The Power of Curiosity and Inspiration

Stanford University good afternoon everybody good afternoon everybody my name is Tom cosmic and I would like to welcome you to the draper fisher Jurvetson entrepreneurial thought leaders seminar brought to you by the Stanford Technology Ventures program and the Business Association of Stanford entrepreneurial students archived for future use by the Stanford center for professional development and all generously underwritten by Draper Fisher Jurvetson it brings me great pleasure to welcome to Stanford Jack Dorsey who is as you know the co-founder and chairman of the board of Twitter and the co-founder and CEO of square Jack welcome to Stanford thank you thank you for uh thank you for having me it's an honor to be here I get a lot of my inspiration from walking around and this is a gorgeous campus to walk around and I've spent many hours walking around this campus driving down here specifically just to do so because I was uh not fortunate enough to go here I wanted to start with the story of entrepreneurship my father when he was 19 years old he was living in st. Louis Missouri and he was a pretty good cook he knew how to make pizzas and he had a best friend who also knew how to cook pretty well as well so they decided to create a company together and to call it two nice guys and it was a pizza restaurant and I think the main reason that they started this pizza restaurant as my dad is you know fascinating work were from st. Louis so there's a lot of meat meat and potatoes so as a personal challenge to him to see how much meat he could get on one pizza which he called the Tim special and they started the restaurant it started going very well and they needed to hire some help and they made one rule before hiring waitstaff they made they made the role we will never date any of the waitstaff and the next person they hired was my mom my dad fell in love with his woman her name is Marsha and went up to his best friend and said I broke the rule I have to quit the company is yours and I'm gonna go marry marry this girl and I was born 10 months later so that's where I got started I got started in st. Louis Missouri it's a very very it feels like a very very small town it's actually five million people but a lot of its spread around the metropolitan area and my parents always stayed in the city they never moved out to the suburbs they were there were true believers in the city and st. Louis was one of the hardest hit cities in America apart from Detroit in the great flight to the suburbs in the 40s and 50s in the 60s so when I was growing up I was surrounded by this urban atmosphere and I I just loved it my first love I think was the city and was walking around downtown st. Louis and it was fairly desolate when I was growing up but it was still a joy and a wonder to me you had skyscrapers and you had all this hidden energy and just walking around you could feel something something different and that sort of love and that obsession was made most tangible by maps I became obsessed by maps and looking at them and I bought every Rand McNally and every single map that I could find and I would put them in my room and hang them all over the walls and just look at them and wonder what was happening at this particular intersection or in this area or how to get down this road most efficiently and my parents didn't know what to make of it but I I loved it and in 1984 1985 we got the first Macintosh and an IBM PC jr. and I really want to play more with maps I wanted to see them I wanted to alter them more and do it on the computer screen so I taught myself how to program because I wanted to learn how to draw a map on the screen and then I accomplished that and it was very very basic and very simple and then I put some dots on the map and then I learned how to move the dots around and then the next challenge was to figure out how to keep the dots on the streets because they're kind of going all over the place and then I had all these dots moving around this beautiful picture of this map which represented downtown st. Louis and then later represented New York City which were which I was amazed by and the issue was that none of the dots had any meaning whatsoever they're just random dots moving around this this city so my parents had a CB radio and they had a police scanner and what was happening on the police scanner was really interesting because you had ambulances and fire trucks and police cars constantly reporting where they are and what they're doing so I'm at fifth and Broadway in New York City I have a patient in cardiac arrest and we're going to st. John's Mercy and I could take that information type it up into a program make some assumptions about speed and direction and what routes are going to take and actually watch the ambulance go to st. John's Mercy and then I could hook up another ambulance and then a taxicab a police car a fire truck and the more and more of this I did the more I learned how to automate more of it because the internet was just coming up and we had go for in st. Louis Missouri has a school named Washington University which was one of the first backbones for the Internet so we had a pretty good connection through the BBS systems the bulletin board systems back then and I found all these open databases of this information this although this was after the fact but it was still interesting to watch and to see unfold so now I had this picture of real live data of a real live City operating in front of me and I just thought it was the most beautiful thing ever that I visualize a city living and breathing and I learned that the software had a name and it was called dispatch so I went to I went to college I went to University of Missouri Rolla initially and I was deciding between political science at the time and computer science because I've always been fascinated by cities and at some point want to maybe potentially go into government still not quite sure if I have more effect there or more effect in programming but I went away from political science because I realized that there are a lot of parallels between what you do in politics and what you do in government in in writing policy and laws and what you do in programming but the difference is the time scale so I could write a policy as you know as a senator or as a mayor and I could see the effect maybe in eight years but I could write that same policy and write a simulator around it and write populations around it and I could see that if I could see that