They showed him the door. We decided we would start a company together. Host when did you come to that conclusion . You talk about your work as a glassblower. When did you realize payments were a problem he had just been kicked out of or its somebody i needed to standm in better the first time, so my first suggestion was lets go to San Francisco and get even. It was like spike motivated. But jack to his credit said why dont we do something more positive and start a new company so that was the impetus and then we were looking for a problem and the only thing we determined was our company was going to be sort of focused on ive got my phone here, ive got to use it as a prop. These things. Are we going to focus on these things because the iphone had just come out and we knew it was going to b be entertained. We hired an engineer from apple and that gave us two weeks to figure out what we were going to do. We were stretching for ideas and i went back to my studio. I am a glassblower. I make things nobody needs. I make art, stuff nobody needs. In dc i used to teach, for all of the cspan viewer viewers ifu were about 20 years ago i taught you how to make a paperweight. But the point is i was in my studio trying to sell a piece of glass and i couldnt make the sale because i couldnt take american express. I was angry. I just lost this great sort of windfall will. I was talking to the lady about one of these devices and i have this attitude towards devices like this. This is a magic device that turns into anything i want. If i want a television entrance into the television, radio, itll turn into that book, literally, tomorrow it will turn into that book. It didnt turn into a credit card machine and so i was angry that i was also motivated to fix it. So i called up on the device and i said its make our iphones turn into credit cards and for that is where we came. Host the name of the book is the innovation stack. How did you learn about that from square . Guest it is and something we knew about when we started square pits the most powerful phenomenon that ive seen in business. Its a way of interweaving inventions together sometimes very simple. They create new industries. If you look throughout history at the Great Industries that have started, almost always there is an innovation stack at the beginning but i didnt know any of this so we want to build an innovation stack. I had no idea that any of this was happening in as a matter of fact, i wrote this book and ive been having people review it like your self and one of the greatest compliments i got was from a very successful entrepreneur. He has a painting on the wall that is worth more than my hou house. So im a little intimidated. He is asking me about this book and he finally says i wish id known this when i was 20yearsold and i was like me too. But it turns out there is a thing that happened. This process that can happen when you start to solve a perfect problem, something that hasnt been sold to people or because most of what we knew was copying and most of the tools and training and comfort and solutions that exist. When you get out of the middle of copying, you can build something that is truly different, but the process is different and it predates this s thing called the innovation stack. At least in m my studies, your company will dominate the world. It would run whatever business you are in. Host in the buck when you talk about innovation stack, it was interesting you talked about those that we dont associate with tech which a lot of people draw the parallel between tech and innovation. You focus on southwest, ikea and others. Why did you decide to focus on those companies outside of the technical industry . Guest i am a scientist by training and my father was a scientist. Ive been very steep in the scientifics. If you are going to do a reasonably controlled experiment, you need to eliminate the variables, and one of the most powerful variables is the phenomenon of viral growth and technology. So, like if you look at the potential for a company that does nothing really that interesting but has sufficient technology to an old business, you can get outside success and i didnt want to study back. When i saw the pattern of the innovation stack i said i want to Study Companies but not Companies Like google. It is successful or amazon, they are successful. What is it that creates this a success. Business success. In some cases just the pure disruptive nature of technology overwhelms anything else. So, this is why i laugh when people study the business practice. They could fund their own Space Program which is tremendous, but the management could be crummy, and its still such a powerful force, technology. So, i wanted to exclude that. If you exclude that, you are left with businesses in history that have still dominated their industries. So, i go back basically sort of 100 years ago and i look forward just to show the pattern is something systemi systemic in te innovation is not just the result of having, you know, Amazon Web Services and federal growth. Host some people have seen the book on the shelf and might be surprised to learn it started as a graphic novel. Can you tell me a little bit about the evolution of sex guest i didnt want to write a business book. Guest i dont particularly like this, most physics are boring. They are selfserving tones, they are not scientific, and i was like so i saw this and i thought i got to show this. And then i didnt want to write a busines Business Books i stard looking at the stories that the companies had done and the stories were epic. I mean, they were fantastic. I dont have to tell this as a business sort. I can use this as a graphic novel. So, what i originally sold to penguin was a sort of schizophrenic manuscript was like graphic novel and it flipped back and forth randomly and they liked it or i should say they pretended they liked it because they signed the contract and once they signed the contract, they owned the book. So, then they took me to this windowless Conference Room in manhattan, and had a little talk and it went like this. Do you realize your cute little comics are not going to show up on a 4inch screen fax people are going to listen to this as an audio book. So as an audio book is useless. You cant take a graphic novel and introduce it as an audio