Jim McKelvey on 'The Innovation Stack' (Podcast)

think you will find our conversation quite intriguing. He is also the author of The Innovation Stack, Building an Unbeatable Business, One Crazy Idea of Time. I have a decent number of authors, um pitch me on coming up on the podcast. And for the most part, I find a lot of the books a little tedious and and tough to plow through. And so you don't hear those folks. The folks I bring the books tend to be more interesting. I found this to be a really amusing, well written, uh and

fascinating book. Uh not just about his experiences at Square. But Jim went back and said, why did Square win when there were so many forces aligned against us, including behemoth Amazon? And so he put in the research and said, let's figure out what we did right and see if there are lessons to be shared with the world, and that's what this book is about. You're gonna find this conversation to be absolutely fascinating. So, with no further ado,

my conversation with Jim McKelvey. This is Mesters in Business with Very Renaults on Bloomberg Radio. My extra special guest this week is Jim McKelvey. He is the co founder of Square along with his colleague Jack Dorsey Uh. He is an independent director at the Federal Reserve Bank in St. Louis. He is also the author of a book, The Innovation Stack, Building an unbeatable business, one crazy idea at a time.

Jim McKelvey, welcome to Bloomberg. Thank you, Barry. Actually, I'm now the chair of the St. Louis FETI you are the chair the president. No, um, I don't get to vote on that interest rate. I get to vote on the little interest rate. That's fascinating. We'll talk about that in a bit. But let's start out with your background. And I have to begin by asking you a question. What's the difference between an entrepreneur and a business person?

These days? Nothing because the word is the same. But originally the word entrepreneur meant somebody in business who was doing something different, very different, So we're talking about the Right brothers trying to build the first airplane, or somebody who you thought was crazy. These days, entrepreneur has sort of lost that original meaning and it means just anybody

who starts a business. But the problem with that is that you can't then talk about how different it is to do something where you're not copying what everybody else is doing and trying to invent something yourself. So so let's stay with that theme, because if I were to go to Jim Mcalvy dot com. On your site, there's a big banner that says, do something that has never

been done. Explain what you mean by that? Yeah. So, um, there's a lot of talk about how we like to be innovative and how we like to be creative, and people are supposed to like that, and I've never been comfortable doing that, although I've done it occasionally, And I wanted to address the fact that it's actually really scary to do something where you don't have any peers, where you don't have any validation, where you don't have anybody else when you look around saying Oh well, uh, they're

doing it too, so it must be sort of okay, if you're doing entrepreneurship in its classical definition, you're doing something that is going to be very very scary to you on on almost a biological level, because humans are hurt animals. We like to be in a group, right, it's a I was a big fan of Mutual of Omaha's Wild Kingdom, and there was always that shot of the herd of whoever zel zebra, that one zebra on

the outskirts of that you know what happens? That was me I was as I was always away from the herd and and lunch for the lions. Yeah, that describes my schooling. So so that raises a lot of really interesting questions, beginning with you know, why is Silicon's focus on disruption so misguided? I think looking at disruption, which is this term that we really used to death in Silicon Valley, is it's a bad focus because if you're looking to disrupt, it puts your eye on the thing

you're trying to disrupt. So we're gonna disrupt healthcare? Okay, Yeah, there's a lot of stuff wrong with healthcare. What do you want to disrupt? But if you spend your time looking at what you want to destroy, it triggers that copying function in your head that says and you that says, oh, I should do this, I should do that, and you start becoming indoctrinated into the thing that you're trying to destroy.

And so I believe you should kind of ignore the thing that you are replacing and just focus on the problem trying to solve. And then then you get this sort of weird thing because you know, Square, which we now call block is, has always been called a very disruptive company, but actually ran the numbers on the number of companies that we wiped out, right, American Express, Visa, they're all bigger card, Right, you killed all of it.

We haven't disrupted anything like we We knocked a few ISOs into you know, sort of more honestly pricing their products, but even they're still around. I mean, we didn't destroy much. What we did instead was we created a new market. And we're gonna talk a lot about Square, uh coming up. But here's another quote of yours. I really enjoyed. Chaos is a good thing. Explain. Oh yeah, so chaos is where you get new ideas. Chaos is that's it's this moment that it puts your brain into a different form

of thinking. Uh So, if you've got if you're if you're a pattern matcher, which we're all pattern matchers, and you see these patterns and you don't think you do the things automatically, you're you go through most of life on autopilot, as you should. But occasionally, uh something goes wrong and it's weird and and things are not working like they should be, and and that puts your brain

into this different state. And so I say chaos because it's a little scary to think of chaos, but it's also a very good creative place that makes a lot of sense. One more one more quote. Thank you for reading the book. I mean, I have to say that you, as an interviewer, have prepared really really well for this. Can I tell you something And I shouldn't say this out loud because I'm kind of revealing my secret sauce. We do a lot of prep when people show up

for an interview, and my thought processes. How often am I going to get a Jim mcelvy sitting in front of me for ninety minutes. I'm not just gonna walk in and coast. I have to do my homework, and I am genuinely shocked that that is this exclusive market niche. It's it's it makes you special. I hate to explain to the listening audience, but a lot of people who have interviewed me about the book haven't read the whole book, and or they you know, they've got cliff notes or something.

I appreciate, you appreciate the work. Um, let me give you one other quote of yours. Reward loyal customers now or risk losing them. Tell us what that means, and then I'll share a anecdote. So there's a different pricing power you have if you have an innovation stack. So myke my book sort of focuses on this world of entrepreneurial companies that build these things called innovation stacks. We can get into that, but the idea here is that if you have one of these things, you have amazing

pricing power. You have extremely low cost You effectively have customers that are willing to do things differently just to experience your products. And this allows you a massive amount of pricing flexibility. And I ran the math, and it's actually better for you to keep your prices absurdly low by normal sort of MBA calculations. And if you undercharge the market, you will actually maximize revenue. That's really that's

really kind of interesting. So I used to have the Starbucks app on my phone and every day on the way into the office, this is pre pandemic, I would swing by a Starbucks, even though we had a coffee maker in the office, uh, and pick up their egg white and turkey bacon sandwich and a and a Starbucks um flat white, and I would go to my office. And then they stopped. They like had less and less of this in stock. Who was here or miss weather they had it, And then the pandemic hits and they

converted their Starbucks points. And then I get an email from Starbucks telling me that despite you know the pandemic and everybody stuck at home, use it or lose it. Your points which used to the last forever, if you don't use them by May eleven, they're going away. And I got really annoyed at that, And then you should. And then outcomes the story that Starbucks has this three billion dollar float because if you have the app on your phone and it gets refilled with your credit card,

fifty Bucks or Bucks every time it runs down. Multiply that by a million Starbucks customers. They're sitting on three four billion dollars. That was pretty much the last draw for me. That and the end. I don't care about the float. No, no, no, but wait, you're sitting with all this money and you have to take our already reduced points. I'm done with you. And ps the same time, I'm getting emails from Delta your silver medallions. Fine, don't worry about it. We're gonna roll it over for a year.

