Fair and SQUARE Analysis

Question everything, question everyone, especially yourself.
– My college Professor of Philosophy, an ex-Jesuit priest.

In a recent, persuasive post, A Tale of Two Story Tellers Square CEO, Jack Dorsey, is dismissed with a few sentences as diworsified and unfocused while the bulk of the post is dedicated to singing the praises of TTD’s CEO, “likable” Jeff Green, who has the “ability to charm people,” make friends and has apparently mastered the “fascinating art of storytelling” which seems to be equated with great management abilities. Even the booyah guy with his strained, high-pitched delivery and his hyperactive manner that makes one suspect he is off his meds, gets almost as much cyberspace as Jack Dorsey who is damned with faint praise, https://discussion.fool.com/ttd-sq-a-tale-of-two-storytelllers-3….

This is the latest of the anti-Dorsey posts and I feel compelled to post my take on Dorsey and Square. I too look at each company’s management but unlike the above author, a self-described Intuitive Investor who follows his gut, I distrust intuition, gut feelings, and CEOs who profusely praise the magnificence of their own product or the greatness of their own company. I also distrust a CEO’s “fascinating art of storytelling.” Let us not forget that all con men are charming and have the gift of gab; that’s what enables them to bamboozle their hapless victims. The Bernard L. Madoff’s of this world, the CEOs of Enron, WorldCom, both bankrupt, and Tyco all charmed their investors and we know how that ended. A lot of investors fell for the charming stories that turned out to be lies and went bankrupt themselves. If I want fascinating storytelling, I’ll go back to the exotic tales of One Thousand and One Nights I devoured as a child. Similarly, I generally don’t watch TV performer Cramer or other talking heads. If I want theater, I’ll go to a good play.

While I occasionally watch a CEO on national TV, I don’t expect any candid revelations about any difficulties the company may face. Instead, I’d rather use my time to get information from public records like the 10-Q or 10-K, including the footnotes and the list of “Risks Related to Our Business and Our Industry” that may indicate where I should look for potential future problems. Periodically I’ll go to the SEC website to see if there is any letter exchange with the company or if there is a new CT or Confidentially Treatment Order, https://www.investopedia.com/terms/c/confidential-treatment-…. I read the transcripts of the quarterly presentation but I will listen to the audio if any answers appear muddled or evasive. The SEC documents are quite dry and somewhat boring but they will tell me more than any CEO could tell me in a few sound bytes on public TV. I prefer to look at the numbers obtained from the company itself to see trends, as Saul and many other number wizards on this board teach us. Emotions and feelings cloud judgment–as some of my own poorer decisions when I did not focus on facts and the numbers, clearly prove. And “gut feelings” aren’t even close to accurate as plenty of research suggests. “Our ability to read people is a whole lot more related to whether we find them likeable, or more to the point, similar to us and our implicit ideals, than it is to being able to determine true talent,” according to experts.

On Jack Dorsey’s Habits

After reviewing my Square file, I have come to the conclusion that the lopsided tale of Mr. Dorsey’s presumed deficiencies, especially his lack of focus, could not be further from the truth. I am baffled by the often revealed antipathy to Mr. Dorsey, expressed at times as barely concealed horror (“he creeps me out,” he is “weird”) and his presumed “eccentricities” and shortcomings, https://discussion.fool.com/questioning-dorsey-34087537.aspx?sor…. Yes, some could call Dorsey a bit eccentric but he is one of the most disciplined and focused people–if you listen to those who have known him for more than a decade or have worked with him closely for many years instead of third hand gossip revealed in some of the posts.

Dorsey gets up at 05:00h in the morning, meditates, exercises and for the last couple of years walks 5 miles to work. His morning walk takes more than one hour, giving him time to think, focus on what needs to be accomplished that day or listen to music or podcasts. He calls that walk his best investment, and he is correct, not only medically speaking. Steve Jobs was another CEO who liked to take walks to clear his mind or discuss with a companion Apple’s possibilities or problems. Dorsey usually spends the morning at Twitter and the afternoon at Square, generally working up to 18 hours a day. The companies are two minutes walking distance apart, timed by Barron’s! Should his immediate physical presence be required, Dorsey could be available in a couple of minutes.

