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hello everyone and welcome back to conversations with tyler i'm here today with pierre palo barbari of argentina he is the ceo and founder of voila a major fintech firm in latin america he's an executive director at green mantle
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a geopolitical consulting firm general all-around very smart person and his senior thesis that he wrote at harvard called hitler's shadow empire the nazis and the spanish civil war was later published by harvard university press
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berpalo welcome thank you it's a great pleasure to be here tyler thanks for the invitation the onset of central bank digital currencies how will that change the world i think it has the potential to change the world
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dramatically but it's going to take time i think that the world needs a new way to send money across borders and i think that over the medium run the the what the chinese are trying to do with their own digital currency threatens the overall supremacy
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of the dollar and the ability of the united states to impose sanctions uh beyond its borders and so the centrality of the dollar in the international financial architecture is threatened by the fact that other countries will want to use their
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new digital currencies to push forward first international transfers then bilateral trade and finally potentially trade and and transfers within their blocks uh in a way that will erode not destroyed by a road the the
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supremacy of the dollar that we have seen over the last 100 years so in this scenario does china have free capital movements not necessarily but it does have a protocol of transfer that is digital that allows you to do
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external transfers with with some state-approved entities and then bilateral trade between two central banks and so what they're premiering with thailand and with malaysia is very interesting because it sort of suggests a possible future
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where the the digital yuan is used to open the capital account on a selective basis in ways that they can control without opening it to everyone and the digital yuan and the internal wun in china do they trade at a one-to-one rate or they're in essence different currencies in in theory yes but but you could potentially see a scenario where there's a divergence in price it's not necessarily my base case but i think what what they're trying to
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do and this is less important for the us dollar because it's freely convertible um is is the ability to um decide who you open with and how you open and meanwhile push an alternative way to denominate international trade
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that is not dollar dependent and i think that's the real optionality that they're gaining but given the failures of chinese soft power and the china more and more seems to have global preferences over what happens why would other countries trust a
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chinese digital architecture more than say swift aren't they just trading in one master for another and ultimately they prefer the devil they know which is united states i think for a lot of countries that will be true but you have to consider
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the weight of chinese trade for certain countries and how chinese trade for certain countries in southeast asia and also in latin america is so important that at least certain countries driven by ideology or just the
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need to diversify their future options would choose to at least leave the option open of doing some transactions in this new currency and not entirely depend on the us dollar so i'm not saying you fully replace one master with another but you
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hedge masters in a way that somebody would have done in 1910 when you were thinking about you know the british sponsored international system or the american system and so you you're an emerging market you might want to
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hedge your bets and see what happens and in we all have to recognize and this is something we spend a lot of time thinking about um swift is old and it's inefficient and it's extremely expensive and so the real opportunity of digital
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currencies lays not in necessarily the the novelty but rather the possibility of supplanting a system that has been very cumbersome and extremely expensive for a long time and so it doesn't start by just replacing the system
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but it's just inserting competition into the system and so if you are going to have a transaction on swift that costs you 200 um and it takes years to clear or sorry days to clear um that won't change in in years you have to think about decades
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and so people may want to start transacting in that in that mode in a way that lowers the transaction costs and makes international transfers easier and so both from a firm perspective and from a government per step perspective
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it may allow you to hedge bets in a way that you wouldn't otherwise have been able to 10 or 20 years ago where swift is the was and still is the only the only real system that you have now i very often send remittances to mexico as a form of charity and i pay fairly high implicit fees on that transfer under this new payments architecture how exactly does that transfer become cheaper in a relevant ground to ground sense where is the cost removed
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the the cost is removed if you have a direct way to connect say a mexican wallet to where we operate now an american wallet where we do not operate but if say we have a way to to connect voila in mexico to an american
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financial institution then we can um net out the transactions and do one transaction at the end of every day because we have a protocol of transfer so that instead of doing a swift each time an individual sends money to another individual or a firm
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sends money to another firm we can just net it out at the end of the day with one financial partner so you drastically reduce the cost and then you insert competition and if you're not doing this in in i mean transferwise is doing a version of this in europe and increasingly in other countries um but i think that you could foresee a world where there's a federation of financial institutions or wallets that have non-swift connections between them
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that allow those private protocols and you could even have it you know with a with a stable coin in the middle at some point to net it out in a way that it doesn't involve individual transactions that increase the cost the people i send
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money to they're not really literate in most regards they're not numerate do they still have to schlep to a branch office in iguala and show an id and pick up the money no that's the revolution but that's how do they how do they
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handle a wallet right no but i mean that that's the revolution and you know if you want to specifically talk about mexico it's fantastic because it's my my first international market and we spent two years designing the
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product that we released there and today we reached the first 100 000 accounts and it took us less than half the time it took us to reach that amount in argentina the real difference in mexico is that seventy percent of people is are as you said
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um uh outside of the system and so they don't have a means of payment that is in cash and that's the real one of the real tragedies of mexico because 86 to 87 of transactions even after covid take place in cash and so the first thing that you have to do is introduce these people to the idea that you could have a means of payment that allows you to buy something or get something that isn't within your immediate uh eight block or ten block
