16 April 2020

On today’s episode, we sit down with Jim McKelvey. Jim is the co-founder of Square, a financial services, merchant services aggregator, and mobile payment company. In 2009, Jim designed a card reader which in 2011 was inducted into the Museum of Modern Art. Jim then teamed with other St. Louis-based serial entrepreneurs to help found Cultivation Capital which was ranked the 7th most active venture capital firm founded since 2009, and the 3rd most active lead investor and since 2017, McKelvey has been appointed as an Independent Director of the St. Louis Federal Reserve.



  • Why you can’t be an expert as an entrepreneur
  • About Jim’s new book “The Innovation Stack: Building an Unbeatable Business One Crazy Idea at a Time”
  • The incredible story of how he first met Jack Dorsey (cofounder of Twitter) and how they built Square together
  • The story of the man that if he had wanted could have been the richest man ever to have lived


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Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Shawn Flynn  00:00

You’re listening to TIP.

Shawn Flynn  00:03

On today’s show, we talk with Jim McKelvey, who is the co-founder of Square, a financial service merchant service aggregator and mobile payment company. In 2009, he designed a card reader, which, in 2011, was inducted in the Museum of Modern Art. Jim then teamed up with other St. Louis-based serial entrepreneurs to help found Cultivation Capital, which was ranked the 7th most active venture capital firm founded since 2009, and the 3rd most active lead investor since 2017, McKelvey has been appointed as an Independent Director of the St. Louis Federal Reserve.

On the show, we talk about how you can’t be an expert as an entrepreneur; the incredible story of how he met Jack Dorsey, co-founder of Twitter, and how they built Square together; the story of the man that, if he’d wanted to be, could have been the richest man to ever live; and his new book, “The Innovation Stack: Building an Unbeatable Business One Crazy Idea at a Time.” Jim has offered our listeners 5 copies of his new book. So write a review, take a picture, and email us at, and you’ll have your chance to win one of the five copies. All right! Now let’s start the show!

Intro  01:15

You are listening to Silicon Valley by The Investor’s Podcast, where your host, Shawn Flynn, interviews famous entrepreneurs and business leaders in tech. Discover how money is made in Silicon Valley, and where tech is going before it gets there.

Shawn Flynn  01:38

Jim, thank you for taking the time today to be on our show! Just to give our listeners a little bit of background of yourself, can you tell us a little bit about what your history up into this point?

Jim McKelvey  01:49

Well, I’m an engineer by training, and have degrees in economics and computer science. I was a professional glassblower for years, and actually still am. I still have a studio in St. Louis and I’m making cell work. Our studio is closed right now because we can’t have contact or share blowpipes with anybody. In addition to that, I’ve started half a dozen companies; started a non-profit called LaunchCode, which trains people to become programmers. I also am the co-founder of Square, and right now, I’m Deputy Director of the St. Louis Federal Reserve.

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Shawn Flynn  02:19

Can you tell us a little bit about that first company you built, and the problems you were trying to solve when building it?

Jim McKelvey  02:26

The very first one was a company called, Mira Digital Publishing. It was a company I started back in 1989, and we were building software or document imaging. This was a precursor to Adobe Acrobat, which means that when Adobe launched, we got our heads handed to us. But in that process, I hired in from a local high school, Jack Dorsey; and Jack and I have been friends and colleagues ever since. Believe it or not, that company, Mira, is still around. It makes money every year. I still own it, and I still think fondly of having one company for 30 years.

Shawn Flynn  03:00

What was the problem you’re solving at Mira that has allowed it to stay around for 30 years? Have there been a lot of pivots? A lot of evolution? Or the same problem you solved then is what you’re solving now?

Jim McKelvey  03:10

Originally, it was electronic record storage, we needed a digital format for contracts and documents. So this was before Acrobat. These days, everybody uses the PDF format. But in the days before that, there was nothing, so we built something like a precursor to Acrobat. It was doing alright, but then Adobe, which was a much larger company, just came and killed us. So we pivoted the company into basically using Acrobat to publish tradeshow literature on CDs. The way that went down was during the imaging tradeshow, where we were exhibiting next to Adobe. hen they unveiled our device, there was this terrible irony because all the attendees would walk home with bags of literature on how to have a paperless office. And so I thought, “Well, this is stupid. Why don’t we give them all a CD-ROM with all the tradeshow literature on?” That’s what we did, and it turns out there were literally thousands of trade shows every year where people were taking paper home and they couldn’t search it or do anything. We put it on a searchable platform and created the world’s first trade show CD-ROMs.

Now you have to remember this pre-internet, so companies didn’t have websites. Being on the trade show, CD-ROM was a fantastic way to keep your product, literature, and name in front of all your customers all year. It was a great business, but then the internet showed up. It was clear that that was going to get us wiped out. I knew the internet was going to wipe us out, like how you can kind of see the virus coming. I got the team together, and I said, “Guys, we have to switch to another business. We have to start publishing technical work on CDs, not doing all this product literature,” but I was not able to get the company to follow me. They all said yes, but didn’t actually do anything differently.

