Hello and welcome everyone. I'm Patrick O'Shaughnessy. And this is invest like the best this show is an open-ended exploration of markets ideas methods stories and of strategies that will help you better invest both your time and your money you can learn more and stay up-to-date and investor Field Guide.com Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management all opinions expressed by
Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions clients of O'Shaughnessy Asset Management, May maintain positions in the Securities discussed in this podcast. My guest today is John Collison, the co-founder of the digital payments company stripe Stripes mission is to increase the GDP of the internet a lofty and deeply interesting Pursuit. John is
Clearly a voracious learner across business and investing which you'll hear instantly. He started stripe with his brother Patrick when he was just 19 years old and has grown it to At Last valuation of 36 billion dollar business in our conversation. We discussed conglomerates the internet economy the power of writing and why board members are like Pokemon characters each with different powers. It's a lively and wide-ranging conversation with one of the entrepreneurs. I've most enjoyed speaking with please. Enjoy.
John I think a fun place to begin this conversation would be probably unexpected to the audience which is with industrial conglomerates. I'd love you to explain why you've been interested in industrial conglomerates and some of your research and then I want to talk about some of these principles applied to technology companies, but first explain why you're so interested in this interesting niche of public companies.
Oh gosh, that's interesting place to start. Well, I think look most of the technologists I know are really interested in studying the history of Technology because you want to not just be
One hit wonder you want to not just have one product that works and then passes by but you want to be able to Surf multiple waves. I think all the kind of people have been talking recently about how much of the S&P 500 is now made up of the Google's Facebook's Microsoft's companies like that. I think if you look at all those companies what's impressive about them is how they've managed to Surf multiple waves and have multiple successful independent lines of business. And so Facebook making the move to mobile successfully integrating acquisitions.
Successfully Microsoft missing the jump to the internet and kind of browsers bus initially, but now having many I think it's six or seven independent the dollar Revenue businesses. And so most of the college's I know are really addressing this topic, but I find interesting to look at is how it tends to be different outside of technology and the different Dynamics you get in conglomerates and going to enduring businesses in other Industries because we're kind of used to the
Decker way in which technology like to do is you talk to investors and they'll often be following successful companies like trans dime in Aerospace or danaher the industrial conglomerate lvmh in the luxury business. They are Louboutin and somewhere the champagne random things like that what I have found interesting in looking at these first off as you probably know from these there are tons of really spectacularly successful companies that have grown as high rates.
For years and years and years outside of technology and Domino's Pizza is another one that people like talk about because actually grown more impressively than all the technology companies and that sounds incredibly obvious to say, but sometimes you have to remind people in Silicon Valley that this is the case and the way the time to do that is somewhat different to what happens in technology and in particular you get a lot of these if you look at single industry conglomerates, the classic conglomerates are maybe the Berkshire Hathaway is very famous for just having so many different intellectual.
Hobbies of Warren Buffett's under one corporate structure. RJR Nabisco is probably the classic multi industry conglomerate. It's like lot is a cigarette manufacturer and literally a cookie maker of Oreos do another room under one Corporation. But if you just have for a second - kind of the single industry conglomerates, like some the ones I mentioned like lvmh and beauty or trance time or something like that. It's actually pretty interesting Vail Resorts might be another one actually owns many of the Key Properties in Vail and Heavenly and places like that. It's really interesting how they work with.
Is firstly you have there are very aggressive acquirers. A lot of their growth has come through selective Acquisitions made a good prices. What's interesting is that then they often give the managers of the acquired companies still a loss of latitude in how they operate and how the company's work. And so it's not the case that there really deeply tightly integrating them to the one platform than not kind of slurping up all the employees and making them work in a whole new way. They
Flee and by these companies and then don't integrate them that tightly with a still driven really interesting performance as a result of that and it's interesting because in Tech it feels like we only really have one of two modes one mode is there are certainly companies that have done Acquisitions really really? Well. I mean Salesforce is probably one of the or Cisco maybe those are two of the most prominent examples for they made acquisition after acquisition Salesforce will acquire a company that acquired desk.com and turned it into
service clouds will make one of these Acquisitions and they'll very tightly integrated with the rest of the sales force and then maybe on the other end of the spectrum you can kind of think of venture capital as the much more loose version of this where they're actually not part of the same company at all, but maybe this kind of common elements and how they're done with no one really has within technology done how to actually see pretty commonly in the rest of the world, which is one holding company for a whole bunch of independent businesses that are sharing expertise. They're sharing management style.
There may be rotating managers across them. There's one counterexample that we probably both know constellation software which at this day Jones, you know, how many Independent Business they have. In fact 500 businesses. I was going to say like four or five hundred. Yeah vast number of independent businesses. And so when will sound like software to golf clubs and the other will sell Plumbing software and the managers will trade notes things like that. But other than that, they're on more or less complete why it's not the case this we don't have this in technology. I mean, I'm curious. Do you have any
theories?
I don't know when you and I first talked about this. I think we were trying to pick apart the sort of jobs to be done for the selling or controlling owners of the businesses. And you made the great point that perhaps Berkshire is a beautiful off ramp for those that are of a certain stage of their career or have certain priorities. It's a great home to stick a business and have an exit of sorts and perhaps that there are far too many very young Founders and Technology perhaps valuations have something to do with this the
Public valuations of SAS companies or whatever else are so high that it just doesn't make sense to run the classic Old Henry Singleton issue at a high price by at a low price strategy that made that conglomerate. So interesting. I'm curious if any of those resonate with you.
Yeah, I think those are some of the natural phenomena has talked about I think Venture Capital feels like it must have something to do with us both the fact that as you say valuations of technology companies tend to be fairly healthy investing the strategy in a way works because all those kind of serial acquirers
Wires we mentioned are able to just do loads and loads of acquiring of businesses essentially reasonable prices. The other thing that may be interesting to think about is is there a platform for common knowledge and best practices that you need in other Industries but actually is provided by venture capital in Tech or classic thing that's done heard. The industrial conglomerates will do they were really big into I mean, especially in the early days there growth rolling out the lean manufacturing, you know, the originally from Japan these lean manufacturing techniques with classic American industrial companies.
So this was a way in which they could have a set of best practices such that when they acquired a business it would be better to perform better as part of down her as opposed to as an independent business where maybe didn't have these best practices. And as I look at kind of the tech landscape with Venture Capital One thing that's striking is you can be an eight-person firm. You actually have really good access to best practices. Our main VC is Sequoia capital and there's a huge amount of expertise in that firm that you get to kind of
Unlock when they invest in you and that's gonna be the case across lots of other of the Venture firms in Silicon Valley. Some of them even have in-house recruiting and so you executive recruiting and things like this like actual in-house functions built out such that in the way. It's you're getting a little bit towards that common platform that made the conglomerate would have had but it's a VC firm and it's kind of provided on a service model. And so that's maybe another reason is that you actually don't need a conveyor or to achieve that best practice sharing and of course, this is by the way something we're trying to do at scale with stripe, which is we think about but
Are those Silicon Valley best practices? And how do we get them out to the millions of Internet businesses over the Internet with things like stripe, press and increment magazine and stuff like that that we can do.
Yeah, there's an interesting two prong thing here where you're both trying to increase the ease of starting an internet based business, but also obviously running a large business yourselves. We're making smart Acquisitions of other businesses could be a great strategy. So I guess I would turn the question into just how you think about it as someone allocating Capital inside of stripe. I'm sure you've made
Acquisitions and have opportunities to make others. I guess the way I would frame it as why haven't you made
more if you're running a business being able to guess which is the point where you can run it by Acquisitions not being in that kind of business myself. It seems like a very pleasant way to run a business because you have this fairly easy way that you can take capital and turn it into incremental growth for the business. I can imagine stripe will get more acquisitive later on in its development. I think as we look a square stripe is and what we need to do on the product side.