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radius and so when you have a card and an account then you free yourself from that branch where uh your friends or your or your family members go to to get the cash and that's the guy that has the racket that the real expensive fees are charged by the company that says i'm the only game in town i'm the only place where you can send these people cash why because cash is the only thing they know however if you have a card and an universal account
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which 70 of mexico doesn't have then you have the ability to use that account to receive the funds and cut out the person that has that little branch that branch is unnecessary at this point because even if mexican networks is not
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as good as u.s networks you still have 4g in most of the country the problem is that we cannot give people accounts and across latin america the reason we started voila is that over 50 of adults are in that situation of never having
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had a payment mechanism you need to make it super easy but it turns out you can teach people how to use a mastercard because everybody wants netflix and everybody wants to have the ability to have spotify so once people learn how to
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use the account and the card then you can boost that and give them the ability to receive funds in those accounts and then you can you know you don't have to do the financial engineering at the personal level you do it at the company level
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but the person sees radically lower transaction fees okay so my friends they're comfortable with prepaid cards what does voila offer them that a normal plain old prepaid card does not well first of all we're a debit card in
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mexico we're fully regulated as a debit card and so what we give them is the ability to build an ecosystem from the card a prepaid card usually is issued in emerging markets by a company to spend only on that company so it's an amazon
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prepaid card and a netflix prepaid card so they go with cash and they literally exchange that cash for a car that can only be used on amazon the beautiful thing about a wall account is that the account can be used for anything
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and the card can be used for anything it sounds revolutionary in in uh for a number you know it sounds like nothing new for a developed market but it is revolutionary for an emerging market why because what you're giving them is
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the ability to transact in anything and so you're doing away with one of the biggest costs that they have and the reason they use prepaids in the first place which is that whenever they talk take cash they charge you a fee for turning that cash into an amazon prepaid card the little spot in mexico the little bodega charges you a two percent fee and then they charge amazon too we do away with that and so we say there is no digitization
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tax and so if you have a hundred pesos you'll see a hundred pesos reflected on your wild card and suddenly all these people that are now over 100 000 in mexico say wait wait a second you just made digital money as cheap as real money so why would i use money in the physical sense i use digital money because with this i don't have to worry about my cash being stolen i can use different services i can pay my bills without having to pay an extra
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to the to the guy there eventually i can receive a remittance without having to pay an egregious fee i can top up money i can re re-top my cell phone which also other people charge for and we don't and in the meantime we're building that
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person's credit history so that like we're doing it in argentina but we're not yet doing in mexico i can then lend you against that credit history that is now digital because before when you transact it only in cash there is no way to know if
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you're going to pay your bill but suddenly if i know where you pay your bills and how you pay your gas and your water and how much you spend on netflix and how much you get every month from your friend across the border in the united states
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then i can finally create a credit history in a way that is more transparent and frankly easier than what existed before where 70 of the country was outside of the system completely where will a cashless society come first
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i think in in northern europe and definitely i mean china is headed that way i think that why in those countries and not others like in the u.s currency per capita is rising that may be held abroad but still currency is far from
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disappearing no absolutely and i think the dollar is very particular because a lot of emerging markets people want to save in u.s dollars i as you mentioned earlier i grew up in argentina argentines hold an amazing amount of
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physical dollars because they don't trust our banking system after the implosion of 2001. and so i think that it'll remain a constitutional right to hold cash if you want cash is anonymous in a way that a lot of people
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value um but i think that that there are societies in which you basically don't need a card i i i you know when i'm in new york i don't remember the last time i was i was i used cash in new york city and so i think a cashless society is driven
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by the fact that the regulators want to see a lot of transactions as in china but it also could be driven by the fact that from a convenience perspective you can create a better credit history without having to deal with the
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difficulties inherent in cash which is dirty expensive for the state hard to manage easy to steal hard to save on that and so i think that that in places like sweden or denmark um cash is going away very quickly the problem is that there are certain
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regions in the world and that's what i do what i do that where you know 50 of adults have been completely left outside of the system and they don't have a way to transact because the banking system gave accounts to the
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people they wanted to give accounts to and they left everyone out which is why those banking systems are so damn profitable you know the mexican banking system which serves only 30 of the population is amazingly profitable it has much better margins
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than a european banking system or an american banking system because they just said well you know i'm going to serve this strata of society and leave everyone out and it's so much carnalized right exactly and the same in argentina and
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the same in brazil where another company like new bank is is triumphing and so and so what we see is a latin america where we need a lot of people to provide those services so then we can can build the credit history
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and and we can insert some competition into a system that had been kept for very few people by a few people and so i always say the same thing we ask the public to believe in democracy and capitalism and then we don't even give them a way to pay for netflix and so it's and very inherently an equal situation where we you know when we launched walleye in argentina people used to sell um netflix subscriptions on our ebay which is mercado libre
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and that's outrageous because netflix prices their services to be freely available to anyone for you know in these in these geographies for four or five dollars a month and yet they couldn't access it because they didn't have a payment mechanism and
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so the payment mechanism opens the door to a credit history to savings funds to insurance to making all those financial services that are readily available in the developed world in the developing world that are really
