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 um but you know given my lack of education credentials elsewhere i i i do um i should for the sake of my parents um
insist that i do in fact or did in fact formally speak and graduated from high school but um i i guess what happened is that i'd become very interested in programming and i sort of wanted to spend as much time on it as possible and ireland actually has this kind of interesting thing called transition year at this year between the sort of two major exams
of kind of high school or at least ireland's high school equivalent and in transition year it's sort of a 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 kind of much more permissive of going and spending three months abroad or going and doing some work
experience in this area or you know whatever the case might be and so in that year i basically decided to spend as much of it as possible programming and so you know i did that and then i returned to school for kind of the latter half of again ireland's kind of high school system and it felt so much slower and less fun and so i tried to see if um well as part of the programming i had
visited the us for the first time um i'd gone to stanford for the 2005 international lisp conference and there was a fairly small conference uh and uh but it was very eye-opening for me uh and i remember you know walking around stanford and thinking man american colleges seem great uh and so i uh you know back in high school in ireland i decided to
see if there was some way that i could just go to college in the us the subsequent year and 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 you know british exams uh and did that for the subsequent year and uh 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 uh and i'll spare you most of the um less interesting details um i guess the overarching thing is
while people in the u.s have grown up in environment in which college attendance is sort of really prioritized from an early age and sort of you know you're optimizing your extracurricular activities from the time you're 14 and you're choosing your kindergarten on the basis of what the sort of downstream college acceptance rates look like and all that kind of stuff um
of course growing up in ireland that sort of wasn't part of the you know culture or discourse or environment at all and and so by the time i got to mit and just to college in general and it didn't feel like that big a deal it didn't feel like um sort of this was the terminal state that i'd sort of spend my entire uh kind of childhood and adolescence instead of trying to pursue
and so as a kind of other things and other ideas and opportunities sort of you know across the transom i i think i was maybe more open to them than uh than my peers not because of i think any differences in me but just because of differences in the cultural environment that i come from and so my brother john and i john at this point uh being a little bit younger
he was now in this transition here in ireland we decided to start a company um six months after i got to mit and so i really just started and i felt that i had some kind of time just better because i'd started college or 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 started there i'd sort of uh 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 at least again trying to get a phd or to
become a professor or whatever and so i think you know that that environment has an effect on me and so i went back um because i felt that i hadn't sort of uh really you know properly rejected the hypothesis that maybe i should try to become a professor right maybe kind of physics is what i should be again at least attempting to spend my career on um and after a year back at mit i
decided that that was not the case um progress in 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 um you know that that's at a broader period of discovery um i felt like the period in which sort of you know we existed in say 2010 was there 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 uh i think i just enjoyed programming and software and technology more than i did math and physics uh even though to some degree is a little bit maybe 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 as the the ceo of stripe i think there's maybe a couple of things in that um 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 by exports by
sort of importing american multinational companies having them set up factories and bases and and you know hubs of different sorts in ireland uh one of the world's first special economic zones was created in shannon uh which was very close to 10-15 miles from where i was born deng xiaoping visited it uh and found this quite inspiring and so decided to set up
uh special economic zones in china and so shenzhen and this sort of um the pearl river delta that sort of special economic zone was in in some ways directly inspired by you know what he saw in western ireland and and so i think the fact that sort of 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 uh of the of the rest of the world are sort of much greater than than kind of those internally um you know that 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 is being questioned somewhat more but i guess the irish experience is very much uh one of seeing it as an almost wholly unalloyed good uh and and again i think that's that's greatly influenced us here certainly me um
well it's interesting too from a cultural standpoint where ireland has had very high rates of immigration um particularly post the expansion of the eu in 2004 a very large number of eastern european immigrants moved to ireland when those countries accessed to the eu and that was really not accompanied by any any material social strife or conflict or a lot of the sort of
um challenges that we've seen in 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 um more sort of facilitation of opportunity things like that again i think that that really is the irish experience um and of course there's 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 um places a lot of importance on just a kind of warmth and there's kind of a particular particular tenor to the sort of interpersonal
dynamics and trying to have other people enjoy themselves and be at ease and have a good conversation with them and whatever else and i think maybe that's something that's influenced us somewhat at stripe where we want stripe to be a a warm place i mean we play music at perception and in the kitchen to just try to put people at ease and to create enough sort of um
soft noise around them where they feel comfortable having just a good conversation uh and you know maybe that's because of entirely unrelated reasons or or maybe again in some way we're influenced by the the kind of environment we grew up in in ireland how would you describe the culture at stripe 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 uh 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 this 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 given the sort of challenges that we currently face with that caveat i think the things that we
really prize and uh try to you know seek in the people we hire are um a kind of rigor and clarity of thought uh in that i think so many organizations prize uh sort of smoothness and smoothness of sort of interactions and uh trying to reduce minimize the number of sort of ruffled feathers and they kind of at least sort of inadvertently if not deliberately prefer cohesion over
correctness and we really try to identify people who who are seeking correctness and who don't mind being wrong and who are willing to at least contemplate things that seem improbable or surprising if true or really divergent to what is sort of the generally accepted status quo and that's hard to find and i don't think most of the sort of educational institutions
that we all tend to have attended actually do a great job of teaching that and so we look for that kind of combination of sort of openness and rigor um i don't exactly know what the right word is but a kind of determination and competitiveness and i guess willfulness uh in that just doing anything of significance is hard uh i mean anyone who's tried to do um anything that's that they
they themselves consider significant knows that very viscerally right uh and i mean especially for a startup like the the default outcome is your relatively near-term non-existence like the the default outcome is that you do not survive um to to survive over the medium or you know even with even more difficulty over the long term and that is 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 uh sort of the expected trajectory of non-existence but people who actually enjoy that who want that right because if they're merely willing to do it but they don't actually enjoy it then the the work is probably going to be less fulfilling for them over the uh or the medium term um
