Group in the middle of solvable problems that have not yet been solved. Thats what i call the perfect problem because that in fact is the focus of what i think entrepreneurship is. In other words, you are looking for a way to solve the problem that is solvable but has not been done. Youre going to have to do something new but you dont get a copy. What happened with jack, jack dorsey and i i hired jack when he was 15, he was a High School Student, came into work at a company that i still have and i dont run any of my companies they just sell them, this ones been around for 30 years and jack and i worked together and he went off to college and he got kicked out of twitter and the first time i guess. And they showed him the door and he came back to st. Louis and we were heading out and talking. And we decided we would Start Company together. So then we were kicking around for ideas, he did not have an idea and i did not have an idea so we look for problems i solve and we came up with the problem of how merchants got paid. When did you come to that conclusion, you talk in the book about your work as a glass blower, tell me about the moment that you realize that payments were a problem for small merchant. It was funny because as i said i was just kicked out of twitter. My first reaction, jack was like a little brother to me, he was somebody i felt like i needed to stand up for and what they did to him and twitter the first time was completely vile. So my first suggestion was was quite to San Francisco and get even with them. It was like despite motivated. But jack to his credit said what it would do something more positive and start a new company. That was the impetus. And then we were looking for a problem. Then we determined our company was going to be focused i have my phone i got a use as a prop, and these things, what are we gonna focus on these things because the iphone had just come out and we knew it was going to be important so we hired an engineer from apple and not give us two weeks to figure out what were going to do. And we cannot think of anything. We were stressing for ideas and i went back to my glass studio, a glass blower and i make stuff that nobody needs, i make art, that stuff that nobody needs. As a matter of fact in d. C. I used to teach acklin echo park. For cspan viewers, you been there 20 years ago, i was a guy who taught you how to make a paperweight. I was in my studio trying to sell a piece of glass and i lost the cell because they could not take an American Express card. I was angry, i lost the great windfall i was talking to the lady about a device. I had an attitude towards a device like this, this device is a magic device, turns into anything i want. If i wanted to turn into a television becomes a television, map, radio. It will turn into that book tomorrow if you want. It did not turn into a credit card machine. And so i was angry but i was 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. Thats what became square. The name of the book is innovation stack, what is innovation stack and how did you learn about that from square. And innovation stack is not something that we knew about when we started square but its probably the most powerful phenomenon that ive seen in business. And we stumbled across it. It is simply a way of interweaving inventions togeth together. Sometimes simple inventions. But put enough together and they take on their own life and they create new industries. If you look throughout history at the Great Industries that have started, almost always theres an innovation stack at the beginning i had no idea any of this was happening and as a matter of fact i wrote this book and i been having people reviewed like yourself and one of the greatest compliments i got was from a very successful entrepreneur. He was interviewing me in the skies living room and he is a painting on the wall that is worth more than my house. I was like oh my god. So im all intimidated and hes asking me about the book and he finally said i wish id known this when i was 20 years old. And i was like me too. It turns out there is a thing that happens, a process that can happen when you start to solve a perfect problem, something that has not been solved before because most of what we do is copying and most of our tools and training and comfort with solutions that exist. When you get out of the world of copying, you can build something that is truly different in the process is different and it creates in innovation stack. If you build an innovation stack, at least in my studies, your company will dominate the world and it will run whatever business youre in. In the book when you talk about innovation stack, it was interesting that you focused on companies that we dont associate with tech i think a lot of people draw the parallel and you focus on southwest, ikea, others. Why did you decide to focus on those companies outside of the Tech Industry . I am a scientist by training i am a my father was a scientist. Ive been very deep in the scientific method. If youre gonna do a reasonably controlled experiment you need to eliminate variable. One of the most powerful variables is a phenomenon of viral growth in technology. If you look at the potential for company that does nothing that interesting but add sufficient technology to an old business you can get outside success. When i saw this pattern of the innovation stack, i want to Study Companies but i dont want to Study Companies like google. If you look at google, they are whopping they successful or amazon, all these companies are fantastically successful. And in some cases, just appear disruptive nature of technology overwhelms anything else. And they can fund their own Space Program and their management can be crummy, its still a powerful force of technology. I wanted to exclude that. If you exclude it, what youre left with is business about history that a bill in innovation stack that has dominated the industry. I go back basically i start 100 years ago just to show that the pattern is something that is systemic in innovation and not just a result of having Amazon Web Services and viral growth. Some people might see this on their