On this episode of the Knowledge Project Podcast, I chat with Patrick Collison, co-founder and CEO of the leading online payment processing company, Stripe. If you’ve purchased anything online recently, there’s a good chance that Stripe facilitated the transaction.

What is now an organization with over a thousand employees and handling tens of billions of dollars of online purchases every year, began as a small side experiment while Patrick and his brother John were going to college.  

During our conversation, Patrick shares the details of their unlikely journey and some of the hard-earned wisdom he picked up along the way. I hope you have something handy to write with because the nuggets per minute in this episode are off the charts. Patrick was so open and generous with his responses that I’m really excited for you to hear what he has to say.

Here are just a few of the things we cover:

  • The biggest (and most valuable) mistakes Patrick made in the early days of Stripe and how they helped him get better
  • The characteristics that Patrick looks for in a new hire to fit and contribute to the Stripe company culture
  • What compelled he and his brother to move forward with the early concept of Stripe, even though on paper it was doomed to fail from the start
  • The gaps Patrick saw in the market that dozens of other processing companies were missing — and how he capitalized on them
  • The lessons Patrick learned from scaling Stripe from two employees (he and his brother) to nearly 1,000 today
  • How he evaluates the upsides and potential dangers of speculative positions within the company
  • How his Irish upbringing influenced his ability to argue and disagree without taking offense (and how we can all be a little more “Irish”)
  • The power of finding the right peer group in your social and professional circles and how impactful and influential it can be in determining where you end up.
  • The 4 ways Patrick has modified his decision making process over the last 5 years and how it’s helped him develop as a person and as a business leader (this part alone is worth the listen)
  • Patrick’s unique approach to books and how he chooses what he’s going to spend his time reading

...life in Silicon Valley, Baumol’s cost disease, and so, so much more.

Patrick truly is one of the most warm, humble and down to earth people I’ve had the pleasure to speak with and I thoroughly enjoyed our conversation together. I hope you will too!


For comprehensive show notes on this episode, including a full edited transcript, go to https://www.fs.blog/podcast/

My free weekly Brain Food digest helps you upgrade your thinking. Don't miss out, sign up at https://www.fs.blog/newsletter/

Follow Shane on Twitter (https://twitter.com/farnamstreet)

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00:00:07walking to the Farnam Street podcast called the knowledge project I'm your host Shane Parrish the curator behind the Front Street blog which is an online community focus on mastering the best of what other people have already figured out the knowledge project is where we talked with interesting people to uncover the Frameworks you can use to learn more than last time make better decisions and live a happier and more meaningful life on this episode I have Patrick Collison the co-founder of stripe when she started with his younger brother John in 2011 will stripe started as a company to make online payments easier is morphed into internet infrastructure company Patrick is one of them and thoughtful people I've ever met after listening to this conversation you're you'll realize his success is less about luck and more bit. I'm pleased to have Patrick Collison on the show
00:01:08before I get started here's a quick word from our sponsor
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00:02:09Patrick I'm so happy to get to talk to you thanks 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 but I didn't technically speaking drop out of the race at of practically speaking dead good my lack of Education credentials elsewhere right I should take my parents and I just I do in fact that I did in fact it formally speaking graduate from high school but I guess what happened is that I become very interested in programming and I said I wanted to spend as much time as possible and I are the next we had this kind of interesting thing called transition year at this year between those are two major exams high school or High School
00:03:09formally designated year that's optional if we can go and pursue things that you might not otherwise you're naturally tender pursue in the school can be too much more permissive going in spending three months abroad or going and doing some work experience in this area or been in that year I bet you decide to spend as much of it as possible permanent oh yeah I did that and then I return to school after the kind of the latter half of an Ireland Schenectady High School system and it felt so much slower and less fun and so I tried to see if that's why the programming I had did you ask for the first time and I might go to Stanford for the 2005 International list conference and their conference and what is it was right eye opening for me and I remember we can walk around Stanford Kentucky Madden American colleges in great and so I am back in the high school in Ireland I said I decide to
00:04:09see if it was some way that I could just go to college in the US and subsequent year and it's a long story but I eventually figured out that I could not do it if I did the standard Irish got to follow the standard Irish education path cuz I could do it if I did the British on to the terminal at examination and so I kind of resume to my set of self education except instead of programming I was now studying for these you know British exams and did that for the subsequent year and ended up starting they might even next fall
00:04:43how do we get from MIT to where we are today which is Stripes offices in San Francisco
00:04:51to the login for true story and I'll spare you the most of the less interesting details I guess you were watching thing is while people in the US have grown up and environment eviction College attendance is really prioritize early age and if you have your optimizing extracurricular activities and downstream College acceptance rates look like on like on stuff for driving Ireland that's it wasn't part of the culture or discourse or environment at all and Center by the time I got that Mighty To College general and it didn't feel like that big a deal I didn't feel like I'm sick of this was the terminal state that I said it's been my entire. I could have childhood and Adolescence it a try to pursue and so as I can other things other ideas and opportunities to do in across the transition may be more open to
00:05:51I then then I'm here is because if I think any differences in me but it's because of the differences in the culture environment I come from and so my brother John and I John at this point being a little bit younger he was never in this transition year in Ireland we decide to start a company 6 months after I got that Mighty that's why I really just started and I thought I had some kind of time to spare because I've started called you you're younger than 5 years and that companies have worked okay and it's kind of a long story but it ended up becoming a small acquisition I went back to MIT because when I started the right sort of I've been very interested in math and physics and just kind of mention this idea especially becoming our Texas attempting to become some kind of academic and of course that's one of the default around you you know everyone is planning on this again trying to get a PhD or to recover faster whatever and so I think that that environment isn't texting me back because I felt that I hadn't really
00:06:51you're very properly rejected my hypothesis that maybe I should try to take a ride maybe kind of physics is what I should be at least attempting to it every year back in the 90s I did that that was not the case progress in physics really felt like I did slow down pretty substantially compared to the tens twenties thirties get the opposite of the. In which so much of it we were learning about brought up here to Discovery I like it. In which existed in SE 2010 with Boost that there really was just not the same rate of progress and to those of a little bit of that and then I'll do some magic
00:07:40appreciation myself that I think I just enjoyed programming and software and Technology more than I did math and physics even though it's 10 degrees a little bit painful to realize that I explore a little more about the cultural differences between Ireland and the US and how that impacts you is that the CEO start
00:08:04things may be a couple of things and that Ireland is very awkward looking necessarily so in that said of Ireland's improbable rise from poverty or the latter half of the twentieth century was very significantly enables maybe almost holy enabled by by exports by importing American multinational companies having them set up factories in basis and you know hubs of different sports in Ireland at one of the world's first special economic zones was created and Shannon which is very close to 10:15 miles an hour I was born Deng Xiaoping visited us and found this quite inspiring and to decide to set up set up a special economic zones in China and search engine and visit with them the Pearl River delta. That's a retired special economic zone was in some ways to Rocky inspired by and what he saw in Western Ireland
00:09:04and and so I think the fact that it is a very visceral link between kind of a dormant and progress and I talked about wind and this kind of weird looking sense that the possibilities of the of the rest of the world lives are so much greater than than kind of those internally that that's Ray price of an island I think that's certainly one stripe in the sense that we really are all trying to emphasize the weather for Annandale and potential of globalization and 1280 the mid-nineties that was so it's something that was
00:09:48uniformly accepted into this but he still eat circles now see that's something that has been questioned somewhat more but I guess it's the Irish experience is very much when I was seeing as an almost holy on alloy good and I think that's that's greatly influences here so we meet to form a cultural standpoint where Ireland is had very high rates of immigration for prickly post the expansion of the EU in 2004 very large number of Eastern European immigrants move to Ireland I want those countries exit to the EU and that was really not accompanied by any any material social Strife for conflict or a lot of the challenges that we've seen and some other parts of the world and so again I think that
