#32 Patrick Collison: Earning Your Stripes

Welcome to the Fernum Street Podcast called The Knowledge Project. I'm your host, Shane Perish, the curator behind the Fernum 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 Callison, the co-founder of Stripe, which he started with his younger brother, John, in 2011. Well Stripe 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 orbit thought. I'm pleased to have Patrick Callison on the show. You have the unique background of having dropped out of high school and dropped out of 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 given my lack of education credentials elsewhere, I should fit to take my parents and insist that I do, in fact, or did, in fact, formally speaking graduate from high school. But 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. Ireland actually has this kind of interesting thing called transition year, at this year between the two major exams of high school, at least Ireland's high school equivalent. In transition year, it's a formally designated year that's optional, where you can go and pursue things that you might not otherwise naturally tend to pursue, and the school tends to be much more permissive of going and spending three months abroad, or going and doing some work experience in this area, or whatever the case might be. In that year, I basically decided to spend as much of it as possible programming. I did that. I returned to school for the latter half of Ireland's 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'd got a Stanford for the 2005 International List Conference, and there was a fairly small conference, but it was very eye-opening for me, and I remember walking around Stanford and thinking, "Man, American colleges seem great," and so 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 it was sort of a long story, but I eventually figured out that I could not do it if I did the standard Irish kind of follow 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 Stripes' 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 sort of grown up in an environment of which college attendance is sort of really prioritized when 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 the 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 or discourse or environment at all, and so by the time I got to MIT and to college in general, and it didn't feel like that big a deal, it didn't feel like, sort of, this was the terminal state that I'd sort of spent my entire childhood and adolescent sort of trying to pursue. And so, as other things and other ideas and opportunities sort of cross the trance of, I think I was maybe more open to them than my peers, not because if I think any differences in me, but just because of differences in the culture and environment that I'd 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'd really just started it. And I felt that I had some kind of time to spare because I'd started college year younger than most of my peers. And that company sort of worked okay, and it's kind of a long story, but it ended up becoming a small acquisition. I went back to MIT because when I'd started there, I'd sort of been very interested in math and physics and had kind of been interested 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 MIT, that's sort of the default around you, you know, everyone is planning on, again, trying to get a PhD or to become a professor or whatever. And so I think, you know, that environment has an 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. And after a year, back at MIT, I decided that that was not the case. And physics really felt like it had sort of slowed down, pretty substantially, compared to the, you know, 1910s, 20s, 30s, the sort of the period in which so much of what we were learning about, you know, that sort of brought up period of discovery, I felt like the period in which sort of, you know, we existed in, say, 2010 was the really 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 degrees, 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 Strait. 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 very significantly enabled, maybe almost wholly enabled by exports, by sort of importing American multinational companies, having them set up factories and bases and you know, 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, 10, 15 miles from where I was born, dank shouting visited it and found this quite inspiring and so decided to set up special economic zones in China and so Shenzhen and this sort of the pro river Delta that sort of special economic zone was in some ways directly inspired by what he saw on Western Ireland and so I think the fact that there's 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 rest of the world are sort of much greater 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, you know, we really are always trying to emphasize the sort of the imperative for and the potential of globalization and while maybe in the mid 90s that was sort of something that was uniformly accepted in sort of at least elite circles, now see that's something that perhaps has been 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 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 exited to the EU and that was really not accompanied by any material social strife for conflict or a lot of the sort of challenges that we've seen in sort of other parts of the world and so again, I think that sort of an appreciation for borders 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 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 somehow to strive where we want to strive 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 Ireland. How would you describe the culture at Strip? What do you actively try to achieve with that? Well, I'll answer that with a 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 to what we needed two or three years ago, right? And so I think there's kind of double contingency in the answer where it's a function of just what we've realized at this point, but also sort of what it is that the organization and the company needs to give them the sort of challenges that we currently face. With that caveat, I think the things that we really prize and try to seek in 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 try 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 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 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. I don't exactly know what the right word is, but a kind of determination and competitiveness and I guess willfulness 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 default outcome is your relatively near term non-existent, like the default outcome is that you do not survive and to survive over the medium or even more difficulty over the long term. And that's like an unnatural act, right? And so you need to find people who not just are willing to sort of push against 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 medium term. And I really don't think that is for everyone. I don't think that's a bad thing, right? In that the t-shirt, of course, is that startups are extraordinarily hard and they just are. And you want somebody who finds that who's 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 underbuilt 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 just a degree of caring for others and a desire to be nice as a kind of out-of-dine word, but to be nice to them and to make them better off, right? We really try to find people who just actively enjoy spending time with, right? You spend such a large fraction of your life inside the wall is 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 think, I mean, of course, don't know for sure, but I think we go to sort of some greater lengths to find these people than other organizations tend to do. And there's other things as well. I mean, it almost