Steve told the story of going from a glass blower in st. Louis teaming of the founder of twitter to build a multibillion payment company. In the book you talk about a lot about perfect problems. When did you realize that Small Business payments were a you are going to have to do something new and you cannot copy. I hired jack when he was 15, he was a High School Student came into work at a company that i actually still have. I dont run any of my companies but it also dont sell them. This ones been around for 30 years. He goes off to college, we kept in touch. And then he had kicked out of twitter, the first time,. [laughter] they showed him the door and he came back to st. Louis and he came back we were hanging out and talking and decided to start a company together. We are then kicking around ideas he didnt have an idea and i didnt have an idea suisse are looking for problems we could solve. And came up with the problem. When did you come to that conclusion you talk in the book about your book as a glass of blower. Tell me about the moment she realized payments were a problem for small merchants. So it was funny jack adjusting kicked out of twitter paired my first reaction to that was jack was sort like a little brother to me felt like he was someone i needed to stand up for. What they did to him it twitter the first time was incredibly vile. My first suggestion was hey lets go to San Francisco and get even with those guys. I was motivated. But jack, to his credit said less to something more positive and just start a new so that was the impetus. And then we were looking for a problem for the only thing we determined was that our company was going to be focused on, i cant find my phone here want to use it as a prop. These things, were going to focus on these things because the iphone had just come out, we knew it was going to be important. To be hired an engineer from apple, he was starting in two weeks they gave us two weeks if for us to figure out were going to do. We could not think of anything. We were stretching for ideas, went back to my glass studio. Im a glass blower, i make stuff that nobody needs. I make art. That stuff that nobody needs. Matter fact in d. C. I used to teach the glassblowing at glenn local park. If youve been to the park 20 years ago, i was the guy that taught you how to make a paperweight. But the point is, i was in my studio and was trying to sell a piece of glass and i lost the sale because they couldnt take American Express card. I was angry, i had just lost this great sort of windfall. And i was talking to the lady with the phone order assignment one of these devices i have this attitude toward devices like this. This device is a magic device it turns into anything i want to prettify wanted to turn into a television, it becomes a television. A map, radio, it will turn into that book for it will literally tomorrow turn into that book if you want. It didnt turn into a credit card machine. And so, i was angry but i was also motivated to fix that. So i called jack on that device and i said lets make our iphones turn into credit card machines. And thats a restarted. The name of the book is the innovation stack. What is an innovation stack and how did you learn about that from square . Speak to an innovation stack is not something we knew about what we started square, it is probably the most powerful phenomena that i have seen in business simply a way as interweaving inventions together. Put enough of these together they start taking on their own life if you look throughout history at the Great Industries that have started, almost always there is an innovation stack at the beginning. I did not know any of this burden we started square i didnt say what to build in an ovation stack i didnt know any of this was happening. As a matter fact, i wrote this book and ive been having people reviewed like yourself, one of the greats compliments i got was from a very successful entrepreneur. Hes interviewing me in the skys living room he has a painting on the wall that is worth more than my house. I was like oh my gosh. So i am all intimidated and hes asking about the book and he finally said i wish i had known this one is 20 years old. Im like me too, theres this thing that happens this process you start to solve a perfect problem something that is not been solved before. Most of what we do is copying most the tools and training and comfort is with solutions that exist. When you get out of the world of copying, you can build something that is truly different, plus the process is different. And it creates this thing called an innovation stack. If you build it innovation stack at least in my studies. Guest in the book when you talk but innovation stack its interesting to me you focused on companies that we dont associate with tech. I think a lot of people draw that parallel with tach and innovation you focus on southwest, ikea, and others. Why did you decide to focus on those companies outside of the Tech Industry . Guest i am a scientist by trading my father was a scientist. I am very steeped in the scientific method. If you are going to do a reasonably controlled experiment, you need to eliminate variables. In one of the most powerful variables is the phenomenon of viral growth and 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. I did not want to study that. So what i did when i saw the pattern of the innovation stack, i said i want to Study Companies but i dont want to Study Companies like google. They are all whopping successful or amazon theyre all fantastically successful but what creates the success . The answer is in some cases is just the pure destructive nature of technology overwhelms anything else. So this is why i laugh when people study Google Business practice. They can find their own space program, which is tremendous. But their management could be crummy but it still such a powerful force of technology. So i wanted to exclude that. If you exclude it, which are left with is business throughout history that built those innovation stacks who have still dominated their industries prayed so i