00:10:48at 7 appreciation for orders that are more open or more open to immigrants more to the facilitation of opportunity things like that again I think that really is the Irish experience and of course is the reverse version / so many Irish people themselves have benefited enormously from being able to go into the person who lives in the UK and Australia and the US and Canada and so on and that's again just really going to part of the nationally test and then maybe more softly I guess Irish culture places places a lot of importance on just kind of warm and interpersonal Dynamics and trying to have other people enjoy themselves and be a tease and have a good conversation with them then whatever else I think maybe that's something that's influence someone at stripe where we want strive to be
00:11:48a warm place in BB Play music app reception and in the kitchen to just try to put people at ease into crowd enough to do soft noise around them where they feel comfortable having just a good conversation and maybe that's because of entirely unrelated reasons or or maybe again in some way we were influenced by this the kind of environment we grew up in in Ireland would you describe the culture at stripe what do you actively try to achieve with that
00:12:19but I like to have the cabbie eye-to-eye on the caveat is that I'm pretty sure the answer I would have given to this would have different in some material weighs 2 or 3 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 so it seemed the significance of two or three years ago and also in part because literally what is the difference between needed two or three or double of contingency in the answer for its function of just realizing this point but also isn't what it is that you organize a shin the company needs of the challenges that we currently faced with that guy yet I think the things that we really prize and try to see can people be higher are
00:13:06kind of rigor and charity of thought in that I think so many organizations prize
00:13:17smoothness and smoothness of interactions and trying to reduce minimize the number of the ruffled feathers they can at least inadvertently if not deliberately prefer cohesion over correctness and we really try to identify people who who are seeking correctness and you don't mind being wrong and for willing to at least contemplate things that seem improbable or surprising your flu or really Divergence to what is some of the generally accepted status quo we all tend to have attended actually do a great job of teaching that until we look for that kind of combinations of openness and Wrecker
00:14:15I don't exactly know what the right word is but kind of
00:14:20determination and competitiveness and I guess willfulness in that just doing anything of significance is hard and I mean anyone tried to do anything that's the date they themselves considered significant right and I'm in the sleeper startups like this the default outcome is your relatively near-term non-existence like this the default outcome is that you do not survive I'm too to survive over the medium or even even more difficult to you over the long-term and that is that that's like an unnatural act right and so you did find people who Rochester willing to serve push against the suburbs
00:15:16the expected trajectory at of non-existence but people actually enjoy that she want that right because if they're nearly willing to do it but you don't actually enjoy us then the work is probably going to be less painful for them over the at where the medium-term and I really don't think that is for everyone I don't think that's that's a bad thing right in that the airport is that startups are extraordinarily hard and they just are and you want somebody who finds that
00:15:49who's on stage in their life but that's the kind of challenge that they want where the fact that the particular area in which there can be working instead of undefined or significantly under built out or significantly broken or whatever the case might be that that's what they're looking for 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 caring for others and a desire to be nice is a kind of anodyne word but to be nice to them to make them better off right we
00:16:37which really try to find people who respectively enjoy spending time with right he's been such a large fraction of your life inside the wallet under the roof of whatever organization situation you're working at and so given that I really think it's worth prioritizing this at night I think of course don't know for sure but I think we go to set up some greater lines to find these people then then other organizations tend to do other things as well let me know but we really care if I do about ethics and integrity in people but yeah I think so too do a lot of other organizations the tree that really stand out to me or just regular and Clarity of thought this
00:17:30hunger appetite willfulness determination and this again warmth and desire to make people around them better but those are three that really stood out to me take me back to the early days of stripe and the struggles you are having and if you walk me through some of the things that you've learned since then there's some of the mistakes that you had made
00:18:00bring the car back on contacts to your is that by almost every every time I sent to be saying analysis pipe look like about it yeah right that this was a crowded Market the word tons of existing and come in through significant Regulatory and just going to partnership the institutional barriers to entry we have no experience in the main we were very young we we weren't even US citizens in an ecosystem that you can just use the regular tree Dynamics that's a bad for the complication we knows it obvious mechanism for gaining some significant distribution and we were not answered naturally viral product or no benefits of organic adoption the way may be a social network or a consumer product might have those reasons I think a lot of people there very recently thought that your trip is a bad idea or stripe
00:19:00today I think they were doing something reasonable by telling us that mean they're giving us the orthodontist and again you a reason to justify The Testament and so it all started in the background context of that I think the thing that primarily give us the confidence to actually attempted was it just seems so strange that something with stripes character didn't exist in that we really looked for striped before we had before we started this must be the case that there is some service some company somewhere offering infrastructure maybe eyes and payments and economic tools that are straightforward to use for a developer right I mean this is one of the top needs that any business opportunity has arguably by definition of a business on the international must have access to these tools there are tens of millions of developers operating on the international so just keep giving the magnitude of that Marcus and assertive
00:20:00listen to the business model really felt like that have to exist and so we've kind of forlornly Google for I should have a different appreciation of keywords and incidents after a couple months became to know someone resigned to the fact that no it did not in fact I'm probably test
00:20:16non existence was so kind of strange trust that initially have discouraged I swear if there is such an obvious idea and such a surprising you know absence of a of a kind of solution maybe this some kind of leaking Force the word not seeing that actually makes the song Impossible right in that for example we were all going to the same time in white kind of consumer bank or so bad they weren't really keep me abreast of technology in the future really high and they were getting fined by the cfpb and etc etc etc and we looked into it because my parents are good reasons why the probably end up in Saltsburg a the bank or subject of such owners regulation for three difficult for them to do anything themselves right to Free Chapel the difference in a checking account in a savings account that actually kind of potentially mandated by law and so it's going up until all the banks fault the second reason is the office of the controller of the currency of Federal Banking Charters that I had
00:21:16stop tissuing new bank in Charters. Angela prices in so if you came along you're like well I'm going to go to solve all these problems in your banking you were blocked from doing so by the end so we can understand it's going to be more vain is there some Force like that not necessarily regulatory but just like there's some constraint that we are deserving or weren't and after maybe a couple months investigation we decided that no 13th appear to be at least I mean of course you can never come to Findlay rejected but we we really couldn't find one
00:21:50once we decide to build a prototype and the four type of guy built on top of them with set of existing payment systems and didn't do anything overly ambitious I was just have enough to come and get a sense for what is almost like a concept rendering of what a solution could look like rather than as a self-sufficient to get just a couple of our friends started using it and I think a particular thing we realize that causes to take it more seriously and I mean concrete later drop out of college was the realization that this will probably be perceived income developers like Ops people building some little side project over this kind of Aryan Nations start up or something like that I received for have that segment of the market or actually the problems that larger companies had as well the kind of what we thought initially might be able to Lake opportunity
00:22:49Morgan to an ocean and we talk to companies in hundreds of millions or billions and revenue or companies in other countries and so on and we just ask them to confirm account to their problems and what they wished existed and everything else they give it the same roster of Futures and when we thought about it and then just like look to the gun micro figures we saw that at the time 2% of all consumer spending in the world happened on the internet and and so even though we are going to
00:23:1920 years into the webs Evolution and even though that we don't engage him not to be Commerce and so on weight when you looked at Savannah on a macro basis it was apparent that we were still can I barely off the starting blocks. I think the combination of those things for be kind of decided that there didn't appear to be some sort of them
