00:00welcome to the a 16z podcast today we're
00:03having another of our hallway style
00:04conversations these episodes are based
00:06on videos that are also available on our
00:08YouTube channel at youtube.com slash c /
00:12how can a payments startup succeed in an
00:15industry dominated by few well-known
00:16incumbents and what obstacles might
00:19encounter along the way a 16 Z turtle
00:21partner Alex rampell and Terry Angeles
00:23SVP of commerce solutions at Visa
00:26discuss these questions and others in
00:28this free-flowing conversation about the
00:30future of payments and their time as
00:31cofounders of payments company trial pay
00:34I'm Alex rampell I'm a General Partner
00:36here at in recent Horowitz where I
00:38mainly cover things FinTech or financial
00:40technology and I'm here with Terry
00:42Angeles who is the SVP of commerce
00:46solutions at visa but I know him better
00:48as my co-founder at trial pay which we
00:51started so if today is April 24th 2018 I
00:54believe we incorporated trial pay in
00:56April of 2006 so I have no need for 12
00:59years that's right nice to be here great
01:02so given that that intro can you think
01:07back does your memory go far enough can
01:09you and your random access memory go
01:10back to 2006 and maybe see how we met
01:14yeah it was kind of a strange trip for
01:17me I had I was I just finished up at
01:21business school and had gone back to
01:24South Africa I was working on some
01:26projects there and had flown back to
01:29Boston actually having some discussions
01:33with him on Tunisia and General Catalyst
01:35and happened to connect with Chris Dixon
01:40Chris at the time was working on an
01:44interesting company was recruiting folks
01:47and and was sort of chatting with me
01:52about whether that might be a
01:53possibility and at the time I said you
01:55know everyone to start something and he
01:57said well yeah you're kind of he didn't
02:01quite use the word idiot but you're you
02:02really should be saying you shouldn't be
02:04saying no to me but there's this other
02:06not quite idiot who also I've been
02:09trying to recruit and has said no this
02:12guy Alex rampell and you
02:13should-should talk and I think we
02:15chatted on a Friday night and and and I
02:22was in New York at the time flying back
02:24to Johannesburg on Sunday and after our
02:27conversation I'm not quite sure what we
02:29talked about but I got in a plane flew
02:33the next day canceled my international
02:37flight and somehow met you in the office
02:41right by the San Jose Airport yeah that
02:44my recollection from my perspective is
02:46who would be crazy enough so I told you
02:48what I was doing which was this idea of
02:51offer based payments called trial pay or
02:54tentatively called trial pay I think he
02:56didn't like the name and you're like oh
02:59I'm going back to Johannesburg on Sunday
03:01interesting idea and then you're like no
03:02no actually I'm gonna cancel that flight
03:03and come to California because I like
03:05this so much I have to meet you and then
03:07I think we we met at that that terrible
03:09bagel restaurant right right near the
03:11San Jose Airport I think was called like
03:12bagel or Rama or bagel bagel house and
03:16that's that's how things started and
03:18then it was a shotgun wedding thereafter
03:20because the other thing is you being a
03:22foreign national like okay this is very
03:24interesting and like we kind of talked
03:25about how we might work together but the
03:27green card not the green card the h-1b
03:30visa application deadline is in like ten
03:33days so if we're gonna do this we
03:35basically have to do this and then
03:37applied for your visa with my then
03:39little shareware company rampell
03:41software our software and you got your
03:43visa approved you were one of the
03:45because you had a master's degree so it
03:46was a little bit easier to get your h-1b
03:48under that and then you moved out here
03:51with your then girlfriend now wife and
03:53then I remember we we we met for dinner
03:56at some Vietnamese restaurant in in
03:59Mountain View actually I think the first
04:01time I met was at the shareware
04:02conference in Orlando oh that's chicken
04:04time a second time yeah yeah and I do
04:07think I mean you know I'm sure as a
04:10General Partner here you don't have the
04:12luxury of procrastinating but in those
04:14days I think the Alex I knew would have
04:17procrastinated a lot more on starting
04:20the company so guess we have the h-1b
04:22deadlines to thank for
04:26you know deciding whether or not to move
04:28forward with a co-founder exactly
04:31well maybe we should talk a little bit
04:33about the evolution of trial pad because
04:35if you think about where it is today I
04:37mean now you run a big chunk of commerce
04:39type stuff at visa this all started from
04:42like the shareware Conference in 2006 so
04:46the first iteration of trial pay was
04:49this idea of particularly for
04:51downloadable software applications you
04:53don't want to pay for X but you will pay
04:55for Y and I'm just trying to think
04:59what's the best way to explain to our
05:00audience here like all the different
05:01trials and tribulations that we went
05:03through but you know maybe how that was
05:06the first model of trial play I mean we
05:08never really changed what we did but we
05:10had to evolve with the time so any any
05:12interesting stories that you want to
05:13talk about yeah I mean I think what what
05:17was appealing about trial pay and was
05:18the thread that continued through trial
05:21pay and Yub and a few of the other
05:23iterations of the company was this
05:26really big idea that you had payments is
05:29usually a two-party transaction and we
05:31were adding a third party into that
05:33transaction in a way that was beneficial
05:36for all three parties I think the
05:39challenge was to find an ecosystem where
05:41a three or multi-party transaction that
05:44occurred and so downloadable shareware
05:47software was a really good use case and
05:51I think we were you know fortunate that
