Disclosure: I’m an angel investor in Waldo, and the offer below for Interchange subscribers is a promotion I put together with the company, through a link that credits sign-ups to me. This is my own opinion, not investment advice. The promo terms are set by Waldo, and you should do your own diligence before moving money. The promo: If you sign up for Waldo and mention “Interchange,” Waldo will do a 1% match on deposits up to $5,000.

Welcome to Runbook, a new Interchange series. Runbooks are investment memos, founder Q&As, roundtables and other direct interactions with what founders and operators are doing and how they do it. This post is a Runbook memo, the investment memo I write for myself and our Chime alumni investment syndicate, 2 Days Early, before I put money into a deal. Most investment write-ups are retrospectives: polished after the outcome is known, once the story is safe to tell. Runbook memos are the opposite. It’s the real pre-investment thinking, open questions and honest risks left in, so you see the deal the way I saw it before I know how it will turn out.

First up is Waldo, an AI-powered treasury platform. How I got here: I’ve known Ryan, the founder, since he ran his previous startup, Gatsby, when my prior company Hudson River Trading, invested in one of his rounds. When he was starting up Waldo, it became clear that I needed to invest and later, Ryan g

ave me his blessing to write about the company publicly, so here’s our investment memo.

The promo: If you sign up for Waldo and mention “Interchange,” Waldo will do a 1% match on deposits up to $5,000.

The Problem

Businesses are sitting on more than $5T in cash, and the overwhelming majority of it is parked somewhere that earns almost nothing: zero-yield checking, low-yield savings, or a narrow, limited-use treasury product. The tools that are supposed to fix this are their own kind of pain. Because they’re all banks (e.g. Mercury, Ramp, Brex, etc.) They demand $250K minimum balances, offer only one or two investment options, run on legacy UX, and, the real killer, they force you to switch your primary bank just to get access. So the status quo is a lot of idle cash and a set of “solutions” that ask for too much and give back too little. No one to date has built a “robo-advisor” for sub-enterprise businesses to manage their cash like a Fortune 500.

The Solution

Waldo is an AI-powered treasury management platform that helps businesses maximize yield, manage risk, and tailor cash allocation to their actual liquidity needs, risk tolerance, and operating profile without switching banks. That last part is the whole point.

What sets it apart is a stack of things incumbents don’t put together: more than 100 portfolios to choose from (versus one or two at the legacy players), a dedicated human advisor paired with agentic AI guidance, up to $75M of SIPC coverage (versus the usual $250K of FDIC), and stablecoin-native cash management. It monetizes the way you’d want: a nominal fee on AUM depending on account size, so Waldo makes more when it’s actually managing more of your money.

I used the product myself before writing a check and the onboarding was genuinely personalized, a real human approved my account, and account linking ran cleanly through Plaid. It felt like a product built by people who care about the experience, not a compliance form with a logo. The founder line that stuck with me was that it’s wild how useful AI is when you’re running an RIA and you can feel that leverage in how much a tiny team is able to deliver. You get an AI and a human that have real-time understanding of your specific business, proactive, dynamic responses and always-on guidance that doesn’t stop after 5pm on the weekends, while still having a human on-hand for the tricky issues or ones where you need human presence.

Reminder: If you sign up for Waldo and mention “Interchange,” Waldo will do a 1% match on deposits up to $5,000.

The Opportunity

The target here is the $5T to $10T of U.S. corporate cash that’s slowly moving beyond checking and savings toward higher-yield, more flexible treasury solutions. Waldo’s wedge is simple to say and hard to build: better yield, broader product breadth, and more control, all without making the customer change their primary bank relationship. On distribution, they’re pairing direct customer acquisition with bank distribution through Grasshopper, which opens the door to roughly 6,000 corporate banking customers. Direct plus a bank channel is exactly the combination I want to see at this stage.

The Team

This is a repeat team that is impressive. Ryan Belanger-Saleh and Jeff Myers have built and sold a company together before Waldo. They co-founded Gatsby, a commission-free options trading app, grew the team to about 40 people, and sold it to eToro in 2022. Taking a regulated consumer fintech from zero to acquisition is exactly the operating experience I want backing a treasury product.

Today they’re lean again: a small team, mostly engineers, with plenty of cash on hand and about two years of runway. That capital efficiency matters here. A small, agentic team that ships and keeps costs disciplined has room to compound before it has to raise on someone else’s terms.

The Traction

Waldo launched in April 2026 with about $240K in AUM and reached $41M in net new AUM in roughly three months. That’s 170x growth, with deposits still accelerating and genuine demand for portfolios that carry investment-grade fixed income exposure. After a recent Grasshopper PR push, they added more than dozens of new sign-ups and millions of scheduled deposits, and last I checked they were about to cross $50M in AUM.

The execution around the growth is just as important as the growth itself: a live Grasshopper partnership, SOC 2 certification, RIA approval, registered reps, and a finalized FINRA broker-dealer application. In a regulated business, that scaffolding is the difference between a fast start and a durable one.

The Round

They’re raising $2M on a SAFE at a $25M cap, earmarked for customer acquisition and marketing to keep the growth curve going. It’s a massive markup to the last fundraise, which tracks given the traction since then.

Interspace Ventures x 2 Days Early Is In

Interspace Ventures and the 2 Days Early operator syndicate are both in on Waldo’s SAFE among a number of angel investors and operators. Cash management is finally a real product again. Rates make yield matter in a way it didn’t for most of the last decade, and the winning wedge is refreshingly simple: don’t make me switch banks. A tiny, capital-efficient team is compounding fast, the regulatory scaffolding is real rather than aspirational, and the AI-plus-human-advisor model fits the moment exactly; enough automation to serve a hundred portfolios, enough human judgment to earn trust with someone’s operating cash.

The risks: this is a regulatory-heavy business, it’s competitive, and it’s still early. The traction curve has to hold, and net new AUM has to keep converting into durable balances rather than a burst that flattens out. Concentrating conviction in something this young only works if the execution stays this sharp.

For Interchange subscribers: if you want to try Waldo, they’re running a promo for this audience. It’s a 1% match on every deposit, up to $5,000, and it applies to all your deposits, not just the first. It’s available for a limited time. Just mention Interchange to get the match. If you’ve got idle cash sitting in a zero-yield account, this is a low-friction way to test the product and put that 1% to work.

I was talking to a startup founder yesterday and he said AI has made startup development the hardest it’s ever been.

Because now the cost of developing a new feature is zero for startups AND the complexity of developing one even for massive codebases is far less onerous AND the difficulty for DIYers who are fine with building single player utilities has never been lower. So you’re now competing with other startups, the incumbents, and DIYers all at the same time at a breakneck pace.

So how do you survive when competition comes from everywhere all at once?

Taste.

Taste isn’t just how your software looks. It’s every single part of your unique approach to software development from the design system to the onboarding to the pricing to the functional mandate to the back-end to logo to UX to operating system deployment. Taste is form, and increasingly, function will follow form, not the other way around.

Let me make this tangible with an example - AI assistants. There seems to be one popping up every day - Viktor, Ollie, Town, Valet, Zo, Spence. In theory it’s simple to build (with AI). Give a model access to tool use, provide context on your writing style and give it memory so it can self-improve. Everyone has the same models and same infra, so we’re all left with the same product right? Wrong.

Instead, the bar is raised. The ability to simply answer questions correctly isn’t enough. Look further and you’ll see that taste is what differentiates the copycats from the true builders, the burnouts from the billion dollar businesses:

• Harness: How much orchestration do you build into your harness? Do you allow tool use organically or ask for users to connect proactively? To what extent does memory help with self-improvement?

• Functional philosophy: Is your app built to automate processes? Is it designed to improve productivity? Is it built to organize your life? Is it built to be whatever the user wants it to be?

• Privacy: Do you orient towards giving users more access at the cost of privacy or towards more privacy at the cost of less context?

• Proactivity: Does the AI figure out what’s important and start doing or do you direct it towards problems? Does it suggest ideas or wait for yours?

• Pricing: Will you charge by input or output? Subscription or credits? Do you offer a free trial to see value or ask for money upfront to prove people are willing to pay?

• Persona: Are you utilitarian or warm/cozy? Is your assistant a bot or a being? How much personality are you embedding into your app?

• Structure: What does an interaction look like? Is it a session? Is it a thread? Is it a task? Is it a process automated?

• Embedding: Do you design for desktop and mobile or choose a platform? Will this work cross-platform or is it Mac only? Are you embedded in the menubar, do you use a universal shortcut, or can you only be accessed in app?

• Connectors: Do you rely on a catalog of one-click connectors that the user adds? Do you have the AI connect as it operates? Are you using external services or building direct connections?

AI can’t answer these questions for you because there isn’t a clear right answer yet. Your experience, philosophy and focus is what helps you make the right decisions. The founders that stand out are the ones who think about all the right questions and have strong views, weakly held about which decisions they’re making and why.

Contrary to the premise, it has never been a better time to build. Development costs should never have been the hard part. Coming up with great ideas and thinking through every element of making them real should have been. And finally, we’re here.

Let’s build something amazing with great taste as the harness.

It’s been a while since I’ve published something. In early September, on the same day I published my last post on the cost of compute (eerily prescient of the tokenmaxxing debacle we face now), we found out we were expecting. Life came at me fast after that.

By October, Chime’s long-awaited IPO became an inglorious fall. In November, we backed out of what we thought was our dream home. At the same time, my physical health deteriorated as my rare genetic syndrome was impacted by medication changes. In December, we went to Aruba for a vacation (don’t go unless it’s for a babymoon!). In January, we celebrated the new year and finally saw Drunk Shakespeare. By February, I was unceremoniously impacted by restructuring at Block and realized later it was the best possible thing that could happen to me. In March, my health condition finally improved after finding a gamechanging medication. In April, I decided to start my own business and we started to see what became Knicks in five. In early May, we bought a home that’s actually our dream home.

And nine months after that last post on May 16th, we welcomed our baby girl into the world, the greatest day of my life and a life-changing moment in time.

Needless to say, the newsletter had to take a pause.To those who stuck around, thank you. The newsletter has always been a source of creativity and pride, and I’m feeling the pull of writing once again. I’m excited to make it a core part of my business going forward. You can expect more takes, more discussions and more over-engineered deep dives on a more frequent basis at least 1-2x / week (between managing diaper dilemmas, navigating feeding frenzies and taking plenty of photos).

As I’m navigating being a new parent, my top question has been: how do I give her the right financial foundation to set her up for success? So I did what any fintech nerd would do: I mapped out every fintech product, tax optimization and savings account for my kid’s financial head start. What I found surprised me. The ecosystem is deeper than expected, the products are better, and once again, fintech is foundational infrastructure.

So I’m thrilled to present the modern financial stack for your child. Here’s what the universal building blocks - Spending, Saving, Borrowing, Investing, and Protection - look like for your newborn. But first, the foundation.

Foundation: SSN, Birth Certificate, Passport

The timeline: When you file the birth certificate, the SSN process kicks off automatically - the card usually arrives in 2-4 weeks. You need that SSN to open everything below, so nothing else happens until it shows up.

Once you have it, you can apply for a passport. Infant passport paperwork is genuinely annoying (both parents present, notarized forms), so I used HelloGov to streamline the filing. Optional, but worth it if international travel is on the horizon (we’re hoping to go to London at 3 months and I’m taking recs!).

Spending: Teaching Financial Responsibility

Spending is money flowing out - and early choices teach restraint, agency, and consequences. Giving a kid their own account, even just $20/week in allowance, teaches them that money is limited, spending has consequences, and saving is a choice.

The players:

• Cash App for Teens (ages 6-17): individual account ownership, parental spend controls, a debit card. Setup is under 5 minutes - the easiest onboarding I found.

• Greenlight (paid, no minimum age): best for younger kids thanks to strong parental controls and chores/allowance features.

• Acorns Early (bundled with paid plans, age 6+): really an investing product, useful for an “all-in-one” feel rather than spending controls.

No tax implications here. Paid “kids debit” apps add convenience, but fees compound so you’re mainly prioritizing clean UX and controls.

Saving: Dependent Care FSA

A Dependent Care FSA is a pre-tax account for eligible care expenses (daycare, preschool, after-school, approved babysitting). Pre-tax contributions mean real savings: contribute $5,000 in a 24% bracket and you save $1,200. That’s major savings to put towards childcare.

The players:

• Forma: Modern, employer-first benefits platform with Dependent Care FSA support, debit card, mobile claims, and configurable grace/carryover (plan-dependent).

• Lively: HSA-first administrator that also runs Dependent Care FSAs; clean participant app, fast reimbursements, and solid support (availability depends on employer).

Limits: up to $5,000 per household (MFJ, single, or HOH); $2,500 if married filing separately. Watch the use-it-or-lose-it rule - some plans offer a grace period or limited carryover. The cap isn’t huge, but it beats nothing.

Borrowing: Building Credit Early

Borrowing capacity is the ability to access credit in the future. For kids, you can lay groundwork by adding them as authorized users (AUs) on your card so long as the issuer and bureaus report those tradelines. Strong, long, clean credit history unlocks better rates later. Start early, keep utilization low, never miss a payment.

The players:

• Apple Card Family: Add participants 13+ with spend controls. Reporting benefits generally start at 18.

• Robinhood Gold Card: Add children as AUs with no stated minimum age and granular controls. Layla is already an AU on our card today

Two things matter most: reporting (verify the tradeline posts for your child’s age and to which bureaus) and discipline (keep utilization under ~10%, pay on time every time - your behavior shapes their file).

Investing: Creating Lasting Wealth

For a newborn, investing is measured in decades of compounding.