The only guy who listened to me was my summer intern; a 15-year-old kid named, Jack Dorsey. Jack and I basically went off by ourselves and pivoted the whole company. We built a second company within the first company, and when the first company died, we had this other thing going. It was a testament to Jack’s ability to work even as a 15-year-old, and my inability to lead. I’m not a guy who runs companies. I’m a guy who starts companies.

Shawn Flynn  05:11

Wait, you and Jack went separate in the company, and started your own company inside the company. What was the idea behind that? How was working with Jack, who you mentioned was 15 years old at that time? What were the dynamics like?

Jim McKelvey  05:26

Well, I was 26. So it was an inexperienced boss and an inexperienced worker. But look, the problems were obvious. We knew we had a job to do, and we did it. I eventually hired a bunch of people to work for Jack. It was ironic to introduce these 30-year-old people that I was hiring to their 16-year-old boss, but the end result was it worked very well. Even as kids we were able to do what we needed to do, and the company survives to this day, and still runs some of that basic technology that we built. So, 30 years later, that company’s innovation stack is still in existence. Although we do didn’t do much that was interesting or innovative, it worked.

Shawn Flynn  06:04

I’m really curious about that company, and the dynamics inside of it, where you had a 15-year-old who was still in high school attending classes.

Jim McKelvey  06:16

No, this was mostly during the summer. He was working full-time during the summer, and part-time during the school year. It was not a full-time job when he was in school, and he would ride his bike to work. He pulled an all-nighter with us on his first day at the office, which got him in trouble with his mother, but other than that, it went pretty smoothly.

Jack was very talented. Some of the things that people see in him today, I saw very early, and we became friends. After they kicked him out of Twitter for the first time, he asked me if I wanted to start a company with him, and I said, “Yeah, let’s do it.” Neither one of us had an idea, but eventually, I was in my glass studio trying to sell a piece of glass. I lost a sale because I couldn’t take an American Express card, and that’s what led us to the idea of Square. So, be nice to everybody –even the summer intern –because he may someday be your boss.

Shawn Flynn  07:01

Okay, so with that, how did you guys agree when you formed Square? Who would be in what role? You were his boss before and he was an intern, but he was coming from Twitter, at that point, with some more experience. How did you guys decide who would take the lead? Who would be the partner? Different roles? Different dynamics? Different responsibilities? What was that conversation like?

Jim McKelvey  07:20

After about 15 minutes, Jack wanted to run the company, and I didn’t want to run the company. So it was super easy. We decided that Jack should have more equity than I did because he had more responsibilities. It was a super simple conversation. By the way, that’s how all my companies run. I’m never CEO, or if I am, it’s a temporary position. I’ve got five or six organizations now, and they’re all run by other people. I do that because management is not my thing. I’m not particularly good at it. I don’t enjoy it, and the people who I manage, particularly, don’t enjoy it, so it’s better for everyone if I got somebody else to run it.

Shawn Flynn  07:59

What are your tips for finding out your strength? You just mentioned it may not be a strong suit for you to manage, but you’ve definitely found what you’re good at in life. What’s some advice on how to find that path?

Jim McKelvey  08:11

Failure helped. You find your strength by learning your weaknesses. In my case, I have tried managing, and I can do it at a mediocre level, but it uses a great amount of energy. It’s not something that’s particularly pleasant for anybody. I think self-awareness helps.

The other thing, I think, is having your ego in check. I’m really happy to give the CEO title away as quickly as possible to somebody who’s competent. I know some people like to have their job titles and stuff like that, but I’ve never really cared about what my job title was. So it’s been fairly easy for me to get out of the way.

The only issue, and this is probably tricky for people in my situation, is if you are the owner of the business, but not the day-to-day CEO, you will have a situation where you disagree with a CEO. That always happens. In those cases, if you override the person you put in charge, you will be back in charge. One of my strong recommendations is that, if you are making a decision to not be the CEO, but you have a controlling interest in the company, be ready for disagreement. When it happens, support your managers.

Shawn Flynn  08:59

When you say, “support your manager,” is that to the other board members? Is that just publicly?

Jim McKelvey  09:28

Obviously, publicly and to the board members, but also privately. You basically say, “Here’s what I think,” and they say, “Well, I think this.” And you say, “It’s your call,” and you let them do it. At every one of my companies, I’ve had disagreements with management. I think that in most cases, the management has been correct, but we don’t know because we never took my path. Maybe my path was also a great idea, but we went their way, and so far it’s worked.

Shawn Flynn  09:51

When you were coming up with the idea for Square, how much banking experience did you have at that time? How did you do the research for coming up with the actual process?

Jim McKelvey  10:00

I had zero banking experience except as a customer. And I would say that most of that experience was negative because I was a small business, and small businesses tend to get abused by the banking system. I was also a credit card user. I obviously have a credit card, but then I also accepted credit cards at my studio, just not American Express, so I knew what it was like to be sort of abused by those people as well. But I had no knowledge of how the banking system really worked. It was funny because neither did Jack. So we entered this business where neither of the founders had any specific information.

Shawn Flynn  10:34

Then how did you go about even creating that roadmap? Was it through mentors, advisors, or the first people you hired?