effect instantly with the computer so I went down the computer science route and all that time I was building this dispatch system because I was just fascinated by these cities and the visualizations and I I eventually found the largest dispatch firm in the world through a lot of research that was called DMS it was in New York City and they had a very very simple website I just had their logo and the company name is just gone public on NASDAQ and I could not figure out how to contact this company I really wanted to see what they were doing and like actually I wanted to work for them so I did they were running a very old version of Apache and there were some holes in Apache so I found a hole in their web service I discovered their corporate email list I picked the email address for the CEO and the chairman and I wrote an email that said my name is Jack Dorsey you have a hole in your website this is how to fix it and by the way I write dispatch software I was flown out a week later and then got a job and transferred to NYU so I was at that point I was living the dream I was living I was I was working at the biggest dispatch firm in the world the biggest call center in the world and writing software to visualize New York City which was which was amazing to me and that is really where a lot of my focus has has been on is visualizing data visualizing information moving around in real time and I took that concept and eventually in 2000 realized that I had this beautiful picture of the city but it was all verticals there were no people in it where all the people in the city and and that's when I started working on very very simple prototype based on some inspiration from Instant Messenger with the away status and also a service called live Journal which it was a very simple journal blogging application that allowed you to compose a blog post and they would go to a friend's page and I also had the first blackberry because I was still working in dispatch at the time it was called the rim 850 and it's basically just an email pager but what it allowed is I could be anywhere in the world anywhere in the in the city and I could share what I was doing and maybe I could also see what other people were doing so I wrote some very simple software to receive an email from my blackberry and then send it out to an email list of some people I put on that list put some of my friends and my family on it and I got that done in about a day and then I went out to Golden Gate Park and I went to the Bison paddock we do have live bison in San Francisco if you haven't seen it there they're awesome and I typed out an email that said I'm at Golden Gate Park watching the Bison and it went out to my service and was broadcast out to all these people and I immediately recognized two things first no one cared what I was doing and second no one else had a blackberry so I was alone in my sharing and also receiving so I was getting no information back so long time good idea put it on the shelf continue to contract around dispatch and got into a lot of lower level medical systems and if you ever take a boat to Alcatraz to go on the blue and Gulf Lee I wrote the ticketing system for that so just random contract jobs until I discovered this company called OTO which was run by Evan Williams and Biss stone was joining in a few months and it was a consumer podcasting company and I had never written a resume before I had no interest in podcasting whatsoever but I was a really good programmer and I wanted to understand the consumer side of the internet a lot of what I was doing was in the backend and while it would touch my mom and her life it would be so in an indirect way my mom may takes take a taxi cab in New York City and may touch my software or buy a ticket to Alcatraz and may touch the software but it wasn't direct so I wanted to learn about being more direct in that interaction so I went to work with eV and biz and I quickly learned that no one else there enjoyed podcasting either so that was interesting no one was really no one was really excited to build the product or build the tool and they weren't consumers of the tool so we weren't building something that we'd love to use so it created an interesting situation which allowed for other ideas to bubble up and in late 2005 early 2006 we all kind of broke up into separate groups and we we were given assignment have come up with an idea of something you'd like to work on and the first thing that came to my mind was this this idea back in 2000 but now in 2005 2006 we had SMS I could actually send an SMS message from singular to Verizon and I was very very new to the United States and I was in love with the technology it's you know it degrades gracefully to every single device even the cheap devices and it has this beautiful constraint of 160 characters and it doesn't really work all the time and it's really rough around the edges I love stuff like that so I brought up this idea what if we could just use SMS you could send what you're doing it would go out in real time to all the people who are interested in hearing it and then it would be archived on the web you could also enter it from the web and it would be device agnostic and be a whole whole thing and be awesome and my two other people in the in the park we're on a playground said it was a good idea and we presented to the company and took about a week but then the company finally got behind it and we were I was given two weeks one other programmer and Biz Stone to write the software and dent and we did it and at the end of that two weeks I wrote the first tweet which was inviting coworkers and then all the audio co-workers came on they loved it and little by little we took from that company and we brought them on the Twitter project until we spun it out as a separate company and sold off audio so that's how that sort of visualization and early desire to see the world led into Twitter which is still a desire for me as to like now we have more and more people using all over the world and it's even faster to see what's happening and what's unfolding in the world but it really comes down to that curiosity about what's happening right now everywhere and and really being the pulse of what's happening right now everywhere being able to point to every single medium in 2008 I stepped into the chairman role of Twitter and there's an interesting thing that was happening the entire market was crashing so all of these financial abstractions that we had built up were suddenly being swept away and