Honestly, there's just lots of really low hanging fruit that we kind of have to do ourselves internally. And so as we think about expanding stripe internationally or making it even easier to get up and running with strike, that's one of the core ways that we have all these differentiated the product since we got started is, you know, we want you to come along and then five minutes set up a business by signing up for strike if we want to make best three minutes, that's not something we can really acquire a business to do whereas those companies get more mature. It tends to be about platform.
Breath, I think you can then all the men to fast platform breath with acquisition. So I think it's probably a bit of a stage of Life thing. The other thing that's may be relevant here is again what we've been building. I actually think it's being helpful that up to now we haven't grown as with Acquisitions. This is a little bit getting into the payments industry wonkish - but the previous generation of companies that people had to use to accept online payments were often assembled through strings of Acquisitions over.
Art form that people would be using was actually kind of seven different platforms and is together by various Acquisitions what that meant was that the in customers who's incredibly painful if they were going to expand to region they would have to change the integration that have to even more engineering work to do that. I think the end part of what's health strength get to this stage is the fact that we made a decision very early on there were going to start from the ideal API and work backwards and so quality. I want to be able to accept money from people all around the world and then we'll do the tough work to standardize that and not expose us.
To our customers and so I think in a way it's been valuable that we haven't relied too much on Acquisitions for international expansion. I think if you're going to have inquisitors business certainly in technology, you need to have a plan for integrating them. Well, I
think we have a neat opportunity here to do a quick crash course on payments more generally. I don't want to take for granted that everyone in the audience understands exactly how this works because everyone pays for stuff all the time probably very few have thought about what's going on behind the scenes. So I'd love you to lay out. Maybe what the landscape look like when you guys
First Incorporated stripe getting into some of the details. I like the wonky details around facilitators and processors and Banks card networks. Some of these are the best performing stocks visa and MasterCard of the last decade really, so I'd love you to lay out what it looked like when you got there and then I'll ask some questions around the evolution since you guys have been building.
Oh, I was hoping you were going to provide the crash course in payments. I'm still figuring this out.
I mean that
seriously, but we can talk about how the industry works. I mean the first thing that I think you have to set back.
And realize is just how crazy inefficient and immature payments on the internet still are that sounds like a funny place to start especially from consumer who runs a payments company you think maybe you'd be better at messaging or branding at this point, but can imagine when we were starting stripe. It was actually really hard to say when you're raising money for the company one of the biggest obstacles we faced was people thinking this is just a solved problem aren't there already ways to accept money on the internet see your 2009. I'm pretty sure we got this thing figured.
Ouch and having to repeatedly repeatedly explained to people no this is actually still unsolved that took some effort. That's the first place to start is if you contrast how mature the internet is essentially as an information exchange Network where we have a majority of people in the world now with some access to the internet, especially with all the recent smartphone growth and it's highly interoperable. We're all I mean with some exceptions. We're all using the same internet you can WhatsApp your
Friend in South Africa or Pakistan or India? And the whole thing just works. Now. If you look at the systems we have for economic exchange. Basically, we have a highly complex heterogenous and increasingly fractured and fracturing landscape and so in the United States people were like on a mostly on credit cards except for the lots of places where bank debit. Our checks are the primary way of working in China as a lot of people like to talk about there was a lot of
Training and paper with credit cards early on but that is since all flipped over to a leap a wee chat things like that in India three different people were really predicting the growth of the Chinese super app model all across Asia and Southeast Asia, especially and that hasn't happened quite as much as people expected starting out with those companies and so in India, for example, you actually have the government taking a very active role in technology developments, which is certainly for people in the United States is not something they expect.
To see you at least see work, but it's worked quite well. So adhar was the first their identity scheme and then you Pi which is are going to Universal payments interface really really cool interoperable and kind of built on top of the real time switch for payments. And so that's a different system still. You don't even have to go that far afield if you look at somewhere like the Netherlands people online their don't actually buy with a Visa or Mastercard, they predominantly use this thing called ideal, which is a local Dutch bank transfer mechanism. And so the reason I bring all that up is
If you want to start an internet business say you wanted to start a podcast monetization is the hip
topic you want some a two-page
invest like the best and I've seen your audience is relatively Global. Do you actually know the audience composition? Yeah. It's very Global most countries. Exactly. And so you just want to be able to accept money from people all around the world fracture historically have been certainly when we started stripe no Goods ways for you to do that. And so that is the problem that we set out to address.
Yes, and it's been really fun as you can tell. I mean weirdly I've ended up a passionate about this problem. We get a really excited about kind of the long-term second-order effects that it drives but we've been expanding stripe a loss by not just building this global economic interconnectivity, but actually over time handling more and more of the tasks that businesses find themselves faced with but that's really how we got our Stars to fact that it's really hard to accept payments on the internet.
I love the idea that you guys are trying to extend the GDP of the internet specifically which
Payments is a critical component of that but think programs like Atlas that help companies for much faster than they could have also obviously contribute to this Mission. I'd love for you to describe your view just on the internet economy. Generally speaking in terms of its size. Its maturity. It's quote unquote market share. How early do you think we are in this transition? I love Toby Luke. He's lying that covid is kind of pulled us 10 years into the future. I'm curious if you agree with that and how much room there is to run for internet
businesses. Yeah again, just like people
all kind of had a hard time believing that we weren't done with the payment systems that we had at the time. Similarly. I think people don't really into it this I mean if you look at the raw numbers, the internet economy is a very small fraction of the overall economy five six percent something like that. The vast majority of economic activity is not International abled. I think it's fairly clear to all of us that that is going to flip we're going to end up with actually a majority that's internet-enabled. But that means we're really out of shock.
In the early point in the sigmoid growth curve, the thing that gets me excited and one of the things this we spend a lot of time thinking about at stripe and trying to drive is what the second order effects are of that shift and I think people spend lots of time thinking about first order effects of Technology changes. And so if you were an analyst looking at the growth of computers in the 50s and 60s part of the effects going to be of computers getting faster presumably you'd say well banks are going to be able to run their
Galatians faster and airlines are going to be able to handle even more routes in the route calculation computers. You look across computers were already used for and just kind of project that forward more and faster. You would never forecast video games. I mean to someone in the 50s it would seem observed the notion that you could have so much excess computing power and it's so cheap there were just going to use this for this wildly wasteful rendering of
triangles. I don't
know if you saw the unreal 5 demo. Oh, yes, but imagine showing that to us.
In the 1950s their brain might have exposed or you know, simply with smartphones. I think people thought this going to be okay salespeople are going to be able to be more email on the road and not predicting Uber has to Simply with us. We think a lot about what are the exciting second order effects of more Commerce moving online. I think some of those were already seeing one is more globalization. We see this all the time with stripe but with stripe Atlas as you mentioned, which makes it even easier to start a company. We're trying to lower the barriers to
Creating company and in particular, we're doing something we're making it really easy for anyone to start a Delaware company in the u.s. Even matter where they themselves happen to be but that means you get way more people in countries that are not the United States or Western Europe or somewhere like that able to participate really meaningfully in the internet economy. And so we've seen all sorts of interesting businesses built on strike from I mean, literally India to Venezuela to the Gaza Strip, I mean you name it. We've probably seen people building businesses on
There I grew up in somewhere at that can Charter be described the middle of nowhere in Ireland? And I feel like the internet was a really big part of getting to where I am today. And so again, we get really excited about Commerce moving online as a global equalizer delivering more opportunity. That's certainly one. The second is just more Innovation as you shake things up a little a change the distribution channels. I mean over the top is a term originates in media, but I think you can apply to lots of things the idea.
