Leadership

David Vélez: “Position Yourself in the Scarcity, Not in The Oversupply”

In this podcast episode, Nubank cofounder advises students to operate in a market where they have a competitive advantage.

May 25, 2022

| by Jenny Luna

When David Vélez, MBA ’12, moved to Brazil in 2008 to open a regional office for a private equity fund, he didn’t expect one of his biggest challenges to be getting a bank account. The process took five months.

Five years later, he was in São Paulo after working as a partner for Sequoia Capital, a venture firm, and has just graduated from Stanford Graduate School of Business. To him, Brazil’s financial services sector seemed ripe for disruption. So in May of 2013, with seed funding from Sequoia Capital and Kaszek Ventures (a firm founded by two Stanford GSB graduates), Vélez launched Nubank, a fintech bank which has grown to be the largest in Latin America.

Vélez shared the story of his path to entrepreneurship with students at a recent View From The Top event on Stanford GSB campus.

“You want to position yourself in the scarcity of the market, not in the oversupply,” he said. Vélez was interviewed by Christopher Stromeyer, MBA ’22, and shared how his drive to continuously be challenged played a large part in his drive to reinvent a part of the banking system. “Why would you wait decades to solve issues if you can now?”

Stanford GSB’s View From The Top is the dean’s premier speaker series. It launched in 1978 and is supported in part by the F. Kirk Brennan Speaker Series Fund.

During student-led interviews and before a live audience, leaders from around the world share insights on effective leadership, their personal core values, and lessons learned throughout their career.

Full Transcript

David Vélez: Culture is the driving force, there’s nothing more important, because culture allows you to hire people, people build products, products bring you customers.

Christopher Stromeyer: Welcome to View From The Top: The Podcast. That was David Velez, founder and CEO of Nubank. David visited the Stanford Graduate School of Business as part of View From the Top, a speaker series where students, like me, sit down to interview business leaders from around the world. David’s visit also coincided with the 10 year anniversary of his graduation from the GSB.

I’m Christopher Stromeyer, an MBA student in the class of 2022. David recounted his entrepreneurial journey that began after graduating from the GSB just 10 years ago, when he founded Nubank which is now the world’s largest digital bank with over 50M customers. He also shared the importance he places on culture as a differentiating factor in business and how he thinks about the legacy he wants to leave behind through philanthropy. You’re listening to View From The Top: The Podcast.

Christopher Stromeyer: Welcome back to Stanford. Welcome back to the GSB. Ten years ago, you would have been sitting out in those seats contemplating your graduation just six weeks away. Today, you founded Nubank, the world’s largest little bank with over 50 million customers and valued almost 30 billion dollars. So on behalf of all my classmates sitting here today, I really just have two questions for you — what and how? We do have a lot to cover, so I want to get started. I want to start before the GSB. You grew up in Columbia, then moved to Costa Rica. You were in a family of entrepreneurs, both your father and your uncles. How did that shape you?

David Vélez: Well, first of all, I’m so honored about that. I don’t even know what to say. I’m really speechless. It’s an honor to be back here at Stanford. As a GSB alum and undergrad, this place is super special for me. I made some of the best friends of my entire life, and it’s been incredibly influential. So thank you for having me. I’m excited to be telling a little bit of our story. As you said, I come from a family of entrepreneurs. I grew up in Columbia. My dad has 12 siblings. My mom has five. They were all entrepreneurs. There were small businesses. And it was all about hustling all the time, every time. My dad had a small button company for jeans, and I was working at the button company doing quality control of buttons when I was 4 years old. I grew up in that environment where it was always about problem solving. It was always about leading and about, not necessarily following rules, but questioning when the rules don’t make any sense and trying to open space to solve those problems.

I remember one day, I had a conversation with my dad about, “What are you going to be when you grow up? What are you going to study?” I told him, “I’m going to be a manager,” thinking that the best thing was, “I’m going to start management.” And he said, “No, no, no, no, no. What do you want to manage? You’re going to be a founder. You’re going to start a business. You’re going to build your own space.” So I think that was the DNA that I grew up in. I was very lucky to be here at Stanford undergrad. I think that radar that everybody has about trying to find what to start, what business to start was always on. To my own disappointment, the first year had passed and the second passed and the third year passed, and I had no idea what to start. To my own disappointment, I ended up going through more traditional financial services, experience, but I loved it. I learned a ton. I worked with really, really amazing, experienced people. And eventually, through a long story, and I’m sure we’re going to talk about it, I finally had a shot at a building, and I started building the company I was. It took me almost 15 years to figure out what to do.

Christopher Stromeyer: I want to get to that in a second. But first, you mentioned after some time investing with [Atlantic] and some banks, you came back to Stanford. You came to the GSB. What were you looking for from the GSB in this case back then? Let me ask it a different way: what mattered most to you and why?

