Full Transcript

Darren [00:00:02]:
Hi everyone. Welcome back to another episode of One of one. I’m your host Darren Gold, CEO of the Trium Group. My guest today is Max Levchin, Co-Founder and CEO of Affirm. Many of you will be familiar with Max’s well known role in founding and building PayPal, one of the most iconic startup stories of the past quarter century. In this conversation, Max and I spend our entire time addressing the last 10 years of his career as CEO of Affirm, the now ubiquitous financial services company. Max shares some of the most unique and valuable lessons of building a founder led company. We cover topics ranging from how to lead product without actually managing the function to the importance of consistently and repeatedly finding a company’s next s curve. This is a must listen to episode for anyone interested in technology scaling startups or how to lead authentically. I trust you will get enormous value out of this incredible conversation. Max, thanks so much for being in this conversation. I’ve really been looking forward to it and looking forward to a really great conversation with you.

Max Levchin [00:01:07]:
Thank you. Happy to be here.

Darren [00:01:09]:
Yeah. So I know there’s been a lot said and spoken by you and others of your kind of history, particularly as co founder of PayPal. I think as I mentioned to you, I wanted to steer our conversation perhaps in a slightly different direction and that is the last decade or so of your life leading as founder and CEO of this incredible company. Affirm. And I thought we’d start with perhaps the. I’m guessing one of the motivations for founding the company was. Which is a pretty unique and compelling mission. And I was hoping you could bring our listeners into the mission of the company and a little bit of the origin story. What was it that led you to start this company?

Max Levchin [00:01:50]:
Sure. So right after PayPal I decided to buy a car which was going to be my flashy. I just took my company public. I could finally afford a nice pair of wheels or four wheels. And so I picked a convertible, found a dealer in LA that sold such convertibles, flew down to LA with my then girlfriend, now wife, showed up to the dealership and said, here I am, I’m gonna buy this here beautiful car. And the dealer said great, let me run your credit check. And he did and came back and said, I’m so sorry. In fact, I know who you are. I saw in the news that you guys took a company public and you’re the PayPal kid. But your credit is terrible. Your credit history has been ruined by something you did at some point. Because my rules basically tell me that unless you bring me a suitcase of Cash, I will not sell you this car. And so imagine 27 year old max being embarrassed with not just my girlfriend, but my friends, sort of all the, my little coterie of people who were there to witness my arrival as a newly self made man. And so I was sort of deep shade of purple as I was trying to figure out what it is that I did. And what I did is that I came to the US as a teenager, did not understand credit history or credit scoring, and started my first company two years later in college, which I financed from my credit cards. And that was great, until it wasn’t. And no one exactly told me about such things as minimum payments or being on time. And three months after my first company went bust, I got a fairly polite call from a collector telling me that I have a multi hundred dollar balance on one of my credit cards, which I think I got on campus. So it was very much the early adopter. And unless I pay, my bills reflect very poorly on my credit history. And at the time my bank account balance was about $19. And not only did I not have enough money to pay off my credit card bill, I was also certainly scrambling to start another company. And so I had very different plans for my personal financial decisions. And so the collector very politely told me that, well, eventually it’ll hit my FICO score and whatever that means, fast forward half a decade later, can’t buy a car. And that was okay. I eventually, obviously I was on that day independently wealthy and in fact found a digital equivalent of a suitcase of cash, bought the car, drove it home. But I had since become very interested in what was it exactly that I did so long ago. And obviously my second and third and fourth company did slightly better than the first one. I eventually paid off all my credit card bills and then some. I had never been late on a single bill since. But you know, fast forward another decade. I think I was turning 35 when one of my friends, as a prank, made my credit card not work at a restaurant that we went to, went out for a meal to. And the sort of purple face emotional horror of oh my God, not again was all too familiar. And not for a second that I think that that was not true. In fact, I thought, oh, of course my credit score is trash. It’s been this way for 20 years now. And that was sort of the second moment, you know, why does it have to be this way? Like I did just fine in life more than once. And that was the rabbit hole where I said, one day I’m going to build A credit score that will not suck for people that screwed up in college and want to buy a car or a TV or pay rent or get an apartment. And that’s where it started. And at this point, it’s a lot more than that. But the very, very beginning was just build a credit score that keeps up with how your life changes.

Darren [00:05:46]:
That’s a great story. And for those listeners that have been maybe sleeping under a rock and haven’t seen the now ubiquitous Affirm at point of sale, or you now have a debit card, can you tell us a little bit about. Okay, what did that translate into? What was the company that was built. And there’s something about injecting honesty into the financial services industry that I know was really important to you, and I’d love to hear about that as well, if you wouldn’t mind sharing.

