Klarna Founder Sebastian Siemiatkowski on Scaling Europe's Most Valuable Private Tech…

Thank you for having me.

What you could say is the following. For whatever reason, I always had this interest in entrepreneurship. It’s kind of odd in a way. I don’t really understand why because my father wanted me to be a doctor, but I was always like Richard Branson. I was like reading his book when I was like which is kind of geeky, isn’t it? Like you’re supposed to read other stuff.

Yeah, exactly. And then Ingvar Kamprad and IKEA and all that stuff. I remember when I was in high school, I started a radio station and got the principal of the school to pay for it. And I always had these projects and ideas all the time that I just wanted to realize. thought I it was always interesting. And then eventually one of the crazy things I did is I took one of my co co-founders and we went together on this trip around the world without flying. And then we got stuck in Australia. and because of that, I had a second sabbatical year.

And on my second sabbatical year, I worked at a debt company slash account receivables. and there I learned everything about payments. And then I felt like, wow, there’s an opportunity there. And then we started Klarna.

Well, I’m an immigrant kid, like a lot of entrepreneurs. My parents moved from Poland. They’re kind of a mix of political, economical refugees. My sister unfortunately got stuck in Poland, so she wasn’t there for a year, which was a big sorrow of my parents, because there was the uprising in Poland at that of time, so the borders were closed. And then I was born, and then my parents struggle. I mean, I think different societies are difficult to integrate in. I think Sweden at that point of time was quite difficult.

My father was unemployed for a long period of time, but also had different type of jobs and so forth, and eventually went on to, for example, drive a cab for multiple years, which for his kind of sensitive intellectual soul was a very demanding work. He had a very hard time dealing with drunk people in the middle of the night and stuff like that. It was very tough on him. And my mother was an early retiree because she had a problem with her back. So it was a fairly modest upbringing. and there were weeks where we only ate pancakes because that was the only thing we had left, which to me, who loved pancakes felt that that was awesome.

But nowadays, as I look back, I realized it was for other reasons than I potentially saw back then. So I guess it’s a typical story in the sense that you grow up and you see your parents struggle and you have an academic or intellectual background and capacity, and you just want to make right what you feel to some degree is unfair. Like that’s kind of the emotional. My parents also divorced when I was eight, So I think that further strengthened that feeling of like, if I could make it, if I could create something, and if I could improve my financial standing, I would somehow be able to mend the family, which unfortunately life later teaches you doesn’t really happen because it doesn’t work that way.

But as a child, that was my drive, my interpretation.

It’s a good question. I haven’t thought about it like that before, but I do know that my father was always annoyed that he felt that I was trying to step into his shoes and act like the father in the house when he was away. So I guess that’s kind of confirms what you’re saying in a way. I mean, my father had a problem with drinking and things like that. So it was actually quite I don’t know if it was the same for you, but to me, never like, when I was growing up, I never felt like, oh my God, it’s a tough environment or whatever.

It was just life. It was just life. and life wasn’t a specific way. But now as I look back, I’m like, whoa, you know what? like that kind of the things that I went through, they weren’t necessarily kind of what the average kid gets, if you see what I mean. like, fortunately, which I’m happy about. And then again, everything’s relative. I’m sure, you know, there’s a lot of people who have had much tougher upbringings and childhoods than I had, so I don’t to exaggerate it, but sure, it had its troubles.

I don’t know if I felt it that way, I definitely acted like that. Right? I definitely felt that I could take some kind of responsibility and I could fix and I should fix and I should take care of it and I should make things better. That’s for sure.

I have learned a lot over those years. So it’s definitely changed and hopefully to the slightly better. When I started, I was and I was surrounded by, unfortunately, a lot of people who had never done anything like Klarna before, who had never built anything of this size or scale. And I had a lot of poor advice initially. I had some really good advice as well, but I had a lot of people who told the wrong things. But I always listened. I was always like listening, and always and this is something that still frustrates some of the people around me.

I always assume that all the other companies out there are much smarter, much better than us, and do everything in a much better way. And that every time something’s gone wrong, it’s something that I could have done differently or better. I always blame myself and I always think that it’s my fault and I should have done something different. I don’t think that much about what other people or other companies or other things out there could have done different.

