Latest / Masters in Business / Jim McKelvey on 'The Innovation Stack' (Podcast)

Transcript

Jim McKelvey on 'The Innovation Stack' (Podcast) · Masters in Business

• 0:02
  Speaker 1: This is Masters in Business with very Results on Bloomberg
• 0:06
  Speaker 1: Radio this week on the podcast what Can I Say?
• 0:11
  Speaker 1: A masterclass in entrepreneurship technology, learning from your mistakes, building
• 0:18
  Speaker 1: a wonderful brand and wonderful company. Jim McKelvey. He is
• 0:22
  Speaker 1: the co founder of Square along with Jack Dorsey. They
• 0:25
  Speaker 1: built an amazing company which is now publicly traded. He
• 0:30
  Speaker 1: has done a variety of really fascinating things, and I
• 0:33
  Speaker 1: think you will find our conversation quite intriguing. He is
• 0:38
  Speaker 1: also the author of The Innovation Stack, Building an Unbeatable Business,
• 0:43
  Speaker 1: One Crazy Idea of Time. I have a decent number
• 0:46
  Speaker 1: of authors, um pitch me on coming up on the podcast.
• 0:50
  Speaker 1: And for the most part, I find a lot of
• 0:53
  Speaker 1: the books a little tedious and and tough to plow through.
• 0:56
  Speaker 1: And so you don't hear those folks. The folks I
• 0:59
  Speaker 1: bring the books tend to be more interesting. I found
• 1:02
  Speaker 1: this to be a really amusing, well written, uh and
• 1:06
  Speaker 1: fascinating book. Uh not just about his experiences at Square.
• 1:11
  Speaker 1: But Jim went back and said, why did Square win
• 1:15
  Speaker 1: when there were so many forces aligned against us, including
• 1:18
  Speaker 1: behemoth Amazon? And so he put in the research and said,
• 1:22
  Speaker 1: let's figure out what we did right and see if
• 1:24
  Speaker 1: there are lessons to be shared with the world, and
• 1:27
  Speaker 1: that's what this book is about. You're gonna find this
• 1:29
  Speaker 1: conversation to be absolutely fascinating. So, with no further ado,
• 1:33
  Speaker 1: my conversation with Jim McKelvey. This is Mesters in Business
• 1:39
  Speaker 1: with Very Renaults on Bloomberg Radio. My extra special guest
• 1:45
  Speaker 1: this week is Jim McKelvey. He is the co founder
• 1:49
  Speaker 1: of Square along with his colleague Jack Dorsey Uh. He
• 1:53
  Speaker 1: is an independent director at the Federal Reserve Bank in St. Louis.
• 1:58
  Speaker 1: He is also the author of a book, The Innovation Stack,
• 2:01
  Speaker 1: Building an unbeatable business, one crazy idea at a time.
• 2:05
  Speaker 1: Jim McKelvey, welcome to Bloomberg. Thank you, Barry. Actually, I'm
• 2:09
  Speaker 1: now the chair of the St. Louis FETI you are
• 2:11
  Speaker 1: the chair the president. No, um, I don't get to
• 2:15
  Speaker 1: vote on that interest rate. I get to vote on
• 2:17
  Speaker 1: the little interest rate. That's fascinating. We'll talk about that
• 2:21
  Speaker 1: in a bit. But let's start out with your background.
• 2:26
  Speaker 1: And I have to begin by asking you a question.
• 2:29
  Speaker 1: What's the difference between an entrepreneur and a business person?
• 2:34
  Speaker 1: These days? Nothing because the word is the same. But
• 2:38
  Speaker 1: originally the word entrepreneur meant somebody in business who was
• 2:42
  Speaker 1: doing something different, very different, So we're talking about the
• 2:45
  Speaker 1: Right brothers trying to build the first airplane, or somebody
• 2:48
  Speaker 1: who you thought was crazy. These days, entrepreneur has sort
• 2:52
  Speaker 1: of lost that original meaning and it means just anybody
• 2:54
  Speaker 1: who starts a business. But the problem with that is
• 2:56
  Speaker 1: that you can't then talk about how different it is
• 3:00
  Speaker 1: to do something where you're not copying what everybody else
• 3:02
  Speaker 1: is doing and trying to invent something yourself. So so
• 3:05
  Speaker 1: let's stay with that theme, because if I were to
• 3:07
  Speaker 1: go to Jim Mcalvy dot com. On your site, there's
• 3:10
  Speaker 1: a big banner that says, do something that has never
• 3:13
  Speaker 1: been done. Explain what you mean by that? Yeah. So, um,
• 3:16
  Speaker 1: there's a lot of talk about how we like to
• 3:18
  Speaker 1: be innovative and how we like to be creative, and
• 3:20
  Speaker 1: people are supposed to like that, and I've never been
• 3:22
  Speaker 1: comfortable doing that, although I've done it occasionally, And I
• 3:26
  Speaker 1: wanted to address the fact that it's actually really scary
• 3:29
  Speaker 1: to do something where you don't have any peers, where
• 3:32
  Speaker 1: you don't have any validation, where you don't have anybody
• 3:34
  Speaker 1: else when you look around saying Oh well, uh, they're
• 3:37
  Speaker 1: doing it too, so it must be sort of okay,
• 3:40
  Speaker 1: if you're doing entrepreneurship in its classical definition, you're doing
• 3:44
  Speaker 1: something that is going to be very very scary to
• 3:46
  Speaker 1: you on on almost a biological level, because humans are
• 3:49
  Speaker 1: hurt animals. We like to be in a group, right,
• 3:53
  Speaker 1: it's a I was a big fan of Mutual of
• 3:55
  Speaker 1: Omaha's Wild Kingdom, and there was always that shot of
• 3:58
  Speaker 1: the herd of whoever zel zebra, that one zebra on
• 4:02
  Speaker 1: the outskirts of that you know what happens? That was
• 4:05
  Speaker 1: me I was as I was always away from the
• 4:08
  Speaker 1: herd and and lunch for the lions. Yeah, that describes
• 4:12
  Speaker 1: my schooling. So so that raises a lot of really
• 4:15
  Speaker 1: interesting questions, beginning with you know, why is Silicon's focus
• 4:21
  Speaker 1: on disruption so misguided? I think looking at disruption, which
• 4:25
  Speaker 1: is this term that we really used to death in
• 4:27
  Speaker 1: Silicon Valley, is it's a bad focus because if you're
• 4:31
  Speaker 1: looking to disrupt, it puts your eye on the thing
• 4:34
  Speaker 1: you're trying to disrupt. So we're gonna disrupt healthcare? Okay, Yeah,
• 4:37
  Speaker 1: there's a lot of stuff wrong with healthcare. What do
• 4:39
  Speaker 1: you want to disrupt? But if you spend your time
• 4:41
  Speaker 1: looking at what you want to destroy, it triggers that
• 4:44
  Speaker 1: copying function in your head that says and you that says, oh,
• 4:47
  Speaker 1: I should do this, I should do that, and you
• 4:49
  Speaker 1: start becoming indoctrinated into the thing that you're trying to destroy.
• 4:52
  Speaker 1: And so I believe you should kind of ignore the
• 4:56
  Speaker 1: thing that you are replacing and just focus on the
• 4:59
  Speaker 1: problem trying to solve. And then then you get this
• 5:02
  Speaker 1: sort of weird thing because you know, Square, which we
• 5:04
  Speaker 1: now call block is, has always been called a very
• 5:07
  Speaker 1: disruptive company, but actually ran the numbers on the number
• 5:10
  Speaker 1: of companies that we wiped out, right, American Express, Visa,
• 5:15
  Speaker 1: they're all bigger card, Right, you killed all of it.
• 5:17
  Speaker 1: We haven't disrupted anything like we We knocked a few
• 5:20
  Speaker 1: ISOs into you know, sort of more honestly pricing their products,
• 5:24
  Speaker 1: but even they're still around. I mean, we didn't destroy much.
• 5:26
  Speaker 1: What we did instead was we created a new market.
• 5:29
  Speaker 1: And we're gonna talk a lot about Square, uh coming up.
• 5:32
  Speaker 1: But here's another quote of yours. I really enjoyed. Chaos
• 5:37
  Speaker 1: is a good thing. Explain. Oh yeah, so chaos is
• 5:40
  Speaker 1: where you get new ideas. Chaos is that's it's this
• 5:43
  Speaker 1: moment that it puts your brain into a different form
• 5:46
  Speaker 1: of thinking. Uh So, if you've got if you're if
• 5:48
  Speaker 1: you're a pattern matcher, which we're all pattern matchers, and
• 5:51
  Speaker 1: you see these patterns and you don't think you do
• 5:53
  Speaker 1: the things automatically, you're you go through most of life
• 5:56
  Speaker 1: on autopilot, as you should. But occasionally, uh something goes
• 6:00
  Speaker 1: wrong and it's weird and and things are not working
• 6:02
  Speaker 1: like they should be, and and that puts your brain
• 6:05
  Speaker 1: into this different state. And so I say chaos because
• 6:08
  Speaker 1: it's a little scary to think of chaos, but it's
• 6:10
  Speaker 1: also a very good creative place that makes a lot
• 6:14
  Speaker 1: of sense. One more one more quote. Thank you for
• 6:18
  Speaker 1: reading the book. I mean, I have to say that you,
• 6:20
  Speaker 1: as an interviewer, have prepared really really well for this.
• 6:24
  Speaker 1: Can I tell you something And I shouldn't say this
• 6:27
  Speaker 1: out loud because I'm kind of revealing my secret sauce.
• 6:31
  Speaker 1: We do a lot of prep when people show up
• 6:33
  Speaker 1: for an interview, and my thought processes. How often am
• 6:38
  Speaker 1: I going to get a Jim mcelvy sitting in front
• 6:40
  Speaker 1: of me for ninety minutes. I'm not just gonna walk
• 6:42
  Speaker 1: in and coast. I have to do my homework, and
• 6:45
  Speaker 1: I am genuinely shocked that that is this exclusive market niche.
• 6:50
  Speaker 1: It's it's it makes you special. I hate to explain
• 6:55
  Speaker 1: to the listening audience, but a lot of people who
• 6:57
  Speaker 1: have interviewed me about the book haven't read the whole book,
• 7:01
  Speaker 1: and or they you know, they've got cliff notes or something.
• 7:04
  Speaker 1: I appreciate, you appreciate the work. Um, let me give
• 7:09
  Speaker 1: you one other quote of yours. Reward loyal customers now
• 7:14
  Speaker 1: or risk losing them. Tell us what that means, and
• 7:17
  Speaker 1: then I'll share a anecdote. So there's a different pricing
• 7:20
  Speaker 1: power you have if you have an innovation stack. So
• 7:22
  Speaker 1: myke my book sort of focuses on this world of
• 7:25
  Speaker 1: entrepreneurial companies that build these things called innovation stacks. We
• 7:28
  Speaker 1: can get into that, but the idea here is that
• 7:31
  Speaker 1: if you have one of these things, you have amazing
• 7:34
  Speaker 1: pricing power. You have extremely low cost You effectively have
• 7:38
  Speaker 1: customers that are willing to do things differently just to
• 7:40
  Speaker 1: experience your products. And this allows you a massive amount
• 7:44
  Speaker 1: of pricing flexibility. And I ran the math, and it's
• 7:46
  Speaker 1: actually better for you to keep your prices absurdly low
• 7:51
  Speaker 1: by normal sort of MBA calculations. And if you undercharge
• 7:55
  Speaker 1: the market, you will actually maximize revenue. That's really that's
• 7:58
  Speaker 1: really kind of interesting. So I used to have the
• 8:02
  Speaker 1: Starbucks app on my phone and every day on the
• 8:05
  Speaker 1: way into the office, this is pre pandemic, I would
• 8:07
  Speaker 1: swing by a Starbucks, even though we had a coffee
• 8:09
  Speaker 1: maker in the office, uh, and pick up their egg
• 8:13
  Speaker 1: white and turkey bacon sandwich and a and a Starbucks
• 8:17
  Speaker 1: um flat white, and I would go to my office.
• 8:20
  Speaker 1: And then they stopped. They like had less and less
• 8:24
  Speaker 1: of this in stock. Who was here or miss weather
• 8:26
  Speaker 1: they had it, And then the pandemic hits and they
• 8:31
  Speaker 1: converted their Starbucks points. And then I get an email
• 8:35
  Speaker 1: from Starbucks telling me that despite you know the pandemic
• 8:40
  Speaker 1: and everybody stuck at home, use it or lose it.
• 8:43
  Speaker 1: Your points which used to the last forever, if you
• 8:45
  Speaker 1: don't use them by May eleven, they're going away. And
• 8:49
  Speaker 1: I got really annoyed at that, And then you should.
• 8:52
  Speaker 1: And then outcomes the story that Starbucks has this three
• 8:55
  Speaker 1: billion dollar float because if you have the app on
• 8:58
  Speaker 1: your phone and it gets refilled with your credit card,
• 9:01
  Speaker 1: fifty Bucks or Bucks every time it runs down. Multiply
• 9:05
  Speaker 1: that by a million Starbucks customers. They're sitting on three
• 9:10
  Speaker 1: four billion dollars. That was pretty much the last draw
• 9:12
  Speaker 1: for me. That and the end. I don't care about
• 9:15
  Speaker 1: the float. No, no, no, but wait, you're sitting with
• 9:17
  Speaker 1: all this money and you have to take our already
• 9:20
  Speaker 1: reduced points. I'm done with you. And ps the same time,
• 9:25
  Speaker 1: I'm getting emails from Delta your silver medallions. Fine, don't
• 9:31
  Speaker 1: worry about it. We're gonna roll it over for a year.
• 9:33
  Speaker 1: You're good, And I'm like, that's the right way to
• 9:35
  Speaker 1: retain a customer. And and even more insidious than that
• 9:39
  Speaker 1: is the fact that when you are in a panic
• 9:41
  Speaker 1: state yourself, when you're in chaos, when you when something
• 9:44
  Speaker 1: is disrupted, like you just had the world shutdown because
• 9:46
  Speaker 1: of CODD, you are in a heightened state of of
• 9:49
  Speaker 1: of of imprint imprint ability. So, in other words, if
• 9:53
  Speaker 1: Starbucks does you a service at that moment, if they
• 9:56
  Speaker 1: help you out, if they say we're gonna stays with you,
• 9:58
  Speaker 1: then then they got a customer for life. Conversely, if
• 10:01
  Speaker 1: it's at the moment they choose to jab their thumb
• 10:03
  Speaker 1: in your eye, then you're gonna hate them, and you're
• 10:06
  Speaker 1: gonna go on air and hate them and and shock. Yeah.
