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Sebastian: [00:01:00] A
Logan: Cool
Sebastian: of different topics. I'm happy to
Logan: We'll see how long we can, we'll see how long we can go. I think there's some uh, stuff in there.
Logan: I appreciated your, uh, in listening to all this stuff in advance of doing this, I'll listen to a lot of the different things that you'll, you've done in the past and The level of like openness, I would say that you've had just maybe asked a [00:02:00] question about it, but just about family and, uh, you know, like leaving your kid's money or not, and your father and, uh, you know, drinking and your grandfather and immigrating from Poland and all that stuff.
It's, uh, it's, it's refreshing to hear someone be so, um, Cerebral and thoughtful about all that stuff.
Sebastian: I mean, we live in a society where people have a lot of opinions about what's spoken about in the public and not, and you know, woke or not woke and all that stuff. But there are still two topics that for whatever reason are kind of taboo to spoke about. And one of them is if you had issues with alcohol.
And the other one is that most of us, or a lot of people have issues getting babies, right? Like, and those two topics are still very. Personal. And I feel that like, obviously every individual have to choose for themselves, but at least when it comes to alcohol thing, I feel like. You know, if I can at least the slightest help with making it more like a, a thing that's okay to talk about, um, then I think that that's a good thing.
So that [00:03:00] kind of was a little bit the choice why I wanted to talk about it
Logan: But was there a specific point that. Uh, led you there or was it kind of just a gradual, like, was there a day that you were like, all right, I'm not going to drink anymore, uh, it was, there was
Sebastian: for sure. No, no, no, but like, no, but it was like, it's very easy. I've, you know, I'm happy to talk about this. Like, I mean, again, my grandpa. Uh, had issues and died out of that. My father died in things related to alcohol abuse and other drug abuse. Potentially it's not entirely clear. Um,
Logan: but it wasn't your childhood, right? I thought that was interesting. It's sort of exposed itself later in life.
Sebastian: yeah, exactly. I mean, when we, when, when I was a kid, he was actually, I think partially because of grandpa, dad was very careful. So like, you know, we, we, many other families had like, you know, the parents had wine for dinner or whatever. That didn't happen in our house. Like there was no alcohol, uh, visible.
And then it changed when he got a little bit older, but like, I think that the, but the other thing that happened, like, despite these things, I was [00:04:00] just partying hard. Right. Like I, I didn't, I think most of my friends would have known. And now he didn't have an issue. It's just partying hard. Right. Like.
Sebastian: But at some point of time, my wife told me like, you know, my, my nowaday wife, but then girlfriend said, look, if you're going to continue partying this hard, like I'm out.
And at that point of time, I was like, okay, but I really want to be with her. So it was very clear for me. It was just a choice of love. I like, I want to be with her. So I got to drop this thing. And, um, but then, you know, the interesting thing is just one note on this is that I met this. um, doctor who was specializing in alcoholism.
Sebastian: And he said to me, which I don't know if it's true or you know, scientifically proven, but that there has been studies that suggest that your brain is physically altered by, uh, drinking if, especially if you have kind of the genes for it. And then when you stop, it takes about 12 months for it to heal. And consequentially, if you off for 12 months, then you're much more likely to kind of prevail than if you are [00:05:00] not capable to keep up for the first 12 months.
And the interesting experience I had just quickly on this is that if you would have asked me like for the first 12 months after I stopped, like, You know, have you stopped? Can you drink? And I'll be like, no, I cannot. But inside my head, there was still a voice that said, but really, you know, at some point in time, I'm going to have a glass of wine and, you know, maybe at some point in time, I'll be fine and I'm going to do it again.
And then after 12 months, it was this. Just miraculous, strange thing. Like somebody turned a thing around in my head and suddenly it was just like, wow, I would have ended up as my father and grandpa, like eventually I would have wasted my life. And then you just got this like cancer survival feeling where you're just like, I survived death, you know, like I'm, I'm, I'm a survivor.
And I'm just been celebrating the fact that I'm not going to fall into that trap, uh, ever since. So since then, it's just been pure joy and happiness over not being drinking anymore.
Logan: Isn't it amazing how I know you've talked about [00:06:00] like setting the six month milestone of, of, Hey, we're not quitting our, you know, jobs or whatever. We're just going to set six months. We're going to go start this Klorna thing. And if it doesn't go anywhere, uh, then, you know, whatever, we'll go back to our other, uh, the rest of our life.
And there's, there's something about like, Uh, just putting one foot in front of the other and setting some realistic milestone. I remember when I was starting to do this, I was like, ah, I'll do four episodes. And if that goes well, I'll do 12 episodes. And if that goes well, I'll do six months. And like, that was my, if I had said, Hey, I'm going to do, I don't know, it's 110 or something.
There's no way I would have committed to do 110. But when you set these little. Incremental milestones. And for you, I mean, probably making it 12 months was, you know, that's reasonable. You can do 12 months of a lot of things, right? but if you set, Hey, the rest of my life, the next 60 years of my life.
I'm not going to consume alcohol. That's so daunting in such a way that like, it almost feels insurmountable, but doing these little goals, I'm sure 12 steps and all [00:07:00] that stuff, you know, plays into that, but it's impressive setting realistic milestones.
Sebastian: you're totally right. And you know what, like, I actually have never made that connection before. So I thought it was really nice that you did it. I've never thought about the connection, but you're obviously entirely right. That's like, it was the same thing when we started the company. It was when we could derive it down to such a.
You know, shorter term decision and not try to, cause these like life shifting decisions. I mean, maybe with the exception of when you get married, right? Like that's a bit different there. You're actually making that decision, but in general you try to, um, you should probably try to avoid it and try to split it down like that instead.
Right. Um, so there's probably a very good advice. I've never thought about that. You're right.
Logan: Yeah, well. That's one of the things that comes when you, uh, when you try to synthesize someone's entire professional existence into prep for a podcast, you get a very meta zoomed out point of your life versus living it, right? So, uh, I guess one of the questions for you, um, I just, to start, um, there was an interesting thing you had said.
Logan: They had never [00:08:00] really heard anyone articulate in this way before, but that there's like three different parameters of a company's success. One is like the internal momentum that you're feeling within the business. And then there's the that might be the most leading indicator, which flows down into the P& L of the business, right, which then flows down into the public perception.
And in the fullness of time, I think those things are pretty directly correlated or they flow into one another. But, uh, at any moment in time, they could be disconnected, right? I'm sure when you were 50 billion valuation, but you're trying to figure out what to do, you might've felt one was off versus the other.
And then when you lowered your valuation, you might've felt that, you know, the momentum was there versus not, I guess. Can you speak about that concept, how you think about those three different Barometers. And then where Klarna is today on each of them.
Sebastian: It started off as, you know, probably more like of an observation of mine. That I just realized that, [00:09:00] you know, I could come to work every day and I could feel that, you know, when I looked at what we were doing and what people were accomplishing and the work and, you know, the culture and the speed of decision making, or if we, if we were shipping good or bad products and all these things that you kind of observe on a day to day basis, that.
You know, you could be very proud of it and feel very excited about it. And you can feel more depressed than, you know, feel like, Oh my God, nothing's really going like the way I wanted to do. Um, and that doesn't necessarily, you know, to your point, instantly translating to the P and L results. Uh, or the perception in the market of the company's success, but that over time, it always correlates a hundred percent, obviously.
And I think that's like, I think that that experience grew over time to me, it played an additional important role because.
Sebastian: In my opinion, when I look at the company as such, between 05 and 10, when we kind of started it in the first startup years and started getting some momentum in what people have to remember was a small market, right?
Sweden, [00:10:00] 10 million inhabitants. So it was, you know, great success on a Swedish market basis, but fairly, maybe, you know, small from a US perspective. But. Um, we, uh, there was a lot of, I mean, there was obviously a lot of bad decisions, you know, things that didn't work out and whatever, but in general still, like, I remember like on a whiteboard, we let's sign, like, here's the list of the merchants we need to sign.
And then like, and then we were like, what if we sign only one of them? It's going to, you know, accelerate the business like amazingly. And then like a few months later we signed all of them and you were celebrating like, how did we do this? Amazing. You know, like, um, so you had this like. Great momentum, right?
And you realize that that's going to eventually show up in the P& L, but then it takes time to go live, to make sure that the product works as intended, you know, and all that kind of stuff. So, um, but it's going to show up. And I think then, however, when we got to like, Oh, nine and 10, I feel that like. We got, we went from 100 million valuation when Sequoia invested in 09 to a billion, [00:11:00] a unicorn status a year after.
And that's when the like perception of the company suddenly was slightly ahead of where we were as an organization ability to execute. And then you start feeling that like, there's pressure, there's expectations at the same point of time, there's a lot of opinions, you know, you need to Hire more senior executives.
You need to have 20 percent of creative time like Google. You need to, you know, whatever is the latest thing written about in the management press, uh, you know, or whatever, or good to great tells you that you should hire the best. So please go and do that, right? Like whatever it is. And you, I just felt very, um, you know, confused personally in, in that space.
And I felt like, wow, you know, as I then started hiring, you know, senior executives and doing all these things. I kind of found myself looking around and I was like, I don't know, like, I'm not, I impressed anymore. Like I don't like the pace of that, or I don't like the pace [00:12:00] of the product development, or I don't like what's going on.
I feel we're sitting so many meetings and just talking and I just didn't see things that impressed me. You, there's two fun ways in which that articulated one was very clearly because in, in oh nine and 10, we shifted the strategy, we pivoted towards what we today call the checkout strategy, which is funny since we announced that we're actually selling that part of the business away, but at that point in time was just when we launched it.
And it was a pivot because up until that time we were a simple payment method. And now we wanted to do a full PSP. acquiring offering. And I had this board presentation where I was like, there's this huge opportunity to build a global PSP business. There's just two small startups. You know, there's this, these Irish guys, the Collison brothers, they have some real good understanding of building great APIs for developers.
And then there's these Peter and his gang in, in Netherlands, the Adyen guys, and they're doing something really good in this [00:13:00] and they're smaller than us. They're not as big as us. So we should just go and nail this. But two, three years down the road, as much as we had some success with it, Adyen launched 50 payment methods in Asia, and we were struggling to add one in Sweden or in Germany, sorry.
And like, it just became, that was a typical moment, momentum question where like, My investors started believing in this. A lot of investors were coming to us and say, Oh, you're building, I can add in. There's a huge opportunity. Like, that's great. And like, they would probably even give us a premium on the valuation because they believe that like, we were just another ad in our stripe, but to me looking at it, I was like, no, we're falling behind.
I mean, we can pretend to be an ad in a stripe, but we're not. Moving at the pace that they are within Nordics, we did well. And that product worked really well in this context, but it was not at their level on an international basis. And so like, those are good example. Um, I think another fun example is also like at one point in time, we talked a lot about a company culture [00:14:00] and like, you know, how to.
Sebastian: Build a great company culture. And we tried so many different things in this area. Like I still sometimes laugh about all the stuff that we've done, but one of the things we did was we brought these consultants in that were going to help us establish what the Klana company culture was and the way it was done very Swedish.
Was that we took the whole company at that point in time, a few hundred people and divided them in small groups of 10 people. And they were all supposed to sit in a, in a, in a group and discuss what is Klauna culture. And then they were supposed to select like three words or three sentences that described it.
And then. They had to decide and agree in that group. And then each of the group had a leader who they met and then they negotiated. Uh, and then at the end, you know, everyone negotiated with each other until we, at the end had like three statements that should represent the Klaana culture. And this was the consensus decision of 300 people of what Klaana culture should stand for.
And the funny thing is like, when I got that in front of me and I looked at it, I remember thinking to myself, like, You [00:15:00] know what? This is probably the most fair and still like nice, probably a little bit too nice description of our culture, but it's still probably a very fair description of what it is.
And the only problem is I don't want to work here. I don't want to work in that environment. So like, so I just like, it gave me two options. Okay. This means two things. Like either I go and try to, either I leave, like, then let these guys continue in this culture. Or I try to make this culture into what I believe it should be and what I want it to be.
And push in that direction. I obviously choose the latter. Um, but it's a good example of when you feel like the momentum here is not what it's supposed to be. This is not like what I actually believe to be
Logan: What, what, what were the cultural things that they were espousing, uh, at an employee level that you, you didn't think was what you wanted to run a business as? Like, what are the types of things?
Sebastian: well, I think most, you know, most people for good reasons [00:16:00] are, they want things to be nice and they want things to be. Friendly, uh, you know, and, and that's nice. I get it, but this is a competition. And if you would be presenting such values in a soccer team, people would say, well, then you're not playing champions league.
Then you're playing, you know, with your friends and soccer. And that's a different thing. And you can do that. That's fine. You can enjoy it, but it's not the same thing as. You know, you know, um, and, and people will have different expectations. Like maybe if you're playing with your friends on a Sunday, it's okay.
If you, you know, show up a little bit, you know, uh, with a hangover, but if you're, you know, showing up to practice in the morning in the champions league team, and you're not fit for fight, I think your, your colleagues, your com comrades in your team will have opinions about that.
Logan: Yeah. It's interesting. I mean, I've heard you talk about like expectation settings with. Founders, but then also, uh, I guess early stage employees. And one [00:17:00] of the things that deals, um, a little taboo, or it became a little taboo, certainly with different generations of employees. And I get yelled at anytime we, we splice something and it goes on Tik and we.