A $10K investment at age 0, growing 7% annually, becomes ~$430K by age 60. The same $10K invested at 18 becomes ~$150K. Time is the whole game - and your newborn has 18 years before they can legally touch it. There’s now four primary vehicles:

A) 529 Plans - Education-Specific

After-tax contributions, tax-free growth if used for qualified education expenses (tuition, room & board, books, supplies, some computers). Contribute $20K by age 5, watch it grow to $50K by college without any additional dollars in, and those gains are never taxed. Some states add a deduction or credit - check yours.

The players:

• Backer: A modern 529 platform with investment management and family gift coordination. I’m using Backer today and I love the experience.

• Wealthfront 529: Automated 529 via Nevada’s plan with algorithmic glide path; shifts from aggressive to conservative as college approaches; 0.25% advisory fee + ~0.14% fund fees; no minimum.

Remember that annual gift exclusion is $18,000 per donor ($36,000 gift-splitting); you can front-load 5 years at once (~$90K per donor). Aggregate caps vary by state, often ~$300K-$550K+. The tradeoff is the education-only restriction - non-qualified withdrawals trigger taxes plus a 10% penalty on gains. Recent rules allow limited 529-to-Roth IRA rollovers under specific conditions.

B) Custodial Brokerage (UTMA/UGMA) - Flexible

Brokerage accounts in your child’s name that you manage until transfer age (usually 18-21), then they get full control. No contribution limits (subject to gift tax rules), broad investment access, withdrawals anytime for the child’s benefit. The “kiddie tax” may apply to unearned income above a threshold.

The players:

• Robinhood: $0 fees, fractional shares, clean UX, ~10 min setup. Best if you’re budget-conscious and want it alongside your own investing. I use this now and have found it to be a seamless experience.

• Acorns Early: Offers custodial investing as part of a paid plan. It has occasional promotions, so evaluate total subscription cost versus assets. It is costly for low-value accounts.

• Greenlight: Also offers custodial investing on paid tiers. All-in-one convenience, ongoing cost: one app for chores, card, and investing, but you’re paying a monthly subscription and accepting a curated investment menu.

Remember that custodial accounts become the child’s asset at transfer age, so set guardrails and expectations now.

C) Custodial Roth IRA - Early Retirement

The most powerful long-term vehicle if you can meet the earned-income requirement. Contributions must equal documented earned income; growth is tax-free. $10K contributed at age 10 at 7% becomes ~$430K by 60 - all tax-free.

The players:

• Halfmore: Modern UX, fractional shares, low-fee workflow. Check that custodial Roth IRA is available and confirm earned-income documentation requirements.

• M1 Finance: Pie-based investing, automation, fractional shares. Check custodial Roth IRA availability for your account tier before opening.

Remember that the earned income must be legitimate and defensible to the IRS (modeling, acting, freelance, a real family-business role). 2025 cap is earned income or $7,000, whichever is less. If you’re trying to move $7K out of your business without justification, the IRS will scrutinize. Roth contributions can be withdrawn penalty-free; earnings are locked until 59 1/2 with limited exceptions.

D) Trump Accounts (530A Plan) - Take money and run

Trump Accounts are a new type of IRA introduced through the OBBB and designed to encourage retirement saving for children. If your child was born between 2025 and 2028, there’s a $1,000 federal seed deposit waiting for you. And the Dell Foundation is giving away an additional $250 for the first 25M kids who sign up.

Here’s the reality: Trump Accounts are structurally inferior to both 529 plans and custodial brokerages on nearly every investing dimension. They’re capped at $5,000/year, limited to U.S. equity index funds only (no bonds, no international exposure, no diversification as college approaches), and completely locked until your child turns 18 with zero exceptions, no emergency access, nothing. At 18, the account converts to a traditional IRA, meaning all growth is taxed as ordinary income when withdrawn, not at capital gains rates, and not tax-free the way a 529 is for education.

Use this as a bonus layer, not a foundation. Claim the $1,000, then build your real strategy on 529s and custodial accounts.

How to Prioritize

Fund a 529 first, at least up to your state tax benefit. Build a custodial brokerage for non-education goals. Add a custodial Roth IRA in any year income - and max it if you can. And only if you’ve done all of the above should you think about contributing to a Trump Account.

Protection: Insurance and Estate Planning

Insurance is buying certainty against catastrophic financial loss. Term life insurance covers you (the parent) against premature death, ensuring your child’s financial security. If something happens to you, who funds college, childcare, housing? Term life insurance ensures financial support.

The players:

• Ladder: Term life only, coverage up to $8M. No medical exam required up to $3M for qualified applicants. Competitive pricing and standout ability to instantly decrease coverage online to lower premiums.

• Ethos: Multiple offerings - Term coverage up to $3M (IUL up to $1M). Optimized for no-exam paths with automatic shift to simplified-issue tiers if health flags arise.

• Lemonade: Term life only, up to $1.5M (direct digital cap). Fully automated, no physical exam. Not available in NY.

• Bestow: Term life only, up to $3M. Strictly algorithmic underwriting with instant data checks; no physical exam fallback.

Coverage recommendation: As a rule of thumb, target 10-20x annual income, adjusted for debts, childcare, and college goals. Buy level term while you’re young and healthy. Tax treatment: Premiums not tax-deductible (purchased with after-tax dollars). Considerations: Get coverage now while young and healthy. Waiting means higher premiums or potential decline.

Considerations: Get coverage now while young and healthy. Waiting means higher premiums or potential decline.

Estate Planning

Estate planning specifies what happens to your assets and accounts if something happens to you. For a newborn: who’s the guardian, who manages finances, what happens to each account, how it all connects. Without a will or trust, state law decides who raises your kid and manages their money. With one, you decide.

The players:

• Origin: A platform for trust/will creation and comprehensive financial dashboard. Users can specify guardians, set up trusts, and access a centralized dashboard for all accounts (checking, savings, 529s, investments, insurance) in one place. I found this process to be seamless and a great add-on to an already useful PFM tool.

• Robinhood: Offers trust and will services (Robinhood Concierge, via Vanilla Technologies) for accounts with $1M+ in assets, plus a separately rolling out Trust Accounts brokerage feature for lower balances.

Considerations: Update documents every 3-5 years as circumstances change. Your priorities at birth differ from those at 10. Make beneficiary designations and contingent guardians consistent across accounts and documents.

Fintech is Everywhere

Here’s what’s clear: I can map out this entire financial infrastructure for a human who can’t hold their head up yet - using multiple fintech platforms, and a half-dozen tax-advantaged account types. I only wish there was a centralized dashboard for all of this, but Origin does get me pretty close.

A decade ago, this required a financial advisor, a CPA, a stack of paperwork, and months of coordination. Now it’s componentized and plug-and-play. The pieces snap together. And that changes what’s achievable for ordinary families.

Not just neobanks and payments. Not just investing apps. But tools that structure financial life from birth to retirement, for humans who can’t speak yet.

Fintech is everywhere. Even in the nursery.

The Price of Intelligence Saga:

1. Episode I: Attack of the Code Editor Clones:

   1. AI Code Editors have the same bold promises as the neobank fintechs of yesteryear, but without factoring in unit economics, we’re due for the same harsh realities.

2. Episode II: The Token Economics Strike Back:

   1. The math of compute breaks down when we break down the price of the prompt and the token taxes for AI code editing

3. Episode III: The Hyperscaler Menace:

   1. The unsustainable economics problem goes deeper than the code editors, down to the looming crisis of the AI infrastructure that powers the entire ecosystem

In late 2021-2022, the fintech scene exploded with a surge of neobanks for every affinity and demographic. They quickly amassed users, deposits, and purchase volume to excite any VC. But everyone seemed to forget that with fintech, unlike SaaS, just getting PMF isn't enough because the costs to serve are real and significant. If pricing isn't right, you're just selling a dollar for $0.50 and your users are taking advantage of you.

Cracks appeared in the ecosystem as bank platform fees, processor costs, and compliance expenses caught up to them. Today, we only see the remnants of many sought-after neobanks.

Today, the same pattern is playing out in AI coding tools, but with a greater disconnect between growth and unit economics. Fintech companies assumed they could acquire users for free and monetize them later, and AI code editor companies assumed they could get developers hooked on unprofitable $20/month tools and either rate-limit them into higher tiers or upsell them to enterprise. Both assumptions share the same fatal flaw - users adopted the products because it was a great deal.

The killer feature was the unsustainable pricing, and we’ll soon find out what happens when you take that away.

The Rise of AI Code Editors

As ChatGPT unleashed a new paradigm of AI interaction, a wave of AI-powered code editors emerged promising to transform how developers write code. These weren't just autocomplete tools; they promised to be integrated development environments (IDEs) and pair programmers that could understand context, explain complex code, debug issues, and write entire functions from natural language descriptions.

Source: Matt Palmer, Replit

The pitch was compelling. It promised “10x developer productivity” through AI assistance handling documentation to debugging. Companies like <u>Cursor</u>, <u>Windsurf</u>, <u>Replit</u>, <u>v0</u>, Convex Chef, <u>Bolt,</u> and Lovable offered seamless integration, context-aware suggestions, and natural language interaction with codebases. The future of development, they claimed, would be a collaborative vibe between human creativity and AI capability. By mid 2025, every company from Airtable to Figma was integrating “vibe coding” into their platform and every post mentioned it.

Within months, the numbers became staggering. Lovable crossed $75M in a 12 months. Windsurf at $100M in 18. Cursor hit $500M ARR in under 3 years. These represented some of the fastest companies to reach $100M ARR in history, outpacing success stories like Wiz and Deel.

Source: Sacra

The playbook seemed perfect. Small, lean teams built AI-powered developer tools that could scale infinitely. Cursor reached $100M ARR with just 20 employees, while Windsurf added $2M in new ARR monthly with a team of 15. This leverage was unprecedented - traditional enterprise software companies needed 5-10x more people for similar growth.

VCs couldn't write checks quickly enough. In two years, Cursor raised $500M at a $10B valuation. Windsurf commanded a $3B valuation before acquisition rumors began swirling. Lovable's rapid rise saw them raise a $200M Series A at a $1.8B valuation 8 months after launching, and Replit reached $3B.

Source: Aventis Advisors

Beneath the surface, a fundamental problem was brewing. The same $20/month "all you can eat" pricing driving this explosive growth masked unsustainable unit economics. Like the neobanks before them, these companies confused price-driven adoption with product-market fit. The assumption was classic SaaS playbook; land users cheaply, then expand through usage limits or enterprise upsell.

This would have worked if they sold high-margin software, but they weren't. They were selling compute, which is more expensive than anyone realized.

Too Many Tokens for Your Thoughts

These companies are selling compute for less than its cost, hoping usage patterns or future efficiencies will help. After an over-engineered deep dive to understand the economics of a code editor (read more in Episode II), the reality became clear; the token unit economics don’t compute.

To understand the unit economics, we focus on the basic unit, the "token." Tokens are the basic units of text that AI models process - they can be chunks of words or parts of words. A token might be a common word like "the," part of a longer word like "comput" in "computing," or a single character. When AI processes text, it breaks it down into tokens, and each requires computational power. The more tokens processed, the higher the computing costs. Even a simple styling change leads to a cascade of AI actions that consume tokens and increase costs.

Replit “effort-based pricing” pricing rationale

A thirty-five token prompt set off a chain reaction inside the AI's brain. First, it read 822 lines of context, then processed it 14 times. It planned, reasoned, generated explanations, and made changes. By the time it finished this supposedly "simple" task, the AI churned through 18,395 tokens of computational power.

At current market rates, this cost the platform $0.62 in raw compute costs. They charged $0.22 for the interaction. That's a 64% loss on every similar request. Even "quick" questions burn through 7,000+ tokens, while debugging sessions can exceed 23,000.

Remember how neobanks discovered they were selling dollars for fifty cents? AI code editors are doing the same thing - faster and at a greater loss. The math reveals an uncomfortable truth: these companies aren't just unprofitable; they're selling compute power at a significant loss, and no clever pricing can fix this fundamental economic problem.

In fact, this problem is worsening due to Jevon's Paradox manifesting in two ways:

First, our expectations of AI capabilities keep expanding. What started as quick responses to coding questions has evolved into multi-minute sessions with thousands of tokens of code changes and detailed explanations. The "magic moment" bar keeps rising.

Source: Metr

Second, while compute costs for older models are decreasing, users demand access to the newest, most capable ones regardless of cost. Ethan Ding's analysis of AI economics notes, "Tasks that returned 1,000 tokens in 2023 now generate 100,000+” - a 100x usage increase driven by expanded expectations and more sophisticated model responses.

Source: Ethan Ding

Remember the viral tweet about AI startup math? He was joking, but the reality reveals something more fundamental. We've built an entire market on the assumption that AI-powered development would follow traditional SaaS economics, which is colliding with the hard reality of compute costs.

The Pricing Model Evolution Crisis

As token costs became clear, companies scrambled to evolve their pricing models. Each iteration revealed the complexity of the unit economics problem and our misunderstanding of AI-powered development.

Phase 1: The $20 All-You-Can-Eat Disaster (2023-early 2024)

Most started with the same playbook: $20/month for unlimited AI assistance. It was a common growth strategy - acquire users now, figure out monetization later. The strategy worked in one sense. Companies like Cursor and Windsurf reached $100M ARR at record pace. But they were effectively paying users to use their product.

Power users exploited this model, consuming 100x the average usage while paying the same flat fee. GitHub’s $20/month Copilot was losing Microsoft $20 per user/month, before reasoning, increased context windows, and vibe code editing came into play.

Phase 2: The Query-Limited Scramble (mid-2024 - mid-2025)

By late 2024, the economics became impossible to ignore. Monthly compute costs per user were skyrocketing and companies faced a difficult choice: raise prices or limit usage, either of which could cause user exodus. Most chose the latter, leading to an era of complex usage restrictions.

Cursor moved to a complex token-based credit system, where different actions cost different amounts. But users revolted en masse at the new pricing that led to escalating costs, leading to a public apology from the CEO.