Jim McKelvey  10:41

No, this is one of the reasons why I wrote the book. We specifically didn’t have any expertise in the company, and that was not an accident. We tried, at first, to hire somebody who was a former head of MasterCard, who advised us; and all his advice was terrible. And the reason it was terrible was not that he was an idiot or anything. It was because he only knew what the system could do, and we were building a new system. It turns out that if you look at most businesses, most businesses are copies of other businesses. Do you want to open up an auto dealership? Well, there are auto dealerships, and you can figure out how to do that. There are models for almost everything we do. But that is not the sort of business we were in.

What Square was doing was something that had never been done. We were giving credit card processing to very small businesses and individual people who were almost, by definition, excluded from the existing systems. Because we were doing something that had never been done before, we could not copy the existing systems. That forced us to go on this path of invention and innovation.

Shawn Flynn  11:50

What were the biggest challenges at the very beginning there?

Jim McKelvey  11:53

We had to figure out a way to build a system that would work. It turns out that when you’re trying to get credit card processing to people who don’t have credit scores or business accounts or enough capital to interest the major banks, there are no underwriting policies or procedures for them. During the first week of running Square, I discovered that there were 17 laws, rules, and regulations that were violated with each transaction. So there were these massive roadblocks in our way. We first decided that we would continue anyway because we thought what we were doing was legit. I knew it was legit because I was a merchant who wanted this product. It wasn’t like we were sitting there thinking, “Maybe if we build it, some people will want it.” I knew for a fact that I wanted it, and I knew exactly what I wanted, so we already had our test case in one of the co-founders. And so I could very easily give direction to the team as to what I wanted them to build for me. Then the question was, “Well, how many people like me are there?” And the answer was we had no idea, so Jack and I really had no idea that it would be this huge success. There was a high likelihood that there were other people like me, we just didn’t know that there were billions or tens of millions of them.

Shawn Flynn  13:08

When you’re looking at a problem like that, how do you go about analyzing the market size, the potential customers in the future?

Jim McKelvey  13:16

That’s a great question if you want to copy. If you want to copy a business, you can analyze the market. Let’s say you want to analyze the market for respirator masks. It has a worldwide shortage of them right now, so you want to do an analysis of that. What you do is study all the companies that make respirator masks. There are plenty of them. And you’d find the people who use respirators, which is mostly the construction trades and hospitals. And you would analyze the market, and say, “Do we want to be the 21st company making these respirator masks?” You could choose to do it or not do it. You could have a very clear idea of how much demand was in the market. You could copy designs from other companies. You could figure out what your price should be because you kind of know what the price of a respirator mask is. You can do all that stuff. You can know. That’s how most businesses start, but not the businesses that I studied. So the businesses that I studied are building new markets, and they are doing a completely different process.


The reason I wrote this book was that I had to answer a question that was bugging me for years, which was: “How did square survive an attack by Amazon?” The answer was that Square’s DNA was fundamentally different than all the other companies that Amazon had attacked and killed. If you look at Amazon’s kill ratio to startups, it’s 100%, with one exception. And that is Square. We’re the only startup that I know of whose product Amazon copied and undercut the price, and didn’t end up getting blown out of the market. Because of that, I was confused, and I said, “Well, why didn’t Amazon win?” And the answer shocked me. I didn’t have a word for it because we were doing stuff differently than other entrepreneurs.

It turns out, if you look at the history of the word “entrepreneur,” 100 years ago, the word used to mean somebody who was doing something different (i.e. not copying). These days, entrepreneurs can copy. Let’s say I want to start a business to make respirator masks. Okay, I would be called an entrepreneur. If I went out tomorrow and started popping masks out, then you’d say, “Oh, Jim’s a respirator mask entrepreneur. But 100 years ago, you would not have been called an entrepreneur. You would have been called a business person. And the difference is profound. Business people copy what has been done before, and that is almost always a better way to make money than entrepreneurship because entrepreneurship has no guarantees. It has no roadmap, and you’re doing something that hasn’t been done before, so there’s a lot of chance for failure.

It turns out that Square was doing something that had never been done before. I found this pattern and then I found dozens of companies, actually hundreds of companies throughout history that had the same DNA. Now there weren’t many of these companies. If you took the office entrepreneurial companies and compared them to normal businesses, we’d be like 1 : 1,000. But for these 1 of a 1,000 companies, they had tremendous differences. The way they just dealt with their customers was different. The way they grew their markets was different. The way they price their products was different. It all came back to this thing that I call an “innovation stack,” which was a series of inventions they were forced to create.

I say “forced to create” because I think a lot of people think they should go out and be inventive. They think they should be innovative because it’s cool to be an inventor and stuff. That’s usually not the right move. The right move is always copy something else that works. That is how, basically, life on this planet functions; like you’re a copy of your parents. I’m going to copy my parents. I got one of my little copies behind me and she may burst in at any moment and interrupt this podcast, but the point is copying success is a good way to ensure another success.

If you think that you should just be innovative because it’s cool, you’re probably going to die. But the companies that I studied were doing innovation for different reasons. They were doing it as a means of survival. And when you do it as a means of survival, you make decisions differently, and you build these things called innovation stacks. If you evolve an innovation stack, this amazingly powerful thing happens: you effectively dominate an industry.