05:55we that used to you know you knew that
05:57market and we were able to establish a
05:59beachhead I think our challenge was
06:02finding similar markets and so gaming
06:05was one that emerged where I think we
06:08established ourselves in that market the
06:12challenges with these markets is that
06:13they developed very very quickly and so
06:16you know I think back on some of our you
06:19know to tougher times a trial pay was
06:22where we had a very good solution for an
06:24ecosystem and in that ecosystem suddenly
06:27changed and for us there were a couple
06:29of step functions one was Facebook and
06:32Facebook applications you know
06:35completely changed gaming into the
06:37social gaming becaming much bigger
06:40of the gaming ecosystem and then mobile
06:44and both of those step functions had
06:46impacts on us no yeah I remember it as
06:49you know so he had downloadable Windows
06:51and Mac software primarily Windows and
06:53that was kind of going like this and
06:55then it fell off a cliff and then as we
06:57were falling down that cliff then social
06:59gaming was taking off the Zynga's of the
07:02world on Facebook and then that fell
07:04down the cliff and then we had mobile
07:06and then we well we actually did a
07:09couple things we kind of sold the
07:10company a couple times I guess he could
07:11think of it but we spun off he up so
07:15maybe it would be interesting to tell
07:16that story and then we eventually sold
07:20the company to visa but the way that
07:22that happened was a little bit more of
07:24you know thinking about this as not so
07:27much an offer wall which was kind of the
07:29the concept that was popularized for
07:31social gaming but really transactional
07:34advertising so I don't know if it would
07:36be I just thought it was I have a lot of
07:39respect for founders me and Lee because
07:42that's kind of what we had to do a
07:43little bit which is alright you have to
07:45keep applying like you don't really
07:47change what you're not pivoting the
07:48company you're kind of pivoting into a
07:50different market where the durability of
07:52the company is higher and I kind of
07:55think about that is that that was what
07:58we had to do a couple times shifting
08:00from this downloadable software to
08:02social gaming to mobile but also
08:07recognizing some of the inherent
08:08weaknesses like you know we were a
08:10payments company but we were also an ad
08:12tech company all right so I don't know
08:14if recounts some war stories for me yeah
08:18I mean I think probably one of the
08:19hardest things that we had to do was
08:23navigate those 2's curves right so you
08:29know startups are difficult I mean
08:30finding product market fit is a really
08:32challenging thing to do when you find it
08:35and you're successful and you build a
08:39business and a product around a market
08:42that's growing that's an incredible
08:43feeling but when that s-curve starts to
08:49flatten out you know this is the hard
08:51part you don't have to find a new
08:54and that was very difficult to do you
08:56almost have to run at kind of two clock
08:59speeds and so the hardest thing I think
09:00we did was make the decision eventually
09:04to really create a start-up inside of
09:09trial pit and and and that was a way of
09:13us maximizing what we were doing on our
09:16on our existing business navigating that
09:19s code while creating something
09:21completely new and it was difficult and
09:23we had to have you know we had to have
09:25separate teams but a motivate people
09:28separately startups are difficult
09:30creating a start-up inside of a you know
09:33eight year old company six year old
09:36company is really difficult and I think
09:38that created a lot of you know sort of
09:42angst and pressure around how we would
09:45create two separate teams structure that
09:48you know Quinn Smith our general counsel
09:51and and you know all-around advisor on
09:56all things difficult and strategy I
09:59think pushed us in that direction and
10:02that was a hard decision to actually
10:04split the company in the end we did
10:06something kind of crazy we we took two
10:09separate teams separated them had
10:12different identities split the company
10:14and then actually found separate offices
10:17about a block from each other and the
10:20thinking there was the only way to
10:22really get a start-up working is to have
10:24two separate environments um I think
10:27that was the right decision and a very
10:29hard way and of course our
10:30responsibilities changed and we had to
10:34figure that out so those are all hard
10:37things that I think we had to navigate
10:41and you're saying was a hard thing about
10:43a hard thing it's definitely hard well
10:46let's see yeah my recollection on this
10:48because now you know I see startups all
10:50the time that are going through hard
10:52times and one of the things that we do
10:55me just to explain to people what we
10:57ended up doing you know trial pay was an
10:59offer based payments platform so we said
11:02you know you get your Zynga game for
11:05free when we were doing Facebook game
11:07position if you go sign up for Netflix
11:09and we had this nice idea that most of
11:13Commerce happens offline and people sign
11:17up for Netflix once every while they
11:18shop at Gap com every once in a while
11:21but they spend most of their disposable
11:23income offline wouldn't it be great if
11:25we could have offline offers and say you
11:28get your Zynga game or you get your
11:31Angry Bird Mighty Eagle for free if you
11:34do some offline element of shopping but
11:36how do we know if that offline element
11:38of shopping actually happened what
11:40wouldn't it be great if we could use
11:41credit card data to close the loop on
11:43that and then how do we do that it
11:46didn't exist so we built that within
11:47trial pay but then it wouldn't have been
11:50successful just purely within travel pay
11:53because in order for this concept to
11:55really reach critical scale it had to be
11:57independent and then it also had this
11:59nice benefit that this was my
