Full Transcript: Earning Your Stripes – The Knowledge Project

Full Transcript: Earning Your Stripes – The Knowledge Project

: Welcome to the Farnam Street podcast called The Knowledge Project. I'm your host Shane Parrish, the curator behind the Farnam Street blog, which is an online community focused on mastering the best of what other people have already figured out. The Knowledge Project is where we talk with interesting people to uncover the frameworks you can use to learn more in less time, make better decisions and live a happier and more meaningful life. On this episode I have Patrick Collison, the co-founder of Stripe, which he started with his younger brother, John, in 2011. While Stripe started as a company to make online payments easier, it's morphed into an internet infrastructure company. Patrick is one of the most well-read and thoughtful people I've ever met. After listening to this conversation, you'll realize his success is less about luck and more about thought. I'm pleased to have Patrick Collison on the show.

: Before I get started, here's a quick word from our sponsor.

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: Patrick, I'm so happy to get to talk to you.

: Thanks so much for having me.

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

: Well I didn't, technically speaking, drop out although I sort of, practically speaking, did. But, you know, given my lack of education credentials elsewhere I should, for the sake of my parents, insist that I did, in fact, formally speaking, graduate from high school. But, I guess what happened is that I'd become very interested in programming and I, sort of, wanted to spend as much time on it as possible and Ireland, actually, has this, kind of, interesting thing called Transition Year, this year between the, sort of, two major exams of, kind of, high school, or at least Ireland's high school equivalent, and in Transition Year, it's, sort of, a formally designated year, that's optional, where you can go and pursue things that you might not otherwise, you know, 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, you know, 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 – well, as part of the programming, I had visited the U.S. for the first time. I had gone to Stanford for the 2005 International Lisp Conference and there – it was a fairly small conference, and, it was very eye opening for me and I remember, you know, walking around Stanford and thinking man, American colleges seem great. And so, 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 U.S. the subsequent year and, it's, sort of, a long story but I eventually figured out that I could not do it if I followed the standard Irish education path, but that I could do it if I did the British, sort of, terminal examination. And so, I, kind of, resumed my, sort of, self-education, except, instead of programming, I was now studying for these, you know, British exams and I did that for the subsequent year and ended up starting at MIT the next fall.

: And, how do we get from MIT to where we are today, which is Stripe's offices in San Francisco?

: Well, it's, sort of, a long and torturous story and I'll spare you most of the less interesting details. I guess, the overarching thing is while people in the U.S. have, sort of, grown up in an environment of which college attendance is, sort of, really prioritized from an early age and, sort of, you know, you're optimizing your extra-curricular activities from the time you're 14 and you're choosing your kindergarten on the basis of a thought that it's a downstream college acceptance rates look like and all that, kind of, stuff. Of course, growing up in Ireland that, sort of, wasn't part of the, you know, culture or discourse or environment at all. And so, by the time I got to MIT, and then just to college in general, it didn't feel like that big a deal, it didn't feel like, sort of, this was the terminal state that I'd, sort of, spend my entire, kind of, childhood and adolescence that I'm trying to pursue. And so, as a, kind of, other things and other ideas and opportunities, sort of, you know, crossed the transom, I think I was maybe more open to them than my peers, not because, I think, any differences in me, but just because of differences in the culture and environment that I come from. And so, my brother, John, and I – John, at this point, being a little bit younger, he was now in this transition year in Ireland, we decided to start a company six months after I got to MIT. And so, I'd really just started and I felt that I had some, kind of, time to spare because I'd started college a year younger than, you know, most of my peers, and that company, sort of, worked out ok and, you know, it's, kind of, a long story but it ended up becoming a small acquisition.

: I went back to MIT because when I had started there I'd, sort of, been very interested in math and physics and had, kind of, been interested in this idea of, you know, potentially becoming, or, at least, attempting to become some, kind of, academic and, of course, at a place like MIT, that's, sort of, the default around you, you know, everyone is planning on, again, trying to get a Ph.D. or to become a professor or whatever and so, I think, you know, that that environment had some effect on me. And so, I went back and because I felt that I hadn't, sort of, really, you know, properly rejected the hypothesis that maybe I shouldn't try to become a professor, right? Maybe, kind of, physics is what I should be, again, at least attempting to spend my career on.

: And, after a year back at MIT, I decided that that was not the case. 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 that, sort of, broader period of discovery. It felt like the period in which, sort of, you know, we existed in say, 2010, was that there really was just not the same rate of progress. And so, there's a little bit of that and then also some amount of, sort of, appreciation, myself, that I think I just enjoyed programming and software and technology more than I did math and physics, even though, to some degree is a little bit, maybe, painful to realize that.

: I want to explore a little more about the cultural differences between Ireland and the U.S. and how that impacts you as the CEO of Stripe.

: I think there's maybe a couple of things in that Ireland is very outward looking, necessarily so, in that, sort of, Ireland's, sort of, improbable rise from poverty over the latter half of the 20th century was very significantly enabled, maybe almost wholly enabled by exports, by, sort of, importing American multinational companies, having them set up factories and bases and, you know, hubs of different sorts in Ireland. One of the world's first special economic zones was created in Shannon, which was very close to, maybe 10, 15 miles from where I was born. Deng Xiaoping visited us and found us quite inspiring and so decided to set up special economic zones in China and so Shenzhen and the, sort of, the Pearl River Delta, that, sort of, special economic zone was in some ways directly inspired by, you know, what he saw in Western Ireland 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 of the rest of the world are, sort of, much greater than, kind of, those internally. 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 all 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 and, sort of, at least elite circles. Now, see that's something that perhaps is being questioned somewhat more but, I guess, the Irish experience is very much one of seeing it as an almost wholly unalloyed good. And, again, I think that's greatly influenced us here. Certainly me.

: Well, it's interesting, too, from a cultural standpoint where Ireland has had very high rates of immigration, particularly post the expansion of the EU in 2004. A very large number of Eastern European immigrants moved to Ireland when those countries acceded to the EU and, that was really not accompanied by any material, social strife or conflict or a lot of the, sort of, challenges that we've seen in, sort of, other parts of the world, and, so again, I think that, sort of, an appreciation for borders that are more open or more openness to immigrants. More, sort of, facilitation of opportunity, things like that, again, I think that really is the Irish experience. 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, kind of, pursue lives in the UK and Australia and the U.S. and Canada and so on. And, that's again, just really a, kind of, part of the national ethos and then maybe more softly, I guess, Irish culture places a lot of importance on just a, kind of, warmth and the, kind of, a particular tenor to a, 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 warm place. I mean, we play music at reception and in the kitchen to just try to put people at ease and to create enough, sort of, soft noise around them where they feel comfortable having just a good conversation and, you know, maybe that's because of entirely unrelated reasons or maybe, again, in some way, we were influenced by 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 tell you that with a caveat and the caveat is that I'm pretty sure the answer I would have given to this would have differed in some material ways two or three years ago, right? And, that's in part, because I think we're coming to realize things that we just hadn't really appreciated or, sort of, seen the significance of two or three years ago. And, also in part, because literally what it is that we need today is just different to what we needed two or three years ago, right? And, so, I think there's a double contingency in the answer where it's a function of just what we realize at this point but, also, sort of, what it is that the organization – the company needs and the, sort of, challenges that we currently face. With that caveat, I think the things that we really prize and try to, you know, seek in the people we hire are a, kind of, rigor and clarity of thought, in that, I think so many organizations prize, sort of, smoothness as, sort of, interactions and trying to reduce – minimize the number of, sort of, ruffled feathers and that they, kind of, at least, sort of, inadvertently, if not deliberately, prefer cohesion over correctness and we really try to identify people who – who are seeking correctness and who don't mind being wrong and who are willing to at least contemplate things that seem improbable or surprising if true or really divergent as to what is, sort of, the generally accepted status quo. And that's hard to fight and I don't think most of the, sort of, educational institutions that we all tend to have attended, actually, do a great job of teaching that. And so, we look for that, kind of, combination of, sort of, openness and rigor. I don't exactly know what the right word is but a, kind of, determination and competitiveness and, I guess, willfulness in that just doing anything of significance is hard. I mean, anyone who's tried to do anything that they, themselves, consider significant knows that very viscerally, right? And, I mean, especially for a startup like, the default outcome is you're relatively near-term non-existence like the default outcome is that you do not survive to – to survive over the medium or, you know, even more difficulty over the long term. And that is like an unnatural act, right? And so, you need to find people who, not just are willing to, sort of, push against the, sort of, the expected trajectory of non-existence, but people who actually enjoy that, who want that, right; because if they're merely willing to do it but they don't actually enjoy it, then, you know, the work is probably going to be less fulfilling for them over the medium term.

