Channeling Anger to Fix the Finance Industry with Deregulation, Technology, and Crypto with Zach Pettet
In today’s episode, I chat with my buddy Zach Pettet about what’s happening in FinTech and where the industry can go.
Zach is currently the Head of Content for Money20/20, which runs the largest FinTech conference in the world. Before taking on this position, Zach spent the previous 8 years working in different positions in finance. His mission is to at least make a dent in changing the industry for better.
During our conversation, Zach and I explore some of the current issues regarding how expensive it is to be poor, the ideal future of FinTech, how stubbornness can get you your dream job, and how the events business can be very lucrative if done right.
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Here’s what I learned from the episode:
Some of the best learning comes from being in the room in private, not from public content.
Broker dealers can take off their fiduciary hat, which mean they have to act the best interest of the person, and can instead put on their broker dealer hat whereby they can merely do something “suitable” for the person.
Wealth and health are intercorrelated, and if you don’t have a dollar, it is really hard to maintain your health.
When money starts coming in, it is hard to let go of the scarcity mindset and to believe in abundance, while also not buying flashy cars or shoes.
We are moving closer to the web3 utopia of streaming money, and there is a wave of earned wage access companies that are finding ways to get people their earned money faster.
Regulation is the main thing that matters in moving the finance needle.
A lot of the yield farming oriented stuff in web3 is illegal or will be soon.
We currently live in a dystopia when it comes to money movement.
The efficiencies that can come with smart contracts and zero knowledge proofs are exciting; if you can take out even just half of the people it takes to get a mortgage approved, the entire conversation about money changes.
Listen to Steven Jobs – if you don’t like what you are getting up to do every day, quit your job.
Neobanks: change the font, change the world.
Money20/20 is an events company, and they are aiming to also build themselves as a media company.
Diversifying from in-person stuff is great, but you still have to have the in-person stuff for business to actually happen.
The main inflows for events businesses are from tickets sales and sponsorships, and the main issue is when people show up without a ticket.
Zach’s other events business V-Sum was started mainly out of boredom. During their events, you can see the ins and outs of different companies, and it has accidentally resulted in over a billion dollars raised for the participating companies.
Learn more about Zach Pettet
Additional episodes if you enjoyed:
Jason Hitchcock: Your Guide to Web3 (DeFi, NFTs, and The Metaverse)
Andrew Finn: WaitButWhy and G64 Co-founder on How To Acquire A Free Company
Episode Transcript:
Eric Jorgenson: Hello again, my friends, and welcome to Jorgensen Soundbox. I'm a writer and investor in early-stage startups, and this show is a sidecar on the magical motorcycle of my curiosity. I bring you along as I try to figure out and place bets on how I think the future will unfold. Today, my guest is my good buddy Zach Pettet. Zach is currently the Head of Content at Money20/20, the biggest FinTech conference in the world, which means he's one of the best suited people to see what's happening in FinTech, who the big players are, and where the industry can go next. He's the perfect person for this job because he's a massively unique individual. I like to describe him as the child of Jason Mamoa and Larry David who was raised by Charlie Munger and Wiz Khalifa as co-parents. Just let your imagination run wild with that. Zach is fearless about being himself, about impacting the world of FinTech, and doing both at the same time, which I really admire him for. And we dive into that in the episode. We talk about what the ideal future of FinTech could be, we talk about how stubbornness can get you your dream job, and we talk about how events businesses work and how they can be wildly profitable if done right. Please enjoy this conversation arriving at your ears right after one quick message from a sponsor.
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Eric Jorgenson: All right. Should we work?
Zach Pettet: I mean, is this work? Getting to talk to you about business on a podcast while we record it and act like this is work? I mean, sure, yeah, let's work.
Eric Jorgenson: We're going to pretend like this is work.
Zach Pettet: Let's work. Let's work. I'll get very serious.
Eric Jorgenson: What would you- how would you describe your specific knowledge?
Zach Pettet: Ooh, interesting. My specific knowledge is- I would describe my specific knowledge as financially oriented and filtered by humans. So, I'd say I don't- I have accidentally spent eight years of my life in finance and accidentally learned a shit ton about finance to the degree where I forget most of the things that I know until I end up in a conversation about it. And then they're like, hey, how do you handle this side of the balance sheet for liabilities when it comes to this? And I'm like, oh, well, yeah, yada, yada, yada. And I'm like, wait, I have to like look around and look behind me, and like, wait, who said that? How did I know this?
Eric Jorgenson: You very slowly just kind of like take in knowledge by being in the room over a decade.
Zach Pettet: Yeah. I mean, being in the room and then also just being in rooms that I shouldn't have been in and then like listening to podcasts and everything else, just complete and utter obsession out of- that was spurred by anger and a lot of it. And it's still maintained. It's still spurred by anger on a very regular basis.
Eric Jorgenson: See, this is the Larry David. Why did you say you ended up in finance accidentally? And why was it spurred by anger?
Zach Pettet: Well, let's go back to my youth. The anger started when I was young. So, my dad went bankrupt when I was a kid and I grew up in a- most folks listening to this I'm guessing are not in Kansas City, so I'll just say grew up on the rough side of town, I suppose. Kansas City is a very racially divided city. I grew up on the side where people would guess I did not based on how I look now as a 6’4” 30-year-old white male, but was surrounded by payday loans and check cashing places and just like saw the insanity that comes along with the American economy, but comes along with being poor in the American economy. Just realizing how frigging expensive it is to be poor was the thing that I figured out as a kid, but I kind of thought that's what everybody was dealing with. And this was just kind of how the world worked. And when you get a check every two weeks, you go to the check cashing place, and they just take 10% of it. And that's just how life works. Oh, wait, it turns out, grow up, that's not how life works at all. That was just a very rough part of town and how you had to function to function in that specific geography. So then when I grew up a little bit further, I went and did an internship at Merrill Lynch. My internship at Merrill Lynch pissed me off to the nth degree where I basically realized- there was like one day where we went to- I actually tell this story pretty often. There was one day we went to a lunch with this woman who was a wholesaler from a, fuck it, SunTrust, because they're known to sell annuities, so I don't think I'm telling any tales out of school. But she came in and said, hey, here's an annuity. So, regular cashflow, yada, yada, yada. Oh, and by the way, you can make 3% when you sell this to your clients. Like, oh well, that's interesting. Everything else I had heard about was 30 basis points, like one tenth of that. And we go back to the office, didn't think much of it. It was just another lunch. We go to a lot of lunches, wealth managers. We go back the whole afternoon, the whole next day. The whole rest of the internship, we're selling annuities to everybody. We're selling annuities to 90-year-olds, we're selling annuities to 50-year-olds, we're selling annuities to anybody. And it's not that they all bought them, but it's even just the fact that we brought it up in conversation and tried. It's like this is not what they need. And then you realize that a broker dealer, which is what Merrill is, has the ability to take off a hat which would be the fiduciary hat, which is where you have to act in the best interest of that person, and put on a broker dealer hat where you can just do something that is suitable for them. Suitable doesn't stand up in court very well most of the time when you actually like- when the rubber meets the road, so you can pretty much sell anybody anything and make a claim that it's suitable. So anyways, really long-winded version of like the incentives in the financial system are incredibly broken, and I got to see that in college. And then ever since then, that was eight, nine years ago, and anger has driven me every day since.
Eric Jorgenson: So, you saw at the ripe young age of, I don't know, 18, 19-
Zach Pettet: Something like that. I was like a year behind, so like 20.
Eric Jorgenson: Commission driven salespeople under the like understanding of a fiduciary responsibility and like the guise of a consultative sale. I don't know if predatory is too strong, but like certainly an asymmetry of knowledge, selling products that may or may not have been beneficial for people. And then now you've decided to spend your life doing a kamikaze run at the financial industry.