selves and they started as a graphic novel per can you tell me a little bit. I did not want to write a business book. I dont particularly like Business Books, theyre boring. They are the ponderous selfserving homes, their nonscientific. I saw this and i thought i had to share this. And then i did not want to write a business book so i started looking at the stories of these companies had done this in the stories were epic. They were fantastic and i dont have to tell this is a business. This can be a graphic novel. So while what i originally sold to penguin was a schizophrenic manuscript that was graphic novel than text in it for backandforth randomly and penguin liked it or i should say they pretended they liked it. Because they signed a contract. Once they sign the contract, they on the book. So then they took me to this windowless Conference Room in manhattan and we had a little talk. The talk went like this. There like you realize your cute comics are not gonna show up in a fourinch ravine. And people besides are going to listen to this as an audiobook and as an audiobook, it is useless, you cannot take a graphic novel and reduce it to an audiobook. Right there you lose 70 . If you want to lose, they were right. So i rewrote the whole thing but i still had all these great comics. I actually made my own comic i will give you a copy this is a banker, there is a murder. There is a murder on that page and there is a funeral and heres 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 and the tales of these companies that build and donation stocks tend to be really good stories because theres a lot of failure and failure makes good stories, nobody wants to hear about success. Boring. But failure, how did you get that scar, thats a good story. So i wanted to tell in this format and although theres only one chapter that survives is a comic, if you buy the book or give the comic. Im not going to sell this but you can have it. In their good stories, they are fun and so often i find that we ignore the fun part of what its like to do something that has not been done because theres a lot of failure and you have to have a sense of humor but mistakes, everyone is talked about that. Only one chapter is turned into a comic book, it seems to me it would be amazon what you tell me what it was like when you realize that amazon was trying to directly compete with you on the payment space. I appreciate the irony of dissing amazon and youre in the middle of selling a book. I will redeem myself at the very last Second Period so amazon did what they do, they looked at our market, decided they wanted and decided to take it. When amazon takes a market, they do to things, the copier produ product, they undercut your price almost by 30 and then the ad whatever else they have like the amazon brand and a couple hundred million customers in all this stuff and then they want you to die. Amazon did this, they ran the playbook. And so we were terrified and some things like netflix already giant. But startups, forget it. They had survived this attack amazon. Its like you are truly alone. It was terrifying, we looked at what we can do, there was not that much he could do amazon was undercutting us and they were being amazon. And we were terrified. But there was not much that we chose to do differently, we looked at all of our options and looking all the options, we realized that they were being done for a very good reason so we just kept doing it. We did not match them on price, amazons price is 30 lower than our price and we do not match their price, we kept going. And it lasted for about a year end a half and at the end on halloween, 2015, amazon gave up and they mailed all of their former customers a little wide square reader. I could not believe it. This never happens. This does not happen. But its what happened. And that is actually what led me to the book because as somebody who is raised as a scientist, i needed an explanation. I needed to answer the question, why does this happen, you cannot just be lucky, there must be some phenomenon and it turns out square had in innovation stack, we did not know it at the time and there was no label calling and innovation stack and theres a bunch of reasons i had not seen it but once i saw i was like that is it. Thats what allows us to survive amazon and all these other companies that i study to survive vicious attacks. Amazon was bad but will happen as Southwest Airlines in the early days was worse. We did not end up in federal and state court herb keller had it worse than i did. I wanted to ask you, you mentioned you looked around and you cannot find other companies that had been able to beat amazon and in the book you also say that you found some people who amazon beat but they were not willing to talk to on the record about it. I found many amazon victims and talk to them personally and got their stories and then said that is great, could i quote you even people who are in industries competing with amazon. Even that they were so afraid of amazon, nobody would go on the record, firsthand quotes in this book about what happened with amazon. Why are people so afraid for amazon. You have to ask them. That is not for me too share. Youd have to ask them. I will tell you, it was so severe that i could get nobody to go on the record. Right now were sitting in washington where theres antitrust ground at the moment when you look at congress, do you think the amazon is monopo monopoly. Not a monopoly in the traditional sense but i think they definitely exhibited some of the behaviors of market dominance. And im not a lawyer, i dont have a legally valid opinion on this thing. But any company that gets big enough that it can move markets ought to be looked at. And again, im not a regulator. I guess i kind of am now, i sit on the fed and im a big believer in regulation. I think regulation is probably good in a lot of situations. And on the other side these tech part from an amazon in particular are very good at keeping the customer in mind so i think what youre looking for is a tech platform that gives very, very powerful that still maintains a semblance of responsibility. I think amazon has