If you want to get a more balanced picture of Square’s CEO, here are two articles, better researched than most cited on this board: the most detailed appeared in the New Yorker in 2013. The author followed and interviewed Dorsey, his associates and friends for several months. This is not some third-hand gossip offered by some fired underling.(1) A briefer more recent assessment of him was published by Barron’s in August of 2018. The author interviewed many of Dorsey’s long-time friends and present and former long-time associates.(2)

In essence all people who know Dorsey, many for decades, and who were directly interviewed by the authors agree that Dorsey is a calm, thoughtful leader who is reserved and doesn’t talk much but is a good listener. His friend Robert Andersen, one of Square’s former creative directors stated: “If [Jack] says something at a meeting, you better listen—he would not have spoken if he didn’t have something important to say.” Evan Williams, well-known internet entrepreneur, who has known Dorsey since 2005 (and got him fired from Twitter in 2008) now regrets not having invested in Square. He said this of Jack: “What I have seen in the last few years as a Jack observer is his intense focus on his work and on himself to become better. It’s amazing.” To improve himself, Dorsey at one point hired a CEO coach during his first stint at Twitter. Long-time friend Christopher Isaac “Biz” Stone, who along with Jack Dorsey holds the patent for inventing Twitter, is impressed with Dorsey’s transition from programmer geek to global leader. He calls it Dorsey’s transition to “sort of embody his own persona in a graceful and leadership-y kind of way. It’s very rare for a programmer—I mean, a geeky programmer kid—to, in a relatively quick amount of time, become a global leader. . . . Larry Page is the C.E.O. of Google, but he doesn’t have anywhere the qualities that Jack has.”

On Running two Companies

Some posters on this board and many in the media have been severely critical of Mr. Dorsey for running two companies. Since 2015 he has been the CEO of Twitter and Square, both companies he co-founded. While I believe that running two companies at the same time is extremely demanding and leaves little time for private life, it is not an unusual arrangement and so far, Jack Dorsey has done well enough and has not had a public meltdown like the CEO of the company that cannot be mentioned on this board.

Somehow, none of the other multi-tasking CEOs running several companies have received the same castigation. They are: 1) Jeff Bezos (Amazon in Seattle, WA, Blue Origin rocket company in Kent, WA, and The Washington Post, in Washington, DC); 2) CEO, whose company in Fremont, CA, cannot be discussed on Saul’s board, see https://discussion.fool.com/monday-morning-rules-of-the-board-34…, is also CEO and CTO of Space X with its subsidiary, Boring Company, both in Hawthorne, CA, and Neuralink, San Francisco, CA; 3) Carlos Ghosn who ran three, at times four companies on two different continents (Renault in France and Nissan Motors and Mitsubishi Motors both in Japan, and AvtoVaz in Russia. In 2016 he gave up his obligations at AvtoVaz, and in 2017 he stepped down as Nissan’s CEO, but remained as chairman of its board); 4) Marcia Kilgore built four companies, including Bliss Spa, bought by LVMH and Soaper Duper, and ran three at the same time (London-based Soap & Glory, Beauty Pie, New York’s FitFlop, eventually selling two, keeping only Beauty Pie); 5) Roy Hessel (ran EyeBuyDirect in Shanghai, FramesDirect in Texas, Clearly based in Vancouver, Canada. He eventually sold all of Shanghai-based EyeBuyDirect to French Essilor International); 6) Steve Jobs (Apple and Pixar, the latter sold to Disney in 2006. Micro-managing Apple Jobs had a more hands-off relationship with Pixar, a company he would visit every Friday.)(3)

All CEOs running more than one company declined to discuss their job juggling with Barron’s. Only Carlos Ghosn voiced an opinion on multitasking: he stated that he lives like a monk. I am sure that juggling several companies, especially if on different continents, exacts a heavy personal price, judging from the high divorce rate of the above group.

