Latest / The Longest View with Dez Fleming / The Competitive Advantage of Caring: Ben Markowitz's Customer-First Approach at Clerq
Transcript
- [Desmond Fleming] (0:00 - 0:11) Yeah. What do you want to talk? I mean, I've got stuff I want to talk about. Honestly, I want to talk to you about, you know, your reflection on your founder journey this far, because I don't think you get to do that. No, too often. [Ben Markowitz] (0:11 - 0:15) So we might as well use it purposely did not prepare for this. [Desmond Fleming] (0:16 - 0:16) Yes. [Ben Markowitz] (0:16 - 0:26) I scroll through the YouTube page. I'm like, okay, let's see what this looks like. But I don't like go in and listen because you don't want to like talk. [Desmond Fleming] (0:27 - 0:37) Yeah. And also, I think you're actually, um, the first, first Mark founder to do, uh, this show. Well, it took three years to earn it. [Ben Markowitz] (0:38 - 0:40) Finally got an invite. [Desmond Fleming] (0:40 - 0:53) Finally into the podcast founder journey. Um, well, maybe, maybe start with people start with a little bit of your background, you know, but even, let's even like, we'll get, we'll get to the founder journey, but start with your, your background. [Ben Markowitz] (0:53 - 1:22) Who has been, who has been from New York? Obviously, as you know, from Long Island, it comes through in the accent. So I can't, I, by the way, when I'm not like, when I hear a recording of myself, I'm even more nasal than I actually am in real life. Um, but, you know, grew up here from Long Island, few miles away, went to Harvard undergrad and I guess very nerdy, like immediately like wanted to spend my time in financial services and financial economics. [Desmond Fleming] (1:22 - 1:24) And were you exposed to that at home? [Ben Markowitz] (1:25 - 3:03) Just as a function of high school was very into like politics. Like policy and political life and all of that. And I like worked on a couple of campaigns that was, it was fun. It was interesting, but it like kind of burns itself out. Um, I'm like, I'm definitely not doing that. You know, as a profession. So I think what was it? When it got to college first semester took started taking act 10, right? intro to economics got very into macro economics because it had these policy elements to it and it was like a natural extension of like okay how does the government impact the real world and so the the class I took that really kind of set me on this trajectory was at a professor he was a Fed Board governor named Jeremy Stein the class was financial system in the Central Bank and that was like the best class I ever took in school that really kind of like went into like how does monetary policy work how does it flow through the banking system I just fell in love with it then and like I didn't know if I was gonna go into banking or you know try and get a job in private equity out of college or consulting or government but I wanted to be in and around financial services yeah that was you know kind of what got me started I ended up starting off in banking out of college I was in at JP Morgan and the Fed group covered some of the early consumer fintech so like SoFi, Green Sky, Affirm, Lending Club kind of Gen 1 of consumer fintech in the US that kind of set me on this trajectory [Desmond Fleming] (3:03 - 3:32) yep yeah it's funny to think back to that time frame where across all of those kind of assets the key theme is providing providing greater access to capital and debt products specifically for people and so even when you when you trace back kind of the consumer or really that like innovation of fintech you know post 2000 yeah like the prevailing theme which makes sense because it's on the back of the internet was hey just improved access to products [Ben Markowitz] (3:32 - 4:16) the tech-enabled lenders that was the buzzword right so Lending Club on deck prosper funding circle like you're right like the initial thesis was how do we use technology to reach new new customers who we couldn't or at least the large banks weren't reaching at that time and I actually in a way it's like kind of what happens now which is folks who are starting new businesses and financial services they generally like find early product market fit with underserved customers right and because there's a need they're in pain they want they want exactly right and they try to expand into more mainline customers yeah but it that that concept hasn't changed yeah so you're [Desmond Fleming] (4:16 - 4:22) watching all these tech-enabled lenders at JP Morgan how do you make it to Citadel [Ben Markowitz] (4:22 - 5:32) and specifically you're a surveyor yeah yeah so Citadel is a couple of long short equities investment businesses the first two so global equities and surveyor have kept their brand for a while the third one is kind of cycled but now it's Ashler capital but I was at JP Morgan I was doing the banking thing out of college I was there a year and a half basically and I just kind of I enjoyed being you know my coverage set I obviously I'm still interested in those businesses I learned a lot but there wasn't a lot of room for ideation and like I'm an ideas person I own probably a hundred domains right like that's what I enjoy classic founders yeah and you wanna know it I see the GoDaddy bill every here and there like a thousand bucks yeah I need to rationalize some of these things on my current salary but I I wanted to go to something where I could actually ideate right like investment banking is more execution oriented right and then my co-founder true it as you know him very well actually hired me to [Desmond Fleming] (5:32 - 5:59) come work for him shadow true it okay so you went from a more execution order-taking yes experience to being able to express your views in the real world how long you were at Citadel for two years or four years okay dinosaur years yeah yeah so what it walk us walk us walk us through that journey and experience because obviously at some point that's when you decided to found [Ben Markowitz] (5:59 - 7:26) and start Clerq so true it hired me as I said I worked for him the book was primarily fintech and payments he basically I came in he's like help me expand my coverage very quickly like I supported him but I also kind of helped build out coverage 70 ish percent of the book was payments 30% other consumer fintech payment-adjacent info services touch things like capital markets so covered a broad swath of things but a majority of the book was always payments was an overbuilt you know the book probably maxed out over a billion dollars so it was fun like there any leverage on that or no so the way it works and I don't think I'm saying anything out of band but basically at the multi-strategy funds at least that Citadel the risk management and leverage happens at a global level so you have all these quote-unquote pods right and you get a set of capital and the capital is actually measured in idiosyncratic risk so there's like dollar value is actually not what you're thinking about you're thinking about what is my idiot right and there's like a risk-based capital measure essentially you have parameters that you have to follow but ultimately like the leverage happens when all those pods roll up and all those strategies roll up okay Citadel levers