00:23:39so dark energy preventing a solution and that the set of problems we could see actually seen this in a very pervasive rather than just so the microcosm and Adam thirdly that actually this whole market and environment was supposed to actually at a certain surprisingly Nation stage when you look to the full picture then besides drop that you guys went from two employees you and your brother is co-founders to 800-900 now we're kind of employees and what have you learned from scaling the business
00:24:20I think on some level scaling a business is both relatively straightforward to end extremely hard maze relatively straightforward in the sense that it's usually not that difficult to
00:24:37see what the problems are and she said that you don't see 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 question of what are you oblivious to because of your own by azis rather than what is particularly difficult to observe and what are your cracked mechanisms to test an account for that so it's I think straight forward in that sense straightforward in the sense that usually solving the problems is not
00:25:16outlandish leh difficult it mean if it's not easy but you do not hire someone in this role you need to figure out a raise this Capital you need to build a system problem. None of those are easy things but they're also not said of scientific breakthroughs there are other companies that have done it there are generally Play Books exist and file episode of your picture strategy might need some to the correction refinements you might hit some balls along the way it's it's rarely unprecedented and I think it's extremely difficult in a sense that you're sure you don't get to really choose the clock cycle Verizon's and flash games on desktop Tower Defense games every receipt of building the towers that shoot missiles evolves into the critters a soda scampering across the board
00:26:16how to break into your Fortress revocation be and I start to feel little bit like that for you fundamentally don't control the set of the rate of problem. You just control the other variable of the recent picture of them building defensive or Michigan Tori or mechanisms to deal with those problems and sometimes the rate of the problem creation can outstrip the rate of which you can solve them even though in principle any one of them is is is relatively manageable right and so I think that really adds a lot of difficulty understanding abstract level doing the problems is tractable
00:27:05did the character of having problems materialize active at every level of the organization or whatever you can level of abstraction of every kind of magnitude and so on so kind of unnatural thing that I think is just a psychological emotional difficult to deal with and so while you might recognize that have fun some contemplative stoic level the this is how it goes you know that's not how it feels in the moment right and it kind of feels like that way everyday and some days you almost have to smile at the sitter's unreasonableness of the suede of problems and challenges that have materialized on your desk or in your inbox and it said she the constellations of the Stars know the set of consolation the problem is looks so implausible
00:28:05Toshiba TV screen with you right and so does that kind of emotional is that is Health Management and then of course there's the child of dealing with uncertainty where
00:28:16you know it's Samantha is kind of I guess
00:28:20fuck you your operating into the weird Zone prayer you're off of making decisions that have soda significant long-term impact or that are difficult to reverse the course correct and in the face of great uncertainty and the uncertainty is often
00:28:41unnecessary in the sense that you couldn't principal going and significantly reduce the uncertainty you could go and study the question more you could go and obtain more information and you can come and running experiments you know it's not like Cosmic uncertainty you rather just that it's true love nicean unknowability true deep unmitigated but I think it's not too hard to say while we was going to chew something and make the best decision we can I think it's more frustrating kind of uncertainty worth actually not necessary but the thing that says limited is your is it is the cost of painting further information for juicing that answer answer your left in this of dissatisfied situation where I have to make a decision does a lot of uncertainty we could have like some certainty we could take SEPTA mitigate that but we just don't have time to and making a lot of decisions in that zone it is somewhat to satisfy
00:29:41right when is correctly reacting to the fact that it could be otherwise right and then lastly maybe you're playing this set of him multi-armed Bandit problem where you're so concentrated balance exploration and exploitation or through the optimization of that which already exist exist in better with trying to figure out what are things that we aren't doing or that we don't know where we haven't even considers or you know if we were dating would make a toga party organization to the vacuum or think of and so on so it's very hard to know what the optimal rate of exploring those things is while also operating outside the system and operating inside the system or optimizing after this it's an uprising it inside system the rate of doing those things as and so you can I think about the challenges of what's going on vacation instead of finding a teaching moment the right way to balance of things but
00:30:41without ever having to sit down before to try Is It Anyway to come just to listen to any unified theory I think that a lot of experience of scaling an organization is specific versions were specific applications of those Dynamics I'm just figuring out how you yourself or have the organization or how your peers and colleagues and deal with the Asian Plaza construction necklaces for Virginia so is or are
00:31:11and then maybe very last thing I needed those are those are all kinds of the structural ones I can do is just how to write a personal version where you certainly don't start being
00:31:26well adapted to or that she's in my case particularly skills in organizational management and Leadership and may depending on the rate of growth of the company you said need to acquire those skills on timeline that's largely out of your control and at the end of the radio station. Might be a pretty difficult thing and so and so did my kids I think I just have to
00:31:58except myself
00:32:03managerial inadequacy relative to fight either is required in the moment or should have will win the
00:32:10your term impending future be required I just figured strategies to try to acquire those skills and abilities of gravity as possible
00:32:19when I go back to the Explorer 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
00:32:38even in the organization or personally in the organization then maybe personally if that's different
00:32:47I don't know the better answer other than using course your sticks and then being willing to revisit or make an exception if something seems particularly promising right roughly speaking we invest most of our effort we've been to the precise number I have to let you say 70 or 80% in optimizing - which we already have that which we already know is producing returns. Which there is a sorority to your line of sight from the input to work the optimization but I've ever tasted of the Improvement and then no some fraction to work and deserve a distribution of bats q but that is some good work let's call it 20% into things that were stacked leather pride and I think that's not necessarily the case because I think it necessarily the case that call it again 70 or 80%
00:33:45is devoted towards optimization of that which already exist if we did not do that you know in the again we did not do that then this kind of default non-existence we just discussed will be guaranteed right it's very easy to set up lighting company in the side of a hill has just do you spend that word even 0% and then maybe second lead to what degree do you allow those answers to be different at different levels and of the company in at 7 different places and got how much is it to be a uniform answer and how much hydrogenated you perm it would you design for
00:34:29I think is we've grown we've we've tried to shift into a model where it is somewhat less uniform and then certain teams last optimization of what already existing computer apart is going to require more exploration in another part of the company at to be tilted into reverse Direction and I think that says if
00:34:50that kind of time recursive decomposition I think is is really required to avoid the diseconomies of scale but otherwise set in how do you decide which speculative projects you take on the based on disrupting your business or these are things that I want to do or one stripe to do or
00:35:15I don't know that is a better answer Beyond given all of the axes of no constraints and returns which ones seem like like a good idea I invest in when you ask you what what what's the what are the criteria for investing in a company its 12 and you can have normalize down from the really high dimensional space of Marquez and Founders and idea and do all these things you normally I call you and ask him to return profile looks good enough right beside you know which ideas for two of course I need access to remain things you prefer no don't want to or whatever
00:36:01for example something that requires less effort than more or and Tails let's downside risk Brothers more whatever you know those are all good things but I think kind of where it all naats out is well when you take account of all of those factors which things just seem like a good bat right answer just have to give a concrete example Atlas the service we launched for helping new Founders Inn corporate companies in particular that I would have to take restrictions that tends to exist before so it says she open to it thunders anywhere in the world have one reason as to why that was a good bad if there's no can you can just measure that anyone access right I'm about to come and you look at overall and you see that while if it doesn't work and it's it's hard to see how it could cause that much on site for stripe it's not to require an enormous can a fixed cost investment in order to serve learn is to it each other with initial e working if it did work it seems like you would use going to quite significant returns