You're good, And I'm like, that's the right way to retain a customer. And and even more insidious than that is the fact that when you are in a panic state yourself, when you're in chaos, when you when something is disrupted, like you just had the world shutdown because of CODD, you are in a heightened state of of of of imprint imprint ability. So, in other words, if Starbucks does you a service at that moment, if they help you out, if they say we're gonna stays with you,

then then they got a customer for life. Conversely, if it's at the moment they choose to jab their thumb in your eye, then you're gonna hate them, and you're gonna go on air and hate them and and shock. Yeah. It was a Starbucks in the lobby of our old office building, and I was a regular there, and I like strong coffee, so I used to defend them against people who are, like I prefer Dunkin Donuts. That's because you're a whim drink. Drink some coffee that puts a

little hair on your chest. But this, by the way, a hundred Starbucks points, what is it? Coffee? It's the cost of it is so meaningless. But the thought process behind it was up yours, And I was like, now, up yours. I was spending I don't know, five hundred bucks a year on Starbucks. You can get coffee elsewhere I cannot do, and I will occasionally get Starbucks, but I am not no longer a regular. It probably doesn't taste as good anymore either. Um no, it's it's still

still pretty good coffee. The the question that I'm curious about, am I just an unreal custs And the only person who got angry no, no, no, no, you're what percentage of people who said, wait, you're taking my points away?

You are so so there's a calculation that you make if you're uh, strictly looking at spreadsheets and you say, well, they've got three billion dollars with a float, and our stores are kind of closing and we need a little bridge and we need you know, they make some sort of cold calculating decision that sort of looks good on

a spreadsheet. What they forget is how impactful that is during a crisis on the psychology of their customers, and those people remember forever, and that that's just a terrible moment to do anything against your customers. It's also a wonderful moment to do something for your customers. So if they if they had a way to do what Delta did and be positive, by the way, same exact circumstances,

the same thing. No one's flying, nobody's going to Starbucks, your points at both they're just sitting there, yea, And Delta is probably worse, k right, So Delta said, hey, we're good. We're gonna roll your flights status over to and any canceled lights you get a lifetime credit. You could use them in the future, don't worry about it, and now good luck getting me on a different You know something besides delta, Yeah, I expect to see you on adulta flight holding a cannon or a cup of

pizza coffee. So so anyway, we digress, and your point happens to be I digress is when you have an opportunity to delight a customer, what what do you do? So the the interesting thing here is I was studying trying to figure out why the math was different for companies with innovation stacks. And this is really uh, sort of personal to me because I was very focused on having some sort of theoretical basis for the stuff that I was saying. And what I did was I found

this perfect case study, which was Southwest Airlines. Southwest Airlines had tremendous pricing power and during the Herb Keller her years, who was one of the founders in original CEO. Yeah, he was one of the founders, a legend, and Herb kept the prices low and then he left and Southwest Airlines raised their prices. So it was this perfect case study of this company that had an innovation stack and then all of a sudden started messing with the math.

They made a lot more money right after her left for a few years. Since that time, five new competitor airlines, like complete new airlines that would have totally died if herb was at the Helm are now competing with Southwest. That makes a lot of sense. And and ps. Southwest was always a pain in the butt, but they were very cheap because you noah sign seats that you have

to get up, you have to wait online. I am a former to your point, former Southwest Fortia because I just don't have the tolerance for the headache and it's not discounted enough. I'll pay a little more for Delta and feel like I'm getting a better experience and not feel like cattle boarding an airline. So all right, enough endorsing Delta and trashing Southwest and Starbucks. So let's talk

a little bit about, um, your business backgrounds Uh. Turns out that um, you were you were doing something with Ceedie Rams and somebody who knew said, hey, I have a kid who who's good with computers, and you hired this kid as an intern. Tell us about had a software company. This with the late eighties, I guess this would have been about ninety two. But back then, uh, my company, Mira was in a desperate situation. We had just screwed up this disc that had to go out,

and we were hiring everybody. And the lady who sold us chocolate covered espresso beans. Her name was Marcia Dorsey, and her son, Jack Dorsey, came to work for us when he was fifteen. He showed up in his bicycle. He pulled an all nighter with us the first night at at his first real job, and he became a cherished part of the team from then. I called him Jack the Genius. When he was sixteen, this used to embarrass him, but now he's sort of grown used to it.

Fifteen year old pulls an all night or that's a lot of chocolate covered espresso beans. Well, you know, Ridland wasn't commonly available back man the way it is today. You get out of you know, shake any kid a couple of written form, right, So so you start working with him, um for this company. Eventually you decide to bolt because the company was not doing what you wanted it to do anymore, and tell us about that. I'm a terrible leader. I don't direct the troops well and

they sometimes don't follow me. And I saw the Internet coming. The Internet was going to wipe out our product, which was an internet based, you know, trade show disc. It had all the stuff that the brochures and stuff at a trade show. And in fact, the disc replaced all those bags of paper that people can't get the bags of paper have a disc. It made a ton of sense in the early nineties, and it was gonna get

wiped out when websites were coming along. And I saw this, and I said to the troops, hey, let's stop making discs and start making websites. And they were like, oh, yeah, sure, Jim, we'll do it. But they didn't. They didn't follow me that, none of them. None of them would listen to me except this fifteen year old. So Jack and I um went off by ourselves and we basically created a new company. And that company still runs today. It's amazing that, you know,

thirty years later, what Jack built is still running. And you said he was a really good code or he knew exactly what he was doing, A good coded, a good guy. I mean, he was a lot of fun and we got on famously. And uh, you know, after he was shown the door Twitter the first time, he asked me if I wanted to start a company with him, So I I got, I got sort of paid back twenty years later when he said, Hey, Jim, let's do something together again. I was like, cool, what do you

want to do? And that's really an interesting story because and you described this very nicely in the book, as you're telling the story of we're trying to think about what to do. Wasn't like we have an idea, let's build a company. It's we want to build a company. Let's find an idea that resonates with both of us. At the time, you're doing glass blowing, and you have some nice products, and you have some products that are

kind of ugly. I have a lot of that you shuff to the side and and pray someone comes along and takes the inventory off your hand. A client wanted to buy an ugly piece of glass via an amex, and you couldn't accommodate her. Tell us about what. Yeah, So the dirty little secret about art is that a lot of artists make stuff they're not proud of, and

we don't signal it in the price. So you look at my stuff, and I've learned very very early to charge the same if I hate it or like it um And this was a piece I hated, and for good reason, I think it was ugly, um, but this lady wanted to take it off my hands. It was like a two thou dollar piece of glass. And she tried to pay me with an AMEX card and I couldn't complete the sale because I couldn't she didn't have a visa car, she didn't have a master card. Uh,

and so I lost this sale. I was really upset, um and I called Jack on my iPhone and I said, hey, man, I know what we ought to do. I said, we ought to build a system so that I can take a payment on my iPhone. And Jack got quiet for a second. He said, that's interesting, and that's how Square started. So so now you guys want to launch this company. You design the hardware. Do you have any background in in hardware design or hard reading or software? No? I

don't have any. Well, I have some background in software, but it turns out of the you know, between the two of us, Jack and me, he's a much much better programmer than I am. Uh. So it was pretty much Jack leading the software effort and me doing everything else. Because there was so much software work to do that I was trying to keep all the other stuff away from him. So I was dealing with the business licenses.

