William Hockey - Building the Operating System for the Dollar and Silicon Valley Heresy - [Invest Like the Best, EP.463]

At a Glance

William Hockey, co-founder of Plaid and founder & CEO of Column, discussed on the Invest Like the Best podcast how his bootstrapped company Column (funded by pledging Plaid shares) became the banking infrastructure for companies like Ramp, Wise, Bilt, and Mercury. Core thesis: Silicon Valley's consensus culture breeds consensus founders, and startups have become too safe; the best builders are specialists with a fanatical research commitment to a single domain. Key takeaways: Owning 100% equity allows Column to pursue business that VC-backed companies cannot; Hockey, through his experiences in emerging markets, emphasizes the dollar's dominance as the global reserve currency and believes large, inefficient brands will benefit from AI. He criticizes the VC ecosystem, advocates for funding with cash flow over external capital, and argues that constrained societies are more innovative.

Theme 1: Column's Unique Model – A Software Company Owning a Bank, Funded by Cash Flow, Not VC

Hockey argues that Column, as a "software company that owns a bank," derives its core advantage from not relying on external capital, enabling long-term decisions that VC-backed companies cannot make.

• Business Model: Column provides backend infrastructure for companies like Ramp, Wise, Bilt, and Mercury, handling payments, deposits, and credit. It is a bank, but over 90% of its revenue comes from software (charging per API call), passing most of the banking economics to its clients.
• Funding Method: Hockey obtained a loan by pledging his Plaid shares (borrowing $70 million at a 5% loan-to-value ratio) to acquire a bank. He has never raised external capital for Column and emphasizes he "almost got margin-called three times, nearly went bankrupt."
• Long-Term Advantage: Not relying on VC allows Column to invest in projects that take years to generate returns, such as acquiring a regulated bank early in the Biden administration, which required "two to three years of not focusing on growth and revenue." Hockey notes that VC-backed companies are forced to chase trends (e.g., stablecoins, AI) because they "need to raise money every 18 months," leading to a zigzag path.
• Employee Incentives: Column uses 25% of its annual profits to buy back employee shares, providing liquidity without diluting employee equity. Hockey believes this is highly attractive to experienced employees (especially those who have endured multiple funding rounds of dilution), resulting in "almost zero regrettable departures."

Theme 2: Silicon Valley's Consensus Culture and Mismatched Startup Risk

Hockey criticizes Silicon Valley for becoming an "elite-dominated consensus society," leading to founders facing too little risk while early employees face too much, which stifles true innovation.

• Consensus Culture: Hockey, citing Dan Wang, states that San Francisco and Beijing are the most "consensus" societies he has experienced. Silicon Valley elites build software for elites, disconnected from average Americans and the world. He believes Silicon Valley's "approval rate is probably very low," and for good reason.
• Risk Mismatch: Hockey argues that starting a company has become "too safe." Founders, via paths like YC, can gain a "founder" credential even after failure and easily find a job. Meanwhile, early employees forgo high salaries (e.g., $400,000–$500,000 at Meta/Google) to join startups, bearing significant financial risk, but a failed startup looks bad on their resume.
• Call for Founders to Take Greater Risk: Hockey advocates for "making failure more expensive," arguing founders should go "all-in" like he did. He personally holds only two assets: Column and Plaid, and doesn't even own a majority stake in his own house. He believes this "only one door" scenario fosters creativity and resilience.

Theme 3: The Dominance of the Dollar as the Global Reserve Currency and National Security

Based on his observations in emerging markets, Hockey emphasizes the dollar's central role in global trade and finance, viewing it as a key weapon for US national security.

• The Dollar's De Facto Dominance: Hockey points out that even trade between China and Russia is largely denominated in dollars. When Switzerland imports natural gas from Qatar, the transaction is settled through US financial institutions. Approximately 75% of global trade is still conducted in dollars.
• Financial Sanctions as a First-Strike Weapon: Hockey believes financial sanctions are the weapon the US uses "before the missile." By controlling the dollar system, the US can preemptively cripple an enemy's economy (e.g., Venezuela), reducing the need for military intervention. He considers the financial services industry, alongside Palantir, Lockheed Martin, and Boeing, as part of the national security strategy.
• Defense of the US Financial System: Hockey refutes the narrative that the "US financial system is broken." He argues the Fed's technical systems are "pretty good" and already capable of 24/7 real-time settlement. The problem lies in the implementation capabilities of institutions like community banks (e.g., inability to manage liquidity on weekends), not the infrastructure itself.