00:37:02the kind of things will have to do for a dry itchy things that played volleyball with Verizon other parts of the business and so on the road with learning seeing you keep deleting skills in the course of doing it etc etc etc I think I'm going I think the reason there aren't more good that's made in the world is because making good backs is difficult and again I think you can live in in different areas on difficult in terms of recognizing them more difficult in terms of acting and executing on them or what do you mean by difficult I think both and most organizations are some things that usually resistant to bats in that because most people are necessarily optimizing things that already exist correctly I bake a mistake I mean the things that are not optimized along the way especially things that are not been going to fix the optimize and patched up and corrected as they virgin I mean those are going to
00:38:02Drake right hand soap operas Asian is critically important I don't mean to sound remotely kind of dismissive towards it but that's a very different character right to continue move back to listen and riskiness dislike them right straight structurally speaking them difficult to understand a difficult interact with this one I think the whole host of reasons there and that people are in startups episode of last word at the risk of failure as people instead of existing systems must worry quite a bit about the risk of failure newer things and operate on to the time on bastardize of clock cycles and so you know I'm Dykstra talked about the idea of the Buxton index and the timer eyes and upon which an organization makes decisions and so maybe
00:39:02first you make a decision yet its decisions which of a decades-long Time Rising where's maybe a company makes decisions on their quarterly time Verizon and maybe a week at your message I'm right and whatever and observation was that organization was very different Buxton indices find it difficult to work together and if normally for the really long time right is working with one that said of rapidly updating and then we thinking if it's just like a fundamental Kevin giddens mismatch and so I think that's why they're quiet hired and why there are no more guns in the world I think there were lots of different kinds impedance mismatch like that it's not just the time ryzen thing but I think it's just like a fundamental deep intrinsic difference between to the existing incumbent systems and the actions in mind that required to optimize them and they said the exploration of figuring out that which is totally orthogonal difference and
00:40:02how do you keep the mentality me when striped start at the cost of failure was really low now you have a thousand employees they all have families you have a business you have people have invested a lot of money in the business how do you maintain that ability to play some massive bats
00:40:20it's really unfortunate how do we make sure that we can place bets that don't have excessive downside we're so fake of a downside right eye or regularly they closed down side across my Yahoo portfolio and I think that actually
00:40:40I think the impediments to play some good but I think it's not like stripe has a long track record of soda making really good investment bad decisions in We Are I Am we are far from being the the apples or the Berkshires or whoever and have a multi decades as a track record of War back in here in that jacket will re-evaluate that if we are here in 3 decades which has established wood would I will not be the default I've gotten three portfolios ass got such decisions then perhaps we going to buy you some confidence and but it feels to me the reason that organizations don't take don't tend to make more of these more make more good ones is it is more than sociological more Institutional Investor that's fundamentally too costly because in most cases
00:41:40Santa Claus is not that large and that you don't have to like just dropped Financial cost or in terms of these out of water damage to your position but that might take it's much more than mine set of improving that much already exist is just quite different to the mindset of screw the old system as let's do something that's fun 219 you from scratch and so I think the challenges in significant part how do you reconcile these two mindsets how do you have the I mean it syrup brands of Peace layering in buildings into the different parts of the building has started building have to change at different rates that have you designed for that and I think of analogous question for an organization is how do you do organizational paste layering how do you have parts of the organization that can try to do something fundamentally different too and hopefully Superior to that much already exist and how do you have people who are trying to
00:42:40who think they know that we were crazy doing it is in fact the right way we're going to do a better and better and because you feel fundamentally disagree with each other and must have significant conviction the respective approaches of the right they do great work how do you have those people at the end of the day have dinner together and fundamental you feel like runs thinking how do you do then come back and take a recall one of the interviews that I was watching his prep for this where you talk to boo one of the first five or six people work at Bridgewater and sat over time we've hired more people who have but yeah we were I would not say we were chiefly Bridgewater influenced
00:43:23did you come at this sort of notion of thoughtful disagreement before that influence and if so how did you determine and maybe they're just some sort of underlying personality traits that adds to the phone come to into different parts of our lives in so many ways and I mean for a start to your earlier question Irish people are always disagree and always arguing until I get new to the cultural Dimension to it it's it's not a
00:44:07it's happening that that the people can shy away from
00:44:11cuz I don't see it as an attack on the exactly right right
00:44:16I think that
00:44:18End of Watch is a common shared personality trait in a lot of the people who helped establish the culture of stripe where they enjoyed
00:44:35through disagreement and trying to find the boundaries of an argument in the places where it's not the case and the exceptions might be I'm just trying to get it
00:44:49Jetta fuel for the topology of a bad space and kind of stumbling in the dark try to construct a map of where different intuitions and fearest applying for they don't and so on and I like I think we kind of deep mines at difference in people is often those who those who enjoy finding the limitation of arguments and beliefs and those who don't and Tyler, and talks about it I think it's his second. There are no knock down arguments and the grenot arguing so just uniformly completely true because there are always the limits to it but there's always the other side and I think that's kind of very deeply true but I think it's kind of just the questions of a fact and and again personality
00:45:49do you enjoy finding those limits in the exceptions and thinking about as well maybe this is last reason I think or where is it electric and I think or or text like a stressful process and I think that's getting that kind of ignorant and Charlie thought requires a joy of Discovery yet like I had this this thing I believe the truth I thought existed in this place and and I'm going to be an enjoyable Discovery rather than something stressful in and you threatening
00:46:20weather station is a good example there for you guys we discussed I think that globalization is Annette overall for the world a fantastic thing and something that support is rising frangible basis and his proposed more people out of poverty than almost any other for ever and yet more people like Danny Roderick and others verses prodding at the edges of fashion showing well but not in this place or not in this way or you're at or any of these other folks at MIT like maybe it has this so under-appreciated downside and I think that's great I think those are important questions and then really interesting work and I think they kind of the underlings were sent him into his interests in where the Aristocats and intuition the rules in the argument Ciroc
00:47:17going to come back to some of that a little bit later I think one of the questions that people want to hear from you is what what would you say is the biggest difference between the Patrick making decisions today and the Patrick making decisions maybe 5 years ago in terms of how you actually make those decisions
00:47:39pindar for big differences the first is United States more power to you on decision speed in that if you can make twice as many decisions at half the kind of have to Precision.. You are feeling better and then given the fact that it is the rate of improvement of decision-making with additional time when was necessarily 10-second of flat nosed I think the most people serve me that Patrick of five years ago and included should be sitting here earlier and she should be operating at earlier in that curve make more decisions with less confidence but insignificant be last time I just recognized in most cases you you can course correct and then treat fast decisions as a kind of asset and capability in their own right
00:48:39attic white writing to me have some of the organization's I hold in highest regard to do this the second thing is not treating all decision this kind of uniformly I think the most obvious actually use to break them down on our degree of reversibility and magnitude things with low reversibility and great impact in magnitude deliberate over and try to get right things very easy as absent air to have me this mechanism as you put in place for those decisions to seep into a decision making for the other categories and wheelie in the other three quadrants you can afford to be so much more flexible in a much more fluid and then again really just a part I speed because obviously if it's very reversible then
00:49:39by definition that you can always practice later and if it's slow Imports then who cares right I'm just being kind of cognizant and before making a decision tried to categorize all what kind of decision is it the third thing is I now try to protect Liberty just makes your decisions in that why am I making the decision and for some kind of decisions that are some good reasons for that shaving their some decisions the CEO watch to make and is going to find a man to hook for but there are some decisions were if I'm making it or if I have to make it up I suggested something else organization or institution Lee has broken and I think the need for a decision for anyone not just for me is often it like only a set of happy and there's really some other underlying issues causing tech make in the first place into thinking of that