12:01recollection of it which was as an eight
12:03year old company that was no longer
12:06going up into the right it's not like we
12:08were going down into the right but we
12:10weren't growing as quickly as we were
12:12you know the hard thing was in in
12:15Silicon Valley which is uber competitive
12:16how do you keep and retain and attract
12:19the best talent when you're no longer
12:22growing four hundred percent
12:23year-over-year so one of the nice things
12:25about splitting Yub which I have my
12:27t-shirt from yaagh was really a t-shirt
12:29production company I think I have 20 of
12:31these but one of the nice things about
12:32splitting Yub from trial pay is that we
12:35were able to take people like the some
12:37of the people that see at a trial pay
12:38Inc were the people that wanted more
12:41management responsibility and wanted to
12:43work in a in a different kind of company
12:45than people that said oh here's
12:46something that doesn't have product
12:47market fit it's a series a start-up
12:49because we basically birthday series a
12:51startup from series D trial pesos series
12:55a start-up was Yub it was an interesting
12:56idea didn't have product market fit it
12:58could be big but it didn't really belong
13:00in kind of steady as she goes trial pay
13:03and I think that actually that work to
13:05the benefit of both because otherwise we
13:06would have had this great idea of Yub
13:08locked within trial pay and the other
13:11nice thing was that from a from a cash
13:13perspective because you know startups
13:15are consuming cash just like you know
13:17human beings consume oxygen we were able
13:21really lower the costs of trial pay
13:22significantly because we put 25 people
13:24into young or the the young marine we
13:27put 25 people into young we had the rest
13:30of people at trial pay and that was kind
13:32of a nice way of dealing with a seismic
13:35shift to our business because we lowered
13:37our cost structure a trial pay we
13:38allowed trial pay to focus more we
13:39weren't doing ten things we were doing
13:41one thing and then a lot of the new
13:43stuff we kind of moved over to you and
13:45this was this online to offline Network
13:48yeah yeah I think as hard as it was I
13:50think some of the things that worked
13:52surprisingly well was you know the
13:56benefits of focus were just tremendous
13:58it's it's you know you think you can
14:02manage two different speeds and and
14:06you're aware of them but when you
14:07actually focus it's amazing how much
14:10better you are at each of those
14:11individual items that was a big thing
14:14that was a that worked out better than
14:17expected and I think people
14:18self-selected better yeah you know we
14:21had a set of folks who just were very
14:25excited to grow the trial pay business
14:28and were you know I think you know felt
14:32that we were invested over investing in
14:33this new thing that was highly risky and
14:36so once you know those folks could then
14:39focus on building something much bigger
14:40and other folks who really just wanted
14:42to have another swing at something you
14:45know that had a much higher beta so
14:47those two things I think worked much
14:50better than expected you know I think
14:53there was as our founding team had a
14:58good relationship yourself Eddie myself
15:01were able to ship responsibilities in a
15:03way that I think was in hindsight you
15:05know quite risky but that worked out so
15:09you know overall probably worked out
15:12better than we had expected at the time
15:15given how much viewers sort of concerned
15:17about it well I kind of think there are
15:18three ways of compensating people
15:21there's especially in Silicon Valley
15:23there is cash which is well-known that's
15:26kind of what drives most labor markets
15:28there's equity and then there's
15:30responsibility and then there's t-shirts
15:31and then there's t-shirts which is kind
15:33of a form it's all it's combination
15:34all three but the nice thing about what
15:37we did with trial pain yup it's kind of
15:39funny like after we did this and then we
15:41saw you base fun out PayPal and then HP
15:43and HP II separated so I like to think
15:45we began this trend right but I think
15:47one of the things that was very very
15:48interesting is that it is that self
15:50selection on responsibility because in
15:53some cases like it's a it's a trade-off
15:55because if you want more responsibility
15:57maybe you do join a start-up like a very
16:00very early-stage startup and what does
16:02that mean that normally entails less
16:04cash more equity more responsibility and
16:07those those three bar charts if you will
16:09they do self adjust based on the stage
16:13of company that you go to and a trowel
16:15pay we got people that the people that
16:17see it because this was a big concern
16:19that we had when we did split the
16:20company is that when people say that
16:22those that were like was yup the good
16:24company at trial paid a bad company or
16:26vice-versa and we try to do it in a way
16:28where people's self-selected and people
16:30that were excited about the new thing
16:32actually taking less compensation more
16:36equity different types of responsibility
16:39not management responsibility because
16:40you don't need managers at a very very
16:43small company but you need a lot more
16:45management at a larger company and that
16:47I think that was one of the things that
16:48really helped us get through a
16:49challenging time on that it wasn't quite
16:52an s-curve because normally the S curve
16:54goes like this we we started going like
16:57our s-curve what I'm trying to think of
16:59the the shape of that letter it's
17:00probably not in in a Latin alphabet but
17:03it it started going like this for each
17:05one of those so I have my own set of
17:07answers on this one but were there any
17:08times that you were absolutely paralyzed
17:11with fear that that we were about to
17:12fail and I think failure for us you know
17:18we were fortunate that we had we had a
17:21business that produced revenue and cash
