Latest / Leaders in Lending / Combating Financial Fraud: Fintech’s Game-Changing Role

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Combating Financial Fraud: Fintech’s Game-Changing Role · Leaders in Lending

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You're listening to Leaders and Lending from Upstart, a podcast dedicated to helping consumer
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lenders grow their programs and improve their product offerings. Each week, here,
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decision makers in the finance industry offer insights into the future of the lending industry,
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best practices around digital transformation, and more. Let's get into the show.
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All right, thanks for making time to join us on the podcast today.
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I really appreciate it, appreciate the invite. So I'm looking forward to
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this conversation. I always like talking about regulation and innovation, and those two
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of my favorite topics, and when you smash them together, it gets me
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really excited. But I like to start off every conversation asking people like,
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how did you get into the industry, because you know, I guess I
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you typically make the jolly. Nobody really grows up dreaming of being a banker
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or a regulator or you know, So, what was your path that led
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you to where you're at today? Yeah, it was a winding path,
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Jeff. I'm a kind of a career switcher, and you know, anybody
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out there, it can happen, but it target to do one hundred and
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eighty degree. I wouldn't say that I'd say it was like a ninety degree
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pivot. So I'm working. I'm a financial regulator right now, right,
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and I worked in the financial industry before, so it's a switch. Politics
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was always my first love, you know, even as a weird child's you
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know, I got in trouble for sneaking into the den after bedtime to watch
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member as a Democratic convention back then. I know, that's weird. I
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was like, you know, eleven years old or something. And then you
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know, my interview was agree was politics went into Wall Street. Twenty eleven,
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I was in Tokyo, I was working. I was first out there
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with Leamon Ruggs. I was with them when they collapsed, and then got
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another job in Tokyo. And then in twenty eleven, I did my career
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switch, you could say, to policy and politics. I moved to Boston
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to work for Mitt Romney's presidential campaign and spent over a year there. Really
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enjoyed it. Obviously, he won the primary, which he had lost in
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two thousand and eight, right, so I didn't know how long I was
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leaving gonna be. He ran, he lost in McCain and a wait,
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so this could have been a three month experiment who knows anyway, got the
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nomination obviously, you know, Barack Obama was reelected president. But I had
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enjoyed my year and change in policy and politics. It was one of those
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things where following your passion actually worked, you know, sometimes doesn't. And
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then I decided to move to DC, where i'd never lived, you know,
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down from Boston. You know, I'd met a lot of people over
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the campaign, and instead of coming down to DC as a triumphant member of
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the incoming Remney administration, I was just an unemployed guy looking for work,
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you know, got this little basement apartment and looking for work. Wound up
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working for Senor Tom Cotton from Arkansas, worked for a great think tank,
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AI, a free market think tank, and was fortunate enough in twenty twenty
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to be nominated by President Trump, and luckily enough Senators voted for meeting in
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the Senate confirmation process. And I'm here, and I've got a couple of
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years left on my third It was a little bit of a whining road.
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It's my sixth big city I've lived here. But which this big city?
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Which do you have a favorite among them? I know, you gotta stay
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in DC because otherwise we will get angry at you. But like, outside
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of DC, what's been your favorite spot? Well, by the way,
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step back a second. For those of us who moved here for work,
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it's common knowledge, like you're kind of supposed to just DC like the swamp,
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you know, you know, especially if you're an elective member, because
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who elected you to people of DC? No, it was the people of
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Arkansas or California. But so I lived in Boston, New York City for
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six years, Los Angeles for nine, DC for ten. Now, it
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was in Tokyo, Japan for five years, and Sydney, Australia from one.
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I would say Tokyo of those, First of all, it's just a
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great city, but also because you know, as an American, as a
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Westerner, to me, that was the most interesting, that was most different.
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You know, It's absolutely terrific time in my life. Love, and
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I'm planning a trip with my family to Tokyo in Japan more broadly in the
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next year. So we're starting to work through our tindery. It's a it
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is a it's a beautiful place, and those cultures that are so different do
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give you the chance to step back and think of things for a different perspective
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kind of get a different view of the world, which I think is really
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good for you to see things from a different end. Neat, but such
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a polite worlds in Tokyo is this giant city, right, I mean,
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it makes DC look like a small town. But what's neat is it's just
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so safe and polite. You have everything in a big city. You know,
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a million restaurants and nightclubs, got you know, anything you want to
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do in the city is multiple baseball I recommend a baseball games for the during
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a season, but you can walk home at night at three o'clock in the
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morning, dropped the walling on the street, and go get it the next
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day. I mean, it is uh, it's kind of neat to have
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that. Uh, as you probably already know it. Tokyo and DC have
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identical climates, hot, sticky summer a winner, that's you know kind of
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yeah, and uh, there's the same latitude east facing of a continent.
