Why Bundling Does Not Work

Look. It’s a great pleasure. I’ve been, you know, listening to your podcasts over the years, and they’ve been really valuable to me as I’ve gone on my journey. So I’m delighted to have the conversation.

Well, look, if I ever write the book on QED, Harry, I’ll make out that it was very thoughtful, and I had laid out a strategic plan, and then I flawlessly executed against it. But look, it’s been a journey of me putting one foot in front of another and figuring it out day by day. But look, the Capital One experience was absolutely amazing. I wouldn’t change it for the world. I got to work with Richard Fairbank, who’s one of the most special human beings on the planet.

And we had amazing run out of Signet Bank, this wonderful old traditional regional bank in Richmond. We built this credit card juggernaut. And I had ten years running a public company with Rich that was just incredibly special. We grew amazingly, we went from a market cap of 1,000,000,000 to 10,000,000,000. We grew our earnings at 25%. We became a great place to work. We developed the What’s in Your Wallet brand, and it was really amazing. But I started to wake up in my late, middle, late 40s and started saying, this is slowing down.

My intellectual curiosity is not being peaked as much. I’m not sure if this is going to be what I want to do in the long run. And people came to me and said, Nigel, this is what happens when you get to the last third of your business career. Have you thought about getting that really nice red sports car? Because it’s all part of life. But look, I was changing, and Capital One was changing, And I thought there were new pastures that I wanted to take on.

So I went back to London, lived there for a year, and I was detoxing from public company. So I took the opportunity to go from being very narrow and very driven during the Capital One years, wouldn’t change it for the world, to being much more pluralist, eclectic, broad. And I joined the board of London Business School, Brookings, ideas42, National Geographic, and The Economist. Platforms, ideas, icons that that I had relished for so many years. And I started to think, know, maybe I’ll just be a pluralist now and dibble and dabble and be a dilettante out there.

And I found it was really interesting, but it wasn’t enough. And I came back to The US and we started to coagulate a series of Capital One refugees, led by my great friend Frank Rotman, and then Karabu Honig, ex Capital One people. And we started to say, you know what, what can we do here? Ideas were starting to come to us. And we thought, you know, out of a family office platform, maybe we’ll make some investments, and maybe we’ll have some fun, maybe we won’t lose too much money.

And it was very modest. And what has happened is almost linearly, meticulously now over thirteen or fourteen years, that has evolved into what is now QED.

I call it the Rubicon Crossing event, and it’s exactly as you frame it because it would have been in some ways relatively comfortable to have that little family office with people I’ve known and loved for years, and do some investing and not build another thing of any scale. But there was three criteria in my mind. One was, are we any good at it? Are we good investors? Now, my sense was I was a half decent strategy consultant, and I had a really good run at Capital One, but this is a different game investing.

And are we any good at it? That was one. Two, do the portfolio companies that we work with want to work with us? And I always say to my team, look, I much prefer to get four x and be loved and respected than five x and be despised and feel like we took advantage. Two is, you know, do they want to work with us? Do the skills and the approaches that we have resonate and work? And then three, do we like it? Do we enjoy it?

You know, at that time in life, I had the luxury of, you know, focusing on doing what I want to do. So I started to tick those boxes. And the size of the opportunity was becoming enormous. The wind was roaring at our back, we were seeing digitalization start to emerge. We’re now six, seven years ago, and the opportunity to embrace that was bigger than I could fund personally with Frank and Caribou. And then we found that there were lots of other refugees from Capital One and other places who wanted to come and join us on the journey.

And they were at different points in life where giving them the opportunity to get the carry and be able to grow their own careers was really important. So I stood at the banks of the proverbial Rubicon for some time, recognizing and with clarity knowing that I would now have a boss, and the boss was going to be my LPs, and that this was no longer a hobby and a folly. This was now a business. And if you’re going to do it, Nigel, you do it properly, and you do it really well, and you give it your best shot.