Max Levchin [00:06:11]:
Yeah. So as we started, the company, which really was started as a let’s build a better credit score, was trying to write down criteria for what kind of a company would I want to run. And obviously, I’ve had my share of financial services. And one of the things that struck me about financial services all through my experiences there was just how amoral the entire industry is. It doesn’t really want you to fail, but it doesn’t mind if you’re late on a bill. It’ll just get some late fees out of you and it’ll be great. And if you revolve a little longer in a credit card, there’ll be more interest. And so this notion of we’re not really on your side, in fact, we’re making a bet that you will not fail, but you don’t necessarily have to do too well. Too many smart decisions financially, and we make less money. And so I wanted to do something the opposite way. And the original slogan for Affirm was honest finance. And then I decided that people don’t understand what that means, and I wrote down a mission statement to build honest financial products that improve lives. And from the very beginning, so this seemed awkward, I wrote it down, thought, that sounds good. I looked at it again the next day and thought, that’s really awkwardly written. But it was set in stone. And we’ve never changed a word of our mission sentence and never will. But the idea was, let’s build a company that provides financial services. Not just credit scores or loans, but anything and everything that would improve people’s lives without ever compromising our morality. And the sort of the spine of the company is do first and foremost the right thing by the end customer and then worry about profits and all the other things that financial industry puts first. And so as we did that, we actually struggled to get adoption for credit score. And people wouldn’t believe us. And by people, I mean the traditional financial players, like, well, no one will ever pay back your loans if you don’t charge late fees and so on and so forth. And that story is well documented elsewhere. But. But we basically bootstrapped ourselves by going to retailers initially very small and eventually very large like Amazon and Walmart and Target, et cetera, and said, we will add our logo to your checkout if you’ll let us. And we think there are enough people in the world that want honesty in their financial services that they will choose us over their existing credit cards. And the first 5,000 times people laughed at us and said credit cards are just fine. I would say, well, yes, but do you know how much you pay in interest or how often are you late? How much did you spend in late fees? You’ll be like, ah, yeah, you’re right, it is kind of annoying, isn’t it? And eventually we started getting some people giving us shots and inevitably the affirm impact was about 30% more volume. So as people saw that, there is this whole unspoken un unserved, underserved crowd of people, typically young, that would say, I just don’t want to use my credit card, I don’t know exactly what it’s going to cost me and I know there are hidden fees in there and Affirm doesn’t have any of those. This notion of honest financial products became more and more real and at this point we barely even talk about why Affirm, because it is everywhere. It is now on hundreds and hundreds of thousands of merchants that put our logo on mostly because everybody else did.

Darren [00:09:32]:
So we talk a lot about mission or purpose as kind of a motivator for people and a way to attract talent. But what I hear you saying is it’s actually been a source of real competitive advantage and been instrumental in the building of scaling of the company. Is that fair?

Max Levchin [00:09:48]:
Yes. But the talent attractor component of the mission is actually also very, very important. In fact, one of my bets very early on. So there’s sort of aside to the whole thing. So there’s a bunch of things in financial industry that are just awful and it’ll take up the entirety of this podcast to cover every one of these ideas that they’ve come up with. But some are truly awful and others are questionable. And so things like deferred interest are evil. There’s no one ever going to be able to convince me that it’s not. But late fees are an interesting one. So a late fee is this interesting bet that a bank or financial service provider makes with you. If you’re late, you’ll pay me, but if you’re not, you won’t. And so it’s a bet where you can win, and it’s an honest bet. If you’re really, really good at keeping calendar and nothing bad happens in your life or nothing too terrible financially, you will win the bet. The problem with a late fee is that the bank is betting against you. And this is a provider of service to you. Like, how often do you have service providers that are actively betting with you against you? And my theory became that if I explicitly said late fees are never going to be a part of our story, I’m going to find all the engineers and all the product managers and all the people that have had that same thought in their head going, wait a second, why am I working for a place that bets against its customers? And that became an explicit pitch where I would interview people and they’re like, wow, that’s a really brilliant engineer. Why are they considering financial services? And half the time they’re like, I wouldn’t work in a financial services, like, well, let me tell you why this one is different. So the differentiation of the mission became a great recruiting calling card where at some point I started reaching into financial services firms and telling them, like, you ought to be ashamed of yourself. You’re working for the financial firm that does this and this and this, and we don’t. And the very best people be like, you’re right, I’m going to put down my arms and join this army. And we’ve picked out some amazing people over the years, certainly very early years where we had no business hiring because we would pay less. And we’re not established and we’re, you know, not necessarily going to succeed at all, basically by saying, you’re doing this the wrong way, we’re going to do it the right way, and we’ll either fail, but we’ll feel great about how we did, or we’ll succeed, but. And then we’ll really feel great about what we’re doing.