• 10:09
  Speaker 1: It was a Starbucks in the lobby of our old
• 10:11
  Speaker 1: office building, and I was a regular there, and I
• 10:15
  Speaker 1: like strong coffee, so I used to defend them against
• 10:18
  Speaker 1: people who are, like I prefer Dunkin Donuts. That's because
• 10:21
  Speaker 1: you're a whim drink. Drink some coffee that puts a
• 10:23
  Speaker 1: little hair on your chest. But this, by the way,
• 10:27
  Speaker 1: a hundred Starbucks points, what is it? Coffee? It's the
• 10:31
  Speaker 1: cost of it is so meaningless. But the thought process
• 10:35
  Speaker 1: behind it was up yours, And I was like, now,
• 10:39
  Speaker 1: up yours. I was spending I don't know, five hundred
• 10:42
  Speaker 1: bucks a year on Starbucks. You can get coffee elsewhere
• 10:45
  Speaker 1: I cannot do, and I will occasionally get Starbucks, but
• 10:49
  Speaker 1: I am not no longer a regular. It probably doesn't
• 10:52
  Speaker 1: taste as good anymore either. Um no, it's it's still
• 10:55
  Speaker 1: still pretty good coffee. The the question that I'm curious about,
• 10:59
  Speaker 1: am I just an unreal custs And the only person
• 11:01
  Speaker 1: who got angry no, no, no, no, you're what percentage
• 11:04
  Speaker 1: of people who said, wait, you're taking my points away?
• 11:06
  Speaker 1: You are so so there's a calculation that you make
• 11:09
  Speaker 1: if you're uh, strictly looking at spreadsheets and you say, well,
• 11:13
  Speaker 1: they've got three billion dollars with a float, and our
• 11:16
  Speaker 1: stores are kind of closing and we need a little
• 11:17
  Speaker 1: bridge and we need you know, they make some sort
• 11:19
  Speaker 1: of cold calculating decision that sort of looks good on
• 11:22
  Speaker 1: a spreadsheet. What they forget is how impactful that is
• 11:26
  Speaker 1: during a crisis on the psychology of their customers, and
• 11:30
  Speaker 1: those people remember forever, and that that's just a terrible
• 11:33
  Speaker 1: moment to do anything against your customers. It's also a
• 11:37
  Speaker 1: wonderful moment to do something for your customers. So if
• 11:40
  Speaker 1: they if they had a way to do what Delta
• 11:42
  Speaker 1: did and be positive, by the way, same exact circumstances,
• 11:45
  Speaker 1: the same thing. No one's flying, nobody's going to Starbucks,
• 11:48
  Speaker 1: your points at both they're just sitting there, yea, And
• 11:50
  Speaker 1: Delta is probably worse, k right, So Delta said, hey,
• 11:54
  Speaker 1: we're good. We're gonna roll your flights status over to
• 11:58
  Speaker 1: and any canceled lights you get a lifetime credit. You
• 12:02
  Speaker 1: could use them in the future, don't worry about it,
• 12:04
  Speaker 1: and now good luck getting me on a different You
• 12:07
  Speaker 1: know something besides delta, Yeah, I expect to see you
• 12:10
  Speaker 1: on adulta flight holding a cannon or a cup of
• 12:12
  Speaker 1: pizza coffee. So so anyway, we digress, and your point
• 12:18
  Speaker 1: happens to be I digress is when you have an
• 12:21
  Speaker 1: opportunity to delight a customer, what what do you do?
• 12:24
  Speaker 1: So the the interesting thing here is I was studying
• 12:27
  Speaker 1: trying to figure out why the math was different for
• 12:29
  Speaker 1: companies with innovation stacks. And this is really uh, sort
• 12:32
  Speaker 1: of personal to me because I was very focused on
• 12:37
  Speaker 1: having some sort of theoretical basis for the stuff that
• 12:40
  Speaker 1: I was saying. And what I did was I found
• 12:42
  Speaker 1: this perfect case study, which was Southwest Airlines. Southwest Airlines
• 12:46
  Speaker 1: had tremendous pricing power and during the Herb Keller her years,
• 12:50
  Speaker 1: who was one of the founders in original CEO. Yeah,
• 12:53
  Speaker 1: he was one of the founders, a legend, and Herb
• 12:55
  Speaker 1: kept the prices low and then he left and Southwest
• 12:59
  Speaker 1: Airlines raised their prices. So it was this perfect case
• 13:01
  Speaker 1: study of this company that had an innovation stack and
• 13:03
  Speaker 1: then all of a sudden started messing with the math.
• 13:05
  Speaker 1: They made a lot more money right after her left
• 13:08
  Speaker 1: for a few years. Since that time, five new competitor airlines,
• 13:12
  Speaker 1: like complete new airlines that would have totally died if
• 13:15
  Speaker 1: herb was at the Helm are now competing with Southwest.
• 13:18
  Speaker 1: That makes a lot of sense. And and ps. Southwest
• 13:21
  Speaker 1: was always a pain in the butt, but they were
• 13:23
  Speaker 1: very cheap because you noah sign seats that you have
• 13:26
  Speaker 1: to get up, you have to wait online. I am
• 13:29
  Speaker 1: a former to your point, former Southwest Fortia because I
• 13:33
  Speaker 1: just don't have the tolerance for the headache and it's
• 13:36
  Speaker 1: not discounted enough. I'll pay a little more for Delta
• 13:39
  Speaker 1: and feel like I'm getting a better experience and not
• 13:43
  Speaker 1: feel like cattle boarding an airline. So all right, enough
• 13:48
  Speaker 1: endorsing Delta and trashing Southwest and Starbucks. So let's talk
• 13:54
  Speaker 1: a little bit about, um, your business backgrounds Uh. Turns
• 13:58
  Speaker 1: out that um, you were you were doing something with
• 14:02
  Speaker 1: Ceedie Rams and somebody who knew said, hey, I have
• 14:05
  Speaker 1: a kid who who's good with computers, and you hired
• 14:08
  Speaker 1: this kid as an intern. Tell us about had a
• 14:10
  Speaker 1: software company. This with the late eighties, I guess this
• 14:15
  Speaker 1: would have been about ninety two. But back then, uh,
• 14:19
  Speaker 1: my company, Mira was in a desperate situation. We had
• 14:23
  Speaker 1: just screwed up this disc that had to go out,
• 14:25
  Speaker 1: and we were hiring everybody. And the lady who sold
• 14:29
  Speaker 1: us chocolate covered espresso beans. Her name was Marcia Dorsey,
• 14:34
  Speaker 1: and her son, Jack Dorsey, came to work for us
• 14:36
  Speaker 1: when he was fifteen. He showed up in his bicycle.
• 14:38
  Speaker 1: He pulled an all nighter with us the first night
• 14:41
  Speaker 1: at at his first real job, and he became a
• 14:46
  Speaker 1: cherished part of the team from then. I called him
• 14:48
  Speaker 1: Jack the Genius. When he was sixteen, this used to
• 14:50
  Speaker 1: embarrass him, but now he's sort of grown used to it.
• 14:53
  Speaker 1: Fifteen year old pulls an all night or that's a
• 14:55
  Speaker 1: lot of chocolate covered espresso beans. Well, you know, Ridland
• 14:58
  Speaker 1: wasn't commonly available back man the way it is today.
• 15:01
  Speaker 1: You get out of you know, shake any kid a
• 15:05
  Speaker 1: couple of written form, right, So so you start working
• 15:09
  Speaker 1: with him, um for this company. Eventually you decide to
• 15:14
  Speaker 1: bolt because the company was not doing what you wanted
• 15:17
  Speaker 1: it to do anymore, and tell us about that. I'm
• 15:21
  Speaker 1: a terrible leader. I don't direct the troops well and
• 15:26
  Speaker 1: they sometimes don't follow me. And I saw the Internet coming.
• 15:28
  Speaker 1: The Internet was going to wipe out our product, which
• 15:30
  Speaker 1: was an internet based, you know, trade show disc. It
• 15:33
  Speaker 1: had all the stuff that the brochures and stuff at
• 15:35
  Speaker 1: a trade show. And in fact, the disc replaced all
• 15:38
  Speaker 1: those bags of paper that people can't get the bags
• 15:40
  Speaker 1: of paper have a disc. It made a ton of
• 15:42
  Speaker 1: sense in the early nineties, and it was gonna get
• 15:44
  Speaker 1: wiped out when websites were coming along. And I saw this,
• 15:48
  Speaker 1: and I said to the troops, hey, let's stop making
• 15:50
  Speaker 1: discs and start making websites. And they were like, oh, yeah, sure, Jim,
• 15:54
  Speaker 1: we'll do it. But they didn't. They didn't follow me that,
• 15:56
  Speaker 1: none of them. None of them would listen to me
• 15:58
  Speaker 1: except this fifteen year old. So Jack and I um
• 16:01
  Speaker 1: went off by ourselves and we basically created a new company.
• 16:05
  Speaker 1: And that company still runs today. It's amazing that, you know,
• 16:08
  Speaker 1: thirty years later, what Jack built is still running. And
• 16:12
  Speaker 1: you said he was a really good code or he
• 16:14
  Speaker 1: knew exactly what he was doing, A good coded, a
• 16:15
  Speaker 1: good guy. I mean, he was a lot of fun
• 16:17
  Speaker 1: and we got on famously. And uh, you know, after
• 16:21
  Speaker 1: he was shown the door Twitter the first time, he
• 16:24
  Speaker 1: asked me if I wanted to start a company with him,
• 16:26
  Speaker 1: So I I got, I got sort of paid back
• 16:27
  Speaker 1: twenty years later when he said, Hey, Jim, let's do
• 16:30
  Speaker 1: something together again. I was like, cool, what do you
• 16:32
  Speaker 1: want to do? And that's really an interesting story because
• 16:35
  Speaker 1: and you described this very nicely in the book, as
• 16:38
  Speaker 1: you're telling the story of we're trying to think about
• 16:41
  Speaker 1: what to do. Wasn't like we have an idea, let's
• 16:43
  Speaker 1: build a company. It's we want to build a company.
• 16:45
  Speaker 1: Let's find an idea that resonates with both of us.
• 16:49
  Speaker 1: At the time, you're doing glass blowing, and you have
• 16:53
  Speaker 1: some nice products, and you have some products that are
• 16:56
  Speaker 1: kind of ugly. I have a lot of that you
• 16:59
  Speaker 1: shuff to the side and and pray someone comes along
• 17:03
  Speaker 1: and takes the inventory off your hand. A client wanted
• 17:07
  Speaker 1: to buy an ugly piece of glass via an amex,
• 17:11
  Speaker 1: and you couldn't accommodate her. Tell us about what. Yeah,
• 17:13
  Speaker 1: So the dirty little secret about art is that a
• 17:16
  Speaker 1: lot of artists make stuff they're not proud of, and
• 17:18
  Speaker 1: we don't signal it in the price. So you look
• 17:22
  Speaker 1: at my stuff, and I've learned very very early to
• 17:25
  Speaker 1: charge the same if I hate it or like it
• 17:27
  Speaker 1: um And this was a piece I hated, and for
• 17:29
  Speaker 1: good reason, I think it was ugly, um, but this
• 17:32
  Speaker 1: lady wanted to take it off my hands. It was
• 17:33
  Speaker 1: like a two thou dollar piece of glass. And she
• 17:35
  Speaker 1: tried to pay me with an AMEX card and I
• 17:37
  Speaker 1: couldn't complete the sale because I couldn't she didn't have
• 17:40
  Speaker 1: a visa car, she didn't have a master card. Uh,
• 17:43
  Speaker 1: and so I lost this sale. I was really upset,
• 17:46
  Speaker 1: um and I called Jack on my iPhone and I said, hey, man,
• 17:52
  Speaker 1: I know what we ought to do. I said, we
• 17:54
  Speaker 1: ought to build a system so that I can take
• 17:56
  Speaker 1: a payment on my iPhone. And Jack got quiet for
• 18:00
  Speaker 1: a second. He said, that's interesting, and that's how Square started.
• 18:03
  Speaker 1: So so now you guys want to launch this company.
• 18:07
  Speaker 1: You design the hardware. Do you have any background in
• 18:10
  Speaker 1: in hardware design or hard reading or software? No? I
• 18:14
  Speaker 1: don't have any. Well, I have some background in software,
• 18:16
  Speaker 1: but it turns out of the you know, between the
• 18:18
  Speaker 1: two of us, Jack and me, he's a much much
• 18:20
  Speaker 1: better programmer than I am. Uh. So it was pretty
• 18:24
  Speaker 1: much Jack leading the software effort and me doing everything else.
• 18:27
  Speaker 1: Because there was so much software work to do that
• 18:29
  Speaker 1: I was trying to keep all the other stuff away
• 18:30
  Speaker 1: from him. So I was dealing with the business licenses.
• 18:33
  Speaker 1: I was, you know, buying office furniture. I also got
• 18:36
  Speaker 1: into an argument with jack about how we were going
• 18:38
  Speaker 1: to get the credit card read. So his attitude was, well,
• 18:41
  Speaker 1: we'll build some software that'll take a photo of the
• 18:44
  Speaker 1: card and we'll just use the photo and IR to
• 18:47
  Speaker 1: convert the gotcha. So it turns out, if you know
• 18:52
  Speaker 1: the subtleties of credit cards that actually cost more, that's
• 18:55
  Speaker 1: called a card not present transactionally cost you more. And
• 18:57
  Speaker 1: I thought, no, no, we want to get card present rates,
• 18:59
  Speaker 1: which means we need to make read the mag stripe.
