Young and Profiting with Hala Taha - Jim McKelvey: The Innovation Stack | E69

Episode Date: June 15, 2020

Fail-proof your start up with techniques developed by Square's co-founder and billionaire, Jim McKelvey ! Today on the show we’re chatting with serial entrepreneur and author Jim McKelvey. Jim co-founded the super successful point of sales company, Square, along with Jack Dorsey who is the CEO of both Square and Twitter. Jim also founded Invisibly, a project to rewire the economics of online content; LaunchCode, a non-profit that trains people to work in technology; and Third Degree Glass Factory, a glass art studio & education center in St. Louis. And if that wasn’t enough, in 2017, Jim was appointed as an Independent Director of the St. Louis Federal Reserve. Jim, recently released his first book The Innovation Stack. Tune in to this episode learn what an innovation stack is and how Square’s innovation stack helped them beat Amazon as a small start up, hear Jim’s definition of what it means to be a true entrepreneur and understand how to find the perfect problem when looking to start a new business venture. Follow YAP on IG: www.instagram.com/youngandprofiting Reach out to Hala directly at [e-mail] Follow Hala on Linkedin: www.linkedin.com/in/htaha/ Follow Hala on Instagram: www.instagram.com/yapwithhala Check out our website to meet the team, view show notes and transcripts: www.youngandprofiting.com Learn more about your ad choices. Visit megaphone.fm/adchoices

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Today on the show, we're chatting with serial entrepreneur and author Jim McKelvie. Jim co-founded the super successful Point of Sales company Square, along with Jack Dorsie, who is the CEO of both Square and Twitter. Jim also founded, invisibly, a project to rewire the economics of online content, launch code, a nonprofit that trains people to work in technology, and third degree glass factory, a glass art studio and education center in St. Louis. And if that wasn't enough, in 2017, Jim was appointed as an independent director of the St. Louis Federal Reserve. Wow!

Jim recently came out with his book Innovation Stack. Tune into this episode to learn what an innovation stack is and how squares innovation stack helped them to beat Amazon as a small startup. Here Jim's definition of what it means to be a true entrepreneur and understand how to find the perfect problem when looking to start a new business venture. Hey Jim, welcome to start a new business venture. Hey Jim, welcome to Young and Profiting Podcast. Hello. Okay, so my first question is taking it way back. I've listened to a lot of different interviews that you've been on and I know that they usually start off with talking about how you met Jack

Dorsey, who's the CEO of Twitter, and how you guys started off with Square. But I'm looking to take it away back. I know that your mother suddenly passed away back in December 1989. And my father actually passed away about a month ago. And I know how difficult that can be, but also how motivating that can be when somebody really close to you passes away. So help me understand like who you were as a person prior to your mother passing, and the type of changes that went on both mentally and physically after she passed away and helping you to become the person that you are today. Wow. So mom died very suddenly. It was suicide and it was not something that we were expecting.

And it really blew my world up because up until that point, I had lived in a very, very isolated world. There were no real problems. My dad was a professor, so we never, you know, we were never rich, but we were never worried about money, and a lot of the world's problems seemed to not bother us. And when mom got ill, we thought that sending to a psychiatrist would make it all go away. And she let us to believe this. My mother was very, very tough, and she didn't tell us how bad she was feeling, because she didn't, I don't know why.

But the bottom line is, her suicide really knocked me over. And at the moment when it happened, I realized that I was actually mediocre in everything that I did. So I had three jobs at the time. I had my own company that was making storage cabinets for compact discs and basically stereo cabinetry. So that business was going pretty well.

I was actually working full time for IBM at the time, but I was working in the Los Angeles office, so I didn't have to actually physically go into the office. I was one of the first remote workers. And then I was a glass blower, so I had a glass studio that I was working at, and I would basically blow glass during the day, do my IBM consulting at night, and then run this other company in the sort of interstitial moments. And then mom died, and I realized that I was mediocre at everything.

Like, my company wasn't that good, and I was a very good IBM employee, and I was a mediocre glass plower. So I decided the day my mom died, that I would focus on something. And so that was Mira, the company that actually still own, I mean, they're office right now. But started Mira basically the night mom died

and I quit IBM and I for a time stopped blowing glass and then I stopped, I basically got rid of my company. So I put it all into this little software company which then, well, didn't make any money for the next five years. So I went it all into this little software company, which then, well, didn't make any money for the next five years. So I went five years without an income. Well, that's so cool that, I mean, it's a terrible thing that happened and I didn't realize how traumatic it was. So I'm sorry that I brought it up right away. Yeah, I mean, it's a tough interview, you know? This is good. I mean, it's a good content,

I guess. But it was like, I've never, I've never had an interview start off with bomb suicide. Like, ever. That was phenomenal. Yeah. Well, there's a silver lining in all of this. And that's the fact that her death kind of was a wake up call for you to not be mediocre. And I did want to share that lesson with my listeners, the fact that you don't have to wait until somebody passes away in your family to kind of get that fire under you, but a lot of the times, like those situations, do bring out a lot of drive and motivation. For example, like I said, my father died from coronavirus last month. Oh my god. Yeah, it was really bad. For me, I feel like I can take over the world and and I have all this passion

because I just wanna make him proud and I know that other people have had similar situations like that. So also during my research, I found out that you were quite a nerd growing up. And still am. Oh yeah, you don't grow out of that. At least I didn't.

Yeah. And so you didn't really fit in as a child and you decided very early on that you weren't going to care if you fit in or not. And I think that probably helped you as well as hurt you later on in life. Could you talk about that a little bit? So it wasn't so much that I wasn't going to care. It was that at some point I couldn't do anything about it. So caring too much wasn't going to help anything. It wasn't like I was this stoic guy that says, I don't care anything about it. So, caring too much wasn't gonna help anything.

