Speaker 1: This is Masters in Business with very Results on Bloomberg
Speaker 1: Radio this week on the podcast what Can I Say?
Speaker 1: A masterclass in entrepreneurship technology, learning from your mistakes, building
Speaker 1: a wonderful brand and wonderful company. Jim McKelvey. He is
Speaker 1: the co founder of Square along with Jack Dorsey. They
Speaker 1: built an amazing company which is now publicly traded. He
Speaker 1: has done a variety of really fascinating things, and I
Speaker 1: think you will find our conversation quite intriguing. He is
Speaker 1: also the author of The Innovation Stack, Building an Unbeatable Business,
Speaker 1: One Crazy Idea of Time. I have a decent number
Speaker 1: of authors, um pitch me on coming up on the podcast.
Speaker 1: And for the most part, I find a lot of
Speaker 1: the books a little tedious and and tough to plow through.
Speaker 1: And so you don't hear those folks. The folks I
Speaker 1: bring the books tend to be more interesting. I found
Speaker 1: this to be a really amusing, well written, uh and
Speaker 1: fascinating book. Uh not just about his experiences at Square.
Speaker 1: But Jim went back and said, why did Square win
Speaker 1: when there were so many forces aligned against us, including
Speaker 1: behemoth Amazon? And so he put in the research and said,
Speaker 1: let's figure out what we did right and see if
Speaker 1: there are lessons to be shared with the world, and
Speaker 1: that's what this book is about. You're gonna find this
Speaker 1: conversation to be absolutely fascinating. So, with no further ado,
Speaker 1: my conversation with Jim McKelvey. This is Mesters in Business
Speaker 1: with Very Renaults on Bloomberg Radio. My extra special guest
Speaker 1: this week is Jim McKelvey. He is the co founder
Speaker 1: of Square along with his colleague Jack Dorsey Uh. He
Speaker 1: is an independent director at the Federal Reserve Bank in St. Louis.
Speaker 1: He is also the author of a book, The Innovation Stack,
Speaker 1: Building an unbeatable business, one crazy idea at a time.
Speaker 1: Jim McKelvey, welcome to Bloomberg. Thank you, Barry. Actually, I'm
Speaker 1: now the chair of the St. Louis FETI you are
Speaker 1: the chair the president. No, um, I don't get to
Speaker 1: vote on that interest rate. I get to vote on
Speaker 1: the little interest rate. That's fascinating. We'll talk about that
Speaker 1: in a bit. But let's start out with your background.
Speaker 1: And I have to begin by asking you a question.
Speaker 1: What's the difference between an entrepreneur and a business person?
Speaker 1: These days? Nothing because the word is the same. But
Speaker 1: originally the word entrepreneur meant somebody in business who was
Speaker 1: doing something different, very different, So we're talking about the
Speaker 1: Right brothers trying to build the first airplane, or somebody
Speaker 1: who you thought was crazy. These days, entrepreneur has sort
Speaker 1: of lost that original meaning and it means just anybody
Speaker 1: who starts a business. But the problem with that is
Speaker 1: that you can't then talk about how different it is
Speaker 1: to do something where you're not copying what everybody else
Speaker 1: is doing and trying to invent something yourself. So so
Speaker 1: let's stay with that theme, because if I were to
Speaker 1: go to Jim Mcalvy dot com. On your site, there's
Speaker 1: a big banner that says, do something that has never
Speaker 1: been done. Explain what you mean by that? Yeah. So, um,
Speaker 1: there's a lot of talk about how we like to
Speaker 1: be innovative and how we like to be creative, and
Speaker 1: people are supposed to like that, and I've never been
Speaker 1: comfortable doing that, although I've done it occasionally, And I
Speaker 1: wanted to address the fact that it's actually really scary
Speaker 1: to do something where you don't have any peers, where
Speaker 1: you don't have any validation, where you don't have anybody
Speaker 1: else when you look around saying Oh well, uh, they're
Speaker 1: doing it too, so it must be sort of okay,
Speaker 1: if you're doing entrepreneurship in its classical definition, you're doing
Speaker 1: something that is going to be very very scary to
Speaker 1: you on on almost a biological level, because humans are
Speaker 1: hurt animals. We like to be in a group, right,
Speaker 1: it's a I was a big fan of Mutual of
Speaker 1: Omaha's Wild Kingdom, and there was always that shot of
Speaker 1: the herd of whoever zel zebra, that one zebra on
Speaker 1: the outskirts of that you know what happens? That was
Speaker 1: me I was as I was always away from the
Speaker 1: herd and and lunch for the lions. Yeah, that describes
Speaker 1: my schooling. So so that raises a lot of really
Speaker 1: interesting questions, beginning with you know, why is Silicon's focus
Speaker 1: on disruption so misguided? I think looking at disruption, which
Speaker 1: is this term that we really used to death in
Speaker 1: Silicon Valley, is it's a bad focus because if you're
Speaker 1: looking to disrupt, it puts your eye on the thing
Speaker 1: you're trying to disrupt. So we're gonna disrupt healthcare? Okay, Yeah,
Speaker 1: there's a lot of stuff wrong with healthcare. What do
Speaker 1: you want to disrupt? But if you spend your time
Speaker 1: looking at what you want to destroy, it triggers that
Speaker 1: copying function in your head that says and you that says, oh,
Speaker 1: I should do this, I should do that, and you
Speaker 1: start becoming indoctrinated into the thing that you're trying to destroy.
Speaker 1: And so I believe you should kind of ignore the
Speaker 1: thing that you are replacing and just focus on the
Speaker 1: problem trying to solve. And then then you get this
Speaker 1: sort of weird thing because you know, Square, which we
Speaker 1: now call block is, has always been called a very
Speaker 1: disruptive company, but actually ran the numbers on the number
Speaker 1: of companies that we wiped out, right, American Express, Visa,
Speaker 1: they're all bigger card, Right, you killed all of it.
Speaker 1: We haven't disrupted anything like we We knocked a few
Speaker 1: ISOs into you know, sort of more honestly pricing their products,
Speaker 1: but even they're still around. I mean, we didn't destroy much.
Speaker 1: What we did instead was we created a new market.
Speaker 1: And we're gonna talk a lot about Square, uh coming up.
Speaker 1: But here's another quote of yours. I really enjoyed. Chaos
Speaker 1: is a good thing. Explain. Oh yeah, so chaos is
Speaker 1: where you get new ideas. Chaos is that's it's this
Speaker 1: moment that it puts your brain into a different form
Speaker 1: of thinking. Uh So, if you've got if you're if
Speaker 1: you're a pattern matcher, which we're all pattern matchers, and
Speaker 1: you see these patterns and you don't think you do
Speaker 1: the things automatically, you're you go through most of life
Speaker 1: on autopilot, as you should. But occasionally, uh something goes
Speaker 1: wrong and it's weird and and things are not working
Speaker 1: like they should be, and and that puts your brain
Speaker 1: into this different state. And so I say chaos because
Speaker 1: it's a little scary to think of chaos, but it's
Speaker 1: also a very good creative place that makes a lot
Speaker 1: of sense. One more one more quote. Thank you for
Speaker 1: reading the book. I mean, I have to say that you,
Speaker 1: as an interviewer, have prepared really really well for this.
Speaker 1: Can I tell you something And I shouldn't say this
Speaker 1: out loud because I'm kind of revealing my secret sauce.
Speaker 1: We do a lot of prep when people show up
Speaker 1: for an interview, and my thought processes. How often am
Speaker 1: I going to get a Jim mcelvy sitting in front
Speaker 1: of me for ninety minutes. I'm not just gonna walk
Speaker 1: in and coast. I have to do my homework, and
Speaker 1: I am genuinely shocked that that is this exclusive market niche.
Speaker 1: It's it's it makes you special. I hate to explain
Speaker 1: to the listening audience, but a lot of people who
Speaker 1: have interviewed me about the book haven't read the whole book,
Speaker 1: and or they you know, they've got cliff notes or something.
Speaker 1: I appreciate, you appreciate the work. Um, let me give
Speaker 1: you one other quote of yours. Reward loyal customers now
Speaker 1: or risk losing them. Tell us what that means, and
Speaker 1: then I'll share a anecdote. So there's a different pricing
Speaker 1: power you have if you have an innovation stack. So
Speaker 1: myke my book sort of focuses on this world of
Speaker 1: entrepreneurial companies that build these things called innovation stacks. We
Speaker 1: can get into that, but the idea here is that
Speaker 1: if you have one of these things, you have amazing
Speaker 1: pricing power. You have extremely low cost You effectively have
Speaker 1: customers that are willing to do things differently just to
Speaker 1: experience your products. And this allows you a massive amount
Speaker 1: of pricing flexibility. And I ran the math, and it's
Speaker 1: actually better for you to keep your prices absurdly low
Speaker 1: by normal sort of MBA calculations. And if you undercharge
Speaker 1: the market, you will actually maximize revenue. That's really that's
Speaker 1: really kind of interesting. So I used to have the
Speaker 1: Starbucks app on my phone and every day on the
Speaker 1: way into the office, this is pre pandemic, I would
Speaker 1: swing by a Starbucks, even though we had a coffee
Speaker 1: maker in the office, uh, and pick up their egg
Speaker 1: white and turkey bacon sandwich and a and a Starbucks
Speaker 1: um flat white, and I would go to my office.
Speaker 1: And then they stopped. They like had less and less
Speaker 1: of this in stock. Who was here or miss weather
Speaker 1: they had it, And then the pandemic hits and they
Speaker 1: converted their Starbucks points. And then I get an email
Speaker 1: from Starbucks telling me that despite you know the pandemic
Speaker 1: and everybody stuck at home, use it or lose it.
Speaker 1: Your points which used to the last forever, if you
Speaker 1: don't use them by May eleven, they're going away. And
Speaker 1: I got really annoyed at that, And then you should.
Speaker 1: And then outcomes the story that Starbucks has this three
Speaker 1: billion dollar float because if you have the app on
Speaker 1: your phone and it gets refilled with your credit card,
Speaker 1: fifty Bucks or Bucks every time it runs down. Multiply
Speaker 1: that by a million Starbucks customers. They're sitting on three
Speaker 1: four billion dollars. That was pretty much the last draw
Speaker 1: for me. That and the end. I don't care about
Speaker 1: the float. No, no, no, but wait, you're sitting with
Speaker 1: all this money and you have to take our already
Speaker 1: reduced points. I'm done with you. And ps the same time,
Speaker 1: I'm getting emails from Delta your silver medallions. Fine, don't
Speaker 1: worry about it. We're gonna roll it over for a year.
Speaker 1: You're good, And I'm like, that's the right way to
Speaker 1: retain a customer. And and even more insidious than that
Speaker 1: is the fact that when you are in a panic
Speaker 1: state yourself, when you're in chaos, when you when something
Speaker 1: is disrupted, like you just had the world shutdown because
Speaker 1: of CODD, you are in a heightened state of of
Speaker 1: of of imprint imprint ability. So, in other words, if
Speaker 1: Starbucks does you a service at that moment, if they
Speaker 1: help you out, if they say we're gonna stays with you,
Speaker 1: then then they got a customer for life. Conversely, if
Speaker 1: it's at the moment they choose to jab their thumb
Speaker 1: in your eye, then you're gonna hate them, and you're
Speaker 1: gonna go on air and hate them and and shock. Yeah.