Square under Jack Dorsey’s Leadership?

So far Dorsey has run Square with great efficiency and innovative imagination. He revived Square and Twitter when both slumped in 2017, a pretty incredible feat according to some management experts. First, let’s look at Square’s numbers, more important than gossipy tales.

Square’s financials:

For a complete discussion and all pertinent numbers, see our resident FinTech specialist, TMFCochrane’s last post on Square Q1 Earnings: https://discussion.fool.com/square-reports-2019-q1-earnings-3419…. I will limit myself to some important points.

• 2019 Q1 TTM Adj. Revenue growth was 62.7%, an increase over previous quarter Q4 of 61.3%. To understand why adjusted revenue is used, see https://discussion.fool.com/brittlerock-back-to-your-questions-y…

• Subscriptions too show a nice upward trend (my percentage deviates a bit from TMFCochrane’s):

Subscription & Services Revenue (millions)

            **Q1	   Q2      Q3      Q4     Total/Yr    % ?**                                                
2016			   35	   41		
2017	    49	   59	   65	   79	    252	
2018	    97	  134	  166	  194	    591	     134.5%
2019	   219					
2018 TTM - $300 M,  2019 TTM - $713 M, a 137.7% increase

• Gross Payment Volume (GPV) shows a steady increase of larger sellers

	**Gross Payment   GPV	  % Larger Sellers    % Sellers**
**Year	   Volume	  % YoY     >$125k/yr Q4'17     >$500k**
2016	    49.7	  39.6%	          43%	         16%
2017	    65.3	  31.4%	          48%	         20%
2018	    84.7	  29.7%	          52%	         24%

• In 2019 Q1, the company created the Square Online Store to make it easier for sellers to integrate their online and brick-and-mortar businesses. This new online system uses Weebly technology and automatically syncs orders, inventory, prices, and data for both online and in-store sales, especially useful to larger sellers.

• Primary growth drivers for Square were Instant Deposit and Cash App. The latter’s volume increased 250% YOY. It is listed as primary driver of growth for subscription and services-based revenue and its success is linked to Twitter. That would deserve a separate post.

These numbers and trends are all positive and that’s what we should focus on instead of Dorsey’s personal habits. Meditation, fasting, eating only one meal a day (requirement for any Buddhist monastic), and regular sauna visits have been used for thousands of years in many cultures with proven health benefits and a dip into ice cold water after 15 minutes in the sauna was de rigueur in any sauna I’ve ever visited. It’s supposed to toughen your immune system. However, medical experts do not recommend it as it can produce a sudden raise in blood pressure. Meditation is being taught successfully to kindergartners right here in the US as I recently saw on PBS. The sensationalistic, gossipy media reporting on Dorsey’s habits only attests to the basic ignorance of the authors.

  1. Dorsey’s Time Management

• The proximity of Square and Twitter makes running two companies a bit easier.

Dorsey manages his time assiduously according to Square and Twitter employees, through highly regimented meetings with specific agendas and goals. Each day is organized around a theme, such as product development. Says to Dorsey: “I like having a lot of repetition in my schedule because it allows us to see how we’re actually growing, rather than randomness, which hides that,” and, “We kick off the week every Monday with a leadership meeting to talk about what we’re committing to this week and what we learned last week. And we have check-ins on Wednesdays and Fridays for 30 minutes.”(2) I call that extremely focused and well organized.

• Square’s focus is on smaller merchants. In his youth, Dorsey worked in his mother’s coffee shop. He learned early the problems of payment processing: “muddled, unnecessarily expensive, and ugly, with hulking cash registers, mounds of paper receipts, hidden charges, and insulting credit checks for merchants.” Not something a small business or market stall could deal with. When his artisan friend Jim McKelvey complained he failed to sell a $2,000 piece of glasswork to an overseas buyer because he couldn’t accept her credit card, Dorsey and McKelvey set out to make a portable credit card reader that anyone could use. Dorsey focused on the software, McKelvey on the hardware. When in 2009 they realized they could attach the reader to an iPhone using the audio jack, Square was born.

