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In the end, all companies can only rely on increasing the value capture rate rather than relying on value creation to maintain growth.

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Editor’s note: Investors in Stripe’s latest round of financing of $600 million gave this payment startup a valuation of $95 billion, making it the most highly valued super unicorn in Silicon Valley. . What kind of story is this company telling? What are its advantages? What is its culture like? For these issues, Byrne Hobart used a long article to analyze Stripe. The original text was published on his personal blog with the title: Stripe and Solid-State Economics. For the length of the publication, we will publish it in three parts, this is the second part.

Stripe and solid state economy (1)

Key points:

As a platform, the value created for users must exceed the value of the enterprise

The history of payment has always been a trade-off between three trends

In the end, all companies can only rely on increasing the value capture rate rather than relying on value creation to maintain growth

The life of an enterprise is also a process of resisting the increase of enterprise entropy

For whom?

Bill Gates has a famous definition of a platform: “When the economic value of everyone who uses it exceeds the value of the company that created it, the platform appears.” Last week When I write an article about AWS, I think the value of AWS comes from the people who grew up with it. This is the second derivative defined by Gates: If as users develop, their share of platform value creation will also increase, a company or product will become more platform-based. Stripe belongs to this type of second derivative, which tends to create more and more value for its users. Although incremental costs are fairly fixed (except for corporate transactions, because the economics of such transactions are often not disclosed), most companies that use Stripe involve a certain form of fixed cost, so when they sell moreAt that time, the gross profit margin will be greater.

Stripe’s mission is to develop the GDP of the Internet. The method is to provide better payment and payment-related services, such as fraud detection, smart card upgrade, dispute update, adaptive acceptance (using machine learning to find the best payment solution for repeated payments), liquidity loans, and transactions Platform payment and so on.

But it’s not that there is no need to weigh trade-offs. Certain functions are undoubtedly win-win for all parties involved, such as any measure that makes conscious payments more likely to pass. Some can transfer value from one side to the other. Stripe’s customers are the merchants who use it, not the customers who buy things from these merchants, although Stripe’s function is to act as an intermediary between the two. Other payment platforms have been trying to balance the conflicts of interest between all parties. For example, credit card companies must deal with merchants, cardholders, merchant acquirers, card issuers, and reward partners. Sometimes, the weaker party has to sacrifice part of the economic value.

The history of payment is full of trade-offs between the following three trends:

• It is generally accepted by merchants, customers and financial intermediaries.

• Short the delay between when someone starts a transaction and when they can stop thinking about it.

• The theory of “smooth consumption” (referring to maintaining a stable consumption level amidst economic cyclical changes and income fluctuations, economic agents use savings and borrowing to maintain a steady pace of expenditure without being restricted by cash on hand) Realization in the real world.

These will always face trade-offs, and new technologies will often push trends forward. The early history of the credit card industry can serve as a complete case study in this regard. For example: before the credit card authorization is automated, it may take a few minutes to confirm the transaction, so many merchants don’t have to bother to verify whether the card is below a certain transaction threshold. After the automation shortened the approval time to less than one minute, these thresholds were lowered-the reduction of time delay indirectly led to the reduction of fraud. The reduced risk of fraud means that more banks are willing to sign with cardholders, which makes the credit card Use becomes more common.

Stripe actually has a way to avoid maturity that requires a high degree of trade-offs, or at least delay it for a long period of time. Patrick Collison quoted Peter Kauffman as saying that the best investment should have a good return, low risk, and a long duration. You can think of redistribution decisions as trading less duration in exchange for a little more reward. If one party gets the worst sex they can endureAn interview with a character in Forbes in 2016:

They spent a few months tossing the top ten recruitments because they knew they would in turn attract the next wave of employees. They reserved 10% of Stripe’s shares for the first group of backbones. This is an unusually large number. Many of the people in that group of people are nodded and approved after working together for a week or more.

