Perfect problem. So he needed a way to sort of delineate problems. If you think about the world problems, you got the ones who are salt so that we can cover the solution. And may be a problem that symbiosis already figured out. Then you have the ones that are one reason or another are so lovable. We just dont have the ways to do it. But then theres a group in the middle of solvable problems that have not yet been solved. Jim so that is what i call the perfect problem because that in fact, is the focus of what i think the leadership is. In other words we are looking for a way to solve a problem that is solvable but has not been density going to have to be doing something new and you dont get a copy it. So what happened with jack, jack dorsey and i, while i hired jack when he was 15. It was a High School Student and came into work at a company that actually still have. I dont run any of my companies but i also never sell them. At some of this one has been around for 30 years. And jack and i started working together. And then he went off to college. We kept in touch. And then he got kicked out of twitter. In the first time. [laughter]. They showed him the door and he came back and we were hanging out and talking. And decided we would start a company together. And so then we were kicking around ideas and neither of us had no idea so started looking for problems that we can solve read and came up with the problem of how small participate. Cat somebody you come to that conclusion pretty talk in the book about your work. Tell me about the moment when you realize the payments were a problem for some merchants. Jim it was funny because as i said jack had been just clicked out of twitter. He was sort of like a little brother to me. Like somebody i needed to sort of stand up for. And what they did to him and twitter the first time was just completely file. So my first suggestion was lets go out to San Francisco and get even with those guys. [laughter]. It was like a motivation. But jack to his credit said well why dont we do something more positive and just started company. So that was the impetus. And we were looking for a problem. The only thing we determined was that company was going to be focused on. I have to use my phone here is a prop. These things. Were going to focus on these things. Because the iphone and just amount. And we know is going to be important so we hired an engineer from apple. He was starting to weeks. So i gave us two weeks to figure out what we were going to do. We could not think of anything. We are stretching for ideas. Im a glass blower. I make stuff that nobody needs. Make art. That stuff nobody needs. As a matter fact, in dc, age to teach. So all the local cspan viewers, 20 years ago, i was a guy that taught you how to make a paperweight. But the point is, i was in the studio and trying to a piece of glass. And i lost the cell because i couldnt take an American Express card. And i was angry. I just have this windfall. And i was talking to the lady on the phone about one of these devices. I have this attitude towards devices like this. This device is a magic device. It turns into anything i wanted. I wanted to turn into a television, it does pretty hard radio. It will turn into that book. It will literally tomorrow, turn into that book that you want. It did not turn into a credit card machine. So, i was angry but i was also motivated to fix thats pretty socalled object on that device and said, lets make our iphones turn into credit card machines. Since we did. Cat so the name of the book is the innovation stack. What is that and how did you learn about it. Jim is not something that we knew about when we started this but it is probably the most powerful phenomenon that i have seen in business. And we stumbled apostate. The innovation stack is simply a way of interweaving inventions together. Sometimes very simple images. But enough of these together, they start to take on their own life. And they create new industries. So if you look throughout history as the Great Industries that have started, almost always it was an innovation stacking. So we started with that and wanted to do this but i had no night idea that this was happening. I was sort of having people reviewed like yourself. In one of the greatest, the god was from a very successful entrepreneur. So his living room and he has a painting on the wall is worth more than my house rated so i was a little intimidated. And asked me about the book and he finally said, i wish i had known this when i was 20 years old. And i said me too. But it turns out that there is this thing that happens. This process it can happen when you start to fall or solve a perfect problem, something does not been solved before. Because most of what we do as copying. In most of our tools and training and comfort us with solutions that exist. When you get out of the world of copying, you can build something that is truly different. And it creates the thing called an innovation staff. If you go into the innovation stack. Your company will dominate the world. Well just run whatever business youre in. Cat in the book, when you talk about the innovation stack, it is interesting that you focus on companies that dont associate with text. I think a lot of people parallel that with tech and innovation. Ntf and southwest. So i did you decide to focus on those companies outside of the tech industry. Jim blame a scientist by training. My father was a scientist. I was very steep into the scientific methods. So if youre going to do a reasonably controlled experiment, you need to eliminate the variable. In one of the most powerful variables is the phenomenon of viral growth and technology. So if you look at the potential for a company and does nothing really that interesting but adas sufficient technology to an old business, you can get outside success. I do not want to study thats what i did when i saw this pattern of the innovations that, i wanted to Study Companies but not Companies Like google. They are walking late successful. All of these companies are fantastically successful. But what is it that creates success. Just the pure destructive nature of technology overcomes anything else. So this is what i laugh