Jim McKelvey | How to Build an Unbeatable Business One Crazy Idea at a Time

Srini: Jim, welcome to the Unmistakable Creative. Thanks so much for taking the time to join us.

Jim Mckelvey: So excited to be here. This is gonna be fun.

Srini: I am beyond thrilled to have you here. So you have a book out called The Innovation Stack, which is one of those books that I tore through in the highlighted and underlined.

And as I mentioned to you before we hit record, I had to reschedule because I left the damn version I had in the US and I'm here in Brazil. But before we get into the book, I wanted to start asking what did your parents do for work and how did that end up shaping what you ended up doing with your life and your career?

Jim Mckelvey: So my dad was the dean of the engineering school at Washington University in St. Louis. And he was an academic chemist a polymer chemist actually. And my mother was a housewife. She before marrying dad was a journalist. And my parents met on the East coast. So my mother actually was a New Yorker and grew up during the depression in New York the daughter of a German brew master.

I mentioned that only because my grandfather was a brew master during prohibition. So they basically had no way to feed the family. So he worked for the mafia during Prohibition brewing illegal beer in Yonkers, New York. So that was mom, right? ? Yeah. And then dad was this academic but I grew up in St.

Louis, Missouri. And my, my folks were just fantastic people and I miss them dearly. They're both gone now. You mentioned your dad was an academic, my dad was called professor, so I probably have some familiarity with the way that you are raised. What was the narrative about education and making your way in the world in your household?

Srini: And how in the hell does the son of a dean become a glass blower?

Jim Mckelvey: It was funny. So first of all, education was always just assumed. It was never discussed. It was like, where are you gonna go to college? I can relate. And I just applied to one school. I applied early decision to Washington University because my dad was on was also on staff there, so I got to go free, which is a fantastic it's a phenomenal school.

I probably would've gone anyway, but it was also free. And I was like, Oh, great. Free education. Check the box, one application done. And so I went into I, I went through like basically assuming that I was going to get a PhD. So the big shock in my family was that I didn't get a doctorate.

And yes, there was another shock when I told my dad that I wanted to study glassblowing. This is when I was still an undergraduate, and dad said Oh yes, that, that can be very useful. And he was very supportive. Of course he thought it was scientific glassblowing he thought I was gonna be making distillation coils and probably bongs.

The idea here is that there glassblowing is a vague term, and he thought I was doing the scientific part, and I did the part where we didn't make bongs. We used them, although I never did. I speak cav of drugs. I've never used them. Like I, I used top one.

Srini: My life is funny to me because like when you.

When you said Wash U I'm like, isn't Animal House based on Wash U? It

Jim Mckelvey: is. It is. People dunno that. Yes. Harold Remus wrote Washoe Wash wrote Animal House based on some of his experiences at Washington University.

Srini: Yeah. Wow. Okay. I think that's so fascinating to me that Like you have this very academic background with your parents.

You assumed you're gonna get a PhD and then you become a glassblower. And I remember the first time we met a Glassblower, I was traveling in Europe, I think it was in Barcelona. And like any idiot, the first question we asked her was, Do you know how to make a bong? And she's That's literally the first thing that everybody asks.

So what in the world goes into the actual craft of glass bullying? Because I've seen very elaborate bongs as a Berkeley undergrad. I've seen my fair of them. And they're like, works of art. You look at them and you're just like, Wow. And while you're busy using it to get high, it rarely crosses your mind that, wait a minute, somebody sat in a studio somewhere making this thing and probably spent countless hours to make this one thing that is not scalable in any way at all.

But really in a lot of ways the epitome of true craftsmanship.

Jim Mckelvey: So I took glassblowing just for fun and got mesmerized by this material. So glass when it's hot is like it's alive and it's glowing and it's moving and it never stops moving. And yet if it stops you're basically gone cuz it'll cool down and crack and sometimes explode.

So you gotta watch the stuff and it's very difficult to manipulate. And what it does is because you can't really touch it with anything, you certainly can't touch it with your hand, but you also can't really touch it with too many tools because the tools then mark the glass. So it's this dance of just balancing heat.

You selectively heat the parts that you want to move. And I mean there's a show called Blown Away Now on Netflix where all my friends are out blowing glass and trying to knock each other off the show each month. But there's a very interesting. Culture around glass.

And I think it captures people's imagination because it's so damn difficult. Like I've been doing it for 30 years, it still frustrates me how little I can do with the glass. So I wonder from that sort of it really what would probably call deep work. What sort of habits you have brought into your day to day life as a technology entrepreneur that have been influenced by glass blowing?

Srini: Because one thing I think I've realized after 20 plus years outside of college, was that so often there's all these things that you do that seem completely unrelated, and then suddenly you start to be able to connect dots with, Oh, I know how to do this because of that, or, I'm interested in this because of that one random experience.

Jim Mckelvey: Yes glass is a big deal for me. And it's half dozen levels, and I could talk about this for your entire show and then some, but just to, not bo the listeners, I'll tell you the sort of the two main things that I always think of in the glass world, which is one the experience is subconscious that I have to get into a state of flow in order to do it.

In other words, if I'm making my complicated pieces, now there's stuff I can bash out with almost no senti, but if I'm actually doing my tough work, the stuff that's really difficult, I can only do it if I don't think about it. Which means I can't be stressed. So there can be, and it's funny cuz I'll open up the, an inhaler.

So when you make a piece of glass, you have to cool it down, you put it in a box, called it a kneeler, and that you, so you don't get to see the work until the next day. And I will come in the mornings and I'll think, Oh I've made some great stuff and I'll open up with ane and I'm like, it's all clunky and heavy and thick and bad.

And I'm like, What's wrong with me? What's bothering me? And I'll look into what's going on in my life. It's oh, I'm stressed out about that. Or, Oh, I couldn't relax, or, Oh, I didn't get a good it's like my sort of physical psychotherapy, so glass and flying airplanes are the two things I do where if I'm doing, in my mind does not wander.

If I'm flying a plane or blowing glass at the end of the day, my head is just clear. So it's just this therapeutic thing. Yeah. The other thing about glass is that it is a very stern. Unforgiving material. It shows every mistake, especially if you're making clean work. And I make very clean precise work and I can tell, and it never lets me off.

So it holds me to an objective standard. And I love that because so many times in you can phone it in. How hell with Zoom now? My God, the number of Zoom meetings where I'm just like, not there But glass doesn't allow that. It makes you show up. Yeah. Wow.

Srini: So what is the trajectory from glass blowing to co-founding Square with Jack Dorsey?

Because that does not seem like a linear trajectory at all.

Jim Mckelvey: No. It's the path of a pinball. So I graduated from Washington, use engineering school immediately started a tech company. We built software. We had an early competitor to Adobe Acrobats product. And guess how that one went, right?

Little company in St. Louis versus Adobe. We lost but in the process we had a business that that started publishing CDs of trade show materials, which this was pre-internet. And we got into a great business because we were taking this fantastic amount of paper and just putting it on CD ROMs.

And people were paying us to scan documents and put 'em on CDs. The business was grown like crazy. And then the internet comes along and I see the internet is gonna wipe out our business. I was the CEO of the company and I got everybody together and I said, Okay guys, look this thing called the internet is coming.

And they're these things called websites. And companies are not gonna have brochures, they're gonna have webpages. And as soon as that happens, we're dead. So we've got 18 months to pivot this company into something else. And I knew we were gonna do and. Nobody would follow me. Nobody at the company.

They all said they'd do it, but I couldn't get my troops to follow me because they were so used to making so much money the old way. They would always go, Yeah, Jim. Yeah, Jim, we'll do it the new way, but I gotta, I just gotta nail this sale. I gotta do this, I just wanna do this one more thing. And they couldn't get themselves off the old stuff.

And so the only person who would listen to me was my 15 year old summer intern. And his name was Jack Dorsey. Yeah. Jack was like, Okay, what do you wanna do? And I told him, I was like, Okay, let's do it. So Jack and I went off by ourselves and basically rebuilt the company. And then sure enough, the internet showed up as expected.