go back basically a hundred years ago and i look forward just showed that the pattern is something that is systemic and innovation, and not just a result of having Amazon Web Services and viral growth. Host some people see this book on the shelf they might be surprised to learn actually started as a graphic novel. [laughter] can you tell me a little bit about the evolution . Guest i did not want to write a business book. I dont particularly like, most books are really boring, they are these a ponderous selfserving they are not scientific and i saw this i thought i got to share this this thing. Then i did not want to write a business book. So i started looking at the stories of companies that have done this and these storks were epic. They were fantastic and i thought i dont have to tell us as a business story. This can be a graphic novel. So what i originally sold to penguin, was the sort of schizophrenic manuscript there was like graphic novel then taxed, then graphic novel been taxed and flipped back and forth randomly. Penguin liked it or at least they pretended they like to because they signed the contract. Once they sign the contract they owned the book, right . Then they took me to it this windowless Conference Room in manhattan and had a little talk in the chocolate like this. You realize your cute little comments are not going to show up on a 4inch screen. And people besides going to listen to this as an audiobook and as an audiobook its useless, you cannot take a graphic novel and introduce it to audiobook. You can lose 70 of your audience if you want to lose that stick with what you got otherwise rewrite it. They were right, so i re wrote the whole thing. But i still had all of these great comics so i made my own comic shes got her book ive got my comic this is for you cant buy this thing but i will give you a copy of this because look at the storybook banker. But there is a murder on that page and there is a funeral, oh heres the destruction of a major city, right . This is comic book staff. The reason i wanted to do a comic was because the tales of entrepreneurship in the tales of these companies that build into ovation stacks tend to be really good stories because theres a lot of failure. Failure makes good stories. Nobody was here about success because theyre boring. But failure . Howd you that scar, thats a good story. So i wanted to tell it in this format. Although theres only one chapter that survives as a comic if you buy the book ill give you the comic. Im not in a cell is. But you can have it. And they are good stories. And so often i find that we sort of ignore the fun part of what its like to do something that hasnt been done. Look, theres a lot of failure needs got to have a sense of humor. The mistakes, everybodys talking about that. Guest so on that point about the comic book i know only one chapters turned into a comic book now. But it seems to me if you wrote that comic book about square, the villain would certainly be amazon. So yes. [laughter] host tell me what it was like when you realize that amazon was trying to directly compete with you in the payment space. Guest yes, yes, yes, believe me i appreciate the irony of dissing amazon when youre in the middle of selling a book. [laughter] i will redeem myself at the very last Second Period so amazon did what they do which is they looked in our market, decided they wanted it and decided to take it. Down amazon takes a market they did two things that copier product, they undercut your price, almost by 30 , and they add whatever else they have like the amazon brand and a couple hundred million customers in all this stuff. Then they watch you die. So when square was fours old amazon did this. They ran the playbook. So we were terrified and we went looking for solutions that we could copy to respond. Looks room for all the companies that had beaten amazon theyd been attacked this way and there were none. Companies like netflix were arty giants but startups . Forget it, zero. Zero startups that i know of or that we could find have survived the attack by amazon. So is like you are truly alone. It was terrifying. We looked at what we could do, there wasnt even that much we could do. But amazon was undercutting us in price, there being amazon. And we were terrified. But there really wasnt much we chose to do differently be looked at all of her options, looking at those options we realized they were all being done for good reason. So we just kept doing it. We didnt even match them on price. So amazons price was 30 lower than our price was. We didnt match their price and we just kept going. And it lasted for about a year end a half, and at the end on halloween of 2015, amazon gave up and they mailed all of their former customers a little white square reader. I couldnt believe it. I couldnt believe it. This never happens. This does not happen. But it is what happened. And thats actually what led me to the book because as someone who has been raised as a scientist, i needed an explanation, i needed to answer the question, why did this happen . You cant just be lucky, there must be some phenomena and turns out square had an innovation stack but we didnt know it at the time there is no label and there were a bunch of reasons i had not seen it. Once i sought i said oh my god thats it thats what allowed us to survive amazon. Its what allows all these other companies i studied to survive these vicious attacks. Amazon is bad, what happened to Southwest Airlines was worse. We did not end up in federal and state court Herb Kelleher had it worse than i did. Speak one so you mentioned you looked around and could not find other companies that had been able to beat amazon. In the book you also say that you found some people who amazon beat, but they were willing to talk to on the record about it. Guest yes i found many amazon victims and talk to them personally. And got their stories, and then its ao thats great could i quote you, no, even people who were in totally different industries, people who werent industries that were 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 