I was, you know, buying office furniture. I also got into an argument with jack about how we were going to get the credit card read. So his attitude was, well, we'll build some software that'll take a photo of the card and we'll just use the photo and IR to convert the gotcha. So it turns out, if you know the subtleties of credit cards that actually cost more, that's

called a card not present transactionally cost you more. And I thought, no, no, we want to get card present rates, which means we need to make read the mag stripe. And so I had this idea for a little mag stripe reader. It was actually an idea that I got out of out of Make magazine. Make magazine had this like hackers, uh story about some guy who turned his mobile phone into a credit card reader, and I was like, oh,

we can do the same thing. So we took this idea and I went to my studio and I started building a credit card reader. Uh so I basically built the hardware before Jackie get the software working. It was sort of a race. So so the hardware it into original form is a square with the tape reader on the inside and and the plug to go into the headphone jack of the iPhone. Yeah yeah, so when it's original form bigger than a square though, Yeah it was, it was. It was sort of a rectangle um and

it was made the first one I made small. So I had a couple of big prototypes of first one I made small. UM was for a demo with Steve Jobs. Oh really, and I got We were terrified because Steve was a legendary little and tim dating. Yeah yeah, and especially if you're the hardware guy, because Steve is a design zealot and if you make something ugly, he won't

touch it. And even get a meeting with Steve Jobs was a big deal because nobody, you know, like Steve was pretty sick at this time, and he he didn't take too many meetings. But we had a meeting scheduled and I was the guy who had to make the hardware. So I was terrified, and I went into, uh, you know, do what a good person does, which is steal ideas from you know, better people. So I went into Steve's

Apple store. I went to the ice you know, the the Apple store, and I started looking at all the stuff that he was building and I saw all the computers were made of aluminum, and I think, oh, well, Steve likes aluminum. So I made the first square reader out of a solid block of aluminum forgetting of course, uh, engineering one on one that aluminium is conductive and that this basically when I hooked it up, turned our card reader into a cardio reader. It was basically turned into

a heart monitor. And um, actually your boss. So Mike Bloomberg was the very first guy to see that because Jack had a demo with Mike back when Mike was a mayor New York. Mike was trying to get Squared open a New York office. Uh, and he, Mike was the first person to see that aluminum reader. Yeah, it was a disaster. So so how did you go from

aluminum to the little plastics? Well, it didn't work. I mean, the the aluminum reader, if you touched it with your finger would short out, so um, you'd have to swipe without touching it. So I switched to plastic immediately thereafter, and then we then we built a square reader and spin square ever, so I gotta imagine it's easier to work the electronics and wiring in plastics, and it is an aluminum anyway, it was a little bit, but I

mean basically a casing is a casing. The hard part is getting all this stuff, miniaturizing, getting the read head and getting a spring and resistors. I mean there a lot of we jammed a lot of stuff in there. So so the meaning with jobs was with a plastic square is that right? Canceled? Oh it did? I canceled because Steve got sick. Wow, So that's that's that's amazing. So um. One of the things I found fascinating was the discussion about credit card companies and how they disadvantaged

small businesses. How is it possible that they're charging small businesses forty times as much as they're charging large businesses to process their credit cards. That that's just an absurd number. So it's amazing when I discovered that. Actually I discovered that information on the first day of research because I was looking, I was following the money, trying to figure

out where the where the money was being made. And it turns out a small business account makes forty five times more profit than a billion dollar company like Starbucks or Walmart. And this is in terms of the fees that are paid by the merchant and I thought, well, that can't be like that. You can't, it can't be. It can't be forts it's profit relative to the total transaction. So it turns out that it's really expensive to be poor.

You may have I learned that growing up after Yeah, I mean, like if you don't have enough money, like diapers cost ten times as much, if you're poor and have to buy m onesI two zi at a dollar store, then if you can buy a bulk at you know,

Sam's Club. There was a store A couple of stories right after the financial crisis about these businesses and families that could not afford to go bankrupt, which is an expensive legal you don't have enough assets, you just walk away and let the business sort of with her on the vine. You can't afford to discharge your debts and banks. Yeah,

it's it's it's really it was eye opening. I mean I sort of knew this because I sort of lived this because I have a lot of friends who are artists, and I was an artist, and you know, you live with you know, marginal credit and weird you know, guys sleep in the back of their cars and stuff like that. So I was familiar with it, with it but what I what I didn't understand was how pervasive this was

and how um powerless small merchants were. And what Square did was we basically said, Okay, we're powerless individually, but if we get a million of them together, I bet we've got some power. And that's eventually what we did. So what else did you find about the credit card industry when you looked under the hood? What else struck you as unfair or outrageous? One of the things that

was the way credit card systems were sold. So they were sold on these three um three year contracts typically where you would be lied to and I was I was personally at you know, a recipient of this behavior. Somebody would show up in my glass video and they would say, hey, what are you paying for credit cards on? Like I don't know, I can't tell what they're charging because bill is too confusing, And you go, oh, well, let me take a look. And he'd come back and say, hey,

guess what, kild we can save your money. And so I'd always sign up with them, and you took me a couple of cycles to realize what was going on. They would always say they save me money, and it would never be any better. And the reason was, first of all, the system is unnecessarily complex and a feature not above it's designed by designed, because if it's so complex, you stop the argument, Oh what what? What? What? Page? On these forty two pages do you are you arguing with?

You know? Um? So if you don't understand something, you can't really argue against it. And secondly, the system is so um uh. There's a line in the book that you wrote that struck me while you're processing that thought, which was how bad does an industry have to be that it turns into a check mark? How much lying must you have? Where's the checkmark where they're made be material misrepresentation which you will not hold against us within

their boiler plate. Yes, so when we went to cancel our first merchant account, I had to facts in a form to cancel the account, and one of the check boxes on the forum was to say why did you cancel the account? And one of the one of the answers was misrepresentation, which is a fancy word for lying and the court word. Think about how bad an industry has to be before lying becomes a box on that that you check like, oh, we don't want to make our customers, you know, right out the fact that we've

we've been lying to them. It's just part of the forum. I mean, and I put the form in the book like it's so appalling. Um, Look, the abusive small merchants were receiving was similar to all small groups. Like, if you are small and powerless, there's somebody who's gonna prey on you, and they're gonna pray on you to the extent that the economy allows them to. I mean, that's capitalism.

That's up until the point where someone else spots an opportunity and says, hey, we could do this faster, cheaper, better, and make it much less. Zone was for the small business person. And that's that's eventually what happens, hopefully, I mean, that's that's hopefully what happens. But what happened to credit card readers is the same thing that happened to travelers, the same thing that happen in banking customers. I mean, their example after example after example of people who are

sort of collectively um, powerful but individually powerless. So let's talk about collectively powerful. Uh. It turns out that your little niche had become successful enough that it attracted uh, some unwanted imperial attention from Bezos and company. What was it like when you realized that suddenly the juggernaut that is Amazon was coming after your business? So Amazon decided they wanted to take our market away. To be fair, your squares white and their square was blacks. Yes, there's

very different black rectangle. They did do that a bit of originality. Um. It was chilling, It was very it was It was absolutely terrifying. It was one of those moments where your hands tingle, at least my hands tingled, because how do you fight Amazon? Like when Amazon attacks a startup, the startup dies. You just you describe it in terms from the Godfather as discovering the horsehead, only they mailed it to you in a box with a smile,

and they mailed us a horsehead with free two day shipping. Yeah, you know, it was terrifying. And um, and then of course, you know what, once the terror wave passes, then the then the questions, well, what do you do? What are we gonna do? What are we gonna do? And so we asked these questions. We asked him at the board, we asked him at the office, and we were asking these questions, how do you fight Amazon, And the first question, the first answer we looked at, was oh, well, let's

find somebody else who's beaten them. Let's find a startup who survived. Good luck with that. There are none. Yeah, they don't that, they don't exist, you know, you know. And and at the time you guys were engaged in rapid growth, you didn't even have time to think about them. You were so busy just dealing with all the new clients and new revenue. How much how much headspace you know, how much rent free space was Jeff Bezos taking in your head or were you just too busy that the

thing we looked at what we could do. There was very little we could do. I mean, we couldn't build a brand like Amazon's. We couldn't actually even match their price because they undercut They undercut us thirty percent, which what they always seem to do. But we ran the numbers and we would be losing, Like, our margins were so slim that if we cut our margins by we'd be underwater on everything. And so it was like, well, that's just death in another form, So why go down

that way? So we didn't do anything. We basically ignored Amazon and what happened. Amazingly after a year they gave up and they actually, I gotta say something nice about Amazon. Um, when they gave up, they decided to mail a Square reader all their all their customers. Now, why would they want to do that? That that's kind of a fascinating coda to to the one of the four horsemen of the apocalypse stampeding into your living room. Why send a

square reader to everybody? Uh? Well, it's beak because they wanted to take care of their customers. Amazon always has that. I've heard empty seat at the table that represents the customer at the meeting. And I believe, I hope this is the reason that they thought we were the best solution for their customers and they said, here, we're not there for you anymore. But Square is that that's amazing. So you're one of the few startups to have beaten Amazon.