And there’s pros and cons to that. but the benefits of that is that it speeds up my learning because a lot of people, and I’ve realized that as I then manage other people, is that because they’re so obsessed of trying to kind of think about what other people could have done differently and why situations arised and why it wasn’t their responsibility and so forth, they spend a lot of time on that because we unfortunately brought up in some kind of like guilt that it’s bad to do wrong and it’s bad if it’s our fault and you want to avoid that.

And these psychological constraints, unfortunately, hinder people from develop much faster. Because if you go into every situation and say, the only thing that’s relevant here is what I could have done differently, what I could have learned from this, if that’s the only thing, it’s just like, whatever, I accept my responsibilities. What could I have done differently? Like, if you only focus on that, you just learn much faster. So I think that from my management style, what I’ve been trying to do over these years is learn and test a lot of things like as an organization, how do we keep agile?

How do we keep fast moving? How do I keep people learning? How do I encourage learning? How do I keep people accountable? How do I create an environment in which people feel challenged at the same point of time, feel encouraged and supported? And I’ve come to believe more and more in this kind of curve. You know, people talk about it like there’s this learning curve, and the best spot is at the place where you’re like challenged to the precise point where you’re almost giving up, but not entirely.

Right? Like, that’s exactly it. Right. And I have this amazing swim teacher for my children. Her name is Pietra, she’s just fantastic. And I just love watching her she has this ability of taking my children in the pool and pushing them to that exact point where they are, like, almost almost giving up and they’re just learning at such a pace.

And if I can recreate such an environment in Klarna, if I can create an environment, if I can be part of creating an environment where we put people in that position where they just are exactly at that curve, where they are challenged, supported, and kind of at the edge and being given the ability to learn really fast and really discover what it means to have an impact. Because at the end, that’s the whole point, They’re supposed to come to Klarna, and they’re supposed to do something, get something done, make something happen, right?

Hopefully something that benefits our customers or benefits our merchant or partners or benefits society or the company in some way. But just establishing that we’re to do something good is fairly easy. How you do it is what’s difficult. Right? I used to read this book, like, good to Great, and you’re like, oh, hire the best people. That’s this. And you’re like, wow, that’s true. I love it. Hire the best people. Like and then you’re like, well, wait a second. How do you actually do that? Like, where do you find them?

Like, how do you identify them? How do you interview them? How do you like, it’s not hard to conclude that like, I need to hire the best people. Like, it’s just a saying. But what’s difficult is, how do you actually do that? And if you do that, how do you do at scale? Once you’ve done it once and you learned how to do that and you found a methodology that allows you to identify great talent, to foster great talent, to challenge talent and develop talent, how do you then do that scale?

How do you make that repetitive in a way in an organization so that you create a system that works? So I think those things are very interesting. And I And I think what you know, I love the fact that Michael Moritz wrote this book that I’m still haven’t read. So it’s kind of funny that I’m referring to it. But he wrote this book about Ferguson, the manager of Manchester United. And I think it’s very relevant because today the saying is that, like, for people to be motivated at work, they need to have a higher purpose.

The company needs to do something good and so forth. And I am not disputing that. that. is very true that that contributes to people’s sense of purpose and so forth. But before you even get to that level, we have to ask ourselves, like, what is it really that makes people motivated and enjoy themselves? And I think when I always think about that, I often look at sports because, like, why do people love soccer? What’s the higher purpose of winning Champions League? Like people say, there’s a massive higher purpose, but not entirely.

You’re not really making the planet better by winning. Still, people are massively engaged in these things. Why? Because it’s a team effort. There are clear roles. You know exactly what you’re supposed to do. I’m supposed to put the ball in that score and then it’s very clear how you win. There is a referee that kind of, stops people from cheating. And so there’s a lot of things in that environment that makes it motivating, that makes people engaged. and those things are usually lacking in companies. Like, you cheat in a company and you make a career by cheating, you can get away with it without a referee coming and giving you a red card.