Darren [00:12:12]:
I want to come back to this notion of placing bets, sometimes contrarian ones. And what I’m hearing is saying, developing real theories of competitive advantage. And I think we’ll circle back to this. But I want to, I want to go back to the founding of Affirm. I think if I, if I’m not mistaken, 2012, you’re one of four co founders. You step in formally at least to be CEO in 2014. And so you’ve had a decade now in a role of leading a company both at its inception, but to pretty considerable degrees of scale. And I wanted to dive into this 10 year period of your professional life and maybe start by asking a question of whether the arc of your career, your CEO experience has followed any sort of storyline or chapter segmentation. Because the needs of the business re its CEO must have changed right from 2014 to where you are today. Has it, has there some discernible kind of segmentation of your 10 years that you could share?

Max Levchin [00:13:18]:
I think these things are always easier to fit into a neat narrative retroactively. But in practice when you’re really close to it, it just both moves very quickly and very slowly. Like it’s when you don’t see someone for 10 years you realize how much they’ve changed. But if you live with them like, well, they’re kind of the same, like there’s not, not a lot going on. So I think in the earliest days a lot of what I had to do was selling. And I don’t just mean selling merchants, but selling future employees, selling our team on taken on some crazy new product idea that I would have because the product idea of yesterday didn’t work. So there’s a lot of persuading and that probably was the primary job. And in fact I sort of volunteered myself into being the CEO because I realized that there’s so much time spent selling. If I’m convincing myself that I’m not doing this as a full time job, I’m just lying to myself. And if I’m going to do anything as a full time job, I’m just going to have to be the chief executive. And fortunately my co founders did not protest. This was a reasonably welcome change. I think. As we grew and found success, I started focusing more and more on thinking than selling. I think that’s maybe the most honest narrative. As you do less and less with your hands and you do more and more with your head. The hand to hand combat becomes brain to brain combat. But spent a lot of time writing and throughout the history of Affirm I’ve written many more documents than I ever done before. And most of the time I think they’re just rehashes of my old documents where I start from scratch but inevitably, inevitably end up in the same place or same similar places. And those documents become sort of attempts at guidance for various teams doing various things and less and less of my hand to hand combat happens by my hands and becomes much more of a thing that the teams go out and do with hopefully a little bit of incremental strategy from all these essays that I write. But I’m buying time here because I don’t actually know exactly how my life has changed.

Darren [00:15:39]:
It’s all consuming, I imagine that hasn’t changed.

Max Levchin [00:15:42]:
Yeah, it’s entirely all consuming. The, I mean, there’s lots of things going public, for example, fundamentally modifies who you are as a chief executive. You go from timelines that you decide for yourself to timelines that quarterly schedules and shareholder reports and things like that decide for you. And you try very hard to avoid forcing things into a three month programs, but inevitably you end up with, well, if we have something to say, then this is the moment when everyone’s listening and you can tell yourself, well, it doesn’t matter. But the reality is the smartest people on Wall street, at least the ones you hope are the smartest people on Wall street, are listening to you right now. And so you inevitably start packaging your life in these three months increments to at least some degree. So I think that’s a tactical change, strategic ones. I’m not sure I could tell you. I think it’s all the same.

Darren [00:16:40]:
Well, there is this interesting phenomenon known as a senior leadership team that somehow all companies have some version of. Even if you’re, you know, really on an outlier and at some point it be. I imagine it became clear that you needed to assemble a team of senior leaders. I’d love to pull on that a little bit and just explore how that journey of leading a team of senior leaders has been for you and how you’ve evolved in your capacity to do that.

Max Levchin [00:17:06]:
That’s a great question. So I think again, every time I try to begin a sentence with well, we’re kind of unique or I’m kind of unique, I realize I’m certainly not. So first of all, let me preface it by saying I’m confident this is not the only company where these things went down this way. But at some point and at the.

Darren [00:17:23]:
Same time, Max, I think the whole premise of this show, and it’s something you know, I believe in strongly, is that like there is, there is an inherent uniqueness to the really effective CEOs. So, you know, the. What I know of you is there is a lot of truth to that and I’d love to bring it out as well. So feel free to highlight where you think you think differently or do things differently because I know that’s true.