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And the cherry trees, you know, are a big thing in DC,
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a cherry blossoms. Those were obviously a gift from Japan. One of the
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reasons they were a gift from Japan is our two capitals Tokyo and DC have
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the same climate, so the cherry trees can grow, can blossom. Yes,
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they would not have given the cherry trees as a game to the King
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of Sweden. They would not have given it to you know, the Prime
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Minister of Jamaica, right because right and now they're famous in DC. That's
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well, I want to dive into the topic of kind of innovation today and
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then a little bit on like you know, how you use a regular support
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there. But I first want to kind of start with, you know,
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what's your perspective on the need for credit unions to innovate? Is that you
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know, where do you said on the kind of like don't don't break,
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don't fix what ain't broken, and like we really have to think about the
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future is coming fast and how do we adapt to it. What's your perspective
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on where credit unions need to be in that? On that spectrum, I'm
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over the view that innovation is necessary, always was, is now and always
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will be. That it's you know, innovator die that said, the core
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of it, what these institutions do has not changed literally for centuries. You
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know, they help people with their financial management. Money goes in, money
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goes out, you lend it, make payments, so that core of it
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hasn't changed in that sense. Yeah, but you know they've always innovated.
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You know, they were there early with ATMs, you know, way back
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in the day, and network with each other, credit unions you know,
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for that matter, and banks, and it's all very different and it always
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has been. We could not have even had this. We're doing this on
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video right now, teams. We couldn't have done this twenty years ago,
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you know. So they have to innovate. And I tell you this as
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a regulator, it is hard because of the way bureaucracies are to develop a
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tolerance for some failure because experimenting, right, the word experiment means you don't
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know what gal come is. Yeah, And it's not really the fault of
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the agency so much. It's just the nature of it where examiners and they're
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supervisors and stuff, they get heat when something bad happens, you know,
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they say, oh, you know what happened at Silkon Valley Bank. Wait,
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who's their examiner or that Jeff Keltner guy, you know. And but
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meanwhile, when they innovate and it goes well, you don't really get you
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don't get a bonus or anything really, you know, so it's kind of
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downside focused. So we have to say listen, you know, just give
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me your technologies. I know you and I might want to talk about digital
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assets. You know, people ask me. I've had a journalists kind of
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well known in the financial world. I said, you know, you were
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gonna let credit uns use you know, blockchain, digital assets. You worried
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w problems and like my worrid grade problems. I know this is gonna be
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problems. Every new technology does, right, you know. And you know
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I always say you guys know this, Jeff that there was zero plane crashes
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before we had planes. I think I could have pieced that one together.
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No, thousands of years, it was zero. You know. Uh,
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you never had a computer virus before you had a computer, you know,
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so there's always no problems. It's always two steps forward, once step back.
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But yes, they definitely have to innovate, and as a regulator,
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we have to have some tolerance for failure because that's the only way for long
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term success and not try to prescribe it. You know, we don't want
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to say this vendor, this partner, this fintech firm, they come to
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me all the time and show me their fintech and I said, right,
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that's cool, but we we don't have a white list, you know,
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of vendors, and I think that would be dangerous to do, so,
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you know, so anyway, that was a long answer your question, but
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there you go. I'n't ask two follow ups to that because I think there's
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two kinds of like fear of failure that happened in the institutions. One is
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to just like many financial institutions are conservative by nature and tend to have a
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you know, the same thing you're talking about the regulators. They have a
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kind of lots of people who can say no, a few people who can
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say yes, like kind of institutional inertia to them in terms of making decisions
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about trying something new. So I'm curious about putting the regulator aside. And
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that'll be my second question. But first, like, do you have advice
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on how you as an institution go, hey, we're gonna start fostering supporting
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more of this, because you know that, I feel like it's unnatural for
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many financial credit us, maybe a little less so than that of the larger
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banks I've seen that are really have a lot of eurocracy that's kind of tends
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to be stasis. You know, it's that is quote oriented. But what's
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your advice on how you as an institution develop the muscle for trying new things,
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experimenting and being tolerant and failure. First of all, I like that
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how you put that. I'm gonna try to remember to use that. Meaning
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what you said about these institutions that are set up that there's a lot of
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people who are allowed to say no and not many people who are allowed to
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say yes. I like how you put that. I hadn't thought of it
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that way. One thing I always say is, and it's not always a
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pointball, but is fail small if you can You know, it always depends
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on what you're trying to do. Have a five dollar failure, don't have
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a five million dollar failure. You know, have you know, just your
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career is not going to go south because you tried something that didn't work.
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Maybe you wasted some time, maybe you wasted some money. Your career is
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going to go south when you tank the entire thing. Yeah, when you
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have a faire So again, it's not a likable all the time, but
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test something, try a little transaction right for it, you know, yeah,
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yeah, just test test, test test, try to minimize your failures.
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I mean, it's an obvious point. But you know, before you're
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you know, as my own boss would say, is from the army.