: And, I really don't think that is for everyone. I don't think that's a bad thing right; in that the cliche, of course, is that startups are extraordinarily hard and they just are and, you want somebody 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 gonna be working is, sort of, undefined or significantly under built out or significantly broken or whatever the case might be, but that's what they're looking for, right? And then, we try to find people who just have a, kind of, again to return to this word, interpersonal warmth and a desire to make others around them better and just a degree of caring for others and a desire to be nice is a, kind of, anodyne word, but to be nice to them and to make them better off, right? We really try to find people who you just actively enjoy spending time with, right? You spend such a large fraction of your life inside the walls and 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 think, I mean, of course, don't know for sure, but I think we go to, sort of, some greater lengths to find these people than other organizations tend to do. And, there's other things as well. I mean, you know, it almost goes without saying but we really care a great deal about ethics and integrity in people. But, you know, I think so too do a lot of other organizations. I think the three that, kind of, really stand out to me are this, kind of, rigor and clarity of thought; this, sort of, hunger, appetite, willfulness, determination. And this, again, warmth and desire to make people around them better off. Those are three that really stand out to me.

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

: Sure. I mean the, kind of, background context here is that by almost every, sort of, under almost every, kind of, ostensibly sane analysis, Stripe looked like a bad idea, right? This was a crowded market. There were tons of existing incumbents, there were significant regulatory and just, kind of, partnership institutional barriers to entry. We had no experience in the domain. We were very young. We weren't even U.S. citizens in an ecosystem that, again, just because the regulatory dynamics, you know, that, sort of, adds further complication. We had no, sort of, obvious mechanism for gaining, sort of, significant distribution. And we were not a, sort of, naturally viral product or, you know, we had, sort of, organic adoption the way, maybe, a social network or a consumer product might have. And for all those reasons, I think a lot of people, sort of, very reasonably, thought that, you know, Stripe was a bad idea or us pursuing Stripe was a bad idea. And they certainly didn't hesitate to tell us that and, you know, I think, to be clear, I think they were doing something reasonable by telling us that. I mean, they were giving us their, sort of, honest, and, again, you know, reasonably justified assessment. And so, it all started in the background context of that. I think the thing that primarily gave us the confidence to actually attempt it was it just seemed so strange that something with Stripe's character didn't exist, in that, we really looked for a Stripe before we – before we started it. It felt that it must be the case that there is some service, some company somewhere offering infrastructure and APIs and payments and economic tools that are straightforward to use for a developer, right? I mean, this is one of the, sort of, top needs that any business operating on the Internet has arguably by definition or, sort of, a business on the Internet must have access to these tools.

: There are tens of millions of developers operating on the Internet and so just given the magnitude of that market and the, sort of, obviousness of the business model, it really felt like this had to exist. And so, we, kind of, forlornly Google for it, you know, with a different set 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, probably exist and its non-existence was so, kind of, strange to us that it actually, initially, kind of, discouraged us where it was, sort of, such an obvious idea and such a surprising, you know, absence of a, kind of, solution, maybe there's some, kind of, latent force that we're not seeing that actually makes, sort of, solving it impossible, right, in that, you know, for example, we were also interested the same time in why, kind of, consumer banks were so bad in that just, you know, they weren't really keeping abreast of technology and the fees were really high and they were getting fined by the CFTB and, you know, et cetera, et cetera, et cetera, 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 were 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's standpoint that's actually, kind of, essentially mandated by law. And so, it's not, on some level, the banks' fault. And the second reason is the office of the controller of the currency, which is the entity that, sort of, issues federal banking charters had basically stopped issuing new banking charters post the financial crisis and so if you came along and you're like well I'm going to go solve all these problems in consumer banking, you are essentially blocked from doing so by the, kind of, regulatory apparatus. And so, we wondered in this, kind of, similar vein is there some force like that. Not necessarily regulatory, but just like there are some constraint that, kind of, we aren't observing or weren't.

: And, after maybe a couple months of investigation we decided that no, there didn't appear to be, at least, 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 built, sort of, on top of and with, sort of, existing payment systems and so, it didn't do anything, kind of, overly ambitious, it was almost like a, sort of, concept rendering of what a solution could look like rather than, sort of, a solution itself, but it was sufficient to get just a couple of our friends started using it and I think the particular thing we realized that caused us to, 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, problems that we perceived and, kind of, developers like us, people building some little side project or with this, kind of, very nascent, you know, startup or something like that, that the problems we perceived for that, kind of, at 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 having hundreds of millions or billions in revenue or companies in other countries and so on and we just asked them to kind of, recount their problems and what they wished existed and everything else, they basically, give us the same roster of features. And, when we thought about it and just like looked at the, kind of, macro figures, we saw that, you know, about at the time two percent of all consumer spending in the world happened on the Internet. And, so even though we were, kind of, you know, 20 years into, sort of, the Web's evolution and even though, you know, we'd all engaged in lots of e-commerce and so on when you looked at it on a macro basis, it was apparent that, you know, we were still, kind of, barely off the starting blocks and so I think the combination of those things where, kind of, decided that there didn't appear to be some, sort of, some dark energy preventing a solution and that this set of problems we could see actually seems, sort of, very pervasive rather than just, sort of, a microcosm. And then, thirdly that actually this whole market and environment was still actually at a, sort of, surprisingly nascent stage when you looked into the full picture. Then we decided to drop out.

: You guys went from two employees, you and your brother as co-founders, to 800, 900 now?

: We're about a thousand now.

: A thousand employees. And, what have you learned from scaling the business?

: I think on some level, scaling a business is both relatively straightforward and extremely hard. Relatively straightforward in the sense that it's usually not that difficult to see what the problems are and to the sense that you don't see what the problems are, it's usually because there's some, kind of, subjective blindness, rather than it being actually difficult to see the problem, right? And so, it's more of a simple question of what are you oblivious to because of your own biases rather than what is particularly difficult to observe and, kind of, what are your corrective mechanisms to, sort of, account for that.

: So it's, I think, straightforward in that sense. And, I guess, straightforward in the sense that usually solving the problems is not outlandishly difficult. I mean, it's not easy but you don't hire someone in this role, you need to figure out how to raise this capital; you need to build the system. Whatever the case may be, I mean, none of those are easy things but they're also not, sort of, scientific breakthroughs. There are other companies that have done it. There are generally playbooks that exist and file, sort of, your particular strategy might need some, sort of, correction, refinement and you might hit some walls along the way, it's rarely unprecedented. And, then, I think, it's extremely difficult in the sense that you don't get to really choose the clock cycle, kind of, and the time horizons. It's a category of, sort of, flash games and desktop tower defense games, where you're, sort of, building little towers that shoot missiles and all these little critters, sort of, scampering across the board trying to, sort of, break into your fortress, whatever the case might be, and I started to feel a little bit like that, where you fundamentally don't control the, sort of, rate of, you know, problem appearance and you just control the, sort of, other variable of the rate of which you're building defensive or mitigatory or mechanisms to deal with those problems. And sometimes the rate of the problem creation can outstrip the rate at which you can solve them even though in principal any one of them is relatively manageable, right? And so, I think that really adds a lot of difficulty.