In a recent interview, Patrick Collison said:

When we recruited the COO (she had previously served as a senior director of Google’s sales organization), everyone was worried that she would change the culture here. We must make this matter clear, and that is what she will. That is her job. And I think the changes she brought are very healthy and beneficial to the company.

Recruitment is not only a way to maintain the culture, but also a means to help the company move in the right direction. There are other methods here:

1. Stripe Press (more on that below) has produced a lot of important books. It’s difficult to get rich returns in making the edition, but it is possible to establish a positive positive relationship-if the most important book you read this year and the best-looking book on the shelf are all from the same one If organized, you will remember it. Stripe Press’s re-released “The Dream Machine” tells the story before the birth of the Internet and illustrates how important it is to have the right people work on the right projects at the right time. (This book Stripe once distributed a copy to every new employee; now, they can choose the book, but Stripe still retains a large number of copies of “Dreams Come True” in the company.)

2, Good design can also be used as a recruitment and motivation tool. It’s a recruitment tool because working in a company that values ​​simple design means that everyone will have a good impression of your work, and since most people’s perceptions will not surpass the first impression, this The company’s external social status has had a huge impact. Outside the technology circle and the recent investment circle, it’s easy to forget that Stripe is actually a rather unknown company, partly because Stripe is working behind the scenes. The trade-off is that requiring good design everywhere means embracing perfectionism. If the quality standard is high, it will take longer to achieve the goal and the process becomes more uncertain. The first draft only requires one attempt, but you never know how many attempts will be required to get a good final copy.

Previous payment companyCompanies also face complex restrictions, some of which are abstract types that may have been mentioned in the MBA program, while others are closer to reality. Take a look at the counter. In the early days, the counter area was one of the main limitations encountered by the credit card system. Bulky outdated point-of-sale systems, or clumsy products used to generate machine-readable receipts, take up too much space, perhaps more than the psychological expectations of the merchants are willing to sacrifice. The modern equivalent of this is the pixel space of the checkout page. Once the customer decides to buy, intends to enter their payment details and complete the transaction, this will become a high-risk interaction: any improvement in the conversion rate of this page will directly affect the revenue and profit, which means that the existence of every pixel There needs to be a valid reason.

If displaying a “Paypal” logo can increase transaction volume, then keep it; not having a logo needs to be an option. If the options make sense, adding options can increase the conversion rate (so, a one-time prepayment or gradual payment through Affirm is an option to increase the conversion rate), but adding a large number of meaningless options will reduce the conversion rate. Stripe uses several methods to save this pixel counter area-by doing some simple things, such as automatically detecting the type of credit card (when the card number contains the card issuer information, why put a drop-down menu for users to choose ” “Visa” or “Mastercard”?!), the information collected to verify the identity of the cardholder is minimized (when the number of the postal code indicates the state, why use the drop-down menu to select the state!?) < /p>

3. The company also recommends as its main recruitment tool, although not the only tool. (If you push completely inward, it means you will be trapped in a bubble that you started to enter, and since it was a bubble, you won’t notice.) For those who dropped out of Harvard or MIT and went to Y Combinator. Of companies, recruiting through referrals is feasible. If you want to speed up the growth of your network, that is what you have to do. However, it turns out that this is scalable: new employees will also know people who might also be good new employees. Recommendations are especially effective for those who feel bad about their resumes or interviews. Why is recruitment difficult? Because it is difficult to understand a person in a few hours of interviews, only years of working together can you understand clearly, and recommendations can make use of this knowledge.

4. Compared with other companies, Stripe’s culture seems to be more inclined to writing and reading. Stripe Press hinted at this. It’s hard to imagine that the American Express Press’s new book is over-excited. The emphasis on reading and writing complements the relatively low emphasis on interview skills. Compared to playing on the spot in a conference room or in a Zoom video call, some people are better at using edited videos.Text to express your thoughts. In terms of hiring, this is more like a trade-off: making a company more attractive to some people, while making it less suitable for those who prefer to speak out their ideas out loud.

Translator: boxi