• Dorsey had initial problems selling himself and Square to venture capitalists. To counter their resistance, Dorsey courageously made a presentation slide entitled “140 Reasons Square Will Fail.” The project attracted funding with the help of Williams who had instigated his ouster at Twitter. Over the years Jack, as he likes to be called, led the company from the maker of a simple dongle credit card reader for small businesses to a broader financial-services provider and for larger enterprises Square also offers payroll and lending features. As the above table shows, with increased offerings of cash and business management services, larger accounts have increased steadily, a nice development. Even Morningstar recently changed their rating to Square having a narrow moat and Argus who began covering the company on July 5, 2019, rated it a buy.

• As Chamonyx pointed out, Dorsey has surrounded himself with a great management team that can function without a micromanaging CEO. It also allows him much needed breaks from his responsibilities.

• He built the Square’s team from scratch, choosing mostly people without a background in the payment industry and avoiding some of the problems and infighting that had plagued Twitter, his other co-creation.

• Dorsey’s style is not to talk much but to listen. Like very few people, he tolerates long silences. The executive who listens well created a company that listens well to its sellers. Square will drop new features if the sellers are not happy with them and add features that the sellers want and suggest. It’s a company completely customer oriented. Look at their quarterly investor reports, each quarterly front page celebrates one of Square’s sellers. How customer friendly!

• He knows his own weakness as introvert who likes to keep to himself and who had a speech impediment when young. Unlike TTD’s CEO Jeff Green, he is definitely not eloquent and not good at telling stories. To this day, he is visibly uncomfortable during TV interviews and left those to the more outgoing, eloquent Sarah Friar. Dorsey said of himself: “I don’t like to talk, I like to do.” One should not confuse eloquence with competence.

• For the last few years Dorsey has taken to consort with many of the nation’s top business leaders, overcoming his natural reserve and tendency to keep to himself. Facebook founder Mark Zuckerberg with whom Dorsey met regularly for dinner for a time (Zuck did the cooking) also admires Dorsey’s company. Maybe that’s why Cramer thinks Facebook should buy Square. Zuckerberg said this of Dorsey: “The hardest thing as a founder is to keep your . . . vision as a company grows. Jack has been clear and disciplined.”

• Dorsey also gets kudos for leading his employees on Fridays to devote themselves to volunteer work and he is active in a group called Girls Who Code, a nonprofit organization founded by Reshma Saujani.

  1. Dorsey’s Choice of Leadership and Board

Square’s Executive Staff

• 40% of his executive staff at Square are women, a great percentage compared to available data for corporate America where women fall behind at every step of the corporate ladder, see McKinsey’s analysis.(4) Gender diversity and inclusion matters as McKinsey research between 2015 and 2018 documents: “Companies in the top-quartile for gender diversity on executive teams were 21% more likely to outperform on profitability and 27% more likely to have superior value creation.”

• 20% are Square’s executive staff are of different ethnic background as far as I can tell. Ethnic-cultural inclusion on the executive team gives an even stronger advantage: “Companies in the top-quartile for ethnic/cultural diversity on executive teams were 33% more likely to have industry-leading profitability. That this relationship continues to be strong suggests that “inclusion of highly diverse individuals – and the myriad ways in which diversity exists beyond gender (e.g., LGBTQ+, age/generation, international experience) – can be a key differentiator among companies.”

• While there has been growing awareness and discussion of gender and ethnic-cultural inclusion, and several other studies support McKinsey’s conclusions, and Silicon Valley finally started looking at itself with Google’s publishing of its diversity statistics in 2014, so far progress of inclusion has moved at glacial speed.The numbers in 2017 are only minimally better than those in 2015, especially in upper management, the C-suite. Lots of palaver, little action, despite increasing documentation of the benefits of inclusion and the penalty for the bottom quartile. “Overall, companies in the bottom quartile for both gender and ethnic/cultural diversity were 29% less likely to achieve above-average profitability than were all other companies in our data set. In short, not only were they not leading, they were lagging.”(5)

• Jack has no problem delegating authority to highly trusted executives, such as his CFO, formerly Sarah Friar, and now Amrita Ahuja. His management style is direct. He does not have an office but carries an iPad as he walks around the office, directly discussing plans or problems with his engineers and staff.