: I think even on this, kind of, very abstract level dealing with the problems is tractable, the character of having problems materialize at every level 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, a natural 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, 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, in the same way that you see the constellations in the stars, you know, the, sort of, constellation of the problems looks so implausible and so unreasonable that, like, someone must secretly be screwing with you, right? And so, there's that, kind of, emotional, sort of, self-management. And then, of course, there's the challenges of dealing with uncertainty where, you know, it's, kind of, I guess – well, you're operating in, sort of, the weird zone where you're often making decisions that have, sort of, significant long-term impact or that are difficult to reverse or to course correct and in the face of great uncertainty, right? And, the uncertainty is often unnecessary in the sense that you could in principal 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 is just – it's Truce of Nice and unknowability. And I think when it is, like, true deep unmitigable uncertainty, then I think it's not too hard to say well we're just going to choose something and, you know, make the best decision we can. I think it's a more frustrating, kind of, uncertainty where it's actually not necessary but the thing that, sort of, limited is essentially the cost of obtaining further information, reducing that uncertainty. And so, you're left in the, sort of, dissatisfying situation where I have to make a highly consequential decision. There's a lot of uncertainty. We could have less uncertainty. We could take steps to mitigate that, but we just don't have time to. And making a lot of decisions in that zone is somewhat dissatisfying, right? And, I think, kind of, correctly so in that, you know, when it's correctly reacting to the fact that it could be otherwise, right?

: And then lastly, maybe, you're playing this, sort of, multi-armed bandit problem where you're, sort of, constantly trying to balance exploration and exploitation or, sort of, just optimization of that which already exists instead of doing it better and better with trying to figure out what are the things that, 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 the organization to be vastly more effective and so on. So, 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 inside the system. 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 scaling the organization is, sort of, finding, at each, kind of, moment the right way to balance those things. But, without ever having, kind of, sat down before to try to, sort of, you know, and anybody to come to listen to any unified theory, I think that a lot of the experience of scaling an organization is, kind of, specific versions or specific applications of, sort of, those dynamics and just figuring out how you, yourself, or how the organization, or how your peers and colleagues, sort of, deal with that and what the, kind of, structural mechanisms for doing so are.

: And then maybe very lastly, I mean, those are all, kind of, the structural ones. I think there is just also a personal version where you certainly don't start out being well adapted to or, at least, in my case particularly skilled in organizational management and leadership, and, I mean, depending on the rate of growth of the company you, sort of, need to acquire those skills, again, on a timeline that's largely out of your control and, you know, depending on the rate of growth of the organization, that might be a pretty difficult thing. And so, you know, certainly in my case, I think I've just had to accept my, sort of, managerial inadequacy relative to what either is required in the moment or, sort of, will in the near-term impending future be required and just figure out strategies to try to acquire those skills and abilities as rapidly as possible.

: I wanna 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 and maybe personally, if that's different.

: I don't know a better answer other than using course heuristics and then being willing to revisit or make an exception if something seems, sort of, particularly promising right now. Roughly speaking, we invest most of our effort, the precise number, 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 is a, sort of, relatively clear line of sight from, sort of, the input, the work, the optimization, whatever to, sort of, the output improvement. And then, you know, some fraction of the work and the, sort of, a distribution of some fraction the work, let's call it 20 percent, into things that are more speculative, right, and I think that's, kind of, necessarily the case because 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, then this, kind of, default non-existence we just discussed would be guaranteed, right? It's very easy to sort of, fly the company into the side of a hill. And so, I think really the question is just do you spend 20 percent of your time on things that are more speculative or do you spend 0 percent and then, maybe secondly, to what degree do you allow those answers to be different, at different levels of the company, and then, sort of, in different places and, kind of, how much of a uniform answer and how much heterogeneity do permit or do you design for. And, I think as we've grown we've tried to shift into a model where it is somewhat less uniform and, in certain teams, less optimization of what already exists is going to be required; it's going to require more exploration and in other parts of the company, to be tilted in the reverse direction. And, I think, that, kind of, recursive decomposition, I think, is really required to avoid the diseconomies of scale that otherwise set in as you grow.

: And you decide which speculative projects you take on, probably based on disrupting your business or these are things that I want to do or I want to strive 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 good idea, and, I mean, I think, it's, kind of, like investing when you ask, you know, what are the criteria for investing in a company. It's well, when you, kind of, normalize down from these, 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, similarly you decide, you know, which ideas to pursue. Of course, on each axis there are many things you prefer or you don't want or whatever. And, for example, something that requires less effort rather than more or entails less downside risk rather than more or whatever, you know. Those are all good things, but I think, kind of, where it all nets out is well when you take account of all those factors which things just seemed like a good bet, right, and so, just, you know, to give a concrete example, Atlas, the service we launched for helping 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, there was no, kind of, one reason as to why that was a good bet. There was no, kind of, you can't just measure that on any one axis, right, but, kind of, when you look at overall and you see that well, if it doesn't work and it's hard to see how it could cause that much downside for Stripe, it's not going to require an enormous, kind of, fixed cost investment in order to, sort of, learn as to, at least, whether it's initially working. If it did work, it seems like it'd produce, kind of, quite significant returns. The kinds of things we'll have to do for it are actually things that are quite valuable for us in other parts of the business and so on. So, we'll learn interesting new capabilities and skills in the course of doing it, et cetera, et cetera, et cetera. I think the reason there aren't more good bets made in the world is because making good bets is difficult. And, again, I think you're gonna, in different areas …

: Difficult in terms of recognizing them or difficult in terms of acting and executing on them, or what do you mean by difficult?

: I think both. I think most organizations are, sort of, institutionally resistant to bets in that because most people are necessarily optimizing things that already exist. And, again, that's correct 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 emerge, I mean, those are going to break, right, and so, the optimization is critically important. I don't mean to, sort of, sound remotely, kind of, dismissive towards it, but banks are a very different character, right? And, you know, sort of, a continuum of betfulness and riskiness …

: Is best.

: Yes, exactly right, and, large institutions and incumbent organizations, sort of, dislike them right, structurally speaking, and find them difficult to understand and difficult to interact with and so on, and I think there's a whole host of reasons there in that, you know, people in startups are, sort of, less worried about the risk of failure; whereas, people instead of existing systems must worry quite a bit about the risk of failure. You know, newer things tend to operate on, sort of, faster, sort of, on clock cycles and so, you know, Dijkstra talked about the idea of the Buxton Index and the, sort of, time horizon upon which an organization makes its decisions and so maybe a university make its decision, you know, its decisions with a decade long time horizon; whereas, maybe a company makes decisions on a quarterly time horizon and maybe a, you know, an individual make decisions on a weekly or monthly time horizon, whatever. And, anyway, so I made the observation was that organizations with very different Buxton indices find it difficult to work together. And if an organization with a really long-time horizon is working with one that, sort of, rapidly updating and, sort of, rethinking, it's just like a fundamental, kind of, a hedon's mismatch. And so, I think that, you know, to your question are, sort of, why it's hard and why there aren't more good ones in the world. I think there are lots of different kinds hedon's mismatch like that. It's not just the time horizon thing, but I think there's just like a fundamental deep intrinsic difference between, sort of, of existing incumbent systems and the actions of the minds that require to optimize them, and, this, sort of, the exploration of figuring out that which is totally orthogonal different and you.