goes without saying, but we really care a great deal about ethics and integrity in people, but I think so to do a lot of other organizations, I think the three that kind of 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 or some of the mistakes that you've had made. Sure. I mean, the 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 that were significant regulatory and just kind of partnership institutional barriers to entry. We had no experience in the domain. We were very young. We weren't even U.S. citizens in an ecosystem that, again, just because the regulatory dynamics, that's a bad further complication, we had no obvious mechanism for gaining sort of significant distribution. And we were not a naturally viral product or one that would have 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 sort of very reasonably thought that your Stripe was a bad idea or us pursuing Stripe was a bad idea. And they certainly didn't hesitate to tell us that. And to be clear, 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 even 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 Stripe's character didn't exist, in that we really looked for Stripe before we started it. 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 this sort of obviousness of the business model, it really felt like this had to exist. And so we'd kind of forlornly Google for us, you know, with different permutations of keywords. And then sort of after a couple of months became, you know, someone resigned to the fact that no, it did not, in fact, you know, improbably exist. And it's non-existence 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, you know, 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, you know, for example, we were also interested at the same time in why 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 CFPB and et cetera, et cetera, et cetera. And as we looked into it, it became apparent that actually there was a good reason why the problem had not been solved, where A, 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 between 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 kind of not on some level of a bank's fault. The second reason is the office of the control of the currency, which is the entity that sort of issues federal banking charters 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 you're banking, you're essentially blocked from doing so by the kind of regulatory apparatus. And so we kind of wondered in this kind of similar vein, is there some force like that, not necessarily regulatory, but just like if there's some constraint that kind of we aren't observing or weren't? And after many, you know, a couple 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 was more 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 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 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. The kind of what we thought initially might be a little lake of opportunity was sort of more akin to an ocean. And when we talked to companies doing 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 when we thought about it and just like looked at the kind of macro figures, we saw that, you know, about at the time, 2% of all consumer spending in the world happened on the internet. And so even though we were kind of, you know, 20 years into sort of the web's evolution and even though, you know, we'd all engage in lots of e-commerce and so on, when you looked at sort of on a macro basis, it was apparent that, you know, we were still kind of barely off the 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 seem to sort of very pervasive rather than just sort of a microcosm. And I'm thirdly that actually this whole market and environment was still actually at a sort of surprisingly nascent stage when you looked at sort of the full picture. Then we decided to drop out. You guys went from two employees, you and your brother as co-founders, to 800, 900 now? We're about 1,000 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 to be sense that you don't see what the problems are, it's 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 what are your corrective mechanisms to sort of account for that? So I think straightforward in that sense. And I guess straightforward in the sense that usually solving the problems is not outlandishly difficult. I mean, it's not easy, but you need to hire someone in this role. You need to figure out how to raise this capital. You need to build this 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 predictor strategy might need some sort of correction refinement and you might hit some walls along the way, it's rarely unprecedented. And I think it's extremely difficult in the sense that you don't get to really choose the clock cycle and the time horizons. There's a category of sort of flash games, desktop tower defense games where you're sort of building little towers that shoot missiles, and you've all these little critters sort of scampering across the board trying to sort of break into your fortress or whatever the K-5B. And I start to feel a little bit like that, where you fundamentally don't control the sort of the rate of problem appearance. You just control the sort of the other variable of the rate of which you're building defensive or mitigatory or mechanisms to deal with those problems. And sometimes the rate of the problem creation can outstrip the rate of which you can solve them, even though in principle any one of them is relatively manageable. And so I think that really adds a lot of difficulty. I think just even if on this very abstract level, dealing with the problems is tractable, the character of having problems materialize at sort of 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 on 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, that's not necessarily how it feels in the moment. 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 sway of problems and challenges that have materialized on your desk or in your inbox. In the same way that you see the constellations in the stars, the sort of constellation of the problem looks so implausible and so unreasonable that someone must secretly be screwing with you. And so that's that kind of emotional self-management. And then of course there's the challenges of dealing with uncertainty, where it's kind of I guess 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 in the face of great uncertainty, right? And that 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. It's not like cosmic uncertainty where there's just it's truths of nice and unknowability. And I think when it is like true, deep, unmitigatable uncertainty, then I think it's not too hard to say, well, we're just going to choose something and 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's sort of limited is your essentially the cost of obtaining further information, reducing that uncertainty. And so you're left in this 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? 