and i really don't think that is for everyone i don't think that's that's a bad thing right in that just the the cliche of course is that startups are extraordinarily hard and and and they just are uh and you 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 under built out or significantly broken or whatever the case might be that that's what they're looking for right and then we try to find people who just have a kind of again to return to this word interpersonal warmth and a desire to make others around them better and and just a degree of
caring for others and a desire to be i mean nice as a kind of anodyne word but to be nice to them um to to make them better off right uh we we really try to find people who we just actively enjoy spending time with right you spend such a large fraction of your life inside the the walls under the roof of you know whatever organization institution you're working at and so
given that i really think it's worth prioritizing this and i i think i mean i of course don't know for sure but i think we go to sort of some greater lengths to find these people uh than than other organizations tend to do um and there's other things as well i mean you it almost goes without saying but we really care a great deal about ethics and integrity in people but you know i
think so so too do a lot of other organizations i i think the the three that can 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 had made sure i mean the kind of background context here is that by almost every sort of under almost every kind of ostensibly sane analysis stripe looked like a bad idea right um this was a crowded market there were tons of existing incumbents there were
significant regulatory and just kind of partnership institutional barriers to entry um we had no experience in the domain we were very young we we weren't even us citizens and you know an ecosystem that again just because the regulatory dynamics you know that's a bad further complication we had no sort of obvious mechanism for gaining sort of significant distribution uh and we were
not a sort of naturally viral product or you know one 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 either stripe was a bad idea or uh you know us pursuing stripe uh was a bad idea and they certainly didn't hesitate to tell
us that and you know to be clear i think they were i think they were doing something reasonable by telling us that i mean they were giving us their sort of honest and again you know reasonably justified assessment and so it all started in the background context of that i think the thing that primarily gave us the confidence to actually attempt it was
it just seemed so strange that something with stripes character didn't exist in that we really looked for a stripe before we uh before we started it as an it just it felt that it must be the case that there is some service some company somewhere offering infrastructure and apis and payments and economic tools that are straightforward to use for a developer right i mean this is one of
the sort of top needs that any business operating on the internet has arguably by definition a sort of a business on the internet uh must have access to these tools uh there are tens of millions of developers operating on the internet and so just given the magnitude of that market and the sort of obviousness of the business model it really felt like this had to exist and
so we'd kind of forlornly google for us you know with different sort of permutations of keywords and then sort of after a couple of months became you know somewhat resigned to the fact that no it did not in fact you know improbably exist and um and it's non-existence was so kind of strange to us that that actually initially kind of discouraged us where
if there 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 uh why kind of consumer banks were so bad uh 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 uh and as we looked into it it became apparent that actually there was a good reason as to why the problem had not been solved where 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 the bank's fault the second reason is uh the office of the controller of the currency which is the
entity that uh sort of issues federal banking charters uh had 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 consider banking you're essentially blocked from doing so by the kind of regulatory apparatus uh and so we kind of wondered in this kind of similar vein
is there some force like that not necessarily regulatory but just like is there some constraint that that kind of we aren't observing or weren't um and after maybe 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 definitely reject it but we really couldn't find one
and so we decided to build a prototype and the prototype was kind of built uh sort of on top of and with sort of um existing payment systems and so it didn't do anything kind of overly ambitious it was just enough to kind of get a sense for what it was more like it was almost like a sort of concept rendering of what a solution could look like rather than a sort of a solution
itself but it was sufficient to get just a couple of our friends uh started using it and i think the particular thing we realized that caused us to you know really go take it a little bit more seriously and i mean concretely to drop out of college was the realization that the sort of problem that we perceived and kind of developers like us people building some little side
project or with this kind of very nascent um you know startup or something like that that the problems we perceived for that segment of the market were actually the problems that larger companies had as well that kind of what we thought initially might be a little 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 um 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 two percent of all consumer
spending in the world happened on the internet and and so even though we were kind of you know 20 years into sort of the web's evolution and even though 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 uh and so i think the combination of those things where we
kind of decided that there didn't appear to be some sort of um some dark energy preventing a solution and that this the set of problems we could see actually seemed sort of very pervasive rather than just sort of a microcosm and and then thirdly that actually this whole market and environment was still actually at a sort of surprisingly nascent stage when you
looked at sort of the full picture uh then we decided to drop out you guys went from two employees you and your brothers co-founders to 800-900 now uh about a thousand now a thousand employees what have you learned from scaling the business i think on some level scaling a business is both relatively straightforward and extremely hard i mean it's relatively straightforward in the sense that
it's usually not that difficult to see what the problems are and and to think 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 kind of what are your corrective mechanisms um to sort of account for that so it's i think straightforward in that sense um and i guess straightforward in the sense that usually solving the problems is not outlandishly difficult um 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 uh there are other companies that have done it uh there are generally playbooks that exist uh and while sort of your particular strategy might need some sort of correction refinement and you might hit some walls along the way um it's it's
rarely unprecedented and i think it's extremely difficult in the sense that you're you don't get to really choose the clock cycle kind of and the time horizons um there's a category of uh sort of flash games um desktop tower defense games uh where you're sort of building little towers that shoot missiles and all these little critters uh sort of scampering uh
across the board uh trying to sort of break into your fortress or whatever the case might be and a startup feels a little bit like that where you fundamentally don't control the sort of the rate of you know problem appearance um you just control the sort of the other variable of the rate at which you're you know building defensive or mitigatory or mechanisms to
to deal with those problems and sometimes the rate of the problem creation can outstrip the rate at which you can solve them even though in principle any one of them uh is uh is is relatively manageable right uh and so i think that really adds a lot of difficulty i i think just on even if on this kind of very abstract level uh dealing with the problems is uh you know tractable um
the character of having problems materialize sort of at every level of of the organization or at every kind of level of abstraction or you know 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 um you know that's not necessarily how it feels in the moment right and it kind of feels like that way every day and some days you almost have to smile at the sort of unreasonableness of the swathe of problems and challenges that have you know materialized on your desk or in your inbox and that you know it it sort of in the same way you see the
