Block, Inc. ($XYZ)

All right. Thanks, everybody, for joining. My name is Tien-Tsin. I'm the payments analyst at JPMorgan. It's always a highlight for me to get to interview this guy and to get an update on Block. So before I do the formal intro, let me just read the safe harbor statement. So during this conversation, Jack may make forward-looking statements, including about Block's preliminary expectations for its financial performance in the second quarter that are subject to certain risks and uncertainties, including changes in macroeconomic conditions. They may also speak as to certain non-GAAP metrics. Please take a look at Block's most recent filings with the SEC for a discussion of the company's risk factors and for reconciliations of non-GAAP metrics to their most directly comparable GAAP financial measure. Further, any discussion of Block's lending and banking products refer to products that are offered through Square Financial Services or its bank partners. I read that without my glasses.

Congrats.

That's the biggest feat of the day. Jack Dorsey, Block, Head, Chairman, Co-Founder, thanks for being here with us, Jack.

Thank you.

Always look forward to the conversation. It means a lot to me. So I was thinking about how to drive this conversation, Jack. There's a lot of ways to go with it. I was thinking because you're always talking about empathy and putting yourself in the shoes of the user, the customer, the SMB, you pick it. I thought we'd start that way, if that's okay. But you talk about being an intelligence company. What does that mean? Can you talk to it in the way that you would tell a restaurant or a retailer? What is being an intelligent company mean? I'll start with that.

Yes. I think in the old world, we would deliver products. And those products would be very top-down driven and opinionated. And we'd have to bet that we're making the right choices for these products, and that's inclusive of the features we offer and the navigation and how to find them. And I think in the future, it feels more like streaming intelligence and streaming interface. And I want to figure out how to -- like our biggest -- any company's biggest limiting factor is the road map. So if we're entering into a world where our sellers and our customers directly can build what they want, and we can make it easy to do it through our interfaces. Even if we don't have a feature, they can build a customization, they can build a feature, they can potentially even build a product right through our interface. And if we don't offer the capability to do so, that becomes our ultimate road map. So what I would say to them is like if we have anything that's limiting you, you can just state, I want this, and it will be built for you in real time and delivered to you in real time. And it's not that far off. I think it's a this year thing, at least within our own ecosystem rather than like very, very far out, like we can do this today internally. It's just making sure that we can deliver that to our customers directly like in the interface that they know.

So the idea would be if I'm a salon and I take appointments and I've heard this before, they complain that they can't penalize customers for not coming in. So they could build a tool or a way to feed that person or to bring them in or to reschedule it. That would be the idea as simple as that, they could do it themselves.

Yes, absolutely. They can build the features they want. They can build the customizations. And this can scale from the very small like sole proprietors all the way up to the very largest customers that we have.

How about on the Cash App side? What would that look like on the Cash App side? So my kids use Cash App. It's going to become an intelligent company. What does that mean? Is it as simple as they can help manage their budgets. They can figure out what they can afford or not afford. What would that look like?

For them, I think it means like you have this protector that's constantly watching your inputs and your outflows and like everything that's going on in your life. And we can build a very rich world model around our customers, and we have that today because we had to build it for lending and for risk for Cash App. And we can be a lot more predictive about what people might do next and also what they might need next. So we can meet them where they are immediately. And instead of us relying upon them finding a product or a feature through our navigation, we can just deliver in the conversation. So I'm a big believer that voice is the definitive interface of the future. But right now, it's very turn driven, and it's not as interactive as it should be. And I believe we need to figure that out. And like being able to talk with your money, allows you to maximize your money a lot more and even build like features or views or things that you want to see within the consumer side. But if we have a lot of customers asking about insurance, for instance, and we don't offer it as a capability, like that becomes our road map. We can have a debate within the company, like should we offer insurance, should we offer XYZ because all of our customers are asking about this thing. And we have such higher fidelity information about what our customers actually want. Whereas in the past, we had to like test things and do A/B tests and like have a strong opinion on this particular direction. It just up-levels a bunch with like real concrete data that we can then act upon much faster.

So in terms of discovery and seeing engagement with the users, how soon could we see this, Jack? Is it months, weeks, quarters?