And you can actually make a career in a company without contributing much, which is very difficult to do on the soccer field. Like, if you run around, you don’t do anything, you don’t contribute much. Like you’re to be out of there pretty quickly, like, to be honest, right? So like, there’s all these things that sports have and games have that makes it motivating. And these essential building blocks have to be in place first. And if you have those building blocks, then you can also add to that a great sense of purpose and some kind of positive contribution to society because you have the building blocks to really make things happen.

So those are the things that guide me today in my thinking around this. But again, now we’re talking about it still on a superficial level. Like the real difficult thing is like, you know, people will listen to this and say, oh, that maybe sound nice, or maybe I agree, but then like, how do I actually do that?

Yeah, that’s a very good point. And I think obviously, that’s one of the things that I have had to learn over time is that there’s a lot of movies where there’s like, for example, like this one, this movie that my kids watch where she wants to become a ballet dancer and she goes to this best school in Paris, and then she meets this very tough teacher that he doesn’t care at all whether people burn out or not. He’s just very demanding and, you know, whatever. And to a lot of people, that’s very scary and so forth. but to the few people that really have the passion and so forth, they enjoy that and they feel like they thrive in that environment, right?

But obviously, real life, like these sports and so forth, they are controlled environments where it’s much more clear. The problem with a company is that it’s a much more complex environment with a lot of other things going on in parallel in people’s lives. And so I have definitely occasionally missed to see that people are beyond that point. But obviously it is a mix. You got watch them, you to talk to them, empathetic. You got to look at them and see how they interact, see how they act, what they’re doing, how receptive they are to what you’re saying and whether they are capable of taking that with them and do something with it.

In Sweden, there’s this course called situation adopted management, right? Which basically means that there is no single management technique, but you look into the situation, you try to understand it from multiple angles, and then depending on where that individual is and how you perceive the mental status and the mood of that individual and so forth, you try to adopt. Either you coach or you challenge or you instruct or you you do different things, right? There’s not a single methodology that will allow you to deal with those situations.

But a lot of it is empathy. It’s the ability to look at people and read them and try to understand and ask them questions and understand where they are.

Well, I think it depends. I mean, Victor ended fairly early. I mean, I think he was about seven, eight years. At that point in time, it was different because it was, like, quite natural. He wanted to do something different, and the company developed. So his role changed, then he decided he wanted to leave. So I think that that was very natural. With Niklas and me, it was slightly different because at the end, me and Nicholas became a little bit like an old couple. An old couple to me is one where you kind stop listening to each other so you don’t anymore actually hear what the other person is saying.

You’re making assumptions about what that person means or you’re even second guessing Oh, now you’re saying that because, and you’re going to say this because, and you’re going to do that. And so we weren’t in a great place in our relationship. And the problem with that is that in an organization, if you have that situation, what ends up happening, it’s not about whether I was right on specific topic or he is totally irrelevant actually. And many times two ways of doing something can be as successful.

Like, there are many paths to success. So it’s not that, but the ambiguity it created within the organization, the lack of clarity and the ability for people, unfortunately, because that’s what happens to some degrees, that not everyone, but some people will see the division in the relationship and play that to their advantage, people within the organization to avoid accountability or to get something that they wanted or, you know, whatever, and they will play that against each other. So was just not a great place that we were in.

And at the end, when Niklas decided to leave, I think it was good just because we just couldn’t get across that part of our relationship at that point in time. And so it was a good thing. So I think I was fairly relieved when he told me that he was to leave. And for the organization also, it created more clarity. Okay, now it’s Sebastian. and in the end, it’s his decision and he’s the CEO and that’s it.

So it. made it better if me and Niklas would have been able to at that point in time, repair our relationship and get to a better place and start listening to each other so that we could allow each other to grow and develop within that partnership, then we might have been able to overcome that and continue. But in this case, it happened like this. And I think he’s doing an amazing thing now with Norgen. and I’m super impressed what he’s doing. and he’s doing that fantastic.

And I’m doing my thing. and that’s okay. Like life goes on.

I think self doubt is not a bad thing, right? It’s a very healthy thing if it represents you continuously trying to understand like, I doing the right thing? Is this something that I want to do? Am I taking the right decisions? I think it’s extremely healthy to do that. I’m not saying it’s not painful or tough when you have it, but I think it’s like a very positive thing. I’m much more worried when people tell me they have no self doubt, and then I’m like, oh, oh, like that means that you’re not really reflecting on your actions and you’re not learning from them.