David Vélez: [Laughs] Yeah. So that essay was a tough one to write. I think for me, so I wanted to start something. To me, going back to business school was, okay, fine. It’s done. I really need to start to get ready to build something. It was also about Latin America and I think related to the question was like impact. At some point, I realized that two things were really drivers for me. One was learning. I had to always feel that I was learning something new. And I felt that my level of motivation quickly declined when I found myself that I had mastered or I had learned or I was not being challenged. But then beyond that, it was almost about what’s the meaning of what I’m doing? Ultimately, what I’m doing every single day, what is that driving towards? What is that creating? Initially, when I was in investment banking, I was learning a ton and getting out of the comfort zone, but what I’m ultimately driving to was harder for me to answer. Moved to GA where I was closer to the entrepreneurs. That was easier to answer.

But ultimately, I was not building it; I was sitting in front of the entrepreneur. And I saw the entrepreneur, what the entrepreneur was doing. I wanted to be that person. I wanted to be the one that was making the hard decisions, not necessarily telling them what to do, but actually doing it myself. And ultimately, what I wanted to do when I was writing the essay was just create that impact to build something. But back in Latin America where I always felt that there was so much to do and so much to build that I needed to be able to tie back what I was doing to that overall impact in the region.

Christopher Stromeyer: So while at the GSB, you were still investing, working for Sequoia, focused on Latin America. And after graduation, you stayed in investing, went back to Sao-Paulo. But within a year, less than a year, you had found a new bank. What happened? Where was that switch?

David Vélez: So I started fall quarter at Stanford, ready to start, taking another class about entrepreneurs, ready to enjoy my two years of partying and learning and thinking. And then one afternoon, David George was around, tells me, “You’ve got to go meet Doug Leone at Sequoia, right here, Mr. Doug. And they are thinking about investing in Latin America.” I, of course, went and met Doug at Sequoia. A lot of things were very odd about the first encounter. Anyplace generally is with the most junior associate with the youngest person. Here, I was stuck in directly with the head of the firm, and that was not usual. And then I sat in front of Doug, and we had a great conversation for 60 minutes, a lot of conversations about family, a lot of questions about personal, very uncharacteristic of a venture capital interview. I later realized that it was all a psychological profiling that was happening at that point. Doug told me, “Come back and meet our people at Sequoia, and let’s see what happens.” And between me leaving Sequoia and getting into my car, I already had an email from Michael [Morris] saying, “Come back. I want to meet you.” It took five minutes for Doug to talk to Mike and send me back. So in two weeks, I went and met everybody, and they proposed to me to help Sequoia look at Latin America and Brazil. So at that point, I wanted to start a business, but this was just too good of an opportunity to say no to. I was going to be able to be closer to entrepreneurs and a venture capital investor. I was going to be able to be very close to some of the best entrepreneurs in the world that operated around this area, seemed to be there as they pitched to Sequoia, so the opportunity was too good to pass, and decided to once again pause the startup idea and spend effectively those two years working at Sequoia.

Christopher Stromeyer: How did you balance that? For the current students here, what was a day like?

David Vélez: It was incredibly intense. There was an advantage that Brazil is five hours ahead. So I had to wake up at 4:00 in the morning so Brazil was at 9:00 and 10:00. I was in the Sequoia offices at 4:00, 4:30, calling entrepreneurs and talking and sourcing like crazy. So I was working at Sequoia from 5:00 to 8:00 a.m., would come to GSB, would have all the classes done, then go back to Sequoia until like, I don’t know, 6:00, 7:00 p.m., then go back home and try to do some homework. I think the video said that somehow I was perhaps close to R.J. Miller’s [color]? No. Not even close. You have to sacrifice something. There is no way you can. Sacrifice, this does not make any sense. I cannot do that. I am not going to do 100 percent of the readings, impossible. I’ll pick, and I’ll take the risk of the professor calling me in class and not having the answer because I didn’t read everything. I’ll embarrass myself, but you have to give something up. You cannot do it all. And that’s what I ended up giving up. And there were no Tuesday night parties for me. Wednesdays were the day off. And those were some of the most kind of really surreal experiences of getting picked out at GSB, going to the airport, get into a plane with Doug, fly to Sao-Paulo, landing Wednesday, 8:00 a.m., having 10 meetings, signing four term sheets, get back to Sao Paulo and be back on Thursday for GSB. So I would pinch myself being in a plane and saying, “What is happening here?” Anyway, it was super intense, but you had to be able to balance it somehow to make everything work.

Christopher Stromeyer: Right. You talk about giving something up. You end up giving up investing, right, and making that switch. What was that decision? What was going through your mind?

David Vélez: So there was really good advice I got from Doug at some point that made me think a lot. It made me conceptualize something that I had already been thinking for a long time. And I’ll just give an example, and I’ll talk about that. I remember right before business school going to a conference in New York, a venture capital conference, Latin America venture capital conferences and seeing one day eight private equity funds in Latin America pitching their fund. At the end of the day, it was like every single pitch is exactly the same. There was no difference. Everybody was pitching the same strategy. And the advice I heard at some point from Doug, and he was also very timely about what was going on in Silicon Valley [unintelligible] is that you want to position yourself on the side of the scarcity of the market, not on the side of the oversupply.