The company cratered, I fired basically everybody. Jack went back to school. He was in high school at the time, but he went off to college. But we saved the company. That company still exists. As a matter of fact, it's moving this week to new. Here we are 30 years later, a company based on the early work that Jack and I did when he was in high school and I was in my twenties is still around.

And that led to a friendship. It then we wandered our paths. Jack became a massage therapist. He wander around. He got some tattoos and started Twitter and then they kicked him outta Twitter. And the first time and he called me up and actually didn't call me up.

How did, I guess I called him up cuz I was trying to build an electric car. All right. So I was in, I was trying to build, this was pre Tesla and I was like, we gotta build electric cars cuz nobody's doing it. So I was starting to build an electric car and I called Jack up because I knew he hated the automobile industry.

We reconnected. He told me about Twitter. And he's Hey, look, if you still wanna do the electric car, that'd be cool, but if you don't, why don't you start a new company with. And I was like, that sounds like more fun than building an electric car company. So I said, Yes. And then the question was what are we gonna do?

And the only thing we knew was that we weren't gonna do anything in social cuz Twitter was been there, done that for Jack. And so we started casting around for ideas and I was in my glassblowing studio one day. I was actually moving out to California. I was packing up my stuff and this lady called to buy a piece of glass that I had sitting on the shelf for years.

And it was ugly. Certainly this thing was it's the thing you wanna sell, right? , Because the first thing I learned as an artist don't admit your mistakes with your price. I, like if it's something I hate, you won't be able to de discern that from the price tag She was willing to pay full price for the state and all she had was an Amex card and I couldn't take an Amex card and I lost a sale and I was just angry. And I looked at my iPhone and I was talking around my iPhone and my attitude towards my technology is that it does whatever I want.

And so my iPhone was this magic device that always turned into a it turns into a book or a TV screen or a map or it turns into a compass or it turns into a flashlight, like it turns into anything that I wanted to, and it didn't at the moment that I needed. It turned into a credit card machine.

So I was like, Jack, this is what we gotta do. Like we need to make this thing turn into a credit card machine so I can get paid. That was square.

Srini: Wow. Obviously that first question raises multiple other questions. You open the book by saying that patterns are funny things for, you can see them your entire life without noticing them, but once you finally noticed, they appear everywhere.

When I learned to notice this pattern, it was like finally seeing the world in three dimensions. I was looking at the same objects, but now everything had depth. My enhanced vision revealed even more patterns that have changed the world. What I wanna know is, why did you have. The foresight to see what the internet was gonna do when half the damn world didn't.

The music industry is a ghost of what it once was cuz they kept fighting it. And I only know this because I probably downloaded every single CD that I was ever thinking about buying for one song on Napster. I still remember, I literally went to Rasputin and Berkeley, wrote down the names on a yellow legal pad of all the CDs I had thought about buying and went home and downloaded all those songs on Napster cuz I agreed that it was bullshit, that we had to pay so much for one cd.

And my sister to this day gets on me about this cuz I made her buy the Rembrandts tape and told her the whole album was good, which was all bullshit. Because I wanted that theme song from friends. And of course she never trusted me again with how she should spend her allowance .

Jim Mckelvey: You'll.

Valuable lesson in sales, right? Yep. Absolutely. Look I'm not omni mission. I'm far from it. Look, I started a tech company before the.com bubble, and I didn't ride the bubble. Like my company was often this niche getting its ass kicked by the internet. So I saw it coming and knew and didn't know what to do about it.

Okay. and Square was not omni mission. Jack and I, when we started Square, we didn't have this great vision. I only saw the pattern after Square. So what led me to see the pattern, which I describe in the book, and which I hope other people will see easier than I did, was that there is this different path to creation than I was taught, than I believed.

And it's not this sort of flash of genius where all of a sudden you see the future. It's this bumpy, iterative path, which is really messy. . But in fact the behavior in that world is different. And I know we're probably gonna go through this for the next couple hours, so I won't try to jam it all into one quick answer but what happened to Square was we got attacked by Amazon.

And Amazon always kills startups. They, that is 100% true when we were attacked, and it was 99% true after we were attacked because we were the only exception, we're the only startup that I ever know that Amazon went after. Now, no, if Amazon can fight Google all day long, fine. But when Amazon attacks a startup, the startup dies, or the startup becomes part of Amazon.

And in 2014, when Amazon copied our product, we thought we were dead. And yet we survived. And after surviving, I then questioned why, Like, why did we cause you if you get lucky, that lucky it probably wasn't luck. There was probably some other force that protected you. You just don't understand what that force is, but oh here it is.

And so I started looking for it, and then I saw this pattern and I was like, Oh my God, it makes sense. It and it, and then all this other stuff that I didn't understand, which was like how Southwest Airlines could become the biggest airline in the country by charging superlo low fairs, or how IKEA could become the world's dominant furniture store.

And nobody uses the IKEA model. Like you think, oh, ikea's so successful, there'd be five copycats, but there are zero, and it's like, why is that? And all of a sudden this formula I saw, I was like, Oh my God, it makes sense. And then I gotta write a book about it.

Srini: Wow. I wanted to bring back a clip from an episode with Julian Smith, that was in 2014.

And as I was going back through your book, it just reminded me of this clip, which I feel like

,

this clip in particular, really fundamentally has shaped how I think about the internet and technology. And I really curious to hear what your thoughts are on this. Take a Listen, technology is a series of jungle blocks that build on top of each other.

And each jungle block is necessary for the next jungle block to exist. But we can't predict what will happen ahead of time. But we always have to be saying, Oh, here's this new tool. What does this new tool allow me to

Jim Mckelvey: do over and

over and over again. It's true, but I dislike the analogy because Jenga always collapses , right?

The thing about Jenga that I think of is everything on the floor of my living room. Like it always ends up on the floor in my living room cuz we play it on the coffee table. And it's, but the analogy is correct, which is that there's a building block and there is a, there's this sort of weird serendipity, like if you ever watched a river stu that starts to flow straight.

I mean there's an experiment used to do in, in when I was a kid, you did it in grade school. You get a box of sand and put water going down it straight and you think it'd keep going straight cuz that's the path of least resistance. But no it naturally starts to curve and Eddie and Undulate and it's this weird thing that evolves And I won't come up with a better analogy than that, but he's absolutely right about the fact that what you do today depends on what has been done.

And I talk about this in the book as, as the event horizon of possibility, which is that, so my book is focused on stuff that has never been done. What does it take to do something for the first time? And what does it feel like to be working without the ability to copy and how terrible is it when you find that your whole life you've been taught to copy really well and you're really good at copying and now you can't use that skill.

Yeah. So I think about that, but one of the things that I say is slightly comforting is, look, a thousand people may have tried this before you and failed, and they have been good, and they're probably better than you were. They were probably smarter and harder working and they couldn't do it.

So what makes you think that you could do it? And the answer is that gen analogy, which is you have a tool today that they didn't have yesterday. Now you don't know what that is maybe but you have a new tool every single day. This rapidly changing world gives us a new tool set. And can you use.

So when we started Square we were pretty lucky because we'd just been handled this handed, this wonderful tool called the iPhone, and we'd been handed all these other tools like like user agreements and frankly different banking laws and like all this stuff that we didn't realize had changed.

And perhaps if we'd tried it a year earlier, it would've failed. But we had those tools and so you never know that all the previous failures mean that you can't do it. And it's some, it's some comfort there. My, my book is not a feel good book. It's a gall humor book , right?

You're not gonna, you're not gonna, you're gonna laugh at the innovation stack, hopefully, because you go, Oh God, oh yeah, I know what that's like. It's not, you're not gonna feel warm and wonderful afterwards, but you're gonna be, you're gonna be prepared for the fight if you ever have to.

Srini: Yeah. It's funny because I remember when Julian told me that and then he explained to me how he came up with the concept for Breather and it just made me trace sort of the history of technology innovation back where it was exactly what you talk about as well, which is just a series of technologies that intersect.

