Apr 5, 2021 · 1h 0m · top-founders
Billionaire Co-Founder of Square Joins Latka
Jim McKelvey · 42m spoken Nathan Latka · 11m spoken Eric Yuan · 4s spoken Vivek Bhaskaran · 2s spoken
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this extensive interview with Nathan Latka, Square co-founder Jim McKelvey details the origins of Square, his decades-long collaboration with Jack Dorsey, and the strategic battles against incumbents like VeriFone and Amazon. McKelvey also outlines the core thesis of his book, 'The Innovation Stack', urging entrepreneurs to cross the boundary of qualification to solve unprecedented problems.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 20.6% of the talking time here. How this is scored →
Nathan as informed peer 5.8 Guest teaching 2.1 Guest disagreement 1.0 Nathan pushing back 2.1
speaking balance: gold is Nathan, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 55:35 Calling out Peter Thiel's dismissal of Square in Zero to One
McKelvey directly calls out Peter Thiel for publicly mocking Square as a commodity in his book Zero to One and explains why Thiel's analysis missed the Innovation Stack.
Hardest push from Nathan ▶ 55:13 Confronting McKelvey on Thiel funding a journalism ventureLatka directly confronts McKelvey on the awkward contradiction of taking money from Peter Thiel, who famously sued Gawker out of business, for a project designed to save journalism.
Biggest teaching moment ▶ 43:20 Explaining the aviation concept of reverse controlMcKelvey uses flight mechanics and reverse control to educate Latka on why standard business instincts become fatal when an entrepreneur leaves the domain of copying and enters genuine innovation.
Nathan holds their own ▶ 7:39 Latka disputes McKelvey's claim of mediocrity with book factsLatka demonstrates deep preparation by rejecting McKelvey's self-deprecation, citing his student textbook authorship of The Debugger's Handbook as proof of early high-level expertise.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nathan as informed peer | Guest teaching | Guest disagreement | Nathan pushing back | Why |
|---|---|---|---|---|---|---|
| Introducing Guest Jim McKelvey | 6 | 1 | 1 | 1 | Latka opens with detailed biographical context about McKelvey's timeline and the 76 billion dollar market cap of Square. McKelvey enthusiastically validates the narrative of the glassblowing origin. | |
| Personal Tragedy, Focusing on Mira, and Authoring Textbooks | 7 | 2 | 1 | 4 | Latka pushes back against McKelvey's self-deprecating assessment that he was mediocre by citing his textbook 'The Debugger's Handbook'. McKelvey explains his psychological response to his mother's death and his need to divide his attention across multiple domains. | |
| Hiring and Mentoring a Young Jack Dorsey at Mira | 6 | 1 | 1 | 2 | Latka shows familiarity with Mira's product shifts and asks detailed questions about mentoring a 15-year-old Jack Dorsey. McKelvey shares how Dorsey was given increasing responsibility until managing adult engineers. | |
| Why Twitter and Square Were Not Built Inside Mira | 6 | 3 | 2 | 4 | Latka asks why Twitter and Square weren't launched within Mira. McKelvey explains how profitable cash cows become inhospitable environments for radical new innovation. | |
| Designing the Iconic Square Hardware Reader | 5 | 2 | 1 | 2 | Latka asks about the technical design trade-offs of the original Square reader. McKelvey explains the internal conflict over card presence vs camera OCR and sacrificing hardware stability for user delight. | |
| Meeting Southwest Airlines Founder Herb Kelleher | 6 | 1 | 0 | 1 | Latka demonstrates deep familiarity with McKelvey's book by referencing the autographed cigarette pack from Herb Kelleher. McKelvey recounts how Kelleher validated his research thesis and urged him to publish. | |
| Early Patent Disputes and the Superiority of Feedback over Secrecy | 6 | 2 | 1 | 3 | Latka questions whether early patent betrayals posed an existential risk to Square. McKelvey emphasizes that execution and gathering market feedback outweigh patent secrecy by 99 to 1. | |
| Countering VeriFone Smears and Collaborating with Apple | 5 | 2 | 2 | 2 | Latka prompts McKelvey on VeriFone's smear campaign and early secret collaborations with Steve Jobs. McKelvey explains the technical flaws in VeriFone's public security criticisms. | |
| Surviving the Amazon Threat and the Mystery of Victory | 6 | 2 | 1 | 2 | Latka brings up historical competitive threats including Diapers.com, prompting McKelvey to detail the terrifying period when Amazon copied Square's card reader and undercut pricing. | |
| Developing 'The Innovation Stack' Concept and Graphic Novel | 5 | 1 | 0 | 1 | Latka encourages McKelvey to show his graphic novel project while discussing historical selection bias. McKelvey describes the two-year journey synthesizing how Southwest and Square survived attacks from incumbents. | |
| The Mechanics of the Innovation Stack and Reverse Control | 4 | 6 | 1 | 1 | McKelvey lays out the core theoretical framework of the Innovation Stack and introduces the aviation concept of reverse control to explain why copying methods crash innovative enterprises. | |
| Unlocking the Bottom of the Market with Square Capital | 7 | 1 | 0 | 1 | Latka cites specific origination statistics and check sizes from Square Capital in 2017. McKelvey expands on how serving the bottom of the market creates a self-reinforcing data moat. | |
