertised and said, everyone can put themselves on this list. And then like, you know, people started doing that and I wanted to help out and promote because they wanted to promote that list. It's like, these are people that are now available for jobs. This is the layoff list. Yeah, exactly. And I put it out on LinkedIn and then the press was, you know, hammering me for why I'm like exposing people being, you know, laid off. And it was insensitive with the things like that happening. So we got a lot of that press and I'm. It was also interesting watching some of the big companies afterwards, like if we did a recorded call, because we had to inform people across like twenty time zones of this.

• 1:14:00Speaker 01

  And operationally speaking, we kind of made it recorded. And we got a lot of hammering for that. So then everyone started doing live calls instead afterwards. Like you see the other companies were like learning from our mistakes, which kind of makes sense. And they're like, you know, but it was just a very hectic time. But we decided we wanted to do that before we raised money. And I remember also having some discussions with the board, like, should you really do this? You wait this on you, you close the funding round. And I said, look, look, I don't want to wait. I want to get this done. It's the fair thing to just get it done. And to some degree, I also felt like that it was going to be better for the employees, because the my suspicion was that the employment market was going to worsen.

• 1:14:42Speaker 01

  And if these people got out in the market earlier, they were more likely to find other things. So I also felt like from that perspective was actually better. So anyways, so those were kind of decisions, not an easy decision to make. And I felt obviously embarrassed about the fact that we may have, we should have, you know, been smarter about it and stopped recruiting earlier. And there were tons of things that you learned from it. But I do think, you know, it was, it was a necessary decision. And then would it have been easier as a public company? Like, maybe the valuation drop to your point would have been less debated, because now it became big news. And we were like, hello, but PayPal dropped ninety percent and it firmed up like nobody cared, right? There was a claw now ninety percent drop like.

• 1:15:24Speaker 01

  But I also feel to some degree that I had the benefit of not being in the public market, because it was going to take us twelve months to set the business right. And after that, things quieted down and nobody was looking at us because we're not public. And it gave me, you know, the mandate to continue. You know, I could have been challenged in my position at that point in time as a CEO, right? But if I was in the public market, maybe more so than in the private. But here I had long term, you know, board members and investors who allowed me the mandate to continue and show that not only did we know how to grow in the U.S. and make it successful, but we also could turn it around back to profitability. And I feel now as people look at that, they say like, wow, that's actually pretty cool. You, you know, you took it from minus a hundred fifty million dollars to a plus at twelve

• 1:16:09Speaker 01

  months later. So so I think to some degree, maybe it was helpful more after that to be private, actually. And I'm not sure to what degree you would have been given that ability in a public company, unless you have like voting stock and you know, whatever.

• 1:16:23Logan Bartlett?

  I guess to that point there, um, and I guess I don't need you to comment on any specifics around this, but I have two questions related to.

• 1:16:35Speaker 01

  I wonder what's coming now, Lauren.

• 1:16:37Logan Bartlett?

  I think you know what's coming. So I'm curious what you've learned. One would be the media point, and I let's let's put a pin in that. I want to come back to your coverage and you, I mean, you've you've taken your lumps in the public markets or from from the media and all that. And I I'd be curious, um, as whenever I get in any media thing, there's always the the reported truth. You know, they're like close to the truth and then the actual truth. But I'm sure you've lived a different manifestations. But um, I guess, uh, how has, uh, what have you learned about, uh, working with venture capitalists in general? And there's been something in the news over the course of the last couple of months, which I don't need you to, uh, comment necessarily on the specific

• 1:17:23Logan Bartlett?

  players and dynamics and all of that stuff involved. But, um, you've worked with a bunch of different venture firms, uh, with a lot of different interests at different price points when they got in, different outcomes that they're underwriting to, different generational transitions, maybe they're going through. Is there anything that you've learned or that you would take away or pass on to the next founder? About picking your investors, working with investors, all of that, um, that that might be salient?

• 1:17:55Speaker 01

  Well, I do think that like, you know, despite what was publicized, I would still say that to me, Sequoia is stands out like the quality of people, um, and what they've been doing. I'm like, you know, uh, I've seen multiple sides of Sequoia.

• 1:18:15Speaker 01

  But I still gotta say, I'm a big fan. I'm just sorry, but I'm always going to be a fan like.

• 1:18:20Logan Bartlett?

  I'll edit this out. I don't allow nice things said about Sequoia on this podcast. So. Yeah. Well, there's some AI dubbing over this. Uh, yeah, no. Uh, yeah, they're obviously, they're obviously a great firm, but that's, that's great to hear. I mean, that's honestly great to hear. I know you've you've dealt with different elements of it.

• 1:18:40Speaker 01

  It was sunny because the funny thing is that like after that whole, what I sometimes laughingly refer to as my succession episode drama.

• 1:18:48Logan Bartlett?

  Are you Lucas Knatzen in this case? I don't know if that's right.

• 1:18:51Speaker 01

  I don't know.

• 1:18:53Logan Bartlett?

  You kind of look like, I've actually, so people have told me I've looked, whatever that actor's name is, I've been told I kind of look like him. You maybe have a little bit of a Lucas Knatzen thing going on.

• 1:19:02Speaker 01

  No, but I actually happened to be visiting with Sam Altman at OpenAI, just like a few days after that whole thing went on.

• 1:19:09Logan Bartlett?

  The only person with a more complicated board dynamic in the last nine months, probably.

• 1:19:14Speaker 01

  Yeah, exactly. And I felt that like, you know, my, my problem dwarfed when he was, I was like, had to ask him like, how did your phone look when this was going on? And he was like, I had some issues with my phone that not even Apple understood that you can have these many messages coming in.

• 1:19:29Logan Bartlett?

  I've done it. I've done an episode with him and he told me, he told me that like, it actually broke the number of messages that came through. He like broke iMessage for something, which is, yeah, but at least you didn't have that, right?