Have you ever spoken with Bezos about this? No? No, I have not. I've I did meet. Uh. We hired a few people that used to work for him, and I got the backstory on it. And smaller market not big enough margin for them? Is they're getting get their kicked? Yeah? Huh, you would think that small businesses and a startup that solving a problem might have a little bit of loyalty to you, well they would. Look, Amazon was expected to

win that battle. And and this is the thing that made me write the book because I couldn't answer the question what so, so we won and I was happy, and then after the happiness sort of subsided, then I was just confused, like, well, we won, but why, like why are we here? What? What? What? What? What in

the world happened? And so it took me two years of research to figure out that there was actually this pattern, this thing that we did that you know, it wasn't that commonplace, but boy, if you do it this way, you can even survive and attack by Amazon. And that's what led to the innovation stack, led to all the research, like that's that's the thing that led me actually to

the research. And then I mean the reason right I wrote the book honestly is because herb callerher whom I was interviewing to sort of complete my research, Basically, he said, well, how are you going to share this with the world? And I was like, oh my god, I just got a homework assignment from one of my from one of my idols. It was weird. Herb was like, what are you gonna do about this? And I'm like, oh god, that's that's really quite quite amazing. So you're now no

longer CEO, but you're still on the board. How did you come to realize I was never CEO? I was chairman? You chairman. That's from from day one. Jack wanted to be CEO and I didn't. So that was a quick But you had a lot of operational Yeah, I was doing all the stuff that Jack wasn't, which was like most of the stuff beside software. When did you realize it was time to relinquish certain responsibilities and step back and say, let me let a new group come in

and take over and running the day to day. Oh. In my case, I was doing about a dozen things, and I eventually got somebody who was better than me at all those dozen things. You just delegated your way out of response. At work, I always assume that I'm mediocre at what I'm doing, and I will always try to find something who's better than me. And well, it's uh, it's been true. I mean, I'm in pretty mediocre, but

I'm fast. So I'm like in a startup situation, I will get things done very very quickly, and okay, but I will I will very quickly give that control to whomever is better and can prove it. And in my case that we're about twenty things to hand over. And when those things were handed over, um, that also happened to coincide with the birth of my son. And you know, people at the office are working twelve fourteen hour days, and if I continued that, I would probably be divorced

right now. And I just didn't. I didn't want to be the guy who was showing up eight hours a day when everyone else was putting in twelve. Um. So it was better at that point for me to step back. But really I was not necessary at that point. I mean, I I've done what I needed to do. That's really that's really interesting. And and to put a little coda on what you did, your card reader design was inducted to the Museum of Modern Arts Pantheon of Great Great

Designs back in two thousand eleven. That had to be pretty satisfying, considering you're not exactly a hardware designer. You're a glass blow Yeah, it's like guy who did art for twenty years. It was sort of flattering and insulting at the same time, right, Like, they didn't take any of my glass, but they took this little piece of plastic that reade a credit card. I mean, look, I'm I'm an engineer by training, so I got it. I mean, you know, I I I'm a technologist and a guy

who builds things. But I also sort of like art, and I was I was flattered but also sort of insulted. Quite quite interesting, So Jim, I really enjoyed the book. A lot of a lot of business books can be a little staid and dry. This is funny and a cerbic, and you seem to be having fun writing it. What was the process like putting all these ideas down on paper? I had fun rewriting it. It went through its eight It went through eight drafts. The first five drafts were

graphic novels. So I thought the I hate business books. They're boring. They put me to sleep. I think most of them are terrible. Um, and I didn't want to write one. Even though Herb Keller, her who was one of my idols, basically assigned me a homework assignment. I thought, well, I'm just gonna do it as graphic novel. I'm gonna make this fun because it turns out that the stories that I tell in the book are actually they lend

themselves to pen and ink. There's the destruction of a major city and murder and Nazis and like, there's a lot of stuff blowing off fun stuff. Yeah, I mean it, like, and it seemed to me like it would be a better comic book. And um, I wrote the drafts as a comic book. And then I showed it to Herb and he hated it. Really, he hated it. I'm on an old school though, isn't he. But he's got a great sense of humor. He has a legendary, legendarily funny,

great sense of humor. I was expecting he was gonna love it, and I was so crestfallen when he said, Jim, if you're going to do it that way, leave me out. Really, And I have to credit him for this, there's one Herb, first of all, didn't want to be portrayed as a cartoon superhero. Okay, And and here's the thing. Here's why Herb is so much smarter than I am is because if you tell a story as a graphic novel in pen and ink. You're telling a hero story and and

superheroes are different from you and me. The whole purpose of my book is to say, look, what makes these super successful companies and super successful founders is not some superpower that the founders have. It's this superpower that anyone can access. And it's really a story for the everyman. And Herb stopped me from making a giant, giant mistake. Um, although I did. If you go to Jimmy Kelby dot com, I did put some of the graphic novel that I did on so you can just download it for free.

It's like it's a comic book, but it's not about herb. Um. But yeah, I don't think you should have to. So here Look, here's here's the thing, Barry. The reason I wrote the book is because if you're in business or in life, you're gonna occasionally run up against this line where humanity has not figured out how to solve this problem that you're looking at. And on the other side of that line, there's no crowd, there's no herd, there's no safety in numbers, and you're gonna feel if you

step across that line, terrified. You're gonna feel fear you're gonna feel all this thing. You're not a superhero for stepping across that line. You're just a that's scared gazelle. You've left the safety of the and you're terrified. Okay, imagine what's like to be that gazelle. I mean, I I see those documentaries, I almost cry because like that was me in grade school and most of high school. You know, it's it's just terrifying. But unless we get

people to step across that line occasionally. I'm not saying live across the line. I'm like being bold or any crap like that, saying, look, a couple of times in your life when you run up to the edge what people have figured out, you can choose to step across that line and maybe solve the problem. Maybe you're not necessarily going to solve it, but maybe you got a chance at it. I want more people to do that.

And so that's not a superhero story. So herb caller her, I wish he was still alive because I wish he got to see the final copy of the book, because there's not a cartoon in it, and it talks about the everyman. It talks about this power that we can all have a scared humans. So let's let's talk a little bit about that before we get to what the innovation stack is. I want to ask you, copying perseverance audacity, tell us about that combination. Yeah, so perseverance and audacity.

So we all talk about grit and perseverance and how perseverance is really crazy. You know this this, this this laudable thing. You should stick with it, don't give up, don't quit, you know. And um, I'm kind of a quitter except in certain circumstances. And I'm not a twitter when I feel threatened, when I'm terrified, when I'm that gazelle that's out of the hurt. Um. So I tend to create situations that put me in those moments. I mean even the state interview. I mean, I'm scared right now.

