Automated or autonomous transactions already exist to some extent today. Lots of services have usage-based billing, right? A lot of the expenses being incurred are autonomously incurred. No human is pushing a button when Stripe does most of what it does with cloud computing and incurs some cost with some cloud service.
Patrick Collison
Recommendations and personal stack
Automated or autonomous transactions already exist to some extent today. Lots of services have usage-based billing, right? A lot of the expenses being incurred are autonomously incurred. No human is pushing a button when Stripe does most of what it does with cloud computing and incurs some cost with some cloud service.
The particular secular tailwinds that we benefited from were tied to the rise of app stores, the on-demand economy, and maybe the startup boom post-YC and the financial crisis; those particular tailwinds were idiosyncratic and specific to Stripe.
The particular secular tailwinds that we benefited from were tied to the rise of app stores, the on-demand economy, and maybe the startup boom post-YC and the financial crisis; those particular tailwinds were idiosyncratic and specific to Stripe.
The particular secular tailwinds that we benefited from were tied to the rise of app stores, the on-demand economy, and maybe the startup boom post-YC and the financial crisis; those particular tailwinds were idiosyncratic and specific to Stripe.
The GFC was 2008 2009 and Stripe was founded in 2010, so as much as you define those as being core, then not that much earlier.
The GFC was 2008 2009 and Stripe was founded in 2010, so as much as you define those as being core, then not that much earlier.
Mostly my story of Stripe is one of market inefficiency.
For example Novo Nordisk – the GLP company, Maersk – the shipping company, I believe also Lego. A lot of these corporations are controlled by foundations and usually have a lot of their stock held by them. In many cases that has the secondary effect, where they actually embed their mission into a legally binding constitution
I often think of Stripe as similar to Mathematica, where we're selling a self-contained universe to model whatever it is of interest to you.
Mathematica now supports all kinds of crazy, arcane stuff, to a very impressive extent. If you go through the more obscure packages in Mathematica, you can definitely find things that are much less broadly employed and understood, even less than Visa error codes.
If you make a change — billions of dollars of transactions don't happen. How does that change the way you think about the initial architecture and the stakes?
And as you look at these other counterfactuals in other places, one feels gratitude for what it is, that Dee Hock and Visa and MasterCard and the card networks made possible. I'm not saying they're perfect, that one can't make critiques, but I'm most interested in critiques from people who've really studied the ecosystems of other countries, because it's easy to underestimate what we got in their invention.
And as you look at these other counterfactuals in other places, one feels gratitude for what it is, that Dee Hock and Visa and MasterCard and the card networks made possible. I'm not saying they're perfect, that one can't make critiques, but I'm most interested in critiques from people who've really studied the ecosystems of other countries, because it's easy to underestimate what we got in their invention.
And as you look at these other counterfactuals in other places, one feels gratitude for what it is, that Dee Hock and Visa and MasterCard and the card networks made possible. I'm not saying they're perfect, that one can't make critiques, but I'm most interested in critiques from people who've really studied the ecosystems of other countries, because it's easy to underestimate what we got in their invention.
It would have been much more difficult to get business operations going. Sorry, I know you're supposed to be interviewing me, but did Stripe play any, even on the margins, counterfactual role in you charging for anything?
To the extent that Substack would not be a convenient place to get payments from to begin with, that's definitely a thing. And also... You wouldn't charge for the newsletter if Substack hadn't made it super easy? Yeah. And also, if I do an ad, I wouldn't even know how to begin with getting the money, if I didn't already have an LLC through Stripe with the dissociative bank account, that I'm going to get the money through. So yeah, probably counterfactually responsible for a lot of the monetization.
To the extent that Substack would not be a convenient place to get payments from to begin with, that's definitely a thing. And also... You wouldn't charge for the newsletter if Substack hadn't made it super easy? Yeah. And also, if I do an ad, I wouldn't even know how to begin with getting the money, if I didn't already have an LLC through Stripe with the dissociative bank account, that I'm going to get the money through. So yeah, probably counterfactually responsible for a lot of the monetization.
