Affirm

Buy-now-pay-later giants: Afterpay $34B, Affirm ~$17B

Shaan sizes the buy-now-pay-later category: Affirm is a ~$17-18B public company, Australia's Afterpay is a $34B company, and Klarna (Europe) is likely the biggest of all.

“So there's Afterpay in Australia, which is even bigger. Afterpay is a $34 billion company, which is kind of interesting because normally Australian companies are much, much smaller. Klarna is big in Europe, I think, for this.”

How Affirm was born from a database technique looking for a use

Shaan recounts Affirm's origin: an EIR at Max Levchin's HVF lab had a new database technique with no application, until Levchin proposed using internet and social signals for instant, on-the-fly creditworthiness scoring instead of legacy credit scores. That insight became Affirm.

“And then one day Max walks in, he goes, Dude, like credit scoring and credit reporting is so like ancient. We should be able to, like, if you're a person today, I should be able to take signals from the internet, social, social networking data, uh, publicly available data on the internet to do instant credit, uh, worthiness”

Don't hate the player, hate the game

Shaan's stance on credit and BNPL: he never blames a company for tricking him into a choice, putting the burden of self-control on the individual; the only line he draws is non-transparency. He notes Affirm often charges 0% interest because it takes 7% from the merchant.

“I'm always a kind of don't hate the player, hate the game type of situation where I put the burden on the individual in the same way that I wasn't like, oh my God, Juul, or like, you know, like, is, you know, is, is Grey Goose evil because it's alcohol and alcohol causes problems? No, like, I don't think so.”

Take it out of the proceeds: removing the out-of-pocket friction

Shaan describes how Compass funds his home-staging improvements as a no-interest loan deducted from the eventual sale proceeds. The same logic powers taxes-out-of-refund, Affirm, and Afterpay, pointing to a broad opportunity wherever people don't want to pay out of pocket up front.

“it's like, take it out of the— take it out of the thing. Like, taxes is another good one where it's like, oh yeah, I don't want to pay for you to do my taxes, just take it out of my refund or put it up, add it to my bill later, you know? And so where are there other opportunities to reduce the money out of pocket up front?”

Steal thisRemove the out-of-pocket moment: let customers pay out of future proceeds (sale, refund, salary) instead of fronting cash, even if the cost is identical.