Speaker 1: It was a Starbucks in the lobby of our old
Speaker 1: office building, and I was a regular there, and I
Speaker 1: like strong coffee, so I used to defend them against
Speaker 1: people who are, like I prefer Dunkin Donuts. That's because
Speaker 1: you're a whim drink. Drink some coffee that puts a
Speaker 1: little hair on your chest. But this, by the way,
Speaker 1: a hundred Starbucks points, what is it? Coffee? It's the
Speaker 1: cost of it is so meaningless. But the thought process
Speaker 1: behind it was up yours, And I was like, now,
Speaker 1: up yours. I was spending I don't know, five hundred
Speaker 1: bucks a year on Starbucks. You can get coffee elsewhere
Speaker 1: I cannot do, and I will occasionally get Starbucks, but
Speaker 1: I am not no longer a regular. It probably doesn't
Speaker 1: taste as good anymore either. Um no, it's it's still
Speaker 1: still pretty good coffee. The the question that I'm curious about,
Speaker 1: am I just an unreal custs And the only person
Speaker 1: who got angry no, no, no, no, you're what percentage
Speaker 1: of people who said, wait, you're taking my points away?
Speaker 1: You are so so there's a calculation that you make
Speaker 1: if you're uh, strictly looking at spreadsheets and you say, well,
Speaker 1: they've got three billion dollars with a float, and our
Speaker 1: stores are kind of closing and we need a little
Speaker 1: bridge and we need you know, they make some sort
Speaker 1: of cold calculating decision that sort of looks good on
Speaker 1: a spreadsheet. What they forget is how impactful that is
Speaker 1: during a crisis on the psychology of their customers, and
Speaker 1: those people remember forever, and that that's just a terrible
Speaker 1: moment to do anything against your customers. It's also a
Speaker 1: wonderful moment to do something for your customers. So if
Speaker 1: they if they had a way to do what Delta
Speaker 1: did and be positive, by the way, same exact circumstances,
Speaker 1: the same thing. No one's flying, nobody's going to Starbucks,
Speaker 1: your points at both they're just sitting there, yea, And
Speaker 1: Delta is probably worse, k right, So Delta said, hey,
Speaker 1: we're good. We're gonna roll your flights status over to
Speaker 1: and any canceled lights you get a lifetime credit. You
Speaker 1: could use them in the future, don't worry about it,
Speaker 1: and now good luck getting me on a different You
Speaker 1: know something besides delta, Yeah, I expect to see you
Speaker 1: on adulta flight holding a cannon or a cup of
Speaker 1: pizza coffee. So so anyway, we digress, and your point
Speaker 1: happens to be I digress is when you have an
Speaker 1: opportunity to delight a customer, what what do you do?
Speaker 1: So the the interesting thing here is I was studying
Speaker 1: trying to figure out why the math was different for
Speaker 1: companies with innovation stacks. And this is really uh, sort
Speaker 1: of personal to me because I was very focused on
Speaker 1: having some sort of theoretical basis for the stuff that
Speaker 1: I was saying. And what I did was I found
Speaker 1: this perfect case study, which was Southwest Airlines. Southwest Airlines
Speaker 1: had tremendous pricing power and during the Herb Keller her years,
Speaker 1: who was one of the founders in original CEO. Yeah,
Speaker 1: he was one of the founders, a legend, and Herb
Speaker 1: kept the prices low and then he left and Southwest
Speaker 1: Airlines raised their prices. So it was this perfect case
Speaker 1: study of this company that had an innovation stack and
Speaker 1: then all of a sudden started messing with the math.
Speaker 1: They made a lot more money right after her left
Speaker 1: for a few years. Since that time, five new competitor airlines,
Speaker 1: like complete new airlines that would have totally died if
Speaker 1: herb was at the Helm are now competing with Southwest.
Speaker 1: That makes a lot of sense. And and ps. Southwest
Speaker 1: was always a pain in the butt, but they were
Speaker 1: very cheap because you noah sign seats that you have
Speaker 1: to get up, you have to wait online. I am
Speaker 1: a former to your point, former Southwest Fortia because I
Speaker 1: just don't have the tolerance for the headache and it's
Speaker 1: not discounted enough. I'll pay a little more for Delta
Speaker 1: and feel like I'm getting a better experience and not
Speaker 1: feel like cattle boarding an airline. So all right, enough
Speaker 1: endorsing Delta and trashing Southwest and Starbucks. So let's talk
Speaker 1: a little bit about, um, your business backgrounds Uh. Turns
Speaker 1: out that um, you were you were doing something with
Speaker 1: Ceedie Rams and somebody who knew said, hey, I have
Speaker 1: a kid who who's good with computers, and you hired
Speaker 1: this kid as an intern. Tell us about had a
Speaker 1: software company. This with the late eighties, I guess this
Speaker 1: would have been about ninety two. But back then, uh,
Speaker 1: my company, Mira was in a desperate situation. We had
Speaker 1: just screwed up this disc that had to go out,
Speaker 1: and we were hiring everybody. And the lady who sold
Speaker 1: us chocolate covered espresso beans. Her name was Marcia Dorsey,
Speaker 1: and her son, Jack Dorsey, came to work for us
Speaker 1: when he was fifteen. He showed up in his bicycle.
Speaker 1: He pulled an all nighter with us the first night
Speaker 1: at at his first real job, and he became a
Speaker 1: cherished part of the team from then. I called him
Speaker 1: Jack the Genius. When he was sixteen, this used to
Speaker 1: embarrass him, but now he's sort of grown used to it.
Speaker 1: Fifteen year old pulls an all night or that's a
Speaker 1: lot of chocolate covered espresso beans. Well, you know, Ridland
Speaker 1: wasn't commonly available back man the way it is today.
Speaker 1: You get out of you know, shake any kid a
Speaker 1: couple of written form, right, So so you start working
Speaker 1: with him, um for this company. Eventually you decide to
Speaker 1: bolt because the company was not doing what you wanted
Speaker 1: it to do anymore, and tell us about that. I'm
Speaker 1: a terrible leader. I don't direct the troops well and
Speaker 1: they sometimes don't follow me. And I saw the Internet coming.
Speaker 1: The Internet was going to wipe out our product, which
Speaker 1: was an internet based, you know, trade show disc. It
Speaker 1: had all the stuff that the brochures and stuff at
Speaker 1: a trade show. And in fact, the disc replaced all
Speaker 1: those bags of paper that people can't get the bags
Speaker 1: of paper have a disc. It made a ton of
Speaker 1: sense in the early nineties, and it was gonna get
Speaker 1: wiped out when websites were coming along. And I saw this,
Speaker 1: and I said to the troops, hey, let's stop making
Speaker 1: discs and start making websites. And they were like, oh, yeah, sure, Jim,
Speaker 1: we'll do it. But they didn't. They didn't follow me that,
Speaker 1: none of them. None of them would listen to me
Speaker 1: except this fifteen year old. So Jack and I um
Speaker 1: went off by ourselves and we basically created a new company.
Speaker 1: And that company still runs today. It's amazing that, you know,
Speaker 1: thirty years later, what Jack built is still running. And
Speaker 1: you said he was a really good code or he
Speaker 1: knew exactly what he was doing, A good coded, a
Speaker 1: good guy. I mean, he was a lot of fun
Speaker 1: and we got on famously. And uh, you know, after
Speaker 1: he was shown the door Twitter the first time, he
Speaker 1: asked me if I wanted to start a company with him,
Speaker 1: So I I got, I got sort of paid back
Speaker 1: twenty years later when he said, Hey, Jim, let's do
Speaker 1: something together again. I was like, cool, what do you
Speaker 1: want to do? And that's really an interesting story because
Speaker 1: and you described this very nicely in the book, as
Speaker 1: you're telling the story of we're trying to think about
Speaker 1: what to do. Wasn't like we have an idea, let's
Speaker 1: build a company. It's we want to build a company.
Speaker 1: Let's find an idea that resonates with both of us.
Speaker 1: At the time, you're doing glass blowing, and you have
Speaker 1: some nice products, and you have some products that are
Speaker 1: kind of ugly. I have a lot of that you
Speaker 1: shuff to the side and and pray someone comes along
Speaker 1: and takes the inventory off your hand. A client wanted
Speaker 1: to buy an ugly piece of glass via an amex,
Speaker 1: and you couldn't accommodate her. Tell us about what. Yeah,
Speaker 1: So the dirty little secret about art is that a
Speaker 1: lot of artists make stuff they're not proud of, and
Speaker 1: we don't signal it in the price. So you look
Speaker 1: at my stuff, and I've learned very very early to
Speaker 1: charge the same if I hate it or like it
Speaker 1: um And this was a piece I hated, and for
Speaker 1: good reason, I think it was ugly, um, but this
Speaker 1: lady wanted to take it off my hands. It was
Speaker 1: like a two thou dollar piece of glass. And she
Speaker 1: tried to pay me with an AMEX card and I
Speaker 1: couldn't complete the sale because I couldn't she didn't have
Speaker 1: a visa car, she didn't have a master card. Uh,
Speaker 1: and so I lost this sale. I was really upset,
Speaker 1: um and I called Jack on my iPhone and I said, hey, man,
Speaker 1: I know what we ought to do. I said, we
Speaker 1: ought to build a system so that I can take
Speaker 1: a payment on my iPhone. And Jack got quiet for
Speaker 1: a second. He said, that's interesting, and that's how Square started.
Speaker 1: So so now you guys want to launch this company.
Speaker 1: You design the hardware. Do you have any background in
Speaker 1: in hardware design or hard reading or software? No? I
Speaker 1: don't have any. Well, I have some background in software,
Speaker 1: but it turns out of the you know, between the
Speaker 1: two of us, Jack and me, he's a much much
Speaker 1: better programmer than I am. Uh. So it was pretty
Speaker 1: much Jack leading the software effort and me doing everything else.
Speaker 1: Because there was so much software work to do that
Speaker 1: I was trying to keep all the other stuff away
Speaker 1: from him. So I was dealing with the business licenses.
Speaker 1: I was, you know, buying office furniture. I also got
Speaker 1: into an argument with jack about how we were going
Speaker 1: to get the credit card read. So his attitude was, well,
Speaker 1: we'll build some software that'll take a photo of the
Speaker 1: card and we'll just use the photo and IR to
Speaker 1: convert the gotcha. So it turns out, if you know
Speaker 1: the subtleties of credit cards that actually cost more, that's
Speaker 1: called a card not present transactionally cost you more. And
Speaker 1: I thought, no, no, we want to get card present rates,
Speaker 1: which means we need to make read the mag stripe.