there is no better time to start a company or a new idea than a depression or recession because a lot of the management teams were being asked to leave there's a lot of people who need to get really creative to create something new and there was a opening and there was an opening particularly in payments and at this time I also reconnected with my first boss when I was 15 years old his name is Jim McKelvey and he is a glass artist he makes these beautiful pieces of glass and we reconnected over Christmas I normally go home for Christmas and visit my family and we got to talking and you know he wanted to uh he wanted to build an electronic car company and I said I have no idea how to do that but it's an interesting idea but let's keep talking we should definitely work together on something and then one day he called me up on his iPhone and I picked up my iPhone and he was frustrated because he just lost a sale of a two thousand dollar piece of glass that he had just made because the woman who wanted to pay him only had a credit card and he couldn't accept credit card and we're both wondering you know you have this general-purpose computer next to your ear why were you not able to make that sale and we decided that he would come out and we would take a month we would hire one other programmer to work on the client side and build the hardware out and I would build this the server software and then answer that question and in the month we we built a very early prototype of what is now known as a square which is a credit card reader that plugs into the audio jack of your iPhone or your Android or your iPad or anything that has an audio jack we just need to write software for it and the software and the hardware was really easy and we got that done in about a month I could actually swipe a card and generate a electronic receipt via email and then send it out to a person and I love this because I would go around to all these angel investors and VCS and charge them five dollars or fifty dollars to show them my new idea and made six hundred dollars from that by the way it was awesome but a month later after we had that prototype Jim started Visa reading the visa regulations and he's like wait a minute this is against the rules we can't do this and here we had built it all the software we built the hardware and we had a greater understanding of the payments world coming from nowhere like I have no understand I had no understanding of the financial world before this moment and we we decided to push through and show this to visa and show this to MasterCard and show this to Amex and the thing that really inspires people is a working product when you're pitching someone the best thing you can do is show them something that works we did this with Twitter we had a great number of users we had a great number of mass we had a lot of use cases and we had investors who are coming to us who are already users of the product their families were used of the products so this story became very very easy to tell and they could easily see why this was something those powerful so square was the same but it was a little bit more tangible because I could actually take their credit card and take money off of it and then say like go to your you know go to your chase account right now and look because I just took $3.00 from your account or in some cases $50 if I didn't really like the VC but the interesting thing I realized along the way is that payments is another form of communication it's another exchange of value and the really interesting thing about payments in the financial world is no one's really designed it if you think about it every single person in this world has some connection to money and they all hate it at some point or the at some point or another you're going to hate some aspect of money so there's never been anyone who's really designed a payments platform or an exchange of value or a currency that's really beautiful and that's really thoughtful and that engages a user experience around communication instead of purely the the service of and the mechanics of transferring that value so when we were building square we realized that wow the receipt is something that's never really been designed or looked at I go up to a coffee store and I hand them my credit card I say I want a cappuccino I hand them my credit card and they type in cappuccino on their little terminal which is basically a calculator on top of a cash box and then they get three dollars and twenty four cents from that they get a receipt and then they take that amount and they go over and they type that amount into the credit card terminal then they swipe the card and then they get that receipt and then they hand me that receipt and I sign for that receipt and then I give it back to them and then they take that receipt take the other receipt staple it together with a little coffee card and then give me all that and I throw that paper away it's useless and it's it would be so easy if you built a cohesive system to actually and that carries the entire transaction to create a receipt that is useful with one swipe I can sign on an electronic screen get rid of paper completely but with that one swipe I learn of the merchants Twitter handle I learned of their Facebook page I learned of their Yelp account I learned of their menu their hours whatever they want to put on their receipt they can put there but it can be used as a publishing medium and something that you can interact with instead of something that you just it's a it's a burden to it's a burden to receive and a lot of a lot of retailers out there are embarrassed by the receipts they give out in the whole payment processing aspect of their business they go above and beyond to craft a beautiful experience in their store and they have to compromise to accept credit cards they have to compromise to accept any form of payment why and then what do they get out of it if you go to any coffee store in America and you ask them how many cappuccinos did you sell today apart from Starbucks and Peet's I don't know we made $300 you know how many cappuccinos did you sell and then what percentage of those people bought the Scotties what happens when it's a rainy day what happens on Tuesday at 5:00 p.m. all this data were used to for google analytics no we've used this effectively to build our electronic systems and our blogs and and all of these companies that we're building but real world offline merchants have none of this data they can buy into it if they buy into