Zach Pettet: From the inside, from the inside, yeah.
Eric Jorgenson: You are like Ron Swanson, the libertarian city manager.
Zach Pettet: A little bit. Yeah, in a weird way, in a weird way. And I mean, the other thing about it as I think like you grow up thinking that there is some utopia to create. Like I always thought back when I was selling, doing the Merrill Lynch thing, I was like this should be perfect. Why isn't this perfect? Why is not every incentive aligned? Why does not everyone function in their own best interest? And then you realize, number one, we’re all animals and making emotional decisions. And then number two, there's inherently no way that we are going to create a utopian financial system. That's just not capitalism, but it's the best we’ve got. So, yeah, I don't- my version of what changing the industry is and my version of success I think has changed a lot, but my general like grrrrrr as to why I get out of bed and like why I kind of have the perspective that I do, it definitely goes back to that. Like I've hated Robinhood for a really long time before it was cool. I hate sports gambling right now. That's not very cool yet, but give it a couple of years, people will fucking hate sports gambling.
Eric Jorgenson: Yeah. You can tell sports gambling is fucking stuff up because they're having to start advertising against themselves now, similarly to how cigarettes and alcohol do.
Zach Pettet: [inaudible 11:01]. It's like anytime that you have to put- like anytime that you have to put boiler plate on your commercial-
Eric Jorgenson: You're selling something that has potentially more harmful externalities than-
Zach Pettet: Yeah. It's potentially something that should not be allowed to be on that fucking commercial. And I don't know, again, this is where I get into the utopian versus the realistic, but I think that it's- Fisher Investments is a good example. They've spent so much goddamn money on these advertisements, and I think it's really hard for people to figure out is that legit, is that not legit? It seems slightly less legit than your Morgan Stanley ad, but maybe the idea of fee only revenue and like not- it's just so hard to figure out. So, in the same way that like how would I know if I should pick Valtrex or this, how should I know if I pick Fisher or Morgan? Like no one is educated enough to make these decisions, and then we just go market to them as if they actually know what the hell we're talking about.
Eric Jorgenson: You said your definition of success has changed after time in the industry. What is it now?
Zach Pettet: My definition of success in the industry at this point is to just leave it better than I found it when I was born and to do that knowing that I had an impact, not just like I lived 80 years and this thing that used to be absolutely horrible is slightly less horrible. I was on my couch the whole time, but it looks good, I'm going to die now. But like actually be able to look back at my career and say this person wouldn't have been able to afford- all the way to the point of like an individual, they wouldn't have been able to afford this house. This group of people benefited because they went to this technology instead of getting into this payday loan cycle. Things along those lines where if I can just look back and feel like I made a dent on the industry, even like a little dent, because it's a big industry, I'll feel good about what we did here. Because it's so freaking big, so big; it's everything. And as like web3 and DeFi everything comes out, like it's literally everything now. Like we're really moving in a direction where everything is finance.
Eric Jorgenson: And it is- like I think you have a unique perspective on it because a lot of people I know who are interested in finance kind of like came from a place where they were financially educated in their household. They came from a place where the game was understood by the generation before them. And I mean, that's how I grew up, and I consider myself incredibly lucky to have been there and had my dad say like, hey, compounding is really important when I was like five. And so, but I think it's really interesting that finance has as much and maybe even more impact on the ability to lift people up than the typical kind of like Ivy League, Wall Street approach that is like, hey, you have to go get in that game because that's where the money is. Like this approach I think is like financial health is upstream of a lot of other things like physical health and housing and continued employment.
Zach Pettet: They're all intercorrelated. And yeah, I think finance, at the end of the day, is the thing. I think a lot of people are like wealth is health or whatever, or health is wealth, or whichever direction you want to go with that. But I truly believe that- I'm going to fuck this up if I try and make like a really intense statement – I'm going to do it backwards. But I believe the dollar comes before the health. I think that if you don't have that dollar, it's really hard to maintain your health. And if you don't have that dollar and you don't have the health, then like what is the rest of life? If you don't have your monetary life figured out, in the United States, it's pretty damn hard to do anything.
Eric Jorgenson: Well, yeah, you end up living in a food desert, you end up buying the cheapest calories you can which is fast food, you end up then having health problems that cause greater challenges. Yeah, I don't think that's a crazy thing. But I think it's worth saying most people in finance are not motivated by that vision or maybe even aware on a firsthand basis of how important that is and what sort of impact even a relatively small improvement in financial health can have for the bottom 50% of Americans.
Zach Pettet: Oh yeah. I don't think that- I think that most folks that are thinking about finance, especially thinking about it without the lens of technology, are thinking about compounding. Like compounding is something that absolutely you need to learn at a young age, but it's almost more of an abundance mindset than a lot of people can handle. I mean, it's great. Yeah, absolutely, we should teach kids about compounding at the age of 5, 6, 7, 8, 10, whatever. But also, as you said, if they live in a food desert, that means that they also probably live in a banking desert, which means that probably the only places they get food is the same place they get their money, which is the ATM at the gas store or at the gas station. And it's just like how the fuck do we expect anybody in this country to feel a sense of equality or even feel a sense of like a shot of getting the hell out of the hood if the only way that you can do it is sports or music. I had a conversation last week with this guy, he's basically like the connector of dots to like the Rick Rosses of the world and to the OBJs of the world. Like if they're either a really big musician or a really big athlete, this is the guy that's connected to all of them because he managed their money and he's a VC and yada, yada, yada. But he was even having a conversation, just talking with him, he was like the first thing that he needed to help a lot of these people with is the mindset of it, like understanding that this money is going to keep coming in, but you can't have a mindset that it's going to keep coming in. Like you have to let go of that incredible amount of scarcity and believe in the abundance while at the same time not buying a Ferrari, which is like a really hard balance.
Eric Jorgenson: And understand that you can put that money to work for you.
Zach Pettet: Exactly. Yeah. And if you've never had anything, it's so hard not to go buy the dope pair of shoes. Like watching this Kanye documentary right now, like he wasn't kidding when he talks about buying a really, really dope watch before he has a house. He wasn't kidding. I always thought it was a joke. He was being serious. But that's the only way that you can display the work that you've done kind of thing. And I just find that so interesting. So anyways, the initial point was like the only other way that I've seen people get out of the hood is that guy who's just the connector to the athletes and to the musicians. It's like we have to build- we have to do something that gives people more of a chance to pull themselves up by their own bootstraps.
Eric Jorgenson: And do you think or has your perspective changed at all about the ability for finance and finance companies to do that? I feel like the perception, if you ask who serves underserved banking communities, it's like check cashing places, payday loan places, all with these kind of like super high margins or high- I don't know. Do you think ill of those companies that serve under-banked communities? Is it possible to have a more- do you believe that capitalism can solve that problem, I guess? That there is like under- there is a great business to build there that is win-win between customers and businesses?
Zach Pettet: Yeah, I think totally. I think, one, it's a really interesting question around the how do I think about the payday loan piece because I do in most cases- So I think there's a delineation. One, online payday lenders. Like if you've seen the first season of Dirty Money when they get into the Scott Tucker stuff that happened like, whatever, 20 blocks that way. That guy is a piece of shit that can rot in hell. That I have no compunction about, like you are what's wrong with America. You're what's wrong with the financial ecosystem. You should be in jail, if nothing else, just to show the world the way that we handle that kind of thing. Like it's not often that I'm like, oh yeah, let's make an example of them. But with that guy, I'm like let's string him up by his toes and make an example of him. Like let's go for it. The person that owns the check cashing place down the street from here that is also a payday lender to some degree and we kind of just put those things together, no, I don't have ill will towards them because that's the bank in the neighborhood. Like that is just kind of how we functioned as a society for so long. So, no, I don't hold it against them. And actually, if you- this is something that a lot of people in our industry don't do, but if you actually walked into one of those and you experienced what it was like- when I was a kid, my dad and I, I used to go in there with him to get his check cashed, people are saying thank you. People aren't like walking in and saying like here's my check, fuck you. It's like here's my check, thank you for helping me get this cash so quickly.
