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Welcome to the Furnham Street podcast called The Knowledge Project. I'm your host, Shane Parrish, the curator behind the front M Street blog, which is an online community focused on mastering the best of what other people have already figured out. The knowledge project is where we talk with interesting people to uncover the frameworks you can use to learn more in less time, make better decisions and live a happier and more meaningful life. On this episode. I have Patrick Coleson, the co-founder of Strib, which he started with his younger brother Jon in 2011.


While Stripes started as a company to make online payments easier, it's morphed into an Internet infrastructure company. Patrick is one of the most well-read and thoughtful people I've ever met. After listening to this conversation, you'll realize his success is less about luck and more about thought. I'm pleased to have Patrick Clawson on the show. Before I get started, here's a quick word from our sponsor. This episode is brought to you by Intel, every business needs great customer service in order to stand out and gain a competitive advantage.


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Intel can provide your company with every touchpoint, including telephone, email, chat and social media. As a listener of this podcast, you can get up to ten thousand dollars off if you go to Intel dotcom slash and that's, I think, TEFL dotcom slash Shane. Patrick, I'm so happy to get to talk to you. Thanks so much for having me.


You have the unique background of having dropped out of high school and dropped out of the university. Can you explain what went through your mind dropping out of high school?


Well, I didn't, technically speaking, drop out, although I sort of, practically speaking, did. But, you know, given my lack of education credentials elsewhere, I do what I should for the sake of my parents, insist that I do, in fact, or did, in fact, formally speaking, graduate from high school.


But, um, I guess what happened is that I'd become very interested in programming and I sort of wanted to spend as much time on it as possible.


And Ireland actually has this kind of interesting thing called transition year at this year between the sort of two major exams of kind of high school or at least Ireland's high school equivalent. And in transition year, it's sort of a formally designated year that's optional, where you can go and pursue things that you might not otherwise naturally tend to pursue in the school, tend to be kind of much more permissive of going in, spending three months abroad or going and doing some work experience in this area or whatever the case may be.


And so in that year, I decide to spend as much of it as possible programming.


And so, you know, I did that and then I returned to school for kind of the latter half of, uh, again, Ireland's kind of high school system.


And it felt so much slower and less fun. And so I tried to see if well, as part of the programming, I had visited the US for the first time.


I had gone to Stanford for the 2005 international conference and there was a fairly small conference and it was very eye opening for me.


And I remember walking around Stanford and thinking, man, American colleges, great. And so I know back in high school in Ireland, I decided to see if there was some way that I could just go to college in the US the subsequent year and sort of a long story. But I eventually figured out that I could not do it if I did. The standard Irish kind of followed the standard Irish education path, but that I could do it if I did the British sort of terminal examination.


And so I kind of resumed my sort of self education, except instead of programming, I was now studying for these British exams and did that for the subsequent year and ended up starting at MIT the next fall.


And how do we get from MIT to where we are today, which is Stripe's offices in San Francisco? Well, sort of a long and torturous story.


And I'll spare you most of the less interesting details.


I guess the overarching thing is while people in the US have grown up in an environment in which college attendance is sort of really prioritized from an early age and sort of, you know, you're optimizing your extracurricular activities from the time you're 14 and you're choosing your kindergarten on the basis of what sort of downstream college acceptance rates look like and all that kind of stuff.


Of course, growing up in Ireland, that sort of wasn't part of the culture, discourse or environment at all. And until by the time I got to MIT and to college in general, it didn't feel like that big a deal.


It didn't feel like sort of this was the terminal state that I would spend my entire kind of childhood and adolescence and trying to pursue.


And so as a kid of other things and other ideas and opportunities that have crossed the transom, I think I was maybe more open to them than than my peers, not because of, I think, any differences in me, but just because of differences in the culture environment that I come from. And so my brother John and I, John, at this point, being a little bit younger, he was now in this transition here in Ireland. We decided to start a company six months after I got to MIT.


And so I really just started and I felt that I had some kind of time to spare because I'd started college a year younger than most my peers. And that company sort of worked OK. And it's kind of a long story, but it ended up becoming a small acquisition.


I went back to MIT because when I started there, I'd sort of been very interested in math and physics and had kind of an interest in this idea of, you know, potentially becoming or at least attempting to become some kind of academic. And, of course, at a place like M.I.T., that's sort of the default around you. You know, everyone is planning on this, again, trying to get a PhD or to become a professor or whatever.


And so I think that that environment has some effect on me. And so I went back because I felt that I hadn't sort of really, you know, properly rejected the hypothesis that maybe I should try to become a professor.


Right. Maybe kind of physics is what I should be, again, at least attempting to spend my career on. Um, and after a year back at MIT decided that that was not the case. Um, progress in physics.


Really felt like I had to sort of slow down pretty substantially compared to the 1910s, 20s, 30s, the sort of the period in which so much of what we were learning about that broader period of discovery, I felt like the period in which sort of, you know, we existed in, say, 2010 was there really it was just not the same rate of progress. And so there was a little bit of that and then also some amount of.


Sort of. Appreciation myself, that I think I just enjoyed programming and software and technology more than I did math and physics, even though to some degree is a little bit painful to realize that.


I want to explore a little more about the cultural differences between Ireland and the US and how that impacts you. Is the CEO of St..


I think there's maybe a couple of things in that Ireland is very outward looking necessarily so in that sort of Ireland's sort of improbable rise from poverty over the latter half of the 20th century was a very significantly enabled, maybe almost wholly enabled by by exports, by sort of importing American multinational companies, having them set up factories and bases and hubs of different sorts. In Ireland, one of the world's first special economic zones was created in Shannon, which was very close to, you know, maybe 10, 15 miles from where I was born.


Deng Xiaoping visited it and found this quite inspiring and so decided to set up a special economic zones in China. And so Shenzhen and sort of the Pearl River Delta, that sort of special economic zone was in some ways directly inspired by what he saw in western Ireland.


And and so I think the fact that sort of the such a very visceral link between kind of betterment and progress and economic development and this kind of outward looking sense that the possibilities of the of the rest of the world are sort of much greater than than kind of those internally, you know, that's very pervasive in Ireland.


And I think that's certainly influenced Stripe in the sense that we really are all trying to emphasize the sort of the imperative for the potential of globalization and maybe in the mid 90s, that was sort of something that was uniformly accepted and sort of at least elite circles. Now, see, that's something that perhaps is being questioned somewhat more. But I guess the Irish experience is very much one of seeing it as an almost wholly unalloyed good. And again, I think that's that's greatly influenced us here, certainly me.


Well, it's interesting, too, from a cultural standpoint where Ireland has had very high rates of immigration, particularly post the expansion of the EU in 2004, a very large number of Eastern European immigrants moved to Ireland when those countries acceded to the EU.


And that was really not accompanied by any any material social strife or conflict or a lot of the sort of challenges that we've seen in other parts of the world.


And so, again, I think that sort of an appreciation for orders that are more open or more openness to immigrants, more sort of facilitation of opportunity, things like that.


Again, I think that that really is the Irish experience and, of course, is the reverse version where so many Irish people themselves have sort of benefited enormously from being able to go and sort of pursue lives in the UK and Australia and the US and Canada and so on. And that's, again, just really kind of part of the national ethos. And then maybe more softly, I guess, Irish culture places, places a lot of importance on just a kind of warmth and the kind of a particular a particular tenor to the sort of interpersonal dynamics and trying to have other people enjoy themselves and be at ease and have a good conversation with them and whatever else.


And I think maybe that's something that's influenced us somewhat astray, where we want tried to be a warm place when we play music at reception and in the kitchen to just try to put people at ease and to create enough sort of soft noise around them where they feel comfortable having just a good conversation.


And maybe that's because of entirely unrelated reasons. Or maybe, again, in some way we're influenced by the kind of environment we grew up in in Ireland.


How would you describe the culture at Stripe? Would you actively try to achieve with that? Well, I'll add to that with the caveat, and the caveat is that I'm pretty sure the answer I would have given to this would have differed in some material ways two or three years ago.


Right. And that's in part because I think we're coming to realize things that we just hadn't really appreciated or sort of seen the significance of two or three years ago.


And also in part because literally what it is that we need today is just different. But we needed two or three years ago. Right. And so I think this kind of contingency and the answer where it's a function of just what we realize at this point, but also sort of what it is that the organization and the company needs and the sort of challenges that we currently face.


With that caveat, I think the things that we really prize and try to seek and the people we hire are.


A kind of rigor and clarity of thought in that I think so many organizations prize sort of smoothness and smoothness of sort of interactions and trying to reduce minimize the number of sort of ruffled feathers and they kind of at least sort of inadvertently, if not deliberately prefer cohesion over correctness.


And we really try to identify people who who are seeking correctness and who don't mind being wrong and who are willing to at least contemplate things that seem improbable or surprising, if true or really divergent, as to what is sort of the generally accepted status quo.