a fifteen thousand dollar point of sale system but then they also need to buy into an entire service army of people to figure out how to use it so what we want to do is we want to build a full point-of-sale system that is just gorgeous and that allows and enable someone to immediately not just make the transaction fast and feel great but to get very very rich data for everything that they're selling Google Analytics type of data for everything that they're selling and and this becomes really really important not just when you're starting a business but when you're trying to grow that business and this is true for every single startup and every single thing we do and one of my greatest lessons that I learned in starting and running twitter and starting and running Square which is how important it is to instrument all usage you have to instrument everything for the first two years of Twitter's life we were flying blind we had no idea what was going on with the network we're not no idea what was going on with a system with how people were using it we're making guesses we were basing everything on intuition instead of having a good balance between intuition and data and we were going down all the time because of it because we could not see what was happening so the first thing I wrote Foursquare on the server was an admin dashboard and we have a very very strong discipline within the company which is now 72 people to log everything to measure everything and to everything and we treat the dashboard we treat the analytics we treat the data as a product and we call it the inference team and their job is to instrument all usage and infer all action and that's something that we need but it's also something that our users need all that data is really really interesting and it speaks to a market that's never really been addressed 94% of Commerce is still offline only 6% has moved online so it's a massive massive market and they have no tools whatsoever so the data has been really important but I think the one of the biggest things that has helped me is learning how to become a better storyteller and the power of a story and by this I mean if you want to build a product and you want to build a product that is relevant to folks you need to put yourself in their shoes and you need to write a story from their side so we spend a lot of time writing what's called user narratives of this user or this person is in the middle of Chicago and they go to a coffee store in the middle of Chicago and this is the experience they're going to have it reads like a play it's really it's really really beautiful and if you do that story well then all of the prioritization all of the product all of the design and all the coordination that you need to do with these products just falls out naturally because you can edit the story and everyone everyone can relate to the story from all levels of the organization engineers to operations to support to designers to you know the business the business side of the house so that story is very very important for us and really constantly considering the story and what new twists and elements we need to add this story are a pretty big deal for us as well and we want to tell an epic story we want to solve a really big problem we don't want to have a bunch of short stories strung together we want one epic cohesive story that we tell the world and and both both Twitter and square are driving driving towards this call it's a number two good storytelling and writing stories for for the users the third thing is as I see my role as CEO of square my role I think of it as an editorial function and it's funny because I'm Square our headquarters are actually in the San Francisco Chronicle building which the paper is not doing so well so they're kind of moving out and we're moving in and we're also right next to the United States Mint so it's a very auspicious location for a payments company but by editorial I mean there are a thousand things that we could be doing but there's only one or two that are important and all of these ideas and all these stories from our users from engineers from support people from designers or going to constantly flood what what we should be doing and we need to choose the one or two that are really going to drive and sustain the network and the service and the product and as an editor I'm effectively just the chief editor of the company as an editor I'm constantly taking all these inputs and deciding on that one or that intersection of a few that makes sense for what we're doing and there's three access points that I pay attention to in particular number one is the team we have to bring the best people in edit the best people and so we have a good cast of characters and edit away any negative elements and and a lot of this is just like you know the timing is off and you know our relationship does it just doesn't matter so just doesn't match so in some cases we have to ask people to leave or they they leave on their own but it's it's always minding that team dynamic because at the end of the day we're just a group of people working on one single goal and if we can't step in a cohesive coordinated fashion then we're gonna trip all over the place and that's that's a messy company and no one wants to use that number two so recruiting is number one number two is internal and external communication internal communication it's just the coordination around what we're doing and why we're doing it and what our goals are and why the goals are like that that's it if you have that sort of high level this is where we're going this is the vision this is the next 30 days and three months and six months and a year maybe it makes it very very easy to set priorities and for all the edges of the company to set their own priorities to do the right thing and the external communication is the product the product is the story we're telling the world and we want to put everything through this we don't want it to be about a person we want it to be about how people are using it and what people how people are fitting it into their lives and what they're doing with it that's the strongest story we have so number two is that internal and external communication and number three is editing the Money in the Bank story and this comes in two ways comes through investment and taking money from investors either through swiping their credit cards while they're not looking or through revenue and fortunately Square is a company that has revenue from day one so we can