WEBVTT - Jim McKelvey on 'The Innovation Stack' (Podcast) 0:00:02.040 --> 0:00:06.760 This is Masters in Business with very Results on Bloomberg 0:00:06.880 --> 0:00:11.000 Radio this week on the podcast what Can I Say? 0:00:11.200 --> 0:00:17.880 A masterclass in entrepreneurship technology, learning from your mistakes, building 0:00:18.040 --> 0:00:22.000 a wonderful brand and wonderful company. Jim McKelvey. He is 0:00:22.040 --> 0:00:25.640 the co founder of Square along with Jack Dorsey. They 0:00:25.720 --> 0:00:29.920 built an amazing company which is now publicly traded. He 0:00:30.000 --> 0:00:33.559 has done a variety of really fascinating things, and I 0:00:33.600 --> 0:00:38.239 think you will find our conversation quite intriguing. He is 0:00:38.360 --> 0:00:43.320 also the author of The Innovation Stack, Building an Unbeatable Business, 0:00:43.560 --> 0:00:46.600 One Crazy Idea of Time. I have a decent number 0:00:46.640 --> 0:00:50.360 of authors, um pitch me on coming up on the podcast. 0:00:50.720 --> 0:00:53.000 And for the most part, I find a lot of 0:00:53.000 --> 0:00:55.840 the books a little tedious and and tough to plow through. 0:00:56.240 --> 0:00:58.960 And so you don't hear those folks. The folks I 0:00:59.200 --> 0:01:02.400 bring the books tend to be more interesting. I found 0:01:02.400 --> 0:01:06.160 this to be a really amusing, well written, uh and 0:01:06.240 --> 0:01:11.000 fascinating book. Uh not just about his experiences at Square. 0:01:11.120 --> 0:01:14.240 But Jim went back and said, why did Square win 0:01:15.280 --> 0:01:18.240 when there were so many forces aligned against us, including 0:01:18.720 --> 0:01:22.040 behemoth Amazon? And so he put in the research and said, 0:01:22.120 --> 0:01:24.360 let's figure out what we did right and see if 0:01:24.360 --> 0:01:27.160 there are lessons to be shared with the world, and 0:01:27.240 --> 0:01:29.679 that's what this book is about. You're gonna find this 0:01:29.760 --> 0:01:32.880 conversation to be absolutely fascinating. So, with no further ado, 0:01:33.480 --> 0:01:39.720 my conversation with Jim McKelvey. This is Mesters in Business 0:01:39.959 --> 0:01:45.680 with Very Renaults on Bloomberg Radio. My extra special guest 0:01:45.760 --> 0:01:48.920 this week is Jim McKelvey. He is the co founder 0:01:49.080 --> 0:01:53.320 of Square along with his colleague Jack Dorsey Uh. He 0:01:53.480 --> 0:01:57.520 is an independent director at the Federal Reserve Bank in St. Louis. 0:01:58.000 --> 0:02:01.120 He is also the author of a book, The Innovation Stack, 0:02:01.400 --> 0:02:05.560 Building an unbeatable business, one crazy idea at a time. 0:02:05.920 --> 0:02:09.639 Jim McKelvey, welcome to Bloomberg. Thank you, Barry. Actually, I'm 0:02:09.680 --> 0:02:11.760 now the chair of the St. Louis FETI you are 0:02:11.840 --> 0:02:15.880 the chair the president. No, um, I don't get to 0:02:15.960 --> 0:02:17.960 vote on that interest rate. I get to vote on 0:02:17.960 --> 0:02:20.960 the little interest rate. That's fascinating. We'll talk about that 0:02:21.000 --> 0:02:25.840 in a bit. But let's start out with your background. 0:02:26.000 --> 0:02:29.280 And I have to begin by asking you a question. 0:02:29.840 --> 0:02:33.880 What's the difference between an entrepreneur and a business person? 0:02:34.720 --> 0:02:38.000 These days? Nothing because the word is the same. But 0:02:38.240 --> 0:02:42.120 originally the word entrepreneur meant somebody in business who was 0:02:42.200 --> 0:02:45.680 doing something different, very different, So we're talking about the 0:02:45.760 --> 0:02:48.560 Right brothers trying to build the first airplane, or somebody 0:02:48.560 --> 0:02:52.000 who you thought was crazy. These days, entrepreneur has sort 0:02:52.040 --> 0:02:54.480 of lost that original meaning and it means just anybody 0:02:54.480 --> 0:02:56.920 who starts a business. But the problem with that is 0:02:56.960 --> 0:02:59.720 that you can't then talk about how different it is 0:03:00.080 --> 0:03:02.600 to do