constellations in the stars you know the sort of constellation the problems looks so implausible and so unreasonable that like someone must secretly be screwing with you right um and so there's that kind of emotional sort of self-management and then of course there's the challenges of dealing with uncertainty uh where you know it's i mean it's kind of uh i guess um well
you're operating in sort of the weird zone where you're often making decisions that have sort of significant long-term impact um or that are at least difficult to reverse or to course correct um in the face of great uncertainty right and the uncertainty is often unnecessary in the sense that you could in principle go and significantly reduce the uncertainty you could go and
study the question more you could go and obtain more information you could go and run an experiment you know it's not like cosmic uncertainty where there's just it's true sort of nicey 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 you know
make the best decision we can i think it's a more frustrating kind of uncertainty where it's actually not necessary but the thing that's sort of limited is your is essentially the cost of obtaining further information reducing that uncertainty um 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 uh and making a lot of decisions in that zone is somewhat dissatisfying right i think kind of correctly so and that you know one is correctly reacting to the fact that it could be otherwise right and then lastly maybe you're playing this sort of um 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 you know we aren't doing or that we don't know or we haven't even considered or you know if we were doing would make this other part of the organization 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 scaling the organization is sort of finding at each kind of moment the right way to balance those things um but without ever having kind of sat down before to try to sort of you know in any way kind of distill us into any um unified theory i think that a lot of the experience of scaling and 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 um sort of deal with that and what the kind of structural mechanisms for for doing so is or are um and then maybe very lastly i mean those those are all kind of the structural ones um i think there's just also a um
a personal version where you certainly don't start out being well adapted to or at least in my case particularly skilled in organizational management and leadership and i mean depending on the rate of growth of the company you sort of need to acquire those skills on again on a on a timeline that's largely out of your control um and you know depending on the rate the
rate of growth of the organization that might be a pretty difficult thing and so certainly in my case i think i've just had to accept my sort of managerial inadequacy relative to what either is required in the moment or sort of will in the near-term impending future be required uh and just figure out strategies to try to acquire those skills and abilities as rapidly as possible
i want to 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 you mean in the organization or personally oh in the organization then maybe personally if that's different
i i don't know of a better answer other than using course heuristics and then being willing to revisit or make an exception if uh if something seems sort of particularly promising right you know roughly speaking we invest most of our effort we have a precise number out but let's just say 70 or 80 percent in optimizing that which we already have
that which we already know is producing returns that which there's a sort of relatively clear line of sight from sort of the input the work the optimization whatever to sort of the uh output improvement and then you know some fraction of the work and the sort of a distribution of um of bet skew but uh some factor of the work let's call it 20 um into things that are more speculative
right and i think that's kind of necessarily the case because uh well i 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 you know in the again if we did not do that that then this kind of default non-existence we just discussed would be guaranteed right um
it's very easy to sort of fly the company into the side of a hill um and so i think really the question is just do you spend 20 of your time on things that are more speculative or do you uh or do you spend zero percent and then maybe secondly to what degree do you allow those answers to be different at different levels and of the company and sort of in different places and how much
is it sort of a uniform answer and how much heterogeneity do you permit um or do you design for um and i think as we've grown we've we've tried to shift into a model where it is somewhat less uniform and in certain teams less optimization of what already exists is going to be required it's going to require more exploration and in other parts of the company it
could be tilted in the reverse direction and i think that's a sort of that kind of recursive decomposition i i think is 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 are they based on disrupting your business or these are things that i i want to do or won't stripe to do or
i don't know that there's a better answer beyond given all of the axes of you know constraints and returns which ones seem like a like a good idea and i mean i think it's kind of like investing when you ask you know what what's the uh what are the criteria for investing in a company it's well when you kind of normalize down from the sort of you know really high dimensional space of
market and founders and idea and you know all these things you normalize all that down into kind of what do you think the return profile looks like well you invest when the return profile looks good enough right i think kind of similarly when you decide you know which ideas to pursue of course on each axis there are many things you prefer or you know don't want or or whatever
and for example something that requires less effort rather than more or entails less downside risk rather than more whatever you know those are all good things um 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 just to give a concrete example atlas uh the
the service we launched for helping uh new founders incorporate companies and in particular sort of without the geographic restrictions that tended to exist before so it's essentially open to founders anywhere in the world um there was no kind of one reason as to why that was a good battle there was no kind of you can't just measure that on any one axis right and but kind of when you
look at it overall and you see that well if it doesn't work it's it's hard to see how it could cause that much downside for stripe it's not gonna require an enormous kind of fixed cost investment in order to sort of learn as to at least whether it's initially working um if it did work it seems like it could produce kind of quite significant returns uh the kind of things we'll have
to do for it are actually things that are probably valuable for us in other parts of the business and so on so we'll learn interesting new capabilities and skills uh in the course of doing it et cetera et cetera et cetera um i think um i mean i think the reason there aren't more good bets made in the world is because making good bets is difficult uh and
again i think you can have in different areas um 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 um well i i think most organizations are sort of institutionally resistant to bets in that because most people are necessarily optimizing things that already exist uh and again that's
correct without making a mistake i mean things that are not optimized along the way especially things that are not being kind of fixed and optimized and patched up and corrected as they burgeon i mean those are going to to break right and so the optimization is critically important i don't mean to sort of sound remotely kind of dismissive towards it um
but but that's a very different character right um uh and you know this is sort of a continuum of betterness and riskiness um absolutely that's right right and and large institutions and incumbent organizations uh sort of dislike them right structurally speaking uh and find them difficult to understand and difficult to interact with and so on i think there's
a whole host of reasons there and that you know people are in startups are sort of less worried about the risk of failure whereas people in sort of existing systems must worry quite a bit about the risk of failure you know newer things tend to operate on sort of um on faster sort of clock cycles and so you know um uh dijkstra talked about the idea of the buxton index and the uh the sort of time
horizon upon which an organization makes its decisions and so maybe university makes a decision you know its decisions uh with some of the decades long time horizon whereas maybe a company makes decisions on sort of a quarterly time horizon uh and maybe a you know maybe an individual makes decisions on a you know weekly or monthly time horizon whatever um and uh anyway