look at constantly building that and we don't have to worry about much investment but we can focus on that that revenue piece so my three priorities and my focus areas are in that order and that's what I'm constantly editing as as a CEO and I think it makes it makes managing a growing company and a fast pace movement very very easy because there's basically one thing that you have to do you have to make every single detail perfect and you have to limit the number of details that's it every detail perfect limit the number of details if you can do that well no matter where you are in the org structure no matter where you are in the company or organization you're going to succeed because you're paying attention to the smallest things and if you pay attention to the smallest things while knowing what's important then everything else takes care of itself so I've gotten a lot from you know from those those three things and that's what's guided my career and I'm always looking around I'm always looking for it you know that that cohesive end to the story and how everything wraps back around and as an example of this I I found recently about three three or four months ago that my father's pizza restaurant still exists and I found out about it because it's there was this account on Twitter and it was pi pizzeria and they said they tweeted hey Jack I think I bought your father's company we're using Square to sell all of our pizzas which is awesome so just all loops back around and and that that is the feeling that is the moment that we're all building for that's why we do what we do and why we work so hard to build what we want to see in the world is for moments like that it's not for moments where I say hey mom go down the street to this particular coffee store and you'll see you know square this new thing that I'm working on it's my mom texting me randomly and she does it all the time and and saying hey Jack I use square at this random place that I just showed up at that's that's the magic moment and and it really reminds me of one of my favorite quotes of all time I'm not really sure who said it but it's in a Linda berry novel called cruddy and I think it speaks very highly of what we all do as entre Newars and what we all do as creators and builders of things everyone in this room it captures it perfectly and the quote is expect the unexpected and whenever possible be the unexpected expect the unexpected and whenever possible be the unexpected and I I try to live by that on a daily basis so with that I would love to open the floor to questions and spend the next 30 minutes talking about whatever you want to talk about so my name is Jesse doula and ITA the class of the spirit of entrepreneurship MSME 178 which we meet on Mondays to prep for this lecture and then we meet on Wednesdays to debrief so for the first question if someone from the class has a question let's ask it and then if not hey where and there are similar products that are also being taught that don't have hardware and things like that mysterious what your marketing strategy is going forward given the idea that this market is it's growing and more people are trying to yeah well I think um so number one the marketing strategy we have not we've not done any marketing whatsoever just yet so a lot of it has been word-of-mouth and what we discovered from that and by the way starting a startup after Twitter is so much easier than before because you have an amazing way not just to promote the product but you get instant feedback of what people are feeling about it and what they what they like and they dislike and you can react very quickly to that but what we're trying to do now is identify the key influencers in those merchant areas and make them distribution points so for instance there's 5,000 in Los Angeles and 300 people a day go to each one of those and 10 to 30% of those people have their own small business and this is not just small businesses this is individual services like teaching piano or cutting someone's grass or a hairstylist so doesn't make sense to ship 200 squares to these taco trucks these 5,000 taco trucks and allow them to give this away for free or with the purchase of a taco we think it does so and then people discover well this is interesting but how can I use it and then suddenly I need to sell my MacBook Air on Craigslist and I can take the person's credit card instead of having them bring $1,200 to me or whatever I'm selling it for so that's how we're thinking about it right now a lot of well a lot of the way I think about marketing is through the product itself so I think the marketing function the best aspect and the best they can do is surface the product as much as possible and and to do that we're doing this taco truck thing and we're also you know purchasing Facebook ads and Google Ads and doing the standard thing and looking into you know print media and you know the the Union of accountants because they might be influencers and there are trade magazines so it surfaces the product and then the product takes over so if the product is Bute is built in a in a beautiful way it just inspires people hopefully to take action we have about three to five seconds to inspire someone to take action to actually get square and then we have about a week to get them to participate more and that's by taking in transaction and it's not just a lot of our users are not just accepting credit cards but they're also accepting cash and we we realized with a receipt that you know it's great that we're sending electronic receipts via email and SMS for credit card payments but a lot of people still still pay with cash so why can't we offer those receipts for cash as well so then we're like oh we can be payment device agnostic we don't have to we don't have to worry about that so we have about a week to get them dissipate more and then about a month to to get them to be users forever more so that's the the phasing that we think about in terms of other competitors the magical thing about square is not just the hardware that it's so small and it's free the app is free and the hardware is free and there's no setup costs and all these other things but typically when you go to accept credit cards you have to get a merchant account what's called a merchant account which is a relationship with a bank which has all these setup fees that has monthly minimums that has a monthly fee it has a one to two year contract and then they tell you that you're going to be paying one point seven nine percent to