We espouse the virtues of long hours and working hard and, uh, and I always get yelled at for it. And I feel like one of the things, uh, you guys did, or I've heard you be pretty explicit about in the early days was that you were in, I don't know if it was in at seven and out of 11 for the first six months and building that
Sebastian: was long at the six months, my friend.
Logan: Oh, was it? Okay. For the early days, what, what, how, how long was it that you guys were actually maintaining the culture?
Logan: I mean, I think it's an important lesson because we've, we've, we've lionized the founder experience and also we've lionized work life balance. The two were often, maybe always very much at odds with one another.
So can you just speak to that, like early days of setting the culture and [00:18:00] expectations among the founders? The early employees, um, it from a work product standpoint.
Sebastian: Obviously it started with us as founders and with us as founders, it was actually a kind of a funny thing. So it started with this thing that like we were three co founders, we had all committed to doing this. Right. But we got a little bit suspicious against each other sometimes of whether the other one was working as hard as the others.
And so this started some fights was like, but you weren't here, you haven't done that. And you know, whatever, like three, three friends sitting in a room and like, you know, and fighting with each other over these things like, Oh, I did show up yesterday. No, you did not. You were on that call with, you know, whatever.
And so we just said, okay, how do we solve it? We don't want to have these fights. Like, and so we just decided like one thing was we decided that at that point in time we had put the computers in the office. So that as you would naturally do, you each sit facing each other with the computer screen facing backwards.
So I wouldn't see the other screen. I would just see their faces. But at this point in time, [00:19:00] we were like, the problem with that is that like, then when I passed by Victor, my co founder, I was like, but he's always on Facebook. Like, you know, and I was like annoyed. And then he got annoyed with me because I was always doing something else, whatever.
So we just created this idea that like, we were like, what if we put the computer screens, like, So that we can always see each other's computer screens. And it was like a self control system. But the funny thing is after doing that, we all like a month later had to like sit down and said, you know what, actually I'll admit that since I turned my screen like this, I, um, I tend to work a little bit more because like I am a little bit embarrassed if my colleagues saw me like on Facebook too long.
Right. So I felt like, so it was a little bit like. Some of these like self discipline things and you know, they work in a founder, you just at that point, I was just the founders in the room, right? Then you start growing and the company becomes more and we used to call this like the open screen policy.
It's like. It helps you to be disciplined, right? Like, I mean, you do this when you go to the gym, you know, you have things like your, you know, your personal trainer that you hire, [00:20:00] you don't expect them to say, Hey, here's my target for you. You're KPI to set, see you in six months. Good luck, mate. Like you're actually expecting them to stand there next to you and like, come on, do another wave, you can do one more, you know, like, You're paying for that, right?
But in the work environment, we have come to the conclusion that that, no, that that's bad. Like your manager is not supposed to tell you that you're not supposed to, like, you're not supposed to, it should just give you a big goal and then you should go and do it. Right. But I actually think if you really want to, you know, if on the soccer field, again, somebody is running, your coach is coming, come on, one more lap, one more lap, right?
Like there's something to that. And again, it comes back to what you want. I'm not saying or suggesting. You cannot build a successful business. You can build a. Totally fine business. Um, without doing that, you don't need to work that much. There, some people are successful working less. Some people are not successful working less.
Um, but I do believe you really want to build a great business. Then you need to put the effort in, otherwise it's [00:21:00] just not going to happen. So I always say like, look, there's activity does not equal productivity. But without activity, there is no productivity, right? Like, so just like, let's be honest about it.
So, so to us, that was one thing. I think the, on the working hours, you have to answer your question. So the other thing that we did was we were also like always suspicious of each other. Like, have you actually worked as much as you say you work? So we said, look, let's, to stop these conflicts, let's start doing like a stamp.
Like, you know, you know, how it used to be in the factories when you have to like stamp in and stamp out when you
came into
Logan: Punch cards
Sebastian: we started
Yeah, yeah, yeah. So we started doing that. We started writing up exactly how much we were working and we, and then we compared the hours so that it would be equal.
It was just about avoiding the fights. We were just tired of like, cause we, we quickly understood this is self serving bias. I will always believe that I work more than everyone else. Like, and unfortunately it's just like how we humans work. We always have this self serving biases. So like, let's avoid that and just put it on the table.
Like how many hours have you [00:22:00] actually pulled in? Right. And so we started doing that and we did that for the first seven years we tracked, we tracked the, the number of hours for the first seven years
Logan: among the founders or for all, all employees.
Sebastian: no, just for the founders. We the open screen policy we tried for everyone, but we didn't do this for the others.
Um, I think the others that came in in the early days. They obviously to some degree saw like, okay, here's some guys, they're working really hard. They started doing that as well. Right? Like, and it wasn't an outspoken expectation or anything. We never said it. Uh, I, I, we talked about like, again, this concept of talking about the fact that ours actually makes a difference.
And I feel sometimes I meet like more senior founders or people that have done an exit or two. And then they come into me. Yeah, when I was a kid, I thought it was all about hours, but now I'm grown wiser and I realized it's much more about what I do with my hours and I don't need to do many hours anymore.
And I feel that's a little bit like. That's also not entirely true, [00:23:00] because the truth is like, yes, I am definitely today, you know, 20 years into it, much better about using my hours than I was 20 years ago. But if I add one more well used hour, it's still do a little bit more. So like, and that doesn't mean again, there's time for reflection, there's time sometimes to go for a walk and think about things.
But I do think that this has become some odd thing that people are not okay with talking about. And I feel it's, I feel sad because like I tell people sometimes like people how I'm concerned about you burning out or whatever. And I'm like, look, I feel like I'm an artist. Look, if I would be a painter and I would be, you know, drinking absent and, you know, hanging out and I would be like last night I was painting until 4 a.
m. Because I was excited about this piece of art. Then you'd be like, Oh my God, he's so amazing. What a fantastic guy. But if I'm a CEO sitting at 4am like, Oh, thinking about my finance sheet, then people go my, Oh my God, relax, man. You're like work life balance. It's a choice. I understand that I'm [00:24:00] sacrificing other things.
I understand that it has implications and I'm not expecting the whole organization to work like that because that would be silly and it's not going to happen. Uh, but I also feel that I have the right to work the way I like and the way it works for me. As long as I'm mindful of making sure in the organization, especially with junior people.
That they don't misunderstand this as an expectation, but that I try to attract and encourage people to the organization that do this purely because of their passion and interest. And that's always, that's sometimes hard, obviously, to distinguish. And there's always risks that I'm, I'm recognizing those risks.
You have to be a bit mindful about it, but I still think you can do that. Like I, for example, tell everyone Slack, just so you know, guys, I will hit you on Slack anytime of the day. But I never expect you to answer until you're back to office. If I need you, I'll call you. And I'm very specific about that. I publish it on my internal like wiki page.
So people know what to expect of me. Like I'm trying to make it very clear, like this [00:25:00] is the thing, but it should also be allowed for me to ping because I'm writing something down. I want to like send a message or something. I should be able to do that. Right. So we tried to make that very.
Logan: I've heard you reference, or there was some point along the journey, you mentioned the cultural thing when everyone was espousing the values and that it wasn't totally the company that you wanted to run. I also have heard you reference that at some point you realized that You just weren't going to be all things to all people as a business.
And it wasn't going to be the employer that everyone wanted to work at. I guess a lot of our founders are currently thinking about putting the toothpaste back in the tube a little bit within office culture, or maybe they're managing rifts and trying to reset the expectations internally on. Hey guys, what in the Zerp era in the 2021 work from home era, There were some sloppy policies.
We let slide and now we can't. Was there anything that you did operationally [00:26:00] to, um, really shift the mindset of the company, that it's not going to be this soft place for everyone, and we're going to espouse niceness and all of that, but instead we're a soccer team to use your analogy and we're working to win here.
Sebastian: I think it's a very, again, it's a difficult because it can be misinterpreted and it can go the wrong way with that said, though, I do believe that in my opinion, among the best leaders. Are people like I always think about this people will be motivated by a number of different things, right? So people are motivated by making a career by making money by being great colleagues and friends by being, you know, when I think about the work related part of our lives, right?
And then and then they will also be motivated by curiosity and learning things and accomplishing things and so forth. Right? So you'll have all of these and for each individuals. Uh, however, it will vary a little bit. What's more important, right? And so, for example, I used to have a [00:27:00] very senior member of my management team who was good in all this super smart guy.
I think it was a Stanford, like in top class, everything. But over time I realized that like his main driver was being liked by his colleagues and. The problem with that is just like, you know, that's obviously great, but if it's your main driver, it will sometimes stop you from taking the necessary important decisions that are necessary for the business.
And, and that's not great. Right. And I think people forget about that. It's like, okay, let's say for example, that our head of customer service a few years ago, wasn't doing a great job, like from other angles and wasn't tough enough. Thank you. You know, we can internally say, yeah, but we want to be nice to that person and so forth.
But like, my customers won't care. My customers don't care if, you know, I'm being nice or whatever. My customers expect great customer service. And if they don't get it, they will go elsewhere. Right? Like, that's just the way it works. And I, and I think it works like that for a good reason, because otherwise we'll get into a society that doesn't deliver [00:28:00] value to its, you know, and usually those societies tend to So I think it's an important concept that obviously you have to be mindful of the implications on the individual basis and how you deal with those situations.
You have to be empathetic about, but so that comes in. So I think that like, and I think, but then to talk about the great people that are great leaders, if you think about what drives them, I think it is curiosity. I think it is about accomplishing things. And I think also one thing that I feel is very, very clear with most of the greatest leaders that I worked with.
They care about serving others. There's this great movie about this Indian guy who came to like, The queen of Britain, like a hundred years ago. And she's like depressed and he was like her guru. And she, and he says, it's in one of the scenes, like your purpose in life is to serve others. And I think that's true.
Like people are really great leaders have as one of their primary drivers that to serve others. However, if you have that as a primary driver. Then you [00:29:00] also see a lot of, I see a lot of talented leaders who then, you know, feel conflicted because they want to serve others. That's why, you know, they're there and that's why they're great leaders because they're empathetic.
I mean, service being service minded to a large degree is about empathy. You have to be able to understand and put yourself in the position of your customer, of your employee, of these people in order to understand their perspectives, that's allows you to be very service minded because you can. You know, come, come ahead of their expectations or whatever they want of you.
And you can deliver amazing service. But the downside of being service minded is sometimes it goes too far. Sometimes you actually have to be able to say no in a good way. And I remember the first time we hired a senior executive that was really good, was our head of customer service called Karin. This is like, I mean, 15 years ago, whatever.
But at that point in time, I remember me and Nicholas, We were so service minded. So whenever an employee would come and say, I'm unhappy about this, or this doesn't make sense or whatever, our gut reaction would always be to try to go and fix it, [00:30:00] like try to go and fix it immediately. Right. Because like we were service minded and we just wanted to fix everything and we want to make everyone happy all the time.
Right. So we were just running around the thing. And then at some point of time, there was a, and we were, you know, we were stressed out about this. We were running around trying to serve everyone to the maximum. And then at one point in time, this. Fairly like junior customer service agent comes in to speak to Karin and, you know, service agent says something like, you know, this is not good and that is not good and so forth.
And then Karin looks, looks at this employee and says, yeah, life sucks. And that was it. You know, that was the end of the conversation. And then the employee was like, yeah, you're right. And then goes out and that's fine. Right. And I was like, Whoa, what can you do that? Are you allowed to say that? Like, can you actually say like no to somebody?
And so obviously you can. And for other people, this is much more natural in their characteristics that they feel that. But I actually think a lot of great leaders don't at first are not capable of saying no. Because they become good leaders [00:31:00] and they, because they're empathetic and they care. And so they want to serve everyone.
And that's actually easy to burn out based on that requirement. But then you have to find a balance because unfortunately you do realize that like sometimes you have to sit no. And, and, and also sometimes people don't really. want you to fix their problem. They just want somebody to listen and that's okay.
And if you just listen empathetically and say, I hear what you say, but you know, this is a situation that's fine. Right. And so I think that that was a, to your point. So that's when we started saying, you know, clone is not for everyone. We're not here, you know, we're not a family. I mean, the, the key to me difference between a family and a team is in a family, you can't, you know, you usually don't, at least sometimes, unfortunately you have to, I mean, Oprah and Dr.
Phil will say that your responsibility is to surround yourself with people that make you happy and feel good in life. But in general, we would mostly in society agree that you don't kick people out of your family because it's hard to do that, right? But if you look at like a team, part of the coach job is to assess that like maybe this One player on [00:32:00] the team doesn't have the prerequisites, uh, to make the team successful or doesn't have the motivation or isn't in the right place or whatever it might be.
And that's part of the job. So it is different. And then I think it's rather something you want to be able to express. And, you know, and say in a good and empathetic way, right. That's like, it's not, and I rather make sure that people know that when they join us as a company, we're all going to find that out later, right.
They don't want people, I think this may also be a little bit where like in Europe due to the difference in labor laws, these topics were earlier at Klona. Maybe something that came up to the top. Then I think now in the U S they become more, you know, something that's discussed at a greater level nowadays.