• 1:19:42Speaker 01

  No, I didn't have the same amount, even though there was a good amount of public scrutiny as well. Um, no, but I think, look, but I obviously one thing, no, there one thing to seriously say on that is that I think still that it's a lot about the person and not the firm. You will have different people and it's all about that personal report. If you can find a person that you really trust and believe in, it, it, it makes a big difference when it comes to the VC. So I, I think a little bit less about the, the brand as much as I think about the individual that I deal with. And I've had fantastic people that I dealt with, with firms that are less well known. And I have people that I've been less impressed by coming from very well-known brands. So I think it, it, it is still very much an, an individual, you know, and then some firms are simply very good at attracting more people

• 1:20:27Speaker 01

  of quality and being more tough in scrutinizing and making sure that it works, right? I think, I do feel that, you know, what I liked, uh, in Sequoia in particular, Michael, was just also very long-term approach. I, I mean, I've worked with that man for Fifteen years now or something and he is one of the most like smartest, really, you know, he's about making money for sure. There's no doubt about it, but like that's what he wants to do. That's what he likes to do. But he's extremely long term and he recognizes the importance of building a reputation

• 1:21:08Speaker 01

  about long-term visibility and being able to come back and that like if you do something like really karma in the sense, right? Like if you do something good here, we'll come back and stuff like that. He's very thoughtful about that in a way that I am very impressed by. And he also had a very long-term view on like he doesn't, he never stressed us to IPO. He never like, you know, did these things and you can, you can, you know, you can challenge him on that. But I think in general, my, my view sympathizes with him. I think that like, you know, we, um, I think there were a lot of times when I saw like, and, and this was also why it actually changed a little bit. My view on this voting stock idea, because I was actually against all of that. I always believed it like, you know, one vote, one stock and all the things.

• 1:21:50Speaker 01

  And because I felt that like, you know, rational markets will do their work and stuff like that. But I ended up in situations where people, some investors, I felt, you know, they were logically arguing for something that makes sense. But I could sense that behind it were things like our fund is running out in two years and we want to make sure that like, you know, there were other things that also played into their decision-making. And I think the integrity and ability as a VC or a representative of VCs to some, to some degree, push back on that a little bit and look at like what makes sense for this company. What are the prerequisites is, is really separates. I think another example that I had is a friend of mine runs a business called Truecaller here in Stockholm,

• 1:22:34Speaker 01

  which has been backed by a number of, you know, uh, great investors. And at some point in time, one of them came, you know, some of these investors came and said, the best engineers in the world are in the valley. Right? Like, and, and then they basically said, if we're, if you don't, if you don't move your engineering team to the valley, you know, like, You're gonna, you know, you're not gonna be successful as a business. You have to do it and we're not gonna invest if you don't do it. So they pushed him and the guy, you know, created an office in the valley, but like, try to recruit the best engineers to this like, you know, twenty people office of some Swedish Indian company that nobody has heard of in the valley. Like, it's gonna be very hard to compete on talent. And it ended up just being them overpaying for people that weren't really as good as the people they had in other countries. And it just, it was just a lost year, right?

• 1:23:19Speaker 01

  Like, based on some pre-concepted idea that this made sense because that was what people were saying back in those days. I think that like, so, you know, I think again, it comes back to evaluating the individual. Do I like this person? Do I think that they're thinking themselves a little bit contrarian? Do I have a good, you know, relationship with this person? Sometimes I feel like I don't trust. I feel that that plays to me more today. You know, how do I feel about this person?

• 1:23:45Logan Bartlett?

  Yeah, there, there's this interesting thing that I guess I would encourage all founders to think about is there's this stability of the institution, right? And if the institution isn't stable and they can't raise money, then you're gonna see a lot of perverse incentives that, that play out within the boardroom. And hey, if I need this win as, as your VC firm, then you're gonna see a lot of perverse behaviors and knobs that are gonna get twisted. And then there's the, uh, the stability of the individual within the firm, right? And it's sort of like, hey, has that person had a win before? How easy would it be for them to get fired? How comfortable are they within their standing within a partnership?

• 1:24:27Logan Bartlett?

  And by both of those vectors, Sepoya and Michael Moritz are, are, were in very good standing. And then there's all the individual characteristics associated with the person. And that's the intellect and the, the, the amount of time they have to provide to you. And, you know, how long-term they're gonna be oriented or the stylistic approaches and all of that. But I sort of think of all those as like the foundational pillars of it. And even if you have a really stable firm, but an insecure individual within that partnership.

• 1:25:00Speaker 01

  Exactly.

• 1:25:00Logan Bartlett?

  You're gonna get some perverse. Perverse incentives for sure, like, hey, I need to win, otherwise I'm gonna get fired or whatever it is. And then you're as a founder feeling a lot of knobs being twisted and you're not sure where they're they're coming from. And so it is to your point, like, you need the firm to be established and then you need the individual to be established. And then you need to like them and get along with them and all that stuff. Because otherwise you could have so many different manifestations of perverse incentives or things that you're not really sure where they're coming from.

• 1:25:32Speaker 01

  For sure. And I think partially when I look at like how some of these firms are operating compared to how myself I'm operating. I feel that like there is a little bit of too much like, once they hired a young, you know, super smart person out of Stanford or whatever it is, right? Like, and they put them in that role, there's so much autonomy given to these individuals. And then to your point, like, if you're lucky and that person is good, then, or if isn't too stressed or whatever about their job or whatever, right? Because it could combination, then it may work really well. But in situations where to your point, there's like, you know, some bad incentives or something's going on, it may become problematic.

• 1:26:12Speaker 01

  And I feel that one of the things that I would apply more as a VC, if nothing else, is that like, I do what I call like random sample testing, right? Like, which is to me, I occasionally participate in customer service calls. I occasionally listen in in meetings, I occasionally walk around. And I feel sometimes that the leaders of these VCs don't do that to that extent, that like, hey, sit down to one of your young, amazing, up and coming. But also listen in, like, how do they sound in the board meeting? How do they act? How do they advise? Like, get a little bit hands dirty side by side in order to also coach them and educate them. And then you will also caught if there is some, you know, bad behavior going on or if they're being a little bit too arrogant.