And we did. And I’ve looked back on that decision a few times, The thing about Rubicon is that once you cross them, you can’t go back. I mean, it was the best thing. It was the greatest thing. And I linked arms with Frank and Caribou and crossed that Rubicon, and it’s been great since then.

I do wanna say this, Harry, that the fact that you’re willing to bring it up so disarmingly and talk about it so openly, I think, is massively refreshing and really, really important. Where does it come from? Look, I have a younger brother who has struggled with drug and alcohol addiction for thirty years. I’ve seen him go up and I’ve seen him go down. And I’ve been there, the nadir and the depths of what alcoholism could do and how it can shred your relationships, how it can shred everything in your life, and how it’s just so destructive.

I’ve watched him try and climb up the 12 step ladder. I’ve helped him go into various establishments and get stable. He’s now been clean for fifteen years, but he talks incredibly openly and disarmingly about his own journey and how hard it’s been. So I have that part of my life. And just to point here, I think many of us have either had our own flirtations with various forms of difficulty in the workplace, or know people that have, and we tend to bury it. We tend to not talk about it.

And I say all the time that if I have a sore arm or sore shoulder, I’ll come into work and I’ll whinge about it, and I do whinge about things like that. But if I couldn’t sleep last night and ambient, or I’m paranoid about going outside, or I’ve been taking substances I shouldn’t take, I won’t talk about it. I’ll say that I’m going to my doctor to get my shoulder fixed, but I won’t say I’m going to talk to my therapist. And this is it’s massively stigmatized.

So that’s the second thing. The third thing is really sadly, three years ago, we lost one of our partners, Greg Mazanek, a total amazing human being, orthogonal thinker, tenacious, brilliant, quirky, and we lost him. And it was really, really hard in a small group of people to lose somebody to this. And I swore to myself and to his widow, Elaine, that I would talk about this whenever had the chance. So whenever I get in front of LPs, whenever I get in front of my portfolio companies, whenever I have the chance to talk about this, I want to just bring it out into the open.

We’ve been working with an entity called Chatterproof, and Chatterproof is Gary Mandolin, he lost his son with alcoholism and drug addiction. What he says is, look, if you bring it out into the open, and you really understand that this is a disease, but it is not anybody’s fault. There’s help out there that can massively change the trajectory of outcomes. If you just do that, you can make a massive impact. And our world of venture of entrepreneurs, I think is replete with people who are going through these kinds of difficulties, even without COVID.

And eighty thousand people lost their lives in the last twelve months as a result of addiction. And it’s so important to bring it out into the open in the workplace. So me and people like you, thankfully, Harry, talking about it in an open, disarming way destigmatizes it, and that is so important.

Yeah. Look, I’ve been really, really blessed and really, really lucky. And I’ve surrounded myself with people who are immensely more talented than me and built great relationships with them. And I’ve had a really good run. But every day I get up and say, what I’m trying to do here with QED, and having the responsibility of managing now over a billion dollars under management is not easy. And venture is much harder than running a big public company. Because if I have a big public company, next year’s earnings are already in the bag largely.

And if I can reduce costs by 5%, and if I can grow at 10%, then I’m going to get my bonus and everything’s fine. And you have an edifice and a cadence that’s already fully up and running. Running a large company is much easier than running a smaller one. Private equity is much easier than venture. I’ve got numbers to look at, I can dial in what the revenue is going to be next year up and down a few percentage. And I can manipulate that on a spreadsheet and outcomes, different answers.

Venture is about extracting enormous signal out of very little data. So what do I know? I got an entrepreneur with an idea, particularly at the early stage. And how do I evaluate that? Now that means that I think it’s like, it’s what I call the point nine to the power six problem. And that is that when you think about all the things that can go wrong, each one of them separately is not problematic. Can you build the team? Is the TAM big enough? Is there a compliance issue?

What’s the regulatory structure? Can you fund yourself? Will you be able to get the a round done? These are all very solvable, but then you have to make them all line up as conditional probabilities. That makes it really uncertain and capriciously difficult to predict. With that is the uncertainty and the stress of this job, because you have to make decisions on very, very little data. People joked with me sometimes, and he went back to my consulting days, Nigel, you’re drawing regression lines through a single data point.