Of going over the top of the existing distribution channels the existing Gatekeepers the existing structures. We see a ton of over-the-top e-commerce where people starting stores. They have a product they're passionate about and now they can sell to people all over the world as a result. You're seeing more niches possible people starting products that they would never have had a big enough audience for that product in Limerick Ireland, but if they can address a global audience, then there's actually a pretty big total audience for that product and
So we get really excited about the increased specialization the benefit to the delivers to upstarts further speed is actually an advantage. Those feel like Trends worth betting on
as you think about the sort of Fringe of the second order effects of maybe we were a few glasses of wine deep or something and sort of almost speculating about what might happen as a result of this transition. What are some ideas that you have there? What are some exciting possibilities
one that people love to argue about is I haven't fully made my mind up on how
I think about us but I think it is very interesting is what happens to the dominance of Silicon Valley in that we've certainly made a lot of overtime after my move to Silicon Valley to start stripe and that was really beneficial for the company and where it was then over time. The company has been growing much more outside of Silicon Valley than with in Silicon Valley. And so most people at striper actually not based in the San Francisco Bay Area last year. We actually tripled the number of remote Engineers of the company. They're not a very significant fraction of the
Engineering cork
but especially with covid and your company's making a temporary move to the cloud essentially. I think it's really interesting debates as to how much of that is permanent and certainly as we look us what's happening with our customers with how we work. It doesn't feel like it's going to go back to the same equilibrium as it had before the second is just one Trend. We pay a lot of attention to is in which Industries do the incumbents get good at digital faster than the
Our native companies can grow and then which companies do the digital native companies just outpaced all the incumbents are not give them a chance. And so obviously Amazon we can call that the digital native one Netflix versus Disney that's actually maybe a bit more of an even battle. We see a ton of our Warby Parker, obviously one of the very famous original successful digital native e-commerce success stories where they took an advantage they have of operating online, which is the lower cost structure. They're able to deliver due to the direct consumer model.
In such a way that the incumbent actually can't really follow them. That's true Christensen disruption, but we spend a lot of time thinking about which of the industries that go which way is because it's not all this obvious to tell times that
one of the things that I'm so interested in is Legacy Traditional kinds of competitive business Advantage like sighs so you mentioned incumbents. They typically have size they often have scale economies versus what I would call an advantage that doesn't get talked about in say like Porter's forces or something which
Is speed I'm curious how you think the world is changing and how you compare size versus speed as a company. That's I think been very fast, but it's also now getting very
big when we started a lot of people told us that payments is a scale business. You'll never make it son. And only the very large companies can survive. We're like no no, no, you don't realize things are different whatever now that we've gotten a chance to actually become familiar in our operating. We're like, wow. This really is a scale business in that as fact that as you look away.
Required in operating payments is a business where you make literally Pennies on a per transaction basis and you have to have an enormous number of them to actually be able to operate with any modicum of profitability and you would not believe I mean, it's fairly obvious that it's a fixed cost business and then you need to guys enough business flowing through you to make the economics work. I think what's interesting is as things have moved online the fixed costs have gone way up compared to
What was needed to run a domestic only payments business if we think about just again going back to your the invest like the best premium model where you get access to in exclusive content the smart people the Patrick interviews are only available on the paid product. And so as we think about that business and again what just strike has to do to unlock the payment system for that. We have Engineers who are based in Singapore. They have built custom Integrations with the local Malaysian bank transfer system and they actually
Are now friends with the people the engineers at the local Malaysian bank transfer system because it still work in Flyers itself. And so they're kind of working with them on some of the functionality that's needed. And so that way if you have someone a listener who's from Malaysia, they can pay the way that they're used to doing. So not just with a credit card, but with you know, a bank account in Malaysia stripe is engineers in Ireland her similarly a French local card switch is actually different to these amounts of cars and you need to get the support that asked to be able to properly serve French customers. And so we've just been shocked that you agreed to
which if you want to be able to reach every Global customer there really are very large economies of skill with all that said I think where it gets interesting is when you have technology shifts that happen where again Microsoft had very nice lock in and network effects with its operating systems business that's helped us while bash was the dominant Paradigm. I think when the Paradigm changes that's when speed is of the essence and speed is
Really defensible trait in companies and so now okay. It's all about browsers or it's all about mobile. The question is how good are you these days out really quickly building an operating system because it turns out to in Mobile that's what has to be the case. And by the way, I think the common narrative is just that it's a fairly simple regression with size for a small startups are fast and large companies are slow. I don't think that's necessarily the case at all where I think Facebook's a good example of a company. That's really remarkable.
Oil at executing quickly from a technology point of view and they've been fairly determined in a new trend will come along say live video and Facebook will decide this is something that we want to own as part of our platform and execute very quickly from a technology point to do to be able to build highly scalable product for that. Google is similarly. I think they do a good job of bringing to Bear all the in-house technology. They've built that is often times quite a bit better than maybe open.
Alternatives that are available and using that to drive product development and so what we think about with stripe as we grow is I mean the some elements in which were operating within a business that benefits from scale, but you cannot have that be an excuse to let your guard down you constantly have to be testing yourself checking yourself like the military runs exercises. You need to be confident that you can really quickly roll out products for two reasons one is there's a business need to actually
be able to do it and oftentimes in certain parts of our business. We are competing with startups. The second is that I couldn't find it much more employees find it much more enjoyable to work as a company that's moving quickly rather than working for IBM. And so we really think about speed as the quality of life Improvement of working in strength.
I'd love to talk about that concept that you sort of ended with their which is the idea that stripe is holding out a certain product to
Attention all employees as well. Not just to customers that are going to use your tooling but you need great people to come work there and to hear what you think are the driving reasons why people choose stripe and how you've refined that over the years. I'll throw one example out there, which is this commitment that you guys clearly have to extremely clear communication both internally and externally often in documentation and writing form. Is that something that you do deliberately to attract more talented people and Beyond writing what else is
Important the great philosopher Paso 11 said stripe is a celebration of the written word which happens to be incorporated in the state of
Delaware. I'm not sure I go
quite as far as Patrick, but it is a pretty important part of the culture and we're all those shocks that the returns to writing. Well are really high and it feels like the world's hasn't fully internalized that certainly when you have a 3000 person global company as strike is we're going to need to do
Lots of asynchronous communication and also obviously not everything is going to the entire company but generally documents have many more readers than they have writers. And so it behooves you to put time into your communication. And so we have always been shocked the degree to under Epps's that people place on kind of crisp written communication and we try to do that both internally and artifacts and externally where we often talk about this on say the marketing side or something like that that one of our principles when it comes to
marketing at strike is that we speak up to the reader not trying to dumb things down for someone who isn't familiar something like this. You are speaking to an intelligent person who is busy but knows what they're talking about knows what they're doing and it's your job to kind of help educate them on this we've certainly made that a big part of the culture early on and I think I mean like any culture it's self-perpetuating. I think people for whom that's important tend to be drawn to us
any tactical tips on what you think makes for good writing of this style. I'm especially interested in the
Communication component of this which as companies get more and more distributed which now seems even more likely to be the case for a lot of businesses. This is just going to get more and more important. So anything that you've learned or improved since you originally made a commitment to this that you think others might be able to adopt
the classic one is still I mean, I do a lot of editing of written materials at stripe and I still find myself leaning on the it must be a cliche at this stage, but the how would you explain this to your friend in a bar who wouldn't
This day and age external I'd go to bars. But how would you explain it to your friend over Zoom say and people somehow adopt a voice that is full of complex filler corporate. Jargon when writing in a corporate environment and then if you ask Pato stripe radar actually do so it prevents fraud for businesses. Why don't you just say that I found that as a really useful device another device I tend to use is get people to read something and then just tell me everything they can remember for us and then basically delete everything they can to
Not literally but I think people most things tend to be too long and not edited tightly enough. I mean, there's plenty more but I find those on the tactics. I keep coming back to
what other key cultural elements of stripe. Do you actively nurture like you do the emphasis on writing
when we talk a lot about is rigor and this shows up I think in different places in different formats, but a lot of what we're doing there's
No playbook for it's interesting. I mean if you look at any business a lot of the parts of their business where they can just take the best practice from everywhere else versus what are the parts of the business? We're pretty genuinely have to invent and generally be novel and in our case certainly the API for stripe a huge amount of the internal payments engine that's new and requires invention. And so as you go work on that this probably the thickest of existing ways that it happens beliefs people.