17:23and we had cash in the bank there were
17:29some times when I think we should have
17:32came close to you know came close to you
17:38know pushing the limits on that but I
17:40think failure for me personally was more
17:42where we're gonna be able to become the
17:45kind of company that we'd set out to
17:47and I think that's maybe less of an
17:50urgent you know pay the bills type
17:52failure and much more how are we going
17:54to realize a vision that we've had for a
17:58long time and and that was part of I
18:01think our story was we're always very
18:05innovative and and and had built an
18:08incredible product and the question was
18:11how did we you know how do we get that
18:14into the hands of you know millions of
18:16millions of you know of consumers I know
18:19what's what's you're about to fail I
18:23seem to recall about 50 but I think my
18:26my biggest concern I mean if you
18:28remember this when we were going into
18:29social gaming at least I remember it
18:32this way I was opposed to it and I
18:36wasn't opposed to it but I thought that
18:38the quality so like the key thing behind
18:40our business model actually working is
18:42that if we we were doing something
18:44called incentive marketing so as opposed
18:48to like you drive down 101 you see a bat
18:50you see a big billboard and it says
18:52Netflix is great and then you're like
18:53okay I remember that maybe next week
18:55I'll go sign up for Netflix we said
18:57you're on Fandango comm you want a movie
19:00ticket click here to get the movie
19:02ticket for free if you sign up for
19:04Netflix right now when we track that
19:06whole transaction end to end and that
19:08worked okay because if you take the Fen
19:09dango case like you're in the market for
19:12a movie ticket that means you probably
19:14might like netflix you would think
19:16especially in 2006 when netflix didn't
19:19have 100 million plus paying customers
19:20we were a big chunk of that but we
19:23helped them get there I would say they
19:24were almost 10% of their signups at one
19:27point yeah yeah we were their biggest
19:28channel by far so this worked really
19:31well because this was incentive
19:33marketing we're saying we're going to
19:34give you something if you go engage with
19:37an advertiser and that worked well from
19:39a one-to-one perspective it didn't work
19:41well or it had downsides if we said okay
19:44every time you go engage with an
19:45advertiser you get 10 coins and you're
19:48addicted to coins so you would get
19:51people you'd have a wall of all these
19:53offers not one-to-one and I just I had
19:55grave doubts around like okay we can do
19:58this and we kind of need to do it
20:01businesses is falling apart I'm not
20:03falling apart just like people used to
20:05download software from things like
20:07in 2006 and then there was this seismic
20:10shift where like everything kind of went
20:12to cloud and web and then there was
20:14another seismic shift where things went
20:16to mobile but like neither of those
20:17really existed when we started the
20:19company in 2006 so social gaming was
20:22kind of this next wave and it was kind
20:24of I looked at it as a damned if we do
20:25damned if we don't because if we don't
20:27do it then our shareware business is
20:30going to just Teeter down into a
20:31relevancy so we can't do that if we do
20:34do it then the quality of customers that
20:37we're sending to advertisers like
20:39Netflix and just to put it in context
20:41like if we send somebody that Netflix
20:42they they sign up they get their 5
20:45thousand coins in Farmville
20:46and then they cancel Netflix like 5
20:48seconds later like why would Netflix pay
20:50us for that and the chance of that for
20:52business model 1.0 or like kind of
20:54market 1.0 it was very very small the
20:57chance of that for model 2.0 or market
21:002.0 which was social gaming was
21:02astronomical and we had this problem but
21:05all of our competitors had it and it was
21:07this it eventually became this tragedy
21:10of the commons issue where some of our
21:12competitors they didn't care about this
21:14at all I cared about this a lot because
21:16I just thought it went to the
21:17sustainability of the models so we would
21:18have the the revenue equivalent of
21:20fool's gold where we would grow
21:22tremendously but a like with social
21:25gaming last and then B even if it did if
21:28we're sending very very bad quality
21:30customers to advertiser is like is there
21:32going to be anything in it for us and
21:34then C which was almost more
21:36disconcerting is was there any was there
21:39any defense ability to the business
21:40because if we were sending people to
21:42Netflix and gap and a hundred other
21:45advertisers and so did other competitors
21:48like how many of them do we have for the
21:50I mean had like a hundred I think the
21:51analogy that we talked about a lot was
21:53the notion of brown water right so we
21:55had this we had this sort of you know
21:57high quality and this is one of our
22:00probably most discussed principles which
22:03was you know how much do we focus on the
22:06quality of the customers that were
22:08saying this is an area I think where we
22:10probably disagreed a little bit and I
22:15for all your perspective was probably
22:20more durable but created a few problems
22:22which was we have to have super high
22:24quality leads right of course if we're
22:27just a channel of water this super clean
22:29water and competitors don't have the
22:33same you know sort of they have their
22:38water isn't as clean ultimately it often
22:40gets combined and so just becomes as
22:43Brownwood and that was our debate was
22:45you know just are we getting perfectly
22:48compensated for the care but in the end
22:51I thought to make sure that our leads
22:53were particularly high you know
22:55particularly yeah good good quality
22:57leads I think in times we probably
23:00should have cared less about that right
23:04and there are other times where I think
23:05it didn't save this and I think
23:08certainly social gaming was one we had