• 19:01
  Speaker 1: And so I had this idea for a little mag
• 19:03
  Speaker 1: stripe reader. It was actually an idea that I got
• 19:06
  Speaker 1: out of out of Make magazine. Make magazine had this
• 19:08
  Speaker 1: like hackers, uh story about some guy who turned his
• 19:12
  Speaker 1: mobile phone into a credit card reader, and I was like, oh,
• 19:14
  Speaker 1: we can do the same thing. So we took this
• 19:16
  Speaker 1: idea and I went to my studio and I started
• 19:19
  Speaker 1: building a credit card reader. Uh so I basically built
• 19:24
  Speaker 1: the hardware before Jackie get the software working. It was
• 19:26
  Speaker 1: sort of a race. So so the hardware it into
• 19:29
  Speaker 1: original form is a square with the tape reader on
• 19:33
  Speaker 1: the inside and and the plug to go into the
• 19:36
  Speaker 1: headphone jack of the iPhone. Yeah yeah, so when it's
• 19:38
  Speaker 1: original form bigger than a square though, Yeah it was,
• 19:42
  Speaker 1: it was. It was sort of a rectangle um and
• 19:45
  Speaker 1: it was made the first one I made small. So
• 19:47
  Speaker 1: I had a couple of big prototypes of first one
• 19:49
  Speaker 1: I made small. UM was for a demo with Steve Jobs.
• 19:53
  Speaker 1: Oh really, and I got We were terrified because Steve
• 19:57
  Speaker 1: was a legendary little and tim dating. Yeah yeah, and
• 20:01
  Speaker 1: especially if you're the hardware guy, because Steve is a
• 20:03
  Speaker 1: design zealot and if you make something ugly, he won't
• 20:06
  Speaker 1: touch it. And even get a meeting with Steve Jobs
• 20:08
  Speaker 1: was a big deal because nobody, you know, like Steve
• 20:11
  Speaker 1: was pretty sick at this time, and he he didn't
• 20:13
  Speaker 1: take too many meetings. But we had a meeting scheduled
• 20:16
  Speaker 1: and I was the guy who had to make the hardware.
• 20:18
  Speaker 1: So I was terrified, and I went into, uh, you know,
• 20:21
  Speaker 1: do what a good person does, which is steal ideas
• 20:23
  Speaker 1: from you know, better people. So I went into Steve's
• 20:26
  Speaker 1: Apple store. I went to the ice you know, the
• 20:28
  Speaker 1: the Apple store, and I started looking at all the
• 20:29
  Speaker 1: stuff that he was building and I saw all the
• 20:31
  Speaker 1: computers were made of aluminum, and I think, oh, well,
• 20:34
  Speaker 1: Steve likes aluminum. So I made the first square reader
• 20:37
  Speaker 1: out of a solid block of aluminum forgetting of course, uh,
• 20:41
  Speaker 1: engineering one on one that aluminium is conductive and that
• 20:44
  Speaker 1: this basically when I hooked it up, turned our card
• 20:48
  Speaker 1: reader into a cardio reader. It was basically turned into
• 20:52
  Speaker 1: a heart monitor. And um, actually your boss. So Mike
• 20:55
  Speaker 1: Bloomberg was the very first guy to see that because
• 20:58
  Speaker 1: Jack had a demo with Mike back when Mike was
• 21:00
  Speaker 1: a mayor New York. Mike was trying to get Squared
• 21:02
  Speaker 1: open a New York office. Uh, and he, Mike was
• 21:05
  Speaker 1: the first person to see that aluminum reader. Yeah, it
• 21:08
  Speaker 1: was a disaster. So so how did you go from
• 21:10
  Speaker 1: aluminum to the little plastics? Well, it didn't work. I mean,
• 21:12
  Speaker 1: the the aluminum reader, if you touched it with your
• 21:15
  Speaker 1: finger would short out, so um, you'd have to swipe
• 21:18
  Speaker 1: without touching it. So I switched to plastic immediately thereafter,
• 21:21
  Speaker 1: and then we then we built a square reader and
• 21:22
  Speaker 1: spin square ever, so I gotta imagine it's easier to
• 21:24
  Speaker 1: work the electronics and wiring in plastics, and it is
• 21:28
  Speaker 1: an aluminum anyway, it was a little bit, but I
• 21:30
  Speaker 1: mean basically a casing is a casing. The hard part
• 21:32
  Speaker 1: is getting all this stuff, miniaturizing, getting the read head
• 21:34
  Speaker 1: and getting a spring and resistors. I mean there a
• 21:37
  Speaker 1: lot of we jammed a lot of stuff in there.
• 21:38
  Speaker 1: So so the meaning with jobs was with a plastic
• 21:41
  Speaker 1: square is that right? Canceled? Oh it did? I canceled
• 21:45
  Speaker 1: because Steve got sick. Wow, So that's that's that's amazing.
• 21:48
  Speaker 1: So um. One of the things I found fascinating was
• 21:51
  Speaker 1: the discussion about credit card companies and how they disadvantaged
• 21:56
  Speaker 1: small businesses. How is it possible that they're charging small
• 22:00
  Speaker 1: businesses forty times as much as they're charging large businesses
• 22:05
  Speaker 1: to process their credit cards. That that's just an absurd number.
• 22:08
  Speaker 1: So it's amazing when I discovered that. Actually I discovered
• 22:11
  Speaker 1: that information on the first day of research because I
• 22:13
  Speaker 1: was looking, I was following the money, trying to figure
• 22:15
  Speaker 1: out where the where the money was being made. And
• 22:16
  Speaker 1: it turns out a small business account makes forty five
• 22:21
  Speaker 1: times more profit than a billion dollar company like Starbucks
• 22:25
  Speaker 1: or Walmart. And this is in terms of the fees
• 22:28
  Speaker 1: that are paid by the merchant and I thought, well,
• 22:31
  Speaker 1: that can't be like that. You can't, it can't be.
• 22:32
  Speaker 1: It can't be forts it's profit relative to the total transaction.
• 22:36
  Speaker 1: So it turns out that it's really expensive to be poor.
• 22:39
  Speaker 1: You may have I learned that growing up after Yeah,
• 22:42
  Speaker 1: I mean, like if you don't have enough money, like
• 22:44
  Speaker 1: diapers cost ten times as much, if you're poor and
• 22:47
  Speaker 1: have to buy m onesI two zi at a dollar store,
• 22:49
  Speaker 1: then if you can buy a bulk at you know,
• 22:50
  Speaker 1: Sam's Club. There was a store A couple of stories
• 22:53
  Speaker 1: right after the financial crisis about these businesses and families
• 22:57
  Speaker 1: that could not afford to go bankrupt, which is an
• 22:59
  Speaker 1: expensive legal you don't have enough assets, you just walk
• 23:03
  Speaker 1: away and let the business sort of with her on
• 23:05
  Speaker 1: the vine. You can't afford to discharge your debts and banks. Yeah,
• 23:08
  Speaker 1: it's it's it's really it was eye opening. I mean
• 23:11
  Speaker 1: I sort of knew this because I sort of lived
• 23:12
  Speaker 1: this because I have a lot of friends who are artists,
• 23:14
  Speaker 1: and I was an artist, and you know, you live
• 23:15
  Speaker 1: with you know, marginal credit and weird you know, guys
• 23:19
  Speaker 1: sleep in the back of their cars and stuff like that.
• 23:21
  Speaker 1: So I was familiar with it, with it but what
• 23:23
  Speaker 1: I what I didn't understand was how pervasive this was
• 23:27
  Speaker 1: and how um powerless small merchants were. And what Square
• 23:32
  Speaker 1: did was we basically said, Okay, we're powerless individually, but
• 23:34
  Speaker 1: if we get a million of them together, I bet
• 23:37
  Speaker 1: we've got some power. And that's eventually what we did.
• 23:39
  Speaker 1: So what else did you find about the credit card
• 23:41
  Speaker 1: industry when you looked under the hood? What else struck
• 23:44
  Speaker 1: you as unfair or outrageous? One of the things that
• 23:47
  Speaker 1: was the way credit card systems were sold. So they
• 23:49
  Speaker 1: were sold on these three um three year contracts typically
• 23:53
  Speaker 1: where you would be lied to and I was I
• 23:55
  Speaker 1: was personally at you know, a recipient of this behavior.
• 23:58
  Speaker 1: Somebody would show up in my glass video and they
• 24:00
  Speaker 1: would say, hey, what are you paying for credit cards on?
• 24:02
  Speaker 1: Like I don't know, I can't tell what they're charging
• 24:05
  Speaker 1: because bill is too confusing, And you go, oh, well,
• 24:07
  Speaker 1: let me take a look. And he'd come back and say, hey,
• 24:08
  Speaker 1: guess what, kild we can save your money. And so
• 24:11
  Speaker 1: I'd always sign up with them, and you took me
• 24:13
  Speaker 1: a couple of cycles to realize what was going on.
• 24:15
  Speaker 1: They would always say they save me money, and it
• 24:17
  Speaker 1: would never be any better. And the reason was, first
• 24:20
  Speaker 1: of all, the system is unnecessarily complex and a feature
• 24:24
  Speaker 1: not above it's designed by designed, because if it's so complex,
• 24:28
  Speaker 1: you stop the argument, Oh what what? What? What? Page?
• 24:31
  Speaker 1: On these forty two pages do you are you arguing with?
• 24:34
  Speaker 1: You know? Um? So if you don't understand something, you
• 24:37
  Speaker 1: can't really argue against it. And secondly, the system is
• 24:40
  Speaker 1: so um uh. There's a line in the book that
• 24:46
  Speaker 1: you wrote that struck me while you're processing that thought,
• 24:50
  Speaker 1: which was how bad does an industry have to be
• 24:53
  Speaker 1: that it turns into a check mark? How much lying
• 24:56
  Speaker 1: must you have? Where's the checkmark where they're made be
• 25:00
  Speaker 1: material misrepresentation which you will not hold against us within
• 25:04
  Speaker 1: their boiler plate. Yes, so when we went to cancel
• 25:07
  Speaker 1: our first merchant account, I had to facts in a
• 25:09
  Speaker 1: form to cancel the account, and one of the check
• 25:13
  Speaker 1: boxes on the forum was to say why did you
• 25:15
  Speaker 1: cancel the account? And one of the one of the
• 25:17
  Speaker 1: answers was misrepresentation, which is a fancy word for lying
• 25:22
  Speaker 1: and the court word. Think about how bad an industry
• 25:24
  Speaker 1: has to be before lying becomes a box on that
• 25:27
  Speaker 1: that you check like, oh, we don't want to make
• 25:30
  Speaker 1: our customers, you know, right out the fact that we've
• 25:32
  Speaker 1: we've been lying to them. It's just part of the forum.
• 25:35
  Speaker 1: I mean, and I put the form in the book
• 25:36
  Speaker 1: like it's so appalling. Um, Look, the abusive small merchants
• 25:40
  Speaker 1: were receiving was similar to all small groups. Like, if
• 25:44
  Speaker 1: you are small and powerless, there's somebody who's gonna prey
• 25:47
  Speaker 1: on you, and they're gonna pray on you to the
• 25:48
  Speaker 1: extent that the economy allows them to. I mean, that's capitalism.
• 25:51
  Speaker 1: That's up until the point where someone else spots an
• 25:53
  Speaker 1: opportunity and says, hey, we could do this faster, cheaper, better,
• 25:57
  Speaker 1: and make it much less. Zone was for the small
• 26:00
  Speaker 1: business person. And that's that's eventually what happens, hopefully, I mean,
• 26:04
  Speaker 1: that's that's hopefully what happens. But what happened to credit
• 26:06
  Speaker 1: card readers is the same thing that happened to travelers,
• 26:08
  Speaker 1: the same thing that happen in banking customers. I mean,
• 26:10
  Speaker 1: their example after example after example of people who are
• 26:13
  Speaker 1: sort of collectively um, powerful but individually powerless. So let's
• 26:18
  Speaker 1: talk about collectively powerful. Uh. It turns out that your
• 26:23
  Speaker 1: little niche had become successful enough that it attracted uh,
• 26:27
  Speaker 1: some unwanted imperial attention from Bezos and company. What was
• 26:32
  Speaker 1: it like when you realized that suddenly the juggernaut that
• 26:38
  Speaker 1: is Amazon was coming after your business? So Amazon decided
• 26:43
  Speaker 1: they wanted to take our market away. To be fair,
• 26:46
  Speaker 1: your squares white and their square was blacks. Yes, there's
• 26:49
  Speaker 1: very different black rectangle. They did do that a bit
• 26:52
  Speaker 1: of originality. Um. It was chilling, It was very it
• 26:56
  Speaker 1: was It was absolutely terrifying. It was one of those
• 26:58
  Speaker 1: moments where your hands tingle, at least my hands tingled,
• 27:01
  Speaker 1: because how do you fight Amazon? Like when Amazon attacks
• 27:04
  Speaker 1: a startup, the startup dies. You just you describe it
• 27:08
  Speaker 1: in terms from the Godfather as discovering the horsehead, only
• 27:12
  Speaker 1: they mailed it to you in a box with a smile,
• 27:14
  Speaker 1: and they mailed us a horsehead with free two day shipping. Yeah,
• 27:18
  Speaker 1: you know, it was terrifying. And um, and then of course,
• 27:21
  Speaker 1: you know what, once the terror wave passes, then the
• 27:24
  Speaker 1: then the questions, well, what do you do? What are
• 27:25
  Speaker 1: we gonna do? What are we gonna do? And so
• 27:27
  Speaker 1: we asked these questions. We asked him at the board,
• 27:28
  Speaker 1: we asked him at the office, and we were asking
• 27:30
  Speaker 1: these questions, how do you fight Amazon, And the first question,
• 27:34
  Speaker 1: the first answer we looked at, was oh, well, let's
• 27:36
  Speaker 1: find somebody else who's beaten them. Let's find a startup
• 27:38
  Speaker 1: who survived. Good luck with that. There are none. Yeah,
• 27:41
  Speaker 1: they don't that, they don't exist, you know, you know.
• 27:44
  Speaker 1: And and at the time you guys were engaged in
• 27:47
  Speaker 1: rapid growth, you didn't even have time to think about them.