Eric Jorgenson: Like pawn shops are the same, probably another part of this ecosystem.
Zach Pettet: It's exactly the same. Totally, totally, totally. There's a lot of pawn shops that do check cashing; it is the same thing. So, I don't have ill will against them. Can capitalism solve it with technology? Absolutely. I think we're already seeing that happen in a lot of ways.
Eric Jorgenson: SoLo Funds is a great example, peer-to-peer payday loans basically for way, way cheaper.
Zach Pettet: There's also a lot of companies that are working really hard to avoid payday loan regulation that are doing a much better job than payday loans. So, one that I don't feel any compunction talking about publicly because I've done it before is one called MoneyLion. So, they got SPACed in the midst of the [inaudible 21:00] stuff and it's not worked out great for them. You are like I think I remember that.
Eric Jorgenson: Is that the one in the UK?
Zach Pettet: No, no they're here. I think they at some point thought about expanding. But anyways, they SPACed it up and it's not gone well, but they're an amazing model for what a payday loan could look like in a less disgusting fashion, which is basically just like here's a monthly membership and that monthly membership is like 12 bucks, 10 bucks a month, whatever. And then, anytime that you need an extra $100 to $200, let us know. And because you're paying us and because we have access to your direct deposit, you're de-risked in a really interesting way. So no, you have zero fucking dollars in your bank account right now. You should be scared. But we have enough history on you to see that you got paid here, here, and here, and based on that, you should get paid here. So sure, here's 200 bucks and just, no, there's no interest on it, it's free, but you're paying us a monthly membership. So, depending on how quickly that turns over, you can look at that between it could be 10 to 12% APR, but depending on how long it- it depends on the situation, but that's a much less predatory way of handling it. And it also de-risks for the company a significant way because they have access to direct deposit and they can pull the cash when it comes in.
Eric Jorgenson: I’ve seen them get attached to stuff like Stripe or Gusto payroll, like predictable payroll things, too, for way, way cheaper, because you can underwrite way better than the guy running a storefront where somebody just walks in. Those underwritings are meaningful actually. You can offer way cheaper money with more data.
Zach Pettet: Totally. And it's like the- it's all I feel on a journey towards that like web3 utopia of like streaming money. It's just like as you do a thing, you get this tiny drip. Yeah. You get paid every day, you get paid every minute, you get paid every second, and get paid every whatever, microsecond, just keep fucking going. But I mean, that's what we're moving towards, I think. And there's this whole wave of what are called earned wage access companies, EWAs is what they'll get called a lot. And it really is just that. It's like you earned this money, your company's payroll system is too old, and your company doesn't have the idea to even give this to you, but like here's a corporate benefit. And you worked this much today, here's that amount of money. Great, we'll just take it out of your payroll in two weeks.
Eric Jorgenson: Interesting. So, what did you do with all this piss and vinegar you came into the finance industry with? Where'd you jump in? What kind of work have you been up to in these eight years?
Zach Pettet: It's been a wild eight years; it’s been a wild ride. The first stop that I made with my piss and vinegar was a company called Blooom, which is where you and I met because your-
Eric Jorgenson: It’s where our relationship blossomed.
Zach Pettet: Yes, it is. It's where the seed planted and where things blossomed. So Blooom is a robo advisor, which is a technical term-ish, I guess, not even really a technical term anymore, but robot advisor. So adviser, but without the human, groundbreaking stuff.
Eric Jorgenson: We got it. Zach, my audience is pretty sharp.
Zach Pettet: I never- when it comes to the depth of the FinTech buzzwords, I never know how much to unpack or just accept that everybody knows my acronyms. But specifically, a robo advisor in the 401k space and 401ks are interesting because they're everywhere. So, it's not just like, hey, go set me up an IRA that is held anywhere. It's like 401k might be at Fidelity, might be at Principal, might be at wherever Diet Coke holds theirs, yada, yada, yada. So, it was a registered investment advisor that would, through technology, manage these 401ks for anyone across any company anywhere. And that was back when I thought that retirement mattered. So that was funny. But I've basically been on this journey through life of like trying to figure out what actually matters in the world of finance. And like, yeah, of course, if you're making enough money, like put the damn money in the 401k and have somebody manage it. Sure. But I used to really think this is what matters. Why does no one have any money in their retirement accounts? Like how is this possible? And then from there, I moved into banking, and then in banking, I realized like, oh, it's because nobody has any savings. So, I worked at a community bank, and I was like, oh, why would anyone put money in their 401k or IRA if they have like a dollar in their emergency savings account or didn't even know what an emergency savings account was. And then from there, I can like tell you what I did, but basically worked through this whole process of trying to figure out what really matters. And it's nothing close to what I thought mattered in the beginning, basically is the takeaway. I basically wasted a lot of time.
Eric Jorgenson: So, we know a little bit about what doesn't matter. Did you get any closer to finding out what does?
Zach Pettet: I think so. Do you want me to cut to the punchline? Regulation. It's the least sexy thing I could have fucking said, but it's true.
Eric Jorgenson: It's also highly unfortunate.
Zach Pettet: It sucks. It really sucks. I mean, it's like I went from retirement to your savings matters to, oh, getting people out of debt matters, oh, debt reconciliation matters, oh, actually at the end of the day, the only thing that moves any of this shit is when Washington decides to move any of this shit. Like that's the only reason people do anything in this world.
Eric Jorgenson: Why is regulation what matters?
Zach Pettet: So, the reason that payday loans have been allowed to function the way they've been allowed to function is because of regulation. The reason that earned wage access is being regulated the way it's being regulated right now is because it's basic- It basically hasn't been regulated. And as we come in and regulate it, it will, I think, improve because right now a lot of people are looking at earned wage access as a loan, as an example. It's not really a loan. You did the work. You've earned the money. It's just a matter of ACH is not that good at getting you your money and your payroll system is not that good at giving you your money. We shouldn't think of that as a loan. You earned the fucking money. It doesn't make any sense. So, it's a matter of like in Washington, getting to the point of actually looking at these things the way they should be looked at. Like there was news last week, whatever, the NFTs are potentially going to get looked at as collectibles, which will impact- there will be like a 26, 27% tax rate or something like that for NFTs if they're considered collectibles. That shit matters. If we decide it’s a collectible versus an equity versus this versus that, I mean, we've been having this conversation about Bitcoin for so long. Who from the Bitcoin world, who from the crypto world has gone and worked in regulation to actually get this fucking thing answered? There's a couple actually, like there are people that have done that, but not enough. And usually, they end up solving their problem through capitalism and the private market, which I fucking respect, but we need more of these folks in Washington. And we also- I mean, if you watched people ask questions about Facebook during a Senate testimony, imagine them trying to ask questions about FinTech.
Eric Jorgenson: Is there a difference between- like in technology, it seems more like something happens and then regulation catches up with it. In finance, maybe traditionally it's a little bit more like you can't do anything until the regulation says it's okay.
Zach Pettet: Yeah, but now those two are starting to cross and intermingle in such a weird way. I won't say the name of the company because I don't know if I'm supposed to or not, but you sent me a thing earlier today of like I'm about to hop on with these guys. When I saw that, it was like, whatever, 15% yield on your treasury, is that what it was?