Speaker 1: And so I had this idea for a little mag
Speaker 1: stripe reader. It was actually an idea that I got
Speaker 1: out of out of Make magazine. Make magazine had this
Speaker 1: like hackers, uh story about some guy who turned his
Speaker 1: mobile phone into a credit card reader, and I was like, oh,
Speaker 1: we can do the same thing. So we took this
Speaker 1: idea and I went to my studio and I started
Speaker 1: building a credit card reader. Uh so I basically built
Speaker 1: the hardware before Jackie get the software working. It was
Speaker 1: sort of a race. So so the hardware it into
Speaker 1: original form is a square with the tape reader on
Speaker 1: the inside and and the plug to go into the
Speaker 1: headphone jack of the iPhone. Yeah yeah, so when it's
Speaker 1: original form bigger than a square though, Yeah it was,
Speaker 1: it was. It was sort of a rectangle um and
Speaker 1: it was made the first one I made small. So
Speaker 1: I had a couple of big prototypes of first one
Speaker 1: I made small. UM was for a demo with Steve Jobs.
Speaker 1: Oh really, and I got We were terrified because Steve
Speaker 1: was a legendary little and tim dating. Yeah yeah, and
Speaker 1: especially if you're the hardware guy, because Steve is a
Speaker 1: design zealot and if you make something ugly, he won't
Speaker 1: touch it. And even get a meeting with Steve Jobs
Speaker 1: was a big deal because nobody, you know, like Steve
Speaker 1: was pretty sick at this time, and he he didn't
Speaker 1: take too many meetings. But we had a meeting scheduled
Speaker 1: and I was the guy who had to make the hardware.
Speaker 1: So I was terrified, and I went into, uh, you know,
Speaker 1: do what a good person does, which is steal ideas
Speaker 1: from you know, better people. So I went into Steve's
Speaker 1: Apple store. I went to the ice you know, the
Speaker 1: the Apple store, and I started looking at all the
Speaker 1: stuff that he was building and I saw all the
Speaker 1: computers were made of aluminum, and I think, oh, well,
Speaker 1: Steve likes aluminum. So I made the first square reader
Speaker 1: out of a solid block of aluminum forgetting of course, uh,
Speaker 1: engineering one on one that aluminium is conductive and that
Speaker 1: this basically when I hooked it up, turned our card
Speaker 1: reader into a cardio reader. It was basically turned into
Speaker 1: a heart monitor. And um, actually your boss. So Mike
Speaker 1: Bloomberg was the very first guy to see that because
Speaker 1: Jack had a demo with Mike back when Mike was
Speaker 1: a mayor New York. Mike was trying to get Squared
Speaker 1: open a New York office. Uh, and he, Mike was
Speaker 1: the first person to see that aluminum reader. Yeah, it
Speaker 1: was a disaster. So so how did you go from
Speaker 1: aluminum to the little plastics? Well, it didn't work. I mean,
Speaker 1: the the aluminum reader, if you touched it with your
Speaker 1: finger would short out, so um, you'd have to swipe
Speaker 1: without touching it. So I switched to plastic immediately thereafter,
Speaker 1: and then we then we built a square reader and
Speaker 1: spin square ever, so I gotta imagine it's easier to
Speaker 1: work the electronics and wiring in plastics, and it is
Speaker 1: an aluminum anyway, it was a little bit, but I
Speaker 1: mean basically a casing is a casing. The hard part
Speaker 1: is getting all this stuff, miniaturizing, getting the read head
Speaker 1: and getting a spring and resistors. I mean there a
Speaker 1: lot of we jammed a lot of stuff in there.
Speaker 1: So so the meaning with jobs was with a plastic
Speaker 1: square is that right? Canceled? Oh it did? I canceled
Speaker 1: because Steve got sick. Wow, So that's that's that's amazing.
Speaker 1: So um. One of the things I found fascinating was
Speaker 1: the discussion about credit card companies and how they disadvantaged
Speaker 1: small businesses. How is it possible that they're charging small
Speaker 1: businesses forty times as much as they're charging large businesses
Speaker 1: to process their credit cards. That that's just an absurd number.
Speaker 1: So it's amazing when I discovered that. Actually I discovered
Speaker 1: that information on the first day of research because I
Speaker 1: was looking, I was following the money, trying to figure
Speaker 1: out where the where the money was being made. And
Speaker 1: it turns out a small business account makes forty five
Speaker 1: times more profit than a billion dollar company like Starbucks
Speaker 1: or Walmart. And this is in terms of the fees
Speaker 1: that are paid by the merchant and I thought, well,
Speaker 1: that can't be like that. You can't, it can't be.
Speaker 1: It can't be forts it's profit relative to the total transaction.
Speaker 1: So it turns out that it's really expensive to be poor.
Speaker 1: You may have I learned that growing up after Yeah,
Speaker 1: I mean, like if you don't have enough money, like
Speaker 1: diapers cost ten times as much, if you're poor and
Speaker 1: have to buy m onesI two zi at a dollar store,
Speaker 1: then if you can buy a bulk at you know,
Speaker 1: Sam's Club. There was a store A couple of stories
Speaker 1: right after the financial crisis about these businesses and families
Speaker 1: that could not afford to go bankrupt, which is an
Speaker 1: expensive legal you don't have enough assets, you just walk
Speaker 1: away and let the business sort of with her on
Speaker 1: the vine. You can't afford to discharge your debts and banks. Yeah,
Speaker 1: it's it's it's really it was eye opening. I mean
Speaker 1: I sort of knew this because I sort of lived
Speaker 1: this because I have a lot of friends who are artists,
Speaker 1: and I was an artist, and you know, you live
Speaker 1: with you know, marginal credit and weird you know, guys
Speaker 1: sleep in the back of their cars and stuff like that.
Speaker 1: So I was familiar with it, with it but what
Speaker 1: I what I didn't understand was how pervasive this was
Speaker 1: and how um powerless small merchants were. And what Square
Speaker 1: did was we basically said, Okay, we're powerless individually, but
Speaker 1: if we get a million of them together, I bet
Speaker 1: we've got some power. And that's eventually what we did.
Speaker 1: So what else did you find about the credit card
Speaker 1: industry when you looked under the hood? What else struck
Speaker 1: you as unfair or outrageous? One of the things that
Speaker 1: was the way credit card systems were sold. So they
Speaker 1: were sold on these three um three year contracts typically
Speaker 1: where you would be lied to and I was I
Speaker 1: was personally at you know, a recipient of this behavior.
Speaker 1: Somebody would show up in my glass video and they
Speaker 1: would say, hey, what are you paying for credit cards on?
Speaker 1: Like I don't know, I can't tell what they're charging
Speaker 1: because bill is too confusing, And you go, oh, well,
Speaker 1: let me take a look. And he'd come back and say, hey,
Speaker 1: guess what, kild we can save your money. And so
Speaker 1: I'd always sign up with them, and you took me
Speaker 1: a couple of cycles to realize what was going on.
Speaker 1: They would always say they save me money, and it
Speaker 1: would never be any better. And the reason was, first
Speaker 1: of all, the system is unnecessarily complex and a feature
Speaker 1: not above it's designed by designed, because if it's so complex,
Speaker 1: you stop the argument, Oh what what? What? What? Page?
Speaker 1: On these forty two pages do you are you arguing with?
Speaker 1: You know? Um? So if you don't understand something, you
Speaker 1: can't really argue against it. And secondly, the system is
Speaker 1: so um uh. There's a line in the book that
Speaker 1: you wrote that struck me while you're processing that thought,
Speaker 1: which was how bad does an industry have to be
Speaker 1: that it turns into a check mark? How much lying
Speaker 1: must you have? Where's the checkmark where they're made be
Speaker 1: material misrepresentation which you will not hold against us within
Speaker 1: their boiler plate. Yes, so when we went to cancel
Speaker 1: our first merchant account, I had to facts in a
Speaker 1: form to cancel the account, and one of the check
Speaker 1: boxes on the forum was to say why did you
Speaker 1: cancel the account? And one of the one of the
Speaker 1: answers was misrepresentation, which is a fancy word for lying
Speaker 1: and the court word. Think about how bad an industry
Speaker 1: has to be before lying becomes a box on that
Speaker 1: that you check like, oh, we don't want to make
Speaker 1: our customers, you know, right out the fact that we've
Speaker 1: we've been lying to them. It's just part of the forum.
Speaker 1: I mean, and I put the form in the book
Speaker 1: like it's so appalling. Um, Look, the abusive small merchants
Speaker 1: were receiving was similar to all small groups. Like, if
Speaker 1: you are small and powerless, there's somebody who's gonna prey
Speaker 1: on you, and they're gonna pray on you to the
Speaker 1: extent that the economy allows them to. I mean, that's capitalism.
Speaker 1: That's up until the point where someone else spots an
Speaker 1: opportunity and says, hey, we could do this faster, cheaper, better,
Speaker 1: and make it much less. Zone was for the small
Speaker 1: business person. And that's that's eventually what happens, hopefully, I mean,
Speaker 1: that's that's hopefully what happens. But what happened to credit
Speaker 1: card readers is the same thing that happened to travelers,
Speaker 1: the same thing that happen in banking customers. I mean,
Speaker 1: their example after example after example of people who are
Speaker 1: sort of collectively um, powerful but individually powerless. So let's
Speaker 1: talk about collectively powerful. Uh. It turns out that your
Speaker 1: little niche had become successful enough that it attracted uh,
Speaker 1: some unwanted imperial attention from Bezos and company. What was
Speaker 1: it like when you realized that suddenly the juggernaut that
Speaker 1: is Amazon was coming after your business? So Amazon decided
Speaker 1: they wanted to take our market away. To be fair,
Speaker 1: your squares white and their square was blacks. Yes, there's
Speaker 1: very different black rectangle. They did do that a bit
Speaker 1: of originality. Um. It was chilling, It was very it
Speaker 1: was It was absolutely terrifying. It was one of those
Speaker 1: moments where your hands tingle, at least my hands tingled,
Speaker 1: because how do you fight Amazon? Like when Amazon attacks
Speaker 1: a startup, the startup dies. You just you describe it
Speaker 1: in terms from the Godfather as discovering the horsehead, only
Speaker 1: they mailed it to you in a box with a smile,
Speaker 1: and they mailed us a horsehead with free two day shipping. Yeah,
Speaker 1: you know, it was terrifying. And um, and then of course,
Speaker 1: you know what, once the terror wave passes, then the
Speaker 1: then the questions, well, what do you do? What are
Speaker 1: we gonna do? What are we gonna do? And so
Speaker 1: we asked these questions. We asked him at the board,
Speaker 1: we asked him at the office, and we were asking
Speaker 1: these questions, how do you fight Amazon, And the first question,
Speaker 1: the first answer we looked at, was oh, well, let's
Speaker 1: find somebody else who's beaten them. Let's find a startup
Speaker 1: who survived. Good luck with that. There are none. Yeah,
Speaker 1: they don't that, they don't exist, you know, you know.
Speaker 1: And and at the time you guys were engaged in
Speaker 1: rapid growth, you didn't even have time to think about them.