: How do you keep that mentality, I mean, when Stripe 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 who have invested a lot of money in the business. How do you maintain that ability to place massive bets?

: It's really a question of how do we make sure that we can place bets that don't have excessive downside or are, sort of, fatal downside, right? Or a cumulatively fatal downside across, maybe a whole portfolio bet, and I think that actually the impediments to placing good – well, again, I will caveat all this by saying it's not like Stripe has a long track record of, sort of, making really good, you know, investment bet decisions. You know, I am, we are, far from being the Apples or the Berkshires or whoever, you know, multidecadal, sort of, track record of …

: We'll be back here in a decade. We'll re-evaluate.

: If we are here in three decades which, you know, as established would not be the default outcome, and we have a great portfolio of successful such decisions then perhaps we can opine, you know, with some modicum of confidence and, but it feels to me and we'll see if it's right or not, it feels to me that actually the reason that organizations don't tend to make more of these or make more good ones is it's more sociological, more institutional and less that it's fundamentally too costly because in most cases, the downside cost is not that large and either in terms of, like, just direct financial cost or in terms of these, sort of, broader damage to the organization in 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. How do you have the – I mean, Stewart Brand, I talked about pace layering in buildings and different parts of the building have to change at different rates and how do you design for that. And I think that, kind of, analogous question for an organization is how do you do organizational pace layering. How do you have parts of the organization that can try to do something fundamentally different to and hopefully superior to that which already exists. And how do you have people who are basically disagreeing with people trying to do something new, who you think that no, the way we're currently doing it is in fact the right way we're going to do it better and better and because these people fundamentally, structurally disagree with each other and must have significant conviction of 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.

: 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, I would not say we were particularly Bridgewater influenced.

: Did you come to this, sort of, notion of thoughtful disagreement. Before that influence. And, if so, how did you …

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

: Because they see it as an attack on – exactly, right.

: Right. I think that there was just a common shared personality trait in a lot of the people who helped establish the culture of Stripe where they enjoyed some disagreement and tried to find the boundaries of an argument and the places where it's not the case, and what the exceptions might be and just trying to, kind of, get a feel for the topology of that space and, kind of, stumbling in the dark try to construct a map of where different intuitions and heuristics apply and where they don't and so on and I think when you have, kind of, deep minds, at difference in people is often those who enjoy finding the limitations of arguments and beliefs and those who don't. And Tyler Cowen talks about, I think, it's his second law, that there are no knock down arguments and there are no arguments are just uniformly completely true. There are always the limits to it. There's always the other side and I think that's, kind of, very deeply true but I think there's, kind of, just a question of, sort of, an 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 it's less true than I think. Or is that just like a stressful process. And I think that, sort of, getting that, kind of, rigor and clarity of thought requires, sort of, a joy of discovery, like, this thing I believe, this rule that I thought existed, like it's actually not good in this place and having that be an enjoyable discovery rather than, sort of, something stressful and frightening. I think globalization is a good example there where, you know, as we discussed, I think that globalization is a net overall for the world, a fantastic thing and something that, you know, support is rising for a global basis and has propelled more people out of poverty than almost any other force ever. And yet, there are people like Dani Rodrik and others who are, sort of, prodding at the edges of that and showing well but not in this place or not in this way or Autor and these other folks at MIT, like maybe it has this, sort of, underappreciated downside and I think that's great. I think those are important questions and really interesting work. And I think that, kind of, again the underlying, sort of, sentiment is, sort of, interest in where the heuristics and the intuitions and the rules and the arguments are at.

: I wanna come back to some of that a little bit later. I think one of the questions that people want to hear from you is what would you say is the biggest difference between the Patrick making decisions today and the Patrick making decisions maybe five years ago in terms of how you actually make those decisions?

: There are four big differences. The first is, and I just place more value on decision speed in that if you can make like twice as many decisions at half the, kind of, half the precision, that's actually often better. And then given the fact that, sort of, the rate of improvement of decision making with additional time almost necessarily tends to, kind of, flatten out, I think that most people, certainly the Patrick five years ago and even 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 can course correct and treat fast decisions as a, kind of, asset and capability in their own right. And it's quite striking to me how some of the organizations that I hold in the highest regard tend to do this. The second thing is not treating all decisions just, kind of, uniformly. I think the most obvious axes to break them down on are degree of reversibility and magnitude and things with low reversibility and, you know, great impact and magnitude, those ones you do want to, you know, really deliberate over and try to get right.

: But, I think it's very easy, sort of, absent care to have 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 part a speed because obviously if it's very reversible then, you know, by definition you can always correct it later and if it's, you know, of low import then who cares, right? So, that's, kind of, the second one just being, kind of, cognizant of that and before making a decision, try to categorize well what, kind of, decision is it. The third thing is I now try to fairly deliberately just make fewer decisions in that why am I making the decision? And, for some kinds of decisions, there are some 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 from anyone not just for me is often like only a, sort of, an epi phenomenon and there's really some other underlying issue that's causing you to have to make it in the first place. And so, thinking like that and concretely doing more to push others to make decisions and, sort of, pushing them back, sort of, to people who ought to be the domain experts and then fourth, when I realize that I would make it a decision differently to have someone else making it, not even really discussing the decision itself but trying to dig into what is the difference in our models such that you want to make decision A and I want to make decision B. And one thing we're currently spending a bunch of time on your 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, their part of the organization, what – who their customers are either internally or externally. And so, the things of this, kind of, persistent, ongoing underlying nature is such that, you know, hopefully, once there's agreement on those longer-term things, then maybe a difference on any future decision might just be well, we differ, sort of, on what the most instrumentally effective way to achieve this outcome is but we're still both really unified on what the desired end state is and there I think disagreement over, sort of, instrumental efficacy, you know, well, that's rarely that problematic a disagreement because well if you're right then we'll soon learn that, if you're wrong reality will probably, sort of, make that pretty clear in short order. I think the more troubling ones and the ones that tend to cause more, kind of, persistent friction in an organization are where, sort of, there is latent disagreement in what you're actually optimizing for but that's, kind of, never explicitly surfaced and uncovered and so now I guess again in decision making, I place, kind of, more importance on making sure that we have the right, sort of, foundational agreement such as the, kind of, disagreement that I intend 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 inclined to say in response to that question that decision making in organizations is slightly overrated in that organizations are not like investment entities or funds or advantages in that with investing, it's fundamentally very binary. There is a moment at which you either buy or don't do or sell or don't or whatever. And maybe it's somewhat more continuous in the case of say public market investing and so on, but given, sort of, constraints on just decision-making time I think you have to treat it more binary. You assess this stock and you make a buy or a or not decision. Whereas, in organizations everything is much more fluid and continuous it's much more about designing the feedback mechanisms, you know.

: Biologic.

: Yeah exactly and, you know, the famous, sort of, water model of the economy. You know, with the, sort of, circulating fluids and you can vary the interest rate or the inflation rate or whatever. But just try to get a sense for the overall, kind of, biological apparatus. And I think an organization is much more like that and so, I think that 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 and less the binary decisions. I wouldn't kind of, completely dismiss, obviously the important decision making and that there are times where you have to decide well, are we going to launch this product or not. Or, are we going to start this project or not or are we going to replace the system or not and so on. So, there are, of course, real decisions but I think it tends to be much more – well, I guess, maybe it doesn't feel like the right unit of analysis to me. I think the right unit of analysis is that of the cell. And the question is, well in an organization what are the cells and what are the organs and how do they interact for the feedback mechanisms between them.

: Let's geek out a little bit on the feedback mechanisms here. What sort of feedback mechanisms do you try to make sure are in place, what point in the process do you try to acknowledge what they are?