something where you're not copying what everybody else 0:03:02.680 --> 0:03:05.400 is doing and trying to invent something yourself. So so 0:03:05.480 --> 0:03:07.240 let's stay with that theme, because if I were to 0:03:07.280 --> 0:03:10.840 go to Jim Mcalvy dot com. On your site, there's 0:03:10.880 --> 0:03:13.880 a big banner that says, do something that has never 0:03:13.919 --> 0:03:16.600 been done. Explain what you mean by that? Yeah. So, um, 0:03:16.600 --> 0:03:18.239 there's a lot of talk about how we like to 0:03:18.280 --> 0:03:20.000 be innovative and how we like to be creative, and 0:03:20.040 --> 0:03:22.720 people are supposed to like that, and I've never been 0:03:22.760 --> 0:03:26.280 comfortable doing that, although I've done it occasionally, And I 0:03:26.360 --> 0:03:29.280 wanted to address the fact that it's actually really scary 0:03:29.480 --> 0:03:32.080 to do something where you don't have any peers, where 0:03:32.080 --> 0:03:34.200 you don't have any validation, where you don't have anybody 0:03:34.240 --> 0:03:37.600 else when you look around saying Oh well, uh, they're 0:03:37.600 --> 0:03:40.000 doing it too, so it must be sort of okay, 0:03:40.080 --> 0:03:43.960 if you're doing entrepreneurship in its classical definition, you're doing 0:03:44.040 --> 0:03:46.160 something that is going to be very very scary to 0:03:46.240 --> 0:03:49.360 you on on almost a biological level, because humans are 0:03:49.400 --> 0:03:53.160 hurt animals. We like to be in a group, right, 0:03:53.200 --> 0:03:55.520 it's a I was a big fan of Mutual of 0:03:55.600 --> 0:03:58.800 Omaha's Wild Kingdom, and there was always that shot of 0:03:58.880 --> 0:04:02.360 the herd of whoever zel zebra, that one zebra on 0:04:02.400 --> 0:04:05.400 the outskirts of that you know what happens? That was 0:04:05.480 --> 0:04:08.440 me I was as I was always away from the 0:04:08.480 --> 0:04:12.400 herd and and lunch for the lions. Yeah, that describes 0:04:12.640 --> 0:04:15.880 my schooling. So so that raises a lot of really 0:04:15.920 --> 0:04:20.960 interesting questions, beginning with you know, why is Silicon's focus 0:04:21.080 --> 0:04:25.760 on disruption so misguided? I think looking at disruption, which 0:04:25.760 --> 0:04:27.760 is this term that we really used to death in 0:04:27.800 --> 0:04:31.840 Silicon Valley, is it's a bad focus because if you're 0:04:31.839 --> 0:04:34.400 looking to disrupt, it puts your eye on the thing 0:04:34.400 --> 0:04:37.440 you're trying to disrupt. So we're gonna disrupt healthcare? Okay, Yeah, 0:04:37.680 --> 0:04:39.080 there's a lot of stuff wrong with healthcare. What do 0:04:39.080 --> 0:04:41.039 you want to disrupt? But if you spend your time 0:04:41.080 --> 0:04:44.480 looking at what you want to destroy, it triggers that 0:04:44.600 --> 0:04:47.960 copying function in your head that says and you that says, oh, 0:04:47.960 --> 0:04:49.159 I should do this, I should do that, and you 0:04:49.200 --> 0:04:52.000 start becoming indoctrinated into the thing that you're trying to destroy. 0:04:52.960 --> 0:04:56.080 And so I believe you should kind of ignore the 0:04:56.120 --> 0:04:59.479 thing that you are replacing and just focus on the 0:04:59.480 --> 0:05:01.960 problem trying to solve. And then then you get this 0:05:02.040 --> 0:05:04.560 sort of weird thing because you know, Square, which we 0:05:04.600 --> 0:05:07.400 now call block is, has always been called a very 0:05:07.400 --> 0:05:10.080 disruptive company, but actually ran the numbers on the number 0:05:10.200 --> 0:05:15.479 of companies that we wiped out, right, American Express, Visa, 0:05:15.839 --> 0:05:17.840 they're all bigger card, Right, you killed all of it. 0:05:17.960 --> 0:05:20.200 We haven't disrupted anything like we We knocked a few 0:05:20.360 --> 0:05:24.200 ISOs into you know, sort of more honestly pricing their products, 0:05:24.240 --> 0:05:26.680 but even they're still around. I mean, we didn't destroy much. 0:05:26.720 --> 0:05:28.680 What we did instead was we created a new market. 