Have about us that may or may not be true and may or may not serve you and so what we've tried to guess is having people five. Why's the problem is that they're working on and really get down to the root cause and that's proved from a product development point of view that's proved really useful for getting the right products out there. And so I mean to give you a trivial example when we started stripe, we're told many times thus it was not possible to offer.
Offer instant set up for a product like this. And so again, imagine stripe part of the value is the so you can come along in five minutes sign up for a stripe account and get up and running many people within the banking industry and payments industry told us well for compliance checks and underwriting and AML and you know, very scary sounding acronyms who just simply not possible and I think the rigor peace comes from continuously chipping away as why is that the case what's the underlying reason? Where is this written down but kind
Constantly drill buzzing and that's something that we broadly try to teach from a product development perspective It Strike because that's sort of rigorous product development. Methodology writ large is how you get original thought in a product development
organization seems to me like you've studied investing as much as anybody in a position like yours and I'm curious which investors or investing Styles have taught you the most
lessons. I think it's certainly useful to study investing.
Yeah, because what is this but the act of allocating Capital the most productive uses and that is what the stock market does. I think that's what the American Stock Market has a remarkably good job of doing is this incredibly efficient engine for allocating capital is the most productive uses when you're running a small company. That's not really what you're doing. And I remember the first time I read the book Outsiders your presumably Reds of these case studies of aten CEO's that did remarkable jobs.
Capital allocators very first time I wrote that book he didn't really resonate and the reason why is because threat to the small company and we're only just we're doing one thing and so I don't get this book. We're just working on our business at the business grows. What happens is you have multiple different investment opportunities and then it becomes very like investing or again. The name of the game is allocating scarce resources in the public markets that's capital internally a companies tend to be a little different. Maybe it's scarce engineering resources or scarce management band.
with something like this towards the most productive use and I think when companies that are really successful are the ones that internalized this lesson and operationalize it and so Amazon if you I mean they're well cited here for a reason but I think they are probably the tech company that are closest to being pure capital allocators in how they work where they have a very strict and intellectually rigorous framework for funding new bets and allow,
People to try out new things and then the initiatives that are working. They really pour gas on Alexa has thousands or maybe tens of thousands of people working on it these days these when the things that works the initiatives that don't work just get resources withdrawn from them or eventually get shot down or something like that. And so I think as a company grows the outcome for the company really depends on how good a job they do is pushing resources towards the most productive use of them and by
The way I've often found that investors when giving advice to operating companies have a really good knack for saying intelligent ish sounding things that are completely non-actionable an example. This is an investor at a board meeting who's like, well you really want a deep moat around your business and you're like, we're just trying to run the business here. How do I do that? And so similarly I think placing resources towards the area of highest feature return. I mean, that is the framework for what all businesses are trying to do is actually not that actionable when you think about it.
Both for two reasons one you times have competing time Horizons. Should I be looking for a return over one year or over 10 years from now and there's no great answer to that and it's hard to know without the benefit of hindsight what the best return is going to because you're dealing with so much uncertainty but I find that a useful framework for thinking about that with stripe because we are really fortunate to have a huge number of potential areas in which we can expand one area in which were expanding is internationally and so we just launched I mean just last week we launched Drive In
Nia and Bulgaria and a handful of other new countries and we continue to invest resources in making strike available to businesses in more countries, but then we've all these interesting software products that we're developing that solve additional problems for businesses. We have our strike radar for fraud prevention or we recently started lending to businesses on strike. And so that's another potential use of resources. And so again, you are making these essentially Capital allocation decisions, which is should the marginal team work on fraud prevention or lending or
Expansion and starts to give you a framework for thinking about that.
How much of that do you think can be studied and then applied versus you have to learn it through
experience. Actually another way in which stripe tends to operate is we think a lot of this stuff can be studied and that's not to say that I mean the experience isn't useful it absolutely is but as we develop our Frameworks for thinking about these things we try to at least come out them from an informed perspective and so as we've looked at something say like how you do company plan.
Seeing how you plan what the company will do in 20 or something like that. This is the bane of our existence. I think it's the bane of every larger companies existence hurts just a pair of a process and we continue to tweak it and try to make it less of a bear but wouldn't things we did is we were putting this process in place is we went out and we studied. How do Apple do us. How do we will do it how to undo it how to lots of other companies that have been this before do us and what can we learn from those because I think an interesting thing that's happening in the technology industry is since there's so many employees who
Different companies or things like that? There's almost a shares Playbook that's being built on how we work companies wouldn't like to hear us had described that way. So I wait a second. That's our IP. But that's basically what's happening is that there's a collaborative Playbook that's being built in Silicon Valley, which is kind of the set of best practices for how we do things Google imported. Lots of Google is famous for okay ours who didn't invent okrs, they took them from Intel Facebook really built a lot of its advertising engine based on what the
Prior art that Google had established and so I think if you are operating a technology business, you would be mad not to study all the companies that have gone before you and that's not to say you just get Fork their processes and run like they do but you study them. You see what you like. You see what they don't you see the set of trade-offs they made for their business a probably might not be the right set of trade-offs for your business and you go from there. So we certainly try to come from a place of being informed
mention that you recently launched in a bunch of new markets in Europe.
Bulgaria Romania Etc. I'm curious what you've learned about going to Market with new things. So we talked about speed and the sort of range of things now that stripe offers in this mission to help internet businesses grow and begin life. What have you learned about effective ways of having a successful launch of something new
not just a new country a new
anything new anything
one funny thing that happens is new things at stripe are almost always started by really tiny teams think that's any announcements.
That you've seen from stripe probably was a team of less than 10 people when it launched and certainly the team of less than 10 people and often less than five people in that kind of core part of its gestation and its development and I think that is really important. I think it's often easier to get fast work done with a small team versus the large team. And also I think the classic big company mistake is to throw 300 people out of problem and have them executed for three years.
Before getting any Market feedback the case of the original version of stripe Patrick and I built the first version of stripe and we had the first customer using this within three months of writing the first line of code that was really helpful because then we had actual validation customer feedback know what's useful. No, it's not you're not working on the wrong things. Some people call this the lean methodology Dean is a little bit different in a bunch of ways. I do agree with the basic Spirit of it, which is when launching new things you really need to start them small and make them earn their way.