Every company that I found that had an innovation stack became the biggest company in their industry. So biggest airline company in the country, innovation stack; biggest bank in the world, innovation stack; biggest furniture company in the world, innovation stack; Square, innovation stack. It’s like it’s a precursor that leads to tremendous success. It’s just really brutal to build one. We happened to do that by accident at Square. We didn’t know any of this theoretical stuff when it happened, but I saw it in hindsight, and that’s why I wrote the book.

Shawn Flynn  18:00

Can you tell us some more stories or examples, from the book, of innovative companies?

Jim McKelvey  18:07

Sure. There were two that were really critical for me. The first was, I wanted to prove that Square was no accident. Because we survived this attack by Amazon, I thought, “Well, maybe we were just lucky,” then luck doesn’t really explain it. So what I wanted to do was find another parallel for Square, but I didn’t want to use a tech company. Square uses a lot of technology. If you use technology, well, you can have a disproportionate level of success because of viral growth, marketplace lock-in, and the network effect. You would have these factors that will supercharge your company’s success even if the company is not run particularly well. So, what I wanted to do was study non-tech companies and see if non-tech companies have this same phenomenon. Because if the phenomenon is valid, then it should exist independent of technology.

It turns out that I was able to find hundreds of examples. I had so many examples, that I said, “Well, I want to study another Square. I want to study a company that was founded by outsiders for the purpose of including people who had been excluded.” In this case, it was banking. They were trying to build a bank to allow people who weren’t using banks to save their money, make loans, etc. I wanted it based in the United States, and I wanted, essentially, another Square, and I found it. I found the perfect example.


As a matter of fact, what you think of as banking today, like your concept of a bank, was built by the Bank of Italy. 100 years ago, banking was unrecognizable. First of all, you couldn’t bank because you’re not a member of the aristocracy. Secondly, if you wanted to go in, you couldn’t talk to a teller because they would not, in many cases, speak your native language. You couldn’t even communicate with them. They had no such things as installment loans, car loans, home loans. There were no savings accounts. There were no branches.

All the things you can think of in a bank was invented by a guy who was a produce vendor. He sold lettuce, oranges and walnuts; things like that. By the way, he dropped out of school at the age of 15, so he was not an educated person, but he wanted to build a bank for people like himself. And he did. The bank that he built so dominated the world of banking that it became the largest bank on the planet, the Bank of Italy, which bought the Bank of America, and just took the name. It was this epic story, and I tell his story in the book. As a matter of fact, his story was so good that I made a new graphic novel out of it. It’s fantastic stuff. There’s a city blowing up. I can have fun with this stuff. His name was AP Giannini. Giannini really was the first person I’d ever read about in history that was doing stuff like what I had done. His story seemed like the way my life was unfolding.

“Oh, this is really cool,” so I started looking for other people. I found all these stories throughout history, and that’s great. History is fantastic. But the problem with history is that everybody’s dead. Nobody’s around to argue with you. Let’s say you’re writing a book, have some idea, and cherry-pick history for supporting examples. If you do that and let’s say your idea is bad, it’s wrong. Nobody is going to crawl out of the grave and say, “Hey, Shawn, you’re full of it,” because it’s history. We can kind of relay it however we want, in some ways, because the protagonists are no longer with us. I was not going to do that, so I did all this research, and I needed to find a living protagonist, but again, somebody who wasn’t in a tech firm; and the best example I found was Southwest Airlines.


I got on the phone with Herb Kelleher who’s the founder of Southwest Airlines. He was in his 80s. I flew down to Dallas with all my research, sat down and spent an afternoon with Herb, and basically laid all my work at his feet, and said, “Mr. Kelleher, do you think this is right? Does this phenomenon that I think I’ve identified fit your memory of what happened in Southwest Airlines?” And he said, “Absolutely. Not only that…,” and he told me a bunch of other stuff that I had overlooked. I was so excited coming out of Herb’s office that I decided that I wasn’t just going to write a business book. I was going to write a graphic novel because these stories of entrepreneurship are epic stories. There are Nazis, murderers, and stuff blowing up, and Herb went to the Supreme Court twice. I thought, “Oh my god! This is graphic novel stuff.” So I did this graphic novel, and I called Herb. I was all excited. I was like, “Yeah, I finally got the book together. It’s going to be great! By the way, I’ve got to portray you as a superhero,” and Herb hated the idea. I was crestfallen because this guy’s one of my idols and he’s a living legend, but he did not want to be portrayed as a cartoon character. And he gave me a perfect reason. He said, “Jim, the subject you’re talking about is so serious that I don’t think you should make it a cartoon. When I was a kid, cartoons were not serious. Maybe they are different today, but I’m 86 years old, and I don’t think that I want to be portrayed that way. So please do not do that.”

Out of respect for this man, I rewrote half my book and cut out a cartoon. I submitted something to my publisher that was like half a graphic novel, and then half business book. And the publisher looked at me and said, “You idiot. Do you realize how many people use e-readers and audiobooks these days? If you do something that’s half graphic novel, you’re losing half your audience. So why don’t you just switch it to text?” So I did, but if you read the book, you can tell it’s a cartoon. I wasn’t able to get all the exclamation points out of it. I made my own graphic novel to go along with it, so you can get a free copy of the graphic novel. It wasn’t published by Penguin, but you can go to, and get a free copy of A.P. Giannini’s story.