I'm not used to me. You shouldn't be. Yeah, I know I shouldn't be. But my hands are sweating over here, right. So, But the point is, if you are audacious enough to step across that line, if you are somebody who is willing to do something that seems a little bit crazy, then you don't have to have a lot of self discipline, your self discipline comes from your survival instinct. And this this has always been my hat because I'm a lazy guy.

I sleep too late, you know, just just you can. Yeah, there's a ton of lazy uh in in my DNA. But there's also a ton of fear. And so what I will do is I will put myself in circumstances where the fear sort of counteracts the lazy. So I end up being kind of a workaholic in certain situations where oh, I've just committed this thing and now I gotta get it done. Oh really, you you want to do this? Okay, well let's go take a lot of work so you don't have to be disciplined if you

are audacious. So now let's talk a little bit about the innovation stack. What is that and how can we put that to work in our startups or existing businesses. So the innovation stack is this weird thing that I found at every company that I studied that fit the

following model. Okay, So when I was trying to explain what happened to do between Square and Amazon, I said, okay, so let's look for other companies when they're small and not very powerful, that were attacked by these major forces, either governments or industries or uh, competitors that were a hundred times their site, Like, let's look for the real underdog and then find the underdogs that won that battle

and see if they have anything in common. And what they had in common, among other things, was this thing called an innovation stack. It wasn't called that. I just had to coin the term. But it was this mess. It was this thing, and I was like, what are they doing? What are they doing? And the answer is a company that's inventing something that's totally new is not

inventing one or two or three things. They're probably doing ten or twenty or thirty different things that have never been done before, certainly never been done before in combination, and in combination, all those things affect the other things. So you get this real mess. And so innovation mess didn't make a good title. Uh, so we came up with innovation stack. But stack makes it sound sort of linear, and it's really this sort of snarl of interlocking things

that you're doing differently. It's a jumbalaya. It's just a pot of brood things. And and use the example, Hey, if there's an eighty percent chance that Amazon is going to beat us at the first thing in our stack, and an eighty percent chance on the second and the third, down to the fourteenth. What you're left with is a tiny percentage that they're gonna be you on everything across the board. Yeah, yeah, the house always wins. If you have to talk toss the dice twelve times, you're gonna

you're gonna crap out. So so let's talk about two other companies. We already talked about Southwest. Let's talk about the Bank of Italy. What was the Bank of Italy's innovation? So the Bank of Italy is amazing because when I say the word bank to listeners of your show, they all think of what was invented by a kid who dropped out of school at age fifteen and was a

produce vender. I mean, this guy sold lettuce for a living and his name, ap Giannini is not one you've probably heard of, but he at one point could have been the richest person in the world, and he built what you think of today as a bank. So what do you think of the bank. You think of a branch you can go into, You think of tellers that you can talk to, You can think of a loan

you can get for a car or a house. You think of the fact that you can go into a bank if you're a woman, right, like he opened the first bank for women. Like what you think of his banking a hundred years ago was totally different and A p. Giannini created something called the Bank of Italy originally, and then that became successful enough that they bought the Bank

of America renamed a Bank of America. And I know you're saying, oh wait, I hate Bank of America, But like Bank of America fifty years ago was still very innovative and very cool, and the Bank of Italy was what started at all amazingly, it was from a kid who knew nothing about banking and just wanted something to include the little guys. So that was the problem that he identified and wanted the solves. And we're just square.

Let's talk about Ikea. What is their innovation stack? So Ikea was very interesting because Comprade, who's the founder of Ikea, tells a very personal story about how he was terrified and scared and crying. In fact, um, this was you know, right after World War Two and you know his country was in devastation the economy was a mess. Uh. He

was trying to make this furniture. Um actually he was trying to make a catalog first, and then he was trying to make furniture, and the furniture manufacturers of Sweden basically ganged up on him and prevented him from going to the trade show. So he had to do his own trade show, which is what created the IKEA showroom. The first warehouse show room was created because he was kicked out of the trade show, and then he was actually kicked out of the country because they would let

him manufacture his wares in Sweden. They had this this industry group that had such a lock on manufacturing. They said, we won't make it for you. So he's like, well, I guess I'll go to uh Poland. Well, Poland just been wrecked by the war, but they were very eager to rebuild, and so he he was sort of forced to build an innovation stack because they wouldn't let him

copy what everyone else is doing. And this is sort of one of the things I get into the book, and that is, look, usually copying is the right solution. Do what everybody else is doing. That's probably what the that's probably what's going to work. But if you can't copy, you're gonna be forced to innovate, and innovation could lead you to be, in this case, the biggest furniture company

on the planet. And Ikea is wildly, wildly successful and very profitable, although we don't know because it's very private, private, it's one of the biggest private companies in the world. So quote another quote of yours that I thought was quite fascinating. Every man made object that you have ever encountered began as an idea in someone's minds ideas compete for atoms, splay. Oh, this is the idea. So everything you see in the world is I like to think

of it as us as a sea of success. So I'm sitting in the studio right now, I'm looking at a microphone. Well, somebody had this idea for this microphone, and somebody had to then build it. And there were other competing designs for microphones that didn't make it into your studio. Okay, And every molecule in this room, including you and me, like we competed for molecules, you know, biologically our parents somehow survived and you know yours didn't mind,

didn't how it happened. Beats me, but it did. If you look at that, everything in the world is a winner to get its atoms into existence. And you may sit there and say, well, this is a crumby you know, coffee cup that I'm holding, and it could be better than the handle, could be more comfortable than all this other crap. But the fact is that that coffee cup one. You don't know the explanation, but you know it's the winner. So you are surrounded your entire life by nothing but winners.

It's so funny you say that because I have a pet theory that says everything you see is survivorship bias. And because you're surrounded by winners, you don't see the millions of losers and iterations and failed attempts that went into trying to build that, which is my theory as to why people continue to put money into plays and restaurants that have such a horrific success rate. Um, because all they see is Hamilton's. All they see is the hot Michelin star rate. They don't see the fifty ones

or the millions that failed before that. Oh yeah, and and you can have selection bias, uh in in an individual form. It's just called denial, right, you know, selection bias on one person is just denial. It'll work this time. Well, I have to repeat. I found the book to be like a really fun read, which is what not what you expect from a business book. And you clearly have a sense of humor and some snark which comes up cross in the book. Thank you. Did you catch the

dirty joke? Which one? Well, I I there are a couple in there. You probably did. Um, there was one in there. I will not tell because I promised not to tell. But my editor was sort of checked out on the last part of the book. He'd taken another job and he didn't tell me, so he didn't really scrutinize what I was writing. So you snuck some I snuck this in and I told him and he's like, we have to tell me. It's like, now I don't.

You're the editor. You have to catch it. And so we had this like game of chicken and uh, and he gave up and went into publication. And I'm not going to say what it is, but like, yeah, there's some stuff in there that I love the idea of Easter eggs within a book just just kind of have some fun. Yeah, we'll talk about the name change, and we'll talk about some of the other things you co

founded or founded. UH. Let's start with UH. Invisibly, can consumers really profit off of all of their private data that these online companies and social networks are grabbing? Tell us, tell us a little bit about invisibly. I wish I could give you a strong yes. I will give you sort of a kind of right now. But the idea behind invisibly is very sound, which is that you should stop being the product and start being the person in control.