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 multi-armed bandit problem where you're sort of constantly trying to balance exploration and exploitation or sort of just optimization of that, which already exists, instead of doing it 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 if we were doing what make this other part of the organization sort of 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 basically operating outside the system and operating inside the system or optimizing outside the system and optimizing it inside the system. And it's very hard to know what the right kind of rate of doing those things is. And so again, I think a lot of the challenge of of skilling the organization is sort of finding at each kind of 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 kind of distillate 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 about the kind of structural mechanisms for doing so is or are. And then maybe very lastly, I mean those are all kind of the structural ones. I think there's 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 depending on the rate of growth of the company, you sort of need to require those skills on again, on a timeline that's largely out of your control. And depending on the rate of growth of your 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 in adequacy, 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 when 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 at all of them? Even in the organization or personally in the organization, then maybe personally if that's different. I don't know a better answer other than using course heuristics and then being willing to revisit or make an exception if something seems sort of particularly promising. Roughly speaking, we invest most of our effort, we're going to the precise number, but let's just say 70 already percent in optimizing that, which we already have, that which we already know is producing returns, that which there's a sort of roughly 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 Betz-Gew, but some fraction of the work, let's call it 20 percent into things that are more speculative. And I think that's kind of necessarily the case because, 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, again, if we did not do that, then this kind of default non-existence we just discussed would be guaranteed. It's very easy to sort of fly the company into the side of a hill. And so I think really the question is just, do you spend 20 percent of your time on things that are more speculative or do you spend 0 percent? And then maybe secondly, to what degree do you allow those answers to be different at different levels of the company 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? And I think as we've grown, 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 another part of the company could be tilted in the reverse direction. And I think that's a sort of that kind of recursive decomposition. I think is really required to avoid the diseconomies of scale that otherwise set in as you grow. How do you decide which speculative projects you take on? They're based on disrupting your business or these are things that I want to do or want to strive 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 good idea. And I think it's kind of like investing when you ask, what are the criteria for investing in a company? It's, well, when you kind of normalize down from the sort of really high-dimensional space of markers and founders and ideas and all these things. You normalize all that down into what do you think the return profile looks like? Well, you invest when the return profile looks good and that, right? I think similarly when you decide which idea to pursue, of course, on each axis there are many things you prefer or you don't want or whatever. For example, something that requires less effort rather than more or until it's downside risk rather than more or 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 seem like a good bet, right? And so to give a concrete example, Atlas, the service we launched for helping new founders incorporate companies and in particular, without the geographic restrictions that tend to exist before. So it's essentially open to founders anywhere in the world. 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 the kind of when you look at it overall and you see it, well, if it doesn't work, it's hard to see how it could cause that much downside for Stripe. 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. If it did work, it seems like it could produce quite significant returns. The kind of things we'll have to do for it are actually things that are probably valuable for it's another part 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. I think the reason there aren't more good bets made in the world is because making good bets is difficult. And again, I think you can have in different areas difficult in terms of recognizing them or difficult in terms of acting and executing on them or what do you mean by difficult? I think both. Well, I think most organizations are sort of institutionally resistant to bets in that because most people are necessarily optimizing things that already exist. And again, that's correct. I'm not 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 burgeon. Those are going to break. And so the optimization is critically important. I don't mean to sort of sound remotely dismissive towards it. But bets are a very different character. This is sort of a continuum of betfulness and riskiness. They're bets. 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 on. I think there's a whole host of reasons there in that 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 them on faster sort of clock cycles. And so, you know, Dijkstra talked about the idea of the Bucks and index and the sort of time horizon upon which an organization makes its decisions. And so maybe university makes its decision, you know, its decisions with sort of a decades long time horizon, whereas maybe a company makes decisions on sort of quarterly time horizon. And maybe a, you know, an individual makes decisions on a weekly or monthly time horizon, whatever. And I mean, sort of the observation was that organizations with very different Bucks and indices find it difficult to work together. And if an organization with a really long time horizon is working with one that's sort of rapidly updating and sort of rethinking, just like a fundamental kind of impedance mismatch. And so I think that, you know, to your question, it's 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 of 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 of the mindset required to optimize them and the sort of the exploration of figuring out that, which is totally orthogonal, different and new. How do you keep them mentality? I mean, when stripes started, the cost of failure was really low. Now you have a thousand employees, they'll have families, you have a business, you have people who 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 do you normally fatal downside across maybe a whole portfolio of bets? And I think that actually, I think the impediments to placing good, well, again, I'll caveat all this by saying it's not like Stripe has a long track record of sort of making really good investment bet decisions. I am we are far from being the apples or the burkshers or whoever, you know, a multi-decade sort of track record. If we are here in three decades, which, as established, would not be the default outcome and a great portfolio of successful such decisions, then perhaps we can apply some modicum of confidence. But it feels to me, and we'll see if this is right or not. It feels to me that actually the reasons that organizations 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 just direct financial cost or in terms of these sort of broader damage to the organization or 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 challenge is in significant part, how do you reconcile these two mindsets? How do you have the, I mean, Stewart Brand talked about pace 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 the kind of analogous question for an organization is how do you do organizational pace layering? 