Make them respond to customer feedback and see if they actually work. And again this ties into the resource allocation Capital allocation framework that we were talking about a little bit earlier. So that's definitely anything you see that has been launched from stripe and probably a pretty core team. They might have gotten help from lots of different parts of stripe, but it probably had a pretty core team that was working on this. That's one thing the second thing this is probably fairly obvious, but is worth calling out is that most markets are not like the United
States and honestly, I think one thing that's been pretty helpful for us is I'm obviously as you can hear not American and Patrick is NOS stripe has lots of people who are not from the United States working United States. And now we have lots of global offices around the world. And so there really is a very Global diverse perspective within the building and as you think about engineering products stripe as a global economic infrastructure provider is really important.
Have those perspectives because the product that succeeds in the United States is actually going to be very different from the product that succeeds. I mean even in the UK nevermind Japan nevermind Indian Commerce is very culturally nuanced and a business in Indonesia is not going to buy from an American company who thinks that they can swan in without taking into account the local considerations. And so that's been really important in our International expansion actually working.
I want to go upstairs.
I'm even a little bit from that with this idea of a 10-person or less team. That's let's say trying something sort of experimentation. How do you even decide what to allow a team of that size to try to explore?
There's two ways this product development happens Thrive tops down and bottoms up and when you say how do we decide what to less people that stripe Explorer is a ton of expiration that's going on that no mandate has come there any
Sign-off process that's being established for us. And so just recently the team that works on credit cards with strive. I mean remember when I said the this really is a scale business and you can just go arbitrarily deep in improving the product in all sorts of incredibly detailed ways that would never be worthwhile for any individual business and so an example of this that was very Bottoms Up was the team that manages our Integrations with Visa were directly integrated with all the card networks. So we have
our Hardware sitting in their data centers and we notice these occasional blips and service coverage. We're just really for a moment. These would be interrupted and what we realized was that it was a failover of Hardware or switchover of Hardware those happening on their end that as a result a few transactions would get dropped. No one would notice this no customers really even notice this to the such a temporary blip, but it was bothering them and so they went and they found a way to be able to predict when one of those favors was going to happen and on
The pages and switch over to the new hardware before it happened such that customers wouldn't see any Interruption. You got a tiny increase in the number of payments that will go through successfully for the business using stripe. No business could ever can afford to do this optimization themselves, but in aggregate when you add up all these optimizations that are really meaningful that's example of the kind of thing best really neat and happens in a bottom-up way. I think the top down side of us comes from what is the strategy
of the company and I think the ones probably painful for a lot of Technology Founders is their eyes are bigger than their bellies and there's a huge number of enticing investment areas and more than they have resources to actually be able to go after and so there we have to be fairly disciplined on again. If you think about these two layers of how this right business works one is this really powerful Global Payments and treasury Network. Thus makes it easy to move money anywhere around the world will be fairly opinionated and
Top-down way, I'm part of the most important initiatives for okay, we have to make it easy for businesses in around Europe and Southeast Asia. Those are two of our priority markets. We're going to make it easy for those businesses to accept money will do that in a fairly tops down way and then similarly for the software business and so you end up marrying together those tops down and Bottoms Up initiatives where you provide high-level guidance on this is how much effort roughly speaking will be spending on International expansion.
The versus software to make the businesses life easier and kind of take some of the administrator author place, but then what actually gets worked on within those constraints will often be determined by the teens.
I know you're a huge student of startup history just like we started with industrial conglomerates that you've also studied some of the Giants of technology companies. If someone wanted to understand kind of how we got to where we are today in 2020 what technology companies would you encourage them to study and why?
It depends a little bit on wash aspects of technology or interestedin because tribe cells to businesses. And so I am probably index more on boring be to be behind the scenes content than maybe someone who's starting consumer company history of Salesforce is quite interesting to look at us. Some of the history of Oracle is entrusted with a good book on Oracle called Soft War by kind of am the author but the name of the software or software that the E chopped off.
It actually has this really interesting for mass that I've never seen the book which has got a lots of access to Larry Ellison while writing it but the condition for getting that access was that Larry Ellison got a right of reply within the book and so kind of like, you know newspapers have a left to the editor or something. And so you're literally kind of see him describing some situation that happened and then a footnote at the bottom and the footnote is Larry Ellison saying this guy got a completely wrong, you know, he was going to fire him.
My fast Larry Ellison, it's usually something like this guy with a deist. I've never seen that formatted super interesting metric. I probably index a little bit more on that. I would say there's obviously tons of content on Google Facebook the super prominent mainstream companies. I think the interesting things to think about are one the lot of content out there. That's essentially propaganda by these companies the Blessed accounts and so it's not like there aren't interesting facts there, but they're probably not as interesting as
as the things the company really wish you didn't read because they go a little bit off script the official accounts and those can be a little bit harder to find the other one. Is this a number of Technology transitions that are maybe Abyss understudied compared to all the prominent major internet businesses these days and perhaps too too high lies the Telco bubble of the late 90s early 2000s people don't really remember this but by market cap, the mm bubble was really a tell covid.
Nos and internet bubble in that the run-up of the world comstock's and people like that is much larger in terms of total size than all the internet companies and things like that and so there's some good reading to be done on what happened with that and I really drove a lot of then the you basically had all this investment and optimism around the growth of the internet and I think it was either is Worldcom that kept going around with this talking point of the internet is doubling every 4 months felt like it was going to the Moon and back.
And with and things like this that ends up with this incredible oversupply of Internet capacity fiber, especially the been made things really cheap and everything washed out in 2001 2002 and as a result was a platform on which everything else could still during that period following that's when that's probably interesting to study. The second is actually I was pretty interested in the cable companies that emerged in the late 80s early 90s. There's like a particularly American phenomena. I don't think that was really quite as much of a scramble in other companies.
But hate all this new technology laying it was a new technology platform new technology Paradigm lay in coax cable to all these towns Across America and you had way more. I mean television bandwidth number of channels possible than previously was the case when you read it actually Rhymes alas with some of the technology shifts that we see and so firstly you had actually in our discussion of Serial acquirers. We left out John Malone. Who's the new one the most successful serial acquirers of all time with Liberty Media where they basically
Continue to roll up small cable companies and build a very large company as of acquiring have a small little local cable companies, but the second thing that was of course interesting is it was one of the original kind of new technology company from out of town versus local municipalities and as funny as I was reading this when I say I think was the book people Cowboys cable Cowboy. Yeah. Yeah. Yeah first as I was reading this they described how one of the cable companies are can't remember who getting in a space with the local Colorado town and changing the
programming to just be called your mayor and tell him you want scaping in your town exactly like the tactics Hoover might have used during that period from they were getting into fights with local cities and so again there's a lot of history repeating itself those are maybe two of History's that spring to
mind back to this notion of Internet businesses and of course you guys representing a big chunk of the infrastructure that will enable this wave of businesses what other infrastructure chunks inside or outside potentially a Stripes eventual
dope do you think are still missing to really make this this kind of vision that you have of internet business growth possible what's the missing
pieces well you really have to contrast where we are with where we were 10 or 15 years ago in that it's it really is amazing thus so much of that mean stripesy part of this but it's type is absolutely not all of this the infrastructure that you have available on top at a very affordable price so that you can reach
A global audience whether it's I mean, you mentioned Toby from Shopify shop fi obviously a very big part of that the tools for software development in GitHub and all the deployment hosting platforms that cloud platforms things. Like this is a radically different environment than we were in 10 or 15 years ago. And I'm young. I'm 29, but I'm already at this stage. I'm talking about when I started in the technology
and
and I feel like I'm that guy you young whippersnappers don't realize I was like in my day, but it was much tougher those much.