You have Mark Andreson who creates the first commercial web browser in the early nineties, which started as Mosaic. And the only reason I know Mosaic is cuz my dad was an academic and caught me looking at porn at his lab. But then ironically the porn industry comes up with the ability to process credit cards.

If you've ever seen the movie Middlemen, which you have the intersection of those two technologies, and then you get e-commerce as we know it today, then you get to 2008 and this is what the thing that Julian said that really struck me, he said you had the combination of both the mobile phone.

Gps tracking and the ability to unlock electronic locks, which sparked his idea for breather. And so that way of thinking has always become my default with all of this, because I had this mentor who went around the country working with people in 2011 after the recession to help them rebuild.

And whenever he met somebody who would ask them, Do you know how to use the internet? Which sounds like a stupid question. And then they would say yes. And he would say, Great. Show me something that you've made using the internet. Ooh,

Jim Mckelvey: wow. Yeah. Great follow up question. I said, don't just sit there and passively consume, but use this wonderful resource that can get you almost any answer, even if it's the wrong answer,

And show me that you know how to use it properly. Ooh, yeah.

Srini: So I, I think that, there was a couple of other things that struck me in the book. You say that a perfect problems need not be massive challenges that affect the world. They can be trivial, annoyances. The magic ingredient that makes a problem perfect is you, If a particular problem is one that you can solve, then it's a perfect problem for you.

And this mentor of mine used to say that people always try to start businesses in areas where they have zero natural advantages. And he's if you have no media experience, starting a media company is an uphill battle. It's if you don't have an engineering background, you're probably not gonna be very good at building electric cars or competing with Elon.

So one, how do people become aware of the skills that they have that allow them to solve perfect problems

Jim Mckelvey: for them? So I need to define the word perfect problem because it's this term that I coined in the book. To refer to a subset of problems that are solvable. Okay? So think about problems.

You have, you can divide the world of problems into solvable problems and unsolvable problems. Like teleportation, we can't do that and it may not be solvable, okay? That just may be one that's unsolvable. But let's say it's unsolvable for now. So you divide the world into solvable and unsolvable problems.

Let's only now consider the solvable problems cuz unsolvable problems are impossible. Within the world of solvable problems, there are the ones where we already know a solution. In other words, somebody else knows how to solve it. You don't. But the solution is probably in some YouTube video or it's on some website or in some library.

Like it's a solve problem. You just haven't found the guy to copy to solve it. But if you take that set out, now you're looking at problems that are solvable. But unsolved, and that's what I call perfect problems. That is the subset that I focus the entire book on. So when you use the word perfect problem, I don't mean like it's, Oh, it's perfect for you.

No. It's this precise definition of a solvable problem that does not yet have a solution. Okay. So then now I'd like to answer your question, which is a fantastic question, which is okay, how do I know I can do it and how do I know that I've got the skillset for this problem?

And so I will disagree a little bit with the, statement you made before, which is if you don't have an engineering background, should, or should you be doing engineering work? And the answer is absolutely not. If the engineering work is what is needed to solve the problem.

If you're doing solved problems without the skillset necessary to solve them, then you're like an idiot getting in an airplane and flying like you can get in an airplane and take off. Yeah, you can do that. It's possible. It's not even hard but you're stupid if you go into an airplane cockpit and take off without being properly trained, cuz it's so easy to get properly trained these days.

Now the Wright brothers didn't have that option, so they had to go first. So the fact that the Wright brothers weren't pilots was reasonable because there were no pilots on the planet. So I see people make this mistake all the time and it's one of the things I hammer on in the book, which is, look, if you end up at some point in your life, on the edge of what humanity knows how to.

So you're about to dip your toe in the water of perfect problems. These are things where there's no YouTube video, there's no known formula. You're gonna have to invent stuff. And believe me, invention is messy. It's pretty horrible. Innovation is unpleasant at best. But if you end up there, the question you'll ask yourself is, Should I continue?

Should I try this thing? Once you discover that there's no YouTube video guiding you along, what do you do? And almost all of us will stop. We'll stop because our whole life we've been said, we've been trained to get qualified. Don't do that stupid thing. Go get a class. Go get a certificate.

Go find an expert. Go hire a professor or a professional. That hesitation is completely correct if there's a solve problem. But if it's an unsolved problem, there's no expert. So the first time anything is done of significance. On the planet, it is done by a novice. And it doesn't matter if you're an expert or a PhD or really good at something because what you're really good at is something that we already know how to do.

Yeah. So the skills that you bring across that line into the world of unsolved problems are very, they're very weird skills. There's tenacity, audacity the, there, they're the ability to just keep going. It's almost like just stubbornness, Like pure stubbornness beats a PhD if you're in the world of unsolved problems.

Srini: Yeah. When we started this show in 2009, people were saying podcasts were dead. And I, to this day, I can't tell you why we did it or why we continued doing it for 10 years, and now we're basically the beneficiaries of a tenure head start on something that became a massive cultural trend.

Jim Mckelvey: Oh my God. Yeah. You were so early. Like it, it wasn't dead, it was just that. The first little blips had come and they were like, Oh, look at that. It's cute. It's cute. This is gonna eat your lunch.

Srini: So the funny thing about this is we're talking about solvable problems. Ones that nobody have ever has ever solved before, but there's something you say in the book.

And I remember thinking, I was like, Okay, what's the sort of, why is there this contradiction where you say the formula for any successful business requires wall, a formula, no bullets, no book, no checklist, no check. I realized how disappointing it is to have a book without any checklist. Who wouldn't like to have a map of unexplored territory?

This formula has worked well for millennia, and it will give you the ability to succeed in any known field of endeavor. Even better. You've been practicing the fundamental skill it requires since before you were born and are almost a, certainly a master ready copy what everyone else does, , which I was like, Wait a minute, did Jim just contradict everything he said in the chapters before?

But now that I'm talking to you I think I understand it What you're talking about there, it sounds is problems that other people have solved already.

Jim Mckelvey: Yes. And by the way I'm, thank you for catching that because it's one of the parts of the book where it makes a hard left turn and a lot of people end up plastered against the right windshield because what I tell people is, look, I have nothing against copying. I have nothing against unoriginal behavior. As a matter of fact, I love unoriginal behavior. I love being the guy that can be the student. I love being a student. I'm going, as a matter of fact, the reason I gotta cut this interview short is I'm taking my kid off to get a lesson in something.

I love the fact that he's a student. I'm gonna watch if you can be taught, get taught, if you can become an expert. And you could live your entire life very successfully and very safely in this world where you're not going first, you don't have to the first person to summit Everest, and you can still climb mount interest Everest.

Go up there. There's a whole industry that will get you to the top of Everest if you wanna go first, if you find yourself in that position, that's what I talk about in the book, but I don't recommend it. What I tell you is, look, yeah, I'm not trying to sell innovation. I'm not one of these guys that says, Oh, be innovative.

No, I stop. I like God I don't know if you've used a Google flight search a matrix. The Google changed the interface. They took something that was awesome and they made it crappy. They innovated on something that was really good and then they made it almost unusable. And I was like, Oh no, really?

Srini: Yeah. Having booked a lot of flights in the last couple months, I like the whole experience of every flight booking site pisses me off.

Jim Mckelvey: Oh God. You know the secret old matrix is still up. They kept, there's a back door to it. It's old matrix dive to, I don't know what the web address is and I probably shouldn't give it out on a podcast cuz it'll change, but like it's still there.

You can find it, dude. Email me off. I'll send you the link. But here's the point. I'm not preaching innovation. I am telling people that you don't have to spend your entire life copying. I'm not saying that's not a great life. Okay. I'm saying copy whenever you can. Don't, Yeah. Because here's the thing, if you don't respect copying, you won't understand innovation.

If you're somebody who thinks I gotta do something new, I can't do it the way everybody else is doing it. Are they succeeding? Cause if they're doing it another way and they're all successful, maybe dude, you wanna do it their way. I don't want somebody original making dinner tonight for me outta some plant that humans have never consumed before.

Hey Jim, we thought we'd fry this up and serve it to your family. Forget it. No, gimme the beans, sprouts.