All this stuff: Atlas, identity fraud, detection — in retrospect, it might not have been obvious back then there was a good complement, but now it does seem that way.
I should mention, John was also instrumentally involved in Arc's formation. It would not have happened without John.
Herb Boyer couldn't have done that at age 23. Herb Boyer first had to accumulate all of the knowledge and the skills required to be able to invent that over the course of a multi-decade career.
Patrick Hsu, one of the co-founders of Arc, which maybe we'll speak about later in the show. This is a biomedical research organization we started a few years ago. He announced this new phenomenon of bridge editing, which is a new recombinase where you can insert DNA into a genome.
Patrick Hsu, one of the co-founders of Arc, which maybe we'll speak about later in the show. This is a biomedical research organization we started a few years ago. He announced this new phenomenon of bridge editing, which is a new recombinase where you can insert DNA into a genome.
Genentech was co-founded by Bob Swanson and Herb Boyer. They produced cheap insulin for the first time with recombinant DNA.
Genentech was co-founded by Bob Swanson and Herb Boyer. They produced cheap insulin for the first time with recombinant DNA.
Genentech was co-founded by Bob Swanson and Herb Boyer. They produced cheap insulin for the first time with recombinant DNA.
Hamilton Helmer is probably the leading scholar on various sources of defensibility for businesses. He has this niche, but very well known in the niche, book called Seven Powers. It tends to disaggregate the various sources of market power in this respect. I think that is true and important, insofar as it goes.
Published claims
one version of what people in their 20s should do is get some ideas for domains you're interested in, but then figure out where can you learn the highest standards, where are the highest standards embodied, and where can you go and experience that first hand
First of all, the conversion rate between those inputs and the output is not a cosmological constant. Maybe any of these things could be done for half or a tenth of the cost
By talking about these things in funding and dollar terms, you're making the implicit assumption that the only relevant constraint is the financial one, where in practice, maybe it's permits or labor shortages or other things
To a fairly close approximation, there were around 1% as many practicing professional scientists in the US pre-World War II as there were post-World War II or say even 1950
When analyzing the NIH or how we should pursue any of this stuff, I try to get more concrete and tactile and think, what would success here look like? What is happening today at the microscale? What are the actual problems? What could success look like at the microscale? What might it look like to scale that up?
Automated or autonomous transactions already exist to some extent today. Lots of services have usage-based billing, right? A lot of the expenses being incurred are autonomously incurred. No human is pushing a button when Stripe does most of what it does with cloud computing and incurs some cost with some cloud service.
there'll be very interesting questions around the legality of bots in terms of: are they treated as the responsibility of the owner? Is there any degree of independence granted? How does liability work? Which rails are best suited? What kind of transaction velocities are we talking about here?
If we just use the analogy of the usage-based services, those tend to incur liabilities in tiny increments, but then to settle on a monthly basis when you pay your bill.
I think what you're saying around these autonomous transactions conceivably being an important dimension, is very true and real and is one of the interesting ways in which the economy might change and expand over the next decade.
The particular secular tailwinds that we benefited from were tied to the rise of app stores, the on-demand economy, and maybe the startup boom post-YC and the financial crisis; those particular tailwinds were idiosyncratic and specific to Stripe.
The GFC was 2008 2009 and Stripe was founded in 2010, so as much as you define those as being core, then not that much earlier.
Mostly my story of Stripe is one of market inefficiency.
most organizations, when they start out, are actually trying to achieve their stated goals.
there's generational turnover on a continuous basis. But say, for the fifth generation: Why are they there and to what degree do their particular incentives align with the originally stated goals of the organization?
the median age of the corporation is famously low.