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You know, before you're playing with live rounds. You know, I fail
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small if you're going to fail. I like that because it also it's something
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I think a lot of institutions a lot of people forget, which is they
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want risk management to be like a black white yes, no, hey,
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this is good, this is bad. And sometimes you say, well,
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we're going to manage the risk by saying it's a little bit of great,
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We're not sure what will happen, but we're gonna we're gonna put it in
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a small scale. So our risk management isn't that we've prevented any possible issues.
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It's that we've limited the scope of where the issues can impact, and
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we can learn from that and then it goes well, and we can expand
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the idea of managing risk not by eliminating the possibility of us but managing the
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scope of impact in the case that something goes wrong. I think is a
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really interesting approach. That is that is often people just want to like we've
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totally this thing down. Well, innovation, you can't. You can't always
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do that, but you can't limit the scope of what what you're taking on
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is kind of the unknown. Yeah, it comes up a lot in government
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and regulation. Some countries, some states within the US has done a good
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job with you know, they call him sandboxes, regulatory sands. You know,
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as long as you stay within these parameters, which basically are all about
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that, do not blow up the world. Okay, but you can try
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something now, you can try something that isn't explicitly authorized, right, as
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long as whatever the problem is doesn't bring down the institution. And NCUA just
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a backup set. You know. We are the ensure for America's almost five
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thousand credit unions and the regulator for about two thirds of them. The rest
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are state charters. But anyway, what we care about, we're like every
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other insure in the world. We care about having to write a check,
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having right acclaim. Like every insure, you like taking in premiums and you
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don't like writing big checks out that's wherever you is. So the main thing
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is, don't make us have to write a big check. Do whatever you
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want, but don't you know, at the end of the day, that's
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what matters. But cost benefit. Yeah, and I say this all the
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time at my agency. You know, you have to realize not innovating as
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a risk. Once you realize that staying, you know that you will hit
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an iceberg evention. So once you know that not changing is the riskies,
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it can change your cost benefit. I think in a positive way. It's
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kind of a freeing lindset too, to get out of the zero risk,
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zero issue mindset into the like how do I manage it? I think it
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can be a relief when you can actually convince yourself to go that way.
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Yeah, you try ten things, one goes wrong? Wait, nine one
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right, Yeah, all right, that's pretty good. Let me ask you
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that fall up to that, which is the how do you think about how
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a financial institition should should approach their regulator in the context of innovation, because
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I've seen in the number of institutions I've worked with, credit unison bakes very
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different approaches from kind of like we get everything totally finalized and don't tell the
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regulator until it's out the door, too, going to call them and tell
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them what I'm thinking and see what their perspective is what's your model for effective
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engagement with the regulator by a financial institution on the topic of new, different
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innovative programs but using some of these new technologies we'll get into in a minute.
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Are you a engage early and often? Are you a kind of button
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it up? Like how do you like to engage with your financial institutions on
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this kind of stuff? All right, So you know I always tell people
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you can go to me. Listen, Vaud in the credit union world is
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listening. Ka Holtman at ncway dot com. You can email me, okay,
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but that's only worthwhile for the next couple of years. But you know,
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I have to find a new job somewhere. But listen, the world
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is never going to be the way I want it to be. What you
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can have free flowing back and forth as long as there's someone who's your regulator,
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who can shut you down, who's giving you grades. You know,
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in the credit union banking world, we give her aport card one through five.
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One is good, five is bad. It as long as there's somebody
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with government power, it's never going to be free flowing. And I know
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some regultors think, oh, we have regalnership. I assure you they're not
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speaking to you the same way, right, you know, it's like speaking
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to a police officer at the end of the day. They have a badge
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and a gun and you don't. You know, so I and you know,
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I want to promote my I'm proud of a couple achievements. You know.
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We now have Uber style feedback, you know, like a quick five
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questions, you know, after the survey, and I'll give credit to the
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Biden wine House for the regular agencies that are not independent, He's also required
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all of them to have like one through five stars for regular government service.
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Does not apply to financially as because we're independent, we don't fall under the
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executive branch precisely. But like if you're a veteran, you go to be
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a hospital house your care, you know, and it's especially important for Monopolis.
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But in terms of communication, we have like five questions. I make
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sure the last one will you know the sixth question is open and says what
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other questions beyond the survey? That helps with communication because the questions you're asking
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signal, Right. I always show people that the photos of your Uber and
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left and right at the top you know when you do your stars. Both
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of them asks right away they have cleanliness up at top. One of them
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calls it l nest you can click on that and then clean card. The
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other one says, what does that mean? Both the driver and a passador.
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Every single time we're being asked by cleanliness, that is uber and left
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communicating signaling that that's important, that little piece of real estate. So we've
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done that, and I think that also shows we want your feedback. A
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lot of agencies only had an on busman line with somebody, a complaint line.
