Wiring Informal Economies with Square

Jack Dorsey (@jack) is a double-timing executive. He spits his week between Twitter and Square, two fundamentally game-changing companies he has founded. You’ve probably heard of Twitter. And you’ve likely heard of Square by now, as everyone who uses it inevitably becomes an advocate for the service. Every time you see a cab driver or food truck faced with the decision to either not accept credit cards or pay high vendor setup costs, you feel compelled to share the gospel of Square’s free setup and bare minimum processing fee (2.75%).

Jack starts with the story of two nice guys who founded a pizza company together. To keep the company intact, they promised not to date the waitstaff. Until they hired Jack’s mother. His dad broke the interoffice dating rule and gave up the pizza company. The moral being that neither Jack’s father nor Jack himself sought to be entrepreneurs. They wanted to do work they loved. Jack lists sailor, tailor, and surrealist artist as his original career paths. His goal was to teach the world to see in a different way.

Entrepreneurship is an attitude, not a declared self-identity. Steve McQueen said “When I believe in something, I’m going to fight like hell to get it.” That’s the attitude you need to hold to start a company.” Entrepreneurship is finding the intersections of life and being there before anyone else.

William Gibson said, “The future has already arrived. It’s just not evenly distributed yet.” This quote excites Jack: just think about the future that lives inside the heads of students at MIT, or inside our laptops.

The Founding Fathers’ best idea was embodied in the phrase “a more perfect union.” They understood that the work wasn’t done yet, that others would have to carry the banner and flush the rest of it out.

We tend to emphasize these founding moments, but Jack points to every new employee and every new user’s ability to change the course of the company. Such an idea can come from anywhere. Successful organizations are the result of multiple founding moments.

Jack’s not a huge fan of the word ‘disruption’ in a startup context. He shows us a photo of what appears to be post-hurricane damage as an example of disruption. Disruption is confusing, has no purpose, and has no values. We want leadership, we want direction. The world has enough confusion. What we really seek to build is a Revolution. Jack isn’t shy about pointing to the French Revolution or Ghandi to illustrate his corporate principles.

Square is the latest version of a fundamental human behavior: commerce. Commerce, put simply, is the activity between buyer and seller. Square seeks to help ease all of the friction and frustration that lives between buyer and seller in our modern economy. They shrunk the complexity of the credit card industry down to a device the size of a quarter that you just plug into your phone.

The onerous fees, setup costs, and credit checks prevented many people from accepting money. Traditionally, only 10% of applicants are approved to receive credit card transactions. Square accepts 95% of applicants because they found more intelligent ways to verify identity and prevent fraud.

We’ve stopped carrying checkbooks. Many of us have stopped carrying cash. How long will it be before we stop carrying credit cards?

The Square team gave themselves one month to build the system, and were successful. Jack had fun demoing the app to friends and family by swiping their credit cards. The simplicity resonated with everyone they talked to. Many of the informal merchants that make up our economy, from golf trainers to food trucks, were free to accept credit cards for the first time.

Accepting credit cards grows your business. You get more customers, and they spend more. Prior to Square, merchants had to rely on POS (Point of Sale…or Piece of Sh&t) terminals. They’re big, clunky, and silly expensive. You get a receipt for a donut. It doesn’t actually track what you sold.

The analytics Square offers are exciting, too. Small businesses can learn what sells when in an intuitive interface. The Square register app runs on an iPad and replaces the DSL line, the cash register, and all of the other credit card processing paraphernalia.


Jack didn’t have to do much business development for Square. Starbucks came to them (a nice perk of being the Twitter founder). It turned out that Starbucks had many of the same problems of small vendors. The cost savings add up. Merely running an iPad rather than a PC and receipt printer saves on electricity, especially when you consider the scale of Starbucks’ stores.

As a company, Square is focused on building a product. They don’t want to get in the way of their users and merchants. They’ve engineered the company to stay out of the way.

Jack tells us the story of the Golden Gate Bridge. The “Golden Gate” refers to the strait in the bay. The water’s deep, and there are earthquakes. But the engineers had the audacity to do it, and the project came in two years early and under budget. Jack attributes this success to the pairing of design and engineering. “Design” here doesn’t mean the visual aesthetics, but also marrying the function and the form. Engineers are concerned with efficiencies and readable code. When you write code, you’re not just telling the computer what to do. You’re communicating with other coders.

The Golden Gate Bridge’s #1 feature is its 100% uptime. But it also takes your breath away. The designers had the audacity to build something functional and beautiful. They built something they could be proud of. Square takes this approach to heart.


Photo by Joe Azure

Money has been with us for 5,000 years and touches every single person on this planet. Everyone on this planet feels bad about money at some point in their life.

Square’s electronic receipts were noticed to be a compelling medium in their own right. You can communicate with receipts.

A team of four people built the idyllic purchasing experience at Square. You can now walk into a store, buy a cappuccino, and walk out wondering if you paid for your coffee. They accomplished this with geofencing and communication between your smartphone and the Square-powered iPad register. Your face and name show up on the register, you give your name, and choose how much to tip. Tips have gone up 22% (interface design and default options can have serious impact here).

Square has seen crazy growth, crazy competition, and yet, Jack promises, a relaxed work environment.


Every Square piece is a real-world ad impression. The device is synonymous with the company name (an improvement upon the previous working name ‘Squirrel’), and makes enough of an impression that people Google it and find them. Jack is proud that the company now beats Wikipedia’s geometry page for such searches, vindicating his 14-year-old self.

Jack’s passionate about maintaing a transparent corporate culture. Twitter holds weekly town halls, which live on at Square as Town Squares. Notes are kept at every major meeting, and shared with the entire company. The final decision is posted at the top of the document, and the conversation that led to it is recorded below. Jack’s also a fan of standing meetings, where long, drawn-out agendas expire with his colleagues’ leg muscles.

Even with major employee growth, Square only employs 5 people with backgrounds in the finance industry. They are engineers, above all else.

When Jack pitched Square to JP Morgan Chase, they pointed out just how much money he was leaving on the table by eliminating all of the traditional fees and hardware costs. But this pro-customer behavior earned them unquantifiable (IMHO) word of mouth for their product. A taxi driver in Cincinnati was paying 15% transaction fees on credit cards, with a significant time delay before the money made it into his bank account. Square’s radically improved economics led this taxi driver to convince the rest of his union to adopt the device. The company has directly benefitted from these offline social networks simply by being great. It would be interesting to see a business case study on the financial value of leaving money on the table in exchange for your customers’ love.

Square’s analytics feature could also prove controversial. Traditional POS systems have shied away from this feature on the grounds of privacy. Square will collect huge amounts of small business data, which is valuable in aggregate.

Jack points out that 90% of the people in large organizations are paid to say “No” to new ideas. They are hired to protect existing business and eliminate risk. They need to be pushed for innovation to occur.

Square makes its money on the 2.75% fee, but must pay the interchange, so there are transactions on which it loses money. The pricing around credit cards hasn’t been rethought in 62 years, when Diners’ Club started charging merchants 7% to accept their cards. Square introduced Simple Pricing to allow merchants to pay a flat fee per month rather than a per swipe fee. Businesses between $10,000 and $250,000 do well with this pricing model. The more compelling case may be around data. Merchants and consumers alike could benefit from insights provided by Square’s data, but Jack doesn’t offer specifics yet.

On NFC: Jack doesn’t see a fundamental connection between NFC technology and payments. With NFC, you don’t get the customer’s identity until after they’ve paid. Merchants don’t have much reason to be excited about NFC at the moment.

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