Can Community Banks Survive the Next SVB? | ModernFi CEO Paolo Bertolotti and Former Comptroller Gene Ludwig

I remember reading the Colesore problem when we were getting this going together and thinking, you know, Trying to solve the Colesore problem with in a network effects business with financial institutions has to be the worst idea All the time, but now that we're on the other side, it's worth it But you want to get the flywheel going? Exactly. It's hard to get the going. It's zero to the first 20 That's the thing for Two and a half years ago, so a climbali bank collapsed at 48 hours Not because of bad loans or fraud because customers could move money faster than regulators Could react. The internet had turned a manageable problem into a systemic crisis Here's what almost no one noticed SVB was already a member of the deposit networks that could have prevented the run. They just weren't using them 94% of their deposits sat uninsured while the solution gathered dust That failure revealed something bigger America has nearly 10,000 banks and credit unions in order of magnitude more than any other country This fragmented system is either our greatest economic advantage or a ticking time bomb depending on who you ask Community banks fund the small businesses and startups that make America different, but without the right infrastructure, they can't compete And today's discussion A16Z general partner David Haper sits down with Jean Ludwig former US controller of the currency and Paolo Bertolotti found her in CEO of modern five a company that could become one of the most systematically important financial Institution utilities in the United States not by replacing banks, but by getting hundreds of them to work together We're talking about the cold start problem in financial services Why the biggest opportunity in FinTech might be the least sexy and what happens when you turn former competitors into co-owners? Jean Palo. Thank you so much for joining me. It's pretty good. It was yeah. Thank you for having us. Jean It's two and a half years since the SVB crisis you were a former bank regulator as the former head of the OCC And I think you'd have a sort of unique vantage point on that crisis, but maybe banking regulation obviously and it's in fact on the economy Maybe just walk us through kind of what happened two and a half years ago with the SVB because I think it kind of can serve as an interesting backdrop for some of the other Conversations that we'll have well the SVB crisis on one sense was inevitable on the other hand is peculiar and it's a real example of what we called Taylor's it was inevitable because people make mistakes and the dynamism of the economy means that somebody's going to be out of Match they had an asset liability mismatch that was considerable and if anybody had really thought about that it said look I don't want to be riding along with the bank that is that out of balance and if the Fed was actually doing its job It would have noticed and meetings had look. I don't care what you do. We're getting this back in the middle, but they didn't on the other hand it is a Taylor's can unique event because it's the first time that I know of in American banking where the technology itself That is the internet and the ability to transfer funds more rapidly Conspired together to put that kind of instantaneous pressure on a bank and the regulators were already for it the whole problem would have been Solved the irrespective of the asset liability mismatch of the Fed had simply opened the discount window wide enough Early enough to stop the run They actually did do that on Sunday, but unfortunately the bank was gone. Oh, yeah early And I guess yeah two and a half years later what's changed from your perspective? Well really was Biden who stopped the run Against all advice he got on television looked into the camera and said all your deposits are safe Your deposits are completely safe. They're insured. You don't have to worry about anything now He knew at the time. That wasn't exactly true There was truth in it because he has president with the getting the group together could have Done what they all of them like did which is basically put everybody under a sort of Either a stop order or a fund order or caused the Fed to open the window wide enough wouldn't have happened But it was a bold move people listened to them. I said well the president said our deposit insured had cooled it right down However, the system remains vulnerable over the long term because deposit sizes get bigger The economy becomes more dynamic the internet problem hasn't been solved And as it turns out there is one real solution to this problem that exists today. It's modern thought Clearly and we're the man and we're gonna get into that I think America and you guys are deeper experts on this than I am you know has such an interesting Banking ecosystem right it seems to be much more federated. There's a much longer tail of Institutions in our country than in many other markets. You go to Brazil and it's an oligopoly of that and a four or five large banks Equator the UK or Canada similar story. I guess either of you like what is sort of the history of that? And then maybe more importantly like what role from your vantage points do you know community of regional banks even credit unions play in kind of the Vibrancy in America's economy. I think the history comes from I mean history is pre-internet. It's pre-tech right I think before we have the connectivity Specific community specific industries needed access to credit. They needed access to banking products which allow for this Wide diversity of institutions and some of that has remained even as we have These digital products, these digital services. You still have these institutions that very much specialize in their pockets of the country And we have modern phi our big believer is that those