when people study Google Business practices. They can fund their own space program. Which is tremendous. But the management could be crummy. Insensitive powerful force technology. So i wanted to exclude that reading and if you excluded, what you are left it is the history, have built an innovation stacking still have dominated their industries. So i go back basically start a hundred years ago they were forward. Just to show that the pattern is something that is systemic in the innovation and not just a result of having Amazon Web Services and growth rate of speech of something loosing this book on the shelf might be surprised to learn that actually started as a graphic novel. Can you tell me a little bit about that evolution. Jim so i didnt write a business book. I dont particularly like most Business Books because they are very boring. There these sort of selfserving and unscientific. And so i saw this and thought i can share this. This thing. And they did not want to write a business book so i started looking at the stories of these companies who had done this. In the stories were epic. They were fantastic. And so that will i dont have to tell this is a business story. I can use this as a graphic novel. So what i originally sold was the sort of schizophrenic manuscript is like graphic novel then tech and flipped back and forth pretty randomly. If anyone liked it. Version say they pretended to like it because he signed a contract. Once they sign a contract, the on the book. So then they took me to this windowless Conference Room in manhattan and had a little talk. It went like this. Do you realize that your cute little comics are not going to show up here and people besides that are going to listen to this as an audiobook. As an audiobook, its useless. You cant take a graphic novelist and like their level is 70 percent of your audience. Otherwise you have to rewrite it. So they were right. And so i rewrote the whole thing. But i still had all of these great comic domain my own comic. You cant buy this thing. I will give you a copy though if you go to my website. Because look, this is a story of a thinker. But its like, is murder. There is a funeral and oh here is that this direction of a major city. This is comic book stuff. And the reason i wanted to do a comic was because the tales of entrepreneurship is a tale of these companies who build innovation stacks, they tend to be really good stories. This is a lot of failure. In failure actually makes good stories. He was here about success. Boring. The failure. How did you get that score. Thats a good story. So i wanted to tell it in this format. And although theres only one chapter the sort of survived, if you buy the book, i will give you the comics. Im not going to sell it. But you can have it. And there is good stories. And they are fun. And so often, i find that we sort of ignore the fun part when what its like to something that has not been done. Was a lot of failure you gotta have a sense of humor but like mistakes, everybody likes to talk about that. Cat so about the comic book, and only one chapter has turned into a comic book now proceed to me the reading that, if you were to write the comic book about squares, the bill and with certainty amazon. Can you tell me a little bit about what it was like when you realized that amazon was trying to directly compete with you in the payments space. Jim leaving, i appreciate the irony of dissing amazon when youre in the middle of selling about. [laughter]. So mean, but i will redeem myself the very last second. So yeah, amazon did with the do which is they look to our markets, decided they wanted it and decided to take it. When they take the market, do two things. The copier product. They undercut the price almost always by 30 percent and then they had whatever else they have like your amazon brand a couple hundred million customers in all the stuff. Then they watch you die. So amazon did this. They just run the book. 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 been amazon when they had been attacked this way. There were none. Netflix were already a giant with startups. Forget it. Zero. Zero startups that i know of, or that we could find had survived the attack by amazon. They were truly alone. I was terrified and we looked at what we can do. And there wasnt really that much we can do. But amazon was undercutting us in price. They were being amazon. We were terrified. There really wasnt much of that we could do just to do differently. We looked at all of our options and we realize there were all being done for a very reasons we just doing it. We didnt even match them on price. Amazons price was 30 percent lower than ours. We did not match the price. We just kept going. And it lasted for about a year and have read and at the end, on halloween, in 2016, amazon gave up. In the mailed all their former customers in little white square reader. I couldnt believe it. This never happens. This step just does not happen but it is what happened. Thats actually let me to the book. Because as someone who was 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 phenomenon and it turns out that they had an innovation stacks. We did it go it at the time. And there a bunch of reasons that i hadnt seen once i saw it, oh my gosh that was what happened. Thats what allowed us to survive amazon. In all of these other companies to survive. These vicious attacks. Amazon is bad but what happened to Southwest Airlines, was worse. So we didnt end up in federal state court did. Cat i wanted to ask you, you mentioned you looked around and couldnt 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 werent willing to talk to you on the record about it. Jim so i found many amazon victims. I talked to them personally. In other stories. And i said that is great. Could i put to you. In no. Nobody would. Even people who work in totally different industries, and industries that were not competing with amazon, everybody was so afraid of amazon the nobody would go on record. Ive zero on the record first in this book about what happened with him zone. Cat why are people so afraid of amazon. I dont know. Cat . Jim i will tell you that it was so severe that i could get nobody to