Max Levchin [00:17:44]:
So I think initially I was primarily following my startup habits where I would have a fairly wide senior team with functional leaders that would be fairly narrow and deep. So you would have a head of capital markets and a head of finance and you would have head of engineering and a head of product and so on. And all these people would report to me. And I’d spent a lot of my time in one on ones and just figuring out how to connect the dots for them. And at some point I had realized that a couple of things. First of all, I realized that I’m probably always going to be a better leader than a manager. And I am not one of these people that thinks that management is a dirty word. And I actually think that there’s extraordinary talent involved in being a great driver of teams to deliver on their plans and stick to schedule and have really intelligent planning and foresight and trade offs and prioritization. Like all that stuff is really, really important. The larger you get, the more you recognize just how important that stuff is. Not because a small team can do it all better, it’s because the complexity of this changed and therefore everybody has to cope with it. Just goes up exponentially like that. That’s an N square function to where N is the number of teams involved. And if you have one team like one tiny little startup, n square of one is still one. But if you’re n squaring 100 teams, definitely looking at 10,000 little wrinkles that you’re going to have to deal with. And so people like that who know how to manage, process and be effective and convince tired executives and tired managers who have just replanned everything for the fifth time that the sixth time is the charm is unique and I do not have any of those skills. And when I realized that. But on the other hand, I can write a pretty good essay describing what the world looks like three years from now when we win whatever thing that we’re trying to win today. And the shorthand that I’ve come up with difference between managers and leaders is leaders get to repeat just what they want to say as often as they see fit. And managers get to repeat the very thing they do not want to say all the time. Sounds like a very similar job. But in reality the managers want is much harder and much more thankless. And so I’d recognized that and decided that from now on my job will be to lead extraordinary managers. And that means I need to find the very best people on my executive team to whom I could hand more and more teams, more and more responsibility for this extremely complex cross functional planning and delivery and deadlines and all the things that management really is, in a good sense of the word. So I ended up with a much, much, much narrower list of direct reports. At this point I have four people reporting to me, which is excluding obviously my executive assistant, et cetera, supporting roles. But in terms of senior leadership team, just four reports. And the honest truth of that group, which is pretty sort of, I think I consider my crowning achievement as a manager of manager, a leader of managers, is that I think if one day I decided to play musical chairs and rotate the roles between the four people, at least three of them could easily switch gears and be like, oh, I’m no longer the Chief Revenue Officer, I’m the chief Operating officer, no problem. Of course I know exactly what to do and so on for others. And I think if you have that, first of all, you obviously have a great succession plan because anyone can do anyone’s job, which is quite awesome. But two, you also have true generalist leaders sitting at the table, which means that no problem, no conversation naturally leads to anyone thinking this would be better without that person in the room. So you actually won the inputs of everyone and you have a true kind of a court of judgment where every opinion matters, everyone respects everybody, because everybody is enough of a generalist, and yet they have very specific functions that they are extraordinarily good at. Again, don’t know if this is a uniquely good or maybe a bad way of doing it, but that’s where we ended up. And I have to honestly say that I am by far the happiest leading this incarnation of the team that I have been in some time. And you’ve known me long enough to know this is actually a true statement.

Darren [00:22:24]:
Yes. And I imagine, and I probably know there’s some period of time where either this really valuable distinction that you’re articulating wasn’t yet crisp for you and or there was still some pressure to want to prove yourself as a manager or think that that was the role of the CEO. So like, what was the moment or how did you come about to be sort of what I would say, in the best sense of the word, unapologetic about this is what I’m good at. This is how I’m going to craft the way I lead and how my team is going to be structured to support that.

Max Levchin [00:22:59]:
It was definitely a process. I don’t think it was a. I didn’t wake up one morning and decide, you know, what here’s what life looks like from now on. I think one of the really important data points was so our president Lebor, who you know well, and I went to college together. So we’ve known each other for a very long time and we’ve worked together in the past as well. So we’ve seen many versions of Max and Liebor go to town together. And most often in the past, Libor led a fraction or the total of my technology team while I had other people reporting to me, this company and other companies. And at some point during Affirm, not even, not that recent, I sort of shoved product under Lieborg in this assumption that I just didn’t have time. And it probably, by the way, is the thing that, one, I think I’m good at. Two, I have a lot of very strong opinions whether I am good at it or not. I just think that the only way product’s going to work is the way I imagine it should and so on. And so this was a temporary thing where I parked product under him because I was busy fixing something else or something like that. And we’re close enough friends where I can tell him things like, grab this team and I’ll take it back. And that’s what I did half a year later. And it’s very clear to me that while it was under him, it performed better. And when I grabbed it back, it promptly went back to performing worse. It didn’t fall off a cliff, but it wasn’t better when I managed it directly. And so one, sending it back to Libra seemed like a good idea, but Two was trying to figure out why did I think it worked better under him. And it wasn’t because they were happier or, or I didn’t worry about them as much or had less influence. In fact, I influenced the product quality and the product direction at least as much, if not better, because I wasn’t worried about things like annual reviews and compensation, strategy and organizational chart and mapping to engineering and design, et cetera. So that was sort of the wake up moment. Like, you know, there are people who are really, really good at that. And if those people are on my side and they’re happy for me to set the strategy or at least the direction of the product, but manage the rest, that would be pretty amazing. I wouldn’t have to worry about annual reviews and compensation, which I am not good at, or not only am I not good at it, I also dread it, which is why I’m late, which is why people are unhappy when they don’t know where they Stand, all of that can be done by someone who enjoys it. And so I had that conversation with Leibor where I said, how about we make it permanent, you manage product. We have to be very clear that I’m still the chief product officer for this company, but so long as you and I are aligned, I don’t think we’ll ever have disagreements. And I don’t need to have these people report to me directly just to feel like I’m in charge of product. And so that part at the time seemed idiosyncratic. But I’ve now repeated this play with more than half the functions and it works beautifully, I don’t think. I’ve written an annual review of anyone in a couple of annuals, and my directs know exactly where they stand with me, and Lieber and the rest of the cast of characters continue to delight people that report to them with thorough and thoughtful reviews and really great management.

