Banking the Unbanked — with Pierpaolo Barbieri

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

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

• 0:01Scott Galloway?

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• 0:49Speaker 01

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• 1:32Scott Galloway?

  Episode 80, The Atomic Number of Mercury. The Empire Strikes Back was released in 1980. I could be Darth Vader, except I am absolutely debilitated with anxiety. Call me Panicking Skywalker. I hate that joke, but my producer wouldn't let me go with having sex with a Darth Vader mask and being diagnosed with syphilis. I think that's better, "sythless," get it? Search your emotions. You know this to be true. Go, go, go!

• 2:08Scott Galloway?

  Welcome to the 80th episode of the Prop G Pod. My voice, when I drink and when I'm at altitude, my voice gets deeper. So another reason I can't afford not to be an alcoholic at high altitudes, because let's be honest, everything I say will have more credibility now that my voice is just a wee bit deeper. In today's episode, we speak with Pier Paolo Barbieri, the founder of Walla, an Argentine fintech company that offers a financial ecosystem through an app and is linked to a free international mastercard card, free international mastercard card, there you go. He is also the executive director at Green Mantle, a macroeconomic

• 2:48Scott Galloway?

  and geopolitical consulting firm. I was introduced to Pier Paolo through Neil Ferguson. Pier Paolo is one of these like crazy ridiculously fucking impressive, you know, guys who at the age of 14 was writing books on economic history, Harvard scholarship, and then has now started a unicorn in Argentina, Banking the Unbanked. But he's this, you know, incredibly thoughtful young man slash kid. Also seems like a nice guy, seems like a nice guy. Anyways, what's happening? Let's take a look at a few data points floating around in the news. The Wall Street Journal reported that US households added 13 and a half trillion in wealth last year, the biggest increase in the past 30 years. For context, US households lost $8

• 3:33Scott Galloway?

  trillion during the 2008 recession. What makes the 2020 recovery different compared to previous economic downturns? Well, here's a clue, $7 trillion, specifically the government pumped $7 trillion worth of stimulus into the economy, which turned into champagne and cocaine for the stock market. Again, we have thrown some loaves of bread and some circuses for the poor, such that two thirds of our economic stimulus can end up in the markets, which juices the equity and real estate markets, which are vastly are over 90% of which are owned by the top 1%. Anyways, you've heard that before here, you've heard that before. And who owns stocks? Who owns stocks? Let's revisit it. Let's beat this Income inequality bitch horse to death.

• 4:15Scott Galloway?

  The top 20% of income earners accounted for more than 70% of the increase in household wealth. About a third of that increase went to the top 1%. That's right. The top 1% got 33% of the spoils of this increase in wealth. While you can make the argument that some of the money went to those who actually needed it, especially this latest round of stimulus, the stimulus checks and bailouts don't necessarily address the structural changes the US needs in order to close the wealth gap. So we, we solved the short-term problem, hopefully, but have we really addressed structural change to try and arrest what is, what is, I would argue, the greatest threat to our democracy and as the greatest democracy in the world that has kept the peace loosely speaking around the world, the greatest threat, the greatest threat to global stability,

• 5:00Scott Galloway?

  and that is income inequality in the US. Anyways, what else is happening? Entrepreneurship, entrepreneurship in the US is booming. Who said six months ago that this was the best time to start a business? That's right. That's right. First name D, first letter D, last, last letter G, A to the W in the middle. That's right. Why? Because during periods of crisis, during recessions, if you can call this, I don't know, it was a recession for about 48 hours, companies are much more open to doing business differently. There is tremendous opportunities to rethink every industry. Just wait, just wait and see the kind of innovation we're going to see in healthcare, in education, and what Pierre Pallas here to talk about in fintech.

• 5:45Scott Galloway?

  You're going to see more funding, more startups. Well, I'm talking future tense, I should be talking present tense. The US saw a 24% increase in startup activity last year compared to 2019. That 24% increase brought the number of new businesses in the US to 4.4 million in 2020. I think that's a record. One of the report's authors told the New York Times, "The one reason we might be seeing this boom is because this is the first recession in the last 50 years where the supply of money is larger than before the crisis." Okay, that kind of blows my mind. And by the way, I gotta be honest, that scares the shit out of me. I just don't, one thing I have learned in life and in our economy is there's no free lunch. So the notion that we can throw

• 6:27Scott Galloway?

  a shit ton of money at the crisis, flood the market with new dollars and hey, it's good for everybody and there's not a popper to be paid here. I just don't buy it. I've started nine businesses. The best predictive signal for their success has turned out to be the phase of the economic cycle in which I started the firm. Put simply, the best time to start a business is on the heels of a recession. Again, stuff is usually cheaper. It's not in this, coming out of this crisis. So that doesn't hold. But again, clients or potential vendors and B2B or consumers just rethink how they will spend money and are much more open to change. And it's also easier to get human capital because they see the opportunity and there's all sorts of financial capital coming into the space.

• 7:09Scott Galloway?