Eric Jorgenson: On any cash. I think we can- there's no reason we can't say this, I guess. They will Stable Coin, no Stablegain. And they are basically a super friendly like front end anchor protocol currently. So, you can take any cash from your checking or savings, whether you're a business or a person, and put it in this friendly kind of front-end like looks like any normal finance app. And on the back end, they will connect it to Anchor, which gets like 20% yield, but you don't have to worry about self-custody and then you get your 15%.
Zach Pettet: So, imagine what you just said, imagine saying that to a regulator. And I don't know, you haven't met a ton of them, but their response to you would be one, what? Two, what? Three, WHAT? And four, that sounds illegal. Like how the fuck? What do you mean you're getting me like 15% returns no matter what, all the time, forever? And they might not be full of shit. Like a lot of these companies are legit and are doing it in a way that if you actually dig into liquidity pools and you dig into why they exist, like, oh okay, well, no wonder, like that asset shot through the roof this way, so of course you can do this and that and move this over here, like whatever. But it doesn't- it should be regulated because there's a lot of other- like if you take what you just described and you expand that kind of aperture out to anyone in the world of web3 that's doing kind of yield farming oriented stuff, I hate to break it to you, but a lot of that shit's illegal or going to be in short order. It's this very, very slippery slope with a lot of it. And I don't want to point to anyone, but like overarchingly, there's a lot. There's a lot.
Eric Jorgenson: You weren't supposed to say that.
Zach Pettet: I'm sorry. I'm sorry, but that's the- the only way that that world- the only way that web3 even comes close to living out its potential, in my opinion, is if it's regulated. Like we have to have that world function inside of the regulatory schema in order for it to actually do what we want it to do.
Eric Jorgenson: What is the utopian like potential that you see? You're about as well-versed as anybody that I know in what the actual old architecture looks like, how it works between the core providers and the ACH system and the community banks and like how the money actually moves and the messes that happen in the backend behind when you write a check or use a credit card. Like how much of that can change? How much- what does the utopia look like?
Zach Pettet: I mean, it’s good question. The first thing I would say is the obvious stuff. Money moves faster. As soon as money moves faster, the whole world changes. ACH taking three days, wires taking however long and you're just sitting there with your butthole puckered because you're not sure if it's going to get to where it needs to go. Like no web hooks on anything. We live in such a dystopia right now when it comes to money movement that like anything is better. That being said-
Eric Jorgenson: I definitely had my butthole pucker on some crypto transactions as well.
Zach Pettet: The overlap’s strong. Like in terms of like moving crypto from one wallet to another, it feels a lot like sending a wire for an investment in a lot of- it's just like ahhhh for whatever period of time.
Eric Jorgenson: I hope I didn’t cut off one of those characters. It’s a long 20 minutes.
Zach Pettet: It's incredibly scary. So, one, that still needs to get figured out for web3, the web hooks don't even necessarily exist there yet. But what I would say is like this direction of trustlessness is interesting, but the efficiencies are what really I think is most interesting. And so, if you think about a mortgage, mortgages as an example, as of right now, regulatorily, you cannot do a mortgage faster than two weeks. There has to be a two week process, a two week waiting process, basically. And some mortgage companies have gotten so efficient now that they literally just sit there and wait for two weeks. Like when I was at NBKC, the bank I was at a couple of times ago, like that two week wait period was basically just like here we are, you got to wait for two weeks. And one of the founders of SoFi went off and founded a company to basically solve this problem through blockchain, because it's just all that you are doing with a mortgage is watching a set of paper go from different division to different division to different division to different division. And then eventually it gets signed off because it got quadruple checked by eight different people on the same number, but it's eight people looking at the same number. It's like is that the accurate income? Is that this? Is that that? And you kind of seeing where I'm leading here where like a smart contract and/or a set of smart contracts could potentially do everything that we're talking about in, depending on the blockchain, depending on a set of situations, less than five minutes. I don't know, maybe even faster depending on what we're talking about. They pull in your income, they verify it. They pull in your previous tax statements. Oh wait, we actually even get to think about digital identity in web3. So, you get to grant permission to your digital identity and that encompasses pieces of your finance, or pieces of your financial life I should say. Here you go, Mr. Mortgage Man, enjoy that. And as soon as you're done with it, let me know your claim or let me know the rate that you want to give me. Also, I've granted access to five other mortgage lenders. And as soon as I pick the one that I want, I'm going to revoke access to all of my private information as soon as I decide. And then, oh, I'm going with you, okay. Click yes. Let me know when it's done. You shouldn't need anything else from me. All I should need to tell you is this is the house I want, and here is who I am, here's my digital identity. Everything else from there should be instant.
Eric Jorgenson: Instantaneous. And actually, I think the zero knowledge proofs allow for like you don't even actually share the private information, all that runs- like something separate runs and just says like yes or no checks on all that stuff.
Zach Pettet: Yeah. And to the actual question you asked, like you just answered it. I was still semi answering it in the way of like web2.5. And I think that's the actual answer is like middle of the road.
Eric Jorgenson: Yeah. I mean, I think what's- so I’ve had it described- like Jason Hitchcock, in one of our- I think our first episode was basically like, I asked the question of like where does that 20% yield come from? Like what happens? And his explanation was basically like you see all the overhead of every bank ever, every person that's employed, every physical location, every piece of paperwork, every regulatory report, like it's all smart contracts. And instead of a profit margin, we're just handing it back because it's all one big collaboration between people who are lending and people who are borrowing, and no one wants there to be margin anymore because there is no ownership- There is no like for-profit entity in there. There's only like just push out the value to some combination of the users of the protocol. Is that the utopian version? Like can you see most of the finance- or what percent of the finance infrastructure can you see melting away in the face of smart contracts and blockchain databases and zero-knowledge proofs?
Zach Pettet: Yeah, that's an interesting question. I think that we will inevitably stay 20 years behind what we should do and just as a governmental entity.
Eric Jorgenson: As things become technologically possible, it still takes a lot of time to catch up with.
Zach Pettet: Yeah, exactly. So, I think, I mean, what we're describing and like the mortgage example I used, I forget the- I think it's called Figure. Do you know the company I'm talking about? I think it's called Figure. I always want to call it Figma and I know it's not Figma. It's FIG-something and it's not the fruit.
Eric Jorgenson: Figment?
Zach Pettet: No, it's not in my imagination. It's real. Anyway, I think it's Figure. I'll look it up after this.
Eric Jorgenson: If we ever figure it out, we'll put it in the show notes.
Zach Pettet: That's a figment of your imagination and a figure joke. We're moving through it good. Sorry, Johnny. So that's already happening today. I mean, that exists. And the reason that he founded the company, and I don't think he talks about it this way publicly, but I'll say it for him, it's so he can have like an employee and $8 billion. Like, why wouldn't you? If you could start this gigantic- mortgages are- it’s a big fucking world, if you could do-
Eric Jorgenson: I can't believe the money that gets made in mortgages.
Zach Pettet: It’s unbelievable. It's amazing. It's so unsexy. But it's amazing money. And if you could do a decent amount of mortgage volume in an efficient manner-
Eric Jorgenson: At a high, high, high margin.
Zach Pettet: Exactly. And that's what I mean. It's like just the NBKC Mortgage- NBKC as a whole, I want to say, when I was there, it was like 350 and the mortgage department was 300.
Eric Jorgenson: Wow. Whole big building, a lot of people, nice cars in the parking lot.
Zach Pettet: It was good years in the mortgage market, so yeah, very nice cars in the parking lot. Low interest rates in the market.
Eric Jorgenson: Whole empty floors in the building.