It wasn't like I was this stoic guy, this is, I don't care what other people think. No, no, I really care what other people think. But at some point, it doesn't do any good. So, at some point, the rational part of my brain just said, look, you got to proceed whether or not people are pissed off at you or think you're an idiot or, I mean, so I've been called a lot of names.

And at some point, I just gave up putting any energy into it. But I guess I still care. I just don't do anything about it. But yeah, it was a big wake-up call because what I became was this thing called an entrepreneur. And at the time, people weren't calling people entrepreneurs. Entrepreneurship is this sort of popular term these days. But when I started doing it, it wasn't very popular.

And people thought it was weird to start your own company, and I thought it was stupid if you didn't go to work for a big company. So it was good to have that thick skin. And I hear a lot of people say, oh, don't care what other people think. Like that's not a good piece of advice because most people can't do that. But what I would say is don't care too much what other people think. And you know, if you can get away from a lot of the social dopamine drips that you get from trying to get followers or likes or things like that, that may help. Yeah, and I believe you don't use any social media at all, is that true?

I don't. So it turns out I wrote a book and my book publicity team has set up Facebook and Instagram accounts and then Twitter of course, because Jack started the company, but I don't use it. If you connect with me on one of the social accounts, it's not me, it's my team. That's to sell books. And I have to say, I don't have anything against social media, but I don't choose to use it personally. I feel the same way about drugs. Like, I don't use drugs. I got nothing against drugs. If you want to

use drugs, we can still be great friends. A lot of my friends, you know, use a lot of drugs. I just don't do it because to me, drugs are probably not something I should be using. I feel the same way about Facebook. Well, I mean, it's kind of crazy because you are a multi-billionaire. We haven't had many billionaires on the podcast. The last billionaire I had on the podcast was Naveen Jane, like 40 episodes ago. And maybe there's something to it, like having a laser focus, not getting distracted by trying to impress people in this fake virtual world. But Hala, I don't have a laser focus not getting distracted by trying to impress people in this fake virtual world. But I don't have a laser focus.

I do six different things. I'm on the Fed. I'm going to go into the Glassblowing studio today. I'm going to spend it after an in-blowing glass. I wrote this book. I do work with Square. I got another company. Focus is not one of the words you would use to describe me. But I will tell you this, having a surplus of time is very valuable.

So I'm one of these people that I think if I got into social media, it would be probably the same way that if I got into drugs, it's like I'd probably use too many of them. Like I'd probably be really concerned about what people think or trying to be clever or trying to look cool or trying to be accepted. Like, I think the sort of weaker parts of my personality would dominate and I would just get sucked in. And so I've explicitly eliminated that. I also don't play video games and I know that's not cool too.

But to me, I would rather spend time talking to people or working or hanging out with folks in real life. I mean, even if it's, you know, these days over video chat. Yeah. Yeah, I think that that makes total sense. I'm kind of similar. Like, I don't watch any TV, you know, I just don't because I'd rather, you know, work on my podcast.

I have a full-time job. Yeah. Aside from just working on my podcast. So you have to choose where you spend your time. And like you said, social media might not be a great use of your time. Well, I mean, I love, let me phrase that a different way. Yeah. You have to choose where you spend your time. But you should choose where you don't spend your time. Okay. In other words, and this is a different way of looking at the equation. Like most people say, well, I should do

more of this. Like I should learn how to play the piano. Well, where's that time going to come from? And I was taught years ago, tricked by Jim Collins, who told me to have a don't do list. And the don't do list is this, I mean, it was life-changing for me because I got rid of all sorts of things that I shouldn't be doing. And this was pre-social media.

So social media wasn't even an option. But I got rid of my TV. I don't watch news. Yeah, especially with everything rid of my TV. I don't watch news. Yeah. Especially with everything going on now. You still don't watch news? I don't watch news. I mean, look, I know what's going on.

I know about Black Lives Matter. I'm going to marches and I'm actually heading to the end of the LVCP office. And LVCP is my neighbor at launch codes. So I'm going to go into their office and do some things to hopefully help them today. But I don't know, I haven't seen the videos. I, and it's not because I'm trying to avoid it, it's just that because the news cycle is tremendously draining.

If I get little snippets of news here and there, that's enough. Now I do read, but I read typically weekly publications, so I don't get the daily hammering of stuff, because it's, I can't just get too depressed. If I soaked in all the news right now, I probably couldn't leave this room. Yeah. I wasn't paying attention to news for a really long time until coronavirus happened, and

then I just became like obsessed with it. Well, yeah, but I mean, so a great example of coronavirus, like I learned everything I could about coronavirus and then I kept watching them the news and everything in the news was stuff that I already had learned. So I went to the scientists, I worked with Washington University's medical school, I'm actually funding some research to try to get us a vaccine and more importantly to try to get us some testing. So I'm deeply involved in this, but I'm not learning stuff on a daily basis that's new. And if I get a piece of information two or three hours or two or three days after somebody

else does, I still get it. People call me all the time and tell me stuff that they think is important. That's how I get my information. Yeah. That's really interesting. So I want to move on to the topic of entrepreneurship and I want to talk about your book Innovation Stack. So for my understanding, you prefer to build completely

new markets. You like to do things that have never been done before rather than copying a proven solution. You call this being a true entrepreneur. Could you define what an entrepreneur means to you because I know you have a very specific definition? Yes. So, the word entrepreneur was first popularized a century ago by an economist who needed

a word to describe somebody who was doing something different. And that's different from business. So you can be very successful in business and basically do what somebody else has already done. So my friend Howard owns a bunch of coffee shops. He's made millions of dollars. And coffee shops have been done before. He opened a really successful coffee shop, but there wasn't anything really that different

about his coffee shops versus all the other coffee shops. And he would be a very successful business person. In history, we needed a word to differentiate all the other coffee shops. He would be a very successful business person. In history, we needed a word to differentiate people who did something different from people who were doing stuff that had already been done. That word was entrepreneur. In the last 100 years, the definition has morphed to mean anybody in business. If you start a coffee shop, we call you an entrepreneur today.