  Anyway, I love startups. And while pandemic economics haven't resulted in a garden variety recession, in either its short duration or its K-shaped recovery, there are factors that make this the best time to start a business in over a decade. Specifically, specifically, unprecedented stimulus and savings resulting in a Nazare like wave of consumer spending. Nazare is that place in Portugal that is this total topographical anomaly where it has this weird canyon that shoots like a funnel and the water, you know, several, several billion tons of water come through and the natural cadence or velocity of the ocean hitting the shore. And because of this weird shoot and the topography or the shape of

• 7:50Scott Galloway?

  the shoot, it results in these, these super waves. Oh my God, that was fascinating. I come here to the economics and the profanity. I leave with information on how big waves are formed. Unprecedented stimulus and then a gestalt among consumers and enterprises to question the status quo and be open to new products and services. Question the status quo. Quote of the status. This makes no fucking sense for me. Let's do it differently. Let's do this differently and put a horn on the zebra and call it a unicorn. The emergence of new fields and the capitals disrupt traditional industries as immunities kick in and monopolies are broken up. Let's break that shit up. Crunchbase found that during the first quarter

• 8:29Scott Galloway?

  of 2021, global venture investments reached $125 billion. That's a 94% increase year over year. We're even seeing innovation in search for the first time since Google rose to dominance with Niva and Brave launching this year. Think about this is just the scrutiny, just the threat of antitrust where all of a sudden. When they get in their rooms to redraw maps or go into a conference room called Good News Only, and they talk about which firms they're going to acquire and or which competitors they're going to kill, perform infanticide on, or if they survive or get out of the crib, we're going to buy them. Now they're much more sensitive to, okay, what kind of antitrust red flags is this going to raise? And I think you're already

• 9:09Scott Galloway?

  starting to see more innovation, as evidenced by the fact, by the number of new startups. We are going to see the antitrust scrutiny before these guys are even broken up, because it's going to take a decade. And I don't know if the courts are going to go along with this, given all the Republican nominees who are absolutely infatuated and have this gross idolatry of innovators. But anyways, you're going to see a huge boom in tech startups. Fintech, health tech, ed tech, the field I'm in, our firm, Section 4, which is trying to democratize business education. I can't get over, just in the last 12 months, the amount of people and the amount of investors that have contacted us. It's clear that the

• 9:50Scott Galloway?

  entire economy, I mean, look at, look at healthcare, $3 trillion. Look at education, $750 billion, right? Look at fintech, a lot, a lot of billions. And we're talking about $5 to $8 trillion of the economy that is sort of up for grabs, or it's going to be a deck of cards thrown in the air, and we're going to see where it all lands. Anyways, back to, back to trying to break up these monopolies. Earlier this week, a federal trial judge dismissed one of the antitrust lawsuits filed against Facebook. So the FTC, distinctive bringing in Professors Wu and Lina Khan, is going to run up, I think, against some, some friction in the form of the courts. This was the action brought by the FTC in

• 10:30Scott Galloway?

  46 states, the District of Columbia and Guam. Guam! Guam's pissed off at Facebook. It alleged that Facebook suppressed, or suppresses, competition. Well, no shit. And most notably, by buying Instagram and WhatsApp. I think that is arguably one of the greatest failures in antitrust, to let that shit go through. The judge ruled that the plaintiffs had not properly defined the market, or Facebook's supposed power within it. And he held that the plaintiffs had waited too long to complain about the Instagram and WhatsApp acquisition. They waited too long, which the government approved back in 2012 and 2014. The FTC and the states can appeal, or they can refile, but they have a difficult road ahead. Why? Why, you ask? Why is it difficult? Why is the road, why is that, that cayé de fiscio?

• 11:13Scott Galloway?

  I think that is road, hard, hard road. Though the swiftness and thoroughness of the trial court's rejection of the lawsuit was a surprise. Most observers believe this was always going to be a difficult case. Why? Because for decades, the courts have made it harder and harder for antitrust challenges to succeed under existing law. To change that will require either, one, dramatic action by the Supreme Court, not likely with this court, or action by Congress, more likely, more likely. Which brings us to the other significant development. The House passed a package of five antitrust bills. It's not likely that any of them will pass the Senate in their current form, except for the, the kind of the layup, which is the one that increases the fees paid by companies seeking merger approvals. That's a big fucking yawn.

• 11:57Scott Galloway?

  But legislation progresses in stages and our hyper partisan environment, antitrust action appears to be at least against big tech bipartisan. Now, they have, they hate big tech for different reasons. Conservatives think that they're biased and suppressing speech. They're not, they're not as, as a matter of fact, if they have any bias, it's towards that crazy whack job, right wing conspiracy shit, because the algorithms love it. Because when you say that there's a basement in a pizza place that is drinking the blood of children, then, you know, Facebook loves that and loves to spread that misinformation, regardless of the damage it does. Anyways, my enemy's enemy is my friend. So if you're fucking out to lunch and think that Facebook has a conservative bias and you'll help me pass antitrust, then you do you, my friend.

• 12:40Scott Galloway?