Speaker 1: You were so busy just dealing with all the new
Speaker 1: clients and new revenue. How much how much headspace you know,
Speaker 1: how much rent free space was Jeff Bezos taking in
Speaker 1: your head or were you just too busy that the
Speaker 1: thing we looked at what we could do. There was
Speaker 1: very little we could do. I mean, we couldn't build
Speaker 1: a brand like Amazon's. We couldn't actually even match their
Speaker 1: price because they undercut They undercut us thirty percent, which
Speaker 1: what they always seem to do. But we ran the
Speaker 1: numbers and we would be losing, Like, our margins were
Speaker 1: so slim that if we cut our margins by we'd
Speaker 1: be underwater on everything. And so it was like, well,
Speaker 1: that's just death in another form, So why go down
Speaker 1: that way? So we didn't do anything. We basically ignored
Speaker 1: Amazon and what happened. Amazingly after a year they gave
Speaker 1: up and they actually, I gotta say something nice about Amazon. Um,
Speaker 1: when they gave up, they decided to mail a Square
Speaker 1: reader all their all their customers. Now, why would they
Speaker 1: want to do that? That that's kind of a fascinating
Speaker 1: coda to to the one of the four horsemen of
Speaker 1: the apocalypse stampeding into your living room. Why send a
Speaker 1: square reader to everybody? Uh? Well, it's beak because they
Speaker 1: wanted to take care of their customers. Amazon always has that.
Speaker 1: I've heard empty seat at the table that represents the
Speaker 1: customer at the meeting. And I believe, I hope this
Speaker 1: is the reason that they thought we were the best
Speaker 1: solution for their customers and they said, here, we're not
Speaker 1: there for you anymore. But Square is that that's amazing.
Speaker 1: So you're one of the few startups to have beaten Amazon.
Speaker 1: Have you ever spoken with Bezos about this? No? No,
Speaker 1: I have not. I've I did meet. Uh. We hired
Speaker 1: a few people that used to work for him, and
Speaker 1: I got the backstory on it. And smaller market not
Speaker 1: big enough margin for them? Is they're getting get their kicked? Yeah? Huh,
Speaker 1: you would think that small businesses and a startup that
Speaker 1: solving a problem might have a little bit of loyalty
Speaker 1: to you, well they would. Look, Amazon was expected to
Speaker 1: win that battle. And and this is the thing that
Speaker 1: made me write the book because I couldn't answer the
Speaker 1: question what so, so we won and I was happy,
Speaker 1: and then after the happiness sort of subsided, then I
Speaker 1: was just confused, like, well, we won, but why, like
Speaker 1: why are we here? What? What? What? What? What in
Speaker 1: the world happened? And so it took me two years
Speaker 1: of research to figure out that there was actually this pattern,
Speaker 1: this thing that we did that you know, it wasn't
Speaker 1: that commonplace, but boy, if you do it this way,
Speaker 1: you can even survive and attack by Amazon. And that's
Speaker 1: what led to the innovation stack, led to all the research,
Speaker 1: like that's that's the thing that led me actually to
Speaker 1: the research. And then I mean the reason right I
Speaker 1: wrote the book honestly is because herb callerher whom I
Speaker 1: was interviewing to sort of complete my research, Basically, he said, well,
Speaker 1: how are you going to share this with the world?
Speaker 1: And I was like, oh my god, I just got
Speaker 1: a homework assignment from one of my from one of
Speaker 1: my idols. It was weird. Herb was like, what are
Speaker 1: you gonna do about this? And I'm like, oh god,
Speaker 1: that's that's really quite quite amazing. So you're now no
Speaker 1: longer CEO, but you're still on the board. How did
Speaker 1: you come to realize I was never CEO? I was chairman?
Speaker 1: You chairman. That's from from day one. Jack wanted to
Speaker 1: be CEO and I didn't. So that was a quick
Speaker 1: But you had a lot of operational Yeah, I was
Speaker 1: doing all the stuff that Jack wasn't, which was like
Speaker 1: most of the stuff beside software. When did you realize
Speaker 1: it was time to relinquish certain responsibilities and step back
Speaker 1: and say, let me let a new group come in
Speaker 1: and take over and running the day to day. Oh.
Speaker 1: In my case, I was doing about a dozen things,
Speaker 1: and I eventually got somebody who was better than me
Speaker 1: at all those dozen things. You just delegated your way
Speaker 1: out of response. At work, I always assume that I'm
Speaker 1: mediocre at what I'm doing, and I will always try
Speaker 1: to find something who's better than me. And well, it's uh,
Speaker 1: it's been true. I mean, I'm in pretty mediocre, but
Speaker 1: I'm fast. So I'm like in a startup situation, I
Speaker 1: will get things done very very quickly, and okay, but
Speaker 1: I will I will very quickly give that control to
Speaker 1: whomever is better and can prove it. And in my
Speaker 1: case that we're about twenty things to hand over. And
Speaker 1: when those things were handed over, um, that also happened
Speaker 1: to coincide with the birth of my son. And you know,
Speaker 1: people at the office are working twelve fourteen hour days,
Speaker 1: and if I continued that, I would probably be divorced
Speaker 1: right now. And I just didn't. I didn't want to
Speaker 1: be the guy who was showing up eight hours a
Speaker 1: day when everyone else was putting in twelve. Um. So
Speaker 1: it was better at that point for me to step back.
Speaker 1: But really I was not necessary at that point. I mean,
Speaker 1: I I've done what I needed to do. That's really
Speaker 1: that's really interesting. And and to put a little coda
Speaker 1: on what you did, your card reader design was inducted
Speaker 1: to the Museum of Modern Arts Pantheon of Great Great
Speaker 1: Designs back in two thousand eleven. That had to be
Speaker 1: pretty satisfying, considering you're not exactly a hardware designer. You're
Speaker 1: a glass blow Yeah, it's like guy who did art
Speaker 1: for twenty years. It was sort of flattering and insulting
Speaker 1: at the same time, right, Like, they didn't take any
Speaker 1: of my glass, but they took this little piece of
Speaker 1: plastic that reade a credit card. I mean, look, I'm
Speaker 1: I'm an engineer by training, so I got it. I mean,
Speaker 1: you know, I I I'm a technologist and a guy
Speaker 1: who builds things. But I also sort of like art,
Speaker 1: and I was I was flattered but also sort of insulted.
Speaker 1: Quite quite interesting, So Jim, I really enjoyed the book.
Speaker 1: A lot of a lot of business books can be
Speaker 1: a little staid and dry. This is funny and a cerbic,
Speaker 1: and you seem to be having fun writing it. What
Speaker 1: was the process like putting all these ideas down on paper?
Speaker 1: I had fun rewriting it. It went through its eight
Speaker 1: It went through eight drafts. The first five drafts were
Speaker 1: graphic novels. So I thought the I hate business books.
Speaker 1: They're boring. They put me to sleep. I think most
Speaker 1: of them are terrible. Um, and I didn't want to
Speaker 1: write one. Even though Herb Keller, her who was one
Speaker 1: of my idols, basically assigned me a homework assignment. I thought, well,
Speaker 1: I'm just gonna do it as graphic novel. I'm gonna
Speaker 1: make this fun because it turns out that the stories
Speaker 1: that I tell in the book are actually they lend
Speaker 1: themselves to pen and ink. There's the destruction of a
Speaker 1: major city and murder and Nazis and like, there's a
Speaker 1: lot of stuff blowing off fun stuff. Yeah, I mean it, like,
Speaker 1: and it seemed to me like it would be a
Speaker 1: better comic book. And um, I wrote the drafts as
Speaker 1: a comic book. And then I showed it to Herb
Speaker 1: and he hated it. Really, he hated it. I'm on
Speaker 1: an old school though, isn't he. But he's got a
Speaker 1: great sense of humor. He has a legendary, legendarily funny,
Speaker 1: great sense of humor. I was expecting he was gonna
Speaker 1: love it, and I was so crestfallen when he said, Jim,
Speaker 1: if you're going to do it that way, leave me out. Really,
Speaker 1: And I have to credit him for this, there's one Herb,
Speaker 1: first of all, didn't want to be portrayed as a
Speaker 1: cartoon superhero. Okay, And and here's the thing. Here's why
Speaker 1: Herb is so much smarter than I am is because
Speaker 1: if you tell a story as a graphic novel in
Speaker 1: pen and ink. You're telling a hero story and and
Speaker 1: superheroes are different from you and me. The whole purpose
Speaker 1: of my book is to say, look, what makes these
Speaker 1: super successful companies and super successful founders is not some
Speaker 1: superpower that the founders have. It's this superpower that anyone
Speaker 1: can access. And it's really a story for the everyman.
Speaker 1: And Herb stopped me from making a giant, giant mistake. Um,
Speaker 1: although I did. If you go to Jimmy Kelby dot com,
Speaker 1: I did put some of the graphic novel that I
Speaker 1: did on so you can just download it for free.
Speaker 1: It's like it's a comic book, but it's not about herb. Um.
Speaker 1: But yeah, I don't think you should have to. So
Speaker 1: here Look, here's here's the thing, Barry. The reason I
Speaker 1: wrote the book is because if you're in business or
Speaker 1: in life, you're gonna occasionally run up against this line
Speaker 1: where humanity has not figured out how to solve this
Speaker 1: problem that you're looking at. And on the other side
Speaker 1: of that line, there's no crowd, there's no herd, there's
Speaker 1: no safety in numbers, and you're gonna feel if you
Speaker 1: step across that line, terrified. You're gonna feel fear you're
Speaker 1: gonna feel all this thing. You're not a superhero for
Speaker 1: stepping across that line. You're just a that's scared gazelle.
Speaker 1: You've left the safety of the and you're terrified. Okay,
Speaker 1: imagine what's like to be that gazelle. I mean, I
Speaker 1: I see those documentaries, I almost cry because like that
Speaker 1: was me in grade school and most of high school.
Speaker 1: You know, it's it's just terrifying. But unless we get
Speaker 1: people to step across that line occasionally. I'm not saying
Speaker 1: live across the line. I'm like being bold or any
Speaker 1: crap like that, saying, look, a couple of times in
Speaker 1: your life when you run up to the edge what
Speaker 1: people have figured out, you can choose to step across
Speaker 1: that line and maybe solve the problem. Maybe you're not
Speaker 1: necessarily going to solve it, but maybe you got a
Speaker 1: chance at it. I want more people to do that.
Speaker 1: And so that's not a superhero story. So herb caller her,
Speaker 1: I wish he was still alive because I wish he
Speaker 1: got to see the final copy of the book, because
Speaker 1: there's not a cartoon in it, and it talks about
Speaker 1: the everyman. It talks about this power that we can
Speaker 1: all have a scared humans. So let's let's talk a
Speaker 1: little bit about that before we get to what the
Speaker 1: innovation stack is. I want to ask you, copying perseverance audacity,
Speaker 1: tell us about that combination. Yeah, so perseverance and audacity.