I don't use that definition. I use the archaic definition because I need a way to differentiate doing new things with copying. And by the way, I don't have anything against copying. I always try to copy. Right now, I'm in the studio, I'm designing a piece of glass.

And I am trying to steal everybody else's techniques. Like I am trying desperately to find a way to make this shape through copying other people. And I keep failing because nobody's ever done this thing before. So I'm gonna have to go invent it. And but invention is a last resort. But the problem is most people don't even have a word

to describe somebody in business who does something new. Because the word entrepreneur these days doesn't mean that. It means just anybody in business. So the reason I wrote this book was because I stumbled upon this super powerful concept that allows Square to become a multi-multibillion dollar company that allowed us to survive and attack by Amazon and allowed us to do all these really, really powerful things. And then I noticed that we weren't the only company that had done this, that there was actually hundreds of companies throughout history that had exactly the same experience.

And I was like, oh my God, one of the things that these companies all had in common was that they didn't begin by copying another business. They began by creating a new market, and that's super powerful. If your listeners wanted to do something to change the world, I think there's more powerful in creating new than in copying what's already been done. Well, to your point, you can get super successful if you create something completely new. I think you can reach new heights in terms of success. But what is the pros of copying someone?

I think it's less risky. Tell us about that. Yeah, so copying is great. Like you should always try to copy. So what I talk about in the book is this idea of the perfect problem. This idea that some problems are unsolved and some problems are unsolved and unsolvable.

But if it's solvable, but it hasn't been done yet, that's a perfect target area. And if you do something in that area, you will almost certainly be very, very successful. That said, I don't want a bunch of people running out there and saying, well, McKelvie said, don't copy. So I'm just going to like reinvent the chair. No, chairs work. Like I'm sitting in a chair right now. This chair is great. And I would not have any time at all if I had to reinvent everything every day.

So yeah, absolutely copy. Like, and if you, by the way, if you just wanna make a bunch of money, don't be an entrepreneur. Just be a business person. Find a business that works, copy, whatever else is doing. You can go to a trade show, the trade show can teach you what you don't know,

you can hire a consultant, if you don't like it's a formula. And all you have to do is work the formula. But I'm not interested in that. I'm interested in solving problems that the world has not figured out yet. And you can't copy the solution the first time. And that's the thing. We are such a copy-centric world.

All of school is copy, basically your entire schooling experience, up through a PhD. Because even if you do a PhD, which is supposed to be original research, like you're really supposed to copy the way other people have done original research. Like, it's just a formula, and run that formula, formula works, but it's not going to solve a new problem.

And that's what I want to do. And so that's why I wrote this book. And then in the process, I discovered that it was resonating with people who also felt frustrated that they didn't have the right tools that they could copy to solve all the problems they wanted to solve. Young and profitors, do you have a brilliant business idea but you don't know how to move

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this podcast has it all. So don't wait. Now is the time to turn your business idea into a reality by listening to the Millionaire University podcast. New episodes drop Mondays and Thursdays. Find the Millionaire University podcast on Apple Spotify or wherever you get your podcasts. So you mentioned the concepts of the perfect problem. So I know that you founded several companies, Square, and Visbili launch code. What are the problems that you're trying to solve with those companies? Well, I mean, Square was a question of getting small merchants paid.

So I was a small merchant. I wanted to be able to take credit cards. So that was the original problem that we solved. Invisibly is trying to solve the problem of people's identity online. Basically, you don't have a voice in how your content is created if it's advertising supported, because an ad doesn't allow you to pay more for something that you like, unless for something you hate. So in other words, if I steal 20 seconds of your time and piss you off, I'm still going to make the same amount of money as if I give you 20 seconds of pure joy.

And you'd rather be able to pay more for 20 seconds of pure joy, but there's no mechanism for doing that online. And the reason, one of the reasons that we're losing journalism and we're losing news and we're losing great content is because these economic models are broken. So that's what invisibly does. And then launch code was an attempt to basically allow people to become programmers for free because I knew we had this worldwide shortage of programmers,

and I thought, well, the best way to get somebody to do something is to give them something great for free. So at Launch Code, we give you a world-class education in six months that gets you a job, and there's no charge for that. And because it's free to everybody, we have thousands of people now that have gotten free training and real world jobs as programmers. And it is life changing. Launch code, I mean, Squarespace is kind of a big deal,

but launch code is probably more impactful on daily human lives because you're talking about people who were half of them were unemployed and probably other half of them. The average salary with people to start a launch code was 17,000. And when they finish the program, it's 55,000. So we're taking people, 3X their salary, and I mean, it's just life changing. So yeah, I do stuff like that.

That's amazing. That must be so rewarding. So I think a lot of my listeners, they want to start companies, they want to start businesses, but they don't have the ideas. They're unable to find the best business idea. So how do you become more aware and alert

to the perfect problems that are out there? So what I recommend is that people find something that appeals to them. Here's the problem, Hala. Entrepreneurship in its current definition, just start a business, starting a business ship, is super popular. It's cool these days. And because it's cool, a lot of people are going into it just because that's the way

they want to make money. And in those cases, I think those people would be well served by just copying an existing business. Find something that's working in Cincinnati and move it to Des Moines, or find something that works in San Francisco and copy it in New York. That's a good formula for making money.