institutions are actually a huge part of American differentiation a big part of American excellence a big part of the American engine because these are where folks get Credit to start small businesses get their mortgages car loans, whatever it may be and that sort of differentiation compared to other countries. I mean, you mentioned it, but we have an order of magnitude more institutions in the next country It is a very special thing and I think SVB that you mentioned is a perfect example of that as well where SVB was very Good at and very focused on supporting a very vibrant and thriving tech ecosystem and two and a half years later I think unfortunately one of the things that hasn't changed is there hasn't been another institution to fill that gap And I do think that's something that the ecosystem the tech ecosystem specifically has suffered from That's an excellent answer and I totally agree with it. Let me take you down memory lane So our founding fathers were not just patriots Not just warriors. They were actually businessmen, right? They were the businessmen of the day they owned land they owned this Benjamin Franklin had a printing press et cetera and The problem was in the United States there were no banks So the banks they had to really bank with Where the British banks and they were the big oligopolistic British banks that constantly took advantage of them So the British banks and the central bank were absolutely anothema to our founding fathers And they beyond setting up a federal system to govern us They wanted very much No central bank at a fractured banking system that could deal honestly and fairly with business people like Themselves who weren't again the biggest business people the banks in England were dealing with but were important business folks So we ended up with this multi-bank system and as Palo said and I grew them entirely It's served us very very well because we have an enormous economy. That's incredibly diverse and we are very Innovative. I think it is not an accident that and recent horror wets and catapetal kinds of venture companies Existing the United States now as a practical matter. I'll give you this example. Why we don't want to let the country Sink into a one-size-fits-all three banks four banks five banks is it so I'm a businessman say an Indianapolis or Baton Rouge and I have a problem with my business and I want to basically talk to the bank see you to get advice and get alone I pick up the phone. I'm going to call Jamie Diamond Do you think that Jamie Diamond who is one of the most talented people that ever lived as the time to call every little small business? Right all over the United said of course he doesn't right and so he has very talented people around that help and do this But you're not going to get the CEO totally but if you're dealing with your local community in regional bank Totally and that tele picks up the telephone and says I want that's who he gets on the phone and that matters Both in terms of flexibility the institution the advice etc So the America's great. It has great institutions like JPM that are a huge and do fulfill an important role And it has small and medium-sized institutions that fit our own in a makes a our economy and usually dynamic totally and we want to do everything possible to keep them And Gene also sort of tied it back to BC and I also love that analogy because something that in Dresden does or you have this sort of little tech manifest All right one of the things that is so special that in Dresden would be seen general as it allows Little tech to get started and to dream and to execute and become pink tech right and that's a key part Obviously of so much of American economic success But banks play that role on the credit side. It allows small businesses to get started and grow and thrive and whether they stay small businesses or eventually become business big businesses So it's that access to credit. I mean credit in a lot of ways is the lifeblood of any economy and it's very easy When these institutions go away the Fed you have what the Fed calls banking deserts It's just whole not just communities not just geographic areas But actually verticals as well industries whether it's agriculture or merchants or wine or VC or whatever you have That becomes a little bit under banked and that has larger downstream effects so As we see consolidation in this space. We don't know what the end number may be. It's not going to be for I think having access to A wider range of institutions that provide a wider range of services is going to be a critical piece of picture Well, and that's why I wanted to start with like the SVB crisis because I you know I mean, I remember we were actually as a GP group all in Las Vegas at an offsite when that whole thing was going down I remember you know the CEO of SV being on state at on a big screen saying you know Don't panic, you know like There's it was just a wild weekend and many of our portfolios is you know freaking out, you know that they couldn't make payroll You know that Monday, but but I think you know I think that they I wasn't that concerned that their deposits would be gone I think the bigger or kind of ripple effect concern was that That you know people would lose faith in community and regional banks, right that the market would sort of consolidate into the G-sibs You know, and that was the reaction that many companies like our portfolio companies were having which was you know taking their deposits out of SV and then putting them into you know one of the largest banks in the country and so Yeah, the fear was that it would sort of hurt some of that dying And you know that dynamism and the kind of local context that I think a lot of these institutions, you know play such an important role You know providing Yeah to that point. I mean, you know we're Here talking about the importance of community and