Many users said they ran out of requests in Cursor rather quickly under the new plan, in some cases <u>after just a few prompts when using Anthropic’s new Claude models</u>, which are particularly popular for coding. Other users claimed they were <u>unexpectedly charged additional costs</u>, not fully understanding they’d be charged extra if they ran over the $20 usage limit and had not set a spend limit. In the new plan, only Cursor’s “auto mode,” which routes to AI models based on capacity, offers unlimited usage for Pro users.

  TechCrunch

Windsurf tried limiting queries, offering "$20 for X queries/month." It was the desperate math of a company realizing its fundamental assumptions were wrong. For what it's worth, Windsurf prices API calls at 20% above the API price at $0.04 (which also means max 17% margins). Their plan pricing of 2,000 prompts for $15 equates to $0.0075 per prompt, costing 0.25 credits, which means $0.03 per credit. So the plan pricing is cheaper than the API pricing? They don't seem to be very good at math.

Source: Windsurf

Phase 3: Effort-Based Pricing Doesn’t Capture Full Effort (mid 2025 to present)

Replit took a fundamentally different approach while others scrambled with query limits and credit systems. They understood that the only sustainable path was to align pricing with computational costs. The result was effort-based pricing - a sophisticated attempt to match user charges with the actual work performed.

Source: Replit

Replit's effort-based pricing aligns costs with usage. They charge based on actual computational work: time spent, actions taken, lines read and changed. It's transparent, fair, and a genuine attempt to match pricing to compute costs.

But here’s the problem: we used Replit’s effort-based pricing model for our cost analysis. Even with the best pricing approach, changing a box shadow color costs $0.62 in compute but generates only $0.22 in revenue. The advanced pricing model still results in ~64% losses on nearly every interaction. Something doesn’t compute. (Note: I used Claude’s pricing for the analysis, the most expensive but the de facto for code editors, so Replit might use cheaper models to make the economics work).

Unfortunately, the company's margins, which should tell the clearest story, are clouded by creative accounting. Companies report 23% to 60% gross margins, but these numbers rely heavily on asterisks - like classifying AI model costs for free users as "R&D" instead of COGS.

Source: The Information

Strip away the accounting magic, and you're left with the reality: these are low-margin businesses pretending to be high-margin software companies. They're selling compute below cost, hoping the economics will improve before reality catches up. Unless they are like Replit and a few others, selling a platform play with higher-margin business lines like hosting and domain purchases to subsidize compute, the math doesn't math.

In Episode II, we’ll do an over-engineered deep dive into the token economics behind AI code editing. We’ll reveal how a simple request to change a box shadow color balloons into thousands of tokens and dollars of compute and why the economics of compute don’t compute.

Full disclosure: I use Kubera and love it enough to write this deep-dive. I get $100 in subscription credits through their referral program (and so do you!) if you sign up through links in this post and reply to their welcome email with my referral, but that's not why I'm writing this. I genuinely believe Kubera is the best solution for complex net worth tracking, and most people haven't heard of it. Consider this my public service announcement.

Early in my career, like any good fintech nerd needing to manage cashflow, I turned to personal finance management tools (PFMs) for the solution. What I didn’t realize is that my journey through PFM tools was the path we all take as we ascend the Over-Engineered Hierarchy of PFM Needs:

• Level 1: The Budget Trackers

• Level 2: The Money Managers

• Level 3: The Wealth Platforms

• Level 4: The Net Worth Dashboard

Level 1: The Budget Trackers

At this stage, I cared most about wrangling my spend into understandable reporting and finding opportunities to save money to enjoy my weekends and time away.

That’s where the Budget Trackers come in. I tried them all, from Mint as the OG budget tracking tool, to YNAB’s overly spreadsheet-driven approach, to Truebill (now Rocket Money)’s subscription management solution. Since my time at Level 1, I also tried new entrants like the beautiful Copilot and the re-imagined Mint as Simplifi. And there are so many more...

Copilot Money Panels

They primarily focus on your income and day-to-day expenses from your main bank account and credit cards. They provide a clear picture of your monthly cashflow so you can see if you’re spending more or less than you can afford.

Ultimately, I discovered too late that budget trackers should only be used for two major things:

1. Finding subscription sprawl: I found Rocket Money most effective at combating subscription sprawl. It has great auto-detection of existing subscriptions, a subscription calendar, and the ability to have the tool cancel subscriptions for you.

2. Quarterly spend reviews: Rocket Money and Copilot excel in categorizing spend to identify causes of spend creep and adjust lifestyle.

Rocket Money’s Subscription Tools

That’s it.

Diligently tracking my daily expenses and categorizing every item that passed my labyrinth of rules didn’t make sense. It wasn’t worth my time to sync accounts when they were out of sync (which happened troublingly often), re-categorize transactions, and update rules and filters.

The brutal truth is that after $100K in annual salary, budget tracking doesn’t make sense. Assuming your total take-home gets shaved by 25% for taxes, that’s $75K. Factor in your rent ($3K) and utilities ($150), and you’re down to ~$35K. With non-discretionary essentials like groceries, transit, and basic essentials, you’re left with ~60% of that or about $20K of discretionary spend. But only the portion of spend on negotiable expenses would benefit from budget tracking, unless you’re looking to reduce your lifestyle enjoyment, which means at most ~50% in the dining/bars, subscriptions, shopping, fitness bucket is negotiable/optimizable. Of that $10K, a budget tracker might get you 5-10% savings, one time (it’s hard to keep finding savings unless you have major lifestyle creep). So after all that work, you might have saved $500 - $1000.

Or, you could set aside 10% of your paycheck to a pre-tax 401(k) which grows at 10% per year in any diversified investment strategy. Without optimizing anything else, you would generate $1K+ per year in investment gains. This is much simpler, requires less mental overhead, and you still end up better off.

After a few years in tech, it’s time to graduate from Level 1 to Level 2 - the Money Managers.

Level 2: The Money Managers

Money Managers expand beyond your checking account and credit cards. They pull in your public investment accounts, joint accounts, auto loans, personal loans, and provide a complete financial picture. They offer planning tools, basic tax optimization insights, and help you think strategically about your finances.

The breadth is valuable when your financial life expands. Instead of asking "am I spending too much on coffee?", you're looking at:

• How are my investments performing across accounts?

• What's my total debt situation, including non-credit card loans?

• How do joint accounts factor into our combined finances?

• Are my investments tax-optimized across accounts?

The names you’ve heard are Monarch Money (useful but expensive) and Personal Capital (great until acquisition). These tools do everything in Level 1 and tackle other parts of your financial life. They also provide a clearer understanding of your financial trajectory and aspects of your overall wealth.

Monarch Money Cash Flow Tracker

But there are clear drawbacks. Investment tracking works for public markets through traditional brokerages, but it doesn’t always cover crypto and alternative investments. Key assets like your first house or car often need manual tracking. Planning is a good start, but if you’re trying to go beyond saving for specific goals to thinking more holistically about your financial goals, these tools don’t have all the answers. And while tax optimization is useful, you’ll still need to file on your own. They also have the same issues with syncing, maintenance, and comprehensiveness as some L1 offerings.

As you continue to achieve, your next level up is Level 3 - The Wealth Managers.

Level 3: The Wealth Platforms

At first glance, Wealth Platforms seem like the final evolution. Companies like Origin, Fifr, Range, SoFi, Wealthfront, and Compound aim to be your all-in-one solution. They do everything Level 1 and 2 tools do, plus advanced planning and analytics, dedicated investing portals, tax filing, and platforms that combine tech, AI, and human advisory.

Each carves out their niche: Origin excels at trust and will services, SoFi brings lending expertise, Wealthfront offers sophisticated robo-advisory, Range provides direct indexing, Fifr automates money movements, and Compound opens access to alternative investments. This feels like the top of the pyramid. Everything in one place, comprehensive service, what else could you want?

But here's the thing: once you reach a certain level of wealth, the all-in-one approach becomes a limitation, not a feature. What you need is simpler but harder to find: a robust net worth tracker that connects to everything, handles any type of asset or debt, and gives insights on your direction. A tool that doesn't try to do everything, but excels at showing you everything.

That's when you graduate beyond the pyramid to Level 4: The Net Worth Dashboard.

Level 4: The Net Worth Dashboard

The final evolution isn't about finding an all-in-one tool. It's about accepting the best-of-breed solution for every aspect of your financial life. I use Robinhood for brokerage, retirement & credit cards, Mercury for banking, Rivet for tax advisory & estate planning. This is the real pinnacle of the hierarchy - not trying to do everything suboptimally, but excelling at the one thing you need: seeing your complete financial picture to make better decisions about specialized tools for each aspect of your wealth.

At this level, you need a powerful dashboard that can track everything without attempting to do everything. That's where Kubera comes in.

Kubera Net Worth Dashboard

First, it has the most complete asset tracking I've seen. Beyond just pulling in traditional investment accounts, Kubera connects to 150+ crypto exchanges, wallets, and DeFi protocols, integrates with data providers for real estate valuations, includes VIN lookups for vehicles, stock options via Carta, private equity and VC investments, and even tracks things other tools ignore like internet domains. If it has value, Kubera can track it.

Kubera’s connections are infinite

The analytics are equally comprehensive. You can model net worth scenarios through retirement, break down asset allocation across platforms, and track performance by asset type over time. I’ve tried every company’s version, from Compound to eMoney, and nothing matches the granularity and simplicity that Kubera provides with straightforward scenario analysis and adjustable inputs.

Kubera’s scenario toggling are the best in the market

They have an interface to ask AI about your net worth and where to optimize. It has fully exportable data to upload LLM-ready JSON for other chatbots like Gemini and Claude.

The practical advantages stack up. The interface is clean and intuitive, especially for spreadsheet users. You can generate clean reports for mortgage lenders' initial underwriting. It supports multi-user access, including advisors. And it stores critical documents like wills, trusts, and other legal documents.

Kubera’s Recap lets you see which assets changed the most each week / month / quarter

The other recent feature is The Billboard, which ranks stocks, funds, crypto, banks, brokers, and exchanges in real-time based on subscriber usage. There is also a percentile calculator to compare your net worth to others on the platform.

Move aside Billboard Top 40, there’s another Kubera Billboard in town

What sets Kubera apart is what it doesn't do. It doesn't attempt to offer overly general tax filing service, trust services, or try to be your everything platform. At $249/year, it's focused purely on being the best possible dashboard for complex financial situations.

Like Maslow's Hierarchy, the journey through personal finance tools leads to self-actualization. You start with basic needs - tracking spending and finding leaks with budget trackers. You progress through psychological needs - understanding your broader financial picture via money managers. You reach for self-actualization through all-in-one wealth platforms. But true financial self-actualization comes from accepting that you need the best tools for each job, unified by a single clear view of your wealth - the net worth dashboard. The peak is about seeing everything clearly so you can make better choices about what you actually need.

They’re wrong, and this is another attempt at thinly veiled sexism, hidden behind a misunderstanding of business metrics. Let’s dismantle their weak argument piece by piece and learn about the WNBA and the basketball business.

The WNBA makes more than enough money to pay its players, especially considering recent deals.

Let's start with the basics around whether the WNBA has enough money to pay them more. The misunderstanding comes from an excessive focus on prior year performance to judge future year pay.

The WNBA reported $200M in 2023 revenue. With 40% year-over-year growth based on the women's basketball industry, we're looking at ~$400M by end of 2025. That's significant and just the beginning.

Because last month, the WNBA signed a groundbreaking $2.35B media rights deal spanning 11 years - roughly $213M annually starting in 2026. ION, the network airing games, saw 23M unique viewers alongside an estimated 54M in the US. This is particularly impressive given that, as an NBA subsidiary, the WNBA can't even independently negotiate these deals. Yet they secured the largest media rights deal in women's sports history.

But wait, there's more. The league is adding five expansion teams over the next five years. They are: Golden State Valkyries (2025), Toronto Tempo (2026), Portland Fire (2026), Cleveland (2028), Detroit (2029), and Philadelphia (2030). Each team will pay a $250M franchise fee. That's $1.25B in expansion revenue, or $250M annually.

These new teams will generate additional league revenue. The current 13 teams average $30M each in annual revenue ($400M / 13). Adding five more teams at similar performance increases annual revenue by another $150M.

Let's calculate the annual run-rate revenue:

• Current league revenue: $400M

• Media rights: $213M

• Annual expansion fees: $250M

• New team revenue: $150M

Total run-rate revenue: $1,013M

That's over $1B in annual revenue - and growing fast. Suddenly, the $50M annual loss critics cite seems less relevant. The available pool for player salaries could be dramatically higher without threatening the league's financial position.

Don’t believe me? Let’s break down the WNBA P&L today with its 13 teams to get to $56M in losses in 2025 (growing the $40M losses reported in 2024 by the same topline growth rate and assuming no efficiencies):

• Revenue: $400M

• Player Salaries: $40M (using ~10% of revenue as is widely reported)

• Non-player Opex: $400M (the plug to reach $40M in losses)

If we extrapolate this to 18 teams (adding 5 expansion teams), that's about $553M in non-salary operating expenses against our $1,013M run-rate revenue. We could increase player salaries from the current $55M run-rate (for 18 teams) to $250M - a 400% growth rate - and still maintain operating margins similar to the NBA.

We haven't even factored in several major growth opportunities:

• Season extension potential: The WNBA currently plays 44 games per season compared to the NBA's 82. Extending the season could significantly increase media rights and ticket revenue.

• Growing attendance: Teams are already hitting capacity constraints with 11,000+ fans per game (double 2022 levels). This is driving even higher ticket sales and league revenue.

• Social Media and OTT: The WNBA saw 2B views on social media platforms (4x last season), a 366% growth in WNBA’s OTT League Pass subscriptions, and a 2.5x increase in WNBA App MAUs.

• International expansion: The WNBA now has a 21% international roster, distribution deals for the UK, China, Brazil & the Philippines, and a Toronto expansion team.