• 27:50
  Speaker 1: You were so busy just dealing with all the new
• 27:53
  Speaker 1: clients and new revenue. How much how much headspace you know,
• 27:57
  Speaker 1: how much rent free space was Jeff Bezos taking in
• 28:01
  Speaker 1: your head or were you just too busy that the
• 28:05
  Speaker 1: thing we looked at what we could do. There was
• 28:07
  Speaker 1: very little we could do. I mean, we couldn't build
• 28:08
  Speaker 1: a brand like Amazon's. We couldn't actually even match their
• 28:11
  Speaker 1: price because they undercut They undercut us thirty percent, which
• 28:14
  Speaker 1: what they always seem to do. But we ran the
• 28:16
  Speaker 1: numbers and we would be losing, Like, our margins were
• 28:18
  Speaker 1: so slim that if we cut our margins by we'd
• 28:21
  Speaker 1: be underwater on everything. And so it was like, well,
• 28:24
  Speaker 1: that's just death in another form, So why go down
• 28:27
  Speaker 1: that way? So we didn't do anything. We basically ignored
• 28:31
  Speaker 1: Amazon and what happened. Amazingly after a year they gave
• 28:36
  Speaker 1: up and they actually, I gotta say something nice about Amazon. Um,
• 28:40
  Speaker 1: when they gave up, they decided to mail a Square
• 28:42
  Speaker 1: reader all their all their customers. Now, why would they
• 28:46
  Speaker 1: want to do that? That that's kind of a fascinating
• 28:49
  Speaker 1: coda to to the one of the four horsemen of
• 28:52
  Speaker 1: the apocalypse stampeding into your living room. Why send a
• 28:56
  Speaker 1: square reader to everybody? Uh? Well, it's beak because they
• 29:00
  Speaker 1: wanted to take care of their customers. Amazon always has that.
• 29:04
  Speaker 1: I've heard empty seat at the table that represents the
• 29:06
  Speaker 1: customer at the meeting. And I believe, I hope this
• 29:10
  Speaker 1: is the reason that they thought we were the best
• 29:12
  Speaker 1: solution for their customers and they said, here, we're not
• 29:15
  Speaker 1: there for you anymore. But Square is that that's amazing.
• 29:18
  Speaker 1: So you're one of the few startups to have beaten Amazon.
• 29:21
  Speaker 1: Have you ever spoken with Bezos about this? No? No,
• 29:25
  Speaker 1: I have not. I've I did meet. Uh. We hired
• 29:28
  Speaker 1: a few people that used to work for him, and
• 29:30
  Speaker 1: I got the backstory on it. And smaller market not
• 29:34
  Speaker 1: big enough margin for them? Is they're getting get their kicked? Yeah? Huh,
• 29:39
  Speaker 1: you would think that small businesses and a startup that
• 29:43
  Speaker 1: solving a problem might have a little bit of loyalty
• 29:45
  Speaker 1: to you, well they would. Look, Amazon was expected to
• 29:49
  Speaker 1: win that battle. And and this is the thing that
• 29:51
  Speaker 1: made me write the book because I couldn't answer the
• 29:53
  Speaker 1: question what so, so we won and I was happy,
• 29:56
  Speaker 1: and then after the happiness sort of subsided, then I
• 29:58
  Speaker 1: was just confused, like, well, we won, but why, like
• 30:02
  Speaker 1: why are we here? What? What? What? What? What in
• 30:04
  Speaker 1: the world happened? And so it took me two years
• 30:08
  Speaker 1: of research to figure out that there was actually this pattern,
• 30:11
  Speaker 1: this thing that we did that you know, it wasn't
• 30:13
  Speaker 1: that commonplace, but boy, if you do it this way,
• 30:16
  Speaker 1: you can even survive and attack by Amazon. And that's
• 30:18
  Speaker 1: what led to the innovation stack, led to all the research,
• 30:20
  Speaker 1: like that's that's the thing that led me actually to
• 30:23
  Speaker 1: the research. And then I mean the reason right I
• 30:26
  Speaker 1: wrote the book honestly is because herb callerher whom I
• 30:29
  Speaker 1: was interviewing to sort of complete my research, Basically, he said, well,
• 30:33
  Speaker 1: how are you going to share this with the world?
• 30:35
  Speaker 1: And I was like, oh my god, I just got
• 30:36
  Speaker 1: a homework assignment from one of my from one of
• 30:38
  Speaker 1: my idols. It was weird. Herb was like, what are
• 30:42
  Speaker 1: you gonna do about this? And I'm like, oh god,
• 30:44
  Speaker 1: that's that's really quite quite amazing. So you're now no
• 30:48
  Speaker 1: longer CEO, but you're still on the board. How did
• 30:51
  Speaker 1: you come to realize I was never CEO? I was chairman?
• 30:55
  Speaker 1: You chairman. That's from from day one. Jack wanted to
• 30:57
  Speaker 1: be CEO and I didn't. So that was a quick
• 30:59
  Speaker 1: But you had a lot of operational Yeah, I was
• 31:02
  Speaker 1: doing all the stuff that Jack wasn't, which was like
• 31:04
  Speaker 1: most of the stuff beside software. When did you realize
• 31:06
  Speaker 1: it was time to relinquish certain responsibilities and step back
• 31:10
  Speaker 1: and say, let me let a new group come in
• 31:13
  Speaker 1: and take over and running the day to day. Oh.
• 31:15
  Speaker 1: In my case, I was doing about a dozen things,
• 31:17
  Speaker 1: and I eventually got somebody who was better than me
• 31:19
  Speaker 1: at all those dozen things. You just delegated your way
• 31:22
  Speaker 1: out of response. At work, I always assume that I'm
• 31:25
  Speaker 1: mediocre at what I'm doing, and I will always try
• 31:28
  Speaker 1: to find something who's better than me. And well, it's uh,
• 31:30
  Speaker 1: it's been true. I mean, I'm in pretty mediocre, but
• 31:33
  Speaker 1: I'm fast. So I'm like in a startup situation, I
• 31:36
  Speaker 1: will get things done very very quickly, and okay, but
• 31:40
  Speaker 1: I will I will very quickly give that control to
• 31:43
  Speaker 1: whomever is better and can prove it. And in my
• 31:45
  Speaker 1: case that we're about twenty things to hand over. And
• 31:47
  Speaker 1: when those things were handed over, um, that also happened
• 31:50
  Speaker 1: to coincide with the birth of my son. And you know,
• 31:54
  Speaker 1: people at the office are working twelve fourteen hour days,
• 31:57
  Speaker 1: and if I continued that, I would probably be divorced
• 32:00
  Speaker 1: right now. And I just didn't. I didn't want to
• 32:02
  Speaker 1: be the guy who was showing up eight hours a
• 32:04
  Speaker 1: day when everyone else was putting in twelve. Um. So
• 32:07
  Speaker 1: it was better at that point for me to step back.
• 32:09
  Speaker 1: But really I was not necessary at that point. I mean,
• 32:12
  Speaker 1: I I've done what I needed to do. That's really
• 32:14
  Speaker 1: that's really interesting. And and to put a little coda
• 32:18
  Speaker 1: on what you did, your card reader design was inducted
• 32:23
  Speaker 1: to the Museum of Modern Arts Pantheon of Great Great
• 32:28
  Speaker 1: Designs back in two thousand eleven. That had to be
• 32:31
  Speaker 1: pretty satisfying, considering you're not exactly a hardware designer. You're
• 32:35
  Speaker 1: a glass blow Yeah, it's like guy who did art
• 32:37
  Speaker 1: for twenty years. It was sort of flattering and insulting
• 32:39
  Speaker 1: at the same time, right, Like, they didn't take any
• 32:42
  Speaker 1: of my glass, but they took this little piece of
• 32:45
  Speaker 1: plastic that reade a credit card. I mean, look, I'm
• 32:47
  Speaker 1: I'm an engineer by training, so I got it. I mean,
• 32:49
  Speaker 1: you know, I I I'm a technologist and a guy
• 32:51
  Speaker 1: who builds things. But I also sort of like art,
• 32:54
  Speaker 1: and I was I was flattered but also sort of insulted.
• 32:58
  Speaker 1: Quite quite interesting, So Jim, I really enjoyed the book.
• 33:01
  Speaker 1: A lot of a lot of business books can be
• 33:03
  Speaker 1: a little staid and dry. This is funny and a cerbic,
• 33:07
  Speaker 1: and you seem to be having fun writing it. What
• 33:09
  Speaker 1: was the process like putting all these ideas down on paper?
• 33:13
  Speaker 1: I had fun rewriting it. It went through its eight
• 33:15
  Speaker 1: It went through eight drafts. The first five drafts were
• 33:17
  Speaker 1: graphic novels. So I thought the I hate business books.
• 33:21
  Speaker 1: They're boring. They put me to sleep. I think most
• 33:24
  Speaker 1: of them are terrible. Um, and I didn't want to
• 33:27
  Speaker 1: write one. Even though Herb Keller, her who was one
• 33:29
  Speaker 1: of my idols, basically assigned me a homework assignment. I thought, well,
• 33:32
  Speaker 1: I'm just gonna do it as graphic novel. I'm gonna
• 33:34
  Speaker 1: make this fun because it turns out that the stories
• 33:37
  Speaker 1: that I tell in the book are actually they lend
• 33:39
  Speaker 1: themselves to pen and ink. There's the destruction of a
• 33:41
  Speaker 1: major city and murder and Nazis and like, there's a
• 33:44
  Speaker 1: lot of stuff blowing off fun stuff. Yeah, I mean it, like,
• 33:47
  Speaker 1: and it seemed to me like it would be a
• 33:48
  Speaker 1: better comic book. And um, I wrote the drafts as
• 33:51
  Speaker 1: a comic book. And then I showed it to Herb
• 33:56
  Speaker 1: and he hated it. Really, he hated it. I'm on
• 33:58
  Speaker 1: an old school though, isn't he. But he's got a
• 34:00
  Speaker 1: great sense of humor. He has a legendary, legendarily funny,
• 34:04
  Speaker 1: great sense of humor. I was expecting he was gonna
• 34:06
  Speaker 1: love it, and I was so crestfallen when he said, Jim,
• 34:11
  Speaker 1: if you're going to do it that way, leave me out. Really,
• 34:15
  Speaker 1: And I have to credit him for this, there's one Herb,
• 34:18
  Speaker 1: first of all, didn't want to be portrayed as a
• 34:20
  Speaker 1: cartoon superhero. Okay, And and here's the thing. Here's why
• 34:24
  Speaker 1: Herb is so much smarter than I am is because
• 34:27
  Speaker 1: if you tell a story as a graphic novel in
• 34:30
  Speaker 1: pen and ink. You're telling a hero story and and
• 34:33
  Speaker 1: superheroes are different from you and me. The whole purpose
• 34:36
  Speaker 1: of my book is to say, look, what makes these
• 34:39
  Speaker 1: super successful companies and super successful founders is not some
• 34:44
  Speaker 1: superpower that the founders have. It's this superpower that anyone
• 34:48
  Speaker 1: can access. And it's really a story for the everyman.
• 34:51
  Speaker 1: And Herb stopped me from making a giant, giant mistake. Um,
• 34:56
  Speaker 1: although I did. If you go to Jimmy Kelby dot com,
• 34:59
  Speaker 1: I did put some of the graphic novel that I
• 35:02
  Speaker 1: did on so you can just download it for free.
• 35:04
  Speaker 1: It's like it's a comic book, but it's not about herb. Um.
• 35:07
  Speaker 1: But yeah, I don't think you should have to. So
• 35:10
  Speaker 1: here Look, here's here's the thing, Barry. The reason I
• 35:12
  Speaker 1: wrote the book is because if you're in business or
• 35:17
  Speaker 1: in life, you're gonna occasionally run up against this line
• 35:21
  Speaker 1: where humanity has not figured out how to solve this
• 35:25
  Speaker 1: problem that you're looking at. And on the other side
• 35:27
  Speaker 1: of that line, there's no crowd, there's no herd, there's
• 35:29
  Speaker 1: no safety in numbers, and you're gonna feel if you
• 35:32
  Speaker 1: step across that line, terrified. You're gonna feel fear you're
• 35:36
  Speaker 1: gonna feel all this thing. You're not a superhero for
• 35:38
  Speaker 1: stepping across that line. You're just a that's scared gazelle.
• 35:41
  Speaker 1: You've left the safety of the and you're terrified. Okay,
• 35:44
  Speaker 1: imagine what's like to be that gazelle. I mean, I
• 35:46
  Speaker 1: I see those documentaries, I almost cry because like that
• 35:49
  Speaker 1: was me in grade school and most of high school.
• 35:51
  Speaker 1: You know, it's it's just terrifying. But unless we get
• 35:54
  Speaker 1: people to step across that line occasionally. I'm not saying
• 35:57
  Speaker 1: live across the line. I'm like being bold or any
• 35:59
  Speaker 1: crap like that, saying, look, a couple of times in
• 36:02
  Speaker 1: your life when you run up to the edge what
• 36:04
  Speaker 1: people have figured out, you can choose to step across
• 36:08
  Speaker 1: that line and maybe solve the problem. Maybe you're not
• 36:12
  Speaker 1: necessarily going to solve it, but maybe you got a
• 36:14
  Speaker 1: chance at it. I want more people to do that.
• 36:16
  Speaker 1: And so that's not a superhero story. So herb caller her,
• 36:19
  Speaker 1: I wish he was still alive because I wish he
• 36:20
  Speaker 1: got to see the final copy of the book, because
• 36:22
  Speaker 1: there's not a cartoon in it, and it talks about
• 36:25
  Speaker 1: the everyman. It talks about this power that we can
• 36:27
  Speaker 1: all have a scared humans. So let's let's talk a
• 36:30
  Speaker 1: little bit about that before we get to what the
• 36:33
  Speaker 1: innovation stack is. I want to ask you, copying perseverance audacity,
• 36:39
  Speaker 1: tell us about that combination. Yeah, so perseverance and audacity.
• 36:44
  Speaker 1: So we all talk about grit and perseverance and how
• 36:46
  Speaker 1: perseverance is really crazy. You know this this, this this
• 36:49
  Speaker 1: laudable thing. You should stick with it, don't give up,
• 36:52
  Speaker 1: don't quit, you know. And um, I'm kind of a
• 36:55
  Speaker 1: quitter except in certain circumstances. And I'm not a twitter
• 37:00
  Speaker 1: when I feel threatened, when I'm terrified, when I'm that
• 37:04
  Speaker 1: gazelle that's out of the hurt. Um. So I tend
• 37:07
  Speaker 1: to create situations that put me in those moments. I
• 37:12
  Speaker 1: mean even the state interview. I mean, I'm scared right now.
• 37:14
  Speaker 1: I'm not used to me. You shouldn't be. Yeah, I
• 37:16
  Speaker 1: know I shouldn't be. But my hands are sweating over here, right. So,
• 37:18
  Speaker 1: But the point is, if you are audacious enough to
• 37:22
  Speaker 1: step across that line, if you are somebody who is
• 37:25
  Speaker 1: willing to do something that seems a little bit crazy,
• 37:28
  Speaker 1: then you don't have to have a lot of self discipline,
• 37:30
  Speaker 1: your self discipline comes from your survival instinct. And this
• 37:33
  Speaker 1: this has always been my hat because I'm a lazy guy.