• 1:26:52Speaker 01

  Because they feel like, oh, I'm working for this fancy firm, so I don't need to be that nice and humble as maybe the first generation of leaders where, you know, whatever is going on, right? You'll catch some of that, those behaviors. So it's a little bit dangerous to just sit at the top and allow the individuals in the organization to feed the full, you know, story of what's going on and happening in every situation. Talk to the founders, like, I mean, even I want to respect, obviously, the reporting lines if you have a board member, but like, why? It's like, you'll be surprised how seldom. The CEO of some of these VCs or investors have called me directly to also like, okay, how's it going? Like, you know, actually, one credit I want to give is to Permira, a private equity company that I worked with. Like, they were like sharing this report where

• 1:27:35Speaker 01

  like they're actually doing more and more of these things where like these conversations also happening. They're listening, like actively asking their CEOs, what could we do to, you know, to make those relationships work better? It's pretty impressive because I feel like sometimes that humbleness gets lost a little bit in the VC community, like where it's like, we're the investors and we know this and like, and we sit in a room and we talk about these companies and these founders do those mistakes and whatever. Like, that may be the, there may be an accurate description of reality, but there could be also a different perspective, right? And the only way to find out is talk to the customer. Like, I mean, that's the only way, right? Like, I can, I can hear so many stories about what Klarna does to his customers internally, and then I can talk to our customers and get a very different story of what the experience looks like and what the real problem is, right?

• 1:28:17Logan Bartlett?

  You touched on a little bit of this, but Michael Moritz, Sir Michael Moritz, one of the iconic venture capitalists over the course of history, right? Certainly the last 25 years. You mentioned long-term oriented and smart. Is there anything else that stands out, having worked with them for 15, 16 years at this point, that you would say is particularly notable that has benefited you along the way outside of those things?

• 1:28:47Speaker 01

  I gotta say, one thing that like, it truly blows me away about Michael is that, and I think that's actually to some degree what made him so successful. He just has this, you know, he just has this amazing, like, I mean, his ability to just cut through the noise and just get to the relevant thing in this like massive thing is just like, I don't know, like, I just, I get blown away sometimes. Like, it's just crazy to me. And that's just like, I mean, that's something that is just about gift and talent, I guess, like, and he'll obviously has trained that over the years. He's been doing these things and learned, but it's pretty, pretty amazing. He just has this capability. And that's a

• 1:29:31Speaker 01

  little bit why I was referring to that. Like, you know, we've been talking about the US for a long period of time, and at Klarna, we had tried a little bit, and we launched something and this and that. And then he just out of the blue calls me on the phone one day and just like, Sebastian, it's now. Like, you're like, and he was all right. Like, it was exactly the timing. It's like, but I hadn't talked to him about it. I hadn't like, you know, it's just like, I don't know. It's just, it's just funny. I think that was make somebody a legend. I think it's cool. It is pretty cool. So I think that's like, that ability to really, because I think, you know, so much is noise, right? Like the same in media, a lot of these things like what is actually working and not working. It, I feel that to a large degree, that is about business as well, right? Like not listening to the trends,

• 1:30:15Speaker 01

  the industry trends and all these things, cutting through all of that and finding what, what is genuinely true here. What are genuinely important that will make a difference? And, and I think that that's also what I found, you know, great managers and leaders in the company understand and are good at, and great CEOs and other founders that I talked to seem to have that skill set. And, and then to some degree, I also think some good, really good investors have that ability to like sort.

• 1:30:42Logan Bartlett?

  Yeah, there's, there's some pattern matching along that stuff that like you just see enough reps and you, you get it. But then there's the intuition side.

• 1:30:50Speaker 01

  Yeah.

• 1:30:50Logan Bartlett?

  And I think, I think my job, I think an investor's job is there's, there's one to two things that are going to matter a year and uh, you gotta lean in when they matter and make sure that you're trying to give the best counsel you possibly can. And if you work for, with a company for 10 years, there, there might be one or two things a year, but there might also only be one or two things that like really are going to be a determinant of success and really helping the company see you around the corner. And it's such an ethereal thing to describe to a founder of like, what's your value add? And it's so easy to be like, oh, we make customer intros and we, you know, we have a recruiting team and we have all that stuff. But at the end of the day,

• 1:31:35Logan Bartlett?

  An investor helps you even 20% see around some corner or help you get to a conclusion six months before you otherwise would have. I mean, that could be the determinant of making it or not, you know, billions of dollars of equity value or not. And it's so squishy, it's hard to describe, but it sounds like Michael's been a real counsel for you in that regard.

• 1:31:57Speaker 01

  Fully agree. And then in addition to that, one thing that just remind me when you said that, the other thing that I feel he says sometimes, and I do feel that he does, is that he generally says, look, a lot of people will be able to describe what can go wrong. Like, okay, this is the risk and this and that and so forth. But like imagining what happens if this actually goes right, right? Like, what if this really delivers? Like, what, how sizable could this be? And I think to some degree, I think that's one reason he's stuck with Klarna, because like Klarna was this odd European investment that Sequoia made back in 09. And like, I'm sure there was a lot of discussions like, what are we doing over there? This company and it's not moving fast enough and this and that and whatever. And then over time, but I think, you know, to some degree, it's like, okay,

• 1:32:42Speaker 01

  but if, I think, my impression is that he thinks more like this, right? Like, if they actually are successful, if they accomplish this idea of becoming, you know, third-party network, the digital financial advisor, you know, really huge, like payments is like a trillion dollar industry, right? Like, the market, addressable market is insane, right? So if you do really make it, it's important. And I think if you combine that with a founder and CEO, which I think is important, it's just that like, somebody that consistently is willing to recognize their mistakes. Like, I go to the board mostly and whine about how, you know, how frustrated I am that we're not moving fast. I'm not a great marketer. I don't go there and tell about all the amazing stuff. I go there and like, oh, my God, I'm so disappointed about this. And sometimes people misunderstand.