  Republican Congressman Ken Buck from Colorado co-sponsored the bills in the House and made a statement immediately after the Facebook case was dismissed, saying the court ruling just highlighted the need for additional tools and resources to our antitrust enforcers to go after big tech companies engaging in anti-competitive conduct. Go, go Representative Buck from Colorado. Get the sense that guy be like, you go, I don't know, hunting with guy. I went hunting with Rep Buck from Colorado or fly fishing, whatever. Anyways, let's hope that the Buck doesn't stop there. That's some humor from the incredible geniuses that write this copy memo to self-fire their asses. Stay with us. We'll be right back for our conversation on fintech and walla with Pierpalo Barbieri.

• 13:26Scott Galloway?

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• 14:11Scott Galloway?

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• 14:26Scott Galloway?

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• 15:47Scott Galloway?

  Welcome back. Here's our conversation with Pierpalo Barbieri, the founder and CEO of Walla. Pierpalo, where does this podcast find you?

• 15:56Speaker 03

  I'm in France, in Paris, visiting family members here.

• 16:01Scott Galloway?

  Wow. So, international man of mystery, an Italian name, working in Argentina in France right now. You have family in Paris?

• 16:10Speaker 03

  Well, I have a godson. One of my best friends in college had the terrible idea of naming me as the godfather to her first son. So I'm here visiting them after many, many months of not being able to see them because of the pandemic.

• 16:24Scott Galloway?

  And what's the mood like in Paris right now?

• 16:27Speaker 03

  It's improving, but everybody is concerned about a Delta variant. And of course, the mRNA vaccines are better. And a lot of people in Europe got the AstraZeneca shots. So the UK growth in cases is worrying.

• 16:42Scott Galloway?

  Yeah, yeah, it is frightening. So let's try and elegantly segue to the world of fintech. So break down Walla for us. I had never heard of Walla till about two months ago. Now I feel like I'm seeing it every 48 hours. Break it down for us. What is Walla?

• 17:00Speaker 03

  Walla is a startup that we began working on in 2015. We started coding in 16 and we launched to the public in 17, based in Buenos Aires, Argentina, where I'm originally from. That's where I grew up. But as you, as you said, from Italian parents. And Walla is basically a financial solution for everyone in Latin America. And why do we need that? Because over 50% of adults in Latin America don't have access to a bank account. They've never paid for anything with any means that is not cash. And therefore, they are completely left out of the digital economy. So we started Walla with the simple premise of having one account that is inclusive, so everybody can have it. It's completely free and universal,

• 17:44Speaker 03

  so we don't turn you away. And then we give you a debit card. And then with that debit card, you start building a credit history. And over time, we've added everything from bill payment to cellphone top-ups to lending to savings and investments and now insurance and merchant acquiring. But at the core, it is the way to include people in a continent that has been served badly for very few institutions for a long time into the digital economy and, you know, modern financial services.

• 18:15Scott Galloway?

  So, and it sounds like an obvious question, but I run out of explanation pretty quickly. Why is it so important and what are the advantages of citizens being banked versus unbanked?

• 18:27Speaker 03

  Yeah, absolutely. As the economy digitizes, which is something that we're seeing everywhere in the world, now almost 50% of transactions in the United States are going to be done digitally. In China, that number is even higher. Europe is going higher. Problems arise when you have continents like Africa and Latin America where people don't have access to accounts. Because if you live in cash, you can only transact in whatever businesses are within your short physical distance. So within your immediate distance or whatever public transportation can take you. And so when we launched Walla, I'll give you a clear example. Somebody in one of the oil-producing provinces in Argentina wrote me an email, because everybody that gets a Walla gets my email.

• 19:09Speaker 03

  And she said to me, before Walla, every time I wanted to visit a financial institution, a bank, I had to go to a branch and I had to take the day off of work. And the banks didn't really want me as a client, and I had to take the day off of work. Whereas with Walla, everything's digital, it's in your app, everybody has a smartphone in Latin America, but the banks have never added them to the system. And so this person cannot have a savings product, cannot invest her savings, cannot have a credit history, so she cannot get a real loan, she doesn't have insurance, and all these things perpetuate a cycle where you have some people in one end of the spectrum who have great financial services, namely the rich, and there's everyone else who's completely out of the system.

• 19:49Speaker 03

  But that hurts the economies, even if it benefits the very few banks that as a cartel chose to bank some people and not the rest.

• 19:59Scott Galloway?

  And it seems to me, I mean, as evidenced by the valuation you're raising money at, there's a lot of stakeholder value to be created through banking the unbanked. Why did the traditional banking ecosystem in Argentina and Latin America ignore these individuals? Because they're not profitable? Because there's technology hurdles? Why have they not done this?

• 20:20Speaker 03

  Well, that's a great question. I think that over the last 50 years, we've seen a great move toward universal banking in most geographies, like the United States and Europe. And regulators in those places basically told the banks, which are all licensed, "Well, if you want to bank the rich and give those people services, and those people are very profitable because you give them a mortgage and a credit card and insurance products and all these wonderful things, well, you have to provide a service to everyone." And there's been a lot more competition. There's over 5,000 banks in the United States. By contrast, in Mexico, a country of 130 million people, there's only 52 licensed banks. In Colombia, it's even less. There's around 30. In Argentina, there's only 70. And so