• Tournament expansion: The league is exploring additional tournament play and extended playoff formats, following the successful NBA In-Season Tournament model.

• Merchandise: Since 2023, WNBA merchandise sales are up 600% and partner store sales are up 2033% year-over-year.

These initiatives could push revenue significantly beyond $1B annually.

Suddenly, the $50M annual loss that critics love to cite seems less relevant. The player salaries pool could be dramatically higher without threatening the league's financial position.

The money is there. The players’ pay isn’t.

The WNBA is a massively successful growing franchise whose value is understated if you consider net income alone, so it can pay players fairly.

Let's discuss the value creation standpoint because investments in player pay and other expenses create enterprise value. On the topic of enterprise value, the WNBA's 13 existing teams are now worth $3.5B combined (2x in the last year):

Add the five expansion teams at $250M each, and we're looking at a $4.75B league. Not bad for a "money-losing" venture.

Speaking of losses, the WNBA lost about $250M ($10M annually) over its first 25 years, plus another $160M in the last 4 years post pandemic with all stars entering the league. So that's a total of $410M of losses to build a $4.75B asset. In venture capital terms, that's better than a 10x return. Any VC would be eager for those numbers.

The "unprofitable" argument gets sillier when you look at the broader market. Over half of Russell 2000 companies operate at a loss. Some of the most valuable ones - Amazon, Uber, Airbnb - were "unprofitable" for years while building massive enterprise value. Tesla didn't turn a profit until 2020, yet created hundreds of billions in shareholder value.

Focusing on net income alone misses the point. The WNBA isn't just growing; it's creating enormous value. A 10x ROI is a no-brainer for the NBA. Paying players fairly to secure and grow that value is an easy decision.

The WNBA should pay its players fairly to compete with other leagues.

Let’s start with the comparison to the NBA, its parent and most comparable organization. Of course, the NBA is significantly larger, and we can adjust accordingly. The NBA generates roughly 10x the revenue of the WNBA, a still growing franchise. But this 10x revenue difference translates to a 100x gap in minimum salary ($1.1M NBA vs $65K WNBA) and a 65x difference in average compensation. How does that math work?

Of course, the math still doesn’t justify the WNBA players’ low pay as a percentage of revenue. The WNBA allocates just 10% of its revenue to player compensation, while the NBA shares over 50%, comparable across leagues. This disparity is unjustifiable.

What’s also troublesome is that only the WNBA can’t justify higher pay when other American women’s leagues can. The new Unrivaled 3on3 Women’s League pays $220K for 8 weeks - nearly matching the WNBA’s maximum annual salary of $235K. Read that again: The average player can make almost as much in 8 weeks in Unrivaled as the best WNBA player.

Even more concerning is the global competition for talent. Of the 11 major international women's basketball leagues, 70% pay higher average salaries than the WNBA. Top players can earn $1M annually in China.

When we can fairly pay players and we're losing talent to international leagues that do, maintaining the current compensation structure isn't just unfair - it's unsustainable. The WNBA can't build a world-class league while paying world-class talent below-market rates. It's falling short of every benchmark right now. And it needs to change.

So the WNBA makes more than enough money to pay its players, especially with recent deals. It’s a massively successful growing franchise whose value is understated if you consider net income alone, so it can pay players fairly. And the WNBA should pay its athletes fairly to compete with others domestically and internationally. The players deserve all of the raises and increases to pay that they get in the upcoming conversations this year. It’s a start.

I recently joined my good friend Nico Simko, Co-founder & CEO of Clair, on HR Tech Trailblazers to discuss my journey in fintech and my thoughts on all things HR Tech.

While I definitely didn't plan it this way, working across early-stage startups, hypergrowth companies, profitable trading firms, and now public companies has given me a unique perspective on how we can expand financial access at scale. A few highlights from the interview:

1. The evolution of payroll platforms is happening now: We're watching payroll companies transform from basic systems of record into sophisticated platforms for financial services innovation. Their thoughtful approach to data sharing, while sometimes challenging for fintechs, creates the foundation for sustainable innovation that protects both employers and employees.

2. Earned wage access isn't just a nice-to-have, it's a necessity: When we talk to users at the fintechs I've worked at about what matters most, it consistently comes back to liquidity. With 40%+ of Americans wanting faster access to their earned wages, this is more than a convenience and is all about financial security. At Block, we're thinking deeply about how to solve this at scale.

3. Ecosystem plays are powerful but complex: Connecting Square Sellers with Cash App users and leveraging our unique ecosystem creates unique opportunities to help both businesses and their employees. While the execution is challenging, I'm convinced that these interconnected solutions will define the next generation of financial services.

Thank you to Nico Simko, Karen Yung and the team that made this happen!

When the announcement of the transaction occurred, politicians, pundits and regulators claimed it would be detrimental for consumers because:

1. It created another giant bank that would eliminate banking competition.

2. It would limit consumer access and services.

3. It would exacerbate the network duopoly problem.

These arguments are not accurate. Now that the transaction is completed and implementation is starting, it’s time to revisit and break them down.

Myth #1: Capital One + Discover create a giant bank that eliminates competition.

Let's address the elephant in the room: the "too big to fail" argument. Critics cite the combined assets of Capital One and Discover as making the 6th largest bank in the U.S., proving regional banks will be crushed by this acquisition.

The argument relies on a flawed interpretation of perfect competition in banking. In this interpretation, the best economic outcomes result from many banks with no single one influencing the market price of banking or access to services.

But this view needs context. We don’t operate in a world of perfect competition for banking services but one dominated by systemically large banking institutions that can’t fail. Sure, Capital One becomes one of the largest banks compared to regional institutions, but what about the “little old” JPMorgan Chase, Citi, and Wells Fargo that CO-DF will also be fighting? Even combined, CO-DF will have 70% fewer deposits than the smallest of the Big 4 systematically important financial institutions.

The "too big" narrative ignores a key reality of modern banking: scale is necessary to deliver competitive services. Without sufficient scale, banks can't afford to provide scaled banking services, leading to worse service, limited underwriting, and higher customer costs. Larger banks have ~35% better loan economics, 30% lower expenses, and are better regulated than smaller ones.

Overbanked

posts.interspace.ventures/p/overbanked

We're not creating a new megabank. Instead, we're enabling an existing large bank to better compete with larger incumbents. That's how you drive real innovation in financial services. Sometimes you need a Goliath to fight other Goliaths.

Myth #2: The Capital One + Discover merger limits consumer access and services

Critics of the merger are so focused on the "big bank" narrative that they are missing how the customer bases and product offerings complement each other. This merger is about addressing gaps in each company's portfolio.

Capital One has mastered premium credit cards and tech-forward banking but struggled to expand their debit and everyday banking presence. Meanwhile, Discover has built a loyal following with cash-back rewards and US-based customer service but never cracked the premium card market.

This combination enables a unique full-service financial platform that can compete across all segments while maintaining the customer service that made both brands successful. Capital One's efficient self-serve technology and Discover's renowned US-based customer support create a service model that JPMorgan Chase and Wells Fargo cannot match.

The technology angle is crucial. Over the last decade, Capital One spent on digital transformation to disrupt itself before fintech could. It pushed for cloud migrations, labor force transformation, and a focus on using data to self-serve, personalize, and better serve its customers.

Sandeep Sood, former VP of Engineering at Capital One, says it now has the best technical infrastructure of any US financial institution of similar size - it’s “the world’s largest fintech.” Capital One is bringing that expertise to overhaul Discover’s legacy technology and infrastructure, anticipating ~$3B of annual operating and network synergies.

Critics arguing this hurts competition have it backwards. The combined entity will force other banks to improve their digital capabilities and customer service to keep up. That's how real competition works; it drives innovation and better customer experiences.

Myth #3: Capital One + Discover would worsen the network duopoly.

Let's start with the facts: Visa and Mastercard dominate payment networks with a combined market share of over 94% of US credit cards. The remaining players - Amex, Discover, and regional networks - fight for the leftovers. The network effects make it nearly impossible for smaller players to compete.

Think about it this way: A new payment network needs both merchants to accept it and consumers to use it. Merchants won't accept a network without consumer volume, and they won't choose a card that's not widely accepted. It's the classic cold start problem that has protected Visa and Mastercard's duopoly for decades.

This is why we so desperately need competition and a large player to compete. Small networks have failed to make meaningful inroads. A recent Fed study shows that despite 15+ minor networks in the US, they've had minimal impact on interchange rates or merchant acceptance (I'll bet only a few of you fintech nerds know Jeanie, Shazam, Maestro, NYCE, START, Culliance, Accel or the one I just made up because the brands are so unfamiliar). The painful truth is that you can't fight network effects with subscale solutions.

Capital One + Discover change this dynamic. Even combined, they will still be smaller than Visa or Mastercard, but they have the scale and resources to compete. Here's why this matters:

1. Capital One has massive consumer reach through its credit card base.

2. Discover brings an established merchant network and payment rails.

3. Together, they have the technology and capital to increase acceptance.

Capital One + Discover could be the first real challenge to the payment network duopoly in decades, benefiting everyone (including even Visa & Mastercard who thrive in competition but may have forgotten along the way).

The Real Opportunity: Scalable Banking-as-a-Service

While everyone's focused on traditional banking, they're missing the biggest opportunity. This merger positions Capital One to lead the Banking-as-a-Service (BaaS) space. Here's why that matters.

The BaaS market is fragmented between smaller players like Green Dot and regional banks monetizing their charters. But none have the technical capabilities and scale to serve major fintech partners effectively. Capital One + Discover changes this.

The banks that power your favorite fintechs

posts.interspace.ventures/p/the-banks-that-power-your-favorite

Consider the assets this combination brings to BaaS:

• Capital One's automated underwriting capabilities

• Discover's payment network and settlement infrastructure

• Combined fraud detection and risk management systems

• Massive data sets for better decisioning

• Technology-focused approach to banking services

This lays the foundation for next-gen fintech partnerships. Imagine:

• Co-branded cards with automated instant decisioning

• Built-style partnerships leveraging both debit and credit rails

• Embedded banking solutions with real-time fraud detection

• Direct access to a competitive payment network

We've already seen hints of this strategy. Capital One has been investing heavily in API infrastructure and cloud capabilities. Discover has been quietly building its digital banking platform. Together, they could offer what every major fintech wants: a full-stack banking partner with modern technology and competitive economics.

This isn't speculation. The investor presentation highlights technology investment and partnership opportunities. They're thinking beyond traditional banking - they're building the infrastructure for the next generation of financial services.

The Big Picture

The Capital One-Discover merger isn't just about creating another big bank. It's about building the first modern financial infrastructure company at scale. This combination has the potential to:

1. Force traditional banks to compete and introduce competition among the Big 4 SIFIs.

2. Increase customer access and services while supercharging tech.

3. Break the payment network duopoly for good.

My fintuition tells me we'll see this deal as a turning point in financial services, not because it created another big bank, but because it created the first real challenger to decades-old industry structures.

The critics aren't wrong that this deal will create a larger bank. They're wrong about why that matters. Will Capital One + Discover reshape financial services? That depends on execution. But for the first time in decades, we have the potential for real change in payment networks, banking infrastructure, and financial technology.

Sometimes you need to build something big to break up something bigger. This deal might just do exactly that.

Interspace VC Index - Q2 2025 Additions

If there’s a household name in global fintech backing, it’s DST Global. Yuri Milner’s brainchild, spun out of the Mail.ru empire in 2009, oversees over $50B in assets. Their $4B 2021 fund has allowed them to discover and double down on winners like Chime, Robinhood, Nubank, and Stripe. Few firms wield that level of firepower or conviction.

Next up, Flourish Ventures operates on a thesis-driven model from eBay founder Pierre Omidyar. Their small global teams focus on Series A and occasional B, pursuing high-impact opportunities that blend mission and scale. Recent highlights include leading a Series B for Reserv and enabling BaaS with Unit.

Formation just launched their $25M inaugural fund and they’re already busy. Strada alum Solly Garber and Floodgate alum Leeor Mushin are writing the first checks ($600K–$900K) to pre-seed founders with big visions including companies like Project 11. Their playbook: cap the portfolio around 30 companies, lean in early, and stay aligned with teams building fintech’s next infrastructure layers.

Of course, Foundation Capital hardly needs an introduction in Silicon Valley. Now on Fund 11 ($600M) and managing $4B across investment partners, they split their thesis between financial services/crypto and enterprise AI/SaaS. Partner Nico Stainfeld, Zach Noorani & Gracie Zaro have been developing their new Fintech AI Build accelerator which is accepting fintech applications for equity-free, stocked with cloud credits from OpenAI to Anthropic, coast-to-coast workspace.

Vine Ventures brings a New York-Israel flavor to early-stage investing. Since closing a $140M second fund, the small team led by Eric Reiner, Dan Povitsky & Demren Sinik has backed founders with $1-$10M checks and continued to elevate companies beyond capital. Their portfolio includes marquee fintech: Carta, Ramp, MANTL and counting.

Finally, White Star Capital deepens our venture capital coverage. Since 2014, they’ve quietly grown to $1.4B in AUM and led Series A/B rounds for fintech and B2B SaaS including early investments into Percent, OatFi, and BoomFi. Their New York team combines ex-JPM tech bankers, quantitative analysts, and product-obsessed associates who scout the next wave of fintechs.

That’s a wrap for this quarter’s Interspace Index updates and here’s the full list - Interspace Index - Fintech VCs | Updated July 2025. Think we’ve missed a fintech VC? Reply here or DM me @heysamir_ on Twitter.

I’ll refresh the Interspace Index quarterly, sticking to our criteria: a primary focus on fintech, at least one fintech investment in the past year, or genuine community-builder credentials via founder nomination. Onward!