Some of the explanations around the effects of shareholder capitalism suggest that it influences the incentives of organizations and their long term fates.
if you look at Europe or places like Denmark, because of the tax code there, a lot of organizations are either controlled or substantially held by non-profit foundations
For example Novo Nordisk – the GLP company, Maersk – the shipping company, I believe also Lego. A lot of these corporations are controlled by foundations and usually have a lot of their stock held by them. In many cases that has the secondary effect, where they actually embed their mission into a legally binding constitution
It's enshrined in their constitution that they have to make insulin broadly available and really cheap or at least that is the case in Scandinavian countries. So it is allowed to charge market prices elsewhere but they're legally obligated to reinvest profits in R&D
These questions of “Why is it that the median age of organizations and corporations is what it is?” are definitely interesting and I suspect the reason is somewhat dependent on the way we've chosen to organize large corporations in the US today
The thing you're mentioning about this firm seems very similar to the export-led growth in Asia. Totally. The idea of tariffs. There's one company tasked with making the cars, so you better make the cars good. You have no competition but you have to invent the best car in the world
if you think about Stripe's mission– it's to facilitate global trade, to make sure that some firm from India can compete with any firm in Nigeria or whatever
So the room for you to have this sort of learning curve where you're less efficient than the global competition should be less, if Stripe exists, right?
To be clear, I'm not specifically endorsing these tariffs and trade barriers. The history associated with them is checkered at best
a lot of the most successful companies are those that are distinguished by the extent to which they exhibit appreciation for and skill in realizing craft and beauty. LVMH is one of the largest companies in the world, and that's literally their business. Tesla is pretty good at this. They're good at many things, including this. Obviously, there's Apple. TSMC is not the Japanese sushi chef you mentioned, but it's the TSMC chip sushi chef in Taiwan.
It might be the case that craft and the pursuit of it is as important as it's ever been.
Part of what's interesting about these aesthetic qualities is they're generally speaking unquantifiable. I don't know if they're intrinsically unquantifiable, maybe you could train a model to do so, but today, they are broadly speaking unquantifiable. And yet they influence people in significant ways.
People very demonstrably care about aesthetics. And if they're a company, they care about the aesthetic characteristics of the products that they produce.
On an intuitive level, people know that that's true. But it's difficult to manage that at an organizational level, where there isn't a P&L associated with it, and if you're screwing it up, you don't see a neat time series decline.
Over the 14 years of Stripe, we have, not exactly through trial and error, but by studying cases where things worked well and less well at Stripe, what customers responded well to, and so on, understood, that even in a domain like ours, where we are selling primarily to businesses, that is something that's truly important.
the best people consider themselves crafts people in their domain and they really, above almost all else, want to work with the best other people.
as it happens, I think customers do, in fact, value it. The evidence is broadly consistent with that.
It's very hard to assemble groups of the best people, if you don't take the practice of the work super seriously.
Whereas for Stripe, people are, on some level, purchasing our architecture or purchasing their ability to do certain things rather than some different set of things, because of what our architecture makes easy and possible.
I often think of Stripe as similar to Mathematica, where we're selling a self-contained universe to model whatever it is of interest to you.
Mathematica now supports all kinds of crazy, arcane stuff, to a very impressive extent. If you go through the more obscure packages in Mathematica, you can definitely find things that are much less broadly employed and understood, even less than Visa error codes.
If you make a change — billions of dollars of transactions don't happen. How does that change the way you think about the initial architecture and the stakes?
When you get API design and architecture right, it can be so enduring over literally multiple decades, even in the face of what are otherwise frenzied evolutions in everything around it.
Unix has tons of shortcomings, but the architecture has worked now for more than half a century.
We're all trying to impress upon people at Stripe the importance of multi-decadal abstractions.
That really raises the stakes in API design for sort of obvious reasons. We have that problem ourselves, where, when we think about introducing something new, it's not just: "Does this exigently address the particular need that's motivating it today?" — but: "Do we think we can stand behind this in 2044? How do we think the world might evolve around us, such that it all remains coherent?"