• 37:36
  Speaker 1: I sleep too late, you know, just just you can. Yeah,
• 37:39
  Speaker 1: there's a ton of lazy uh in in my DNA.
• 37:42
  Speaker 1: But there's also a ton of fear. And so what
• 37:45
  Speaker 1: I will do is I will put myself in circumstances
• 37:47
  Speaker 1: where the fear sort of counteracts the lazy. So I
• 37:51
  Speaker 1: end up being kind of a workaholic in certain situations
• 37:54
  Speaker 1: where oh, I've just committed this thing and now I
• 37:56
  Speaker 1: gotta get it done. Oh really, you you want to
• 37:58
  Speaker 1: do this? Okay, well let's go take a lot of
• 38:00
  Speaker 1: work so you don't have to be disciplined if you
• 38:04
  Speaker 1: are audacious. So now let's talk a little bit about
• 38:07
  Speaker 1: the innovation stack. What is that and how can we
• 38:11
  Speaker 1: put that to work in our startups or existing businesses.
• 38:16
  Speaker 1: So the innovation stack is this weird thing that I
• 38:18
  Speaker 1: found at every company that I studied that fit the
• 38:21
  Speaker 1: following model. Okay, So when I was trying to explain
• 38:24
  Speaker 1: what happened to do between Square and Amazon, I said, okay,
• 38:27
  Speaker 1: so let's look for other companies when they're small and
• 38:30
  Speaker 1: not very powerful, that were attacked by these major forces,
• 38:33
  Speaker 1: either governments or industries or uh, competitors that were a
• 38:38
  Speaker 1: hundred times their site, Like, let's look for the real
• 38:40
  Speaker 1: underdog and then find the underdogs that won that battle
• 38:44
  Speaker 1: and see if they have anything in common. And what
• 38:47
  Speaker 1: they had in common, among other things, was this thing
• 38:49
  Speaker 1: called an innovation stack. It wasn't called that. I just
• 38:51
  Speaker 1: had to coin the term. But it was this mess.
• 38:53
  Speaker 1: It was this thing, and I was like, what are
• 38:55
  Speaker 1: they doing? What are they doing? And the answer is
• 38:58
  Speaker 1: a company that's inventing something that's totally new is not
• 39:01
  Speaker 1: inventing one or two or three things. They're probably doing
• 39:05
  Speaker 1: ten or twenty or thirty different things that have never
• 39:08
  Speaker 1: been done before, certainly never been done before in combination,
• 39:11
  Speaker 1: and in combination, all those things affect the other things.
• 39:13
  Speaker 1: So you get this real mess. And so innovation mess
• 39:18
  Speaker 1: didn't make a good title. Uh, so we came up
• 39:22
  Speaker 1: with innovation stack. But stack makes it sound sort of linear,
• 39:25
  Speaker 1: and it's really this sort of snarl of interlocking things
• 39:29
  Speaker 1: that you're doing differently. It's a jumbalaya. It's just a
• 39:32
  Speaker 1: pot of brood things. And and use the example, Hey,
• 39:35
  Speaker 1: if there's an eighty percent chance that Amazon is going
• 39:38
  Speaker 1: to beat us at the first thing in our stack,
• 39:41
  Speaker 1: and an eighty percent chance on the second and the third,
• 39:43
  Speaker 1: down to the fourteenth. What you're left with is a
• 39:46
  Speaker 1: tiny percentage that they're gonna be you on everything across
• 39:50
  Speaker 1: the board. Yeah, yeah, the house always wins. If you
• 39:52
  Speaker 1: have to talk toss the dice twelve times, you're gonna
• 39:54
  Speaker 1: you're gonna crap out. So so let's talk about two
• 39:56
  Speaker 1: other companies. We already talked about Southwest. Let's talk about
• 39:59
  Speaker 1: the Bank of Italy. What was the Bank of Italy's innovation?
• 40:04
  Speaker 1: So the Bank of Italy is amazing because when I
• 40:06
  Speaker 1: say the word bank to listeners of your show, they
• 40:10
  Speaker 1: all think of what was invented by a kid who
• 40:13
  Speaker 1: dropped out of school at age fifteen and was a
• 40:16
  Speaker 1: produce vender. I mean, this guy sold lettuce for a
• 40:18
  Speaker 1: living and his name, ap Giannini is not one you've
• 40:22
  Speaker 1: probably heard of, but he at one point could have
• 40:24
  Speaker 1: been the richest person in the world, and he built
• 40:27
  Speaker 1: what you think of today as a bank. So what
• 40:28
  Speaker 1: do you think of the bank. You think of a
• 40:30
  Speaker 1: branch you can go into, You think of tellers that
• 40:32
  Speaker 1: you can talk to, You can think of a loan
• 40:34
  Speaker 1: you can get for a car or a house. You
• 40:36
  Speaker 1: think of the fact that you can go into a
• 40:37
  Speaker 1: bank if you're a woman, right, like he opened the
• 40:39
  Speaker 1: first bank for women. Like what you think of his
• 40:41
  Speaker 1: banking a hundred years ago was totally different and A p.
• 40:45
  Speaker 1: Giannini created something called the Bank of Italy originally, and
• 40:49
  Speaker 1: then that became successful enough that they bought the Bank
• 40:53
  Speaker 1: of America renamed a Bank of America. And I know
• 40:55
  Speaker 1: you're saying, oh wait, I hate Bank of America, But
• 40:57
  Speaker 1: like Bank of America fifty years ago was still very
• 41:00
  Speaker 1: innovative and very cool, and the Bank of Italy was
• 41:04
  Speaker 1: what started at all amazingly, it was from a kid
• 41:06
  Speaker 1: who knew nothing about banking and just wanted something to
• 41:10
  Speaker 1: include the little guys. So that was the problem that
• 41:12
  Speaker 1: he identified and wanted the solves. And we're just square.
• 41:16
  Speaker 1: Let's talk about Ikea. What is their innovation stack? So
• 41:20
  Speaker 1: Ikea was very interesting because Comprade, who's the founder of Ikea,
• 41:24
  Speaker 1: tells a very personal story about how he was terrified
• 41:27
  Speaker 1: and scared and crying. In fact, um, this was you know,
• 41:30
  Speaker 1: right after World War Two and you know his country
• 41:32
  Speaker 1: was in devastation the economy was a mess. Uh. He
• 41:35
  Speaker 1: was trying to make this furniture. Um actually he was
• 41:38
  Speaker 1: trying to make a catalog first, and then he was
• 41:40
  Speaker 1: trying to make furniture, and the furniture manufacturers of Sweden
• 41:44
  Speaker 1: basically ganged up on him and prevented him from going
• 41:46
  Speaker 1: to the trade show. So he had to do his
• 41:47
  Speaker 1: own trade show, which is what created the IKEA showroom.
• 41:50
  Speaker 1: The first warehouse show room was created because he was
• 41:53
  Speaker 1: kicked out of the trade show, and then he was
• 41:55
  Speaker 1: actually kicked out of the country because they would let
• 41:57
  Speaker 1: him manufacture his wares in Sweden. They had this this
• 42:00
  Speaker 1: industry group that had such a lock on manufacturing. They said,
• 42:03
  Speaker 1: we won't make it for you. So he's like, well,
• 42:04
  Speaker 1: I guess I'll go to uh Poland. Well, Poland just
• 42:07
  Speaker 1: been wrecked by the war, but they were very eager
• 42:09
  Speaker 1: to rebuild, and so he he was sort of forced
• 42:12
  Speaker 1: to build an innovation stack because they wouldn't let him
• 42:15
  Speaker 1: copy what everyone else is doing. And this is sort
• 42:17
  Speaker 1: of one of the things I get into the book,
• 42:19
  Speaker 1: and that is, look, usually copying is the right solution.
• 42:24
  Speaker 1: Do what everybody else is doing. That's probably what the
• 42:26
  Speaker 1: that's probably what's going to work. But if you can't copy,
• 42:30
  Speaker 1: you're gonna be forced to innovate, and innovation could lead
• 42:33
  Speaker 1: you to be, in this case, the biggest furniture company
• 42:36
  Speaker 1: on the planet. And Ikea is wildly, wildly successful and
• 42:40
  Speaker 1: very profitable, although we don't know because it's very private, private,
• 42:43
  Speaker 1: it's one of the biggest private companies in the world.
• 42:46
  Speaker 1: So quote another quote of yours that I thought was
• 42:48
  Speaker 1: quite fascinating. Every man made object that you have ever
• 42:53
  Speaker 1: encountered began as an idea in someone's minds ideas compete
• 42:58
  Speaker 1: for atoms, splay. Oh, this is the idea. So everything
• 43:04
  Speaker 1: you see in the world is I like to think
• 43:08
  Speaker 1: of it as us as a sea of success. So
• 43:09
  Speaker 1: I'm sitting in the studio right now, I'm looking at
• 43:11
  Speaker 1: a microphone. Well, somebody had this idea for this microphone,
• 43:14
  Speaker 1: and somebody had to then build it. And there were
• 43:18
  Speaker 1: other competing designs for microphones that didn't make it into
• 43:21
  Speaker 1: your studio. Okay, And every molecule in this room, including
• 43:24
  Speaker 1: you and me, like we competed for molecules, you know,
• 43:28
  Speaker 1: biologically our parents somehow survived and you know yours didn't mind,
• 43:31
  Speaker 1: didn't how it happened. Beats me, but it did. If
• 43:36
  Speaker 1: you look at that, everything in the world is a
• 43:40
  Speaker 1: winner to get its atoms into existence. And you may
• 43:44
  Speaker 1: sit there and say, well, this is a crumby you know,
• 43:46
  Speaker 1: coffee cup that I'm holding, and it could be better
• 43:48
  Speaker 1: than the handle, could be more comfortable than all this
• 43:50
  Speaker 1: other crap. But the fact is that that coffee cup one.
• 43:53
  Speaker 1: You don't know the explanation, but you know it's the winner.
• 43:56
  Speaker 1: So you are surrounded your entire life by nothing but winners.
• 44:00
  Speaker 1: It's so funny you say that because I have a
• 44:02
  Speaker 1: pet theory that says everything you see is survivorship bias.
• 44:07
  Speaker 1: And because you're surrounded by winners, you don't see the
• 44:10
  Speaker 1: millions of losers and iterations and failed attempts that went
• 44:15
  Speaker 1: into trying to build that, which is my theory as
• 44:19
  Speaker 1: to why people continue to put money into plays and
• 44:23
  Speaker 1: restaurants that have such a horrific success rate. Um, because
• 44:28
  Speaker 1: all they see is Hamilton's. All they see is the
• 44:31
  Speaker 1: hot Michelin star rate. They don't see the fifty ones
• 44:34
  Speaker 1: or the millions that failed before that. Oh yeah, and
• 44:36
  Speaker 1: and you can have selection bias, uh in in an
• 44:39
  Speaker 1: individual form. It's just called denial, right, you know, selection
• 44:43
  Speaker 1: bias on one person is just denial. It'll work this time. Well,
• 44:47
  Speaker 1: I have to repeat. I found the book to be
• 44:50
  Speaker 1: like a really fun read, which is what not what
• 44:53
  Speaker 1: you expect from a business book. And you clearly have
• 44:57
  Speaker 1: a sense of humor and some snark which comes up
• 45:00
  Speaker 1: cross in the book. Thank you. Did you catch the
• 45:02
  Speaker 1: dirty joke? Which one? Well, I I there are a
• 45:05
  Speaker 1: couple in there. You probably did. Um, there was one
• 45:07
  Speaker 1: in there. I will not tell because I promised not
• 45:09
  Speaker 1: to tell. But my editor was sort of checked out
• 45:12
  Speaker 1: on the last part of the book. He'd taken another
• 45:13
  Speaker 1: job and he didn't tell me, so he didn't really
• 45:15
  Speaker 1: scrutinize what I was writing. So you snuck some I
• 45:17
  Speaker 1: snuck this in and I told him and he's like,
• 45:19
  Speaker 1: we have to tell me. It's like, now I don't.
• 45:21
  Speaker 1: You're the editor. You have to catch it. And so
• 45:23
  Speaker 1: we had this like game of chicken and uh, and
• 45:26
  Speaker 1: he gave up and went into publication. And I'm not
• 45:29
  Speaker 1: going to say what it is, but like, yeah, there's
• 45:31
  Speaker 1: some stuff in there that I love the idea of
• 45:33
  Speaker 1: Easter eggs within a book just just kind of have
• 45:36
  Speaker 1: some fun. Yeah, we'll talk about the name change, and
• 45:39
  Speaker 1: we'll talk about some of the other things you co
• 45:41
  Speaker 1: founded or founded. UH. Let's start with UH. Invisibly, can
• 45:47
  Speaker 1: consumers really profit off of all of their private data
• 45:51
  Speaker 1: that these online companies and social networks are grabbing? Tell us,
• 45:56
  Speaker 1: tell us a little bit about invisibly. I wish I
• 45:59
  Speaker 1: could give you a strong yes. I will give you
• 46:01
  Speaker 1: sort of a kind of right now. But the idea
• 46:05
  Speaker 1: behind invisibly is very sound, which is that you should
• 46:09
  Speaker 1: stop being the product and start being the person in control.
• 46:13
  Speaker 1: And what I mean by that is when you're using
• 46:14
  Speaker 1: a platform for free like Facebook or Twitter or any
• 46:18
  Speaker 1: of those platforms Google for this for that matter, they're
• 46:21
  Speaker 1: going to monetize you. And what that means is that
• 46:23
  Speaker 1: they serve you things that serve them and only them.