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 just going to do it better and better. And because these people fundamentally structurally disagree with each other and must have significant conviction, the respective 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, were 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 I would not say we were particularly Bridgewater influence. Did you come at this sort of notion of thoughtful disagreement before that influence? And how, if so, how did you. Well, it's hard to know exactly where to attribute it and it's probably kind of over-determined and maybe they're just going some sort of underlying personality traits that we each had sort of come to into different parts for our lives in 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, if there's a cultural dimension to it, it's not something that people tend to shy away from. Because they don't see it as an attack on the. Exactly, right, right. I think that. I think there was just a common shared personality trait in a lot of the people who helped us 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 what the exceptions might be. And just trying to kind of get a feel for the topology 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 I think one kind of deep mindset difference in people is often those who enjoy finding the limitations of arguments and beliefs. And those who don't. And Tyler Cohen talks about, I think it's his second law that there are no knockdown arguments. There are no arguments, they're just uniformly, completely true. There are always the limits to it. 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 affect and again, personally, is to do you enjoy finding those limits and the exceptions and thinking about, well, maybe this is less true than I think or where is this less true than I think, or that's just like a stressful process. And I think that sort of getting that kind of rigor and clarity of thought requires sort of a joy of discovery. This thing I believe, this rule that I thought existed, it's actually not good in this place. And having that be an enjoyable discovery, rather than sort of something stressful and threatening. And I think globalization is a good example there where, you know, as we discussed, I think that globalization is unnet overall for the world, a fantastic thing. And something that support is rising for a global basis and has propelled more people out of poverty than almost any other force ever. And yet there are people like Danny Rodrick 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 or a tour and these other folks at MIT, like maybe it has this sort of underappreciated downside. And I think that's great. I think those are important questions and really interesting work. And I think that kind of, again, the underlying sentiment is sort of interest in where the heuristics and the intuitions and the rules and the arguments are wrong. I 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 would you say is the biggest difference between the Patrick making decisions today and the Patrick 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, and I just place more value on decision speed in that. If you can make twice as many decisions at 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 flatten out, I think that most people, certainly the Patrick of five years ago and the Patrick 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. 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 uniformly. I think the most obvious axes to break them down on are degree of reversibility and magnitude. And things with low reversibility and great impact and magnitude, those ones you do want to really deliberate over and try to get right. But I think it's very easy sort of absent care to have maybe this mechanism that 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 it later. And if it's of low import, then who cares, right? And so that's kind of the second one. And just being cognizant of that. And before making the decision, trying to categorize what kind of decision is it. The third thing is I now try to fairly deliberately just make fewer decisions in that why am I making the decision? And for some kind of decisions, there are some good reasons for that. I mean, there are some decisions the CEO ought to make and is kind of fundamentally on the hook for. But there are some decisions where if I'm making it or if I have to make it, that probably suggests that something else organizationally or institutionally has broken. And I think the need for a decision from anyone, not just from me, is often like only a sort of an epi phenomenon. And there's really some other underlying issue that's causing you to have to make in the first place. And so thinking at that, and concretely doing more to push others to make decisions and sort of pushing them back sort of to people who ought to be the domain experts. And then fourth, when I realize 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 decision A and I want to make decision B. And one thing we're currently spending a much time on your its stripe is having different parts of the organization right down what they're optimizing for essentially, like what their mission is, what the long-term key metrics are for kind of they're part of the organization. What who their customers are either internally or externally. And so things of this kind of persistent ongoing underlying nature such that hopefully once there's agreement on those longer term things, then maybe a difference on some 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 so both really unified on what the desired end state is. And there I think I think disagreement over sort of instrumental efficacy, you know, well, that's really that problematic 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 and insured order. I think the more troubling ones and the ones that tend to cause more kind of persistent friction in an organization are where 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 kind of more importance on making sure that we have the right sort of foundational agreement such that the kind of disagreement that 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 the organization makes. What do you do? I'd 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 and response that question that decision making in organizations is slightly overrated in that organizations are not like investment entities or funds or managers. In that, 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. 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 you've treated it a bit more binary. You assess this stock and you make a buy or a or a or not decision. Whereas in organizations, everything is much more fluid and continuous. It's much more about, I think, designing the feedback mechanisms. Yeah, exactly. And the famous water model of the economy, with the circulating fluids and you can vary the interest rate or the inflation rate or whatever, but just try to get a sense for the overall biological apparatus. And I think an organization is much more like that. And so 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 and less the binary decisions. And I want to kind of completely dismiss obviously the important decision making and that there are times where you decide, well, are we going to launch this product or not? Are we going to start this project or not? Are we going to replace this 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 of analysis 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 with the feedback mechanisms between them? Let's geek out 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, I've made 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've made over the last year and things like that, but like Stripe has been a thousand person organization for more than 500 person organization for just over a year, right? We're beginners at this. And three years ago, Stripe was under 100 people. And I think either to opine as if or to even more problematically believe that we kind of have it figured out, would be real hubris. And so it kind of input we've been talking about. I think that's maybe some of where our and my thinking comes from, but I don't know what the right answer is are yet. And we spent a lot of our time sort of scrutinizing other organizations trying to find out and reverse engineer what works for them and why. And I think that part of what's interesting at the tech industry is that it's a kind of pure knowledge work that we're still I think quite early and sort of figuring out in terms of how to optimally coordinate and collaborate on it in that you can sort of draw lineage of HP and Intel and Microsoft and Google and Facebook and so on WhatsApp. And there are 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 at such scale or the fact that the way the new paradigm. Yeah, yeah. And the way kind of 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 that are strong first off. Cultures that when you ask somebody who's in the culture, can you describe it and that they will that they can expound on its merits for more than half an hour. And in almost every case, describe that some length, all the things they don't like about it, right? Because if it's strong, they're, I mean, it's improbable that every aspect of it is something that the person, you know, really agrees with or feels an affinity for. And so whether it's to New Yorker or the military, a shared characteristic of those cultures is they're strong, right? 