: I really think that this is not the question but I really think it's too early to answer that in the sense that I mean I can, kind of, tell you what I think today and the, sort of, changes we've made over the last year and things like that. But like Stripe has been a thousand-person organization for or has been more than 500 person organization for just over a year, right? We're beginners at this and, you know, three years ago Stripe was under 100 people and I think either to opine as if or to even more problematically believe that we're gonna have it figured out would be real hubris. And so, it, kind of, in what we've been talking about I think that's gonna be some of, you know, where our thinking comes from them, but I don't know what the right answers are yet and we spend a lot of our time, sort of, scrutinizing other organizations trying to find out, in, kind of reverse engineer what works for them and why. And I think that part of what's interesting at the tech industry is that it's a kind of pure knowledge work that we're still, I think, quite early in sort of, figuring out in terms of how to optimally coordinate and collaborate on it in that you can, sort of, draw lineage of HP and Intel and Microsoft and Google and Facebook and so on, WhatsApp. And they're all these set of suggestive examples, but I think these, again, suggest that we may not have it all figured out. I mean, the fact that WhatsApp was such a miniscule team, and, Instagram too, of course, despite operating at such scale or the fact that …

: In the wake of a new paradigm.

: Yeah, yeah. And the way Facebook operates is very different to the way, you know, HP operated.

: Under 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. Culture is that when you ask somebody who's in the culture, can you describe it, 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? Because if it's strong, I mean, it's improbable that every aspect of it is something that a person, you know, really agrees with or feels an affinity for. And so, whether it's the New Yorker or the military, a shared characteristic of those cultures is that they're strong, right? So, I think that's the first, sort of, thing and I don't think that describes most organizational cultures. I think most organizational cultures are some, kind of, milquetoast Afrojack, right. So, that's number one. The second is cultures of perfection. And so, both the economists and Apple have extraordinarily high standards for themselves and really, kind of, in both cases the work has a, kind of, primacy. And so, who designed the latest iPhone or who wrote that article. In both cases that's anonymous because there is such a belief that the work speaks for itself, right, and a lot of admiration for that. And then cultures that have longevity and really sustained success. And so, I think that one of our major investors is Sequoia Capital and Sequoia has been, you know, the top firm or in the top three firms. Obviously, it's a subjective ranking but call it, you know, a top, unquestionably a top three firm for essentially its entire existence. And there was no other VC firm that has been a top three firm for, you know, call it for decades. 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 that to be sustained. And of course, you know, this applies to some of the other organizations we mentioned like, say, The Economist or the New Yorker or even, this is one that I began to read more about of late, Koch Industries, 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 that has, kind of, compounded from 20 million in annual revenue to now according to public estimates 100 billion over, you know, call it five decades and there aren't that many organizations that have compounded like that for that long without there being, kind of, one driver of success there's no one thing that enabled that rise. They didn't like, stumble upon some resource that they, kind of, cornered. There was no, kind of, iPhone for them, etcetera. It's clearly something, kind of, deeper and more, sort of, institutional and the fact that that's been, kind of, sustained for so long I think is interesting in its own right. And what is it that Sequoia Capital Koch Industries and the New Yorker share, and I haven't quite unpacked the answer to that yet.

: Can you give us an example of what you've learned from studying Koch Industries?

: It's very striking to me how Warren and Charlie at Berkshire, and accounting for biases and mechanisms for clarity of thinking elected to a very striking degree I mean, obviously, if you read the public writings or you go to Omaha and you listen to what, you know, Warren and especially Charlie talk about, you know, it's, sort of, half investing and half applied epistemology, half philosophy, right? And that's been the case as well to a striking degree with Koch. And I don't know them well enough by any means to, sort of, opine in any deep sense, right. Like I've never been to one of their factories, I've never looked at one of their financial statements and so I'm not qualified to assess in any, kind of, comprehensive way, but just in terms of what it seems that the leadership prioritizes, it's strikingly consistent across two of the most successful, multidecadal institutions in the U.S. something to be said going back to your point earlier about learning from companies that have consistently demonstrated over a period of time without these huge, kind of, like one off hits that have caused most of that track record.

: Right. You're a huge reader. Where did this love of books get started?

: Well we had 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 and it was treacle slow and so on. And, you know, I was fortunate my parents were very willing to pursue all these harebrained schemes and so we eventually got an ISDN line, which was ferociously expensive, but God that, you know, that, sort of, the fiber of its day, at least as far as I was concerned. 7.6K a second was majestic. I could barely keep up with the speed. And then we eventually got satellite internet connection, which was really a game changer, but it effectively meant that for the first, I don't know, 14ish, 15 years of my life, there was no internet and we lived in a very rural part of Ireland. I was quite distant from even my friends at school. And so all there really was for us to do was to play in the garden, which we did a lot of, and to read and, you know, it's funny, I often wonder about this in the context of, you know, if I had kids or when I have kids, what's the optimal upbringing for them? And, of course, you think well you, kind of, want them to grow up in a stimulating environment and have all these experiences and extracurriculars and everything else and, but something that was not my upbringing.

: My upbringing was I, 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 can just, kind of, burrow our way, sort of, sequentially through the shelves, but you know, it was pretty unfettered and I think our parents had a, kind of, they followed our interests and supported them but they didn't choose them. It felt like they pushed from behind rather than pulling in front and so yeah, I think that's for the reading thing came from and I think that well I don't know, I run quite a bit and I don't even run because I enjoy it that much. I mean, I enjoy it but it's nothing, kind of, in the immediate moment. It's not like it's euphoric or anything close to that. I mean, it's pretty painful, and you know, the Greg Lamont quote about how, I mean, it's very dispiriting when you think about it. It is very deeply true that 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, it will never get easier. I will just go faster but just it feels like something I ought to do and I vastly rather having run than not having run and so I continue, sort of, continue to do it. And, with reading, basically, I don't feel like I'm weird; I feel like everyone else is weird in that they're just like so much stuff to know and I guess I just feel stressed out by. Like, it feels important or it's obviously important and I don't know it. And so shit, like I better, you know, get to work. But it's not what I'm reading, I'm not in this, like especially blissful place. I mean, I enjoy it perfectly fine, but it's more like I am, I think there are extremely important things that I really should know and I don't. And that feels problematic.

: How do you filter what you read? There's millions of books.

: Right.

: There's one of you.

: Right. Well, I discard a lot of books. I like the insight that there's a set of great books that are really worth reading, right? And there's a subset of those books that are really enjoyable to read. Maybe it's like 10 or 20 percent of them say. And the subset, the intersection of really worth reading and really enjoyable to read is actually still more books than you can read than you can read in a lifetime. And so, I've, sort of, decided well I would read all the books that are really worth reading and really enjoyable to read, and then when I run out of those, then I'll go back to the books that are merely worth reading, right? And so, you know, very quickly you can decide if this is an enjoyable book to read or not and if not, discard it. I think reading, you know, should be treated as a, kind of, more active process, Sort of, you should skim, you should skip, you should backtrack. You should discard and potentially return, like the book. You know, you were not subject to the book, you're not a passive consumer. Like the book is there for you. You bought it, it's yours. And like jump back and forwards. Tear it in half if you want, annotate wildly like, you know, use it.

: I wholeheartedly agree.

: And, I maybe, you know, start half the books I get and I probably finish a third of the books I start. And that works out to, you know, finishing one to two books a week. But if I finish it then, you know, I guess, well, it's probably been recommended by somebody in the first place and then it looked interesting enough upon some very superficial skimming to start. And then, you know, if I finish it again it was quite interesting so there's actually like a lot of selection that, kind of, happens along the way. And then I think, just the other thing worth pointing out is, you know, the line from Basho about the Japanese poet and that you shouldn't follow the people you most admire but you should follow what they admired. And I try to do that, I try to figure out for the people who can be doing really great work or to have really interesting ideas or just who I admire in whatever regard. How do they get to who and what they are? What influenced them or what's upstream? 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, in the evening, while walking. While walking is a good one actually like your peripheral vision is such that you can actually quite function and read a book while walking. And there's other people that have started to do this and do it much more and faster than I do. But you just spend a lot of your time walking and so be able to do that, I've found to be quite valuable. Often while eating.