And that's hard to find. And I don't think most of the sort of educational institutions that we all tend to have attended actually do a great job of teaching that.


And so we look for that kind of combination of sort of openness and rigor. Um, I don't exactly know what the right word is, but a kind of determination and competitiveness and I guess wilfulness in that. Just doing anything of significance is hard.


I mean, anyone who's tried to do anything that's the date they themselves consider significant knows that very viscerally.


Right. And I mean, especially for a startup like the the default outcome is you're relatively near term non-existence, like the the default outcome is that you do not survive and to survive over the medium or even with even more difficulty over the long term.


And that is that's like an unnatural act. Right.


And so you define people who not just are willing to sort of push against the sort of the expected trajectory of non-existence, but people who actually enjoy that, who want that right.


Because if they're merely willing to do it but they don't actually enjoy it, then the work is probably going to be less fulfilling for them over the or the medium term. Um, and I really don't think that is for everyone.


I don't think that's that's a bad thing. Right. In that just the cliche, of course, is that startups are extraordinarily hard and they just are, uh. And you want somebody who finds that.


He was at a stage in their life where that's the kind of challenge that they want, where the fact that the particular area in which they're going to be working is sort of undefined or significantly under built out or significantly broken or whatever the case might be, that that's what they're looking for.


Right. And then we try to find people who just have a kind of, again, to return to this word, interpersonal warmth and a desire to make others around them better and and just a degree of caring for others and a desire to be nice as a kind of anodyne word, but to be nice to them and to to make them better off.




We really try to find people who actively enjoy spending time with right.


To spend such a large fraction of your life inside the the walls and under the roof of whatever organization institution you're working at.


And so given that, I really think it's worth prioritizing this. And I, I think I mean, I, of course, don't know for sure, but I think we go to sort of some greater lengths to find these people than the other organizations tend to do. And there's other things as well, I mean, you know, it almost goes without saying, but we really care a great deal about ethics and integrity in people, but I think so, too, do a lot of other organizations.


I think the the three that really stand out to me are this kind of rigor and clarity of thought, this sort of hunger, appetite, willfulness, determination, and this, again, warmth and desire to make people around them better off. Those are three that really stand out to me.


Take me back to the early days of stripe and the struggles you were having and maybe walk me through some of the things that you've learned since then. There's some of the mistakes that you had made.


Sure. I mean, the kind of background context here is that by almost every sort of under almost every kind of ostensibly sane analysis, Stripe looked like a bad idea. Right? This was a crowded market. There were tons of existing incumbents. There were significant regulatory and just kind of partnership, institutional barriers to entry. We had no experience in the domain. We were very young. We we weren't even U.S. citizens and an ecosystem that, again, just because the regulatory dynamics that provides for the complication, we had no sort of obvious mechanism for gaining sort of significant distribution.


And we were not sort of naturally viral product or sort of organic adoption the way maybe a social network or a consumer product might have.


And so for all those reasons, I think a lot of people thought a very reasonably thought that your stripe was a bad idea or, you know, us pursuing Stripe was a bad idea. And they certainly didn't hesitate to tell us that. And, you know, clear, I think they were I think they were doing something reasonable by telling us that. I mean, they were giving us their sort of honest and, again, you know, reasonably justified assessment.


And so it all started sort of in the background context of that.


I think the thing that primarily gave us the confidence to actually attempt it was it just seemed so strange that something with Stripes character didn't exist in that we really looked for a stripe before we before we started as it just it felt that it must be the case that there is some service, some company somewhere offering infrastructure and APIs and payments and economic tools that are straightforward to use for a developer.


Right. I mean, this is one of the sort of top needs that any business operating on the Internet has, arguably, by definition, sort of a business on the Internet must have access to these tools. There are tens of millions of developers operating on the Internet.


And so just given the magnitude of that market and the sort of obviousness of the business model, it really felt like this had to exist.


And so we kind of forlornly Google for us, you know, with different set of permutations of keywords and then sort of, after a couple of months, became somewhat resigned to the fact that, no, it did not, in fact, probably exist and.


And nonexistence was so kind of strange to us that that actually initially kind of discouraged us where it was sort of such an obvious idea and such a surprising absence of a kind of solution. Maybe there's some kind of latent force that we're not seeing that actually makes sort of solving it impossible. Right.


In that, for example, we were also interested at the same time in y kind of consumer banks were so bad in that just, you know, they weren't really keeping abreast of technology and the fees were really high and they were getting fined by the CFTC and et cetera, et cetera, et cetera.


And and as we looked into it, it became apparent that actually there was a good reason as to why the problem had not been solved, where the banks are subject to sort of such onerous regulation, where it's very difficult for them to do anything themselves. Right. And so, for example, the difference in a checking account and a savings account, which might seem sort of quite unfriendly from a consumer standpoint, that's actually kind of essentially mandated by law.


And so it's not on some level the bank's fault.


Now, the second reason is the Office of the Comptroller of the Currency, which is the entity that, uh, sort of issues federal banking charters that had basically stopped issuing new banking charters, both financial crisis. And so if you came along and you're like, well, I'm going to go solve all these problems and they're banking, you're essentially blocked from doing so by the kind of regulatory apparatus.


And so we kind of wondered and it's kind of similar vein, is there some force like that? Not necessarily regulatory, but just like there's some constraint that that kind of we aren't observing or weren't.


And after maybe a couple of months of investigation, we decided that, no, there didn't appear to be at least I mean, of course, you can never kind of definitively reject it, but we really couldn't find one.


And so we decided to build a prototype and the prototype was kind of built sort of on top of and with sort of existing payment systems.


And so it didn't do anything kind of overly ambitious. It was just sort of enough to kind of get a sense for what it was.


But it was almost like a sort of concept rendering of what a solution could look like rather than sort of a solution itself. But it was sufficient to get just a couple of our friends started using it. And I think the particular thing we realized that caused us to really go take it a little bit more seriously.


And I mean, concretely to drop out of college was the realization that the sort of problem that we perceived and kind of developers like us, people building some little side project or with this kind of very nascent, you know, startup or something like that, that the problems we perceived for that segment of the market were actually the problems that larger companies had as well. That kind of what we thought initially might be a little lack of opportunity was sort of more akin to an ocean.


And when we talked to companies and hundreds of millions or billions in revenue or companies in other countries and so on, and we just asked them to kind of recount their problems and what they wished existed and everything else, they basically give us the same roster of features and what we thought about it.


And just like looked at the kind of macro figures we saw that you know about at the time, two percent of all consumer spending in the world happened on the Internet.


And and so even though we were kind of, you know, 20 years into sort of the Web's evolution, and even though we'd all engage in lots of e-commerce and so on, when you looked at it sort of on a macro basis, it was apparent that we were still kind of barely after starting blocks. And so I think the combination of those things where we kind of decided that there didn't appear to be some sort of some dark energy preventing a solution and that the set of problems we could see actually seems sort of very pervasive rather than just sort of a microcosm.


And and then thirdly, that actually this whole market and environment was still actually a sort of surprisingly nascent stage when you looked at the full picture, then we had to drop it.


You guys went from two employees, you and your brothers co-founders to eight hundred nine hundred now, or about a thousand now, a thousand employees, and what have you learned from scaling the business? I think on some level, scaling a business is both relatively straightforward and extremely hard. I mean, it's relatively straightforward in the sense that it's usually not that difficult to.


See what the problems are and and you don't think the problems are usually because there's some kind of subjective blindness rather than it being actually difficult to see the problem?


Right. And so it's more sort of a question of what are you oblivious to because of your own biases rather than what is particularly difficult to observe and kind of what are your corrective mechanisms to sort of account for that?


So I think straightforward in that sense, um, and I guess straightforward in the sense that usually solving the problems is not. Outlandishly difficult, know it's not easy, but you don't hire someone in this role.


You need to figure out how to raise this capital.


You need to build the system, whatever the case might be. I mean, none of those are easy things, but they're also not sort of scientific breakthroughs.


There are other companies that have done it. There are generally playbooks that exist. And while sort of your particular strategy might need some sort of correction refinement and you might hit some walls along the way, um, it's it's rarely unprecedented.


And then I think it's extremely difficult in the sense that you're you don't get to really choose the clock cycle.


And the Time Horizons is a category of sort of flash games, desktop tower, defense games, every sort of building little towers that shoot missiles and all these little critters sort of scampering across the board trying to sort of break into your fortress or whatever the case might be.


And I start to feel a little bit like that where you fundamentally don't control the sort of the rate of, you know, problem appearance. You just control the sort of the other variable of the reader which you're building defensive or mitigator or mechanisms to to deal with those problems. And sometimes the rate of the problem creation can outstrip the rate at which you can solve them, even though in principle any one of them is is is relatively manageable. Right. And so I think that really adds a lot of difficulty.


I think just on even if this kind of very abstract level dealing with the problems is, uh, tractable, um.