Darren [00:26:24]:
Yeah, I hear this a lot with founders who are product visionaries themselves and are stuck between either hiring a senior chief product officer or trying to manage the function themselves. And I think what you’re offering is a really unique, artful way of being effective. And I imagine it’s a lesson for other founders who are kind of similarly situated. But I’m also hearing you say that it extends beyond just product as well.

Max Levchin [00:26:51]:
Yeah, product was the first one. And by the way, I spend in terms of hours or minutes communicating, I probably spend the most of those relative to other executives with our head of product, Vishal, who reports to Leaver. And so he and I are in a daily conversation which mostly happens over text of some kind or another, but we also have lots of one on ones and he travels to hang out with me in person and vice versa. And so we have a deep and rich relationship. I’m confident his performance rating is really good, but I’m not the one who wrote it. The alternative is real and I quite enjoy it. And it is effective. Once I knew that it works, I had asked myself, where else can I find such savings? So it’s time back and more importantly, it’s work happiness for the person that I’m theoretically managing, but practically just trying to figure out how to survive. A the one on ones that are interesting are the ones about the work. The ones that are awful are the ones where I’m supposed to be helping them onboard a new exec of their own or find a way to reorganize their team. That again, I’m, you know, I’m pretty well usable in organizing an engineering team for a startup that was founded in in 1999. That’s my last experience leading an engineering team anyway. So I think that it works well. I’ve now been able to do that with even something as sensitive as people, which was the last one such team that I moved where traditionally I think the CEO must be deeply involved in people. But again it is a complex and management rich function and I realized that Michael, another one of my Swiss army knife, can do any job. Executives who’s our chief operating officer would actually do much better managing the function which would leave me with a rich and meaningful relationship with our head of people without the need to go super deep into org charts and compensation structures and instead actually focus on things like are we culturally consistent with what I’d set out to do 10 years ago or are we training our people well or do we have standards that are high enough where again I’m basically focusing on product of that function versus the function itself.

Darren [00:29:19]:
Yeah, I think this whole conversation is highlighting a bit of a broader phenomenon that I want to articulate and then have you react to, which is all aspects of CEO leadership I always advise are best done from the first principles basis. There’s always a desire to have the sense of like how is this done elsewhere? What are the best practices? And what I’ve increasingly found is particularly for founder led companies, that it has to be first principles, it has to be experimented with and you look at Bezos and Reed Hastings at Netflix and designed and it ultimately looks very unique to that particular individual in that particular company. Does is that, has that, does that ring true for you?

Max Levchin [00:30:02]:
It does. I think most of the time these experiments are products of necessity where you know you’re not happy and you are sloshing around. Well, it works like this at a company like that tells you a board member or an advisor or a mentor and you’re not really told, hey, you should just figure out what works for you. And you are. But it’s sort of comma, here’s a list of possible solutions. And maybe if I were talking to my six years ago self, seven years ago self, I’d say just like ask yourself honestly, what do you want to get rid of? And then say I’ve gotten rid of it and not in the function way or even anything but a very, very specific these lists of tasks are the things that I’m not going to do now solve for, they still have to get done, someone has to do them. How can you create an environment where these tasks are accomplished but it isn’t your responsibility and then fill out the time with the tasks that you are good at and love doing and don’t mind sinking all available time and then some into. And so that’s maybe a less artful way of repeating what you said.