• 21:01Speaker 03

  they've acted as a cartel, and so they've chosen to bank whoever was profitable with their structure of analog businesses, which are based on papers and on branches and on horrible tech systems. And then come us, like challengers that are saying, "Well, we can do everything digitally. We don't need a branch anymore. And we don't need your your structure of costs that leaves half the population literally outside of the system." Because ever more, there are all these services that you often talk about, you know, companies like Spotify or DoorDash or Netflix that want to give services that are priced universally, right? Netflix in Latin America is only $4 a month. And guess what? That's less than one ticket to the movies. You can have entertainment for your

• 21:45Speaker 03

  whole family for less than one ticket to the movies. So there's a lot of people that want that access, that service, but they cannot pay for it because they don't have a debit card. And these banks never gave it to them. And so if you think about it, when we launched Walla, believe it or not, there were people that were selling on Mercado Libre, which is our Amazon. Subscriptions to Netflix are double the cost. So the poor had to pay double the cost to access the service because they didn't have a card to pay for it. And so we partnered with one of the card companies with Mastercard to provide these cards. And everybody gets an account from which to create a credit history to start saving. Now we do, you know, we have a money market fund that is now over thirty percent of the savings market or the investment market in the country of Argentina. And it grows from there.

• 22:28Speaker 03

  But at the core, it's an account so that everybody can participate in the digital economy, which, you know, is the future.

• 22:34Scott Galloway?

  So I'm just trying to put on my banking hat here because traditionally you kind of, we look at incumbents as stupid and lazy and what you find out is they're not. And that they're smart people. And I'm trying to figure out why smart people decided not to offer these services to the unbanked. And I would, I would guess, at least initially, that they did an analysis and said that they weren't profitable, that they, right out of the gates, they couldn't make a lot of money or margin off of unbanked people who probably tend to cluster more lower middle class or lower income. How does your firm make money? It's like a traditional credit card company where the Mastercard or the underlying infrastructure takes two or three percent and you take a piece of that. How does, how does Wallow make money?

• 23:16Speaker 03

  That's a great question, but let me start with the previous premise. Absolutely, these people are not dumb. They're very, very smart. And guess what? Some of the most profitable banking services are provided in Mexico, Brazil and Argentina. And so, you know, there's a company in Brazil that has over thirty million credit cards called Nubank, a company that we greatly admire. There's us in Argentina. We're now in Mexico. There's obviously MercadoLibre doing this. They're all digital companies, right? So the structure of costs is lower. And so my break even for a customer is a lot lower than some of these banks that had to rely on, you know, credit reports that were done on paper and on branches around the country. And yet, some of the most profitable banks in the world are Mexican and Brazilian and Argentine banks in an, you know, ROE.

• 24:01Speaker 03

  And these banks sometimes, you know, in the European crisis, I remember that some of the banks were more eager to sell their, their home operations in European countries than they were to give up the Mexican franchises because there is little competition. You took money at two percent and you lent at eleven percent. And, you know, in the US, margins for banking are a lot lower than that. So these people could could optimize that and have great financial return without having to bother with middle class and lower middle class people. And so how do we make money? Well, we come in, we have radically lower cost structure, so we cut the cost of providing that universal account by eighty percent. And then we fully digitize the experience at a time when almost ninety percent of these countries have a smartphone.

• 24:45Speaker 03

  And then I argue that that it's actually more human to have an experience on the phone because it doesn't rely on a branch that in big countries like Mexico or Argentina are not accessible to everyone. And so we, around twenty-five percent of our revenue comes from interchange, which is the part of the transaction that comes from Mastercard that they take from the merchant. And then we have twenty-five percent of it that comes from credit because we build people's credit history and then we offer them the first formal loan that they've ever had access to. And we've built a revolutionary product because it's very transparent. And we're not afraid to tell people how much we charge for the loan and we explain every step of the way in a way that the incumbents cannot because they usually want to hide how much they charge lower middle class people.

• 25:30Speaker 03

  And and then we do merchant acquiring, which is now we're helping like Square provide POSs. Because guess what? Like, there are more people that have cards, the more merchants want to take cards. But in Argentina, unsurprisingly, you know, the people that do merchant acquiring take huge, sometimes three times or four times what it costs in the United States to process a transaction. So Square takes two point two percent of a transaction. Our competitors take six percent in Argentina. And so we are, we are providing that service for forty percent cheaper. And finally, we we also now offer investment services. So as as people digitize their spending, the final twenty-five percent of our revenue comes from the fees that we charge on a money market accounts and soon other investment

• 26:15Speaker 03

  products that we're going to launch. But realistically, we charge, you know, much lower fees for even money market accounts than the incumbents because the digital structure allows for that. And and only three years into our operations, three and a half years, we already cover seventy-five percent of our costs with the accounts that we have and the transactions that we have. So we're not that far from breaking.

• 26:37Scott Galloway?

  You started in Argentina and your next big market is Mexico?

• 26:41Speaker 03

  Yes, because 70% of Mexico, believe it or not, has never had access to a card. So on the border in the United States is a country that is young and its economy is growing. It's very integrated with the United States. And yet, 70% of Mexicans have never had a Visa or a MasterCard. So they cannot buy something on Amazon. There is Amazon, but they cannot buy something there. And so, believe it or not, in Mexico, there are all these places where people have to go physically there to pay their water bill or their electricity bill. And they have to pay an extra dollar on that bill just to pay it. So we do away with that. We fully digitize that experience so that you can pay directly from your cellphone without an added charge.