The character of having problems materialize at every level of the organization or at every kind of level of abstraction or at every kind of magnitude and so on, that's just a kind of unnatural thing that I think is just a psychological, emotional level, difficult to deal with.


And so while you might recognize sort of on some contemplative, stoic level that this is how it goes, um, you know, that's not necessarily how it feels in the moment. Right. And it kind of feels like that way every day. And some days you almost have to smile at the sort of unreasonableness of the swathe of problems and challenges that have materialized on your desk or in your inbox.


And that, you know, it it's sort of the same way that you see the constellations in the stars, you know, the sort of constellation, the problems looks so implausible and so unreasonable that like someone must secretly be screwing with you. Right. Um, and so there's that kind of emotional sort of self-management. And then, of course, there's the challenge of dealing with uncertainty where, you know, it's I mean, it's kind of I guess.


Well. You're operating in sort of the weird zone where you're often making decisions that have sort of significant long term impact or that are at least difficult to reverse or to course correct and.


In the face of great uncertainty, right, and the uncertainty is often unnecessary in the sense that you could in principle go and significantly reduce the uncertainty, you could go and study the question more.


You could go and obtain more information. You could go and run an experiment.


You know, it's not like cosmic uncertainty or just it's truths of nici and unknowability. And I think when it is like true deep, unmitigated uncertainty, then I think it's not too hard to say, well, we're just going to choose something and, you know, make the best decision we can.


I think it's a more frustrating kind of uncertainty where it's actually not necessary. But the thing that sort of limited is you're essentially the cost of obtaining further information and reducing that uncertainty.


And so you're left in the sort of dissatisfying situation where I have to make a highly consequential decision.


There's a lot of uncertainty. We could have less uncertainty.


We could take steps to mitigate that, but we just don't have time to. And making a lot of decisions in that zone is somewhat dissatisfied right now, I think kind of correctly so. And that one is correctly reacting to the fact that it could be otherwise. Right. And then lastly, maybe you're playing this sort of armed bandit problem where you're sort of constantly try to balance exploration and exploitation or sort of just optimization of that which already exists and sort of doing a better and better with trying to figure out what are the things that we aren't doing or that we don't know or we haven't even considered or, you know, if we were doing would make this other part of the organization to the vastly more effective and so on.


Sort of it's very hard to know what the optimal rate of exploring those things is while also operating outside the system and operating inside the system or optimizing outside the system and optimizing it inside the system. And it's hard to know what the right rate of doing those things is.


And so, again, I think lot of the challenge of of of scaling the organization is sort of finding at each moment the right way to balance those things, but without ever having kind of sat down before to try to sort of in any way to come distil us into any unified theory.


I think that a lot of the experience of scaling an organization is kind of specific versions or specific applications of sort of of those dynamics and just figuring out how you yourself or how the organization or how your peers and colleagues sort of deal with that and what the kind of structural mechanisms for for doing so is or are.


And then maybe very last I mean, those are all the structural ones, I think there is just also a personal version where you certainly don't start out being. Well, adapted to or. At least in my case, particularly skilled in organizational management and leadership, and I mean, depending on the rate of growth of the company, you sort of need to acquire those skills.


And, uh, again, on a timeline that's largely out of your control and depending on the rate, the rate of growth of the organization, that might be a pretty difficult thing. And so certainly in my case, I think I've just had to accept my sort of managerial inadequacy relative to what either is required in the moment or sort of will in the near term, impending future be required and just figure out strategies to try to acquire those skills and abilities as rapidly as possible.


I go back to the explore, exploit kind of comment that you made, which we can probably just relate to focus.


How do you think about focusing on one thing and being exceptional at that or doing a variety of things and trying to be exceptional on all of them?


Even in the organization or personally in the organization, then maybe personally, if that's different. I don't know of a better answer other than using coarse heuristics and then being willing to revisit or make an exception if, uh, if something seems sort of particularly promising.


Right. Uh, you know, roughly speaking, we invest most of our effort into a precise number, but let's just say 70 or 80 percent in optimizing that which we already have, that which we already know is producing returns, that which there's a sort of relatively clear line of sight from sort of the input, the work, the optimization, whatever, to sort of the output improvement and then some fraction of the work and the sort of a distribution of of that skew.


But some of the work, let's call it 20 percent into things that are more speculative. Right. And I think that's necessarily the case because, uh, well, I think it's necessarily the case that call it, again, 70 or 80 percent is devoted towards optimization of that which already exists.


If we did not do that in the again, what if we did not do that, then this kind of default nonexistence we just discussed would be guaranteed. Right.


And it's very easy to sort of fly the company into the side of a hill. Um, and I think really the question is just do you spend 20 percent of your time on things that are more speculative or do you or defend zero percent?


And then maybe secondly, to what degree do you allow those answers to be different at different levels and of the company and and sort of in different places? And how much is it sort of a uniform answer and how much heterogeneity do you permit or do you design for? Um, and I think as we've grown, we've we've tried to shift into a model where it is somewhat less uniform and in certain teams, less optimization of what already exists is going to be required.


It's going to require more exploration. And in other parts of the company, it could be tilted in the reverse direction. And I think that's sort of that kind of recursive decomposition, I think is, uh, is really required to avoid the economies of scale that otherwise set in as you grow.


How do you decide which speculative projects you take on day based on disrupting your business or these are things that I want to do or want to do or. I don't know that there's a better answer beyond given all of the axes of constraints and returns, which ones seem like a like a good idea? And I mean, I think it's kind of like investing when you ask, you know, what's the, uh, what are the criteria for investing in a company?


It's well, when you kind of normalize down from these sort of really high dimensional space of Markussen founders and idea and all these things, we normalize all that down into kind of what do you think the return profile looks like while you invest when the return profile looks good enough?


Right. I think similarly, when you say, you know, which idea to pursue, of course, on each axis, there are many things you prefer or you don't want or whatever.


And for example, something that requires less effort rather than more or entails less downside risk or that more whatever. Those are all good things. But I think kind of where it all nets out is, well, when you take account of all those factors, which things just seemed like a good bet. Right. And so just to give a concrete example, Atlus, the service we launched for helping new founders and corporate companies and in particular sort of without the geographic restrictions that tended to exist before.


So it's essentially open to the founders anywhere in the world.


Um, there was no kind of one reason as to why that was a good bet. There was no kind of you can't just measure that on any one axis. Right.


But when you look at overall and you see that, well, if it doesn't work, it's it's hard to see how it could cause that much downside first. Right. It's not going to require an enormous kind of fixed cost investment in order to sort of learn as to at least whether it's initially working. Um, if it did work, it seems like you produce kind of quite significant returns. Uh, the kind of things will have to do for it are actually things that are really valuable for us in other parts of the business and so on.


So we'll learn interesting new capabilities and skills in the course of doing it, et cetera, et cetera, et cetera.


Um, I think I mean, I think the reason there aren't more good bets made in the world is because making good bets is difficult. Uh, and again, I think you can live in different areas, um, difficult in terms of recognizing them or difficult in terms of acting and executing on them or what you mean by difficult.


I think both.


Um, well, I think most organizations are sort of institutionally resistant to Batz in that because most people are necessarily optimizing things that already exist.


And again, that's correct. Without making a mistake. I mean, things that are not optimized along the way, especially things that are not being kind of fixed and optimized and patched up and corrected as they burgen.


I mean, those are going to to break. Right. And so the optimization is critically important. And I don't mean to sort of sound remotely kind of dismissive towards it. Um, but but that's a very different character. Right. Um, uh, and sort of a continuum of bashfulness and riskiness is our best strategy.


Right. And large institutions and incumbent organizations sort of dislike them. Right. Structurally speaking, and find them difficult to understand and difficult to interact with.


And so I don't think there's a whole host of reasons there. And that, you know, people are in startups are sort of less worried about the risk of failure, whereas people in sort of existing systems must worry quite a bit about the risk of failure.


You know, newer things tend to operate on sort of on a faster sort of clock cycles. And so, you know, um, Dijkstra talked about the idea of the Buxton index and the the sort of time horizon upon which an organization makes its decisions. And so maybe university makes a decision, you know, its decisions with a decades long time horizon, whereas maybe a company makes decisions on sort of a quarterly time horizon and maybe a, you know, maybe an individual make decisions on a weekly or monthly time horizon, whatever.


Um, and I mean, sort of the observation was that organizations with very different buckstone indices find difficult to work together.


And if an organization with a really long time horizon is working with one that sort of rapidly updating and sort of rethinking, um, just like a fundamental kind of impedance mismatch.


And so I think that, you know, your question is sort of why they're why it's hard and why there aren't more good ones in the world.


I think there are lots of different kinds impedance mismatch like that.


It's not just the time horizon thing, but I think there's just like a fundamental, deep intrinsic difference between sort of existing incumbent systems and the actions, the mindset required to optimize them and the sort of the exploration of figuring out that which is totally orthogonal different. And a new.