Darren [00:31:22]:
So I want to keep going on this sort of founder path a bit. In some ways, you’re the kind of quintessential founder CEO in your unique ways, which is kind of quintessential founder CEO. If you spend time talking with anybody at Affirm, what they will tell you is that this is a, this is distinctively Max’s company. And I, and I say that in again, in the best sense of that phrase, which it has your fingerprints on it. You, at least, as it occurs to other people, aren’t. Don’t apologize for the kind of culture and the kind of standards and the company that you want to build. And it’s a very clear sort of invitation to opt in or opt out. First, I just love your reaction. Is that accurate? And second, like, you know, for those of you I’m imagining like a founder two years in, maybe questioning their, their opportunity to be that bold seeking sort of counsel, what would you say with respect to that?

Max Levchin [00:32:21]:
I think it is. I hope it is. I think the only advantage you have as a founder at the limit anyway is sort of a carte blanche to make decisions about how the company’s going to go about doing its work. There’s not a whole lot more you have beyond what everybody else has. And so I think it’s very important to be crisp about what it is that you are and you’re not apologizing for what you are and not changing it is the ultimate lunacy. So fortunately we don’t do a whole lot of that. But it is. And I don’t think I’ve ever sort of said, hey, it’s an invitation to opt in or opt out. But I am fairly clear that we are who we are. We’re not going to change our ways in either direction. We will never charge deferred interest or late fees. It’s not in the cards. And in the old days I was probably slightly harder edged than I am now. I would tell people that you can ask me about charging deferred interest or late fees once and I’ll give you a very good explanation why this is not part of the strategy. If you ask me a second time and you don’t offer a reason for why you want an answer to this question, done again, I will fire you. And it’s a fireable offense to ask the same question twice if it’s that question. And it was sort of like a. A bit of an apocryphal tale until I fired someone for asking this question second time without a real good explanation why they wanted to reopen the conversation. And that sort of sent the shockwaves. And people were like, whoa, this guy’s crazy. And like, well, I am. But then again, it’s in the mission of the company. We’re not going to do these things. What are you doing? And the question, of course, the full story goes something like this. The person said, well, I thought about it and you’re really, really good at pretending that this is that kind of company, but we all know it can’t be. Like, all right, I’m actually not pretending, but I know you are, and that I didn’t fire the person. I told him, I think you’re fundamentally in the wrong place. You actually should go back to banking where you came from anyway. So, yes, we don’t apologize for certain kinds of behaviors and we feel very proud of them. There’s very little downside to being who you are. You will eventually be found out if you’re not anyway. So the upside of being who you are is perhaps limited to just whatever mistakes you have in your strategy. But the downside is near infinite. Like the day your team tells you you lied to us is the day they start walking out, either actually or in their heads.

Darren [00:34:53]:
Where is the line, though? And is there a line between, you know, using that as a license to not be introspective, not be curious, not be open, not be willing to look at yourself, to grow? How do you reconcile the two?

Max Levchin [00:35:07]:
That’s why the semi apocryphal tale has the very important caveat. If you come up with a new argument why something that we have nailed to the proverbial mast should be reexamined. You will never get any kind of trouble. So I always, always preface any one of my we will never do X or Y with a unless someone here has a really, really good argument, why not? The world changes, we better change with it. And there’s no such thing as dogma in business. You’d be an idiot to believe that everything is today the same way it was yesterday. But you can’t change it based on some things, and you must change it based on others. That requires analysis and being thoughtful. There’s no limit. In fact, one of my areas for improvement is certainly, if given an opportunity, I’ll self analyze and just overanalyze for as long as the time permits and then some like I’ll run out of the clock on any chess game just it doesn’t matter how long and sometimes you just have to act so that that too is a is a guardrail but without self analysis dogma will get you into a bad place. So don’t do not mistake steely spine approach to doing business with dogmatic well I’ve already decided and so we’re just going to believe that the sky is green sky is different color every day.

Darren [00:36:42]:
You mentioned chess and I want to pull back that thread that I said we might return to and that CEO is strategist I find far too few CEOs actually engaging in the real questions of true competitive advantage. I’d love to hear you talk a lot about AN S curves 3 years, 5 years, 10 years ahead how important that aspect of your role is and bring that to life a little bit.