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That's all they had. And I was like, you guys, if
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you're you're signaling you don't care that much, because it's really easy these days
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to do you know, uh in uber and left or to ask hell,
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you can't even order another pizza before you rate the last guy, you know.
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Yeah, So anyway, I'm going off topic. My point about communication.
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It's been important to me some transparency, normal private sector transparency. We've
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brought that to the agencies, so I think that matters. It is signals
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that that you should be a little more comfortable calling me because you know we
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care. We're signaling it. After every example, also recording at least for
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the two thirds of the credit units that are federal charters, were encouraging recording
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of the exit interview. You have an exams a couple weeks, examiner is
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going to leave. They give your grade to the board of directors to record
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that, just because it's useful information, you know. So anyway, so
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on the topic communication, you can tell them passion about it drove me crazy
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when I dealt with regulators in my prior life anyway. But because no matter
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what we do, there's that differential. You know, it's talking to a
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cop, you know, even if it's just on the street. You don't
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speak to them like you're friend at the bar. You know. This is
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why trade groups are useful, because we don't regulate them. They can put
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their head above the tree line. The trade group a vendor, I'm using
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a term vendor. But fintech partners, we're not their regulator. We're not
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there insurer. So the credit union usually don't come to us and say,
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uh, you know this really cool fintech talk to us. We're wondering if
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we can do it? Are we gonna get in trouble? Is that all
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right? They are afraid to say that right, because what's the one thing
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they know. They know that if you might deem a risky, so have
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other people who we won't regulate and ensure if possible. Credit unions usually have
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a state league or a combination of states. You know, there's like a
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New England one. You know, there's a DC Virginia DC Maryland one.
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Have them, that's what they're for. Have them put their head above the
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tree line, you know, or the national groups, or have the fintech
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vendor or hell they're venture capital firm then investment, having them talk to us.
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If you credit union person, don't want to put your head above the
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tree line, because it happens all the time. You know. You have
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somebody call you a salesperson, Hey, we want to work with you credit
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and we want to partner with you. We want we want you to buy
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our product. And people say, you know, I'd love to, but
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you know, the government man, the regulator, you know those guys.
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Sometimes that's just an excuse to get the salesperson off the phone. That happens,
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but sometimes it's legit, you know. So that's what I would say.
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Number one, I want to be communicative. We're trying to be more
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responsive. We made legitimate strides on that recording and those ubstyle feedback emails.
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But also if you're concerned about it, or you say, hey, one
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hundred credits want to try his fintech partnership, why should I? You don't
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one who puts my hands up and brings it up, right, Have someone
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else do make a call, have the conversation, have the meaning your fintech
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firm. They have a financial interest in doing this, you know, having
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your league organization, have your trade group. That's what they're for, all
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right. I want to dive into a couple of the actual technologies here,
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and there were two that came up when you and I spoke earlier. The
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first is one that I feel like has gone out of fashion, so I'm
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I'm curious to get your perspective it, which is digital assets, because I
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feel like, you know, the the interest in digital assets and blockchain technology
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seems to swing with the price of bitcoin, and the price of bitcoins has
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been up and down and all over, and not that that's a good metric,
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but how do you think about you know, is that going to be
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a valuable technology? Was it a flash in the pan? What do you
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think the future is on the on the front of digital assets and blockchain.
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Yeah, it's funny, you know behind me here in my I CNC on
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you know, without the sound, and something's changed that I think probably will
19:00
be with us, which is, you know, down the bottom of the
19:02
corner they have the stock index is dal Jones SMP, you know, part
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of their things. They have the bitcoin place right and they'll leave the switch.
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They have ether. You know, I don't know if that's going away
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anytime soon, but I hear you on that on that the interested bubble.
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Listen, it's the gold rush stage. We've seen all this before, Jeff.
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There's a gold rush stage where some of the things is a pile of
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money and people rush in dreamers, thinkers, and you get overvalued assets sometimes
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and you get bubbles, and you get bad business models that we only find
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out when there's a crash, and you get some flat out scammers and con
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artists. Anytime there's a bunch of money, people think. We saw this
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twenty five years ago with the Internet bubble. Right, a lot of people
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first heard the term dot com not from using any product, but from the
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investment world. Oh this IPO triple people are making money. You know ads
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for a merrit trade. You know, hey, make a bunch of money,
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and remember those ads that you know, some kid has a yacht,
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you know, and and then remember it all crashed and then tons of people
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lost money and tons of empty office space. It's all gone vaut. But
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that was the investment bubble side of it, and you hit right on it
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the price of bitcoin. Okay, put that aside. When the Internet crack
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and all those things, loss of money, some lumber, bad companies.
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There were also scams and some of those models are just were before their time.
