Coronavirus hits ‘somebody who is living pay check to pay check' harder: Square cofounder Jim McKelvey
Author of ‘The Innovation Stack: Building an Unbeatable Business One Crazy Idea at a Time’ and Co-founder of Square Jim McKelvey joins The Final Round to discuss how the coronavirus has impacted the business sector.
Video Transcript
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JEN ROGERS: How can innovation survive in a time of crisis? Joining us now to discuss is Jim McKelvey. He's the author of "The Innovation Stack: Building an Unbeatable Business One Crazy Idea at a Time." And he's also the co-founder of Square. Welcome.
JIM MCKELVEY: Thank you, Jen.
JEN ROGERS: So you know what's happening in the markets.
JIM MCKELVEY: Well, I mean, nobody knows what's happening. I see what's being reported.
JEN ROGERS: Yes, I guess, and that's part of it.
JIM MCKELVEY: Yeah.
JEN ROGERS: There's so much uncertainty out there.
JIM MCKELVEY: Of course.
JEN ROGERS: And I'm curious as an entrepreneur-- and that's what you're writing about in here.
JIM MCKELVEY: Yeah.
JEN ROGERS: What happens now? Because we're seeing the economy as a whole as we know it changing? Does it change for people that are in the disruption business?
JIM MCKELVEY: Yeah, so the advantage of being in the disruption business is that you are used to or more used to situations like this where nobody knows what's happening. So what I talk about in the book is entrepreneurship in the old school definition where entrepreneurs are doing things that have never been done before. And in that case, there's no certainty.
There's no map of the territory. And so a situation like this, look, I'm as unsettled with what just happened or what is happening as everybody else. But I am actually more familiar with being in this position because sometimes I voluntarily put myself and my companies in this position, yeah.
MYLES UDLAND: You know, Jim, we hear a lot from companies that are new, that are starting out, that have maybe even got their footing, you know, companies young-- much younger than Square.
JIM MCKELVEY: Yeah.
MYLES UDLAND: They're not public yet. But they're like, but things are going OK. And we often hear from their founders and their leadership that they're recession-proof or that they operate outside of the economic model. And it seems-- we were talking earlier in the show about you look at the stock price of the 2019 IPO class. You look at what have the pressures that some of the companies that haven't come public yet are. Is there really any world in which these new tech companies can operate outside of those paradigms? Because it seems like it was such an accepted wisdom, really, in Silicon Valley in the last five years--
JIM MCKELVEY: Gravity doesn't apply to us.
MYLES UDLAND: Right, and it feels like now we're finding out that actually that was never--
JIM MCKELVEY: Gravity happens, OK? And you may have some sort of quirk of fate that temporarily relieves you from the responsibilities that we all have. But no, everything falls back to Earth. But I think the real issue with tech companies is that sometimes they build these engines that are so powerful and so dominant that they can run for years with all sorts of things against them, you know, incompetent management and, you know, crazy mistakes and just bad behavior. And that, you know, networking and effects can hide that.
And as a matter of fact, in the book, when I studied this, so I saw this phenomenon at Square. And it created this tremendous power. And I was like, "Wow, I need to study this power." So what I specifically did was I started looking at non-tech companies as parallels. And what I-- I found a perfect parallel for Square 100 years-- 100 years earlier.
JEN ROGERS: For Square?
JIM MCKELVEY: For Square.
JEN ROGERS: A company now? What's the parallel for Square? What was going on 100 years ago?
JIM MCKELVEY: So this was a financial tech company that dominated its industry and was founded by people or a person who knew nothing about the industry. So Jack--
JEN ROGERS: A fintech company--
JIM MCKELVEY: Fintech, a financial company.
JEN ROGERS: OK, in 1920?
JIM MCKELVEY: Yeah, yeah, so it turns out the biggest bank in the world was founded by a boy who dropped out of school at age 15 and was a produce vendor. And he changed what you now think of his banking. So what you think of now as a bank was invented by a guy named AP Giannini. And most people haven't heard of him.
But it was such an epic tale that I actually-- I mean, that's a book that looks like a business book. But what I originally wrote looked like this. So this-- this was my-- when I was telling these stories originally, it was a graphic novel. And this is the story of the birth of banking.
And, you know, but it's a comic. I mean, like there's an evil gang. Like, here's a murder, OK? And then, you know, oh, it's like a comic--
JEN ROGERS: You really did a comic book of AP-- I know who AP Giannini is because I'm from San Francisco.
JIM MCKELVEY: See, some people know.
JEN ROGERS: --which brings us back to Square, which is out there as well.
JIM MCKELVEY: Yeah.
JEN ROGERS: You know Jack Dorsey.
JIM MCKELVEY: I've known him for over 20 years, yeah.
JEN ROGERS: He's a very busy man. Do you know that he has-- he has two-- he has two jobs?
JIM MCKELVEY: He has two jobs, but no wife.
JEN ROGERS: No, OK.
JIM MCKELVEY: So like, you know, he's got-- he gets some of that time back, you know?
JEN ROGERS: I'm married. I understand what you're talking about.
JIM MCKELVEY: Would you trade your husband to run a public company on the side?
JEN ROGERS: Um, no.
MYLES UDLAND: Don't answer that question. Don't answer that question.