so the observation was that organizations with very different bucks than indices find it difficult to work together and if an organization with a really long time writing is working with one that's sort of rapidly uh updating and and sort of uh rethinking um there's just like a fundamental kind of impedance mismatch and so i think that you know to your question as a 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 mismatched like that it's not just the time horizon thing but i think there's just like a fundamental deep intrinsic difference between sort of existing incumbent systems and the actions the mindset required to optimize them and this sort of the exploration of figuring
out that which is totally orthogonal different and new how do you keep the mentality i mean when stripes started the cost of failure was really low now you have a thousand employees they all have families you have a business you have people have invested a lot of money in the business how do you maintain that ability to place massive bets it's really a question of uh
how do we make sure that we can place bets that don't have excessive downside um or sort of fatal downside right or cumulatively fatal downside across maybe a whole portfolio of bats um and i think that actually um i 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 you
know investment bad decisions you know we are i am we are far from being uh the the apples or the berkshires or whoever you know a multi-decadal uh sort of track record of we're back here in a decade we'll we'll re-evaluate if we are here in in uh three decades which you know as established uh would uh will not be the default outcome um uh and and we have a great portfolio of uh
successful such decisions then perhaps we can apply you know with you know some modicum of confidence um but it feels to me and we'll see if there's right or not it feels to me that actually the reasons that organizations don't take don't tend to make more of these um or make more good ones is it's more of sociological more institutional and less that it's
fundamentally too costly because in most cases the downside cost is not that large uh and either in terms of like just direct financial costs or in terms of the sort of the broader damage to the organization whatever form that might take it's much more the mindset of improving that which already exists is just quite different to the mindset of screw the old system and 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 um how do you have the i mean stuart brand talk 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 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 uh 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 their effective approaches otherwise they do great work how do you have those people at the end of the day have dinner together and fundamentally
feel like they're on the same team how do you do that come back in 30 years um i think i recall one of the interviews that i was watching as prep for this where you talked about one of the first five or six people worked at bridgewater no one guy in particular did and over time we've hired more people who have but yeah we were i would not say we were particularly bridgewater influenced
did you come at this sort of notion of thoughtful disagreement before that influence and how if so how did you well yeah it's hard to know exactly where to attribute it and it's probably kind of over determined um and maybe they're just kind of some sort of underlying personality traits that we each had sort of um come to into different parts of our lives in in sort of
somewhat coincidental ways um i mean for a start to your earlier question irish people are always disagreeing and always arguing and so again there's a cultural dimension to it um uh it's it's not a um it's not something that that people tend to shy away from um because they don't see it as an attack on them exactly right right um i think that i i think there was just a common
shared personality trait uh in you know a lot of the people who helped establish the culture of stripe where they enjoyed sort of disagreement and trying to find the boundaries of an argument and the places where it's not the case and uh and what the exceptions might be and just trying to kind of get a feel for the topology of of that space and kind of stumbling
in the dark try to construct a map of where different intuitions and heuristics apply and where they don't and so on and like i i think one kind of deep mindset difference in people is often those who those who enjoy finding the limitations of arguments and beliefs and those who don't um and tyler cohen talks about i think it's his uh second law um that there are no knock-down arguments
um there are no arguments that are just uniformly completely true uh there's there are always the limits to it uh 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 a question of affect and again personality as 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 uh or or is that just like a stressful process uh and i think that uh sort of getting that kind of rigor and clarity of thought requires sort of uh a joy of discovery like ah this this thing i believe this rule that i thought existed like it's actually not good in this place uh and and having
that be an enjoyable discovery rather than sort of something stressful and threatening i think globalization is a good example there where you know as we discussed i think that globalization um is on net 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 you know almost any other force ever um
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 auteur and these other folks at mit like maybe it has this sort of underappreciated downside and i think that's great as an i think those are important questions and and really interesting work um
and i think that kind of again the underlying sort of sentiment is uh 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 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 i i now just place more value on decision speed in that uh if you can make like if you can make twice as many decisions at half the kind of um half the precision that's actually often better um
and then given the fact that sort of the uh rate of improvement of decision making with additional time almost necessarily tends to kind of flatten out i think that most people certainly that patrick of five years ago and potentially 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 right and just recognize that in most cases you you can course correct and and treat fast decisions as a kind of uh asset and capability in their own right uh 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 kind of uniformly
i think the most obvious kind of axes to break them down on are degree of reversibility and magnitude uh and things with low reversibility and you know great impact and magnitude those ones you do want to you know really deliberate over um and and try to get right but i think it's very easy uh sort of absent care to have maybe this mechanism you put in place for those decisions to
seep into decision making for the other categories and really in the other three quadrants you can afford to be sort of much more flexible and much more fluid and again really just a priority speed because obviously if it's very reversible then you know by definition you can always correct it later uh and if it's you know of low import then i mean who cares right um
and so that's kind of the second one and just being kind of cognizant of that and before making the decision trying to categorize well what kind of decision is it uh the third thing is uh i now try to fairly deliberately just make fewer decisions in that why am i making the decision uh and for some kind of decisions you know there are some um good reasons for that and there's 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 uh from anyone not just for me is often like only a sort of um 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 about that and concretely doing more to push others to make decisions um and sort of pushing them back sort of to people who ought to be the the domain experts and then fourth when i realized that i would make a decision differently to how someone else
is making it uh 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 bunch of time on here at stripe is having different parts of the organization write down what they're optimizing for essentially like what
their mission is what the long-term key metrics are for kind of they're part of the organization um what who their customers are either internally or externally uh and so things of this kind of persistent on ongoing underlying nature such that hopefully once there's agreement on those longer term things then maybe a difference on um ons of any particular decision
might just be while we differ sort of on what the most instrumentally effective way to achieve this outcome is but we're both really unified on what the desired end state is and there i think i think disagreement over sort of instrumental efficacy you know well that's really that problematic a disagreement because well if you're right then we'll soon learn that if