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 milketose to averaging, right? So that's number one. And the second is cultures of perfection. And so both the economists and Apple have extraordinarily high standards for themselves. 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 a lot of admiration for that. 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 the top firm or in the top three firms, obviously it's a subjective ranking, but call it a top. Unquestionably, a top three firm for essentially its entire existence. And there was no other VC firm that has been a top three firm for, you know, call it four decades. And so I think the obvious question is that, well, 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, the supplies to some of the other organizations we mentioned, like, say, the economists or the New Yorker, or even this is one that I've been trying to read more about of late Coke industries in that, you know, Charles's, 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 annual revenue to now according to public estimates, 100 billion over, you know, 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 enable their 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 the fact that that's been kind of sustained for so long, I think, is interesting in its own right. As in, what is it that Sequoia capital, Coke 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 Coke industries? It's very striking to me how Warren and Charlie at Berkshire and how the folks at Coke industries are so into a kind of epistemology and structuring of doubt and accounting for biases and mechanisms for clarity of thinking. Like to a very striking degree. Obviously, if you read the public writings or you go to Omaha and you listen to what Warren and especially Charlie talk about, it's sort of half investing and half applied epistemology, half philosophy. And that's been the case as well to a striking degree with Coke. 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 multi-decade 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? Well, we crappy internet when I was growing up because our house was so remote. There's so much noise on the phone line and that we didn't have internet for years and then we got it was treacle slow and so on. And you know, I was fortunate. My parents were very willing to pursue all these hair-brained schemes. And so we eventually got an ISDN line, which was ferociously expensive, but God, that was sort of the fiber of its day, at least as far as I was concerned, 7.6K a second was majestic. I barely keep up with this beat and then we eventually got a satellite internet connection, which was really a game changer. But it effectively meant that for the first, I don't know, 14-ish, 15 years of my life, 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 that really was for us to do was to 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, I don't know, experiences and extracurriculars and everything else. But certainly there was not my upbringing. My upbringing was a kind of get out of the house, go play. And I mean, there was plenty of stimulation around, you know, our parents had lots of books and so, you know, we could just kind of burrow our way sort of sequentially through the shelves. But you know, 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. It felt like they pushed from behind rather than pulling in front. And so I think that's where where the reading thing came from. And I think that, 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 immediate moment. It's not like it's euphoric or anything close to that. I mean, it's pretty painful. And, you know, the the the Greg Lamont quote about how, I mean, it's very disparaging when you think about it. It is very deeply true that how you how it never gets easier. You just go faster. That's true of running. Like if I stay running for the rest of my life, and it will never get easier, I will just go faster. But it feels like something I ought to do. It's I vastly rather having run that not having run. And so I said continue to do it. And with reading, basically, I don't feel like I'm weird. I feel like everyone else is weird. In that, there's 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 shit, 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, it's I enjoy it perfectly fine. But it's more like I I think there are extremely important things that I really should know. And I don't. And that feels problematic. How do you filter what you read? There's millions of books. There's one of you. Right. Well, I discard a lot of books. I like the insight that there's a set of the set of great books that are really worth reading. And there's a subset of those books that are really enjoyable to read. Maybe it's like 10 or 20% of them say. And the subset, the intersection of really worth reading and really enjoyable to read is actually still more books that you can read than you can read in a lifetime. And so I sort of decided, well, I will read all 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, fairly quickly, you can decide if this is an enjoyable book to read or not. I'm not discarded. And I think reading is like a you know, should be treated 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 the book, 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 forward, a terrible half if you want, annotate it as wildly. Like, you know, use it. I wholeheartedly agree. 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 books a week. But if I finish it, that, you know, it's I guess 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 it, it 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 and 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 have really interesting ideas or just who I admire and whatever record to get. How do they get to who and what they are? What influence them? What's upstream? And often it's quite obscure. But I try to kind of disentangle that. When do you typically read? All was, I mean, in the morning and the evening while walking while walking is a good one actually. Like your peripheral vision is such that you can actually quite functionly read a book while walking. And there's other people that try to do this and do it much more and faster than I do. But you just spend a lot of time walking. And so being able to do that, I found to be quite valuable. Often 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. Yeah, normally I'll jump sort of midway through. I should 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 do I want to be here or have gotten here? 