But like to us, it's just been something that we had to talk about a bit earlier because. The situation here is different in that sense.
Logan: Now, we, we've gotten a while into this without actually describing what Quorna does, and I, I, uh, it's funny, a lot of people I talked to when I said we were doing it, uh, doing this podcast, uh, everyone, uh, in the U. S., I think, Like [00:33:00] knows what clarinet is, at least as a brand, everyone's like, Oh, I know clarinet.
No one can fully, that I've talked to, could fully articulate what clarinet is. They're always like, Oh, I, I, I've seen it. Yeah, I know that. And then when I described it, I think it's like, Oh yes, now I know what it is. How do you articulate, uh, cause I've done it the last couple of days and I don't have the pithy version down quite as well.
How do you articulate what clarinet is in kind of an elevator pitch.
Sebastian: Well, I think this is coming back to the, you know, the artist because like people talk, you always want me to do the 30 second pitch and I feel a bit like you would ask an artist to like express all of your art in 20 seconds. Like, I was like, I don't know, you like I, if I think about all the complexity I've lived to in the last 20
Logan: I'll take your answer, by the way, whatever you say here. I'll put it in chat. GPT say synthesize. And then, then that'll be the output of it. So
Sebastian: No, but I think that like, look, I mean, obviously at the core of it, we're, uh, a payments company, we offer an ability to pay [00:34:00] online debit or credit. We're mostly famous for this buy now pay later where you can split things into installments. You will see us on websites online, but also in physical stores.
But I mean, nowadays we're also Neo bank. We offer card services. We offer full banking. We're fully licensed bank. So it's kind of evolved beyond that. I think, um, so that's kind of the, that, but I think going forward, you know, this comes back to the whole AI thing. And, and this is actually, it kind of ties back to what I said about the, um, uh, the client checkout when we launched that 2010, we basically tried to, you know, play in this PSP Stripe ad in type of business we concluded in 15.
Um, When Adyen signed with Spotify, which was like our neighbor here, we were like, okay, you know, your, your worst competitor, you know, your, your closest neighbor is signing with your worst competitor, like that's a pretty good sign that you're gonna, you know, you're losing out and not a lot of the investors didn't see that at that point in time.
Our P and L didn't say that at that point in time, but we said that and we said, [00:35:00] it's time to pivot. And at that point in time, we asked ourselves, okay, what did we learn from those five years? And the one thing that we learned was that we were right. We were right about where the market was going, that these global payment solutions would make sense, that people like Stripe and Adyen and like this, that directionally we were right, we just didn't execute.
And, um, in 15 then we said, okay, what if we would try to formulate a new big hairy goal like that as they use the term for it. And that was actually funny enough was AI already then that we said, okay, in the future, at some point in time, you wake up in the morning, your computer will say your financial digital financial system tells you, Hey, I'm going to save 10 bucks on your mortgage, Logan, by moving from bank A to bank B, and I'll do all the paperwork for you.
The only thing you need to do is say yes. Right. Is it like, okay, that's eventually going to happen. Just like self driving cars is going to eventually happen. We just don't know how fast, but if that is the direction of financial services, what do we want to be? And then it became clear to us, the [00:36:00] digital financial system.
Like we want to be that we want to advise you on those decisions to help you save time, save money, make you feel less more in control of your finances. And like, I think that the, and less worried about them, but so I think that that's the like big vision goal, right? As much as like, and then these services, the payment services are amazing because we are over a hundred million users and we.
You know, acquiring them ourselves would have been very expensive. And now we have these merchants who like our services and see that they help them grow their business. And as a consequence, they're advertising our brand and, and people see us online on Macy's or Uber or Airbnb, and then they try us and they're like, Hmm, I like this.
And then they start using us for more things. And in Europe, you know, Sometimes people drop their credit card and explain, you know, and replace it with ours, or they drop their bank relationship and, you know, replace it with ours. But it's, uh, it's not like your bank used to be where you have to sign up and, you know, and please, please, please make me a customer and, you know, go through 55 forums and, you know, beg with your local banking guy.
It's different. It's more that [00:37:00] like you try us for something and then you like us and then you try us for something else. And then eventually that becomes like a full, full relationship like that. So I think, you know, that was not the 32nd, but at least I did it in four or five
Logan: yeah, no, no, no.
Logan: You, you cut it down as you reflect on the, uh, Adyen Spotify thing or the, you know, Stripe, uh, you were doing more things at once around that time. Uh, where I think Adyen and Stripe were sort of singularly focused on, on that part of the business. It's a bike. If I recall correctly, do you attribute, um, them succeeding in that arena?
And as you reflect on your guys now selling off part of that and, you know, not, not winning the Spotify account or whatever, was Was it a focus thing in your mind? Was it, uh, just execution, hand to hand combat and Peter and those folks just did a great job. What do you sort of, as you self flagellate and say, Oh, what could have been, what do [00:38:00] you attribute it to?
is
Sebastian: look, I think both the Collison brothers and Peter are fantastic entrepreneurs, and I think it would be very like, you know, you would not have understood the world correctly if you believe that would be an easy thing to compete with them. So I don't think. It's that simple. I think they did an amazing job.
The question to me is not necessarily the commercial outcome. Like, could we have one more commercially or less, but from a product perspective, could we have built a product that was great? With the bandwidth and capacity, or would that have required more focus or less? I think the point is that we had the focus, in my opinion, at that point of time, this was the main focus of the company.
It was mine and at that point of time, management teams and the company's ability to turn that vision and understand how do you turn a vision into a working product? You know, like from, from this big, grandiose idea of direction. Into something that actually delivers value on a day [00:39:00] to day basis. And we were simply not doing that.
Right. And I think I cannot promise that we would have a different commercial outcome, but I think with my experience today of how to turn vision into an actual product outcome, I could have had a better chance at least coming out with a product that would have been more competitive going back with the same amount of resources and focus.
So I do think that like, we learned a lot from that. And the people who were involved, um, learned a lot from that. So there's tons of learnings that I would have done differently, but it
Logan: there, as you're an entrepreneur or someone's listening to this, is there a specific staffing thing or is there, is there any salient point? I'm sure you have a million of them, but like, as you reflect on that, And you were to distill it down to one or two things that now you would do in retrospect that you didn't do at that time and you're an entrepreneur listening and trying to get, you know, the, the, the wisdom of [00:40:00] those five years executing on this.
Uh, is there something that stands out?
Yeah
Sebastian: there are a few things. I mean, one is obviously we did hire too many senior executives from the outside. Um, that's had great CVS, but not really. And one of the major things that I did in 15, when we decided, because 15 to us was such a pivoting time, we realized the client checkout was not going to become a stripe or an idea, and it was going to do well, but it was not going to come to like a hundred billion dollar outcome.
And so as a consequence of that, you know, we had to pivot, but it was also the time when my co founder Nicholas, uh, departed the company and which was good from the perspective that like over the last years, we have become a little bit like a married old couple. So like when he was saying something, I was like, I already know what he's going to say next sentence.
Like I know where that's going. And we weren't really listening to each other anymore. And to some degree, some people internally, some troublemakers, you know, We're basically using that to their advantage to create political infighting. Um, and that [00:41:00] was not good. And when he left, it wasn't really about who was right or wrong, but it was about the ability that it created clarity.
Suddenly, suddenly it was like me. And I think the biggest actually, to me, benefit of that was that before he left, if something went wrong, I could always say in my brain, like, yeah, but I listen a little bit too much to Nicholas. If I would have done it my way, we would have been like, You know, whatever.
And you don't learn, you don't learn anything thinking like that. The benefit, like, after he left, it was like, we screwed up. It's only me, man. Like, it was me. And like, there's nobody else to blame.
Sebastian: So let's figure out what the hell I did wrong, right? Because that did not turn out well. So I think it like, it forces this.
I think that's the funnest part of being a CEO. Like there's nobody else to blame. Like there's a lot of other people to give credit for great things, but there's nobody else to blame.
Sebastian: So like, um, so I think that just accelerates your self development, but I think that the, from the learning cycle, so definitely, so in 15, when Nicholas left, I wanted to [00:42:00] form a new management team and one of the things at that point in time, the company was 10 years old, so it allowed me to actually promote some people.
Cool. Uh, from within and bring them up to management level. When everyone had advised me, Oh, people are too young for that. They're not going to be, you know, more account, typical startup advice. And it was the opposite. It was the right thing. These were proven individuals. Like there's a reason why if you go to very traditional industry companies, like industrial companies or these things, they almost never hire senior executives from outside.
You always, like I was talking to like. The guy, Volvo Trucks, running Volvo Trucks, right? Like, he, they don't hire some senior guy off the street and just like, Hey, come on in and fix our Volvo Trucks, right? Like, you have to work there for 20 years. Like, there's a reason for that, right? Like, it's not. It's not that, you know, so, so like to me actually being willing to bet, you know, to bet more, even if they're junior and even if they're learning, but like allow these people the same development and learning that I myself had had, because I was a CEO as at a young [00:43:00] age.
Right. So very critical. I think the other thing that I probably think it's a lot is just like, like, you know, Just stay very focused and close to product development and the actual. Like today we spent, I spent so much more teams, like even today, my work week. If I look at it today, I really enjoyed when, you know, Nvidia was talking about, you know, 60 director reports.
I don't have 60 director reports or whatever, but I do have four days out of five spent very deeply with specific teams that plan on doing specific things, interacting with them, working with them. I feel like I'm a team member. Uh, that's what I want them to feel. You know, sometimes they do, sometimes they don't, but like.
I'm trying to engagement and we're reviewing exactly how we're doing the product, how the code looks, I mean, the amount of code I've been reviewing, like we're into the details and we're discussing, you know, how does this execute a reality and people often feel that like, how am I going to scale if I do that?
You will scale better [00:44:00] than ever. If you nail something with a team and really understand how to do things together, and then you move on to the next team, if you do that on a, you know, over and over again, you'll have a fantastic organization that can execute amazing things, but you need to be close and you need to help these teams succeed because there are so many blockers, so many things in the organization, Oh, I'm dependent on that team and I didn't get an answer.
And I'm not sure, but because they said this and they said that, like just helping them Resolve these things. These teams want to be successful. These people want to be successful, but many times they're, they're stuck in a larger organizations in inabilities to take decisions or having senior leaders who don't understand the product and the nitty gritty, you know, importance of the nitty gritty.
This is enough to be able to advise their teams and support their teams on what's really important. I think those things was, was that more a
Logan: no, that's super helpful.
Logan: I guess I guess one question on that is, um, as you think about the tension that exists, there's sort of the there's a [00:45:00] spectrum between autonomy and empowerment and centralization and standardization, right? And they sort of live at extremes. And, you know, If you go all the way to centralization and standardization, you're not empowering people to make their own decisions, but you get some shared frameworks and design consistency.
And a here's how we do things. If you go on the other side, you're empowering people to be nimble and moving quickly, but you could end up with. 50 different businesses or or little autonomous units operating within an organization, and there's no cultural consistency. There's no design consistency, you know, but maybe this is on G.
C. P. That's on a W. S. This is written in Java. That's written. How do you think about the balance of empowerment with? Uh, consistency or centralization and the tension that exists within an organization.
Sebastian: You know, it's a very good question. And actually in 15, the first [00:46:00] thing that we concluded after feeling that we had failed was that we need to change like, okay, we now have this big hairy goal of becoming this digital financial assistant. If we're lucky it's a hundred billion or even bigger kind of opportunity ahead of ourselves.
So. What's going to be different this time around. And then the only difference, if we're lucky and the vision is right, then it has to be that our execution is different so that we actually deliver on this and we become that ad in the Stripe success. And so then it was, what do we do differently? And the first thing we did was to change the operating model.
We had a very typical functional. Set up with like marketing product, engineering, et cetera, et cetera. We moved into this autonomous small teams that we called startups. We decided everyone in the company would be organized with eight people, the two pizza slice team, Amazon influenced. They were all going to act as startups.
They were all going to write a poster, a press release of what they're going to accomplish in a few years. And we, we poor, I think a little bit, I feel now sad because a [00:47:00] lot of these teams like made so much effort in these amazing press releases. And today I realized that maybe are of some limited value at that point.
Now we were crafting them to death. All of us together. We're just going to have a perfect press release and what this product is going to, or this team is going to achieve in a few years. There were some things of that were great, but the downside of that was we created this. 500 teams that were rowing in totally different directions to your point, applying different standards, working in different patches.
So it was, it was a great uplift in productivity already. Then in my opinion, we managed to get much more done than the kind of traditional functional organization. Um, and the agility and I, I'm very influenced by the agile and agile is partially coming from the Toyota way that in itself is coming from, uh, the Americans who were preparing for the war.
Uh, World War II and stuff like that. So these, these, you know, these methodologies have been around for a long bit of time, but the point is that like they were part of it, but to your point, there's a downside to it, uh, that there is something about standardization and doing things in a consistent, coherent [00:48:00] fashion in the organization.
I think about it today a little bit more also that like. You know, if you go to, my kids go to Taekwondo class, right? When they come in in Taekwondo class and they have white belt, the first thing they do is not start to discuss if you should hit like that or stand like this or whatever, you're kind of expecting your coach to come and tell you like, move like this.