It's this year, like it's this year, like we're working really hard on it. Like we need to convert our company and transition into a pure like intelligence streaming company. And I don't think it's that far off. And like we don't -- the amazing thing to me is we don't have to be dependent upon the frontier labs to do this. We can use open source models, which we are like Moneybot and Managerbot are based entirely on open source models. We've optimized for speed because we think that's a differentiator because it gives time back. We have this rich understanding of our customers, which we can be proactive around. But like our world models ultimately will be focused on not something that's LLM driven, but actually action driven. And like that's what our company needs to work through the next few phases, but also what we need to deliver to our customers. Like you just can't do this with LLMs. And the most interesting thing about this is like the resource cost for a world model is far less, like order of magnitude less than you would need for an LLM, which is all trained on the past. Like it's all like everything in an LLM right now is just like things that happened in the past. But what we need is something that's more present-based, more real-time based and more future looking, and that's what we intend to build. And we've already built it because of, again, the risk and lending engines that we need.

Good. I know you're doing a lot of building and testing and work internally. I've been talking to your team and folks at Block. I mean, the usage of the tools are -- it's just incredible. Everybody is buzzing about it. So from an investor standpoint, Jack, I get this question a lot, right? We've all had mixed success in using some of these tools. You're placing a lot of emphasis on AI and Builderbot internally. So what can you tell investors around the guardrails that you have in place that the service and the quality, all of that good stuff is actually where you want it to be that you can roll it out as fast as you have been doing?

I think it's a framing thing more than anything else. Like if you're building assistance or advisers like you're not inherently building a a world view that protects the code base and protects the cohesion of the system and protects like our design elements and like our brand value. But if you have that sense going in of like these are -- what we need to build are protectors that are looking at everything that we're doing 24/7 and keeping us from making bad decisions or at least alerting to us where we have variation or any sorts of standard deviations from the norm. And we get to choose like where we actually go far off and where we stay on track. I think that's the most important thing. But like it's it's a decision you make. And like we've decided that like Goose and Builderbot are going to be more of a protector role than anything else, more than an adviser and assistant, which are more throw away. If you have a protector, it's just constantly looking and ideally like meeting you where you are, helping you think about the next steps -- and it's trained exactly to do that. And that's not easy to do if you don't have a lot of real-time data, and you don't have like super legible company. We have a benefit in that we are a remote-first company. So everything that we do, all of our meetings are recorded. We have all the transcripts for every meeting. Everyone's writing in Slack, everyone like is using Jira and GitHub and Linear and Airtable and all these things, literally, almost everything in the company is eligible and something that's readable and adjustable by intelligence that we can then use to build a predictive model around and help us think through some of the issues. And like nearly everyone in the company is now thinking along this path. And we have 100% usage of the tools. like 100% of our population is using the tool in some way in their day-to-day. And we just like we're early with Goose and it's become a portal into our company. And this is a full agentic coding system, but it also allows you to query, have a conversation with any part of the company, any one of our systems. Everything is logged in, everything is a, like it just like works. And that is probably the best way to like change the culture towards like our job now is to align this thing. Our job is around judgment. Our job is around taste. Our job is around opinionation and like what we want to see in the world and what we want to build in the world and how it's differentiated from what others are doing.

Yes. So what this think about segueing this into -- you've been pretty visible talking about the future of work. You've spoken at a lot of different events. I know you did that podcast with [ Rollo ], and that was great. Maybe it's a good chance for you to maybe elaborate on that, if you don't mind, Jack. I thought it was really insightful. And some of the statements that you've made around the reorganization, we've heard repeated by some of the companies that even I cover, let alone broader tech. So it was quite prescient. But can you just elaborate, again, what does this mean for the future of work? And you just talked about it, right? You were on the stage with me before talking about distributed workforce, work from home, and you mentioned how everything is archived and transcribed and you have reference points to all of this. So I didn't know if that's by accident or if this all is getting to the place that you're ultimately landing, which is the future of work. How do you see it, Jack?