And sometimes there isn’t even a single data point. And that quality of the signal you get in a COVID world has been diminished significantly. I can’t feel the human being on the other end of the pipe as well. So it’s really difficult. So I find myself constantly challenging myself about is the hypothesis correct? We’re very hypothesis driven what we do at QED. How do I know what is true? And how do I know what is yet to be proven? And how do you deal with that?

A great deal of the strength that I get and the confidence I get is being around people that I love dearly, and I trust implicitly. And Frank Rotman and Bill SoFi, and so many other people have come on this journey with me. I think if I were alone making decisions by myself, Harry, I think it’d be much, much harder. So they are crutches and they are advisors, and we all join arms and jump into the river together. No matter how successful you are actually, no matter how many pounds, shillings and pence you’ve got, insecurities are gonna be with you forever.

And if you seek out places where insecurities are more likely to haunt you, such as venture investing, it’s something you just have to deal with.

So look, you know, a working class grammar school boy, Welsh parents, growing up in a household where everybody read the Daily Mail, and I don’t think there was a book in sight. I’ve been incredibly lucky in that I’ve been able to create escape velocity economically for myself and my family. And in the early days, it was about just having enough money to be able to travel a little bit and not to worry about money. The basic Maslovian stuff of feeding the family. And then it was getting to f you money, whatever that is.

And we can debate what that is. Maybe it’s 15, maybe it’s $20,000,000. And I think once you cross that threshold, it doesn’t matter anymore. Whether or not my latest investment, and we just invest in Bitso, for example, in Mexico City, I love that business. And I think it’s going to be a rocket ship. But candidly, whether or it does brilliantly or does well, is not going to change my life at this point. So the relationship with money has changed substantially through time, I don’t get my nourishment from more zeros at this point.

I get my nourishment from palpable, genuine relationships that I build on route, where I can help people half my age, twice as smart, haven’t been through the slings and arrows of misfortunes and mistakes like I have, helping them navigate that, being a coach, being a steward, being a support, being an encourager. Those things drive me now, and those things are much more important than pounds, shillings and pence. Now, I do want to say I’m really, really lucky. I don’t mean to sound like everybody should do that.

Clearly, fortune has shone upon me, but I now have the luxury of being able to focus on things that I think are much higher up the old Maslovian hierarchy.

So many of the people that come in with pitch decks and by the way, we’re in Alexandria, Virginia, Harry, and nobody rides their bike to pitch us. So we have to do a lot more outreach, we have to build a lot more relationship. And we spend a lot of time with companies that we’ll never invest in. But we’re building the ecosystem, and we’re being supportive to the overall environment, the agar jelly of fintech investing, and we’re very happy to do that. So first of all, you’ve got to create the right ambience where people will have a conversation with you in a way that’s meaningful, where you get incremental nuanced signal from the conversation.

So it’s not like talking to a robot. You don’t ask a question, what do you think your revenue is gonna be in six years? They have no idea what the revenue is gonna be in six years. They can’t even predict what it’s gonna be in six months. So don’t ask silly questions and set up a sense of what the nature of what the conversation is gonna be, which is gonna be about important things. Harry, I think it’s a really interesting business. Why are you doing it?

Harry, what’s important to you here? If you look back on the last six months, what’s gone really well and what hasn’t gone well? And if you could run the clock back, what would you do differently six months ago? Who are the people that you really trust on your team? And how do you know you trust them? Is the goal here to make money? Is the goal here to be successful? Is the goal here to make a difference in our society? What’s driving you? And how do you trade them off?

When you ask those kinds of questions in a supportive and non adversarial way, Pitching and building relationships and making decisions should not be running the gauntlet. It’s not a chance to show off how clever you are. It’s not a chance to rough people up. It’s about creating an environment where you can really learn from that conversation and learn about the human being that’s at the forefront, the spearhead of driving this business. Most venture investments fail. Most of the people you’re talking to are not going to be successful.

