In your book new innovation you tell the story about gas blower to team up with the founder of twitter to build a multibillion dollar payment company. In the book you talk about perfect problem so when did you realize these were a perfect problem . Its funny. I needed a way to delineate problems and if you think about the worlds problems you have the ones that are solved it can come to fruition but somebody already figured it out. So we just dont have the way to do it. That Stimulus Group in the middle to solve the problems that have not yet been solved. That is the focus. So in other words you are looking for a way to solve a problem that has not been done so you have to do something new. You dont get to copy. So jack dorsey and i come i hired him when he was 16 a High School Student to help me with a company that i still have. I dont run any of my companies. They manage themselves. We started working together through when he went to college. We kept in touch but then he was kicked out of twitter the first time. [laughter] they showed him the door he went back to st. Louis and we were talking and decided we would start a company together. We were kicking around ideas. We didnt have ideas so looking for problems that we could solve. When did you come to that conclusion . So as a glassblower tell me about that moment this was a problem for small merchants . Jack was just kicked out of twitter so my first reaction is he was like a little brother to me and i felt that i needed to stand up for. So what they did to him at twitter the first time was completely file. So my first suggestion was go to San Francisco and even just completely spite motivated. But jack to his credit said lets do something more positive and start a new company. So that was the impetus. And we were looking for a problem the only thing we determined the company would be focused on my phone i use it as a prop. These things. We will focus on these things because the iphone had just come out. We knew it would be important so we hired an engineer from apple and starting in two weeks for us to figure out what we were going to do. We couldnt think of anything. We were stretching for ideas so i am a glassblower. I make stuff that nobody needs i make art. In fact in dc i use to teach glassblowing for all the cspan viewers if you are there 20 years ago i was a guy that taught you how to make a paperweight. But the point is i was in my studio and i lost a sale because i couldnt take American Express card i was angry. I just lost it this great windfall. So was talking to the lady on one of these devices with the phone order so i have this attitude towards devices like this. This is magic and turns into anything i want to. A television, map, radio, that book. It didnt turn into a credit card machine. I was so angry but motivated to fix that so i called jack on the device and i said lets make her iphones turned into credit card machines. Thats where we started. Host the name of the book is the innovation stack. What is that and how did you learn about that from square . This is an something we knew about when we started square but the most powerful phenomenon i have seen in business. We stumbled across it it is simply a way to interweave inventions together. Sometimes simple inventions but if you put them together they take on their own life and create new industries. If you look history, at the industries that have starte started, almost always there is the innovation stack at the beginning. But i didnt know this. I had no idea this was happening and as a matter of fact, i wrote this book and having people review it like yourself, one of the greatest compliments i got was from a very successful entrepreneur interviewing me in his living room and he has a painting on the wall. So i am intimidated hes asking me about the book and he finally says i wish i knew this when i was 20 years old. I said me to. But it turns out there is a thing that happens, this process that happens when you start to solve a perfect problem that has not been solved before because most of what we do is copying and most of the tools and training with those solutions that exist. When you get out of the world of copying, you can build something that is truly different to create this innovation stack if you go to the innovation stack your company will dominate the world and run whatever business you are in. In the book talking about innovation stack its interesting that you focus on companies you dont associate with tech but i think people draw that parallel between tech and innovation like southwest and ikea. Why did you decide to focus on those outside of the Tech Industry . I am a scientist by training. My father was a scientist. I am steeped in the scientific method. If you are going to do a reasonably controlled experiment you need to eliminate variables and one of the most powerful variables is the phenomenon of viral growth in technology. If you look at the potential for a company that does nothing that interesting but add sufficient technology, you can get outside success. So what i did when i saw the pattern of the innovation stack. Is that i want to Study Companies but look at google. They are successful or amazon but what creates a success . In some cases it is just the pure disruptive nature of technology overwhelms anything else. This is my people studied googles business practices. They can find their own Space Program which is tremendous that management could be crummy but it sets a powerful force for technology. So if you exclude that what you are left with is businesses throughout history building those innovation stacks to dominate their industry so i go back several hundred years ago and work forward just to show the pattern that is systemic and innovation and not just the result of having Amazon Web Services and viral growth. People might be surprised to learn this actually started as a graphic novel. Tell us about that evolution. I didnt want to write a business book. I dont particularly like them they are boring. [laughter] this ponderous selfserving , not scientific. So i saw this and thought i have to share this. But i didnt want to write a business book so i start looking at stories of the companies that had done this. And the stories were epic. Fantastic. I have to tell this. I could use this as a graphic novel. So what i originally