accept credit cards and there's a little asterisk next to it and the low Asterix goes to for qualified cards only which represent a very very small amount of the cards actually used so the merchants are actually paying 3 to 3.5 percent and 50 cents on every single transaction they have no idea they're doing that until the end of the month when they get the merchant statement the bank comes in and takes the money out and if they don't have enough money in then they get an overdraft fee it's a mess it's a mess and it's it's a it's almost criminal so we're we're changing all that we're making a lot more transparent we're not just focused on the hardware so the difference between us and and those other competitors that you named as that we're focused on the software we think the software experience is what can be beautiful we think all of the data around the transaction is really really interesting and something that we can do a lot with although something our users can do a lot with something their users who the payers can do a lot with and something we can do so the question is do you have any plans to go to larger retail institutions I I really like building utilities I like building utilities that scale from individual use all the way up to a larger use and you see this with Twitter with people using it to talk about what they're having for breakfast which is something that I do and it's meaningful it's meaningless to 99.99999% of the people in the world but it's extremely meaningful to my mother so it's it's a good use case and you have businesses using it you have governments using it and we see square in the same where you can use it to you know get your rent money or to tutor someone and get paid for that or sell something on Craigslist but you can also use it in a retail environment and we have retailers in New York City who have multiple iPod Touches and now they're just replicating the Apple Store and the Apple store experience they're bringing the point of purchase to the decision so they don't have anyone lining up behind the cash register and again the experience feels awesome the more you can minimize and that's the other thing about utilities is the more you can minimize the thinking around the mechanics in in in the in the moment then more people are going to use it and more people are going to feel good about it in squares case it's really focused on we want to get you to the value of what you're actually intending to purchase or the service that you're intending to purchase and get all the mechanics of the payments out of the way you can go home with the receipt and you can interact with it there if you want but you came for a cappuccino you should get a cappuccino you shouldn't have to worry about you know taking out your credit card and doing all this all this mess and like having to now do something with three pieces of paper that you have no use for so yes we are very interested in the retail Merchants and the larger merchants the thing about the larger merchants is they're very stubborn and they have a lot of and they have a lot invested in their systems and they're very very stubborn to change so our thinking around that is we're going to build an API we're gonna introduce them to it you know see what works we're gonna be focused entirely on payments will fit in we're gonna make sense and then we disappear when they have to go back to their system but we don't want to build inventory systems or anything like that yeah what's up you and I personally am i choosing random people or okay I just wanted you to tell us a little bit more about how uh that's a great question I uh the biggest the biggest thing for me on that on that path is I need to I need to draw something out and I need to get it out of my head I found myself very early on thinking about something like you know thinking about this this early idea for Twitter and saying to myself I could build this awesome you know you have those like shower moments or you're walking at Midnight's in some town in New York City and you've got these amazing brand ideas and and then you start thinking well I could really start doing this if only X and if I had this person or if this technology existed or if this happened or this happened and what I what I realized I was doing is I constantly making excuses for not working on it and then the window it passed and then I couldn't do anything so I think it's really really important to write it out or to draw it out or to code it but you need to get out of your head and the reason you have to get it out of your head is you need to be able to see it on a surface that is not in your mind and once you can see it once you can step back from it and you can also decide this is you know this passes my filter passes my you know constraint so maybe I can show it and share with some other people and then they'll be like you know what that's the stupidest idea ever and or you know that's somewhat interesting but maybe this and this and this so the sooner you can do that then you have a lot of momentum around it and you can you know really decide if you want to commit to it and work on it more or put it on the shelf for a later date and the realization that I think everyone needs to have about that latter option put it on the shelf is that you can come back to it and it'll it'll surface back up in another piece of work or another idea at some point in your life so you know having that having that ability to close off a chapter and move on is really really important you can't have all these open threads and and that's what I realized I was doing and and that also encouraged me to to really write more and to really think about you know what is what is the story what how are people coming to this and like when I show my friends this how are they going to react and I would write it down I would actually treat it like a play and in and when I realized that I was writing plays I wrote I read a lot more place for style and for substance and for technique and I think it's you know I think it's I think it's really good and I think there's another company that I've always looked towards for inspiration and I know a number of people in this room probably have a similar company in mind which is Apple Apple I think is run like a theater company it has a great sense of pacing has a great sense of story and has a great sense of execution and it's all about it's all event-driven it's all stage driven the stage being a billboard of the stage being a keynote or the stage