How do you separate, discern? How do you get a sense of who’s going to win and not? And when they face failure, which they will, when something goes wrong. So many of the people have had charmed lives, they went to the right schools, they did really well, they went and worked for the right investment banks or consulting firms or startups, and now everything’s gone really well. What are they going to do when they stare into the jaws of failure? Are they gonna dust themselves up and go at it again?

Or are they gonna like, you know, fold the cards up and say, I give up? And most of them, you can start to grapple with those kinds of things. Is that superior listening? Maybe. But it’s not about just reading numbers off a page, because early stage companies have no idea what they’re going to do. And therefore, it’s a it’s a futile waste of time. It’s about really kind of getting to know the human on the other end of the here, the video pipe, hopefully much more face to face down the road.

I messed around in a lot of psychology in my undergrad days. And there’s a humanist psychologist called Sydney Gerard, Canadian, and he talks about reciprocity and disclosure being really important about building trust. So he has this notion that the stranger on the train phenomenon. You’re on the train, there’s a stranger, and she starts telling you about her life and her divorce and how her children this and that, you’re going like, hold on. This feels like weird because she’s disclosing too much. But when you build relationships by a stair stepping of incremental disclosure about each other and build rapport and relationship and trust around that.

And I find that the people that we want to work with and the ones who want to work with us are willing to engage in that. QED is not about stock picking. We play the full ninety minutes, use a soccer football analogy there. We don’t just pick the team to go on the pitch and let them sort of manage the next ninety minutes. My team, Tottenham Hospital, does this regularly. You’re two nil up at thirty minutes, and you lose four two. It’s really easy to do that.

So we play the full ninety minutes, and the people who want to work with us, and it’s a mutual mating process, are the ones who recognize that what they’re attempting to do is really difficult. It’s point nine to the power six, and they need partners and supporters along the way that can help them navigate that. So, yes, the ones that we wanna work with wanna work with us. The ones that just want the money and leave me alone, and I’ll bring you back much more money, they’re not the ones that work with us.

I’ll take that as a point of development for myself even at these advanced years. Yeah, and look, think it comes out of being an operator. In the operating environment, and you’ve got six or 10 people working with you, you tend to spend more time with the ones that are not working, you tend to ones who are failing. In venture, it’s much easier to turn four x into five x than turn zero x into one x. Clearly mathematically the case. But this is not about stock picking.

It’s not about just picking the team to go onto the field. Part of the quid pro quo of that really deep relationship is that you are willing to engage all the way through the journey from a seed to IPO, and you can add value all the way through that period. Now, that doesn’t mean that you are just passively supportive, it doesn’t mean that you are wedded ad infinitum in bondage with the relationship that you had at the beginning. Many of the conversations I’m having with trusted relationships is, look, we need to sell this thing.

It’s not working. Growth is slowing. You can’t be CEO anymore. You need to move to executive chairman. And the relationship that you have enables you to have those kinds of conversations. And Harry, they don’t happen in the boardroom, they happen outside of the cadence of the board meeting. So often, the value that I’m having, if I’m adding any at all, is not in the boardroom per se, it’s actually in those periods between the board conversations and nudging and focusing attention on the key things. But yes, if I have a failing here, it’s that I do not give up.

I am absolutely maniacally tenacious, and if I buy into something, I hate to lose. The fear of losing and the pain from losing is much greater than the euphoria of winning. But you know what? I think it’s better than the alternative. I see a lot of cutting. You you see, I see this with some of my friends in BC. They make an investment. They go to the second board meeting. The company’s missed their revenue, and the very senior person is now substituted by the very junior person, and the senior person is nowhere to be seen.

Oh, man, I do too. Look, I’ve been saying to my team the last few months, look, we’ve got this enormous growth in value in the portfolio from investments we’ve made in the past. And one of the things I learned very much was, look, it’s never as good as you think it is, and it’s never as bad as you think it is in the worst times. So get some balance, get some perspective. When you’re climbing up the ladder, don’t keep looking up, look around you and enjoy the view.