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interesting cost structure what factor will determine whether or not crypto outcompetes you i mean i don't think crypto is competing with me because it's very difficult to go from cash directly to 100 crypto and so an intermediary can do that right
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so there can be a startup akin to yours but the transfer occurs in crypto there's an optional final conversion into cash if you're dealing with people at the wallet level why not trust crypto more than a government currency
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especially for mexico and argentina two countries the history of which i don't need to tell you about well actually mexico has pretty good financial stability recently yeah in 94. yeah so um i i we see very high levels of adoption in in places like venezuela and argentina for crypto i respect that i think uh bitcoin is is a very useful store value not great to transact on your daily needs i i don't remember ever seeing anyone pay for a coffee in
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in bitcoin and those people who used to sell coffees in 2011 for for bitcoin now they want to um you know uh forget about those transactions given what they missed out on but there could be a crypto option and i think it's part of the ecosystem
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but when you think about it when 50 of adults have never had a payment mechanism what they want to do when they first get it is sign up for netflix sign up for spotify pay for a game on playstation pay for something on steam buy something
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on mercado libre or amazon none of those platforms take crypto and so the day after tomorrow when they do maybe there's an argument to be had but you know only only you know it's not a first transaction you do when you digitize to
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go buy a test line bitcoin it's quite right say you're outside of the earlier phase of your company where you're just seeking to build the size of the network right and become a kind of dominant source of network externalities
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and you have a portfolio you're taking money from people in a sense that's like deposits for a lot to make money don't you need to make loans and if you make loans then aren't you a bank that's a fantastic question so um it
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depends on the geography and it depends on what we do first of all we operate like a narrow bank we are we are um we can have the argument about whether i should be regulated as a bank or not in fact it was reported on friday that we bought
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a traditional bank um although we are waiting for central bank approval to integrate it because obviously you need central bank approval um but we've always operated 100 of reserves so we never lent out deposits and so the rule in argentina has been if you operate with 100 of reserves and legally you don't lend those deposits you do not need to be regulated like a bank why can i have a business model that that relies on that first of all we do
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have lending but we do it with investors money we don't do it with our deposits so the deposits are kept on separate accounts that are never lent because otherwise i would violate the rule by the central bank and therefore i would have to be
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regulated by by the central bank as a bank and so unlike other fintechs we don't derive most of our income from lending in fact um most of the revenue we derive is either from the very low fees that we charge on asset management which are the
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lowest in the market we charge less than one-fifth of our competitors because i'm sure you're not going to be surprised when i tell you that in argentina and mexico the incumbents charge four or five percent fees on aum just to give you a low risk money market fund because inflation's high and so they charge you egregious fees second we we make quite a bit of money on interchange in that sense we're more similar to the united states than we are
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to the european neobanks because interchange in latin america is quite high and so we can make a lot of revenue just by having those mastercard transactions on our network versus someone else's network and thirdly we're also in the net in the business of merchant acquiring which is growing a lot and so once we've built the network on the payment side we can build the network on the merchant acquiring side which is kind of reverse square and
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square started with merchants and then it went into personal accounts we started with personal accounts and eventually moved into merchants but all those transactions are amazingly profitable and we are once again the most competitive um player in the
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system because lo and behold the only player that existed in argentina doing merchant acquiring at this level giving you live transactionality used to charge six percent of every transaction versus two percent that you pay in the
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united states why because there was no competition so what did we do we launched the product that was 45 cheaper than the competitor and guess what we're growing 100 month on month and so we have a suite of of products that allows us to be competitive and
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drive a lot of revenue without having to lend deposits i can see if what you're doing is forcing cartelized banks to become more competitive but it seems to me in the broader sweep of economic history which you know quite
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well 100 reserve banking has never really been competitive and won't it be the case you simply evolve into being a banker merged with the bank with superior software capabilities but you have to end up lending just to stay profitable i don't think you need to end up lending i think that lending eventually becomes 20 to 30 percent of your revenue share that's what we project five years from now but it's not on you know there are other fintechs
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that rely more heavily on that because they don't have a full ecosystem and so if you look at the chinese players like like baba and tencent tencent full disclosure and as an investor and voila you don't need to rely on lending for so
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much if you have a very good payments product and if you have fee earning products on the asset management side or on the merchant acquiring site in fact merchant acquiring for instance what square does is more profitable
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um on a per dollar invested than lending is even in geographies like argentina where lending is is very has very low competition the problem at the core is what you said there's cartelized banks that never wanted competition that
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always charged for things that were never a reality in the developed world it's the same institutions in spain that don't charge opening fees maintenance fees renewal fees that do so in latin america in places like mexico or colombia or
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argentina where every time you go to the bank they charge you for an opening fee or maintenance fee or renewal fee so we insert competition and we do it with radically lower costs because we lower the cost of running a financial entity by 85 percent why because we don't have any branches we don't have any of the fiscal infrastructure we don't do our credit history on paper as the banks still do in latin america and we give an account to everyone
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and so that gives us an economy of scale that other people just cannot have and the banks don't move fast enough let's say we take away your short-run advantage just from being smart and better at software and we look at a longer-run steady-state equilibrium what is the factor or the variable that determines if the market will be filled with institutions that make money from loans as opposed to institutions that make money from payments on fees
