How Jack Dorsey approached the payments market: As a buyer

What does Jack Dorsey know about retail point-of-sale systems? That was the big question potential investors had for Square’s founder and CEO when he sought their funding five years ago, Dorsey said on stage at Gigaom’s RoadMap conference Tuesday.

“People would look at Square and they would say ‘your previous life was about micro-blogging what you had for breakfast,’” the Twitter co-founder said. “’Why do you think you can move money around? You’ve never worked in finance, you’ve never dealt with credit cards. Sellers aren’t the sexiest thing in the world.’ This was all their perception.”

At the time Dorsey didn’t have a definitive answer. In fact, he gave investors a lot of reasons why Square could fail, which probably cost Square a lot of interest from prominent VCs, Dorsey recalled.

But Dorsey has an answer now. Square’s engineers and designers may not be merchants or bankers. They may not have had much experience building the card readers and financial transaction networks that power plastic commerce, but they all were buyers of retail goods. According to Dorsey:

“We wanted to make something internally that we feel great about, that we feel is something that feels really amazing, that feels really stunning, that feels like something we want to use everyday. That was very, very hard in the early days of the company because a lot of us in the company — we’re not merchants, we’re not sellers. We’re not building for people who are us.

“When you’re building for yourself, it’s easy to have passion. It’s easy to have drive. But when you’re not, it becomes much, much harder. One of the framings that we got into was that we are all buyers. We love these merchants that we go to. We love these places like Blue Bottle and Sightglass Coffee. We want to do right by them. We want to have a great experience as well. We don’t want to have them wait and try to figure out an ugly point-of-sale system and all of these mechanical things, because that actually impacts the time that I spend in line or the time it takes to get the cappuccino that I just ordered.”

Square stepped back from the payment transaction and all of its component parts and approached commerce as an interaction between two people. It then sought to simplify that interaction as much as possible, Dorsey said. The result was Square Reader, but the company applied that same principle to its other products, from Square Stand and Market to its new peer-to-peer payments service Square Cash.

“It’s not about technology disappearing or how we design things, or how we engineer things,” Dorsey said. “This is what we want to use every single day, and we hope it resonates with other people. We’re making the bet it’s going to resonate with other people. We go out as far as we can, and we just work backwards. We break it into small problems. To me, a lot of what great engineering and design is, is taking something that is very large and very complex and breaking it into simple problems.”

Check out the rest of our Roadmap 2013 live coverage here, and a video embed of the session follows below:

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A transcription of the video follows on the next page