Zach Pettet: Yeah, where we got to play. But I mean, it takes so many humans to get a mortgage done. If you needed one- if you needed half of the humans, much less one tenth, the entire algorithm, the entire conversation about money changes. So, I think that is really possible throughout the financial system in general.
Eric Jorgenson: And back to, I mean, where we started with the purpose driven nature of this, like it's not just that the margins get bigger, it's that the margins get bigger and you can offer this for drastically less, which means more and more homes are accessible, which is an increasing problem since the housing prices are increasing, like a lot more people should be able to get mortgages or get mortgages for more- probably not get mortgages for more, that's its own problem.
Zach Pettet: We've all seen that movie. Ryan Gosling was great. Yeah, I mean it does, but that's the thing. It's like, yes, it does lift people up by their bootstraps and it lowers the barriers to entry in general, which I think is great. But 99% of the time, in my experience, it goes towards what you just said, not what we'd like- not the why of the whole conversation we just started. It went towards, oh shit, this exists, how do I start a thing that turns in- how do I go start a Ponzi scheme around it or something. It's like humans tend to go the personally beneficial route, which I'm not acting like I don't, but I'm just going to sit here on my soap box and act like they're worse than me.
Eric Jorgenson: And that's humanity. The constant re-narrative-ing to protect the ego.
Zach Pettet: Yeah, this is 90% of our conversations. We sit in the hot tub-
Eric Jorgenson: And defend our fragile inner selves.
Zach Pettet: And the one points out to the other one that this is happening and that we're just being our fragile little selves.
Eric Jorgenson: And then we just try to carry on with our lives as though that didn't happen.
Zach Pettet: Try to, yeah.
Eric Jorgenson: Okay. Do you want to talk about how you just basically like bluffed your way into a paid sabbatical for-?
Zach Pettet: We can. It is up to you. If you think it's valuable to listeners, I'm happy to cover it.
Eric Jorgenson: Look, who doesn't want like extended paid vacation? For mental health reasons. I try in these to start with like what do I think my guest is world-class at? And I have a number of responses to that in this case that I'm happy to explore, but I think this is one that merits some investigation.
Zach Pettet: He is world class at getting out of work for two months while getting paid.
Eric Jorgenson: I don't know a lot of people who have done that.
Zach Pettet: It was not a conscious effort.
Eric Jorgenson: Exactly. You're just- it's a gift. It's a gift. And I should- that is a shit version of setting this up. But I do think the more friendly version is that I think of all the people I know, you are one of the few who is happiest in their job. And I think that your career has been like you spent years unhappy in your jobs. And I think so many people just like choose to fit the cookie cutter that they end up in, and I think that's like a perfectly reasonable way to go about your life if you just like got a job in a mortgage center and you're like I'll just get good at this, and that'll be my life. And I think it's remarkable that for like eight years you were stubborn enough and determined enough and had a high enough bar to sit there and be like, no, the world will give me a job that I love that lets me serve this industry the way I want to, and I will just not stop throwing tantrums until it happens. And it turned out beautifully.
Zach Pettet: I've never thought about it that way. It's actually pretty accurate.
Eric Jorgenson: And I genuinely mean it as a compliment too.
Zach Pettet: No, I know you do. The way you teed it up, I was like, oh God. Now that I actually know what you mean, I get where you're coming from. How did I get to the place of the sabbatical? Or like just the whole- I don't really know where to start on that one.
Eric Jorgenson: I don’t know. Maybe talk about your mindset about- because that is really one chapter of the whole story of like coming into the industry with piss and vinegar and spending eight years trying to figure out what mattered, working in a ton of different places with a ton of different people and learning all these different things and trying to figure out how to end up in a high leverage place, work with people that you want to work with, have an actual meaningful impact, and use your talents for good. And I mean, I guess choose whatever chapters you want to kind of like tell that story, but I think that's a thing that, I don’t know, it was sort of like divine and inspired dissatisfaction that like threads you through that whole thing.
Zach Pettet: That's actually, that's painfully accurate. I mean, when I look back at like my past, yeah, every job that I've had, except for my time at the bank that I keep bringing up, I've kind of left in a huff and left in a bit of a- not even, I mean, I haven't burned any bridges, surprisingly, but I've definitely left in a y'all motherfuckers can't get your shit together.
Eric Jorgenson: Like Larry David leaving a party.
Zach Pettet: But for some reason in my head, I sound like Katt Williams. So, it’s confusing.
Eric Jorgenson: That's the Wiz Khalifa part.
Zach Pettet: There it is, there it is. I true- I mean, I guess I have a very strong pain tolerance until I suddenly get to that level of fuck it attitude where I just know there's no hope. And then I quit. I mean, groundbreaking story, I know. But with Bloom as an example, I'm still friends with the people that were the reason that I quit, and you and I talk a lot about why I quit and it just came down to like I think I was too big for my britches at that point. I was convinced that I knew the direction the company needed to go. And people were like, hey, motherfucker, you're too big for your bridges, you don't know where this company needs to go. And I was like I'll show you, I'll quit. It was like what? But it came from a place of knowing that I needed to learn something about technology. And Blooom was an amazing, amazing company. I got so damn lucky, and I love everybody I worked with there and still spend time with them. But I would say that the thing that held the company back was being KC. It's not even a matter of like the founders, who they are as people, it's like this is a really hard time to find a technical co-founder. And if you don't have a technical co-founder from day one, a business like that, where had you built an API five years ago to plug in to all of these neobanks that exist today, I think it's a multi-billion-dollar company right now. But you go into that company five years ago and you say, hey, we should build an API – AP-what? Like, what's that? And it's like not a, oh, let's go learn about it and find- it's a no, we're building a financial management company, this is how we do it. So, I left because I knew there was something I needed to go learn. And then I got to the next company, I learned a shit ton. It was the worst job I've had in my life. It was a year of pure fucking hell where I had to do everything from sell to QA, the software that I was developing with outsource developers everywhere from the Ukraine to Russia to other places where wars are not happening right now, actually like Mexico. I had Mexican developers, and I think they're safe, and across South America, everywhere else. But it was terrible. I mean, one, nobody should do all of those jobs. Nobody should sell and do QA. Those are just not the same human. But also, it was a year of learning everything from conversation to shipment. It was horrible. I think I made $8. But it was worth it because now I can actually talk about it. I quit. Literally watched the Steve Jobs commencement speech about how if you're looking at yourself in the mirror and you don't like what you're looking at or what you're getting up to go do, quit your job. I watched that like December 30th and then went in January 1st and quit. I even told them, I was just like, so I watched the Steve Jobs commencement. That's how I explained it. I was like don't take it personally.
Eric Jorgenson: Steve Jobs told me to do this.
Zach Pettet: Yeah, Steve Jobs told me to do this, so I promise it's a good idea. And all I'm eating is apples. So that one was out of sheer anger, like that one, I just fucking hated everything that company stood for and I needed to get out of there. But I also knew that I needed to get back in the industry. Like as much- I am very Larry David-y I guess in my like, ah, fuck you, I'm getting out of here. But also, I know exactly where I'm going next, and actually this is kind of strategic, but I'm going to do it in a bit of a huff. And then like give me a month and I'm like, who? I was mad about what? Like you have to remind me that I was even pissed about half this shit. And you remember that I was pissed because you dealt with it.
Eric Jorgenson: Because I'm a good listener.
Zach Pettet: You're a good listener. This is a good example of that. And then I ended up going to NBKC without- like I didn't have a job. Like they were just like, yeah, I guess, if you can bring in partners, maybe we'll consider giving you a job. So, I quit that development company with nothing. And then I went and built the FinTech portfolio and program for what is today known as like one of the top 20 FinTech banks in the country. And that was like a fucking accident. Like that just kind of happened because it kind of happened because I actually had that free time to kind of make that happen. But you remember. It was a cool chapter. But I was also fucking yoked because I was going to the gym twice a day and it was like my priorities were backwards.