No, no, not like that. Move like this. No, no, no. Move like that. And then maybe if you. showcase that by hard practice and learning, you know, swipe off, swipe on, right? Like care of the kid. If you, if you at some point of time reach a level where you're black belt and so forth, maybe you will suggest the new movement.
Maybe you'll create a move in Taekwondo nobody had done before. Maybe you'll do something right. But it has to build on the amazing work And, you know, you have to work, you have to build on top of the giants that come ahead of you, right? So like today with the teams, so like, it's awesome that, you know, we have this amazing passion, NG people coming in and wanting to do [00:49:00] things new, but like, let's make sure that we actually build on what we have done.
Like, let's find a balance between that. And there is, Logan, what you're describing is to still today, one of my biggest. Challenges when I go in and I speak to teams and I'm like, Hmm, did I, like, am I pushing them too much on how to do things right now? And am I like stopping their own creativity and their own independent thinking, or, you know, Or the opposite, am I getting them to lose?
Like, and I think it's like, to me, almost like it should be a consistent evaluation of a leader. It's there, there is a, um, a nice leadership program in Sweden called, um, situational leadership. But it basically speaks to the fact that like each situation is different. So you would apply different methodologies depending on, you know, the situation.
And if I assess. Maybe this person right now needs clarity and I just need to, you know, make sure to develop their skills, but maybe right now what they need is to go and, you know, and do something on their own and learn something and make some of their [00:50:00] own mistakes. And I think you, and then you have to obviously weigh that versus how important is this for the company?
Is it okay if they fail? You know, or is this like a mission critical thing that I need to be a little bit like, I think it's more of something dynamic where you, you have to apply it slightly differently from a situation to situation basis. And I think the best leaders, the best managers I see at Klona are doing that.
They're, they're very thoughtful about like, maybe now like this may push a little bit more and, you know, move back, let them, you know,
Logan: You referenced Toyota there and I, I've heard you, uh, espouse or, or, or celebrate Toyota's culture and, or some of the things that they've done from a process standpoint, I guess. What, um, why, why do you take inspiration from them? What stood out about the way that they've operated historically that you've maybe tried to bring in to clarinist culture?
Sebastian: I mean, as you know, you get, I get a lot of management books pushed my way. And then you try to read some and some, you're just like, Oh, I, you know, like a, um, but, uh, and then I just, at some point of time, I was like, I'm stopping with this [00:51:00] in my life. I'm only going to read, read like Kafka and Dostoevsky from now on.
I'm not going to do this anymore. And then you start reading, but the problem is then you, as a, as a CEO, you start reading Dostoevsky and you're like, there's management ideas in here. Like, you know, there's like things to do, but anyways, um, What I liked about Toyota, I liked when I read the book, but it was not close to what it meant when we finally, after many years talking about it, we booked A session to go to the factory in the UK.
We went to the factory, we'd brought our 50 topic managers and, um, we brought them to the Toyota factory outside. I can't remember somewhere North of London. And, um, we got there and they walked us around on the factory floor and they explained to us, In practice, how does it work in the factory? And they showed how they did the Gemba and the Kaizen and the, you know, all the different methodologies that they have developed, and you just look at that and you're like, God, this is freaking impressive, [00:52:00] you know, and I.
I think to me, like, you know, I mean, obviously Elon with his management technology has also been able to establish himself in that industry. And he has shown that even the Toyota way has its flaws because there's some other benefits to the way he does things, but there's also downsides to how he does things, right?
So like, there are always, there's many ways to be successful, but the point is that like, It just inspired me. And one of the things I really loved, which I think was really cool, and I know it's going to sound a little bit like maybe Vogue or whatever, I actually think it's genuinely true from the heart, from my heart is that Toyota has this fantastic capability of bringing in people that don't have academical backgrounds that aren't, you know, trained at amazing universities and actually encourage and involve them into a continuous improvement of how to build and manufacture trucks.
In a way that, or in cars that is simply, you know, um, that just improves. And, you know, [00:53:00] Toyota as a manufacturer has beaten the profitability and growth of basically virtually any other car manufacturer in the world for decades, right? And it was quite inspiring to see these people really being part of that.
And I, I just. I found it very, very, very interesting. I really recommend it for people to book one of those to fund. Nice thing is they give away the money from that to a charity as well. So you booked that and you get to walk around the factory and really reflect on this. And the one thing that I really loved about that is the Gemba walk, right?
So the Gemba walk is the fact that the senior manager has to walk the factory floor, and I found that very difficult to do in a digital company until. We started being a little bit more disciplined talking about your standardization today within Klana. We're a little bit more tougher on the expectation that every team in Klana has a Slack channel and that that Slack channel is actually the one that is public and that is.
Genuinely used for the day to day work conversations and so forth. And the [00:54:00] amazing thing about that, it allows me to do virtual Gemba walks. I can walk around, I can read the Slack channels and I can see directly like, okay, here's a team struggling with something and I can jump in and support them and, you know, resolve a Creel matter.
Things that will not come up in meetings because people may be, you know, feel. You know, shy to ask for help or they don't feel that it's a matter for the CEO or whatever. And here these things come up and I can come in and say, like, Hey, you should talk to that team and like, you know, you sort it out or here's an idea.
This is how we solved it. And it's such a nice to me. That's the same as I see the coach of my kids on Taekwondo. He's walking around and saying, like, you can hit like this instead. And then if you do that, you get a different outcome. And, you know, I. That's an amazing type of leadership. That's the way I would like it to work.
Um, and I don't, you know, you know, obviously sometimes people can feel afraid of that. Oh my God, the CEO wrote something in our Slack channel, whatever. I get it, but it still must be the way that we [00:55:00] do, right. We support each other and we're like engaging in people's work. I think it's amazing.
Logan: One of the interesting things I heard you, you say is, um, just, it was something to the extent of like leaning into regulation and you, you have a bank license now. And that, I think the point you said was doing hard things is the way that businesses create capital. Value, which, which I hadn't heard articulated in that way.
And in the U S we have a lot of people doing these, um, uh, what do they call the, the bank lending licenses or maybe cut corners in pursuit of the end customer, and then maybe they'll go back and do some of the regulation or some of the harder things. Um, it seems like you guys have leaned into doing the hard stuff.
Duff from a regulatory standpoint, can you speak to that? Is that a philosophical thing? Uh, is that just happenstance of what you needed to do for your business?
Sebastian: Yeah, I [00:56:00] think, look, um, well, first I think I stole it from Martin Lawrence on the co founder of Spotify. That's less known than Daniel, but I think he said at some point in time that, and he probably stole it from somebody else. It's always with these things, but still, he said at some point in time that like, you know, the value of a business is the sum of all the, you know, tough problems you solve or something like that.
And I think that like, it's pretty. You know, it comes back to that internal momentum as well. Like, I mean, the P and L is something, you know, the, uh, investor perception is something, but still you have to go around and look around and ask yourself, like, are we creating true value? Is it really working?
Right. Like I think the, and to me, you know, people were always warning us about like, Oh my God, it's going to be difficult to launch in Germany. It's going to be, oh my God, it's going to be difficult to launch in the U S oh my God, it's going to be like, and at some point, I mean, like, yeah, you know, it's probably true.
It's not going to be easy, but like, again, if you don't do it right, you're not going to create real value. And the same goes for the product and regulation and so forth, I think is, I mean, it's just a long [00:57:00] rule book of things that you need to do. And if you allow it to be this, you know, scary big thing, you're just not going to learn anything, but if you embrace it and start learning it and understanding it and what it is and how it can be used.
I feel, for example, that the funny thing about bank regulation, right. Is that when you really read it. And you get into the nitty gritty details. Most of it makes tons of sense. Like some of it is like, let's take an example. Um, banking regulation requires us to do new product approval process, which means that when we launch a new product, we need to actually have some kind of assessment of whether this is a good idea or whether we're going to blow the things up and like, that's a pretty good thing to do.
And a lot of tech companies may at the beginning, like just ignore it and run, but then eventually they're going to blow something up. And then you're going to say, Hey, you know what? We put some, a little bit of like order and just like a few, like, and if we commit code, maybe we have at least a four I principle before we put it into production, you know, like these things are going to happen.
So like, it's not actually that what unfortunately happens though, [00:58:00] is a lot of these things. The language is different. I more and more, the longer I work, the more I see that like lawyers are thinking and doing things in a similar way, but the engineers are doing it. And then the marketeers are doing it.
They all call it slightly different things. They use different terminology. And as a consequence, companies put layers of layers of administrative. Process on top of each other that really is there to basically do very similar things, right? A new product approval process, not that different from committing code and having code review.
It is very, very similar, but because it's not described with the same language, people believe it's something new. And then you create additional layers and those layers of administration. The problem with them is they instead increase the risk of errors and increased silo thinking, which in itself creates more risks, right?
So it's the critical thing is to recognize that these things are the same and [00:59:00] try to harmonize and fight. You know, and, and, and then like when we talk to regulators, we sometimes have a translation box where we kind of translate it into terminology that they would recognize because we internally may use slightly different because we want more of the different competences that are, you know, working at Klana to recognize the terminology and then sometimes we need to like, you know, Apply it in a more banking ish language, right.
In order to feel regulators feel more comfortable recognizing it, but it is the same stuff. Um, so yeah, so I think that like, to me solving these problems, solving the difficult stuff is like, and it's also more, I think partially that's why I love being in banking and FinTech is that like, it's freaking difficult.
There's so much complexity in this. You have to, the regulators and the customers, and you know, it's not like, I'm not just doing some gaming apps so that if it's like. If it breaks down and stops working, you know, people will be a bit sad and you'll be a little bit angry and your investors will complain your revenue dropped.
But like if we drop like payments doesn't work, like I'll have, you know, the CEOs of Nike and [01:00:00] Macy's calling me and what the hell is going on? Like, you know, like, and there will be like pretty big disruptive things going on. So like, and that's fun. It's difficult, right? It's very, very hard. It makes it more interesting.
Logan: I think, and I might be a little wrong on the years here, but, uh, it seems like for maybe 90 percent of Klarna's history, you guys have been profitable plus or minus in the money you raised. Uh, I know there's, there's some funky stories in the early days of, you're not technical, your co founders weren't technical, you had to hire engineers to come in, and then ultimately there's a lot of secondary buying.
Buying folks out, but I sort of did the rough math, and I think it was about 90 percent of the, uh, what are you? 19 years now? How long have you been at
Sebastian: Yeah. 20 years next year.
Logan: Yeah, so, so, so I think the vast majority of the time you've been profitable. Uh, you swung the pendulum at one point, very unprofitable, uh, 150 million, uh, in burn a month, um, which I realize on a dilution basis based on your [01:01:00] valuation, I realized it was nominal.
It was 2 percent a year. Like I totally get that in moving in that direction. Did it? Did it feel unnatural to the DNA that you had built for that amount of time? Or was it, Hey, we're just going in the U. S. and it takes, it's going to, we need to be aggressive to do this. I guess shifting from one side of the pendulum so far to the other.
Can you just take me through like what that actually feels like as a business when you've been so frugal historically and then all of a sudden so ambitious, if you will, uh, in terms of capital consumption?
Sebastian: I do think. Yeah. It's a, it's a tough question. And, um, I struggle a little bit because I feel some degree that's like, um, I wonder sometimes if, if it helps me to be that transparent, uh, but I think that like, You know, but I, at that point, I can't stop. That's my problem. I'm just like very honest person, but, but like the, the, the, the problem is that [01:02:00] I think the truth is right.
Is that when, well, we had identified from our perspective was that Klana got a hundred million dollar valuation, then a billion in 2010 when we, and then we went down the Klana checkout thing, which delivered, but didn't deliver growth at the pace we were hoping to. In 15, we got a 2 billion valuation, which was a hundred percent increase, but not necessarily what GA and DST who had come in at the billion were hoping for, and as a consequence,
Logan: And the Sephoria realm was, was 08, 09?
Sebastian: Yeah. So Sequoia came in at a hundred million dollars in 09.
Logan: 09 then a billion later, uh, one year later five years later.
Sebastian: later, just a year later. And then five years later, it was just 2 billion, right? Like, and so, and I think that, and Sequoia bought a 25 percent stake back in 09, right? Uh, of secondaries mostly because over these years we were always profitable.
So there wasn't much of primary being raised. Most of these [01:03:00] investments were really secondaries that people were buying. Trading in like GA and DST, there was a little bit of primary was limited, which is also why, you know, Sequoia has been very little diluted or yes, because there was never a big round until we hit very different valuations.
And so, um, then GADST won it out. I think partially maybe because they started, you know, I think maybe since GA then invested in Adyen, maybe they were listening a little bit too much in the board meetings, me complaining about Adyen moving faster than Klauton. I don't know. I don't know. Maybe that was the reason.
I have no clue. But anyways, um, they ended up basically selling Klauton and buying Adyen and stuff. But, um, and then DST wanted out. Niklas, my co founder had quit and he wanted to give everything to charity. So, so actually 25 percent of the cap table was for sale. And I was just like, Jesus, you know, it's going to be difficult to get the company's valuation to grow.
I mean, some people wanted us to IPO back then me and Michael of Sequoia felt there was much too early and wasn't the right time.
Logan: This is 15.
