Yours in Finance: Shamir Karkal

The same questions asked of the people shaping the future of banking and fintech.

Welcome to Yours in Finance, where we are tracking how banking is changing. Once again. Shamir Karkal, president at Aleph Invariance and co-founder of Sila, responds to our questionnaire: "And that's when I realized that it was a complete deepfake of my own voice that had completely fooled me."

About Shamir

A true fintech pioneer, Shamir Karkal is President of Aleph Invariance, a modern, AI-native, market-neutral, multi-strategy quantitative asset manager. Previously, he co-founded Sila in 2018 to empower financial innovation and support entrepreneurs building a new financial world. In 2009, he co-founded Simple, the first bank of its kind in the United States. In doing so, he played a crucial part in building the infrastructure that would pave the way for online banking. After BBVA acquired Simple in 2014, he headed the Open Platform at BBVA. Shamir studied physics and computer science at Bangalore University and is a graduate of Carnegie Mellon’s Tepper School of Business. He lives in Portland, Oregon.

Q&A

The interview is edited for brevity and clarity.

What's difficult about managing money?

This is a really interesting question, too, because Aleph Invariance is a hedge fund. So, we are basically in the business of managing money. But I think as an individual, the hard thing about managing money is it's a cash flow management problem, which is you have a bunch of income and it's semi-regular, at least for most people, and then you have a set of expenses, and those are semi-regular, too. And if they match up really well, then life is relatively straightforward. But the problems are when they don't, right? You have an unexpected expense, which could be anything. For Americans in general, medical debt is a huge problem. So, you run into an accident, fall down, something happens, and now healthcare doesn't cover it all, if you even have healthcare, and suddenly you have a bunch of debt and it's even worse if it affects your work. The hard thing to do is to make sure that across whatever irregularity or regularity you have in the income side of the cash flow, you build up enough of a buffer to cover the irregularity in the expense side of the cash flow, which is always going to be there.

You can go get a job, which is the safest job on the planet. You get paid every month like clockwork for the next 20 years, so your volatility in income is almost zero. You cannot guarantee zero volatility in expenses. That is impossible. You're like, ‘I guarantee that I will never have an unexpected expense.’ I'm like, ‘dude, you said that, you jinxed yourself, it's going to happen tomorrow now,’ and so then that's why you need to build up that buffer. If you don't have that buffer, then you're going to be in a bad or a worse world.

What do you like about digital banking?

What I love about digital banking nowadays is the ease of access to information, and the ease of making payments. Every now and then, even now, like twice a year, somebody will send me a check and it's like, ‘how do I deposit this? What the heck?’ But let's be honest, I have an online bank. I have a credit union account. I open up one of those apps and sit down and endorse the back of the check, and take photos of it, and submit it, and it's done, right? And as irritating as it is for me to get a check now, it doesn't cost me more than like five minutes to solve that problem. Two decades ago, it was a much worse problem to have. You would actually have to take time out of your day to go to a bank branch and deposit those checks. And guess what? You used to get a lot more checks. It was not once or twice a year, it was like once or twice a month. Sometimes people got literal paychecks monthly. So, yeah, the fact that checks are slowly vanishing into the background, haven't quite vanished, but there are very functional apps that let you check your balance, your transactions, and make payments, and do it all from your phone, and do it near instantaneously. We take that all for granted, but none of that existed as recently as 15 years ago.

What financial habit or behavior are you unwilling to automate?

I would actually automate nearly everything. The one thing that I would not automate is the irrevocable sending of large amounts of money.

So, when we do wire transfers, it's mostly a business problem, not a personal issue. I would like to have at least one and ideally two humans sign off on it before it gets sent.

Two years ago now, one of my product managers sent me an audio file and I started listening to the audio file and it was a recording of me on some speech, saying something about payments and blah blah blah blah, and then at the end, I seamlessly switched to asking them to wire a certain amount of money. And that's when I realized that it was a complete deepfake of my own voice that had completely fooled me. So I'm like, wow, if it fools me…

Now that was just audio back then. Now, we are at the video level where I was doing this online notarization thing, and they literally asked me to move my hand in front of my face like this, and I'm like, ‘oh, that's one way to try to establish that this is actually really me, not some deepfake.’

What's a financial decision you'd be happy to outsource to an AI agent?

Most minor spending decisions below a certain limit and that limit would not be below say, $500.

I'm like, ‘hey, I'm going to go to New York in a couple of weeks time, book me a flight, find me a hotel, book that for me. And this is the nice thing: If you do it right and you do it over time, you don't even have to tell it, like ‘I don't want a red eye. I live in Portland and when I say New York, I mean Manhattan, not some far corner of Staten Island.’ They're already pretty good at applying common sense to that, and it's just like, ‘go find the flights, find the hotels, optimize knowing what I like, go ahead and book them, and tell me about it.’

What earns the right to be someone's primary financial relationship?

I think it still goes back to the old thing, which is trust. I think that the contours of trust have changed. Before, trust was about having the big branch somewhere nearby with the marble in the lobby and lots of people you could talk to. That was probably how it was 20, 25 years ago. Now, I think trust is much more about reliability.

If you tell me that this is a banking app, and I download it from the store, and I open it up and it crashes, I'm like ‘okay, that's not a good sign.’ I open it up again and log in, and it logs me in, and then a minute later, it crashes again. Then, I'm like, ‘I'm done with this.’ Just the basic reliability of the app, but then there are levels to that reliability, right? Like, reliability in whether it functions. Do all the basic tasks of putting money in, taking money out, and storing money, whatever the app does, do those things work reliably and easily? Does it always work? Does it work every time the same way? Does it have any weird, unexpected surprises? No, that's the next level of reliability. And the third level of reliability is, how reliable are you when I am in trouble. I got scammed, lost my card, whatever problems that people have. When that happens, how reliable are you in being able to solve that problem for me?

I think those are the levels of reliability which earn my trust, at least. And as you go through those, if you get more trusted, then you're more likely to become my primary financial app.

How do you define a bank?

I'm always in the camp that if it looks like a duck, it walks like a duck, it smells like a duck, then it's a duck. No matter how many times you say that it doesn't have a license to be a duck.

If it has a way for me to deposit my funds into it, and a way for me to withdraw those funds on demand, and it provides a set of payment services that I can use pretty reliably and easily on an everyday basis, then that's a bank to me.

What's the last thing you bought that you're still thinking about?

I don't really think much about the things that I buy. Well, I just rented an apartment in a place called West Hempstead, which is just on the eastern suburbs of New York City. So there's Brooklyn, Queens and then this area of Garden City in Long Island. So, this West Hempstead is over there. I'm moving there in two months' time, so I bought it to the extent that I signed the lease and put a down payment down on the lease. So, that's still on my mind, and we have the whole move to do, so that's the next thing on my mind.