being a product launch all of it has a very very cohesive end to end story I mean you think about what happened when Steve Jobs came back the company the first thing he did is he killed every product line the company was working on and for two years they had no product on the market whatsoever all they had were a bunch of posters all around the world was Steve's heroes and it said think different and he was just focused on bringing up the brand and making people aware of the brand again and how the brand is aligning to this particular feeling and story and then they came out with the iMac and then built built iTunes and then the iPod and they realized that wait a minute people are carrying music on their phones now so we better build the phone the iPhone and so this this unfolding of the plot and the epic story has been very very interesting to watch especially if you look back you know to that that time when he came back to the company so I've learned a lot from that company and other companies who operate in a similar fashion so I'm curious about I mean are you basically and it caught becoming an acquiring bank how are you getting rich it becomes the people we're um we're doing some interesting things we we are an aggregator and there was another company that was an aggregator before us and that was PayPal and we learned a lot from PayPal and paypal kind of paved the way for what we're doing and it made a lot easier for what we're doing and the other thing that made things easier for us is I hired Keith Raboy who was working at PayPal in the early days and he was the one that went to Capitol Hill and and lobbied against these other organizations that were trying to shut PayPal down and he's now our CEO oh so he has a good understanding of how to get through a lot of these complexities but when we first saw the merchant account as funny because we uh we actually went to we built the software and then we needed the payment back-end and we were like how do we get a merchant account it is a nightmare to figure out how to get one of these things these days we went to rock bottom merchants and counts calm and we signed up for a merchant account as a glass artist and we said we were selling glass and we created a company to do it it's called a JD jam which are the initials of my co-founder and I and we were passed off to this other organization with a queue and they told us a different price and then we're passed off to another organization and they had another different price in another infrastructure and it was just a mess but it was so inspiring to see that because we're like we can simplify this there is no reason that this needs to exist in the world and that goes back to that editorial is like it's not it's not what we can build it's what we can take away all the things that we can take away from this world are going to be the things that drive adoption we were going to our partners and we're showing this to all these financial institutions and we're like we're giving this away for free we're given the software way for free we are not going to have any sort of merchant account and not gonna have any monthly fees or any of those things then and the first thing they said to us literally was you're being really stupid you're leaving money on the table people are used to paying for these things and what we said well that's probably why you only have seven million people processing credit cards with you today we can bring that number way way up and we can enable everyone to accept the form of payment that every single person in this country is carrying around in their pocket from a credit card to a debit card to a gift card to a prepaid card everyone knows exactly what this is and how to use it so we don't need to train the users with a new user behavior they can use what they know they can use the devices that they have in their pockets today the tools the simple tools that they have in their pockets to do everything they need to do it doesn't require anything from the payer site so the merchant account was was the first to go and were the only one that doesn't require a merchant account and way we've set that up structurally is we have to work with an acquiring bank we have an inquiring Bank and we pass through and you know we don't want to be a bank because if we're a bank then we're under all this regulation and suddenly people from the government are asking for our seven year plan and you know it's hard enough coming up with a 30 day plan for a startup so we we want to resist that for as long as possible I get someone from the back red shirt I guess there's a lot of red shirts and so the question is is squares gold just to make credit cards easier to use or do you want to get rid of them and go after something bigger we want to make payments feel amazing we're going to make this exchange of value feel awesome and right now everyone in this country is using this plastic device and the easiest thing for us to do is build this other plastic device that accepts this plastic device and then brings it into the software and then we have a software experience around it so we want to make that feel great and we want to make you know people accounting for cash feel feel great as well but at the end of the day you know we want to constantly iterate that experience so we don't know what that looks like in the future there's a lot of talk around NFC which is near field communication and what that means NFC by its very nature is just identity it's just identity in authentication you can tie payments to it you can tie walking up to your car and unlocking to it you can tie the same thing to your house and whatnot or you can tie like transactions to it but the thing about it is it makes the transaction easier so if there's a mass of technology that makes the transaction easier than this which everyone knows how to use then we will accept that we will use that but we we are not we are not just focused on accepting credit cards we're focused on the payment experience and all the information and all the platform around payments and when you really consider it and you really consider the potential of actually being able to carry the transaction end-to-end then there's a massive amount of things that you can do with it one swipe and you can suddenly check in to Foursquare if you have that option turned on you know the I'm sure many of you have been to the malls where you get those little buzzers and you know they call you back to the counter when your food is ready why