• 46:29
  Speaker 1: So I'll give you an example. Facebook has figured out
• 46:31
  Speaker 1: that the more time you spend on their platform, the
• 46:34
  Speaker 1: more money they make. And they have also figured out
• 46:36
  Speaker 1: that if they piss you off towards the end of
• 46:38
  Speaker 1: your browsing experience, you're going to spend more time on it,
• 46:41
  Speaker 1: So it serves them to get you. Know you, they'll
• 46:44
  Speaker 1: show you the pictures of your cousins and your kids
• 46:46
  Speaker 1: and all the cool stuff. And then if you if
• 46:48
  Speaker 1: it looks like to their algorithms that you're gonna leave,
• 46:50
  Speaker 1: they will piss you off on purpose. And that's how
• 46:52
  Speaker 1: they're one of their tricks to keep you engaged. Well, yeah,
• 46:55
  Speaker 1: it's well known now that is not good for you,
• 46:59
  Speaker 1: but it's good for Facebook. How do you monetize How
• 47:02
  Speaker 1: do you, as the individual user flip the script and
• 47:06
  Speaker 1: monetize that. So about five years ago I started working
• 47:09
  Speaker 1: on this idea that everybody's had it. It's an idea
• 47:12
  Speaker 1: called micropayments. And micropayments are simply making you the center
• 47:16
  Speaker 1: of the transaction. So if you see an ad, you
• 47:18
  Speaker 1: get paid for seeing that add a tiny amount. And
• 47:21
  Speaker 1: if you view a piece of content or read something
• 47:24
  Speaker 1: or listen to something like you listen to this podcast,
• 47:26
  Speaker 1: and we should we should you know, we gotta pay Barry, Yeah,
• 47:29
  Speaker 1: we should pay Berry. We gotta pay for you all
• 47:31
  Speaker 1: the work you did I forgot sake. You read the
• 47:32
  Speaker 1: book like, you know, that should be compensated. So at
• 47:36
  Speaker 1: the center of this, though, is the person in charge.
• 47:39
  Speaker 1: And what we're trying to do with invisibly is create
• 47:41
  Speaker 1: an invisible agent. And this agent is going to buy
• 47:44
  Speaker 1: for you and sell for you. They're gonna buy at
• 47:45
  Speaker 1: the lowest prices they can. They're gonna sell your eyeballs
• 47:48
  Speaker 1: at highest prices they can. They're gonna negotiating your negotiate
• 47:51
  Speaker 1: on your behalf. So the first thing we're going to
• 47:53
  Speaker 1: stand up is a newsreader which will take you know,
• 47:56
  Speaker 1: most of English language news and give you control of it.
• 48:00
  Speaker 1: And look, I can't tell you that people are gonna
• 48:02
  Speaker 1: want to use this because news is so polluted right now.
• 48:05
  Speaker 1: Everybody the currentcept of this, it's really it's really interesting.
• 48:09
  Speaker 1: It's a great concept, Barry. I can't swear that it works,
• 48:11
  Speaker 1: but if you go to invisibly dot com you can
• 48:13
  Speaker 1: try it. And look, we're giving it a shot, um.
• 48:17
  Speaker 1: And the hope is that if we can give people control,
• 48:20
  Speaker 1: then they will feel better about what they're consuming and
• 48:23
  Speaker 1: also what they're selling, because believe me, if you think
• 48:26
  Speaker 1: something free, you're paying for it with your attention, and
• 48:29
  Speaker 1: you should be in control of the The old joke
• 48:31
  Speaker 1: is if if the product is free, then you're the problem.
• 48:33
  Speaker 1: That's so that's it. How'd you like working with Founders Fund?
• 48:36
  Speaker 1: They have a really interesting. Uh history, I really like
• 48:39
  Speaker 1: founders Fund. Founders Fund was the only money I wanted
• 48:42
  Speaker 1: in the company. Uh, And it's it's because of Peter
• 48:44
  Speaker 1: teel So micropayments. If you know anything about the history
• 48:48
  Speaker 1: of the Internet, everyone's had the idea, nobody's made it work.
• 48:52
  Speaker 1: So we're talking about twenty five years of constant failure.
• 48:55
  Speaker 1: So when I was pitching Peter, well, so first of all,
• 48:57
  Speaker 1: forget Peter when I when I did the problem, when
• 49:00
  Speaker 1: I did the company, I said, well, I could fund
• 49:02
  Speaker 1: the company myself, but that would be stupid because then
• 49:04
  Speaker 1: I'm just an idiot who has no validation. So I thought,
• 49:08
  Speaker 1: who would be the most validating capital in the world.
• 49:12
  Speaker 1: And I thought, I need somebody who's made contrarian calls,
• 49:16
  Speaker 1: who's been right, who's been in your face, who's not
• 49:18
  Speaker 1: afraid to be a little controversial. And only two names
• 49:22
  Speaker 1: came to mind. It was Elon Musk Competer too and Elan.
• 49:25
  Speaker 1: I can't get in touch with him, but I can
• 49:26
  Speaker 1: get in touch with Peter, and I went, I pitched
• 49:28
  Speaker 1: Peter and they both were part of the original PayPal
• 49:32
  Speaker 1: man memory serves. But I mean Peter has made contrarian
• 49:36
  Speaker 1: calls and been right. This is the thing when Peter
• 49:39
  Speaker 1: invested invisibly, it said to the rest of the world,
• 49:41
  Speaker 1: you better pay some attention here because somebody who's been
• 49:44
  Speaker 1: right more often than you are is putting his money.
• 49:47
  Speaker 1: But in this so let's talk a little bit about
• 49:50
  Speaker 1: what you learned building a billion dollar business. Square when
• 49:53
  Speaker 1: public it's become wildly successful. What are the lessons from that? Uh? Wow, um,
• 50:00
  Speaker 1: I think it's the lesson of serve the unserved. I
• 50:04
  Speaker 1: mean what Square has been focused on from day one
• 50:07
  Speaker 1: are people who weren't invited to the party. And we
• 50:10
  Speaker 1: began with payments. That's where we were. We're now doing
• 50:14
  Speaker 1: that with cash app, which is a runaway success. But
• 50:16
  Speaker 1: cash app is esessionally a bank in your pocket. It's
• 50:19
  Speaker 1: a way of trading stock, it's a way of buying crypto,
• 50:21
  Speaker 1: it's a way of it's a way of participating in
• 50:24
  Speaker 1: the financial system that you know, people like you and
• 50:26
  Speaker 1: I take this for granted. We think, oh, well, why
• 50:28
  Speaker 1: are there unbanked people? There people for the same reason
• 50:30
  Speaker 1: their business are too small to declare bankruptcy. Like you,
• 50:33
  Speaker 1: you don't realize how many people were excluded. So cash
• 50:36
  Speaker 1: app is inclusive. There Um, you know we just bought Title.
• 50:39
  Speaker 1: Our excitement would that was a big surprise. It seems
• 50:42
  Speaker 1: like a little outside of of what square folks. Yeah,
• 50:46
  Speaker 1: it is if you think of it in terms of music,
• 50:49
  Speaker 1: if you think of it in terms of artists and
• 50:51
  Speaker 1: how artists are at the you know, sort of receiving
• 50:54
  Speaker 1: end of a lot of abuse. Like, we really think
• 50:56
  Speaker 1: that empowering artists through the Title platform could be transformed
• 51:00
  Speaker 1: for the music industry and for the artists. So look,
• 51:03
  Speaker 1: in other words, get them a fair payment on their
• 51:05
  Speaker 1: streams and down laws. Yeah, and look, I mean you
• 51:07
  Speaker 1: can get the same song on Title that you can
• 51:09
  Speaker 1: on Spotify. I mean, like we've got to hire data rate.
• 51:12
  Speaker 1: But look, they'll catch up at some point. Um, And
• 51:16
  Speaker 1: I think it's more about what the artists are gonna
• 51:18
  Speaker 1: experience with Title. But again the focus is just like
• 51:21
  Speaker 1: what can we do to empower the people who have
• 51:24
  Speaker 1: traditionally been left out of the party. So let's talk
• 51:27
  Speaker 1: about defy. Do you see squares business as part of
• 51:30
  Speaker 1: the decentralized uh finance movement or are they outgrowing the
• 51:36
  Speaker 1: traditional payment system? So it's a little both. I mean,
• 51:39
  Speaker 1: as a so I'm a I'm a Fed regulator. Now
• 51:42
  Speaker 1: I actually get to see regulation from inside the Federal Reserve,
• 51:46
  Speaker 1: and regulation is really really good for a lot of things.
• 51:50
  Speaker 1: But if it becomes too ossified, if it becomes too
• 51:53
  Speaker 1: too restrictive, then it becomes bad. And I like the
• 51:56
  Speaker 1: idea that we've got decentralized options. What do you make
• 51:58
  Speaker 1: of the name change of air to block Inc. What
• 52:01
  Speaker 1: what does this say about the role crypto is gonna
• 52:04
  Speaker 1: play in the square ecosystem? So the block was a
• 52:07
  Speaker 1: pretty you know, sort of clever round a couple levels.
• 52:10
  Speaker 1: It was you know, the three deventual version of Square
• 52:12
  Speaker 1: of block blockchain. It was also block you you know,
• 52:14
  Speaker 1: it had some negative connotation to on Twitter. Yeah, I mean,
• 52:17
  Speaker 1: look there's there's a lot of you get blocked on Twitter.
• 52:19
  Speaker 1: I mean like like, you know, you take the go
• 52:21
  Speaker 1: of the bad um. The Square brand really means payments,
• 52:25
  Speaker 1: and people think of Square, they think of getting paid. Uh.
• 52:28
  Speaker 1: They don't necessarily think of person to person payments, or
• 52:31
  Speaker 1: bank in your pocket like cash app. They certainly don't
• 52:33
  Speaker 1: think of music like title. They don't think of other
• 52:35
  Speaker 1: things that we might be doing. And so so this
• 52:38
  Speaker 1: is sort of the alphabet to Google search. Yeah, yeah,
• 52:41
  Speaker 1: so we're still calling you. You still call Search, Google,
• 52:43
  Speaker 1: you still call payment Square. But we got this thing
• 52:45
  Speaker 1: over it that you know have I mean Google's case,
• 52:48
  Speaker 1: I got a space program. In our case, you know,
• 52:50
  Speaker 1: we got something called Spiral. So so let's talk about
• 52:53
  Speaker 1: something else you're doing besides chairman of the St. Louis
• 52:57
  Speaker 1: fed And and by the way, I have my Fred
• 53:01
  Speaker 1: swag Love Fred. Yes, I haven't worn that T shirt.
• 53:05
  Speaker 1: Uh it's Bloomberg yet. Um, but I'm a giant Fred fan.
• 53:09
  Speaker 1: For those of you who like manipulating economic data and
• 53:12
  Speaker 1: generating charts and things. Fred is the best tell us
• 53:16
  Speaker 1: about the innovation district for downtown St. Louis. And how
• 53:20
  Speaker 1: did you get involved in that? So? Uh, St. Louis
• 53:23
  Speaker 1: has had some hard times and I wanted to build
• 53:26
  Speaker 1: something in my hometown that was going to not only
• 53:28
  Speaker 1: show off how cool St. Louis is but also attract
• 53:31
  Speaker 1: people to it. And so we bought the old Post
• 53:34
  Speaker 1: Dispatch building where the newspapers used to be printed. This
• 53:37
  Speaker 1: is basically a factory, and we put a hundred million
• 53:40
  Speaker 1: dollar new office in there for Square and a bunch
• 53:42
  Speaker 1: of employees, and then we save some space for some
• 53:44
  Speaker 1: new folks who who want to come in, and we're
• 53:46
  Speaker 1: hoping to catalyze this whole district because what I'm trying
• 53:49
  Speaker 1: to do in downtown St. Louis is create this sort
• 53:52
  Speaker 1: of swagger that you have in the fancy office. So
• 53:56
  Speaker 1: I mean, I don't know if you've uh Barry. When
• 53:58
  Speaker 1: he was taking me through Bloomberg to Barry was walking
• 54:01
  Speaker 1: me into the studio, he was talking about boot Bloomberg
• 54:03
  Speaker 1: has a curved escalator. It's the coolest thing in the world,
• 54:06
  Speaker 1: the only curved escalator in North America. Right, It's just
• 54:09
  Speaker 1: so cool. And Barry feels cool walking down this curved
• 54:12
  Speaker 1: escalator because that's how you should feel if you work
• 54:14
  Speaker 1: for Bloomberg, because Bloomberg is a kick out the organization, Right.
• 54:17
  Speaker 1: I want people to feel that way when they work
• 54:19
  Speaker 1: for Square. And when you work in Square in Melbourne
• 54:21
  Speaker 1: or Sydney or or or our offices in San Francisco,
• 54:24
  Speaker 1: and you do you feel that swagger because our offices
• 54:26
  Speaker 1: are great. We didn't have a great office in St. Louis.
• 54:29
  Speaker 1: Now we do our office and St. Louis is spec tackular,
• 54:33
  Speaker 1: and I want the people to come into St. Louis. Oh,
• 54:34
  Speaker 1: it's the best looking office we've got. I want people
• 54:37
  Speaker 1: to have that swagger and then I want to take
• 54:38
  Speaker 1: them to carry a little bit that outside and bring
• 54:41
  Speaker 1: more people to St. Louis. So, so is this an
• 54:44
  Speaker 1: enterprise Is this an enterprise zone? It's hard to spit
• 54:47
  Speaker 1: that out. What what? What is this actually set up
• 54:50
  Speaker 1: as it possibly is? I don't know the tax there's
• 54:53
  Speaker 1: a bunch of tax things that I didn't pay much
• 54:55
  Speaker 1: attention to that. Look, it's just a cool building and
• 54:57
  Speaker 1: I think it's an opportunity zone or something like that.
• 54:59
  Speaker 1: Opportunity but you know what, I honestly didn't pay much attention. Look,
• 55:02
  Speaker 1: the numbers are terrible. Whenever when sometimes if everyone's like,
• 55:06
  Speaker 1: oh can I invest with you, it was like yeah, yeah,
• 55:08
  Speaker 1: you like you can have the whole thing. It was
• 55:10
  Speaker 1: not a good amount of money maker. It's not a
• 55:12
  Speaker 1: many maker for me. But that's okay. That raises an
• 55:15
  Speaker 1: interesting issue. You've been a serial entrepreneur and a fintech investor.
• 55:22
  Speaker 1: The traditional route from your success is, hey, become a
• 55:26
  Speaker 1: venture capitalists, seed a bunch of companies, lead a bunch
• 55:29
  Speaker 1: of A and B rounds. Why not go that route?
• 55:31
  Speaker 1: Oh I did? I'm a VC, but I mean, I don't.
• 55:33
  Speaker 1: I don't lead with it because it's honestly kind of boring.