I am not the right guy to talk to about that stuff. I believe if you want to be an entrepreneur, you're probably not going to succeed, but if you succeed, your success will be 100 or 1000X, what a normal business person would be. Think about the problems that you're going to encounter and understand that money is a very weak motivator. The difference between being a middle class person in the United States and being a billionaire

is not that great. And I'm just telling you, like there's not anything really that money makes that much of a difference. Like if you're basically in the middle class, it doesn't get much better than that. You know, you're still gonna sleep indoors, you're still gonna have Netflix, you're still gonna, like just, it doesn't get much better than that. You're still going to sleep indoors, you're still going to have Netflix, you're still going to have, like just all this stuff is pretty much the same.

Like maybe you'll have a fancy or a car, but you know what? Who cares? Maybe you'll fly in a private plane as opposed to a regular plane and you know what? Who cares? There's no big difference. So money's a very weak motivator if you get into real problems. So pick a problem you care about. So I'm not interested in talking to people who want to start a business.

I want to start a business. Well, I don't care. But somebody who comes to me and says, Hey, Jim, I want to fix this problem that I care deeply about. So look, I mean, just look at your window. Look at the issues we have in society. Okay. The terrible problems going on right now. I spend every morning working out with a guy, he's a 76 year old African American. Like he was been, he been through the civil rights movement. He's been through all these situations. Like he and I talk every morning

for an hour and a half about what's going on. And he's telling me all these things that there should be solutions for. Now, are those going to be good businesses? Well, some of them will be. Some of them will be great businesses because what I talk about in the innovation stack is the massive power of serving the unserved. And that's different than most people when they think about opportunity. You know, there's like, oh, well, I'll make this product that rich people will buy. Well, there aren't a lot of rich people. But if you make a product that every person

can buy, well, that's amazing. So one of my projects right now is I'm trying to figure out a way to make a 5 cent diaper. You know, diapers cost 25 cents poor women can't afford it. Poverty starts a lot of times when a young mother can't afford diapers for her kid, and then a horrible stuff happens because the kid can't go to preschool or the mother can't hold it on a job. If you look at what poverty starts, that's one of the places.

And I'm like, why is the world paying 25 cents for a diaper? I think we could do it for five. Now, can I build a 5 cent diaper? Absolutely not. Well, I ever be able to. I don't know. I'm literally investing in investigating hyperabsorbent materials right now because that's a problem that I care about.

If you don't care about that, don't work on it, but find a problem you care about. So you just gave a great example of this diaper issue that you're working on. You're certainly not a diaper expert, right? My two-year-old daughter would differ with you, but yes. I'm not the diaper ape. I don't know anything about diapers, except I'm a user. Yeah, so how do you deal with all that uncertainty? Like how do you get comfortable with uncertainty

going into a problem that you don't know if you can solve? How do you get past that? So the answer is, and again, this is one of the reasons I wrote the book, because I wanted people to know what it was like firsthand to feel that. You're not gonna get over it. There is no trick to getting over the uncertainty. There will, if you are doing something

that has never been done in human history before, you are gonna feel really weird. You're gonna feel alone, you're gonna feel scared. Probably your friends who love you will tell you that you're stupid. Not because they want to criticize you, but they'll say, they'll say, Hala, don't do that.

Yeah, it's because they care about you most likely. They care about you, and they are looking at a world of copies saying, well, what she's doing, I've never seen before. So therefore, it's never going to work. And you know, don't get in that flying machine. And I say, yeah, most of the early flying machines killed their operators. But then the Wright brothers got it right and we have the airplane now. And think about Orville and Wilbur Wright being the first pilots, because neither one of them were qualified to be a pilot.

I mean, nobody had ever flown a plane before. Like how could they be qualified? So I think you're not, and this is the thing that pisses me off. People expect these sort of simple answers. Oh, here's a way to not be afraid. No, you probably are going to be afraid. here's a way to not be afraid. No, you probably are going to be afraid. Here's a way to not be scared. No, I'm scared. I've done it 20 times.

And I still, every time I have to do something new, I get scared. But the difference is, if you're expecting that, you're better prepared to handle it. So, in algae I use in the book, it's a difference between being an adventurer and being, or I should say an explorer, or being a tourist. Like if I'm gonna go be a tourist, I expect to sleep indoors and have room service. Like I just, I've got this sort of tourist thing.

Now, if I'm planning to go visit some place that I've never been before, and it turns out that that place has been unexplored in human history, and I get off whatever the vehicle that drops me there, and I'm in a jungle, and I've brought my laptop and a visa card, I'm probably gonna die. Okay? But if I know I'm gonna be dropped off in a jungle,

well, I'll probably bring flashlights, band-aids some machete. Like, I'm going to pack for the trip. So, if you're going to be an entrepreneur, at least you should know how to pack for the trip. I love that analogy. So, when I was doing my research and studying, I found out that you don't consider yourself to be a good leader, and that's very different than a lot of the people that I've interviewed in the past. You never really take the CEO role. You know, Jack Dorsey is the CEO of Square. You're really quick to give up that role

when somebody competent comes along. So help us understand how did you realize that like you weren't a good leader, you weren't a good manager. What made you decide that I'm not gonna be a CEO for any companies that I've been? Well, so I tried it for a while. And it was one of these things like accounting,

which I can do accounting. I know how to do accounting, but I'm not a natural good accountant. I'm not that sort of person. And I could force myself to do this thing that was unnatural for me, and I would do it poorly. And then I met somebody who was a great accountant, and he loves it, and he's just phenomenal. And I was like, wow, I can like pay you to do this thing that I'm not very good at and

should be doing probably anyway. And that just was this light bulb of my head. And then I looked at the other things that I was doing. It's like, wait a second, I'm actually not very good at running these meetings. And I don't really enjoy measuring the weekly progress of the teams. And I don't enjoy motivational measuring the weekly progress of the teams that I don't enjoy, you know, motivational retreats and all this. I mean, just like, I wasn't very good.