0:05:29.120 --> 0:05:32.200 And we're gonna talk a lot about Square, uh coming up. 0:05:32.279 --> 0:05:36.799 But here's another quote of yours. I really enjoyed. Chaos 0:05:37.080 --> 0:05:40.680 is a good thing. Explain. Oh yeah, so chaos is 0:05:40.680 --> 0:05:43.080 where you get new ideas. Chaos is that's it's this 0:05:43.160 --> 0:05:46.200 moment that it puts your brain into a different form 0:05:46.240 --> 0:05:48.920 of thinking. Uh So, if you've got if you're if 0:05:48.920 --> 0:05:51.039 you're a pattern matcher, which we're all pattern matchers, and 0:05:51.080 --> 0:05:53.360 you see these patterns and you don't think you do 0:05:53.360 --> 0:05:56.080 the things automatically, you're you go through most of life 0:05:56.800 --> 0:06:00.760 on autopilot, as you should. But occasionally, uh something goes 0:06:00.760 --> 0:06:02.920 wrong and it's weird and and things are not working 0:06:02.920 --> 0:06:05.320 like they should be, and and that puts your brain 0:06:05.320 --> 0:06:08.520 into this different state. And so I say chaos because 0:06:08.600 --> 0:06:10.599 it's a little scary to think of chaos, but it's 0:06:10.640 --> 0:06:14.520 also a very good creative place that makes a lot 0:06:14.520 --> 0:06:18.000 of sense. One more one more quote. Thank you for 0:06:18.040 --> 0:06:20.600 reading the book. I mean, I have to say that you, 0:06:20.760 --> 0:06:23.719 as an interviewer, have prepared really really well for this. 0:06:24.279 --> 0:06:27.320 Can I tell you something And I shouldn't say this 0:06:27.400 --> 0:06:30.440 out loud because I'm kind of revealing my secret sauce. 0:06:31.360 --> 0:06:33.240 We do a lot of prep when people show up 0:06:33.279 --> 0:06:38.000 for an interview, and my thought processes. How often am 0:06:38.000 --> 0:06:40.120 I going to get a Jim mcelvy sitting in front 0:06:40.160 --> 0:06:42.799 of me for ninety minutes. I'm not just gonna walk 0:06:42.800 --> 0:06:45.680 in and coast. I have to do my homework, and 0:06:45.800 --> 0:06:50.839 I am genuinely shocked that that is this exclusive market niche. 0:06:50.960 --> 0:06:54.480 It's it's it makes you special. I hate to explain 0:06:55.200 --> 0:06:57.480 to the listening audience, but a lot of people who 0:06:57.520 --> 0:07:00.880 have interviewed me about the book haven't read the whole book, 0:07:01.440 --> 0:07:04.640 and or they you know, they've got cliff notes or something. 0:07:04.960 --> 0:07:08.920 I appreciate, you appreciate the work. Um, let me give 0:07:09.000 --> 0:07:13.800 you one other quote of yours. Reward loyal customers now 0:07:14.160 --> 0:07:17.080 or risk losing them. Tell us what that means, and 0:07:17.080 --> 0:07:20.480 then I'll share a anecdote. So there's a different pricing 0:07:20.520 --> 0:07:22.640 power you have if you have an innovation stack. So 0:07:22.680 --> 0:07:25.320 myke my book sort of focuses on this world of 0:07:25.800 --> 0:07:28.400 entrepreneurial companies that build these things called innovation stacks. We 0:07:28.440 --> 0:07:31.320 can get into that, but the idea here is that 0:07:31.400 --> 0:07:34.040 if you have one of these things, you have amazing 0:07:34.080 --> 0:07:38.200 pricing power. You have extremely low cost You effectively have 0:07:38.320 --> 0:07:40.880 customers that are willing to do things differently just to 0:07:40.960 --> 0:07:44.080 experience your products. And this allows you a massive amount 0:07:44.120 --> 0:07:46.400 of pricing flexibility. And I ran the math, and it's 0:07:46.440 --> 0:07:51.160 actually better for you to keep your prices absurdly low 0:07:51.320 --> 0:07:55.560 by normal sort of MBA calculations. And if you undercharge 0:07:55.640 --> 0:07:58.800 the market, you will actually maximize revenue. That's really that's 0:07:58.800 --> 0:08:02.160 really kind of interesting. So I used to have the 0:08:02.160 --> 0:08:05.080 Starbucks app on my phone and every day on the 0:08:05.080 --> 0:08:07.840 way into the office, this is pre pandemic, I would 0:08:07.840 --> 0:08:09.960 swing by a Starbucks, even though we had a coffee 0:08:09.960 --> 0:08:13.200 maker in the office, uh, and pick up their egg 0:08:13.200 --> 0:08:16.520 white and turkey bacon sandwich and a and a Starbucks 0:08:17.080 --> 0:08:19.560 um flat white, and I would go to my office. 