How do you keep the mentality? I mean, when Stripe's started, the cost of failure was really low. Now you have a thousand employees. They'll have families, you have a business. You people have invested a lot of money in the business. How do you maintain that ability to place massive bets? It's really a question of how do we make sure that we can place bets that don't have excessive downside or sort of fatal downside. Right. Or cumulatively fatal downside across your whole portfolio of bets.




And I think that actually I think the impediments to placing good, but again, I caveat all this by saying it's not like Stripe has a long track record of sort of making really good investment decisions.


We are. I am we are far from being the the Apples or the Berkshires or whoever multidecadal sort of track record of we're back here in a decade.


We'll overexaggerate if we are here in three decades, which as established, would will not be the default outcome. And we have a great portfolio of successful such decisions. Then perhaps we can opine with some modicum of confidence.


But it feels to me and we'll see if this right or not, it feels to me that actually the reason that organizations don't take don't tend to make more of these or make more good ones is it's more sociological, more institutional and less that it's fundamentally too costly because in most cases the downside cost is not that large.


And either in terms of like just direct financial cost or in terms of the sort of the broader damage to the organization, whatever form that might take, it's much more the mindset of improving that which already exists is just quite different to the mindset of screw the old system, let's do something that's fundamentally new from scratch. And so I think the challenges in significant part, how do you reconcile these two mindsets? How do you have the I mean, Stewart brand talk about peace, layering in buildings and sort of different parts of the building?


Has parts of the building have to change at different rates?


And how do you design for that? And I think that kind of analogous question for for an organization is how do you do organizational piece learing? How do you have parts of the organization that can try to do something fundamentally different to and hopefully superior to that which already exists?


And how do you have people who are trying to who basically disagree with people trying to do something new who think that, no, the way we're currently doing it is in fact the right way. We're going to do it better and better. And because it will fundamentally, structurally disagree with each other and must have significant conviction that effective approaches, otherwise they do great work. How do you have those people at the end of the day have dinner together and fundamentally feel like they're on the same team?


How do you do that? Come back in 30 years?


I think I recall one of the interviews that I was watching as prep for this, where you talked about one of the first five or six people worked at Bridgewater.


No one guy in particular did. And over time, we've hired more people who have. But we were I would not say we were particularly Bridgewater influenced.


Did you come to the sort of notion of thoughtful disagreement before that influence?


And if so, how did you.


Well, it's hard to know exactly where to attribute it, and it's partly kind of overdetermined. And maybe they're just some sort of underlying personality traits that we each had sort of come to into different parts of our lives and sort of somewhat coincidental ways. I mean, for a start to your earlier question, Irish people are always disagreeing and always arguing. And so, again, there's a cultural dimension to it. It's not a. It's not something that the people tend to shy away from.


Because they see it as an attack on exactly right. Right. I think that. I think there was just a common shared personality trait in a lot of the people who helped establish the culture of Stripe where they enjoyed.


Sort of disagreement and trying to find the boundaries of an argument and the places where it's not the case and and what the exceptions might be, I'm just trying to kind of.


Get a feel for the topology of of that space and kind of stumbling in the dark, try to construct a map of where different intuitions and heuristics apply and where they don't and so on.


And like I think one kind of deep mindset difference in people is often those who those who enjoy finding the limitations of arguments and beliefs and those who don't.


Um, and Tyler Cohen talks about I think it's his, uh, second law, um, that there are no knock down arguments and there are no arguments or just uniformly, completely true.


There's there are always the limits to it and there's always the other side. And I think that's kind of very deeply true.


But I think there's kind of just a question of sort of afact and again, personality as to you enjoy finding those limits and the exceptions and thinking about, well, maybe this is less true than I think or where is it less true and I think or is that just like a stressful process?


And I think that sort of getting that kind of rigour and clarity of thought requires sort of a joy of discovery.


Like I had this thing, I believe this rule that I thought existed, like it's actually not good in this place and having that be an enjoyable discovery rather than sort of something stressful and threatening. I think globalization is a good example there, where, you know, as we discussed, I think that globalization is a net overall for the world, a fantastic thing and something that, you know, support is rising for a global basis and has propelled more people out of poverty than almost any other force ever.


Um, and yet there are people like Danny Rodrik and others who are sort of prodding at the edges of that and showing, well, but not in this place or not in this way or auteur.


And these other folks at MIT like maybe it has this sort of underappreciated downside. And I think that's great, as I think those are important questions and really interesting work. Um, and I think the kind of again, the underlying sort of sentiment is sort of interest in where the heuristics and the intuitions and the rules and the arguments Iraq.


Want to come back to some of that a little bit later. I think one of the questions that people want to hear from you is what what would you say is the biggest difference between the Patriot making decisions today and the Patriot making decisions maybe five years ago in terms of how you actually make those decisions? I think there are four big differences. The first is I know this place more value on decision, speed in that.


If you can make if you can make twice as many decisions at half the kind of half the precision, that's actually often better.


And then given the fact that the rate of improvement of decision making with additional time almost necessarily tends to kind of flatten out, I think that most people certainly the Patrica five years ago and even the pattern of today included should be sort of earlier, should be operating earlier in that curve, make more decisions with less confidence, but in significantly less time.


Right. And just recognize that in most cases you can course correct and treat fast decisions as a kind of asset and capability in their own right.


And it's quite striking to me how some of the organizations that I hold in the highest regard tend to do this. The second thing is not treating all decisions is kind of uniformly, I think, the most obvious kind of excuse to break them down on our degree of reversibility and magnitude and things with low reversibility and, you know, great impact and magnitude.


Those ones you do want to really deliberate over, um, and and try to get right. But I think it's very easy sort of absent care to have me. This mechanism you put in place for those decisions to seep into decision making for the other categories.


And really in the other three quadrants, you can afford to be sort of much more flexible and much more fluid. And again, really just to prioritize speed, because obviously, if it's very reversible, then by definition you can always correct later. And if it's, you know, of low import, then who cares? Right. And that's kind of the second one. And just being kind of cognizant of that and before making a decision, trying to categorize, well, what kind of decision is it?


The third thing is, uh, I now try to fairly deliberately just make fewer decisions in that. Why am I making the decision? And for some kinds of decisions? You know, there are some good reasons for that. And there are some decisions the CEO ought to make and is going to fundamentally look for. But there are some decisions where if I am making it or if I have to make it, that probably suggests something else organizationally or institutionally has broken.


And I think the need for a decision from from anyone, not just for me, is often like only a sort of an epiphenomenon.


And there's really some other underlying issue that's causing you have to make in the first place and to thinking about that and concretely doing more to push others to make decisions and sort of pushing them back sort of to people who are truly that the domain experts and then forth.


When I realized that I would make a decision differently to have someone else is making it not even really discussing the decision itself, but trying to dig into what is the difference in our models such that you want to make decisions and I want to make Decision B..


And one thing we're currently spending too much time on your trip is having different parts of the organization write down what they're optimizing for, essentially like what their mission is, what the long term key metrics are for their part of the organization, what who their customers are either internally or externally and sort of things of this kind of persistent and ongoing underlying nature such that hopefully once this agreement and those longer term things, then maybe a difference on account of any particular decision might just be, well, we differ sort of on what the most instrumentally effective way to achieve this outcome is.


But we're both really unified on what the desired end state is. And there I think I think disagreement over sort of instrumental efficacy. Well, that's really that problematic a disagreement because. Well, if you're right, then we'll soon learn that if you're wrong, reality will probably sort of make that pretty clear in short order. I think the more troubling ones and the ones that tend to cause more kind of persistent friction in an organization are we're sort of there is latent disagreement and what you're actually optimizing for, but that's kind of never explicitly surfaced and uncovered.


And so now, I guess, again, in decision making, I place more importance on making sure that we have the right sort of foundational agreement such that the kind of disagreement then tend to arise are of the sort of essentially more superficial sort, and their agreement is actually less important. Part of culture is learning from the decisions your organization makes. What do you do, strive to make sure that people are learning? And what do you do personally to make sure that you're learning from the decisions that you've made, both positive and perhaps ones that you, in retrospect, would have wished you could make differently?


I'm inclined to say I don't know if I actually believe this, but I'm inclined to say in response to that question that decision making in organizations is slightly overrated, in that organizations are not like investment entities or funds or managers in that. Or organizations? Well, with investing, it's fundamentally very binary.


There is a moment at which you either buy or don't or sell or don't or whatever, um, and maybe it's somewhat more continuous in the case of, say, public market investing and so on.


But given sort of constraints on just decision making time, I think if the treaty is a bit more binary, you assess the stock and you make a buy or a um, or not decision makers in organizations, everything is much more fluid and continuous.


It's much more about, I think, designing the feedback mechanisms, you know, biologically. Yeah, exactly.


And, you know, there's the famous sort of water model of the economy, the sort of circulating fluids, and you can vary the interest rate or the inflation rate or whatever, but just kind of try to get a sense for the overall kind of biological apparatus. And I think an organization is much more like that.