• 1:33:26Speaker 01

  Like, I remember Chris, who was the representative of Sequoia back in the day, who made the investment together with Michael, you know, just after the investment, I sent him a text message. I was like, call me. Yeah. And he thought that like, the business had blown up. And, you know, and I was like, just wanted to whine about something I was unhappy with that we weren't moving fast enough, right? Like, so I think that like, I think Michael to some degree recognized it. Like, I mean, the most important thing is that you have somebody that's willing to learn and just like, recognize their mistakes and learn from that. You're not gonna, you're not gonna, as much as people want to push, push around and say like, I'm so smart and I know all this stuff, like, nobody's that smart. But what you can be is you can be extremely self-critical. And really take to heart when things go wrong and and try to adjust it and learn from that, that you can do. And if you do that on a repetitive basis over and over again,

• 1:34:11Speaker 01

  you're gonna see, in my opinion, slightly better results and outcomes.

• 1:34:15Logan Bartlett?

  To that end, how have you changed most as a leader since you were, you know, a twenty three year old, right? Is that when you started Colorado, twenty three?

• 1:34:24Speaker 01

  Yes.

• 1:34:25Logan Bartlett?

  In what way do you look back and feel like you've matured the most, changed the most? What would you tell your twenty three year old self about leading and managing a company?

• 1:34:34Speaker 01

  Well, I think it's almost funny you ask that because to some degree I feel that I am closer running it like I did twenty years ago than than I did, you know, than I've done over the full twenty years. Because I get so much bad advice about this is how you're supposed to do it, or that's supposed to do it. And and then you don't listen to your internal voice and don't follow your heart. And then you end up doing things and then you can blame that you listened to the advice and not learn from it. While actually today is to some degree, like, I've never been as involved with my teams, I work as closely with them, I'm like, I feel like I'm, you know, I'm basically on the battle

• 1:35:16Speaker 01

  front out there fighting with them, with the teams. And I may be a little bit more relaxed about noise in the market as well and things going on. I have a little bit more like comforted, like, don't worry, things will sort out and will work. But I feel to some degree that like, to some degree, I feel like I more recognize myself from twenty years ago than maybe I did like ten years ago, when I was trying to be a corporate CEO, when I was trying to, you know, follow the latest industry standards, or, you know, do what you're supposed to do and all these things. So to some degree, I feel like, I feel, you know, and it was actually partially what happened in fifteen as well. It was one of my, you know, one of my promises to myself was that, you know, that

• 1:36:03Speaker 01

  Back then, I said, look, I had had this like co-relationship with my co-founder. I have sometimes listened to him and let him decide and sometimes I haven't listened to myself and sometimes it makes it unclear. And then I said in fifteen to myself like, now I'm just gonna go all in. I'm gonna try to do what I believe to be right. And just like always make that the leading thing. And um, and not listen so much to what other people say. And then, you know, and then I'm sure I may blow it up and whatever, but at least I can look back and said, I did what I thought was the right thing to do. Uh, and at least it's fully on me, right? Like, and I, ever since that, I've been trying to do it that way.

• 1:36:42Speaker 01

  And I feel that that has made me better since fifteen, when, you know, I feel that like between ten and five, I was quite confused.

• 1:36:50Logan Bartlett?

  Yeah, it's, it's hard to, uh, I mean, it's one of the, the, the most powerful things about being a founder is that confidence that, hey, it came from nothing. If it goes back to, I'm gonna do my best. If it goes back to nothing, that's sort of where it came from. And so I'll execute on it. I sort of think about the canonical like John Sculley versus Steve Jobs thing. When, when Sculley was trying to shepherd Apple, it was like, oh, I can't mess this up, right? Versus Jobs is like, well, I don't know, it started in my garage and now I'm back here and if I blow it up, uh, so be it. But it's an interesting point that you can't, just in leading in general, especially in startup culture, I feel like you can't try to present a version of yourself. Uh, you sort of need to present the totality of yourself.

• 1:37:33Logan Bartlett?

  And, a- and some people are gonna like it and some people aren't, but you need to lean into all of that. Certainly keep improving, but you can't try to be the leader that someone else wants you to be. Because you'll always be playing a part, right? Being an actor in that regard, right? Which I'm sure you felt through that, through that period of time, ten to fifteen.

• 1:37:55Speaker 01

  Which, oh, but I also feel that like, I mean, obviously to some degree, that is true. I also feel that like, obviously Steve Jobs cared, like obviously he cared about winning. Yeah, and also that's, it's a combination, right? Um, and I care, I don't wanna mess up. But I also feel that like, you also start recognizing over twenty years that like, I'm not in full control of everything, right? Like. Things are gonna happen like, you know, and so you just have to do, you just have to go. I just feel I wanna come back from home when I come home from work and I wanna feel I did my very best based on my prerequisites. At least I like, I didn't hold back in that regard, right? And then, you know, things will happen like, it's sometimes funny when, you know, uh, one thing that I do that helps me, I laugh about this bit is um,

• 1:38:41Speaker 01

  when, you know, when I was, for example, dropping from fifty to six and a half, I had this like, you know, interview with some CNBC anchor, something that starts yelling at me, this is a disaster and like, you know, this is like WeWork and you know, whatever. And I was just like, oh my God, like, this is a funny interview, you can actually watch me like, I'm just like, what, what is he saying like? Um, and then you have these situations with my succession drama here with the board in Q1 and stuff. And one of the things that I do that helps me is like, when I'm in these situations, I um, I go into the car and I put on Under Pressure by Queen and I put it on maximum volume. And I just listened to that and I was like, yes, like, you know, like, a great song.