And what I mean by that is when you're using a platform for free like Facebook or Twitter or any of those platforms Google for this for that matter, they're going to monetize you. And what that means is that they serve you things that serve them and only them. So I'll give you an example. Facebook has figured out that the more time you spend on their platform, the

more money they make. And they have also figured out that if they piss you off towards the end of your browsing experience, you're going to spend more time on it, So it serves them to get you. Know you, they'll show you the pictures of your cousins and your kids and all the cool stuff. And then if you if it looks like to their algorithms that you're gonna leave, they will piss you off on purpose. And that's how

they're one of their tricks to keep you engaged. Well, yeah, it's well known now that is not good for you, but it's good for Facebook. How do you monetize How do you, as the individual user flip the script and monetize that. So about five years ago I started working on this idea that everybody's had it. It's an idea called micropayments. And micropayments are simply making you the center of the transaction. So if you see an ad, you

get paid for seeing that add a tiny amount. And if you view a piece of content or read something or listen to something like you listen to this podcast, and we should we should you know, we gotta pay Barry, Yeah, we should pay Berry. We gotta pay for you all the work you did I forgot sake. You read the book like, you know, that should be compensated. So at the center of this, though, is the person in charge. And what we're trying to do with invisibly is create

an invisible agent. And this agent is going to buy for you and sell for you. They're gonna buy at the lowest prices they can. They're gonna sell your eyeballs at highest prices they can. They're gonna negotiating your negotiate on your behalf. So the first thing we're going to stand up is a newsreader which will take you know, most of English language news and give you control of it. And look, I can't tell you that people are gonna want to use this because news is so polluted right now.

Everybody the currentcept of this, it's really it's really interesting. It's a great concept, Barry. I can't swear that it works, but if you go to invisibly dot com you can try it. And look, we're giving it a shot, um.

And the hope is that if we can give people control, then they will feel better about what they're consuming and also what they're selling, because believe me, if you think something free, you're paying for it with your attention, and you should be in control of the The old joke is if if the product is free, then you're the problem. That's so that's it. How'd you like working with Founders Fund? They have a really interesting. Uh history, I really like

founders Fund. Founders Fund was the only money I wanted in the company. Uh, And it's it's because of Peter teel So micropayments. If you know anything about the history of the Internet, everyone's had the idea, nobody's made it work. So we're talking about twenty five years of constant failure.

So when I was pitching Peter, well, so first of all, forget Peter when I when I did the problem, when I did the company, I said, well, I could fund the company myself, but that would be stupid because then I'm just an idiot who has no validation. So I thought, who would be the most validating capital in the world. And I thought, I need somebody who's made contrarian calls, who's been right, who's been in your face, who's not afraid to be a little controversial. And only two names

came to mind. It was Elon Musk Competer too and Elan. I can't get in touch with him, but I can get in touch with Peter, and I went, I pitched Peter and they both were part of the original PayPal man memory serves. But I mean Peter has made contrarian calls and been right. This is the thing when Peter invested invisibly, it said to the rest of the world, you better pay some attention here because somebody who's been right more often than you are is putting his money.

But in this so let's talk a little bit about what you learned building a billion dollar business. Square when public it's become wildly successful. What are the lessons from that? Uh? Wow, um, I think it's the lesson of serve the unserved. I mean what Square has been focused on from day one are people who weren't invited to the party. And we began with payments. That's where we were. We're now doing that with cash app, which is a runaway success. But

cash app is esessionally a bank in your pocket. It's a way of trading stock, it's a way of buying crypto, it's a way of it's a way of participating in the financial system that you know, people like you and I take this for granted. We think, oh, well, why are there unbanked people? There people for the same reason their business are too small to declare bankruptcy. Like you, you don't realize how many people were excluded. So cash app is inclusive. There Um, you know we just bought Title.

Our excitement would that was a big surprise. It seems like a little outside of of what square folks. Yeah, it is if you think of it in terms of music, if you think of it in terms of artists and how artists are at the you know, sort of receiving end of a lot of abuse. Like, we really think that empowering artists through the Title platform could be transformed for the music industry and for the artists. So look, in other words, get them a fair payment on their

streams and down laws. Yeah, and look, I mean you can get the same song on Title that you can on Spotify. I mean, like we've got to hire data rate. But look, they'll catch up at some point. Um, And I think it's more about what the artists are gonna experience with Title. But again the focus is just like what can we do to empower the people who have traditionally been left out of the party. So let's talk

about defy. Do you see squares business as part of the decentralized uh finance movement or are they outgrowing the traditional payment system? So it's a little both. I mean, as a so I'm a I'm a Fed regulator. Now I actually get to see regulation from inside the Federal Reserve, and regulation is really really good for a lot of things. But if it becomes too ossified, if it becomes too too restrictive, then it becomes bad. And I like the

idea that we've got decentralized options. What do you make of the name change of air to block Inc. What what does this say about the role crypto is gonna play in the square ecosystem? So the block was a pretty you know, sort of clever round a couple levels. It was you know, the three deventual version of Square of block blockchain. It was also block you you know, it had some negative connotation to on Twitter. Yeah, I mean, look there's there's a lot of you get blocked on Twitter.

I mean like like, you know, you take the go of the bad um. The Square brand really means payments, and people think of Square, they think of getting paid. Uh. They don't necessarily think of person to person payments, or bank in your pocket like cash app. They certainly don't think of music like title. They don't think of other things that we might be doing. And so so this is sort of the alphabet to Google search. Yeah, yeah, so we're still calling you. You still call Search, Google,

you still call payment Square. But we got this thing over it that you know have I mean Google's case, I got a space program. In our case, you know, we got something called Spiral. So so let's talk about something else you're doing besides chairman of the St. Louis fed And and by the way, I have my Fred swag Love Fred. Yes, I haven't worn that T shirt. Uh it's Bloomberg yet. Um, but I'm a giant Fred fan. For those of you who like manipulating economic data and

generating charts and things. Fred is the best tell us about the innovation district for downtown St. Louis. And how did you get involved in that? So? Uh, St. Louis has had some hard times and I wanted to build something in my hometown that was going to not only show off how cool St. Louis is but also attract people to it. And so we bought the old Post

Dispatch building where the newspapers used to be printed. This is basically a factory, and we put a hundred million dollar new office in there for Square and a bunch of employees, and then we save some space for some new folks who who want to come in, and we're hoping to catalyze this whole district because what I'm trying to do in downtown St. Louis is create this sort of swagger that you have in the fancy office. So

I mean, I don't know if you've uh Barry. When he was taking me through Bloomberg to Barry was walking me into the studio, he was talking about boot Bloomberg has a curved escalator. It's the coolest thing in the world, the only curved escalator in North America. Right, It's just so cool. And Barry feels cool walking down this curved escalator because that's how you should feel if you work for Bloomberg, because Bloomberg is a kick out the organization, Right.