you're wrong reality will probably uh sort of make that pretty clear in short order i think the more troubling ones and the ones that tend to cause more kind of persistent friction in an organization are 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 i place kind of more importance on making sure that we have the right sort of foundational agreement such that the kinds of disagreements 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 at stripe 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 trying to say in response to that question that decision making in organizations is
slightly overrated in that organizations are not like investment entities um or funds or managers uh in that organizations well with investing it's fundamentally very binary there is a moment at which you either buy or or don't or sell or don't or whatever um and maybe it's somewhat more continuous in the case of say public market investing and so on but given sort of um
constraints on just decision-making time i think you've treated a bit more binary you assess the stock and you make a buy or or or not decision uh whereas in organizations everything is much more fluid and continuous it's much more about i think designing the feedback mechanisms you know the biological yeah exactly and you know there's the famous um uh sort of um
water model uh of the economy um uh you know with the sort of circulating fluids and you can vary the interest rate or the inflation rate or whatever but just kind of try to get a sense for the overall kind of um uh biological apparatus uh and i think an organization is much more like that and so the the i think the things the things to optimize are the incentive structures and the
mindsets and the definitions of the goals and the feedback mechanisms from the outcomes to the inputs and the work and the operations themselves and all those things unless the the binary decisions and i don't kind of completely um dismissed obviously the importance of decision making and that there are times where we've decided well are we going to launch this product or not are we going
to start this project or not are we going to replace the system or not and so on so there are of course real decisions but i think it tends to be much more well i guess maybe it doesn't feel like the right unit of analysis to me uh i think the right universe analysis is is that of the cell and the question is well in an organization what are the cells
and what are the organs and and how do they interact what are the feedback mechanisms between them let's geek out a little bit on the the feedback mechanisms here what sort of feedback mechanisms do you try to make sure are in place what point in the process do you try to acknowledge what they are i really think that and this is not to evade the question but
i really think it's too early to answer that in the sense that i mean i 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 uh or has been a more than 500 person organization uh for just over a year right um we're we're beginners at this uh and you know
three years ago stripe was under 100 people uh and and i think either to uh opine as if uh or to even more problematically believe that we kind of have it figured out would be would be real hubris um and so kind of an input we've been talking about i think that's maybe some of uh where our and my thinking comes from but but i don't know what the right answers are yet um
and and we spend a lot of our time sort of scrutinizing other organizations trying to find out and kind of reverse engineer what works for them and why um and i think that part of what's interesting about the tech industry is that it's it's a kind of pure knowledge work that we're still i think quite early in sort of figure it out um in terms of how to optimally
coordinate it and collaborate on it in that you can sort of draw a lineage of hp and intel and microsoft and google and facebook and so on whatsapp um and they're 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 minuscule team and instagram too of course despite
operating at such scale um 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 at some length all the things they don't like about it right um because if it's strong they're i mean it's improbable that every aspect of it is something the person you know really agrees with or feels an affinity for and so whether it's uh
the new yorker or the military uh a shared characteristic of those cultures that 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 milky toast averaging right so that's number one um the second is cultures of of perfection um and so both
the economist and apple have extraordinarily high standards for themselves and and really kind of in both cases the work has a kind of primacy and so who designed the latest iphone or who wrote that article in both cases that's anonymous because there's such a belief that the work speaks for itself right and i have a lot of admiration for that um and then cultures that have
longevity uh and really sustained success uh and so i think that um one of our major investors is sequoia capital and sequoia has been you know the top firm or in the top three firms obviously it's a subjective ranking but call it you know unquestionably a top three firm for uh 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 uh and so i think the obvious question is well why is that what's different about sequoia there's 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 the this that to be sustained
and of course this applies to some of the other organizations we mentioned uh like say the economist or the new yorker or even this is one that i've been trying to read more about of late uh coke industries uh in that you know charles of course or charles and david are most famous for their political activities but if you just look at the company uh that has kind of compounded from 20
million in annual revenue to now according to public estimates 100 billion um over call it five decades and there aren't that many organizations that have compounded like that for that long without there being kind of one driver of success there's no one thing that enabled 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 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 uh sequoia capital koch industries and the new yorker share uh 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 [Music] warren and charlie at berkshire and how the folks at koch industries are so into a kind of epistemology and structuring of doubt and accounting for biases and mechanisms for for clarity of thinking um like due to a very striking degree i mean obviously if you read um uh the the
public writings or you go to omaha and you listen to what you know warren and especially charlie talk about um you know it's sort of half investing in half applied epistemology half philosophy right and and that's been the case as well to a striking degree uh with with coke um and i i don't know them well enough by any means to sort of opine in any deep sense right like i
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-decadal institutions in 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 uh 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 brain schemes and so we eventually got an isdn line which was ferociously expensive but god that um you know that was sort of the the uh um fiber of its day at least as far as i was concerned uh 7.6k a second was
majestic um i i barely keep up with the speed um and uh and then we eventually got a satellite uh internet connection which um really a game changer um but but it effectively meant that for the first i don't know 14 ish 15 years of my life uh there was no internet and we lived in a very rural part of ireland um i was quite distant from even my friends at school and so
all it really was for us to do was play in the garden which we did a lot of um and to read uh and you know it's funny i 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 experiences and extracurriculars and
everything else um but certainly that was not my upbringing my upbringing was a kind of get out of the house go play that and i mean there's plenty of stimulation around you know our parents had lots of books and so you know we could just kind of burrow our way sort of sequentially through the shelves um but you know it was pretty um it was pretty unfettered and i think our
parents had a kind of they followed our interests uh and supported them but they didn't choose them um it felt like they they pushed from behind rather than pulling uh in front um and and so yeah i i think that's where where the reading thing came from and i think that um well i don't know i i run quite a bit and i don't even run because i enjoy it that much i mean i enjoy it um
but it's nothing kind of in the in the immediate moment it's it's not like it's euphoric or anything close to it i mean it's pretty painful um uh and you know the the greg leman quote about how i mean it's very dispiriting when you think about it it is very deeply true that how you how it never gets easier you just go faster that's true of running like if i