• 1:39:25Speaker 01

  It's a great song and you're like, that's exactly how it feels. You could to some degree, to some degree, you're like, okay, it's super hard. I've, I don't wanna play down, like, I've cried. I've been like, very like emotionally drained, I've been stressed out in these situations. It's not like I'm laughing about them, that's very far from true. But at the same point of time, I can also to some degree enjoy that like, okay, this is, you know, this is life, it's difficult, it's hard and I appreciate the fact that I am given a good challenge. You know, if you would be religious, you would talk about God is giving you a challenge, right? Like, and so the point is like, I'm given a challenge and I can only make my best to try to do that.

• 1:40:07Speaker 01

  But it's also, it's, i- i- it really pushes you and I, I usually again make that soccer comparison that like, if you, if you genuinely, you know, are Slatan as this great Swedish soccer player. But if you, you know, you dream about playing in the Champions League. It's not like the finals of Champions League is easy. You have a crowd yelling, you're the biggest stress hormones ever in your career, this is the game, you know, everything is at stake. Like, you watch that with the, you know, sports professionals, like the amount of pressure they're under when they come in these situations. And but at the same point of time, it's like, This is what I trained for. This is what I dreamt to try to solve these difficult.

• 1:40:47Speaker 01

  I I can still also feel in that some of the things that like this situation is now really testing me. You know, and and again, if you would be religious, we say God is testing me now, like, you know, this is my ability to show what I'm made of and how I'm going to deal with this and do my very best. So you also have to feel some, you know, find some solitude in that. Like, I think. And then at least that gives you a little bit of help and comfort to deal with the situation.

• 1:41:11Logan Bartlett?

  When I was a kid, uh, Under Pressure, I think, was my favorite song or one of my favorite songs. And, uh, I learned, I'm like ninety nine percent sure of this, that like David Bowie came out after the fact and said he didn't remember recording a single lyric of a song. I think him and him and Freddie Mercury went into the studio and there was a lot of substances around. And they recorded this iconic song and neither of them had any memory of, uh, of recording it. So I always, whenever I think that, I'm like, well, it's a great, I'm glad the output was great. Uh, it was a little questionable, uh, what was going on in that studio, but, um, I'd be remiss to not ask about artificial intelligence and you guys have been, uh, I think at the forefront of a lot of things related to this.

• 1:41:55Logan Bartlett?

  Uh, my understanding is you told, uh, Sam and, uh, OpenAI that you wanted to be their their guinea pig for a lot of the stuff that they're, uh,

• 1:42:03Speaker 01

  Even their favorite guinea pig.

• 1:42:04Logan Bartlett?

  Their favorite guinea pig. Okay, I got it. So they have some other guinea pigs, but you are, uh, you're the top of the shelf, the the primo guinea pig. Um, what, uh, what led you to want to pursue that? Uh, how'd you go about actually, um, operationalizing, uh, that within Flarna?

• 1:42:21Speaker 01

  So, I mean, I guess as many others, I'm on Twitter in November, you know, twenty two, and somebody's tweeting, you gotta try this. And I try it and my, you know, my mind is blown away. I'm just like, Jesus, I'm speaking to a computer. And as many others, probably I went away a little bit depressed first. I'm like, okay, this is it. This is over, you know, like, um, but, um, You know, and then Christmas passes and I come back and I'm just like, okay, I gotta, you know, I gotta reach out to Sam before it's too late and he's the most wanted man in the universe. So like, I tried to reach out, so I jump on a plane to, um, to San Francisco, pretending I have other business, but the only, the only reason is to meet Sam when he still accepts me.

• 1:43:04Logan Bartlett?

  By the way, that's, that's like a, that's a patented venture capitalist move there, just showing up at someone's office saying, oh, I'm in town. Yeah. So, uh, you know, a different career. I know you're happy running Florida, but that I do that all the time. So.

• 1:43:16Speaker 01

  And so, you know, my meeting initially with him was two hours. By the time I arrive, it's cut down to 30 minutes. Which, you know, I was like.

• 1:43:23Logan Bartlett?

  So flight time, flight time to meeting time, the ratio is a little skewed at that point, whatever. 10 hours of flying, uh, for 30 minutes.

• 1:43:33Speaker 01

  And I think it was there, you know, it was just, you know, what was happening open. I was just like, you know, taking off. And so anyways, but I get some time with Sam and I tell him these things that I want to be a favorite candidate picks. And I understand from the team later on at, at OpenAI that they were like, yeah, some, you know, European bank, like, sure, you know, like, that's not gonna happen. That they're gonna be fast moving and so forth. But we got a Slack channel with them and we're just like, give us everything you have and just, we're gonna try it and use it. I felt that there was too much. Look, it, it again, like, I have obviously when one of the people who haven't been all excited about Bitcoin and crypto.

• 1:44:09Logan Bartlett?

  You're me both, man.

• 1:44:11Speaker 01

  Sorry?

• 1:44:11Logan Bartlett?

  You said you're me both, man. I, I got yelled at.

• 1:44:14Speaker 01

  I'm happy to hear that. Yeah. Finally, finally I meet someone. No, but the thing is that like, and the reason for that is just like, I've tried the technology and I don't see how it solves the problem for my mom. You know, and I always like think about my mom in these situations, like, how, how does it help her? And like, she doesn't really care if her money is with the central bank of Sweden or with something else, as long as it's safe. Like, you know, she didn't really care about the monetary systems of the world and all that stuff. She cares about being able to pay with simplicity, right? Like, so the point is that like, that technology never got me on the hook because I just didn't see it solve a real problem. And, you know, maybe it will take off and do something for people in some areas, whatever. Um, this technology, the instant I tried, I was just like, my God, this will solve a lot of problems. And so like,

• 1:44:58Speaker 01

  so that just made me feel that like, okay, this is something I want us to double down on. And I started spreading that message internally and there were at that point of time in Klarna as well, people being skeptic and data and privacy and training and this and that and that and that. And we tried to obviously first resolve all these stuff. And then we just encouraged people to start doing things and not being too careful about them doing things that were business core to Klarna. So as an example, one of the things I, I think is a good example is that there was a team came up with an idea that instead of doing these employee surveys where you asked like how happy you at work, one to five and whatever. We're like, this is pretty cool. We can actually now send up a bot to do an in-depth interview with all of our employees.