book. Book. I dare you will lose 70 of your audience. So stick with what youve got otherwise you have to rewrite it. So, they were right and so i rewrote the whole thing. But i still have all these great comics. I need my own comic. Shes got our book and this is free, you cant buy this if you go to the website i will give you a copy of this because look, this is a story about a banker, but its like theres a murder on that page and a funeral and heres the destruction of a major city. I mean, like this is comic book stuff. And the reason was because the tales of entrepreneurship and the companies that build innovation tend to be really good stories theres a lot of failure, and failure actually makes good stories. Nobody wants to hear about a success. Boring. But failure, how did you get that scar, that is a good story. So, i wanted to tell it in this format. And although there is only one chapter that sort of survive as a comic. If you guid by the book i wil give you the comic. They are good stories. They are fun. So often i find the sort of ignore the fun part on what its like to do something that hasnt been done because theres a lot of failure and you have to have a sense of humor about the state mistakes. Host on the point about the comic book i know only one chapter has turned into a comic book now, but it seems to me if you were to write a comic book about square, the villain would certainly be amazon. Can you tell me about what it was like when you realized that amazon is trying to directly compete with you in the payment space . Guest i appreciate the irony when you are in the middle of selling a book. I will redeem myself at the last second. So amazon did what they do which is they looked at the market and decided they wanted and decided to take it. They copied the product. They undercut the price by 30 and add whatever else they have like the amazon brand and 100 million customers and all this stuff. So lets grow this foryearsold and find a business. They just run the playbook. So, we were terrified. And we went looking for solutions that we could copy to respond. We looked around for all of the companies that had beaten amazon when they had been attacked in this way and there were none. Somebody like netflix with all of these giants startups, forget it. As he wrote that i now have survived this attack by amazon. We looked at what we could do and there wasnt that much we could do. They were being amazon and we were terrified that i wasnt much we chose to do differently, so we looked at all options and looking at the options, we realized they were all being done for good reasons we kept doing it. And we didnt even match them on price. The price was 30 lower than our pricewisprice was and we didnth the price. He just kept going. And it lasted for about a year and a half. And at the end, on the halloween of 2015, amazon gave up and mailed all of their former customers a little white square reader. I couldnt believe it. This does not happen, but it is what happened and that is what led me to the book because as somebody raised as a scientist, i needed an explanation. I needed to answer the question why does this happen, you cant just be lucky. They had innovation and we didnt know it at the time, there was the label and there were a bunch of reasons i havent seen but once i saw it i was like thats if thats what allows us to survive amazon and all these other companies i studied to survive the vicious attacks. Amazon was bad what happened in the early days was worst. We didnt end up in federal and state court. Host you mentioned you couldnt find the companies that havent been able to beat amazon and in the book you also say you found some people amazon beats but they were not willing to talk to you on the record about it. Guest i found many victims and talked to them personally and got their stories and then said thats great. Could i quote you. No. Even in industries competing with amazon. Everybody was so afraid of amazon nobody would go on the record. That isnt for me to share but i will tell you that it was so severe i could get nobody to go on the record. There are no quotes, just me. Host right now we are in washington where there is a lot of scrutiny on antitrust grounds at the moment. Do you think amazon is a monopoly . Not in the traditional sense but they exhibited some of the behaviors of market dominance. I dont have a valid opinion on this. But any company that gets big enough that it can move markets ought to be looked at. Again, im not a regulator. I guess i kind of am. Im a big believe her and regulations. Its good in a lot of situations. But on the other side, these platforms and amazon in particular are good at keeping the customer in mind. I think what you are looking for is a platform that gets very powerful but still maintains a semblance of responsibility. And i think that amazon and google have kind of done that and facebook kind of has not done that so they deserve regulation in different levels. Host i want to ask about apple because the square couldnt exist without the iphone and later much of the business rely on the ipad so what do you think of them in that context . Guest they are super powerful and really important to get along with. They also have great innovation. Ive got tremendous respect for them. We built our Company Based on a product that apple introduced to the world. I have a tremendous amount of respect for them and they are also not somebody that you want to kiss off. Dont do stuff like we did in the early days that could have upset apple a lot. Bought. We bypassed the connector. We thought we would get in trouble when we did that but then we thought maybe it will just be good with it because steve jobs at the time had a way of protecting the like. Host tell me about the design in the process of creating such an iconic design that people recognize. Host it is about this wide and had a basic design flaw. It was one that i noticed in the chose not to correct which is when you are swiping a credit card through it is so narrow that it would wobble as it would go through. About 80 of the time it would wobble and it wouldnt work and this was the result of my testing so to solve the problem, i built another reader that was about the wide and everybody was 100 with that so then the question why did we build a tiny little device