Where was a lot of oversupply? There was a lot of oversupply with investors at that point in Latin America trying to do. There was a lot of oversuppliers, people like me, in the U.S. And so me staying in the U.S. was being positioned in the area where I was a complete commodity in the U.S. My background, what I knew, was too many competent people. In Latin America, that’s not true. There is a scarcity of talent. And then where’s even more scarcity? We went and made a lot of startups. There were a few startups. And the few startups that they were trying to do were almost like clones of U.S. companies. They were not solving the real Latin America problems. There were 3000 [clones of Groupon] in that time. That’s not the biggest problem of Latin America, getting/figuring that out. That’s not what people really care about when they don’t have banking access, when they’re in hospitals, when their [unintelligible] is horrible, when there is bad infrastructure.

So there were these gigantic problems, and there were no entrepreneurs actually solving them or addressing them. So when you combine all that, it’s like, this is where their scarcity lies is these huge challenges in Latin America. I can position myself strategically to be able to address those, and ultimately that meant also stopping investing and going as an entrepreneur to build something that was very different at that stage.

Christopher Stromeyer: So you mentioned that you wanted to solve difficult problems. You chose banking, which is highly regulated. In particular, Latin America has a lot of [entrenched] players, particularly in Brazil. Why banking? What were the [unintelligible] telling you about that when you were picking that idea?

David Vélez: Yeah, so a couple of reflections I think I had at some time. Going back to what really was driving me, the big question was like, “Why does this impact? How can I optimize the amount of impact per unit of time? I’m going to start a business. It’s going to take decades. It’s going to take as much energy to do something small as something big.

And when I asked the question, “What is the single hardest thing I could possibly imagine,” “What is the single most impactful thing I could possibly imagine?” “Banks.” Well then, yes. Because when you look at Latin America, the biggest companies in Brazil are banks. The biggest companies in Mexico are banks. The biggest companies in Argentina are banks. There’s nothing bigger. It was the hardest thing I could imagine.

It was the single most impactful thing I could imagine because it’s an oligopoly structure, it’s the five banks that dominate 80, 90 percent of all these countries. When you have an oligopoly, you have no competition. That translates into some of the highest interest rates and fees in the world, really horrible experience and a significant percent of the population not having access to anybody, not being able to get into bank accounts, not being able to serve them. So if I manage to figure out how to bring more competition to that industry, make it 5, 10 percent better by competing with these five giants, then the impact of that was going to spread around to an entire region. We’re going to be really, really impactful.

So I arrived to that from a very high end, thinking about that impacting question, no idea really how to do it. It seemed impossible. I think I had like 30 meetings, coffees, in Sao-Paulo with the former CEO of the bank. The overwhelming consensus is, “No, you cannot compete with these banks. It’s impossible. They are the most powerful corporations in Latin America. They are controlled by the wealthiest families in Latin America. They will never let you compete. They will go after your kids. They will go after your family. A lot of people have done it. But then a lot of arguments just didn’t make any sense. I listened very carefully trying to filter out the no’s because there was real reality behind the no’s, and the no’s were just ultimately a symptom of consensus and fear. And there were things like, “Well, Unibanco tried to do an online bank in ’99, and they failed. That’s where you’re going to fail.” We’re in 2012. Sixty million people have a smart phone. ’99 you have five percent interpretation, and that was the argument that the experts were using to tell me that people would not use or Internet in Brazil is very slow, and then you had 100 million people already in Brazil’s top 5 in the world in Instagram and Facebook and YouTube.

So, a lot of arguments that the experts were proposing against that idea. But when you think a little bit deeply about them, they would be very weak underneath. Ultimately, my conclusion at the end of maybe two months of talking to people was, wow, there is so much fear. There is so much fear about competing with that. That’s all it’s driving. And obviously, technology was switching the opportunity. If you’re having 2010 to compete with those banks and you need a billion dollars to put branches in every corner, and buy IBM mainframes, the right time, the why now question, smartphones removed all those barriers and allowed us to use technology to reach 100 percent of the population.

So it was a confluence of technology and getting to the right time, but also kind of as an outsider, and I saw myself as an outsider; I’m not Brazilian, I never worked for a bank in Brazil. I did not grow up in that environment where people were fearful of these big companies. I didn’t even know a lot of these controlling families that my Brazilian friends knew and feared. Being an outsider and looking in ended up being a huge advantage because it allowed me to disentangle a lot of those arguments and ultimately realize there could be an opportunity there.

Christopher Stromeyer: From that idea to traction is a long road, right? When did you know that you were getting traction with the consumers, the ones making the decisions every day?