Shawn Flynn  24:05

We’ll have all that information in the show notes for everyone. Herb going to the Supreme Court twice; your fight with Amazon; these entrepreneurs, how do they have the mindset to keep going to face all these challenges? How does one build that? Or do you have advice for overcoming such challenges?

Jim McKelvey  24:24

It’s pretty simple. Motivation is difficult if you’re a business person, and super easy if you’re an entrepreneur. If you’re a business person, you’re copying everyone. Every day you wake up and five competitors have just copied what you did last month, or you’re trying to copy what one of your competitors are doing, or they lowered prices and you got a lower price. Dealing with those requires a tremendous amount of energy.

For an entrepreneur, it’s different because it’s just a question of: Do you die or not? It’s just survival. In a normal business, you can kind of slack off a little bit, and maybe you’re not the top company. Maybe you’re the 17th in a while; you’ll still make money. I’m on the Fed. We regulate hundreds of banks. If you’re the 600th bank, in whatever stack rank you want, you’re still making money. You’re fine. Your 600. Maybe you can move up to 300; work really hard, and you can move up to be number five. You’re all fine. So that requires a tremendous amount of motivation. But in the world of the entrepreneur, if you fail, you die. Your company ceases to exist.

If you’re in a situation where innovation is necessary, then it’s a survival case. In Square’s case, we didn’t have any other choice. It was either fix this or the company dies. Ironically, in a situation like that, there are no motivational problems. Everybody comes to work. Everyone’s totally jazzed. If you want to quit, you just leave the company. But the company survives until everybody quits. I’ve had situations with my companies where everybody has quit, and it’s been just me. Like for Mira, the company we talked about at the beginning. It’s been around for 30 years. There were two times in its life when Mira was just me, and I didn’t quit. “Here it is again!” It kind of springs back like some crazy invasive plant species.

Shawn Flynn  26:10

Okay, then how can the founder be that leader to encourage everyone to keep going, and not just quit?

Jim McKelvey  26:17

It depends on the problem you’re trying to solve. At the core of all these companies is not some motivation to get rich or make a name for yourself or do anything sort of external. The motivation is to do something that has not been done before.

Herb Kelleher wanted regular people to be able to fly because before he started Southwest Airlines, they couldn’t afford to fly. A ticket on an airplane was ~$1,000 in 1970. You could not fly unless you were rich. Herb, and the team that founded Southwest Airlines with him, wanted to change that. That was their mission: to fly people affordably.

Jack and I wanted to give economic power to small businesses in the first case of credit cards. But then in the case of all these tools that we built, we had questions like: Why is it that your big competitor down the street has an employee management system, and you have to do everything on a spreadsheet? Why is it that they have a loyalty program that draws people in, and you don’t have one? Why is it that they can click a button and see their inventory, whereas you have to walk up and down with a yellow legal pad? We’re building tools to make those things happen because that’s what we want to do. That’s our mission.

In Giannini’s case, his father was murdered when he was six years old. He grew up with a single mother and two brothers. This was lived through the depression. This guy had a tough life and watched his city burn to the ground. He watched people that he loved and these terrible situations, and he knew that banking would help. People in Giannini’s era were going to loan sharks to get the money they needed for any sort of emergency. So, I mean, like we’ve got a bad situation happening in the world right now, but loan sharks are not that big a problem; not compared to what it used to be. Giannini really wanted to fix that. 

So, if you choose to solve a problem, and you care about the problem, and you collect people around you who also care about that problem, there’s your motivation. I’m not a great leader. I’ve never been. But I’m pretty darn good at pointing to problems that other people care about, and it turns out great leaders show up when you point to the right problem.

Shawn Flynn  28:30

Talking about problems right now in FinTech and the future of FinTech. Are there any things on the horizon that people should be aware of or that really are exciting for you?

Jim McKelvey  28:40

I’m going to give you two answers. Because I’m a venture capitalist, I have a $150-million fund that does FinTech investment. We invest in software as a service model, and we invest in this rinse-and-repeat thing that almost always produces a pretty good return for the fund. It’s a formula. We follow the formula. You build something innovative that the banking system doesn’t have, or the financial system doesn’t have, and you sell it as software as a service, and demonstrate that you’ve got growing revenue, and we’ll invest and help you scale that massively, and sell you off to one of the five platforms that always acquire these companies. If you don’t want to sell out, we don’t want to work with you. If you don’t want to follow the formula, we don’t want to work with you.

So in that case, in FinTech, we just want to make a bunch of money. There’s a complete formula for that. I invest in that because I’ve got other people’s money trusted to me, and we’re actually doing really well. But that’s fundamentally boring. I believe there is another type of FinTech work characterized by what Square did that is trying to solve problems that have not been solved before. So if you solve one of those and you build an innovation stack, my venture fund would not invest with you. But anyone who does invest with you will probably make 1,000 : 1 return.

