LOST PINES, Texas–Jim McKelvey, the billionaire who co-founded Square (now Block) and who served a term as an independent director of the Federal Reserve Bank of St. Louis, believes credit unions have something that others can’t copy—and if credit unions ultimately prosper and succeed, it will be the reason why.
Speaking to Catalyst Corporate’s Strategic Summit, McKelvey said he shouldn’t be in a position to speak to the meeting or offer any advice. The reason: three years after the launch of the payments app Square, Amazon decided it wanted in on the business.
“They don’t buy you. They just kill you,” he said. “They copy your product and then undercut your price by 30%. What did we do? Nothing. It worked. “
Why? Square was unsure how to respond, but after 13 months Amazon gave up and actually sent Square readers to every business using its device. But the reason Amazon surrendered “gnawed at me,” McKelvey said. “I didn’t believe we just got lucky.”
McKelvey said after much thought he decided it was something in the nature of “entrepreneur” that was the reason Square survived and grew.
Everyone Has One Thing in Common
“We all have one thing in common: we are all copies,” he said. “None of us are original. Copying is probably the most powerful force in the universe, because most stuff doesn’t work. If you have something that works, you copy it. But what if you can’t copy? That was the situation Square was in.”
Square, which was cofounded by Jack Dorsey who would go on to start Twitter, after McKelvey, a former glassblower, discovered many of his fellow glassblowers had difficulty getting paid for their work. If a small merchant did process cards, it was at a cost significantly higher than the big box stores paid.
“We’re taught we have to innovate, that there must be innovation. No. Innovation is the last resort,” he said.
’14 Things Never Done Before’
In Square’s case, innovation involved doing “14 things” never done before in card processing and finance.
“We ended up with a product that was almost impossible for Amazon to copy because Amazon could copy the stuff that they saw, but all the other stuff they couldn’t see they couldn’t copy,” he said, likening his story to that of Southwest Airlines, which also had to do things no other airline had ever done.
“There are no people who are superheroes in innovation There are people who find themselves in really tough situations and those people, as a last resort, have to build something new,” he said. “It gets dire, and a lot of times it doesn’t work. But the ones who succeed end up with this incredible power. It’s about having an innovation stack. It’s about learning all the ways to do something, and when a competitor comes after you they can’t copy it.”
As an example, he cited United Airlines’ launch of Ted, aimed at responding to Southwest. It didn’t fly..
Qualified to be Unqualified
“When you get into a situation where things are dire and, my guess is that in some credit unions things are kind of dire, that is a good time to try something new,” McKelvey told the meeting. “I have seen many talented people in tough situations and I have watched them take the first tentative steps toward innovating, and what always happens, for good reasons, is they hesitate, stop and quit, because they don’t feel qualified. You have spent your entire life being qualified to do the things to be qualified.
“All progress is made by the unqualified,” he continued. “If you’re going to turn around some problem your business has, you are not qualified to do it. But you have to do it anyway. Meaningful progress is made by unqualified people.”