: So, you're sitting at home on your couch. It's after dinner and you pick up a book for the first time. Walk me through how you process that book, what you look at.

: Yeah, normally I'll jump, sort of, midway through 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 antecedent ideas I won't be familiar with or whatever, but like do I want to be here or to have gotten here. And if for a couple of pages, it seems like the answer is yes then I might, sort of, backtrack to the start and start, kind of, pursuing it a bit more seriously. I mean John has this insight that, and it's related to the previous point, that at every moment you should be reading the best book, you know, in the world. I mean, I don't mean, kind of, the absolute best for everyone but, sort of, the best book for you. But like as soon as you discover something that 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, "worse 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 I'll, I don't know, be in my room and I'll stumble across something else. And I might just, you know, switch rails. The other thing that I think is actually quite valuable is just leaving books out. And so, when somebody recommends a book, I'll, you know, very often pick up a copy, ideally, a used hardback copy, cause the hardback books, you know, they're more durable and now with Amazon, used hardbacks are really cheap. And, I'll leave it out and so there's books in the kitchen; there's books in my bedroom; and there's books, you know, on my bed and just strewn everywhere. And surprisingly, commonly either or someone else will recommend the book or some aspect of the book whatever. And it's still salient, it's still around you and you're like oh yeah, I really should check out that thing. Or something else triggers its relevance. You read an article or you just start appreciating a point or a question or something, right? And so, I like part of the reason that I still really value physical books is because you, I mean, for now at least, we still exist in physical space and it creates a, kind of, idea space for you that makes, kind of, productive collisions more likely to happen.

: What types of things do you typically mark up in a book and what does that look like?

: So I tend to just make notes in the margin. So, I tend to underline stuff but, in the margin, and, I underline, you know, misusing the term, I annotate it, mark it, highlight it, in the margin because then you can flip through the book quickly see the party you marked, right? And then the other thing is, on the last pages, like on the inside cover at the end, I tend to very quickly note page numbers for particularly interesting points or things that jumped out or whatever, so, that I can easily go back to a book and, you know, I have the list of the 30 things that I found most interesting.

: So you keep the book, a book that you completely read, that you have like?

: Yeah.

: How often do you come back to that book?

: If I want to make a particular point or be reminded of a particular aspect or, you know, whatever. Maybe I will, but generally speaking, I don't, and I think, you know, part of the value of making annotations is, of course, to imprint them more firmly in your mind so that you, sort of, don't need to come back as much in some sense. If it's really good, I don't often do this, but if it's really good, I might write a review for friends and just maybe share an e-mail or a Google doc or something or just share snippets with friends and that's valuable both because again, so the act of a summary or summarization, sort of, aids a, kind of, synthesis and better recollection but also, of course, it triggers out pointers and for those suggestions from those friends and so, you know, if you want to identify candidates in adjacent or if I'm to form the flustering and figure out what type of adjacent candidates might, you know, be interesting for further exploration 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 was A Culture of Growth by Joel Mokyr and it's basically a book about why did the Enlightenment and the Industrial Revolution, really the Industrial Revolution, start when it did and where it did? And, he basically makes the case. I mean, there's obviously tons of different arguments that have been made for this and because it only happened once it's, sort of, we can never know definitively. And, you know, was it the abundance of, or was it the abundance of coal in the UK? Was it the setting up 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 Mokyr basically makes the argument that it was primarily intellectual and more than, sort of, "economic." And, secondly, that it was, sort of, specifically a, kind of, synthesis of the importance placed in, kind of, scientific knowledge where we going to realize that scientific progress knowledge about the world, you know, exists and can be important and that progress is possible and that we're not just, kind of, imperfect imitators or receivers of the knowledge of the Ancients. And so a, kind of, a belief in scientific progress and coupled with a belief in, sort of, the practical importance of, sort of, engineering and of the more prosaic aspects of, you know, industry and of, kind of, practical pursuits.

: And, you know, Mokyr offers the example of bacon through both, kind of, inspired the Royal Society was going to one of his followers who created it but also intended to catalogue the practical knowledge of all of the crafts people in the UK and the, kind of, implicit functional knowledge that they had. And, it's, kind of, this interesting combination of those that are really high minded and the very practical, right? And, so anyway, Mokyr, kind of, teases through all these arguments and the, kind of, republic of letters and the, sort of, nascent, you know, rise of science on the continent and so forth. But all in terms of this question of why the industry revolution then and there. And, you know, it talks about versions of it in China and so forth. And anyway, so, I mean, I think it's a very important question and Mokyr is, kind of, a discussion of it as I thought, you know, particularly interesting. And so, yeah, I summarized it for my friends.

: That's awesome. Which book or books would you say have most influenced you?

: So I asked this question on Twitter, back a couple of weeks ago, and some of the responses I got were really interesting, and a lot of people responded. Like, many more than expected to, I didn't actually, embarrassingly, I feel guilty about this. I didn't post the response myself and I thought about it and it's actually just a very hard question to answer. Like, I actually worried that it may not have been a good question because, like it's so hard to know. Did the book influence you or did you have an inkling or 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, but yeah there's that, kind of, question. And then also, what I've often found is, I think the books that perhaps did in fact influence me the most, in a causal sense, are often not necessarily that good, right? And that maybe I'll read a book that, sort of, triggers a realization of some idea or something. And the book, kind of, jolts me in some direction and then I'll go read better things about that question. And so, it probably would've been better if I had just started with the better stuff. But in some, kind of, truthful descriptive sense, it's yeah it was like the worse one that actually influenced me, right? And so like, you know, maybe a better version, the question is like which books do you wish you'd read sooner or something, right?

: Let's answer that question.

: Actually, I don't think I can even answer that one as I think about it.

: This is yours.

: Yeah, I know, I hoist my own petard. Like, it's also just, sort of, clusters of books in that, you know, I think of programming, for example, like, it would be hard for me to answer this question and not cite any programming books, I mean, kind of, so influential at least in my mind's eye, in my life. But, I can't really point to any single programming book, I can name ten that I think, in aggregate, work together like Paradigms of AI Programming by Norvig and Structure and Interpretation of Computer Programs and, you know, K&RC books are about operating systems. The Tennenbaum book, you know, etcetera, and in aggregate, those like hugely shaped me. But I don't think I can single out just one, even two books on PHP, 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 answering this question, I could hardly not cite those, right? But it's not really the cluster or, you know, a similar cluster at science or economics or sociology or whatever and so they may all have to just get back with a better version of the question.

: Switching gears a little bit, what's the smallest habit that you have that makes the biggest difference?

: I reach out to people whose work I admire and tell them that, and often it leads to a dialogue and in some cases, I've gotten to know them pretty well. And, so I'm fortunate that Tyler Cowen, who I mentioned, is a friend but I was never introduced to him. I just randomly emailed him years ago. I actually invited him to a bitcoin meet up that I held in 2011, and I did not, however, buy any bitcoin, but I invited him to that meet up and he replied and, you know, apologized that he couldn't make it but we, sort of, ended up in, kind of, a dialogue after that. And, you know, when you reach out to the people, half the time they don't respond. But, you know, half the time they do and it's asymmetric. Doesn't really cost you much when they don't, and it can be incredibly rewarding when they do. And, so yeah, if I did not do that I would have missed out on a huge amount.