• 1:45:43Speaker 01

  And actually ask questions and read free text answers and then summarize like what is people's perception of working on and maybe instead of like trying to interpret if they answered a two or a 3.5 on this question, what does that mean? Why are people saying 3.5 on how happy they are at working on our like, and then you're trying to like, look at the free text comments and make something like here we actually, you know, and again, it's just a compliment. The best way to manage your culture is have you great leaders that actually talk to you people and find out what's going on, right? But that's still, they're not gonna, not gonna be replaced by neither a survey nor an AI tool. But we built that tool. That's not core business of Klarna to build AI employment engagement tools. But the learnings the team had from doing that and the learnings that we had

• 1:46:27Speaker 01

  have been now applied to so many things inside. And I think that to me is that like, just encouraging people to explore and learn. And not trying to decide what the business is initially, because you have to realize when you become larger as a company, you can't run it like that anymore. When you're startup, you have to be very selective. We can do these three things and these are the features that we have time to build and we have to bet that these are the best ones that are actually gonna build, you know, bring the company forward. When you're a CEO of a larger company, it's a little bit more of a portfolio of bets. You just gotta say, look, I gotta make sure we're making a lot of bets. And that these are in general, I'm giving them to a lot of teams. And then I'm gonna see which ones take off and I'm gonna double down on them, right? Like you have to a little bit more run a portfolio strategy of these bets. Like a VC in that sense. And so.

• 1:47:13Speaker 01

  So you have to do a little bit more like that. And so we did that with this and we like, like just, just try things and see what takes off. And then it turned out that one of the things that really took off was a dispute resolution co-pilot for our customer service agents that helped them resolve disputes, which is one of the more tricky errands for a payments company. Cause the consumer complains and says, I didn't receive the package. The merchant said, but we did ship and here's the delivery shipment I, you know, proof. And then you have to be this mini court that takes a decision. And it's a tough thing to do for customer service agents. You have to collect a lot of information, take decisions, go through a protocol. And the co-pilot just started helping them resolving these things. And then we realized like, it's actually mature enough to be able to help customers.

• 1:47:57Speaker 01

  And when it helps customers, it does so with at least the same customer satisfaction score that the human agents do. And that to ourselves was also learning. And so I felt it like, and then we started being very excited about these things. And we started testing and it's, it's just, we've learned so much from this, from this exercise. And it changed our ways of thinking internally and the momentum has grown internally. And then one of the biggest thing that we did, which has gotten some, but not a lot of attention just yet, is we stopped hiring in September, October last year. And I said then internally to all people, I said, look, to me at least, it is pretty clear.

• 1:48:40Speaker 01

  I believe that we will be able, I don't know what other companies are going to do. But in our case, we can see that we can do what Klarna is doing. We can do more with less. But we have a 20% retention, 20% churn or retention, like people leave 20% every year. Typical tech company.

• 1:48:57Logan Bartlett?

  Yeah.

• 1:48:58Speaker 01

  You know, one, people stay five years, whatever. So by stop hiring, we're going to shrink 20% a year. And so that brings us from 4,000 to 3,200 people at the end of this year, as an example. And it requires some thoughtfulness on how you manage that. So when somebody leaves here, you can move people around and, and stuff like that. So that you can constantly make sure that people are working on the highest return on investment stuff. And the biggest, most important thing.

• 1:49:24Speaker 01

  But I have also said internally that. Our total payroll cost will go down, but my ambition and commitment to you is that our cost per employee will go up. So you guys will all benefit from it. And if you stay around and participate in this, and if you don't like it, you know, there's also other options to go in other places. And I think each one has the, you know, optionality to decide what you want to do.

• 1:49:51Speaker 01

  But the good thing is it allows us to avoid layoffs and such things, right?

• 1:49:57Speaker 01

  And so we can actually, you know, allow people to take their decision. And we've seen a lot of people lean in and I feel that like that has made people less nervous about it. Like, of course, there's tons of meetings where we sit and we're like, oh, like, this was a lot of work. This just was removed. And so like, and that's fine. But I feel that like people can relate to that. And I, and the other funny thing is because we got so much virality, I mean, we did a tweet about, you know, our chatbot removing the equivalent of 700 full-time agents, which again wasn't, you know, these are employed by companies that have hundreds of thousands of employees, these customer service companies. So nobody lost a job. They were just reapplied to other companies at this point in time. But obviously, long term, we wanted to be honest about the fact that we think this

• 1:50:42Speaker 01

  is going to have implications for jobs. And I don't want to like hide that.

• 1:50:48Speaker 01

  But with that said, we got a million views on that tweet. It became viral. We also had now another where we shared what we're doing in marketing that got three million views. And the funny thing is what happens is, you know, people told me, if you're a clone employee, you have four times as many job offers now on LinkedIn than you used to do like six months ago, because everyone wants to hire these AI people from us. And so to some degree, it's like, good, like everyone's a winner, right? Like, Hopefully it doesn't go from 20 to 25%. Yeah, exactly. We're going after him. Yeah. We have to find a balance there. But like, I think right now it's a win-win.

• 1:51:26Logan Bartlett?

  Yeah. I mean, what are the things with that and the derivative consideration? It's a point I've heard you make, because I'd love to get you to found on, but also just, just say is,

• 1:51:38Logan Bartlett?