0:08:20.200 --> 0:08:24.400 And then they stopped. They like had less and less 0:08:24.440 --> 0:08:26.600 of this in stock. Who was here or miss weather 0:08:26.640 --> 0:08:31.160 they had it, And then the pandemic hits and they 0:08:31.240 --> 0:08:35.480 converted their Starbucks points. And then I get an email 0:08:35.600 --> 0:08:40.880 from Starbucks telling me that despite you know the pandemic 0:08:40.920 --> 0:08:43.800 and everybody stuck at home, use it or lose it. 0:08:43.880 --> 0:08:45.800 Your points which used to the last forever, if you 0:08:45.800 --> 0:08:49.400 don't use them by May eleven, they're going away. And 0:08:49.440 --> 0:08:51.920 I got really annoyed at that, And then you should. 0:08:52.120 --> 0:08:55.000 And then outcomes the story that Starbucks has this three 0:08:55.000 --> 0:08:58.600 billion dollar float because if you have the app on 0:08:58.640 --> 0:09:01.800 your phone and it gets refilled with your credit card, 0:09:01.960 --> 0:09:05.880 fifty Bucks or Bucks every time it runs down. Multiply 0:09:05.960 --> 0:09:09.920 that by a million Starbucks customers. They're sitting on three 0:09:10.000 --> 0:09:12.680 four billion dollars. That was pretty much the last draw 0:09:12.800 --> 0:09:15.199 for me. That and the end. I don't care about 0:09:15.200 --> 0:09:17.400 the float. No, no, no, but wait, you're sitting with 0:09:17.440 --> 0:09:20.640 all this money and you have to take our already 0:09:20.760 --> 0:09:25.960 reduced points. I'm done with you. And ps the same time, 0:09:25.960 --> 0:09:31.240 I'm getting emails from Delta your silver medallions. Fine, don't 0:09:31.280 --> 0:09:33.400 worry about it. We're gonna roll it over for a year. 0:09:33.440 --> 0:09:35.520 You're good, And I'm like, that's the right way to 0:09:35.559 --> 0:09:39.480 retain a customer. And and even more insidious than that 0:09:39.640 --> 0:09:41.840 is the fact that when you are in a panic 0:09:41.880 --> 0:09:44.240 state yourself, when you're in chaos, when you when something 0:09:44.240 --> 0:09:46.360 is disrupted, like you just had the world shutdown because 0:09:46.360 --> 0:09:49.880 of CODD, you are in a heightened state of of 0:09:49.880 --> 0:09:53.120 of of imprint imprint ability. So, in other words, if 0:09:53.160 --> 0:09:56.200 Starbucks does you a service at that moment, if they 0:09:56.200 --> 0:09:58.360 help you out, if they say we're gonna stays with you, 0:09:58.880 --> 0:10:01.800 then then they got a customer for life. Conversely, if 0:10:01.840 --> 0:10:03.920 it's at the moment they choose to jab their thumb 0:10:03.920 --> 0:10:06.240 in your eye, then you're gonna hate them, and you're 0:10:06.280 --> 0:10:09.520 gonna go on air and hate them and and shock. Yeah. 0:10:09.640 --> 0:10:11.800 It was a Starbucks in the lobby of our old 0:10:11.880 --> 0:10:15.040 office building, and I was a regular there, and I 0:10:15.600 --> 0:10:18.760 like strong coffee, so I used to defend them against 0:10:18.800 --> 0:10:21.560 people who are, like I prefer Dunkin Donuts. That's because 0:10:21.600 --> 0:10:23.439 you're a whim drink. Drink some coffee that puts a 0:10:23.480 --> 0:10:26.960 little hair on your chest. But this, by the way, 0:10:27.480 --> 0:10:31.720 a hundred Starbucks points, what is it? Coffee? It's the 0:10:31.880 --> 0:10:35.720 cost of it is so meaningless. But the thought process 0:10:35.760 --> 0:10:38.840 behind it was up yours, And I was like, now, 0:10:39.040 --> 0:10:42.240 up yours. I was spending I don't know, five hundred 0:10:42.240 --> 0:10:45.079 bucks a year on Starbucks. You can get coffee elsewhere 0:10:45.679 --> 0:10:49.400 I cannot do, and I will occasionally get Starbucks, but 0:10:49.679 --> 0:10:52.400 I am not no longer a regular. It probably