• 27:24Scott Galloway?

  Give me, give me total numbers. How many people is wallet serving right now?

• 27:28Speaker 03

  So we have over 3 million clients in Argentina, which is around 9% of the country. And over 25% of 18 to 25 year olds have a wallet. And in Mexico, we launched six months ago and we have around 170,000 users. And we add between 1,000 and 3,000 people every day.

• 27:51Scott Galloway?

  And Pierre Paulo, when you look at a market, what you clearly, you strike me as a very analytical person. What are the, what boxes do you look for? What criteria? Is it the percentage of the population that's unbanked? Is it how concentrated or monopolistic or cartel-esque the incumbents are? But why, why did you skip up to Mexico and what do you look for in a market?

• 28:16Speaker 03

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

• 29:01Speaker 03

  that are amazingly successful and yet very few in Mexico. So we are attracted by the size of that opportunity and the true social impact that you can have when people can start creating a history and accessing services. And so this is a positive cycle that has a great positive externality for the rest of society, which is the ability of getting all those people that were outside of the system and bringing them in. And so actually it's good for the incumbent banks because then in the future they'll be able to compete against me and offer services to all these people that now have a credit history that we've helped them build.

• 29:39Scott Galloway?

  Yeah, I'm not sure they'd agree that you're good for them. Maybe they tell their shareholders that.

• 29:44Speaker 03

  No, they don't. They don't like us very much. That's why they, they really, they really argue with the regulators that we're dangerous. And I always say the same thing. You know, we ask people to believe in democracy and capitalism, but then we don't give them a card. You know, we don't let them pay their services. We pay, so the poor have to pay extra to pay their water bill. Uh, when the rich have, you know, automatic debit.

• 30:06Scott Galloway?

  Well, that's an interesting point. So let's talk about a little bit of regulation. The U S is seen as a country that appreciates innovators and disruptors and probably errs on the side, I would argue, of a lack of regulation. Um, uh, because we have this sort of idolatry of innovators and disruptors. Where have you found that Argentina and Mexico have, have embraced the idea of a disruptor that might be providing value or banking the unbanked? Or have, has the government, if you will, I don't want to say weaponized, but is, have an unnatural bias towards the incumbents?

• 30:42Speaker 03

  Well, I mean, it depends on the situation, right? And so, actually, Argentina has some pretty revolutionary regulations when it comes to accessing the financial system, because in 2016 and 2017, the government said, "Well, you guys haven't innovated," and they haven't added people. And so, 50% of the country is out of the system. So, they came up with an instant transfer system, like what the Fed wanted to do with FedNow, but the banks in the US lobbied against very successfully. And so, you can send from any account in a traditional bank to any fintech interchangeably without real costs. It's like what India did, and now Brazil is doing, and Mexico has something like that,

• 31:24Speaker 03

  but Argentina was a pioneer back in 2017, pushing that kind of system. But the truth is that the incumbents want to lobby against this kind of innovation, because it eats into their margins. And obviously, at first, it's only the M-bank that sign up for Walla, because it's just a card and an account. But then, when there's investment products, and a better money market experience, and merchant acquiring products, and insurance products, then wealthier people say, "Wait, why am I paying this incumbent bank an opening fee, a maintenance fee, a renewal fee for my card that doesn't give me any benefits? Whereas, these guys are doing it faster, cheaper, better, and my kids have access to Walla, why don't I?" And then, they sign up.

• 32:07Speaker 03

  And so, we've seen a lot of lobbying from the incumbents, saying, "Oh, these fintechs are unsafe," when we actually don't lend out our deposits. We operate with 100% of our deposits. And so, we're actually safer than a bank, because a bank lends, you know, the financial crisis 90, 95%, but right now, 85% of everything that you deposit in it. And whereas, we are what in the economic jargon is called a narrow bank. We don't lend out our deposits. And yet, the banks, and sometimes the bank unions, have argued against allowing us to grow. But I think that governments, both from the left wing and the right wing in emerging

• 32:49Speaker 03

  markets, are realizing that, within 10 years, every part of the economy will be digitized. And so, if you don't give people access, how are they going to be participants in the economy? And so you know, you see the government of Lopez Obrador in Mexico is a left wing government and their government of Duque in Colombia is a right wing government and they all talk about financial inclusion. So I think financial inclusion itself is a very revolutionary idea. And even in the US, there's a lot of people working on financial inclusion because in the US, even with 5,000 banks, there's 20 to 30 million people, mostly immigrants, that don't have good services and they cannot build a good credit history. And I don't need, you don't need me to tell you how much a payday loan is in the United States. And the fact that those things are completely out of the system means that a

• 33:33Speaker 03

  lot of the less well off are kept in this cycle of poverty because of what others charge them to access the same things that you and I can access for free.

• 33:42Scott Galloway?

  And who do you see as your competition? Is it the incumbents or is it MercadoLibre that similar to Alibaba's getting, my understanding is, is going vertical into payments? Who do you, who do you think is the biggest, the threat, the big and sort of the lazy that are already there? Is it Mastercard and Visa? Is it Square? Is it other disruptors? When you look at what you're doing, you think this is who poses the biggest threat to our growth?