Eric Jorgenson: That stress manifested itself beautifully.
Zach Pettet: It did, it did. But it shouldn't have. Like no rational person without a job would go to the gym more, eat more, and work less. But somehow that turned into exactly what it needed to be because I was taking care of myself or something. It was very bizarre. And then leaving there was like fucking hard because I love them and that was difficult. So, and then now, we can get into the sabbatical story if you want, but I feel like most of the lessons from the sabbatical story maybe got covered by the story I just told and then I don't have to throw anybody under a bus for giving me a sabbatical they shouldn't have given me. But maybe that's the lesson. Maybe the lesson here is if you have someone that's trying to leave your company, let them. Do not offer them a sabbatical. I mean, there's certain circumstances, but if they've been there eight months, which I had been at that point, if they have not been there a decade or more and were not an instrumental piece of something, maybe just let them go. If somebody wants to leave, maybe let them leave. You don't always have to hold on to everybody and value your confidence in that instead of the way the market perceives somebody leaving or staying.
Eric Jorgenson: Yeah. That's a good way to put it. I think if you are a highly visible employee, you may have more leverage than you think.
Zach Pettet: That's another good lesson. That's a very good lesson actually.
Eric Jorgenson: If you are a company that's raising money and your suggested use of funds is to give it to an employee who no longer works at your company, that will not be impressive to investors.
Zach Pettet: It would not. It would not.
Eric Jorgenson: Hypothetically. Money20/20, which is the current employer delivering you this incredible blissful working experience that you're having, Money20/20 for the uninitiated like me, is the- is it fair to say it's the biggest financial conference in the world? And there's two of them?
Zach Pettet: There's two that happen every year. One, and literally my boss for Money 20/20 is calling me and I'm making sure nothing was burning.
Eric Jorgenson: Zach is just texting his way through this podcast.
Zach Pettet: Never. I’m making sure that- you just said the word, you just said Beetle Juice. So I needed to make sure that Beetle Juice didn't pop up. It's the largest financial conference in the world, two big ones that happen as of right now – there were more before COVID. But right now, it's one that happens in Vegas every year that attracts anywhere from COVID numbers are around 10K, pre COVID numbers are anywhere from like 20 to 25K, something along those lines. And the other one's in Amsterdam, it's a slightly smaller venue. So, it's 10 to 15K, something like that. It's sometimes more pre- this year, I think, or last year, I should say, with kind of coming out of COVID, it was like 8K or something like that. But anyways, a lot of people come, and we do finance stuff.
Eric Jorgenson: What's finance stuff? It sounds dumb, but I think it's a fair question. Like who actually shows up to this thing? Is this like just bankers go? Is this like anybody who's selling to bankers, anybody who sells money, is it investors? Who shows up? A lot of people have money in the world. It is not clear to me what a finance industry even really is or where the boundaries are.
Zach Pettet: That is actually a really good point. That's a really good point. That's something that needs to be defined and has a very, very gray area. So, money stuff encompasses- Money20/20 is innately a FinTech conference. So, the goal of the conference, it was started in 2011, and the goal was to really just kind of pour gas on the fire that was starting to form around FinTech. So, coming out of the crisis, obviously the Satoshi White Paper was written, but also a lot of people tried to put lipstick on a pig that became neobanks. So, it's like the old school banking system but with like a slightly prettier front end that's green and that gives you your money two days earlier or something like that hypothetically.
Eric Jorgenson: Helvetica font.
Zach Pettet: Exactly. We change the font, we change the world. Change the font, change the world – that should be on like Adobe's front door or something. And this whole wave was starting to form because people just didn't trust the classical financial industry, a.k.a., we saw what happened in ’08.
Eric Jorgenson: Banks didn't build a fucking website either.
Zach Pettet: That's also true. That's also true. The ability to do online banking was actually way less than a lot of people remember or realize. So anyways, the conference was started for that. I mean, it was pretty small. I think it started with like less than a thousand people in a room just like nerding on shit. And then over a period of time, it grew and grew and grew. And now it's everything from investment bankers to venture capitalists to startups to regulators to bankers to like everybody, everybody, everybody, from the JP Morgan biggest banks in the world, all the way to like when I was at NBKC, a sub billion dollar bank in assets, I went twice. So, I've been three times now. This will be my first year working there.
Eric Jorgenson: And how did you, just to kind of cap the Larry David employment story, did that opportunity come to you kind of more from attending and being there? Something else that we haven't mentioned yet is your podcast, which is like you're three or four years into now, For FinTech’s Sake, which is I think definitively the least boring podcast about FinTech that there is.
Zach Pettet: For saying that and for specifying the low bar.
Eric Jorgenson: Well, in the niche of FinTech, it is a very big podcast actually and I think in its own right is a cool story about how deeply niching down can create something super valuable. But did you end up at Money20/20 more because of the podcast or more because of the job? Like how did that career leap happen?
Zach Pettet: It's an interesting question. I think, and like not interesting question as in I'm thinking about your answer, but interesting question as like it's actually an interesting question because I don't know. I truly- I'm going to Vegas this week for an onsite before the big thing that we do later in the year, and I want to get a drink with my boss and literally ask her this question. Because she recruited me for a month before I took her seriously, two weeks after that, before I really considered, and then another two weeks before I was like, okay, I need to come to New York and like meet you and like understand, like feel this. So, she probably spent like three months recruiting me. And you know me well enough to know that's fucking hilarious. It's weird, right? It's weird.
Eric Jorgenson: It's weird. But also seeing you kind of like tackle this challenge- I don’t know, it is a pleasure to see you in your natural habitat and like planning a conference and doing work that- I don’t know, like I'm glad they recruited you because they're actually like using your full weirdness and eccentricity and energy and imagination to its fullest. Do you have a personalized Chappelle hoodie? That is so sick.
Zach Pettet: Have you never seen this?
Eric Jorgenson: No. That's awesome.
Zach Pettet: It’s my second one. I lost the first one.
Eric Jorgenson: That's amazing. Okay. I think like, I don't know. I'm very excited to see the kind of like crazy shit you brew up for this thing. When you hear the answer, let me know. I'm excited to find out what it is.
Zach Pettet: I mean, I have conjecture. So, the way that I met Scarlet-
Eric Jorgenson: But we also should say what your job is. We haven’t established that context.
Zach Pettet: Good point. So, US content director, meaning I'm in charge of content in the US, but what that actually means is that I'm in charge of developing the, with a team of fucking bad asses for the record, but I'm in charge of developing basically the thematic elements for what this year encompasses in the world of finance. That's pretty straight forward. It's obvious, like let's pull out the three to five most interesting things and most prevalent things in the world of finance right now in the midst of everything in the world, sure, and make sure that they encompass everything at the same time, whilst being incredibly specific. That, who is getting onstage, and then also our plans for world domination, I would say, are another big piece of it. So, we do a big road show. We have a lot of digital stuff. And in general, we're trying to kind of build things more in a direction of a media company. So, that's the other part of my life that is just in the back of my head, trying to figure out how to move a really successful, highly profitable events company in a direction, not away from the events, but just thinking of the world in a more digital fashion.
Eric Jorgenson: I mean, let's talk about the events business maybe in general and maybe specific to Money20/20 because I think it's a really interesting- I feel like events businesses get famously low multiples and are kind of viewed as extremely fragile, but also produce a ton of cash and can be wildly lucrative.