This is a great time to be in venture. The wind is roaring at our back, fintech is winning, digitalisation is coming at us like a train, we as QED have positive selection, and deals are coming our way, and things are working out. Enjoy it, because you know what, six months from now, it might not be this way. But I am not very good at celebrating the gains on the way, and I try very hard to make sure that I get the time to do that.

I think it’s a it’s a challenge.

I’ve sort of equated what’s going on now in some ways to the Weimar Republic Of Germany in the twenties, in that you’ve got people running around with wheelbarrows full of money trying to buy a loaf of bread. Yeah, there’s a lot of money out there, and some of it is not incredibly discerning about where it puts the money, and valuations have gone up dramatically. That’s absolutely true. You know, for us, it’s staying focused on the basics of this business. Do the unit economics make sense? Are we solving a real customer problem?

Can this technology and this team really scale? Can they sell the story? Can they attract the talent they need to build the business? But I’ve had the luxury, Harry, of being a strategy consultant in banking, being a banker in a public company, and now as a venture for and I have three unique purchase. So I see how challenged the banks are in being able to meet the needs of a digitalising economy, and how difficult is it for them to compete with the burgeoning fintechs. So I believe actually, there’s a huge amount of Open Field running to come.

Now, that mean that all venture firms will succeed? I don’t think so. There’s a lot that don’t really have a lot that they bring to the table per se. And we are specialists, We are very deep in what we do. That doesn’t mean that we’re always gonna be successful, but our unique perch allows us to be able to get very discerning about what we do.

Yeah. I mean, somewhere between c and a, you start to get some serious data. What does it cost me to acquire a customer? What do I think the LTV is? What do I believe the payback period will be? But in the Capital One days, Harry, the ultimate litmus test, the decision making algorithm was all around unit economics. And in the end, successive cohorts at the individual level in unit economics add up to the p and l of the company. And we joined those two phenomenon up.

So for us, it is sine qua non that you focus economics. Now, and with each passing day, each passing week, you get more data and you get more clarity. Because we’ve made a 150 investments now over fourteen years, we actually have a good sense of, here’s one data point now we can extrapolate from that. If it’s like this, it’ll do this. If it’s like that, it’ll do that. And we can go on that learning loop really fast, really quickly, do lots of AB testing so that we can actually test the limits, and we can get a sense of the unit economics very quickly.

Now, we have seen fintech companies that have issued in the whole notion of unit economics. Hey, what does it matter? I’ve got a net promoter score that’s off the scale, I can book customers for $5. I have no idea what the attrition rate’s going to be. And you know what? I’m gonna figure out how to make money down the road. Now that sort of land grabbing California gold rush mentality can work in certain businesses, and it has worked in fintech. For us though, that is far too much of a Promethean leap, where you say, I’m going just get loads of customers, they’ll love me, and then I’ll figure out how to make money down the road.

That usually ends in tears, it usually ends with down rounds, and then you’re fighting this losing battle internally of trying to tell people why they should stay with you on the journey when the valuation of the company has just got fallen in half. So unit economics to us are absolute building block of our investment heuristic.

You’re quite right. And look, any data point you have is only as good as when you capture that data point and on the population it was driven from. So yes, you’re right. There’s a first mover advantage, you get a bunch of low hanging fruit, the cost to acquire is really low. In time, you get better at branding. Yes, you get better at origination. Yes, you figure out how to do affiliate marketing, yes. And those dynamics will move things around considerably. And when people realize that you’re doing it, competition’s going to come in, and they will try and cherry pick your best customers, which will erode your LTV rates.

This is a complex dynamic of managing unit economics, and it’s not done in your finance department. It’s done by your best business people who speak the language of horizontal economics, and it’s so critical. But yes, have it being really cogent and really thoughtful about the underlying dynamics at the customer level is really critical.

There’s a thing called the just world hypothesis, and in the end, unit economics drive p and l’s. And if your business is built on a house of cards and your unit economics don’t make any sense, in the end, your business will not succeed. And that competitor, all be them terrifically funded, all be them getting on all kinds of lists of being unicorns, etcetera, in the end, they will fall apart. In the end, the talent pool there will go away. So it’s a short run, long run phenomenon will be my first comment.