Shawn Flynn  29:56

Can you talk about your fund’s investment thesis a little bit more? Because the research I did before, at least on Crunchbase, says that you’re one of the most active venture capital funds released since 2009, but you just mentioned right there that you find it a boring area where these others might have bigger returns.

Jim McKelvey  30:15

I would say this: Our early days on venture funds is highly suspect. We’re doing very, very well. We’re doing this formula. The formula is about as exciting as investing in commercial real estate. I mean, it’s one step above real estate investing. Now, if you’ve done real estate investing, you know that there are some things you have to do. You have to check a few things. Successful real estate investors, they’re not idiots. They have a certain formula, and they follow that formula; they make money. FINTOP has a formula. Our formula makes money. We don’t deviate from that formula. And that, to me is boring, but successful. And getting a nice 10x return on an investment is lovely. Getting a two or three x return on investment is really good. So that’s what we do at FINTOP.

I don’t personally build companies like that. I don’t even try to build companies, honestly. I mean, sometimes, it’s a non-profit. Sometimes, I start something and give it to somebody else. I’m trying to fix problems that I care about. Even with Square. I was well-off when I started Square. Square was maybe a little bit more well-off. But the bottom line was, I had everything I needed when I started Square. And the only reason to start Square was that I saw something that was frustrating to me, which was how merchants were getting ripped off. I wanted to change it. That was the start of Square. It was to solve the problem. It was not to have a public company or anything like that.

Shawn Flynn  31:43

When you’re analyzing other companies or your venture fund, or just to get to know, how are you analyzing that problem? I also want to go back to the question of any companies on the horizon that are doing anything that people should know about or that are interesting.

Jim McKelvey  32:02

Companies that are doing some very interesting stuff. We have one company in the hotel space, that is really lightening the burden for hotel operators, which turns out is a very manual inefficient process. I’m excited about that company. I should say this: I mean, I’m as excited as I can be about a company that’s just an investment.

I am more excited about a friend of mine who came to me with an idea to make an inexpensive diaper. Because it turns out the diapers are where poverty starts. Typically, young mothers who are sort of on the edge of poverty, can’t afford to put diapers on their kids. Diapers are insanely expensive vis-à-vis the materials that go into them, and we think there’s a way to cut the cost of diapers by 70-80%.

That, to me, is interesting because that lifts a lot of people out of poverty. Because, it turns out that if you don’t have diapers, then you can’t go to daycare; and if you can’t go to daycare, then your mother can’t work. And a lot of these cases are single-parent family cases. If you could solve the diaper problem, you would materially help millions of people. Plus, diapers themselves, right now, and I changed one this morning, are these toxic messes of plastic and all sorts of petrochemicals that shouldn’t be filling up our landfills. We could achieve the same thing with biodegradable and absorbent materials. I believe that’s an interesting problem. I’m really interested in diapers right now, but as a social issue, not just because I have a waste camp.

Shawn Flynn  33:32

Countries around the world. I mean, we’re talking about bringing people out of poverty, going back to invention versus innovation; the same situation there. Would you recommend that they try to encourage copying and kind of modification for the local culture? Or do you have recommendations to help people outside the US raise their economy out of poverty or upper level?

Jim McKelvey  33:54

First of all, I would say that one has to be very humble in giving advice from a country like the United States to any other country. Things that work here will not work there. Things that will work there will not work here. So advice from one country is often useless. We saw that with Square. We’ve opened in five other countries now, and we’re not having the massive success that we had in the US launch partially because we’re not a Canadian company. We’re becoming one. Now, we have Canadian DNA in our company; and some Australian DNA; and some Japanese DNA in our company. But we didn’t start with that, so there’s a big asterisk on any advice that I would give. 

But if I did have advice, it would be this basic insight: Don’t invent unless you have to. But if you have to, understand that invention is a different process, and probably not like what you’ve been told.


One of the things that really pissed me off when I was seeing these epic stories of change from companies that build innovation stack was the difference between first-person and second-person accounts.

Okay, so first-person account: A.P. Giannini. He was a very humble man. He died with less than a million dollars and literally he could have made himself the wealthiest man on the planet. He could have easily become the richest person in history; way richer than Carnegie, JP Morgan, and any of the big names that you’ve heard throughout history. He could have been five Rockefellers, but he decided that he didn’t want that. He was very humble.

I guess I’m sort of guilty of this because I made him a superhero in a comic book that I designed, but his story, when told by others, is a hero story about this hazel-eyed giant who was unafraid after the earthquake. He was like this great conquering monster, and it makes him sound not very human. It makes him sound superhuman. 

When I met Herb Kelleher, he was amazingly humble. When I studied in *inaudible*, he was amazingly humble. He admitted to crying a lot during the early days of IKEA. Those are the first-person accounts. Hopefully, I don’t impress anybody as somebody who’s bold, because I’m not. But then what happens is the stories get retold, and they get retold by the Hollywood version. The Hollywood version of this is these two guys go out and they disrupt an industry, and they’re bold in the face of uncertainty, and they don’t take failure, and they don’t accept compromise. They’ll make it sound like we’re some sort of badass heroes, and that, to me, is a tremendous disservice to normal people who have the potential to do what these other normal people have done and literally changed the world, but they then disqualify themselves because they don’t feel like they’re a superhero. 