David Vélez: So at every stage, we got the first million from Sequoia. It was a huge bet on the region, on the [unintelligible] about [how we dug]. We [unintelligible]. But there were so many open questions that I couldn’t even answer. And there were so many points of perhaps complete failures. For example, there were two [unintelligible] of credit cards. One of them, when we went to them and said, “Hey, we’re starting these [unintelligible],” said, “You’re crazy. Now way. We’re not going to work with you.” That left one left. Anyway, we went to them, and they said yes. So if they had said no, we’re done.

There were changes in regulations that came in, and at every single step, there were points of failure. But somehow with a small team we were creative. I remember there was a new law that appeared in Brazil [unintelligible] that effectively forced us to launch three months before, in April 2014. We were going to launch first card in June, and the regulation changed and said, “If you’re not operating in April of 2013, you will need a banking license, which means you will take three years to get it, which means you’ll be dead.” So we grabbed the entire team and said, “Forget the timeline. Survival mode. April we have to be live.” And we had a timeline. And it was so crazy that to be able to match the timeline perfectly, we had to get an approval from Mastercard at the right time, and it was only approved in Holland. FedEx was going to take two more days than me flying in an airplane to Holland and giving that [unintelligible] Mastercard there. So we would get in a plane and fly to Holland to get one page to [unintelligible] Mastercard because that would save us two days from FedEx.

So that was the level of urgency of trying to figure out how we survive so we could launch those products on time. So we launched on time. We had the 12 cards up and running. We had 12 employees, went to the corner shop, paid some coffee. Obviously, as always, didn’t work, the first product. Everybody’s disappointed. Everybody’s sad, went home. What’s happening? Eventually, [unintelligible] worked out. And then with a serious [unintelligible], and then that was going to be the coming out kind of announcement. We’re going to have to do a lot of PR, and we’re going to open up the company for external consumers.

The day we announced [unintelligible] and we opened the Web Site, we had an internal bet about how many customers are going to sign up. And somebody said 1500, 1000. Somebody else said 10,000. The average of the employees was 1000. We worked really hard to get ourselves named there in the big magazine. We got 200. Completely disappointed. Everybody went home, sad. Oh my god. What’s going to happen? Everything is wrong. Then three months happened. We were getting 150 people there. The year passed.

And then one day, unexpected, one very niche publication. It was not the main paper. One niche publication that went after the design community and engineer community, talked about the card. And suddenly the following day we got 3000 people, and the following day we got 6000, and the following day 10,000. And suddenly, growth just started going out of control to the point where we were completely unprepared and we created this concept of waiting lists, which then created even more scarcity, which meant more people wanted the card, which created more. So that’s when I started to think, that day when [unintelligible] and all the people turned up, it’s like, whoa, okay. There’s something here.

Christopher Stromeyer: It’s incredible to hear this journey. And there are a lot of budding entrepreneurs in the audience. Let’s check. Who here is working on a business or thinks they’re going to work in a business after graduation? Even more than I thought. What’s one thing you know how that you wish you knew when you were sitting out there?

David Vélez: A lot of different things. I think when we looked at that industry, and when all these experts told us no, our approach was forget experience. We don’t want experienced people. We want complete outsiders. We want to reinvent everything from first principles, everything. From the way the product works, collections. We did not want to hire somebody from the collection agencies of the big banks. We reinvented the collection from scratch. We did not want the core banking systems of the [unintelligible].

We built the core banking system from scratch. So it was all about reinventing the entire industry from scratch, and that meant hiring people that were completely outsiders. That worked well, but it did not scale. And that became a significant bottle neck as we started scaling. That also ultimately meant reinventing the wheel in a number of different things that frankly we just didn’t need to reinvent. There was a lot of good people in banks, good people in collections that could bring [their one] and saved us a year of reinventing collection from scratch. So that complete dismissal of experience was too extreme.

Ultimately, I think what we learned was we needed to figure out how to find the right balance between the outsiders and the insiders, how to find the insiders that were still able to think as a beginner. We always say that we like to hire people that have more questions than answers. And we continue to look for those people that have more questions than answers. That person that comes in that has all answers, that has [30] years of experience, we don’t want that person even now. But the insiders that can ask a lot of questions, they’re very valuable because they know the enemy within. They saw all the vulnerabilities. They saw all the things that could be better. But they still have the beginner’s mind of reinventing a lot of products from scratch.

And so what we’ve increasingly done and as we scale the organization, we’ve been actively more looking for those insiders that can help us reinvent. And especially as you start really tackling scale problems, how do you build engineering systems at scale? How do you build customer service at scale, data science, [machine-learning] system to scale? Then you need to rely much more on experience. It doesn’t make a lot of sense to be trying to reinvent. So it’s all a balance. But I would say having been able to find the right balance earlier would have saved us a lot of pain.

Christopher Stromeyer: So you mentioned people. I want to talk about something related to that, which I know you talk a lot about, which is culture. You talk about having kind of the founding team then expanding. How do you maintain the Nubank culture that the company’s so famous for?