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what does that depend upon that is a that is a fantastic question i think it depends on a variety of factors first of all is the macroeconomic stability and in a place like argentina if you only depend on loans there are times
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when you have a recurring crisis and if you have a crisis every 10 years it used to be the norm or crisis every four years your whole lending book could blow you up if you don't have access to any other type of fees and that is why
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you know historically speaking argentine banks have pivoted in and out of lending a lot very regularly in a more stable economy i think it depends on the kind of quality of the ecosystem that we have and what kind of competition exists out
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there so i could have a very profitable asset management business on its own but it's less defensible and so eventually there's going to be more competition and more people are going to get into that business and so eventually
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i think the value is in the whole ecosystem and that's something that we can learn in the new steady state that we learn from china where people want to have all their money managed in very few platforms and then different platforms are able to channel a variety of services tomorrow in argentina we're launching insurance in partnership with willis towers we're going to be the first fintech to offer direct access to insurance products on
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a fintech platform and so there you want to move faster and offer services that are similar to what the banks do in a more digital way without the associated costs of the banks but i think eventually there are positive externalities that come with
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having the best and fullest ecosystem in the same way that that facebook was able to profit from having uh the network effects of having a just a better ecosystem where more people wanted to join and then economies of scale also help
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financial institutions because unsurprisingly when you have ten thousand cards nobody picks up the phone when you have a hundred thousand cards people start picking up the phone and we have three million cards then everybody wants
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to be your partner and everybody wants to sell services through you and that means that they want to sell it through you and not someone else and so that should help you keep staying ahead of the game and in the steady state diversify away from
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having uh you know 80 revenue from lending institution to a 20 revenue from lending institution which i think is also from a from a stability perspective smarter in a place like latin america where historically speaking you have a lot of potential um uh you know macroeconomic negative uh effects why did argentina's liberalization attempt under mockery fail well that's a great question um there's a there's a very big ongoing debate about that
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um i think that um there was a huge divergence between fiscal policy and and monetary policy in the first two years of the macro administration and so the fiscal consolidation was not done fast enough in 2016 and 2017 and then needed to accelerate
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dramatically after um the you know taper tantrum if you want to call it or or perceived higher global rates of 2018 and so macro had to run to the imf and then do a lot of fiscal consolidation that hadn't been done in
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16 and 17 in 18 and 19. and ultimately that's why he lost the election generally speaking i think i think that's the short-term you know electoral answer there's a wider uh answer which is that um i think that many of the deep reforms that argentina needed lacked or lack wide consensus and so i think there is no question that argentina needs to modify how the state spends money and what's its propensity to have larger fiscal deficits that
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eventually need to be monetized and then we restart the the process and so there's a there's a great scholar locally called pablo gartunov who's written a very good paper that analyzes argentine economic history since the 1950s and sort of shows how we move very um schizophrenically between two models one with a high exchange rate where we all want to um export a lot and then when elections approach people want a stronger local currency so that
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we can import a lot and feel richer and then the two models don't have a wide acceptance on what are the reforms that are needed and so i think that that in retrospect macri would say that he didn't seek enough of a of a back a wider backing
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for the kind of reforms that he needed to enact like spain did in 1975 if you will or chile did um after pinochet um having some you know basic agreements with the opposition that would outlive a defeat in the elections as you know
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there are other latin american economies that have reformed mexico fiscally used to be a mess now the central bank the fiscal authority are reasonably responsible what is it special about interest groups in argentina that makes fiscal consolidation infeasible for governments that really mean to do the right thing right that is also a great question and one i i think a lot about and um first of all i i don't have the magic answer i wish i did um
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i think that that historically speaking um i think that that generally we have oscillated between these two models and the it is not widely understood sometimes in argentina by certain politicians that eventually if you run persistently
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large fiscal deficits you eventually have to monetize them and the monetization of those deficits leads to inflation in a way that it hurts the people who have the least in society because the rich are able to hold real
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assets that generally do well in an inflationary scenario and so the losers of that are the people that end up voting for those policies but we do have politicians that don't really see that and even you know just 10 days ago
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there was one very prominent politician that is part of the governing coalition who said we need lower inflation for the elections and we also need more pesos on the streets and he he literally said that as if the two things were not an oxymoron
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but the pedernista movement won in argentina right ruled for some time the reforms in 2001 failed the more recent reforms failed is it that i think look argentina was argentina was an amazingly successful reform story in 1995 1996 1997
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and so you know the convertibility that domingo cavallo brought and and the liberal presidency of aprionista carlos menem in the 1990s under the aegis of the of the washington consensus was successful and i think the problem there
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was that argentines became enamored of of the idea that they were suddenly a rich country that were suddenly developed they were suddenly had this peg that nothing could touch and so they kept it too long and so if argentina had exited convertibility in 1997 or 1998 after the russian crisis let alone after tequila in 94 if if they had if they had known that they needed to float the currency to avoid an unsustainable physical path then you
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would have avoided the the collapse of 2001 which you know caught me as a 14 year old so i i know you know firsthand what it is to feel it i think that there weren't deep reforms done in 2001 2002 but there was a social collapse
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that led to to a very radical change in the pironis party and a destruction of the consensus that had existed until then and and you know suddenly argentina was able to grow at chinese rates with no inflation despite fiscal spending