00:50:32concretely dream or to push others to make decisions instead of pushing them back to the main exports and forth when I realize that I would make it is Asian differently to have someone else is making us not even really discussing the decision itself but try to dig into what is the difference in a models such that you want to make it there today and I want to make a Susan B and one thing we're currently spending much time on your it's stripe is having different parts of the organization write down what they're up metaphors actually like what their mission is what the long-term key metrics are there part of the organization fought their customers are either internally or externally answer the things of this kind of persistent on ongoing underline nature such that hopefully once his agreement on those longer-term things then
00:51:32different Sign Station might just be well we differ up the most instrumental effective way to achieve his how come it is but worth it felt really unified on what the desired and state is and there are things I think disagreement over as it is instrumental ethicacy because well if you're right then will soon learn that if your on reality will probably so make that pretty she ran in short order I think the more troubling ones and the ones that tend to cause more kind of persistent friction at in an organization are where is Legion disagreement in what you're actually optimizing for but that's kind of never explicitly surface and I'm covered until now I guess it going to decision-making that I placed on more importance on making sure that we have the right to the foundational agreement such that the kind of disagree with that then tend to rise or of the century more superficial sort and their agreement is actually less important
00:52:33part of culture is learning from the decisions organization makes what do you do at strive 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 but positive and perhaps ones that you in retrospect would have wished you could make differently and it's kind of sad actually believe this but I'm kind of a response that question that decision making an organization's is slightly overrated in that organizations are not like Investments entities more funds or are badgers in that
00:53:13organizations with investing fundamentally very binary there was a moment I hurt you either buy or or or don't or sell or dumped her but I needed someone were continuous in against a public market investing and so on but given to the time constraints and decision-making time at use a treated before this. Can you make it by or or or not decision wears an organization's everything is much more fluid and continuous it's much more about I think designing the feedback mechanisms you know their biological is the famous time soda fountain
00:53:53water model of the economy of circulating fluids and you can bury the interest rate or the inflation rate or whatever it was just kind of try to get it sent to the wrong kind of them biological apparatus and I think an organization is much more like that and so that the I think the things the things to optimize are the incentive structures and the mindsets and the definitions of the goals and the feedback mechanisms from the outcomes to the
00:54:26Imports in the work in the operation himself and all those things and less than the binary decision said I don't completely dismissed obviously the important decision making and decide well I'm going to launch a product or not are we going to start this project or not we're going to replace this system or not and so I took the position but I think it tends to be much more well I guess maybe it didn't feel like the right unit of analysis to me I think the right unit analysis is
00:54:56is that of the saddle and the question is well in an organization what are the silos and what are the organs and and how do they interact for the feedback mechanisms between them let's kick out a little bit on the the feedback mechanisms hear 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
00:55:21I really think that and it's not a the question but I really think it's too early to answer that I understand. Let me know. I can kind of tell you what I think today and there's a change of e major last year and things like that but like stripe is being a thousand person Organization for more than 500 person organisation for just over a year right we're beginners at this and you know
00:55:554 years ago striped was under a hundred people and I think
00:56:03either to opine as if or to even more problematic can you believe we going to have it figure it out would be really really cute
00:56:17and so it kind of invoice and talking about I think that maybe some of the prayer Our and I thinking coming from but I don't know what the right answers are you I never said a lot of our Time episode of scrutinizing other organizations trying to find out then can reverse-engineer hot works for them and why and I think the prediction of the tech industry is that it's it's a kind of pure knowledge work that were still I think quite as early instead of figuring out and then cuz of how to optimally coordinator and collaborate on it in that you can so draw lineages
00:57:03hpnn Thailand Microsoft and Google and Facebook and so on WhatsApp and they're only said of suggestive examples that I think these suggest that we may not have it all figured out I mean backup WhatsApp was such a minuscule team and Instagram to of course just by operating at the scale or the fact that I have a new pair. Yeah on the way to the way you need to be operated stripe which company cultures do you admire the most not business models but culture and why
00:57:44I'm our cultures are strong first off cultures that when you ask him if he's in the culture can you describe Ed and that they will
00:57:53but they can expound on its merits for more than half an hour once every case describe the time length all the things they don't like it that much right because if it stronger but it's improbable that every aspect of it is something wrong person it really agrees with her children affinity for and so whether it's the New Yorker or the military if they are strong so I think that's the first order thing I I don't I don't think that describes most are some kind of milquetoast averaging right September 2nd is
00:58:36call Sherry's of imperfection and so both
00:58:44The Economist and apple have extraordinary high standards for themselves and I'm really kind of in both cases the work has a kind of Primacy and so who designed the latest iPhone or who wrote that article in both cases that's anonymous because there's such a belief that the work speaks for itself right and operation for that
00:59:15and then culture is that has longevity and really sustain success and so
00:59:25I think that one of our major investors is Sequoia capital and Sequoia has being the top four more in the top three firms I was at the subjective ranking but call her for for accentuate entire existence VC firm that is being a top freeform 4 call it for decades and so I think the obvious question is at what height is that what is VC firms and I'm not tripping firms have had at any moment I'm a strong team to be a top three firm
01:00:06but what are the underlying institutional characteristics that enable the back to be sustained and of course in this applies to some of the other organizations you mentioned like City, Stewart Road New Yorker or even this is one that I had to read more about as late as Koch Industries in that Charles of course there is Charles and David are most famous for their political activities but if you just look at the company that has kind of compounded from 2940 public estimate 100 billion
01:00:46the older Impala five decades organizations that have compounded like that for that long without there being kind of one driver success is no one thing that enable that rise didn't like StumbleUpon some resource that they kind of cornered there was no kind of iPhone for them at cetera it's to be something kind of deeper and worth of institutional and and the fact that that's been comes to stain for so long I think is interesting in its own right as an what is it that Sequoia Capital Koch Industries in the New Yorker share and I haven't quite unpack the answer to that check can you give us an example of what you've learned from studying Koch Industries
01:01:34it's very striking to me how
01:01:37Warren and Charlie at Berkshire I'm Tayo the folks at Koch Industries are so into a kind of epistemology and structuring of doubts and accounting for biases and
01:01:55mechanisms fervor charity of thinking like to do a very striking degree I mean I'll see if you read the public writings are you go to Omaha listen to Charlie side of symbology half philosophy and and that's been the case as well as was striking degree with with Coke
01:02:31and I don't know them well enough by any means to open any deep sense right. 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 assassinate kind of comprehensive way but just in terms of what it seems that the leadership prioritises is strikingly consistent across truth the most successful multi-decadal institutions in Indian us something to be said about your point earlier but 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 about tracker right you're a huge reader of where did this love books get started
01:03:17will be crappy internet when I was going out to eat because I was over that there's still so much noise in the phone line and then we didn't have internet for years and then we got it was Treecko slow and so on and I was I was Fortune my parents were very willing to pursue all these harebrained schemes and so you eventually got an ISDN line which is ferocious the expensive but... That is supposed to be the fiber of its day if he's too far as I was concerned 7.6 K S II was Majestic of the speed and and then we eventually got a satellite internet connection for really game changer
01:04:0414-15 years of my life there was no internet and we live in a very rural part of Ireland by quick distance was my friends at school and so all the really wants for us to do was clean the garden which we did a lot of men to read and write this in the contacts if I had kids or when I have kids Optima praying for them and of course you think while he kind of wanted to grab a stimulating environment and have all these experiences in extra-curricular is in everything else and what time it was not my African my upbringing was kind of get out of the house go play had lots of books and so we know we are going to Borough are they should have said country to the shallows but it was pretty pretty unfettered and I think our parents had a kind of they followed our interests
01:05:04and supported them but they didn't choose them on it sounds like they they push from behind pulling in front and I think that's where it came from and I think that
01:05:28I don't know