Less on demand. I'm not that old. It still feels to me like the way we build and deploy software now is not what it's going to be 10 years from now that's going to change and in particular we've actually regressed a little bit where it has gotten harder to build a consumer startup than it was 10 years ago. I think because 10 years ago. It was you're just on the web and you had I mean those words
rest 10 years ago you could use some pretty simple Frameworks to get a product out there broadly to people on the web now if you are starting a consumer company you probably need a iPhone app you need an Android app maybe there's some other platforms are mobile platform they need to take into account instead the art for web has evolved and maybe kind of the expectations for a real-time or kind of the capabilities of your application those standards are higher and so as a result I think just launching a consumer service the bar
our for that is a little bit higher than it was and I think you've seen this reflected in it's a little bit harder to like a really lean consumer start up than it was before maybe if you're doing anything involving video again I think bass infrastructure is not where it's going to be 10 years from now we have a lot of challenges there and you think maybe is that obviously has much more of the internet becomes Regulators I think we haven't fully caught up with that in terms of making it easy for the companies that are regulated and so again there's not all the infrastructure we need their one area of business that we've just started dabbling in
Is identity verification because there are so many different parts of the international where you need to verify someone's identity if you're going to pay out money to someone that's one that's fairly close to Stripes business. Then you need to verify people's ID by with all the AML rules. But even you think about it, if you're selling any kind of an age-restricted product these check their ID as so the content of the Rage that's something that historically has been really really hard. I mean, it kind of reminds us of payments before we started stripe and so we've started playing in that space again to make it.
Easy for if you're doing anything that involves verifying someone's identity. It should be used to provide that
you and I are both really interested in public markets and public businesses. And one of the topics that I think is really of the moment is how different a business like stripe is relative to the standard. Let's say public S&P 500 company for which the standard structure of an income statement and balance sheet kind of makes it easy to compare across those businesses. I'd love you to describe whether or not you think General accounting.
Needs to change to accommodate the type of business that seems to be dominating today and likely will continue to dominate tomorrow and maybe to pick a starting point just the idea of the importance of your engineering Talent as an asset and skill of the business and how that really isn't captured inside of a I just looked at an income statement and balance sheet. I probably couldn't really tell that I'm curious your thoughts here on accounting and it's need to
change.
Yeah, well if you starts with it'll sound like funny question. If we imagine where the product manager for accounting or just hired us can't remember the name of the agency this that managers Gap the accounting principles. Let's imagine that were hired as a product manager there. And so like any good product manager we start with. Okay. Well, what are the jobs to be done? Who is our Target customer Target persona. It's interesting to think about we're actually trying to do a number of different jobs with accounting. We're trying to figure out how much profit we are in so we know how much tax we have to pay. That's one job.
Have we're also trying to help the business run itself. We're prank provide a view of the business managers so that we can determine whether we need to invest in new Machinery to be more efficient or something like that. We're also trying to solve for the needs of creditors where people want to be able to evaluate the business and understand realize have enough money to pay off its best and then we're also separately importantly trying to solve the needs of equity holders for the
trying to understand what are the long-term cash flows for this business going to be and the reason I bring that up is people think of accounting and GAP as these fundamentals that are etched into stone tablets. I mean accounting standards are invented by us humans to give us a view of a business and they're up to us to choose. I mean, they're generally and kind of long boring committees, but we humans choose how we look at businesses and I think we should be able to reason about how to Better Way Watson worst way to look at business.
that's why I have absolutely no patience for the crowds that's all this whinging about non-gaap metrics because you just there are relatively arbitrarily chosen I'm constantly tweaked sash of standards for looking at a business and so if they're constantly tweaked presumably you would expect that they can be improved upon and one of the areas in which I think the standard way we look at businesses is just completely wrong is in reasoning about essentially research and development and
intangible capital and so Capital obviously has really moved over the past hundred years away from heavy machines that will really hurt your foot if you drop one on them to intellectual capital and intangible capital and so traditionally if you read a balance sheet and a company has a bunch of stuff has a bunch of assets on its balance sheet wash Woods that company have well if you're a cafe maybe your assets are the coffee machines you
really expensive coffee machine these days with technology businesses quite as the capital within the business one of the assets of the business have it's probably software that has been developed in-house by the business Google it is the search engine that now for 20 years Engineers have laborious Lee worked on to make good and the case of strike it is the payments engine along with strike radar the fraud detection engine along with lots of process knowledge on how we all work together again how we kind of make sure there's the matter
maximum number of payments go through online and we've all the hookups to various other places but again the capital has gone from something really tangible and espresso machine doesn't change in value that much you can reason about the value really easily why can you reason about the value really easily it doesn't change that much over time there's a clear market for us to go out and sell this espresso machine you paid something for us you just bought this espresso machine and so when the accounting principles is you just carry things asked cost for depreciation but again it's really easy to
About the value of tangible Capital like that espresso machine. It's really hard to reason about the value of intangible Capital like stripe radar on it the value of that system that we've built. I think the reason this gets interesting is because you and I might very reasonably want to think about what is the profitability of a business after you strip out all the investment in future growth because as you look at the technology sector the entire
Rarity of the technology sector one of the things that kind of unified technology companies is that they don't tend to produce kind of huge amounts of cash flows certainly on to later in their maturity companies that are in their growth phase either pre public companies or recently public companies tend to be mostly reinvesting that in growth. And so, okay one question you might have is how much of this is a profitable underlying business versus how much of us is investment in the future systems.
the best answer that people tend to have is that they split house different lines of business and kind of categorize them as cash flowing or growth so if you're looking at Amazon you might say okay well the retail business produces money and then we play this back into AWS has an investment area and so we'll just kind of separate out AWS and the retail business and we'll look at the profitability of each will create AWS has investment area of course that's how quite right because the retail business it's fractal the retail business itself as you look at us they
are expanding to new lines they are expanding to new geographies and things like that and so the retail business itself is composed of a cash flowing Core Business and then new expansion areas of the planning that money and time and so as we look at how kind of accounting works for this it's really basic all you have is companies that are spending lots of money on operations engineering salaries operation salaries lawyers salaries kind of those General op X and
No real intelligent view on what is the capital that we're developing? What is the multi-year value that we're getting from this system that we're building versus what is the actual ongoing cost of operating the system? And so that's something that I mean, we spent a lot of time at stripe getting good internal management views into a say system by System line by line level. How much are we investing in kind of the future potential of this system versus what is the existing profitability of the system, but I'm always
A surprise. I mean you must be too as you read kind of statements of various public companies out there how unhelpful they are at answering. What is really the core question for a technology business, which is how much are you paying to operate this business versus how much are you investing in a long-lived technology Advantage?