So I realized pretty early on that I was sort of a terrible leader. But I still wanted to solve these problems that I still wanted to start companies. And then I realized that wait a second, there are people who are great leaders who love that. So why not work with them? So, you know, like when Jack and I started Square, there was like this, you second, there are people who are great leaders who love that. So why not work with them? So, you know, like when Jack and I started Square, there was like this, you know, there's that awkward discussion, you know, like two people start a cup of it, like, who's going to be the boss?

We had zero questions. It's like, I was like, well, I don't want to be the boss and Jack's like, I want to be the boss. I was like, great, you're the boss. I mean, that was it. That took like a minute and a half. You know, yeah. I love the fact that Jack's the boss. He's doing way better than I would have.

So since you brought up Jack, let's talk about how you guys met. I think it's a really unique story. So I hired Jack when he was 15 years old. His mother owned a coffee shop and he was this little kid who loved working with computers and came into our office and we put him to work and he pulled it all night or with us on his first day at the office. So we ended up becoming friends after that. I mean, sort of work friends, but he, even as a 15-year-old, was incredibly competent,

so I kept giving him bigger, bigger assignments. And after a while, we did a special project, just him and me, which turned out to save the company. And so, Jack and I stayed friends. Not, you know, I wouldn't see him every year because he moved out of town for a while. But after they kicked him out of Twitter, he came back to St. Louis and we caught up again and he suggested that we started another company together. He invited me to start a company with him. I thought, well, that's cool. What do you want to do?

And he was like, I thought you had an idea. I'm like, I don't have anything. So that's kind of what we started. Yeah. So I think there's a lot of lessons to be learned with your relationship. So he started out as your intern. You were still young. I think you were like 25 or 27.

Yes, about 26. Yeah. And he was 15. Yeah. So you were still young, but you were more 25 or 26. That's about 26, yeah. And he was 15. Yeah, so you were still young, but you were more experienced than he was. How was it becoming kind of business partners with somebody who was so much younger and less experienced than you at the time?

Like how did you trust him? And did you learn anything from that? So it turns out that there is a huge age bias in this country. So at Launch Code, we place a lot of people, and we place programmers. Well, I placed a programmer six months ago who was in his 70s, seven-year-old programmer,

like a programmer. The number one bias in programming is not gender or race. It is in fact age. And if you are prejudice, which I guess to some extent we are all prejudice a little bit, but if you see people of color or a certain gender or a certain age and you say they can't do this job, then you're really limiting yourself and those people. So to me, the fact that somebody is really young, like 15 years old, doesn't mean that he or she can't manage a team, do great work.

So I don't know, like it's like, I just never saw Jack as a 15 year old. Like he was just somebody who, I'd give him a task and he'd do the task right. So I gave him more tasks. And after a while, I gave him too many tasks that he couldn't do them all. So I started hiring people to work for the 15-year-old.

Now, the people I was hiring was in their 30s, so they were basically working for somebody who came to work on his bicycle, but he was still their boss, and I made sure they knew he was their boss, and Jack did a great job. So you got to get over this idea, don't prejudge. So what if they're 15? So what if they look a certain way? You just, I mean, but that's so baked in to everything we do that I think, look,

there's phenomenal talent out there. This is, okay, so you want to trick? Here's a trick. Go where the people ain't. If everybody's got a problem hiring women programmers, which statistically they do, for some reason, that bias still exists, which is insane. Wow, that means that you, if you can hire women programmers,

we'll get better programmers. Just so simple. Like, we're seeing right now that there's huge biases in society. Well, that doesn't mean there isn't talent. It just means that the talented people don't get the same opportunities. Well, if you can give them the opportunities,

well, you'll get better, I mean, it's good for everybody. So just get over whatever the bias is. Try to accept the fact that your new programmer may be a 65 year old black female. Oh, and by the way, if you need one, I've got a few that will crush you, you know, on JavaScript, like launch code, like we let everybody in. And some of our people defy the stereotypes. And I love it. Yeah, I think it's a really important topic to discuss.

Like there's ageism and it goes both ways, whether it's young or old, that people just have their prejudices. So something I was looking at the news today unlike you. And I saw that Twitter and Square will make June 10th, which commemorates the end of slavery on June 19th 1865. It's going to be a permanent company holiday. So I thought that was really cool. That is really cool. And thank you for telling me that. You didn't know. No, honestly, I yesterday they announced it. I don't read the news on a daily basis. Yeah. And I have to say I haven't checked my square email in three days. So yeah.

I got hundreds and hundreds of pieces of email so that did. Yeah. Well, do you know what square is doing in relation to supporting Black Lives Matter and anything with their, you know, inclusion and diversity plans and how they're doing there. Well, I know what I'm doing. As far as the company's process, I don't know what the company's like, it would be inappropriate for me to speak for that because they're doing so much. If I named three of the programs and they were doing 12 others, I would just upset everybody.

Totally understand. So, because I don't have a complete list of all this stuff, look, I would just upset everybody. That would be a nice sound. So because I don't have a complete list of all the stuff we do, look, I would say this, there's sort of two general things that we can do as corporate citizens. One is treat our employees really, really well. Try to quash biases and look, we all have biases. Like, I got caught the other day on something that it was a bias that I had and somebody pointed out to me

and I was so embarrassed. Like I couldn't even, like I felt terrible for about a week. Somebody caught me on something and I was like, oh my God, I can't believe that I would say that but it was this thing that was just sort of, it was sort of in there and somebody exposed it. So we tried to be good citizens that way.