The second thing is when a competitor who might not be as vigilant in terms of unit economics is funded so aggressively, it’s for you to raise your game. And you still have to stay true to your North Star, but you have to figure out how to compete with that. You have to figure out how to make sure you get better customers that have better LTVs, that have better revenue, because that’s not what they’re focused on. They’re focused on brand building and just getting number of customers to shout about to their LPs perhaps.

So you have to, in the jujitsu of this, recognize that you stay focused on true north, and at the same time, you beat them at their own game. Now that means that you have to look for ways to segment. This customer is better than that customer. Is it based on geography? Is it based on demography? Is it based on FICO score? Is it based on history? Is it what is that based on? What drives the underlying slope, if you like, in the economics at the customer level?

That’s problem solving using data to do that. Because again, your hypothetical putative company that just got massively funded is not doing that.

To me, a lot of it is about how the company’s doing and what the team wants to do. When a team comes to you and says, we want out, we want to take our chips off the table, we want to get our f u money, and we have an option to exit. And we’ve had a number of these quite recently. It’s very hard to say, no, no, you shouldn’t do it, because that’s really crucial. There’s a time when you see the exponential growth starting to decay, and you see that the opportunities are less than they were, and we saw that at Capital One during my era.

We had gone from credit cards to installment loans to home equities to deposit to mortgages, and we’ve done it in The US, The UK, Canada, Italy, France, Spain, South Africa. And you know, you could see that we’d spread our wings widely and everything was working, but that couldn’t go on ad infinitum. And I think there’s a time when you see the growth rate slowing and you see the market being very supportive of the business model. And you say, look, this might be the time to move on.

Now how do you move on? No way of moving on is perfect. Do you sell to private equity? And you know what? That changes the culture, and there’s some good private equity firms and the ones that aren’t so good. How do you figure that out? How do you bring in later stage investors? Should you IPO? Lots of conversations going on now with the IPO market being wide open. We have several of our portfolio companies that are musing upon it. Or thirdly, do you sell to a bank?

This is a very interesting question because the banks are competitively disadvantaged in many ways to the fintechs in terms of technology, in terms of analytics, in terms of customer experience, embracing of digital. But often, particularly with the regional banks, when they look at a nascent fintech, they’ll say, look, this is not industrial strength. We don’t know if it’s going to work. We don’t know if they’re good enough with compliance. We’ll wait until they get a bit bigger. And then when the company gets a bit bigger and it’s working, the valuation becomes too high, and then it’s diluted to the earnings.

So there’s never an easy time for a bank to invest in fintechs unless they have their finger on the pulse and are monitoring the ecosystem really, really carefully. And very few of them do that. Actually, we have a number of relationships with Scotiabank, with Fifth Third, KeyBank, others that we have really tight relationships with. And what they’re saying is, look, QED has got this vast set of tentacles into this ecosystem, and they are seeing things that we will never see. But we want to be able to run the video rather than getting the photograph so we can see the ascendancy of these companies and potentially be in a position where we can offer an exit to management and to investors at the right time.

Well, here’s what I would say, I’ve been saying this for years to them in the boardrooms. And I should say there were very few, if any, digital deniers anymore. Five years ago, the people saying this is a flash in the pan. This is not going to work. We are better at technology. We have these customer relationships. Look. We’ve got all these branches. This whole fintech thing is tulips in Amsterdam. I think there are very few digital deniers now, and very few of them now saying, look, we’re gonna be able to outcompete the plaids and the Credit Karma’s and the Square’s of this world.

So they’re now in the mood to engage in a way they weren’t in the past. But now they’re struggling with how do they engage. It’s very challenging. They’re building a venture platform, which they can easily do in many ways. You have to say, what’s the objective function? Is it I want to make money, I want to get lots of Xs? No. Do I want to go and learn? Maybe. But I have to then engage the whole corpus of my organisation so it’s in the mood to learn.

