25 March 2018
What do chinchillas, Kendrick Lamar, machine learning and cryptocurrencies have in common?
We found out that and more when Jack Dorsey, co-founder and CEO of payments firm Square got together with the brilliant Dr Anne-Marie Imafidon MBE, founder of social enterprise STEMettes for an evening of empowering conversations at the British Library’s Business & IP Centre.
Jack, who was born and raised in St. Louis, Missouri is a self-taught coder, serial entrepreneur and co-founder of another tech giant that will for now remain unnamed, but let’s just say for him there is only one social network, and it doesn’t start with F.
For the benefit of everyone who wasn’t as lucky as us, we have compiled the highlights of a fascinating, in-depth discussion about things as big as the future of the economy and as intimate as the personal journey of an established entrepreneur from a childhood fascination with maps to the lasting impact of disrupting more than one industry, on a global scale.
Anne-Marie Imafidon: Jack, can you tell us what is Square?
Jack Dorsey: Like many companies, Square started with one simple idea and we found the purpose by watching people use it. For us, it began with a piece of glass art that Jim [McKelvey, co-founder of Square, who is also a glass artist] made and tried to sell but couldn’t because he didn’t accept credit cards. So we tried to solve his problem!
What we had in common is we both knew nothing about credit cards, we knew nothing about building hardware, we were both in credit card debt and we both came from St. Louis, Missouri.
What we did know is a thing or two about software, we were both comfortable with taking risks and we were willing to learn or do whatever it takes to make it work. That to me is what entrepreneurship is.
We gave ourselves a month and built a prototype around magnetic stripe technology that plugged into a cell phone jack. Then we started showing it to people and asked if they would use it. Initially a lot of the responses were negative.
But we continued to persist and so noticed the real purpose of what we built was not to accept credit cards, but help individuals make a sale. If they could make a sale and accept a credit card, they could participate in the economy. The economy at the time in the US was moving away from cash and towards plastic: merchants who accepted plastic could sell; those who didn’t were losing more and more. And both groups were treated unfairly by the financial institutions.
Once we built up from the prototype to something we could actually scale, we really focused on what we could do to help our customers achieve their potential and grow. Because if they grow, we grow. This, I think, is an amazing business model: when you have perfect alignment of incentives with your customers.
We then looked at other things to help our customers reach their goals and we eventually managed to build an ecosystem of financial services around that. Not just in the US, but also in Australia, Japan, Canada and the UK.
One more dimension was recently added to our company and we are now providing individuals financial services through an application called Cash. We have seen people use it as their bank account. What we managed to do is serve people who have been excluded by the banks and financial institutions, but we partnered with those very institutions to do so. We don’t want to replace banks, we want to make what they have more accessible.
A word that really represents Square is “access”. We believe that we can provide more access to more people and do so in a fair, simple, transparent and fast way.
AMI: How has machine learning, AI and other recent technological developments transformed what Square does and provides as a business?
JD: The easy part was building the reader, the hard part was to overcome the exclusionary nature of the whole industry. In the US, there was one tool to vet identity and authenticity: a credit check. Now, it’s common knowledge that a lot of entrepreneurs don’t have great credit history. Even we were denied a merchant account in the first place!
What we found was that only about 30% of merchants who applied to accept credit card payments made it through. The whole system was exclusionary, based on lack of trust.
To tackle that problem, we had to change our mind set. Our point of departure became trust and the will to include as many people as we can. Also, a credit check seemed like a terrible indicator of one’s ability to accept credit cards, so we used the latest advancements in technology to get more and better data. By doing those two things, the number of Square users who could start processing payments went from 30% to 99%.
We believe that we can provide more access to more people and do so in a fair, simple, transparent and fast way.
One of our fastest growing services in the US is Instant Deposit. Typically, when merchants accept a credit card payment they don’t get access to that money for a week, or at best 2-3 days later. Because of so many ongoing business needs, we realised early on the importance of speeding that process up. And we decided to deliver money to businesses the next business day, something that was a big risk for us: banks would not pay us until several days later.
What do you do when you want to make something happen? You figure out what technology can make it possible. We built that technology and decided to take it one step further by making the payment instant: any time a credit card is taken, you hit a button and that money goes to your account so you can use it.
It seems quite simple and obvious, and it feels like everyone should have that access, but in fact they don’t because of older approaches in the industry that have not been questioned. Well, we challenged those, took a risk and made it work because we believed it was worth it!
AMI: You said you don’t want to replace banks and that you’re relying on their infrastructure. What then do you think is their role in the future?
JD: I am a great admirer of Clayton Christensen’s theory of innovative disruption, set out in his book Jobs to be Done. And so, the way I would like to think about banks is not based on the definition, but on what they are needed for, what their job is. Ultimately, they exist to help people achieve a dream they have.
I do believe that if banks focus on what they are needed for, on what their job is, they will have a significant role in the future. For example, if I need to store my money securely, how can technology today enable a bank to do that for me in a secure, innovative and creative way? If you ask that question, the answer starts sounding a lot like blockchain.
I don’t want to replace banks, because I want to do my job: which is to help people make a sale. We could have stopped at helping people accept credit cards. But we realised that was the wrong job. The right one is making small businesses grow. That revelation broadened the field for us, it meant that as a company we don’t just serve a particular need: we can now go anywhere.
AMI: We have a whole fintech industry that is booming, with London being a global hub. Is there something other than Square that you find exciting in terms of fintech and the way technology is being used to solve problems that banks have ignored over time: like digital currency and blockchain?