it at you know a global level as [Desmond Fleming] (7:26 - 7:32) yeah so you're you're you're operating with your pool of dollars to play there [Ben Markowitz] (7:32 - 7:51) might be leverage on it exactly and there's a risk model of course so like yeah it is market neutral and it is factor neutral so there are some central factors there's a risk model you can't like have a massive lean on like growth socks for example so it really forces you to like try to come up with [Desmond Fleming] (7:51 - 7:56) true idiosyncratic ideas yeah very interesting so more idiosyncratic risk [Ben Markowitz] (7:56 - 8:01) was better for you you want your idiot to be as high as possible yeah I like and [Desmond Fleming] (8:01 - 8:04) that's not you're less correlated to everything exactly and it's supposed to [Ben Markowitz] (8:04 - 8:44) be an alpha generating strategy right like I think there are a lot of folks who like call themselves alpha but in reality like levered beta lever exactly like I think I think folks are smart and they come up with good ideas but they know deep down like I am making this macro or factor bet and I'm going to express it through this security as opposed to I have done a bunch of work on this security here is why it's going to outperform the most similar companies and express it that way we were forced to do that in many ways so you know that it was a slightly different game than your average kind of you know net [Desmond Fleming] (8:44 - 8:50) long or long only shop and so what was that training like so you're probably [Ben Markowitz] (8:52 - 10:29) 2023 24 I showed up and literally the first week he like hands me like visas 10k and a bunch of research on visa and then he's like you'll actually figure that out go to this meeting it's gonna be a group meeting I won't say which company it was but it's a at the time it was like a 60 billion dollar market caps probably hundred billion dollar market cap company today and he's like it's a group meeting go like you don't you don't have to know anything you can hide in the back there can be a bunch of other people I show up it's the CEO of the company and there's literally two other people in the room and me and we're like sitting at this tiny table and I'm like I legitimately know nothing about what you do and like I like I was scrambling it was like then think of like two or three questions yeah and I did and it was fine but he his style was sink or swim like you'll figure it out I'll guide you and it's honestly like in many ways it's kind of how we operate as we operated our team at Citadel as we expanded that way also which is like upfront like over indexed people you think of high horsepower and can figure things out themselves and guide them and ask questions but like you can't there are certain things about public markets that are very hard to train people on yeah I'm like having an intuition for what's important is a very hard thing to train people on yeah ultimately like you're gonna need to know the industry and the company is better than anyone else to make money and that's a matter of just like internal motivation yeah [Desmond Fleming] (10:29 - 10:56) because you got to put a lot of hours into it there's no avoiding that I do want to come back to when did you start to gain conviction in doing something on your own because obviously like six months six months into the into your tenure tenure at Citadel yes okay and you were like great I want to do something but then three and a half you spend an additional three and a half years there so like there's some sort of dissonance that's a long time to sit on [Ben Markowitz] (10:56 - 11:22) something very lucky that true it and when when I got hired his boss Brian who we work closely together they basically gave me as much leashes I could take so it's like okay you've picked up these names like earnings are coming up let's let's put a position on no start small right it didn't feel small to me a few [Desmond Fleming] (11:22 - 11:27) million dollars a lot of money yeah I mean cuz in in on a absolute basis it [Ben Markowitz] (11:27 - 12:24) is on a relative basis yes exactly but still like your brain needs to adjust to the fact that yeah putting 10 million dollars on something is like a lot of money yes what you haven't you know it kind of feels like funny money over time yeah but it was basically hey put on a position oh you think this is what's gonna happen all right let's put it on yeah and you just have to like get over that like fear of like getting things wrong yeah it's kind of like the baseball analogy maybe with the numbers a little different which is like the best public markets investors get things right maybe 55% of the time like you're gonna be like an all-time legend if you're doing more than that we're adding adding 300 is all thing numbers exactly but ultimately I mean I got promoted every year I was there basically so you know by the end had my own kind of capital that I could deploy it was a lot of fun yeah it's a fun job yes and so [Desmond Fleming] (12:24 - 12:45) you're making money yes yeah yeah so you're doing well yeah you're enjoying the business you're getting increasing comfort with taking risk yes you have conviction in yourself on wanting to do something and so you say hey I want to go start Clerq I know there's more backstory behind that but fill the [Ben Markowitz] (12:45 - 15:34) so I think it was really two things one is the idea was percolating for a while in various forms like I think we were sitting there seeing the advent but really adoption of open banking and like that was like pretty watershed in terms of like what you could then build and suddenly like a lot of the problems that we saw in the marketplace like became solvable right where it's like it is impossible to like retrofit bank rails and make it like Visa MasterCard right and provide instant authorization but what if now we have access to you know customers bank date on an authorized basis like suddenly things that weren't possible that people had tried many times over became possible so the idea was like kind of cooking it's over a course of you know really 18 months before we left so there was that piece and maybe it wasn't the best financial decision right like that I would that wasn't the primary motivator for starting a company frankly it's probably if that was the goal was probably you know unexpected value basis it's very hard to size right because your chances of success at building something that is difficult and people have tried is very low yeah I think for me personally and I'll only speak for myself I think one I felt a little bit more comfortable from a financial perspective right like New York is expensive right it's hard to live here on no salary at least for a period of time and like I felt like I was at the age and just like position that I could take risk and more risk than my day to day and I think that had helped kind of like you know I became more accustomed to taking risk and it was like kind of a next step versus like I were just in banking and I had a fixed salary and it's not like super performance-based I think there was that I'd say the more like existential thing was investing is a lot of fun and no debt no day care by the way these is very different the part totally different