Zach Pettet: It's the one business, you know how they say if you want to make money, don't start a company. Like it's the one exception to that rule I think where like if I was just broke and I knew a lot about one industry, I'd be like let's do a conference next week. And even if we just get 50 people there, we're going to charge them all a thousand dollars. It's like it escalates so fast. And if you actually put something decent together, it's very, very lucrative.
Eric Jorgenson: I mean, talk us through it.
Zach Pettet: Well, I think the events industry in general is scary as hell. I think the point of it being unsexy and risky is not untrue. Like in 2020, case and point, points on the board, one for COVID, zero for all other things in the world including live events. I mean, so if you're hypothetically a business that does two events a year, and I won't use actual numbers, but I will say Money20/20 does two events a year. So that part, the rest of this is made up, but two events though, telling you the truth. So, let's say you make a hundred million dollars in a year. 30 million of it is from your second event. 70 is from your first event. You don't get to do either one. So, whatever, it should've just been 50/50; I made it more confusing than it needed to be. What the fuck do you do?
Eric Jorgenson: Yeah, when your revenue goes to zero.
Zach Pettet: When it goes to zero and you have nothing but- I mean, you have some variable costs associated with like the venue and this and that, but you have nothing but fixed costs for the most part. You have employees, you have all- it's incredibly fucking scary. And if you have not- I mean, Money20/20 was lucky because it was bought by a publicly traded company in London pre any of this. So good valuation, good outcome for everybody, and had the staying power to get through all of it. But it is incredibly scary to think about what the world looks like if we were living- I mean, until Omicron, I think we all were like, well, this is the new normal. All right, I guess I'm going to be checking constantly how I'm supposed to handle the world in every different city that I go to. But I think with 2020 having happened, I think the entire industry is like, okay cool, let's just make- let's harvest what we can harvest, which is a large amount of people coming to one place with significant, with fixed costs and some variable costs. And then you harvest all- I mean, you really do just make millions of dollars in like three or four days, but it takes a year to set that up. And if you want to make one of the- if you want to build an event that actually makes $30 million, it takes years to set that up. It's an amazing business if you can build a thousand person conference that you can set up by yourself with one other person or something like that in like three months. Like that's actually a pretty great idea as to how to live your life. You would probably be pretty happy. There'd probably be a good amount of like balance. But that is not what you do to get to a 30 to 50 to 100 million dollar event. Like the other companies that are owned inside of our portfolio is Cannes Lions which is like one of the biggest advertising media film festivals in the world to the point where like if you get a Lion from Cannes Lion, you actually like get automatically like a 30% pay increase and a multitude of other things in your industry automatically. But the other part- so, well, we'll check back in a year. The funny part though is that there was a publicly traded company that in 2020 said that they were nervous about hitting their numbers, not because of COVID, but because of COVID canceling Money20/20. Because they were like the amount- they do like 30 to 40% of their business every year at this event, which is insane. So, it's like as much- and this is the interesting part, it's like everybody wants to diversify away from the in-person stuff, but you're not- you can't. It's like you have to have the in-person stuff for the business to actually happen. And the content is great, and that's what everybody's trying to diversify with is like how do we become the next Netflix, the next Hulu for finance? It's like I hope that happens. But like the actual value of these things isn't in the content, it's in people in back rooms sitting and signing large multi-million-dollar deals.
Eric Jorgenson: Yeah. It's taking 10,000 of the most powerful and influential people in the world and putting them all in the same city for five days. What is the- can you say the rough order of magnitude of the budget of this event?
Zach Pettet: In terms of like costs of goods sort of situation? I can say that it's less than the profits.
Eric Jorgenson: I think it's just like the scale of-
Zach Pettet: Under- well, it's hard. It's hard because, I mean, it depends on how you calculate it. Like if you truly are talking about like venue, things along those lines, also Vegas is super expensive. Like something that people don't know about Vegas is that it's – what's it called, iron workers when they all get together? Unionized, thank you. Sorry, long day. They're unionized, so pretty much everything- like to pick a pencil up off the ground, you need the thing signed in triplicate and you're not allowed to do it yourself. And if you do, then you get fined or something. It's insanity. So, a better example would be outside of Vegas, there's a FinTech conference called Lend It that happens in San Francisco. It probably gets like 5,000 people to show up, something like that. It's in a pretty nice spot, in a good area. I bet it costs 2 million bucks to put on. And things in Vegas are more expensive, much more expensive for reasons. And you can also- the other thing is like the premium nature of these things is fascinating.
Eric Jorgenson: It’s like a luxury market. If you go to one conference a year, you have super pricing power.
Zach Pettet: Exactly. It's like the Louis Vuitton of conferences. It is. And like the sales rack- I mean, the sales rack doesn't exist. And tickets are, it depends on the size of your company, but around three to four grand for one person.
Eric Jorgenson: The attendees are paying you, and the sponsors are paying you, and you got to pay the unions.
Zach Pettet: Yeah. I mean, yeah, exactly. But I mean, those are the two, in terms of like actually explaining the business, those are the two big inflows. You sell tickets, you sell sponsorships, put those together, it becomes pretty significant.
Eric Jorgenson: And it's almost like a mini network effect. Like you end up- you have 30 years of back history. If people were coming here and doing like 40% of their business for the year, you have massive pricing power. And people tend to just go back to the conferences that work and it's expensive and exclusive to try something else because there's only so much time.
Zach Pettet: Exactly. The biggest problem is the South By problem where people just show up and don't buy a ticket. That's the hardest thing for any conference, I think. You just attract all of these people. You create this mini network effect, and then Eric and Bo sit in the fucking van, sitting there in a RV in a parking lot somewhere, and you don’t get their money.
Eric Jorgenson: I’ve been to South By three times, I've never once had a pass. I’ve never even been into the conference.
Zach Pettet: That's what I’m saying. That is why I call it the South By problem.
Eric Jorgenson: I'm your problem.
Zach Pettet: Well, yeah, until this year because you are coming. I call it the South By problem because it's just like the place where it's most visible, but I think it's across the whole industry.
Eric Jorgenson: On the other end of the event business spectrum is your little mini event, personal events business, V-Sum. Do you want to tell me about V-Sum?
Zach Pettet: Yeah, so V-Sum was started- it stands for Value Summit. It was started in the midst of the pandemic between a friend of mine and myself and Jessie, my girlfriend. And it really just started out of like sheer boredom and depression, I would say, for the most part. I was pretty depressed, and Ben, the founder of Dwolla, who co-founded it with me, was pretty bored. And Jessie was living with me, so she was like good lord, fine, whatever. So yeah, we started it in 2020. The goal was basically just like bring new technologies so that Ben and I- Ben was like kind of considering being a VC. He was like maybe I'll do this, maybe I'll do that. He's like way too good of a person to be a VC, so he didn't do that. Just kidding, I love all of you. So, we just wanted to stay close to technology though. So, we were like, all right, three companies come, they do like a live demo, and then we'll just talk about shit. And then that turned into those three companies from the first one- Like right after we finished, all raised like 20 million plus rounds. It was kind of weird. And then we did the second one and they all raised like 30 million plus. Like if you actually look back, we've done 11 or 12 of them now, if you look back, there's like over a billion dollars raised in these companies.
Eric Jorgenson: Was that the express purpose?
Zach Pettet: It was a total accident.
Eric Jorgenson: -when you get cool finance companies demoing and 200 investors looking at them, not even investors?