23:10huge debates over this I remember in my
23:15sort of perspective was will figure up
23:18we have to go with the businesses going
23:19we'll figure out the advertising model
23:22it turned out to be less commerce and
23:25more brand advertising radio advertising
23:27which I think in the end was an area
23:31that wasn't it was a full-strength for
23:33us but we had to be in that market and I
23:37think in the end we my concern was
23:39always even if we won we would lose
23:42because I think Furyk victory came up a
23:45few times yes and that so that you know
23:49that wasn't we're about to fail we only
23:50we never got to the point where we had
23:52like two weeks of cash left we got to
23:53the point many many times where it's
23:55like the current trajectory would get us
23:57to two weeks of cash left at some point
23:58in time like there is no it just seemed
24:00like there is no way off of the the
24:02downward slope except if we did
24:05something new but the challenge is that
24:07if we have an existing business that has
24:09tens of millions of revenue which we did
24:11and then we had all these new things
24:12that would produce nothing but we're
24:15interesting ideas like that was the
24:16again kind of both of those options were
24:19bad the other set of you didn't have to
24:22deal with this as elf and as I did where
24:24we would get into an acquisition
24:25discussion which I believe happened like
24:29before the ultimate one that worked and
24:30we'd get to the end and it's like yeah
24:33it's gonna happen and I'd be talking to
24:35the Corp dev people it's like we're
24:36gonna buy your company for hundreds of
24:37billions of dollars and then I just has
24:40to go through this final thing from the
24:42CEO of this big giant company and then
24:44the CEO of the big giant company I I
24:46used to joke had a bad tuna sandwich or
24:48something that morning and then decided
24:50not to do it after after it seemed like
24:52a done deal and that was that was
24:54probably the toughest because it wasn't
24:56we're about to fail but you know one of
24:57the things with M&A in general is that
25:00I've now this has kind of changed my
25:02perspective on a lot of things which is
25:03you cannot change people's minds with
25:05data it just doesn't work you could
25:08change people's minds with data in time
25:10and I now think about I actually give
25:12this advice to people all the time in my
25:14current job which is you know somebody
25:15pitches me on Monday and I have a bad
25:18tuna sandwich and I say no I'm not
25:20interested in investing in your company
25:21I might be completely wrong and they
25:24might be completely right but you can't
25:25change like feelings are what they are
25:27you can't you can't change that so if
25:29the person that pitched me on the
25:31company came back Monday night and said
25:33hey I think you were wrong how about now
25:35it's like no well here's new data no
25:38like it's just it's very hard to change
25:40perspective perspectives with data you
25:42need enough time along with data in
25:45order to reset belief systems and
25:47sometimes you just need people sometimes
25:49the the data that needs to change or
25:51people that are working at a company
25:53like that does change out so you know
25:54one of the challenges of if you get
25:57rejected by especially in an M&A process
26:00like a company doesn't go and say hey we
26:02want to buy your company they do all
26:04this diligence they're ready to go and
26:06then the CEO says no on a Monday and
26:09then on Tuesday that ready to roll again
26:10like that institutional memory lasts for
26:12a long time so one of the every time we
26:15went through one of those processes
26:16which as you recall there there were a
26:18handful of them they were numerous it
26:20fits on more than one hand I believe so
26:22several handfuls of them like that that
26:24was very demoralizing because you know
26:27if you raise venture capital you often I
26:29mean you're doing it not to run a
26:31quote-unquote lifestyle business you're
26:33doing it to eventually bring liquidity
26:35to the shareholders and that's ideally
26:38you know it's an IPO it's you get
26:42maybe this is kind of a good segue to
26:43something which was you know Mikey
26:45learning from trial pay him there were
26:47thousands and I'm sure you have
26:48thousands as well but Mikey one and
26:50actually that this became a my first
26:52blog post here because I called it
26:54innovation versus distribution and I
26:57kind of have this little pity saying now
26:59which is the battle between every
27:00startup and incumbent comes down to
27:02whether the startup gets the
27:03distribution before the incumbent gets
27:06the innovation and this was my key thing
27:08if you remember I called it the tivo
27:10problem at trial paid because we built
27:12this great appendage on top of payments
27:14we made payments more lucrative we made
27:17payments more profit like everybody
27:18benefited as you said normally a payment
27:21transaction is two parties we introduced
27:22a third to the benefit of all three and
27:25I think we did a very very good job of
27:26that the challenge was that we didn't
27:28control the payment infrastructure so it
27:31was hard I also called it the janitorial
27:32services problem if you remember it was
27:34very very hard to go to a company that
27:36has billions of transactions and lots
27:38and lots of revenue and you know their
27:40core business and say hey we want to add
27:42something to this little little tiny
27:44part we want to add something to the
27:45checkout receipt and to get them to care
27:48about that was very very hard we cared
27:49about that a lot so you know and I
27:52called this the Tebow problem because we
27:54effectively built TiVo but we didn't
27:56have Comcast and my concern was that I
27:59mean and actually if we had to do it
28:00over again the way to a potentially
28:03built trial pay would have been to say
28:05let's build stripe first and then after
28:09they gets critical mass after we have
28:10distribution for this thing that is in