and I really enjoyed just like coming up with ideas I'd say there's a couple options one is you could expand your coverage right you can build out a team all of that I felt like I hadn't actually like achieved anything yeah and maybe and I don't think that it's actually true but it's how I felt and like just had this like internal like I don't want to do this for another 20 years and like can't point to oh I actually like did something and created something and there was like that like yeah kind of [Desmond Fleming] (15:34 - 15:46) voice in my head type of thing yeah you wanted to have a more tangible manifestation of your work yes makes a ton of sense okay so tell people about [Ben Markowitz] (15:46 - 18:21) Clark what do you all do what do we do so what we do just the quick tagline is we make it very easy mainly now for high ticket businesses to accept payments from their customers bank account at the point of sale at low cost so account to account payments we've actually made it real for these customers and the pain point that we solve is and anyone who knows payments right like the big mega trend over the last 10 15 years has been a digitization and verticalization of card acceptance infrastructure right so the stripes of the world right have made it really easy for me as a company that sells t-shirts online to accept card payments right and get paid that has worked well for a large part of the economy so to play commerce digital marketplaces you know really just mainline retail billing things like that it works well right like yes all if you ask any merchant like yeah of course they're gonna say yes I'd like my pain processing costs to be lower yeah right but ultimately the system works well I think what we saw is there's a very large part of the economy where that 3% and part acceptance in general is a an actual hair-on-fire pain point and the way you can kind of suss that out is are they doing things to manage that 3% that are inefficient so businesses are still accepting checks wires legacy ach cash and they all have drawbacks from the merchant side right they're not digital they have overhead they have risk right there's a like a clean arbitration mechanism for them there is a dispute mechanism and we can talk about that if you want but it's not a Visa MasterCard like mechanism and on the consumer side right like nobody wants nobody expects to pay for something with a check anymore and if I'm going to buy it's a bad experience terrible I don't have a checkbook yeah I think there was one there was something in the last year I can't remember what it was where I needed to send a check oh god where I get this I was like mom can I borrow a check yeah people don't expect to pay for things with checks other than if I'm buying a car right like yeah suddenly I need a check again right and that's a terrible experience so we thought that there was room to actually solve a hair-on-fire pain point in real large mainline legitimate use cases we'll talk [Desmond Fleming] (18:21 - 18:42) a little bit more about the business and where you guys have settled from a product perspective but you know one of the things that I was thinking of is when you think about checks when you think about wires when you think about ACH you know a lot of that still is from a B2B use case there still are like the B2C use cases in that as well but that'd be surprised how much [Ben Markowitz] (18:43 - 19:03) consumer check and wire volume there is B2C or consumer to consumer consumers paying businesses yeah yeah surprised how large it is now the reason is that the transaction count is gonna skew much lower than credit cards but the average dollar value is very that's where you're seeing yeah and it's but [Desmond Fleming] (19:03 - 19:57) it's like you know any inventor people will say oh payments is a massive business and they'll be like you know we'll set aside these and MasterCard but they also be like Stripe huge Adyen huge Corpay like 20 billion like whatever yeah those are you know when you think about those pools right that's like the digitization a largely yeah B2B use cases and they're eating share or participating in the share of like card volume when you think about check when you think about wire when you think about ACH but I think it's so fascinating is that it's probably again this is the statistic I don't have in my head but like I don't know like 30% of volume in the US it's just this still huge is trillions of dollars yeah but I want to think about the pie yeah the pie when I think about the pie is so much volume and people don't focus on it as [Ben Markowitz] (19:57 - 20:47) lower take rate volume right so the reason it hasn't necessarily had solutions chasing that problem is that if I'm Stripe my take rate is you know more than a hundred basis points right I'm built I've built first into the card ecosystem yep you'd have to adjust your business model to a lower tape rate fundamentally right because the reason that they're pushing people to check is because that spread just doesn't work for them so your average auto dealer in the US their margins are called five to ten percent three percent is not going to work on that right so they just won't do it and you as a business from day one need to accept I'm gonna have to have a massive amount of volume it's gonna be a volume game but I need to be willing to accept that [Desmond Fleming] (20:47 - 21:22) lower take rate right right talk a little bit about the early days of finding product market fit and your customer base talk about what you learned about identifying pain in customers because that's a consistent refrain when anyone goes on their startup journey it's like differentiating between people who tell you like oh this is interesting or I'd like to have that or yeah I would pay to people that kind of foamy at the mouth to need your product I feel like [Ben Markowitz] (21:22 - 24:13) that's a direct attack no I'm kidding I'm kidding no I mean it's it's the one thing that I wish I knew before I started the business yeah right is like what product market fit looks like and what not product market fit looks like yeah and when you explain that for audience yeah you know which is I think a lot of people for various reasons like your startup they will tell you you know this is super interesting you know call me back when you have something right or oh this sounds so cool like I definitely would use this we would definitely use this it's a combination of things I think one is people don't want to tell you no yeah right they want to be friendly they want to be nice I think people like to leave their options open I don't need to be an armchair psychologist but you're gonna get a lot of things that to the untrained ear sound like a yes but are actually a no yeah and I think for us where we saw it was our first in our core customer base today we start primarily a large portion of the business is auto and power sports so people selling cars other vehicles you know ATVs four by four things like that Fred Gullo Toyota yeah exactly Longo Toyota I'll take large largest Toyota dealership in the world which that was a des intro our first customer in the our core customer base today one was like we did a tigas call so we cheated a little bit and he followed up immediately afterwards it