doesn't 0:10:52.400 --> 0:10:54.960 taste as good anymore either. Um no, it's it's still 0:10:55.200 --> 0:10:58.960 still pretty good coffee. The the question that I'm curious about, 0:10:59.360 --> 0:11:01.439 am I just an unreal custs And the only person 0:11:01.480 --> 0:11:04.000 who got angry no, no, no, no, you're what percentage 0:11:04.000 --> 0:11:06.520 of people who said, wait, you're taking my points away? 0:11:06.800 --> 0:11:09.880 You are so so there's a calculation that you make 0:11:09.920 --> 0:11:13.520 if you're uh, strictly looking at spreadsheets and you say, well, 0:11:13.520 --> 0:11:16.080 they've got three billion dollars with a float, and our 0:11:16.120 --> 0:11:17.640 stores are kind of closing and we need a little 0:11:17.640 --> 0:11:19.840 bridge and we need you know, they make some sort 0:11:19.840 --> 0:11:22.520 of cold calculating decision that sort of looks good on 0:11:22.559 --> 0:11:25.880 a spreadsheet. What they forget is how impactful that is 0:11:26.280 --> 0:11:30.400 during a crisis on the psychology of their customers, and 0:11:30.440 --> 0:11:33.320 those people remember forever, and that that's just a terrible 0:11:33.400 --> 0:11:37.680 moment to do anything against your customers. It's also a 0:11:37.840 --> 0:11:40.880 wonderful moment to do something for your customers. So if 0:11:40.920 --> 0:11:42.839 they if they had a way to do what Delta 0:11:42.880 --> 0:11:45.760 did and be positive, by the way, same exact circumstances, 0:11:45.720 --> 0:11:48.320 the same thing. No one's flying, nobody's going to Starbucks, 0:11:48.320 --> 0:11:50.800 your points at both they're just sitting there, yea, And 0:11:50.840 --> 0:11:54.400 Delta is probably worse, k right, So Delta said, hey, 0:11:54.440 --> 0:11:57.679 we're good. We're gonna roll your flights status over to 0:11:58.880 --> 0:12:02.120 and any canceled lights you get a lifetime credit. You 0:12:02.120 --> 0:12:04.160 could use them in the future, don't worry about it, 0:12:04.360 --> 0:12:07.360 and now good luck getting me on a different You 0:12:07.400 --> 0:12:10.520 know something besides delta, Yeah, I expect to see you 0:12:10.559 --> 0:12:12.719 on adulta flight holding a cannon or a cup of 0:12:12.760 --> 0:12:17.720 pizza coffee. So so anyway, we digress, and your point 0:12:18.040 --> 0:12:21.440 happens to be I digress is when you have an 0:12:21.520 --> 0:12:24.400 opportunity to delight a customer, what what do you do? 0:12:24.559 --> 0:12:27.199 So the the interesting thing here is I was studying 0:12:27.480 --> 0:12:29.439 trying to figure out why the math was different for 0:12:29.520 --> 0:12:32.760 companies with innovation stacks. And this is really uh, sort 0:12:32.800 --> 0:12:36.800 of personal to me because I was very focused on 0:12:37.480 --> 0:12:40.800 having some sort of theoretical basis for the stuff that 0:12:40.840 --> 0:12:42.920 I was saying. And what I did was I found 0:12:42.920 --> 0:12:46.000 this perfect case study, which was Southwest Airlines. Southwest Airlines 0:12:46.080 --> 0:12:49.240 had tremendous pricing power and during the Herb Keller her years, 0:12:50.200 --> 0:12:53.079 who was one of the founders in original CEO. Yeah, 0:12:53.160 --> 0:12:55.600 he was one of the founders, a legend, and Herb 0:12:55.800 --> 0:12:59.160 kept the prices low and then he left and Southwest 0:12:59.160 --> 0:13:01.520 Airlines raised their prices. So it was this perfect case 0:13:01.559 --> 0:13:03.720 study of this company that had an innovation stack and 0:13:03.720 --> 0:13:05.360 then all of a sudden started messing with the math. 0:13:05.559 --> 0:13:08.040 They made a lot more money right after her left 0:13:08.400 --> 0:13:12.480 for a few years. Since that time, five new competitor airlines, 0:13:12.559 --> 0:13:15.760 like complete new airlines that would have totally died if 0:13:15.800 --> 0:13:17.960 herb was at the Helm are now competing with Southwest. 