Square’s Board of Directors

• Dorsey has assembled a great board of directors whose two primary roles are oversight and long-term value creation. It has been shown that here too, gender and ethnic inclusion improves a company’s long-term performance. For a list of all members of the board, see https://squareup.com/us/en/about.

• Besides including the other co-founder Jim McKelvey, Square’s 11 member board includes 3 women. One of them is the “Internet Queen” Mary Meeker, recent founder of Bond Capital building her own empire, formerly at Kleiner Perkins, and author of the yearly Internet Trends Report, a “must study” slide deck, discussing several of “our” companies as well as IT trends in various countries.(6)

• NB: Square is ahead of California’s new board gender diversity mandate, SB 826, which requires a company to have a minimum of one woman on its board of directors by the close of 2019, to be increased to three by 2021 to avoid fines, see Mondaq for details.(7)

• Square’s board also includes two former CFOs, Roelof Botha, previously CFO at PayPal, David Viniar, former CFO at Goldman Sachs. Both, I am sure, will keep a trained eye on Square’s financial developments and Botha will most likely understand mobile payments, digital wallets and banking the unbanked better than most.

• Former UK’s Commercial Secretary to the Treasury and a partner at Goldman Sachs, Lord Paul Deighton, and former Secretary, U.S. Dpt. of the Treasury Larry Summers both know the financial regulatory and legal requirements of their respective countries, useful to avoid regulatory pitfalls as Square’s expands its financial offerings.

Jack Dorsey is a techno-esthete, a minimalist similar to Steve Jobs, obsessed with simplifying and streamlining everything. His obsession helped Dorsey to create Square. “Our niche is countertops and farm stands” said Dorsey some time ago. However, since his statement, the horizon of the company has kept on expanding as has its ecosystem, becoming increasingly sticky. Square with its simplicity and ease of use attempts to pare down the process of buying and Dorsey hopes, that Square technology will one day kill the cash register, simplifying commerce the way his other creation, Twitter, simplifies online communication. Says Dorsey, “Twitter is about moving words. Square is about moving money.”

Square’s Investor website attests to that simplicity. It is streamlined and easy to use. Check out Square’s quarterly earnings, in my view one of the best organized: shareholder letter, 10-Q or 10-K, and audio file all in one place the very day quarterly earnings are announced, see https://squareup.com/us/en/about/investors. Timely, easy, simple, and accessible! I have gotten similar feedback about the simplicity and ease of use from people who use Square, like the small Estate Sales Agency I have used, the two skinny lads from a small moving company who delivered some of the furniture, the owner of the motel where I stayed for several months. The latter, a bit over a year ago, groused about a price increase of Square’s products. When I asked him if he would switch companies, he shrugged, turned both palms up in a helpless gesture and grinned. He still uses Square, apparently it has become too sticky to change.

On Dorsey’s Choice of CFOs

The spokesperson for Square has always been its CFO. Sarah Friar, born in Northern Ireland and educated at Oxford U. and later Stanford U., was an excellent choice. She never worked as CFO prior to joining Square**(8), unlike Amrita Ahuja who had at least eleven months worth of CFO experience during her 8-year stint at Blizzard Entertainment.(9)** Not that it matters. As early as 2008, a McKinsey article disabused me of the notion that a CFO is simply a bean counter, responsible only for a company’s finances, record keeping and financial reporting. To show that the Chief Financial Officer’s role is changing from financial gatekeeper with a solid accounting background to Chief Future Officer, who is advisor and strategic partner of the CEO, McKinsey, an American worldwide management consulting firm, surveyed 164 CFOs of different tenures, interviewed 20 of them and drew on their experiences.