The card networks generally, Visa and MasterCard, are pretty good at equilibrium.
The card networks do a couple of things. Originally, they were designed to replace store credit. It was a credit card originally, not a debit card, right? That was important. The availability of structured consumer credit is a pretty big deal and is beneficial, especially for lower income people.
many people would consider Stripe to be on the wrong side of the interchange cost equation, in the sense that we're giving away the interchange revenue to other companies.
It is a distribution incentive fee, where you're paying other entities for recruiting customers, convincing them to get a card, getting them to maintain the card and to pay it off at the end of the month etc.
Germany is one of the classic ones. From our vantage point, dealing with the online economy in Germany as compared to the US is so much worse.
If Stripe could push a button and have really broadly adopted cards in Germany à la the US, we would push the hell out of that button.
And as you look at these other counterfactuals in other places, one feels gratitude for what it is, that Dee Hock and Visa and MasterCard and the card networks made possible. I'm not saying they're perfect, that one can't make critiques, but I'm most interested in critiques from people who've really studied the ecosystems of other countries, because it's easy to underestimate what we got in their invention.
collect that amount from the buyer, report to Uppsala, and then eventually figure out how you're going to get that money to Uppsala. Obviously, it's this combinatorial problem of buyer jurisdictions and product types, and then all the different jurisdictions that you have to remit the money to.
As to those amounts, we're not talking three basis points — the taxes in question are often 5% or 10%, so it's not trivial.
As I think about the funds flows on the internet and how all that's evolving and unfolding, I think changes in tax law are actually a much bigger deal than anything about the transactional economics.
It would have been much more difficult to get business operations going. Sorry, I know you're supposed to be interviewing me, but did Stripe play any, even on the margins, counterfactual role in you charging for anything?
To the extent that Substack would not be a convenient place to get payments from to begin with, that's definitely a thing. And also... You wouldn't charge for the newsletter if Substack hadn't made it super easy? Yeah. And also, if I do an ad, I wouldn't even know how to begin with getting the money, if I didn't already have an LLC through Stripe with the dissociative bank account, that I'm going to get the money through. So yeah, probably counterfactually responsible for a lot of the monetization.
All this stuff: Atlas, identity fraud, detection — in retrospect, it might not have been obvious back then there was a good complement, but now it does seem that way.
Honestly, our problem ends up being that more things then we could possibly pursue, look like complements. In that every business almost by definition has revenue we obviously want to help them generate, accept, manage and orchestrate everything pertaining to that revenue.
When Stripe started out, it definitely wasn't cool. It was the opposite, it was just a couple of us and we thought that we could make this superior payments API. For the vast majority of its history, Stripe has attracted people who are drawn to unglamorous infrastructure challenges and problems.
Stripe has attracted people who are drawn to unglamorous infrastructure challenges and problems.
We're not a company that specializes in making beautiful cars— we make roads.
the core problem of global money orchestration remains really big and unsolved.
We would much prefer that Stripe plugged into every existing system, rail, domestic organization, rather than that we tried to come along and supplant them.
Is Stripe a writing culture for the benefit of the writer or the reader? It can be both.
How do you deal with that kind of responsibility? How do you keep the uptime and keep the reliability while deploying fast? This is one of the things we've spent the most time on.
I think it works out to about 1% of global GDP. It's about a trillion dollars a year.
we deploy production services that are in the core charge flow around 1,000 times a day. Most of these services are automatically deployed, so when anybody makes any production-ready change, it just goes into production. It's meticulously and carefully orchestrated: first is just running some small sliver of traffic and then incrementally more traffic until it's everything. So about 1,000 deploys per day at roughly or somewhat in excess of five-and-a-half-nines — 99.9995% reliability
Silicon Valley doesn't tend to... I'm perhaps now being unfair in attributing things to Silicon Valley — a lot of the tech industry doesn't place a lot of value on process and operational excellence. We culturally value the spontaneous, the creative, the iconoclastic, the path-breaking.