regional banks and and something that I remember well from that weekend was You know one of the arguments I'm sure their arguments for and against the the the regulators stepping in that weekend But one of the arguments for was look this is This institution or this concept of an institution so important that if we don't support this institution You know what does American start a ecosystem look like what does the American tech ecosystem look like? So I think it is a reflection and good example of how important these institutions actually are to The economy as a whole but specific areas of the economy. Maybe we just take a step back. What is a deposit network? Well a deposit network is Let me just give the concept is each institution has a certain amount of deposit authority yep and Often a certain amount of that is not used and a deposit network in essence allows one institution that has capacity that's unused to allow its fellow Institution of the same size to use that capacity and so it's basically a pooling of the capacity now the way it has to be done is different than just simply trading insurance chips But the the concept is really taking a certain amount of unused capacity and and sharing it and I mean maybe pal just You know for for those that aren't familiar, you know with modern bank and you kind of describe what the business does And you know how you got into this you know what why did you choose to start this company in particular? So modify helps financial institutions grow that's the mission we're talking about the importance of these institutions regardless of size Regardless of location and our mandate is to provide software infrastructure services to help them grow competitive threat And you can do that through a lot of different angles our core product is a deposit network And a deposit network to Jean's point is you can almost think of it as a market for deposits institutions are Really sweeping sourcing or or reciprocating deposits or buying selling exchanging deposit and folks use that for different reasons Jean sort of touched on the insurance piece one of the key pieces is it's we'll we'll get into it through the conversation Is what's called a reciprocal deposit Jean invented the market invented the idea in 2003 so a few years ago now, but the whole idea is Through a reciprocal deposit a community bank a regional institution can provide Access to more deposit insurance to their customers, so your community bank you want to bank a business They have 10 million of deposits normally that's insured up to 250,000 with a deposit network through these exchange mechanisms I'm supply placing deposits at other institutions. You can actually provide 10 million or access to 10 million 20 million 30 million Retracts and that is so critical because that for that institution Is the difference between being able to serve that customer and not being able to serve that customer so We talk a lot and we see about is this a you know a nice tab or must have It's a must have for those institutions without it. They just don't serve those segments And and to Jean's point about that exchange mechanism you can also use these in interesting ways in the sense that You know some folks Are exchanging deposits one for one some folks, you know a lot of Sponsor banks want to remain a certain size due to regulatory requirements things like the Durban amendment Which we can get into so they have an incentive to just sweep deposits You have folks on the other side. We like to accept deposits for liquidity and lending purposes And that's one of the beautiful things about deposit networks and just markets in general is that you have that efficiency right you're making connections You're claiming the market So that's you know the core of what we do we have some analytics some some data services around that as well as we expand and grow But no, this has been a field and a topic that The team and I and me personally have been Involved with and fascinated by for a long time now is in finance previously. I was at a hedge fund Really enjoyed it fixed income doing funding markets, so thinking a little bit about these problems and the firm was was well known for Rebus portfolio optimization tools So really enjoyed those market clearing problems and went off to grad school as fortunate to do my to do my doctorate in ML and did a few different things but Was was fascinated by a few things but was fascinated by bank balance optimization Talking about SVB These institutions the banking business model is as gene and you know so well Is a fascinating business model because you are using short duration deposits to make long-term loans You're using money in a checking or savings account to make a 30-year mortgage So how you do that matching how you do that asset liability matching the modeling the optimization How you source that funding is a fascinating problem and and unfortunately we see from the SVB situation the first republic situation You you can get it wrong and you can get it wrong in a big way and when you do get it wrong It's critical or it's vital And so it's I think you know this being both of you know this being founders It's you kind of start to see these ideas and then become like onion towards like you peel back a layer and it's interesting You peel back another layer and it's even more interesting And and that was definitely the story of modern fire where okay, it's a huge market There's you know 20 trillion in deposits in the u.s There's nearly 10,000 institutions Roughly four and a half trillion of that is wholesale funding we're banks are just buying and selling these deposits Turns out there's no real Great deposit optimization turns out there's no real great deposit infrastructure There firms like you know the ones that a Gina founded that have really been paved the way and have been vanguards in the space but You know, we're