28:13many respects a commodity I mean I don't
28:15mean that disrespectfully to stripe I
28:17don't mean that disrespectfully to any
28:18company that does a very very key part
28:20of critical infrastructure but they're
28:21doing something that doesn't have a lot
28:23of bells and whistles attached to it you
28:25get massive distribution for that you
28:28you get very very patient you make sure
28:30it works very very well and then you add
28:32the bells and whistles on top and even
28:34though people like to hate on Comcast I
28:36mean what they did for v1 of their
28:38product if you will is they strung a lot
28:40of cables and they made this thing work
28:42and then eventually they were in the
28:44position with tens of millions of
28:46customers to introduce their own TiVo
28:48called the digital video recorder and
28:50now TiVo kind of became a patent trolls
28:52that that was kind of my key learning
28:54I'm kind of curious what was your
28:56I mean I so it was just a kind of build
28:59on that I mean if you think about now
29:00what trial pay looks like inside of visa
29:03and you know I sort of have this view
29:07that most acquisitions the ones that
29:09work either work because you kind of
29:12leave them alone entirely or you sort of
29:14fully absorbed them and this was a case
29:17where we took that innovation put it on
29:20to a much much larger platform at scale
29:24and so you know today if you look at
29:27what we've done with local offers in
29:29uber you actually start to see how that
29:32innovation looks at scale and you you go
29:34back to your example of you know I'm
29:37gonna get lunch today at Chipotle or at
29:40Chili's how does that actually benefit
29:44me visa via game in this example when I
29:48go have lunch at at Chipotle I can
29:51actually get credit in my uber ride
29:53right I think that would be very
29:56difficult for us to have pulled off you
29:58know as a standalone company and so that
30:01principle you know I think what it did
30:05it limited the number of companies that
30:06I think we could ultimately work with
30:09but when we combined them where she
30:11landed up getting that innovation
30:12sitting on top of a you know you know
30:14much more sort of scalable platform yeah
30:18I mean I think the other kind of you
30:20know learning for me from you know from
30:25from trial pay is that just the the
30:29payments ecosystem is unbelievably
30:32complex and sometimes defensibility is
30:37just simplifying it so I think we have a
30:39conversation about stripe early on and
30:42you know we were a pretty large pinion
30:45sort of processor just because it was a
30:49complicated thing to do and I think we
30:51always dismissed that and said that that
30:54isn't very defensible so I think that
30:58that is something that we at the time if
31:03we spent more time in that I think we
31:04could have built an interesting payments
31:06company not just this intersection of
31:08payments and advertising
31:10just because it is super complicated
31:11yeah I think it's hard to start off with
31:14TiVo recognize that this whole
31:17distribution thing is important then go
31:20build Comcast while still maintaining
31:22TiVo when the more when the world
31:24perhaps isn't ready for TiVo because we
31:26tried building stripe if you remember
31:28like we actually built a payment
31:29processor and I remember it was very
31:31controversial within the company because
31:33like why are we there already exists a
31:35hundred payment processors like why are
31:37we doing this it was actually hard to
31:38sell the team I'd sell it sell the
31:39troops internally because I think it
31:41strategically made sense but we didn't
31:44do I mean we built one but it wasn't the
31:47best in class as opposed to like our
31:50Tebow product if you if you will I think
31:52was yeah yeah I mean I think the point
31:55is that we that had we focused on it I
31:57think we could have done that you know
31:59and that certainly is a you know is it
32:00learning for me um so we're so maybe
32:03kind of talking about payments now less
32:06about history and and lower from from
32:09the early days of trial pay like where
32:11do you see payments going or what are
32:12the things that you find most exciting
32:13about it yeah so you know obviously from
32:17the the visa vantage point I think we
32:19get a pretty good view of what's
32:20happening kind of you know globally
32:22around the world and a couple things
32:25that I think is super interesting one is
32:27the idea of verticalized commerce and
32:31this is really an innovation that is
32:33coming out of you know Alibaba and 10
32:36cent where you have a whole commerce
32:38ecosystem and payments is just embedded
32:42as part of that ecosystem I mean I think
32:46examples here would be baby
32:48uber or toast where you have you've
32:51built all of this functionality that in
32:55the past would have been separate
32:56systems and the payment is embedded and
33:00frankly is not something that merchants
33:04have to think about I think that's both
33:06an opportunity for for startup so for
33:11sort of payments in the ecosystem but
33:14it's also a threat because if you're if
33:17you're building that ecosystem you have
33:18tremendous power over who is the
33:22processor so you take toast for
33:24you know they've done all the hard work
33:26of vertical izing restaurant
33:28point-of-sale everything from the front
33:30of the house to the way that the whole
33:31ecosystem works their decision as to
33:34who's gonna actually process the
33:36payments is really about who has the
33:39pipes to kind of plug into that
33:41ecosystem in the case of you know $0.10
33:45or you know you know sort of a leap a
33:47you've really got entire ecosystems that
33:51are managing everything from the menu
33:54that I see when I walk into a store to
33:57you know where do I go after that after
34:00that visit and payments is just embedded
34:02so I think we're gonna see a big race
34:05toward verticalized commerce I think
34:07when you put together in the u.s. at
34:09least what Amazon is trying to do