Building mechanisms that can enable the very reliable provision of important services at scale, and removing the sources of variability, that can really cause a bad day for a very large number of people — I don't think these things get quite as much cultural credit.
None of this sounds like rocket science, but defining what it is, that we care about, and then building automated measuring systems to measure to what degree it's happening in practice, to then try to figure out the cases where we're not living up to that, and determine what is the reason, then to actually intervene and improve the system, so that that's not happening, then importantly, to build secondary controls, that detect instances of deviation long before they cause a production problem, but where we understand the behavior of the system in sufficient detail, so that we can instrument it in some upstream way — most of what I said there was well understood by production engineers in 1930s. So again, I'm not claiming that it's any kind of radical breakthrough, but we have found that the adoption of these practices in really tenacious multi-year form yields really high returns.
It's a real testament to the remarkable folks at Stripe who made it happen.
Once you get the AI engineers, they can push the commits and you have the infrastructure set up, so that it can be readily evaluated.
But if you take that seriously as a goal — you think about what you would have to measure, if you were actually going to pursue it in earnest?
The customers that Stripe serves in aggregate are outgrowing the internet economy as a whole.
And I don't even mean new technologies or AIs, but just all the basic per-capita math you can do around.
What if everybody had an income on par with the US? One of the reasons I am so interested in working on Stripe is: it's the old line, the Lucas line, about how when you start thinking about differential rates of development in countries, it's hard to think about anything else. Why does Brazil have the particular income and GDP level that it does? Why does Poland have the level that it does? Why did Ireland have the trajectory that it did, where it went from being the sick man of Europe to now one of the wealthiest countries there?
I feel like Stripe is some applied version of this question in practice, where you're building software products, but in some sense connected to or touching upon these questions of: Why aren't there more companies? What determines the growth rate of a company? Why is it that when you start the merch store, why does it have X level of buyers rather than 2X?
We haven't optimized the meta system of business to any particularly great extent. For the vast majority of time, businesses have been offline, inefficient, analog. It's really only over the last one to two decades that a significant share of this has been meaningfully digitized. And the prospects for optimizations there are still significantly underexplored.
We find incredibly basic things, like 'just extending capital to businesses'. The reason we do that is not to generate profit from the loans, but because we find that the businesses, whom we extend the capital for, then just grow faster on a persistent subsequent basis.
To your question about: where does the growth come from? There's still an awful lot of low-hanging fruit in just asking some of these incredibly basic questions.
Stripe is doomed to eventually grow at the rate of the economy, there is only a question of how long it takes to get there.
there's a lot of innovation that comes from large established businesses.
As I take stock of the businesses, the enterprises that are in the process of migrating to Stripe or that did so over the last year, whether it's the large retailers, global manufacturing firms or shipping companies, it typically has one of those two patterns. New product or current product sold to people who weren't buying it before.
Relentless iterative improvement, yes. It's underrated.
The general thing I'd say is: working with people you're close to is underrated. I'm doing Arc with Patrick Su and Silvana. Fast Grants was with Tyler and Silvana. Stripe is obviously with John.
Stripe would be a less effective company without either of us. And I'm just meaning from a bandwidth standpoint, but I think we both bring different things to bear.
I think John and I can work together for... You never know life, but I think we'll probably work together for decades.
I should mention, John was also instrumentally involved in Arc's formation. It would not have happened without John.
San Francisco valorizes striking out on your own, iconoclastically dismissing the received wisdom. It praises the founding archetypes and lore of Steve Jobs and Bill Gates and all the rest.
I don't think San Francisco, using San Francisco as a kind of a metonym for a cultural orientation, encourages the pursuit of really deep technical knowledge.
Herb Boyer couldn't have done that at age 23. Herb Boyer first had to accumulate all of the knowledge and the skills required to be able to invent that over the course of a multi-decade career.