David Vélez: So I mentioned earlier how impressed I was with Sequoia and how the things at Sequoia were so different. One of the things that I reflected while I wasn’t doing the internship is I had never felt myself so motivated in my entire life with any work. In previous jobs, I felt that I was always at maybe 80 percent of my capacity, 90 percent of my capacity at the beginning of being pushed and learning. At Sequoia at the first few months, I was 100. It was clear to me there was nothing more.

So it made me think — what is driving this? What is different about this place that is driving somebody like me to want to go at this pace and working for [Doug] who is driving me to go at this speed? [Laughs] And it wasn’t that. That’s amazing. First, it was this sense of ownership. I was an intern from business school. And I had the head of the firm, investment committee, asking me what I thought about a deal. Nobody in my previous experience had asked me what I thought. It was always an analyst. In the first [unintelligible] Sequoia as an intern, I sat next to Doug, and he asked me what I thought. And I didn’t know. I didn’t have an opinion ready. And that meant that for the next one, I better be prepared. I better know how to give a good answer. So that level of autonomy with ownership was what [unintelligible] how flat the organization was.

There was not all these layers where the CEO was over there. It was like everybody had the same room. Mike [Moritz] didn’t even have an office. He had a chair in the hall, and you were like talking. So that to me was culture. And culture was driving that motivation. The other thing I heard a lot about at Sequoia that I was able to learn when I was sitting in front of this entrepreneur was hearing a lot saying the culture of a company was built in the first six months by the first 10 to 15 people.

So when I started Nubank, the first thing I did was the pitch deck for [unintelligible]. But the second thing I did was the culture deck. And this culture deck was like the constitution. What are the values of this company we’re about to begin to do? It had a lot of elements that I had learned at Sequoia, this level of ownership, this autonomy, this flat organization, this view that I personally thought drove a lot of motivation. And see, the first 10, 15 employees were so important that as we hired them with my cofounder, we were very actively looking for people that had brought that DNA.

And we codesigned this culture deck with everybody. From the designer to the first engineer, they all participated in the construction of the deck. And this was very powerful because, in a way, sometimes I think about it as the Constitution of the United States. Because the Constitution of the United States is over 200 years, it’s very short. It represents what the U.S. as a country stands for. And here we are, and people are still drawn to that. And for us, that deck was the constitution of Nubank. And today, those values are [lately] as important for us as they were when we were 10 employees. So that has scaled a lot. That gave us a lot of clarity around the people we wanted to hire, about the way we did performance management, the way we let go of people that drove all the decisions, that drove product decisions, that drove the type of language we should use in an email with a consumer.

Our focus number one is this obsession about consumers that meant hours of debate about the work that we could not use with the consumer because they were too complex. But the level of [unintelligible] ownership of everybody flat that meant customers calls would go initially to my cofounder, Christina’s phone and my phone. [Unintelligible] not a customer service person. I would get them in my phone. So I think ultimately that became a bit of the realization where culture was — what is the driving force? There’s nothing more important because culture allows you to hire people. People build products. Products bring you customers. And so ultimately, consumers won’t come to you because of your products.

Consumers come to you because of the culture. They are consumers of culture; they’re not consumers of products. And really authentic companies are companies that are able to really ultimately represent and show what they stand for. And obviously, more importantly, they have integrity. They do what they say they do. There’s perfect alignment. And this is perhaps as you scale the part we’ve been much more mindful about. The expanding culture has meant we have [unintelligible] the routine.

For example, this culture deck that I mentioned, I still present the culture every month to everybody that starts at Nubank. Since the beginning ’til now, it’s me. I don’t delegate it to anybody. Every month, I present this culture deck with the values to every single person, from the customer service, the receptionist to the engineer. They all go through this onboarding session with me where I present them the deck. And I think that shows the level set, the [unintelligible], the transparency, show how important culture is, the values. But then every single time thinking about the decisions you make, you have to bring those values back in. So I’ll give one last example just to exemplify this. About a year ago, one team came back and said, “Wow, something is happening. We’re making more money per customer.” Suddenly, the cohorts, the economics start increasing. You see a [blip] of revenue per customer. We went and looked and tried to figure out what had happened. And it turns out that through a bug in a system, an engineer had removed an email that reminded the customer to pay on time. Obviously, customers were being late more, and we were charging more late fees. It was very simple for everybody to know what to do because we had a framework of values that provided context around that decision. The right thing to do was not only go back and put that email, but also go back to customers that have overpaid and tell them, “Sorry, we made a mistake. We removed this email that you should have received. We’re not going to charge you this fee, and here is your money back.”

To me, that was a really powerful example, because first, 99 percent of companies would have done the exact opposite. They actually would have said, “Ah, let’s see what other email we’ll remove,” right? “This is great. Let’s take this email out. Let’s take this email out to make more money.” Even companies that say they’re consumer-obsessed probably have had a lot of really tough conversations of somebody saying, “No, the customer should have known. It was his responsibility.” For us it was, “There’s clarity. We want consumer obsession. Put that money back. Put that email back.”