stay running for the rest of my life um it will it will never get easier i will just go faster but just it feels like something i ought to do um it's i i vastly rather having run than not having run uh and so i said continue to do it um and with reading basically i don't feel like i'm weird i feel like everyone else is weird uh 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 [ __ ] like i better you know get to work but it's not when i'm reading i'm not in this like especially blissful place i mean it's i enjoy it perfectly fine um but it's more like i am i think there were extremely important
things that i really should know and and i don't and that feels problematic how do you filter what you read um there's millions of books there's one of you right um well i discard a lot of books i like the insight that uh there's a set of um the set of great books that are really worth reading right and there's a subset of those books that that are really enjoyable to read maybe
it's like 10 or 20 of them say um 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 uh and so uh i sort of decided well i will read all of the um the books that are really worth reading and really enjoyable to read and when i run out of those then i'll go back to
the books that are merely worth reading right and so you know fairly quickly you can decide if this is an enjoyable book to read or not i've not discarded i think reading is like a you know should be treated as a um as a kind of more active process uh sort of you should you should skim you should skip you should backtrack uh you should discard and then potentially return like
the you know you're not subject to the book you're not a passive consumer like the book is um the book is there for you you bought it it's yours um and like jump back and forwards tear it in half if you want annotate it wildly like you know use it um i wholeheartedly agree uh and and yeah i i maybe uh you know start half the books i get and i probably finish
a third of the books i start um and that works out to uh you know finishing one to two books a week um but but if i finish it that you know it's i guess it well it's probably been recommended um 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 an event that was
quite interesting so it's actually like a lot of selection that kind of happens along the way and then i think just the other thing worth pointing out is you know there's the the line from basho about the the japanese poet um 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 regard um to figure out how do they get to who and what they are uh what influenced them or what's upstream and and often it's quite obscure but i try to kind of disentangle that when do you typically read always i mean in the morning and evening while walking while walking is a good one actually uh
like your peripheral vision is such that you can actually quite function read a book while walking um and and there's other people that stripe you to this and do it much more and faster than i do um but you spent a lot of time walking and so uh being able to do that i found to be uh quite um quite valuable um often while eating uh so you're sitting at home on your couch
it's uh 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 it and just start reading and see like would i like to have ended up here and almost certainly like a bunch of the terms i won't recognize or the you know antecedent ideas i won't be familiar
with or whatever but like do i yeah do i want to be here or had to have gotten here and if after a couple 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 um i mean john has this insight that and it's kind of related to the previous point that um at every moment you should be reading
the best book you know of in the world um i i mean i don't 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 or 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 sub-optimal yeah exactly and so i'll be reading the book on the couch and then you know maybe after 50 pages uh i'll i don't know be in my room and i'll stumble across something else um and uh and i might just you know switch rails uh the other thing that i think is actually quite valuable is just leaving books out
and so when somebody recommends a book i'll you know very often pick up a copy ideally a used hardback copy um because the hardback looks you know they're more durable and now with amazon used hardbacks are really cheap uh i'll leave it out and so this book's in the kitchen there's books on in my bedroom and this book's 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 it's still salient still around you um and you're like oh yeah i really should check out that thing uh or something else triggers its relevance you read an article you just start appreciating a point or a question or something right and so i i
like part of the reason that i still really value physical books is because uh you i mean for now at least uh we still exist in physical space and uh and it creates a kind of idea space for you uh that makes kind of productive collisions more likely to happen what types of things do you typically mark up in a book and how do you what does that look like um
so i tend to just make notes in the margin um so sorry i tend to underline stuff but in the margin and i underline it you know misusing the term i annotate it mark it 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 uh like i'm in the inside cover at the end uh 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 you know i have a list of the 30 things that i found most interesting um so you keep the book a book that you completely read that you like yep how often do you come back to that book um if i want to make a particular point or
be reminded a particular aspect or you know whatever um maybe i will but but generally speaking i don't and i think you know part of the value of making the annotations is of course to um imprint them more firmly in your mind so you sort of don't need to come back as much in some sense if it's really good i don't often do this but if it's really good um i might write a review
for friends and just you know share an email or a google doc or something or just share snippets with friends um and that's valuable both because again sort of the act of of summary or summarization uh sort of aids the kind of synthesis uh and and better recollection um but also of course uh it triggers outpointers uh and further suggestions uh from from those friends uh and so
you know if you want to um identify candidates in adjacent or or if you want to perform the clustering and figure out what sort of adjacent candidates might be you know interesting for further exploration uh writing review is you know a good place to start what sort of books have you written reviews on for friends this year one that i really enjoyed um was a
culture of growth by john mohir uh sorry joel mokir apologies um and it's basically a book about why why did the enlightenment and the industrial revolution uh really the industrial revolution start when it did and and where it did and he basically makes the case i mean there's obviously tons of different arguments that have been made for this and because it only happened once it's
sort of we can never know definitively and you know was it the abundance of uh or what was it the abundance of coal in the uk was it the something that the intellectual property system and patents was it the high cost of labor in the uk that sort of created more sort of that made productivity enhancing improvements more valuable was it something about trade you know and so on
and so forth and and mohir basically makes the argument that it was um that it was primarily intellectual and more than sort of quote-unquote economic uh 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 realize that scientific progress knowledge about the world is exists and can be important and the
progress is possible and that we're not just kind of imperfect imitators um or receivers of the knowledge of the ancients uh and so kind of a belief in scientific progress um coupled with uh a belief in sort of the practical importance of sort of of engineering and of the more prosaic aspects of of you know industry uh and of kind of practical pursuit and
you know mokir offers the example of bacon who both kind of inspired the royal society uh it was kind of one of his followers who who created it but also intended to catalogue the practical knowledge of uh 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 they're really high minded and
they're very practical right and so kind of mohir kind of teases through all these arguments and the kind of republic of letters and the sort of nascent you know rise of of science on the continent and so forth but all in service of this question of why the industrial revolution then and there and you know talks about [Music] versions of it uh in
in china and so forth um and anyway so so i mean i think it's a very important question and mokir's kind of a discussion of it is i thought particularly interesting uh and so yeah i i summarized it from 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 weeks ago and some of the fans