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. And John has this insight that, and it's kind of related to the 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 kind of 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 to whatever, you should absolutely discard your current book sort of in favor of that. Because any other algorithm necessarily results in you reading kind of quote unquote worst stuff of our time 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 I might just switch rails. 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. It's the hardback books. They're more durable. And now with Amazon, used hardbacks are really cheap. And I'll leave it out. And so this book's in the kitchen, there's books in my bedroom and there's books on my bed. And just strewn everywhere. And surprisingly, commonly, either someone else will recommend the book or some aspect of the book whatever. And it's still salient, it's still around you. And you're like, oh, yeah, I really should check out that thing. Or something else triggers its relevance. You read an article or you just start appreciating a point or a question or something. And so part of the reason that I still really value physical books is because for now, at least, we still exist in physical space. And it creates a kind of idea space for you that makes productive collisions more likely to happen. What type of things do you typically mark up in a book? And what does that look like? So I tend to just make notes in the margin. So I tend to underline stuff, but in the margin. And I underline, you know, missing the term, I annotate it, market, highlight it in the margin, because then you can flip through the book just like quickly see the parts you marked, right? And then the other thing is on the last pages, like kind of in the inside cover at the end, I tend to very quickly note page numbers for particularly interesting points or things that jumped out or whatever. So that I can easily go back to a book and I have a list of the 30 things that I found most interesting. 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, maybe I will, but generally speaking, I don't. And I think part of the value of making the annotations is of course to imprint them more firmly in your mind so you 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, 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 because again, sort of the act of 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 those friends. And so if you want to identify candidates in adjacent if you want to perform the clustering and figure out what type of adjacent candidates might be you know, interesting for further exploration, writing 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 Mokir. Sorry, sorry, John Mokir, apologies. And it's basically a book about why did the Enlightenment and the Industrial Revolution really the Industrial Revolution start when it did and where it did. And he basically makes the case. I mean, there's obviously tons of different arguments that have been made for this. And because it only happened once it sort of we can never know definitively. And was it the abundance of coal in the UK? Was it the something at the intellectual property system in patents? Was it the high cost of labor in the UK that created more sort of that made practically enhancing improvements more valuable? Was it something about trade, you know, and so on? And so forth. And Mokir basically 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 realized that scientific progress knowledge about the world is exists and can be important and the progress is possible. And there were not just kind of imperfect, I don't know, imitators or receivers of the knowledge of the ancients. And so kind of a belief in scientific progress and coupled with a belief in sort of the practical importance of engineering and of the more prosaic aspects of industry and of kind of practical pursuit. And Mokir offers the example of Bacon who both kind of inspired the Royal Society and was kind of one of his followers who created it, but also intended to catalog the practical knowledge of all of the crafts people in the UK and the kind of implicit functional knowledge they had. And it's kind of this interesting combination of this really high-minded and the very practical, right? And so kind of Mokir kind of teases through all these arguments and the kind of republic of letters and this sort of nascent rise of science on the continent and so forth. But all in series of this question of why the industrial revolution then and there and you know talks about versions of it in China and so forth. And anyway so I mean I think it's a very important question and Mokir's kind of a discussion of it is I thought you know particularly interesting. And so yeah I summarized it for my friends. That's awesome. Which book or books would you say have most influenced you? So I asked this question on Twitter back a couple of weeks ago and some of the response I got were really interesting and a lot of people responded like many more than I expected to. I didn't actually embarrassingly I feel guilty about this. I didn't post a response myself and I thought about it and it's actually just a very hard question to answer. Like I actually worry that it 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 it's the book is not actually causal in and of itself right now. Maybe it's still interesting to talk about the book is a kind of symbol for the belief but yeah there's that kind of question and then also what I've often found is I think the books that perhaps did in fact influence me the most in a causal sense are often not necessarily that good right and that maybe I'll read a book that sort of triggers a realization or some idea or something and the book kind of jolted me in some direction and then I'll go read better things about that question and so it probably would have been better if I 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 a better version of the question is like which books do you wish you'd read sooner or something right. Let's answer that question. I actually I don't think I can even answer that one and I think about it. Yeah I know I hoist by my own petard and it's also just sort of clusters of books in that you know I think I'm programming for example like it would be hard for me to answer this question not cite any programming books I mean it's been kind of so influential in at least my mind says in my life but I can really point any single programming book. I can name 10 that I think an aggregate work together like paradigms of AI programming by Norveg and structure and interpretation of computer programs and you know K and R C and you know books about operating systems the 10 and bound book you know et cetera and in aggregate those like hugely shaped me but I don't think I could single out just one and even two books at PHP which are 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 cite those right but it's but it's kind of really the cluster and you know you can give a similar cluster of science or economics or or sociology or whatever and so yeah me I'll have 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 meetup and he replied and you know apologize that he couldn't make it but we sort of ended up in kind of a dialogue after that and you know when you reach out to these people yeah half the time they don't respond but you know half the time they do and it's it's asymmetric it doesn't really cost you much when they don't and it can be incredibly rewarding when they do and so yeah if I did not do that I would have missed out on a huge amount how would you answer a question of the what your personal values are probably by evading it I'm not about to do you think perhaps this this prove that answer I'm actually answering it but I guess I just think it's so it feels like too important to question it's a kind of the book question I feel like too important a question to answer simplistically and and too complicated a question to answer briefly and