And so the I think the things the things to optimize are the incentive structures and the mindsets and the definitions of the goals and the feedback mechanisms from the outcomes to the inputs and the work and the operations themselves and all of those things, unless the binary decisions are kind of completely dismissed.


Obviously, the importance of decision making in that there are times we will decide, well, are we going to launch the product or not or are we going to start this product or not, or are we going to replace the system or not and so on. So there are, of course, real decisions, but I think it tends to be much more. Well, I guess maybe it doesn't feel like the right unit of analysis to me.


I think the right unit analysis is. Is that of the cell? And the question is, well, in an organization, what are the cells and what are the organs and how do they interact for the feedback mechanisms between them?


Let's get a little bit on the feedback mechanisms here. What sort of feedback mechanisms do you try to make sure are in place?


What point in the process do you try to acknowledge what they are?


I really think that and this is not to evade the question, but I really think it's too early to answer that in the sense that I mean, I can kind of tell you what I think today and the sort of changes we made over the last year and things like that.


But like strep has been a thousand person organization for, uh, or has been more than 500 person organization for just over a year. Right. Um, we're we're beginners at this, uh, and, you know.


Three years ago, Stripe was under 100 people, uh, and and I think.


Either to opine as if or to even more problematically believe that we can have it figured out would be would be real hubris.


And so we've been talking about, I think that maybe some of you know where our and my thinking comes from, but but I don't know what the right answers are yet. And we spent a lot of our time. Sort of scrutinising other organizations, trying to find out and kind of reverse engineer what works for them and why.


And I think that part of it's interesting at the tech industry is that it's it's a kind of pure knowledge work that we're still, I think, quite early in sort of figuring out in terms of how to optimally coordinate and collaborate on it, in that you can draw a lineage of HP and Intel and Microsoft and Google and Facebook and so on WhatsApp and there all these sort of suggestive examples that I think at least, again, suggest that we may not have it all figured out.


I mean, the fact that WhatsApp was such a miniscule team and Instagram, too, of course, despite operating on such scale or the fact that the way the new paradigm.


Yeah. Yeah. And the way Facebook operates is very different to the way, you know, HP operated outside of Stripe. Which company cultures do you admire the most. Not business models, but culture and why.


Well, I admire cultures are strong, first off, cultures that when you ask somebody who's in the culture, can you describe it, that they will, uh, that they can expound on its merits for more than half an hour and in almost every case, describe at some length all the things they don't like about us.


Right. Because if it's strong there, I mean, it's improbable that every aspect of it is something that the person really agrees with or feels an affinity for. And so whether it's, uh, The New Yorker or the military, a shared characteristic of those cultures, that they're strong. So I think that's the first order thing. And I don't think that describes most organizational cultures. I think most organizational cultures are some kind of milquetoast averaging. Right. Set number one.


Um, the second is cultures of of perfection. Um, and so both. The economist and Apple have extraordinarily high standards for themselves and and really kind of in both cases, the work has a kind of primacy. And so who designed the latest iPhone or who wrote that article? In both cases, that's anonymous because there's such a belief that the work speaks for itself. Right.


And I've a lot of admiration for that. Um. And then cultures that have longevity and really sustained success and so.


I think that one of our major investors is Sequoia Capital and Sequoia has been, you know, the top firm or in the top three firms.


Obviously, it's a subjective ranking, but it is unquestionably a top three firm for for essentially its entire existence.


And there was no other VC firm that has been a top three firm for call it for decades. And so I think the obvious question is, why is that?


What's different about Sequoia? There have been tons of VC firms and a lot of different firms have had at any moment in time a strong claim to being a top three firm.


But what are the underlying institutional characteristics that enable that to be sustained? And of course, this applies to some of the other organizations we mentioned, like, say, The Economist or The New Yorker or even this is one that I've to read more about of late Koch Industries, in that, you know, Charles is, of course, or Charles and David are most famous for their political activities.


But if you just look at the company that has kind of compounded from 20 million in annual revenue to now, according to public estimates, 100 billion, um, over call it five decades.




And there aren't that many organizations that have compounded like that for that long without there being kind of one driver of success, there's no one thing that enabled that rise.


They didn't like stumble upon some resource that they kind of cornered. There was no kind of iPhone for them, et cetera. It's clearly something kind of deeper and more sort of institutional. And and the fact that that's been kind of sustained for so long, I think is interesting in its own right. As an what is it that Sequoia Capital, Koch Industries and The New Yorker share. And I haven't quite unpacked the answer to that yet.


Can you give us an example of what you've learned from studying Koch Industries? It's very striking to me how. Warren and Charlie at Berkshire and how the folks at Koch Industries are so into a kind of epistemology and structuring of doubt and accounting for biases and. Mechanisms for for clarity of thinking.


I'd like to to a very striking degree, I mean, obviously, if you read the public writings or you go to Omaha and you listen to what you know, Warren and especially Charlie talk about, you know, it's sort of half investing and half applied epistemology philosophy.


Right. And and that's been the case as well to a striking degree with with Coke.


Um, and I don't know them well enough by any means to sort of opine in any deep sense. Right. Like, I've never been to one of their factories. I've never looked at one of their financial statements. And so I'm not qualified to assess in any kind of comprehensive way. But just in terms of what it seems that the leadership prioritizes, it's strikingly consistent across two of the most successful multidecadal institutions in the US.


There's something to be said, going back to your point earlier about learning from companies that have consistently demonstrated over a period of time without these huge kind of like one off hits that have caused most of that track record.


Right. You're a huge reader. Where did this love of books get started or with crappy Internet?


When I was growing up, um, because our house was so remote, there's so much noise on the phone line that we didn't have Internet for years and then we got it was treacle slow and so on.


And, you know, I was I was 14. My parents were very willing to pursue all these harebrained schemes. And so we eventually got an ISDN line, which was ferociously expensive, but got that that was sort of the the fiber of its day, at least as far as I was concerned, seven point six K a second was majestic. I could barely keep up with the speed.


And and then we eventually got a satellite Internet connection, which really a game changer.


But but it effectively meant that for the first, I don't know, 14 or 15 years of my life, uh, there was no Internet. And we lived in a very rural part of Ireland. I was quite distant from even my friends at school. And so all it really was for us to do was play in the garden, which we did a lot of. And to read.


And, you know, it's funny, I often wonder about this in the context of, you know, if I had kids or when I have kids, what's the optimal upbringing for them?


And of course, you think, well, you kind of want them to grow up in a stimulating environment and have all these kind of experiences and extracurriculars and everything else. But certainly that was not my upbringing.


My upbringing was a kind of get out of the house, go play that.


And I mean, there's plenty of stimulation around. You know, our parents had lots of books. And so, you know, we could kind of burrow our way sort of sequentially through the shelves. Um, but, you know, it was pretty it was pretty unfettered. And I think our parents had a kind of they followed our interests and supported them, but they didn't choose them.


Um, it felt like they they pushed from behind rather than pulling in front. Um, and and so I think that's where the reading thing came from. And I think that, um. Well, I don't know. I run quite a bit and I don't even run because I enjoy it that much, I mean, I enjoy it, but it's nothing kind of in the in the immediate moment.


It's not like it's euphoric or anything close to it. I mean, it's pretty painful.


Uh, and, you know, the Greg Lemond quote about how I mean, it's very dispiriting when you think about it. It is very deeply true that how you how it never gets easier. You just go faster through of running. Like, if I stay running for the rest of my life, it will it will never get easier.


I will just go faster.


Um, but it feels like something I ought to do and it's I vastly rather having run than not having run.


And so I sort of continue to do it. And with reading it I don't feel like I'm weird.


I feel like everyone else is weird in that they're just like so much stuff to know.


And I guess I just feel stressed out by like it feels important or it's obviously important and I don't know it. And so qaid like I better get to work, but it's not what I'm reading. I'm not in this like especially blissful place. I mean I enjoy it perfectly fine.


Um, but it's more like I, I think there are extremely important things that I really should know and and I don't and that feels problematic.


How do you filter what you read. Um, there's millions of books. This one of you write.


Um hmm. Well, I discard a lot of books. I like the insight that the there's a set of the set of great books that are really worth reading. Right.


And there's a subset of those books that that are really enjoyable to read.


Maybe it's like 10 or 20 percent of them say, um, and the subset the intersection really worth reading and really enjoyable to read is actually still more books that you can read then you can read in a lifetime.


And so I've sort of decided, well, I will read all of the, um, the books that are really worth reading and really enjoyable to read.


And when I run out of those, then I'll go back to the books that are merely worth reading. Right. And so, you know, very quickly, you can decide if this is an enjoyable book to read or not. I'm not describing it.


I think reading is like a you know, should be treated as a as a kind of more active process. Sort of you should you should skim. You should skip, you should backtrack.