And, as a matter of fact, the book is written for one person. I had her in mind as I was writing every paragraph. She’s brilliant and hard working. She’s great at everything she does, and yet, I’ve seen her in situations where she is not experienced with a problem. She says, “Well, I can’t do anything about this. I’m not qualified.” And here’s the thing: She’s right. If she comes across a problem that has never been solved before, she is, by definition, unqualified to solve it. And yet, that lack of qualification applies to everybody on the planet.

Think about what I said. We’re considering a problem that’s never been solved before. Who was qualified to solve it? And the answer is nobody’s qualified. It hasn’t been solved yet. You get qualified after the problem has a known solution, right? So, if I want to go out tomorrow and fly an airplane, I have to get qualified to go to the FAA. I have to get a medical certification. I have to take a written exam. I have to do 40 hours of flight training with a CSI. I have to do stalls, spin simulations, and all this stuff. And if I do it all correctly and pass the exam at the end, then they’ll give me a little card that allows me to fly an airplane, that allows me to become qualified as a pilot. Great, that is an appropriate thing, but Orville and Wilbur Wright had no such qualifications. These guys got into, literally, the first airplane, unqualified to fly the thing. If you say, “Well, they couldn’t be qualified.” I’d say, “Yeah, it’s impossible to be qualified if you’re doing something the first time.”


So here’s the big message of the book: You think that entrepreneurship or these world-changing companies are somehow built by these egotistical badasses who are either genius or somehow possessing superhuman capabilities? No, they’re not. They’re people who happen to stumble across this process which I described in the book, and that process gives them this massive power to essentially create a totally new market. You don’t have to be a genius, or particularly that hard-working to create a new market if you’ve got an innovation stack. These can be created by normal people. And frankly, today, literally, our world is in chaos. We have just shut down the economy. It’s freakingly terrifying. That was on the board yesterday with a four-hour Fed meeting. Like, nobody knows. Everyone’s terrified, and yet, if you look at the history of these inventions, many of the greatest companies in the world were started in equally terrifying times.

The Bank of Italy was started a year before the Great San Francisco earthquake. The entire city burned to the ground. Giannini’s bank burned to the ground. But the difference between Giannini and the dozen other banks that burned to the ground that day was he was an entrepreneur, and he opened up a day later. He got his bank opened. He started making loans, literally, from the docks of the San Francisco wharf. He responded as an entrepreneur does. He didn’t just sit there saying, “Oh well, we don’t know what to do, because we’re in this new situation.” Look, I know everybody’s in hard times and I really feel it. Not to paint a big smiley face on this, but there are going to be some phenomenal companies that learn to adapt to this ecosystem. And in the ecosystem, whatever is going to exceed us are going to be the new massive successes. It’ll probably happen right now.

Shawn Flynn  40:05

The recording of this episode is April 3rd, just to give everyone that’s listening a frame of reference. But Jim, you’re saying that in the hardships, there are opportunities?

Jim McKelvey  40:14

Well, yeah, that’s sort of trite, though. I mean, you say that. Turn lemons into lemonade. Well, look. I hate trite advice. So I’d like to nuance that a little bit and just say, “Look. I get it. Nobody wants to be here. Nobody wants to be where we are.” Except maybe Purell company and Amazon. Purell is probably psyched about this. I guess the guys at Zoom are kind of psyched. But with those three exceptions, nobody else wants to be here. That said, at least the companies that I’ve studied, have all had some similar cataclysm. I’m not talking about some minor annoyance. I’m talking about something that was a flat out disaster.

For the Bank of Italy, their bank burned to the ground. Their safe melts, then they go through depression, then a World War. That’s a pretty tough environment. You wouldn’t wish that on anybody. But they emerge on the other side of all that as the most powerful bank in the world.

Shawn Flynn  41:12

I was just talking to Christina Kumar, a journalist here in Silicon Valley, and I’d like to thank her because she was the one that made the first introduction that allowed the interview today to actually take place. In the conversation, she was talking about how the application to large Square financial service has just been approved by the FDIC. How will this change the banking system? What can we expect?

Jim McKelvey  41:32

We are now one step closer to everybody we deal with. I think that’s really helpful. We had previously connected our systems to another ILC (industrial long corporation), entities that can be owned by corporations. There are a bunch of them, and there’s now I think, one or two more. We have one. And really what this does are two things: One, it allows us to work without this intermediary in the middle. I think that’s ultimately good because every time there’s another link in the chain, there’s a chance for the chain to break; there’s a chance for misinformation to happen. So, Square was complying with all the banking regulations anyway. Since the people we were dealing with were all very, very heavily regulated, we had to be heavily regulated as a subset. Regulation never decreases. If there’s an intermediary, it’s just a multiplier. So I think it’s just going to be a more efficient system.