Speaker 1: So we all talk about grit and perseverance and how
Speaker 1: perseverance is really crazy. You know this this, this this
Speaker 1: laudable thing. You should stick with it, don't give up,
Speaker 1: don't quit, you know. And um, I'm kind of a
Speaker 1: quitter except in certain circumstances. And I'm not a twitter
Speaker 1: when I feel threatened, when I'm terrified, when I'm that
Speaker 1: gazelle that's out of the hurt. Um. So I tend
Speaker 1: to create situations that put me in those moments. I
Speaker 1: mean even the state interview. I mean, I'm scared right now.
Speaker 1: I'm not used to me. You shouldn't be. Yeah, I
Speaker 1: know I shouldn't be. But my hands are sweating over here, right. So,
Speaker 1: But the point is, if you are audacious enough to
Speaker 1: step across that line, if you are somebody who is
Speaker 1: willing to do something that seems a little bit crazy,
Speaker 1: then you don't have to have a lot of self discipline,
Speaker 1: your self discipline comes from your survival instinct. And this
Speaker 1: this has always been my hat because I'm a lazy guy.
Speaker 1: I sleep too late, you know, just just you can. Yeah,
Speaker 1: there's a ton of lazy uh in in my DNA.
Speaker 1: But there's also a ton of fear. And so what
Speaker 1: I will do is I will put myself in circumstances
Speaker 1: where the fear sort of counteracts the lazy. So I
Speaker 1: end up being kind of a workaholic in certain situations
Speaker 1: where oh, I've just committed this thing and now I
Speaker 1: gotta get it done. Oh really, you you want to
Speaker 1: do this? Okay, well let's go take a lot of
Speaker 1: work so you don't have to be disciplined if you
Speaker 1: are audacious. So now let's talk a little bit about
Speaker 1: the innovation stack. What is that and how can we
Speaker 1: put that to work in our startups or existing businesses.
Speaker 1: So the innovation stack is this weird thing that I
Speaker 1: found at every company that I studied that fit the
Speaker 1: following model. Okay, So when I was trying to explain
Speaker 1: what happened to do between Square and Amazon, I said, okay,
Speaker 1: so let's look for other companies when they're small and
Speaker 1: not very powerful, that were attacked by these major forces,
Speaker 1: either governments or industries or uh, competitors that were a
Speaker 1: hundred times their site, Like, let's look for the real
Speaker 1: underdog and then find the underdogs that won that battle
Speaker 1: and see if they have anything in common. And what
Speaker 1: they had in common, among other things, was this thing
Speaker 1: called an innovation stack. It wasn't called that. I just
Speaker 1: had to coin the term. But it was this mess.
Speaker 1: It was this thing, and I was like, what are
Speaker 1: they doing? What are they doing? And the answer is
Speaker 1: a company that's inventing something that's totally new is not
Speaker 1: inventing one or two or three things. They're probably doing
Speaker 1: ten or twenty or thirty different things that have never
Speaker 1: been done before, certainly never been done before in combination,
Speaker 1: and in combination, all those things affect the other things.
Speaker 1: So you get this real mess. And so innovation mess
Speaker 1: didn't make a good title. Uh, so we came up
Speaker 1: with innovation stack. But stack makes it sound sort of linear,
Speaker 1: and it's really this sort of snarl of interlocking things
Speaker 1: that you're doing differently. It's a jumbalaya. It's just a
Speaker 1: pot of brood things. And and use the example, Hey,
Speaker 1: if there's an eighty percent chance that Amazon is going
Speaker 1: to beat us at the first thing in our stack,
Speaker 1: and an eighty percent chance on the second and the third,
Speaker 1: down to the fourteenth. What you're left with is a
Speaker 1: tiny percentage that they're gonna be you on everything across
Speaker 1: the board. Yeah, yeah, the house always wins. If you
Speaker 1: have to talk toss the dice twelve times, you're gonna
Speaker 1: you're gonna crap out. So so let's talk about two
Speaker 1: other companies. We already talked about Southwest. Let's talk about
Speaker 1: the Bank of Italy. What was the Bank of Italy's innovation?
Speaker 1: So the Bank of Italy is amazing because when I
Speaker 1: say the word bank to listeners of your show, they
Speaker 1: all think of what was invented by a kid who
Speaker 1: dropped out of school at age fifteen and was a
Speaker 1: produce vender. I mean, this guy sold lettuce for a
Speaker 1: living and his name, ap Giannini is not one you've
Speaker 1: probably heard of, but he at one point could have
Speaker 1: been the richest person in the world, and he built
Speaker 1: what you think of today as a bank. So what
Speaker 1: do you think of the bank. You think of a
Speaker 1: branch you can go into, You think of tellers that
Speaker 1: you can talk to, You can think of a loan
Speaker 1: you can get for a car or a house. You
Speaker 1: think of the fact that you can go into a
Speaker 1: bank if you're a woman, right, like he opened the
Speaker 1: first bank for women. Like what you think of his
Speaker 1: banking a hundred years ago was totally different and A p.
Speaker 1: Giannini created something called the Bank of Italy originally, and
Speaker 1: then that became successful enough that they bought the Bank
Speaker 1: of America renamed a Bank of America. And I know
Speaker 1: you're saying, oh wait, I hate Bank of America, But
Speaker 1: like Bank of America fifty years ago was still very
Speaker 1: innovative and very cool, and the Bank of Italy was
Speaker 1: what started at all amazingly, it was from a kid
Speaker 1: who knew nothing about banking and just wanted something to
Speaker 1: include the little guys. So that was the problem that
Speaker 1: he identified and wanted the solves. And we're just square.
Speaker 1: Let's talk about Ikea. What is their innovation stack? So
Speaker 1: Ikea was very interesting because Comprade, who's the founder of Ikea,
Speaker 1: tells a very personal story about how he was terrified
Speaker 1: and scared and crying. In fact, um, this was you know,
Speaker 1: right after World War Two and you know his country
Speaker 1: was in devastation the economy was a mess. Uh. He
Speaker 1: was trying to make this furniture. Um actually he was
Speaker 1: trying to make a catalog first, and then he was
Speaker 1: trying to make furniture, and the furniture manufacturers of Sweden
Speaker 1: basically ganged up on him and prevented him from going
Speaker 1: to the trade show. So he had to do his
Speaker 1: own trade show, which is what created the IKEA showroom.
Speaker 1: The first warehouse show room was created because he was
Speaker 1: kicked out of the trade show, and then he was
Speaker 1: actually kicked out of the country because they would let
Speaker 1: him manufacture his wares in Sweden. They had this this
Speaker 1: industry group that had such a lock on manufacturing. They said,
Speaker 1: we won't make it for you. So he's like, well,
Speaker 1: I guess I'll go to uh Poland. Well, Poland just
Speaker 1: been wrecked by the war, but they were very eager
Speaker 1: to rebuild, and so he he was sort of forced
Speaker 1: to build an innovation stack because they wouldn't let him
Speaker 1: copy what everyone else is doing. And this is sort
Speaker 1: of one of the things I get into the book,
Speaker 1: and that is, look, usually copying is the right solution.
Speaker 1: Do what everybody else is doing. That's probably what the
Speaker 1: that's probably what's going to work. But if you can't copy,
Speaker 1: you're gonna be forced to innovate, and innovation could lead
Speaker 1: you to be, in this case, the biggest furniture company
Speaker 1: on the planet. And Ikea is wildly, wildly successful and
Speaker 1: very profitable, although we don't know because it's very private, private,
Speaker 1: it's one of the biggest private companies in the world.
Speaker 1: So quote another quote of yours that I thought was
Speaker 1: quite fascinating. Every man made object that you have ever
Speaker 1: encountered began as an idea in someone's minds ideas compete
Speaker 1: for atoms, splay. Oh, this is the idea. So everything
Speaker 1: you see in the world is I like to think
Speaker 1: of it as us as a sea of success. So
Speaker 1: I'm sitting in the studio right now, I'm looking at
Speaker 1: a microphone. Well, somebody had this idea for this microphone,
Speaker 1: and somebody had to then build it. And there were
Speaker 1: other competing designs for microphones that didn't make it into
Speaker 1: your studio. Okay, And every molecule in this room, including
Speaker 1: you and me, like we competed for molecules, you know,
Speaker 1: biologically our parents somehow survived and you know yours didn't mind,
Speaker 1: didn't how it happened. Beats me, but it did. If
Speaker 1: you look at that, everything in the world is a
Speaker 1: winner to get its atoms into existence. And you may
Speaker 1: sit there and say, well, this is a crumby you know,
Speaker 1: coffee cup that I'm holding, and it could be better
Speaker 1: than the handle, could be more comfortable than all this
Speaker 1: other crap. But the fact is that that coffee cup one.
Speaker 1: You don't know the explanation, but you know it's the winner.
Speaker 1: So you are surrounded your entire life by nothing but winners.
Speaker 1: It's so funny you say that because I have a
Speaker 1: pet theory that says everything you see is survivorship bias.
Speaker 1: And because you're surrounded by winners, you don't see the
Speaker 1: millions of losers and iterations and failed attempts that went
Speaker 1: into trying to build that, which is my theory as
Speaker 1: to why people continue to put money into plays and
Speaker 1: restaurants that have such a horrific success rate. Um, because
Speaker 1: all they see is Hamilton's. All they see is the
Speaker 1: hot Michelin star rate. They don't see the fifty ones
Speaker 1: or the millions that failed before that. Oh yeah, and
Speaker 1: and you can have selection bias, uh in in an
Speaker 1: individual form. It's just called denial, right, you know, selection
Speaker 1: bias on one person is just denial. It'll work this time. Well,
Speaker 1: I have to repeat. I found the book to be
Speaker 1: like a really fun read, which is what not what
Speaker 1: you expect from a business book. And you clearly have
Speaker 1: a sense of humor and some snark which comes up
Speaker 1: cross in the book. Thank you. Did you catch the
Speaker 1: dirty joke? Which one? Well, I I there are a
Speaker 1: couple in there. You probably did. Um, there was one
Speaker 1: in there. I will not tell because I promised not
Speaker 1: to tell. But my editor was sort of checked out
Speaker 1: on the last part of the book. He'd taken another
Speaker 1: job and he didn't tell me, so he didn't really
Speaker 1: scrutinize what I was writing. So you snuck some I
Speaker 1: snuck this in and I told him and he's like,
Speaker 1: we have to tell me. It's like, now I don't.
Speaker 1: You're the editor. You have to catch it. And so
Speaker 1: we had this like game of chicken and uh, and
Speaker 1: he gave up and went into publication. And I'm not
Speaker 1: going to say what it is, but like, yeah, there's
Speaker 1: some stuff in there that I love the idea of
Speaker 1: Easter eggs within a book just just kind of have
Speaker 1: some fun. Yeah, we'll talk about the name change, and
Speaker 1: we'll talk about some of the other things you co
Speaker 1: founded or founded. UH. Let's start with UH. Invisibly, can
Speaker 1: consumers really profit off of all of their private data
Speaker 1: that these online companies and social networks are grabbing? Tell us,
Speaker 1: tell us a little bit about invisibly. I wish I
Speaker 1: could give you a strong yes. I will give you
Speaker 1: sort of a kind of right now. But the idea
Speaker 1: behind invisibly is very sound, which is that you should
Speaker 1: stop being the product and start being the person in control.