go on the record read so there were no posts. Just me. [laughter]. Cat right now where in washington where there is a ton of scrutiny larger Tech Companies. When you look at congress, sec, and so, do you think that amazon is a monopoly. Jim led a monopoly in the traditional sense. But i think they definitely, and some of the behaviors of the market dominance read i dont have a sort of legally valid opinion on this thing but any companies that gets big enough, that it can move markets. They ought to be looked at. And again im not a regulator. I guess i kind of them now. But im a big believer in relation. I think it 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 its very powerful still maintains the semblance of responsibility. I think amazon is and that maybe google to. They deserve relation and different levels. Cat i wanted to ask you about apple because square could not exist without my phone. And they relied on the ipad. So i think about them in that context. Jim thoughtful and superpowerful. And there really important to get along with. They have great innovations and i have tremendous respect for them. And we build our company and product then i think apple introduced to the world which was the this thing. The sample convention. And so, good tremendous amount of respect for them. And theyre also someone you dont want to pass off them. Like what we did in the early days. Which could have ups and apple a lot by we bypassed a little connecting thing in the bottom of it. And we put it square reader and through the microphone jack. I was a nono. You were not supposed to do that. We thought we would get into trouble with apple. And maybe we thought that are product was so cool that maybe they would be good with it. Steve jobs had a way of protecting privacy. If you thought you recall, your fine. Apples lawyers would leave you alone pretty so we did this to save our butts. Cat tummy elisabeth about the design of the square and that process of creating such an iconic design the people recognize in the smithsonian. And in the midst today. Jim this rater which is about this wide, and the one i built was even smaller. It had a basic design flaw. It was one that i noticed that i not to correct. And it was when you are swiping a credit card through, it was so narrow the card would wobble as we go through. And as a result of that, it would result in a misread. Its about 80 percent of the time it would work in about 20 percent of the time, the card would wobble would not work. So to solve this problem, i build another reader was that was a little bit wider and tested it and everybody was 100 percent without. So the question is why did we build a tiny little device that didnt work as well as these big devices. And it wasnt for cost reasons or anything like that. But the reaction of the device was very different. Use the big device, people would be like oh hohum. If i used the small device, the one that is now in this custodian, they were amazed. They were blown away. What just happened. Like remover the first time you saw card go through a square reader. You were impressed. Like everybody was impressed. It cut your intention. So we took this giant gamble, the square to build a product, mechanically did not work all of that will as it could. But it just got your attention and glee away. And looks so cool. It was fun to have people were talking about it. And we just had to go for the cool. So we built something super cool. This day, square meters, they will work better if they were wider. But they are cool. The funny thing is as it turns out that 80 percent of the number really drops after a little bit of practice. So what you practice a little bit you will always get a good read. So we made a product lessthanperfect, the train to customers to use our product and then once they were using it, they were showing off to their friends about how good it was. Cat is a major gamble. You talk about the distinction in your book about entrepreneurs and business people. Could you talk a little bit about that. Jim so i was trying to discover what allowed square to survive amazon. In the process i saw this thing and about the innovation stack and i wanted to tell the world about the sprit of god to draw this or write this but i got to story. And immediately realized that the english leg which does not have a word for this sort of process that i was describing and was building a business but not one that has been done before. So how do you describe somebody to start a business. That was an entrepreneur. Im a friend of mine who started the Coffee Company and hes entrepreneur. As a bishop. The coffee shops have been around for centuries. Like you know how to make a coffee shop. If you dont, you can go to a tradeshow where they will teach you all of the stuff you need. How does this vendor set up your espresso machine. Coffee is a solved problem. So how do you differentiate surveys like that from somebody was doing something that they have never done before. So another friend of mine is trying to launch a satellite for super cheap. And is buying all of these old fighter planes a sense of up to 90000 each and put cinemark to howard dimon and pulls up at the last second. And he has all of this Kinetic Energy and is 70000 feet up. And if you fire a missile at that high, you dont need to have a very big missile because theres so much energy in it. So we can launch satellites cheaper. Where is his tradeshow or jump. He doesnt wealthy is living in a different set of rules. Hes living in this world where i needed to be able to describe that so it turns out, the word entrepreneur was originally used and popularized to describe the person is doing something new and weird. It was the original use of the word. Not in a sense in the main just business. You can say, and entrepreneur. He started the business. But the engineers, the 100 yearold use, and economists that were using it hundred years ago, met nobody who is different. So i sort of in the book, go back 100 years they say when you use this word. We will use in its archaic definition. This is the only word that i can use to describe it it and wanted to be able to differentiate what is it like to not copy because i did not