sold to penguin was a schizophrenic manuscript that was graphic novel then text and it flipped back and forth randomly and penguin liked it or pretended they liked it because they signed the contract now they own the book. When they took me to the windowless Conference Room in manhattan and had a little talk and said do you realize your cute little comics will not show up on a 4inch screen and people listen to this as an audiobook so as an audiobook it is useless you cannot say its a graphic novel so right there you lose 70 percent of your audience then just stick with what you got i got to rewrite it. So i rewrote the whole thing. But i still had all these great comics so i made my own comic. This is for you cant buy it i wont give you a copy of this because this is a story book banker but there is a murder page and a funeral and here is the destruction of a major city. This is comic book stuff and the reason i wanted to do a comic was because the tales of entrepreneurship or these companies with the innovation stack tend to be really good stories because failure actually makes good stories nobody wants to hear about success. Boring. But failure . Thats a good story. So i wanted to tell in this format. Although theres only one chapter that survives. If you buy the book i will give you the comic. I will not sell this but you can have it. And they are good stories. They are fun. And so often i find we forget the fun part to do something that hasnt been done and you have to failure and a sense of humor but mistakes everybody talks about that. So with that point on the comic book, i know only one chapter has turned into it now but it seems if you write a comic book about square the villain is amazon. Tell us what it was like when you realize that amazon was trying to directly compete with you in the payment space. Yes yes yes. Believe me i appreciate the irony in the middle of selling a book. [laughter] i will review myself or redeem myself at the last second. They did what they do. They looked at our market and decided to take it. When they take a market they do two things. They copy your product. They undercut your price almost by 30 percent and the they have like the amazon brand and a couple hundred million customers and then they watch you die. Square was four years old amazon did this and ran the playbook. So we were terrified and we went looking for solutions that we could copy to respond. We looked around for all the companies that had be in amazon when they were attacked and there were none. Netflix was already a giant but startups . Forget it. Zero. Zero startups that we could find have survived this attack by amazon so you are truly alone. And it was terrifying. There wasnt even that much we could do. But they were undercutting us they were being amazon and we were terrified but there wasnt much that we chose to do differentlys we looked at her options and then we realized we just kept doing it. We didnt even match them on price. For we just kept going. And it lasted a year and a half and that at the end on hallowee halloween, amazon gave up. And they mailed all of their former customers a little white square reader. I couldnt believe it. This never happens. This does not happen. But it is what happened. And that is what led me to the book because of somebody who was raised as a scientist, i needed an explanation. So why did this happen . You cant just be lucky. There is a phenomenon and it turns out square had an innovation stack. We didnt know it at the time and there were a bunch of reasons i had not seen it but once i saw it i said thats why. Thats what about all the other companies that i studied to survive these vicious attacks. Amazon was bad what happened to southwest was worse. We didnt end up in federal and state court. Herb kelleher and i. But you mentioned that you looked around and you could not find other companies that were able to be amazon but you also said he found some people that amazon beat but they would not talk to you on the record. Yes. I found many amazon victims and talk to them personally. And got their stories and then said thats great. Can i quote you . Know. Even the people who were in totally different industrie industries, people that were industries now competing with amazon. Everybody was so afraid of amazon that nobody would go on the record. I have zero on the record firsthand quotes in this book about what happened. Why are people so afraid . You have to ask them. I dont know. Thats not for me to share. But i will tell you it was so severe that i could get nobody to go on the record. So there are no quotations. Just me. Right now in washington there is a ton of scrutiny of antitrust grounds looking at congress and the ftc. Do you think amazon is a monopoly. Not a monopoly in the traditional sense. But i think they deafly have exhibited some of the behaviors of the market dominance. And i am not an antitrust lawyer i dont have a legally valid opinion but any company that gets big enough that it can move markets ought to be looked at. And then i guess i kind of and am with the question of the fed and im a big believer of regulation i think it is probably good in a lot of situations. But on the other side, the tech platforms and amazon in particular come are good at keeping the customer in mind. So i think what you are looking for is the tech platform that is very powerful to maintain a semblance of responsibility. Google has done that facebook has not. So their regulation is at different levels. I want to ask you about apple because it cannot exist without the iphone that much of us rely on the ipad so how do you think about them . Apple is superpowerful and they are really important to get along with. They also have great innovation. I have tremendous respect for apple we built our company on a product that apple introduced to the world with the mobile phone. So i have a tremendous amount of respect for them and also somebody you do not want to pass off. You do not want to do stuff like we did in the early days which could have upset apple a lot with the. Connector we put a square reader and through the microphone jack. That was a nono. We were not supposed to do that but then we thought maybe our product is so cool they will be cool with a because steve jobs at the time had a way to protect products if you thought you were cool