Max Levchin [00:37:06]:
Definitely what I consider to be my job quote unquote. I think in the I forgot who told me this, but this is a not my idea but when I was somewhat younger someone told me that the job of the CEO is threefold. You set the three year strategy so you sort of figure out what it is you’re going to be when you have a little bit of traction because it takes a few years to get to real traction. You hire the best team to execute that strategy and you raise enough money so you don’t run out of cash between the time you have your team and you have your strategy actually working. And I think it works really well for the first probably five years of any sort of a successful or semi successful startup. And then at some point it works and you have something resembling an S curve because life’s not worth burning midnight oil if you’re not building a thing that has an S curve shape to it. Like if you’re just growing linearly, you should take full weekends off and as you’re watching your S curve go up, you realize that it’s not forever. You will run out of free growth at some point and the question becomes or the fourth leg of the stool of what’s the CEO’s job is inevitably well, where is that next rocket booster? Where’s the next S curve going to come from? The growth that points to the sky is addictive. You actually want to see more of it. And as you raise money, as you hire the team, all the people you’re selling on, why this is the place to spend the next X years of their life on your telling them it’s going to go to the moon, it’s going to go up. Like, look, this is a rocket ship and you’re getting the seat as an investor, as an employee, whatever. And if you’re not thinking, yeah, but I know that the rocket ship will run out of fuel at some point. The S curve has that top part that bends to a flat and sometimes doesn’t stay that way, sometimes starts declining. You have to spend a considerable amount of time just asking the question, where’s the next fuel tank or the next rocket booster or the next rocket going to come from? And it sounds like, okay, well, you thought of one, going to think of another. But most entrepreneurs think of one in their lifetime. And you have to be very, very deliberate about asking that question and putting yourself on a deadline. Because if you tell yourself, well, right now I got to make sure the site’s up and hire my next head of engineering and all the things that are tactical today, you’ll look at the S curve and you’ll realize that you’re at that upper bend or worse. And restarting the rocket as it’s falling down is much more expensive than just strapping on another booster. And so that’s sort of something that I was aware of from the very beginning and did a decent job finding time every year. So my typical time for reflection for what’s the next S curve going to look like? Where is it going to come from? Is around this time of the year, actually mid December. As the world starts shutting down, I try to find time to be somewhere where I’m not always exposed to pings of my various communication devices and messengers and try to write a story of Affirm three years from now, five years from now. There’s more to what does that look like? The most important thing is probably what some people call right to win. And the business school term is synergies. It’s not enough to come up with another rocket booster if it doesn’t fit your rocket, it has to be propelling in the same direction. Or because of what you have today, what you’re dreaming up for tomorrow is easier. If you are doing really well with your financial services company and your next best idea is a T shirt store, you’re not going to do better than anyone else launching a T shirt store. And that may be the best idea you have, and you have to contend with that, but you’re far better off saying, okay, that’s a fine idea. T shirts, we really can do some great work here. What can we do as a financial services company? One with a mission, one with a very specific set of core values that just accelerates us towards that mission and where we have a right to win from day zero, not in a three year cycle to get to that S curve. How do we skip the lower elbow of the S curve where it looks flat and you just hope it bends up a little bit. And that takes years. The average time to an S curve is three years. Just as so if you’re not thinking about the one three years from now, you’re already late. And if there’s one thing that keeps me up at night, it’s have I thought up enough of these things for the next three, five, seven years? Because you know, not all of them are going to work anyway like you will have, you know, best late plans are only going to work half the time. And if you’re, that’s. If you’re really, really good. So those are all meta points of how to do this, what it looks like for us. You’ve seen some of these essays. They’re mostly random Madman.

Darren [00:42:04]:
The Genius comes through. I think you answered my next question and maybe a question to sort of bring us home a little bit, but I’m going to ask it anyway. To the extent there are other lessons learned, other pieces of advice, and it can be to frankly, anyone that might be interested in listening to this conversation. But I’m again picturing that, you know, founder two years into their journey who may not have the the privilege of speaking to you directly other than you better be thinking about your next S curve at least three years in advance or you’re too late. Other lessons you’ve learned that you would want to impart to somebody similarly situated, but 10 years early.