Srini: One of the things that you had, you mentioned when we were talking about this idea of copying, was this idea of a formula. And I basically wrote this entire book called Unmistakable, which I jokingly have said an interview after interview that it could have easily been called everybody as full of shit, because that's all, that's what I said in a more diplomatic way.

And now I'm actually working on a book idea titled everybody is Full of Shit, Including Me. Oh, beautiful. Because I. After a thousand interviews the joke I've always said is, if I could actually put all this advice into action, I'd be a billionaire with six pack abs in a har of supermodels.

But I am not And so I wanna talk about this idea of copying and look at it through the lens of the role that context plays. Because so often and this is something I've just been hammering endlessly on the show, because I feel like people listen to people like you and they have this sort of tendency to see somebody like you as a person of who is in a position of authority and say, Oh, Jim Co-founded Square with Jack Dorsey, so he must be right.

So I'm gonna follow his advice to the letter not taking into account that, wait a minute, your life in Jim's life are wildly

Jim Mckelvey: different. Yeah. And I say explicitly that I was incredibly lucky that, now that doesn't mean I didn't work hard. Yeah. It doesn't mean that I'm not a smart guy who knows a lot of math and stubborn and all the, I you put a bunch of qualities there, but the fact is luck pa plays a huge part.

And if you get lucky, there's this horrible selection bias where the publishers of the world ask you to write books. And then you come up with this tried advice, and I wanted none of that. As a matter of fact I fought the idea of writing a book so hard. The only reason I wrote it was because it basically, when I was interviewing Herb Kellerher he told me I had to share the ideas. Yeah. It was I went to Herb to validate all this research that I was doing, for my own my own amusement and nothing that was supposed to be public. And then I went to Herb and he's like, How are you gonna share this?

And my initial answer was, I'm gonna make a comic book. Like I'm gonna make a graphic novel. And the first five drafts of Innovation Stack were all graphic novels. Wow. And as a matter of fact, if you go to I still actually printed up chapter nine as a graphic novel and I'll send you a copy cuz it's we printed that up as a comic book cuz you know, the story of Gene 80 is so great that it deserves Penn and Ink.

But I fought this idea of writing a book until the last minute when I was doing Herb's chapter and I called him to tell him, Hey man, you like this is gonna be great. And he said, Don't portray me or this subject

,

as a comic. He's it's way too serious and you need to take it seriously. And he's I can't stop you from doing it, but I can ask you to leave me out.

And I took that really seriously, which is why the book has no drawings in it. But look you gotta take yourself seriously enough, but not too seriously. And I say many times that. If you're lucky and you're working hard, it feels like the working hard was what got you success. But there was somebody else probably working just as hard who didn't get lucky and he's not writing a book. Yeah. I like I said, I mean for me it was damn lucky that I just happened to start a podcast in 2009. And this is why I'm so reluctant when people have asked me to teach a course on podcasting I'm always like, What am I gonna tell you?

Srini: Move home, Live with your parents until you're 39 and get lucky. Find an amazing mentor on Twitter and hope that some editor on Medium finds your article that you wrote. And it's not that I didn't work hard, but there's just so many sort of serendipitous events in that, that I can't replicate

Jim Mckelvey: for somebody else.

Yeah. And look, part of that is getting out there and trying, and I always advocate trying, but yeah, luck has to happen. . And the here's the thing that I hope someone will get when they read the book, is that there's this invisible line between what we know how to do and what we don't know how to do.

And you better start getting good at recognizing that line because the rules change on one side or the other. And once you start recognizing a line, a lot of people say, Oh I'm never gonna cross it. I'm never gonna try something that hasn't already been validated by a bunch of others.

Okay, cool. That's fine. But I don't want the whole world to stay on one side of the line because the future is brought to us by the people who cross the line and it is messy and ugly and unpleasant, and you do need to be lucky. And you'll probably fail. Okay. I'm sorry. If you're doing something that hasn't been done before, the odds of success are pretty slim.

But I still want people to intentionally cross because I accidentally stumbled on o on either side of the line, not knowing what the hell I was doing for. And then not knowing how to behave differently on one side or the other. And the results were a disaster. It helped me develop a sense of humor, but that was about it.

Yeah. Yeah don't undercount luck.

Srini: Yeah. One thing that you say when we talk about this idea of copying is that there's really only one problem with copying. Nothing ever changes. We advance me. There's a species nors a society, unless something changes, of course most changes will fail, which you just alluded to.

And then you go on to say that copying almost always feels comfortable, but it will never produce the thrill of invention. Copying is almost always the right answer to will never produce transformative change. I, which it's funny because you're right. I, the reason I ended up writing my book was.

I remember somebody once said to me, There's great creative potential in the things that make you angry. And that stayed with me. And I thought what pisses me off is when I see people take some online course and then literally tactic by tactic word by word, try to copy to the T exactly what the person who taught the course does.

I had a friend once who sent me a list of something like 10 of her clients and I put all their websites up next to each other cuz she wanted to pitch them as podcast guests. And I replied back and I said, One, I don't have any idea what the fuck any of these people do. And it sounds like they all do the exact same thing.

Jim Mckelvey: Oh my God. Yeah. Did you get the story in the book about my friend who taught a class on entrepreneurship

Srini: and he, I wanna, do, I wanna talk about that in the context of education?

Jim Mckelvey: Absolutely. Cause that is, Oh my god, Yeah. It perfectly illustrates what you just said. Yeah.

Srini: So I wanna come back to the types of motivation because I think that'll make more sense later.

But there's something that you say, which really struck me as well. You said, I've undertaken a dozen projects that people have called crazy. I've made a living as an artist and started a glassblowing studio. I've founded companies in the fields of software, book printing, roofing, and payments. I launched a non-profit to solve the national shortage of programmers.

I'm currently trying to give people control over their online identities. I have no idea what, if anything, these organizations have in common except that the core is a problem that I care about and. He got me thinking about bat shit, crazy ideas, you, because I I told you I needed 45 minutes on working on this article titled How to Upload Your Brain to the Internet because now with network based note taking tools, the sort of idea that Gordon Bell had when he had that total recall project, for those of you don't know what I'm referring to and I'm guessing, Jim, you probably know what I'm referring to a little bit.

Yeah. Gordon Bell tried to basically upload his brain to the internet for the most part, and he wanted complete and total recall. Now, when he undertook this project, it was one of those things that was damn near impossible cuz the sheer amount of effort that went into actually organizing the information so that it was actually retrie.

Was a project in and of

Jim Mckelvey: itself. Yeah. And then you start recording the information about recording the information, and then you're in a middle loop that just and it falls outta the air. And

Srini: so that's where network thinking and organizing information and networks changes all of that. I only know this because I'm living and breathing this on a daily basis right now because I'm a diehard fan of the note taking app.

Me and you start to see that, wait a minute, this is a very different way of organizing information, but it sounds completely insane until you've actually used it. And it's funny because you were talking about Jack Dorsey, and I remember the very first time I saw Twitter, I was like, this is the dumbest thing ever.

Why would anybody use this? And you have a term that I think is probably a better description, but I call it utility paradox, where you don't really understand why something is useful until you've used it for long enough and. So there are two sort of questions that come from that is on the side of the person who's creating this thing, how do they persist long enough to get past this perceived utility paradox?

Because I've heard investors say that when they heard the ideas for Airbnb and Uber, they thought it was the plot of a murder movie in the making. And I then I remember made, making a note as I was writing this article, saying what initially sounds dumb becomes our new default. Do you bookmark articles that you never read?

Do you download a ton of free eBooks that you never open? Do you collect quotes, highlight passages and books, and take notes on online courses and even episodes of this podcast that you can either never find or use or disappear into a black hole of information on your hard drive or note taking up. We live in a world where we create and consume more information than anyone could possibly use in a lifetime.

But what if I told you there was a way that you can stop collecting quotes and start using your notes to create content, to build a body of work, and to grow your business? Our free course on how to take smart notes isn't just gonna give you another life hack or get another tool to manage, but don't take my word for it.

