Talking Square on CNBC

I had a fun conversation yesterday with Carl Quintanilla, Kayla Tausche and John Fortt on CNBC’s Squawk Alley regarding Square.  (See below for video interview) In particular, they were interested in whether Jack Dorsey can run two companies effectively. Below are a few key points I’d like to highlight regarding the conversation:

  • Post IPO Information Scarcity. Public company-specific information is most scarce in the initial quarter post IPO.  Other than on the roadshow and in the S-1, investors haven’t yet had the chance to hear from management, so they don’t know what metrics will be highlighted, whether guidance will be provided and what to expect in terms of the level of disclosure. Additionally, management won’t yet have earned a reputation for being reliable (or not) – this can actually take several quarters to sort out. In the absence of company-specific information, investors lack conviction. As a result, in the 1-2 quarters post IPO, stock prices are generally even more dependent on macro factors and can vacillate wildly. Square has definitely gotten caught in this type of scenario. Ultimately, Square’s stock price will depend much more on results and outlook than anything else, but in the short run a seat belt is required!
  • The Role of a CEO. As companies scale, the role of a CEO, particularly a founder/CEO, changes. Although a founder/CEO still usually has moral authority over product direction and culture, management of the day to day in these areas is delegated to others in well run companies. CEOs need to focus more and more on selling – selling customers, candidates and existing employees, partners, the financial markets and the press. Although I’m sure certain things might get done more quickly if Jack was 100% focused on Square, his lieutenants are quite strong in all the key functional areas. He’s very persuasive as well – having done a strong job raising money, recruiting his team and attracting partners (every time I’m in their office I seem to see a financial company executive!). As such, I think half of Jack is better than 100% of anyone else on the planet to run Square.
  • Product Cycles. Chamath Palihapitiya from Social Capital recently posted to Quora that Jack running Square and Twitter in not analogous to Steve Jobs running Apple and Pixar because product cycles are much more rapid for internet businesses. As you can see in the video, I was asked about this argument. I think Chamath’s point might be relevant for Twitter (which was his focus in the post), but I don’t think its on point for Square. I think one can convincingly argue that Square’s product innovation and release schedule is faster today than its ever been, and that’s largely because Jack has recruited in a team to deliver high quality and well designed products rapidly.

Here’s the video clip:

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Glenn Solomon