You should discard and potentially return like, you know, you are not subject to the book. You're not a passive consumer like the book is. The book is there for you. You bought it, it's yours. And like jump back and forwards it in half. If you want annotators wildly, like, you know, use it.


Um, I wholeheartedly agree. Uh, and and yeah.


I maybe. Start half the books I get and I probably finish a third of the books I start, and that works out to.


You know, finishing one to two bucks a week, but if I finish it that, you know, it's I guess it what it's probably been recommended by somebody in the first place. And then it looked interesting enough upon some very superficial skimming to start. And then, you know, if I finish that event, that was quite interesting.


So it's actually like a lot of selection that kind of happens along the way. And then I think just the other thing worth pointing out is, you know, the line from Basho about the Japanese poet that you shouldn't follow the people you most admire, but you should follow what they admired.


And I try to do that.


I try to figure out for the people who seem to be doing really great work or to have really interesting ideas or just who I admire in whatever regard to how do they get to who and what they are, what influenced them or what's upstream.


And and often it's quite obscure. Um, but I try to kind of disentangle that. When do you typically read?


All of us, I mean, in the morning, in the evening, while walking, while walking is a good one, actually, like your peripheral vision is such that you can actually quite function, read a book while walking and and as other people try to do this and do it much more and faster than I do.


Um, but you just you spend a lot of time walking and so be able to do that. I found to be quite, quite valuable even while eating.


So you're sitting at home on your couch. It's after dinner and you pick up a book for the first time.


Walk me through how you process that book, what you look at, you know, myalgia sort of midway through it and just start reading and see, like what I like to have ended up here and almost certainly like a bunch of the terms I won't recognize or the antecedent ideas I won't be familiar with or whatever, but like to do what I do.


I want to be here. Or I had to have gotten here.


Um, and if after a couple of pages it seems like the answer is yes, then I might sort of backtrack to the start and start kind of pursuing it a bit more seriously. I mean, John has this insight that and it's related to that previous point that at every moment you should be reading the best book you know of in the world.


I mean, I don't mean have the absolute best for everyone, but sort of the best book for you.


But like, as soon as you discover something that that seems more interesting or more important or whatever, you should absolutely discard your current book sort of in favor of that.


Um, because any other algorithm necessarily results in you reading kind of quote unquote worst stuff of or suboptimal.


Yeah, exactly.


And so I'll be reading the book on the couch and then maybe after 50 pages I'll be in my room and I'll stumble across something else and and I might just, you know, switch rails. Uh, the other thing that I think is actually quite valuable is just leaving books out.


And so when somebody recommends a book, I'll very often pick up a copy, ideally a used hardback copy.


Um, it's the hardback books. They're more durable. And now with Amazon used hardback, they're really cheap and I'll leave it out.


And so this book's in the kitchen, there's books and in my bedroom in this book on my bed and just strewn everywhere.


And surprisingly commonly, either someone else will recommend the book or some aspect to the book or whatever.


And it's still it's still salient still around you.


Um, and you're like, oh, yeah, I really should check out that thing or something else triggers its relevance. You read an article, you just start appreciating a point or a question or something. Right.


And so like part of the reason that I still really value physical books is because you I mean, for now at least, we still exist in physical space.


And, uh, and it creates a kind of idea space for you, uh, that makes kind of productive collisions more likely to happen.


What types of things do you typically markup in a book and how do you what does that look like?


Um, so I tend to just make notes in the margin. So I tend to underline stuff, but in the margin and I underline the term I annotators market highlighted in the margin because then you can flip through the book because I quickly see the party marked.


Right. And then the other thing is on the last pages, like I'm on the inside cover at the end, I tend to very quickly note page numbers for particularly interesting points or um, things that jumped out or whatever, so that I can easily go back to a book and have the list of the 30 things that I found most interesting.


Um, so you keep the book a book that you completely read that you like. Yep. How often do you come back to that book?


If I want to make a particular point or be reminded of a particular aspect or whatever, um, maybe I will. But but generally speaking, I don't know. I think, you know, part of the value of making the annotations is, of course, to imprint them more firmly in your mind so that you sort of don't need to come back as much in some sense.


If it's really good.


I don't often do this, but if it's really good and I might write a review for friends and just share an email or a Google doc or something, or just share snippets with friends, and that's valuable both because again, sort of the act of a summary or summarization sort of aids, the kind of synthesis and better recollection, but also, of course, it triggers out pointers and further suggestions from from those friends. And so, you know, if you want to identify can.


That's an adjacent or you can't perform the clustering and figure out what to do, adjacent candidates might be interesting for further exploration.


Writing a review is a good place to start.


What sort of books have you written reviews on for friends this year?


One that I really enjoyed was A Culture of Growth by John MacArthur, Joel MacAir, apology's and.


It's basically a book about why why did the Enlightenment and the Industrial Revolution, uh, really the Industrial Revolution start when it did and.


And where it did and he basically makes the case, I mean, obviously tons of different arguments that have been made for this and because it only happened once, it's sort of we can never know definitively. And, you know, was it the abundance of or what was the abundance of coal in the U.K.? Was it the something of the intellectual property system and patents? Was that the high cost of labour in the UK that sort of created more sort of that made productivity enhancing improvements more valuable?


Was it something about trade and so on and so forth?


And here obviously makes the argument that it was that it was primarily intellectual and more than sort of quote unquote, economic.


And secondly, that it was sort of specifically a kind of synthesis of the importance placed in kind of scientific knowledge where we kind of realised that scientific progress, knowledge about the world is exists and can be important and that progress is possible and that we're not just kind of imperfect imitators or receivers of the knowledge of the ancients.


Uh, and so kind of a belief in scientific progress, coupled with a belief in sort of the practical importance of sort of engineering and of the more prosaic aspects of of industry and of kind of practical pursuit.


And, you know, smokier offers the example of bacon, who both kind of inspired the Royal Society.


And I was kind of one of his followers who created it, um, but also intended to catalogue the practical knowledge of all of the people in the UK and the kind of implicit functional knowledge they had.


And it's kind of an interesting combination of the sort of really high minded and the very practical right.


And MacAir kind of teases through all these arguments and the kind of republic of letters and the sort of nascent rise of science on the continent and so forth.


But all in terms of this question of why the industrial revolution then and there and talks about versions of it and in China and so forth. Um, and anyway, so so I mean, I think it's a very important question.


And Mark, here is kind of a discussion of it is is I thought particularly interesting.


And so I summarise of my friends.


That's also which book or books would you say have most influenced you? So I ask a question on Twitter back a couple of weeks ago, and some of the responses were really interesting, um, and a lot of people responded, um, like many more than expected to. I didn't actually embarrassingly, I feel guilty about this, I didn't post a response myself, I thought about it.


It's actually a very hard question to answer.


Like, I actually worry that may not it may not have been a good question because, like, it's hard to know. Do the book influence you or did you have an inkling or a leaning?


And then you read something that really resonated.


But sort of it's actually not like the book is just the artifact upon which you project the sort of the characteristic that had already arisen or the belief that it already arisen. And the book is not actually causal in and of itself right now.


Maybe it's interesting to talk about the book as a kind of symbol for the belief.


But yeah, there's that kind of question.


And then also, um, uh, what I've often found is I think the books that perhaps did in fact influenced me the most in a causal sense are often not necessarily that good.




And that maybe I'll read a book that sort of triggers a realization or some idea or something, and that both kind of jolt me in some direction and then I'll go read better things about that question. And so it would've been better if I had just started with the better stuff. But in some kind of truthful descriptive sense, it's yeah, it was like the worst one that actually influenced me. Right. And so, like, you know, maybe it may be a better version.


The question is like, which books do you wish you'd read sooner or something?


Right. Well, um, let's answer that question. Um, I actually I don't think I can even answer that one.


I think about it is this this is your book.


And I hoist by my own petard, uh, like it's also just sort of clusters of books in that, you know, I think I'm programming, for example, like would be hard for me to answer this question and not say any programming books.


I mean, it's been kind of so influential in my mindset in my life.


But I can really point to any single programming book. I can name 10 that I think in aggregate we're together like paradigms of programming by NORVIG and structure and interpretation of computer programs and, you know, Canarsie and, you know, books and operating systems, the Tannenbaum Book, et cetera.


And in aggregate, those like hugely shaped me.


But I don't think I could single out just one, um, um, even two books at which they were written by a guy who now works at Stripe. I mean, one of those books is the book that taught me to program. And so, you know, in answering this question, I could hardly not recite those.


Right. But it's but it's kind of really lackluster or and, you know, for similar to about science or economics or or sociology or whatever. And so I had to just get back with a better version of the question. Switching gears a little bit, what's the smallest habit that you have that makes the biggest difference?


I reach out to people whose work I admire and tell them that, and often it leads to a dialogue and and in some cases I've gotten to know them pretty well. And so. I'm fortunate that Tyler Cohen, who I mentioned is a friend, but I was never introduced to him, I just randomly emailed him years ago, actually invited him to a Bitcoin meetup that I held in 2011. And I did not, however, buy any Bitcoin, but I invited him to that meet up and he replied, and I apologize that he couldn't make it.