What does that efficiency mean? Well, let me [apply] the current crisis [into consideration]. We just got that entity approved, so we don’t really have a functional tech stack yet. But were we to have had that system in place now, we could probably be getting cash to people who need it faster. Were we able to do that, we might be able to get people their government checks faster or their payments faster, as long as they’re checks. We wouldn’t get you a check. It would be an electronic payment. And these are unknowns, but it’s generally good to have closeness with your customer. And this puts us a little bit closer to our customers.

Shawn Flynn  43:03

In these times right now where people might be looking for more knowledge and more information, have there been any CEOs or mentors or people in your past that other people might be able to gain information from?

Jim McKelvey  43:16

Well, unfortunately, all the people that I study are dead. So I would say, if you have time to read your history, learn about the history of Southwest Airlines, IKEA, Birds Eye Foods, and Bank of America. I would say I’d make it a history lesson, and look at the history of those great companies.

As far as me, personally, I never really had a mentor, so I always felt very alone and weird. And the reason I never had a mentor was that when I went looking for one, all I could find were business people (i.e. people who were doing stuff that had been done before) and they were very successful. I had a lot of contact with very, very successful people, but none of them were doing what I was doing. So, therefore, their advice didn’t really work. The first mentor that I found was actually this dead Italian immigrant named A.P. Giannini. Although I’ve never met him, he talked to me through history. And he had lived through some of the same things that Jack and I lived through, and I thought, “Okay, well, I can take some guidance from this guy’s life,” and hopefully I will continue to get educated in that way.

Shawn Flynn  44:23

I just want to ask one more question before wrapping it up. Just wondering how does one go about designing their life to have a balance? From my research, you do glassblowing. You seem to have this balance of not just heads-down focus, but pretty well-rounded. How does one go about it? Or is my research just wrong?

Jim McKelvey  44:42

No, no, I think the research is right. I think your conclusion may be wrong. I don’t know that my life is balanced. It just may be a series of imbalances that collectively add up. Look, I do a bunch of different stuff. I don’t know that I should be offering advice here, but I will share a book called Good to Great by Jim Collins. Jim gave me this book in 2001. 19 years ago, Jim gave me a review copy of Good to Gray so that I could tell him what I thought about the book. When he gave me that book, he gave me some advice. He said, “Do you have a don’t-do list?” And I said, “What the heck is that?” Most people have a to-do list, and they add things that they want to do to their to-do list. He said, “The problem with that is that everything takes space, but where is that space going to come from? and the answer is: It’s going to come from stuff you don’t intend.”

So, for instance, let’s say you want to learn how to play the piano. Where’s that time going to come from? Well, it’s probably going to come from the time you spend with your friends or the time you spend reading or the time you spend with your family or the time you spend resting. If you add too much new stuff, you end up without time. So Collins’s suggestion to me was to make the don’t-do list. This is a list of things you intentionally do not do.

So let me give you some things on my don’t-do list. I don’t do social media. So if you see me on LinkedIn or Facebook or Twitter or any of those things, that’s not me. That’s a marketing firm that was hired to sell a book. And if you’ll notice, most of those accounts are pretty recent except for LinkedIn, where I have like 2,000 unrelated requests. I have a Twitter account because, of course, my friend started Twitter, but you’re not gonna find me tweeting. I don’t do it. I don’t read it. I don’t touch any of that stuff. I’m buddies with Kevin who started Instagram. I don’t use Instagram. I’ve never been on Facebook ever. So, zero social media. I don’t watch the news. I kind of have to these days because of COVID-19, but generally, zero news. I don’t gas up cars. I basically made a list of all things I was not going to do. And the interesting side effect of this, Shawn, was, it gave me a massive amount of free time. Like I have gobs of time. I am so protective of my time, and I am frequently bored. And if you’re frequently bored, you can learn to play the piano or learn to blow glass or learn to fly a plane or serve on the Fed or start companies. Or, I spend a lot of time with my family. I hang out with friends a lot. And I get a lot of sleep… It’s Jim Collins’s Good to Great. Maybe that’s the best secret I can offer your listeners.

Shawn Flynn  47:20

Ah, good advice. I’ve never heard that from anyone ever before. After this call, I think I’ll start my do-not-do list.

With that, Jim, I want to thank you for your time today. If any of our listeners write a review and share this episode, is there a way that they could get a book or we could put their name in a hat, raffle it off for a prize that’s possibly a copy of your new book?

Jim McKelvey  47:45

Yes, I’m going to have the publisher send you five copies, and you can distribute them to your folks as you wish. And everybody can get a free copy of the Birth of Banking, which is the cartoon version of chapter nine of The Innovation Stack. It’s a cartoon. It’s a comic book, but go to, and get that for free. I want to give everyone something. And, look, I want these ideas out there. There are too many problems in the world for us to have some of our greatest resources on the sideline. So, yeah, get in there and do something.

Shawn Flynn  48:12

Great! So, everyone listening, please write a review, take a picture, and e-mail me at All the information on Jim’s new book, Good to Great, and everything that was talked about today will be in the show notes, so visit the website. 

Jim, thank you once again for all your time today! 

Jim McKelvey  48:32

This is great, Shawn. thank you again.

Outro  48:35

Thank you for listening to TIP. To access the show notes, courses, or forums, go to This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Witten permissions must be granted before syndication or rebroadcasting. 


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