• 34:09Speaker 03

  No, I mean, Mastercard and to some extent Visa are allies. Square is our inspiration in the merchant acquiring business at least. And obviously Cash App is an awesome innovation that they brought in. And so our biggest competitor, I would say, is cash. And it's a great competitor to have because cash is an innovating. And more widely conceived, I think that obviously, you know, MercadoLibre is a competitor. They're rolling out their, their verticalized, you know, payments infrastructure and they were a first mover in many of these markets. And the same as, as Nubank, which is expanding outside of Brazil into other markets. We compete against them in, in Brazil, even though they do a credit card and we do a debit card. You know, you could construe that as competition. But I would say first

• 34:54Speaker 03

  and foremost, it's cash and it's the incumbents who are all rushing to digitize, thanks to an army of consultants that, that, you know, want to help them develop digital services. But Funny enough, it's the same people that two years ago were saying to the regulators, "Oh, Walla shouldn't be legal," that today are, you know, trying to come up with the Walla killer product, at least in Argentina. And I find that funny, but when people are trying to copy you, it shows that we're doing something good. And as I always say, if at the end of this road, the incumbents win, but they do a product that they should have done 50 years ago, great. Then let there be competition, let there be creative destruction. And if we're not the best ones, then we should not win.

• 35:35Scott Galloway?

  Does Argentina have a disproportionate number of unicorns?

• 35:38Speaker 03

  Yeah, Argentina created some of the best sort of early tech companies, including MercadoLibre, but don't forget about Patagon.com, which was the first kind of digital banking platform that Wenches Casares started. It created, you know, Despegar and OLX and Globant, which is an amazing company that has grown exponentially in the last few years. They do development for some of the world's biggest companies. And so, I mean, American Airlines hires there, JP Morgan, Google, Facebook, they all have dev teams. And so, I think the talent point and the human capital point is a great one. But what these companies often want, and their right to, is macroeconomic stability, which is what Argentina hasn't had. But on

• 36:21Speaker 03

  the other side, you know, there's going to be a search for tech talent around the world. And places like Argentina have a great opportunity, as does Ukraine, or Bulgaria, or Romania, places that have good education, good developers, at a radically lower cost. And so, if I'm a CFO of a publicly traded, you know, big tech company in San Francisco, why argue with some of the, you know, cultural battles that you have to face in San Francisco and not try to give an opportunity to people in other geographies? And that benefits these middle-income countries, because you suddenly have a lot of inflow of hard currency.

• 37:01Scott Galloway?

  Coming up after the break.

• 37:03Speaker 03

  Financial inclusion is one of the ways in which Latin America can create a middle class. And when you have a middle class, you have a better republic, you have better institutions, you have a more independent press, because they don't need to be paid off by businessmen or the government. And I think that actually strengthens democracy.

• 37:22Scott Galloway?

  Stay with us.

• 37:28Scott Galloway?

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• 39:06Scott Galloway?

  So, let's talk a little bit about funding. How much capital have you raised to date? This strikes me as what would be a fairly capital-intensive industry. But at the same time, it seems like fintech is so, so hot. Is it an easy, difficult time to raise money as a Latin American fintech company?

• 39:28Speaker 03

  I think that there's a boom in Latin America startups and you've seen, you know, a lot of unicorns being created in the last few weeks. Like, it doesn't really matter if you're a unicorn or not. Nothing really changes about a company from nine hundred ninety-nine million, uh, million dollars of valuation to a billion, right? Mm-hmm. But from a, from a, a PR perspective, there's a lot of great stories and we have more interest than we've ever had, that we've ever seen from VCs trying to invest in the region. And guess what? The region is under-invested. There's an amazing talent in Mexico, Brazil, Colombia. It's great to see that. Uh, but I also think that there is such a thing as too much money and, and more money is not always the right answer. And we've raised

• 40:12Speaker 03

  a hundred and ninety million dollars to date. Um, we, we have, you know, as I said, three million cards and you have to print and send those cards. We don't charge for the shipping and so you have to pay for that as well. And obviously you have to build a lot of the infrastructure. It's a lot harder to do one card in, uh, you know, a country. I worked for two years to issue a single card in Mexico, but then scaling that is easier. So I can predict what I, what I'm gonna issue in the next month or the next two months. And so, and so it is a capital-intensive business, but it, it is less so as you go along. Because adding new parts to the ecosystem, like, you know, the day we launched insurance, um, you know, it was a lot easier than launching the first card. Or if you add a mi- a new

• 40:55Speaker 03

  product to the money market solution that invests in, in foreign equities, you know, that's a lot easier than doing the first account. And so, we've raised a hundred and ninety, and to quote one of our best investors, you know, we, we want you to have money, but we don't want you to have enough money that you start doing stupid things. Mm-hmm. And so, I think we've been very careful. We've also seen cycles, and so, we, we don't want to over-raise, uh, because that's what, what sometimes makes you do stupid things.

• 41:25Scott Galloway?

  Talk about you transitioned from a historian to the CEO of a fintech company. How has that informed your decision-making or your approach to business?