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because the fx was was um was just so high and and ultimately that that um that was not used as a time to do the necessary reforms for long-run economic growth and a lot of the you know the the political timelines and the personalities involved
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can be blamed for that but i think we can all agree now uh 20 years since then that argentina didn't enact the reforms that mexico did that colombia did that peru did and a lot of it there's a cultural answer to this which
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is that argentines think that we can take the easy way out and for these things to be fixed we cannot we have to do what everyone else did what israel did what peru did what mexico did to bring down inflation what brazil successfully
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did to bring down inflation it takes years and it needs a broad consensus because you cannot avoid doing it between one election and the other what is the economic future for uruguay your neighbor um uruguay has a very good
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economic future i think it's a very um you know if you're a ppp basis very successful economy open small you cannot really be close when you're that size and um and it has a great future exporting digital services to the world i personally believe that that's what also argentina should be doing and that's part of what i did walla and started walla here is because i think that argentina has needs a digital soy you know argentina has had a very
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efficient agro exporting sector since the 1860s and 1870s which led to its fantastic wealth in 1880 and 1890 and 1900. but it hasn't reinvented that model and hasn't reinvented itself it still has a fantastically good educational system it creates a lot of interesting companies and great talent and so it should be exporting services and i think that's a little bit of what uruguay's doing with a more pro-market pro world integration view
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that is making uruguay richer every year more developed every year and more competitive every year will miami be the tech center of latin america or some other place that's a great question i think miami is making strides um but for now the the the tech center of latin america remains sao paulo i mean the brazilian companies are five seven years ahead of the rest of the ecosystems in the region i think that it's a great place to start a company
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and we had incredible success stories you know starting with my competitor newbank which was started there as well as banco inter or kintondar or loft which is started from by a friend in college all those companies are there and there's readily available
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capital everybody wants to invest more in brazil and you have a huge domestic market so as i always say you know when you're a brazilian company you have zero incentive to go abroad because you have such a large internal
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market in a way that also the united states does but you know a lot of the internet revolution if you think back to 1998 and 1999 started with argentine companies that's when mercado libre was was started in argentina that's when
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says casara started paragon and i think that that argentina does have a great talent pool and it needs a better ecosystem which has been eroded in the last 10 years and i think that that's starting to change with companies like out zero
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um and and despegar here and obviously mercado libre which is still a huge employer and of course globals argentina has a good chance of of regaining lost ground but for now the capital of tech in la nam is is very much sao paulo in cultural terms the startup market in latin america still seems underdeveloped to me so a few days ago i looked at the per capita income of paraguay right which is not a country leaps to people's minds it was about
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seven times higher than that of india a highly imperfect comparison but nonetheless much wealthier than india yet in the world of startups india compared to latin america it doesn't even seem close and what
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culturally do you think is keeping latin america behind or would you dispute the categorization i would say that that um first of all there's a huge cultural difference in the in the proclivity of people to go into startups i think it's only become
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cool in in in recent years to to you know become an entrepreneur in latin america when i even when i grew up in the in the early 2000s in in latin america i wasn't very cool um a lot of the people that have gone abroad from latin america stay
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abroad they don't want to go back and i live 12 years in america and then return to argentina to start voila and but but those two lead me to a more important point which is the availability of capital and so there's a lot of people
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that want to deploy more capital into you know chinese tech or indian tech and their relative stability demographic profiles and size of domestic markets means that every vc fund that loves risk wants to more exposure into those
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whereas for latin america that has lagged behind when we started voila i can't tell you the amount of funds that tell me yeah we might sit in in san francisco we might sit in new york three four hours away from mexico but we don't
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look at mexico we don't look at brazil we don't deploy any capital in argentina please don't bring me your idea if you're based in argentina that's too unstable a market for us to invest and so you know in 2019 when we raised
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our series c was the first time tencent invested in argentina it was the first time that softbank invested in argentina and only the first time in 20 years the goldman sachs invested in argentina in a real economy play and we
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represented 96 of all the venture capital funds raised by argentine companies in 2019 and yes 2019 was the year when macri lost the re-election we can have that conversation but the truth is that there's a dearth of capital
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and you cannot really have entrepreneurship and people willing to take the bet if you don't have readily available capital and that has changed first in brazil why because of its macroeconomic stability generally speaking and also
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because of its availability of a huge domestic market and a lot of entrepreneurs saying well if nothing else i'm just going to copy that american idea or copy that chinese idea and bring it to brazil and finally if people are willing to
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deploy the capital i think latin america is generally grossly underinvested outside you know government bonds and the energy sector are latin american families somehow too happy too supportive and not nagging enough
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because it strikes me that relative to per capita income a lot of latin countries seem happier than average or happier than comparably wealthy southeast asian countries have you in some social ways engineered the family too well
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and that you can just stay put in the family and be accepted and no one kicks your butt across the room i think that there is a little bit of the i'll i'll interpret it in a different way slightly more negative than yours uh
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um you know which is that there's a lot of the european cultural aversion to the kind of risk inherent in in entrepreneurship and i think that's a bad thing and so especially when you want to get into the technological sector which is a
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a less certain sector a less known sector or less stable sector where change happens a lot more drastically and rapidly you know think of think about the last three years in crypto completely changing you know paradigms in even three years