McK concludes that modern CFOs, to be effective, have to lead the leader and drive the CEO’s agenda. They often begin aligning themselves with the CEO and board members well before taking office. During the recruiting process, most CFOs received very explicit guidance from the CEO and board members about the issues they consider important, as well as where the CFO would have to assume a leadership role. With increasing use of Artificial Intelligence and Data Analytics, the CFO’s role will most likely morph more and more into a strategic alliance with the CEO. For further enlightenment see also the paragraph with good references, “The Changing Role” in Wikipedia’s “Chief financial officer” as well as the TechCrunch article of the shift in the CFO’s role.(10)

Sarah Friar

Until January 2019 Square’s CFO was beloved Sarah Friar, one of The Bloomberg 50: The People Who Defined Global Business in 2018.(11) She was de facto Square’s CEO. Citigroup Global Markets Inc. analyst, Peter Christiansen, goes even further and wrote, according to Bloomberg, that Ms. Friar was “a key architect in building Square’s business model.” Her UK background was probably quite helpful during Square’s expansion to the UK, as was Lord Paul Deighton’s.

The importance of Friar’s role should be obvious from the level of compensation. She received $6,165,089 in 2017 and $3,871,075 in 2018 while the nominal CEO, Jack Dorsey, received a measly $3.00 per annum both years. He doesn’t reward himself with a salary for running Twitter either.(12), (13). Compare that to the generous compensation of TTD’s CEO Green of $10,782,252 in 2018 while running a money-losing business. The almost 11 Million dollars per year in CEO compensation represent a yearly increase of 76.12% while at the same time TTD revenue increased only 54.86%, ROE 11.14%, Net Income 73.51%. Quite generous I’d say.(14)

Amrita Ahuja,

After star CFO Sarah Friar went on to become CEO at another startup in January of this year, Jack Dorsey replaced her with Amrita Ahuja. Why would Dorsey and his board have suddenly less judgment when choosing Ms. Ahuja? She was born in the USA to Asian Indian immigrant parents who were small business owners. I suspect that having grown up in a family running a small business, would help her more than anyone else to understand the needs of small business owners and the problems they face. She too has been unfairly criticized; it included her good looks. She was unfavorably compared to Jayshree V. Ullal: https://discussion.fool.com/sq-loses-another-big-exec-34105578.a…. If you look at Ms. Ahuja’s LinkedIn biography you’ll note that that she has impeccable educational credentials and that most of her training was in business development and strategic planning which included a summer job at McKinsey working on Strategy for Growth in International Markets. To me hiring her was most likely a brilliant move. Why?

  1. As second generation Asian Indian and woman she probably studied more diligently than anyone else. In case you did not read the McKinsey report, see page 5 reference**(4)** for an eye-opening graph: women still have to be twice as smart, work twice as hard to get less than half as far as men. This is especially true for women of color.

  2. Research shows that Asian Indians are generally better educated than U.S. natives. High achievement seems to also hold true for the second generation if the results of U.S. Spelling Bee and Geography Bee for the last ten years are any indication. A study by the Migration Policy Institute, The Indian Diaspora in the United States, confirms the high educational attainment of the Indian population whether first or second generation.(15) They are overly represented among the innovative business leaders, especially in the IT space, e.g., Zscaler’s Jay Chaudhury, MongoDB’s Dev Ittycheria, Nutanix’ Dheeraj Pandey, Arista Networks’ Jayshree V. Ullal, praised as competent. Why should Amrita Ahuja be less competent than Jayshree Ullal?

  3. I believe Amrita Ahuja is the perfect choice, especially if Jack Dorsey plans to expand Square services to India as I strongly suspect. When interviewed, he said Ms. Ahuja rose to the top of the search for her entrepreneurial qualities, not because of her experience as CFO, see Square’s PR of January 3, 2019: “In Amrita, we have found an amazing, multidimensional business leader.”… “Amrita brings the ability to consider and balance opportunities across our entire business, and she will help strengthen our discipline as we invest, build, and scale…,” https://squareup.com/us/en/press/amrita-ahuja-to-join-square…. That doesn’t sound like the job description of a typical number cruncher to me. It sounds more like a description of the modern CFO, Chief Future Officer, a multidimensional business leader who with her Indian background, education, and work history would be ideal during Square’s expansion into India. And good looks in the executive suite have never hurt anyone, male or female, climbing up the executive ladder. On the contrary! I can only say, she’s got it, https://www.youtube.com/watch?v=QnimFh5vw14. For all persistent admirers of the prettiest girl, here is a racier version, https://www.youtube.com/watch?v=7saUb3mHxpk.