But the second thing we could do, and I think Squares done a wonderful job of this, is build tools that connect people and payments and allowing small businesses and small individuals. Like if you're using cash app, cash app is phenomenal. And it connects people and people who don't have access to the tools that middle-class Americans have, we're making those tools more available. And we do it for small businesses

and we now do it for individuals through cash app. And I think those things are just great for society. I'm actually not familiar with cash app. Is that similar to Venmo or is it that different? Yeah, it's similar to but better than Venmo. So much better. How so? You'll just have to use it.

But I can prove it. Sure. Cash app is an application that is outgrowing Venmo. Okay, so here, look at the, this is the real time of all of the applications in the world. Okay. Number one is Zoom. Okay, make Okay. Number one is Zoom. Okay, make sense.

Number two is TikTok. Mm-hmm. Can you see what number three is? Is it cash-shop? It's cash-shop. Wow. Number three in the world. Okay.

Now let's- I must've been under a rock. And I just pulled my phone out of the pocket. Like this is real time as of 1243 on June 10th, three in the world, ahead of Instagram, ahead of WhatsApp, ahead of Netflix, ahead of Snapchat, ahead of PayPal, ahead of Disney, Venmo, I can't even see on the look, but the point is this, This is a very useful tool.

Yeah, you might want to use it. Like, it's awesome. I'm not going to sit there and tell you how awesome it is. Just come on. It's free. Try it. It's fantastic. And I had nothing to do with this creation, by the way.

I mean, except I started the company that started the product, but like I was not on the cash app team, but I love it. Oh, I definitely have to look more into cash app. You'd absolutely do. Yeah. So, let's go back to you and Jack starting off square. So you guys had very little financial experience. How did you turn your lack of knowledge in the financial space into an advantage when

starting square? So this is the process that I outlined in great detail in the Innovation Stack, and it's super, super powerful because this is the formula that essentially unlocks the power of these world-changing companies. And we stumbled upon it. It was sort of accidental. And actually a lot of world-changing companies sort of stumble upon the same formula. It's very simple. You try to serve somebody who has been excluded from a market. You take a group that wants to do something but can't. In our cases, it was merchants who wanted to take credit cards but couldn't. In Southwest Airlines case, it was people who wanted to travel

in the air not on buses, but couldn't afford to. Well, I mean, there are hundreds of examples. I won't bore you with them. But you start with that premise. And even though you don't know to. Well, I mean, there are hundreds of examples. I won't bore you with them. But you start with that premise. And even though you don't know anything about it, and this is where entrepreneurship comes in, if you are doing something where there is the potential for expertise,

then you are almost always going to get your ass kicked by an expert. So if I want to go out today and fly an airplane, I will probably kill myself, but if I don't, I will certainly not fly it as well as a trained pilot. But if you are trying to fly the world's first airplane where there are no pilots in the world, then you can have an even playing field. So Jack and I knew nothing about payments. So we went into a world where nobody else did either.

Because we were building payments and credit card processing for this group that was completely unserved. And because the group was completely unserved, our total ignorance was not as big a disadvantage as it would have been in a known market. This is so important for your listeners to understand. There are no experts at new things. Like right now, are there any experts in world economic shutdown?

No, and I'm on the Federal Reserve. I talk to the world's best economists, and we don't have any expertise, because we've never done this before. We haven't shut down the world's economy before. Okay, so now six months from now, we'll have some experts, because they've all lived through it, okay?

But if you're doing something for the first time, it's like magically the playing field levels out. So the playing field is so steeply against you in a world of businesses copying. But all of a sudden, once you get past where the market ends, the playing field becomes perfectly level. So the fact that Jack and I knew nothing about payments

didn't hurt us because nobody else knew anything about this type of payments because it didn't exist. We invented a new market and then we kept most of it to ourselves. Your dog is an important part of your family. Don't settle when it comes to their health. Make the switch to fresh food made with real ingredients that are backed by science with nom nom. Nom nom delivers fresh dog food that is personalized to your dog's individual

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No fillers, no nonsense, just nom nom. Go right now for 50% off your no risk two week trial at trinom.com slash app. That's trinom and om.com slash app for 50% off trinom.com slash app. That's super, super interesting and very eye opening. So when Square was taking off Amazon launched a similar product, it worked better according to you. Mark, you did it very aggressively. They undercut the price by 30%. From my understanding, you were trying to figure out why you were able to compete

successfully against Amazon when so many other companies have failed. And that's how you discovered the innovation stack. So can you explain to us what the innovation stack is, like your definition of it? And then also what your innovation stack was that helped you compete successfully against Amazon. Yes. So the odds of surviving in Amazon attack are basically zero. If Amazon takes your startup, copies your product, undercuts your price and adds the Amazon brand, you die. And that happens, well, basically 100% of the time, except in Squares case. And when we survived, I was happy that we had survived, but I couldn't explain why. And so, as somebody who was raised by a scientist, I got obsessed with answering the question, why did, like, why was square the one person spared?