we're 25 years past the founding of a lot of those firms So the opportunity set to build something so meaningful so critical and so impactful to these institutions It was just too good of an opportunity to pass up and that's how we ended up starting the firm and and partnering all together I remember when we first met out, you know I think you were the only person I ever met that did a PhD machine learning and MIT on bank balance sheet optimization You're an end of one palo. We're in it. It's a little niche. It's a nice and that's important. It's an important expertise Uh, this is critical for America. It is a wonderful time for modern fire to start this because the mechanism Uh, that uh, it's being used for reciprocal deposit mechanism is now widely understood and accepted by the regulators Debt accepted broadly as a um, a real contribution to American finance And so now that it's understood both by the banking system that uses it and more broadly It means that the ability for modern fire to grow and prosper Is it dramatically different than it was when I started yeah Creating it. Oh nobody was against it. There was no regulatory negatives But it seemed to people peculiar one that you know smaller institutions Had on occasion had larger institutions neighboring institutions say well you can't really take your business Mr. Businessman down to that bank because I'm sure they're fine people But you have a fiduciary obligation and I'm the big one that's safe Maybe maybe for our audience who isn't as you know aren't as familiar with with your career You've had such a fascinating, you know Career and different capacities both as an entrepreneur as as a regulator Um, I want to come back to the modern fire you know business in particular and the unique approach you take it But maybe you're for folks can you kind of share a bit more of uh, uh, you know your trajectory and You know, even take us back also to like 2002 2003 and in you know first starting in trope I was headed. I thought to the justice department to be a justice department official on president Clinton got elected But as it turns out There was a huge problem And that was that the banks in the United States have a coming off Difficulties of the late 80s and early 90s had almost stopped lending and in some parts the United States In California New England they had actually stopped lending and I Clinton who was devoted to getting the economy Rolling again. Remember James Carville I just saw the other day um, I said uh, you know, it's the economy stupid if you're gonna be elected So Benson and Clinton cooked up the idea That they had to do that and the person to do it was of all people me now. I do not know to this day Why? I decided to do that But and they also benzo was a very shrewd fellow He decided the way to do that was put me at the controller's office because one We control the majority of the banking assets in the United States at the OCC and two that if they didn't Confirm anybody else any other position which they didn't That I in essence would have the authority to control the financial system and turn the surround Which we were able to do and that got me deeply into banking and regulation and I've and banking regulation of all sizes and You know, it was five wonderful years. That's the term of law of the office To really try to make a difference in turn things around But I was on the FDIC board Well, you know, since the only confirmed well not in essence the only confirmed member of that board for a period of three and a half years Who really running the FDIC and in terms of these kinds of issues of deposit insurance they were day-to-day You know sort of real to me Now oddly enough as as I know I've bored you guys with before the idea of They're creating reciprocal network Came to me because of two factors One was the little bank and it was actually a little bank in a disadvantaged community in Kansas City That couldn't get a decent deposit flow because the big banks kept saying You know, they're wonderful people but you know you have a fiduciary responsibility and if they didn't get a hundred percent Positions they weren't going to get a decent deposits and even though they were wonderfully run back But the second reason was how it affects the individual So I had an aunt and Betty Betty Chadwick in Philadelphia who I Both by and up my father were both were Immigrants sons and daughters and themselves almost immigrants and so they were very conservative And they saved every penny and they put it in the bank but the problem was as she got older she realized oh my god The bank only has 35 and those days was 35,000 but a positive insurance and she had a couple hundred thousand dollars That's all she was able to save as a as a secretary to a brokerage house and but she still wanted every penny insured So she used to get on the bus and go From bank to bank to get a CD That was insured including interest up to the limits When she got older to this day, I believe she forgot where she put it And I don't think the families ever figured out where the money is but um It it was an essential safety net for her and it dawned on me that this is crazy. You can solve both problems one way Um, if if a bank was in essence collecting for aunt Betty Uh, all the deposits and basically parceling it out and her deposits to the other banks in terms of CDs But it was it was actually doing the the uh Mac you creating the mechanism it was solving Aunt Betty's problem and when if it did that but there were other Aunt Betty's around the country with similar problems that reciprocating Mechanism would allow for deposit insurance as I said earlier using the unused capacity To be broadly shared and satisfied the need of the consumer for safety Not just Aunt Betty's but small businesses and and on the other hand Creating a larger funding safety funding source or a direct deposit gallery