• 55:35
  Speaker 1: Like what my venture capital firm does is we invest
• 55:37
  Speaker 1: as software the service companies that are gonna te xt
• 55:40
  Speaker 1: their returns and our returns have been fantastic. It's just
• 55:44
  Speaker 1: a family officers just open. No, every it's fin top.
• 55:48
  Speaker 1: You can, you can go to fin top. It's it's
• 55:50
  Speaker 1: an open fund. I don't know if I'm allowed to
• 55:52
  Speaker 1: say when we're open, but yeah, with a fin top
• 55:55
  Speaker 1: is a VC fund and I'm a general partner. We
• 55:57
  Speaker 1: we make a lot of money, and we make a
• 55:58
  Speaker 1: lot of money by using a form law that makes
• 56:01
  Speaker 1: a lot of money. Um, and the formula, I'll tell
• 56:03
  Speaker 1: you what the formula is. Uh, Big platforms have to
• 56:06
  Speaker 1: buy small companies because big financial platforms are terrible at innovation.
• 56:10
  Speaker 1: And if you identify the companies that they have to
• 56:12
  Speaker 1: buy and fund them for three years, they tend to
• 56:15
  Speaker 1: ten x year or money interesting, really interesting. So no,
• 56:19
  Speaker 1: it's not, that's really boring. Come on, you don't think
• 56:22
  Speaker 1: you think ten x is boring? No, I think it's
• 56:24
  Speaker 1: I think, but it's it's it's a wonderful result. The
• 56:28
  Speaker 1: process that I go through there is so mechanical. It's
• 56:32
  Speaker 1: not interesting because it's work. It's successful. Yeah, and the
• 56:36
  Speaker 1: other partners work really hard and I you just count
• 56:39
  Speaker 1: the money that I show up and do your scro
• 56:43
  Speaker 1: and I'm I'm making swimming in the gold coins. And
• 56:47
  Speaker 1: they used me to fire people like if I have
• 56:49
  Speaker 1: to talk to an entrepreneur about how they should leave
• 56:51
  Speaker 1: their own company. But what I've done it myself like
• 56:54
  Speaker 1: and occasionally have to pull pull somebody aside and say, hey, look,
• 56:56
  Speaker 1: it's really good to be the other guy that makes
• 57:00
  Speaker 1: that makes a lot of sense. So so let's stick
• 57:02
  Speaker 1: with traditional banks and being unable to innovate. Since you
• 57:07
  Speaker 1: mentioned you're looking at small companies that can facilitate ten
• 57:12
  Speaker 1: x on larger platforms, why can't traditional banks innovate and
• 57:17
  Speaker 1: and what are the missed opportunities that these folks um
• 57:21
  Speaker 1: are creating for for startups. So banks and financial institutions
• 57:26
  Speaker 1: become structurally conservative for a very good reason, which is
• 57:29
  Speaker 1: you don't become a big bank if you ever lose money.
• 57:32
  Speaker 1: So one of the you know, the classic images of
• 57:35
  Speaker 1: the bank is is the bank vault that this giant
• 57:37
  Speaker 1: piece of stainless table all these bolts in it. I mean,
• 57:39
  Speaker 1: we don't see them that much anymore. But like that
• 57:41
  Speaker 1: used to be why you should trust this bank, as
• 57:43
  Speaker 1: we have this you know, big vault. Look, if you
• 57:47
  Speaker 1: lose money, you're dead. I don't care how innovative you
• 57:49
  Speaker 1: are as a financial institution. You first have to be conservative.
• 57:53
  Speaker 1: You have to be good at auditing, accounting, record keeping,
• 57:56
  Speaker 1: you have to be good at legal and compliance and
• 57:58
  Speaker 1: all these things that are not innovative. The problem is
• 58:01
  Speaker 1: that these organizations that get too big become structurally conservative.
• 58:06
  Speaker 1: They proved they promote only accounts and lawyers and auditors,
• 58:10
  Speaker 1: and after a while they kill innovation. So what you
• 58:13
  Speaker 1: have is this company that needs to grow. They need
• 58:14
  Speaker 1: to get new products in but they can't, so then
• 58:17
  Speaker 1: they have to buy their way into that. And it's
• 58:20
  Speaker 1: actually a pretty good marriage because the big platforms are
• 58:23
  Speaker 1: given regulatory um permission to access the rails of commerce,
• 58:28
  Speaker 1: whereas the small companies aren't. So I mean we even
• 58:30
  Speaker 1: went through the at square when we started our our
• 58:33
  Speaker 1: our our product, we had to get permission from Visa
• 58:36
  Speaker 1: and MasterCard in the banks to even transact legally on
• 58:39
  Speaker 1: the rails. So when you first went to Visa and
• 58:41
  Speaker 1: MasterCard and said, hey, we want to do credit card processing.
• 58:46
  Speaker 1: What was the response, what was the pushback? Lay the responses,
• 58:49
  Speaker 1: we have an app. We have a rule against exactly
• 58:52
  Speaker 1: what you're doing. In our operating regulations it says you
• 58:55
  Speaker 1: can't do what Square wanted to do? So how did
• 58:57
  Speaker 1: you get around that? We had to get them to
• 58:59
  Speaker 1: change our minds. And I got the sense from the
• 59:02
  Speaker 1: book that you guys were kinda on not like Uber
• 59:06
  Speaker 1: violating rules and laws, but you were kind of right
• 59:10
  Speaker 1: at the edge when you were startup. We built a
• 59:13
  Speaker 1: product that violated, by my count, at least seventeen rules
• 59:17
  Speaker 1: and regulations that were promulgated by Visa, master Card, Visa
• 59:21
  Speaker 1: master Card, the federal government. We I mean that the
• 59:23
  Speaker 1: total body count was like seventeen and and And it
• 59:27
  Speaker 1: wasn't like we were intentionally trying to flaunt the laws.
• 59:29
  Speaker 1: It's just that we couldn't build our product in compliance
• 59:32
  Speaker 1: with everything initially, and we had to have a working
• 59:34
  Speaker 1: product because when you're building something new that somebody has
• 59:37
  Speaker 1: never seen before, if you don't have a working prototype,
• 59:41
  Speaker 1: people can't visualize it. They will always map you into
• 59:44
  Speaker 1: something they've seen, their history, their frame of reference. Yeah,
• 59:48
  Speaker 1: and so if you're gonna break that frame of reference,
• 59:49
  Speaker 1: you better do it with a product that actually physically
• 59:51
  Speaker 1: exists and works. And so to make it physically exist
• 59:55
  Speaker 1: and work, we had to break a bunch of rules. Now,
• 59:57
  Speaker 1: what we then did was get compliant with all those rules,
• 1:00:01
  Speaker 1: or in some cases, get those rules changed. In one cases,
• 1:00:03
  Speaker 1: we had a MasterCard, Visa American Expressed actually changed their
• 1:00:06
  Speaker 1: operating regulations for Square to exist. How on earth do
• 1:00:09
  Speaker 1: you get behemoths like that to change there? Because I
• 1:00:14
  Speaker 1: my assumption is all those rules, not only have they
• 1:00:17
  Speaker 1: been vetted by lawyers and and everybody else, they will
• 1:00:21
  Speaker 1: work to the advantage of m X and MasterCard. Well, yes, uh,
• 1:00:25
  Speaker 1: rules exist, but remember there's a there's a time when
• 1:00:29
  Speaker 1: that rule is written. And if the world moves thirty years,
• 1:00:33
  Speaker 1: and remember we're talking about tech years, so we're talking
• 1:00:35
  Speaker 1: about probably a hundred years in banking time, um, then
• 1:00:39
  Speaker 1: that rule may no longer be applicable. And so those
• 1:00:42
  Speaker 1: rules can be rewritten. They've been written by humans, that
• 1:00:45
  Speaker 1: can be changed by humans. And the way we got
• 1:00:46
  Speaker 1: them changed was we did a demo that dropped jaws
• 1:00:50
  Speaker 1: at MasterCard really and MasterCard said, well, actually, wasn't MasterCard.
• 1:00:56
  Speaker 1: I say master Card. It wasn't MasterCard. It was Ed McLoughlin. Yeah.
• 1:01:00
  Speaker 1: And his title was what what he was? Chief of something? Right,
• 1:01:03
  Speaker 1: because you talked about in the book sending money with
• 1:01:06
  Speaker 1: a credit card and the reader in the in the
• 1:01:08
  Speaker 1: early days of Square, and people like, that's not possible. Yeah. Yeah,
• 1:01:12
  Speaker 1: they were like, what the hell happened? Yeah? I mean,
• 1:01:16
  Speaker 1: and we did a demo for Ed, and and we
• 1:01:19
  Speaker 1: knew that his decision was going to determine the fate
• 1:01:22
  Speaker 1: of our company because if he said no, we were dead.
• 1:01:24
  Speaker 1: Really that's amazing. So so how did tell us about
• 1:01:28
  Speaker 1: the demo? We did the demo? Um and uh, it
• 1:01:32
  Speaker 1: went perfectly. I mean, Jack and I demo the product
• 1:01:34
  Speaker 1: about fifty times. So we had our we had our
• 1:01:35
  Speaker 1: game down perfectly. And the great thing about Jack Dorsey,
• 1:01:38
  Speaker 1: of the many things, he's very quiet, He's very calm.
• 1:01:43
  Speaker 1: I'm a nervous guy, like I get your high energy. Yeah,
• 1:01:46
  Speaker 1: but I've also learned to never interrupt. I will never
• 1:01:48
  Speaker 1: interrupt anybody. So we did the demo and then Ed said,
• 1:01:52
  Speaker 1: you realized that violates our operating regulations? And I said, yes, sir,
• 1:01:57
  Speaker 1: We do, and then neither Jack nor I said it
• 1:02:00
  Speaker 1: thing for like twenty seconds and I don't want to count.
• 1:02:03
  Speaker 1: That silence is I don't want to count twenty seconds
• 1:02:06
  Speaker 1: and dead air on Bloomberg just right now. Just imagine
• 1:02:10
  Speaker 1: how horrible you feel, how tight your clenching on that countdown.
• 1:02:17
  Speaker 1: And then he said, so, I guess we have to
• 1:02:19
  Speaker 1: change our rules, and he left the meeting. He looked
• 1:02:22
  Speaker 1: at his team, glances team. He's like, I guess we
• 1:02:25
  Speaker 1: got to change our operating rigs, and he goes what
• 1:02:28
  Speaker 1: was the eye contact like with you and Jack at
• 1:02:30
  Speaker 1: that moment, I was I was probably suppressing a laugh,
• 1:02:36
  Speaker 1: like you know, like a kid in the back of
• 1:02:38
  Speaker 1: a you know, classroom in high school. I was so
• 1:02:41
  Speaker 1: giddy at that moment because it's like, oh my god, well, no,
• 1:02:45
  Speaker 1: we can live like we hadn't one yet because we
• 1:02:47
  Speaker 1: hadn't released as we didn't even know if anyone wanted
• 1:02:49
  Speaker 1: the product. You have to think someone at that level says, oh,
• 1:02:52
  Speaker 1: we're gonna change MasterCards rules so your product can do
• 1:02:56
  Speaker 1: what it does. That feels like now all that's left
• 1:03:00
  Speaker 1: going out and doing it. Now, all is left is
• 1:03:01
  Speaker 1: going out and see if anybody but me wants this
• 1:03:04
  Speaker 1: product because we had not been had to know. No,
• 1:03:08
  Speaker 1: we didn't. We didn't because look, and this is this
• 1:03:10
  Speaker 1: is another thing about innovation. You don't get to test
• 1:03:14
  Speaker 1: your product, if it's truly new, until it's built and working,
• 1:03:17
  Speaker 1: because if you say we'll imagine this, they can't do it. Right.
• 1:03:22
  Speaker 1: Elon Musk when he was building the early Tesla's, you know,
• 1:03:24
  Speaker 1: it was like, well, it's electric car, and people think
• 1:03:26
  Speaker 1: electric car. What do you think of when you think
• 1:03:27
  Speaker 1: of electric car? Golf card? Right, you think of this
• 1:03:31
  Speaker 1: crappy little thing, you know. Uh, And and it's got
• 1:03:34
  Speaker 1: terrible acceleration. Electric cars accelerate great and needed instantaneous. So
• 1:03:41
  Speaker 1: Musk used to sit you in the car and he'd
• 1:03:43
  Speaker 1: ask you to pick your favorite radio station, and you
• 1:03:45
  Speaker 1: reach for the radio dial, He'd punched the accelerator and
• 1:03:49
  Speaker 1: glue your with five g's of acceleration to the back
• 1:03:52
  Speaker 1: of the seat. And that's how we did it. You
• 1:03:54
  Speaker 1: have to build that demo. If we hadn't had permission
• 1:03:57
  Speaker 1: for master Card to build it, we couldn't have released it.