I want people to feel that way when they work for Square. And when you work in Square in Melbourne or Sydney or or or our offices in San Francisco, and you do you feel that swagger because our offices are great. We didn't have a great office in St. Louis. Now we do our office and St. Louis is spec tackular, and I want the people to come into St. Louis. Oh,

it's the best looking office we've got. I want people to have that swagger and then I want to take them to carry a little bit that outside and bring more people to St. Louis. So, so is this an enterprise Is this an enterprise zone? It's hard to spit that out. What what? What is this actually set up as it possibly is? I don't know the tax there's a bunch of tax things that I didn't pay much

attention to that. Look, it's just a cool building and I think it's an opportunity zone or something like that. Opportunity but you know what, I honestly didn't pay much attention. Look, the numbers are terrible. Whenever when sometimes if everyone's like, oh can I invest with you, it was like yeah, yeah, you like you can have the whole thing. It was not a good amount of money maker. It's not a many maker for me. But that's okay. That raises an

interesting issue. You've been a serial entrepreneur and a fintech investor. The traditional route from your success is, hey, become a venture capitalists, seed a bunch of companies, lead a bunch of A and B rounds. Why not go that route? Oh I did? I'm a VC, but I mean, I don't. I don't lead with it because it's honestly kind of boring. Like what my venture capital firm does is we invest as software the service companies that are gonna te xt

their returns and our returns have been fantastic. It's just a family officers just open. No, every it's fin top. You can, you can go to fin top. It's it's an open fund. I don't know if I'm allowed to say when we're open, but yeah, with a fin top is a VC fund and I'm a general partner. We we make a lot of money, and we make a lot of money by using a form law that makes a lot of money. Um, and the formula, I'll tell

you what the formula is. Uh, Big platforms have to buy small companies because big financial platforms are terrible at innovation. And if you identify the companies that they have to buy and fund them for three years, they tend to ten x year or money interesting, really interesting. So no, it's not, that's really boring. Come on, you don't think you think ten x is boring? No, I think it's I think, but it's it's it's a wonderful result. The process that I go through there is so mechanical. It's

not interesting because it's work. It's successful. Yeah, and the other partners work really hard and I you just count the money that I show up and do your scro and I'm I'm making swimming in the gold coins. And they used me to fire people like if I have to talk to an entrepreneur about how they should leave their own company. But what I've done it myself like and occasionally have to pull pull somebody aside and say, hey, look, it's really good to be the other guy that makes

that makes a lot of sense. So so let's stick with traditional banks and being unable to innovate. Since you mentioned you're looking at small companies that can facilitate ten x on larger platforms, why can't traditional banks innovate and and what are the missed opportunities that these folks um are creating for for startups. So banks and financial institutions become structurally conservative for a very good reason, which is you don't become a big bank if you ever lose money.

So one of the you know, the classic images of the bank is is the bank vault that this giant piece of stainless table all these bolts in it. I mean, we don't see them that much anymore. But like that used to be why you should trust this bank, as we have this you know, big vault. Look, if you lose money, you're dead. I don't care how innovative you are as a financial institution. You first have to be conservative.

You have to be good at auditing, accounting, record keeping, you have to be good at legal and compliance and all these things that are not innovative. The problem is that these organizations that get too big become structurally conservative. They proved they promote only accounts and lawyers and auditors, and after a while they kill innovation. So what you have is this company that needs to grow. They need to get new products in but they can't, so then

they have to buy their way into that. And it's actually a pretty good marriage because the big platforms are given regulatory um permission to access the rails of commerce, whereas the small companies aren't. So I mean we even went through the at square when we started our our our our product, we had to get permission from Visa and MasterCard in the banks to even transact legally on the rails. So when you first went to Visa and MasterCard and said, hey, we want to do credit card processing.

What was the response, what was the pushback? Lay the responses, we have an app. We have a rule against exactly what you're doing. In our operating regulations it says you can't do what Square wanted to do? So how did you get around that? We had to get them to change our minds. And I got the sense from the book that you guys were kinda on not like Uber violating rules and laws, but you were kind of right

at the edge when you were startup. We built a product that violated, by my count, at least seventeen rules and regulations that were promulgated by Visa, master Card, Visa master Card, the federal government. We I mean that the total body count was like seventeen and and And it wasn't like we were intentionally trying to flaunt the laws.

It's just that we couldn't build our product in compliance with everything initially, and we had to have a working product because when you're building something new that somebody has never seen before, if you don't have a working prototype, people can't visualize it. They will always map you into something they've seen, their history, their frame of reference. Yeah, and so if you're gonna break that frame of reference, you better do it with a product that actually physically

exists and works. And so to make it physically exist and work, we had to break a bunch of rules. Now, what we then did was get compliant with all those rules, or in some cases, get those rules changed. In one cases, we had a MasterCard, Visa American Expressed actually changed their operating regulations for Square to exist. How on earth do

you get behemoths like that to change there? Because I my assumption is all those rules, not only have they been vetted by lawyers and and everybody else, they will work to the advantage of m X and MasterCard. Well, yes, uh, rules exist, but remember there's a there's a time when that rule is written. And if the world moves thirty years, and remember we're talking about tech years, so we're talking about probably a hundred years in banking time, um, then

that rule may no longer be applicable. And so those rules can be rewritten. They've been written by humans, that can be changed by humans. And the way we got them changed was we did a demo that dropped jaws at MasterCard really and MasterCard said, well, actually, wasn't MasterCard. I say master Card. It wasn't MasterCard. It was Ed McLoughlin. Yeah.

And his title was what what he was? Chief of something? Right, because you talked about in the book sending money with a credit card and the reader in the in the early days of Square, and people like, that's not possible. Yeah. Yeah, they were like, what the hell happened? Yeah? I mean, and we did a demo for Ed, and and we knew that his decision was going to determine the fate of our company because if he said no, we were dead. Really that's amazing. So so how did tell us about

the demo? We did the demo? Um and uh, it went perfectly. I mean, Jack and I demo the product about fifty times. So we had our we had our game down perfectly. And the great thing about Jack Dorsey, of the many things, he's very quiet, He's very calm. I'm a nervous guy, like I get your high energy. Yeah, but I've also learned to never interrupt. I will never interrupt anybody. So we did the demo and then Ed said,

you realized that violates our operating regulations? And I said, yes, sir, We do, and then neither Jack nor I said it thing for like twenty seconds and I don't want to count. That silence is I don't want to count twenty seconds and dead air on Bloomberg just right now. Just imagine how horrible you feel, how tight your clenching on that countdown. And then he said, so, I guess we have to change our rules, and he left the meeting. He looked

at his team, glances team. He's like, I guess we got to change our operating rigs, and he goes what was the eye contact like with you and Jack at that moment, I was I was probably suppressing a laugh, like you know, like a kid in the back of a you know, classroom in high school. I was so giddy at that moment because it's like, oh my god, well, no, we can live like we hadn't one yet because we hadn't released as we didn't even know if anyone wanted

the product. You have to think someone at that level says, oh, we're gonna change MasterCards rules so your product can do what it does. That feels like now all that's left going out and doing it. Now, all is left is going out and see if anybody but me wants this product because we had not been had to know. No, we didn't. We didn't because look, and this is this is another thing about innovation. You don't get to test your product, if it's truly new, until it's built and working,

because if you say we'll imagine this, they can't do it. Right. Elon Musk when he was building the early Tesla's, you know, it was like, well, it's electric car, and people think electric car. What do you think of when you think of electric car? Golf card? Right, you think of this crappy little thing, you know. Uh, And and it's got

terrible acceleration. Electric cars accelerate great and needed instantaneous. So Musk used to sit you in the car and he'd ask you to pick your favorite radio station, and you reach for the radio dial, He'd punched the accelerator and glue your with five g's of acceleration to the back of the seat. And that's how we did it. You have to build that demo. If we hadn't had permission for master Card to build it, we couldn't have released it. But the day we released it, we didn't know if

anyone wanted it. This is the thing about innovation. You don't get that guarantee. I I gotta say this to your to your listeners, because it's so important. You've been told your whole life not to jump unless you've got to guarantee, unless you got to study, like show me the report from McKenzie or something that's just gonna prove that what I'm about to do is gonna work. So I'm not like responsible or at risk. I think it doesn't exist. If it's being done for the first time,

