I hired jack when he was 15. A High School Student. Came to work for a company that i actually still have. Then he went off to college. We kept in touch. And then he got kicked out of twitter. The first time. And they showed him the door and he came back to st. Louis and we were hanging out talking. Decided wed start the company together. We then were kicking around ideas. So we started looking for problems we could solve. Came up with the problem of how got paid. You talk in the book about your work as a glassblower. Talk about that moment that you realize that payments were a problem for small merchants. As i said, jack had just been kicked out of twitter. He was sort of like a little brother to me. Someone i felt i needed to stand up for. What they did to him at twitter the first time was completely vile. So my first suggestion was lets go to San Francisco and get even with those guys. It was lex fight motivated. But jack, to his credit, said why dont we do something more positive and start a new company. That was the impetus. The only thing we determined was our company was going to be focused on my phone here i have to use it as a prop. These things. The iphone had just come out. We knew it would be important. So we hired an engineer from apple and he was starting in two weeks of that gave us two weeks to figure out what we were going to do. We couldnt think of anything. We were stressing for ideas. Im a glassblower. I make stuff that nobody needs. I make art. In dc i used to teach at if youve been to the park 20 years ago, i was the guy that taught you how to make a paperweight. I was in my studio and i was trying to sell a piece of glass and i couldnt make a sale because i couldnt take an American Express card. I was angry. I lost this great windfall. And i was talking to the lady about one of these devices. I have this attitude towards devices like this. This device is a magic device. It turns into anything i want. A television, a map, a radio. It will turn into that book. It didnt turn into a credit card machine. And so, i was like angry. But also motivated to fix that. So i called up jack on that device and i said lets make our iphones turning to credit card machines so thats what became square. The name of the book is the innovation stack. How did you learn about that from square . Its not something we knew about. But probably the most powerful phenomenon that ive seen in business. And we stumbled across it. The innovation stack is simply a way of interweaving inventions together. Sometimes very simple inventions. But put enough of these together and they start to take on their own life. If you look at history through the Great Industries that started. Almost always, theres an innovation stack in the beginning. As a matter of fact, i wrote this book and ive been having people review it like yourself. One of the greatest compliments i got was from a very successful entrepreneur. So we are in his living room. He has a painting on the wall thats worth more than so im all intimidated. Hes asking me about the book. He said, i wish i had known this when i was 20 years old. And i went, me too. Turns out theres this thing that happened. This process that can happen when you start to solve a perfect problem. Something that has not been solved before. Most of what we do is copying and most of our tools and training and comfort are solutions that exist. When you get out of the world of copying, you can build something that is truly different. It creates this thing called an innovation stack. At least in my studies, your company will dominate the world. Whatever business youre in. In the book, it was interesting to me that you focused on companies that we dont associate with tech. You focused on southwest, ikea. Why did you decide to focus on those companies . Im a scientist by training. Very steeped in the scientific method. If you going to do a reasonably controlled experiment. You need to eliminate the variable. One of the most powerful variables is the phenomenon of technology. If you look at the potential for a company that does nothing really that interesting but adds sufficient technology to an old business, you can get outside success. But i didnt want to study them. When i saw this pattern of the innovation stack, i said i want to Study Companies but i dont want to Study Companies like google. You look at google, or amazon, all of these are fantastically successful. What is it that creates their success . In some cases, just up your disruptive nature of technology overwhelms anything else. This is why i laugh when people study googles business practices. They could defend their own space program. Which is fantastic but their management could be crummy. I wanted to exclude that. What youre left with is businesses throughout history that built innovation stacks and have still dominated their industry. So i go back, i started 100 years ago. Just to show the pattern is something that is systemic in the innovation and not just the result of having amazon services. Some people might be surprised to learn the book started out as a graphic novel. Can you tell me about that evolution . I didnt want to write a business book. I dont particularly like most Business Books are really boring. They are these ponderous selfserving tones. Nonscientific. So i thought, ive got to show this thing. Then i didnt want to write a business book so i started looking at the stories of companies that have done this. And these stories were epic. So i thought, i dont have to tell this is a business story. This can be a graphic novel. What i originally sold to penguin was this schizophrenic manuscript hours graphic novel and text and it fit flipped back and forth. Penguin liked it. Why should the, pretended they liked it. Because they signed the contract. Then they took me to this windowless Conference Room in manhattan. Had a little talk. And it went like this. You realize your cute comics are not going to people are going to listen to this as an audiobook. As an audiobook, its useless. So right there you will lose 70 percent of your audience. Otherwise youve got to rewrite it. They were right. So i rewrote the whole thing. But i still had all of these great comics. This is free, you can find this. I will give you a