JEN ROGERS: Yeah, no, no, I shouldn't-- I won't even joke. I won't even joke. I was going to say something, "depends about which company." But so Square, Jack Dorsey is there. He's also at Twitter.
JIM MCKELVEY: Yes.
JEN ROGERS: He's got two really important jobs.
JIM MCKELVEY: Yes, he does.
JEN ROGERS: You know this man very well.
JIM MCKELVEY: Yes.
JEN ROGERS: You know we've had some activists coming in saying, you can't run two companies at once. Jack Dorsey you know. Can you-- can he do it all?
JIM MCKELVEY: So they kicked Jack out of Twitter twice before. And it didn't work. So he's back for the third time. Leave him there. He's doing a good job. Like, Twitter is a really tough company to run because it's unique. And Jack has a very good DNA for unique situations. I mean, Square was the same thing.
We were doing stuff that nobody else had done before. And so we had to invent all these different things. And that became our innovation stack. And that's what allowed us to thrive.
And Jack is good at this stuff. So leave him at the helm. And, you know, look, he's doing, I think, as well as anyone can be doing in such an uncertain, tumultuous environment.
JEN ROGERS: Well, I think he's also got a connection to the Fed.
MYLES UDLAND: I was going to say, I mean--
JIM MCKELVEY: Oh, you want to rip on me--
MYLES UDLAND: Speak no-- speak it.
JIM MCKELVEY: Let's hear it. Yes, I'm on the Fed.
MYLES UDLAND: No, I'm not here to rip the Fed.
JIM MCKELVEY: Go for it.
JEN ROGERS: Myles is a Fed lover.
MYLES UDLAND: It's a momentous time-- it's a momentous time to be involved with anything related to the economy, let alone be a member of the St. Louis Fed board.
JIM MCKELVEY: Yeah.
MYLES UDLAND: So when you think about where the Fed sits in this conversation right now with respect to what happens--
JIM MCKELVEY: We are not sitting. We are standing.
MYLES UDLAND: --what happens to--
JIM MCKELVEY: We are running. We are doing-- no, look--
MYLES UDLAND: Yeah, what are those conversations like right now?
JIM MCKELVEY: They're super interesting. And what I can say about the Fed is you have this apolitical entity, which is so important. So the Fed is not Democrat. It's not Republican. It doesn't have a political leaning. Its mission is to ensure maximum employment and price stability. And those missions it's trying to fulfill.
And it's got really, really smart people who are looking at the data, just as we are. They're trying to make sense. We've got some blunt tools.
You know, we've got some monetary policy. We also have the ability to communicate. And the ability to communicate has the power that the Fed has just sort of figured out in the last decade.
MYLES UDLAND: Yeah.
JIM MCKELVEY: And, look, it's a crazy time. And we're trying to do what we can. But there's some mathematical bounds. You can't take some rates below zero. And, like, there's some there's some physical issues that we have.
But we have the smartest, most competent people that I've ever met working on this without sort of a personal agenda. It is such an honor to even be in the room with these people. And I usually just sit there and listen.
JEN ROGERS: So you're in St. Louis, where-- around there. We're on a coast here in New York.
JIM MCKELVEY: Yes, yes.
JEN ROGERS: Coronavirus, though, it seems like what we're hearing, this could go everywhere. And the people that are going to be hurt the most might be at the bottom of the pyramid, your gig workers, people that are at restaurants.
JIM MCKELVEY: Yes, sure.
JEN ROGERS: It's not people that are dealing with liquidity issues in, you know, in markets.
JIM MCKELVEY: No, I mean, if you're worried about-- like, if you think the impact of the coronavirus is a 10% correction in the Dow, like that ain't the impact. It's somebody who is literally living paycheck to paycheck and has meager credit and has basically been excluded from the system. And those people fall off the edge really fast. And we work with a lot of them at Square. We've given a lot of them economic empowerment.
You know, Giannini, when he built the Bank of America, the biggest bank in the world was built for, as Giannini would say, the little fellow, for those people. And those are the people I'm most concerned about. I mean, I guess I care about stocks a little bit. But I deeply care about the people I work with, you know, in my art studio who are going to lose their jobs.
MYLES UDLAND: --with the Square readers on their phone.
JIM MCKELVEY: Yeah, I mean, the guys we built Square for are the folks who are likely going to face disruption. But also they're going to have probably an increase in total population. Because, believe me, a lot of these people who've been getting regular paychecks, that may be disrupted. And if that happens, there will be a lot more people in that sort of lower rung.
JEN ROGERS: That's Square co-founder Jim McKelvey. He's the author of the new book "The Innovation Stack: Building an Unbeatable Business One Crazy Idea at a Time." Really great to talk with you, especially on today, I would say, because you bring some energy and a different perspective and you touched so many different areas. So I hope that we'll get to talk with you again when we aren't seeing the worst sell-off since 1987.
JIM MCKELVEY: Well, you know, the worst sell-off happened on my birthday in 1987, so.
JEN ROGERS: Oh, really?
MYLES UDLAND: There you go.
JIM MCKELVEY: It's like coming home.
MYLES UDLAND: So we did a little, we did a little better 33 years later. All right, Jim, thanks so much for coming by.