I think the word and the concept that matters most to us, and I think to every company before they realize it is legibility. Like how eligible is your company and the operations of your company. I think every organization is, by definition, in distributed intelligence, but all the intelligence is trapped in people's heads. And if it -- like the probability of it reaching to you through the management chain is very, very low and very lossy. So if you just look at the history of the management chain and like the hierarchy, it's there for a reason. It's there to like route information towards like huge numbers of people. But now we have much better systems that can coordinate people and that can orchestrate people and put people at the same level of the information as anyone else. And I'm a big believer that an idea that can change our company can come from anywhere in the company. But that's a function of like how much information, how much context any one individual has. And if they're right there with the data and right there with the decision, then it allows a lot more speed and allows us to feel the product of the future much faster and allows us to make a decision much faster. So like right now, I think we're about -- for me, we're about 5 layers deep. I would love to get that down to 2 to 3 by the end of the year. And the ultimate path in my view, is that we move from a structure of like reporting to one of assignment. So instead of like managers having a team that they tell what to do, you're assigned to a group of potentially hundreds of individuals that you're focused on helping get to mastery of their discipline and helping them think through their career and like how to think about problems and see around corners and being strategic and just mentoring them, but you don't have to like tell them what to do. You can show them how to do it. And in engineering last year, we moved from a world of having pure managers to the requirement that every manager must be technical and they must contribute code. And that was just one step, and we need to do that throughout the organization for all of our other disciplines as well. And we're already seeing that. I think Owen right here is probably one of our most voracious builders at the moment, and he's never engineered before this, and he's creating entirely complex systems that benefit him, that benefit his team that are thinking about like what it means like to have this hierarchy and what it means to diminish it and how to continue to scale this with these tools. And if we have everyone in the company thinking that way and anyone can have an intent or an idea that can change the course of the company, then our probability of success is much higher because we just have more people thinking about these like creative outcomes, and we have all this customer input coming to us. So like the probability like feel that it creates is just unlike anything I've ever seen in building systems and building companies. It's just like it's such a -- I'm so grateful for this time because it's just like something I've always wanted to do. And I've just always felt like -- and I experienced it every day that the reporting structure gets in the way of creativity. And it slows everything down, especially as you get bigger and bigger and deeper and deeper. And the sooner we all realize this as companies, the faster we can move and deliver like significant innovations to our customers.

Right. So the output, we should just think of as more product velocity, Jack? I know gross profit.

Higher quality as well. Like it's just more creativity. Like we've always been good at interface, and we've been good at like pairing capability with interface. And we've been very inventive -- like the Square reader was a new interface. The Cash Card with the customization was a new interface. Peer-to-peer with a payment pad was an interface. And it was stark and it was opinionated and it was unlike anything anyone has seen. And now it's taken for granted. But there's new form factors, there's new mediums, there's new interfaces that today are quite -- like the chat one for me right now, how turn-based it is, is just like so crappy and such like there's so much opportunity to like reinvent that thing and make it feel a lot more human. I mean you like -- when I'm talking, you're like interrupting and like all these things, and that's natural, but like the chat interfaces and every voice interface that you experience today cannot do that because it has to translate everything back into text and then go back into a turn and wait and just like if you're interrupting it, it stops the whole chain of thinking and like goes back to a different turn. So there's just a whole different experience that we can create and for you and your money and you and your business, I think that's the right thing because we want these intelligence to feel like you hired one of the best business managers you could for your company, your small business or your large business. and the best financial adviser and kind of friends for your -- to maximize your money and get you on track or to like hit your goals or give you new opportunities. If it's anything but that it's going to feel just mechanical. And like there's just so much exciting stuff there that like we're building right now that I'm excited to push out to the world.

So I'm simple-minded. So if I'm thinking about quality, does that mean customization, are things going to be more customized or more tailor suited to the individual? Is that one way to think about quality?

Yes. I think this concept of product or app like just blurs out into nothing because it just becomes a stream. It just becomes a stream of like what I need in this moment to do this thing that I need to take care of, and then it dissipates into nothing again. And that's what it should be, but we just haven't had the technology to make that scale, but now we do. And we can bring it to a very broad base of customers.