0:13:18.040 --> 0:13:21.200 That makes a lot of sense. And and ps. Southwest 0:13:21.480 --> 0:13:23.319 was always a pain in the butt, but they were 0:13:23.440 --> 0:13:26.760 very cheap because you noah sign seats that you have 0:13:26.840 --> 0:13:29.240 to get up, you have to wait online. I am 0:13:29.280 --> 0:13:33.000 a former to your point, former Southwest Fortia because I 0:13:33.040 --> 0:13:36.160 just don't have the tolerance for the headache and it's 0:13:36.200 --> 0:13:39.560 not discounted enough. I'll pay a little more for Delta 0:13:39.720 --> 0:13:43.200 and feel like I'm getting a better experience and not 0:13:43.320 --> 0:13:48.400 feel like cattle boarding an airline. So all right, enough 0:13:48.520 --> 0:13:54.320 endorsing Delta and trashing Southwest and Starbucks. So let's talk 0:13:54.360 --> 0:13:58.520 a little bit about, um, your business backgrounds Uh. Turns 0:13:58.559 --> 0:14:02.640 out that um, you were you were doing something with 0:14:02.720 --> 0:14:05.600 Ceedie Rams and somebody who knew said, hey, I have 0:14:05.640 --> 0:14:08.880 a kid who who's good with computers, and you hired 0:14:08.880 --> 0:14:10.920 this kid as an intern. Tell us about had a 0:14:10.960 --> 0:14:15.640 software company. This with the late eighties, I guess this 0:14:15.640 --> 0:14:19.040 would have been about ninety two. But back then, uh, 0:14:19.040 --> 0:14:23.040 my company, Mira was in a desperate situation. We had 0:14:23.160 --> 0:14:25.440 just screwed up this disc that had to go out, 0:14:25.640 --> 0:14:29.560 and we were hiring everybody. And the lady who sold 0:14:29.640 --> 0:14:34.320 us chocolate covered espresso beans. Her name was Marcia Dorsey, 0:14:34.360 --> 0:14:36.240 and her son, Jack Dorsey, came to work for us 0:14:36.240 --> 0:14:38.800 when he was fifteen. He showed up in his bicycle. 0:14:38.920 --> 0:14:41.240 He pulled an all nighter with us the first night 0:14:41.920 --> 0:14:46.280 at at his first real job, and he became a 0:14:46.480 --> 0:14:48.200 cherished part of the team from then. I called him 0:14:48.280 --> 0:14:50.360 Jack the Genius. When he was sixteen, this used to 0:14:50.400 --> 0:14:53.760 embarrass him, but now he's sort of grown used to it. 0:14:53.920 --> 0:14:55.800 Fifteen year old pulls an all night or that's a 0:14:55.800 --> 0:14:58.360 lot of chocolate covered espresso beans. Well, you know, Ridland 0:14:58.400 --> 0:15:03.080 wasn't commonly available back man the way it is today. 0:15:01.920 --> 0:15:05.840 You get out of you know, shake any kid a 0:15:05.840 --> 0:15:09.520 couple of written form, right, So so you start working 0:15:09.560 --> 0:15:14.120 with him, um for this company. Eventually you decide to 0:15:14.240 --> 0:15:17.640 bolt because the company was not doing what you wanted 0:15:17.680 --> 0:15:21.440 it to do anymore, and tell us about that. I'm 0:15:21.440 --> 0:15:25.960 a terrible leader. I don't direct the troops well and 0:15:26.000 --> 0:15:28.480 they sometimes don't follow me. And I saw the Internet coming. 0:15:28.480 --> 0:15:30.200 The Internet was going to wipe out our product, which 0:15:30.200 --> 0:15:32.960 was an internet based, you know, trade show disc. It 0:15:33.200 --> 0:15:35.160 had all the stuff that the brochures and stuff at 0:15:35.160 --> 0:15:38.360 a trade show. And in fact, the disc replaced all 0:15:38.360 --> 0:15:40.960 those bags of paper that people can't get the bags 0:15:40.960 --> 0:15:42.560 of paper have a disc. It made a ton of 0:15:42.600 --> 0:15:44.880 sense in the early nineties, and it was gonna get 0:15:44.880 --> 0:15:48.320 wiped out when websites were coming along. And I saw this, 0:15:48.720 --> 0:15:50.720 and I said to the troops, hey, let's stop making 0:15:50.920 --> 0:15:54.360 discs and start making websites. And they were like, oh, yeah, sure, Jim, 0:15:54.400 --> 0:15:56.720 we'll do it. But they didn't. They didn't follow me that, 0:15:56.840 --> 0:15:58.360 none of them. None of them would listen to me 0:15:58.400 --> 0:16:01.360 except this fifteen year old. So Jack and I um 0:16:01.880 --> 0:16:05.000 went off by ourselves and we basically created a new company. 