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But put all that aside. When the Nastat crashed in two thousand,
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was that a fat will hold on the investment bubble that happens this new thing
20:27
called the Worldwide Web. That was not a fad that has changed all of
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our lives. We couldn't even be doing this interview right now. So once
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you shift away all the debris and you have a helpful bear market, because
20:38
that's what cleans out a lot of problems. It also cleans out scams and
20:42
con artists. Member made off was only found out because of the financial crisis,
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right, he could have kept on going. Bear markets are useful.
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They cleared the brush out, you know. So yes, I think when
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it's all of a sudden done, they'll be concrete, actual uses. Right,
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We're already saying it with instant payments around the world, different currencies,
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stable coins very useful. We're seeing disasters happen and people can send money instantly
21:07
for people to use. You don't have to run it through bureaucratic charities.
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I've seen people do interesting stuff on the identification. It reduces fraud trying to
21:15
figure out who somebody is. You can also help people who are kind of
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marginalized, like prisoners get out. They don't have a valued ID. They
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can't get going with their life, to get a job until they have ID.
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I find out a little weird, Jeff, and I think you too,
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because if there's anyone who's identity, the government should absolutely be if it's
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the guy they locked up for the last twenty years, right, Meanwhile,
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they walk out with no ID. So so it's fraud reduction, it's access
21:37
or services, and it's quicker onboarding. That sort of thing. That's a
21:42
concrete use of blockchain technology. Obviously, blockchain being the underlying technology behind bitcoin,
21:48
and we've seen a few of these things and just tokenized assets. Right
21:53
again, like you said, a lot of things on people buying this coin
21:56
or that coin and make them money. What about regular since we already have
22:02
various loans, et cetera that are just tokenized, they're just easier to distribute
22:07
on a piece of right, things that were very hard to break it to
22:10
pieces before, so tokenized assets. And I bet it's just like the Internet
22:14
in nineteen ninety nine, where it's a whole world of things that I can't
22:18
think of right now. Remember how the Internet started. All it was was
22:21
literally the web, meaning it was a web page and you typed it an
22:22
address and you went to it and you saw a page and went to another
22:26
one. Well, that later became apps that were only possible because of like
22:30
GPS. Half the apps I use wouldn't be possible without if I didn't have
22:34
a mapping app. You know, it's not necessarily going to a web page.
22:37
We're using the Internet all the time and lots of things. So anyway,
22:41
my point is I'm just trying to be humbled and trying to say,
22:44
well is this use case and that use case? Yeah, I can think
22:45
of something, I have seen something, but my guess is it will be
22:48
something very different, you know, than the ones I can think of right
22:52
now. Put it that way, But Jayline uses put aside the bubble.
22:56
We've seen this before, and it's kind of good. We had cryptome theory
23:00
cleans out a lot of bad actors. Yeah, we've seen We're gonna give
23:03
you a watch. A few of the bad actors get cleaned out here over
23:04
the next couple of a couple of months, I think in dramatic let's talk
23:10
about one other technology area that I think is pretty interesting, obviously near and
23:12
dear to my heart, which is AI. Where do you I feel like
23:17
that's one that's maybe a little farther along the hype cycle at least we're seeing
23:21
more more concrete use cases in many ways like live today and production, often
23:26
behind the scenes. But what's what's your take on where we're at in the
23:29
evolution of AI and the adoption of that in different areas within the Credit Union.
23:33
Well, if if I use the Internet as the analogy for digital assets
23:37
in the sense that there was a hype and a bubble, but at the
23:41
end of the day, there were very good uses the AI. One is
23:45
conference with the Internet in the sense that normal regular people can see cool uses
23:51
in front of them. A lot of cool things you don't necessarily see.
23:55
So like, for example, let's go back and box to en for a
23:57
second title. If you ever real estate in this country, you know how
24:00
creaky are a sort of title insurance, you know, making sure that the
24:04
house I walk from Jeff was actually just to sew man well. People may
24:08
benefit when that title is transferred digitally as an NFT. You the mortgage buying
24:12
a new home. You don't even know that it happened. The title went
24:17
from the seller to your lender. You benefited, perhaps in lower title insurance
24:22
in the process. You don't even realize you did. Right, There's a
24:25
lot of things we benefit from. We don't see AI anybody on their phone
24:29
or a computer or even just viewing it. Hell, I keep seeing Instagram
24:33
posts from cool AI generated art. I didn't even have to use it myself.
24:37
I can already see it without touching AI. So in that sense,
24:41
people can see it and learn it the way that you know, the first
24:45
time you got on the internet, you're like, man, this is cool.