Is Jack Dorsey Eyeing an Indian-Burmese Expansion?

Note that this is pure speculation on my part at this point. The reason why I suspect Dorsey may plan to expand Square’s services into India and perhaps Burma is simple. I don’t think Jack Dorsey does anything without purpose. In the Fall of 2018 he visited India for the first time. He met with Prime Minister Nahendra Modi, the Dalai Lama and other high officials and dignitaries. Unfortunately, he created an uproar when a private photo of a roundtable with Indian women journalists and activists on how Twitter could become more women friendly went viral on Twitter. It showed him with a placard given to him as a gift by a Dalit (Untouchable) woman activist. It read, “Smash Brahminical Patriarchy.” Brahmins are the highest caste in India’s complicated caste system where caste is more of a minefield than even religion. The intricacies are difficult for Westerners to understand. Tensions between higher castes and Dalits have been escalating in recent years with the rise of Hindu nationalism under Modi. Dorsey’s Indian Twitter staff should have advised him better. That was their responsibility. Many Indian Twitterati were outraged but Mr. Modi, not a Brahmin, and a Twitter enthusiast with 44.4 Million followers, never entered the Twitter storm as far as I could determine. There was also outrage against Twitter’s subsequent apology. I am sure this kerfuffle was a great learning experience for Jack.

Judging from Dorsey’s past record, I believe that his trip to India and his meditation in Burma (still the official name for the UK and some US government agencies), was not based on some whimsical decision. He could have gone to his usual meditation center in Texas. Instead, he traveled to and meditated in two countries that have the highest percent GDP growth per capita in Asia. I checked Jack’s Twitter feed around December 8, 2018, https://twitter.com/jack/status/1071575424931512320. Yes, he participated in a 10 day silent Vipassana meditation, but he also visited the cities of Yangon (Rangoon), formerly the capital, Mandalay, and Bagan (Pagan). From my own visit to Burma while a student when the military junta still ruled, I know that it is a beautiful country and the Burmese are very friendly people. The country is slowly opening up to Western influences. From Jacks Twitter feeds it is obvious that the younger Burmese are learning English now and have enthusiastically taken to Twitter which is good for Twitter and will be good for Square.

It amazes me that Dorsey gets chastised for taking 10 days off. There was no indignation or outrage anywhere when Jeff Green moved to Hong Kong and was absent from his headquarters and staff in Ventura, CA, for nearly all of 2017! https://video.foxbusiness.com/v/6049490354001/#sp=show-clips…. Green wants to expand into China. In my opinion his move was an excellent idea to get a feel for the land just as Dorsey’s trip to India and Burma was an excellent move to help him assess possibilities there for future expansion. I’d say, good for both of them.

Why Expansion into India and perhaps Burma makes Sense

If I were Square’s CEO I would definitely expand services to India, the second most populous country after China, where Twitter is already well entrenched and perhaps later to Burma, at one time the “rice bowl of Asia” but after 50 year of military dictatorship, still one of the poorest and most corrupt countries on earth, though there has been a little bit of improvement according to the latest figures of Transparency International.

  1. Both countries are among Asian countries with the highest GDP growth per capita. India has one of the youngest populations and recent GDP growth is estimated to be above 7% (McKinsey in 2018 lists it at 5%), higher than China’s with its aging population and current economic and trade problems. Myanmar was last reported to show 8.9% GDP growth per capita.(16)

  2. Both India and Myanmar are developing countries where small merchants are the norm especially outside the big city centers. When I was in Burma, there were no posh, touristy restaurants but only tiny eating places or roadside stalls. This was also true outside the major tourist areas even in cosmopolitan Bangkok,Thailand.