34:11Google's trying to do with echo and a
34:12few other things you'll see payments
34:15just recede into the background and that
34:18may become harder for others to
34:20penetrate if my entire you know Amazon
34:25today is almost like a sort of
34:27enterprise software for my life at some
34:30point they're gonna have you know my
34:32entire supply chain will just be sitting
34:34in the cloud and stuff will show up at
34:37my house based upon my usage that's how
34:39companies work it's very hard to think
34:43of there's almost a payment in that in
34:45that net world it's just a consumption
34:47that happens to be fronted by some sort
34:51of you know store of value that that's
34:53one area yes I'm curious what would you
34:56think about on the you know vertical
34:58eyes Commerce trend yeah I think I think
35:00that's certainly true I mean the the
35:01thing that I one thing on payments is
35:04that if you if you look at the plastic
35:08world and payments are increasingly
35:10going towards plastic or towards digital
35:12and away from cash so if you look at
35:14that world where a lot of the
35:16advertising is really around how do i
35:19influence Sherriff spends so you do it
35:21at the network layer like Visa wants
35:23people to use Visa cards but ultimately
35:25Visa doesn't make Visa cards visa has
35:28card issuers who issue cards that go on
35:31the visa network so this baguettes
35:34samuel l.jackson saying what's in your
35:36wallet for Capital One
35:37why does he do that not so much to get
35:40new card holders I mean that's part of
35:42it but also if you have five cards in
35:44your wallet and one of them is a capital
35:45one card and one of them is in a chase
35:48Amazon card and one of them is an
35:50American Express card when you go to
35:51Chipotle which one are you gonna pull
35:53out and why do you choose it and there
35:55might be some background processing your
35:56brain because you watched some
35:59commercial five hours ago with with
36:01sammy saying go use you know what's in
36:03your wallet use Capital One that gets
36:05you to use Capital One worse versus the
36:09online wallet that are rather like the
36:10Apple pay is the Google pays of the
36:12world where they're still in their
36:14infancy but if that takes off and all
36:17these different payment modes are
36:18actually digitized you're not really
36:21choosing like I want to pay with this
36:23lucky as far as I know my Apple pay
36:26thing seems to be like alphabetized so
36:29my Amazon card pops up first and I end
36:31up paying with my Amazon card which is a
36:33Visa card so don't worry about it so
36:35that that's I think there's a lot of
36:37interesting things that start changing
36:38when what is your default card for a lot
36:42of these applications I think that
36:43that's one thing in payments that I find
36:45interesting like if the entire stack
36:49moves to your phone and I have a
36:52presentation that I think I've shared
36:54with you on this but like you can
36:56actually start unbundling the different
36:58components of credit cards so part of a
37:00credit card is the payment part of the
37:01credit card is the credit part if you
37:03don't pay your bill on time but in Apple
37:05pay as an example what if you add a
37:07credit provider you add Lending Club
37:09there you have the payment go through
37:10here and it's it's potentially bad for
37:13the big banks and the opportunity might
37:15be for startups that maybe it's a robo
37:19advisor for debt that says hey you know
37:21pay off there's a company called Talley
37:23that does this as an example so you know
37:25I think that's interesting I think
37:26there's also a lot of opportunity and
37:27commercial cards yeah and providing more
37:29granularity that way yeah I think the
37:33the wallet is a is a good example of
37:35both sort of payments disappearing but
37:38also sort of unbundling so a lot of what
37:41I think issuer is today are providing is
37:46authenticating a customer and by the way
37:48like in the u.s. at least debit
37:51cards are a very large percentage of
37:53transactions and so that credit point is
37:56becoming you know less and less of a use
38:00case and so why can't you have credit at
38:05the point-of-sale say a firm or have
38:08something to it some intermediaries sit
38:10between me and my actual debit card I
38:13think those types of applications become
38:15a lot more interesting because you've
38:17you've authenticated the customer
38:20there's a there's a method of payment
38:22and now you're just adding the sort of
38:24you know credit layer on top of that
38:26that's super interesting so and I'm not
38:31sure if that benefits the incumbents
38:33worth or to the benefit startups but you
38:39know as you as you sort of digitize
38:42payments you have the opportunity to
38:43unbundle some of the functionality
38:45that's there today and I think that's
38:48probably going to happen across all
38:51types of you know all types of payment
38:53the other point about having multiple
38:55cards is we haven't really come up with
38:58a system where you optimize and so maybe
39:00you should use your Amazon Prime card
39:03only on Amazon and Whole Foods where you
39:04get 5% back right but you want to use
39:07your capital one card for international
39:09trips and today that's kind of murky and
39:12unclear and a lot of the consumer
39:15messaging is actually unclear I think
39:17one of my two takeaways from thinking
39:19visa is for all the marketing that's
39:21spent it's it's incredible how confusing
39:24or confused customers are as to what the
39:28benefits are on their card right you
39:30know some of the things we're thinking
39:31about are how does some of the trends in
39:36crypto and sort of you know digital
39:38currencies impact payments and one of
39:40the things that we look at is what does
39:43a what does digital Fiat look like and
39:46so today we have really you know
39:49payments are electronic in the sense
39:51that we're not carrying cash around
39:54so the ledger is updated in real time
39:57but settlement is delayed once you