01:05:30I run quite a bit and don't even run because I enjoy it that much in the Indian deity moment it's it's not like it's euphoric or anything close to it I mean it's pretty painful and very discouraging when you think about it is very deeply true that how you haven't ever get easier if you just go faster not true of running like If I Stay running for the rest of my life it will never get easier I will go faster but it feels like something I ought to do and it's vastly rather
01:06:17having run that not having run and so I took him to do it I misreading busy I don't feel like I'm weird I feel like everyone else is weird and that they're just like so much stuff to know and I guess I just feel stressed out by like it feels important words obviously important and I don't know it and so she had like I better get to work but it's not
01:06:42I'm reading I'm not in this like a specially Blissful placement it to I enjoy it perfectly fine but it's more like I am I think you're extremely important things that I really should know and I don't and that Fields problematic how do you filter what you read
01:07:02there's millions of books writers one of you right well I discard a lot of books I like the inside that there's been a set of the set of great books they're really worth reading right and is a subset of those books that's been a really enjoyable to read maybe it's like 10 or 20% of them say and the subset the intersection of really worth reading and really enjoyable to read is actually still more books that you can read then you can read me like that and so I decided I would read all of the books that are really worth reading and really enjoyable to read and when I run out of those I'll go back to the books that are merely Works reading right on so you know pretty quick you can decide if this is an enjoyable book reader not reading is like I should be treated as a
01:08:02should scam You Should Skip you should backtrack you should discard and since you returned like you were not subject to the book of consumer like a book is there for you you bought it at yours I'm just like jumped back and forwards that Aaron half if you want annotated Wiley like it and use it I wholeheartedly agree and I may be
01:08:32and start half the books I got and I probably finish a third of the books I start and that works out too
01:08:46finishing one to two bucks a week but if I finish it then I guess it was recommended by somebody the first place and then it looked interesting enough upon start and then you know if I should have been there was quite a few things that you like a lot of selection that can happen to all the way and then the other thing worth worth pointing out as soon as the line from bash show about Japanese poet and that you shouldn't follow the people you most admire but you should follow up a at Meijer and I try to do that try to figure out for the people who think you're doing really great work or have really interesting ideas or just who I admire and ever retired how did they get to
01:09:33cool and what they are. What influenced and what's Upstream but I tried
01:09:45disentangle back when do you typically read
01:09:51always I'm going in the morning in the evening if I walking walking is a good one actually like your your peripheral vision is such that you can actually quite function read a book while walking on Saturday and do it much more and faster than I do but I've just walk in and so I might be able to do that to be a credible am eating after dinner and you pick up a book for the first time walk me through how you process that book what you look at you know me I'll jump out of Midway through I should just start reading and see like
01:10:37what I like to have ended up here and almost certainly like a bunch of the term that won't recognize or the antecedent ideas I won't be familiar with or whatever but like I did do it wants to be here right that I have gotten here and have a couple pages and it seems that the answer is yes then I might go to backtrack to the sergeants are going to put you in a bit more seriously and John has been since I did that and it's not related to the previous point that every moment you should be reading the best book you know of in the world I mean the absolute best for everyone but that is the best book for you but like as soon as you discover something that
01:11:21the team's more interesting or more important or whatever you should absolutely discard your current book as it in favor of that because any other algorithm necessarily result in you reading. Overtime optimal something else and I might just switch rails volleyball is just leaving books out to be recommended book and very awesome pick up a copy idea used hardback copy hardback books in are there more durable and now it's Amazon used hardback to really cheap books in the kitchen is books on
01:12:11in my bedroom in those books on my bed and just strewn everywhere and surprisingly commonly either someone else would recommend the book or some aspect of book whatever and it it's so it's so Salient feel around you really should check out that thing or something else triggers its relevance you read an article you just start appreciating a point to her question or something right and so I like part of the reason that I still really Dolly physical bucks is because you for now at least we still exist in physical space and Anna creates a kind of idea space for you that makes got a productive collisions more likely to happen
01:13:02what types of things do you typically mark up in a book and how do you what does that look like on so I can just make notes in the margin to underline stuff but in the margin I underline is Michigan the termite Market highlighted in the margin because then you can flip through the book cuz I quickly to the party mart right on the last pages I like on the inside cover the end I tend to very pretty note page numbers for particular person points or things that jumped out of whatever so that I can easily go back to a book and are the list of the 30 things that I found most interesting so you keep the book book that you can put the ring that you don't like how often do you come back to that book if I want to make your point or be reminded of sugar aspect or you know whatever
01:13:59maybe I will but generally speaking I don't I think you know part of the value of making a patient's
01:14:05is a horse to ride in Princeton and more firm in your mind said you so don't need to come back as much and sometimes if it's really good it's really good and I might write a review for friends and share an email of a Google doc or something or just shark Snippets of friends and that's how it will look good again so he act of summary or summarization AIDS and kind of synthesis better recollection but also of course I'd pointers and further suggestions from from those friends and so if you want to identify candidates in adjacent or or did you come from the testing and figure out whatever Jason candidates might be interesting for further exploration writing review is a good place to start what
01:15:05books have you written reviews on for friends this year one that I really enjoyed was a culture of growth by John Mercure antibodies and
01:15:21let me see a book about why why did the Enlightenment and the industrial revolution revolution start when it dead
01:15:35and we're at this and she busy makes the case I mean obviously tons of different arguments have been made for this and because it only happened once it's that we can never know definitively and you know wasn't the
01:15:52abundances the abundance of coal in the UK was at the property system in the high cost of Labor in the UK that's who created more to the Sun at the maid talk to me and hunting improvements morality book was it something bad trade you know that and so on and so forth and I know you're busy make the argument that I was but it was primarily intellectual and more than I should have put on Kodak anomic and secondly that it was specifically a kind of synthesis of the importance placed in a kind of scientific knowledge where we going to realize that scientific progress knowledge about the world is that exists and can be important in the progress as possible and they're not just going to the Imperfects
01:16:49imitators or receivers of the knowledge of the Ancients until kind of belief and scientific progress and coupled with belief inside of the Practical importance of engineering and of the more prosaic aspects of industry and of a kind of practical Pursuit and you unlock your offer the example of bacon do both kind of that inspired the world society I was going to one of his followers who who created it but also intended the catalog the Practical knowledge of all of The Craft people in the UK and the kind of functional knowledge they had a combination of this is a really high minders in the very practical joke your kind of cheeses to all these arguments and they're kind of Republic of letters in this is nascent risen's of science on the continent and so forth but all answers to this question is
01:17:49fighting does Revolution van and baron duplex bad versions of it in China and so forth and so very important question here is kind of vegetation of it is is as I talk to my friends which book or books would you say have most influenced you
01:18:17Jurassic Quest on Twitter back a couple weeks ago and I got a really interesting and a lot of people responded like many more than I expected to
01:18:28I didn't actually embarrassing that I feel guilty but this time I didn't post a response myself and I thought about it I text you some very hard question to answer like I actually worried that may not get me out of being a good question because like it's hard to know to the book influence you or did you have an inkling or leaning and if you read something that really resonated but said if it's not like if the book is at the artifact of upon which you project the the characteristic that had already written for the belief that already Arisen and it's like in the book is not actually cause all that in and of itself right now cuz I kind of symbol for the belief but they have that kind of question and then also I'm that good
01:19:28and then maybe I'll read a book that's in a trigger is a realization or somebody or something that they both could have choked me in some direction and then I'll go read better things about that question and so it might have been better if I just started the battery stuff but in some kind of Truth full of descriptive science and so like you know maybe it may be a better version of question is like