Everyone will pay a lot of lip service to the concept of free cash flow, but I think for all the reasons you've pointed out it's a very hard metric to get to and then there's also just silly Concepts like I think you were the
said it to me what is the useful life of a piece of software how do you even reason about something like that and therefore think about something like depreciation a lot of what is registered as operating expenses in business is really kind of like what we used to call Capital expenses because it's going to be useful for a long time it's a really important topic for public investors with more of these businesses do to become public it's interesting to hear someone running one of those businesses and their thoughts on and I think ultimately the best thing in the world would be
investors to have whatever dashboard it is you use internally you're the one understands the company best and has built your own metrics and then have to back them to Gap I think it's very strange
and sadly we don't even have kind of the metrics that we're fully happy with internally yes but I think it's interesting thus I have not seen a company publicly in how they kind of talk about things where I'm like oh that's clearly the answer and that's how we should do that and I think what you see is a number of proxies that are maybe I mean unsurprisingly the proxies are perhaps overly generous
the companies where they say okay we're going to count all of this spend as Rd something with a Long Live pay off but I thought was interesting people talk about concept Buffett introduced in is 86 letter of owner earnings and the more interesting thing about that definition for me was splitting a house the two forms of capex capex spend that has a multi-year horizon or a multi-year payoff but splitting how capex into quality is just needed to tread water
investment required for the company to keep its same competitive position keep its unit volume versus capex required to expand we haven't fully chased the through but I think that's a really interesting distinction because often times you can have technology companies that really spend a lot of I mean buffered obviously always talked about the example of the textile mills that Berkshire Hathaway got it starts with and just being such an incredibly terrible business because you're always spending this capex just to tread water just to stay in place I
Similarly, it's important for companies to be honest with I mean not only external investors but companies be honest with themselves on is this spend just the cost of doing business the cost of operating our business and we are maintaining our competitive position or are we expanding in some way? Are we growing our share of markers? Are we expanding to a new country? Are we developing a new product that will monetize separately, but it's hardly worth you being honest with yourself on the answer that question.
What topic do you not understand? Well yet that you wish you did payments.
No, I mean I still learning. I mean we're touching on us here, but I talked about this phenomenon of the shared playbooks that Silicon Valley is developing and I really think this is what's going on. And it's one of the things that is probably under discussed. The notion that there is a common Playbook that goes from companies company in people's heads. Maybe one of the most mature ones is the B2B sales.
a book I mean there is really a set of best practices there and Silicon Valley is on version 27 of the Playbook and it's always being updated people took the Playbook from Oracle and apply to Salesforce with improvements and now all the up-and-coming need to be startups today are kind of modifying bass and making improvements but it really is a shared Playbook as we look at engineering it is interesting to me one kind of related to the measurement question we were just talking about it is frightfully
hard to measure engineering and So within sales there is measurability down to the level of the individual person and even down to the level of month by month on individual person that probably seen these curves but companies talk about time to productivity curves with salespeople where it's actually a measure of a product's complexity fast maybe an HB SAS a standard time to productivity curve would be people are asked more or less their terminal productivity within six to nine months that would be
Of these standard, but that is the level of granularity you have on a domain like sales then meanwhile, you look as the domain of software engineering look I come from that's when I wrote the first version of stripe my first love and to Maine where I spend a huge amount of my time but is incredible to me how hard it is to measure the output of software engineering and you can measure Us in you can look at the goals that we set out to accomplish and how good a job we did at accomplishing them. But if you're trying to put any kind of overarching metrics
So to compare and contrast the productivity of different segments, that's something that we are really interested in that we have not made that much progress on we have found I would say we do probably at stripe a lot more surveying of Engineers than other companies and it's not the best system metrics, but I think it's better than nothing. It's kind of analogous to look at how well the media companies work and it's lots and lots of or any kind of advertising company lots and lots of consumer survey guest brand awareness.
TV ratings and things like that so that's how all those Industries run similarly with stripe if you're an engineer a stripe you spend a lot of time being surveys because that way we get a sense for okay how productive are you in this domain versus where you were six months ago how productive are you in this domain versus this other domain where you used to work and that can give us a sense for when we're making overall macro developer productivity improvements for we spend our effort and stuff like this so we are I would say it's something we probably spend
and a lot of time on compared to other companies is developer productivity and getting scientific about developer productivity and yet I still think we're really early in our journey compared to a reason
I'm curious how you think about the transition to what's now being called the no code movement so the first part of the question is how undersupplied is the world in terms of just talented software developers but may that potentially not be as big a problem if we do get no code tools that would allow someone like me that has dabbled but it's certainly not
Terribly technical on software more so in data science to build things for myself and not need Engineers. What do you think that Glide path looks like over the next ten years.
So I mean the answer to how short stuff who aren't Engineers is still clearly loads in that stripe is an investor in a company called Lambda school and you probably seen what they do. It's a Nifty but I mean, they're essentially they often explain themselves in financial terms of being an Arbitrage play where they help people who are in software engineering is such a highly compensated field.
Odds that has people who might be working some other job that want to make the jump into software engineering they help them via remote night courses over the course of I think its nine months get trained up in a software effectively a software engineering degree and then move into the field. And so the fact that they have had such success I think speaks to the fact that we're still really short of software engineers. And again, that's our experience with strike doing lots of hiring that Fields again. I think one of the really exciting trends for me that we touched on earlier is more and more software engineering moving outside.
it's the Bay Area like when I go back to Ireland it's crazy it's night and day the difference in the Irish technology industry and Technology seen versus when I left back in 2009 that's some of the case are no codes I don't think no code is fully a Panacea because I think to the set of even when you're doing no code you're still reasoning about the relations between different objects and data flows and things like that and so I think when you're building an app with zapier or something
like that you're still doing a form of engineering you're just not necessarily writing codes and so hopefully that's something that can give leverage to people without necessarily needing to have to spend quite as much time in it and is not new by the way if you look at Excel you no one calls as a no code 200 but Excel I think is one of the most underappreciated programming environments in the world the number of excel programmers versus people using what we think of as more traditional languages is really something to behold and actually lat
Features of excel that make it a really nice program environment and really nice to learn in prayer the fact that it's continuously executors means that unlike you running your code and it doesn't work and you get some error that's hard to comprehend and said code is just continuously executors in the form of the sheet. You see in front of you and similarly, you know, the fact that it's individual cells in do kind of lay out the program spatially where the code and the data is interspersed together and no one part of it can get too big and I have your all these ways in which anyone who's developing a note.
Codes or new software Paradigm should look at Excel because so many people have managed to essentially learn how to do some light programming from looking at other peoples models. In other people's work books and kind of emulating what they see but I mean times the direct question. I don't think no code will obviate the need for self programmers. I would hope that I can make many more people able to participate in software creation and kind of smooth the on ramp which is right. Now, there's like a really sharp vertical part of element.
We've
talked a lot obviously about software for the obvious reasons. I'm curious if there are any other businesses or business types that you studied and find interesting that really aren't built primarily on software. Everyone of course uses software and will continue to do so any other lessons from businesses as different from stripe as
possible. I mean, I still find technology one of the most interesting places to look because what I find so exciting about technology is from a business point of view. It's
positive sum so many other businesses are essentially I mean, they learn not to talk about them this way but there's all these business euphemisms for the fact that there's a fixed amount of Supply in this industry and we're getting really good price discipline. That's one of these investor e euphemisms for not competing too much on price or Revenue optimization things like that as you look at something like I mean real estate in many kind of parts of the world barriers to building.