source For smaller uh Banking word as agents and um we we created a Early models and algorithms to make it happen Uh, I'll tell you things were so early then that when we started to do our match Computer technology had not advanced to the degree that it could actually accommodate the complexity of a serious amount of Money flowing and we had to invent the use of resident memory as opposed to normal memory To basically be able to do the match instantaneously so it grew from there and um, it was a lot of fun getting the network together and running around the country Uh to banks hitherto and y'all taught me a lot too his home taught me a lot because sir you learned about the banks and their communities and their needs and Uh, so I got myself the first 450 banks Uh bank by bank and then I got a team together Sales and I was pretty well exhausted. He he's stronger. He's stronger He's already seated 450 by your powers combined, you know Um What's awesome, and you know, obviously it was an incredibly successful business. You know minor sanding is You know, I don't know 75% EBITDA margin in a style company and ultimately sold you know sold the business to pervade equity very successfully um Yeah, maybe maybe we come back, you know to modern fly. I think um You know describe kind of your business at a high level and you kind of have two businesses, you know Today, you know both power and credit unions, which is kind of a new market and then you know also serving um, you know the bank ecosystem Um, yeah, maybe describe the company today and also I think people would be very interested in like Some of the technical challenges of actually building this Yeah, absolutely. Yeah, and you know, I think jeans jeans far too humble as well with With the story because reciprocal on the bank side has grown now To roughly 450 billion and reciprocal and so that's you know a half trillion dollar market using these networks But I think there's some interesting uh takeaways from that as well in the sense that You know, it's a huge market yet For the average person for the average business. No one really has heard of these products No one really utilizes these products and why is that? Yeah, it's it's a few reasons which all of which we've set out to solve but it's it's technology it's economics it's alignment And so I think SVB is actually a great example in the sense that SVB was a client It was a member of these existing alternatives of these existing networks yet SVB had 94% unsure and deposits meaning No one at the institution was using these products again raises the question of why because if they were uh The institution would have had no trouble right because people were afraid that you know their deposits were uninsured and therefore that sort of Yeah, yeah, that's the sort of classical bank run where everyone wants their money at the same time and the bank on paper is Solvent, you know, it has enough assets, but if everyone wants their funds at the same time there's not enough liquidity And that liquidity crunch causes it and it's sure how very important this is and what pala is doing is essential is SVB Didn't have like a lot of junk Assets on the other side What was on the other side the mismatch was with you S treasury bills good as gold treasury bills. It was just a duration Uh mismatch so that just imagine a normal bank that is actually supposed to Uh a lend and support the economy that way And the durations are longer. So you really can't have the You know magic of banks The the generation of business If you don't have confidence in the uh deposit system Yeah, absolutely yeah, and so you know, we've done two things really to start and can get into the longer term vision I do think we view these deposit numbers as maybe the most Incredible profitable uh impactful wedge because then there's so much more that you can do But what we've done so far is is a couple things first You know the US has we're off we call it roughly 5,000 banks roughly 5,000 credit unions These solutions exist for banks, but they don't exist for credit units And so one of the first things we did was we we built the first or several hour for credit units And again sort of that binary value proposition has been so powerful because if you're a credit union You're you're very mission focused. You're very member focused Now, you know without these products you cannot serve public funds you cannot serve small businesses You cannot serve nonprofits and that is Very detrimental to their sort of the execution of their mission. So Bringing reciprocal to credit units has been a wonderful Step change for the industry and there's so much more work to do on public funds and all these different pieces But now these institutions are able to serve a wider member base in a more meaningful way And so that's been a wonderful network to grow and to scale But that's been an interesting You know an interesting process because it's a lot of education. It's you know You've never had this product before the the alternative is do nothing On the banks that it looks very different because these products exist But as we were talking about you know They're not utilized in the way that they really could be both To the benefit of the end customer the you know the business or the the VC firm or the you know the tech company or that High net worth individual But they're also not utilized for the benefit of the institution because there's a little bit of a hesitation to use them And the hesitation to use them comes from We'll call it three things the tech the economics and the alignment the tech is the sense that You know, we live in a digital age for for for everything but banking has historically been a little bit behind the times and so digital banking it's so It's so second nature to to to many of us in the younger generation But for a lot of institutions are still catching up with the