But we sort of ended up in kind of a dialogue after that. And when you reach other people half the time, they don't respond. Um, but, you know, half the time they do.


And and so it's asymmetric doesn't really cost too much and they don't. And it can be incredibly rewarding when they do. And so yeah, if I did not do that, um. I would have missed out on a huge amount. How would you answer a question about what your personal values are?


Probably by evading it, uh, I'm not about to do you think perhaps this disprove that answer by actually answering it, but I guess I just think it's so it feels like too important a question.


It's the kind of question I feel like too important a question to answer simplistically, uh, and or and too complicated a question to answer briefly, uh, and thereby perhaps unsuited to something extemporaneous. And I'm sure whatever answer I gave, you know what? I'm thinking about it in an hour's time, I'll kick myself and realized I'd left out this critically important dimension to it. And I think I so I can I can cite some things I value, but the sort of the sense of giving a complete answer is very oppressive.


I mean, this is, of course, the value of Twitter where because of the constraint there isn't the same because because the system chooses when to cut you off rather than you choosing when to stop. But that's quite liberating. And if you like me 20 seconds speaker values, I could do that, but I could blame the constraint on anything I omitted.


We have ten hours of recording left.


What would you say is the most common mistake that you see people make over and over again that you wish you could correct? And you have one hundred and forty characters.


Maybe not having the right peer group or not having the right, um, mentors isn't quite the right term because mentor implies something kind of quite active, but not striving to be more like the quote unquote right people or not just being kind of in either case, deliberate enough about that. Uh, of course, who the right peer group is for you is.


I mean, that's an entirely kind of personal and subjective question. But whoever it is is going to be massively formative and influential in determining where it is that you end up.


I mean, Drew, Houston is a quote about how you end up the average of your five closest friends. And it's a very deep truth to that. Right. But if you accept that, then, of course, your five closest friends are I mean, choosing that and we do that, we may not think of it this way.


We do choose those people like you are choosing who you are.


And of course, that's a kind of a sort of bidirectional process where who you want to be is determined by who you're around, which determines who you want to be around and so on.


But the people that will accept you. Exactly. Right. Right.


Um, but I think certainly my mental model when I was 18 is that my five closest friends are, you know, people I run into who kind of like me and I like them. And there's a kind of, you know, we're cordial and close and all those things, but that it's kind of fundamentally mediated by sort of happenstance. Uh, and I think people should kind of invest more in it than than they do and related.


Once you found those people, you should really invest in it, because if you accept they can shape you and you think that the right people to shape you well and embrace that shaping.


Right. And then kind of on the on the mentor point or the latter one, you know, I think almost all of us, at least subconsciously have a set of people we hold in really high regard or would like to be more like and at least some ways and so on.


Um, I see people, in my opinion, um, they've kind of, uh, they haven't either found the right people or just like the right relationships and so on.


And if they had someone who was, um. Steering them more, uh, or in better ways could be much better off.


I want to talk a little bit about the future of e-commerce and maybe Silicon Valley culture.


And I know we've got to end soon, but talk to me about how payments you foresee them changing from not only the customer perspective, but from the merchant perspective, um, over the next, you know. Well, I think there's two levels to this.


Maybe, um, in that there's there's all the just like the basic mechanical stuff about payments where we kind of forget just how much friction still exists and how many business models and transactions and businesses and everything sort of are impeded for fundamentally kind of stupid reasons. Right.


In that because micro transactions aren't possible, both because the fixed costs are too high and because just like the friction is too high, then things that one would pay for with micro transactions just don't exist right now that they pursue a different monetization model. In some cases they might. But as a general matter, a significant, significant number of them just don't exist.




Or because maybe it's hard to purchase things that are really expensive in a way where the kind of risk of fraud is sufficiently low, then, you know, don't pay your rent online, say.




And so and then I think maybe the most important dimension to that is the sort of geographic kind of balkanization and sort of inefficiency that ensues, where it's extraordinarily difficult for somebody in Brazil to buy from somebody in Germany or somebody in Germany, from somebody in India, et cetera, et cetera.


And so you get this kind of unnatural sort of some clusters existing, not because of sort of, you know, deep necessarily limitations, but because of something much more arbitrary and contingent.


And, you know, economists talk about sort of the gravity equation and the fact that these sort of proclivity of any two countries to trade falls off with the square of their distance. And there's all these like big questions I'd like. Well, is that about something kind of fundamental in culture or about just surprising returns to proximity or what have you?


Um, assuredly there's some of that stuff. But I think talking about the challenges and kind of complexities and hidden costs of PIN methods, that doesn't feel like a very deep thing.


It doesn't feel like something that is kind of significant enough on some level to have such kind of far reaching and deep consequences. But I think a lot of these sort of ostensively, quote unquote, cosmic phenomena are actually consequences of these very prosaic and straightforward limitations.


And so I really think that solving this aspect of commerce on the Internet, like literally just making it easy for any two parties, a business and a consumer in arbitrarily chosen countries, making it easy for those two entities, transact will have enormous consequence for the world.


And like that, that sounds like such a sort of a straightforward idea that it almost sounds cliched. And the fact that it sounds cliched should not blind us to the fact that it is still extraordinarily far from being the case today.


Right. We have had commerce in the Internet for decades to this point, but it's still like 90 plus percent of Brazilian credit cards do not work online outside of Brazil.


Brazil is not some backwater. It's not some inconsequential country. Right. Obviously, one of the top economies in the whole world and Brazilian consumers basically cannot purchase outside of Brazil. And so it's difficult to overstate the magnitude of of the sort of limitations and inefficiencies that prevailed today. Um, so that's kind of the kind of payments level.


And then on top of that, I think there's or beneath it, depending how you look at it, um, there's maybe just like a deeper question of what determines how many firms there are in the world and what determines the character of those firms.


Are they doing something innovative and novel or they're doing something prosaic that has existed for a long time? What determines who starts and why and the probability of survival?


What determines the growth trajectory and the expansion rates into other markets and their products and so on?


And I think part of this trip hypothesis is that things like that that seem very sort of one would think are very difficult to move, are actually movable.


And that and really macro measures like the number of people who start a company or who start a technology company or again, the the.


Success rate of those companies, and just to give some kind of illustrative, maybe intuition comes here when we survey companies started with Atlas, 60 percent of them tell us that they would not exist if not for Atlas.


You know, that can be rock like maybe maybe some of them actually secretly would, but maybe but maybe some of them are actually overstating their own resourcefulness or overstating maybe maybe they're underestimating the challenges they would have faced. And so I think that number could either be too high or it could be too low. Right. But but let's be conservative and say that it's actually only 40 percent if Atlas is causing 40 percent of those founders to to start companies where they otherwise would not have.


And if the kind of subsequent success rates look similar, that's a huge deal, especially if Atlas itself gets back. Right.


I mean, over time, that kind of real economic significance or, you know, if we can make it the case that businesses sell to twice as many global markets as they would otherwise sell to, I mean, again, integrate it over into our portfolio, that's a really big deal.


Or a Nick Bloom at Stanford did this really interesting work, has done a whole bunch of interesting work about management practices.


New management practices matter is it is good management merely correlated or that causal in terms of leading to the advent of better outcomes.


And they did it and asked a proper trial in India where they taught better management practices to a cohort of firms and did not to sort of control group and saw double digit percentages in revenue over a multi-year period. I don't recall exactly. I think it was 13 percent over three years or something like that. Right.


That's an incredible low hanging fruit.


Like all they did is, is teach better management practices, 13 percent more revenue, like 13 percent more value provided by the company as assessed by their customers just from better management practices.


And so, you know, when we think about Strib and what to do in the future and the possibilities that exists and so on, it's much more, I think, about sort of how do we perturb this overall system to move some of these kind of macro outcome measures like a number of technology firms started survival rate of these companies, expansion rate of these companies, magnitude of the value provided to the end users, consumers, customers and so on, and kind of mediated by Heyman's as this kind of foundational layer, because it's something every business necessarily has and because it, uh, gives us good sort of understanding of the dynamics within the business and so on.


But it's on some kind of fundamental level in. Not about the payment, even though we think that kind of per the first point, the impact of just solving the payments will itself be enormous.


Do you think reducing friction across the board is a good thing, or do you think friction in certain parts of it actually serves the system well, serves it for who? Well, that's a good question. I mean. Oh, yeah, sure.


I mean, look, I think across society, I think so many of the things that look like bugs are actually features from the perspective of, uh, of of somebody of some constituency. Right. And of course, so much of politics is a reconciliation of the countervailing interests of different constituencies. And of course, you know, the problem is that in so many cases, the incremental gain of the constituency is substantially outweighed by the social utility loss of the rest of society.