was like can I use your product oh yeah and we didn't even have a dashboard or anything yet so we're like yeah like we'll sign you up we'll send you the docu-sign and then in the background like we're like scrambling to get a dashboard ready for him yeah and we got it to him in like 10 days basically yeah and he immediately started using the product on day one and we got probably 20 to 25 percent wallet share in the first two months yep and we're like oh my god this is real he immediately followed up yeah started using it immediately when you get a lot of that's interesting like follow up with me again or give me a call in a month and then they sign up and then you know it takes them two weeks to get rolling yeah when somebody is following up with you in a very short amount of time and immediately starts using your product and you see that repeated over and over again that across different people yeah across yes well the same customer yes like similar characteristics that is much closer to product market fit I you can be misled for a very long time with people saying this is really interesting call me back when your products or you can have good [Desmond Fleming] (24:13 - 24:32) salespeople and then it's but it's also like communicated versus revealed preferences yeah and then the common on good salespeople is that a lot of founders are just very good at selling and also can be very aggressive and pushy with their stuff which will allow them to generate some levels to this [Ben Markowitz] (24:32 - 26:30) which is you can in our business we are a volume-based business and we don't own the entirety of the checkout yet maybe maybe one day so anyone who uses the product is using it because they're finding value at that point in time for that transaction mm-hmm so yes there's like two levels to the product market fit does the person we're selling into it want you know selling the product into is making the decision sign the docu-sign yes right like that is where I think like good salespeople they can lead you about product market fit I think what's harder to misunderstand or to mask with good salespeople is actual usage of a usage-based product right and that is to us like yes signing we got people to sign various stock you see no conversion you see no conversion you get no volume it's not working right and frankly like there were people who I hate to like lump us in with other accounts account payments providers or people who have tried that in the past because we're solving a very specific problem as opposed to like we're account account payments and I think that I understand how people could be misled there which is owners of businesses were like this sounds cool I'm signing you up but the customers don't use it and the teams don't and the merchant doesn't try to push it on them for whatever reason so for me what is a much clearer sign of product market fit is can we have replicable usage across merchants without forcing it on them right so we don't have minimums today by and large we've started to in certain very specific scenarios but in hindsight it was a good thing to not have minimums and not force people to use it to see if they actually want to use it and are generating value and once we saw that be repeated over and over again we're like okay we're we're swimming in the right direction yeah so you start to [Desmond Fleming] (26:30 - 26:52) see that repeatability then what happens you know yeah you get five ten twenty five customers whatever it is and then you start to say okay hey this is really working you know what was what was going through you and into its minds at that [Ben Markowitz] (26:52 - 27:33) point I think we said we need to figure out how to like build the infrastructure to make this repeatable right because I agree with you there is a little bit of like can someone else sell your product there's not who's not you the founder yes and that was step one thankfully the answer is yes it becomes much more of like in can we actually build a company now and we're still in that process right like we're figuring it out every day but can I take something that I used to do and find someone else or a process or automated to actually scale it and that's really where we are now and parts of it we figured out and parts of it [Desmond Fleming] (27:33 - 28:05) we're still figuring yeah that's that's the journey for anyone you know I've never asked you this question do you have an entrepreneur or a founder that you look up to right where I don't want to say idolize because I don't think that's your personality but like is there someone that you're like wow you know you have the hypothetical you can have one three-hour dinner with anyone in the world like who would it be I can talk to a lot of people on the founder side maybe answer on the founder side and then Sarah whoever the other person [Ben Markowitz] (28:05 - 29:15) if I have like a specific person who I'm like wow they're amazing I think my appreciation anyone who gets to make up a number millions of dollars of revenue just getting there are is this so much harder than I thought it would be yeah like my appreciation for anyone who's built something yet that gets to scale it's very different like you almost imagine that things companies get built because they they make sense and they should happen yeah but you don't realize that like that's not how the world works and you kind of have to will certain things into existence right and my appreciation for that is much greater where I look at anyone with a hundred million dollars of ARR now I'm like oh my god that that person is like a beast like yeah I don't know there are a lot of people who I think are smart interesting like I gravitate toward people who know a domain really well right like there's the guy who's gonna know like stablecoin infrastructure better than anyone else and know the mechanics like I'm interested in the details people who are that kind of [Desmond Fleming] (29:15 - 29:25) character like I would enjoy yeah kind of spending time with them don't exclude it to just a founder but for a founder set mm-hmm who who would it be just who [Ben Markowitz] (29:25 - 30:10) spent spend a dinner three-hour dinner with anyone in the world yeah man probably right now Jalen Brunson just cuz he's got eggs yeah he's brought a lot of happiness to my life likewise and otherwise New York struggle right now yeah but probably probably Brunson yeah a domain expert in a if you listen to him he's clearly like a very smart guy also like and a real human like he's a real person like he's not there's some silly people out there yeah that's probably where I'd go right now yeah okay but then the answer I know that was a total cop-out question is like I don't have I'm not like an idols type of no no [Desmond Fleming] (30:10 - 30:15) I I get it but the other thing that I would like your opinion on is on to your [Ben Markowitz] (30:15 - 30:48) point of I actually have one sorry I had Mark Rowan is one of the smartest Apollo guy yes he is Apollo and a Drexel guy he's like the professor yeah as far as like CEOs and financial services even before he was CEO he's just like a first principles thinker and like if you look at what the alternatives industry looks like now a very large portion of that is his ideas about