digital experience And historically these reciprocal products have not lived within the banks existing digital experience Meaning you know the bank has a web app they have a mobile app But to access these reciprocal products you're not going through this apps you're going through you know third party portals and whatnot So if these products truly are going to become the default For large value accounts you're going to need checking your needs savings You're going to need an insurance week account right and so it needs to be integrated needs to be digital Not a crazy idea, but definitely didn't exist before us So the idea is like I can open up a digital account and as simple as like checking a box I can totally have unlimited Theoretically you know after a seed coverage and that's how you make it a default right because you know Let's say you run a business and you're going to want you know an operating account Maybe you want a high yield account and then you know maybe a reserve account and you want their reserve account to be Ten million in charts perfect. Right. That seems like a very natural product tech staff And so that's it right really simple The second piece and I'm sure we'll talk about the Envy coalition and and some of the genius that jeans been able to put together as well is this notion of these When you have these markets where there are only a few providers You sometimes you get some of these You know undesirable outcomes and a lot of the underdial outcomes come from pricing And so the the margins and the existing pricing structures have just Been to the detriment of the clients and they just haven't been existing alternatives And that's why competitions great because competition leads to better products better service better tech better pricing And so you know we came in with look it's going to be better products going to be better service And it's also going to be better economics and that makes a huge difference for these institutions that are so margin sensitive And then the last piece is We can talk about the end of its structure, but You have this beautiful opportunity to say look this is actually In our mind really a utility service where you have all these institutions coming together Really the value of a reciprocal network at the end of the day Is the banks themselves say the ones providing the insurance or the ones providing liquidity So is there a way that we can build a coalition model where the banks have a notion of oversight have a notion of ownership have a notion of of true membership And if you can get that right That is a very very powerful a very very powerful vector here and there's so many wonderful Historical precedents for this something that we had talked about a lot when we got this going together all three of us was Look, you know, if we think about visa in the early days if we think about dtcc if we think about swift clearinghouse El early warning systems these are all Member-owned coalitions for utility services totally and we have the opportunity to do something very similar with reciprocal Which I know is something that you know gene back in the day was already thinking about and so to be able to Finally make that vision happen. I think it's been very very rewarding When I started this activity when I had assumed what happened is that I would have the banks have Ownership stakes in it and that they would help run it because it does have a You know really national significance. Yeah, and I also recognize that one really had to make sure that it wasn't just Safe and sound in terms of a good operating, but it had to be safe and sound in terms of what the regulators would You know few as a really well-run organization. So you had to do two important things that were a little bit a less Common than you had another business But in the original days people didn't take it seriously enough. They thought this was a nice time Not a must happen that they while they shared it on They didn't feel there was necessary or desirable even to spend a time You know being part of it in an ownership way and also having you know some governance rights There's things have changed dramatically That's a sense SVB has been a a You know see change event Because banks can't pretend any more they know they can't pretend they really have to take this on full-throatedly and Palo's great credit in yours David. You might thought that we really ought to create a A board of banks that would both have ownership stakes in the company and have governance rights in the company Is something that I said I said a lot of entrepreneurs and other VCs wouldn't have the courage to do and or the foresight to do So we've done that and we've created a robust bank board and ownership governance structure and But that be and then and then priced it a sensibly so that what that does is it really You not only makes for a better Organization, but it also means it creates the enthusiasm to do what they should be doing Which is basically using this mechanism to ensure all their deposits because it's theirs and of course The the volume and the benefits to the company are profound to the banks is profound and to the public it's profound Now the other thing we've done which Is you know what to happen from the beginning thanks to Palo, but now even more You know double down is making sure that in the regulator's eyes. This was really you know a first class Well-run respectful from a regulatory perspective operation and You know, it was done that never conceivable way But in addition It's say we got people in the organization who are former FDIC regulators and who actually have been senior people Understanding how this is to be done correctly and maybe just walk through kind of like Enbid like how does it how does it work? You know at high level um You know Again, why did the why did the these banks want to participate in this kind of