And then the answer ultimately is a teaching moment for everybody. Why doesn’t it make sense and why isn’t it consistent with the business? Because when you’re a consumer and your bank is telling you this, you say, “I will never go anywhere else for the next decade. You’ve got me forever. Nobody else will do that for me. And that exemplifies very well what we think, which is ultimately this culture is aligned with business objectives. We get to retain that customer for a decade now because we reimbursed a dollar in a late fee. So, ultimately, that is a very powerful example internally and shows the integrity of the culture, which is actions speak louder than words. And this example ultimately exemplified that very well.

Christopher Stromeyer: I want to switch gears a second and talk about South America, a region that’s close to both of our hearts. As you mentioned, Sequoia pulled the plug on Latin America in 2012 because of a lack of tech and entrepreneurial talent. And last year, they came back into Latin America. In 2017, Nubank opened an office in Berlin to attract tech talent, right? And now we have a classmate of mine out in this audience somewhere who is gringo as gringo gets and is moving to San Paolo next year to join your team. There’s a transformation happening, but how far do we still have to go?

David Vélez: It’s early days. There’s a lot of work ahead. I think the future of every industry and every country is technology companies; like there is no way back. I think it was obvious in retail initially with Amazon and then companies like Netflix in media and companies like Uber in transportation. Every single vertical of the economy will be owned 10, 20, 30 years from now by new digitally native companies. That means that every single industry you see today in any country in Latin America is going to be reinvented. And sometimes we’ll be the incumbent that will be able to reinvent.

That will probably be an exception on the rules, but there is a huge opportunity to reinvent all economies in all industries. Now who does that reinvention? Entrepreneurs and very much engineers at the end. We’re starting to finally get entrepreneurs in Latin America. Hopefully all of you, even the gringos, go to Latin America and start businesses because 12 years ago, that was not happening. People were going to the consulting firms. People were going to the big companies. And the few entrepreneurs were just, again, looking at the clones, looking at this stuff, but there was a lot of opportunity. Reinvent banking, reinvent healthcare, reinvent telecom, reinvent transportation.

Now engineers, that’s a big, big problem, very unresolved. It’s one of the reasons. If all industries are going to be reinvented by tech companies in Latin America, there are two options. They get reinvented by Latin America technology companies or will be American and Chinese companies that will be global and will be [unintelligible]. If it’s Latin American companies, you need engineers. And there are not engineers in Latin America; there are not. I remember with Doug in University of San Paolo, 42 computer science engineers graduating in 2013. Brazil graduates I think something like 30,000. I was looking at the numbers in Columbia a couple weeks ago. There are 10x more graduates today, there are 10x more people studying law in Columbia than computer science. It doesn’t make any sense. And what’s strange is you would think initially you would say the lack of this bottleneck and you would think it’s a supply issue. Nobody’s teaching these people computer engineering. It’s actually a demand issue. These students are graduating from high school today, and they’re still choosing to do business administration or law when there is about half a million gap of computer scientists in Latin America, which is more or less the bottleneck. So, unclear how to solve that.

There’s a big opportunity. There’s a big challenge. If we don’t’ solve it, there will be Chinese tech and U.S. companies owning all the industries in the [unintelligible], because somebody’s going to do it. If we solve it, somehow we grab all these people. There’s a huge opportunity to not only reinvent all the economies in all of these countries, but also to contribute to solve one of the biggest problems that we have, which is opportunity and income inequality. Because if it’s just a few companies from abroad, then you have this extreme concentration of market gap in some of these companies. And you don’t have the Latin Americans contributing to that. So you’ll end up with much, much higher income and equality.

If you solve it, then you have all Latin Americans building their own programming and design and product, creating the next companies they’re going to be reinventing in this region. So it’s almost like an existential threat for all countries right now globally.Same thing happens in Africa. Same thing happens in Asia. The problem is that I would say [unintelligible] and perhaps Africa were just farther away. And even though I think here at Stanford for us it’s almost like it’s clear now what’s happening in the next 10, 20 years, you go and talk to the student that is graduating in high school in Guadalajara or in Cali, they don’t see it. They don’t know what’s coming. They haven’t seen it yet.

Christopher Stromeyer: Speaking of inequality, your wife, Maria, lives here today as well. And together last year, as Dean Levin mentioned, you were only the second Latin-American family to sign the [unintelligible] Pledge. Take us into the conversation you were having together. What motivated that decision?

David Vélez: We did Nubank, as I said, because we wanted to build, we wanted to problem solve, we wanted to create an impact. And it was the sheer joy of creation and creating impact. And so money was never a motivation. It was never really something that we thought about. It was not an issue. Both Maria and I come from middle-class families that gave us a lot of opportunity, and we feel very blessed by the opportunities that we had, but money, per se, was never really a driving factor. And then suddenly, this company is worth a billion dollars and 5 and 10 and 30 billion, and the [unintelligible] is huge.