copy of this. This is a storybook banker. Theres a murder on that page. And there is a funeral. Heres the destruction of a major city. This is common book stuff. The reason i wanted to do a comic was because the tales of entrepreneurship and companies that built innovation stacks tend to be really good stories because theres a lot of failure. Failure makes good stories. How did you get that scar . Thats a good story. So i wanted to tell its in this format. Although there is only one chapter that survived of the comic. They are good stories. They are fun. So i find we sort of ignore the fun part of what its like to do something that hasnt been done. Theres a lot of failure and you have to have a sense of humor. Mistakes, everyone was talking about that. On the point about the comic book, i know only one chapter has turned into a common book now but seems to me reading this, if you were to write, book about square, the villain would certainly be amazon. Yes. What was it like when you realized amazon was trying to directly compete with you in the payment space . Believe me, i appreciate the irony of dissing amazon when youre in the middle of selling a book. But i will redeem myself at the last second. So amazon did what they do, which is they looked at our market and decided they wanted it and decided to take it. They copy your product. They undercut your price. Almost always by 30 percent. Then they and whatever else they have. The amazon brand and couple hundred million customers. So when square was four years old, they did this. They ran the playbook. So we were terrified. And we went looking for solutions that we could copy to respond. We looked around for all companies that had beaten amazon when they were attacked this way, there were none. Companies like netflix were already giant but startups, 0. 0 startups that i know of have survived to this attack by amazon. So its like you are truly alone. It was terrifying. There wasnt even that much we could do. Amazon was undercutting they were being amazon. And we were terrified. But there wasnt really much we chose to do differently. So we looked at our options. We realized they were all being done for good reason. So just kept doing it. We didnt even match them on price. Amazons price was 30 percent lower than our price. We didnt match their price and we just kept going. And it lasted for about a year andahalf. At the end, on halloween of 2015, amazon gave up and they made all their former customers a little light square reader. I couldnt believe it. Couldnt believe it. This never happens. This does not happen. And thats actually what led to the book. As someone whos raised as a scientist, i needed an explanation. Why did this happen . You cant just be lucky. There must be some phenomenon. Turns out square had an innovation stack. We didnt know it at the time. There was no label. And there were a bunch of reasons i hadnt seen it. Once i saw it i was like, oh my god, that was it. Its what allowed these other companies i studied to survive vicious attacks. Amazon was bad but what happened to Southwest Airlines in the early days was bad. We didnt end up in federal and state court. Had it worse than i did. I wanted to ask, you mentioned you looked around and you couldnt find other companies that had been able to beat amazon. In the book, you also say you found people amazon beat but they werent willing to talk to on the record about it. Yes, i found many amazon victims and talked to them personally. Got their stories. And then said, thats great, could i quote you . No. Nobody. Even people who were in totally different industries. Even people who were in the industry is 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 with amazon. Why are people so afraid of amazon . You would have to ask them. I dont know. But i will tell you that that it was so severe that i could get nobody on the record. So there are no quotes. Just me. Right now, we are sitting in washington where there is incredible screening on Tech Companies on antitrust grounds. Do you think that amazon is a monopoly . Not a monopoly in the traditional sense. But i think theyve definitely exhibited some of the behaviors of sort of market dominance. Im not an antitrust lawyer, i dont have a legally valid opinion on this. Any company that gets big enough that you can, you know, move markets. Art to be looked at. You know . And im not a regular here. I kind of am, i sit on the said. And im a big believer in regulation. I think regulation is probably good in a lot of situations. On the other side, these tech platforms, and amazon in particular, are very good at keeping the customer in mind. So i think what you are looking for is a tech platform that gets very powerful. That still maintains a semblance of responsibility. I think amazons done that. I think google has done that facebook is kind of not done that. They deserve regulation at different levels. I wanted to ask about apple too because square couldnt exist without the iphone and much of this business relied on the ipad. How do you think about them in that context . Apple is superpowerful and theyre really important to get along with. They also have great innovation. We built our Company Based on a product that apple introduced to the world. This thing. So i have a tremendous amount of respect for them and also not somebody you want to piss off. Like we did in the early days. We bypassed the dot connector and put square reader and through the microphone jack. And that was a nono. We thought we would get in trouble with apple but then we thought maybe our product is so cool that theyd be good with her. Steve jobs at the time had a way of protecting if steve thought you were cool, you were fine. Apple lawyers would leave you alone. So we approached steve. Tell me about the design of square and that process of creating such an iconic design that people recognize thats in the smithsonian. The square card reader which is about as wide. The one i built was even smaller. Had a basic design flaw. And it was one that i noticed. And i chose not to correct. Which was when youre swiping a credit card through, it was so narrow that the card would wobble as it would go through. As a result, it would result in a missed read. About 80 percent of the time