0:16:05.720 --> 0:16:08.720 And that company still runs today. It's amazing that, you know, 0:16:08.800 --> 0:16:12.120 thirty years later, what Jack built is still running. And 0:16:12.440 --> 0:16:13.920 you said he was a really good code or he 0:16:14.000 --> 0:16:15.760 knew exactly what he was doing, A good coded, a 0:16:15.840 --> 0:16:17.600 good guy. I mean, he was a lot of fun 0:16:17.720 --> 0:16:21.320 and we got on famously. And uh, you know, after 0:16:21.400 --> 0:16:24.080 he was shown the door Twitter the first time, he 0:16:24.120 --> 0:16:26.000 asked me if I wanted to start a company with him, 0:16:26.080 --> 0:16:27.840 So I I got, I got sort of paid back 0:16:27.880 --> 0:16:30.640 twenty years later when he said, Hey, Jim, let's do 0:16:30.680 --> 0:16:32.320 something together again. I was like, cool, what do you 0:16:32.320 --> 0:16:35.400 want to do? And that's really an interesting story because 0:16:35.600 --> 0:16:38.480 and you described this very nicely in the book, as 0:16:38.520 --> 0:16:41.000 you're telling the story of we're trying to think about 0:16:41.040 --> 0:16:43.040 what to do. Wasn't like we have an idea, let's 0:16:43.040 --> 0:16:45.640 build a company. It's we want to build a company. 0:16:45.720 --> 0:16:48.520 Let's find an idea that resonates with both of us. 0:16:49.160 --> 0:16:53.120 At the time, you're doing glass blowing, and you have 0:16:53.280 --> 0:16:56.720 some nice products, and you have some products that are 0:16:56.800 --> 0:16:59.320 kind of ugly. I have a lot of that you 0:16:59.440 --> 0:17:03.400 shuff to the side and and pray someone comes along 0:17:03.760 --> 0:17:07.200 and takes the inventory off your hand. A client wanted 0:17:07.240 --> 0:17:11.200 to buy an ugly piece of glass via an amex, 0:17:11.359 --> 0:17:13.760 and you couldn't accommodate her. Tell us about what. Yeah, 0:17:13.880 --> 0:17:16.359 So the dirty little secret about art is that a 0:17:16.400 --> 0:17:18.800 lot of artists make stuff they're not proud of, and 0:17:18.840 --> 0:17:22.280 we don't signal it in the price. So you look 0:17:22.280 --> 0:17:25.360 at my stuff, and I've learned very very early to 0:17:25.440 --> 0:17:27.199 charge the same if I hate it or like it 0:17:27.680 --> 0:17:29.760 um And this was a piece I hated, and for 0:17:29.840 --> 0:17:32.359 good reason, I think it was ugly, um, but this 0:17:32.440 --> 0:17:33.879 lady wanted to take it off my hands. It was 0:17:33.920 --> 0:17:35.480 like a two thou dollar piece of glass. And she 0:17:35.560 --> 0:17:37.040 tried to pay me with an AMEX card and I 0:17:37.280 --> 0:17:40.439 couldn't complete the sale because I couldn't she didn't have 0:17:40.480 --> 0:17:43.040 a visa car, she didn't have a master card. Uh, 0:17:43.080 --> 0:17:46.000 and so I lost this sale. I was really upset, 0:17:46.520 --> 0:17:52.760 um and I called Jack on my iPhone and I said, hey, man, 0:17:52.800 --> 0:17:53.960 I know what we ought to do. I said, we 0:17:54.000 --> 0:17:56.359 ought to build a system so that I can take 0:17:56.400 --> 0:18:00.119 a payment on my iPhone. And Jack got quiet for 0:18:00.119 --> 0:18:03.399 a second. He said, that's interesting, and that's how Square started. 0:18:03.640 --> 0:18:07.240 So so now you guys want to launch this company. 0:18:07.520 --> 0:18:10.240 You design the hardware. Do you have any background in 0:18:10.240 --> 0:18:14.560 in hardware design or hard reading or software? No? I 0:18:14.560 --> 0:18:16.560 don't have any. Well, I have some background in software, 0:18:16.560 --> 0:18:18.760 but it turns out of the you know, between the 0:18:18.760 --> 0:18:20.400 two of us, Jack and me, he's a much much 0:18:20.400 --> 0:18:24.399 better programmer than I am. Uh. So it was pretty 0:18:24.480 --> 0:18:27.480 much Jack leading the software effort and me doing everything else. 0:18:27.520 --> 0:18:29.119 Because there was so much software work to do that 0:18:29.160 --> 0:18:30.640 I was trying to keep all the other stuff away 0:18:30.640 --> 0:18:33.040 from him. So I was dealing with the business licenses. 