Speaker 1: And what I mean by that is when you're using
Speaker 1: a platform for free like Facebook or Twitter or any
Speaker 1: of those platforms Google for this for that matter, they're
Speaker 1: going to monetize you. And what that means is that
Speaker 1: they serve you things that serve them and only them.
Speaker 1: So I'll give you an example. Facebook has figured out
Speaker 1: that the more time you spend on their platform, the
Speaker 1: more money they make. And they have also figured out
Speaker 1: that if they piss you off towards the end of
Speaker 1: your browsing experience, you're going to spend more time on it,
Speaker 1: So it serves them to get you. Know you, they'll
Speaker 1: show you the pictures of your cousins and your kids
Speaker 1: and all the cool stuff. And then if you if
Speaker 1: it looks like to their algorithms that you're gonna leave,
Speaker 1: they will piss you off on purpose. And that's how
Speaker 1: they're one of their tricks to keep you engaged. Well, yeah,
Speaker 1: it's well known now that is not good for you,
Speaker 1: but it's good for Facebook. How do you monetize How
Speaker 1: do you, as the individual user flip the script and
Speaker 1: monetize that. So about five years ago I started working
Speaker 1: on this idea that everybody's had it. It's an idea
Speaker 1: called micropayments. And micropayments are simply making you the center
Speaker 1: of the transaction. So if you see an ad, you
Speaker 1: get paid for seeing that add a tiny amount. And
Speaker 1: if you view a piece of content or read something
Speaker 1: or listen to something like you listen to this podcast,
Speaker 1: and we should we should you know, we gotta pay Barry, Yeah,
Speaker 1: we should pay Berry. We gotta pay for you all
Speaker 1: the work you did I forgot sake. You read the
Speaker 1: book like, you know, that should be compensated. So at
Speaker 1: the center of this, though, is the person in charge.
Speaker 1: And what we're trying to do with invisibly is create
Speaker 1: an invisible agent. And this agent is going to buy
Speaker 1: for you and sell for you. They're gonna buy at
Speaker 1: the lowest prices they can. They're gonna sell your eyeballs
Speaker 1: at highest prices they can. They're gonna negotiating your negotiate
Speaker 1: on your behalf. So the first thing we're going to
Speaker 1: stand up is a newsreader which will take you know,
Speaker 1: most of English language news and give you control of it.
Speaker 1: And look, I can't tell you that people are gonna
Speaker 1: want to use this because news is so polluted right now.
Speaker 1: Everybody the currentcept of this, it's really it's really interesting.
Speaker 1: It's a great concept, Barry. I can't swear that it works,
Speaker 1: but if you go to invisibly dot com you can
Speaker 1: try it. And look, we're giving it a shot, um.
Speaker 1: And the hope is that if we can give people control,
Speaker 1: then they will feel better about what they're consuming and
Speaker 1: also what they're selling, because believe me, if you think
Speaker 1: something free, you're paying for it with your attention, and
Speaker 1: you should be in control of the The old joke
Speaker 1: is if if the product is free, then you're the problem.
Speaker 1: That's so that's it. How'd you like working with Founders Fund?
Speaker 1: They have a really interesting. Uh history, I really like
Speaker 1: founders Fund. Founders Fund was the only money I wanted
Speaker 1: in the company. Uh, And it's it's because of Peter
Speaker 1: teel So micropayments. If you know anything about the history
Speaker 1: of the Internet, everyone's had the idea, nobody's made it work.
Speaker 1: So we're talking about twenty five years of constant failure.
Speaker 1: So when I was pitching Peter, well, so first of all,
Speaker 1: forget Peter when I when I did the problem, when
Speaker 1: I did the company, I said, well, I could fund
Speaker 1: the company myself, but that would be stupid because then
Speaker 1: I'm just an idiot who has no validation. So I thought,
Speaker 1: who would be the most validating capital in the world.
Speaker 1: And I thought, I need somebody who's made contrarian calls,
Speaker 1: who's been right, who's been in your face, who's not
Speaker 1: afraid to be a little controversial. And only two names
Speaker 1: came to mind. It was Elon Musk Competer too and Elan.
Speaker 1: I can't get in touch with him, but I can
Speaker 1: get in touch with Peter, and I went, I pitched
Speaker 1: Peter and they both were part of the original PayPal
Speaker 1: man memory serves. But I mean Peter has made contrarian
Speaker 1: calls and been right. This is the thing when Peter
Speaker 1: invested invisibly, it said to the rest of the world,
Speaker 1: you better pay some attention here because somebody who's been
Speaker 1: right more often than you are is putting his money.
Speaker 1: But in this so let's talk a little bit about
Speaker 1: what you learned building a billion dollar business. Square when
Speaker 1: public it's become wildly successful. What are the lessons from that? Uh? Wow, um,
Speaker 1: I think it's the lesson of serve the unserved. I
Speaker 1: mean what Square has been focused on from day one
Speaker 1: are people who weren't invited to the party. And we
Speaker 1: began with payments. That's where we were. We're now doing
Speaker 1: that with cash app, which is a runaway success. But
Speaker 1: cash app is esessionally a bank in your pocket. It's
Speaker 1: a way of trading stock, it's a way of buying crypto,
Speaker 1: it's a way of it's a way of participating in
Speaker 1: the financial system that you know, people like you and
Speaker 1: I take this for granted. We think, oh, well, why
Speaker 1: are there unbanked people? There people for the same reason
Speaker 1: their business are too small to declare bankruptcy. Like you,
Speaker 1: you don't realize how many people were excluded. So cash
Speaker 1: app is inclusive. There Um, you know we just bought Title.
Speaker 1: Our excitement would that was a big surprise. It seems
Speaker 1: like a little outside of of what square folks. Yeah,
Speaker 1: it is if you think of it in terms of music,
Speaker 1: if you think of it in terms of artists and
Speaker 1: how artists are at the you know, sort of receiving
Speaker 1: end of a lot of abuse. Like, we really think
Speaker 1: that empowering artists through the Title platform could be transformed
Speaker 1: for the music industry and for the artists. So look,
Speaker 1: in other words, get them a fair payment on their
Speaker 1: streams and down laws. Yeah, and look, I mean you
Speaker 1: can get the same song on Title that you can
Speaker 1: on Spotify. I mean, like we've got to hire data rate.
Speaker 1: But look, they'll catch up at some point. Um, And
Speaker 1: I think it's more about what the artists are gonna
Speaker 1: experience with Title. But again the focus is just like
Speaker 1: what can we do to empower the people who have
Speaker 1: traditionally been left out of the party. So let's talk
Speaker 1: about defy. Do you see squares business as part of
Speaker 1: the decentralized uh finance movement or are they outgrowing the
Speaker 1: traditional payment system? So it's a little both. I mean,
Speaker 1: as a so I'm a I'm a Fed regulator. Now
Speaker 1: I actually get to see regulation from inside the Federal Reserve,
Speaker 1: and regulation is really really good for a lot of things.
Speaker 1: But if it becomes too ossified, if it becomes too
Speaker 1: too restrictive, then it becomes bad. And I like the
Speaker 1: idea that we've got decentralized options. What do you make
Speaker 1: of the name change of air to block Inc. What
Speaker 1: what does this say about the role crypto is gonna
Speaker 1: play in the square ecosystem? So the block was a
Speaker 1: pretty you know, sort of clever round a couple levels.
Speaker 1: It was you know, the three deventual version of Square
Speaker 1: of block blockchain. It was also block you you know,
Speaker 1: it had some negative connotation to on Twitter. Yeah, I mean,
Speaker 1: look there's there's a lot of you get blocked on Twitter.
Speaker 1: I mean like like, you know, you take the go
Speaker 1: of the bad um. The Square brand really means payments,
Speaker 1: and people think of Square, they think of getting paid. Uh.
Speaker 1: They don't necessarily think of person to person payments, or
Speaker 1: bank in your pocket like cash app. They certainly don't
Speaker 1: think of music like title. They don't think of other
Speaker 1: things that we might be doing. And so so this
Speaker 1: is sort of the alphabet to Google search. Yeah, yeah,
Speaker 1: so we're still calling you. You still call Search, Google,
Speaker 1: you still call payment Square. But we got this thing
Speaker 1: over it that you know have I mean Google's case,
Speaker 1: I got a space program. In our case, you know,
Speaker 1: we got something called Spiral. So so let's talk about
Speaker 1: something else you're doing besides chairman of the St. Louis
Speaker 1: fed And and by the way, I have my Fred
Speaker 1: swag Love Fred. Yes, I haven't worn that T shirt.
Speaker 1: Uh it's Bloomberg yet. Um, but I'm a giant Fred fan.
Speaker 1: For those of you who like manipulating economic data and
Speaker 1: generating charts and things. Fred is the best tell us
Speaker 1: about the innovation district for downtown St. Louis. And how
Speaker 1: did you get involved in that? So? Uh, St. Louis
Speaker 1: has had some hard times and I wanted to build
Speaker 1: something in my hometown that was going to not only
Speaker 1: show off how cool St. Louis is but also attract
Speaker 1: people to it. And so we bought the old Post
Speaker 1: Dispatch building where the newspapers used to be printed. This
Speaker 1: is basically a factory, and we put a hundred million
Speaker 1: dollar new office in there for Square and a bunch
Speaker 1: of employees, and then we save some space for some
Speaker 1: new folks who who want to come in, and we're
Speaker 1: hoping to catalyze this whole district because what I'm trying
Speaker 1: to do in downtown St. Louis is create this sort
Speaker 1: of swagger that you have in the fancy office. So
Speaker 1: I mean, I don't know if you've uh Barry. When
Speaker 1: he was taking me through Bloomberg to Barry was walking
Speaker 1: me into the studio, he was talking about boot Bloomberg
Speaker 1: has a curved escalator. It's the coolest thing in the world,
Speaker 1: the only curved escalator in North America. Right, It's just
Speaker 1: so cool. And Barry feels cool walking down this curved
Speaker 1: escalator because that's how you should feel if you work
Speaker 1: for Bloomberg, because Bloomberg is a kick out the organization, Right.
Speaker 1: I want people to feel that way when they work
Speaker 1: for Square. And when you work in Square in Melbourne
Speaker 1: or Sydney or or or our offices in San Francisco,
Speaker 1: and you do you feel that swagger because our offices
Speaker 1: are great. We didn't have a great office in St. Louis.
Speaker 1: Now we do our office and St. Louis is spec tackular,
Speaker 1: and I want the people to come into St. Louis. Oh,
Speaker 1: it's the best looking office we've got. I want people
Speaker 1: to have that swagger and then I want to take
Speaker 1: them to carry a little bit that outside and bring
Speaker 1: more people to St. Louis. So, so is this an
Speaker 1: enterprise Is this an enterprise zone? It's hard to spit
Speaker 1: that out. What what? What is this actually set up
Speaker 1: as it possibly is? I don't know the tax there's
Speaker 1: a bunch of tax things that I didn't pay much
Speaker 1: attention to that. Look, it's just a cool building and
Speaker 1: I think it's an opportunity zone or something like that.