24:48
I can read the newspaper from another city. You know AI. You
24:52
can do it, and it's neat and I think concrete uses, you know,
24:56
call centers. You know, we got people calling in in many,
25:00
many languages just in the United States. Yeah, and it's hard to hire
25:06
customer service people who are fluent in English and Ethiopian language, like if you
25:10
have it in DC or Ukrainian. So there's neat neat neat uses. The
25:17
politically, the one you hear about here in DC is lending. You know,
25:21
is it going to be fair? Is it going to discriminate? You
25:22
know, and people think that humans can't be discriminatory lending it. And then
25:30
when you make a machine that's just supposed to analyze it rationally, maybe that
25:33
goes two. I don't know, but that's the one you hear about.
25:36
I think it's going to change a lot of things. Lending decisions for sure.
25:40
Yeah, you know we have you know, the FICHO world, you
25:44
know, may decrease in value in terms of its importance. You know,
25:48
it may be a variable because you can analyze so many other things. And
25:52
fraud detection, Yeah, fraud's a big one, because that's a there.
25:56
It's really interesting to me that a lot of people think of AI in term
26:00
of the large language models that chat and GEPT kind of conversing with a model
26:03
in some way, but in many ways, the lending and fraud detection problems
26:07
are like the perfect problems for the algorithmic side of AI, because it's like,
26:11
what do you need a lot of data? You need a lot of
26:14
examples you're trying to find up make a prediction about something that doesn't happen.
26:18
Then often you well, hey, yeah, like loans are we got tons
26:21
of data, We have lots of history and who's paid back and not,
26:22
and we can make really smart decisions, and it turns out there's quite a
26:26
bit of inefficiency in the space. And the same thing is true of fraud.
26:29
You know, lots of data points, very difficult to analyze as a
26:30
human, thousands of pieces of information about how this individual acted, but but
26:34
yet at the same time, very clear signals when you can piece them together.
26:37
So I think, yeah, frosters ones who are you know, good
26:44
at fraud? They know how the current system works and they know how to
26:48
gain it and work around me. The whole point of AI is not is
26:51
that which the human mind does not necessarily see the problem up front? You
26:55
know, yeah, really, the majority of righting there was the last two
26:59
years have gone down in America. We've had to take over well because of
27:02
fraud. Now that's partially because we've had a pretty good economic times with load
27:06
delinquent seas and everything, so we're not having a lot of credits claps because
27:10
of standard economic reasons. But yeah, I think four to seven last year
27:14
were a fraud. So that's that's one neat thing. And you know there's
27:18
uh, you know Joe and Barefoot. Okay, I was on her podcast.
27:25
Like all three NCA board members, myself, Todd Harper, and Running
27:26
Hood have been on it. She did one a couple of months ago.
27:30
Do you know who her podcast guest was. I'm gonna guess yeah, that
27:36
would that makes sense given the conversation, that's fascinating. I need to go
27:38
listen to because I'm very curious how chat you could see now, it wasn't
27:41
even like a Smart Ai. The voice sounded like Siri like you could kind
27:45
of tell it was a computer. Now, so what she said this is
27:48
I think she called it dumb agi. I mean, it wasn't trying to
27:51
rep it sounds like talking to Syria on your phone. But you know,
27:53
they had an in depth conversation on American Financial regultary policy. And you know,
28:00
I just yesterday at a conference I just got home from New Orleans sean
28:03
scream interview Joe Rogan and Steve Jobs. Steve Jobs died several years before Joe
28:10
Rogan ever had a podcast. Yeah and check it out. It wasn't Joe
28:15
Rogan talking to a AI Steve Jobs. Neither Joe Rogan or Steve Jobs had
28:19
anything to do with this. Both were AI. Both in their own voices.
28:23
You and I could sit in the car drive for twenty minutes, listen
28:26
to podcasts and think it was those two. Or if you knew Steve Jobs
28:30
died a while back, you'd say, oh, I guess Joe Rogan got
28:33
an AI Steve Jobs. But it's not. They're both entirely AI, with
28:38
their sensibilities, with their accents, with their voice, saying the stuff they
28:42
would say, absolutely fascinating. So we talked about fraud detection. You know,
28:48
if somebody can call up and sound like me and look like me on
28:52
a video or whatever, all technology will be used by a scammer. All
28:56
technologies helped to fight scams, right, so that'll happen both ways. Anyway,
29:00
I'm babbling a little bit, man, But I just think ay I
29:02
is super cool, it's super fight. It's a wrong way to go.
29:06
Yeah, yeah, I mean I think it is interesting that we see this
29:10
real push against a eye because of the potential downsides or mali uses. Right.
29:15
Politics is a huge area where you can start to make it look like
29:17
somebody said something that they didn't say, and it can be very very convincing.
29:19
We received a fundraising call and it wasn't them, you know, it
29:23
wasn't made the media. Listen, you should be scared of the problems.
29:27
Oh you bet. Remember what I said about no plane crashes where it plays.
29:30
But they're going to be here anyway, so I assure you. So.
29:37
Yeah, that's right. Like from fire on, there has been the
29:40
possibility for good and ill uses of every every technology that's ever been developed by
29:45
human Yeah, and all just like digital asses. I think America twice,
29:49
you're gonna get the downsides in the long run, anyway, do you want
29:52
to at least get all the upsides? And America won the Internet so well.