And then about 12 months ago, we raised money at 25 [unintelligible] and you start making the numbers, like wow, this is a lot of money, and we don’t need it. We don’t need this money. We don’t need it. We don’t live a luxury life. We don’t need it. It just feels like a big responsibility suddenly because, going back to impact, that’s what drives us, and then it becomes a big responsibility. Like how do you use this money to provide the biggest impact possible? You go back to the same driving factor, the impact question. I have read a book that I recommended everybody to read. It was one of my morning [packs] of books called, A Billionaire who Wasn’t by Chuck Feeney, the founder of Atlantic Philanthropies. It’s a fascinating book where he goes for 20 years doing philanthropy in the world. He decides that he wants to spend all the money while he lives. And he says that he wants his last check to bounce. And I thought that was the most powerful analogy.

And when we started thinking about it, we said, ‘We want to be that person.” Because if you start thinking about it, first, what a great opportunity. All society is going to change. And we’re benefitting significantly from the change of technology. But second is it is going to drive significant [unintelligible] equality. And so philanthropy and social impact, giving back, plays a role. Buy why delay this ‘til the end when you’re 80 years old, when you’re tired, when you don’t have the energy, when you don’t necessarily bring the clarity of mind to solve problems? Even worse, why dying and leaving all the money to a foundation of people that will do it or to your kids where a lot of the times that is just going to make more damage to them than good.

So we decided we do not want to leave it to the kids. They will be loved. They will get a lot of opportunities. But living [unintelligible], we don’t want to do that. So number one, not to the kids. They’re young and they’re not looking at this. But one day, they’ll be very [resentful]. I hope not. I hope they’ll get to understand why we’re doing this, so number one. Number two, we’re all dying, at some point. There will be one day where we won’t exist anymore. I think it was Andrew Carnegie who said, “Who dies rich, dies disgraced,” because there is so much pain and so much problems to be solved in the world today. It’s like, why would you delay it? Why would you not use all that money now to solve those issues? Why would you wait decades if you can make a difference using your energy, your mind and your money to do that? Why die and risk not participating in the solving of those problems?

So all of that, there was a big, kind of brainstorm that led us to the decision that we want to give it all away. We want our last check to bounce. And we’re going to be thoughtful about it. We’re going to set it the right way. We’re going to build a family foundation. We’re going to go back and use a lot of the tools that Stanford and business gives us of think back on first principal, think about these problems. What is driving this inequality? Where is the highest impact per dollar spent in the region? And how can we over the next four, five, maybe six decades use this money and energy to create as much impact as possible? And so we’re in the very, very early days of that journey. It’s a very interesting question.

I think philanthropy needs to be disrupted. There are a lot of lessons. We see ourselves with Danielle here who is also [unintelligible]. We find ourselves admitting using the concept of computer science in philanthropy, talking about platformization, talking about Open Source, talking about Crypto. And there is a lot that can be used to start addressing some of these big problems that ultimately not led this technology become one more driver of inequality, but actually have it be an enabler of more equality, of opportunity for everybody.

Christopher Stromeyer: Let’s actually end on that note for now.

[Applause]

Christopher Stromeyer: Incredibly inspiring and a motive for action. I want to go to some audience Q&A. I know we have a lot of questions. The first question is right over here from Ben.

Ben Goldwater: Thank you very much for being here. I’m Ben Goldwater, MBA Class of ’22. One of the reasons I’m very excited is I’m coaching someone who tells me he wants to be the next you in 10 years. So financial products, there are kind of two sides to each coin. You can help people, but those products can be damaging. I’m thinking about consumer debt. You can give someone access to resources, but interests can be crippling. I’m curious how you think about what products to launch and what guard railings you should put around them.

David Vélez: No, It’s a really good question. Going back to culture, knowing that we are consumer-obsessed first and we’re doing the right thing for the consumer allows us to move back and then define the product versus what happened in a lot of the banks, which is how do I make more money by this product and just launch another fee or increase the interest rate? Or you end up what you see in most banks where you have 110 different fees. If you look at one of the big banks in Brazil, their fee table is 110 different things — two cents here, one cent here, ten cents here. Just send me a text message. I’ll charge you. We went and said zeroes. Our fee table is just a bunch of zeroes.

So we start with this [unintelligible] pricing of the business and figure out how we can create a sustainable business model that provides a lot of simplicity and transparency. And then, specifically with credit, there is a lot about aligning incentives. We’ve been fully aligning incentives. We only win if we provide a line of credit that’s going to work for a customer because we get to maintain the customer for a very long time. If we provide the wrong product at the wrong price for the customer, that customer will be in massive debt, but we also lose a very great customer that we could have in our base. So, that just means that it’s [great] underwriting, it’s [fraud] underwriting, it’s [unintelligible] sophistication around modeling. There’s a lot of simplicity in the language, a lot of transparency in the communication with that customer and always trying to be fully aligned with him or her.

Christopher Stromeyer: All right. Next question, over there.