Sebastian: Yeah, I was 15. And so [01:04:00] finally we got two new shareholders come in and split that 25 percent on a 12 and a half each, and they invested at a 2 billion valuation. And that was good.
Cause we got some new people that wanted to believe in the company. Um, I mean, the funny thing though, is that the private equity fund that invested per Mira, they were kind of still hoping that we were going to do client checkout and kind of go and compete with Addy and Stripe. So it was a little bit of misalignment about the focus and, You know, whatever.
But like, we, we managed to, you know, agree on that eventually. And they were also, you know, so, so that kind of changed. I think though, at this point of time, we started having some success, uh, which actually, you know, I don't want to credit to myself, which is funny, but in the UK or our UK team at that point of time, they said, look, this client checkout thing.
Like it's not actually that interesting to us. This buy now pay later thing that you've been doing in Sweden for a long period of time, like we think that would make sense in the UK. And I was like, no, it's never going to work. People have credit cards, forget about it. [01:05:00] Like, so I actually told him not to do it and talking about autonomy, they went and did it anyway, and then a year later I was like, what are you guys doing?
You promised you would not do this. Yeah, but you know, like I was like, no, you have to stop. It doesn't make sense. And they still did it. And then they signed ASOS and then it just took off, right? Like boom. And so in 17, we're like, wow, you know, this is really working. And then we started hearing about this company down in Australia, having the same success.
So now we're in the situation where also like the perception of client is starting to change this, you know, because Afterpay was listed, um, it became a phenomenon, buy now, pay later, and. You know, after they had made a lot of private retail investors in Australia, very wealthy. So that started spreading a lot of the rumors of this like growing new thing.
And, um, we just realized like, wow, you know, this is going to be a point in time where. You should not be careful. Like this is the time to double down, invest, you know? And so we started seeing that articulate in our [01:06:00] valuation. So I've growing like two, three and a half, 5 billion. But, and then basically Michael Morris calls me one day and says, look, Sebastian, like we've talked about the U S now for 10 years, like, but if you don't do it now, I think you're never going to do it.
And he was so right. It was like, he's right. So we started looking at the U S market. At that point in time, we had been around, but we haven't really had any meaningful success. And, um, and you know, and then, you know, Nick out of off the pay comes in sounds urban outfitters and starts creating this massive momentum around his business.
And I'm just like, no, no, you know, this is unfair. It's a funny conversation. I, I think I've tell them one place something, but it was funny. There's an amazing guy that I think is really great. Uh, my mood who runs a business called boohoo. And I was sitting and complaining in his office. I was like, and he's a very Frank guy.
And I was like, Oh, you know, it feels like the Olympics, you know, it's my, it's the third Olympics for me. I'm the season guy. And now I'm like, finally my Olympics to win the gold medal. And then [01:07:00] this young Nick comes out of nowhere and like, you know, is about to win the gold medal. It's just like, it's so unfair.
And then Mahmood just looks at me and like, shut up. This is the best thing that ever happened to you. You know, competition is just going to make you stronger. Right. And that's obviously very true. I mean, the years competing with Off The Pain, those early 19 and 20, they were amazing. We were both like so focused.
I'm just winning in the U S market, but it did lead us to conclude it. Like we need to raise money. So we started raising more money and we went into losses, right. Or like red numbers as a consequence, which also to us was like, okay, this is a U S market is massive. And I think it's actually true that like people don't fully understand that in Europe, the concept of kind of creating a loss making business in markets that are. Maximum 50, 60 million people. It does not make sense to the same degree it does in the U S where you have 20, 220 million people. It is a more viable business case to burn through cash, to reach scale and then win in the U [01:08:00] S. The European markets are smaller and it's just doesn't lend itself to the same degree to that idea.
And so in our case, however, we realized, okay, when I was going into the U S we're going to have to, you know, invest much more. And so we started investing more in our valuation because also investors went from like, Oh, there's this European buy now pay later. We maybe give them 5 billion to like Egon and Silverlake coming in and saying, you know what, like, you know, this could actually be the winner in this space and other investors as well.
So like, we'll give it a 10 billion valuation. And then, you know, COVID happens and digitization goes nuts and everyone's like. You know, blah, blah. And suddenly the valuation is 30 billion. And you're seeing this heavy multiple expansion, right? The multiples, because the business is not growing from 10 to 30, like, you know, three X in a year, like, I'm sorry, as much as we were doing well, we weren't doing that well.
And so you, you start realizing that it's getting ahead of yourself, but the problem is you're in this echo chamber, every business around you, everyone's seeing growth. I mean, [01:09:00] we had like 50, 60 percent growth in 2021 or something like that due to COVID, right? So you're seeing this, you're like, maybe there's a shift.
You know, everyone is saying the same things around you. So you get caught into it to some degree. And I feel a little bit like, you know, looking back, I obviously can be self critical, like I get caught into it a little bit too much, right? Like I, I wish that I was a little bit more careful going back now when I look at it, I wish, and that's why I said about transparency, maybe I shouldn't say this, but like I do, I'm not happy about that.
I feel a little bit like I got swept up. Swooped up too much in that. But then again, I wasn't alone. There was a lot of other people, right? Everyone got swooped up in it. A lot of people got swooped up in it. And, um, and I think the good thing is we really doubled down and we spent a lot of money on building our success, which today us is our largest markets.
It's been profitable for five quarters, you know. It's a massive success for us as a company. Uh, and that would not have happened would we not have doubled down with that said, did we need to hire so many people? Right? Like, was that necessary? Like, did it make [01:10:00] sense? Could we have been a bit thoughtful?
Yeah, of course. Like looking back at it, I regret some of that. Um, and I wish that we would have been a bit more thoughtful about it, but, um, you know, it's unfortunately like everyone does mistakes, right? Like, so I think that like there's, there's a mix and I do think that it changed the focus Of the company, uh, where, you know, we weren't as thoughtful.
We weren't as bootstrapped. We became a little bit excessive on some places and it wasn't good for the culture either when there was like money everywhere, right? Cheap money everywhere. But I think it was true for a lot of other businesses as well.
Logan: One of the things, um, that you were unique in was. You reset valuations in the private markets, which I don't know, I could go look at the numbers, but like, if I looked at a firm or PayPal or whatever, like, I'm sure it was directionally proportional with what those businesses did, but you, you, you did it in the private markets, which makes it, uh, A little more anomalous.
I think most [01:11:00] businesses, um, uh, have been reticent to reset valuations and, and deal with all that. I guess, uh, as, as you, um, internalized that with your employee base and sort of set expectations and, uh, I know there were some layoffs associated with it or not. Do you, do you wish you had done it in the public markets?
Uh, because Hey, you know, that's normal for valuations to swing like this. And it's a little more anomalous to do it in the private markets. Or were you glad that you could do it with a little bit more, um, I don't know, discretion and less quarterly, uh, uh, increments in the way that probably a firm had to deal with it.
Sebastian: I think that the few things right, like I, since I've never been public, it's hard to compare, but one thing, like I remember at the point of time when COVID first came and there was so much uncertainty, what it was going to mean. One of my investors called and said, you have to throw that growth strategy out of the door.
You have to [01:12:00] start, you know, um, Shutting down. And you may remember at the very early days of COVID, a lot of businesses started announcing that they were like shutting things down or closing or, and et cetera, and then the digital businesses realized like, Oh, wow. The effect is the opposite. And I said at that point in time to the investors, I said, look, I'm a captain of a fairly big ship now.
Like I can't turn around like that, right? Like I have to wait a little bit more, get a little bit more information. When we were fundraising and we needed at some point in time to raise money. And, you know, the latest valuation was 50, you know, 45 billion or whatever, 50 billion. It's actually not entirely true because, uh, SoftBank actually got a blended deal.
So the actual investment was, I think it was valuation was 33 or something, but media reported it as 45. Um, but, but there were transactions happening even at 50 in the stock. Like when that shifted and to your point, PayPal and everyone drops the same amount to me, it was just like, okay, one, we're going to have to raise money.
But it was also clear that like, [01:13:00] we're going to have to change. And take this. And I feel that like, to me, at least after being a CEO for so many years, it's like, once you come concluded, this is my now current belief that the markets are changing and it's going to require a different way of operating going forward.
Then you just want to act as fast as you can and just like bite the bullet. The bullet and just do it as much as it's tough empathetically speaking to your point about the implications. And I feel that like, you know, the odd thing was that like the whole month, the whole world hadn't necessarily. Woken up yet to the fact that things were changing to that degree, especially not the private market.
And then we got a lot of publicity for like, Oh, we're, you know, are we in trouble because we're. You know, laying off and stuff like that. Right. And then only a few months later, other companies were doing the exact same thing and nobody really cared anymore because it became norm. Um, and there was even this like silly thing where like, you know, some of our MPS had created a Google [01:14:00] sheet where they advertised and said, everyone can put themselves on this list.
And then like, um, you know, people start doing that. And I wanted to help out and promote because they wanted to promote that list is like, these are people that are now available for jobs.
Logan: This is the layoff list.
Sebastian: Yeah, exactly. And I put it out on LinkedIn and then the press was, you know, hammering me for why I'm like exposing people being laid off.
And it was insensitive. Whether it's. Things like that happening. So we got a lot of bad press and I'm, it was also interesting watching some of the big companies afterwards. Like if we did a recorded call, because we had to inform people across like 20 time zones of this and, and operationally speaking, we, we kind of made it recorded and we got a lot of hammering for that.
So then everyone started doing live calls instead afterwards. Like this is like, you see the other companies were like learning from our mistakes, which kind of makes sense. And they're like, you know, but it was just a very hectic time, but we decided We wanted to do that before we raised money. And I remember also having some discussions with the board, like, should [01:15:00] you really do this?
You wait this on you or you close the funding round. And I said, look, look, I don't want to wait. I want to get this done. Um, it's the fair thing to just get it done. And to some degree, I also felt like that. It was going to be better for the employees because the, my suspicion was that the, um, employment market was going to worsen.
And if these people got out in the market earlier, they were more likely to find other things. I also felt like from that perspective was actually better. Um, so anyways, so those were kind of decisions, not an easy decision to make. And I felt obviously embarrassed about the fact that we may have, we should have, you know, been smarter about it and stopped recruiting earlier.
And there were tons of that you learned from it. But I do think You know, it was, it was a necessary decision. And then would it have been easier as a public company? Like maybe the valuation drop to your point would have been less debated because now it became big news. And we were like, hello, but PayPal dropped 90 percent and affirmed like nobody cared.
Right. So there was a claw now, 90 percent drop. [01:16:00] Like, and, but I also feel to some degree that I had the benefit of not being in the public market because it was going to take us 12 months to set the business. Right. And after that things quieted down and nobody was looking at us because we're not public.
And it gave me, you know, the mandate to continue. You know, I could have been challenged in my position, uh, at that point in time as a CEO. Right. Um, if I was in the public market, maybe more so than in the private, but here I had long term, you know, board members and investors who allowed me the mandate to continue and show that not only did we know how to grow in the U S and make it successful, but we also could turn it around back to profitability.
And I feel now as people look at that, they say like, wow, that's actually pretty cool. You, you know, you took it from minus 150 million to a plus 12 months later. Um, so, so I think to some degree, maybe it was helpful. Cool. More after that to be private, actually, I'm not sure to what degree you would have been given that ability in a public company, unless you have like [01:17:00] voting stock and you know, whatever.
Logan: I guess to that point there, um, and I guess I don't need you to comment on any specifics around this, but, uh, I have two questions related
Sebastian: I wonder what's coming now, Lauren.
Logan: I think, you know, what's coming. Uh, so I'm curious what you've learned. One would be the media point. And I, I let's, let's put a pin in that. I want to come back to your coverage and you, I mean, you've, you've taken your lumps in the public markets or from, from the media and all that.
And I, I'd be curious. Um, as whenever I get in any media thing, there's always the, the reported truth, you know, the, the, like close to the truth and then the actual truth. But I'm sure you've lived to different manifestations, but, um, I guess, uh, how has, uh, what, what have you learned about, uh, working with venture capitalists in general, and there's been something in the news over the course of the last couple of months, which I don't need you to, uh, comment necessarily on the [01:18:00] specific topic.
Players and dynamics and all of that stuff involved. But, um, you've worked with a bunch of different venture firms, uh, with a lot of different interests at different price points when they got in different outcomes that they're underwriting to different generational transitions. Maybe they're going through, uh, is there anything that you've.
learned or that you would take away your pass on to the next founder about picking your investors working with investors all of that, that that might be salient.
Sebastian: I do think that like, you know, despite what was publicized, I would still say that to me, Sequoia. stands out, like the quality of people, um, and what they've been doing. I, I'm like, you know, uh, I've seen multiple sides of Sequoia, but I still got to say, I'm a big fan. I'm just sorry, but I'm always going to be a fan.
Like, I just
Logan: I'll edit this out. don't allow [01:19:00] nice things said about Sequoia on this podcast. So
I'll cut
this part. Yeah.
Sebastian: Yeah. Yeah, that's
Logan: do AI dubbing over this. Yeah, no. Yeah, they're obviously they're obviously a great firm.