new network? Yeah, absolutely so so Enbid is a bank-owned bank managed consortium that Core does the deposit network for banks and What has been so nice about that is you know, we were talking about these these financial market utilities like I'd mentioned You know the banks themselves are the ones Providing the value to these networks in terms of the insurance in terms of liquidity So building a structure where they can actually benefit from the value that they add and so they benefit in terms of alignment and oversight They have you know oversight over the firm financials things like that they have a saying the direction and the management They have you know better economics from these networks we talked about how the the margins in these business Not the margins per se but just the economics have never been institution-friendly which has actually Been short-sighted because it limits the actual total addressable market It just limits the adoption of these products and then um and then finally actually having some notion of a revenue share I think all the best consortium models the members whether it's modern-fire whether it's institutions have alignment and and and upside and you Align the incentives so that everyone wants to do well And what's been so exciting about that is to your point it is this or orthogonal Approach that is so well aligned with what the institutions actually want and I think for for any Folks building building firms, right? Sometimes you think oh just better tech is gonna be enough But that's not always a solution, right? I think to your point about competing against entrenched incumbents You have a better search than Google it doesn't necessarily mean you're gonna Observe Google so there needs to be There needs to be more than needs to be Real differentiation and in this case It was born from just having a I think hopefully a deep understanding of what these are Institutions were actually looking for what they were actually worried about what they actually wanted what they would get excited about And for you know the folks at modern five but very much so for the banks and the partners that were fortunate to work with What's been such a joy is how Excited and enthuse and motivated they are to make and be to success and I think that's how you drive The success that we've been having is when you have of course, you know our firm excited But the actual participants the actual members just Amped up to make the success and something that you know the the the bank board talks about something that we talk about something And our members talk about a lot is the the US has Seven water control systemically important financial market utilities. These are some of the firms we talked about dtcc Ice clear credit. They are a lot of the Organizations that provide the deepest most critical infrastructure Behind our financial markets And what we're doing with envy in a lot of different ways is is building what could be and what will be the eighth Absolutely and for yeah and for everyone involved that mission that Vision is just beyond exciting and the banks want to be part of that. They want to own it They want to be on that journey. They want to see upside They want their customers to see the benefit and so that has been a huge motivator for everyone involved And and I think that's been done here with that and basically the company itself is it's actually An interesting lesson that even goes beyond finance could be on the company So if you're really going to have a really winning technology enterprise I you've got to do three things you've got a good technology right and people like you know where can Create and adopt good technology This company's done that has that team It's got to be well-managed Which is often a challenge for young companies this company has got that but then the other part of this which is often You know In the ether, but it's not as precisely focused on as this company is modern files figured out. This is about the customer This is about adding critical value for the customer if you have an idea that is as big as You both have articulated and as as a modern file is and as and it is you've really got to make it a customer centric Operation and I think if you look at the biggest most successful tech companies in the United States You will find that the way they operate is in essence With that sort of that focus in mind. So now it's exciting where I think Palazzoong is exciting. It's great to be a part of it and But there's a lot of moving parts and we're working on every one of the way No, I think what gets me so excited to your point on like, you know I mean you proved that you know the closet networks can be an unbelievable edge and an incredible business I mean, you know you created billions of dollars that you know valued at your last company um But you know if I think back to your your PhD and and bank balance your optimization right now We're only focused on the liability side. I think once you get the the network built There's a whole other side of the balance sheet to even think about and lots of other products and analytics That we can kind of route not just in the network, but serving an individual institution So but again the hard part is solving the cold surplus problem And I think that's been what's been so exciting for me even just watch the last you know few months you know together I remember reading the cold surplus when we were getting this going together and thinking you know Trying to solve the cold surplus problem with in a network effects business with financial institutions Has to be the worst idea of all time But now that we're on the other side, it's worth it But you want to get the flywheel going? Exactly. It's hard to get the going. Zero to the first 20 That's a painful part Awesome. Thank you guys. Thank you. 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