Patrick Hsu, one of the co-founders of Arc, which maybe we'll speak about later in the show. This is a biomedical research organization we started a few years ago. He announced this new phenomenon of bridge editing, which is a new recombinase where you can insert DNA into a genome.
Genentech was co-founded by Bob Swanson and Herb Boyer. They produced cheap insulin for the first time with recombinant DNA.
That's a simple way to explain a lot of it, in that if you're just adding exponentially more unproductive capacity, then on a stylized level, a lot of this stuff would just fall out of it.
makes me not persuaded that the low-hanging case is necessarily true, and gives some weight to the prospect that it's fundamentally structural, cultural, or organizational.
it seems pretty clear that the trajectory of NASA's efficacy has not fully followed the trajectory of its inputs.
If the binding constraint is the number of John von Neumann's, then yes, that's bad news, I guess.
Mostly my story of Stripe is one of market inefficiency. I do wonder why much of this didn't happen sooner. I always find it really interesting when there's cases, where it wasn't even the case that: "Well it could have been started sooner, but there was nobody in the market." There were many people in the market. And they weren't just random people, they were technology companies headquartered in San Francisco who were in the market.
My general view is: "For most products and most businesses, things can just be done much better". Moats are typically overrated. The payments are a great example of a domain where, on a logical basis, you would say that there are so many sources of defensibility: there's the network effects of the account holders, the data network effects/economy of scale for fraud, regulatory modes and barriers etc. etc.
It gets down to deep questions of: "What is the binding constraint on the number of effective organizations that exist in the world?" For any given sector, why is it that number of companies rather than twice that number of companies and so on? It's about motivation, ideas and people's willingness and determination to organize talent and so forth. But these are kinds of more sociocultural explanations.
Hamilton Helmer is probably the leading scholar on various sources of defensibility for businesses. He has this niche, but very well known in the niche, book called Seven Powers. It tends to disaggregate the various sources of market power in this respect. I think that is true and important, insofar as it goes.
I do think that one can have organizational and cultural moats. Maybe this contradicts what I was just saying, or it's consistent with it in the sense that it's a kind of cultural explanation. In as much as we have a moat, it's because we have a very good understanding of our domain. We have a set of people who actually care about solving the problems, who are continually paranoid at the prospect that we might be forgetting something important.
So we are trying to figure out what the important thing that could supplant Stripe's approaches is, and make sure that we build that first.
We observed in 2018, that everyone seems to agree, that carbon removal will be very important. Even if we decarbonize the economy on the most optimistic timeframes, there'll still be an accumulated stock of carbon, which will be a problem. It sounded pretty weird, that there were virtually no carbon removal companies in the world in 2018.
So we thought: "Well, somebody's got to start and it might be valuable to not only transfer some dollars, but to confer some credibility on this sector." Not that Stripe is the world's most credible company, but it's better than nothing. So we started contracting with some of these carbon removal companies.
Then, in 2021, we formed Frontier, which is an AMC, an advanced market commitment. That was inspired by the first AMC, which was a pre-commitment to purchase vaccines for developing world's countries for diseases that were market failures, where either pharma companies hadn't pursued the vaccines, or where the profits weren't sufficient to pay for the program. So we decided to do this for carbon removal.
We raised a billion dollars. Stripe was the first investor. We're not actually investing, we're just buying, so we were the first company to commit.
Frontier has contracted with between 40 and 50 companies, the overwhelming majority of which didn't exist when we started out with this.
Is Stripe a writing culture for the benefit of the writer or the reader? It can be both. But which one is the more so? There are really considerable benefits on both sides, because for the reader, it's not just that it's maybe more efficient to communicate stuff through text, though in many cases it is, but also there's intertemporal benefit
But it's also true that I and lots of people write things in order to organize one's own thoughts. If that ability was taken away from me, I'd be meaningfully less effective.
you might expect firms, that have a lot of writing, to be the first to experience the productivity gains of AI, because in other cases there's all this context that the model doesn't have readily available.