you were fine. Apples lawyers would leave you alone. So we approached steve to save our butts. Host tell us about the design of square and that process to create such an iconic design that people recognize. The square card reader was this wide and then had a basic design flaw and it was one that i noticed that i chose not to correct that when you swipe a credit card through it was so narrow the card would wobble as it went through and it would result in a misread. So 80 percent of the time it would work in 20 percent of the time it would wobble and it wouldnt work. So to solve the problem i built another reader that was that wide and everybody was 100 percent with that so why did we build a tiny little device that did not work as well as the big one . It wasnt for cost. But the reaction was very different if i use the big device people thought another credit card device if i use the small one the one is in the smithsonian they were amazed what just happened remember the first time you saw a card go through the square reader you were impressed he got your attention. We took this giant gamble to build a product that mechanically did not work that well as it could but got your attention and blew you away. And set i think we just did something very cool. And to this day squares reader would work better if they were wider but they are cool. They are great and it turns out that 80 percent drops after practice so then youll always get a good read so by making a product that was less than perfect you could train the customers to use the product and then once they were using it they were showing off to their friends how good they were swiping the square. Host doesnt that major gamble because you talk about the distinction between entrepreneurs and above business people. Yes i was trying to discover what allowed square to survive and one amazon i saw the innovation stack. I have to draw this or right at this but tell the story that i immediately realized the english language does not have a word for this sort of process i was describing and that was building a business so how do you describe somebody who starts a business that was an entrepreneur a friend started a Coffee Company he has coffee shops. They have been around for centuries. If you dont know how to make a coffee shop you can go to a trade show they will teach you hire this vendor to set up the espresso machine so coffee has a soft problem how do you go from that to what has never been done before . The friend is trying to launch satellites for supercheap stripping them loading them up and then send 790,000 feet with a mock to power dive pulls up at the last set it on last second with Kinetic Energy and fires on the so if you could do that the we dont have to have a very big missile there so much energy to begin with. Launching a satellite is cheaper. Where is his trade show and russian fighter jets sending them up into the stratosphere. He doesnt get that he is living in a world where i needed to describe that. The word entrepreneur was originally used and popularized to describe the person who was doing something new and weird. Now it has since come to mean business. That is a correct use today. But the ancient use the 100 year old use that the economist for using 100 years ago meant they were doing something different. So we will use this word in the archaic definition this is the only word that we have to describe it. And i want to differentiate what it is like to not copy because i didnt want to write about. Thats a pain in the ass. It was very tough for me. I have to write another book. But i had to write this because i looked for that phenomenon that i had seen. So how will they explain it . Theres not even a vocabulary with the part that you want to talk about sweated dust off the definition of entrepreneur and then find examples that supported my thesis. When did you realize you found into that category . I am still realizing it. By my definition entrepreneurs solve a problem that has not been solved before or fail to resolve a problem that has not before. And i still dont have solutions but i also have the fortune to do some stuff that hasnt been done and then to see the results and they are tremendous. Is just a great thing when it finally works because typically the path that i have taken this failure failure it kind of succeeds but then it creates to other problems. One of two things will happen you will die or time and when you succeed you are in possession of the innovation stack and have done so many Different Things and that will interrelate and influence each other that what you have will look like nothing else and behave like nothing else. Even when amazon decides to copy what you just did, they cannot even with all the resources and talent, could not. This pattern is creates Great Solutions to new problems. Host he mentioned earlier you mentioned you knew jack dorsey since High School Student working for your company. Tell me when did you first realize he had some of these qualities of the entrepreneur . It was demonstrated the first night we made him pull an all mitre the day he was hired because literally everybody from around the location and his mother ran the coffee shop this is one ritalin was widely available. And marcia sold us the beans and i think she regretted it because we would go home at 5 00 a. M. That morning so thats how i met jack. [laughter] quality one, tenacity, got it. I later discovered that jack is incredibly competent. Hes quiet. Hes not bombastic but hes quiet and it shows through. You talked about relationships and you are so defensive of him so what are your thoughts now of a recent activist investor and what are your thoughts about that . Come on. You have tried that before. Dirt kicked them out once and brought them back you kicked my the second time and brought him back. Who else but jack will run that well . I dont know anything about twitter. I dont have anything to do with the company. But i would say that he is fantastic and things very deeply and the whining about the fact is running two companies, i think square has been phenomenally successful and that his other company and i leave him alone. Host what it is about him to give him the ability to run both of these successfully . He is single. [laughter] single and no kids. Are you married . Host i am not. You cannot have a