01:19:59which books do you wish you read sooner something right is this and that would be hard for me to answer this question not say any program books I mean it that's been kind of so influential and he's my mindset in my life I can really want any single programming Buckeye weather like paradigms of the I program by North leg and structure and interpretation of computer programs and no cat RC and Etc and then I have to get those like usually shaped me but I can't seem to have just one
01:20:56even to Brookside PHP retriever written by a guy who networks it's ripe I mean but one of those books in the book that taught me to program and so answer this question I could hardly not decide those right but it's supposed to really the plaster and where and you know you keep some more faster at science economics or or sociology or whatever and so it may just get back to the better version the question
01:21:28Switching gears a little bit what's the smallest habit that you have that makes the biggest difference
01:21:38I reach out to people whose work I admire and tell them that and definitely needs to a dialogue and I'm in some cases I've gotten to know them pretty well and so
01:21:55I'm fortunate that Tyler coming my mentioned is it is a friend but I've never introduced to him I just randomly emailed them years ago I can invite him to a Bitcoin be at the house in 2011 and I do not have her buy any Bitcoin but I invite him to that meet up and you replied and do not apologize if you could make it but we have ended up at I like after that other people don't respond but you know half the time to do and Patrick Henry cost too much of a Downton and it can be incredibly rewarding when they do and so
01:22:38if I did not do that
01:22:43I would have missed out an engagement how would you answer a question about what your personal values are
01:22:51we buy everything at so if you like two important question it's kind of a question feel like two important question to answer simplistically want you complicated a question to answer briefly and thereby perhaps unsuited to something extemporaneous and I'm sure whatever answer I gave you know what I'm thinking about it in an hour's time I'll keep my child realize I left an important Dimension to it and I think I
01:23:31so I can I can cite some things I value but the decision is the sense of doing a complete answer is very impressive I mean to support the value of Twitter wear because of the constraint and then there's the same because because the system chooses when to cut you off rather than you choosing when to stop at that that's quite liberating until it movie made you like me 20 seconds to be good values I could do that but like I could blame the constraints anything I admitted we have 10 hours of recording left
01:24:06what would you say is the most common mistake that you see people make over and over again that you wish you could correct and you have a 140 character maybe not having the right for a group or not having the right
01:24:27Mentor isn't quite the right term because Mentor imply something kind of quite active but not striving to be more like the right people are just being in either case delivered enough about that of course is for you is entirely in person one subject in question but whoever it is is going to be massively formative and influential in determining where does the German. Houston is a quote about how you end up the average of your five closest friends and some very deep truth to that right but if you accept that then of course of your five closest friends are I mean choosing that and we do not think of it this way we do choose those people like you're choosing who you are and of course that's kind of
01:25:21bi-directional process where do you want to be is determined by here around which term is he want to be around and so on but people that will accept you as but I think like sucking mine at the model and I was 18 isn't my five closest friends are people I ran into who like me and I like them and they're the kind of Cordele and South similar things but that it's kind of fundamentally mediated by happenstance and I think people should come invest more in it than that then they do end and related once you found those people should really invest in it because it is you except they can shape you and you think of the right people to shake you Embrace that shaping write an entrance on the on demand curve point on the ladder one I think almost all of us at least subconsciously have a set of people we
01:26:21golden really high regard or would like to be more like and if he's some ways and so on I see people
01:26:30in my opinion because they haven't found the right people or just like the right relationships and so on and if they had someone who was
01:26:45steering them more or in better ways could just be much better off I want to talk a little bit about the future of e-commerce and maybe Silicon Valley called her and I know we've got to end soon but talk to me about how payments you foresee them changing from not only the customer perspective but from the merchant perspective over the next you know this may be in that there's like a basic mechanical and where we going to forget just too much friction still exists and how many business models and transactions and businesses and everything that's what I repeated for fun of Matthew got stupid reasons right in that because my actions on possible because the fixed costs are too high and because like a directions to High and things that no one would pay for chiropractors infections
01:27:45exist right decision model in some cases they might but as a general matter a significant significant number of them or because maybe it's hard to purchase things that are really expensive in a way for their kind of risk of fraud is fish meal oh then don't pay your rent online safe right and so I can do the most important invention to that is the set of geographic kind of them balkanization and the beneficial tea that ensues where it's extremely difficult for somebody in Brazil to buy from somebody in Germany or something in Germany from somebody in Indiana until you get this kind of unnatural some some plasters existing. Not because of some notes deep necessary limitations but because of something much more arbitrium contingent and you know we kind of missed sockrider the gravity equation in the fact that these are proclivity
01:28:45any two countries to trade falls off with the square of the distance and Jen's always like big questions I'd like wow is that about something kind of fundamental enclosure or about surprising returns to proximity what have you shortly there's some of that stuff but I think
01:29:08talking about the challenges and kind of complexities and hidden costs of pan methods that doesn't feel like a very deep thing it doesn't feel like something that it is kind of significant turn off on somebody to have such kind of far-reaching a deep consequences but I think a lot of these that if I stand Sibley Court Uncle Cosmic phenomena are actually consequences of these very Prozac and straightforward limitations and so I really think the solving this aspect of Commerce in the international like literally just making it easy for any two parties a business and a consumer in arbitrarily chosen country is making it easy for those two empties transact will have
01:30:00enormous consequence for the world and like that that sounds like a straightforward idea that it almost sounds cliched and the fact that it sounds cliched should not blind us to the fact that it is so extraordinary far from being the case today right we have had Commerce in the internet for decades of this point but it's still like 90-plus percent of Brazilian credit cards do not work online at side of Brazil is not some Backwater it's not some inconsequential country right now see what are the top economies in the whole world and Brazilian consumers Bay City cannot purchase outside of Brazil and so it's difficult to overstate the magnitude of of limitations end in efficiencies that Prevail today
01:30:45it's okay I did too kind of hemans level and then come on top of that I think there is orbit that they are you looking at there's maybe just like a deeper question of what determines how many firms there are in the world and what determines the character those firms everything to me in a bit of a novel 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 gross reject me and the expansion rates into other markets in the product and so on I didn't park the stripe hypothesis is that
01:31:23things like that that seem very one would think are very difficult to move are actually movable and that and really macro measures like the number of people who start a company or who started technology company or again the success rate of those companies and you're just to give some kind of time
01:31:50electric news. Intuition pumps here when we survey companies started the bad list 60% of them tell us they would not exist if not for Atlas V rocket bike maybe maybe send them actually secretly what but maybe but maybe some of them aren't you over stating the Run Resource One Less or overstating maybe they're under estimating the challenges they would have faced and so I think that number could either be too high or could be too low right but but let's be conservative and say that it's actually 40% Atlas is causing the 40% of those sanders to to start companies for the otherwise would not have and if they can a subsequent in a success rates look similar that's a huge deal especially about with itself cats big right I mean overtime they could have real economic significance or you know if we can make it the case of businesses sell to twice as many Global markets as they would otherwise he'll 2 Da mean again integrated over in Harper folio that's a really big deal or
01:32:50Nick Bloom at Stanford I did this really missing work has been a whole bunch of interesting Work Med management practices do you have to turn back to this matter is good match in Premier League correlated or that causes internal bleeding to the Advent of better outcomes and I were they taught better management practices Troy court affirms and did not to Ace of a control group and saw double-digit percentages in Revenue over a multi-year. I don't recall exactly was 13% over 3 years or something like that right but that's an incredible low-hanging fruit like all they did is is teach better management practices 13% more of you like 13% more value / the company as assessed by their customers just one better magic tracks list and so it when we think red stripe and what to do in the future and