Speaker 1: Opportunity but you know what, I honestly didn't pay much attention. Look,
Speaker 1: the numbers are terrible. Whenever when sometimes if everyone's like,
Speaker 1: oh can I invest with you, it was like yeah, yeah,
Speaker 1: you like you can have the whole thing. It was
Speaker 1: not a good amount of money maker. It's not a
Speaker 1: many maker for me. But that's okay. That raises an
Speaker 1: interesting issue. You've been a serial entrepreneur and a fintech investor.
Speaker 1: The traditional route from your success is, hey, become a
Speaker 1: venture capitalists, seed a bunch of companies, lead a bunch
Speaker 1: of A and B rounds. Why not go that route?
Speaker 1: Oh I did? I'm a VC, but I mean, I don't.
Speaker 1: I don't lead with it because it's honestly kind of boring.
Speaker 1: Like what my venture capital firm does is we invest
Speaker 1: as software the service companies that are gonna te xt
Speaker 1: their returns and our returns have been fantastic. It's just
Speaker 1: a family officers just open. No, every it's fin top.
Speaker 1: You can, you can go to fin top. It's it's
Speaker 1: an open fund. I don't know if I'm allowed to
Speaker 1: say when we're open, but yeah, with a fin top
Speaker 1: is a VC fund and I'm a general partner. We
Speaker 1: we make a lot of money, and we make a
Speaker 1: lot of money by using a form law that makes
Speaker 1: a lot of money. Um, and the formula, I'll tell
Speaker 1: you what the formula is. Uh, Big platforms have to
Speaker 1: buy small companies because big financial platforms are terrible at innovation.
Speaker 1: And if you identify the companies that they have to
Speaker 1: buy and fund them for three years, they tend to
Speaker 1: ten x year or money interesting, really interesting. So no,
Speaker 1: it's not, that's really boring. Come on, you don't think
Speaker 1: you think ten x is boring? No, I think it's
Speaker 1: I think, but it's it's it's a wonderful result. The
Speaker 1: process that I go through there is so mechanical. It's
Speaker 1: not interesting because it's work. It's successful. Yeah, and the
Speaker 1: other partners work really hard and I you just count
Speaker 1: the money that I show up and do your scro
Speaker 1: and I'm I'm making swimming in the gold coins. And
Speaker 1: they used me to fire people like if I have
Speaker 1: to talk to an entrepreneur about how they should leave
Speaker 1: their own company. But what I've done it myself like
Speaker 1: and occasionally have to pull pull somebody aside and say, hey, look,
Speaker 1: it's really good to be the other guy that makes
Speaker 1: that makes a lot of sense. So so let's stick
Speaker 1: with traditional banks and being unable to innovate. Since you
Speaker 1: mentioned you're looking at small companies that can facilitate ten
Speaker 1: x on larger platforms, why can't traditional banks innovate and
Speaker 1: and what are the missed opportunities that these folks um
Speaker 1: are creating for for startups. So banks and financial institutions
Speaker 1: become structurally conservative for a very good reason, which is
Speaker 1: you don't become a big bank if you ever lose money.
Speaker 1: So one of the you know, the classic images of
Speaker 1: the bank is is the bank vault that this giant
Speaker 1: piece of stainless table all these bolts in it. I mean,
Speaker 1: we don't see them that much anymore. But like that
Speaker 1: used to be why you should trust this bank, as
Speaker 1: we have this you know, big vault. Look, if you
Speaker 1: lose money, you're dead. I don't care how innovative you
Speaker 1: are as a financial institution. You first have to be conservative.
Speaker 1: You have to be good at auditing, accounting, record keeping,
Speaker 1: you have to be good at legal and compliance and
Speaker 1: all these things that are not innovative. The problem is
Speaker 1: that these organizations that get too big become structurally conservative.
Speaker 1: They proved they promote only accounts and lawyers and auditors,
Speaker 1: and after a while they kill innovation. So what you
Speaker 1: have is this company that needs to grow. They need
Speaker 1: to get new products in but they can't, so then
Speaker 1: they have to buy their way into that. And it's
Speaker 1: actually a pretty good marriage because the big platforms are
Speaker 1: given regulatory um permission to access the rails of commerce,
Speaker 1: whereas the small companies aren't. So I mean we even
Speaker 1: went through the at square when we started our our
Speaker 1: our our product, we had to get permission from Visa
Speaker 1: and MasterCard in the banks to even transact legally on
Speaker 1: the rails. So when you first went to Visa and
Speaker 1: MasterCard and said, hey, we want to do credit card processing.
Speaker 1: What was the response, what was the pushback? Lay the responses,
Speaker 1: we have an app. We have a rule against exactly
Speaker 1: what you're doing. In our operating regulations it says you
Speaker 1: can't do what Square wanted to do? So how did
Speaker 1: you get around that? We had to get them to
Speaker 1: change our minds. And I got the sense from the
Speaker 1: book that you guys were kinda on not like Uber
Speaker 1: violating rules and laws, but you were kind of right
Speaker 1: at the edge when you were startup. We built a
Speaker 1: product that violated, by my count, at least seventeen rules
Speaker 1: and regulations that were promulgated by Visa, master Card, Visa
Speaker 1: master Card, the federal government. We I mean that the
Speaker 1: total body count was like seventeen and and And it
Speaker 1: wasn't like we were intentionally trying to flaunt the laws.
Speaker 1: It's just that we couldn't build our product in compliance
Speaker 1: with everything initially, and we had to have a working
Speaker 1: product because when you're building something new that somebody has
Speaker 1: never seen before, if you don't have a working prototype,
Speaker 1: people can't visualize it. They will always map you into
Speaker 1: something they've seen, their history, their frame of reference. Yeah,
Speaker 1: and so if you're gonna break that frame of reference,
Speaker 1: you better do it with a product that actually physically
Speaker 1: exists and works. And so to make it physically exist
Speaker 1: and work, we had to break a bunch of rules. Now,
Speaker 1: what we then did was get compliant with all those rules,
Speaker 1: or in some cases, get those rules changed. In one cases,
Speaker 1: we had a MasterCard, Visa American Expressed actually changed their
Speaker 1: operating regulations for Square to exist. How on earth do
Speaker 1: you get behemoths like that to change there? Because I
Speaker 1: my assumption is all those rules, not only have they
Speaker 1: been vetted by lawyers and and everybody else, they will
Speaker 1: work to the advantage of m X and MasterCard. Well, yes, uh,
Speaker 1: rules exist, but remember there's a there's a time when
Speaker 1: that rule is written. And if the world moves thirty years,
Speaker 1: and remember we're talking about tech years, so we're talking
Speaker 1: about probably a hundred years in banking time, um, then
Speaker 1: that rule may no longer be applicable. And so those
Speaker 1: rules can be rewritten. They've been written by humans, that
Speaker 1: can be changed by humans. And the way we got
Speaker 1: them changed was we did a demo that dropped jaws
Speaker 1: at MasterCard really and MasterCard said, well, actually, wasn't MasterCard.
Speaker 1: I say master Card. It wasn't MasterCard. It was Ed McLoughlin. Yeah.
Speaker 1: And his title was what what he was? Chief of something? Right,
Speaker 1: because you talked about in the book sending money with
Speaker 1: a credit card and the reader in the in the
Speaker 1: early days of Square, and people like, that's not possible. Yeah. Yeah,
Speaker 1: they were like, what the hell happened? Yeah? I mean,
Speaker 1: and we did a demo for Ed, and and we
Speaker 1: knew that his decision was going to determine the fate
Speaker 1: of our company because if he said no, we were dead.
Speaker 1: Really that's amazing. So so how did tell us about
Speaker 1: the demo? We did the demo? Um and uh, it
Speaker 1: went perfectly. I mean, Jack and I demo the product
Speaker 1: about fifty times. So we had our we had our
Speaker 1: game down perfectly. And the great thing about Jack Dorsey,
Speaker 1: of the many things, he's very quiet, He's very calm.
Speaker 1: I'm a nervous guy, like I get your high energy. Yeah,
Speaker 1: but I've also learned to never interrupt. I will never
Speaker 1: interrupt anybody. So we did the demo and then Ed said,
Speaker 1: you realized that violates our operating regulations? And I said, yes, sir,
Speaker 1: We do, and then neither Jack nor I said it
Speaker 1: thing for like twenty seconds and I don't want to count.
Speaker 1: That silence is I don't want to count twenty seconds
Speaker 1: and dead air on Bloomberg just right now. Just imagine
Speaker 1: how horrible you feel, how tight your clenching on that countdown.
Speaker 1: And then he said, so, I guess we have to
Speaker 1: change our rules, and he left the meeting. He looked
Speaker 1: at his team, glances team. He's like, I guess we
Speaker 1: got to change our operating rigs, and he goes what
Speaker 1: was the eye contact like with you and Jack at
Speaker 1: that moment, I was I was probably suppressing a laugh,
Speaker 1: like you know, like a kid in the back of
Speaker 1: a you know, classroom in high school. I was so
Speaker 1: giddy at that moment because it's like, oh my god, well, no,
Speaker 1: we can live like we hadn't one yet because we
Speaker 1: hadn't released as we didn't even know if anyone wanted
Speaker 1: the product. You have to think someone at that level says, oh,
Speaker 1: we're gonna change MasterCards rules so your product can do
Speaker 1: what it does. That feels like now all that's left
Speaker 1: going out and doing it. Now, all is left is
Speaker 1: going out and see if anybody but me wants this
Speaker 1: product because we had not been had to know. No,
Speaker 1: we didn't. We didn't because look, and this is this
Speaker 1: is another thing about innovation. You don't get to test
Speaker 1: your product, if it's truly new, until it's built and working,
Speaker 1: because if you say we'll imagine this, they can't do it. Right.
Speaker 1: Elon Musk when he was building the early Tesla's, you know,
Speaker 1: it was like, well, it's electric car, and people think
Speaker 1: electric car. What do you think of when you think
Speaker 1: of electric car? Golf card? Right, you think of this
Speaker 1: crappy little thing, you know. Uh, And and it's got
Speaker 1: terrible acceleration. Electric cars accelerate great and needed instantaneous. So
Speaker 1: Musk used to sit you in the car and he'd
Speaker 1: ask you to pick your favorite radio station, and you
Speaker 1: reach for the radio dial, He'd punched the accelerator and
Speaker 1: glue your with five g's of acceleration to the back
Speaker 1: of the seat. And that's how we did it. You
Speaker 1: have to build that demo. If we hadn't had permission
Speaker 1: for master Card to build it, we couldn't have released it.