yield excess [Desmond Fleming] (30:48 - 31:02) yield generation that became consensus yeah yeah and not to mention but all the Apollo Blackstone KKR those businesses have done incredibly well in the public [Ben Markowitz] (31:02 - 32:16) market so it's two things and totally not payments related I enjoy that but two things happen one is I think partially zerp related there were a lot of folks who were underwater on their liabilities and needed excess yield so the combination of zerp plus new models that folks like Mark Rowan came up with where private credit basically went from you know a private equity sized industry to something massive yeah right and frankly it feels infinite right now I'm sure sure it won't be infinite but it feels like there's endless room to run that was one thing the other was the public securities they became c-corps so most of them were publicly traded partnerships a lot of institutional capital and index capital can't own those structures and becoming c-corps they took a tax hit right like that was the concern is fun they'd have to pay do they go public as partnerships yes okay yes there are publicly traded partnerships they took the jump all well most of them or all of them the ones you know became c-corps and the capital that could own these businesses just skyrocket yeah so it was a combination of those two things I would say super interesting the comment I [Desmond Fleming] (32:16 - 33:13) want to come back to is you mentioned you know and I agree with this building a company is a continuous act of will but I also do agree with there is market timing certainly plays a huge factor like when I think about you know to a certain extent I'll pick on it but when I think about like an outcome like coinbase probably 60 80 billion dollar company today like obviously cannot build that pre Bitcoin no but once you have that new entry point you know plus or minus order of magnitude people didn't know how big Bitcoin can be and that has certainly helped it go from you know a one ten billion dollar outcome to this business that could very clearly be hundred billion plus over continuously over time so like would just love to get your perspective in general about how you think about how market timing plays a role as you are a founder currently [Ben Markowitz] (33:13 - 34:52) building something of your own it's a really good question because most ideas are not original yeah right and like if you're just thinking about it like are you actually too late you don't know who else is building at the same time right like we nominally in our space like there were more people building not the same toward the same customer but like infrastructure wise similar things at the same time that we didn't even know about when we started right turns out we don't really compete with any of them today and many of them don't exist but it's hard to know am I too late if I've thought of it right so that's on one end and the other is like is your customer base ready you don't know until you try right right and like I think you need to actually be able to solve a problem on day one if your product is important enough they will tolerate it not being perfect yeah and that's a real thing I guess that's somewhat of the YC mantra right to put it out there they're willing to use it and it's not perfect it means you maybe you're on to something and we experienced that for real so the first like five payments that are first I was I mentioned our first dealer customer a small independent dealer down in South Florida the first like five payments were like screwed up and like it broke they did process and he just stuck with it because he's like this I need this yeah I'm like they'll figure it out they move fast yeah I don't really know like it's hard to time markets it's hard to know if people are ready unless you just go [Desmond Fleming] (34:52 - 35:22) try yeah yeah and there's a little bit of as an entrepreneur if you have the luck herb or not luck the opportunity to be a serial entrepreneur like you get better at noticing when there are inflection points in markets I think people still can never understand how big things will actually end up and I also do think it it takes there's a little bit of specific brain wiring around orienting yourself to be worried about the upside and not the downside [Ben Markowitz] (35:22 - 36:49) it's luck also like people like to say oh I knew 20 years ago that this would be massive right I think like a good way to kind of size that is am I actually talking about a big problem that people care about I think that that's probably and I think what's a function for venture markets it's a you know if I'm Brian Armstrong right or I'm like it's early days of Bitcoin like I think privacy people care a lot about privacy and I actually see it like mm-hmm like we contend with that right which is like do I want to share my bank account info to get X Y & Z service like we see the implications of that when it comes to consumer privacy and like not skepticism of government and like the ability to transact privately which is part of the original ethos yeah of of crypto right and Bitcoin in particular like that is a very big problem and a lot of people care about that yeah and like whatever the solution ended up being like it worked yeah you know I told you forget forget Bitcoin forget crypto if I told you it's you know post financial crisis we want money that the ability to transact without money that is controlled by the government you're like okay that's a big idea that can be very big if it works yeah like that that's kind of I [Desmond Fleming] (36:49 - 37:19) worked backwards from that yeah crypto Bitcoin that industry for sure in the fullness of time has proven to be one of the uncapped asymmetric opportunities within tech history when everyone looks back people will be okay like we had the computing revolution we had mobile we had the cloud we had you know crypto I'm not a hundred percent sold on that yet but okay do you don't think crypto out of [Ben Markowitz] (37:19 - 37:43) staying power I think it has staying power but it has had staying power by evolving toward traditional financial services yes we try to recreate everything and away from the original value proposition in the ethos of it yeah which is why like stablecoins are the big thing and stablecoins fundamentally have intermediaries who custody assets or at least are responsible for safe [Desmond Fleming] (37:43 - 37:52) keeping assets the dollar claim right centralization value yeah he says behind it people don't care yeah or they're probably are people who care [Ben Markowitz] (37:52 - 37:59) that's the kind of irony is it's solving a very different problem than the original I still think the original problem is a very big one yeah that [Desmond Fleming] (37:59 - 38:29) solving different things now there's still ways if you really care about like the peer-to-peer cash components or value prop of Bitcoin that's still very possible today it's just the overwhelming usage yeah is not tied to those needs I still think the overall and usages are still like speculation and speculation trading and then now or you know millions of people just having access to the US dollar which goes back to your point yes there are real real [Ben Markowitz] (38:29 - 