01:33:50distance so on it's much more I think about it today how do we perturb this overall system to move some of these kind of macro outcome measures like number technology from started survival rate of these companies expansion rate of these companies 9 through the value provided to the end users consumers customers and so on I'm going to mediated by payments as kind of foundation layer because it's something every business in this early has and because it gives Goods to the understanding of the damaged in the business and so on but it's on some kind of fundamental level in it
01:34:34not about the payment even though we think that's going to for the first point the impact of just salt in the payments will itself enormous 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 there's a for who that's a good question I mean like bugs are actually features from the perspective of constituency reconciliation of the billing contrastive different constituencies and of course the problem is it in so many cases the incremental gain of the constituency is substantially outweighed by the social utility loss of the rest of society right and so no bad teachers do great in the US but I'll most certainly that's kind of a bad trade for society but the bad teacher is care
01:35:34is it in their ongoing employment at and the rest of society hair is evident take about scratching that same thing applies to fishing policy where they started makes all the different people driving fishing stocks to Extinction Karen care more about their ongoing no right to do so then the rest of society cares about the red stable ecosystems I think that's just so yeah
01:36:11I need to return to her earlier example it's not even tear that the right the
01:36:21which one could look at the fact that essentially know you banking Charters are being issued in in the US 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
01:36:407 Seconds were banks are higher than they've ever be
01:36:43until they all get wiped in the next Crisis because they're even more important than they were in the past will be needed to the extent that was a systemic argument for Bella and in a wait don't believe it even stronger argument and in the future it's almost like we're telling me this earlier but that's when you get big you I have more loss aversion and see your goal is not necessarily to get better from your customers perspective it could be to prevent competition prevent new entrance that might be a more weather tomorrow judgement on it it might actually be more effective business strategy for sure then innovating for your no question and you know I think that
01:37:36I think we're very sensitive
01:37:40dissonant on this point as a society where on the one hand we decry lack of innovation on the other hand in an hour
01:37:49Collective action we do so much to ensure that it doesn't occur right and so on the one hand we decry the state of these are medical industrial complex and the 18 and a half percent of GDP that has mental health care costs and the plateau or even too tight and life expectancy the declining rate of drug Discovery and so on and yet on the other hand we should have two regular three structures make it harder and harder to engage in front of separate or two when you you can't answer the hospital certificate to meet but but if you if you observe that while hey you know Medical Care in San Francisco doesn't seem so great and it seems extremely expensive you know even though it seems like a pretty thankless undertaking I'm going to try to do better well first you better
01:38:49approval for that you can you can just enter the market and I think they're kind of think of a normative judgement lady did the thing I feel strongly is that we were inconsistent in our state of desires there's like a Perpetual sort of Seaside if you will wear successors the seeds of its own distractions would you how would you make an argument right now to San Francisco or Silicon Valley is doing that
01:39:28and youngest one was obvious once I guess
01:39:33are are in culture and housing cost in general I mean on the ladder I'm coughing a lot after everything is getting more expensive and
01:39:48I know reasons are quite understand exactly what's going on right now. Is there some
01:39:55major issue take Healthcare again for example I mean the case has the Mage that this is not in fact a bad thing that would you expect an enlightened society that is solved all of it to the material needs to spend its money on but Healthcare it's going to visit it's the last thing of the Last Frontier and perhaps we are actually getting sick of commensurate improvements if you serve disaggregate appropriately and I like the right way or perhaps not right how much of this is some kind of bow Mall cost is the use for some things are getting more efficient and chiropractor be in higher wages are closing cost increases elsewhere today for opportunity costs and all the rest but I think so specifically in in in Silicon Valley and specifically on cost of living and and housing is Silicon Valley is this it is
01:40:50greatest concentration of wealth creation that I think has ever existed in the US on a per square mile bassist potentially that is adjusted ever in the world right Facebook Google Apple and tell Darrell Basden am a fairly small number of square miles in a few sodas if you were to look at the Seattle and in the Bay Area kind of together right to end of the convent aggregation Urban Zone separated as they are invited to a half hour flight then of course you can layer in Amazon and Microsoft as well I don't see what you see is that they're there Rise and success wasn't able to in part by
01:41:40cheap mobility and cheap expansion at again to go through just to the political economy in a collective decision making that no longer exists cheap and cheap expansion and you can see it now in this it is latest generation about to start so you know via Twitter or Uber or Airbnb or less or whatever you're facing the these really significant kind of structural bad ones and so much of the wealth of improbable Fountain of wealth creation is a crane 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 are true all these are the barrier to entry for for newcomers is getting progressively hiring you see it and designing Rita Mobility
01:42:39and 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 it is not necessary I mean you can look at places like Tokyo has over the last couple decades in a banana supposed to take nation of Japan in the early 90s on what Santa brought the thing isn't really well but because of vastly fewer limitations on has Supply have had just very stable housing cost have not had the same displacement right and so they're the kind of the issues we Face me see you're in San Francisco where it's getting ever 40% rise since we got San Francisco in 2010 that's not necessary it's not natural and and it's it's a it's a function of ours of collective decisions rather than kind of some of them some secular and unavoidable
01:43:39economic forest and I guess I I find it to decide dispiriting because it's negative something in the sense that it's not just that these games go to go to the city just saying I lined owners but actually The Reef you were future games like I think you should be mad about this you know if you don't live in Silicon Valley and you don't have the slightest interest in doing so because it's much less likely the next cool technology that you'd like to take advantage of really exist it it's a it's a it's a Suffocation of a future potential in the future games and there aren't many places if you believe in increasing returns to scale attitude of this kind of them all drummers work and another's that because of the city of the Collision of ideas and people in cities makes them more productive than that if they were elsewhere
01:44:39if you believe that to be the case in this like pretty good empirical data that it is then you can't just move elsewhere you can't you can't just moved in about it at work or whatever this have you actually will be less productive in those sound so again I think it's a real loss in terms of spillover games the rest of society in service not building 6 story buildings in San Francisco would you think your role as a large employer and thoughtful citizen of San Francisco is in in this well I don't make any secret of the the Injustice and Bobby Marlin Justice in terms of the displacement that's it occurring and the
01:45:34economic Ron headedness of the prevailing policies and you know I'm a landowner in San Francisco John and I own a house together and I hope its value designs in that thing is 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 production productive region of the country would vastly outweigh the reduction wealth existing landowners the going back thanks everybody has a system that they want to come already had estimated that 50% of US GDP growth between 1964 and 2010 was left on the table as it were by
01:46:34I need some inefficient land use and land application to the high number in the idea that with a straight face hypothesizing to be anything remotely in that vicinity I think gives you a sense for how high the stakes you are right and yes we we we we can decide that we place such an enormous premium on the aesthetic if you're into the San Francisco today recognizing that it is approximately 1/3 of the density of Greenwich Village in New York right in front of the Other Extreme is not on COD you can triple time for this go and get the Greenwich we can decide that's a preference but still sober estimates are are measuring the cost of that in India
01:47:34double digit percentage points of aggregate national GDP and of course when you look at a reveal preferences because it's very like to take vacations to or we're going to be dream of the Endless Summer someday and things like that it's two two two two European cities which tend to be of vary significantly higher density Paris London much much higher density than San Francisco and so again I'm headed into Cash Norman of judgment but I personally feel strongly I think that's a good place to leave this this is been a phenomenal conversation thank you so much for coming on the show where can people find out more about you, but if they want to subject themselves to more of the protector Dutch artist that I post and they can head to my Twitter account which is just Patrick seat
01:48:33thank you so much thank you
01:48:39hey guys this is Shane again in just a few more things before we wrap up you can find show notes from Today 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 fsw newsletter the newsletters all the good stuff I found on the internet this week that I've read shared with close friends books and 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 expander reach ensure message with more people and it only takes a minute thank you for listening and being part of the Furnace Street Community

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