I mean that part of what makes it a good business is the fact that has a fixed number of assets that can be monetized. And so you are getting the in the case of San Francisco a huge amount of the wealth creation as flow directly to landlords in San Francisco because it's so hard for new construction to take place there. I think that's actually true for a lot of other businesses. I mean banking is another classic one where there is not a giant number of new banks in the United States. So instead what we see is a lot of consolidation of share in the industry. I mean Airlines another classic example
And so I mean you can look at lots of these other Industries in their structure and how they work but part of what I find. So exciting about technology by contrast is it is not a fixed pie that everyone's looking to find creative ways to redo the capital stack or do a roll up or something like that. But instead we can just create all sorts of new technology wealth and all sorts of new technology value. Someone will come along and do something super interesting and payment side like well, that's awesome because that's just kind of taking share away from
stripe. I love that. What about
a future are you most excited about I mean it kind of has to
be right now the increasing globalization that's been driven I mean Cove it has certainly given it a Philip but it was a trend that was happening anyway but from a product point of view were deeply investing in us we didn't really cover this but stripe the company is very Global or we have engineers in Dublin Singapore and Mexico City and all these places around the world building for all the startups that are springing up in all these countries around the world and again Kovac drives it
even further but the fact that if you are kids in one of these countries who grows up interested in technology and previously you could look over the fence ask the game that everyone else was playing but not participate and now you get to really meaningfully participate the internet economy that's exciting
what was your first memory of feeling like you had started to participate you mentioned growing up in the middle of nowhere in Ireland was there a moment or an episode that sort of was the transformation
you can I is actually a little contemporaneous with stripe we had a set of iPhone apps for the first for the iPhone from the very start you probably remember those that one year between No7 and no.8 when there's no app store and so there were jailbroken apps and that's when I ran a business that was all flying Wikipedia for your iPhone and so compressive English Wikipedia was the largest by far but if you stripped out tables and images and everything like that you can compress it to have a fish on the four gigabytes
was the first release iPhone you can have it fit on a 4 gigabyte iPhone and it was especially popular overseas because unlike in the US the iPhone didn't launch often with good data plans and so you people without internet access I was really useful to have this Hitchhiker's Guide to the Galaxy but we were at the time when we started doing this we were teenagers we were selling it in the App Store and we're making two I mean pop to the teenagers felt like just raking it in I mean just observed amounts of money for kids
And and just an ocean and we would look at the App Store will give you these reports of where people are buying the app and you have sales happening in Saudi Arabia and Mexico and all these places buying your app. But again, the these two Irish Hooligans running a multinational business. I mean, I think that was one of the first times for me for it was really striking to feel that
I've been to asked this earlier. So I'll ask it now as we wind down here, which is about board members, so
As someone interested in being a board member for other companies in the future. It's an interesting role. It strikes me as one that would be tough to be a really good board member. I'm curious what you think board members should do and in your experience, if you've had a great one or two what they've done for stripe.
I mean, we've been lucky to have incredible board members and I think part of they're all different Pokémon with different strengths and weaknesses and attacks and and such like
and so I think it's important to kind of for the board member to know what they are providing and for the company to know what they should be getting from the board member first and foremost obviously it is a governance role you are managing the management team and I think there's a method called this hours in is the letter this year complaining about the Cozy relationship between board members and management at company but I think that is an important aspect of us which is board meeting members need to realize that they work for the
shareholders and they are the boss of management and not the other way around I think when's the internalized that relationship tends to be the most effective I'm look that's generally pretty friendly because often times the best way to help the shareholders is to help the management but there can be no confusion about that there's some specific rules this exists within the board's the audit committee the competition committee things like that where in the board member will actually be put to work inside the company to be a relatively high workload task so that
once had responsibilities then depending on the experience the board member has I mean generally you have people who are much more experienced at a certain set of thing this and they're able to contribute that experience to the company and people who maybe are much less experienced in that just give you a few examples we're hiring a CFO right now Jonathan Chadwick who's on our board and previously with the CFO of VMware and Skype in various places like this has been extraordinary helpful to us and as we run that search because he's actually done the road
of a public company and threes much more experience in the domain that we are similarly you see in lots of kind of early stage companies who talks about his with Venture Capital this notion that you're getting a bundle of experience the partner can bring so Mike Moritz is Sequoia capital and he invested in stripe in 2010 and joined our board and in 2011 and so again it's been really fabulous from a company strategy and from a hiring perspective to have that experience which is totally different set of experience to Jonathan's experience
just mentioned it's been really
helpful to have that as we've built out the company and so again I think what you're looking for is in building a boards is a set of experiences that will be really valuable to the company both in building the company but in occupying that governance East who are the people that you want ultimately accountable to shareholders
I love the idea of Pokemon my six-year-old son is into that right now so it definitely resonates as a great way to think about boards well John I've learned so much my closing question for everybody It'll ask you as well
is to ask for the kindest thing that anyone's ever done for you
you really set up to the high bar when you say kindest to run expensive query over a large data set there I was reflecting on this and so I grew up in Ireland I spent all my years there until I moved out United States for college and I feel very culturally Irish and there's something about acts of kindness I've experienced with Irish people it's may be different to that I've experienced with Americans and just there's something about kind of the
Right there is just to give you maybe two examples one is first moving out to San Francisco. The person we stayed with was an Irish guy and we got to know him is how to kind of going-away party at MIT. There was an Irish guy who came to the going away party didn't know the impact of know each other that well, but oh sure you're going to San Francisco. You can stay with my brother. So with I mean barely met the guy never met his brother, but this guy lorcan by Irish name was willing to let us stay at his place for a week.
And so we got there and it wasn't one of his many guest rooms get there at the studio apartment. And so I was like, okay you can take the bedroom and he sleeps on the couch, but that was for me kind of very Irish act of kindness from first moving here. Similarly when I was in secondary school. We just had this incredibly understanding principle where we all this had various Pursuits and weird things going on and we know we were serious about Academia, but we're taking may be an unconventional path. And so this principle guy called
Mark and Wallace has since passed away sadly but he was always incredibly understanding that we had a path in mind that we want to take and it might not be fully aligned with all the rules that were written down that they had for running a secondary school and so I just dropped out of half year of high school that I more or less skipped when we were running on a kind of a previous technology company prior to stripe and he just kind of made it work
work despite the fact that Alder attendance requirements and things like that he was willing to enable that because he felt like there's a good thing or in the case of Patrick Patrick just decided to skip the Irish end of school exams and do British ones as well because he could shortcut and go to college are earlier this kind of extremely benevolent oversized of us and flexibility and understanding in a very unassuming and quiet way where it never really came up as a big thing it was just
Bahamas assumes out of course I want to enable you on the path that you want to be on even if it makes my life hard and it's extremely different to what I might be used and so as I think a lot of the acts of kindness that people have done for me and especially the Irish themed ones some of the most interesting ones are ones that are much bigger steps than certain you would expect from someone in that position delivered really unassuming
with your answer makes me think of just one more question which is obviously a big part of your
guys to success has been now it's become an overused term first principles thinking but just applies well you mentioned the five wise earlier as one sort of fun example is there any advice and the stories you just told are also like the enablement of people just going their own way which is really cool any advice that you would give to very young people that are kind of searching for what they want to do given your success at following that unique path
so much to say Patrick actually wrote up a guide to this
actually pretty good that he put on his website of advice for youngsters but I think for me it is being willing to go down the rabbit hole whatever your particular rabbit hole is in that I think all the institutions are probably part of want to help you want to bring you back on the normal track as it were and again kind of Martin Wallace the principle I mentioned when things that was remarkable about him is despite the fact that he was a principle that's almost the perfect societal Clip hours
of someone who brings you back on track and makes you do the done thing instead he was incredibly supportive in US wandering in all are weird and wacky ways and so we're really interested in how you I'm really interested in how you help people wander and go down those rabbit holes similarly actually stripe invested in a company called Pioneer which is
other than yesterday
yeah your spend time with Daniel Daniel is fabulous and again it's Pioneer I feel like it is going after the same opportunity
which is how do we help people go further down the rabbit hole it's rather than trying to bring them back on track
fantastic well John as always when we talk I learned a ton I learned a ton today thanks so much for your time it's really fun thank you hey everyone Patrick here again to find more episodes of invest like the best go to investor Field Guide.com forward slash podcast if you're a book lover you can also sign up for my book club at investor field guide.com forward slash book club after you sign up to receive a
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