  The job of a business is to produce profits, you know, create value. Profits are a derivative of value and all of that. And I guess, how do you think about, like, you're no longer empire building. You're no longer, you're gonna, at some point, you can't attrit 20% forever, I don't think. I think at some point, you might need to get some equilibrium and hiring back. I don't know, there's probably some number of people who are right. But can you make that, that point in how you think about like the societal implications, which you touched on there for a second with the Klarna implications and how you hold those two thoughts in your head?

• 1:52:19Speaker 01

  But I think first and foremost, like, at the core, as much as capitalism is getting a bad reputation now and then, and people talk about it. I think there's some very strong aspects to that system. The point is that like, I'm a CEO. It means that I have multiple constituencies, right? I have my employees, I have our customers, I have our investors. I also have society at large, as the company starts growing, you have to take that into consideration as well. Like, if you run a restaurant, you can ignore some of that things. If you're McDonald's, you have to think about it a little bit differently on your, you know, your impact to society.

• 1:52:51Logan Bartlett?

  By the way, you don't use Burger King. Is it PTSD from your first job?

• 1:52:57Speaker 01

  You're right, you're right. I should have used Burger King, that's a good point. No, but like, so I think that like, you have multiple constituencies. And obviously, what people sometimes miss is that it is a trade off. And a good example of that to me was when, when we had to make the larger employee layoffs back then. Because we simply recognized that the investor sentiment has changed and they were not going to be willing to invest. And at those high valuations, which in the end would have meant the end of the business in a longer term perspective, if we did not make adjustments to how we were working. Like, I mean, maybe it would take a few years, but it would not have been good. So at that point in time, we decided to, you know, to make the layoffs. And with, as much as it was tough and sad.

• 1:53:39Speaker 01

  And in that discussion, one of the things that we raised is like, you are so greedy. Why can't all the employees keep their IT equipment, right? Like, why can't you keep your computer when you're leaving? And to some degree it was fair, we just hadn't thought about it, to be honest, like it was just like a very hectic time. But we then calculated, and it was a few million dollars to let everyone keep their IT equipment, which is the equivalent of a few jobs. And so what people tend to forget is that as a CEO or as a management team, you're sitting in that situation, it's like, not, there is no free lunch, right? There's always in that, in that balancing these constituencies, the investors, the shareholders, society, the customers. If I give the employees more, it means my customers get less, right?

• 1:54:24Speaker 01

  It means a little bit higher prices for them for the same service, which may make it less competitive. And that may make it less success in the long term. I have short term value, I have long term value. And part of this job is constantly trying to balance that in an optimal way. The interesting thing is that an organization is based on the concept that everyone, I tried to tell this to the European Union, because we tend to forget it in Europe sometimes. The whole concept of creating a union is that everyone comes together and sacrifice a little bit in order for a greater good of the common, right? And the problem is if everyone goes to Brussels or Washington for that stake, only thinking about how to get as much as possible to their own constituencies

• 1:55:06Speaker 01

  and ignoring that effect, then you will have a less well functioning organization. And over time, it may lead to an outcome where that dissolves or ends, right? Like the fall of the Roman Empire, when like, you know, the Romans didn't care anymore what was happening in the empire. They only cared about what happened in the city. Like, I think that like, you have to remember that. And so the same applied here, like, fine, we can give everyone computers, but like, please remember, it comes at a cost, like, there's not, there's no unlimited resources. And, and I think people tend to forget that, and part of leadership is to try to, you know, keep the saneness of these decision making and make sure that those tough trade offs are being made on a continuous basis. And I do think that, I believe that that's good for society to work like that.

• 1:55:50Speaker 01

  My parents came from a communism society that had a different idea of how to make that work. And it turned out in most cases that over time, it leads to dictatorships and a different way of distributing means where there's less for everyone to share of. And whatever is good is usually taken by the top people at the top. It doesn't seem to work as well as a system, like this system has flaws. But it has a lot of benefits. Now, with that said also, I'm not an anarchist. I don't believe that, you know, like free capitalism, like everything is just going to solve itself. I think like, you know, we have rules in society for a reason. Like, it's not allowed to just go and hit somebody on the, on the face. And the same should apply in a capitalistic society.

• 1:56:33Speaker 01

  There needs to be some minimum amount of rules. And I see that very much because as a bank and as a credit issuer, there's been a lot of like expectations. How should Klarna do underwriting? What about, you know, people getting in debt and all these situations? And there is a limitation to where I as a business, I can say I have a long-term perspective. I want to build a long-term successful business. And hence, I'm going to take decisions that are beneficial for the consumer, which means I'm willing to sacrifice some short-term profit for the long-term trust of my business and the belief in it and the support of it from a society perspective. However, we can't entirely rely on that to function as a mechanism.

• 1:57:18Speaker 01

  When it comes to things like climate change and other things, there is a need for an additional amount of regulation and some rules being forced. Because otherwise, we're just going to see is that like, there's going to be too much pressure on me. If like, if you as a business can do whatever and you can totally ignore your consumers and find ways to, you know, put them into really difficult situations and whatever, and there's no rules applying, then what will happen is people who try to do it in a little bit more long-term and sustainable way are going to be outcompeted or find it difficult to compete. So it is, I mean, I mean, again, in the end, it's not that hard. Think about a freaking soccer game where like one of the teams was allowed to hit the other ones on the, you know, and do what the hell they wanted. Like, they could win the game, but like it wouldn't necessarily make for a great,

• 1:58:02Speaker 01

  you know, outcome in the longer term of playing soccer, right? So like, the same applies in, in, in business, right? So politicians do have to come in and put some rules in place. Problem is also if you put too many rules. Or rules that are counterproductive, it may sometimes hurt and doesn't really help the game and doesn't help it produce the value. But in the end, profit is nothing else than the fact that you're able to create value to your customers, that they are willing to pay more for than what it costs you to produce it. That's what it is. And that means inherently, that's what NGOs struggle with. It's easy to set up an NGO and just give back money, you know, give money away. But are you really creating value? That's very unclear if you're not measuring it.