done that and google has done that and i think facebook has kind of not done that. So they deserve regulation and different levels. I want to ask you about apple, square could not exist without the iphone and later much of the business relied on the ipad. How do you think about them in that context . Apple is superpowerful and they are really important to get along with and im tremendous respect for apple, we built our Company Based on a product that apple had introduced to the world which was this thing, thats an apple invention. I have a tremendous amount of respect and theyre not somebody that you want to piss off. You dont want to do stuff like we did in the early days which could upset apple a lot, we had a little connecting thing on the bottom and we put the square reader and through the microphone jack and that was a nono. We thought we would get trouble but we thought our product is so cool that they would just be good with them. Steve jobs had a protect enter production of jobs that he liked. If steve thought your call you were fine. Apples lawyers would leave you alone. So we approach steve. Tell me a little bit about the design of square had a basic default under design flaw. I chose not to correct when youre swiping a credit card, it was so narrow that the card would wobble. As a result would be a mystery. 80 would work in the 20 and was a wobble. To solve this problem until another reader this wide and tested it and everybody was 100 without we build a tiny little and it was not for reasons like that. But the reaction was very different. If i use the big device and if i use the small device the one in the smithsonian, they were amazed. Remember the first time he saw cargo through square reader. I got your attention. We took a giant gamble at square to build a product that mechanically did not work that well as it could but just got your attention and pull you away and look so cool and fun to have and people were talking about it and they said i think you just have to go for the cool, and to this day squares readers would work better if they were wider but they are cool, they are great and the funny thing is that 80 really drops after little bit of practice, went to practitioner get a good reading. 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 how good they were, swiping the square. Thats a major gamble, it reminds me of one part of the book of the distinction between entrepreneurs and business people. Can you talk a little bit about that. I was trying to discover what allowed square to survive amazon. In the process i sold the innovation stack. I wanted to tell the world about it. I have to draw this or write it but i have to tell the story. I immediately realized that the english language does not have a word for this process that i was describing in the process i was describing was building a business but not a business that has been done before. How do you describe somebody who goes out and start the business, thats an entrepreneur but i had a friend who started the Coffee Company and hes an entrepreneur, he opened up a Coffee Company at the coffee shops. Coffee shops have been a around for centuries. You know how to make a coffee shop and if you do not, you can go to a tradeshow where they will teach you all the stuff that you need. In higher this vendor to set up your espresso machine, coffee is a problem. How do you differentiate somebody like that from somebody who is doing something thats never been done before. I have another friend who is launching satellites for supercheap so hes buying old russian fighter planes and stripping the crab out of them, loading them with the missile and send them to 90000 feet and puts them in a power dive and pulls up at the last Second Period he has all the Kinetic Energy and 70000 feet up and he fires the missile. If you fire a missile from 7000u dont need a very big missile because theres so much energy to begin with. He think they can launch satellites cheaper. Where is his tradeshow . Where is im buying old russian fighter jets and sending them into the stratosphere, there is nothing. He does not get hes living in a different set of rules. Hes living in a world where i needed to be able to describe that. It turns out the word entrepreneur was originally used and popularized to describe the person who is doing something new in weird and it might not work. It was the original use of the work. It has since become demeaned business. You can say youre an entrepreneur because you started the business. That is the correct use today. But an economist that was using 100 years ago that 70 was doing something different. So in the book i go back 100 years and we said will use this word and will use in the archaic definition because thats only word i can describe it. I wanted to differentiate what it is like to not copy because i think i did not want to read the book, writing a book is a pain in the ass and its very tough for me. Im a slow writer. I was not like i need to write another book by had to write this. I look for the explanation phenomenon that i seen, nobody has ever explained and then i understood why. How are they going to explain it, theres not a vocabulary to clean off the part that you want to talk about. So i needed to dust off the definition of entrepreneur and then going find examples that supported my thesis. When did you realize that you yourself fell into that category of entrepreneur versus businessperson. I am still realizing it. By my definition entrepreneur is people who solve problems or have not been solved before. And sometimes fail to solve problems that have not been solved before. I am in that category not a lot of problems that i work on and i dont have solutions to. But ive also had the fortune of doing some stuff that hasnt been done and then having it work and then seeing the results and the results are tremendous. Its a great thing when it works, when it finally works because typically the path that ive taken is failure, failure, something kind of succeeds but then that success creates two other problems, you do that enough, one of two things will happen, you will either die because you run out of energy or res