29:57
And I'm a Republican, but I was praise Clinton. Gore administration put
30:00
out early guidance nineteen ninety seven for the internet, and we got all the
30:04
negative everybody else. You know, all the video jobs, video rental jobs
30:07
were gone, the travel agens, we got all the downside, you know,
30:11
print media, we lost all those jobs like everybody else. But we
30:15
also got the most upside. You know, the block Westing Video is gone,
30:18
but we got the headquarters for Hulu and Netflix and the investors that got
30:22
in and make money and the people had life changing. Well, you know,
30:25
we got all the upside AI. We're gonna get the downside, right
30:27
we can try to stop in this country. Even if we succeeded in slowing
30:32
down AI. Well, the rest of the world is not going too so.
30:34
Our history in this country has always been embracing the upside, knowing full
30:40
well we're gonna get the downside anyway. But man, it is it is
30:44
neat stuff. Yeah, I feel like it's a very difficult topic to talk
30:47
about and too much depth on the podcast because whatever you say is can I
30:51
feel like right now you're going to be out of datas in a week or
30:52
two anyway, because they maybe I'm not really Kyle having maybe you're not really
31:00
defth you know, Oh, don't tell my wife. All right, I
31:04
got three questions. I like to end the podcast with that. I kind
31:08
of ask all my guests, so I'd love to ask them of you now.
31:11
And the first one is what's the best piece of career advice you've ever
31:15
gotten? I'd say one practical one. It's great. The laster you reply
31:19
to, the faster you reply to an email, typically, the less you
31:22
have to say, oh, interesting, tell me more about that. The
31:27
longer you let it sit, the more of like a longer answer, you
31:30
know, or if it's on a whole bunch of people and you chime them
31:33
in first you can say the most basic, simple thing, get out of
31:36
the way. The sixth person to reply has got to be a little more.
31:38
You know, you had it. The quicker you reply, less you
31:41
have to say. And I'll just do one more, which is broader,
31:45
which is just one word. People. You know a fabulously successful guy when
31:48
I was working at Lehman in Australia. You know, it's actually Vietnamese immigrant
31:52
to Australia, the incredibly wealth and he said, it's people. There's a
31:56
lot of things, but it's people. People people people. You learn skills,
31:59
you get you have that, you get degrees. Someday you might not
32:02
get a job because and you don't even realize it, someone didn't like you,
32:06
right, beetle lights. And in this town, in particular, in
32:09
DC, an astonishing number of decisions are made by people in their twenties.
32:15
You go to Capitol Hill, you know, there's a lot of white haired
32:19
centers being walked around by twenty six year olds, you know. And so
32:24
even though I'm sort of you know, call it mid career now a man,
32:28
I always made a point when I would get these, you know,
32:30
real polite linkeding messages here, mister Altman. You know, I see you
32:34
work in the Senate Righting Committee. Can I speak with you three years later?
32:37
That person to be high and try to Presidential Personnel office, you know,
32:42
like so people people people. I don't want to sound too machiavelliant about
32:45
it, but it's it's just a better life when you want to be respectful,
32:51
honest. When I worked on the Hill, I was routinely asked to
32:54
leak information, and I put the short term gain out of pleasing whoever that
33:00
was a journal a lobbyist, whoever, for my long term reputation. But
33:04
people, people pee people, Yeah, blow you people above you. People
33:07
next you being well liked and respected. Stop right there. You're ahead of
33:13
a lot of people, and it's just very important, and it's going to
33:15
come around in waves that will blow you away. You know. Yeah,
33:19
there's a concept I've heard from a few people now called the infinite game,
33:22
this kind of idea that if you're you know, you can think of things
33:25
as transactional, a one time game, but really the game is infinite because
33:30
those same parties that you interact with. Your leading example is a perfect example.
33:34
Like, yeah, maybe it's a short term win for you in a
33:36
certain way, but like in the infinite game, in the long term game
33:38
where you're playing, where you're interacting with all of these people on both sides
33:42
multiple times, you've got to think of it in those contexts. And in
33:45
that context, understanding people, being respected by people, doing right by people
33:49
pays dividends well into the future is a very valuable asset, even if it's
33:52
not always the most immediately expedient. That's easier man not being worreless walking in
34:00
well I want you know, I wonder if that guy is going to be
34:01
there. You know, we don't like each other, you know, it's
34:04
just and again I tend to view things through a political lens because that's my
34:08
life now, but being able to work across the aisle, and you know,
34:15
we're in a system, a two party system where it's designed for opposition,
34:19
right, You're not supposed to agree because that's how you were sorted in
34:21
the first place. So getting along well, and you know, I'm proud
34:27
of the fact that what I went through as one of the last Trump nominees,
34:30
even after the election was over, Pausin Biben's coming in. One of
34:32
the reasons I got some votes from the Democratic centers was because of their staffers
34:37
in particular, said no, Kyle, I were that guy. Listen.
