20VC Max Levchin on What Makes A Truly Great CEO, Why SelfAwareness Is The Most Important Trait For Entrepreneurs & Why When There Is Doubt There Is No Doubt

Summary Notes


In this episode of Founders Friday on the 20 Minutes VC, host Harry Stebbings interviews Max Levchin, founder and CEO of Affirm, a financial company revolutionizing consumer credit with over $400 million in VC funding. Levchin, who also co-founded PayPal and served on the boards of Yelp and Yahoo, discusses Affirm's mission to provide transparent financial services that align with customer interests, particularly for those poorly represented by traditional credit scores like young people, students, and immigrants. He reflects on leadership, the importance of EQ alongside IQ, and how having children has sharpened his organizational skills and deepened his focus on long-term impacts. Levchin's goal for Affirm is to improve the lives of 100 million people, valuing customer satisfaction over revenue.

Summary Notes

Introduction to Founders Friday Episode

  • Harry Stebbings hosts Founders Friday on the 20 Minutes VC podcast.
  • Harry encourages listeners to add him on Snapchat and suggests future guests and questions.
  • Max Levchin is introduced as the special guest.

We are back for another very special episode of Founders Friday here on the 20 Minutes VC with me, your host Harry Stebings. Harry Stebbings introduces the special episode of Founders Friday.

Max Levchin's Background and Achievements

  • Max Levchin is the founder and CEO of Affirm, a company aiming to reinvent consumer finance.
  • Affirm has received over $400 million in VC funding from prestigious firms.
  • Max has served as chairman of Yelp for 11 years and on the board of directors at Yahoo.
  • He founded Slide, which was acquired by Google, and was the co-founder and CTO of PayPal.
  • Brian Singerman from Founders Fund facilitated Max's introduction to the show.

Now, Max is the founder and CEO at Affirm, the company that aims to remake consumer finance from the ground up... Harry Stebbings details Max Levchin's current role at Affirm and his past executive positions.

EShares and Fond Software Endorsements

  • EShares is highlighted as essential cap table management software for VCs, offering equity management and more.
  • Fond is promoted as an employee engagement suite with rewards, perks, and engagement surveys.

...but eshares most certainly is. EShares is the number one cap table management platform... The importance of EShares for equity management and cap table management is emphasized.

Introduction to Affirm's Mission

  • Affirm's goal is to include young people and those typically underrepresented in the financial world.
  • The company focuses on creating financial services with perfect alignment between provider and customer.
  • Transparency is a core value in Affirm's approach to changing the financial industry.

...let's try to include people that will make the future of the economy into the financial world. Max Levchin explains the founding principle of Affirm, which is to include underrepresented groups in the financial system.

Affirm's Founding Story

  • The founding of Affirm was accidental, stemming from discussions about the outdated FICO score system.
  • Affirm was created by a group of data science enthusiasts questioning the efficiency of the FICO score.
  • The company was born out of a challenge to prove their new credit scoring model by lending their own money.

...could we build a better one? We thought we did, and then we showed it to a bunch of people that were in the lending business... Max Levchin recounts how the challenge to create a better credit scoring model led to the founding of Affirm.

Critique of Traditional Financial Services

  • Max points out the misalignment between customers and service providers in the financial industry.
  • Traditional financial products often have incentives that do not favor the customer, leading to distrust.
  • Affirm seeks to rectify these misalignments by focusing on transparency and customer alignment.

...the more kind of you dig, the more you find these pockets of misalignment, mismatch between the incentives of the customer and the service provider. Max Levchin discusses the fundamental problems with traditional financial services that Affirm aims to solve.

The Future of Fintech

  • Max Levchin is asked to comment on the statement by Bill Clerico, founder of Wepay, about the infancy of fintech.
  • The transcript cuts off before Max's response, leaving the discussion on the future of fintech incomplete.

I do have to ask. I had a previous guest, Bill Clerico, founder at Wepay, on the show, he stated that we're at the very earliest days of fintech. Would you agree with h Harry Stebbings poses a question to Max Levchin about the future of the fintech industry, referencing Bill Clerico's statement.

Fintech Landscape Evolution

  • Fintech is an ever-changing field without a clear beginning or end.
  • There are significant changes and developments, with Bitcoin being an example on the periphery.
  • Transparency and simplicity are lacking in traditional financial services, providing new companies with opportunities.
  • Established companies like PayPal are still seen as disruptors in financial services.

"I think fintech is kind of a forever changing landscape. I don't know if there's such thing as the beginning or the end."

Max Levchin notes that the fintech industry is continuously evolving, with no definitive start or endpoint.

"Bitcoin is kind of one on the very outer edges of stuff that will create some really interesting value and simplification and efficiency."

Max Levchin recognizes Bitcoin as an example of a fintech innovation that has the potential to add value and streamline financial processes.