that were really interesting um and a lot of people responded um like many more than i expected to i i didn't actually embarrassingly i feel guilty about this i didn't post a response myself uh and i thought about it and it's actually just a very hard question to answer like i actually worry that may not it may not have been a good question because like it's hard to know did 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 had already arisen and the book is not actually causal in and of itself right now maybe it's still
interesting to talk about the book as a kind of symbol for the belief um but yeah there's that kind of question and then also um 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 um and that maybe i'll read a book that sort of triggers a realization or some idea or something
and that will kind of jolt 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 just started with the better stuff um but in some kind of truthful descriptive sense yeah it was like the worst one that actually influenced me right uh and so um like you know maybe maybe a better version the question is uh like
which books do you wish you'd read sooner or something right um let's answer that question um i actually i i don't think i can even answer that one how did i think about it this question this is yours yeah yeah i know i i hoist by my own petard um uh like it's also just sort of clusters of books uh in that you know i think i'm programming for example like it would be
hard for me to answer this question and not cite any programming books i mean it's been kind of so influential in at least my mindset in my life i can really point any single programming book i can name 10 that i think in aggregate work together like paradigms of ai programming by norvig and structure and interpretation of computer programs and you know knrc and
um uh books about operating systems the tannenbaum book you know etc and in aggregate those like hugely shaped me um but i don't think i could single out just one um um even uh two books said php um which were written by a guy who now works at stripe i mean one of those books is the book that taught me to program and so in answering this question i could hardly
not decide those right um uh but it's but it's kind of really the cluster um or and you know you give a similar cluster about science or about economics or or um or sociology or whatever um and so yeah may i have to just get back with the better version of the question switching gears a little bit what's the um 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. uh
and i did not however buy any bitcoin but um uh i invited him to that meetup and he replied and you know apologized that he couldn't make it but we sort of ended up in kind of a dialogue after that um and when you reach out to these people yeah half the time they don't respond um but you know half the time they do and it's you know it's asymmetric it doesn't
really cost you much when they don't and and it can be incredibly rewarding when they do uh and so yeah if i did not do that um i would have missed out on a huge amount how would you answer a question about what your personal values are probably by evading it uh i'm not about to do you think perhaps this disprove that answer um um by actually answering it but i i guess i just think it's so
it feels like too important to question it's a kind of the book question it feels like too important a question to answer simplistically uh and uh too complicated a question to answer briefly uh [Music] and thereby perhaps unsuited to something extemporaneous um and i'm sure whatever answer i gave you know when i'm thinking about it in an hour's time i'll kick
myself and realize i left out you know this critically important dimension to it and i think i've so i can i can cite some things i value but the sort of the sense of giving a complete answer is very oppressive uh i mean this is of course the value of twitter uh where because of the constraint um the there isn't the same because because the system chooses when to cut you off rather than you
choosing when to stop uh that that's quite liberating uh and so maybe if you allowed me 20 seconds to speak about values i could do that but i i could blame the constraint in anything i admitted we have 10 hours of recording left okay um 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 uh of course who the right peer group is for you is i
mean that's an entirely kind of personal and subjective question but whoever it is uh is going to be massively formative and influential in determining where it is that you end up i mean drew houston is the quote about how um 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 um like you are choosing who you are uh and of course that's a kind of uh sort of um 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 um but people that will accept you uh
exactly right right um 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 kind of like me and i like them and there's a kind of you know work cordial and close and all those things but that it's kind of fundamentally mediated by sort of happenstance uh and i think people should kind of invest more in it than they do
and and related once you've found those people you should really invest in it um 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 pointer on 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 um i see people well in my opinion um they've kind of uh they haven't either found the right people or just like the right relationships and so on and if they had someone who was um steering them more uh or in better ways could just be much better off i want to talk a little bit about the future of
e-commerce and maybe silicon valley culture uh and i know we've got to end soon but talk to me about how payments you foresee them changing from not only the customer perspective but from the merchant perspective um over the next you know well i think there's two levels to this maybe um in that there's there's always just like the basic mechanical software payments um
uh where we kind of forget just how much friction still exists and how many business models and transactions and businesses and everything sort of are impeded for fundamentally kind of stupid reasons right in that because microsoft transactions aren't possible both because the fixed costs are too high and because just like the friction's too high then things that you know one would
pay for with microtransactions 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 significant number of them just won't exist right or because maybe um it's hard to um purchase things that are really expensive in a way where the kind of risk of fraud is efficiently low
then you know don't pay your rent online say right um and so and then i think maybe the most important dimension to that is uh the sort of geographic kind of um 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 sub-clusters existing 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 the sort of proclivity of any two countries to trade falls off with the square of their distance and
you know there's all these like big questions about like well is that about something kind of fundamental in culture or about um i don't know just surprising returns to proximity or you know what have you um assuredly there's you know some of that stuff um but i think talking about the challenges and kind of complexities and hidden costs of payment 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 um quote-unquote cosmic phenomena are actually consequences of these very prosaic and straightforward limitations and so i really think that solving this aspect of commerce on the
internet like literally just making it easy for any two parties uh 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 that sounds like such a sort of a straightforward idea that it almost sounds cliched and the fact that it sounds cliched should not blind us to
the fact that it is still extraordinarily far from being the case today right we have had commerce on 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 not some backwater it's not some inconsequential country right obviously one of the uh top economies in the whole
world and brazilian consumers basically cannot purchase outside of brazil uh 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 um there's maybe just like a deeper question of what
determines how many firms there are in the world and what determines the character of those firms are they doing something innovative a novel are they doing something prosaic that has existed for a long time uh what determines who starts and why and the probability of survival what determines the growth trajectory um and the expansion rate into other markets
another product and so on and i think part of the stripe hypothesis is that things like that that seem very uh sort of one would think are very difficult to move um are actually movable um and that and really macro measures like the number of people who start a company or who start a technology company or again the the success rate of those companies and