Right. And so there are bad teachers do great in the US, but almost certainly that's kind of a net bad trade for society. But the bad teachers care more about sort of their ongoing employment than the rest of society cares, evidently, about correcting that. And the same thing applies to fishing policy where, uh, perspective makes all the difference.


Well, or what? But but, you know, people driving fishing stocks to extinction. Carramar care more about their ongoing right to do so than the rest of society cares about, about sustainable ecosystems. I mean, I think that's just that's the character of political economy. And so, yeah, absolutely.


I think I mean, to return to our earlier example, um, it's not even clear that the rate the well, one could look at the fact that essentially no new banking charters are being issued in the US as a bug.


Uh, or of course, depending on your perspective, it's a wonderful feature. It's great for the regulators and it's great for the banks.


Province of where banks are higher than they've ever been. Until they all get wiped out the next crisis. And then because they're even more systemically important than they were in the past, they'll be to to the extent there was a systemic argument for bailing them out in 08, they'll probably be an even stronger argument in the future.


It's almost like we were talking about this earlier, but that's when you get big, you have more loss aversion. And so your goal is not necessarily to get better from your customers perspective. It could be to prevent competition and prevent new entrants that might be more, um, without a moral judgment on it.


It might actually be a more effective business strategy. Oh, for sure. I've been innovating for your.


No question. And I think that. Um. I think we're very sort of dissonant on this point as a society where on the one hand, we decry lack of innovation. On the other hand, in our.


Collective action, we do so much to ensure that it doesn't occur, right, and so, you know, on the one hand, we decry the state of the sort of medical industrial complex and the 18 and a half percent of our GDP that is spent on health care costs and the plateau or even decline in life expectancy and the declining rate of drug discovery and so on.


And yet, on the other hand, we sort of, through regulatory structures, make it harder and harder to engage in drug discovery or to I mean, you can't even start a hospital unless you got a certificate of need. But but if you observe that, well, hey, you know, medical care in San Francisco doesn't seem so great and it seems extraordinarily expensive, you know, even though it seems like a very thankless undertaking, I'm going to try to do better.


Well, first, you'd better get approval for that. You can't you can't just enter the market. And so I think that kind of and I'm not being kind of a normative judgment. I mean, I have my personal preferences, but I'm not casting normative judgment.


That's kind of what we ought to do as a society. But the the thing that I feel strongly is that we were inconsistent in our stated desires.


There's like a perpetual sort of seesaw, if you will, where success sows the seeds of its own destruction.


Would you how would you make an argument right now that San Francisco or Silicon Valley is doing that?


Oh. I mean, the obvious one well, the two obvious ones, I guess. Ah. Our in culture and in housing and cost in general, I mean on the ladder, well, on costs and the ladder, everything is getting more expensive and.


And nobody seems to quite understand exactly what's going on, right, and that is this. I mean, if you if you take health care again, for example, I mean, the case has been made that this is not, in fact, a bad thing, that what would you expect an enlightened society that has solved all of its other material needs to spend its money on health care.


It's kind of it's the last thing. It's the last frontier.


Um, and perhaps we are actually getting sort of commensurate improvements if you sort of disaggregate appropriately and analyze the right way. Um, you know, or perhaps not.


Right. How much of this is some kind of Baumel cost disease for? Some things are getting more efficient and that higher productivity and higher wages are sort of causing cost increases elsewhere to pay for opportunity costs and all the rest.


But I think sort of specifically in Silicon Valley and specifically on cost of living and and housing, you know, Silicon Valley is the sort of greatest concentration of wealth creation that I think has ever existed in the US on a per square mile basis, potentially that has existed ever in the world. Right. Um, Facebook, Google, Apple, Intel, um, you know, they're all based in a you know, a fairly small number of square miles.


Right. Uh, and and if you sort of. If you were to look at sort of Seattle and the Bay Area kind of together, right. And look at the kind of that aggregation urban zone, you know, separated as they are by a two and a half hour flight, then, of course, you can layer in Amazon and Microsoft as well.


And obviously, what you see is that there their rise and success was enabled in part by.


Cheap mobility and cheap expansion and again, sort of through just sort of political economy and collective decision making that no longer exists, cheap mobility no longer exists, and job expansion and you can see it now in the sort of latest generation of upstarts, you know, via Twitter or Uber or Airbnb or Lyft or whatever, who are facing these really significant kind of structural headwinds.


Uh, and and so much of the wealth that's being created, this improbable fountain of wealth creation, is accruing to the sort of lottery winners of the existing landowners rather than to the people who are actually doing the work.


Um, and because of that accrual, the sort of the barrier to entry for, uh, for newcomers is getting progressively higher.


And you see it in declining rates of mobility. And furthermore, the other people in the city, not in the tech industry who might otherwise benefit from it are, of course, getting priced out. And, you know, this is not necessary. I mean, you can look at places like, you know, Tokyo has over the last couple of decades been an improbable, not especially improbable, but has been such an enormous economic success story.


And, you know, you had the boom in the bust, uh, of the supposed stagnation of Japan in the early 90s on, but sort of broadly speaking, has done really well.


But because of vastly fewer limitations on housing supply, have had just very stable housing costs, have not had the same displacement. Right. And so the kind of the issues we face and we see here in San Francisco where it's getting ever, you know, 40 percent rise since we got San Francisco in 2010, that's not necessary. It's not natural. And it's it's a it's a function of our sort of collective decisions rather than kind of some some secular and unavoidable, uh, economic force.


Um, and I guess I find it sort of dispiriting because it's it's a negative sum in the sense that it's not just that these gains go to, uh, go to these sort of existing landowners, but actually fewer future gains.


Like, I think you should be mad about this if you don't live in Silicon Valley and you don't have the slightest interest in doing so because it's much less likely the next cool technology that you'd like to take advantage of will exist. It sort of it's a it's a suffocation of a future potential and a future gains. And there aren't many places.


Well, if you believe in increasing returns to scale, that sort of you know, this is kind of Paul Rohmer's work and and others, um, that because of the sort of the collision of ideas and people in cities makes them more productive than than if they were elsewhere. If you believe that to be the case and there's like pretty good empirical data that it is, then it you can't just move elsewhere.


You can't you can't just move to Nevada, uh, or or wherever the south, uh, you actually will be less productive in those zones. And so, again, I think it's a real loss in terms of spillover gains to the rest of society.


Um, in service of not building six storey buildings in San Francisco, what do you think your role as a large employer and thoughtful citizen of San Francisco is in in this?


Well, I don't make any secret of the, uh, the injustice.


And while the moral injustice in terms of the displacement that's occurring, um, and the sort of.


Economic wrongheadedness of the prevailing policies and you know, I'm a landowner in San Francisco, John and I own a house together and I hope its value declines in that.


I think it's impossible to answer what the price of land should be.


But I think it is very clear that on a marginal basis, the social returns of cheaper land in the most productive region of the country would vastly outweigh the reduction in wealth cut to existing landowners.


Um, but going back to the banks, everybody has a system that they want to do.


Right. Right. I mean, of course, you can try to estimate the magnitude here.


And so over at Berkeley, this guy and Enrico Moretti has estimated that 50 percent of U.S. GDP growth to 1964 and I think 2010, uh, was left on the table, as it were, by sort of inefficient land use and, uh, and land allocation and obviously 50 percent of the high number and quite speculative.


And it's very difficult to measure the counterfactual, but even just the idea that one can, with a straight face, hypothesize that it could be anything remotely in that vicinity, I think gives you a sense for how high the stakes here are. Right. And yes, we can decide that, uh, no, we place such an enormous premium on the aesthetic appearance of the San Francisco of today, recognizing that it is of approximately a third of the density of even just Greenwich Village in New York.


Right. We're not you know, the sort of the other extreme is not Hong Kong. You can triple San Francisco and get to Greenwich and, uh, we can decide that that's our preference. But sort of, you know, sober estimates, uh, are measuring the cost of that in, uh, in double digit percentage points of aggregate national GDP.


And of course, when you look at our revealed preferences in terms of where we like to take vacations to or where we dream of spending a summer or some day and things like that, it's to to European cities, um, which tend to be of, uh, a very significantly higher density Paris, London, much, much higher density than San Francisco. And so, um, again, uh, I'm hesitant to cast normative judgment, um, but I personally feel strongly I think that's a great place to leave this.


This has been a phenomenal conversation. Thank you so much for coming on the show. Where can people find more about you?


Well, so I want to start a business they should to outcome.


But if they want to subject themselves to more of the particular detritus that I post, they can head to my Twitter account, which is just Patric's.


Thank you so much. Thank you.


Hey, guys, this is Shane again, just a few more things before we wrap up. You can find Schnitz from today's show at F-stop Blogs podcast. You can also find out information on how to get that transcript there. And if you'd like to receive a weekly email from me filled with all sorts of Brainfeeder, go to F-stop blogs, newsletter, the newsletters, all the good stuff I found on the Internet this week that I've read and shared with close friends, books and reading and so much more.


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