"Transparency and simplicity should have been a core feature of every product out there, but somehow it has escaped the attention of the established players."

Max Levchin highlights the lack of transparency and simplicity in traditional financial services, indicating an opportunity for new companies to innovate in this space.

Leadership and Self-Reflection

  • Leaders should be involved and present, especially during emergencies.
  • Young, talented individuals are drawn to ambitious projects and should be given opportunities to lead.
  • Leadership involves balancing presence with enabling others to grow and take charge.
  • Over time, awareness of long-term career objectives for team members becomes more important.

"I still believe that you have to lead from the front. If there's an emergency, you better be there to roll up your sleeves, and it's all hands on deck."

Max Levchin emphasizes the importance of leaders being actively involved, especially in critical situations.

"And what they crave is the opportunity to step out and say, you know what? I am going to solve this one. This one is on me."

Max Levchin acknowledges that aspiring leaders and entrepreneurs are motivated by the chance to take responsibility and solve challenging problems.

Scalability of Leadership

  • Strategic presence is crucial as a company grows.
  • Good leadership involves trusting and empowering management teams.
  • Great leaders can engage in both high-level strategy and hands-on problem-solving.
  • Authentic leadership is recognized by the ability to contribute meaningfully at all levels.

"You can't be in two places at once. So at any given time, you need to decide where you'll add the most value, but you also need to be there with your team."

Max Levchin discusses the necessity of being strategic about where a leader's presence is most valuable.

"Hallmark of a really great leader is someone who can drop down from the 64,000ft into the trenches with the team, roll up their sleeves and do some of the work directly right there with the team."

Max Levchin describes a key characteristic of effective leadership as the ability to engage directly with the team on ground-level issues.

Leadership Challenges and Growth

  • Leaders must learn from mistakes and undesirable outcomes.
  • Integrity issues in management should be addressed promptly.
  • Trusting in the potential of less experienced individuals often yields positive results.
  • Self-restraint should not hinder giving opportunities to capable, high-potential team members.

"Most of those are events where things go wrong and you sort of say, well, I never want to see this happen again."

Max Levchin reflects on learning from negative experiences to avoid repeating mistakes in leadership.

"Anytime you're doubting the integrity of someone very close to you, it's almost certainly the case that that doubt isn't without basis, and you need to act upon it."

Max Levchin shares a lesson on the importance of addressing doubts about a team member's integrity, emphasizing the need for decisive action in such situations.

"Every time I had told someone with less experience, but extremely high potential, just high processing capacity, you know what? You can do this. Go for it."

Max Levchin recounts positive outcomes from empowering less experienced but high-potential individuals to take on challenges, indicating a belief in the value of nurturing talent.

Hiring Practices and Team Building

  • Importance of hiring carefully to ensure additional capacity in team members.
  • Interviewing for potential and the ability to handle challenges.

That isn't because everyone has that secret extra gear, but because when you hire really, really carefully and really well, there's always that extra capacity available.

The quote emphasizes the significance of meticulous hiring processes to ensure that team members have untapped potential, which can be crucial when facing challenges.

Traits of High Potential Individuals

  • Self-awareness as a key trait in identifying high potential individuals.
  • The ability to be present, process information quickly, and engage in rapid mental exchanges.
  • High raw IQ is also a strong predictor of future success.

So I think the trait that I look for first and foremost, self-awareness...able to process and react very, very quickly, basically playing mental ping pong with you, as opposed to some much slower sport.

This quote highlights self-awareness as a critical trait Max Levchin looks for in potential hires or partners, associating it with quick thinking and engagement.

The Role of Emotional Intelligence (EQ)

  • Evolution of Max Levchin's perspective on the importance of EQ.
  • EQ becomes increasingly important as a company scales.
  • The ability to read people and their nonverbal cues is essential for early detection of issues.
  • EQ aids in understanding motivations, responding to failures, and coaching team members.
  • Personal growth in EQ, especially after having children, which revealed the importance of nonverbal communication.

Over the years, I've gone from shrugging off the value of EQ to being very aware of its importance...Once you have children, you realize the amount of communication that happens nonverbally is significantly greater than that that happens verbally.

Max Levchin discusses his initial underestimation of EQ and how his perspective shifted over time, particularly after becoming a parent and recognizing the extent of nonverbal communication.

Impact of Parenthood on Business Perspective

  • Parenthood prompts a reevaluation of the significance and impact of one's work.
  • It brings a heightened awareness of mortality and the desire to leave a meaningful legacy.
  • Children can lead to increased self-discipline and organization in a parent's professional life.

Having children fundamentally changes your perception of what you're working on and how far ahead you're looking...So if anything, I think I've become infinitely more organized with children.

Max Levchin reflects on how having children altered his approach to work, making him more future-oriented and organized.