But that's
that's great to hear. I mean, that's honestly great
to hear I
know you've, you've dealt with different elements of
it
Sebastian: it was funny because the funny thing is that like after that whole, what I sometimes laughingly refer to as my succession episode drama,
Logan: Are you Mattson in this case? I don't know
Sebastian: Hey, I don't know. I don't know.
Logan: you kind of, kind of look like I've actually, so people have told me I've looked at whatever that actor's name is. I I've been told I kind of look like him. You maybe have a little
bit of a Lucas Mattson
thing going on.
Sebastian: No, but I actually happened to be visiting with Sam Altman at OpenAI just like a few days after that whole thing went on and so we
Logan: The only person with a more complicated board dynamic in the last nine months, probably. Yeah.
Sebastian: exactly. And I felt that like, you know, my, my problem dwarfed when he was, I was like, I had to ask him like, how [01:20:00] did your phone look when this was going on? And he was like, I had some issues with my phone that not even Apple understood that you can have these many messages
coming you
Logan: I've done it. I've done an episode with him and he told me. He told me that like, it actually broke the number of messages came through. He like broke I message for something, which is, yeah. But at least you didn't have that. Right.
Sebastian: no, I didn't have the same amount, even though there was a good amount of public scrutiny as well. Um, no, but I think, look, but I obviously, one thing, no, the one thing to seriously say on that is that I think still that it's a lot about the person and not the firm, you will have different people. And it's all about that personal report.
If you can find a person that you really trust and believe in, it, it, it makes a big difference. Uh, when it comes to the VC. So I, I think a little bit less about the brand as much as I think about the individual that I deal with. And I've had fantastic people that I dealt with, with firms that are less well known and I have people that I've been less impressed by coming from very well known brands.
So I think it, it, it is still very [01:21:00] much an individual, you know, and then some firms are simply very good at attracting. More people of quality and being more tough in scrutinizing and making sure that it works right. I think I do feel that You know what I liked, uh, in Sequoia in particular, and Michael was just also very long term approach.
I, I mean, I work with a man for 15 years now or something, and he is one of the most like smartest, really, you know, he's about making money for sure. There's no doubt about it, but like, that's what he wants to do. That's what he likes to do, but he's extremely long term and he recognizes the importance. Of building a reputation about long term visibility and being able to come back.
And that's like, if you do something like really karma in the sense, right? Like if you do something good here, we'll come back and stuff like that. He's very thoughtful about that in a way that I am very impressed by. And he also had a very long term [01:22:00] view on like, he doesn't, he never stressed us to IPO.
He never like, you know, did these things and you can, you can, you know, you can challenge him on that. But I think in general, my, my view sympathizes with him. I think that like, You know, we, um, I think there were a lot of times when I saw like, and this was also why it actually changed a little bit, my view on this voting stock idea, because I was actually against all of that.
I always believed that like, you know, one vote, one stock and all the things. And because I felt that like, you know, rational markets will do their work and stuff like that. But I ended up in situations where people, some investors, I felt. You know, they were logically arguing for something that makes sense, but I could sense that behind it were things like our fund is running out in two years and we want to make sure that like, you know, there were other things that also played into their decision making and I think the integrity and ability as a VC or representative VCs to some, to some degree, push back on [01:23:00] that a little bit and look at like, what makes sense for this company.
What are the prerequisites is, is really separates. I think another example of that I had is a friend of mine runs a business called true color here in Stockholm, which has been backed by a number of, you know, Uh, great investors. And, uh, at some point of time, one of them came, you know, some of these investors came and said the best engineers in the world are in the valley.
Right. Like, and, and then they basically said, if we're, if you don't, if you don't move your engineering team to the valley, you know, like you're gonna, you know, you're not going to be successful as a business. You have to do it. And we're not going to invest if you don't do it. And so they pushed him and the guy, you know, created an office in the valley, but like, try to recruit the best engineers to this, like, you know, You know, 20 people office of some Swedish Indian company that nobody has heard of in the Valley.
Like it's going to be very hard to compete on talent and ended up just being them overpaying for people that weren't really as good as the people they had in other countries. And it just, it was just a lost year, right?
Sebastian: Like based on some preconcepted [01:24:00] idea that this made sense because that was what people were saying back in those days.
I think that like, so, you know, I think again, it comes back to evaluating the individual. Do I like this person? Do I think that they're thinking themselves a little bit contrarian? Do I have a, you know, relationship with this person? Sometimes I feel like I can trust. I feel that that plays to me more today.
You know, how do I feel about this person?
Logan: Yeah.
Logan: There there's this interesting thing that I guess I would encourage all founders to think about is. There's the stability of the institution, right? And if the institution isn't stable and they can't raise money, then you're going to see a lot of perverse incentives that, that play out within the boardroom.
And Hey, if I need this win, uh, as, as your VC firm, then you're going to see a lot of perverse behaviors and knobs that are going to get twisted. And then there's the, uh, the stability of the individual within the firm, right? And it's sort of like, Hey, has that person had a win before? How easy would it be for them to get [01:25:00] fired?
How comfortable are they within their standing within a partnership? And by both of those vectors, Sequoia. And Michael Moritz, uh, are, are, were in very good standing. And then there's all the individual characteristics associated with the person. And that's the intellect and the amount of time they have to provide to you.
And, uh, You know, how long term they're going to be oriented or the stylistic approaches and all of that. But I sort of think of all those as like the foundational pillars of it. And even if you have a really stable firm, but an insecure individual within that partnership. You're going to get some perverse incentives for sure.
Like, Hey, I need a win. Otherwise I'm going to get fired or whatever it is. And then you're as a founder, feeling a lot of knobs being twisted and you're not sure where they're, they're coming from. And so it is your point, like you need the firm to be established and then you need the individual to be established and then you need to like them and get along with them and all [01:26:00] that stuff, because otherwise you could have so many different manifestations of.
Perverse incentives or things that you're not really sure where they're coming from.
Sebastian: For sure. And I think partially when I look at like how some of these firms are operating compared to how myself I'm operating, I feel that like there is a little bit of too much, like once they hired a young, you know, super smart person out of Stanford or whatever it is, right? Like. And they put them in that role.
There's so much autonomy given to these individuals. And then to your point, like if you're lucky and that person is good, then, uh, or if isn't too stressed or whatever about their job or whatever, right? Because it could combination, then it may work really well. But in situations where to your point, there's like, you know, some bad incentives or something's going on.
It may become problematic.
Sebastian: And I feel that one of the things that I would apply more as a VC, if nothing else is to like, I do what I call like random sample testing, right? Like, which is to me, I [01:27:00] occasionally participate in customer service calls. I occasionally listen in the meetings. I occasionally walk around and I feel sometimes that the leaders of these VCs don't do that to that extent that like, Hey, sit down to one of your young, amazing up and coming, but also listen in, like, how did they sound in the board meeting?
How did they act? How did they advise? Like, Get a little bit hands dirty side by side in order to also coach them and educate them. And then you will also caught if there is some, you know, bad behavior going on, or if they're being a little bit too arrogant because they feel like, Oh, I'm working for this fancy firm.
So I don't need to be that nice and humble as maybe the first generation of leaders were, or, you know, whatever it's going on, right? You'll catch some of that, those behaviors. So it's a little bit dangerous to just sit at the top and allow the individuals in your organization to feed the full. You know, story of what's going on and happening in every situation.
Talk to the founders. Like, I mean, even I want to respect obviously the reporting lines. If you have a board member, but like, why it's like, you'll be surprised how seldom this, the [01:28:00] CEO of some of these VCs or investors have called me directly to also like, okay, how's it going? Like, you know, I feel like one credit I want to give is to premiere a private equity company that I worked with.
Like I, uh, they were like, Sharing this report where like, they're actually doing more and more of these things where like these conversations also happening, they're listening, like actively asking their CEOs, what could we do to, you know, to make those relationship work better. It's pretty impressive because I feel like sometimes that humbleness gets lost a little bit in the VC community.
Like where it's like, we are the investors and we know this and like, and we sit in a room and we talk about these companies and these founders do those mistakes and whatever, like. That may be the, there may be an accurate description of reality, but there could be also a different perspective, right? And the only way to find out is talk to the customer.
Like, I mean, that's the only way, right? Like I can, I can hear so many stories about what Klana does to his customers internally. And then I can talk to our customers and get a very different story of what the experience looks like and what the real problem is. Right.
Logan: You touched on a little bit of this, but Michael Moritz, Sir Michael Moritz, uh, one of the [01:29:00] iconic venture capitalists over the course of history, right? Uh, certainly the last 25 years, you mentioned, um, long term oriented and smart. Is there anything else that stands out having worked with them for 15, 16 years at this point, uh, that you would say is particularly notable, uh, that, uh, that has benefited you along the way outside of those things?
Sebastian: I gotta say one thing that like, it, it truly blows me away about Michael is that, and I think that's actually to some degree what made him so successful. He just has this, you know, he's just has this amazing, like, I mean, his ability to just cut through the noise and just get to the relevant thing in this like massive thing is just like, I don't know, like I just, I get blown away sometimes, like, it's just crazy to me.
And that's just like, I mean, that's something that is just about [01:30:00] gift and talent, I guess. Like, and he's trained that over the years he's been doing these things and It's pretty, pretty amazing. He just has this capability. And I, that's a little bit why I was referring to that. Like, you know, we've been talking about the U S for a long period of time and at Klarna and we had tried a little bit and we launched something and this and that.
And then he just out of the blue calls me on the phone one day and just like, Sebastian, it's now like, you're like, and he was so right. Like it was exactly a timing. It was like, uh, but I hadn't talked to him about it. I hadn't like, you know, it's just like, I don't know. It's just, it's just funny. I think that was make somebody a legend.
I think it's cool. It is pretty cool. So I think that's like that ability to really, because I think, you know, so much is noise, right? Like the same in media, a lot of these things, like. What is actually working and not working it. I feel that to a large degree that is about business as well. Right? Like not listening to the trends, industry trends and all these things cutting through all of that and finding what is genuinely true here.
What like [01:31:00] genuinely important that will make a difference. And, and I think that that's also what I found, you know, great managers and leaders in the company understand and are good at, and great CEOs and other founders that I talked to seem to have that skillset. And, and then to some degree, I also think some good, really good investors have that ability to like
Logan: Yeah, there's there's some pattern matching along that stuff that like you just see enough reps and you get it. But then there's the intuition side. And I think, I think my job, I think an investor's job is there's There's one to two things that are going to matter a year and, uh, you got to lean in when they matter and make sure that you're trying to give the best counsel you possibly can.
And if you for with a company for 10 years, though, there might be one or two things a year, but there might also only be one or two things that like really. are going to be a determinant of success in really helping the company see around the corner. And it's such [01:32:00] an ethereal thing to describe to a founder, uh, of like, what's your value at?
And it's so easy to be like, oh, we make customer intros and we, you know, we have a recruiting team and we have all that stuff. But at the end of the day, If an investor helps you even 20 percent see around some corner or help you get to a conclusion six months before you otherwise would have, I mean, that could be the determinant of making it or not, you know, billions of dollars of equity value or not.
And it's so squishy, it's hard to describe, but it sounds like Michael's been a real counsel for you in that regard.
Sebastian: fully agree. And then in addition to that, one thing that just reminds me when you said that the other thing that I feel he says sometimes, and I do feel that he does. is that he generally says, look, a lot of people will be able to describe what can go wrong. Like, okay, this is the risk and this and that and so forth.
But like imagining what happens if this actually goes right. What if this really delivers? Like what, how sizable could this be? And I think [01:33:00] to some degree, I think that's one reason he's stuck with Klana because like Klana was this odd European investment that Sequoia made back in 09 and like, I'm sure there was a lot of discussions, like, what are we doing over there, this company, and it's not moving fast enough and this and that and whatever, um, and then over time, but I think, you know, to some degree it's like, okay, but if I think I, my impression is that he thinks more like this, right?
Like. If they actually are successful, if they accomplish this idea of becoming, you know, third party network, the digital financial advisor, you know, really huge, like payments is like a trillion dollar industry, right? Like the market addressable market is insane, right? So if you do really make it, it's important.
And I think if you combine that with a founder and CEO, which I think is important, it's just that like somebody that consistently is willing to recognize their mistakes. Like I go to the board mostly and whine about it. You know, how frustrated I am that we're not moving fast. I'm not a great marketeer.
I don't go there and tell about all the amazing [01:34:00] stuff. I go there and like, Oh my God, I'm so disappointed about this. And sometimes people misunderstand. Like I, I remember Chris, who was the representative Sequoia back in the days who made the investment together with Michael, you know, just after the investment, I send them a text message.
I was like, call me, you know, and he thought that like the business had blown up and, you know, and I was like, just wanting to whine about something I was unhappy with that we weren't moving fast enough, right? Like So I think that like, I think Michael is on degree recognized as like, I mean, the most important thing is that you have somebody that's willing to learn and just like recognize their mistakes and learn from that.
If you're not gonna. You're not going to, as much as people want to push, push around and say, like, I'm so smart and I know all this stuff, like nobody's that smart. But what you can be is you can be extremely self critical and really take to heart when things go wrong and, and try to adjust it and learn from that, that you can do.
And if you do that on a repetitive basis over and over again, you're going to see, in my opinion, slightly better results and outcomes.