JD: There’s a real opportunity to enable more people to participate in the economy and to guide them to financial health. People aren’t always going to choose that, but we need to make sure they have all the tools to make an informed decision: just like they would with biological health.
We will all benefit from levelling the playing field. With more participation come more creative ideas.
Blockchain and digital currency is something I’m really excited and optimistic about. To me, the Bitcoin Whitepaper is one of the seminal works in computer science in the last 20 years. However regardless of what you think about Bitcoin and its manifestation today, there’s amazing technology within the blockchain. If you look at the history of computing, all power comes from decentralisation. It removes single points of failure, increases reliability and trust. This technology can be applied to more than just financial transactions and payments, and I think we’re just seeing the start of what possibilities lie ahead.
Personally, I believe that the internet wants and deserves its own currency that is global, that is free, that is electronic, that is convenient, that is as decentralised as the internet is. And I believe that will be Bitcoin.
Due to its smaller surface area, it is less prone to attack. It’s been through a lot and it also has a brand: everyone’s heard of it! At the moment, Bitcoin is mostly seen as a digital asset you can buy and keep as an investment. I don’t think that’s how it’s always going to be used: I believe in its power as an actual currency for the world and the internet. I think it is extremely liberating.
AMI: As a serial entrepreneur, how do you evaluate ideas and decide what to build, but also what failures have you had that you’ve learned from in that process?
JD: I never wanted to grow up to be an entrepreneur, to program, to build a company and certainly not to be a CEO.
As a kid I was fascinated by cities and how they work. I wanted to be able to visualize them, so I was obsessed with maps. When my dad got a computer, I realised I can use it to draw a map: but I had to learn how to do that first. St. Louis [where Jack grew up] had a thriving hacker culture at the time which in general is very open to knowledge-sharing, and so I taught myself to program with the sole purpose of being able to design a map.
When I finally drew one, I became fascinated with the movements of police cars and ambulances I heard on the radio frequencies. By plotting them on my map I could actually see them. And it turned out there is a whole industry around that called dispatch. So I was soon hired by the biggest dispatch company in the world: but only after I found and flagged security flaws in their servers. I then started my own dispatch company, which failed and so I went back to contracting. I did that for years until I started Twitter.
And in a way, Twitter is also based on that same idea behind dispatch: showing where you are, what you are doing and by extension, what you are thinking.
My life has always been about understanding what I don’t know so I can learn and take the next step, and about being open to mistakes along the way. I think that’s the definition of entrepreneurship: you do whatever it takes to make it work! You work hard, and eventually you figure it out.
One of the creative things that we did at Square when we were first pitching investors was to show them a working product. The second thing we did after getting them excited was to enumerate all the ways in which our business could fail.
- We know nothing about the credit card industry;
- We’re in credit card debt;
- We don’t know how to build hardware.
Do whatever it takes to bring your idea into the world. This is what I enjoy and love and get inspired by: building tools to empower people to make them bigger than themselves. That’s the story of Square, and of Twitter as well.
AMI: Risk is important for entrepreneurs. Were you comfortable with it from the very beginning or is this something you’ve built over time?
No, I wasn’t. But I always learned best when I put myself in very uncomfortable situations. I had a speech impediment which really inhibited me from socialising: no one understood what I was saying and that made me very shy. I decided to change that and at a time when I could not imagine something more terrifying than getting in front of people and talking, I forced myself and signed up to a speech and debate class. These classes were like torture… But I embraced them and learned how to do it.
Being comfortable with risk is a mindset, and it’s not necessarily one where you think about risk itself, but about identifying and overcoming what makes you uncomfortable.
AMI: As a leader in the technology industry, you’re able to set an example and have the power to change the world. For an industry that’s quite new, tech unfortunately amplifies what we also find in the wider society: lack of minority and female representation. What have you done to tackle that?
JD: The majority of our company, Square, reports to only three women. You need to really push that diversity at every level so people are empowered to see what they can achieve.
The only way we are going to build a business of relevance is to have diversity of perspective and background: if we want to serve the world, we have to be the world.
Be open to all backgrounds, enable career development and growth: don’t just rely on the system to train people, invest in them and their ambition. Have leadership that people aspire to be. Give back to the community: it was hugely important for me to have a presence in St. Louis, where I’m from, when we could afford to do that. We now have around 400 people working there.
Reaching out to programmes that identify problems and address them, like STEMettes or Girls Who Code in the US, is another thing that is extremely important. They build confidence and empower people through experiences: one little spark and click can change things.
Do you think it’s possible to replicate the success of the Silicon Valley ecosystem here in London?
JD: First and foremost, Silicon Valley works because of a particular set of occurrences that are very unique to that area. If we spend too much time to try and replicate that, we can miss the opportunities in the environment and culture that make London great.
What I love about the tech scene here and find unique about London for example is that some of the best machine and deep learning people are here.
The ecosystem develops in the same way open source does: by exchanging knowledge and sharing what you are working on. Now that may or may not resonate with others, but it will move things forward. My advice is to look more deeply at yourself instead of Silicon Valley and be open, in constant conversation.
Jack went on to answer other questions from the public, and even a few about Twitter. Well, that and horse-sized ducks (yes, this actually happened). If you want to see the full video, which by now no doubt you will, down below is the recording of the event.
Ewa Domaradzka, Commercial Marketing Manager