Speaker 1: But the day we released it, we didn't know if
Speaker 1: anyone wanted it. This is the thing about innovation. You
Speaker 1: don't get that guarantee. I I gotta say this to
Speaker 1: your to your listeners, because it's so important. You've been
Speaker 1: told your whole life not to jump unless you've got
Speaker 1: to guarantee, unless you got to study, like show me
Speaker 1: the report from McKenzie or something that's just gonna prove
Speaker 1: that what I'm about to do is gonna work. So
Speaker 1: I'm not like responsible or at risk. I think it
Speaker 1: doesn't exist. If it's being done for the first time,
Speaker 1: you can't prove that it's gonna work. That that's that's
Speaker 1: just astonishing. Maybe this is a little hindsight bias because
Speaker 1: we now see how how much demand there is for
Speaker 1: for Square. But if you would have asked me years ago, Hey, anybody,
Speaker 1: So my wife used to teach fashion, illustration and design
Speaker 1: and art. So I've been dragged around to all these
Speaker 1: museums and all these art fairs and shows, and you
Speaker 1: show up at them. In the old days, they would
Speaker 1: have the physical clunk clunk machines, the knuckle and it
Speaker 1: was very very clear early on that square was made
Speaker 1: for those soda people. Oh, I lived in an easy,
Speaker 1: uptent baby and and you know, you see the the
Speaker 1: Washingm call you. It was not long after you guys
Speaker 1: formed that you started seeing this thing show up everywhere
Speaker 1: at the littlest merchants. People who you wouldn't think would
Speaker 1: be ready to sell something to ready to sell something, right,
Speaker 1: and you know you those impulse buys, especially a piece
Speaker 1: of jewelry, is sculpture, some sort of wind chime, that's
Speaker 1: a couple hundred bucks who walks around with five hundred
Speaker 1: dollars on them? Putting a credit card in an iPhone
Speaker 1: turns out to be just that's the solutions of that problem. Yeah,
Speaker 1: it turned out it worked. But again we couldn't know
Speaker 1: that at the beginning. I guess so, so I know,
Speaker 1: I only have you and the studio for a limited
Speaker 1: amount of time with some of our with with some
Speaker 1: of the last time we have. Let me ask you
Speaker 1: our favorite questions that we ask all of our guests,
Speaker 1: and I'm gonna start with, tell us what you're streaming
Speaker 1: these days? What was keeping you entertained during lockdown? Could
Speaker 1: be Netflix or Amazon Prime or even podcasts. Tell us
Speaker 1: what what you've been watching or listening. I'm rewatching old
Speaker 1: episodes of Community so hilarious. I went through the whole
Speaker 1: run of those community thirty Rock Silicon Valley, the show
Speaker 1: which I kind of lived through, and so yeah, I've
Speaker 1: got friends who are in the cast, and I was like,
Speaker 1: I love this stuff. It's so I mean, I'm escapist
Speaker 1: when it comes to streaming UM and sometimes doubly so
Speaker 1: when I have to watch a Swedish television. So my
Speaker 1: wife is sweeping the Rock No, no, no, no, no.
Speaker 1: This we watched that. It was actually pretty good rack
Speaker 1: and Mack was good. But I'm talking about Swedish public television.
Speaker 1: My wife speaks Swedish with our kids. She's trying to
Speaker 1: get them to speak Swedish, and I'm trying to not
Speaker 1: learn Swedish so that my kids can talk behind my
Speaker 1: back with my wife. So I'm not allowed in the
Speaker 1: room during this, so they're Swedet. We're streaming Swedish TV.
Speaker 1: By the way, if you like Silicon Valley, I'm going
Speaker 1: to recommend something to you which is the same thing,
Speaker 1: only apply to gaming. Mythic Quest on Apple TV with
Speaker 1: I'm Forgetting his Name from It's Always Sunny in Philadelphia
Speaker 1: plays the lead. It's the same sort of absurdest comedy,
Speaker 1: only instead of being set in a software company set
Speaker 1: in a gaming company. Marry, thank you, you will, you
Speaker 1: will do that. You've just made my Christmas vacation that
Speaker 1: much better. And I'll tell you my favorite Silicon Valley story. So,
Speaker 1: when I was on the West Coast a couple of
Speaker 1: years ago, UM I did an interview with Marc Andreeson
Speaker 1: at Andreas and harraways I fly. So that was during
Speaker 1: the week, and we were at there for the whole week.
Speaker 1: We fly home on Friday or Saturday, and I believe
Speaker 1: Silicon Values to broadcast on Sunday and Sunday night. I'm watching.
Speaker 1: I picked up the phone. I call Chris, who was
Speaker 1: out there with me from my office. Are you watching this?
Speaker 1: He's like, yeah, there was a scene set in the
Speaker 1: A sixteen Z building. Because it I recognize it immediately
Speaker 1: because it has waterfall that runs around the perimeter. It's
Speaker 1: almost like a goes goes continually around the building. And
Speaker 1: I'm like, we were just there. It was such a
Speaker 1: weird experience to see the outside of building that you
Speaker 1: just were on television. It was really music. Yeah, Sahill
Speaker 1: Road south Side. So so Silhan Valley was such a
Speaker 1: great show. I really enjoyed it. If you like that.
Speaker 1: I think you'll I think you'll like epic Quest. It's
Speaker 1: Apple epic Quest Quest, Mythic Quest, It's Apple TV. That's
Speaker 1: the reason to subscribe. Okay, yeah, there you go. Or
Speaker 1: if you have an Apple product, usually you get Apple
Speaker 1: TV free for a year or something. They're they're good
Speaker 1: about giving that sort of coop away. Um, you mentioned
Speaker 1: herb Kella her tell us about some of your early
Speaker 1: mentors who helped to shape your career. Oh my god,
Speaker 1: I didn't have many mentors. Um. I wished I had
Speaker 1: because I was always doing stuff where I wished I
Speaker 1: had some peers. And what I realized, or actually what
Speaker 1: I realized very late, was that I was doing things
Speaker 1: differently enough that my peers were not good good help.
Speaker 1: So this is actually one of the things that that
Speaker 1: hit me in the book, which was that a lot
Speaker 1: of the advice that I was following from people who
Speaker 1: are super successful, I would implement it and would blow up,
Speaker 1: and I thought, oh, I'm just a terrible person, like
Speaker 1: I can't do anything right. It turns up, it turns
Speaker 1: out that I was on that other side of the
Speaker 1: line where the physics are different. So if and this
Speaker 1: is the thing that that just drove me nuts. Is
Speaker 1: I would find competent, successful people and ask them for
Speaker 1: advice and do what they told me to do, and
Speaker 1: it would just be a disaster. Keller Her was the
Speaker 1: first guy, the very first guy that I sat within
Speaker 1: a room who I said, I did this and I
Speaker 1: felt this way, and her was like, I felt exactly
Speaker 1: the same way. But that was late in my career.
Speaker 1: I never had a mentor growing You're you were doing
Speaker 1: quantum physics and you were asking people about Newtonian Yeah,
Speaker 1: it was. It just didn't apply. It was it was
Speaker 1: just different math. Different math really are interesting. Let's let's
Speaker 1: talk Since you wrote this book, let's talk about some
Speaker 1: of your favorite books or what you might be reading
Speaker 1: right now. Um. One of my favorite books right now
Speaker 1: is a pre Suasion Robert Child, Robert Robert Aldini. Yeah,
Speaker 1: fantastic book. Um. I'm reading uh some uh some Churchill.
Speaker 1: I'm going through Churchill's autobiographies and his story of the
Speaker 1: World War two. Um, and that's that's part of my
Speaker 1: main reading. I look at Churchill like he was a
Speaker 1: bad polo player. He was an aristocrat. Uh, he was
Speaker 1: a war hero. He was uh, you know, a leader
Speaker 1: of a nation. He was, you know, he basically the
Speaker 1: reason we're all sitting here, Like he pretty much credit
Speaker 1: Western civil civilization to like one guy. That would be
Speaker 1: the guy. Um. And he was a prolific artist and writer,
Speaker 1: and he's a great writer. And so I'm just chewing
Speaker 1: through Churchill. That's really interesting. He if you watched The Crown,
Speaker 1: he really is a key player in in the latter
Speaker 1: episodes of that. Yeah, I wish, wish, wish I've been
Speaker 1: able to meet him. Um, But uh, there's enough of
Speaker 1: his writings and enough of his recordings that I feel
Speaker 1: like I'm learning something really intriguing. What sort of advice
Speaker 1: would you give to a recent college grad who is
Speaker 1: interested in a career in technology. Um, I'd say, get
Speaker 1: engineering training, learn learn to be a tech learn to
Speaker 1: be gig, go to the go to the school that
Speaker 1: teaches you how to how to make this stuff. For
Speaker 1: two reasons. Number one, there is a massive bias in
Speaker 1: Silicon Valley against people who are non technical. And the
Speaker 1: way you determine this, if they will ask, they'll ask
Speaker 1: you very innocuously, are you technical, very technical? And if
Speaker 1: you say, uh, no, I've got a degree in accounting
Speaker 1: or finance or something, but not really hardcore engineering. Uh,
Speaker 1: they won't invite you to the meeting. Really, you'll get bullied,
Speaker 1: you'll get excluded. And just having those technical chops will
Speaker 1: get you into those rooms. Now, what you do in
Speaker 1: those rooms depends on your other skill set, but if
Speaker 1: you want to get in the room, you better be technical,
Speaker 1: really really interesting. And our final question, what do you
Speaker 1: know about the world of filling the blank, technology, payments, innovation,
Speaker 1: entrepreneurship today that you wish you knew twenty or so
Speaker 1: years ago when you were first getting Oh my god,
Speaker 1: I wish I knew there was a line between innovation
Speaker 1: and copying. I never recognized it. I never recognized that
Speaker 1: there was a different set of physics. That was the
Speaker 1: greatest revelation because I'd seen all these mistakes that I
Speaker 1: had been making again and again and again, and all
Speaker 1: of a sudden, I was like, oh my god, I
Speaker 1: can I can explain what was going wrong. You know,
Speaker 1: It's almost like if you if you're in a social
Speaker 1: situation and you just have this weird social tick and
Speaker 1: people don't like you because of your social tick. You
Speaker 1: learn to get out of control and then people are
Speaker 1: nice to you. Like, that's what I felt like I was.
Speaker 1: I was a failure for so many years in situations
Speaker 1: where I thought I was prepared and ready to succeed,
Speaker 1: and the fact was I was just playing a different game.
Speaker 1: And if the game you're playing is using a different
Speaker 1: set of rules and you don't know those rules, then
Speaker 1: you're going to fail a lot. And that's that's why
Speaker 1: I had That's why it took me so long to
Speaker 1: sort of get my career out of you know, the dumpster,
Speaker 1: really really fascinating stuff. Jim mcklvey, co founder of Square,
Speaker 1: author of The Innovation Stack, Thank you for being so
Speaker 1: generous with your time. If you enjoy this conversation, we'll
Speaker 1: be sure and check out any of our previous four
Speaker 1: hundred or so such discussions. You can find those at iTunes, Spotify,
Speaker 1: wherever you get your favorite podcasts. We love your comments,
Speaker 1: feedback and suggestions right to us at m IB podcast
Speaker 1: at Bloomberg dot net. Sign up from my daily reads
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Speaker 1: Rid Halts. I would be remiss if I did not
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Speaker 1: Bron is our project manager. Michael Batnick is my head
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