This is what one of our students from our Personal Knowledge Management course said.

Jim Mckelvey: This is a completely different way of learning how to actually use your content instead of collecting and hoarding your content. It's how to turn it into your own content and use. In a way that you can build your body of work, your body of knowledge, your unique different way of looking at things, and share it in a cohesive way that other people can

Srini: understand.

Get our free note taking course@unmistakablecreative.com slash smart. Put your knowledge to use in ways that you never have before. This episode is sponsored by TED Business, a podcast from the TED Audio Collective. Whether you wanna learn how to land that promotion, set smart goals, undo injustice at work, or unlock the next big innovation business is tough.

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Jim Mckelvey: Yeah, so Airbnb and you Uber both require you to be comfortable with a stranger in your car or in your house. Yeah, and at the time that was not normal, so it was this very weird moment. Where people had to do a state change and accept strangers. And now it's Oh, okay I'm getting in an Uber, You're not a stranger, you're an Uber driver, right?

I have this new category for non strangers. But that didn't exist. And when they were starting, they were running up against that wall every day. Yeah. And people forget that but this is the thing when you're called crazy because there is a change that hasn't happened in the world.

And we had the same thing at Square. People initially told us that no one is gonna hand their credit card to some sketchy looking dude with an iPhone and a funny little white square plugged into it. Like that just won't happen. And we tested it out on a few people and people were reluctant they were hesitant.

But then we started to refine the idea and make it cool. And then we made it interesting. And then we made the hardware so small that it was fascinating and became this trick. And instead of being creeped out by it, you were fascinated by it. And I think that may have helped us.

Srini: Funny enough, one of the things you say early on is that when you guys pitched Square, you actually told your investors 140 reasons that it would fail

And the only reason that, that I know this because Sun Gupta talks about this in his book Backable, where it actually shows your ability to be thinking about the future in a way that most people don't. But I'm just curious, can you talk about that

Jim Mckelvey: a bit more? Oh, yeah. It's the greatest strike in the world.

I go through our pitch in detail and outline two or three things that I think were very important and I never see in pitches anymore. But the reasons you fail is it's a total state changer in the room. Because if you think about, Okay, think about life as a venture capitalist for a minute.

Okay, So you're wearing this checkered collared shirt and you're sitting there in your vest, and what's your job? Your job is to find. Out where the entrepreneur is lying to you, where this person who's pitching you is not telling you the truth. Because if everything is to be believed, you'd invest in every company so it's an attack and defend model the entrepreneurs are attacking, the VCs are defending, and that's what sort of permeates the room. And by putting the 140 reasons slide in our pitch, we changed that entire dynamic because it was very early on. Basically we we introduced ourselves, we showed 'em the product, and they were like, and here's why it's not gonna work.

Okay, . And and then we had I mean we had some humorous bullet points, but most of them were deadly serious. And Amazon attacking us was a reason that Square might fail. And surprise, it did happen. And actually in one of our pitch. One of the VCs who we didn't go with, but he, his reason for us to take their money was that he was on the board of Amazon and that he could stop Amazon from attacking us if we took his money.

In other words take our money and I'll keep Amazon from attacking you. I can protect you from one of those reasons. You'll fail. And that changes the tone of the entire room. So now the VCs are trying to see the ones you trying to see if you're being honest with the reasons you could fail. They honesty begins honesty.

And they will then respond honestly and say actually we don't see that as a problem. Or, Yeah, that's a real one. I don't know how we're going to solve that. Or, Hey, I actually do know how we can solve that one and we could help you. And that's what happened in the room. So after that slide, it was no longer a VC pitch.

It was this weird sort of problem solving communal exercise. And we got I think we pitched 21 times and we got 19 turn. . Wow. So it was unbelievably effective, and I think everyone should do it. Wow.

Srini: Let's actually get into this entire concept of an innovation stack. You say that the problem with solving one problem is that it usually creates a new problem that requires a new solution with its own problems.

The problem, solution, problem chain continues until eventually one of two things happens. You either fail to solve a problem and die, or you succeed in solving all the problems with the collection of both interlocking and independent innovation. This successful collection is what I call an innovation stack.

And you say that an innovation stack is not a plan, it's a series of reactions to existential threats. So let's talk about this idea of an innovation stack on both an organizational level and an individual level, because I'm guessing that we probably have innovation stacks in our own lives on a day to day basis.

They're just unconscious

Jim Mckelvey: to us. Yeah. Anything that works that requires a series of different things to work collectively is an innovation stack. So if you take a take any problem that has been solved, it's normally not just one thing, it's normally you gotta do two or three or 20 things in order for it to work.

And if you think about take an internal combustion engine, like what has to work for an internal combustion engine to work like 75 different things. The cam lifters, the springs the way the Pistons seal the carburetor or the fuel injectors the exhaust system the fuel metering.

Like I, I like all this stuff and then you turn it 45 degrees and it stops working there are all sorts of assumptions that that went into that product that eventually had to be proven right or wrong. And eventually they figured out how to make the engine work and then they refined it and refined it.

That's the nature of stuff that works. It's not one thing, it's this mess. Yeah. And if you're like, if you like to lump things into this category of engine I just need an engine. Okay, great. You can say the word engine because it's been around for 200 years, but you can't say engine the first time.

You don't know what the hell's gonna happen. All, all you know, is gas explodes or actually kerosene explodes so you're in a situation where you're unable to figure out the problem. But I will tell you that the solution is this mess that I call an innovation stack. And recognizing that's the mess that is supposed to happen, is one thing to help you not quit.

So if you're bumping along and it's not working, But you're making progress. You're getting well we fixed that problem now. What's the new problem? Okay. Oh, we fixed that problem. Oh crap. That just caused this other three problems. I don't know how to fix those, but I can

,

fix two of them.

And the third one, I'll wait until maybe I can find somebody else to help me fix that. And and you just go back and forth. Eventually you'll get it. Or not. There's no promises. I'm not gonna sit there and say, You keep trying and you'll succeed. No, sorry. The only way I can prove that you're gonna succeed is by giving you a problem that I already know the solution to.

I e I'll give you something that I know how to do. Yeah, but that's not innovation. That's just copying again. So the process of innovation is a mess. And it results in this thing that there was no word for it. See this is the weird thing when I wrote this book. And English is a pretty rich language.

Cause we we steal words from everybody else and we're hundreds of thousands of words. There was no word for what I wanted to do. There was no word for a business person that didn't copy. There was no, I found all these sort of gaps in the language and I was like, wow, that's because nobody discusses this part of creation.

Srini: Yeah. Let's go through a specific examples and then I'm going to do the most selfish example of all, which is I want to talk about how I could build an innovation stack for unable creative. Like what that would even look like for my own business. Because I think that there's this sort of tendency, and I know you addressed this, to think that, oh, this is only relevant to people who are building the next Tesla.

Jim Mckelvey: No. It's relevant to anybody who's solving an unsolved problem. Or a problem that you don't know the solution. So maybe there's a solution, you just don't know it. But if you are making a solution to a, any sort of complex problem it personal or business, you will find that this is the process.

You try something, it doesn't work. You try something else. Oh, that works, but it causes other problems. Now you gotta deal with those and on you go. And that process will feel very foreign to you at first. Once you start to recognize, and this is what I hope people who read the book will do.

Is when they find themselves in that world where they're bumping along but making progress, they won't quit because they'll go, Oh yeah, Kel V warned me about this. Oh wait, there was a chapter on how I'm supposed to feel uncomfortable right now. It's not because I want you to feel uncomfortable. It's just you look, you're a human.

Your body is wired to replicate stuff that works and replicate cells that work, and it's, you're just a copy machine and that's how you are most comfortable. So when you get out of that comfort zone at. , if you have this context of what innovation looks like, you might not quit as soon as you would otherwise.

Yeah. Let's go through a couple of the examples that you go through in the book. I think the one that I was so interesting to me was Jean, you, I was like, really? That's where that came from. Cuz I, I think that's the one that most people will be like, Whoa, wait a minute. This is something that most of us have used at one point or another in our lives.