Theme 4: Winners in the AI Era – Large, Inefficient Brands and Financial Services

Hockey believes the biggest beneficiaries of AI will not be AI startups, but large, inefficient brands with massive distribution networks and cost structures, particularly large banks.

• Value Will Flow to Distribution and Brand: Hockey draws an analogy to the railroad era, where the biggest beneficiary was Standard Oil (using railroads to transport oil), not the railroad companies themselves. He argues that brands with "massive distribution" and "massive costs" will benefit most from AI, as AI can drastically cut their expenses.
• Large Banks are Natural AI Beneficiaries: Hockey notes that a bank's primary costs are people and technology, not physical assets (like a railroad's fuel and track maintenance). Therefore, large banks have enormous potential to cut costs using AI. He predicts the most efficiently operated banks with the largest distribution and cost structures will be the biggest winners.
• AI Will Improve the User Experience in Financial Services: Hockey believes current frictions in financial services (e.g., transfer delays) are primarily for fraud prevention (e.g., romance scams targeting the elderly). AI can build better fraud detection models, thereby protecting vulnerable groups while offering "almost completely instant and frictionless" experiences for other users.

Position Moves

Position	Guest Stance	Key Data
Column	Bullish (Founder 100% owned)	Borrowed $70M at 5% LTV by pledging Plaid shares; >90% revenue from software; uses 25% of annual profits for employee share buybacks.
Plaid	Neutral (Past experience)	Attempted to sell to Visa for $5B, blocked by DOJ.
Ramp	Bullish (Client)	Uses Column's infrastructure.
Wise	Bullish (Client)	Uses Column's infrastructure.
Bilt	Bullish (Client)	Uses Column's infrastructure; card back reads "Issued by Column".
Mercury	Bullish (Client)	Uses Column's infrastructure.
Kaspi (Kazakhstan)	Bullish (Case study)	Started by acquiring a bank, now the largest e-commerce platform and largest bank; users can pay taxes and renew driver's licenses on it.
Rawbank (Congo)	Bullish (Case study)	Mobile app experience surpasses US banks; allows upgrading TV subscriptions.
J.P. Morgan	Neutral (Industry benchmark)	Mentioned as the largest but not dominant US financial institution.
Stripe	Neutral (Industry benchmark)	Mentioned as a company capable of managing 24/7 liquidity.

Memorable Judgments

1. "VC money is like heroin – it feels great, but you have to keep injecting, and it's very hard to quit." (William Hockey) – Hockey believes that once a company raises a large sum (e.g., a $100M Series A), founders get trapped in a cycle of continuous fundraising, unable to make truly long-term decisions.

2. "The best builders are specialists, not generalists. You have to find an incredibly boring area that no one else wants to touch and become the world's best at it." (William Hockey) – Hockey illustrates the leverage of deep research by noting that reading a 2,000-page book on 19th-century Chinese banking history yielded only one idea worth millions of dollars.

3. "In Silicon Valley, founders have too little risk, and early employees have too much. We need to make failure more expensive." (William Hockey) – Hockey argues that failed founders still have a "CEO" credential, while early employees forgo high salaries and bear greater personal financial risk, a mismatch that makes companies "safe" rather than "bold."

4. "The dollar is the default currency for global trade, even for trade between China and Russia. This is the first line of defense for US national security." (William Hockey) – Hockey points out that financial sanctions are the weapon used before military action, and controlling the dollar system allows the US to preemptively cripple an enemy's economy.

5. "The biggest winners from AI won't be AI startups, but large, inefficient brands with massive distribution and cost structures, like big banks." (William Hockey) – Drawing an analogy to the railroad era, Hockey argues that Standard Oil (which used railroads) was the biggest beneficiary, not the railroad companies themselves. Banks' cost structure (people and tech) makes them the prime target for AI-driven cost reduction.

6. "All the friction in financial services exists to protect that 5-10% of consumers who are easily defrauded. AI can solve this, creating a frictionless experience for the other 90%." (William Hockey) – Hockey believes current pain points like transfer delays stem from anti-fraud needs, and AI models can better detect fraud, thereby unlocking efficiency across the entire system.

7. "YC's 'Startup Request List' should be your 'Don't Start a Company List' – because when it becomes consensus, competition is already too fierce." (William Hockey) – Hockey advises founders to avoid consensus hotspots and instead attack areas where "the dumbest people make the most money," where competition is lower.

8. "Constrained societies are more innovative. In the Congo, with mobile penetration below 25% and banking penetration below 5%, people are forced to solve problems creatively." (William Hockey) – Hockey argues that constraints in emerging markets (e.g., lack of infrastructure) have fostered innovations like mobile payments (a decade before Venmo).