Invest Like the Best with Patrick O'Shaughnessy
· Gokul Rajaram
[00:00:00] S1: Jack is, I think, on par with Jony Ive and Steve Jobs in terms of his thinking about design. I understood what good design means. Good design doesn't mean visually pleasing. It means a product that is designed so well that you don't have to give your customers a manual on how to use it. They should be able to see the product and use it. Think about your point of sale. Every point of sale except Square and things that have copied Square, you have to train a barista still for several days after they join on how to use the point of sale. Square is something you can download from the app store and start using it as a point of sale to run your business. A category where you had to train somebody for weeks. That's the example of a good design. He brought that to every part of the company, and removing friction from what is traditionally – I mean, Square's whole premise was removing friction from small businesses applying for financial services. And that extended to the product. That also extended to risk. One of the most interesting things that I didn't realize is that Square at its core is a risk company. When you apply to a bank for payment processing – in fact, the company was founded because Jack's co-founder, Jim, was rejected many, many times to accept Amex by banks. He was a fairly successful glassblower in St. Louis, and he basically was selling $2,000-$3,000 glass sculptures to people who would send him checks. So a woman called from Panama one day and said, "I want to buy this on his website." He had this beautiful piece of glass. He said, "Great." They agreed on the price. And she said, "Can you take my credit card number?" He said, "I don't accept credit cards." So she said, "Sorry, I can't send you traveler's checks." So he lost the sale. And so he went to his friend Jack Dorsey. They had never built hardware. They'd never done any of that stuff, but they brainstormed and realized that the iPhone, which had just been released a couple of years ago, had this thing called the audio jack that could be used to put a piece of hardware in and process cards. I can't even imagine the leaps you have to make to get there. But the number one thing that they realized is most small businesses are denied by banks when they apply. Square instead said, we are going to accept 90 plus percent of people.
· Gokul Rajaram, Patrick O'Shaughnessy
But what they did was they put risk at the transaction level. So they accepted you as a person, as a business. But then once you started processing transactions, they would then run machine learning models on every transaction – this transaction is risky, this is not. [00:00:00] S0: It shifted the level.
· Gokul Rajaram
[00:00:00] S1: Shifted the level. And so that kind of lazy, but brilliant onboarding is something that characterizes a lot of good thinkers. Sergey, very similar. When we were going to launch AdSense in 2003, I'll never forget this. We were doing our final launch things. Sergey was a sponsor. He came and sat in the meetings. He said, "What are you guys building here?" We're like, "Website publishers are going to apply from all across the world. It just sells a product. We have to review them and say, we should approve them, not approve them to run AdSense." He's like, "Why do you need to approve them?" We were like, "What do you mean? Our ads are going to be, we are going to be running ads on these things. Google ads, or ads powered by Google. You don't want to be on a porn site or something else." He's like, "Why not?" We didn’t even have a good answer to why not. It was like, "Well, you know, standards or policies." Okay. "But what if they lie?" He was right. What if they lie? We had so many people applying with Nike.com, for example. It's true. It was very hard to know who owns a domain. I could apply with your domain and, you know, get accepted. He was right. In some ways, we were just doing it to cover our asses, it turns out. And so he said, "Oh, kill all this." So we had literally spent half of our engineering team building this complex approval system with ops and so on. Ops are super excited. They hired a lot of people and now he was telling us not to do it. And instead, do it in real time for every page that loads, because we had the JavaScript on it, we know what URL it is. Look at the content at that point. And we were like, "It's too slow. We won't be able to look at the content because it's billions of pages." "That's fine. Let it load for a hundred times. And after a hundred impressions, if any URL hits a hundred impressions, then start reviewing it." It actually makes sense. Not trying to put lots of checks upfront, but being intentional about where and why. Most things don't even get to the level where you care about them.
· Patrick O'Shaughnessy, Gokul Rajaram
[00:00:00] S0: In both these amazing examples, and then you also said that Jack would do this across the company, not just in the product. How would you sum up the process of great design that you've observed from the people that are the best at design? What is the method that they're going through over and over again as they apply it to different parts of the company or product? [00:00:00] S1: The number one thing I've seen is they try to minimize the number of steps. Everything should be in one page and you need to cut down things. In fact, Jack called the product manager role product editor. Why? Because he believed rightly so that the role of the product manager is not to add more features. Any of us can look at a product and say, "Here's 10 things you should build." The best designers, the best product people edit down things. Similarly, we have a hundred features. What are the two things that really matter that will drive the customer outcome? So the best designers really will takes 10 pages of design and say, "Cut out all the extraneous stuff." So I think it's the process of editing, and this goes to judgment. In an AI age, humans with amazing judgment, which is really editorial capabilities, are the ones that are going to do well and thrive, I think. [00:00:00] S0: Apparently, Rick Rubin would say that he wasn't a producer, he was a reducer. [00:00:00] S1: Great example. Reducer. I like that.
· Gokul Rajaram, Patrick O'Shaughnessy
[00:00:00] S1: Great example. Reducer. I like that. [00:00:00] S0: I wonder how that applies also to communication. Maybe this is a fun opportunity to ask you about the format that you've alighted on that a leader can send to his team on a weekly basis, I think. It seems like this idea of reducing and simplifying can be applied in so many ways by great leaders. Talk about it in terms of communication from leadership to a team.
· Gokul Rajaram
[00:00:00] S1: One of the things that people, especially founders of startups, don't realize is – initially most startups start with two or three people and then they go to people who are all sitting in a room together. Everyone can hear what you're saying, but as soon as a company goes into, I think I call it two rooms, where they're not in the same room together, then you have to communicate. You have to let people know what's going on. And there are a few artifacts that companies need to start putting into place. One is the notion of an all hands. It seems cliched and unnecessary, but even with a 15%-20% company, just getting together once a week and basically just sharing what people have built and been working on in a way. And then having the leader address everyone or one of the leaders address everyone is a great way to get people together. The second thing is a weekly CEO email. And I think this is a very powerful way for the CEO to get across to the team what is on their mind. The best way I think is, that I've done myself – is during the course of the week, you start jotting down things that you think you want to communicate. And then you'd spend Sunday taking all of those things and adding it to two or three things that matter, that you want to get across. Most businesses, I think, can be communicated along three dimensions, product, business, and team. What's happening on the product? How is it becoming more remarkable or serving the customers better? What's happening to the business side? How are we doing better as a business? And then what's happening on the team front? Who have we added, subtracted? What changes have we made? And most importantly, don't be afraid of repetition. Because repeating it once, twice, thrice, four times. That's when actually it seeps into their bones.