Yeah. A bank . We've all used a bank, actually not all of us. They have a lot of unbanked, but my guess is they're probably not listening to this podcast. Hopefully they are. That'd be awesome.

Yeah. So walk

Srini: me through that innovation stack, like how it emerged and how it came to be and what that innovation stack looked like.

Jim Mckelvey: Okay. So APG and Amy was the founder of what you think of as banking. So if you've been to a bank in the last a hundred years, you have been to his invention. He founded a little bank called The Bank of Italy, which then became the biggest bank in the world and eventually became Transamerica and Bank of America.

And this sort of multinational monster. But what you think of his banking was invented by this guy who was not a banker. He didn't even finish high school. Like he quit school at age age 13 or 14 and became a produce vendor. So he was trading lettuce and buying walnuts and made so much money in that business that at the age of 30 he retired.

So he was done by age 30. Talk about success. Joined the board of a bank cuz he was a little bored and discovered that the bank was not lending to farmers and immigrants and normal people like just normal people, couldn't use banks. Banks were only for the rich and privileged. And this was banking before Gini got his hands on it.

And what this guy did was he said, This is stupid. I wanna build a bank for everybody. I wanna build a bank that I could have used when I was starting out in my business. So he goes out, doesn't know a thing about banking, and says I'm gonna start a bank. So he calls up one of his friends and who knows something about bank.

He says how do I start a bank? And you guys goes you do this and this. And then Gini in the process of building his bank, reinvents the entire industry at banking the idea of a branch, that's his innovation. The idea of home loans, car loans, like installment loans. His idea, the idea that you could go in and actually talk to a teller, that's an innovation that he brought to us.

Dozens and dozens of ideas. And first in the world of banking was a pg and e. And what he did was so successful that a hundred years later, every other bank has copied it. So it's now a, it's now what you think of as just like normal banking. But at the time it was revolutionary. And remember Gini, he was a poor kid who's lost his father very tragically.

And he was living in California and all the banks were in New York. So this was this was the years, the era when you had to cross the continent by rail. They like, they just laid the first railroad tracks across the United States. So Gini was way separated from the traditions of normal banking.

And I thought that was such a great example too, because my point is, look, a lot of times knowledge is super helpful if you're doing something that's already been done. But a, but if you had asked a banker to build the Bank of Italy or the Bank of America or whatever Gini built, they'd never been able to.

They would've said, Oh, it's impossible. Oh, you can't do that. Oh, like you can't loan money to normal people. They'll never pay you back. You can't loan money. You can't have a branch system. You can't do that. You can't. And they would come up with all these reasons, which they think are legitimate reasons because of their buy into the existing system.

But there's a different system out there, and that's what Gini invented. Wow.

Srini: Let's talk about pricing, because I think that this kind of struck me because I thought to myself yeah, if you are Twitter or you have Walmart, you can price things low. Whereas if you're me just based on the economies of scale, if I price things low, I'm gonna have a very unprofitable business.

So I, I'm curious because you say that building an innovation stack will give your firm the ability to set prices differently from other companies. If you want to change your price, that sh change should originate from the innovation stack, low price as a result, and low price forges a stronger relationships.

By with customers, by building trust in the brand. And that seems so paradoxical to me because like on the one hand I've read the exact opposite where people say that it changes the perception of the value of something if it's

Jim Mckelvey: cheap. Oh, yeah. And you're talking to a guy who sells glass, which is art, which I, I completely admit that art is a gift and good, and you wanna charge a lot, even if it's garbage.

And I do but the context for that understanding is tied to another thing that I talk about in the book, which is the pyramids and how these companies that I studied all had this sort of weird trait, which was that they expanded access to a market. So the first thing to do to understand my pricing weirdness, which a, again it's the opposite of what they teach in business school, but I stand by it.

But to understand that, you first have to understand that most markets are these sort of pyramid shaped entities, where at the very top you have expensive, exclusive, right? So Bentleys and Aston Martins and Fancy Cars at the top. Down at the middle you have high end, but mass produced, that's Mercedes and Lexus.

Going down further, you have common products that's Chevy and Ford. Down at the very bottom you have do brands. I don't know, Kia's actually gotten pretty good Kia and b y d if you're Chinese like those are off brand cars. And then the market stops, okay?

And it stops at the point where you can no longer buy a new car. They can no longer, the market can no longer create a car and sell it profitably below that bottom part of the pyramid. And. All the companies that I studied were in a market that had this pyramid shaped structure, and they built below the pyramid, they shoved an entire new wet an entire new level of the pyramid underneath.

And by that I mean they expanded access. So what did Gini do with Bank of America? Gini brought banking to normal people, to farmers and immigrants and just people like you and me. And so what do you do if you're able to do that with your price? Okay, so let's you build this innovation stack. You figure out how to give banking or credit card processing or furniture or banking to some new group.

By definition, you probably have a very efficient system, which means you can charge. The question is, should you, or should you just price it so that you're barely a little bit less than the cheapest guy in the market? And the answer is, paradoxically, you should charge less because it, it grows the market tremendously, but more importantly, for long term survival, it prevents your competitors from getting it and copying you.

Because if you think about the math of attacking a company who's super efficient and low cost is, you never get a subsidy from your in for your inefficiencies. You better start with an entire innovation stack ready to go, which is damn near impossible. When you've got a competitor who's doing it correctly.

So you people have tried to rip off IKEA for decades. They look at ikea, they're like, Wow, these guys are making a ton of money and it's such an easy idea to understand and we can walk through and let's build a warehouse and make a cheap furniture to put together. When the Alan Kia, like they don't understand a 10th of what Ikea.

And when they do, they start to run up against I ikea's innovation stack, which is 75, 80, a hundred different components and they can't do it. But then IKEA keeps their prices low so they don't even survive long enough to get a second chance. And you look at a situation and I do this in the book as a perfect example of this pricing theory at work for the 20 years that Herb Kellerher ran Southwest Airlines, there were dozens of startup airlines that got into his face that, that attacked Southwest.

It said, Oh we'll just copy what Southwest is doing and we'll be another successful airline. Okay. The only one that survived was JetBlue. And the only reason they survived was because they had this weird lock on the Northeast market. They had New York and they had some stuff, but aside from that, they totally copied Southwest and they made it.

But every other carrier, and I list them, they were probably like eight or nine entire air carriers. Trying to copy Southwest. Okay, so then what does Southwest do? Herb retires and the new guy takes over and the new guy looks at and says, Hey, I could make a lot more money by jacking up our prices. We're still a great airline, but we could we're leaving 50% of our ticket price on the table.

Let's jack up the prices. So what does he do? He jacks up the prices. And what does the stock market do? The stock market goes, Oh wow, this guy's great. Look at all this profit that Southwest is making. Okay? And when I was sitting there talking to Herb, he was ringing his hands. He was like, Spirit Airlines, Frontier Airlines.

He's Those wouldn't exist if I was still in charge. Like he was pissed because they gave away pricing as an advantage. They did what the MBAs teach you to do, which is go maximizing profit here charge what you can charge. But if you do that within Innovation Stack, you're giving away the long run.

Wow.

Srini: Wow. Th this is crazy. Let's talk about business school because I I think that I remember I wrote this article and medium titled Why Business School Teaches You Absolutely Nothing About Running a business. As somebody who ran a business, and I remember Naval Racon actually had a really good way of putting this.

He said that in the case study world, he's like, Idiosyncrasies that don't express themselves in reality. And the most ridiculous example I came up with we do this weekly segment my, my friend and I co-host called The Creativity Hour. And we were talking about this and I said, Look a lemonade stand could become a distribution arm for a cocaine cartel.

And he was like, What the hell are you talking about? And I said, All right, look, you go to business school and you think, Okay, cool, I'm gonna build this lemonade stand empire. I have a lemonade stand on every corner in America. And then one of a Columbian cartels henchman comes up to the lemonade stand and says, You know what?