So I wish I could give you something more comforting than that, but I would actually say, enjoy it. Be happy that you have it and it’s going make you a better person.

We played around with a lot of different concepts at Klarna. We had like free Coca Coca-Cola, ping pong tables, no ping pong tables, Lego in the rooms. Google was pushing for a while, 20% of creative time. We implemented 20% of creative time. Nothing happened. We We took it away. Like people were angry that we took it away. We tried so many things. At the end, around and I got a new management team in place. Niklas had left and the marriage quarrel were gone. And so we were finally able to sit down seriously and talk through how do we think we create a culture and a setup that works.

And we decided to get inspired by Netflix and Amazon, a couple of other companies. We created the idea of small startups, eight people in each team, two pizza teams with a cross competence background, preferably. I to see as many teams in Klarna as possible with cross competence. I always get a little bit sad when I see only marketeers or only this or only whatever. I to see as much cross competence as possible. They have an an accountable lead that’s kind of the mini CEO. They have a roadmap.

They have a vision and mission statement. They have a clarity of what they own. They have KPIs representing what they’re trying to achieve. And they have a goal and they’re working towards that goal. But they also know they belong to competence. And occasionally these teams dissolve because things change or things grow or they close things. They dissolve and they form new teams very organically, new teams around new objectives.

And this has allowed us as a company that’s fast growing and so forth, so that every time we need to change something, and you need to change things, unfortunately, quite often, people know that that’s part of what we do, and they don’t feel worried that what is to happen to my job or my salary or my title or my career or whatever, because we’ve created a system that allows that change and separates it from the promotions and the salary and the titles. And that has been instrumental because it allows us a much higher level of flexibility.

It makes the whole organization more agile. So these are kind of the critical components that we put into place. And obviously to some degree also, and this might sound like I’m trying to say something that’s political correct and sounds nice, but it’s actually true. Partially when we did this transformation, it actually was taking the pyramid and moving it the other way around so that at the top you have the teams, the people are actually doing things. Because in the end, I think a lot of times as a company grows, what ends up happening is the thing just becomes so complex.

So management tries to organize the company in a way that makes sense to them and that is easy to understand for them. But the consequence of that often, unfortunately, is it makes no sense for the person who’s actually doing the job. So they lose the purpose. Why am I coming to work? What are we trying to achieve? All of these things get lost. So what we said is we have to do the exact opposite. The critical element is that the people who are actually supposed to do something, not the manager, people are actually supposed to do something.

If they program or they do a marketing campaign or whatever they’re doing, they need to come to work every day and feel, I know exactly why I’m coming. I know how I’m contributing. I know who I’m contributing for. I know what value I’m creating. And if that then creates tons of complexity for us as managers, because the whole system becomes much more complex, then that’s what we’re getting paid for. That’s the point. That’s why we’re getting a good salary, because we need to manage that complexity, and we need to challenge these teams, and we need to provide them guidance and help them be successful.

So I think that whole thing is critical. And then on top of that, obviously, keep very close on the recruitment and trying to understand like, especially in a country like Sweden, a country where a typical saying is like Alaska, means like everyone should come, everyone should join. And it’s very nice and I appreciate that with Swedish culture, I’m not trying to ridicule it. I think it’s fantastic and it’s a fantastic society. But as a consequence of that, it took us some time to conclude something which maybe in the US or maybe even in the UK would have been much more obvious, which is that not a company for everyone.

It is a company for the people that want have that challenge, that want be in that environment, that think that’s interesting, that want be challenged, that to learn a lot fast and to get a lot of things done. And that’s not everyone, and that’s okay. The simple like, you play soccer, some people play soccer for fun. Other people play to win champions League. People do it for different reasons, and they have different ambitions with it and different objectives with it. And the same applies to us.

So it took us some time to realize that we need to tell people, look, just so you know, this is not to be your standard company. You’re going to be expected to do a hell of a lot of things. You’re going to be expected to be challenged. You’re to expect it to do your uttermost, and we’re to try to support you and help you and grow. So you just know what you’re getting into. Like before you get into it. Can

I would say in the best of worlds, if you have great leaders that are very self self-sustained and really can push forward themselves, then you can have a lot of direct reports. You can even manage up to you can maybe do 14 people if you are in a tougher starting phase or whatever, you know, four or five is probably more realistic. So it kind of that’s where it starts. And then you have everything in between. Right?