Okay. Good. No, that's helpful. Always learning, Jack, that's why I love talking to you. So thinking about the two ecosystems, if you don't mind. Let's get into that. So Cash App, and I've told you this before, I feel like with Cash App, right, having empathy about your customer, I think that's one of your superpowers. And I think it's really hard, right, to gain this kind of empathy. Do you feel like there's a real point to get to where you can really differentiate from the traditional banking system. We're so accustomed to thinking about banking in a certain finite way. Has your thinking around what Cash App looks like changed here given everything we just talked about?

I think -- like I think that framing of a protector, like I'm going to work nonstop to protect your money and give you optionality to grow it and to maximize it. I think that's extremely valuable. I think it's very out of reach for most people. I think we can scale it into something real and feels amazing. But the traditional banking relationship is one of taxation more than anything else and fees and obscurity of information to encourage bad behavior which creeps more fees. That's what our experience was when we first started Square is like the merchant was encouraged through obscurity of information to overdraft. I mean, like it was ridiculous. And just by like doing a simple thing of like your rate is 2.75% for every card changed the game for most of our sellers because they could predict what they could do with their business and what they need to do with their business. Square loans, they would go to a bank, ask for a loan. The smallest amount a bank would give them is $25,000 at that time. They would take the $25,000 and they would spend it all, and then they're in this like doom loop of like how do I pay this back when all they needed was $1,000 to buy a new salon to double -- potentially double their business and paying back by just swiping their customers' cards and the sale felt like it wasn't alone. It was more like a stream within their business that they can just like they don't have to think about, like I just need to now sell and focus on my customers. So anywhere where this is alignment with this concept of like if we help our customers grow, we grow. And if we grow, we can serve more customers. It's just this amazing virtuous loop that I'm so proud of and happy to be in this space because we found it because there's a lot of other business models that are tax-based.

Yes. Because when I think -- I'm glad you said some of that because when I think back to Square in the beginning, and you broke the status quo of onboarding merchants, right, with instant underwriting, and that was unheard of at the time, and that's what broke that opportunity open for you on the Square side. So thinking back to Cash App and lending because, Jack, we get questions all the time from investors, right? Why is Square going to win in lending? How can they lend better than the bank with years of all this data. But do you think of that as the same opportunity, okay, I'm going to instant underwrite a merchant with Square onboarding similar to Square Borrow or Cash App borrow or any lending product that you can break that status quo of traditional underwriting and do it your own way? ?

Yes. We just have a better model. Like we've been doing machine learning and deep learning for 16 years. And like if you really understand what a world model is, this is -- it's a customer-focused reality of like what's happening and it understands the consequence of giving like a loan or like allowing this transaction to pass or not and just constantly updating its understanding of like what these risks are and what the opportunity cost is and like what the consequence is. So not only do I believe that we can continue to grow that and do it better than anyone else. But I believe that we can now translate these systems to all customer actions across Cash App, across Square and even across our company, where we can be a lot more predictive around what the company should be doing more of or should be doing less of and like how we think about like building our company in total.

Yes. Because even like -- you have a credit score product now, right, Jack. And investors are always saying, "Hey, let's see what happens in the down cycle on credit. Will it perform well?" Your response is you have the data. You're confident in the data, and it will live up to that. Is that the simple response?

Yes.

We'll have to go through a cycle then. we'll ask you about it. But no, the team -- the credit team that we've met have all spoken again with a lot of analytical rigor to talk about why it's going to work. Just one more on the credit side, if you don't mind. What's your vision on the Cash App credit score? I mean, thinking about traditional credit scores and people are always trying to outrun that or think about it differently. This does seem like it's a brand-new way of looking at your credit score. What's the vision behind it?

Well, the vision is like, again, it's a real-time picture. Like money is the most honest signal one can have because you can't lie about it. We see every transaction going in and out for an individual, but also a much larger base. And we see it from a seller side and we see it from a consumer side. And we can bring that to bear in terms of what that actually means and like what it means from a trustworthiness and like how you can increase those scores. And so we think there's opportunity to like distribute that through other parties or just like completely own it ourselves or like a partner. There's a bunch of paths we can take. We're just trying to figure out like what that means. But right now, like it's a very credible system. It's very predictive, and it's based on like 16 years of understanding and operations.