that didnt work as well as the big device and it wasnt for cost reasons or anything like that. But the reaction to the device was different. If i use the big device, people are like another credit card reader. If i used a small device thats no, they were amazed. They were blown away. Remember the first time you saw a car to go through you were impressed, like everybody. It was super cool and to this day the square later they were not working better but they were cool. They were great and the funny thing is it turns out that 80 number really drops after a little bit of practice. So once you practice a little that you will get a good reader. We discovered by making a product that was less than perfect we trained customers to use our products and then once they were using it they were showing off to their friends about how the good they were. Host can you talk a little bit about this . Guest i was trying to discover what a lot of square to survive amazon and there was the innovations back i wanted to tell the world about it. Ive got to draw this one i got to tell the story. And i immediately realized that the english language does not have the word for the sort of process that i was describing into the process i was describing was building a business but not a bill business that has been done before. Coffee shops had been around for centuries. Like you know how to make a coffee shop or if you dont know, you can go to a trade show and they will teach you all the stuff you need to set up. How do you differentiate somebody like that from somebody doing something that has never been done before so i have another friend of mine trying to launch satellites stripping everything out of them and loading them up with a missile and she sends them to 90,000 feet and put it in a powered dive and fires the missile from 70,000 feet you dont need to have a very big missile because theres so much energy to begin with. So if you can launch them cheaper. Now where is his trade show, the fighter jets up into the atmosphere instead. He doesnt get this. Keep living in a different set of rules where i needed to be able to describe it, so it turns out the word entrepreneur was originally used and popularized to describe the person whos doing something new and weird and it might not work. It was the original use of the word but now it has since come to mean business. That is the correct use today that the ancient 100yearold use of an economist from 100 years ago it meant somebody who was doing something different, so i sort of go back 100 years s and say we are going to use this word but in its archaic definition because that is the only word we have that i can use to describe it and i wanted to be able to differentiate what it is like to not copy because i didnt want to write a book. Its a very tough thing. And then we are like ive got to write another book that i had to write this one because i looked for the explanation phenomenon that i have seen. Nobody ever explained it and then i understood why. How can they, there isnt even a vocabulary to take off the parts they want to talk about so i needed to dust off the old parts of the entrepreneur and then go and find examples that supported my thesis. Host when did you realize that use your cell phone into the category of entrepreneur versus business person . Guest i am still realizing it so by my definition, entrepreneurs are people level problems that havent been solvebeen toldbeen toldbefore ao solve problems that havent been sold before and im certainly in that category. I have problems i still dont have solutions to. But ive also had the fortune of doing some stuff that hasnt been done and then having it work and seeing the results and the results are tremendous. So, its just a great thing when it works or when it finally works i should say because typically at least the path ive taken a slight failure, something kind of succeeds but then that creates two other problems. You do that enough, one or two things will happen, you die because you run out of energy or resources or time or you will succeed and when you succeed, you will basically be in possession of this thing called an innovations back. You will have done so many Different Things and those Different Things will interrelate and influence each other. Look like nothing else in the market and behave like nothing else in the market and even when amazon decides to try to copy what you just did, you wont be able to come even amazon with all of the resources to tell. And this pattern is what creates Great Solutions to new problems. Host you mentioned youve known jack dorsey since she was a High School Student working for your company. Tell me when did you first realize he had some of these qualities of an entrepreneur . Guest demonstrated the first night we made him pull an all nighter we were in this panic. Thats how we got to him because we were getting everybody from the location where the company was in his mother ran the coffee shop we were using to keep everybody a week. So we would stay awake by munching on caffeine. I think she regretted it because we sent him home at 5 a. M. That morning. Quality, tenacity, survive on little sleep. I later discovered he is incredibly competent. Hes really good and it just shows through. Host you mentioned you had a brother like relationship with him and you are so defensive of him the first time he was pushed out of twitter. What are your thoughts now that theres been this recent activist push once again to push him out of the company and what are your thoughts about that . Guest she kicked him out once, brought him back, didnt kick him out of the third time i think theyve come to some terms but come on, who else is going to run twitter. I dont know anything about twitter or have anything to do with the company, but i would say this, jack is a fantastic leader and this whining about the fact he is running to Public Companies i think it has been successful and i assume he is working as competently as the other company. Host what do you think it is about him that gives the ability to run these Companies Successful . Guest hes single. [laughter] guest co. Single, no kids. [laughter] if i said you could not have a family, not have kids but have to run another company, im not saying it isnt a good tradeoff, but actually thats why i left square