It's sort of like one of these guys that falls out of an airplane. Like there have been cases of people who have literally fallen out of airplanes and their parachutes don't open and they live. Right? And like, well, what did they do differently? And the answer is, if you're in that situation, you, at least I became obsessed with it, is that it turns out that Square had this thing,

which I now call an innovation stack, which is the thing that protects you. And an innovation stack is this thing that you build in response to a harsh environment where you have to invent new things. So this is why entrepreneurship is so important because entrepreneurs, by my definition, the archaic definition, do new things. And if you do new things and you can't copy, then the process you go through is fundamentally different. So what Square did because we were trying to serve merchants who worked totally out of the system, we couldn't just copy what all the banks were doing because

the banks had systems to exclude these people. So we had to invent new underwriting, new hardware, new terms of service, new customer support, new software, new settlement rails. Like, we did 14 things that were different and these 14 things, if you add them up, form what I call an innovation stack. And it turns out that if you build an innovation stack, you end up with this thing that at least in all the cases that I've studied ends up dominating the market. So whenever I found a company with an innovation stack, that company also always became the biggest in their market, biggest furniture store in the world. IKEA, innovation stack, biggest airline in the United States,

Southwest, innovation stack. And this is many times in the case of, in the face of ruthless competition. So how does a little startup survive Amazon? Innovation stack. And by the way, Amazon, I gotta give them a plug here. When Amazon quit, they mailed all their customers a square reader.

They were really cool about that. They were so good. They were really cool about it. I have to praise Amazon here, even though I sort of tease them a little bit, but they were really classy in the way they sort of tease him a little bit, but they were really classy in the way they sort of got out of the fight. So hats off to Amazon.

But look, I want people to have this power because this is the power that brings society forward. Like if you're fixing stuff that's already been fixed, that's useful. But if you're inventing the new fixes to problems that nobody else has saw before, that's super useful. Nobody gives you a handbook on that because, well, I mean, we don't even have words to describe it. So an interesting tidbit that I learned when I was studying your Amazon

Square use case is that you found out that Amazon's reader worked better than yours, but you guys decided not to change the design. And I thought that was so different than what most people would have done. Different, I thought you were going to say stupid. But yes. No, I mean, it's interesting because at the end of the day, you won.

So I want to understand like why was having a sleek design more important than functionality? So I have a theory. So I'm the guy that made the square reader this big, this little tiny white thing. And I actually, the original one I built was even smaller than this. This is a, I think it's 22 millimeters. I think my first one was like 17.

Anyway, there's a problem with making a credit card reader to this small. And that is the credit card wobbles as you go through. So if it wobbles, it screws up the read and you're never gonna fix that. So if it wobbles, it screws up the read and you're never going to fix that. So the solution to this, which is what Amazon and everybody else did, was they made the card reader wider.

And I built wide readers at square, and I tested it, I actually made 40,000 of the things, but we never released it because in my tests, I discovered this really weird phenomenon, which is that if I showed somebody a wide reader, they were sort of ho-hum, you just read my credit card. And if I used the tiny reader, they were blown away. Like I got their attention.

And all of a sudden, they paid attention. And one of the hardest things to do if you're a startup or if you're doing anything creative is get people to pay attention to the fact that you've actually solved the problem. You've actually built something new. And so, despite the fact that the reader that I designed didn't work as well as it could,

I kept the small unit because it grabbed people's attention. And during those couple of seconds, when people were saying, what the hell did you just do? We were able to say, it's square, it's this new thing. You got to check it out. And at that moment of attention was worth the fact that it was a little bit hard to use. The other thing was, because it was hard to use a little bit,

and still is, by the way, the square reader to this day requires a tiny bit of practice. But it's something you can master. It's like teaching someone to tie their shoes. Like tying your shoes, by the way, if you've ever tried to teach somebody it, it's not that easy, but yeah, you learn it in two minutes. You can learn to use a square reader in two minutes. And after that, you get really good at it. Like these days, I tie my shoes, I don't even think about it.

And people would get proud of the fact that they were good at using their square readers. And then they would show off, because if you're proud about something, you brag. So did I just show my credit card front and back to the entire world? We're not live, don't make sure. Oh my god.

Don't worry, I'll edit that. I'm sorry, I just put the front back of my credit card Out of the video. Not please Just blur that out if you will oh my lord. Okay. You could just me don't worry. Yeah. Sorry about that. Whoops. It's okay Just a billion dollars. Don't worry about it. No, you're not going to get that far on my car. Don't worry about it. It's, uh, yeah. Okay, so that's really funny.

And it's so interesting because it's basically one viral because you kept a design. So I think that's kudos to you for sticking to your guns and going with it. It turned out to be super successful. Yeah, you always get congratulated after you take the risk and it works. But it was just a gut call. We didn't do any user groups. There was no consultancy called in. It was just like, people are really reacting well for this.

And I just want to go for the big reaction. So your book Innovation Stack has excellent reviews. I would recommend everybody to go out and get a copy. It's really fun. it's really engaging. I heard that you rewrote that book eight times. Yes. Well, Square just took like three weeks to launch or three weeks for you to design that product.

So help us understand why you wrote it so many times and if that was a very difficult thing for you to do. So when I answered my question, when I figured out why Square survived the Amazon attack, I did all this research and I found most of my research in history. And so the problem with historical research, Hala, is that you can dilute yourself

into thinking you're right, but you've just cherry-picked examples. So if you want to prove any example, just pick the right subjects and it'll always work, right? I can prove any drug works if you let me pick the people that I get to use it on, right? So I had all this historical example and I thought, well, this is no good. I need to speak to somebody who's still alive because most of the people I studied were

dead. But I was able to meet Herb Kellerher who was a legendary founder of Southwest Airlines. So I took all my research to Herb and I said, Mr. Keller, Her, Am I right? Like, is this phenomena that I think I live through the way you see it? And he's like, yes, he's like, this is, this is an incredible thing. You need to do something about it. So what Herb did was he basically said, get out there and tell the world. Herb Keller basically told me to write this book.