: How would you answer a question about what are your personal values are?

: Probably by evading it. I'm not about to. Do you think perhaps this just disproved that answer by actually answering it? But I guess I just think it's so, it feels like too important to question. It's, kind of, the big question. I feel like too important a question to answer simplistically and too complicated a question to answer briefly and thereby perhaps unsuited to something extemporaneous 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'd left out, you know, this critically important dimension to it and I think, so I can cite some things I value. But the, sort of, the sense of giving a complete answer is very oppressive. I mean that's, of course, the value of Twitter where because of the constraint that there isn't the same because the system chooses when to cut you off rather than you choosing when to stop. That's quite liberating, so maybe, if you allowed me 20 seconds to speak on values, I could do that, but I could blame the constraint on anything I omitted.

: We have 10 hours of recording left. What would you say is the most common mistake that you see people make over and over again that you wish you could correct in 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 "right," people or not just being, kind of, in either case, deliberate enough about that, of course, who the right peer group is for you is, I mean, that's an entirely, kind of, personal and subjective question, but whoever it is, is going to be massively formative and influential in determining where it is that you end up. I mean, Drew Houston, has a quote about how you end up the average of your five closest friends. I think there'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 the people, like you are choosing who you are. And, of course, that's a, kind of, a, sort of, bidirectional process where who you want to be is determined by who you're around which determines who you want to be around and so on. But …

: These people that will accept you as …

: Exactly, right. Right. But I think, like, certainly my mental model when I was 18 is that my five closest friends are, you know, people I ran into who kinda like me and I like them and there's a, kind of, we're cordial and close and all those things but that it's, kind of, fundamentally mediated by a, sort of, happenstance. And I think people should, kind of, invest more in it than they do and related, once you've found those people, you should really invest in it because if you accept they can shape you and you think they're the right people to shape you, well then embrace that shaping, right? And then, kind of, on the mentor point, or the latter one, you know, I think almost all of us, at least subconsciously, have a set of people we hold in really high regard or would like to be more like in at least some ways and so on, and I see people – well, in my opinion, they've, kind of, they haven't either found the right people or just like the right relationships and so on and if they had someone who was steering them more, or in better ways, could just be much better off.

: I want to talk a little bit of what the future of e-commerce and maybe Silicon Valley culture and I know we've got to end soon but talk to me about how payments. Do you foresee see them changing from not only the customer perspective over from the merchant perspective over the next, you know.

: Well, I think there's two levels maybe in that there's all this just like the basic mechanical stuff about payments and where we, kind of, forget just how much friction still exists and how many business models and transactions and businesses and everything, sort of, are impeded for fundamentally, kind of, stupid reasons, right? In that because micro transactions aren't possible both because the fixed costs are too high and because just like the friction too high than things that, would pay for it micro transactions just don't exist, right? It's not that they pursue a different monetization model, in some cases they might, but as a general matter, a significant number of them just won't exist, right? Or because maybe, it's hard to purchase things that are really expensive in a way where the, kind of, risk of fraud is officially low then, you know, you don't pay your rent online say, right? And so, and then, I think, maybe the most important dimension to that is the, sort of, geographic, kind of, balkanization and, sort of, inefficiency that ensues where it's extraordinarily difficult for somebody in Brazil to buy from somebody in Germany or somebody in Germany from somebody in India, etc. etc. And so you get this, kind of, unnatural set of sub-clusters existing not because of, sort of, you know, deep necessary limitations but because something much more arbitrary and contingent. And, you know, economists talk about the gravity equation and the fact that there's a proclivity of any two countries to trade falls off with the square of their distance. And, you know, there's always, like, big questions, like, wow, is that about something, kind of, fundamental in culture or about just surprising returns to proximity or what have you. Assuredly there's, you know, some of that stuff. But I think talking about the challenges and, kind of, complexities and hidden costs of pin methods. That doesn't feel like a very deep thing. It doesn't feel like something that is, kind of, significant enough on some level to have such, kind of, far reaching and deep consequences. But I think a lot of these, that have ostensibly "cosmic phenomena" are actually consequences of these very prosaic and straightforward limitations. And so I really think that solving this aspect of commerce on the internet like literally just making it easy for any two parties, a business and a consumer, in arbitrarily chosen countries making it easy for those two entities to transact, will have enormous consequence for the world.

And like that sounds like such a, sort of, a straightforward idea that it almost sounds cliched and the fact that it sounds cliched it 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 to this point but it's still like 90 plus percent of Brazilian credit cards do not work online outside of Brazil. Brazil is not some backwater, it's not some inconsequential country, right? Obviously, one of the top economies in the whole world and Brazilian consumers basically cannot purchase outside of Brazil. And so, it's difficult to overstate the magnitude of that, sort of, limitations and inefficiencies that prevail today. So that's, kind of, the, kind of, payments level and then come on top of that. I think there is, or beneath it depending how you look at it. There's maybe just like a deeper question of what determines how many firms there are in the world? And what determines the character of those firms are they doing something innovative and novel or are they doing something prosaic that has existed for a long time. What determines who starts and why and the probability of survival? What determines the growth trajectory and the expansion rate into other markets in other products and so on? And, I think part of the tripe hypothesis is that things like that that seem very, sort of, one would think are very difficult to move are actually movable. And, really macro measures like the number of people who start a company, or who start a technology company, or again the success rate of those companies. And, you know, just to give some, kind of, illustrative maybe intuition pumps here, when we survey companies started with Atlas, 60 percent of them tell us they would not exist if not for Atlas. I know they could be wrong, like, maybe some of them actually secretly would, 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, let's be conservative and say that it's actually 40 percent. If Atlas is causing only 40 percent of those founders to start companies where they otherwise would not have. And if that, kind of, subsequent, you know, success rates look similar that's a huge deal, especially if Atlas itself gets paid, right.? I mean, over time, that can have 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 an entire portfolio. That's a really big deal. Or Nick Bloom at Stanford did this really interesting work about management practices. Do management practices matter? You know, is good management merely correlated or, in fact, causal and in terms of leading to the advent of better outcomes? And they did an RCT, a proper trial, in India where they taught better management practices to a court 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 percent over three years or something like that, right? That's an incredible low hanging fruit. Like all they did is teach better management practices 13 percent more revenue, like 13 percent more value provided by the company as assessed by their customers just from better management practices. And so, you know, when we think about Stripe and what to do in the future and the possibilities that exist and so on, it's much more, I think, about, sort of, how do we perturb this overall system to move some of these, kind of, macro outcome measures like number of technology firms started, survival rate of these companies, expansion rate of these companies, magnitude of the value provided to the end users, consumers, customers and so on? And, can be mediated by payments as this, kind of, foundational layer because it's something every business necessarily has. And because it gives U.S. good, sort of, understanding of the dynamics within the business and so on but it's on some, kind of, fundamental level 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.

: Oh yes sure. I mean look, I think our Cross society I think so many of the things that looked like bugs are actually features from the perspective of somebody of some constituency, right? And ,of course, so much of politics is, you know, reconciliation of the countervailing interests of different constituencies and, of course, you know, the problem is that in so many cases the incremental gain of the constituency is substantially outweighed by the social utility loss of the rights of a society, right? And so, you know, bad teachers do great in the U.S. but almost certainly that's, kind of, a net bad trade for society. But the bet teachers care more about, sort of, their ongoing employment than the rest of society cares, evidently, about correcting that. And, you know, the same thing applies to fishing policy where perspective makes all the difference.

: Well but, you know, people driving fishing stocks to extinction care more about their ongoing, you know, right to do so than the rest of society cares about sustainable ecosystems. I mean, I think that's just the character of political economy. And so, yeah, absolutely I think, I mean, to return to our earlier example. It's not even clear that the rate – well, one could look at the fact that essentially no new banking charters are being issued in the U.S. 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. Profits in consumer banks are higher than they've ever been.