38:35) applications largely outside the US and develop markets today and those are [Desmond Fleming] (38:35 - 39:09) legitimate yeah but where I was going with that yeah that thread or that line of thinking was saying hey here are here are all these transformations or inflection points and opportunities in kind of the tech pantheon tech history we're now at a new inflection point with AI mm-hmm how do you all think about applying it to your business using it to be more productive and do you guys see opportunities to you know this is a question for I think a lot of people in FinTech is are there areas where we can productize this for our benefit [Ben Markowitz] (39:09 - 42:01) there's a lot to unpack in there I'd say operationally like AI is obviously gonna be very important to every company right like customer service has obviously been feels like the initial use case that is sort of working it's to get a little bit better for it to actually truly be like enterprise grade and for you to trust it without human in the loop but operational things documentation right customer outreach communications like that I think is gonna become like commonplace table stakes embedded in everything you do fairly quickly within financial services I think what's somewhat nuanced is that it's a regulated industry right and you can't have free-thinking models running roughshod over your data and making decisions right there's certain places where you need to explain ability that right and you need to be sure of accuracy right and that's unique and it's not just financial services any regulated industry is gonna have those dynamics but it's particularly true for us and I think we're still wrapping our heads around like where can we actually use this we actually do have a handful of very clear applications where we have unstructured data that we believe actually has a lot of signal value for us and can be a material driver of things like detecting fraud for example and using LLMs to classify that data and clean up that data on a programmatic basis like that's an interesting application that's very real and it actually unlocks things that we that would I don't know if we couldn't do it without it but it would be an absolute pain yeah do it I know the relative base is probably more expensive because you would add I would assume you have to throw people you'd have to throw people at it exactly so that's a real like unlock we are just very careful that everything we do we are following the law we are tight from a regulatory perspective so there are things that are in flux that we're kind of waiting for some clarity on but I think ultimately like in financial services there is a lot of unstructured data that you get and using LLMs to classify that I think is gonna be a very real application machine learning like I think people use AI as like a catch-all today but ultimately like machine learning has existed in financial services and been widely adopted for various use cases for a long time and they're obviously traditional ML applications for fraud authorization models things like that that are more commonplace I'd say for [Desmond Fleming] (42:01 - 42:13) sure do you guys have any tasks that you've operationalized with LLMs specifically and that could be on you know something as simple as you know [Ben Markowitz] (42:13 - 42:21) even here internally we use granola a lot I am deeply anti note-taking apps hmm I [Desmond Fleming] (42:21 - 42:27) would I think this is contrarian tell me more it's a privacy issue it's a privacy [Ben Markowitz] (42:27 - 43:25) issue and you don't realize the stupid things you say in normal conversation that are harmless and with harmless intent that sound really bad maybe I I started my career at JP Morgan which is like the largest most regulated like political institution on the planet and then you're in public markets right where like you don't want to say the wrong thing that sounds weird you're gonna get restricted on a stock even though you didn't mean it the way you did right and like I'm just deeply terrified of like saying something that you didn't mean on on and I I don't know like what the big banks are and other regulated institutions are doing with note-taking apps but there's going to have to be like some very specific enterprise features that allow that so yeah maybe it's a good thing it polices people from saying dumb things well I was just trying to [Desmond Fleming] (43:25 - 43:31) give an example of like operational thing that that we've adopted right it's [Ben Markowitz] (43:31 - 45:12) again pre and post like it's we haven't had the need to do that yet there's like baseline levels of automation that we should be spending time on that don't require a general AI at this point even customer service like I want to be in direct contact with our customers at this point I am so I am I'm a very large percent of Clerq support at this point and I want to do that because we're not at the stage where I feel like I should disengage from that and let some AI chat by we where we are using it in the very near term is actually more like data classification use cases so I'll give you an example which is there are close to 10,000 banks and credit unions in the US this is a very niche problem by the way a lot of them sound very similar so like first bank of X yeah first or state bank of Y yeah and if I'm searching right I'm going through search right and like I'm looking for first Bank of Texas you know Houston versus first Bank of Texas Dallas right it is very hard like we work with multiple providers that we route to and they all have different codes for that bank and using LLMs to consolidate and reconcile to make sure the customer is getting right it routed to the right bank yeah and using LLMs to do that with some degree of certainty like that is a like it's solving a real technical challenge and that's where we've been focused I don't really trust it to interact with third parties or anything that like requires certainty the core value [Desmond Fleming] (45:12 - 45:26) proposition today for a lot of these tools because interacting with multiple applications and grabbing data between them they're just brittle at this point they'll break but if you have unstructured data it's great at [Ben Markowitz] (45:26 - 46:49) structuring that for an output right now or at least getting closer to the right answer right or if you need something that isn't a hundred percent accurate but there is value in it being 95% accurate so like the example I just gave you what's the worst thing that happens the customer gets routed to the wrong bank and like they don't complete a payment yes that is a bad customer experience but we're gonna get a lot closer if we use the LLMs instead of trying to classify everything by hand yeah right and I like those use cases right now we are in a regulated space for a small company right I don't feel comfortable yet letting I like handle my customer service do you think what would make you more comfortable like what would your government guideline like regulation that sets out the rules and where liability rests for hallucinations and things like that that cause consumer harm right like clarity around that vendors that have SLAs that basically like guarantee that and assume the liability