Morning Routines and Work-Life Balance

  • Adjusting to a structured routine due to children's needs.
  • The discipline required by children's schedules can lead to increased personal organization.
  • Morning routines are adapted to ensure a good start to the day and accommodate family life.

If you're not home by 550, they sit down to eat. At six, you will miss kids dinner, and then your whole schedule is off...I've become a lot more organized as a result of children.

Max Levchin explains how having children necessitates a strict routine, which, in turn, has made him more organized in his professional life as well.

Daily Routine and Work-Life Balance

  • Max Levchin's daily routine has shifted significantly since having children.
  • He wakes up between 4 and 5 AM to check the world's happenings, answer urgent emails, and then goes on a bike ride.
  • Post exercise, he feels energized for work, arriving at the office between 8:30 and 9:30 AM.
  • Most of his workday consists of meetings with team members and external parties.
  • Max strives to have dinner with his family before 6 PM and spends the evening with his children, returning to work after they sleep.
  • He operates on 5.5 to 6 hours of sleep, which he considers a biological gift.

And one of the things that happens with children is they get up early. And over the years I've become quite addicted to road cycling. So at this point my wake up time is somewhere between four and 05:00 a.m.

This quote explains the adjustment in Max Levchin's routine to accommodate his children's early wake-up times and his passion for cycling.

And then by the time I'm done with that, I'm fully energized and I'm ready to go to work.

Max feels energized after his morning routine, which includes cycling, and is ready for his workday.

I try to get home just a little bit before six or 06:00 so I can sit down and have a quiet family dinner with my kids, catch up with them, find out what they heard in school, but try to explain what I do for a living to them.

Max prioritizes family time in the evening, valuing dinner and conversations with his children.

One biological gift I've had taken full advantage of is I seem to be able to go fine on five and a half, 6 hours of sleep, not really need a lot more.

He acknowledges his ability to function well on limited sleep as an advantage to his productivity.

Family and Explaining Work

  • Max Levchin's children are interested in superheroes and comic books.
  • He relates his work to the concepts of good and bad, helping his children understand his professional drive.
  • Max uses his efforts to bring transparency and honesty to the financial industry as a relatable example for his kids.

They sort of have good and bad, and they're now starting to understand not really bad, but not really good. And so people need to be good in their world.

This quote highlights how Max Levchin uses simple concepts of good and bad to explain the importance of his work to his children.

And so the fact that I'm working on something that is good and good for people, it's a very powerful way for them to make sense of what it is I get up for every morning.

He emphasizes the positive impact of his work as a powerful motivator and teaching tool for his kids.

Personal Interests and Beliefs

  • Max Levchin's favorite book is "Master Margarita" by Mikhail Bulgakov, which he appreciates for its metaphorical and ironic depiction of human nature.
  • He believes that willpower and a deep desire can make almost anything achievable.
  • Max does not have a single favorite blog or newsletter but reads various staples like Techmeme and The Wall Street Journal.
  • His grandmother, a strong-willed woman with a PhD in astrophysics, was his biggest mentor, instilling the belief that determination can lead to success.

Master Margarita by Mikhail Bulgakov. Easily the best piece of russian prose of the 20th century.

Max Levchin expresses his admiration for "Master Margarita," calling it the best Russian prose of its time.

That most around you disbelieve willpower and deep desire to make something happen is pretty much unstoppable, or almost unstoppable.

He shares his belief in the power of will and desire to accomplish goals, a belief he feels is not commonly held by others.

So my personal hero is Winston Churchill. I have a beautiful Churchill's portrait that I'm staring at right now as a reminder of that I shall never surrender.

Max Levchin draws inspiration from Winston Churchill and his grandmother, both of whom exemplified unwavering determination.

Future Aspirations for Affirm

  • Max Levchin's primary goal for Affirm is to reach and improve the lives of 100 million people.
  • He is less concerned with revenue or loan volume and more focused on customer satisfaction.

I'd like to see a firm reach and improve the lives of 100 million people.

This quote encapsulates Max Levchin's vision for Affirm, highlighting his desire to have a significant positive impact on many people's lives.

Acknowledgments and Promotions

  • Max Levchin expresses gratitude for being invited to the show.
  • The hosts thank Max for his time and share information on how to follow him on social media.
  • The podcast also promotes eShares, a cap table management platform, and Fond, an employee engagement suite.

Thank you.

Max Levchin thanks the show for the opportunity to share his thoughts and experiences.

EShares is the number one cap table management platform, allowing for equity management 409 a valuations and liquidity all in one place.

The podcast advocates for eShares, emphasizing its importance for companies of all sizes.

Fond is the employee engagement suite with three core products rewards, a premium corporate discounts program, and Engagement IQ.

Fond is promoted as a valuable tool for employee engagement, offering rewards, discounts, and engagement surveys.

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