thereby perhaps unsuited to something you know 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 realize I'd left out you know 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 that that that's quite liberating and so maybe if you allow me 20 seconds to speak out values I could do that but I could blame the constraint on anything I admitted we have 10 hours of recording left okay 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 140 characters maybe not having the right peer group or not having the right 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 of course who the right peer group is for you is I mean that's 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 as the quote about how you end up the average of your five closest friends I think it's a very deep truth to that right but if you accept that then of course who your five closest friends are I mean choosing that and we do though 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 bi-directional 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 people that will accept you exactly right but I think like certainly my mental model when I was 18 is that my five closest friends are you know people I ran into who can like me and I like them and there's a kind of work cordial and close and all those things but that it's kind of fundamentally mediated by sort of happens dance and I think people should kind of invest more in it than they do and 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 then embrace that shaping right and then kind of on the on the mentor point around 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 in at least some ways and so on and I see people in my opinion they've kind of they haven't either found the right people or just like the right relationships and so on and if they had someone who was steering them more or in better ways could you 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 an end soon but talk to me about how payments you foresee them changing from not only the customer perspective but from the merchant perspective over the next you know well I think there's two levels to this maybe in that there's there's all just like the basic mechanical stuff about payments and 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 imputed for fundamentally kind of stupid reasons right in that because micro transactions are impossible both because the fixed cost are too high and because just like the friction is too high then things that you know one would pay for with micro transactions just don't exist right not that they pursue a different monetization model in some cases they might but as a general matter a significant a number of them just won't exist right or because maybe it's hard to purchase things that are really expensive in a way where the kind of risk of fraud is efficiently low then you know you don't pay your rent online say right 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 subclusters existing not not because of sort of you know deep necessary 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 you know there's always like big questions about like well is that about something kind of fundamental in culture or about just surprising returns to proximity or you know what have you and assuredly there's you know some of that stuff but I think talking about the challenges and kind of complexities and hidden costs of pain 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 ostensibly 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 and the international 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 to transact will have enormous consequence for the world and like that sounds like such a sort of 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 at this point but it's still like 90 plus percent of Brazilian credit cards do not work online outside of Brazil Brazil is you know 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 the sort of limitations and inefficiencies that prevail today 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 and 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 doing something innovative a novel are they doing something prosaic that existed for a long time what determines who starts and why and the probability of survival what determines the growth trajectory and the expansion rate into other markets and other products and so on and I think part of the stripe 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 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 you know just to give some kind of illustrative maybe intuition pumps here when we survey companies started with Atlas 60% of them tell us they would not exist if not for Atlas I know they can be rock like maybe maybe some of them actually secretly what but maybe but maybe some of them are actually overstating their own resourcefulness or overstating 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% if atlas is causing you know 40% of those founders to to start companies where the other ways would not have and if the kind of subsequent you know success rates look similar that's a huge deal especially if atlas itself gets big right and 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 other way sell to I mean again integrated over an entire portfolio that's a really big deal or Nick Blument Stanford did this really interesting work has done a whole bunch of interesting work about management practices do management practices matter you know is it is good imagine merely correlated or in fact causal in in terms of leading to or the advent of better outcomes and they did an RCT a proper trial in India where they taught better management practices to a core of firms and did not to a 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% over three years or something like that right um like that that's an incredible low-hang fruit like all they did is teach better management practices 13% more revenue like 13% more value provided by the company as assessed by their customers just from better management practices and so you know when we think about Stripe and what to do in the future and the possibilities that exist 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 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 payments as this kind of foundational error because it's something every business necessarily has and because it gives us good sort of understanding of the dynamics within the business and so on but it's on some kind of fundamental level and 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 as for who 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 of of some idea of some constituency right and of course how much of politics is you know reconciliation of the countervailing interests of different constituencies and of course 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 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 you know the same thing applies to phishing policy where respect it makes all the difference well or but but you know people driving phishing stocks to extinction care more care more about their ongoing you know 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 it's not even clear that the right the well we couldn't look at the fact that essentially known you banking charters are being issued in the US as a bug 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 comments of consumer banks are higher than they've ever been until they all get wiped out in the next crisis and then because they're even more stemically important than they were in the past they'll be to the extent there was a systemic argument for building the matters in in in 08 there'll presumably be an even stronger argument in in the future it's almost like we're talking about this earlier but the bats when you get big you have more loss of version and so your goal is not necessarily to get better from your customer's