• 41:35Speaker 03

  Well, I think being careful with capital is the perfect answer to that from the previous question. And trying to understand the economic history of Argentina led me to this realization that one of the big problems that countries like Argentina have is this bifurcated structure, right? Fifty percent of the country has great financial services because they can afford it and the rest are completely out.

• 41:58Speaker 03

  And that's part of the inherent inequality in Latin America, which is something that has historically been with us for a long time. And I think financial inclusion is one of the ways in which Latin America can create a middle class. And when you have a middle class, you have a better republic, you have better institutions, you have a more independent press because they don't need to be paid off by businessmen or the government. And I think that actually strengthens democracy. And the real reason, in my humble opinion, for the de-development of Argentina in the last century is the lack of institutions. And that was my working assumption as an economic historian. And so in that importance of institutions, I thought, you know, what's the best thing we can do? Well, bank the unbanked. Give those people a chance to have a credit history and build a nest egg.

• 42:43Speaker 03

  And that way, they'll be more invested in the institutions and they'll be more invested in our democracy because the interruption of democracy is frankly, the worst thing that has happened over the region. And, you know, we can argue about the Cold War, but the truth is that sometimes and oftentimes it was the locals that wanted to eliminate the institutions. And I think what's beautiful about America, the best thing about America, and one of the reasons why, you know, America has been exceptional in history is how, you know, above all, everyone that has played politically has preserved or tried to preserve the US Constitution. And that has never been put into question. And so I wish Latin America had that. I think if we had a stronger middle class, it would be easier to defend that.

• 43:23Speaker 03

  And so that's the segue between economic history and starting a fintech that provides financial services that are more open and transparent for more people.

• 43:34Scott Galloway?

  So I'd love to do a bit of a lightning round because you're a Harvard-educated economic historian, but you're not cursed with age or the experience to start checking your... I don't know, observations or conclusions. So quickly tell me, what do you think in your view, top of mind is the the future and the greatest threat of the American economy right now? You look at the American economy and you say, this is what could take it down?

• 44:00Speaker 03

  I think too much concentration of of a very few businesses. And I think that creativity and competition are a great thing, and we need more of it, not less of it.

• 44:11Scott Galloway?

  So monopoly power.

• 44:12Speaker 03

  And so I think, yeah, I think monopoly power in in big corporations that have better access to capital and better access to talent, those are some of the some of the best companies in the world. But I think that when you have some of the best companies in the world, you need to make them compete. And so I think that's, that's a great threat. And I think that the greatest opportunity is actually the fact that no matter how difficult the immigration rules, a lot of the best talent in the world still wants to go to the United States. And I wouldn't trade my 13 years living in America for anything in the world. I greatly admire the the promise of the American Republic and the structure of the American Republic. And there's something really beautiful about it.

• 44:56Speaker 03

  And and there's a, there's this promise of coming as an immigrant to America and being able to fulfill your dreams. And I think that Americans sometimes underappreciate how transformational that can be for the people that stay and for the people that leave. But guess what? If everybody opened the borders tomorrow and there were no limits, where would all the wannabe entrepreneurs want to go? Where would all the want, the people that want to get the best education would go? They would all try to go to the United States. And so I think historically, you know, that's a great opportunity for for America. It has been, and it is today, even if because of political battles, we don't see it. And so I think that that that remains a great promise, because a lot of countries try to shut the borders so that people don't get out.

• 45:40Speaker 03

  And America shuts the borders so that people don't get in, which I think is, is short-sighted.

• 45:46Scott Galloway?

  Yeah, it's crazy that we would decide not to, not to continue to embrace our superpower. What?

• 45:53Scott Galloway?

  Crypto. Do you think crypto's opportunities vastly outweigh its risk? Do you see any risk to crypto to, you know, maybe the USD losing its role as a default currency? When you look at crypto, do you think, wow, there's, there's some externalities and some, some unknown knowns here? Thoughts on crypto?

• 46:14Speaker 03

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

• 46:55Speaker 03

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

• 47:40Speaker 03

  not used to volatility, trading crypto, thinking that it's always going to go up. And I think the last few weeks have seen a big reckoning, not to mention a lot of regulators trying to, for lack of a better term, preserve the, the monopoly of states over the issuance of money. And so coordinated attacks from the UK and, and China, and there's a lot of rumors about what the US might do, there's been for six months, you know, create a big potential unknown for crypto holders, even if, you know, I think that there is a future in the space, particularly in what's being created on ETH.

• 48:15Scott Galloway?

  When you look at the incumbents, the US banks, the financial services companies, whether it's JP Morgan, or Goldman, or Wells Fargo, or B of A, are they Sears and about to begin a march to irrelevance? Or are they Apple and Microsoft that will be able to come back and fight off disruptors and come back stronger? Are you bullish or bearish on the incumbent financial services institutions in the US?

• 48:44Speaker 03

  Well, I would differentiate that. I think there's a group of very large banks that are actually the most attuned to innovation. And I've had the opportunity to meet Jamie Dimon, and I think that I have never met a banker like that, right? Those are people that think about innovation every day, and they're amazing leaders and inspirational leaders. But not every bank in the United States led by Jamie Dimon. And so I think that the United States is eventually going to have a lot less banks, and it's going to be a lot more concentrated. And big tech is coming for them, as are a lot of challenger incumbents. And so I think there's going to be a bifurcation, and you have to have a few that remain winners, like JP Morgan and Goldman. Full disclosure, an arm of Goldman invested in Walla.