Yeah, this was awkward. The same day I posted about Wells Fargo's deal, Bilt announced a $250M round valuing the firm at $11B with $100M of strategic capital from United Wholesale Mortgage and WF is ending the deal early. Was I off the mark?

Maybe it wasn’t actually about economics.

The early termination of the Wells Fargo deal initially confused me. I still firmly believe that economically this wasn’t a bad deal for Wells Fargo, especially since the core criticisms came from a WSJ article that misinterpreted Wells Fargo executives’ statements. One example of many I detailed in my post:

WSJ said Wells Fargo assumed 50-75% of balances would be revolving. However, for the credit score Bilt targeted, the revolving balance is only 20-30% or less. Given the size of an average rent payment in someone’s monthly spend, getting to 50-75% would mean targeting subprime creditors (which aren’t eligible for the card at <580) OR assuming the core demo can revolve on rent payments (which isn’t possible or this product wouldn’t exist).

Instead, Wells Fargo likely assumed 50-75% of non-rent payments would revolve, amounting to ~10-15% of total balances. This assumption aligned with the actual metrics from the partnership, indicating the deal wasn’t unexpected economically. There’s unfortunately a few other misinterpretations in the article like this which when reinterpreted make it clear that the partnership economics were actually sound.

But on a basic level, Wells Fargo also acquired ~675K cardholders for ~$120M/year. If you're a bank, you'd pay $180 CAC any day since customer acquisition is often $1K+ given the average bank relationship lifetime is 10+ years. Remember Chase CEO Jamie Dimon's quote:

One of the fictions here is that the marketing cost ... gets booked over 12 months. The benefit of the card gets booked over 7 years. The card was so successful it cost us $200 million, but we expect that to have a good return on it. I wish it was a $400 million loss.

Of course, the business model was potentially different than what Wells Fargo imagined when it underwrote the deal. Even this is a stretch because the numbers show card spend was never more than ~25% of overall rent payments and rapidly went down so it couldn’t have been a surprise. In any case, with $1.4B in outstanding balances per WSJ, and ~675K members (15% of 4.5M homes on the platform), the $2K average revolve might not have looked appealing from a traditional credit card economics standpoint, but it was about much more.

Instead of a card with high revolving balances and a traditional credit card economics model, they were getting a customer acquisition engine and a lower-touch, lower brand engagement sponsor bank model. While Wells Fargo could have run a sponsorship model that many banks have minted billions with, it wasn’t ready to take on this model that Cardless, Bilt’s new card partner and behind Coinbase’s new Bitcoin Amex card, will now monetize. The economics are viable, but some banks must be ready to take a less prominent role if they can't bring the rewards network.

The banks that power your favorite fintechs

posts.interspace.ventures/p/the-banks-that-power-your-favorite

But Wells Fargo wanted to increase their brand equity. They wanted what Chase got with Chase Sapphire Reserve - the Wells Fargo Bilt Card. Instead, it became the Bilt Rewards Card with a tiny Wells Fargo reference. That's Wells Fargo's loss and an opportunity for First Electronic Bank, the sponsor bank powering Cardless.

Don’t be surprised by more new entrants in this space. When valuations reach decacorn status, startups will emerge. I see potential entry points from one or all of the following:

1. Chase entering directly and leveraging its in-house and partnerships-driven rewards network or issuing via a co-brand.

2. Amex (with its substantial Offers rewards platform) entering via co-brand partnership to launch this partnership, potentially issuing through Cardless or Imprint.

3. A startup partners with either to issue a “points on rent + points on mortgage” card. Haven, Mesa and Further are already in the mix. It’s going to grow.

It’s a great time to enter the space Bilt has paved, given the expected expansion into condos & HOAs, student housing, and mortgages. It’s a different model, but one that can work well; consider the co-brand cards from Chase or Capital One.

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Maybe it was a technology and CX problem.

Of course, to be the bank behind the fintech, you need to be built to engage with a tech-forward company and a tech-savvy userbase. It’s unclear if Wells Fargo was ready for this experience. Its underlying technology and integrations were a sore spot for Bilt with complaints about customer support and card repayments leading to a low 1.7/5.0 rating on Trustpilot:

Bilt would have wanted to disintermediate Wells to improve the customer experience, but this would have made it harder to identify Wells Fargo behind the app. Given Wells Fargo’s regulation, it likely made sense to reduce and retrench the business rather than overhaul the legacy tech infrastructure.

Maybe it was fear of competition.

While Wells Fargo let people believe the end of the deal was an economics story, it was probably bristling at Bilt signing up another mortgage provider, United Wholesale Mortgage, which invested $100M of strategic capital into the latest round.

United Wholesale Mortgage (UWM) is a wholesale mortgage lender that underwrites loans for independent real estate brokers. Since 1986, UWM has been the largest mortgage lender in the U.S. Brokers originate loans for home buying, and UWM underwrites and funds them, then sells them to secondary markets of mortgage servicers. They also provide tech, training, and support for mortgage brokers.

Bilt was always going to build a marketplace because multiple providers make a network compelling. But if WF had to compete on price, they knew they wouldn't always win. Perhaps it was better to exit the partnership rather than becoming commoditized in a race to the bottom on pricing.

The breakup was better for everyone involved. Bilt gets a tech-forward partner that doesn’t mind taking a backseat on brand because it monetizes on transaction volume and deposits, not customer acquisition and cross-sell. Bilt adds UWM to supercharge its mortgage and home-related services expansion while Wells Fargo rethinks its strategy.

If you Bilt it, they will come (with high-flying valuations)

Finally, a word on Bilt's valuation. I assigned a lofty 15x multiple on $200M of revenue. Should the valuation be $15B when the company reaches $1B in NTM revenue? No, not when it is operating what will be primarily a rewards network at mature scale with more measured growth prospects.

An excellent article from my friend Michael Bloch, Partner at Quiet Capital, states that Delta made ~10% of its revenue (almost $6B in absolute and up to 50% of its profits) from co-brand partnership with Amex, a useful proxy for Bilt's rewards network business model.

Let's assign a generous $20B to the Delta rewards network with Delta's market cap of ~$40B. That gives rewards a 4x multiple. So what does that mean for Bilt, who is expecting $1B in revenue by Q1 2026? That takes us back to ~$4B for Bilt. Back in my day, $4B was impressive though, but maybe not good enough for Bilt's lofty aspirations.

Let’s see how Bilt’s valuation develops as it matures into a potential IPO-ready company in a few years. Perhaps Bilt’s high-flying valuation will be a rising tide to lift all boats, or maybe we’ll see the true valuation rationalize with time.

Bilt is back in the news, but not for a misunderstood bank partnership that everyone wrote off as unsustainable. It’s for rumors they’re attempting to raise at a whopping $10B valuation, making them unofficially a decacorn if true. While I agree the valuation is generous, I disagree with the critics that Bilt struck a bad deal. By extension, it’s clear the Bilt partnership with Wells Fargo and Mastercard is a smart and replicable one, and startups should copy it (WSJ gave you the playbook, and Bilt’s recent update to valuation shows it works).

They Bilt a Housing & Neighborhood loyalty network

To understand Bilt, we need to explain its platform and business model. At its core, Bilt is a rewards network and loyalty program. It is an enhanced and streamlined affiliate network.

Here’s how it functions:

1. Merchants go to Bilt for access to their userbase.

2. Bilt works with the merchant to structure an appealing rewards offer, like significant cashback, to bring users into the store.

3. The merchant agrees to provide a 10% bounty. Bilt offers users 8% back in points, keeping the 2% on every transaction.

Everyone wins. Merchants attract more users at a comfortable price. Users get significant cashback and discover new merchants. Bilt makes a tidy sum at nearly 100% gross margin.

The economics can be better for Bilt and the merchant because, while the headline is perceived as 10% cashback, it’s actually 10 points per dollar and the business of points is a whole different ball game. They must be redeemed to matter and there’s a drop-off of up to 40% in points spending. The points to cashback transfer is only 1:0.5 so 1 point is worth $0.50 cashback. A merchant can offer 10% cashback and be comfortable knowing it’s only 3-5% cash out the door.

The Business of Free

posts.interspace.ventures/p/the-business-of-free

They Bilt a viral user acquisition engine

How did they build a strong userbase to get merchants excited about marketing to them? That’s where Bilt’s value proposition came in - points on rent, for any building no matter what. Recently, the CEO, Ankur Jain, explained this:

At its core, we started Bilt to reward people on their biggest monthly expense, which is rent. And it’s funny because it’s one of those things where people have totally taken it for granted. But you spend 30%, 40%, in some cities 50% of your income on housing costs every single month, and, yet it’s the one category that hadn’t really been modernized to the way that the rest of the payments ecosystem has evolved. I mean, if you’re under 35, the only reason you probably have a checkbook still is for rent. So can you digitize that, and can you do what other payment worlds have done, and bring rewards into the experience?

First, let’s set the economics aside for a moment to understand mechanically how rental payments via Bilt work. There are two ways Bilt makes that happen:

1. Direct property integration: Bilt integrates directly with the rental property. This enables seamless, instant, on-time payments for landlords while providing a feature renters want. Bilt monetizes payment processing like a standard processor.

2. Indirect property integration: Bilt offers a smart workaround for properties that haven’t integrated with Bilt. They set up a shadow bank account for users where the company provides just-in-time funding for rent payments off their own balance sheet and debits your credit card. While it doesn’t generate economics on its own, it expands their reach and increases user acquisition while avoiding the credit card processing fees landlords charge.

Together, Bilt can credibly market a claim of providing points on rent for any building that accepts bank payments.

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They Bilt valuable (& replicable) strategic partnerships

Points on rent is an amazing benefit, but so is 100% cashback. It doesn’t matter unless you can build a sustainable business model around it. That’s where Bilt’s two key strategic partnerships come in.

Mastercard

Mastercard has stayed out of the headlines, but it is a key part of the strategic partnership ecosystem Bilt created. Normally, rent payments over the network incur substantial network fees that make them unsustainable (hence the high credit card processing fees or inability to use your credit card to pay a landlord).

But Bilt struck a favorable deal with Mastercard to reduce or waive typical network fees. This was likely in exchange for a treasure trove of data about renters’ financial behavior that networks normally don’t see with ACH/wire transactions. Payment networks talk about “new flows” to stay ahead of any payment flows that might reduce dependence on them, like real-time payments (RTP), FedNow instant payments, A2A transfers, or BNPL. You can bet that Mastercard values this data and would pay for it.

Wells Fargo

Restating my 2024 over-engineered year in review, the Wells Fargo partnership is the most well-known and controversial from the Bilt saga. The drama started in June 2024, the WSJ reported that Wells Fargo was losing millions monthly on its partnership with Bilt Rewards, and it turned our ecosystem upside down. The gist of the argument was the following (as summarized by Sheel Mohnot on X):

1. Wells Fargo assumed the Bilt card would be the top one for renters with balances, but most users use it only for rent and five required transactions.

2. Wells Fargo assumed 65% of card purchase volumes would be non-rent, generating interchange revenue. However, the reality was over 65% rent-related, earning very little (<40bps gross and effectively negative with cashback).

3. Wells Fargo assumed 50-75% of balances would be revolving and earn interest, but most don’t carry a balance and only 15-25% is revolving.

4. Wells Fargo is paying ~0.80% to Bilt on rent payments and hoped to cross-sell its mortgages, but that hasn’t happened yet.

The early WSJ takes that the cash back on rent payments model doesn’t work are wrong. Both WF and Bilt denied issues in the contract, which extends until 2029. It is also funny that a WSJ reporter talked to only Wells Fargo about the contract negotiation and took their word on opinions that could just be negotiation talking points. Didn’t they wonder why WF was eager to “leak” this?

Here are a few counterpoints to the article’s main points:

1. We’re 2 years into a 7-year partnership. It’s too early to measure top-of-wallet success. Any increase in spending is a success, and they have the actual rent payment on the card (if rent isn’t your biggest monthly spend, I want to be you).

2. Wells Fargo could not have thought this fact was true and the statement was misinterpreted. They said 65% of non-rent card purchase volumes wouldn’t relate to rent-related payments (e.g. utilities, maintenance, internet) and it was misstated. Wells Fargo knew the majority of card spend would be rent-related as that’s the case for every individual anyway (~50%+ spent on rent/housing). People were eager to criticize Bilt and assume Wells Fargo was foolish, but remember “Banks are slow, not stupid.”

3. I can’t believe this was true and this is another misinterpretation. The actual statement was 50-75% of non-rent payments would revolve. For the credit score that Bilt targeted, the revolving balance is only 20-30% or less. Getting to 50-75% would mean they’re targeting subprime creditors which aren’t eligible for the card (<580) OR they assume the core demo can revolve on rent payments (which isn’t possible or this product wouldn’t exist).

4. We’re two years into a 7-year relationship. At the time of the article, Bilt didn’t have an upsell motion for homebuyers. Within months, they launched a program to earn Bilt points on home purchases and revamped tools to help renters estimate monthly payments including taxes and insurance. This is just the beginning, and any smart fintech nerd can see many ways to expand the upsell opportunities.

The article hinged on a supposed $10M/month loss, but for a bank making $20B/quarter, this is a rounding error. Bilt may not succeed, but judging them by this article is the wrong way to evaluate them.

Remember Jamie Dimon’s quote on the Chase Sapphire Reserve Card’s success:

One of the fictions here is that the marketing cost ... gets booked over 12 months. The benefit of the card gets booked over 7 years. The card was so successful it cost us $200 million, but we expect that to have a good return on it. I wish it was a $400 million loss.

The article increased interest in consumer credit in the mortgage space. We saw mortgage servicing platform Haven launch in September 2024, Mesa launch in November 2024, and Further to help aspiring homeowners. This model works, it’s replicable, and startups are already doing it.

They built a self-sustaining virtuous cycle.