to them. Host wears people so afraid of amazon . Guest you have to ask them i dont know. Thats not for me to it share. But i will tell you it was so severe that i could get nobody to go on the record. So there are no quotes, just me. [laughter] thats it. She went right now are sitting in washington where theres a ton of scrutiny of the Larger Tech Companies on antitrust grounds at the moment. Looking at congress, the ftc. You think amazon is a monopoly . Guest not a monopoly in the traditional sense. But i think they definitely exhibited some of the behaviors of sort of market dominance. I am not an antitrust lawyer, i dont have a legally valid opinion on these things. But any company that gets big enough that it can move markets, ought to be looked at. And again im not a regular here, i guess i kind of him now, im a big believer in regulation. I think regulation is probably good in a lot of situations. But 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, very powerful, that still maintains a semblance of responsibility. I think amazon is done that and i think google is kind of done that. I think facebook has not done that. They deserve regulation different levels. See what i want to ask you about apple two because square could not exist without the iphone and later it relied on the ipad. So how do you think about them in that context . Guest apple is superpowerful and theyre really important to get along with. They also great innovation. I have tremendous respect for apple. We built our Company Based on a product that apple had sort of introduced to the world which was the mobile phone, this thing, thats an apple invention. I have a tremendous amount of respect for them and theyre also somebody you dont want to piss off. You dont want to do stuff we did in the early days, which could have upset apple a lot. We bought the dock connector which is the connected thing on the bottom and we put the square reader in through the microphone jack. That was a nono we were not supposed to do that. We thought weve get in trouble with apple will be did that without maybe or products is so cool they would be good with it. Because eve jobs of the time, who is in control of apple had a way of protecting products but is steve that your cool you are fine. Apple lawyers would leave you alone. So we approach steve to save our butts. Host so tell me a little bit about the design of square in that process of creating such an iconic design the people recognize thats in the missoni and museums today. Guest so the square car reader was about this wide and the one i built was even smaller and had a basic design flaw. It was one that i noticed, and i chose not to correct. It was when youre swiping a credit card there, it was so narrow that the card would wubble and wouldnt go through. As a result of that it would result in a misread period sub at 80 of the time it would work in about 20 of the time the card would wubble and it wouldnt work. This is a result of my testing. So to solve the problem i built another reader it was about that wide and tested it and everybody was one hunter with that. So the question was why do we built a tiny little device that didnt work as well as the big device . It wasnt for cost reasons or anything like that. But the reaction to the device was very different. If i use the big device, people were like oh hohum, and of the credit card reader. If i use the small device, the one that sound the smithsonian, they were amazed, they were blown away. What just happened . Whomever the first time he saw card go through a square reader you are impressed. Like everybody was impressed that got your attention. So we took this giant gamble at square to build a product that mechanically did not work all that well as it could, but just got your attention blew away. And it just looks so cool and fun to have. People were talking about it nice and i think we just have to go for the cool. So he built something supercool into this day, square readers, they would work but if their wider, but they are cool. The funny thing as it turns out that 80 number really dropped after a little bit of practice. So once you practice a little bit you always get a good read. So we discovered by making a product that was less than perfect, we trained customers to use our product. And once they were using it they were showing off to their friends about how good they were at swiping the square. Host that is a major gamble and it reminds me of one part of the book you talk about the distinction between entrepreneurs and business people. Could you talk a little bit about that . Guest i was trying to discover what allowed square to survive amazon. In the process i sell this thing called an innovation stack and i wanted to tell the world about it. Ive got to draw this or write this but ive got to tell the story. 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 a business that hemond done before. So how do describe someone who goes out and starts a business thats an entrepreneur. But i have a friend of mine who start a Coffee Company hes an entrepreneur he opened a Coffee Company he has coffee shops. But coffee shops have been around for centuries. You know how to make a coffee shop or if you dont know how to make a coffee shop you can go to a trade show where they will teach you all the stuff you can hire this vendor to set up your your espresso machine, coffee is a solved problem. So how do you different somebody from that from somebody whos doing something thats ever been done before . Another friend of mine is trying to launch satellites for supercheap suites buying old russian fighter plane stripping the crab out of them loading them up with the missile and sends them up the 90000 feet, put cement on mach two power dive and pulls up at the last second says all this Kinetic Energy 70000 feet up any fires initial. If you fire a mission from 70000 feet up going mach two you dont need to have a very big missile there so much energy in the thing to begin with. He thanks he can launch satellites cheaper. Now wheres his tradeshow . Wheres the eom buy