That is one of the absolutely most difficult things because a lot of us, including myself and others, are very ambitious. We want to accomplish a lot. We want to win. We want to contribute to society. We want to do a lot of things with Klarna. And that means that we’re all very emotionally invested, very engaged. And when things doesn’t move at the speed we’d like them to, or when things doesn’t happen, or we simply see that they’re not moving at that pace, That creates for a lot of us a sense of frustration because you’re emotionally connected to it.

Nobody would be surprised if, you know, a soccer player gets like really angry when, you know, the other team scores a goal or something, right? But unfortunately, in a corporate environment, that emotional expression creates occasionally fear, right? And if you react too violently or if you’re too violently sounds like now somebody’s hitting something, that’s not the case. But if you’re at least expressing yourself or being angry or raising your voice slightly or just using stronger words, then that creates fear. And that fear in itself is bad for the company environment and the culture.

And it can create an environment in which, to your point, people avoid doing mistakes and hide mistakes and get worried about mistakes. And I don’t think I have the perfect answer to your question. I think what we’ve been trying to do is trying to encourage people and highlight people who dare to challenge people who dare to share their mistakes and celebrate when people are open and frank and say, look, I did this and I think I could have done this better, and so forth. So I think we’ve learned to become better at highlighting and supporting when that happens. but it is still a problem because it’s a very natural reaction for a lot of people. when something goes wrong, they rather just hide it.

That’s just human nature, right? So in that environment where you want to move fast and learn fast and people are emotionally invested and at the same point of time, those things happen. I wish I had a better answer. I don’t really know. I I know we become better at it, but I still don’t feel that we’re entirely there. I would like to push even more in that direction.

People have asked me sometimes this typical question that journalists love, which is like, did money make you happy or did they make you happy? And at some point in time, I answered, no, it does not. And I regretted that answer because I think that as you improve your financial standing, it’s very easy to lose touch, lose your feet on the ground. And it is obviously true in a sense that your mental state and your level of happiness and content of life isn’t entirely connected to what you have in your bank account.

Like, obviously not. Like, I will wake up and have terrible days and I would have good days. And I’ve faced a lot of issues in my life, like with my father who had serious issues that, money could do absolutely nothing for, like almost probably did things worse to some degree. But at the same point of time, when I am really tired and I’ve had, a tough work at week, I don’t go home and worry about my bills. And if I want to, I put the kids on a plane and we fly to some nice place, at least before COVID.

And that’s just so easy to forget what an immense freedom that is. And there’s this whole pain in life or issue in life that just has been removed that I just don’t have. And I think that’s why I took my statement back, because I do think that having that freedom and that sense of, you know, not being dependent on that does give you something very valuable in life that is really different. And so that’s why I think it’s a little bit like, I don’t really like when people with money say that.

I think it’s a little bit like they’ve lost their understanding of what normal life used to be.

Yeah, mean, it’s difficult. The problem also with me is I’m one of those people that when I come now that’s a benefit of not working in the office. when I come into the office, people can tell, they look at me and they’re like, oh, he’s in a bad mood. And the problem is I’ve always been like that. I mean, long before I had this job, did this. I remember in school, sometimes my friend thought I was a little bit tricky because I could be in a very poor mood or I could be in a good mood and that’s just me.

But today, obviously, your point, sometimes I’m just like, can somebody just stop looking at me? It has nothing to do with you people. I just had a bad night. Just leave me alone. But at least what I’ve learned to do much more nowadays is that I’m trying to your point about vulnerability and kind of approachability. I try to at least tell people that if I go into a meeting, I’m just like, guys, just so you know, like I had a quarrel with my wife this morning or, you know, my kids were all over me or I didn’t sleep anything tonight or whatever.