And I was so excited because Herb is a legend or was a legend. He unfortunately died. That I was so excited that I decided to write a graphic novel because I thought business books by the way suck, they're boring, they will put you to sleep. Like if you could just, like, listen to one

if you have insomnia problems. They're terrible, even like the best selves. They're just poorly written. So I was like, I'm not going to write one of these. So I wrote a comic book and I called up her, but I was super excited. I said, Herb, you're not going to believe this. It's taking me a year, but I've written this as a graphic novel. And he was really disappointed because he thought that was trivializing

this very important subject, and he thought all that research that he just didn't see it. So, Herb said, look Jim, I can't stop you from doing that, but I can't tell you to leave me out of it. And I was like, well, I'm not going to leave Herb Keller her out of this story. So I rewrote the thing again as like half-graphic novel and then half regular book. And then that's what I sent to the publisher.

That was draft number six. Sent that to the publisher. The publisher said, well, you can't have this schizophrenic book that's like graphic novel and then back to text and then graphic novel and back to text because that's not going to work on e-readers or audiobooks or anything like that. So my publisher basics that look, you got a great book, but just rewrite the thing as a book. But they did let me keep a really dirty joke in there.

I don't know if you caught it. But they really let me. So yes, it's a business book, but it reads more like what I wanted, which is stories. There's a burning city, there's murder. I mean, there's just a bunch of stuff that blows up because, look, entrepreneurship is actually really good theater because a lot of the times when you're doing something new, there are disasters and disasters and disasters. And disasters are great stories.

You don't want a story of a nice, normal, functioning, nuclear family. That's just boring. Like you want somebody who's a space alien. So like he said, it's a very fun, engaging book. Make sure you go out and get it. The last question that we ask all of our guests is what is your secret to profiting in life? And that can be financial or personal.

I would say my secret, which I've already sort of shared, is create space. So, don't fill, leave some room in your garage for that extra tool you might acquire. Leave some time in your day for some joy or to talk to a stranger. Leave some space in your head by not filling it with stuff that little suck you up. I mean, it's not that I don't wanna know the news, it's that I can't know the news. If I know all the news, all the creative thoughts get sort of like stopped to death

by whatever sort of headline I just ingested. So space is, it's so easy to fill space up right now. We've got all these wonderful tools. And here, I mean, honestly, I guess as an author, I'm asking you to give me some space in your head by taking three hours and reading or listening to my book. And like, where is that space gonna come from?

Like, is that three hours less sleep you're gonna get? You have to have space. And so if I'm asking for space, let me try to justify it by explaining this. The person I wrote the book for is a certain person. I had her in mind when I wrote the thing. She's incredibly competent, but every time she encounters a new problem that has not been solved by mankind or by anyone she knows, she hesitates.

She quits. She just qualifies herself. Because she says, oh, well, people can't do that. You know, they can't start a top 10 Apple podcast and keep a full time job. Like whatever, like whatever that thing is, and I looked at her and I was like, how many millions of people are just qualifying themselves

just like my friend did, and by the way, just like I used to do, where you have the potential to solve the problem. But that doesn't mean you get to copy the solution. It just means you have this potential. So don't sit on the sidelines. So the reason I wrote the book, the reason I'm asking people to give this time to this thing is to understand when you are disqualifying yourself. Because right now we have so many problems in the world that it can't just be up to a small handful of elite superheroes

to solve it. Like every person has the potential to do it. I mean, look, I'm a guy who's basically a glass blower, no payments experience. Look at Square. I mean, it worked. Jack and I, zero experience, doesn't matter. Like, you run this formula the right way.

You don't need to be an expert because there are no experts. But you do need to be prepared to live in a world where you don't have expertise. And that's a different thing and that's what I've tried to prepare people with. I love that, that's so inspiring and motivating. Jim, where can our listeners go to learn more about you and everything that you do?

So I, again, I'm not on social media, so don't, I mean, you can follow me, I guess it'd be flattering to my marketing guys, but they're marketing to you. Actually, it's not guys, this is my marketing team is all female. Like everybody works on my team. I have a 100% female team.

I shouldn't use the word guys, sorry. But don't follow me on social media. I do have a website, gymmekelvy.com. If you go to gymmekelvy.com, I will give you a free copy of the graphic novel because actually I did produce the book as a graphic novel as well, and I'll just give it to you for free. So you don't have to buy the book. It's not the whole book. It's just chapter nine, but it's a great story and there's a there's a murder. There's a. Oh, that looks really cool. Yeah, there's a there's a city burning down. Yeah, I mean, get the graphic novel. I'll put that in my show notes. Everybody has a link. Yeah, I mean, it's good. It's good stuff. So that's it. Jim McElvy.com.

Very cool. Well, thank you so much, Jim. I think this was an awesome conversation. How what what fun and good luck to you. And I'm terribly, terribly sorry to be about you dad. I mean, I know what that's like. Oh, thank you. Because I was like parents too. So, yeah. It stinks, but you know, life goes on and just gonna keep on going up and up.

Yeah, yeah, I mean, I'm wearing my office right now. So like, that's the photo of my dad. Oh, that's so nice. Yeah, he died seven, one second. Oh wow, that's so nice. Yeah, he died seven months ago. Oh, wow. Yeah, so good. That's recent too, yeah. Yeah, I know it's like good luck to you.

Thank you so much, Jim. Have a great day. Thanks, bye-bye. Thanks for listening to Young and Profiting Podcast. If you enjoyed this episode, please consider leaving a review on Apple Podcasts or comments on YouTube, SoundCloud, or your favorite platform. Reviews make all the hard work worth it.

They are the ultimate thank you to me and the YAP team. The other way to support us is by word of mouth. Share this podcast with a friend or family member who may find it valuable. Follow YAP on Instagram at Young & Profiting and check us out at YoungandProfiting.com. You can find me on Instagram at Yap with Hala or LinkedIn, just search for my name, Hala Ta Ha. Until next time, this is Hala, signing off. Are you looking for ways to be happier, healthier, more productive and more creative?

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