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um and so i think that in latin america it's less widely accepted that people are gonna go into that kind of risk and take that kind of risk and a lot of the people that are willing to do it just find their way to the united states
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or find their way to the uk and never come back and so for instance you know we've had a hard time and we've talked about this with many prominent american entrepreneurs how hard it is to find talent in mexico because unless you are
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an heir or an arrest if you found your way to an american college or or an american business school or a uk degree or a french degree what's your incentive to go back there is no capital it's hard to hire the incumbents are powerful and a lot of the sectors like banking are catalyzed so why am i going to go back i'm just going to stay in new york make a better salary take less of a gamble and not have to explain to my family why
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i'm betting my farm and coming back you know we've hired a lot of people from walla that have moved back from the united states or from the uk to work a wall and they've had to explain to their families why on earth they were headed back to
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argentina when they had made it to america you know it reminded me of of what my forefathers used to say in italy when you know you left to fare america to make it in america and you certainly never looked back putting aside covid
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why does it seem that political economy in brazil has so much just flung off the rails right you have bolsonaro maybe against lula everything a mess constitutional crises never got on a stable track what's going on how do you explain that
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obviously brazil for argentina is a necessary partner um um brazil is is at the heart of mercosur which should have become a european union for latin america and never did and never embraced free markets uh in the way
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that that the free trade area of the americas would have done but chavez and lula and kushner stopped it uh i think negatively negatively affecting the whole region back in in 2004 2005. when when chavez famously said alcalca
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i think that what brazil has is a profound political crisis where you've had a loss of of representation on the center right so the center right has been hijacked by bolsonaro who has a very free market thinking um finance minister in paulo
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gettish but remains somebody that you cannot predict because one day you think that you know bolsonaro is going to do the right thing and then he suddenly replaces the the managerial head of petrobras one of the largest companies in the country
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by an army person and everybody's thinking about a coup um and this following day he puts forward a very liberal tax reform plan designed by gettish and so that kind of player has has taken over the center right
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in us in a similar way to how donald trump hijacked and replaced the elite of the republican party um in 2015 and 2016. and then on the left you have a deepening problem of the judicial uh issues associated with la vagiato which was a little bit of an america of a brazilian manipulite going back to the italian scandal in the early 1990s that imploded the political scenario until berlusconi appeared in 94. and so you have a vacuum of power and so
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lula has been in jail now he's out and i expect him to form back together the pt which is the the workers party the parties and i think that lula will become the the rallying cry of the center left and the left and then
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it remains to be seen if bolsonaro can still build an anti-lula coalition but the answer to your question is you have um um a radical politically with a liberal in the in the british sense you know um economic agenda who has been trying to build a coalition
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that is becoming smaller and a resurgent left and so it's very difficult for bolsonaro not to give in to spending as much as he can as fast as he can to secure re-election next year and that boat's ill for brazil's long-term reform since the cardozo administration so brazil is at the risk of throwing out um you know of wasting the difficulty and the time spent in lowering inflation and building credibility in its domestic economy
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by spending too much too fast to stave off lula's return okay so take chile they're fairly wealthy by regional standards they have reasonable state capacity yet even with their economic growth they don't seem to have made much of a dent
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in their inequality problem and the quality of their educational system for maybe even the bottom two-thirds still seems quite poor why is that such a hard problem for them to fix that's another great question i'm not an expert in chile
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i would think that chile went a little bit too far in the in the you know neoliberal playbook and there are certain things that in chile that are private or overwhelmingly private that make it difficult for social mobility to exist and so the
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amount of privatization in the health care sector and in the education sector make it difficult for families from from the lower income quintiles to have the ability to access the services needed to move to the third
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or second or first quintiles and so that reduces social mobility however you should still think about chile as an amazing success story of the last 40 years development much lower poverty much lower hunger much lower um you know
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educate much higher educational um achievements and so i think chile is still a success story especially when you compare it to argentina which is created net poor people in the last 30 years versus reducing it but i think it could have been done
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in a in a smarter way if if healthcare and education had had more of a public element than they have been and they have had we now move to the overrated versus underrated section i toss out an idea name or thing you tell me if it's overrated or underrated yeah ready the french author michelle hullebeck underrated or underrated why uh he's he's my favorite uh french novelist right now i think that nobody has been able to to um epitomize or
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or or put in words the angst uh that i've that i've seen over the course of my lifetime in a europe that feels sometimes aimless and in particular france um that that feels at odds with the modern world chinchilliness overrated or underrated
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overrated i can't stand them i know i know it's not it's not uh consistent with my passport but i cannot stand them i find it disgusting wittgenstein um underrated i think essential uh for for you know 20th century philosophy
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and how we conceive of ourselves in the world who's the philosopher who's influenced you the most including in business um that is a that is a great question um i would say i've um that really threw me off i um well we can come back to it if you want
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yeah we can go back to it sorry yeah charles de gaulle overrated or underrated you read the long biography what do you think um i really i really enjoyed that book i think he was uh the right personality at the right time but
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but ultimately overrated as a political leader and my macronista friends will will have to forgive me for that italian neorealist cinema underrated always the best cinema and uh you know fellini i think the best filmmaker of the century
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what's your favorite fellini movie you know ingmar bergman what do you think um not an expert overrated i never quite understood why everyone loved it so much love them so much the best movie from argentina is it nine queens um