40:01combine that into a native digital asset
40:04you have what I think with never sort of
40:07happening before which is the notion of
40:08programmable money because at that point
40:11I've got the proof of funds in my in my
40:14wallet and I can have a smart contract
40:16that can do some things that you know
40:18that I can't do with a sort of ledger
40:21settlement sort of set up that that that
40:25sort of exists today and so you know
40:28when that starts to happen or if that
40:30starts to happen that radically changes
40:33how payments work I think you know the
40:38the set of circumstances where digital
40:41fear exists are you know more around
40:44kind of how how governments might want
40:47to implement this but you could see
40:49certainly if I was a autocratic state
40:53and I wanted to have perfect visibility
40:56into all transactions in my economy
41:00I could implement a central bank digital
41:03currency deep monetize the large bills
41:09remove the lower bound on interest rates
41:12have tax collection at the point of sale
41:15and not gonna have to rely on some
41:17merchant who there has to report her
41:21sales so there are a lot of reasons why
41:23I think a nation-state could implement a
41:26central bank digital currency on the
41:29other side you might have a you know
41:31kind of upstart nation who wants to sort
41:35of innovate and maybe they'll adopt a
41:38central bank digital currency so I'm not
41:41sure the US is gonna do this first but
41:43if any of those scenarios happen I think
41:46it you know completely changes the way
41:49payments work because you have the store
41:51of value in a wallet much so that you
41:54need an intermediary to then to then
41:57actually Park in a sort of you know
41:58transfer the value and so I think that's
42:03a trend that that may appear as as
42:07government's grapple with you know how
42:09they can take advantage of
42:10cryptocurrencies ya know I think I think
42:13that's interesting I mean I I don't know
42:14if I'd call it crypto currencies per se
42:16I think it's more of this
42:18of the government controls the money
42:21supply but doesn't really control the
42:23commerce supply which is almost as
42:25important so if you think about I
42:27remember actually when I was when when
42:29we became part of visa I think at one
42:32point we had to enforce sanctions
42:34against Crimea and this wasn't these are
42:37doing it it was like the government of
42:39the United States says okay
42:41Putin annexed Crimea we think that's bad
42:43and therefore you cannot do business in
42:47Crimea United States companies visa
42:49being one of them and it turns out that
42:51a Crimean that's buying something with
42:53their Visa card or their MasterCard in
42:55Crimea that transaction gets routed
42:59through San Francisco if it's visa were
43:02purchased New York if it's MasterCard so
43:05the government of the United States made
43:07a private company not allow commerce to
43:11happen in another nation-state that's
43:145,000 plus miles away so and this was
43:18never an issue because governments
43:19printed cash and/or once upon a time
43:22cash was backed by gold and like the
43:24government really just wasn't involved
43:25in this process like one government
43:27couldn't do anything to constrict
43:29Commerce in another government's
43:31territory but now that that does happen
43:33which is actually kind of interesting so
43:36it makes sense at some level like this
43:38is why China has China UnionPay because
43:41her cup they nationalized their commerce
43:45system if you will so that it's not
43:47subject to any third parties so you can
43:50make an argument I agree with a lot of
43:51what you're saying which is you can make
43:52a very strong argument that the entire
43:54flow of money should be controlled by
43:57the government now from the startup or
44:00corporation perspective it's like you
44:02would rather that not be the case but
44:04there is a lot that could be done if
44:06there was one single kind of
44:07programmable and not watchable that's
44:10kind of a scary word but a set of like a
44:13currency that actually is a little bit
44:16more controlled as opposed to something
44:19where it's like there are all these
44:19disparate actors everything's fungible
44:21you can't really track everything in
44:24moving to a currency actually moving to
44:27a digital currency I mean color
44:28cryptocurrency or not but like there
44:29would be a lot of repercussions for it
44:31in many in many respects this is kind of
44:33like the the incumbents of the 200 plus
44:35nations on earth they've been doing this
44:37kind of print money thing for a long
44:40time so I I don't I don't know who's
44:42going to be the first to adopt that I
44:43mean I think once a nation-state
44:46discovers the the super powers of
44:50controlling a digital currency that's
44:52going to be intoxicating yeah and I
44:55think that will will certainly have an
44:57impact it may not happen and may not
44:59happen in Western democracies if you one
45:02of the challenges with Visa MasterCard
45:04is if you try to buy Bitcoin today that
45:08is seen as buying cash because it's
45:10totally fungible and so as a result
45:12there's a whole lot of there's a certain
45:15rate that gets charged there's certain
45:17kind of currency controls if you feel
45:19the things that sort of come into play
45:21but if I could buy ether and know that
45:25it's going to be used to buy file coin
45:28right and it's specifically used for
45:33that purpose well then we can create an
45:34MCC code for storage and it's a
45:38perfectly allowed transaction provided
45:40that the resulting digital currency is
45:43used for that purpose I think that
45:45doesn't exist today and that could be
45:47enforced by government or to the
45:50commercial entities but I think that's
45:52some of the exciting stuff that's that
45:54sort of coming down the line yeah no
45:56totally agreed well thank you so much
45:58for coming in fun to relive some old
46:00stories and think about new futures yeah
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