Zach Pettet: No. So, it's a hundred- I should explain more what the event is. Just you know so much about my life, it's almost like hard to know how much to go into or not. Anyways. And you've been to one. So, a hundred people or less. The goal from that is, one, we don't pay for Zoom and, two, so that – this is so funny because we have billionaires on this thing – so we don't pay for Zoom and just to keep the feeling of community tight. And yeah, so it opens with an opening, duh, and then we do two little what we call Russian roulette intros. Well, we’ll just call them intro roulette because that's connotations now. But basically- Russian roulette intros, and it just tosses you into a room with a random person, you talk to them for three minutes, and that happens twice. So, off the bat, the quality of people in this hundred person room are always going to be generally pretty high, always pretty interesting and something always to learn from these people. So, you meet two new people off the bat like that. It takes six minutes. From there, we take you into demos. The demos are each 5 to 10 minutes. So, in 15 to 30 minutes, you see three new companies, but you don't just see three new companies, you see three new back ends and you actually see how the APIs function. You see how the product manager either has or hasn't done a good job of setting up the sandbox. You see the ins and outs of everything, which as an investor is really interesting, but as an operator and somebody that doesn't know shit about technology for the most part, it is really, really interesting because then you can suddenly talk about it.
Eric Jorgenson: And it's a savvy crew. The questions that get asked by- there's technical leaders in there who are asking about the tech questions, there's finance people. There’re regulators who are like umm.
Zach Pettet: And that's why it's all off the record. And so everything- So the demos are recorded and they're up on YouTube, so you can go look for V-Sum if you want to see the demos that we're talking about – V dash Sum. But everything else is totally off the record to the point where if you do any attribution- I can't, she is so cute. I'm totally focusing. My puppy is just all up in your business. There's a dog running around for those listening. And everything else from there is off the record to the point where if there is any attribution, we kick you out of the community. So, we do breakout rooms with like a max of 15 people where it's either a subject, it’s like the DAO tooling or like is inflation as bad as we think it is. And it's like that seems like an interesting subject potentially to spend an hour out of left field with people you don't know in a room, but when it's this quality person, it’s fucking fascinating and it's pretty much impossible not to learn something, even if you don't contribute at all, you just sit there silently and you can learn something. But the really interesting part is, to your point, the regulators and the people that normally don't speak openly. Like it's not crazy to have a crypto bro come out of left field and be like here's my most inner thoughts. Like that's not anything that you don't see on the internet every day. That's just Twitter. But regulators. And like we have the most successful- not even most successful, most helpful and respected FinTech lawyer in the world that shows up to every goddamn event and contributes and participates in a way that he's just like another one of us. And I'm still so deferential to this individual that I am like always nervous when I talk to him. Yeah, exactly, we're not worthy. And that's how I feel every time in it. So, I don’t know. Anyways, if there's a lesson to be learned, it's do things in private.
Eric Jorgenson: Which is funny for somebody who like spends- planning a conference, spending so much time like podcasting. But I mean, you and Jessie put on an amazing event. Jessie is really, really good, especially digital events. But yeah, V-Sum is incredibly well produced and high energy, and it's just kind of amazing to like see all of the random experiences that you've had like come together and start to form this vague theme of like high energy, unique, super high value events.
Zach Pettet: Sorry, everybody. I just tried to pick her up and I squeezed her. And now she's sniffing the microphone. I don't know if you can hear her. Hi, I’m sorry.
Eric Jorgenson: I think, I mean, where is there a better place to leave it then just interrupted by puppy cuddles?
Zach Pettet: I feel terrible.
Eric Jorgenson: Just give us a little wag.
Zach Pettet: She's okay. She's okay. But yeah, I mean, I think if there's a takeaway from any of that, I think it's like you have the public stuff is table stakes. The public stuff, like doing the podcast – if you don't enjoy doing a podcast, don't do a podcast – but if you do, if you are that kind of person, do the public work. Like my podcast is your Twitter account. Like you've done some good Twittering, my friend. And it's impressive, the reach that you've been able to build on the back of it, but you wouldn't be you I don't think if you didn't do like Junto as an example. Like we used to do this private happy hour dinner series thing that we did together. I’m saying that to the world, not to you – you know what it is. I think that's where you get the competitive advantage. Like you have to do the public stuff; that's just required, and it's fun. That's where all the fun happens. But I don't think that your public stuff is good unless it's informed by the private stuff.
Eric Jorgenson: Yeah. There's been a couple of times in my career where I've just either been in the right room or the right conversation, and I’ve been like there is just nobody who's going to say what you just said from the stage, but it was a life-changing thing for me to hear. So yeah, I agree with that. We can learn a lot from podcasts. We both have learned a lot from podcasts, but it is not quite the same as like getting in some of those private rooms at the conferences or digitally at V-Sum or something like that and hearing some of the off the record stuff.
Zach Pettet: One of my favorite stories of yours is one of your biggest fuck ups.
Eric Jorgenson: I have fucking fuck-ups?
Zach Pettet: When you met Brian Armstrong. Do the listeners know this story?
Eric Jorgenson: Probably. I met Brian Armstrong in like 2012 at an Airbnb party because he's an Airbnb alum. Brian Armstrong, the founder of CoinList, Coinbase.
Zach Pettet: Oh, he's a YC alum. He's an Airbnb alum? He used to work at Airbnb? What did he do there?
Eric Jorgenson: I think he was a developer.
Zach Pettet: I didn't mean to put you on the spot, with what was his job title? No, I just didn't know that. I thought you fucked up and meant YC alum because I didn't think Coinbase went through YC.
Eric Jorgenson: I think they did.
Zach Pettet: Did they? Wow. This is getting off the rails.
Eric Jorgenson: Yeah. I met Brian Armstrong and he was like explaining Bitcoin to me. And I was- I'd had one or perhaps too many beverages to totally comprehend the magnitude of what he was explaining to me and properly reorient my life around cryptocurrency in the year 2012, which would have had- it was a long time ago, which would have had a meaningful impact in my life. And that's why alcohol is bad for you. You should never drink it.
Zach Pettet: Leave it on that public service announcement. That's amazing.
Eric Jorgenson: You never know when you're going to meet the next Brian Armstrong, and you're going to be a little too stupid to understand, and a little too impatient to wait and a little too forgetful to follow up.
Zach Pettet: But it's such a good story. I mean, it's so painful, but it's such a good- we were having this conversation yesterday about a potential podcast you were going to do, and it's like it's so much better to have that personal pain than to have that pain on the behalf of somebody else.
Eric Jorgenson: I would just rather have like one or two thousand Bitcoins. I'm sure you probably understand.
Zach Pettet: I mean, I would've gone with USD, but yeah. I would convert it quickly into the USD. I'm just not a maximalist.
Eric Jorgenson: Well, get on board.
Zach Pettet: No, I mean, I'm a crypto maximalist.
Eric Jorgenson: 2022 is the new 2012.
Zach Pettet: All right. Sure.
Eric Jorgenson: No, I mean that. Whatever's going to be awesome in 2032 is happening in some nascent moment today and we're just not paying attention to it.
Zach Pettet: That's true. That's true. Let's go build a DAO.
Eric Jorgenson: I’m down. Yeah, we must stop.
I appreciate you hanging out with us today. Thank you so much for listening. I encourage you to please leave a quick review in your podcast app of choice or text this episode to a friend to help support the show. If you like this episode, you will also love my conversations with Jason Hitchcock on DeFi, NFTs, and the metaverse, also great takes on how technology and finance will work together in the future, and also my episode with Andrew Finn of G64 Ventures and Wait But Why, who talks about how to acquire private companies and when you’ve got to know when to eat a shit burger. I appreciate you listening. Thank you so much. I hope you took something away from this episode and maybe something to carry with you, a question for yourself, a takeaway from this episode could be how stubbornness could serve you. Where have you perhaps been slightly too malleable in the conditions that you've accepted and where have you compromised on your mission or your vision for your life and where could you stand and be a little more stubborn and get something a little better out of the universe? Have a great day. Thank you for listening.