So at least give people kind of an understanding. So I think that’s part of it. And then obviously you do have to watch your words. You have to be much more disciplined. You cannot allow yourself to express yourself or do things. am definitely no queen of England, but I look at the crown and I can see and understand some aspects of the challenge it means to have that immense weight and responsibility, and my is much smaller than hers. But still, like there is a dimension to that that I can understand relate

I appreciate it.

Absolutely.

The favorite book is The Neverending Story. I read it for my seven years old, and I so much.

The hardest element today is just still managing my calendar and understanding what I’m supposed to spend most time on. think that’s years later. still haven’t figured

I mean, tons. Like, there’s so much. But it’s an adventure you learn things all the time. So it’s a bit like an explorer. Just because you learned so much doing it, it doesn’t necessarily mean that you would like to go back and look at the same place again. Like, I did that that was a different time. I learned things, and I’m keen on the new stuff.

You know, Oscar Wilde, apparently, a lot of quotes are given him that I’m not sure he said, but he said something like, whatever you are, be a great one. I really hope that whatever they do, I don’t care what they do, but as long as what they do, they really try to strive for excellence. That’s something that I try to do, and I hope that they will do as well, because I think there’s amazing fulfillment and learning and happiness coming from that pursuit of excellence.

Probably the biggest gift I’ve been given is I don’t stay up at night. I sleep so extremely well. I just go to bed and I’m just like off. And I know a lot of other CEOs that I talk to and founders who are like worrying in the night and can’t sleep and I feel sad for them, this is my biggest luxury. I’m just like, boom, and I’m out.

Michael Moritz. Michael is amazing in so many ways that, like, I could write a book about Michael and what he’s done for me and the support he’s given me. And someday I will tell the stories of what really happened. And I think he genuinely very different to a lot of other investors. I think what Michael is looking for, he’s looking for a CEO or co-founder where he says, does he have the ambition? Does he have the intent? Does he have the intellectual capacity and the abilities?

And is he really continuously focused and kind of trying to learn and iterate and become better? Like, those are the things that he tries to assess. And once he’s established that he believes that’s the case, he then gives you all the trust and then he just supports you. And that is the best possible way of supporting somebody who has that. Like, I’ve been just so humbled and so grateful for having him on board.

Look, I have been doing this now for years, and that year has been spent understanding retail banking, understanding these day to day banking services that we use. I’m not talking about investment banking, corporate banking, all that stuff. I’m talking about our everyday spending. That is a trillion dollar industry that has totally lost sight of the customer, that has a lot of legacy systems and a lot of companies that have benefited from massive barriers of entry, massive barriers of entry from capital, technology, regulatory protection. This is like the dream of an entrepreneur to come in such an industry and have customer focus, fast speed, new technology.

And the question is only like when, like it’s a little bit like self driving cars. We all know it’s going to happen. The question is when? Based on what I’ve seen in the last years, and I’ve seen how retail has gone from retail to e commerce and all these trends, this decade is going to be the disruption of retail banking. At the end of this decade there will be a couple of new total players that will be very dominating in this space and the rest will either cease to exist, will merge and kind of try to acquire some of the new ones, or maybe a few of them will manage to reinvent themselves.

But this is going to be an extremely interesting time. And most importantly, which I always point out, people don’t listen to this. it’s kind of funny. One thing I always say, it’s going to be a much smaller industry and that’s because it is ridiculous that moving money back and forth is a trillion dollar industry. That is ridiculous. There is no good reason for that whatsoever. This is going to be much more cost efficient, much smaller revenue business than it is today. the whole industry that is.

But even though it would be much smaller than it is today, it’s still massive. And Klarna has the opportunity to be a one big player in that industry, similar to what Tesla is doing in cars or whatever. That’s what I want to do, and I feel we have all the prerequisites to accomplish that. So I’m super, super, excited to see how this is going to play out. And that’s why, you know, people compare us to, I know you’re going to have Revolut as an example, or you already had Nick.

Like, obviously, partially he’s a competitor to me, but much more he’s a soulmate to me. Like, he’s also going to change this industry successfully and so forth. And we’re both going to do it. There’s going to be this push that’s going to transform this industry and the people going to lose on it are the suits in the marble offices in the city centers. Like, that’s where, you know, the pain is going be felt. But the winner is going to be the consumer.

Thank you so much. Great talking to you. I really enjoyed it as well.