Alexei Andreev: Alexei Andreev with Class of 2022. I’m a founder of venture capital firm, Autotech Ventures. So a question to your cultural, behavioral, managerial style. A lot of companies are struggling to transition from, let’s call it, flat organization with free flow of information and very egalitarian decision-making into more structure in businesses. Once you scale, you need to create business units. You need to create responsibility and accountability and reporting articles. What would be your advice? At what point do you say, “Okay, I cannot be flat anymore; I have to verticalize?” And do you have any recipes how to protect the culture and still maintain the culture of this open exchange as the organizations scale?

David Vélez: That’s a great question. I said about the culture deck and how little has changed through the years. A few things have changed. And one of them was, again, going back to this mindset of trying to reinvent everything and think everything [unintelligible] principal, we came in and said, “We’re a flat organization, and our deck said flat organization.” And that was a really bad idea.

It turns out that if you’re completely flat and everybody has an idea, it’s complete chaos, and you become really slow. And you end up with this system of consensus where everybody needs to agree. It turns out that consensus is actually a driver towards lower-risk type of decisions, which means that you end up with a lower-risk type of organization. And you also slowed down your product. So after seeing all this happening, and you always go back and kind of question yourself about why this doesn’t make any sense, and kind of the realization was hierarchy is a good thing. There’s fundamentally nothing wrong with hierarchy. Hierarchy has existed in human organizations for over 5000 years. Almost every organization has a hierarchy because hierarchies are very useful ways to organize a larger group of people. What’s not good are hierarchies that are created sometimes for other purposes rather than doing the right thing for the organization or doing the right thing for the product. And what are some of those things?

Remember going in San Paolo where we were renting a new building, and I got a question from the architect of our new building saying if we needed a special elevator for the directors. And I had no idea what that meant, until I was invited for lunch at a big bank, and I saw myself going to a special elevator to the top floor that was for directors, and it had waiters with white gloves serving me lunch in a silver platter where everybody else in the organization were [not] eating food. So that is the wrong reason to build hierarchies, symbols of power and ego. And a lot of hierarchies ends up being [unintelligible] by the ego of the founder, by the ego of the directors. A symbol of power is the big corner office of the CEO. When you have a little cubicle or having a special parking lot for the CEO, why? I would love to go, and I’ve never done it; I will someday, go to the CEO [of one of these big organizations]. Explain to me why having that restaurant only for you and that office, how can you tie that directly to better business performance? There isn’t. There is no way to justify those divisions through better business performance. It’s ego.

So I think that’s when your organization hierarchy ends up being a bit corrupted because it’s just more ego and power and titles that are driving a lot of layers rather than doing the right thing for the organization. So we have a hierarchy. It’s as flat as it becomes. We try to organize ourselves in autonomous units, but with a clear leader that has real accountability. We don’t believe any more on group decision-making. It’s simple — we want to hear everybody. But ultimately, we’ve got to make a decision, and there’s got to be an accountable person to make that decision so we can move. We don’t believe in consensus necessarily. If consensus arrives, excellent. It doesn’t, we have to make a decision. And then you have a hierarchy with many layers with clear lines of accountability in the organization. And that allows you to drive fast. But ultimately, it’s all about business performance and driving [unintelligible]. It’s as egoless and title-less as possible so you can remove that from the day-to-day.

Christopher Stromeyer: Great. We’re almost out of time. I know there are more questions, but unfortunately, we’re almost out of time. But before we close, we want to do a traditional View From The Top lightening round. Are you ready? Columbia did not qualify for the FIFA World Cup. Who are you supporting?

David Vélez: Brazil.

Christopher Stromeyer: That’s the wrong answer. Let me try again.

David Vélez: So I got one now, so all Brazil.

Christopher Stromeyer: Messi or Reynauldo?

David Vélez: Reynauldo.

[Applause]

Christopher Stromeyer: Okay, we should move on. Favorite class at the GSB.

David Vélez: Touchy-feely.

Christopher Stromeyer: Biggest learning from that class?

David Vélez: It’s simple insight, but really, really powerful, which is success is driven by people. If you are better at relating with other people, that’s a huge advantage because everything you do is with people. Your family is people. Your personal relationships are people. Your companies are people. Your teams are people. And ultimately, being able to create strong bonds with people through vulnerability and knowing yourself way is a very, very powerful super power.

Christopher Stromeyer: Worst piece of advice you’ve ever received. Bonus points if it’s from Doug.

David Vélez: [Laughs] Yeah, exactly. Don’t launch a digital bank back in Brazil because Unibanco Bank failed in 1999.

Christopher Stromeyer: Better parties, Stanford Undergrad or Stanford GSB?

David Vélez: Oh, I think GSB.

Christopher Stromeyer: We can all relate to that. Last one. Favorite memory with GSB?

David Vélez: Favorite memory at the GSB? There are just so many. I think it was just being in our house, appropriately named Animal Kingdom, with some assortment of these animals right here, Animal Kingdom, with allusion of Animal House, and just spending time with friends, having a beer in the afternoon, grilling a burger and having just a great blast with great people.

Christopher Stromeyer: Ladies and gentlemen, please help me thank David Vélez.

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