And I have to be able to feed the learning back to the core organisation. Is it that I want to be able to take advantage of things that a fintech can bring and leverage it through my asset base, my distribution channel, my low cost of funds, my ability to manage compliance and regulatory environment? That the third one is the most powerful in my mind. But it takes a management team that’s very progressive at the bank and forward looking. And often what I see, Harry, is, candidly, people who are my age running the bank saying, you know what?

This is really flipping hard. Going from an analog company to a digital one, that transformation is really painful. It will take years. You know what I’m gonna do? I’m gonna hand it off to my 47 year old guy who’s coming up behind me, and I’ll let him do it, and I’m gonna move off stage. So a lot of kind of can kicking that goes on. But look, if I’m running a big bank, I’m saying, look, this is something I have to learn how to do well.

And I have to be able to use in the jujitsu of it again, my assets. My assets have low funding base, lots of profits, footprint, brand, unique proprietary data. And now I wanna make myself friendly and adaptable to be able to deal with this emerging fintech universe in really creative ways.

Complex question, really good one. A null hypothesis here, Harry, is that bundling doesn’t work. It’s a canard. It’s a ruse. It’s a justification to buy things that doesn’t pay off. And if you start with that assumption, then you say, well, where’s the exception that proves that rule? And I over the years, I’ve been looking for those exceptions. Where are they? USAA does a marvelous job of cross selling, but it’s got a unique proprietary customer base with a unique commonality. Two, Wells Fargo did it really well, and a lot of that was quite naughty, and they got into a lot of trouble for it.

Who else has done NuBank is doing it. You’re exactly right. Why is NuBank doing it? Because the gap between NuBank and their offerings and the incumbents in Brazil is massive in size. There’s a yawning gap between them. And, know, NuBank’s virality index was a I’ve never seen before when they started offering the credit cards. So what David has done at NuBank is offer the right cross sell product at the right time in a frictionless way, click and get. So he’s thought through how do you make cross selling work.

So cross selling can work, and current are doing it. One of our portfolio companies doing a nice job of it. We’re seeing Chime build that out. But you know, it’s much harder than it looks like on paper. So that’s my first point. Secondly, we will see that any company that starts with a wedge product and gets traction and the unit economics make sense and they’re building brand and they’re growing. The next thing is, okay, what’s the next product? How do I build that out? And so many of the challenger banks are on route to having to offer a full vista of consumer products.

You’re quite right in that. And the challenges are it’s certainly in The US and and in The UK is that wherever you start, you don’t have the skills to develop the other side of the balance sheet. You know, Monzo started with a checking account and a debit card. Okay. NuBank started with lending. One of our portfolio companies, Mission Lane, has started with lending. I posit that lending is much harder to start with because you take the gestation periods to figuring it out as much longer. So they’ve cracked the code there and then are building the debit out.

Chime started with debit and will build out the lending site. But the challenge of building out all the apparatus is that it’s very hard to do. You have to have patience. Your venture investors have to understand how hard it is and have to give you the rope to do it. But it can be done, and they have a competitive advantage because many of the entities that I just rattled off have net promoter scores that are in the seventies and eighties, and have the focus on meeting the customer’s needs where they are, rather than trying to get you to go into a bank branch and try and cross sell you stuff.

So the canard of cross selling is in the old orthodox world. In the new world of digitalization, we will see the best challenger banks and entities make cross selling work. And you will see the new banks of this world have student lending and asset management and a full vista of different products.

Yeah. Let’s go quickly. Yeah. Good.

Favorite book is Leadership, The New Science by Margaret Wheatley. And what she talks about is the old method of sort of Newtonian physics doesn’t work in a world of of chaos complexity and having to move really quickly. And what she talks about is how do you create teams in chaos. And she talks about how it requires different spans of control, different ways of managing people, different ways of driving results. The second most interesting book, and the really fun one, is a children’s book by Peggy Rothman called officer Buckle and Gloria that I used to read to my kids.