Logan: To that end, how have you changed most as a leader since you were, you know, a 23 year old, right? [01:35:00] Uh, is that when you started at Colorado, 23?
Sebastian: Yes.
Logan: In what way do you look back and feel like you've matured the most, changed the most? What would you tell your 23 year old self about leading and managing a company?
Sebastian: Well, I think it's almost funny you ask that because to some degree, I feel that I am closer running it like I did 20 years ago. Um, then, then I did, you know, then I've done over the full 20 years, um, because I get so much bad advice about this is how you're supposed to do it, or that's supposed to do it. And then you don't listen to your internal voice and don't follow your heart. And then you end up doing things and then you can blame that you listen to the advice and not learn from it. Um, well actually today is to some degree, like I've never been as involved with my teams. I work as closely with them.
I'm like, I feel like I'm, you know, I'm basically on the battlefront out there fighting with them. With the teams and, um, I may be a little bit more [01:36:00] relaxed about noise in the market as well, and things going on. I have a little bit more like comforted, like, don't worry, things will sort out and we'll work.
Um, but I feel to some degree that like, to some degree, I feel like I more recognize myself from 20 years ago than maybe I did like 10 years ago when I was trying to be a corporate CEO, when I was trying to, you know, uh, follow the latest industry standards or, you know, do what you're supposed to do and all these things, so.
To some degree, I feel like I feel, you know, and it was actually partially what happened in 15 as well. It was one of my, you know, one of my promises to myself was that, you know, that, uh, back then I said, look, I had had this like co relationship with my co founder. I have sometimes listened to him and let him decide.
And sometimes I haven't listened to myself and sometimes it makes it unclear. And then I said in 15 to myself, like, now I'm just going to go all in. I'm going to try to do what I believe to be right. And just like always make [01:37:00] that the leading thing and, um, and not listen so much to what other people say.
And then, you know, and then I'm sure I may blow it up and whatever, but at least I can look back and said, I did what I thought was the right thing to do. Uh, and, uh, at least it's fully on me, right? Like, and I, ever since that I've been trying to do it that way. And I feel that that has made me better since 15 when, you know, I feel that like between 10 and five, I was quite confused,
Logan: Yeah, it's, it's hard to, uh, I mean, it's one of the most powerful things about being a founder is that confidence that, Hey, it came from nothing. If it goes back to not, I'm going to do my best. And if it goes back to nothing, that's sort of where it came from. And so I'll execute on it. I sort of think about the canonical, like John Sculley versus Steve Jobs thing.
When, when Sculley was trying to shepherd Apple, it was like, Oh, I can't mess this up. Right. Versus jobs is like, well, I don't know it started in my garage and now I'm back here, and if I blow it up uh, so be it. But, it's an interesting point that you can't, [01:38:00] just in leading in general, especially in startup culture, I feel like you can't try to present a version of yourself.
Uh, you sort of need the totality of yourself. And, And some people are going to like it and some people aren't, but you need to lean into all of the, it's certainly keep improving, but you can't try to be the leader that someone else wants you to be because you'll always be playing a part, right?
Being an actor
in that
regard, right? Which I'm sure you felt through that, through that period of time, 10
to 15 or
Sebastian: all, but I would feel it like, I mean, obviously to some degree that is true, I also feel that like. Obviously Steve Jobs cared, like obviously he cared about winning. Yeah. And also that's a, it's a combination, right? Um, and I care, I don't want to mess up, but I also feel that like. You also start recognizing over 20 years that like, I'm not in full control of everything, right?
Like these are going to happen. Like, you know, and so you just have to do, you just have to go. I just [01:39:00] feel, I want to come back from home when I come home from work and I want to feel I did my very best based on my prerequisites. At least I like, I didn't hold back in that regard. Right. And then, you know, things will happen.
Sebastian: Like it's sometimes funny when, you know, uh, one thing that I do that helps me, I laugh about this a bit. Is, um, when, you know, when I was, for example, dropping from 50 to six and a half, I had this, like, you know, interview with some CNBC anchor, something that starts yelling at me, this is a disaster. And like, you know, this is like we work and you know, whatever.
And I was just like, Oh my God, like this is a funny interview. You can actually watch me. We're like, I'm just like, what, what is he saying? Like, um, and then you have these situations with my succession drama here with the board in Q1 and stuff. And one of the things that I do to help me is like when I'm in these situations, I, um, I go into the car and I put on Under Pressure by Queen and I put it on maximum volume and I just listened to that and I was like, [01:40:00] yes, like, you know, like here it
is
It's a great song and you're like, that's exactly how it feels. You get to some degree. To some degree, like, okay, it's super hard. I've, I don't want to play down. Like I've cried. I've been like, very like emotionally drained. I've been stressed out in these situations. It's not like I'm laughing about them.
That's very far from true, but at the same point of time, I can also to some degree enjoy that, like, okay, this is, you know, this is life, it's difficult. It's hard. And I appreciate the fact that I am given a good challenge. You know, if you would be religious, you would talk about God is giving you a challenge, right?
Like, so the point is like, I'm given a challenge and I can only make my best to try to do that, but it's also. It really pushes you. And I, I usually, again, make that soccer comparison that like, if you, if you genuinely, you know, are slapped on as this great Swedish soccer player, but if you, you know, you dream about playing in [01:41:00] the champions league, it's not like the finals of champions league is easy.
You have a crowd yelling, you're the biggest stress hormones ever in your career. This is the game, you know, everything is at stake. Like you watch that with the, you know, sports professionals, like the amount of pressure they're under when they come in these situations. And, but at the same time, it's like, this is what I trained for.
This is what I dreamt to try to solve these difficult. I, I can still also feel in that some of the things that like this situation is now really testing me. You know, and, and again, if you would be religious, we say God is testing, you know, like, you know, this is my ability to show what I'm made of and how I'm going to deal with this and do my very best.
So you also have to feel some, you know, find some solitude in that, like, I think, and then at least that gives you a little bit of help and comfort to deal with the situation.
Logan: when I was a kid, uh, under pressure, I think was my favorite song or one of my favorite songs. And, uh, I learned I'm like 99 percent sure of this, that like David Bowie came out after the [01:42:00] fact and said he didn't remember recording a single lyric of the song. I think him and him and Freddie Mercury went into the studio and there was a lot of substances around and they recorded this iconic song and neither of them had any memory of, uh, of recording it.
So I always, whenever I think that I'm like, well, It's a great, I'm glad the output was great. Uh,
the
Logan: input there was a little questionable, uh, what was going on in that studio, but, um, I'd be remiss to not ask about artificial intelligence. And you guys have been. I think at the forefront of a lot of things related to this, uh, my understanding is you told, uh, Sam and, uh, open AI that you wanted to be their, their Guinea pig for a lot of the stuff that they're, uh,
Sebastian: their favorite guinea pig.
Logan: favorite Guinea pig.
Okay. Got So they have some other Guinea pigs, but you are, uh, you're at the top of the shelf, the, the primo Guinea pig. Um, what, uh, what led you to want to pursue that? Uh, how did you go about actually, um, operationalizing, uh, that within Florida?
Sebastian: So, I mean, I [01:43:00] guess as many others I'm on Twitter, November, you know, 22 and somebody's tweeting, you got to try this. And I try it and my, you know, my mind is blown away. I'm just like, Jesus, I'm spoken, speaking to a computer and as many others, probably I went the way a little bit depressed first. I'm like, okay, this is it.
This is over, you know, like, um, but, um, you know, and then Christmas passes and I come back and I'm just like, okay, I gotta, you know, I gotta reach out to Sam before it's too late. And he's the most wanted man in the universe. So like I tried to reach out. So I jump on a plane to, um, to San Francisco, uh, pretending I have other business, but only the only reason is to meet Sam when he still
Logan: by the way, that's, that's like a, that's a patent adventure capitalist move. They're just showing up at someone's Oh, I'm in town. Yeah. So, uh, you know, a different career. I know you're happy running Florida, but that I do
that all the
time. so
Sebastian: And so, you know, my meeting initially with him was two hours. By the time I arrive, it's cut down to 30 minutes, you know,
[01:44:00] exactly
Logan: time to meeting time. The ratio is a little skewed at that point, whatever. 10 hours of flying, uh, for
30 minutes
Sebastian: And I think it was there, you know, it was just, you know, what was happening open, I was just like, you know, taking off and so anyways, but I get some time with Sam and I tell them these things that I want to be a favorite guinea pigs. And I understand from the team later on at open AI that they were like, yeah.
Some, you know, European bank, like sure, you know, like that's not going to happen that they're going to be fast moving and so forth, but we got a slack channel with them and we're just like, give us everything you have and just, we're going to try it and use it. I felt that there was too much look it again.
Like I have obviously, when one of the people who haven't been all excited about Bitcoin and crypto,
Logan: have any
Sebastian: that is just
Sorry,
Logan: You said you and me both, man. I, uh, I
Sebastian: I'm happy hear that finally, finally, I mean, no, but the thing is that like, and the reason for that is just like, I've tried the technology and I don't see how it [01:45:00] solves the problem for my mom.
You know, and I always like think about my mom and he's like, how does it help her? And like, she doesn't really care if her money is with the central bank of Sweden or with something else, as long as it's safe. Like, you know, she didn't really care about the monetary systems of the world and all that stuff.
She cares about being able to pay with simplicity, right? Like, so. The point is that like that technology never got me on the hook because I just didn't see it solve a real problem. And, you know, maybe it will take off and do something for people in some areas, whatever. Um, this technology, the instant I tried, I was just like, my God, this will solve a lot of problems.
And so like, so that just made me feel like, okay, this is something I want us to double down on. And I started spreading that message internally. And they were at that point of time. Incline as well. People being skeptic and data and privacy and training and this and that, and that, and we tried to obviously first resolve all these stuff, and then we just encourage people to start doing things and, um, not being too careful about them [01:46:00] doing things that were, uh, business court to Klana.
So as an example, one of the things I, I think is a good example is that there was a team came up with an idea that instead of doing these employee surveys, where you asked like how happy you at work one to five and whatever, we're like, this is pretty cool. We can actually now send up a bot. To do an in depth interview with all of our employees and actually ask questions and read free text answers and then summarize like.
What is people's perception of working in Clona and maybe instead of like trying to interpret if they answered a 2 or a 3. 5 on this question. What does that mean? Why are people saying 3. 5 on how happy they are at working in Clona? And then you're trying to like look at the free text comments and make something like Here we actually, you know, again, it's just a compliment.
The best way to manage your culture is have you great leaders that actually talk to your people and find out what's going on, right? But that's still, they're not going to be replaced by neither a surveying or an AI tool, but we built that tool. That's not core business of Klana to build AI employment engagement tools, but the [01:47:00] learnings the team had from doing that, and there were learnings that we had have been now applied to so many things inside.
And I think that to me is that like. Just encouraging people to explore and learn and not trying to decide what the business is initially, because you have to realize when you become larger as a company, you can't run it like that anymore. When you start up, you have to be very selective. We can do these three things, and these are the features that we have time to build.
And we have to bet that these are the best ones that are actually going to build, you know, bring the company forward. When you're a CEO of a larger company, it's a little bit more of a portfolio of bets. You just got to say, look, I got to make sure we're making a lot of bets and that these are in general, I'm giving them to a lot of teams and then I'm going to see which ones take off and I'm going to double down on them.
Right? Like you have to a little bit more around a portfolio strategy of these bets, like a VC in that sense. And so, so you have to do a little bit more like that. And so we did that with this and we'd like, like, just, just try things and see what takes off. Then it turned out that one of the things that [01:48:00] really took off was a dispute resolution co pilot for our customer service agents that helped them resolve disputes, which is one of the more tricky errands for a payments company, because the consumer complains and says, I didn't receive the package.
The merchant said, but we did ship and here's the delivery shipment. I, you know, proof. And then you have to be this mini court that takes a decision. And it's a tough thing to do for customer service agents. You have to collect a lot of information, take decisions, go through a protocol. And the co pilots just started helping them resolving these things.
And then we realized like, it's actually mature enough to be able to help customers. And when it helps customers, it does so with at least the same customer satisfaction score that the human agents do. And that to ourselves was also learning. And so I felt that like, and then we started being very excited about these things, um, and we started testing and it's, it's just, We've learned so much from this, from this exercise and it changed our ways of thinking internally and the momentum has grown [01:49:00] internally.
And then one of the biggest thing that we did, which has gotten some, but not a lot of attention just yet, is we stopped hiring in September, October last year. And I said then internally to all people, I said, look, to me, at least it's pretty clear. I believe that, uh, We will be able, I don't know what other companies are going to do, but in our case, we can see that we can do what Klona is doing.
We can do more with less, but we have a 20 percent retention, uh, 20 percent churn or retention. Like people leave 20 percent every year, a tech company, you know, one people stay five years, whatever. So by stop hiring, we're going to shrink 20 percent a year. And so that brings us from 4, 000 to 3, 200 people at the end of this year, as an example.
And it requires some thoughtfulness on how you manage that. So when somebody leaves here, you can move people around and stuff like that so that you can constantly make sure that people are working on the highest return on investment stuff and the biggest, most important thing. [01:50:00] Um, but I have also said internally.