you know just to give some kind of um illustrative maybe um intuition pumps here uh when we survey companies started with atlas 60 of them tell us they would not exist uh if not for atlas you know they could be rock like maybe maybe some of them actually secretly would but maybe but maybe some of them are actually overstating their own resourcefulness or overstating maybe
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 they otherwise 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 i mean over time that kind of real economic significance or you know if we can make it the case that businesses sell to twice as many global markets as they would otherwise sell to i mean again integrated over entire portfolio that's a really big deal or nick bloom at 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 imagined merely correlated or in fact causal in terms of um uh leading to or the the advent of better outcomes um and they did an rct a proper trial in india where they taught better management practices to a cohort 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-hanging 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
um just from better management practices um 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 a number of technology firms started survival rate of these companies expansion rate of these companies
magnitude of the value provided to the end users consumers customers and so on and kind of mediated by payments as this kind of foundational layer 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 it 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 um uh of of somebody of some constituency right and of course so much of politics is reconciliation of the countervailing interests of different constituencies and of course the problem is that in so many cases uh the incremental gain of the constituency is substantially outweighed by the
social utility loss of the rest of society right and so bad teachers um 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 um uh about correcting that and you know the same thing applies to phishing policy where
uh perspective makes all the difference well or but you know people driving fishing stocks to extinction care care more about their ongoing you know right to do so than the rest of society cares about um about sustainable ecosystems uh i mean i think that's just that's the character of political economy um uh and so yeah absolutely i think um i mean to return to our earlier example um
it's not even clear that the right the well one could look at the fact that essentially no new banking charters are being issued in the u.s um 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 provincial consumer banks are higher than they've ever been until they all get wiped out in the next
crisis um and then because they're even more systemically important than they were in the past they'll be to to the extent there was a systemic argument for building them out in in in a way they'll presumably be an even stronger argument in in the future it's almost like we were talking about this earlier but bets when you get big you have more loss aversion
and so your goal is not necessarily to get better from your customers perspective it could be to prevent competition and prevent new entrants that might be a more um without a moral judgment on it it might actually be a more effective business strategy oh for sure uh than innovating for your no no question um and uh you know i think that um i 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 [Music] decry the state of the sort of um medical industrial complex and the eighteen and a half percent of our gdp that i spent on healthcare costs and uh the [Music]
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 uh or to i mean you can't even start a hospital unless you get a 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 um you can't you can't just enter the market and so i i i think that kind of and i'm not thinking kind of a normative judgment i mean i have my personal
preferences but i'm not casting normal judgment as to kind of what we ought to do as a society the the thing that i feel strongly is that we were inconsistent um in our state of desires there's like a perpetual sort of seesaw if you will where success sows 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 [Music] 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 nobody seems to quite understand exactly what's going on right uh and that is this um i mean 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 healthcare 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 you know or perhaps not right um how much of this is some kind of bowel mall cost disease where some things are getting more efficient and that higher productivity and higher wages are sort of causing cost increases elsewhere to pay for opportunity costs and all the rest um but i think sort of specifically in in silicon
valley um 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 a fairly small number of square miles
right uh and and if you sort of if you were to um look at the seattle and uh and the bay area kind of together right and look at the kind of that aggregate 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 microsoft as well um and obviously what you see is that their their rise in success was enabled in
part by uh cheap mobility and cheap expansion and again sort of through just sort of political economy and collective decision making that no longer exists cheap mobility no longer exists and cheap expansion uh and you can see it now in the 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 really significant kind of structural headwinds uh and and so much of the wealth that's being created this improbable fountain of wealth creation is accruing to the sort of lottery winners of the existing landowners rather than to the people who are actually doing the work um and because of that accrual the sort of the barrier to entry for for [Music] newcomers
is getting progressively higher and you see it in declining rates of mobility and furthermore the other people in the city not in the tech industry who might otherwise benefit from it are of course getting priced out and you know this is not necessary i mean you can look at places like um you know obviously tokyo has um over the last couple decades been an improbable well
not especially improv but has been such an enormous economic success story and you know you had the boom and the bust uh uh of the supposed stagnation of japan uh in the kind of early 90s on but sort of broadly speaking has done really well but because of vastly fewer limitations on on housing supply 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 san francisco in 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 dispiriting because it's it's a negative sum in the sense that it's not just that these games go to uh go to these sort of existing landowners but actually there'll 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's sort of it's a it's a suffocation um of a future potential and a future gains 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 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 it you can't just move elsewhere you can't um you can't just move to nevada um uh or or wherever the south uh you actually will be less productive in those zones and so again i think it's a
real loss in terms of spillover gains to the rest of society um 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 wrong-headedness 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
productive region of the country uh would vastly outweigh the reduction in wealth 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 enrico moretti has estimated that 50 percent of uh 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 obviously fifty percent of the high number and quite speculative and it's very difficult to measure the counter factual but even just the idea that one can with a straight face hypothesized 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 [Music] 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 sort of the other extreme
is not hong kong you you can triple san francisco and get to greenwich um uh we can decide that that's our preference um but sort of you know sober estimates uh 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 our reveal preferences in terms of where we like to
take vacations to or where you know we dream of i don't know spend in a summer or someday and things like that it's to to to european cities um uh which tend to be of a very significantly higher density paris london much much higher density than san francisco and so um again i'm hesitant to cast a normative judgment but i personally feel strongly i think that's a great place to leave this
this has been a phenomenal conversation thank you so much for coming on the show where can people find uh more about you well if they want to start a business they should destruct.com but if they want to subject themselves to more of the particular detritus that i post and they can head to my twitter account which is just patrick c thank you so much thank you you