for that or at least give you a perspective of like what would be my liability and I think to be very clear like I'm not a Luddite like would it be in this business if we were I think we'll get there very soon but it's just [Desmond Fleming] (46:49 - 47:17) not there yet yeah it's interesting people are trying to help I don't know how quickly government and regulations remove I think in the US people want to actually globally people avoid a patchwork of regular regulations because that puts down pressures on any business operating there are startups that are attempting to fill the liability gap because to your point if you know it's [Ben Markowitz] (47:17 - 47:21) a real problem yeah you see much more deal flow than I know it's also one of [Desmond Fleming] (47:21 - 48:04) these problems where it's like it's like is the market ready right because if someone is one it's derivative an AI agent company would have to come to you and say hey Ben we want to run all of your customer support yeah and in the event we run customer support and we tell an end client the wrong information and that involves either some financial loss to them or financial loss to you we have insurance and are liable for it and we can pay for it that would involve that agent product being viable enough to say hey we can run all your customer support for a business like yours and then also some liability provider selling into that agent and that's what they're that's effectively [Ben Markowitz] (48:04 - 49:26) it's still early in my that makes a lot of sense I'd say for us in particular I think two things one is even if they assume liability on paper like there's reputational risk that extends to the business that is uncapped effectively yeah right so there's that there's that piece of it the other is and I think it this is just a matter of the stage we are there are a lot of things that we could automate today that we don't because we want to understand what is the right automation to build you know we're there's a long way so like customer service like how should we actually service our customers how do they want to reach us yeah what types of responses should we be giving to them that they understand right and I think skipping that and going straight to we're gonna use LLM's to handle it yeah you're gonna miss out on understanding parts about your customer which is a lot of the reason like we don't automate certain things that we could right now how often do you talk to your customer every day yeah and is that like it's not it's unscheduled in many cases yeah but I am I'm heavy in support like I see every support ticket that comes in yeah and I view that as like a key part of my job right now I don't know how scalable it is yeah but it's important for us right now yeah I mean [Desmond Fleming] (49:26 - 49:52) I remember one of the things that was fascinating to me about the entrepreneurial ecosystem is I can't remember who but it was some founder who's like you know Siri CD whatever he was like yeah till like and I might have even been a public company at that point so he might have been talking about you know until there was seriously DRE and he was like yeah and I interviewed every single person who joined the company you're like what funny thing is I don't [Ben Markowitz] (49:52 - 50:17) know if he still does it but Ken Griffin until like much more recently than you would imagine approved every single hire which is wild yes including my own yeah like up until that point like he had to sign off on every hire yeah and you would imagine hey you know he would have real comments it wasn't a rubber stamp yeah he would literally send comments like why is there a gap in this resume yeah [Desmond Fleming] (50:17 - 50:52) yeah no but you if you aren't in the entrepreneurial ecosystem if you haven't been a founder you would hear that it would say that's crazy that's a waste of his time why would he do that but then you think about it and you're like this man this guy has put in 30 40 years of his life into building this thing and creating this culture so if you were in his shoes and you're bringing in some incremental person let's say it's you're welcoming someone into your house would you want to shake their hand when they're coming into yours yeah it [Ben Markowitz] (50:52 - 51:49) becomes impossible at a certain point and you hope to reach that stage I'd say on the support side though I think two things one is like you get so much goodwill by providing good support and it's like it sounds like such a commodity but it's real and like merchants know who are their vendors who care maybe this is not a good way to think about business you're running a business but I take it very personally if people like don't like our product or didn't have a good experience and like it is I probably shouldn't it's maybe not a healthy thing to do but if somebody is like Clerq sucks like I'm offended by that and I want to prevent that from happening yeah it frankly happens very rarely which is a good thing yeah but like I care that they have a good experience yeah so and that that's why I'm like a support ticket comes in I'm like I'm not gonna wait till some I just need to respond right yeah you need [Desmond Fleming] (51:49 - 51:52) to know yeah I mean people differentiate their whole careers on just being [Ben Markowitz] (51:52 - 52:28) responsive to people it's funny because you're like in Citadel land you know you're you're getting invited to Knicks games and you're sitting down with CEOs of four to five hundred companies and your 25 year old pipsqueak and like asking them like oh why aren't you doing this well enough and now it's like me on a Saturday at 8 a.m. being like I can't reset my password yeah and it's like I got you it's a funny change but like they're real people who have real problems or like trying to do their job and there's a level of satisfaction [Desmond Fleming] (52:28 - 52:32) that comes from that yeah what has been the most fulfilling aspect of [Ben Markowitz] (52:32 - 53:15) being a founder it's really that like knowing that we have created something from zero that our customers otherwise wouldn't have right that makes their life easier it either saves them time or helps them make more money in many cases so for our product in particular like the salespeople at dealerships and the finance managers it saves them time versus telling somebody to go get a cashier's check they don't want to lose the sale number one so many times they'll drive a customer to the bank to get a cashier's check and bring them back yeah and that's time they could be spending with another customer closing another deal you know taking home over more pay that month and that's like we are [Desmond Fleming] (53:15 - 53:30) crazy that people it's a real thing it happens every day okay and what is what has been the most challenging thing about being a founder I think two things [Ben Markowitz] (53:30 - 55:59) one is like living every day not knowing if like you're gonna succeed ultimately like that is something you need to just get over it doesn't get it doesn't get easier per se I think that that is a very challenging thing I think there's like there's a mantra I don't know if it's a YC thing or something else but you know you know invest in founders who have nowhere else