Your lemonade stands are a perfect place for us to distribute our cocaine. And any normal person like, Yeah, that's illegal. I would never do that. And then they say here's the thing. We're gonna blow your brains out and kill everybody in your family if you don't do this. There's literally no way you could have anticipated that.

And now your lemonade stand empire is a distribution arm for a cocaine cartel.

Jim Mckelvey: Got it. Okay. Is

Srini: That is the most extreme and ridiculous example of what we're talking about here. But that's the thing I think that struck me so much about business schools, that you learn all these different models, but the variables inside of everything that you do in business school are static.

Like you don't have difficult people to work with. Or I mean you do, but there's so many things that are not there in the way that you learn to approach building a business in business school that you cannot learn without building a business.

Jim Mckelvey: Yeah. There's just some trial by fire. I, and I don't dee business schools but I do lump their graduates into the, you better be copying a model that works pile.

So in other words, once I have a company that's working and we know what we're doing, I generally leave it, and we hire a bunch of people who are good at running things, and a lot of those people have MBAs. A lot of those people were, went to business schools, studied business, know how to do operations know how to do pricing theory.

They know all this stuff. I don't think that skillset is terribly useful in the innovation phase, like when you're building something new. Yeah. The business school training is not particularly relevant. And my friend Howard and I, he was he was teaching an an entrepreneurship class and we thought about how we would do it because he was like, How do I teach entrepreneurship?

He like, How do I teach this stuff ? And I was like, Oh, here's the first assignment. You lock the door, you put a box within you, you put a box in the center of the classroom that is your homework is due in 60 minutes and the door's locked and you don't even show up. Like you have to get your name in this box, or you fail the first assignment.

Now you're an entrepreneur. Like, how the hell are you gonna get in? Are you gonna break the glass? That's pretty stupid. Are you gonna pick the lock? Hope you have that skillset. Are you gonna try to find a janitor or somebody who gonna let you in? Or maybe there's an air duct.

I don't know. Or maybe you'll make like a paper airplane like 500 paper airplanes and just launch 'em until one of 'em lands in the box. I don't know how you're gonna solve that problem, but that's the sort of stuff we concocted for this. But Howard was sure he was gonna get fired if he started teaching that way.

And so he never totally had the balls to implemented. But that was if you're building something new the skillset that we teach in business school, it, they look, they can't teach this stuff. It's the same reason I don't have checklists in my book. I can't give a checklist.

Yeah. To an unknown problem. We don't know what the solution is. How many items are on this checklist? We don't know.

Srini: This is something I was just thinking about throughout our conversation is like I'm thinking about problems that podcasters have. And there are a series of small ones.

One thing I think that people have issues with, and I think this is an issue for podcast advertisers as well, right? Is that most of the time when people hear an ad on a podcast, they're not in front of their computer. And so that makes it very difficult to get them

,

from the ad to the call to action unless you have an audience of Joe Rogan's size.

Or Tim Ferris size, but that's a small subset that's the 1% of, or the 0.1% of the podcast ecosystem. And so what, I guess the question is then is when you look at building innovation stacks, do you start to look at a series of small, unsolved problems that all combine together?

Jim Mckelvey: I never intentionally try to build an innovation stack. I, it's not this thing that I'm going for, it's this thing that I recognize as it's happening. I'm like oh, wow. Okay. There it is. There it is again. But it's not the goal because if you focus on that, then you start focusing on innovation, which is not the point.

The point is to solve a problem. So you find the problem that is there. Okay. So you've identified a problem, which is that advertisers don't get the attention that they need in the traditional podcasting format. Then the question is what's the solution to that problem? And I don't know it right now, but we can, we could sit here and hypothesize, but what you would do is you would come up with some hypothesis.

Let's say, look I believe that the best way to podcast is to only podcast in conjunction with display a. like you need call to actions on billboards and then the response rate doubles, or I only believe that podcast should be weaving their stuff into into the programming.

Like Chesterfield cigarettes used to do in the 1950s there would be, all the actors would be smoking Chesterfield and they'd be sponsored by Chesterfield and the horse would be smoking and everybody's smoking and Chesterfield Chester I don't know how you do it, but neither do you.

So you start exactly doing something and then all of a sudden you realize, Oh wait a second, we can't do that cuz it's illegal. Or it's it destroys the podcast. Or it's driving listeners away. So then you have to pivot and you go, it's working, but it's causing the side effect. So you think you have to deal with the side effect and and like maybe you just discover that the secret.

Podcasting is some weird music base like you have to put a theme behind it, and you only mention the products at these sort of subliminal crescendos in the music track. I don't know what the hell's going on but you start with a problem, right?

Don't start, don't focus on innovation. Please that's not the point. The point of the book is to recognize when innovation is happening and not recoil from it because it's such a foreign thing to you. So don't say we have to invent something new. No, you don't.

Maybe somebody's already figured this. And maybe it's from another industry, like maybe the advertising industry or the auto industry or the scuba diving industry figured this problem out. Like you have to figure out if somebody's figured it out and either apply those lessons or make up new rules.

Srini: Yeah. I want to wrap with one sort of final area. One of the things that you say in the book is that money and fame are weak motivators. We tend to overvalue both commodities because they're easy to measure. The view looks better from the outside than it does from within. The scales go to infinity, but with diminishing returns and sometimes negative returns.

And I think that probably half my listeners are thinking, Yeah, that's easy for Jim to say he co-founded Square with Jack Dorsey. Does Jim have any problems related to money? Is he gonna worry about money ever again in the rest of his life? But I also have seen that play out in my own life to some degree where when I looked at any creative project that was done, surely because I thought that money was a reason to do it, that was a disaster, or if it did make money, I hated the entire process.

Jim Mckelvey: Yeah. So I had this weird epiphany. Sorry that's my meatloaf, but I'll get it later. Yeah. And yeah just for the record, Yes. I'm making dinner tonight and it's meatloaf there. Life is a billionaire, right? I got ground beef under my fingernails. What were we talking about?

Oh yeah. The day I realized I was rich, I, so I was, this was years before Square, I was driving into my glass studio and this I was radio contest was given away a 10,000 bucks and the radio announcer said, Think how $10,000 would change your life. And I was like, Wow.

Actually it wouldn't I'd love to have 10,000 bucks. I didn't have a lot of money at the time. I had a crappy old car and I was going into my glass studio, but I was already successful enough that I could buy everything that I wanted. And so I started thinking about how much money I would need to change my.

and the number I came up was astounding. Like it was like tens of millions of dollars. And I didn't have a million dollars to my name at that point, but I was like, what are the odds of me making 60 million bucks? I figured, if I made 60 million bucks I might be able to get a little bit of a passive income and then I could afford a better airplane.

Cause I was flying at the time, like I had an old airplane, but my airplane's a piece of crap. I still have the same airplane. My airplane costs $23,000. It was 23 grand. It's a Moony M 20. Okay. Yeah. Manual Atlantic gear. The hold on yours. But it's a great little plane. It gets me where I need to go. I could fly it That's what I flew.

It was cheap plane. Cheaper than your car. Yeah. But I was rich and I had this moment where I was like, Oh crap, I'm rich. And it wasn't that I had a lot of money, it was that money wasn't gonna change anything. And now I have a Fanta Orical amount of money and it has changed very little. . I guess I have a fancier plane now.

Okay. So you can hate me for that. I still we live in a two bedroom apartment. Why? It's not because we can't afford a bigger pla Why would you do it? Yes. It's Oh, more crap to take care. I don't think I have the ego to deal with my bank account. I certainly don't aspire to do anything with it except give it away.

What my wife and I are doing now is we're trying to figure out how to do effective altruism and give it away. But back to motivation. I talk about money and fame as weak motivators, but I think they're very easily packaged. Motivators. Yeah. Because fame looks really cool, right?

The champagne on the yacht, the caviar, all the bling like the brands, all that stuff. Hey man, if you're into that, if that really makes you happy, get it. Do it. That's cool. I wish I was that way cuz then I'd be happier. But I'm not like you put a label on my shirt, it ain't gonna make me any happier.