perspective it could be to prevent competition prevent new entrants that might be a more whether the moral judgment on it it might actually be a more effective business strategy oh for sure then innovating for your no no no no question um and uh you know I think that 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 these sort of um medical industrial complex and the 18.5% of our GDP that has 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 uh 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've 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 thinking of a normative judgment I mean I have my personal preferences but I'm not casting normative judgment as a kind of what we ought to do as a society the the the thing that I feel strongly is that we we're inconsistent um in our standard desires there's like a perpetual sort of seesaw if you will where success shows the seeds of its own destructions 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 um are are in culture and in housing um and cost in general I mean on the ladder well on cost on the ladder everything is getting more expensive um and and nobody seems to quite understand exactly what's going on right and that is this um 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 but health care it's kind of it's it's the last thing it's the last frontier um and perhaps we are actually getting sort of commensurate improvements uh if you sort of disaggregate appropriately and you know analyze the right way um you know or perhaps not right um how much this is some kind of bowel mall cost disease where some things are getting more efficient and that higher productivity and higher wages um are sort of causing cost increases elsewhere to pay for opportunity costs and and all the rest um but I think sort of specifically in in Silicon Valley and and you know specifically on cost of living and and housing you know Silicon Valley is the sort of greatest concentration of wealth creation uh 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 um you know a fairly small number square miles right and and if you sort of if you were to look at sort of Seattle and 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 and and Microsoft as well and obviously what you see is that their their rise and success was enabled in part by cheap mobility and cheap expansion um and again sort of through just sort of political economy and um or collective decision making that no longer exists cheap mobility no longer exists and cheap expansion uh and you can see it now in this sort of latest generation of upstarts you know be it Twitter or Uber or Airbnb or Lyft or whatever who are you know facing these these really significant kind of you know 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 these sort of the barrier to entry um 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 uh getting priced out and you know this is not necessary I mean you can look at places like um you know obviously Tokyo has um over the last couple decades being an improbable well not especially in pro but has been such an enormous economic success story and you know you had the boom and the bust uh and the supposed stagnation of Japan uh in the kind of early 90s on but there are broadly speaking has done really well but because of vastly fewer limitations uh on on on housing supply I have had just very stable housing costs have not had the same displacement right and so the the kind of the issues we face and we see here in San Francisco where it's getting ever you know 40% rise since we got time for this go 2010 that's not necessary it's not natural and and it's it's a it's a function of our sort of collective decisions rather than kind of some um some secular and unavoidable uh economic force um and I guess I I find it sort of uh disparaging because it's uh it's a negative sum in the sense that it's not just that these gains go to go to these sort of existing landowners but actually there will be fewer future gains like I think you should be mad about this you know 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 um it it sort of it's a it's a suffocation um of of future potential and of future gains uh and there aren't many places well if you believe in increasing returns to scale uh that sort of um you know this is kind of um Paul Romer's work and um and others um that because of the sort of uh the collision of ideas and people in cities makes them more productive uh than if they're elsewhere if you believe that to be the case and there's like pretty good empirical data that it is then you can't just move elsewhere you can't um you can't just move to Nevada um uh or or wherever in 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 you know in service of not building six story 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 well the the moral injustice in terms of the displacement that's occurring um and the sort of economic wrongheadedness of the prevailing policies um and you know I'm a landowner in San Francisco John and I own a house together and I hope its value declines um in that I think it's impossible to answer uh what the price of land should be um 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 uh would vastly outweigh the reduction wealth cut you know to existing landowners um but going back to the banks everybody has a system that they want to protect totally right right I mean of course you can try to estimate the magnitude here and so over at Berkeley this guy I'm Enrico Moretti has estimated that 50 percent of US GDP growth between 1964 and I think 2010 um uh was left on the table as it were by sort of inefficient land use and uh and land allocation um and I was the 50 percent of the high number and quite speculative and it's very difficult to measure the counterfactual but even just the idea that wouldn't kind of a straight face hypothesize that it could be anything remotely in that vicinity I think gives you a sense for uh how high the stakes here are right uh and yes we we can decide that um uh you know 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 we're not um you know the the the sort of the other extreme is not Hong Kong you you you you can triple San Francisco and get the Greenwich um uh we can decide that that's our preference um but sort of you know sober estimates uh are are are measuring the cost of that in uh in you know double digit percentage points of aggregate you know national GDP uh and of course when you look at uh our revealed preferences in terms of where we like to take vacations to or where you know be dream of I don't spend in a summer someday and things like that it's to to to European cities um uh which tend to be of uh of 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 uh this has been a phenomenal conversation thank you so much for coming on the show working people find uh more about you well they want to start a business they should have to start com but um if they want to uh subject themselves to more of the particular detritus that I post um uh they can head to uh my twitter account which is just patrick c thank you so much thank you hey guys this is Shane again just a few more things before we wrap up you can find show notes from today's show at fs.blog/podcast you can also find out information on how to get a transcript there and if you'd like to receive a weekly email from me filled with all sorts of brainfeed go to fs.blog/newsletter the newsletters all the good stuff I found on the internet this week that i've read shared with close friends books i'm reading and so much more lastly if you enjoyed this or any other episode of the knowledge project please consider subscribing and leaving a review every review helps us make the show better expand our reach and share our message with more people and it only takes a minute thank you for listening and being part of the fernheim street community