Yes. I'm excited about it. So I think one more, if you don't mind, just last year on stage, we talked about the shift towards user density and the importance of density. Sort of 1 year later as you're thought changed on where you're going to grab that next user from? How are you going to get that next user? What's the latest?

I think what will always attract new people is like as we consider new interface mediums and new packaging for like card formats and new interactions. We'll add all the tactical things that we need to, like, serve customer gaps, but like I think where we've been great is just truly inventing on the interface and rethinking it from the ground up. And that's what the company now has the freedom to do because a lot of the mechanical stuff is now handled by a bunch of our systems that we built to program and to build and to really shift like our outcomes. So I feel like there's a lot more creativity in the company, again, like harkening back to our early days of when we're just like thinking like why does this need to be a rectangular like piece of plastic or metal, why can't it be something completely different? And like why can't we why can't we focus entirely on voice? And why can't we generate UI in real time? And just questioning all the fundamentals to make sure that like we're 10 steps ahead of the expectations that people will have, including ourselves. And like this change we made in February, I think, has unlocked a bunch of that because it just kind of shook the snow globe a bit. And so like we need to get creative again. We need to wake up. We need to like apply the technology in creative ways in the way that we did in the past of like looking at the phone, this thing that just came out and looking at its capabilities, has a headphone jack at the back of a credit card is a magnetic strip. It's a cassette tape. It's audio. We can get the number. We can send it up to Visa Mastercard. Like there's dimensions of that, that are still yet to be manifested within our two core capability categories of finance and operations that we're really excited to like bring to life. And it's just starting, but I think we'll see a lot -- you'll be able to experience a lot like this year, which I'm very excited about.

Now creativity, I don't know Jack sitting here talking to you. I mean, creativity is -- seems like a theme you're excited about. I feel like we haven't talked about that in 15, 16 years. It does feel like that's the big unlock here that I didn't appreciate until we got up on stage. Is that fair?

Oh yes. I mean I think the durable skill for humans going forward is judgment, it's creativity, it's taste. I mean it's like putting the things together, like the -- with a lot of these models right now, if you like prompt them and then you get output and then you just treat that output as output, I think you lose a lot of the potential. If you treat the output as input for your own creative process, like you get to see a much broader range of possibility. And it really -- like you get serendipity and you get all these like sparks that you probably would not have otherwise. That's how I use it. I just want to increase the breadth of everything that is possible, and then I can pull the thread of what I think is interesting and then keep pulling it and like keep pushing it. And I think that's where the design discipline is going. That's definitely where engineering is going. That's where all of our disciplines that we see are going because now everyone in the organization is -- has a potential to be a builder and to leave a mark in a way that they couldn't in the past. They're not just a user. They're not a consumer anymore. They can actually put something out, produce something that they can use or someone else on the team could use. And the confidence that, that builds and the randomness that it gives the company such that like we can see new things, all that fuels creativity in my view.

Yes. No. So the output should be they're fun to watch. So we are going to take questions from the audience, by the way. I should have said that upfront. So let me just ask one more, if you don't mind, on the Square side, which is I think last year, you showed off a new terminal. You and Owen showed off a new terminal. I think we just saw the drive-through in Chicago at the Restaurant Association event. And there's so much talk about AI and software development and how that's going to change. But you've always been very focused on hardware, Jack. And I know there's questions around memory and supply and everything else. But why is hardware so important to you?

Hardware is a superpower. It changes your mindset about how you build things because the lead times are so great, and it's so complicated to get things right and to be vertically integrated in the way that we are with deep relationships with our vendors that have decades because we have a lot of people from Apple had those relationships as well, allows us to do things that others can't, like they have to contract third parties and they have third-party designers and like it doesn't really fit the software in the way that it was meant to. And like we can just be we can be laser-focused on like exactly the experience we want to have, and we can be very opinionated without compromise because we control the whole stack. I'm really excited this year, like there will be one thing on Cash App. That's hardware related that you always see. And there'll be one thing on Square that's hardware related, which I think, completely changes the game in terms of interface and how seller thinks about operating their business and interfacing with their customers. So both are only possible because we are a hardware company, first and foremost. And everything else follows that. It's also -- it's the impression, like it's a tangible thing that feels real, I think inspires trust and allows people to like just have a different experience than they would with just pure software, which is becoming more and more throw away.