you work in 20 percent of the time the card would wobble and wouldnt work. So to solve this problem, i built another leader that was about that wide and tested it. Everybody was 100 percent with that. Then the question was why did we build a tiny little device. It wasnt for cost reasons or anything like that. But the reaction to the device was very different. If i used the big device, people were sort of like, hohum. If i use the small device thats now in the sony, they were amazed. They were blown away. What just happened. Remember the first time you saw a car go through a square reader. You were impressed. It got your attention. So we took this giant gamble to build a product that mechanically didnt work all that well as it could. But just got your attention and blew you away. It looks so cool and was fun to have and people were talking about it. I think, we were like, we have to go for the pool. To this day, squares readers would work better if they were wider. But theyre cool. Turns out 80 percent really dropped after little practice. We discovered by making a product that was lessthanperfect, we trained customers to use our product. Then once they were using it, they were showing off to their friends about how good they were about swiping the square. Thats a major gamble. It reminds me in one part of the book you talk about the distinction between entrepreneurs and business people. Could you talk a little about that . I was trying to discover what allowed square to survive amazon. And in the process i saw this thing called an innovation stack. And i wanted to tell the world. I immediately realized that the english language does not have a word for this sort of process i was describing. The process i was describing was building a business but not one that has been done before. So how to describe that goes out and starts a business presents an entrepreneur. But i have a friend that started a coffee company, hes an entrepreneur. Has coffee shops. But coffee shops have been around for centuries. You know how to make a coffee shop in or she dont, you can go to a trade show where they will teach you. Hire this vendor to set up your espresso machines. Coffee is a solved problem. How do you differentiate someone like that from somebody doing something that has never been done before then i have another friend was trying to launch satellites for super cheap. So hes buying old russian fighter planes. Stripping them and he sends it up to 90,000 feet. Puts it in there to power dive and pulls up at the last second so hes got all this energy and he fires a missile. If you fire a missile going mock two, you dont need a big missile because theres so much energy to begin with. He thinks he can launch satellites cheaper. Now, wheres his trade show . Wheres the eye by old russian fighter jets and send them into the stratosphere. Hes living in a different set of rules. Hes living in a world where i needed to describe that. 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. It has since come to mean just business. Say youre an entrepreneur because you started a business. Thats the correct use. At the ancient use, the 100yearold use, meant somebody that was doing something different. So i go back 100 years and say we will use this word but we will use it in its archaic definition. Thats the only word i can use to describe it. I wanted to be able to differentiate what it is like to not copy. Because, look, i think, i didnt want to write a book. Im a very slow writer. But i had to write this. Because i looked for the explanation phenomenon i had seen. No one had explained it. Then i understood why. Theres not even a vocabulary. So i needed to dust off the definition of entrepreneur and find examples that supported my thesis. When did you realize that you yourself fell into that category of entrepreneur versus businessperson . Im still sort of realizing it. [indiscernible] ive had the fortune of doing stuff that hasnt been done and having it work. The results are tremendous. Its just a great thing when it works. When it finally works, i should say. You do that enough, one of two things will happen. You will either die because you run out of energy or resources or time. Or you will succeed. When you succeed, you will basically be in possession of this thing called an innovation stack. You will have done so many Different Things. And those Different Things will interrelate and influence each other. That what you have will look like nothing else in the market and it will behave like nothing else. Even as amazon tries to copy, they wont be able to. Even actions even amazon with all their resources, couldnt do it. You mentioned early that youve known jack dorsey since he was a High School Student and was working for your company. When did you first realize that he had some of these qualities of an entrepreneur . The first quality was demonstrated the first night. The day he was hired. We were in this panic. We made a giant error. Thats how we got to him because we were literally everybody from the location where our company was. His mother ran the coffee shop and so does the espresso beans we were using to keep everybody awake. So which they went by munching on caffeine. And she let us hire her son. I think she accredited because we sent him home at 5 00 a. M. On his first day of work. [laughter] so thats how i met jack. Quality, tenacity, survive on little sleep, got it. I later discovered that jack is just incredibly confident. Hes quiet. Hes not a bombastic person. But hes really good. It just shows through. You mentioned earlier, you almost have a brother like relationship with him. You were so defensive of him the first time he was pushed out of twitter. What are your thoughts now that theres been this recent push once again to potentially push him out of the company. What are your thoughts about that . You guys have tried that before. Let him run his company. You kick them out once, it didnt work. You take them out the second time. Who else but jack will run twitter well . I dont know any thing about twitter. I dont have anything to do with the company. But, i would say this. Jack is a fantastic leader. Hes a guy that thinks very deeply. This whining about the fact that hes running to public companies. I thin