: Until they all get wiped out in the next crisis.

: And, then because they're even more systematically important than they were in the past, they'll be needed. To the extent there was a systemic argument for bailing them out in '08 there presumably be an even stronger argument in the future.

: It's almost like, we were talking about this earlier, but that's when you get big, you have more loss aversion. And so your goal is not necessarily to get better from your customers perspective. It could be to prevent competition prevent new entrants that might be a more, were there a moral judgment on it. It might actually be a more effective business strategy.

: Oh for sure.

: Innovating for your …

: No question. And, you know, I think we're very, sort of, dissonant on this point as a society, where on the one hand we decry lack of innovation, on the other hand in our collective action, we do so much to ensure that it doesn't occur, right? And so, you know, on the one hand we decry the state of the, sort of, medical industrial complex and the 18-1/2 percent of our GDP that is spent on health care costs and the plateau or even decline in life expectancy and the declining rate of drug discovery and so on. And yet, on the other hand, sort of, two regulatory structures make it harder and harder to engage in drug discovery or to, I mean, you can't even start a hospital unless you've got a certificate of need. But, if you observe that well hey, you know, medical care in San Francisco doesn't seem so great and it seems extraordinarily expensive. You know, even though it seems like a very thankless undertaking I'm going to try to do better. Well first, you'd better get approval for that. You can't just enter the market and so I think that, kind of, and I'm not being, kind of, a normative judgment.

: I mean I have my personal preferences but I'm not casting normative judgment that's, kind of, what we ought to do as a society. The thing that I feel strongly is that we're inconsistent in our stated desires.

: There's like a perpetual, sort of, seesaw, if you will, where success sows the seeds of its own destructions. How would you make an argument right now that San Francisco or Silicon Valley is doing that?

: Well the obvious one, the two obvious ones, I guess, are in culture and in housing and costs in general. I mean on the latter – well on costs and the latter everything is getting more expensive and nobody seems to quite understand exactly what's going on, right? And that is, I mean, if you if you take health care again, for example, I mean, the case has been made that this is not in fact a bad thing that what would you expect an enlightened society that has solved all of its other material needs to spend its money on but healthcare? It's, kind of, it's the last thing, it's the last frontier. And perhaps we are actually getting, sort of, commensurate improvements if you, sort of, disaggregate appropriately and you analyze the right way. Or perhaps not, right? And how much of this is some, kind of, Baumel 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. But I think, sort of, specifically in Silicon Valley and specifically on cost of living and housing, you know, Silicon Valley is the, sort of, greatest concentration of wealth creation that I think has ever existed in the U.S. on a per square mile basis. Potentially, that has existed ever in the world, right? Facebook, Google, Apple, Inktel, you know, they're all based in a fairly small number of square miles, right? And, if you, sort of, if you were to look at Seattle and the Bay Area, kind of, together right and look at the, kind of, 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 Microsoft as well. And, obviously, what you see is that their rise in success was enabled in part by cheap mobility and cheap expansion. And again, sort of, through just, sort of, political economy and collective decision making that no longer exists. Cheap ability no longer exists and cheap expansion.

: And you can see it now in this, sort of, latest generation of upstarts, you know, via, be it Twitter or Uber or Airbnb B or Lyft or whatever who are, you know, facing these really significant, kind of, structural headwinds. And so much of the wealth that's being created, this improbable fountain of wealth creation is accruing to the set of, lottery winners of the existing landowners rather than to the people who were actually doing the work. And because of that accrual the, sort of, the barrier to entry for newcomers is getting progressively higher and you see it in declining rates of mobility. And, furthermore, the other people in the city not in the tech industry who might otherwise benefit from it are, of course, getting priced out and, you know, this is not necessary. I mean, you can look at places like, obviously, Tokyo has, over the last couple of decades, been and improbable, well not especially improbable, but has been such an enormous economic success story and, you know, you had the boom and the bust and the supposed stagnation of Japan in the, kind of, early 90s on. But broadly speaking has done really well, but because of vastly fewer limitations on housing supply, have had very stable housing costs have not had the same displacement, right? And so the, kind of, the issues we face and we see year in San Francisco where it's getting ever, you know, 40 percent rise since we got temperatures in 2010. That's not necessary, it's not natural and it's a function of our, sort of, collective decisions rather than, kind of, some some secular and unavoidable economic force. And I guess I find it, sort of, dispiriting because it's a negative sum in the sense that it's not just that these gains go to go to these, sort of, existing landowners but actually will be fewer future gains. Like, I think you should be mad about this. You know, even if you don't live in Silicon Valley and you don't have the slightest interest in doing so because it's much less likely the next cool technology that you'd like to take advantage of will exist. It's, sort of, a suffocation of future potential and future gains and there aren't many places. Well, if you believe in increasing returns to scale that's, sort of, you know, this is, kind of, Paul Romer's work and others, that because of the, sort of, the collision of ideas and people in cities makes them more productive than if they were elsewhere. If you believe that to be the case, and there's like pretty good empirical data that it is, then you can't just move elsewhere. You can't just move to Nevada or wherever in the south, you actually will be less productive in those zones. And so again, I think it's a real loss in terms of spillover gains for the rest of society. 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 this?

: Well I don't make any secret of the injustice, well the moral injustice in terms of the displacement that's occurring and the, sort of, economic wrongheadedness of the prevailing policies. And, you know, I'm a landowner in San Francisco John and I own a house together and I hope it's value declines in that, I think it's impossible to answer what the price of land should be. But I think it is very clear that on a marginal basis the social returns of cheaper land in the most productive productive region of the country would vastly outweigh the reduction in wealth, you know, to existing landowners.

: But going back to banks everybody has a system that they want to protect.

: They're totally right. Right. And, I mean, of course, you can try to estimate the magnitude here and so over at Berkeley this guy, and Enrico Moretti has estimated that 50 percent of U.S. GDP growth between 1964 and I think 2010 was left on the table as it were by, sort of, inefficient land use and land allocation. And, obviously, 50 percent is a high number and quite speculative and it's very difficult to measure the counterfactual. But even just the idea that one can, with a straight face hypothesize that it could be anything remotely in that vicinity I think gives you a sense for how high the stakes here are, right? And yes we can decide that, you know, we place such an enormous premium on the aesthetic appearance of the San Francisco of today recognizing that it is of approximately a third of the density of even just Greenwich Village in New York. Right? We're not, you know, the, sort of, the other extreme is not Hong Kong you can triple San Francisco and get to Greenwich. We can decide that that's our preference but, sort of, you know, sober estimates are measuring the cost of that in double digit percentage points of aggregate national GDP. 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, spending a summer or some day and things like that. It's to European cities which tend to be of very significantly higher density. Paris, London, much, much higher density than San Francisco. And so again, I'm hesitant to cast 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 more about you?

: Well, if they want to start a business, they should head to Stripe.com. But if they want to subject themselves to more of the particular detritus that I post, they can head to my Twitter account which is just Patrick C.

: Thank you so much.

: Thank you.

: Hey guys, this is Shane again, just a few more things before we wrap up. You can find show notes from today's show at fs.blog/podcast. You can also find out information on how to get a transcript there. And if you'd like to receive a weekly email from me filled with all sorts of brain food, go to fs.blog/newsletter. The newsletter's, all the good stuff I've found on the internet this week that I've read and shared with close friends; books I am reading and so much more. Lastly, if you enjoyed this or any other episode of The Knowledge Project, please consider subscribing and leaving a review. Every review helps us make the show better, expand our reach, and share message with more people. And, it only takes a minute. Thank you for listening and being part of the Farnam Street Community.

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