With these three pieces, they have what every startup wants - sustainable product market fit with a self-reinforcing virtuous cycle:

1. More users join Bilt for unique rental/mortgage benefits and a network of merchant rewards.

2. More merchants join the platform and offer more rewards due to the growing user base.

3. Bilt can negotiate better strategic and financial partnerships to strengthen the business model and unit economics.

When this works, it benefits all stakeholders and mints a sustainable, competitive business model. The market will reward you handsomely (perhaps too handsomely) for building in this space, as seen by Bilt’s jaw-dropping 50x revenue multiple implied by their latest rumored round, and you can do this profitably as suggested by the rumors of Bilt having been profitable since their prior round.

All that said, this valuation is still overpriced. Bilt is a loyalty rewards network, and we have many. It makes no money on the credit card (as was always their plan), so why are we valuing it like the next big neobank? They have an amazing business that should get a ~15x revenue multiple at most, taking them to $3B (which was their last round). If someone offers 2% back on rent + 1% back on mortgage and uses a company like Percents for merchant-funded rewards, I don't see how Bilt competes except on rewards pricing in a downward trend.

I credit the Bilt team for building (bilting?) a network effect and competitive moat that is hard to dethrone. But let’s remember that this network effect makes Bilt’s business model hard to replicate, not special partnerships. Startups in this space have a shot at expanding this concept and building on or adjacent to Bilt. There’s room for many winners because your competitor isn’t Bilt, but the 99% of people not optimizing their rent and mortgage spend. I’m excited to see what more fintech nerds build and how users continue to benefit from this innovation.

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So I decided to take a BLADE helicopter from JFK to their helipad on the west side of Manhattan. For those unaware, BLADE is modern helicopter commuting:

BLADE is a technology-powered, global urban air mobility platform committed to reducing travel friction by enabling cost-effective air transportation alternatives to some of the most congested ground routes in the U.S. and abroad. Our long-term goal is to make aviation more accessible by preparing for the adoption of EVA (Electric Vertical Aircraft) quiet, carbon-neutral and cost-effective aircraft that are currently being developed by our investors and partners.

The helicopter service is straightforward. It has a maximum of 4 passengers per flight, Uber-like booking, and a modern helicopter fleet. Trips take ~15 minutes from hangar to touchdown with a 5-minute on-flight journey that also serves as a helicopter tour of your favorite cities. They will pick you up from the airport, drive you to the helipads, and offer dedicated private cars from the well-located helipads to the city (for an additional fare).

My flight took 5 minutes. Then, another 15 minutes for the Uber into Times Square. I arrived just in time to see the company I had been with for 1/3 of my career finally list.

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"It's Too Expensive"

This is the most common pushback, but it misses the forest AND the trees. For me, there was no other way to make the time given my flight, so the marginal ~$100 for a priceless event is obvious. Practically, to make the time any other way, I would need an earlier flight the previous day which would cost over ~$150 extra. So it was the cheapest option for me, empirically.

But I can prove it’s the best value option even on non-IPO days. Here’s the math:

(1) Time Saved

The average BLADE trip takes 15 minutes door-to-door, while a cab ride from JFK to the same location takes about 2 hours.

Using an average salary of ~$200K for tech workers with 10 years of experience (likely low but fine for this purpose), the marginal minute value is ~$1.80. Saving at least ~100 minutes of travel time, the value is conservatively ~$180.

The $195 BLADE fee includes tip, so the time saved covers the BLADE’s $163 cost. But we’re not finished.

(2) The Helicopter Tour

When booking a BLADE, you don’t consider the benefit of the breathtaking helicopter tour of the city, but you immediately experience it. I’ve flown into and out of the city, and the experience is equally impressive. Normally, people pay for that privilege.

I estimate the BLADE flight time to be ~5-7 minutes. At 5 minutes, it should be worth at least $260 / 15 × 5 = $86. They aren’t highlighting things for you, but that’s what your phone is for!

Economics

We pay $195 per seat for $266 value via time saved ($180) and extra benefits like a helicopter tour ($86). That seems like a smart financial decision. Suddenly, that helicopter doesn't look so expensive. But is it safe?

"It's Not Safe"

This is usually the strongest pushback against helicopters. However, despite the perception, helicopters are much safer than they appear.

Safer than Air Travel

First, let’s compare flying on a commercial helicopter like BLADE to other forms of air travel. BLADE helicopters are considered civil helicopter operations, including sightseeing tours, charters, air ambulance, news agencies, film agencies, and agricultural operations. In that group, the fatality rate is ~0.62 per 100,000 flight hours.

For commercial non-sightseeing operations like BLADE, safety is even more evident. According to the US Helicopter Safety Team, there hasn’t been a helicopter accident in New York City for as long as the FAA has recorded the data (at least 18 years). So the rate is specifically 0 for commercial non-sightseeing operations. Compare that to other forms of air travel:

Safer than Trains

An alternative to flying a helicopter is to use a train, which should be extremely safe given the infrequency of major accidents, right?

Not exactly. Train and other wheeled travel accident rates are conveyed in accidents per million miles driven rather than per hour traveled, so we need some math. Train accident rates have been rising and average ~1.4 accidents per 1M miles traveled. Trains travel ~60MPH inclusive of stops (which is why any train on the eastern corridor is no faster than driving), so 1M miles translates to ~17,000 hours of travel. That means trains are closer to 8.3 fatalities per 100,000 hours. Yikes.

Safer than Cars

Lastly, let’s compare cars like the Uber or taxi I’d normally take. Cars aren’t safe. But just how unsafe surprised me when we compare them using the same metrics as helicopter safety.

At ~40MPH for cars, 1M miles translates to ~25,000 hours. So, 13 deaths per 1M miles driven is 52 fatalities per 100,000 hours driven.

Will autonomous driving save us? No. Even with a generous ~60% reduction in crash rates per million miles driven between normal and L3 autonomous driving, we’re still looking at 21 fatalities per 100,000 hours driven. Try to ignore this when taking your next Uber.

But what about Kobe Bryant?

We all fall into this psychological trap. Kobe Bryant's terrible helicopter tragedy, the recent New York sightseeing helicopter crash - these stick in our memory precisely because they're rare. It's the same reason people fear shark attacks but not bee stings, even though bees kill more people annually.

Consider this: multiple plane crashes kill thousands yearly, but a single helicopter accident makes global headlines for weeks. The rarity makes it memorable, which makes it feel common. It's a cognitive bias, not a statistical reality.

But you have no control in a helicopter

This one's interesting because it reveals our perception of control versus actual control. In a helicopter, you have a wider viewing aperture than any plane - no "metal box with tiny porthole" experience. You can see everything happening around you.

You've got a human pilot making real-time decisions, not an autopilot system. You have higher escape capability than a plane at 30,000 feet. Yet we feel more "in control" in a self-driving car or on a train where we literally control nothing.

The control argument falls apart when you realize you have about the same level of control in helicopters as in trains, planes, or increasingly, cars.

The Real Question

The real question isn't why helicopters are scary. The real question is why are we bad at risk and value assessment? We reject the higher cost option due to poor value assessment. We fear the statistically safer option because it feels unfamiliar, while accepting higher risks in our daily commute because they feel normal.

Next time you're stuck in traffic for 120 minutes to get somewhere a helicopter could take you in 10, ask yourself: what are you really afraid of?

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I’ve always written on Interspace because I’m a fintech nerd and enjoy writing. What started as a way to learn to write compelling fintech Twitter threads (and recover from the burnout of my hyper-growth startup career) became one of my favorite interests. Making the complex simple and reconstructing thoughts to fit single 280-character tweets that engage someone to page through 10+ tweets at a time was incredibly captivating.

As my posts became more frequent, Twitter’s algorithm favored shorter takes or singular ultra-long tweets. With worsening search features, I moved my over-engineered fintech tweets to Substack to become over-engineered fintech posts.

The format worked better than Twitter threads and allowed me to expand my thinking to longer essays with more data, charts, links, and multimedia. I found it easier to broaden my writing interest from fintech to AI, governance, and technology. Eventually, Substack’s limited features and theming became a blocker, so I moved my newsletter from Substack to Beehiiv.

For customization, brand equity, and product innovation, it’s the clear choice for any newsletter creator. Beehiiv is better in almost every way except for Substack’s stubborn network effect around its recommendations feature that generates subscriptions. Beehiiv will get there eventually as it launched Top 4 to provide the Recommendations network effect, and it’s better in every other way, but it’s worth noting Substack’s lone standout feature.

Moving to Beehiiv prompted me to think about monetization and rethink my approach. I didn’t realize this at first. As a full-time operator and because writing has only been an interest, I never considered monetization. But money is a strong incentive for focus in a busy schedule. When folks like Sheel Mohnot make ~$50K / year for posting interesting content (alongside a full-time VC job) and CJ Gustafson left a lucrative career as a high-powered CFO to run the Mostly Metrics newsletter with ~200,000 subscribers, I wondered about the potential.

Broadly speaking, there are two main ways to monetize attention:

1. Subscriptions: Your users pay a recurring fee for access to premium content. You can have a fully paywalled experience or offer some free content with subscriptions for ongoing or exclusive access (Mostly Metrics, Fintech Business Weekly, Payments Culture)

2. Advertising: Your users see advertising, promotions, affiliate marketing, and other forms of advertising in your newsletter. Advertisers pay you for the audience and/or engagement (Fintech Takes, Popular Fintech, Fintech Brainfood)

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Subscriptions

The playbook for Option #1 is simple. Get as many people to read and subscribe to your content and price it to maximize subscribers and optimize revenue. We can derive key unit economics from Lenny Rachitsky of Lenny’s Newsletter. In under 5 years, he went from 0 to 1.1M subscribers. His paid subscription is ~$10 / month (often a corporate L&D expense). With 15,000 free subscribers and 500 paid members (~3.3% conversion), he was netting ~$65K/year before fees (Substack takes ~20%). At 1M, he should be netting ~$4-$5M / year in gross fees. That’s a lot of money.

I now have about 1,000 subscribers. With a conversion rate of ~3%, I’ll have 30 paid subscribers at $10 / month, resulting in about $300 per month if I started now. It’s a start. To do subscriptions well, you must gate information between the free and paid newsletters to make paying feel worthwhile. I’ve seen folks limit the number of posts for free vs. paid, provide special content for paid subscribers only, and/or exclusive events for subscribers. You don’t need everything at once, but there needs to be some gating or your free subscribers won’t convert.

That sounds like a lot of work, and it interferes with what I started this newsletter to do: inform and distill complex concepts into digestible essays.

I don’t want an entrance fee for information I’m trying to make accessible.

Advertising

With advertising, the approach is different. Advertisers pay for attention and engagement, so the goal is less about convincing an engaged audience to pay for information access. Instead, the goal is to build a large or engaged memberbase worth spending money to promote products to.

Generic advertising

Advertisers will pay per impression or qualified engagement, with CPM (cost per 1,000 units) as the primary metric and the units being measured as views or engagements. Values range between $5 - $10 per 1K impressions. Twitter recently started monetizing with CPMs at ~$4 per 1,000 qualified impressions (engagements: likes, replies, reposts). Twitter engagement is lighter than a blog post, so we will use a YouTube or Pinterest CPM instead. If I ran generic ads on my blog posting ~2-3x / week at ~$15 per 1K engagements, I will earn ~$180 per month.

That said, I don’t want to charge for information access or dilute my content quality with generic ads. So this isn’t a realistic option for me.

Sponsored Advertising

One way to do this is to spend more time with brands and advocate for them as a product user (paid influencer) or through sponsored posts. Given the Interspace community comprises operators from major fintechs and exciting startups, I could work with brands to craft narratives that explore topics interesting to readers and appealing to brands.

How much could that accrue for my newsletter? Packy McCormick, of Not Boring, charged ~$5K per post and ~$20K for a sponsored deep dive when he had ~36,000 subscribers ($140 per 1K subscribers). I could charge at least ~$150 per post and $500 for a deep dive. Adam Ryan of Workweek suggests Packy might charge $200 CPM or ~$160 post-fees. At 2-3 posts per week and ~1 deep dive per month, that might be $2,000 monthly.

I would need to maintain my post frequency and ensure my brand partnerships resonate with Interspacers. I would need to find the right partners who believe in our vision, and have a network of fintech operators to choose from.

But the incentive alignment is there, the content can remain free, and there can be a win-win when I am sponsored by products I use, people and thought leaders I respect and services I trust.

This is the way.

Interspace is going to the moon

With that in mind, Interspace is going sponsored over the next few months and some future content may be sponsored with explicit sponsorship tags and guidelines.

As always, content will remain now and forever free. And while sponsors may pay for my posts, editor ownership will always remain with me; brands choose the types of content they want to sponsor but will never get direct editing privileges.

Ultimately, I want to align incentives and ensure writing stays a focus of mine when other priorities in life become increasingly in demand of attention. Help me make Interspace the priority because I have so much more to share.

If you want to reach the leading minds in fintech, stratfin, tech, AI and politics, respond to this email and we’ll make it happen.

Coinbase is building a modern payments network from scratch, using the best traditional and blockchain infrastructure. The future of fintech payments is here and we are witnessing something transformative.

I didn't connect it until Jev explained it clearly:

1. Stablecoins addressed the volatility problem.

2. Coinbase’s Base addressed the speed and cost problem.

3. Coinbase Commerce protocol can now address the commerce transactions problem.

The missing element is chargebacks and representment, and I can't figure out why they skipped it. It's crucial to commerce and I don't see a replacement, as it ideally funds the disputes system which increases trust between merchant and user and should boost acceptance.

Kazanins and many others believed the system was intentionally skipped because Coinbase didn’t view it as necessary for a modern payments protocol. “It’s a cool feature for consumers, but it harms merchants (and is likely abused by consumers).” Based on their Shopify experience, the fraud and uncertainty from chargebacks didn’t justify the user trust benefit or offset the operational and financial expense of maintaining this dispute system.

