When Amazon attacked Square with a cheaper clone, they failed because they only copied surface-level features. Square had built a deep, interconnected "stack" of 14 non-obvious innovations out of necessity, creating a powerful, invisible moat that Amazon couldn't replicate.
Needing to connect hardware to the iPhone without Apple's restrictive permission for its dock connector, Square built a reader that translated magnetic stripe data into an audio signal sent through the universal headphone jack, circumventing a massive potential roadblock.
When Adobe Acrobat made his document software obsolete, Jim McKelvey pivoted. He started charging his competitors to include their marketing materials on a trade show CD-ROM, turning a failing software company into a profitable publishing service.
After his mother's death, Jim McKelvey was haunted by his inaction. This profound regret transformed into a core operating principle: when something needs to be done, he must be the one to do it, rather than assuming someone else will solve the problem.
McKelvey's first entrepreneurial success, a popular computer science textbook, was motivated by indignation over his professor's expensive, low-quality book. This shows how negative emotions like spite can be channeled into productive, creative energy.
Jim McKelvey tested two prototypes: a small, square reader that sometimes failed but wowed users, and a longer one that worked perfectly but lacked magic. The small one's "magic trick" effect created such a powerful reaction that they chose its flawed but delightful experience over boring reliability.
During their seed round pitch, Square's team led with a slide detailing 140 potential failure points. This radical candor disarmed VCs, shifting the conversation from a defensive pitch to a collaborative brainstorming session on how to overcome those obstacles, resulting in dozens of term sheets.
To get rule changes from giants like Visa and MasterCard, Square didn't fight them. Instead, they showed how their technology would bring millions of new, smaller merchants onto the credit card network—a market the incumbents' existing system was too expensive and complex to reach.
Jim McKelvey realized in college that his strength wasn't being the best engineer, but his ability to join a group of superior talents and make the entire team more productive. This skill of facilitation and amplification proved more valuable than being the top individual contributor.