The Innovation Stack summary

One day in 2008, McKelvey got a call at his St. Louis studio where he was working as a glass artist. A customer was finally interested in an orange-yellow double-twisted glass spout for her new bathroom. 

McKelvey was thrilled! This ugly thing had been sitting on the shelves for years. To him, it was a bit of free money and spring cleaning in one . . . until the customer revealed that she only had American Express. As fate would have it, McKelvey’s studio could only accept Mastercard or Visa. 

Six months into launching Square, McKelvey and Dorsey needed cash. It was time to pitch to venture capitalists. The goal was to hook investors by showcasing a working prototype of a card reader that plugged into an iPhone’s headset jack and processed payments.

The cofounders demonstrated this prototype in a very unexpected way. They asked each prospective funder for a credit card, swiped it using the card reader, and charged it between $1 and $40 (the amount depended on how much they personally liked the card holder). This gave investors proof of the transaction in their bank accounts – and the cofounders some extra spending money! 

When Square first started, the company was three guys and a cat named Zoë – all crammed into a small San Francisco apartment. The three guys divided the work: Dorsey coded the server software; Tristan, the only employee, wrote the iPhone client software; and McKelvey did the rest. Zoë’s job was to sit on Tristan’s lap and console him for not having health insurance.

Within a day of launching Square, its founders realized why no one had attempted to build a payments system before: it was illegal! With every transaction, Square would violate 17 credit-card laws and regulations. 

Meet Orville and Wilbur – otherwise known as the Wright brothers. They built the first-ever airplane, aptly called the Wright Flyer, in 1903. Because no one had ever put a flying machine in the air before, the brothers had to invent many things from scratch.

First, they needed a lightweight engine with enough horsepower to turn propellers. Then, they needed to build these propellers. After that, they had to figure out how to steer the airborne plane with a not-yet-invented yoke. And then, of course, they needed to develop a safe way to land. 

Piranhas. Grizzly bears. Great white sharks. There are many powerful predators in the animal kingdom – and the business world is no different. A competitor awaits at every corner, ready to steal your customers and snaffle your market share. 

For Square, its brush with death came from a particularly indomitable predator: Amazon. The firm with nearly infinite resources in money and talent also had a history of entering whichever market it wanted – and winning.

Throughout his early career, McKelvey was always on the lookout for a mentor: someone he considered to be a “true” entrepreneur. He was searching for someone who had built a successful and innovative business that squared up an aspect of the world. But he never came across anyone that fit that bill – not in today’s market anyway.

So McKelvey resorted to looking back in history. To his surprise, he found a trove of examples – one of which will transport us to 1901. During a time when banking was still primitive, there was one entrepreneur willing to go against the norm and build an innovation stack to improve the world of banking for all.

When it comes to starting a new business, a lot of would-be entrepreneurs feel they lack sufficient expertise. But what they don’t realize is that many of the world’s greatest innovators had no formal qualifications in their area of focus.

Take Giannini as a case in point. He started as a produce vendor – and later became the owner of one of the largest banks in the world. McKelvey is another example: he was a glassblower before he founded Square. Never in his wildest dreams did he think he’d run a payments company.