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it is it is a strong contender but i would think um the secret in her eyes is my my favorite film about argentina because of what it says about the very difficult period um of uh of of you know modernization and in particular the horrors
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of the military of the last military regime that marta so much that it still defines our politics 50 years since why is the best pasta in buenos aires often so cheap so you can get everything but even relative to prices there you can get an
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amazing pasta for three dollars right yeah well first of all the macroeconomic instability of argentina and if you come here with dollars everything seems quite cheap most of the time except for the very few times when it seems ridiculously expensive um but generally it's the amount of of italians that live in argentina around 40 of the population is directly or in directly descendant of italians and so there is this uh attachment um to to
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italian culture and italian food as a result and my name should tell you everything you need to know about that i think the average pasta not the peak pasta but the average pasta in rosario is better than in buenos aires agree or disagree
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i agree i love rosario and i go every time i can it also has an amazing uh you know scene of of not just food but also entrepreneurship should borges have won a nobel prize in literature one 100 borges is my favorite author and the
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other is my favorite story if you haven't read it you should it's an amazing um uh you know inquiry about heraclitus and who we are the one we are today or the one we were 34 years ago is about him meeting himself with himself on the charles river and it makes me want to tell you that my favorite philosopher is jorge luis borges but yes that's a good answer if you were to meet yourself 15 years earlier what would you tell yourself
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and would the earlier you listen i would i will guarantee you that the earlier me would not listen especially if you were on the on the banks of the charles as borges is on that just to be clear you're 33 now and 15
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years ago you would have been 18 for those who died yeah so i would have i would have been in my first year at harvard um i i would have um i i would have just encouraged me to to to to make mistakes and to uh enjoy the years of free inquiry
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in college i often worry that the people that are there now don't get the freedom to explore ideas and explore different visions of the world as i did when i was there at least from you know the general literature around
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what is happening in colleges and and what kind of dissent is accepted and i would certainly cherish my time with with professors there and and the time in the united states i i think it's important to to really explore different visions of your life
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and and areas to explore i arrived at harvard thinking i was going to do film i ended up studying history and on writing a book about nazi germany and the spanish civil war as you mentioned in the beginning that nobody read by the way um i've read
48:44
it and okay well um that makes that makes some of you um but uh i think that that the the it's often undervalued in the world the the great um aspects of a liberal arts education and especially when i when you come from a
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geography of where i come from and i see what other people studied and how they were closeted into certain ideas very early on um i think that um it is that's an amazing time an amazing opportunity and it remains
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um a great uh you know luck i had in life to to go from argentina to studying at harvard having the friends i i did there and what i learned there and who is your best or most important professor at harvard um i mean you know i had i had many
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wonderful professors obviously neil neil ferguson has been a mentor a friend uh for almost 20 years now um and you know he's the he's the person that encouraged me to to turn my thesis into my graduate work and then a book um and also he he greatly encouraged me to start walla not to mention green mental where we work together but also you know having the ability to to work with people like like charles mayer um and and patricia gone
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and wonderful historians like stanley hoffman um you know all of them emma rothschild like all of them i i was just so lucky to be there and i i know that education needs uh a tech revolution so that you know
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that education is more readily available to more people because it is amazingly stratified and and opaque as it is but harvard is an amazing institution and i still i'm so grateful that somebody from argentina could go there on a scholarship because
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god knows i couldn't pay for it three years after the 2001 crisis and thanks to the reforms that larry summers implemented as president and that the whole body of the faculty you know put together i was able to go
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so you know i can't even choose why is spain still so obsessed with its civil war from the 1930s which is now a very long time ago yeah it's a it's it's a long time ago but as i say in the introduction of of my book um you know there's a there's
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there's a lot of bones hidden beneath the surface and i think that that the civil war itself crystallized many conflicts in spain that had been brewing for 150 years and neil once joked to me that i wrote about spain because i didn't feel
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old enough to write about argentina but the process of economic decline that spain endured since the 1830s to the civil war that culminated in the civil war um between uh you know republican spain that looked to france and a
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very catholic conservative conservative spain that wanted to turn back the clock um are still the dividing uh fault lines of spanish society today but at least montclair happened at least democratization happened
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at least european integration happened and so spain today has a developed open competitive democracy with a developed open competitive economy so people can be you know less less tied to old stigmas but the civil war was a very dark time and
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um a lot of the crimes were never prosecuted and a lot of the the faults uh were never inquired about and so they keeps coming up in culture just like the the american civil war is still really important part of american
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culture and just like you know the dirty war in argentina in the 1970s still defines our politics today it's not that unique did the nazi german desire to use spain for mercantilist purposes ever have much of a chance of succeeding and what i
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have in mind if i look at the german balance of trade with eastern europe which was another area that was to be used for mercantilist purposes as the german economy recovered the balance of trade worsened with eastern europe
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and wasn't simply the same going to happen with spain in any case and this whole big nazi plan was not really very wise what says you uh that's a great question um i think that what the nazis needed from from uh eastern europe was
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was different uh and yet i think that if shocked had been able to implement the kind of policies that he wanted to start implementing in 1937 to avoid such large percent of of new gdp going into weapons they could have had a