So I don't have a label on my shirt. But if you're motivated by money and fame, what you'll find is that goes away very quickly. You don't tend to stick with it as much as you mentioned it earlier in the podcast. I think it was a great example. You're motivated by being angry. You find something that you think is wrong.

Hey man, I'm the same way. I see something that pisses me off. I see somebody taking advantage of a poor person or somebody doing something that's racist or weird or just messed up like that makes me angry. And that anger is a source of energy. Way more motivating. So I've been working harder since Square than before because like now I feel like, okay, my family's taking care of, I'm never gonna have to go out and beg for food.

So I can take some really big shots. What's pissing me off today? And I'm working on these big problems now. Might not solve 'em, but boy, the motivation is there. And it's not to make any. Yeah.

Srini: Yeah. It's such an interesting paradox. Cause I remember we had my friend Y Silver here as a guest and he had a coaching client and he asked him what's the money amount?

And he said, A billion dollars. And he was like what are you gonna do with it? What do you need a billion dollars for? And it's really eye opening when you actually sit down, down and make the list of all the things that you would spend money on. And suddenly you hit a point where you're like, Wait a minute.

That's everything. And my ongoing joke is always there's only one thing I need more than a billion dollars for, and that's to buy an NBA basketball team, which is a ridiculous goal considering I don't watch sports on tv. But I love the idea of owning a sports franchise. And I play NBA two K religiously

Jim Mckelvey: Okay. So there's your thing if you wanna own a basketball team, good luck. That, that's, Yeah. That's a reason to get like money. No, but I. I get offered sports teams occasionally. The guys, there's a short list of us, right? Suckers who might wanna buy this stuff?

And I thought about it like, would I like to own my own football team? And I was like, I just, it wasn't something for me. I just like, and I'm not saying I could afford one right now, but I think that's cool. If you want it all right? Get it. Do it. No judgment. All right?

But I don't think most people want that stuff. Have you been in a 20,000 square foot house? They're ridiculous. You never see any of your family . Now, if that's your job, get a separate house. Get like two cheap houses and set put a yard between you and the kids hire a nanny, Wall 'em off.

I don't know. Prep school, boarding school. No school homeschool fricking live on the road. There's solutions to these that don't. They're not money problems. Yeah. The number of problems that are truly money problems are and look, I've had money problems. I've, I know what it's like to not be able to pay a bill.

I know it's to I used to have pop, I used to pop start my car cause I couldn't afford a starter on it. So I parked it at the top of the hill and I'd get in, I would push it and it always started. So I was like, Oh, I'm good. But the, if you're, here's the thing, if we're talking about innovation back to the subject of innovation, if you believe me, that innovation is unpleasant, which I really think true innovation is, I really think not knowing what's gonna work and having a lot of failure and having a lot of uncertainty is uncomfortable for almost every sane human.

So if you're gonna live in that world, what's gonna keep you going? Because you gotta keep going or you're never gonna solve the problem, and you don't know how many steps there are to the solution. So you gotta keep going and going. You just don't know what's gonna keep you going. The answer's probably not money.

At some point you'll go, God, it doesn't matter. I'm sleeping indoors. I gotta television. I got Netflix. I'm living pretty well. I'll just go get a job. I'll quit. I'll stop. But if the reason is, Hey man, I'm fixing a problem with the world and I'm gonna keep going until this problem is solved, then your motivation is almost infinite.

Srini: Yeah. Wow. I have two final questions that, you know, and I intentionally did not want to make this about Jack Dorsey because I wanted to talk to you about your book. But I am curious because you read the mythology, right? Which is magazine cover articles and all this, but just out of morbid curiosity, how in the hell does somebody run two companies simultaneously that are both massive and what makes somebody like that tick, I guess is really the question.

And you saw him when he was in high school. Is that something you could predict from the outset?

Jim Mckelvey: No. No. Look, you could run two companies too if you don't have a family, right? Jack's a very solitary person and he's very thoughtful. He's very smart. And if you're a good CEO and you have excellent people around you, they don't want 40 hours of your input, right?

What they want is knowing that you've got their back when it happens. And Jack was very good at that. And you know what I do, You're not married this isn't gonna be as great a rhetorical question, but ask yourself. I talk to my people who, my friends who run public companies and and I say, Okay, you can get rid of your family obligations and run another public company.

Have your workload gone up or down and Oh yeah. Down . So running two public companies is, at least in my simple surveys, less work than running wood public company and having a family at the same time. , which many people do. Yeah. But look, Jack's super capable. And he set up his life to be able to do it and he enjoys it.

If you enjoy it, then it doesn't feel like work and you could clock 60 hours. And like Jack got in trouble once at Square because the people were complaining that we were working him too hard. And Jack was like, I take a vacation every weekend. He sent out this email business.

I get a vacation every weekend. I don't work on Sundays. And people were like, like I got nannies I got childcare, I got a car seat. Go to hell with your weekend vacation. I need two weeks. I knew two weeks in August. But no, he did a, I think he did a great job did a great job.

Those companies, Squares continued to kick ass and look what Twitter did under Jack, yeah. Wow. This is amazing. I feel like I could talk to you all

day. This was super fun. I so appreciate how prepared you were.

Srini: Yeah. I would, I just knew. If I have an hour to talk to somebody like you, I want to make sure that I learn as much as I can.

I have one final question for you, which is how we finish all of our interviews at the unmistakable creative. What do you think it is that makes somebody or something

Jim Mckelvey: unmistakable? Unmistakable? I think it's the ability to be wrong. I think if you're willing to go and bump along in failure, you're eventually stumble on success and then that becomes something that you're credited with that is unique.

That to me is the moment of magic. When you're wrong. You're wrong, you're right. Okay, but can you be wrong five times in a row or 20? That's the ability that's what makes something or someone noteworthy. Unfortunately, you can't aim for the noteworthy thing, cuz that's the.

Again, like if your goal is to be noteworthy, you're gonna quit. It's a weak motivator, but if you get it, it's it's magical because you will have traversed this dark path and come out on the other end, and that gives you a little bit of strength for the next dark path that you might walk.

Yeah.

Srini: Amazing. I can't thank you enough for taking the time to join us and share your story and your insights and your wisdom with our listeners. Where can people learn more about you at the book you're work and everything that you're up to?

Jim Mckelvey: I don't use social media. Yes, I have Instagram accounts.

Those aren't me. And I make I'll tell you this when I wrote the book, the publisher was like, You gotta do social media. I was like, I'm not doing social media. He's You gotta do social media. I was like, Okay, can I hire a team? So I've got a bunch of 26 year olds to tweet on my behalf, and if you see the hashtag happy place that's not me.

I don't use that phrase right. . So ignore all social media from Jim Mackel. I do have a website jim mackel.com where I put some articles, some blogs and some, so some thoughts. Generally I'm a pretty private person. So if you're super interested in what I'm doing, you can check out what invisibly is doing invisibly.com.

You can check out Launch code is a phenomenal thing. If you wanna learn how to become a programmer, we'll teach you how to do it for free and get you a job. So launch code.org play with Square come blow glass. I've got a book on glass blowing. You can read there's all sorts of ways that if you share my interest that will run into each other, but I don't broadcast my life on social.

Jim o's dot com's about as close as you can get, but I would say this people who read the book and then approach me I like if they've really read it and understood it it's easy to find me. Okay. I'm easy to find. And they find me, and I'll usually respond because they have shown me the courtesy of actually thinking about stuff that I think is important.

And I do think these ideas are important. That's the whole reason I wrote this. It wasn't for any money. Okay. . And it wasn't because I enjoyed spending three hours of my life, like editing and editing. It was that, look, somebody's gotta say this stuff. And I never heard it said before.

And I wish somebody had told me when I was way younger that there was this difference between you when you're inventing and when you're copying it. I never drew that distinction. So I missed a lot of lessons early on. Amazing. Like I said, this has been one of my favorite conversations the year.

Srini: I just learned so much talking to you.

Jim Mckelvey: What a pleasure, man. Absolutely. Thank you. Yeah.

Srini: And for everybody listening, we will wrap the show with that.