0:18:33.080 --> 0:18:36.760 I was, you know, buying office furniture. I also got 0:18:36.800 --> 0:18:38.919 into an argument with jack about how we were going 0:18:38.960 --> 0:18:41.719 to get the credit card read. So his attitude was, well, 0:18:41.760 --> 0:18:43.960 we'll build some software that'll take a photo of the 0:18:44.000 --> 0:18:47.720 card and we'll just use the photo and IR to 0:18:47.760 --> 0:18:52.040 convert the gotcha. So it turns out, if you know 0:18:52.080 --> 0:18:55.120 the subtleties of credit cards that actually cost more, that's 0:18:55.160 --> 0:18:57.240 called a card not present transactionally cost you more. And 0:18:57.240 --> 0:18:59.000 I thought, no, no, we want to get card present rates, 0:18:59.000 --> 0:19:01.080 which means we need to make read the mag stripe. 0:19:01.560 --> 0:19:03.560 And so I had this idea for a little mag 0:19:03.600 --> 0:19:06.159 stripe reader. It was actually an idea that I got 0:19:06.160 --> 0:19:08.840 out of out of Make magazine. Make magazine had this 0:19:08.920 --> 0:19:12.320 like hackers, uh story about some guy who turned his 0:19:12.600 --> 0:19:14.280 mobile phone into a credit card reader, and I was like, oh, 0:19:14.320 --> 0:19:16.360 we can do the same thing. So we took this 0:19:16.440 --> 0:19:19.600 idea and I went to my studio and I started 0:19:19.640 --> 0:19:24.080 building a credit card reader. Uh so I basically built 0:19:24.080 --> 0:19:26.320 the hardware before Jackie get the software working. It was 0:19:26.359 --> 0:19:29.480 sort of a race. So so the hardware it into 0:19:29.520 --> 0:19:33.159 original form is a square with the tape reader on 0:19:33.200 --> 0:19:36.480 the inside and and the plug to go into the 0:19:36.480 --> 0:19:38.800 headphone jack of the iPhone. Yeah yeah, so when it's 0:19:38.840 --> 0:19:42.520 original form bigger than a square though, Yeah it was, 0:19:42.600 --> 0:19:45.000 it was. It was sort of a rectangle um and 0:19:45.040 --> 0:19:47.720 it was made the first one I made small. So 0:19:47.760 --> 0:19:49.479 I had a couple of big prototypes of first one 0:19:49.480 --> 0:19:52.919 I made small. UM was for a demo with Steve Jobs. 0:19:53.119 --> 0:19:56.960 Oh really, and I got We were terrified because Steve 0:19:57.680 --> 0:20:01.000 was a legendary little and tim dating. Yeah yeah, and 0:20:01.080 --> 0:20:03.040 especially if you're the hardware guy, because Steve is a 0:20:03.080 --> 0:20:06.240 design zealot and if you make something ugly, he won't 0:20:06.240 --> 0:20:08.440 touch it. And even get a meeting with Steve Jobs 0:20:08.520 --> 0:20:10.960 was a big deal because nobody, you know, like Steve 0:20:11.000 --> 0:20:13.800 was pretty sick at this time, and he he didn't 0:20:13.840 --> 0:20:15.920 take too many meetings. But we had a meeting scheduled 0:20:16.320 --> 0:20:18.000 and I was the guy who had to make the hardware. 0:20:18.040 --> 0:20:21.240 So I was terrified, and I went into, uh, you know, 0:20:21.280 --> 0:20:23.199 do what a good person does, which is steal ideas 0:20:23.200 --> 0:20:26.280 from you know, better people. So I went into Steve's 0:20:26.280 --> 0:20:28.240 Apple store. I went to the ice you know, the 0:20:28.240 --> 0:20:29.840 the Apple store, and I started looking at all the 0:20:29.840 --> 0:20:31.720 stuff that he was building and I saw all the 0:20:31.720 --> 0:20:33.960 computers were made of aluminum, and I think, oh, well, 0:20:34.000 --> 0:20:36.840 Steve likes aluminum. So I made the first square reader 0:20:37.080 --> 0:20:41.160 out of a solid block of aluminum forgetting of course, uh, 0:20:41.200 --> 0:20:44.159 engineering one on one that aluminium is conductive and that 0:20:44.320 --> 0:20:48.240 this basically when I hooked it up, turned our card 0:20:48.280 --> 0:20:52.400 reader into a cardio reader. It was basically turned into 0:20:52.400 --> 0:20:55.880 a heart monitor. And um, actually your boss. So Mike 0:20:55.920 --> 0:20:57.920