• 49:29Speaker 03

  But also, you're going to have a lot of losers, which are people that are just too small to really have the digital size, or the ability to invest in the digital innovation that is necessary to remain competitive when Google tries to get into your business.

• 49:45Scott Galloway?

  So, just to wrap up here, Pierre-Paul, you're one of these kind of freakishly successful young men. So I usually ask people advice to the younger selves, but that's, you are your younger self, and you've kind of, I don't know, you're sort of in one of those crazy, superhuman, built in a factory of lesser humans. What advice would you have for your 22-year-old self now that you're at this age, old age of 30?

• 50:16Speaker 03

  God, I can't believe that. Um, I'm actually, I'm actually thirty four. I'm actually thirty four. Oh, wait, I got that wrong. Oh, you're old. Maybe. You're old. I thought you were thirty. That makes me feel less bad. Too old to die young. Absolutely. I'm so old. Yeah. Um, but going back to your question, if I had to give advice to my twenty-two-year-old self, I would say, uh, find the right mentors and invest time in that. Because a great mentor can, can really change your life and can give you great advice at the moments when you need it.

• 50:53Speaker 03

  And so, you know, Neil Ferguson, as you know, has been a mentor of mine. Yeah, yeah. And, and Neil once gave me great advice about my career. He encouraged me to, I had gotten an offer from Goldman and an offer from somewhere else. And it was the summer of, of oh eight and the world was melting. And as a young college kid, I wanted to go do something else and something potentially more fun in the short term. And he said, are you crazy? You have an opportunity to go to Goldman while the, the financial crisis is ongoing. Go there. And, and that is just one example of the million times in which a great mentor gives you life-changing advice.

• 51:38Speaker 03

  And, and that creates opportunities in and of itself. And the other piece of advice I would give is, is, is try to fail early and learn from it. And so I, I think that, that when we started Wala, I was overly worried about the, the first MVP. I was overly worried about the first reception and I didn't understand that the product iterates with time. And it's really not a cliche when people say if you're proud of the first product that you ship, then you shipped it too late. And so that I think applies not just to apps, it applies to life. I think it's important to learn the lessons early so that you have the experience of failure and what it teaches you when the stakes are higher.

• 52:22Scott Galloway?

  Pierre Paulo Barbieri is the founder and CEO at Wala and the executive director at Green Mantle, a macroeconomic and geopolitical consulting firm. He's also a senior associate at the Applied History Center of Harvard's Kennedy School of Government. Pierre Paulo has also served as chief strategist of the Brevin Howard Argentina Fund. He joins us from Paris, where he is visiting his godson. Pierre Paulo, stay safe.

• 52:47Speaker 03

  Thank you so much, Scott. Pleasure to be with you.

• 52:56Scott Galloway?

  Algebra of happiness, grandparents. I did not have grandparents in my life. I have, you know how everyone brags about their life expectancy, that everyone in their family is living to be 140. The average lifespan of my grandparents was about 53. They all kicked off, the majority of them didn't even make it to my age, and I'm 44. Actually, that's not true. I'm older, but I started lying about my age. I'm also on T-therapy. Naked, I look 45 again. Anyways, probably too much information. Back to grandparents, back to grandparents. My kids' grandparents are in their lives, and I can't express how rewarding it is.

• 53:38Scott Galloway?

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

• 54:20Scott Galloway?

  I think people are polite to old people, but mostly they become invisible. And when my kids see their grandparents, it's like Jesus Christ and LeBron and Beyonce.

• 54:32Scott Galloway?

  Walked in, they go so apeshit crazy at these nice people who want to hang out with them and play Risk with them and bring presents for them. We were watching the Euro Cup yesterday, and my oldest grandmother was literally sitting there feeding him white cheddar popcorn and clipping his toenails, grooming him, and he just looked like he was in heaven. But that gift, just observing that kind of just that unfiltered love, it's just so rewarding. And you gotta think it provides the kid with that level of reassurance that these people just are so crazy about me. I must have some value. Anyways, where am I heading with this? One, I have tips on how to get along with

• 55:17Scott Galloway?

  your grandparents or your in-laws. This is gonna piss some people off. One, I have a fantastic relationship with my in-laws, mostly because Polish is their first language, German is their second language, and they speak competent English, but I wouldn't describe them as having, you know, great English. I'm not gonna catch shit about that. But we don't really communicate, and it's a feature, not a benefit. And that is, I believe that relationships with your in-laws come off the tracks when you start communicating, because you find out he supports Trump, and you find out that she has real views on your parenting, none of which result in anything good. So the key is, don't communicate a lot. They know I love them. I know they love me. That's enough. The other key

• 56:00Scott Galloway?

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

• 56:44Scott Galloway?

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

• 57:29Scott Galloway?

  We will catch you next week.

• 57:39Scott Galloway?

  We don't have that problem in my household. Everyone complains about everything right the fuck away.

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