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different type of way out where they could have tried to craft i'm not saying they would have been necessarily successful but tried to craft an informal empire over europe that would have allowed them to reduce the dependence that they had on final armaments
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but i don't think that the leadership of the party and at that point of the state would have gone with that because the general conclusion of my book in terms of nazi economic policy is that unless you really tap the brakes in in mid 1937
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war was the only possible way out because at one point as as adam twos wrote masterfully in wages of destruction you know you ended up having 20 to 25 of gdp going into armaments and that's wholly you know you're not going to sell that
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to the french so um ultimately war was decided upon as early as as 1937. now you could have become a historian you could have become an academic you didn't but that modal possibility to bring up an idea from bortes
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how has that shaped the kind of founder you have ended up being because it's unusual background for a founder right it's certainly unusual and one of my investors said i broke two rules with you i never invest in argentines and i never invest
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in non-technical founders so i said great fantastic um i think i think the the problem of of contingency uh and understanding contingency in history allows you to be a great founder um and i think that obviously learning
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and knowing financial history is essential to wanting to disrupt a cartelized uh you know group of banks because i've seen it elsewhere and i know what what universal banking can do to a society to its development possibilities to
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social mobility to democratization um as i was saying earlier and but i think that that you know understanding possible paths and and you know here's a good time to to bring up another another borges and the divergent paths of your history
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um and the possibilities of building a product are are good for bringing together a team i think ultimately what a founder does is provide a vision and hire people i can't claim that i wrote a line of code and i can't claim
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that i um you know run everything in the company but the key job is to be to inspire to set the direction and to trust people and hire well and so when you have the better people the best people and i've done that in a way that is different from most
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latin american founders because over 15 of the company is owned by the management team and that excludes me but that can only be born out of the humility that comes from the idea that i kind of do it myself i cannot
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write the code but i know where we have to go to disrupt the system because historically i've seen it elsewhere i know what needs to happen to have universal financial literacy and financial education so that people can be integrated into the system so i want us to take us that way and i think that in that sense this unusual background is is useful and some of the best uh backgrounds for for founders are people who come from different industries
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from different walks of life that have the the gall for lack of a better word to try to disrupt an industry and it remains whether it remains to be seen if i succeed or not but if it does it will have something to do with the fact that
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we wanted to start from scratch and ask the basic fundamental questions in a different way anyone can equitize and many companies do what is it you think that you understand about spotting talent possibly from your background in history
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that other founders might not in latin america i think it's a very american idea which is that in order to spot the best talent you need to attract people that have to be fully aligned with you and so i don't know any other latin
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american company where over 15 of the company is owned by the management that allows me to convince all those people that we're in the diaspora to come back to argentina and change the game with me and when the big banks try to hire my
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people they can offer them great salaries but they're not gonna offer them one percent of some time there and they're not gonna offer them the growth trajectory of what we're building here and so um that's how i've gotten people
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to quit from goldman from jp morgan from mckinsey from mercado libre to join voila and share in the dream and i think that that as a founder you have to recognize that you don't have all the answers and so when you build a better team they
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improve on your idea and i think the wars founders are the ones who obsess with their own centrality to the process whereas learning from history i think that in order to craft the best team you have to have them fully aligned with you and give them the power to really execute on what they know about because i can't tell my head of cards who ran cards at citibank for 25 years how to do a credit card i cannot tell my head of ops who
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used to run ops for for a division of jp morgan here how to do ops i just have to trust them and and have the humility to know that they know how to do things that i just couldn't learn how to do let's say you're speaking to some other founders
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and they're interested in learning a bit of history but obviously their time is limited what kind of tips would you give them for how to get started on that project that's a great question i think that that uh the best way to
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to learn history is to read history and so i would choose a timeline or time period that you like and and read some great books if you like economic history i would recommend you know wages of destruction by twos if
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you're interested in the nazi period i would um you know if you if you want to learn about the first world war for instance i would um i would recommend uh sleepwalkers or or neil's pity of war um you know great books teach you a lot and
59:06
biographies are a great way to to get there obviously chernow's biography of hamilton has been so widely recommended that it can be more recommended but you know lately i've read a fantastic biography of of bismarck um i read a great um
59:20
a great biography of gabriele d'annunzio the the proto-fascist poet um and i think that that it could be a great way to to read about personal histories if you don't love as i do diplomatic or military how old-fashioned
59:34
of me economic history last two questions first other than the general benefits of exercise how does going for a run improve your thinking it clears the mind i um i work you know um 14 15 hours every day and um the the run is i think when i crystallize my best ideas and i think it's very important to save some part of the day to to really think and um and and clear your head and i always go in with problems and come out of the run with solutions
1:00:06
final question what is your best weird work habit uh my best uh weird work habit is that um now i i it's actually a non-work habit um now i i i really never try to do email in bed i used to do a lot of email in bed and cutting that out has been fantastic
1:00:30
to be able to sleep better and and and you know create a boundary for your personal life i think that the importance of sleep is one of those things that has been massively undervalued in the last 30 40 years with our work
1:00:43
obsession and i god knows i work a lot but i wouldn't be able to work um as i do if i didn't sleep well and so not doing email on your bed not doing work on your bed is absolutely essential for that and that's a relatively new development
1:00:57
and so you know i forced myself to actually get up uh turn on the coffee machine open the windows and and only then think about my email pier apollo barbarity thank you very much great pleasure tyler thank you for your time