34:38
I know he's Republican, He's different, always honest, always answered the phone,
34:43
could always talk to him. He did what he said he was going
34:45
to do, and I'm very proud of them. And it's just flat out
34:47
more a more effective way to be. But again, I'm aware that I
34:52
tend to now think part is it politics, that's the world I'm in,
34:55
but it's all encompassing. My second question for you is what's the best advice
35:00
you have about the financial services industry? You know, for someone in the
35:05
space, like what's one thing they should think keep in mind about succeeding in
35:07
the industry. B Let's say you're a young person starting out right now,
35:13
no free You know, if you knew the first three pages of a book
35:16
about AI and knew how to use a couple of these tools from a man,
35:20
there's so many. Now there's the artwork ones. You're gonna look impressive
35:23
because older people who've got success in a different world hear all this stuff.
35:29
You can't not hear about bitcoin. You can't not hear about AI. Yeah,
35:32
have you ever traveled with somebody you're been in a restaurant where someone speaks
35:36
a little bit of the language you don't you know? And you know,
35:37
I remember I first got in Japan. One guy I knew how to like
35:40
order some food. And you know, to me, this is a magic
35:43
trick. Whoa You know why? Because you knew twenty wars more than I
35:46
did. You know, if you're that person who seems to know what's up
35:52
when it comes to cryptocurrency or blockchain, you don't need to know a ton
35:57
you're you're the person who knows how to say ten phrases is in French,
36:00
and when you're in France, with your friend. It doesn't speak anything.
36:04
You're the guy, you're the one you know, you're the person. So
36:07
and it doesn't take a whole lot of knowledge to be known as someone who
36:10
knows knows. I've already seen it on the hill. People have now carved
36:15
out careers for themselves by learning about digital assets. Like there's a whole lot
36:20
of people that know it like matters, and they hear about it and they
36:22
know it. It shoudn't matter to them. And there's a small number of
36:28
people you know that if at least sort of done the one on one understanding.
36:30
So that's what I would say to a young person for right now,
36:34
play around with AI know some stuff, no, some terms, and that
36:37
for that matter, digital assets. The older people know it's important, but
36:40
don't necessarily like really know how to use it. They're not confident you can
36:45
go far being somebody with a little knowledge about something new. All right,
36:50
that's great advice. And my last question for you, what's one bold prediction
36:52
for the future. I mean, I can get a cheesy one change.
36:57
I really want to say that by New England Patriots go back to the super
37:00
Bowl, but I don't, I don't know. I don't know about that,
37:06
but I think that, again, I tend to think of things politically,
37:09
some of our problems will be solved in ways that are not dealt with
37:14
in the current arguments about the problem. Okay, it sounds weird now,
37:19
but two thousand and four, two thousand and five that you know, the
37:22
US government trying to block a merger between Netflix and I'm sorry, Blockbuster Video
37:28
on Hollywood Video because they were gonna have too much market power and there was
37:30
already concerns about how much they were charging. There was also a massive class
37:34
actual lawsuit in like twenty six attorneys general were in it about how Blockbuster did
37:38
their late fees, how they computed them. There people off and everything,
37:43
and you can have regulators get in and how you do lead fees. And
37:45
they had a settlement. You know what solved that problem Netflix, That's what
37:50
solved the problem. Right. So the framing of well, but you need
37:55
more competition in the video rental space and we shouldn't allow this murder and arguing
38:00
about they're gonna use market power and pricing and the arguments about the late fees,
38:02
and this is just one example of the many. It wasn't solved in
38:06
that paradigm, it was solved by a whole new thing blowing it away,
38:10
and it was irrelevant. Try to speak to a ten year old today,
38:13
explain it, you know, returning a movie late? How do you return
38:15
a movie? Athletes? Like, how does that even make sense? How
38:17
do you rewind it? You know, like the terms don't even make sense.
38:21
So I think a lot of our yeah, you know, they're going
38:25
to be solved in ways that are not necessarily part of the certain argument.
38:29
And we might look back at ourselves and say, man, that was a
38:30
lot of energy expended when if we had just let human ingenuity run free.
38:37
Not that we'll solve problems, but we're going to solve them in ways that
38:39
are not necessarily debated right now, you know. So that was that was
38:44
a very unspecific broad one, but that's what we broad But I love it
38:47
the idea that the answer to a lot of our problems isn't a totally different
38:52
framing, and you don't you don't always see it coming, you don't always
38:54
see it coming. I think that's a great way to end it. Kyle,
38:57
thanks again for making the time today. This was a great conversation.
38:59
I appreciate you're joining me. Hope do back sometime again. I'm sure.
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