The best business returns are usually achieved by companies that are doing something that it's hard or impossible for you to do to them. Every year they get harder and harder to compete with. They have an ever-widening moat around their castle, and the key is not 'how big is the castle today?' but 'what is the trajectory of the moat?'
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The banks in Brazil were making 30% return on equity, some of the highest returns of any banks in the world, and yet the service was horrible, the products were terrible, the interest rates were the highest in the world. That paradox was a sign that something was deeply broken.
David Vélez — Invest Like the Best with Patrick O'Shaughnessy
The banks were so profitable and they were so used to that level of profitability that they just didn't need to change. And so when we came in with a completely digital model, with no branches, with a much lower cost structure, we were able to offer a credit card with no annual fee at a time when every single bank in Brazil was charging annual fees that were sometimes higher than the credit limit they were giving to customers.
David Vélez — Invest Like the Best with Patrick O'Shaughnessy
The banks had been making so much money for so long that they had basically forgotten to serve the customer. They were just extracting value from the customer. And the interesting insight that I had was that you could build a much better bank just by using the customer as your north star, as opposed to using profit extraction as your north star.
David Vélez — Invest Like the Best with Patrick O'Shaughnessy