Coinbase seemed to share the view, but I wonder if it was biased by their design partner, Shopify, dedicated to serving merchants. Matt Jones of Payments Culture pointed out that “no one wants to build chargebacks because it’s really hard” but as a user, if you can’t chargeback a large purchase like travel expenses, you won’t make the purchase. This was the sentiment of many in the commerce space, that chargebacks are essential for users to adopt the new payments network.

With all that said, there is no issue at all if you think about where the responsibility for maintaining a disputes & chargebacks system lies. Kazanins noted that the protocol doesn’t prevent Operators from building a chargeback mechanism on top of it, giving Coinbase the benefit without the responsibility to maintain it. Indeed, Jones pointed out the difference between rails (the protocols in which payments are made) and schemes/networks (the methods by which stakeholders agree to transfer payment data between each other). It is the schemes, like Visa and Mastercard, that have historically developed and maintained chargebacks & disputes systems, with each having their own procedures and infrastructure.

Coinbase is taking an explicit stance that chargebacks should happen at the schemes level versus the rails level in their omission of the chargebacks & disputes system at the protocol level. They should have mentioned or guided this concept to get buy-in from traditional ecommerce participants wary of a new protocol.

The protocol’s introduction may help us challenge our legacy assumptions around chargebacks & disputes. Should we remove the entire system since it could be an unsustainable and expensive one that doesn’t support itself as some argue? Or should we take a new approach with different chargeback options for different risk merchants with onchain transactions as a deterrent and built-in incentives to price and manage risk as Jones suggests?

Ultimately, as Jones says, “If someone can build a solution where the competence and value assigned by issuers isn’t a factor in dispute success, that would be a net benefit of any new system.” This is a future I am excited to see.

I’ve seen more focus on earned wage access, but fintech nerds may not understand the opportunity or unit economics. So, it’s time for another over-engineered deep dive.

To set this up, let’s define Earned Wage Access / Early Wage Access / Earned Wage Advance (“EWA”). At its core, EWA relies on three tenets:

1. Specifically for intra-paycheck liquidity

2. Extremely short duration (<2 weeks)

3. Non-recourse

These tenets define EWA’s core principles and minimum requirements. Non-recourse is a critical element, allowing for the key features of the typical EWA product:

• No fixed repayment schedule and limited ability to collect on outstanding advance beyond the agreed-upon revenue stream (the specific paycheck).

• No need for state lending licenses for originations.

• No requirement to disclose the APR or structuring fees as APRs, which would make these products seem predatory.

Many EWA flavors exist, but they vary across two dimensions impacting risk and core business model and unit economics: 

Direct Employer Connected vs. Cash Flow Underwritten.

Direct Employer Connected (“DEC” EWA)

With direct employer-connected EWA firms, EWA is provided via a direct connection to the employer’s payroll. This allows sophisticated payroll & time tracking to calculate earnings and provide an advance.

Key benefits & Considerations:

(+) Lower underwriting risk due to verified calculated earnings

(+) Can offer services for free and monetize through card interchange and/or instant transfer fees.

(-) Complex tech stack requiring multiple integrations with large payroll providers

(-) Lengthy sales cycles to acquire employer connections

The structure makes it difficult to run DEC EWA profitably without major scale because the upfront tech investment and long sales cycles mean slow but consistent growth. However, strong unit economics allow successful players to become profitable quickly with the right distribution.

Unit Economics (for $200 wage advance):

+$3.00 fee charged to payroll provider / employer for EWA

+$0.50 for customer service & platform (charged as platform fee and amortized)

-$2.00 estimated losses (1% loss rate)

= $1.50 (75% contribution margin, excluding financing)

Key Players / Competitive Landscape (by estimated valuation and target employer size)

XL (>$500M): DailyPay (Enterprise), PayActive (Mid-size)

L ($150M - $500M): Clair (SMB), Rain (Enterprise)

M ($50M - $150M): 

S: (<$50M): Clockout, TapCheck, Wagestream

M&A / Exits Landscape

M&A can be limited because small players are generally sub-scale as they build employer integrations and quickly become scaled with no easy M&A entry point. Once key employer integrations are set, it takes time and/or select partnerships to accelerate growth.

Conversely, only with DEC EWA do you see significant independent players because unit economics are favorable, growth is steady and low cost, and profitability doesn’t depend on building out the product suite.

Cash Flow Underwritten (“CFU” EWA)

With EWA, firms using cash flow underwriting use sophisticated transaction analysis to estimate earnings and provide an advance.

Key benefits & Considerations:

(+) Faster sales cycle since it can be offered directly to customers.

(+) Simplified tech stack with no need for direct employer integration.

(+) Can run a business profitably at small scale.

(-) Higher underwriting risk due to EWA loss rates (CFPB estimates ~6%)

(-) Need to charge fees to counter underwriting risks.

Unit Economics (for $200 wage advance):

+$5.00 user access fee

+$2.00 Instant Transfer fee

-$0.50 Instant Transfer expenses

-$3.00 Loss Rate

= $3.50 50% contribution margin (ex. financing)

Key Players / Competitive Landscape (by estimated valuation)

XL (>$500M): Chime, Earnin, Dave, MoneyLion (acq. by Gen), Truebill (acq. by Rocket Money)

L ($150M - $500M): Brigit (acq. by Upbound)

M ($50M -$150M): FloatMe

S: (<$50M): 

M&A / Exits Landscape

There’s a clear opportunity to acquire sub-scale or ramping players with ~$50M in contribution profits, and there is historical precedent for this. Valuations offset significant growth rates against consumer target demo (vs. B2B view of DEC EWA).

On the flip side, it’s rare to see scaled independent CFU EWA players because unit economic margins are tight, customer acquisition is expensive, and profitability often requires building out the product suite or achieving mega-scale.

Of course, it wasn’t clear that my Chime IPO prediction would come true. On April 1st, Tariff Day forced several fintechs to delay their IPO plans. That day, I claimed that rather than a permanent halting of their IPO, we’d see a delay until Q3 or Q4 2025, especially if markets improved and tariff actions were reversed. That’s because Chime’s financial performance is outsized in Q1 2025 as their users get and spend tax refunds. A May IPO would allow them to report only full year 2024 financials on their S1 and have their first reported quarter be a strong Q1. This tried-and-true strategy was the same one we used in the majority of fundraising rounds when Chime was a hyper-growth private company.

By May 8th, despite a stock market rebound and the administration’s efforts to walk back the tariffs globally, it didn’t seem like the administration would be able to counter China’s asks. Still, I argued that given some Q1 tax refund spend had shifted to Q2 and MyPay growth could offset the normal Q2 revenue slump, Chime might file within 1-2 months with an IPO by Aug-25 at the latest.

After the surprise trade deal announced on May 11th, I remarked on May 13th that Chime could file its IPO docs publicly by May 14th, 2025 without updating its financials from the original registration statement, just two days later.

On the same day, Chime filed its S1 publicly, setting the stage for a historic IPO in the window I set up with an IPO date from May to August 2025. As predicted, they filed with 2024 audited financials but provided an unaudited look at another strong Q1-25, likely because they expect Q2-25 to be even higher so they’ll have two great reported quarters, just as I had thought.

There’s a lot to digest in the Chime S1 and I’m reserving my thoughts for later when the dust settles to add to the discourse. There are already some great takes from fintech nerds that I’d check out:

• Nick Madrid, a former Chimer from The Free Toaster, comments on Chime’s ARPAM flywheel.

• Zu Daya, from Strategic Finance Careers, discusses the metrics and proposes a potential valuation range.

• Simon Taylor from Fintech Brainfood explains the significance of owning the primary financial relationship. 

• CJ Gustafson’s Mostly Metrics runs the most detailed S1 breakdown available, supported by the Run The Numbers interview of Chime CFO Matt Newcomb.

• Jason Mikula from Fintech Business Weekly covers their marketing metrics and provides another view on valuation.

For now, here’s my over-engineered take on Chime’s Q2-25 performance: 

We know that IRS filings delayed tax refunds that normally fall in Feb/Mar to April. We saw that CashApp’s recent shareholder letter noted tariff uncertainty led to a Q1 spend pullback shifting to April. As a result, we’ll see spillover spend boosting Q2-25 interchange revenue.

We also know that Dave and other companies with short-term lending products outperformed in Q1-25, so MyPay will benefit from the same tailwinds. MyPay will dominate the topline growth story (but struggle on the bottom line), boosted by new member acquisition from the IPO brand play of a household consumer brand.

Q2-25 should thus give us strong topline revenue, great new member acquisition but perhaps a narrowing operating profit margin as the relatively lower margin MyPay offsets the otherwise SaaS-like interchange profit margins.

Let’s see if my fintuition holds true for Chime earnings and beyond.

The trade war changed a lot of things in the fintech ecosystem, but potentially none more jarringly than the prospects for IPO for major companies like Circle, Klarna and Chime. A few weeks ago I made the claim that Chime's IPO would be delayed, but not necessarily halted and that if the stock market improved there would be a chance that Chime could still file the S1 by the end of the month with a target IPO before mid May 2025 (see original view at end of the post). This is no longer possible.

My predictions at the time (one day after "Tariff Day") were:

1. America will pull back and renegotiate tariffs (correct)

2. Stock market will rebound (correct)

3. It would be in Chime's interest to file S1 with 2024 financials so they could report a mega Q1-25 on the back of tax refunds season (correct)

4. It would in Chime's best interest to file S1 in near-term so their first reported quarter would be larger than any S1 filed report, avoiding 2+ quarter delay (mostly correct)

So if all of those predictions were correct, why didn't Chime file their S1? What I now think I didn't get fully correct was exactly how (4) would play out. I still think that Chime is delaying their IPO not halting it, and there's a good chance that it's only 1 quarter.

Here's why:

A. The gutting of the IRS significantly delayed tax refund timing, so a portion of tax refunds normally spent in Q1-25 will now be spent in Q2-25

B. Even though most tariff policy was pulled back, it created lots of uncertainty and volatility that reduced consumer spend in back half of Mar-25

C. Chime's installment loan and MyPay product likely growing quickly and can offset seasonal decrease in Q2 revenue vs. Q1 revenue at least in near term

D. Chime has built up enough brand equity, hype and investor expectation around a 2025 IPO that it won't be prudent to wait longer

What does this practically mean? There's enough indication for Chime that Q2-25 is going to be better than Q1-25 that they are okay with waiting out the volatility and regrouping around a short-term delay. If volatility does subside, we should see an S1 filing in the next 1-2 months with anticipated IPO by Aug-25.

Original thinking circa April 1st 2025

My completely personal view as an experienced fintech operator who understands the ecosystem well on what is happening with Chime's IPO. It does not represent the views of my current or former employers - it's my own over-engineered fintech take.

The Klarna IPO delay is definitely not a great indicator for Chime IPO timing (in the next 4 weeks). If Klarna couldn't get enough commitments to be comfortable with IPO at the price they've set, there's no way Chime is going to follow suit (yet). I had previously thought they would drop an S1 right around today with a target IPO date of the last week of April. I no longer think that's the case.

That said, it's not all tears and fears. There's some indication that the pain we're feeling now in the stock market will improve over the next few weeks. The US literally put a tariff on everyone, how much worse can it get (famous last words). More likely, America pulls back or renegotiates some of these tariffs.

And we can't argue with the fact that at current prices, any stock you pick is definitely on sale. If you have any shred of optimism, you're buying stock now. It's no wonder that retail investment inflows was the highest it was in the past decade. And it's not surprising that even in this market, Circle filed its S1.

I also think that practically speaking, Chime will want to IPO before Q1-25 financials are due. Unless markets get materially worse, there is no way they want to have to rewrite their S1 and talking points by letting this delay more than a few weeks. We've seen Chime launch Chime+, mention Instant Loans, announce Chime Enterprise, wrap ATMs. They built up a TON of brand around a now or soon to be released S-1. That's an important cost.

That's in addition to a lot of business / financial reasons for Chime to launch in early Q2 and it's all about the fundamentals of the business. Chime's core demo is paycheckers, and this demo tends to get tax refunds and spend it. That means Chime's Q1 is going to be massive, as it always has been. There's a reason we ran 80% of Chime's fundraising rounds around Q4/early Q1. It's a proven formula.

Chime will want to have an S1 with full year financials, IPO, and then immediately report Q1 which will be outsized. They do not want to report Q1 in S1 and then have to report a lower Q2 after. It feels weird to say this about fintech, but for this demo, the business IS seasonal.

So for Chime, the decision tree is - do we do this IPO now (or in a few weeks) or do we push this out at least 6 months or longer? I definitely can see a small delay, but the idea of pushing this out 6+ months for some future uncertain IPO window seems pretty unrealistic. I can't see them doing that, knowing what we know today.

Where does that leave us? I think Chime will still post their S1 sometime in the next few weeks with a target IPO date of no later than end of May. Any time after that and the SEC will pressure them to include Q1 financials which just throws off everything.

Let's see what happens!

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If you know me, you know I’m a huge Duke fan. My first year was when Jon Scheyer captained the national championship-winning squad in 2010. So March Madness is a big deal for me. I watch as many matchups as I can while filling out a bracket usually ruined by the end of the round of 64 (which needs a better name like “Big 64” or “Nintendo 64”).

When Robinhood announced they would work with Kalshi and DerivativesX to surface March Madness prediction markets in-app, I couldn’t believe my fintech and sports worlds were colliding and I had to check it out.

I’ve always been interested in sports betting as a non-correlated supplement to stock market investing, but I found the practice arcane and uninviting, often requiring sophisticated knowledge of unintuitive terms and access to questionable gambling websites that only accept cryptocurrency. Robinhood’s promise to democratize access and simplify the market like they did for stocks, options, and crypto resonated with me, and I knew that, more than beating the odds, it would be a good way to learn how fintechs could innovate on and improve a legacy practice.