to go maybe that's right because the more you have other opportunities it's like harder to like opportunity cost exactly there's opportunity costs so I think that that's just like an a never-ending challenge and it's hard just like half of it is just keep on going yeah there are a lot of times like less so recently which is a good thing but like early on when you're finding product market fit very easy to get discouraged and be like I'm done like yeah so I think that that's that's a really hard thing in terms of like actual operationally it is not hard to find acceptable talent it is very hard to find and hire excellent talent mm-hmm and good people have lots of opportunities it's a very competitive marketplace like that I'm sure ever I don't know if you ask the question to every founder or whatever but hiring great people is and there's no like shortcut to it like yeah there's no way to speed it up no way to speed it up and you're especially at the stage we are like you have certain personalities that are like I want to be at the ground floor I want to be a founding engineer right I want to be a pirate right and like there are people who have that personality and then on the other end it's like I'm gonna go to Citadel securities make million dollars a year and like have a job right and like in the middle is where most of your startup journey and most of your startup life is and like finding the best talent who is okay not being a founding engineer but also wants to work really hard and is like super motivated to get from you know a million dollars of revenue to a billion dollars of revenue but on a salary that's less like that it's hard to find that it's a smaller pool they do exist it's a very competitive pool you know this is a good or bad or ugly [Desmond Fleming] (55:59 - 56:25) comment but I've found that one of the cheat codes is just to look at where people grew up like where their high school was because the people are who are willing to work very hard and take the pay cut normally they have some sort of soft landing somewhere and so you just you know can pick any nice school from any state really and it's like especially if those people are in New [Ben Markowitz] (56:25 - 57:58) York you're kind of like hmm like what's going on there is some of that I would it's really blocking and tackling right like there's so much like I do cold outreach I do a ton of it right and just like shots on goal have you found a way to automate the initial so it's interesting there are some tools out there now yeah what are they I forget what there are a couple of tried I forget I forget off the top of my head two things one is LinkedIn will block you oh they'll be like are you doing bought things and I also think the best that like smart people can tell if something is an automated message and like I try to focus on like if I'm spending my time doing it manually I try to actually focus on people who I might want to hire her right yeah fit a certain profile and like send them a message that shows that I put in more than one second of thought into like who they are and why I'm reaching out yeah and the hit rate is much higher when you do that I've tried the span just man people it doesn't work yeah yeah it's still pain it's pain people don't realize that half of like going from zero to product market fit is just like LinkedIn spanning people oh yeah the number of LinkedIn messages I've said I didn't even have a LinkedIn before a star Clerq yeah like I had to make one from scratch yes oh I [Desmond Fleming] (57:58 - 58:43) was off the grid my last question for you Ben and this is one that I do genuinely love because when I like started writing content and then doing these podcasts like you know the main thing that I I love about tech is that like people are very open people are very down to give back and communicate to the people who start companies two three four or five years from now you know my main question for you is you know given everything that you know right now you're in the middle of your journey maybe even still in the early parts of your journey knowing what you know now whether it pertains to starting a company in FinTech or in payments related to open banking or just generally from what you've learned about entrepreneurships thus far you know what would your advice be to someone who wants to step into a role similar to [Ben Markowitz] (58:43 - 1:01:51) yours and to be a founder I think a lot of people especially now they're seeing their friends go do it right and like maybe it's the availability of capital right that's make it made it easier to raise venture funding right I don't I don't know all the dynamics but it has been elevated like being a founder as like something that is higher status in society and I think that that pulls in a lot of people I get it right like being an entrepreneur doing your own thing being your own boss like there's there's maybe merit to that in some way and I just as someone who didn't know what he was getting into as much as you can read everything you know you don't realize that half of it's just gonna be like pain endurance mm-hmm it's probably not for everyone and even for me right like it has taken like I've grown into it in a sense where there were things that I couldn't have a map if you told me that my job was gonna be answering support tickets at 8 a.m. from someone who can't figure out how to reset their password I'd be like I'm saying it so yeah but on the flip side right like there is there is real satisfaction that comes from actually solving problems for people I'd say in FinTech lands like there are a lot of people who look at inefficiencies in financial services and think that it's because no one has built technology to solve that problem and most of the time they're wrong somebody has built technology and tried to solve the problem but it's not just a technology problem it's a matter of what are the incentives for all the parties mm-hmm who are the players in the ecosystem what can they do to stop you from doing it and that is why the things are the way they are and I see a lot of this and crypto and stable coin land which is like the number of theses around oh let's replace cards with lower cost payments and now let's use stable coins to do it and it's like people have had that thesis in various forms for 25 years and like they're they're right like yes from a technology perspective that would solve that but there are reasons why it hasn't right and like I don't think in financial services in particular like people necessarily see that nuance from the outside yeah and even us right who like came from financial services like it has been my life right professionally in many ways I'm like core academic interests like even I knowing that they exist there they're always nuances that we've picked up that are underneath the surface that you just don't know until you get into it and start doing it just because something seems like it is solvable with technology doesn't mean it's actually gonna work and that that is somewhat unique to financial services [Desmond Fleming] (1:01:51 - 1:02:00) yeah yeah we'll love it Ben thanks for coming on the pod thanks for having me three years late but thanks for having me anyway yeah we'll do the next one in less than three years