That our total payroll costs will go down. But my ambition and commitment to you is that our cost per employee will go up. Uh, so you guys will all benefit from it. Um, uh, if you stay around and participate in this, and if you don't like it, you know, there's also other options to go in other places. And I think each one has the, you know, optionality to decide what you want to do.
Um, but the good thing is it allows us to avoid layoffs. And such things, right? Um, and so we can actually, you know, allow people to take the decision and we've seen a lot of people lean in and I feel that like that has made people less nervous about it. Like, of course, there's tons of meetings where we sit and we're like, Oh, like this was a lot of work.
This just was removed. Um, and so like, and that's fine. But I feel that like people. Can relate to that. And, um, I, and the other funny thing is because we got so much virality, I mean, we did a tweet tweet [01:51:00] about, you know, our chat bot removing the equivalent of 700 full time agents, which again, wasn't, you know, these are employed by companies that have hundreds of thousands of employees, these customer service companies.
So no, nobody lost a job. They were just reapplied to other companies at this point in time, but obviously long term, we wanted to be honest about the fact that we think this is going to have implications for jobs. And I, I don't want to like hide that. Um, but with that said. Um, we, we got a million views on that tweet.
It became viral. We also had now another where we shared what we're doing in marketing that got 3 million views. And the funny thing is what happens is, you know, people told me if you're a client employee, you have four times as many job offers now on LinkedIn than you used to do like six months ago, because everyone wants to hire these AI people from us.
And so to some degree it's like, good, like everyone's a winner, right? Like,
Logan: Hopefully it doesn't go 20 to 25 percent
Sebastian: yeah, exactly.
It's just
Logan: going after him. Yeah.
Sebastian: we have to find a [01:52:00] balance there. But like. I right now it's a win win,
Logan: Yeah, I mean, one of the things with that and the derivative consideration, it's a point I've heard you make, 'cause I'd love to, um, get you to dispo, uh, expound on, but also just, just say is, um, the job of a business is to produce profits, uh, you know, create value. Profits are a derivative of value in all of that.
And I guess. How do you think about, like, you're no longer empire building, you're no longer, you're gonna hope at some point, you can't a trip 20 percent forever. I don't think I think at some point, you might need to get some equilibrium and hiring back. I don't know. probably some number of people.
Right. But can you make that that point and how you think about like, the societal implications, which you touched on there for a second with the karma implications and how you those two thoughts in your head?
Sebastian: but I think first and foremost, like at the core, as [01:53:00] much as capitalism is getting a bad reputation now and then, and people talk about it, I think there's some very strong aspects to that system. The point is that like, I'm a CEO. It means that I have multiple constituencies, right? I have my employees, I have our customers.
I have our investors. I also have society at large. As the company starts growing, you have to take that into consideration as well. Like if you run a restaurant, you can ignore some of that things. If you're McDonald's, you have to think about a little bit differently on yours, you know, your impact to society.
Um,
Logan: way, You don't use Burger King. I, uh, is it, is
Sebastian: uh,
Logan: it
PTSD from your first job?
Sebastian: you're right. You're right. I should have used Birkin. That's a good point. No, but like, um, so I think that like you have multiple constituencies. And obviously what people sometimes miss is that it is a trade off. And I, a good example of that to me was when, when we had to make the larger employee layoffs, uh, back then, because we simply recognize that the investor sentiment has changed and they were not going to be willing to invest.
Um, at those high valuations, [01:54:00] which in the end would have meant the end of the business for in the longer term perspective, if we did not make adjustments to how we were working, like, I mean, maybe it would take a few years, but it would not have been good. So. At that point in time, we decided to, you know, to make the layoffs and with as much as it was tough and sad.
And in that discussion, one of the things that we raised is like, you are so greedy. Why can't all the employees keep their IT equipment? Right? Like, why can't you keep your computer when you're leaving? And to some degree it was fair. We just hadn't thought about it, to be honest, like it was just like a very hectic time, but we then calculated and it was a few million dollars to let everyone keep their it equipment, which is the equivalent of a few jobs.
And so what people tend to forget is that as a CEO, as a management team, you're seeing that situation. It's like not, there is no free lunch, right? There's always in that, in that balancing these constituencies, the investors, the share, I mean, the shareholders, uh, society, the customers. If I give the employees more, it means [01:55:00] my customers get less, right?
It means a little bit higher prices for them for the same service, which make, make it less competitive on that may make it less success in the longterm. I have short term value. I have long term value. And part of this job is constantly trying to balance that in an optimal way. The interesting thing is that an organization is based on the concept.
That everyone, I tried to tell this to the European union because, uh, we tend to forget it in Europe sometimes. The whole concept of creating a union is that everyone comes together and sacrifice a little bit. in order for a greater good of, of the common, right? And the problem is if everyone goes to Brussels or Washington for that stake, only thinking about how to get as much as possible to their own constituencies and ignoring that effect, then you will have a less It's well functioning organization and over time it may lead to an outcome where that dissolves or ends, right?
Like the fall of the Roman empire when like, you know, the Romans didn't care anymore what was happening in the [01:56:00] empire. They only cared about what happened in the city. Like I think that like you have to remember that. And so the same applied here. Like, fine, we can give everyone computers, but like. Please remember it comes at a cost like there's not there's no unlimited resources and and I think people tend to forget that and part of leadership is to try to, you know, keep the saneness of these decision making and make sure that those tough trade offs are being made on a continuous basis.
And I do think that. I believe that that's good for society to work like that. My parents came from a communist society that had a different idea of how to make that work. And it turned out in most cases that over time, it leads to dictatorships and a different way of distributing means where there's less for everyone to share off.
And whatever is good is usually taken by the top people at the top. It doesn't seem to work as well as a system like this system has flaws. But it has a lot of benefits. Now with that said, also, I'm not a anarchist. I don't believe that, you know, society, [01:57:00] like free capitalism, like everything is just going to solve itself.
I think like, you know, we have rules in society for a reason. Like it's not allowed to just go and hit somebody on the, on, on the face. And the same should apply in a capitalistic society. There needs to be some minimum amount of rules. And I see that very much because as a bank and as a credit issuer, there's been a lot of like expectations.
How should Klarna do underwriting? What about, you know, people getting in depth and all these situations. And there is a limitation to where I, as a business, I can say, I have a long term perspective. I want to build a long term successful business. And hence I'm going to take decisions that are beneficial for the consumer, which means I'm willing to sacrifice some short term profit.
For the long term trust of my business and the belief in it and the support of it from a society perspective. However, we can't entirely rely on that to function as a mechanism when it comes to things like climate change and other things, there is a need for an [01:58:00] additional amount of regulation and some rules being forced because otherwise we're just going to see is that like, there's going to be too much pressure on me.
If like If you as a business can do whatever and you can totally ignore your consumers and find ways to, you know, put them into really difficult situations and whatever, and there's no rules applying, then what will happen is people who try to do it in a little bit more long term and sustainable way are going to be out competed or find it difficult to compete.
So it is, I mean, I mean, in the end, it's not that hard. Think about a freaking soccer game where like one of the teams was allowed to hit the other ones on the, you know, and do what the hell they wanted. Like they could win the game. But like, it wouldn't necessarily make for a great, you know, outcome in the longer term of playing soccer, right?
So like, the same applies in, in, in business, right? So politicians do have to come in and put some rules in place. Problem is also, if you put too many rules, Or rules that are counterproductive. It may sometimes hurt and doesn't really help the game and doesn't help it produce the value. But in the end, [01:59:00] profit is nothing else.
Then the fact that you're able to create value to your customers, that they are willing to pay more for what, than what it costs you to produce it. That's what it is. And that means inherently, that's what NGOs struggle with. It's easy to set up an NGO, just give back money, you know, give money away. But are you really creating value?
That's very unclear. If you're not measuring it, the benefit with profit is if you don't have profit, it means that people are not attributing value to what you're creating. to a level that is higher than the cost it costs you to produce it. And that means you're not creating value. That's basically it.
So like, you know, that's how it works, right? So to me, that is the indication from a society perspective. I think often this profit thing is lost in like a lot of other discussions, but like, And again, I'm simplifying things. I realized that. And I realized that sometimes on specific occasions, it may look differently, but generally speaking, directionally speaking, profit is an evidence that you're able to create value [02:00:00] that is of value to your customers, and they're willing to pay more than it costs to produce that right now, banking and financial services, unfortunately.
Protected by barriers of entry, poor competition, very many times, seldom feels like that because we feel we have to have a bank and it's horrible customer service. And we don't think it's creating value that is equal to that. And that's true because it's not competitive enough and it hasn't allowed for that level of competition, but restaurants, they in general do live up to that requirement.
Like, you know, you like the food and you pay for it because you like there and you go there. And then I'm still happy that there's something called. Um, you know, municipalities controlling that they're not making that food with like tons of bugs in it and germs and that they have some minimum health inspections and stuff.
I still think that's nice because otherwise I would probably get food sick a little bit too often. So like, that's pretty good.
Logan: Yeah.
Logan: Well, one more and I want to let you go, but there, there's, there's one comment I heard you make that, um, [02:01:00] I thought was, it was profound. I hadn't heard articulated in this way. You said, and this is a more general thing about entrepreneurship and founding companies, but you said something to the effect of creativity is about solving problems with many constraints in a way that nobody has solved before.
So you satisfy the problem in a better or new way than anybody has thought of. Um, I thought that was an interesting sort of way of, of talking about creativity and as we go, um, can you just expound on that or, or, or elaborate on how you think about constraints and creativity? And, uh, the, the two kind of intertwining to breed some special output.
Sebastian: Well, I do think it's funny you asked that because I also remember your previous question about, you know, what happened in 2021 when we got a little bit too much money in the system, right? I think that the truth is that You know, if you have unlimited resources, you can't be creative, [02:02:00] uh, because you basically relax one of those requirements.
And so it just, you know, that's why society tends to have these cycles, in my opinion, when there's too much money in the system, um, you know, the productivity and creativity goes down. And as a consequence, you know, the bubble bursts and then, you know, you start over again. But like, from my perspective, when I think about a lot of the problem solving, it's like, They remind me of when I was solving equations at school.
You know, I like math, right? And you had these different, you know, you had to solve the equation and that means that you had a number of constraints and, you know, the eloquently of solving a, a, um, such a thing was that you could create a very simple relationship between those and show, look, this is true.
This equals X, right? And you had to write down the assumptions that you were doing and which constraints you were, you know, using in order to solve it. I feel that that is very much, if I think about a painter. A painter has constraints. He has the oil [02:03:00] and the colors and he has the specific canvas that he's using and the size of it.
And despite the fact, like it's, it's a very constrained environment to create in. He's not, there's, there are these things and the colors work and the oil works like it does and you know, and so forth. And yet, Over and over again, these people come in and they surprise us. Like, wow, I didn't know you could do that with a canvas and, you know, a little bit of paint.
I didn't know, like people are creating things that we just like, Whoa, you know, or somebody making music. Like Max Martin is a friend of mine. Like he's one of the most fantastic music makers, most famous song of Donald's on the weekend as an example. Right. And like, and you just like. His ability to take these tones and whatever and combine them in a totally new way.
There's tons of constraints in that, in that creative system, um, that are applied. And I think about business problems many times. So the problem in business is that what, and what makes me excited about them is that the number of constraints, It's so much more inherent in your brain. Like, [02:04:00] you know, that's why I meant with also doing the Gemba walks and virtual, when I go in and I read what my teams are doing, I realized that they think they need to follow or they have this constraint, or they believe that constraint applies to their problem solving, or they think that they need to do it this way.
And a lot of me working with them is highlighting to them. Look. Maybe you can try to do it this way instead, or what if you would try to do this or like, relax that constraint and focus on these constraints instead. What would the outcome look like then? And so I feel that that is, to me, creativity is about, you know, creating something entirely different on you.
Um, by really truly understanding what are these constraints are important, you know, okay, I have the regulators constraints. I have the employee constraints. I have consumer constraints to your point about constituents previously, but also in the kind of day to day product development cycles, okay, I need to think about usability, but I also need to think about technically for it to scale and have this and that I just find that fascinating it's to me. And [02:05:00] when people come to me and present, look, we solved it this way. That is creativity to me that somebody has been able to take some of these constraints and then presented a solution that satisfies them in a way that I didn't think was possible. Like. You can actually satisfy all of these constraints to this level.
And like, that is just amazing. Right. Um, but then sometimes people come and say, look, I have a solution. And I'm like, yeah, but you've totally ignored these requirements or, you know, or, you know, you have overemphasized on this and forgot totally about that. Um, that's a pretty common conversation. Right. Or, you know, or this solution is just not very good.
Yeah. Sometimes it's just like, it was pretty blunt, you know, pretty bland, you know,
Logan: Well, Sebastian, thanks for doing this. This was a lot of fun. I, uh, I appreciate through all this stuff. Uh, it was a really fun conversation.
Sebastian: Thank you, Logan. I appreciate it. And thank you for doing this call.
Logan: Thank you for joining the Logan Bartlett show in this episode with Sebastian [02:06:00] Siemiatkowski, the co founder and CEO of Klarna. If you enjoyed this discussion, we'd love for you to share it with whoever else you think might find it interesting, as well as subscribe on whatever platform you'd like. We will see you next week with another great guest here on The Logan Bartlett Show.
Have a great weekend, everyone.