And what the punchline of that book is that you need to have people with you to build value. And officer Buckle is this boring old policeman, and Gloria is his dog. And when they’re together, they are magical. And when they’re separate, they’re really boring. So have a partner, build partners to build things together. That was Richard Fairbank in Capital One, and it’s been Frank and Bill in QED.

There’s a lot of really boring people in it, Harry. I want people that are quirky, funny, orthogonal, stimulating, thinking people. I’d love to see more of that. So many of us come from this classic winter business school strategy consulting, people like me in a way. So challenge the edifice, one. And two, the degree of diversity is really a huge opportunity. We’ve worked hard on it accurately on the gender side, and I think we have to really continue to work on it in terms of people of color.

I hope I’m not in the robot category here, my friend. Jesus,

The people that I’ve had the best time with when I’ve been through ups and downs with them, when I’ve been in the foxhole with them, you see how they really react, and seeing how they stand up and change the course of outcomes. So, know, I point to a couple of people, I put Matt Harris at Bain, I think is a total mensch and a superhuman being. I love him dearly. And then Philip Reese, who used to be a senior at Amex, and when I’m on a number of boards with him, I learn from both of them all the time, but innumerable others that I’ve been able to grow and learn with.

Well, I love all of the boutique fintech venture firms. So Mickey Malk at Ribbett, a dear friend, Matt Harris, at Bain. Hans Morris at Nike, I’ve known for thirty years. And then the mainstream, you know, the really great generalists, Sequoia, Andreessen, Axel, Benchmark, I see them all doing really good work. As fintech has become a thing, and not just a fad, we’re seeing the mainstream firms really invest in that. And although they may not have come out of operating roots and know financial services in the way that somebody like QED or Revit would know, what they bring is enormous other assets to the table in terms of scale and brand and reach and lots of other things.

Ever since I was a kid, I’ve been a fanatical exerciser. And I think that we talked about addiction earlier. I think this is my addiction. And so actually a more socially acceptable version of it. So I love to ride my bike, I love to exercise in lots of ways. And for me, it’s a huge stress releaser. And I sort of track everything in a nerdy, analytical way that you’d expect. And for me, it’s great to be now, you know, in my sixties. Two years ago, I took two of my sons, Dylan and Harry, and we went to we rode up the Stelvio Pass, 7,000 foot two hour climb in the Italian Alps.

And it was absolutely amazing to be at my age and to be able to do that with my boys. So I was gonna do that this year. COVID means that I can’t, but I’ll hopefully stay fit enough to be able to do it next year and be able to do things like that.

I’m my knees gave up on me. I used to run a lot, but my knees gave up on me, so I took up cycling. Maybe if you have that kind of cardio, maybe I can talk you into doing some riding.

There are two that we’ve just done now. One is investment in Bitso, which we announced a few days ago. I’ve been a crypto denier. I don’t get it. I can’t predict if it’s gonna go up or down. But what I do know is crypto is a thing, and people want it. They want to store it, they want to trade it, they want to borrow against it, margin lending. I need it in my portfolio to hit my efficient frontier, and I wanna be able to move it across border.

So what we’ve done with Daniel Vogel at Bitso is that we’re gonna really lean in and help you build out traditional, if you like, banking products around this new asset class called Bitso. And a lot of what I’m doing working with him is how to scale his business and helping him do that. For me, it’s loads of learning about an asset class that I haven’t really grown up with, and using leveraging things that I have done for many, many years. The second thing that we just announced recently is a startup platform, an accelerator, if you like, in Mexico City called Fontes, which is Spanish for fountain.

We see in Mexico lots and lots of talent, but we don’t see the accelerators in Mexico. So we’re gonna put that together. And we’ve raised money from LPs, some of which we’ve mentioned already today in the conversation, and we’re gonna help start things out of the ground in Mexico.

Can I just say, look, so many of these conversations can be very dry and not terribly insightful? And what I’ve really enjoyed here is that we have a kind of sharing conversation about stuff that really matters. And if it’s of use to your listenership in any way, hey. I’m delighted.