do you have to do that when you can swipe you put in your phone number for a receipt if you've already used Square before it remembers that they can just send you a text message when you need to go back to the counter so there's a ton of stuff we can build hooked off the transaction that's really really interesting and has never really been done before in the cohesive way where people are building the hardware and and the software and and that's what we're focused on is is building that cohesive story and how are you actually keeping up the companies with PCs and keeping you company PCI compliant especially with all the wireless transmission of the data okay so the question the questions are with the rapid growth of square how are you keeping the company PCI compliant which is a compliance we have to go under as a financial institution and then without the merchant account how are you doing the Clearinghouse which is called a you all know it as a direct deposit it's also called ACH so PCI compliance is is very interesting you have all these auditors come in and they and they you know audit your lines of code and your practices and you know the cryptography you use and everything so we encrypt as soon as it comes off the reader and it's encrypted with our server's public key it's sent up through encrypted channels and then it's decrypted and then sent off to the processors and the banks and the whole chain of the credit-card industry which is a which would take another hour to describe but the way that we've made sure that we're always compliant is we do a lot of what's called pair programming in square so we have two people at one computer two keyboards two mice and you have two people working on the same problem you have two two eyes on every line of code which happens to be one of the requirements for PCI compliance but something we just do naturally so we have a lot of folks who know exactly what's happening in the system who can encourage best practices so we've been able to we were the fastest through our PCI audit that our auditor ever went through and the other thing that's happening with PCI is it's evolving very very quickly PCI was not written for mobile and it has to be rewritten for mobile so everything's kind of in a gray area right now and you know there's going to be a lot of changes and I think squares going to inform allow those changes because I I believe that a lot of our practices our security practices and our safety practices are better than what PCI mandates you know we're engineers and we want to run an engineer a precise and safe and secure system from end end it goes back to that detail point we want every single detail to be perfect and a lot of these a lot of these committees and and auditors don't have the same same source of ideas on the Clearinghouse side so what he means by that is I can accept a credit card but how do I get the money so you get the money by you you download the application you put in your address we send you a square in two to three days for free and then you take someone's money you take $50 from them and now you need to get the money out so what you do is you go to the bottom of a checkbook or on your your online banking and you get the routing number and the account number and you put in your bank account information we send a test transaction which is you know to microtransactions and then you verify that that's actually yours and then we start funneling the money to you every single night so the clearinghouse function is we're just telling all the money goes into a bank account which is owned by our acquiring bank and then when we have the information we tell that bank to send this amount to this bank account which is the bank account that you put in so that means that we don't have to be under the same regulations that the banks do they can handle all that we don't have a need for any money transfer license because we're not crossing state lines the bank is we're just telling the bank to send this money from A to B and that's it so that's how it technically works what about two major ones sort of theory of solutions one of them deals on communication and the other one in processing and really customer relationship management are there any other paint 1.10 points that you know of but don't we have time to solve that we might have actually that's a great question there's a lot of pain points in the company so we would love to come here to have you join the company the yeah there's there's going to be there's going to be a lot III think of square as a platform that's going to you know build an ecosystem around it and we're going to be very very good about releasing strong and clear api's on how to build things and you know the best thing that you can do is hook something off that payment and a real time hook off that payment goes back to that sort of visualization I would just love to see a visualization of all commerce happening in the world right now and can you imagine a visualization of like money flowing from one place to another place and like you know what that looks like that's that's awesome so I'd love to see projects like that and we're certainly not going to think about all them but we are going to think about a lot of them and we are going to do allowed the company out right now is already doing about eight different things and we have to coordinate all those eight different things into one thing we're building hardware we're fulfilling hardware we're building a payment network that can't go down because if we go down we lose money for one of our users it's not just 140 characters it's potentially $140 because they can't make the sale we're building a risk fraud function building support and then we're building a web service and a client so there's a lot going on and there's going to be even more so I think of square as a startup with many startups inside of it and that's that's how we're organizing the company internally you can have a lot of different projects and they'll be coordinated by this one it's one cohesive unit outside Jack with that we have to call the event to a close the Business Association of Stanford entrepreneurs do a basis I want to thank you for your talk today thank you very much for more please visit us at stanford.edu

Channel: Stanford

Views: 51,520

Keywords: technology, business, entrepreneur, thought, idea, company, start-up, money, profit, twitter, square, payment, credit card

Id: w7j0VEwWmkE

Length: 60min 26sec (3626 seconds)

Published: Fri Jun 03 2011