you can't prove that it's gonna work. That that's that's just astonishing. Maybe this is a little hindsight bias because we now see how how much demand there is for for Square. But if you would have asked me years ago, Hey, anybody, So my wife used to teach fashion, illustration and design and art. So I've been dragged around to all these museums and all these art fairs and shows, and you

show up at them. In the old days, they would have the physical clunk clunk machines, the knuckle and it was very very clear early on that square was made for those soda people. Oh, I lived in an easy, uptent baby and and you know, you see the the Washingm call you. It was not long after you guys formed that you started seeing this thing show up everywhere

at the littlest merchants. People who you wouldn't think would be ready to sell something to ready to sell something, right, and you know you those impulse buys, especially a piece of jewelry, is sculpture, some sort of wind chime, that's a couple hundred bucks who walks around with five hundred dollars on them? Putting a credit card in an iPhone turns out to be just that's the solutions of that problem. Yeah, it turned out it worked. But again we couldn't know

that at the beginning. I guess so, so I know, I only have you and the studio for a limited amount of time with some of our with with some of the last time we have. Let me ask you our favorite questions that we ask all of our guests, and I'm gonna start with, tell us what you're streaming these days? What was keeping you entertained during lockdown? Could be Netflix or Amazon Prime or even podcasts. Tell us what what you've been watching or listening. I'm rewatching old

episodes of Community so hilarious. I went through the whole run of those community thirty Rock Silicon Valley, the show which I kind of lived through, and so yeah, I've got friends who are in the cast, and I was like, I love this stuff. It's so I mean, I'm escapist when it comes to streaming UM and sometimes doubly so when I have to watch a Swedish television. So my wife is sweeping the Rock No, no, no, no, no. This we watched that. It was actually pretty good rack

and Mack was good. But I'm talking about Swedish public television. My wife speaks Swedish with our kids. She's trying to get them to speak Swedish, and I'm trying to not learn Swedish so that my kids can talk behind my back with my wife. So I'm not allowed in the room during this, so they're Swedet. We're streaming Swedish TV. By the way, if you like Silicon Valley, I'm going to recommend something to you which is the same thing,

only apply to gaming. Mythic Quest on Apple TV with I'm Forgetting his Name from It's Always Sunny in Philadelphia plays the lead. It's the same sort of absurdest comedy, only instead of being set in a software company set in a gaming company. Marry, thank you, you will, you will do that. You've just made my Christmas vacation that much better. And I'll tell you my favorite Silicon Valley story. So, when I was on the West Coast a couple of years ago, UM I did an interview with Marc Andreeson

at Andreas and harraways I fly. So that was during the week, and we were at there for the whole week. We fly home on Friday or Saturday, and I believe Silicon Values to broadcast on Sunday and Sunday night. I'm watching. I picked up the phone. I call Chris, who was out there with me from my office. Are you watching this? He's like, yeah, there was a scene set in the A sixteen Z building. Because it I recognize it immediately because it has waterfall that runs around the perimeter. It's

almost like a goes goes continually around the building. And I'm like, we were just there. It was such a weird experience to see the outside of building that you just were on television. It was really music. Yeah, Sahill Road south Side. So so Silhan Valley was such a great show. I really enjoyed it. If you like that. I think you'll I think you'll like epic Quest. It's Apple epic Quest Quest, Mythic Quest, It's Apple TV. That's

the reason to subscribe. Okay, yeah, there you go. Or if you have an Apple product, usually you get Apple TV free for a year or something. They're they're good about giving that sort of coop away. Um, you mentioned herb Kella her tell us about some of your early mentors who helped to shape your career. Oh my god, I didn't have many mentors. Um. I wished I had because I was always doing stuff where I wished I

had some peers. And what I realized, or actually what I realized very late, was that I was doing things differently enough that my peers were not good good help. So this is actually one of the things that that hit me in the book, which was that a lot of the advice that I was following from people who are super successful, I would implement it and would blow up, and I thought, oh, I'm just a terrible person, like

I can't do anything right. It turns up, it turns out that I was on that other side of the line where the physics are different. So if and this is the thing that that just drove me nuts. Is I would find competent, successful people and ask them for advice and do what they told me to do, and it would just be a disaster. Keller Her was the first guy, the very first guy that I sat within a room who I said, I did this and I felt this way, and her was like, I felt exactly

the same way. But that was late in my career. I never had a mentor growing You're you were doing quantum physics and you were asking people about Newtonian Yeah, it was. It just didn't apply. It was it was just different math. Different math really are interesting. Let's let's talk Since you wrote this book, let's talk about some of your favorite books or what you might be reading right now. Um. One of my favorite books right now is a pre Suasion Robert Child, Robert Robert Aldini. Yeah,

fantastic book. Um. I'm reading uh some uh some Churchill. I'm going through Churchill's autobiographies and his story of the World War two. Um, and that's that's part of my main reading. I look at Churchill like he was a bad polo player. He was an aristocrat. Uh, he was a war hero. He was uh, you know, a leader of a nation. He was, you know, he basically the reason we're all sitting here, Like he pretty much credit Western civil civilization to like one guy. That would be

the guy. Um. And he was a prolific artist and writer, and he's a great writer. And so I'm just chewing through Churchill. That's really interesting. He if you watched The Crown, he really is a key player in in the latter episodes of that. Yeah, I wish, wish, wish I've been able to meet him. Um, But uh, there's enough of his writings and enough of his recordings that I feel like I'm learning something really intriguing. What sort of advice would you give to a recent college grad who is

interested in a career in technology. Um, I'd say, get engineering training, learn learn to be a tech learn to be gig, go to the go to the school that teaches you how to how to make this stuff. For two reasons. Number one, there is a massive bias in Silicon Valley against people who are non technical. And the way you determine this, if they will ask, they'll ask you very innocuously, are you technical, very technical? And if you say, uh, no, I've got a degree in accounting

or finance or something, but not really hardcore engineering. Uh, they won't invite you to the meeting. Really, you'll get bullied, you'll get excluded. And just having those technical chops will get you into those rooms. Now, what you do in those rooms depends on your other skill set, but if you want to get in the room, you better be technical,

really really interesting. And our final question, what do you know about the world of filling the blank, technology, payments, innovation, entrepreneurship today that you wish you knew twenty or so years ago when you were first getting Oh my god, I wish I knew there was a line between innovation and copying. I never recognized it. I never recognized that

there was a different set of physics. That was the greatest revelation because I'd seen all these mistakes that I had been making again and again and again, and all of a sudden, I was like, oh my god, I can I can explain what was going wrong. You know, It's almost like if you if you're in a social situation and you just have this weird social tick and people don't like you because of your social tick. You learn to get out of control and then people are

nice to you. Like, that's what I felt like I was. I was a failure for so many years in situations where I thought I was prepared and ready to succeed, and the fact was I was just playing a different game. And if the game you're playing is using a different set of rules and you don't know those rules, then you're going to fail a lot. And that's that's why I had That's why it took me so long to sort of get my career out of you know, the dumpster,

really really fascinating stuff. Jim mcklvey, co founder of Square, author of The Innovation Stack, Thank you for being so generous with your time. If you enjoy this conversation, we'll be sure and check out any of our previous four hundred or so such discussions. You can find those at iTunes, Spotify, wherever you get your favorite podcasts. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. Sign up from my daily reads

at Rid Halts dot com. Follow me on Twitter at Rid Halts. I would be remiss if I did not thank the crack team that helps with this conversation together each week. Mohammed Ramaui is my audio engineer. Atico val Bron is our project manager. Michael Batnick is my head of research. Harris Wald is my producer. I'm Barry Ridalts. You've been listening to Masters in Business Bloomberg Radio