• 1:04:02
  Speaker 1: But the day we released it, we didn't know if
• 1:04:04
  Speaker 1: anyone wanted it. This is the thing about innovation. You
• 1:04:07
  Speaker 1: don't get that guarantee. I I gotta say this to
• 1:04:09
  Speaker 1: your to your listeners, because it's so important. You've been
• 1:04:13
  Speaker 1: told your whole life not to jump unless you've got
• 1:04:15
  Speaker 1: to guarantee, unless you got to study, like show me
• 1:04:18
  Speaker 1: the report from McKenzie or something that's just gonna prove
• 1:04:20
  Speaker 1: that what I'm about to do is gonna work. So
• 1:04:22
  Speaker 1: I'm not like responsible or at risk. I think it
• 1:04:26
  Speaker 1: doesn't exist. If it's being done for the first time,
• 1:04:29
  Speaker 1: you can't prove that it's gonna work. That that's that's
• 1:04:33
  Speaker 1: just astonishing. Maybe this is a little hindsight bias because
• 1:04:36
  Speaker 1: we now see how how much demand there is for
• 1:04:39
  Speaker 1: for Square. But if you would have asked me years ago, Hey, anybody,
• 1:04:45
  Speaker 1: So my wife used to teach fashion, illustration and design
• 1:04:48
  Speaker 1: and art. So I've been dragged around to all these
• 1:04:51
  Speaker 1: museums and all these art fairs and shows, and you
• 1:04:55
  Speaker 1: show up at them. In the old days, they would
• 1:04:57
  Speaker 1: have the physical clunk clunk machines, the knuckle and it
• 1:05:01
  Speaker 1: was very very clear early on that square was made
• 1:05:04
  Speaker 1: for those soda people. Oh, I lived in an easy,
• 1:05:06
  Speaker 1: uptent baby and and you know, you see the the
• 1:05:10
  Speaker 1: Washingm call you. It was not long after you guys
• 1:05:14
  Speaker 1: formed that you started seeing this thing show up everywhere
• 1:05:17
  Speaker 1: at the littlest merchants. People who you wouldn't think would
• 1:05:21
  Speaker 1: be ready to sell something to ready to sell something, right,
• 1:05:23
  Speaker 1: and you know you those impulse buys, especially a piece
• 1:05:27
  Speaker 1: of jewelry, is sculpture, some sort of wind chime, that's
• 1:05:30
  Speaker 1: a couple hundred bucks who walks around with five hundred
• 1:05:32
  Speaker 1: dollars on them? Putting a credit card in an iPhone
• 1:05:35
  Speaker 1: turns out to be just that's the solutions of that problem. Yeah,
• 1:05:39
  Speaker 1: it turned out it worked. But again we couldn't know
• 1:05:41
  Speaker 1: that at the beginning. I guess so, so I know,
• 1:05:44
  Speaker 1: I only have you and the studio for a limited
• 1:05:46
  Speaker 1: amount of time with some of our with with some
• 1:05:50
  Speaker 1: of the last time we have. Let me ask you
• 1:05:52
  Speaker 1: our favorite questions that we ask all of our guests,
• 1:05:55
  Speaker 1: and I'm gonna start with, tell us what you're streaming
• 1:05:58
  Speaker 1: these days? What was keeping you entertained during lockdown? Could
• 1:06:02
  Speaker 1: be Netflix or Amazon Prime or even podcasts. Tell us
• 1:06:06
  Speaker 1: what what you've been watching or listening. I'm rewatching old
• 1:06:09
  Speaker 1: episodes of Community so hilarious. I went through the whole
• 1:06:12
  Speaker 1: run of those community thirty Rock Silicon Valley, the show
• 1:06:16
  Speaker 1: which I kind of lived through, and so yeah, I've
• 1:06:18
  Speaker 1: got friends who are in the cast, and I was like,
• 1:06:20
  Speaker 1: I love this stuff. It's so I mean, I'm escapist
• 1:06:24
  Speaker 1: when it comes to streaming UM and sometimes doubly so
• 1:06:26
  Speaker 1: when I have to watch a Swedish television. So my
• 1:06:29
  Speaker 1: wife is sweeping the Rock No, no, no, no, no.
• 1:06:32
  Speaker 1: This we watched that. It was actually pretty good rack
• 1:06:35
  Speaker 1: and Mack was good. But I'm talking about Swedish public television.
• 1:06:40
  Speaker 1: My wife speaks Swedish with our kids. She's trying to
• 1:06:42
  Speaker 1: get them to speak Swedish, and I'm trying to not
• 1:06:44
  Speaker 1: learn Swedish so that my kids can talk behind my
• 1:06:47
  Speaker 1: back with my wife. So I'm not allowed in the
• 1:06:49
  Speaker 1: room during this, so they're Swedet. We're streaming Swedish TV.
• 1:06:52
  Speaker 1: By the way, if you like Silicon Valley, I'm going
• 1:06:55
  Speaker 1: to recommend something to you which is the same thing,
• 1:06:59
  Speaker 1: only apply to gaming. Mythic Quest on Apple TV with
• 1:07:04
  Speaker 1: I'm Forgetting his Name from It's Always Sunny in Philadelphia
• 1:07:08
  Speaker 1: plays the lead. It's the same sort of absurdest comedy,
• 1:07:13
  Speaker 1: only instead of being set in a software company set
• 1:07:16
  Speaker 1: in a gaming company. Marry, thank you, you will, you
• 1:07:19
  Speaker 1: will do that. You've just made my Christmas vacation that
• 1:07:23
  Speaker 1: much better. And I'll tell you my favorite Silicon Valley story. So,
• 1:07:28
  Speaker 1: when I was on the West Coast a couple of
• 1:07:30
  Speaker 1: years ago, UM I did an interview with Marc Andreeson
• 1:07:33
  Speaker 1: at Andreas and harraways I fly. So that was during
• 1:07:37
  Speaker 1: the week, and we were at there for the whole week.
• 1:07:39
  Speaker 1: We fly home on Friday or Saturday, and I believe
• 1:07:42
  Speaker 1: Silicon Values to broadcast on Sunday and Sunday night. I'm watching.
• 1:07:47
  Speaker 1: I picked up the phone. I call Chris, who was
• 1:07:49
  Speaker 1: out there with me from my office. Are you watching this?
• 1:07:52
  Speaker 1: He's like, yeah, there was a scene set in the
• 1:07:56
  Speaker 1: A sixteen Z building. Because it I recognize it immediately
• 1:07:59
  Speaker 1: because it has waterfall that runs around the perimeter. It's
• 1:08:03
  Speaker 1: almost like a goes goes continually around the building. And
• 1:08:08
  Speaker 1: I'm like, we were just there. It was such a
• 1:08:10
  Speaker 1: weird experience to see the outside of building that you
• 1:08:14
  Speaker 1: just were on television. It was really music. Yeah, Sahill
• 1:08:18
  Speaker 1: Road south Side. So so Silhan Valley was such a
• 1:08:21
  Speaker 1: great show. I really enjoyed it. If you like that.
• 1:08:23
  Speaker 1: I think you'll I think you'll like epic Quest. It's
• 1:08:26
  Speaker 1: Apple epic Quest Quest, Mythic Quest, It's Apple TV. That's
• 1:08:30
  Speaker 1: the reason to subscribe. Okay, yeah, there you go. Or
• 1:08:32
  Speaker 1: if you have an Apple product, usually you get Apple
• 1:08:35
  Speaker 1: TV free for a year or something. They're they're good
• 1:08:38
  Speaker 1: about giving that sort of coop away. Um, you mentioned
• 1:08:41
  Speaker 1: herb Kella her tell us about some of your early
• 1:08:44
  Speaker 1: mentors who helped to shape your career. Oh my god,
• 1:08:48
  Speaker 1: I didn't have many mentors. Um. I wished I had
• 1:08:51
  Speaker 1: because I was always doing stuff where I wished I
• 1:08:54
  Speaker 1: had some peers. And what I realized, or actually what
• 1:08:57
  Speaker 1: I realized very late, was that I was doing things
• 1:09:00
  Speaker 1: differently enough that my peers were not good good help.
• 1:09:04
  Speaker 1: So this is actually one of the things that that
• 1:09:06
  Speaker 1: hit me in the book, which was that a lot
• 1:09:08
  Speaker 1: of the advice that I was following from people who
• 1:09:10
  Speaker 1: are super successful, I would implement it and would blow up,
• 1:09:13
  Speaker 1: and I thought, oh, I'm just a terrible person, like
• 1:09:16
  Speaker 1: I can't do anything right. It turns up, it turns
• 1:09:19
  Speaker 1: out that I was on that other side of the
• 1:09:20
  Speaker 1: line where the physics are different. So if and this
• 1:09:23
  Speaker 1: is the thing that that just drove me nuts. Is
• 1:09:27
  Speaker 1: I would find competent, successful people and ask them for
• 1:09:31
  Speaker 1: advice and do what they told me to do, and
• 1:09:35
  Speaker 1: it would just be a disaster. Keller Her was the
• 1:09:39
  Speaker 1: first guy, the very first guy that I sat within
• 1:09:41
  Speaker 1: a room who I said, I did this and I
• 1:09:44
  Speaker 1: felt this way, and her was like, I felt exactly
• 1:09:46
  Speaker 1: the same way. But that was late in my career.
• 1:09:49
  Speaker 1: I never had a mentor growing You're you were doing
• 1:09:52
  Speaker 1: quantum physics and you were asking people about Newtonian Yeah,
• 1:09:56
  Speaker 1: it was. It just didn't apply. It was it was
• 1:09:58
  Speaker 1: just different math. Different math really are interesting. Let's let's
• 1:10:01
  Speaker 1: talk Since you wrote this book, let's talk about some
• 1:10:04
  Speaker 1: of your favorite books or what you might be reading
• 1:10:06
  Speaker 1: right now. Um. One of my favorite books right now
• 1:10:09
  Speaker 1: is a pre Suasion Robert Child, Robert Robert Aldini. Yeah,
• 1:10:14
  Speaker 1: fantastic book. Um. I'm reading uh some uh some Churchill.
• 1:10:20
  Speaker 1: I'm going through Churchill's autobiographies and his story of the
• 1:10:24
  Speaker 1: World War two. Um, and that's that's part of my
• 1:10:27
  Speaker 1: main reading. I look at Churchill like he was a
• 1:10:29
  Speaker 1: bad polo player. He was an aristocrat. Uh, he was
• 1:10:33
  Speaker 1: a war hero. He was uh, you know, a leader
• 1:10:37
  Speaker 1: of a nation. He was, you know, he basically the
• 1:10:40
  Speaker 1: reason we're all sitting here, Like he pretty much credit
• 1:10:42
  Speaker 1: Western civil civilization to like one guy. That would be
• 1:10:45
  Speaker 1: the guy. Um. And he was a prolific artist and writer,
• 1:10:49
  Speaker 1: and he's a great writer. And so I'm just chewing
• 1:10:52
  Speaker 1: through Churchill. That's really interesting. He if you watched The Crown,
• 1:10:56
  Speaker 1: he really is a key player in in the latter
• 1:10:59
  Speaker 1: episodes of that. Yeah, I wish, wish, wish I've been
• 1:11:02
  Speaker 1: able to meet him. Um, But uh, there's enough of
• 1:11:05
  Speaker 1: his writings and enough of his recordings that I feel
• 1:11:07
  Speaker 1: like I'm learning something really intriguing. What sort of advice
• 1:11:12
  Speaker 1: would you give to a recent college grad who is
• 1:11:15
  Speaker 1: interested in a career in technology. Um, I'd say, get
• 1:11:19
  Speaker 1: engineering training, learn learn to be a tech learn to
• 1:11:22
  Speaker 1: be gig, go to the go to the school that
• 1:11:24
  Speaker 1: teaches you how to how to make this stuff. For
• 1:11:27
  Speaker 1: two reasons. Number one, there is a massive bias in
• 1:11:31
  Speaker 1: Silicon Valley against people who are non technical. And the
• 1:11:34
  Speaker 1: way you determine this, if they will ask, they'll ask
• 1:11:37
  Speaker 1: you very innocuously, are you technical, very technical? And if
• 1:11:42
  Speaker 1: you say, uh, no, I've got a degree in accounting
• 1:11:46
  Speaker 1: or finance or something, but not really hardcore engineering. Uh,
• 1:11:50
  Speaker 1: they won't invite you to the meeting. Really, you'll get bullied,
• 1:11:53
  Speaker 1: you'll get excluded. And just having those technical chops will
• 1:11:57
  Speaker 1: get you into those rooms. Now, what you do in
• 1:11:59
  Speaker 1: those rooms depends on your other skill set, but if
• 1:12:01
  Speaker 1: you want to get in the room, you better be technical,
• 1:12:03
  Speaker 1: really really interesting. And our final question, what do you
• 1:12:07
  Speaker 1: know about the world of filling the blank, technology, payments, innovation,
• 1:12:13
  Speaker 1: entrepreneurship today that you wish you knew twenty or so
• 1:12:16
  Speaker 1: years ago when you were first getting Oh my god,
• 1:12:19
  Speaker 1: I wish I knew there was a line between innovation
• 1:12:22
  Speaker 1: and copying. I never recognized it. I never recognized that
• 1:12:25
  Speaker 1: there was a different set of physics. That was the
• 1:12:27
  Speaker 1: greatest revelation because I'd seen all these mistakes that I
• 1:12:29
  Speaker 1: had been making again and again and again, and all
• 1:12:32
  Speaker 1: of a sudden, I was like, oh my god, I
• 1:12:33
  Speaker 1: can I can explain what was going wrong. You know,
• 1:12:35
  Speaker 1: It's almost like if you if you're in a social
• 1:12:38
  Speaker 1: situation and you just have this weird social tick and
• 1:12:41
  Speaker 1: people don't like you because of your social tick. You
• 1:12:43
  Speaker 1: learn to get out of control and then people are
• 1:12:44
  Speaker 1: nice to you. Like, that's what I felt like I was.
• 1:12:46
  Speaker 1: I was a failure for so many years in situations
• 1:12:48
  Speaker 1: where I thought I was prepared and ready to succeed,
• 1:12:51
  Speaker 1: and the fact was I was just playing a different game.
• 1:12:54
  Speaker 1: And if the game you're playing is using a different
• 1:12:56
  Speaker 1: set of rules and you don't know those rules, then
• 1:12:58
  Speaker 1: you're going to fail a lot. And that's that's why
• 1:13:01
  Speaker 1: I had That's why it took me so long to
• 1:13:03
  Speaker 1: sort of get my career out of you know, the dumpster,
• 1:13:07
  Speaker 1: really really fascinating stuff. Jim mcklvey, co founder of Square,
• 1:13:11
  Speaker 1: author of The Innovation Stack, Thank you for being so
• 1:13:14
  Speaker 1: generous with your time. If you enjoy this conversation, we'll
• 1:13:18
  Speaker 1: be sure and check out any of our previous four
• 1:13:21
  Speaker 1: hundred or so such discussions. You can find those at iTunes, Spotify,
• 1:13:25
  Speaker 1: wherever you get your favorite podcasts. We love your comments,
• 1:13:29
  Speaker 1: feedback and suggestions right to us at m IB podcast
• 1:13:33
  Speaker 1: at Bloomberg dot net. Sign up from my daily reads
• 1:13:36
  Speaker 1: at Rid Halts dot com. Follow me on Twitter at
• 1:13:39
  Speaker 1: Rid Halts. I would be remiss if I did not
• 1:13:42
  Speaker 1: thank the crack team that helps with this conversation together
• 1:13:45
  Speaker 1: each week. Mohammed Ramaui is my audio engineer. Atico val
• 1:13:49
  Speaker 1: Bron is our project manager. Michael Batnick is my head
• 1:13:52
  Speaker 1: of research. Harris Wald is my producer. I'm Barry Ridalts.
• 1:13:57
  Speaker 1: You've been listening to Masters in Business Bloomberg Radio