| The IKEA Effect and Customer Co-Creation in Innovation | 6 | 2 | 0 | 1 | Latka notes a shared pattern across IKEA, Southwest, and Square where slight friction increases customer emotional investment. McKelvey elaborates on early adapters versus early adopters and the IKEA effect. | |
| Inner Child, Philanthropy, and Pitching Contrarians | 7 | 2 | 3 | 6 | Latka challenges McKelvey on pitching Peter Thiel for his journalism project Invisibly given Thiel's role in destroying Gawker. McKelvey clarifies Thiel's contrarian track record and notes he convinced Thiel after Thiel dismissed Square in 'Zero to One'. | |
| Breaking the Qualification Barrier: The Wright Brothers Lesson | 5 | 4 | 1 | 0 | McKelvey closes with a philosophical takeaway using the Wright brothers to argue that true innovators are inherently unqualified when doing something for the first time. Latka provides a sharp summary and McKelvey commends Latka's preparation. |
Statements from this episode (18)
McKelvey: Square was inspired by losing a glass sale to an Amex card
“Jack Dorsey and I, who had been friends for years and worked together on another company that actually I still own he and I were going to start a new company. We didn't have an idea. I'm a glass blower, so I work in a grubby studio and I sell stuff that nobody…”
Jack Dorsey managed a tech team at just 16 years old
“So Jack actually was a manager by the time I guess he was 16 years old.”
Jack Dorsey's 2008 ousting from Twitter was 'unconscionably terrible'
“No. Absolutely not. What they did to him was unconscionably terrible, and I was very angry.”
McKelvey: Square pivoted to payments before first employee started
“We already had the team together and we'd actually already hired our first employee and he was starting in a week. And we pivoted the company before he even started.”
Jack Dorsey opposed Square's iconic hardware, preferring a camera scanner
“I said, we need to build a piece of hardware, and Jack thought I was crazy because he said, we don't want to build hardware. Hardware is a terrible business, and it'll slow us down, and we can just use the camera on the phone”
Square intentionally sacrificed card reader reliability for attention-grabbing novelty
“We made a critical decision at the company to release a card reader that was actually too small to do the job it was supposed to do, but got your attention in a way that nothing on the market had ever done. And I believe that attention was super important. And…”
Early Square contractor rejected an equity offer now worth nearly $1B
“And what we offered him was a very generous offer. It would be close to a billion dollars today. You know, if he accepted our offer, he'd probably be a billionaire. And he didn't want it.”
McKelvey: Put 99% of focus on feedback over protecting ideas
“So I put 99% of the emphasis on getting feedback and one percent on protecting ideas. I've literally never seen an idea stolen. Okay. I mean, I've seen ideas copied. I see it all the time. But I've never seen somebody outrun the entrepreneur. Most people who a…”
McKelvey: Apple kicked VeriFone out of Apple Stores after Square attack
“He ended up upsetting Apple, and Apple kicked them out of the Apple store.”
McKelvey: Bypassing Apple's dock connector for the audio jack was right
“Our, you know, our first product was bypassing the dock connector, which was that, you know, multi-pinned thing at the bottom of the phone. And We went through the hardware jack, and I think that was still the right decision”
Amazon ruthlessly cloned Square's card reader and undercut its price
“Amazon came after us in a way that was terrifying. They copied our product, they undercut our price, and they added the Amazon brand name to that, along with some customer support that we at the time didn't have.”
Amazon conceded to Square by mailing Square readers to Amazon customers
“What they did was they said, the best thing for our customers is to make them Square customers. So they mailed all their soon to be former customers, one of our Square readers, and said, look, if you like what Amazon is doing, you'll be happy with Square. So t…”
McKelvey: Copying established solutions is almost always the best problem-solving method
“If you have a problem, your best way of solving it is usually to find somebody else who solved the same problem and do what they did. That is almost always the best solution, and I don't care what it is”
McKelvey: Applying copying strategies to unprecedented problems leads to failure
“If you're on one side of that line, a totally familiar set of behaviors, which is the behaviors of copying, are optimal and appropriate. But if you're on the other side of that line, those behaviors will get you in deep trouble.”
Jim McKelvey: Every market offers billion-dollar opportunity at the bottom
“It turns out in every market, I believe there's opportunity at the bottom. And if you want to, you know, you want a new business, billion dollar business idea here, I'll give a hundred away right now. Just look where the market ends.”
McKelvey plans to donate his fortune rather than build generational wealth
“We've made an absurd amount of money, which we're planning to give away, because I don't think it serves me or my family to, you know, pass on generational wealth.”