Some people think Robinhood shouldn’t enter sports betting, but they are making broad generalizations and big assumptions that hinder their ability to think through their reservations. First, we should define what we’re arguing about and ensure the legal foundations are clear.

When we talk about betting on sports, there are two major ways to do this:

1. Sportsbook-based sports betting (“traditional” sports betting): A centralized entity (the bookmaker) determines the odds for a sports event and provides pricing (the spread) for the outcomes, inclusive of their fee. Bettors place bets against the bookmaker, who balances the spread between bettors on both sides to pay winners.

   1. Sportsbooks’ business model relies on determining the spread and optimizing based on real event odds, as it dictates the bookmaker’s revenue (e.g. DraftKings, FanDuel).

   2. Since the bookmaker sets the odds and payouts, there’s no federal regulatory body governing these entities. This leaves legality and enforcement to the states.

2. Exchange-based sports betting (“new age” sports betting or “sports trading” or “sports prediction markets”): An exchange provides a platform where bettors can bet directly against each other, rather than against a centralized bookmaker. Sports event contracts are largely binary (win/lose) rather than based on point differentials, initial odds are set at 1:1, and the market determines the spread through buying and selling event contracts with a small per contract trading fee. After the event, the winners take money from the losers.

   1. The exchange-based sports betting model depends heavily on platform trading activity. The exchange doesn’t care who wins or loses, only that many people are trading (e.g. Kalshi, DerivativesX, Robinhood).

   2. Since the exchange is a platform for facilitating trades, federal regulatory bodies like the CFTC govern these entities and provide legality and enforcement at a federal level.

In short, exchange-based sports betting:

• operates on a federally regulated, open platform where odds are clear via the market order book.

• allows trading against other bettors instead of a centralized bookmaker, reducing incentives to lower bettor odds.

• allows live, real-time unlocked bets that can be closed out or added to at any time during an event

Now, in order to engage in this debate, we need to understand Robinhood’s position and the regulations. Sportsbook-based sports betting is federally allowed and legal in 40+ states, and the practice will continue regardless of Robinhood’s participation. Traditional sportsbook-based sports betting is associated with negative perceptions of gambling including dark patterns that encourage high-risk plays like parlays, adversarial odds-setting, and access cutoffs for players that “beat the house.” This type of sports betting can have negative expected value when spreads are determined in a black box way and bettors on both sides interact with a bookmaker, not each other.

But despite being legal in many states, Robinhood isn’t even operating in the sportsbook-based sports betting space. Robinhood, Kalshi, and DerivativesX are in the exchange-based sports betting space. In this space, bettors trade directly against each other, and the expected value is zero, not negative (other than the nominal fees). The fees are transparent, and it’s in a platform’s interest to make the spreads as clear and real-time as possible to encourage trading. Robinhood is actually one step removed in that it surfaces the contracts that Kalshi/DerivativesX provide in a user-accessible way. Stopping Robinhood from accessing exchange-based sports betting only stops good UI, not the practice itself.

There are at least five arguments against sports betting:

1. You think sports betting should be illegal and fintechs shouldn’t be able to enable it

If you have an issue with fintechs engaging in sports betting, talk to your legislator to change the legislation. Don’t stop companies from operating legally. You should also justify why we legalize vices like cannabis, alcohol, and smoking but want to crack down on gambling. Explain why banning sports betting will lead to better outcomes than Prohibition or other attempts to ban vice versus drive incentive alignment via penalties.

I don’t like profiting off vice, but let’s not apply rules to one versus another or claim to know what’s best for Americans. Evidence shows sports betting can engage consumers and have an economic impact (over $300bn annually). Despite the charged topic, 80% of US states have legalized it. The people voted for this - why should you determine its enablement?

2. You think sports betting should remain as it is because it’s efficient and well regulated

Are we discussing the same industry where two major players face hundreds of class action lawsuits and have settled for millions? You’re defending an industry where centralized sportsbooks operate an oligopoly with FanDuel and DraftKings controlling 70% of the legal market and the top four players comprise 90% as somehow “good” for society? Or are you satisfied with the fact that despite progress on online betting, 60% of all sports betting occurs on unlicensed platforms with no consumer protections and high exploitation risk? I hope that’s not the position you chose to defend.

Source: AmericanGaming.org

3. You think that sports betting is more dangerous and less “good for society”

This is patronizing and inconsistent. How are trading memecoins, 3x leveraged tech shares, zero day options, bitcoin ETFs, and index options “better for society” than sports betting? If you believe this, I have some SPACs, penny stocks, and dividend arbs to sell you.

Some may argue that holding stock is more long-term than sports betting. I would point them to the rise in day-trading, memecoin investing, and the declining average hold duration. Why hold onto a stock when we have real-time information on its trend and finfluencers claiming to know our investment moves? I would also ask you to justify why people invest in financial engineering and price improvement like the market-makers driving 80%+ of market volumes.

4. You think banks and fintechs should only provide services for financial health

Have you ever shopped for financial services in America? Alongside Robinhood’s prediction markets are high APR cash advances, payday loans, memecoins, hyperyield-bearing stablecoins, high fee earned wage access products, shady alternatives, complex real estate investments, and stock market derivatives, all available at a bank or brokerage. Robinhood should not be the only one above your line while Schwab, Fidelity, and E*Trade are saved from ire. And maybe go after those big banks that provide for financial wellness but have caused $20B in overdraft fees, predatory lending, and reductions in financial access.

5. You think sports betting is too risky, so we should ban it outright or prevent fintechs from having access

I find it hard to believe that sports betting is riskier than other investments allowed for regular investors and enabled by fintechs. Real estate trusts, home flipping, crypto, venture investments, hedge funds, infrastructure funds, etc. Why do we draw the line at sports betting when many are riskier, especially on an exchange with binary outcomes, making the chances 50/50 for most bets?

If we have issues with regular retail investors adding “sports betting” to their portfolio, why not use the existing investor accreditation feature instead of banning or limiting fintech access? There’s no reasonable argument to bar a savvy investor from investing in legal sports betting.

The power of prediction markets

The backlash against Robinhood stems from a misunderstanding of exchange-based vs. sportsbook-based sports betting. The claims that Robinhood isn’t “democratizing finance” or seeking truth are also incorrect. By allowing more regular investors access to the sports betting market, it democratizes finance (reducing fees and increasing transparency).

But more profoundly, having bettors determine the markets ourselves is crowdsourcing and amplifying intelligence gathering, increasing our ability to pursue truth. Dismissing prediction markets’ power due to the near-term sports applications misses the point.

Instead of waiting for closed-door meetings and filtered public disclosures to understand interest rates, we can utilize the hive mind to gauge expectations in real-time. We will no longer be limited to quarterly government reports rife with errors or talking points from politically influenced leaders; we can go to prediction markets for the truth. If you can’t grasp prediction markets, look at the stock market’s real-time access to a company’s performance compared to their one-sided shareholder letters and quarterly earnings reports.

I’m excited about prediction markets, not just for March Madness sports betting (forget stale brackets for real-time betting each round) but for all national financial KPIs and international metrics.

We’re putting our money where our mouth is, and that’s a good thing.

If you haven’t heard potential future presidential candidate Pete Buttigieg go straight into the lion’s den to debate his critics on the Flagrant podcast, start watching. Among the many engaging exchanges was one about government research.

I largely agree with @PeteButtigieg's take (similar to @hasanthehun and @BernieSanders) on principle, except the idea that only the government can invest in long-term return ideas. In fact:

1. The government doesn’t necessarily have a special long-term view on the initial creation of its large-scale research projects (it is an open question on whether the internet was ever meant for public usage)

2. The government isn’t the only entity that can come up with multi-trillion dollar ideas.

We are experiencing a multi-trillion idea right now - conversational AI. It wasn't developed in a government lab; it was created by private enterprise (@OpenAI). The notion that private enterprise can only be short-term focused is literally short-sighted.

Government should play an important but indirect role. Non-profits and governments aren't effective at driving scalable change because they're not focused on sustainability (i.e. profit). Combined with a near requirement to sacrifice pay & benefits "for the greater good" to hold an American government position, it makes it very difficult to retain the best and brightest.

Here's how the right government should operate:

1. It should provide consistent regulatory frameworks that counter capitalism's tendency towards monopoly and negative outcomes from unrestricted capitalism. With constituency support, it will direct funding and regulatory favorability towards broad causes like stopping global warming or rebuilding American infrastructure.

2. It should raise and direct funds to public goods with challenging business models, but only through the funding and support of non-government enterprises.

3. It should provide an enforcement layer for companies violating regulations and a national defense system. It should have ultimate power and ability to enforce regulations approved by its constituency.

That's it.

Of course, there are important implications:

(A) We need to overhaul our entitlement programs, not to eliminate them but to install private enterprise leads that care about balancing budgets, optimizing efficacy, and driving social change.

(B) We need to increase government power to regulate bad actors. When the Mag7 or big corporates violate regulations, penalties must be strict, substantial, and swift.

(C) We need to rethink or dismantle the government apparatus managing the IRS, NIH, TSA, CBP, DEA, SSA, DOT, Education, and even the USPS among other agencies.

In practice, government entitlement programs and research labs will transition ownership to private enterprise over time, though the government may still provide significant funding. Government programs like IRS and USPS should enforce regulations around free and fast tax filings and mail delivery rather than attempting (poorly) to provide these services directly. Government enforcement agencies can remain but shouldn’t enact independent programs other than those that enforce regulations.

People on both sides will immediately challenge (C) and some will resort to ad hominem arguments and/or out-of-context misreads to counter this position. Some may say these changes are unprecedented and anarchic.

But for every example I've provided, I can point to a developed country that does what I'm advocating for and does it well:

- Privatized transportation: Consider Japan's subway infrastructure or the Public-Private Partnerships shaping many countries' infrastructure development.

- Privatized research: We already operate this way in many respects, and NASA shows how funding private enterprises instead of building directly has led to improved outcomes.

- Privatized healthcare: Switzerland and Norway require private insurance, and their governments heavily regulate it to ensure universal healthcare.

- Privatized education: I attended public schools and want my future kids to go to one. However, American education needs a major overhaul. Public charter schools, funded partly by the government but privately operated, exist in the US and should be more widespread given their performance.

- Privatized taxes: In most countries, employers/banks drive tax calculations because tax authorities pre-fill returns based on this data for user approval instead of requiring the user to fill it out.

- Privatized utilities: Look at the UK and France for examples of a largely privatized utility infrastructure that works and is efficient. Large-scale energy markets establish consistent pricing across markets.

- Privatized logistics: Look at Germany and the UK, where privatized enterprises operate under government regulation.

I share a common cause with @AndrewYang, @pmqrcq, @garrytan, @ezraklein and others who believe that (1) tech can support abundance as the primary driver and (2) government should regulate and enforce right action.

What do you think?

Here's my hot take regarding OpenAl's flop with 4.5:

First, they didn't want to lose the spotlight. Plain and simple, 4.5 was clearly half baked and with Grok and Sonnet coming out, Sam Altman didn't want to be seen flatfooted.

Only problem is it backfired.

Now, here's my deeper analysis:

Ilya left OpenAl in May 2024, but was part of the ouster attempt in November 2023. All the progress that OpenAl has made since then was primarily the momentum championed by Ilya. In other words, Q* and Strawberry and all that were llya, and Sam made the miscalculation that he could continue research at the previous pace without Ilya. But then Mira and a ton of other researchers jumped ship because of the profit maximizing strategy that Sam took, throwing caution to the wind. I mean, OpenAl reneged on literally every single one of their founding principles. For profit, closed source, reduced focus on safety.

"We don't have enough GPUs"

That could be part of it. But also consider that Sam's pedigree from Y Combinator is rapid startup, rapid exit. OpenAl is no longer in the startup phase, they are in the hypergrowth and sustaining growth phase. Sam is completely out of his depth with respect to the phase of the business. Sam Altman has never run, grown, or scaled a company as large as OpenAl. This is why they have a scattered product strategy and focus more on hype than substance lately.

It's actually pretty common for companies around the size of OpenAl to have a total change of leadership. This is often when the exit would happen. The founding team, having built something that is clearly resonating, but not yet profitable, would sell out to a more mature, experienced management team who then bring the product strategy and margins to the next level.

Correct me if I'm wrong, but Sam has no experience actually making a company profitable.

  David Shapiro @DaveShapi

And it got me thinking:

• (A) Could Sam’s position ever be not secure?

• (B) If he ever decides to leave, who would be the right CEO for him and for the company?

On the topic of (A) after what happened in 2023, my thinking is there is absolutely no way Sam is no longer CEO unless it's on his own terms. He cannot and will not be pushed out. Who leads OpenAI is completely up to Sam.

But on (B) I think there's a shot that he recognizes what he's good at and that to take the company to the next level and realize the full value of his equity, he needs to stand aside.

But he's not going to stand aside for just anyone. He needs that person to have a specific and special set of skills and experience:

1. Understands R&D-led companies with developer-led GTM, enterprise sales and API-driven business models

2. Well respected in startup ecosystem with connections to Y Combinator

3. Seen company growth from idea stage to thousands of employees

4. Driven a founder-led business to IPO and beyond

5. Successfully navigated complexity of dealing with multiple global stakeholders and investors

6. Comfortable with build/buy/partner approach to company building with a history of successful acquisitions and partnerships

Who is a person that has all of these characteristics and happens to available to jump into this multi-billion dollar company? Who could possibly be ready for all that OpenAI requires?

That person is Jeff Lawson, former co-founder and CEO of Twilio.

He fits every quality, characteristic and life experience necessary to lead OpenAI to its next stage. He's the person that should take on the role. Sam - you are so great at building companies and you need to stay at OpenAI to build. Carve out a President role and lead OpenAI's moonshot factory. The future is already here because of you so help lead OpenAI to what's next.