Max Levchin [00:42:46]:
If you search the web for lessons learned Max Luftchin, you’ll find on some question and answer site. Years ago someone asked me this question and I decided to write it down and I was still writing it down several hours in. So it’s like a short booklet of pithy sayings from Max Levchin and lessons learned. Now it’s all primarily from PayPal years, so I have not yet bothered of updating it to the affirmed lessons which are both more relevant and more timely. So I’ll do my best to package a few up right now. You cannot compromise on integrity or excellence. The few times that I’ve seen people try, it just really, really backfires. And it’s never that you wake up one morning and say today’s gonna be the day I’m gonna compromise my integrity or excellence that I demand from myself and my team, it’s always in the moment or like, well, it doesn’t seem that bad. It is that bad. And it’s just a thing to be aware of. And it’s a thing where your team in the moment might find you annoying, but at the limit will appreciate you significantly more than the other way around. Time moves in variable ways. It’s a really important thing I learned over the years, where you can be in an extreme rush and also in a very, very slow moving river, currently, certainly consecutively. And a lot of the choices you make, especially inside that sort of middle inning where you’re no longer just trying to survive, but you’re not yet profitable and stable and growing at a good but not frenetic pace. That middle area is actually very, very difficult. And in fact, when I was sort of listening to my various mentors during that time, that’s when I felt most unsure if I’m qualified to run this company. Because they all told me that the most common failure mode they’ve seen is the move from 10 million in revenue, 100 million in revenue, to a billion in revenue. Like that, adding a zero and making a revenue with a B is just a different beast. And everyone I talked to gave me permission to find someone more experienced or professional. Of course, that obviously egged me on to do exactly the opposite. But none of these people were trying to tell me, you’re not doing so good, so maybe leave the wheel to someone else. But they were definitely very clear that this is not a thing that you naturally are great at. Going from 100 million in revenue to a billion in revenue was not an easy thing and it required a lot of organizational changes and things like that. But as you go through that, you find that your collection of stressors and most important decisions of type X, where X can be anything from raising another round of financing or waiting like you’re not, you know, unless you’re really bad, you’re not going to be in the oh, we’re going to run out of money situation by year six or seven. You know, you can. I mean, bad things happen to good people, but if you’re doing a reasonably decent job, you by then have kind of figured out the fundraising cadence or you’re maybe getting close to profitability, but you still need to raise money. And so you have tactical and strategic decisions around, well, what’s good for dilution and valuation, management and all that good stuff. And who do I really want on my cap table and when can I sort of what time of the year Is it? And as you do that, you may have like a real scalability issue in engineering and everybody’s running around like chickens with their heads cut off trying to scale the site, you know, whatever that means to your business. If you’re confused about which decision is tactical, which decision is strategic, and sometimes they’re both. So therefore the analysis becomes which timeline am I traveling on? Is this the one that’s moving so quickly that if I miss a blink I’m in real trouble? Or is this the one where I can actually move at the pace that it moves on its own and I don’t need to rush it? Being able to operate in those modes concurrently is a skill that nobody teaches you. But when you realize which one of the streams you’re in and you act accordingly, you end up in some. You find time where you didn’t have, where you didn’t think you have any. I don’t know. That was a particularly well elucidated. But that was one of the more subtle things that I thought I learned at some point where I would say I have 50 different things that are stressing me out. I would say I’m going to write them all down. 10 will still be here next month and next year and there’s nothing I can do about it and therefore I should do nothing about it. I have 40 things that are stressing me out much easier today, 20% off. So that’s probably an important one that’s slightly hard to explain.

Darren [00:47:29]:
And being right about it, it’s a fun thing to discern. You have to be right, at least to some large measure.

Max Levchin [00:47:36]:
It is true. The other thing, actually I was going to start there, Paul, but I’ll finish there. It is annoyingly true that being really smart and surrounding yourself with really smart people is not a thing you can compromise on. And there’s a lot of people who are very smart, who are not kind. There are a lot of people who are very smart who are obnoxious and so on and so forth. And I have no recipe or advice to offer. And I’m confident that when people list me, hopefully they say he’s pretty smart. But I’m sure there’s. But he’s blank. And I will live happily not knowing exactly what they say. But as you make the list of people you want to surround yourself with smart and potentially a trade off is reality of life. And you have to, if you’re a great manager, which I’m not, you help those people get better. And if you’re a good leader, you try to surround yourself with people who are naturally kind and, and nice and friendly. But to know which of the 40, 50 stressors are to postpone, you have to have some very, very intelligent people around you. And that’s potentially a difficult to achieve, but a very real unlock.

Darren [00:48:50]:
So as we wrap things up here, anything that you want to add or even revisit and summarize before we close out that we haven’t covered?

Max Levchin [00:49:00]:
The other thing I learned over the years, maybe the most important thing I learned, which I’m very much a work in progress, being a clear communicator is significantly undervalued. And I will spend all available time these days watching TED talks and courses online about effective communication. And I’m confident even this talk could be edited down to one tenth its size for clarity, but it is unrehearsed. But learning how to be a great communicator is a difference between doing really, really well and just doing well enough.

Darren [00:49:41]:
I think you may be your harshest critic, and I would say the last 50 minutes have been, if not a masterclass, a really great example of phenomenal communication. We covered a ton of ground, all of it extremely valuable. I just want to thank you for the. The gift of, of sharing all of that and being with me in the conversation. Max, thank you.

Max Levchin [00:50:01]:
Thank you for humoring me.

Darren [00:50:11]:
I think I lost count of the number of hugely valuable and distinctive lessons, principles, and practices Max offered. I hope you took copious notes or plan to listen again. I know I will. And I look forward to being with you on the next episode of one of One. Until then, I hope you live and lead with courage, wisdom, and above all, with love.

One of One is produced by Erica Gerard and Podkit Productions. Music by John LaSala.