• 1:58:44Speaker 01

  The benefit with profit is if you don't have profit, it means that people are not attributing value to what you're creating to a level that is higher than the cost it costs you to produce it. And that means you're not creating value. That's basically it. So like, you know, that's how it works, right? So to me, that is the indication from a society perspective. I think often this profit thing gets lost in like a lot of other discussions, but like, and again, I'm simplifying things. I realize that and I realize that sometimes on specific occasions it may look differently. But generally speaking, directionally speaking, profit is an evidence that you're able to create value that is of value to your customers and they're willing to pay more than it costs to produce that, right?

• 1:59:28Speaker 01

  Like now, banking and financial services unfortunately protected by barriers of entry, poor competition, very many times seldom feels like that because we feel we have to have a bank and it's horrible customer service and we don't think it's creating value that is equivalent to that. And that's true because it's not competitive enough and it hasn't allowed for that level of competition. But restaurants, they in general do live up to that requirement. Like, you know, you like the food and you pay for it because you like there and you go there. And then I'm still happy that there is something called, um, you know, municipalities controlling that they're not making that food with like tons of bugs in it and germs and that they have some minimum health inspections and stuff. I still think that's nice because otherwise I would probably get food sick a little bit too often.

• 2:00:13Speaker 01

  So like, that's pretty good.

• 2:00:15Logan Bartlett?

  Yeah. Well, one more, and I want to let you go, but there's, there's one comment I heard you make that I thought was, was profound. I hadn't heard articulated in this way. You said, this is a more general thing about entrepreneurship and founding companies, but you said something to the effect of creativity is about solving problems with many constraints in a way that nobody has solved before. So you satisfy the problem in a better or new way than anybody has thought of. I thought that was an interesting sort of way of, of talking about creativity. And as we go, can you

• 2:00:52Logan Bartlett?

  just expound on that or elaborate on how you think about constraints and creativity and the, the two kind of intertwining to breed some special output?

• 2:01:07Speaker 01

  Well, I do think, it's funny you ask that because I always remember your previous question about, you know, what happened in 2021 when we got a little bit too much money in the system, right? I think that the truth is that, you know, if you have unlimited resources, you can't be creative because you basically relax one of those requirements. And so it just, you know, that's why society tends to have these cycles, in my opinion, when there's too much money in the system. You know, the productivity and creativity goes down and as a consequence, you know, the bubble bursts and then, you know, you start over again. But like, from my perspective, when I think about a lot of the problem solvings, it's like, they remind me of when I was solving equations at school. You know, I liked math, right? And you had these different, you know, you had to solve

• 2:01:52Speaker 01

  the equation and that means that you had a number of constraints. And, you know, the eloquently of solving a, a, such a thing was that you could create a very simple relationship between those and show, look, this is true, this equals X, right? And you had to write down the assumptions that you were doing and which constraints you were, you know, using in order to solve it. I feel that that is very much, if I think about a painter. A painter has constraints. He has the oil and the colors and he has the specific canvas that he's using and the size of it. And despite the fact, like, it's, it's a very constrained environment to create in. He's not, there's, there's, there are these things and the colors work and the oil works like it does and, you know, and so forth.

• 2:02:38Speaker 01

  And yet, over and over again, these people come in and they surprise us like, wow. I didn't know you could do that with a canvas and, you know, a little bit of paint. I didn't know, like, people are creating things that we're just like, whoa, you know, or somebody making music like, Max Martin is a friend of mine, like, is one of the most fantastic music makers. He makes the most famous song, a download, it's on a weekend as an example, right? And like, and you just like, his ability to take these tones and whatever and combine them in a totally new way. There's tons of constraints in that, in that creative system that are applied. And I think about business problems many times. So the problem in business is that, and what makes me excited about them is that the number of constraints

• 2:03:20Speaker 01

  is so much more inherent in your brain, like, you know, that's why I meant with also doing the Gamba walks and virtual. When I go in and I read what my teams are doing, I realize that they think they need to follow or they have this constraint. Or they believe that constraint applies to their problem solving, or they think that they need to do it this way. And a lot of me working with them is highlighting to them, look, maybe you can try to do it this way instead. Or what if you would try to do this or like relax that constraint and focus on these constraints instead? What would the outcome look like then? And so I feel that that is, to me, creativity is about, you know, creating something entirely different or new by really truly understanding what are these constraints are important, you know?

• 2:04:01Speaker 01

  Okay, I have the regulators constraints, I have the M P constraints, I have the consumer constraints to your point about constituents previously. But also in the kind of day to day product development cycles, like, okay, I need to think about usability, but I also need to think about technically for it to scale and have this and that. I just find that fascinating. It's to me, and, and when people come to me and present, look, we solved it this way. That is creativity to me, that somebody's been able to take some of these constraints and then presented a solution that satisfies them in a way that I didn't think was possible. Like, you can actually satisfy all of these constraints to this level? And like, that is just amazing, right? But then sometimes people come and say, "Look, I have this solution."

• 2:04:44Speaker 01

  And I'm like, "Yeah, but you've totally ignored these requirements," or, you know, "or, you know, you have overemphasized on this and forgot totally about that." That's a pretty common conversation, right? Or, you know, "Or this solution is just not very good." You know, sometimes it's just like, "It was pretty bland, you know, bland."

• 2:05:04Logan Bartlett?

  Well, Sebastian, thanks for doing this. This was a lot of fun. I appreciate you through all this stuff. It was a really fun conversation.

• 2:05:13Speaker 01

  Thank you, Logan. I appreciate it. And thank you for doing this call.

• 2:05:18Logan Bartlett?

  Thank you for joining the Logan Bartlett Show in this episode with Sebastian Shaimi Akowski, the co-founder and CEO of Klarna. If you enjoyed this discussion, we'd love for you to share it with whoever else you think might find it interesting, as well as subscribe on whatever platform you're listening on. We will see you next week with another great guest here on the Logan Bartlett Show. Have a great weekend, everyone.