Good teaser. And I know you always value the elegance of the hardware. So thanks for answering it that way. Questions from the audience, happy to take them. We have 5 minutes left. I promise we leave time. upfront over, sorry. It's hard to see we'll try and repeat it.

I was very interested in a quick uptake on a general basis for products. And I think particularly those under 30 that opportunity in many ways other credit card I want to do some longer-term thinking about when you look at the next 5 years, about how that business develops since you're really one of the leaders there. And I'm interested to see the potential.

think the -- what we want to look at is like what is the use case? And like what are the pain points and how is the customer suffering with today's products and today's formats versus like what we could do in the future. And the idea that like we're thinking a lot about is most work today is postpaid. It's a 2-week postpayment. And how do we bridge that gap such that it feels like you're being paid in real time. Like that's a format shift that I think is super compelling, especially to a much younger generation where everything is kind of streamed to them. And if you can imagine money being streamed in a similar sense, there's a packaging there that I think is extremely innovative, presents an entirely new interface and solves a real need that is independent of like these categories that we put them in, but more of like how do we like just like what is the customer suffering problem and like how do we address something with -- how do we address that with something like super creative -- this is exactly what we did with Square Loans all the way back in the day. But like we just looked at like what does the seller actually need and how should they pay it back? They should not pay it back in just like one lump sum. They should pay it back in every transaction they do because it feels like a part of their business. So we're looking at the same on the consumer side. And we think there's a 10x jump from the current formats into this newer format. So we'll be exploring -- hopefully, you'll see some of that this year, but it's the one I'm most excited about. It's just like questioning the format altogether.

Jack, this is [ Brendan ] from [ Ten-Tsinsein ]. Thanks so much for doing this. You spoke about creativity as well as focus, which I feel are sort of doing strengths of your organization. So I wonder if you could share with us to what extent our creativity and focus strengths that sort of pull against or in concert with one another and how you manage and prioritize between creativity and focus on the vision?

Yes, I think it's attention, and I think it's a tension we want to build. We want a lot of people experimenting and like ideating and like just testing things. And then it's a function of like how good our judgment is and how good our taste is and how good are sense of like cohesion is. And I think we've been very excellent on all those in the past. There's been some like mishaps, of course, but like you expect it. But we come from a very design-driven background and a lot of that is due to hardware because you can't make mistakes and it just has to feel like really, really good. And it has to feel cohesive, it has to feel tangible, it has to feel way, has to feel real and authentic. And I think that like it's just part of our culture and people are just constantly making sure that like I'm walking through this experience and this feels super odd. And why does it feel odd and like how do we address that? And it's that healthy tension that like if we do too much of that, we're too comfortable like we're not taking enough risk. And if we're doing if we're being too risky and like we're not being cohesive, then it's going to feel terrible to people. So there's a happy medium, but I'd rather us go to the extremes to find the balance than just like stay in the middle. And I would say like the past 3 years, we are more in the middle than we should be and not enough on the edge. But now especially this year, I feel like we're all edge and like we're finding that balance again. And that's super exciting to me. And it's from a technology and design place as well.

Excellent. I think we're out of time. Let's have a quick closing comment here, Jack. I appreciate the conversation. I always enjoy it. Any final remarks?

I think -- I don't know how many of you have actually used these tools to build anything just by a show of hands. it's like the one thing I would encourage you to do is just like go home and fire up Codec or Cloud Code or Goose and just try to get it to do something you didn't think it was capable of doing. It can be anything. It can be taking a picture of you from your laptop. It can be like you can ask it like find all the devices I can control on my home WiFi and build me a dashboard. But just something because you're not really going to understand the shift we're going through until you feel it and you feel what these capabilities are upon us. And I don't think you'll be able to really judge the companies before you and the opportunities until you understand that and the shifts that these companies have to make fundamentally as they think about themselves as companies.

Perfect.

Awesome. Thank you all.

Thanks for the time, Jack.