  3. India and Myanmar have a high percentage of the unbanked and underbanked, lots of possibilities for Cash App expansion.

  4. India has more internet users than any other country other than China. Asia in a recent report accounts for half the world’s internet users, a total of 2.2 billion. China and India account for one third.(17)

  5. India is, according to Twitter executives, one of the fastest growing areas of Twitter. The popular Cash App is closely linked to Twitter and in a country with a high percentage of unbanked, I can see possibilities for Square’s expansion.

  6. Board Member Mary Meeker, “Queen of the Internet” is, judging from her yearly slide decks, aware of all these trends and possibilities and I am sure so is Dorsey.

These are my own thoughts on Jack and Square. Should Jack Dorsey intend to expand Square’s services to India, I guess he would announce it only if and when the entire India and perhaps Burma expansion is set up and a sure thing. Time will tell. In the meantime I’ll look forward to the next earning’s call, the numbers, and trends.

As always and as Saul preaches, investors have to do their own research and come to their own conclusion.

I. M. Young
Long Square and TTD


(1) D. T. Max (2013), The New Yorker, Two-Hit Wonder, https://www.newyorker.com/magazine/2013/10/21/two-hit-wonder…

(2) Jon Swartz (2018), Barron’s, Jack Dorsey Is a Double-Duty CEO for Twitter and Square. Here’s How He Revived Them Both, https://www.barrons.com/articles/jack-dorsey-is-a-double-dut…

(3) Cheryl Strauss Einhorn (2018), Barron’s, How Some CEOs Successfully Run More Than One Company, https://www.barrons.com/articles/how-some-ceos-successfully-… (correction of author’s error: Jobs headed Pixar for more than a year)

(4) McKinsey and Company with LEAN IN (2018), Report on Women in the Workplace 2018, https://womenintheworkplace.com, click “Read the Report” on the left for the 36-page PDF version.

(5) McKinsey and Company (2018-01), Delivering through Diversity, https://www.mckinsey.com/business-functions/organization/our…, scroll down for the 42-page report.

(6) Mary Meeker, Internet Trends 2019, https://techcrunch.com/2019/06/11/internet-trends-report-201…, scroll down for entire slide deck.

(7) Mondaq, UK, New California Law Mandates Female Representation On Boards Of Directors By December 2019, http://www.mondaq.com/article.asp?articleid=796336&email… (free subscription of invaluable source of world-wide legal rulings)

(8) Sarah Friar, https://www.linkedin.com/in/sarah-friar-922b044/ (Linked-In requires free subscription)

(9) Amrita Ahuja, https://www.linkedin.com/in/amrita-ahuja-2402595/

(10) The Role of CFO:
• McKinsey and Company, Starting up as CFO, article 3, page 12, (PDF) https://www.mckinsey.com/%7E/media/mckinsey/dotcom/client_se…, free subscription may be required.

• Wikipedia, a good paragraph “Changing Role” in “Chief Financial Officer,” https://en.wikipedia.org/wiki/Chief_financial_officer

• TechCrunch, CFO Role Shifts From Number Cruncher To Business Leader, https://techcrunch.com/2015/04/14/cfo-role-shifts-from-numbe…

(11) Sarah Friar, Bloomberg 50, https://www.bloomberg.com/features/2017-bloomberg-50/

(12) Square Inc A, Morningstar Executive compensation, https://insiders.morningstar.com/trading/executive-compensat…

(13) Twitter Inc, Morningstar Executive compensation, https://insiders.morningstar.com/trading/executive-compensat…

(14) The Trade Desk Inc A, Morning* Executive compensation, https://insiders.morningstar.com/trading/executive-compensat…

(15) On Indian Immigrants
Migration Policy Institute (MPI) (July 2014), Report for Rockefeller Foundation - Aspen Institute Diaspora Program (RAD), The Indian Diaspora in the United States, https://www.migrationpolicy.org/research/select-diaspora-pop…, scroll down, click India, click download profile

MPI (2017), Indian Immigrants in the United States (figures are from 2015), https://www.migrationpolicy.org/article/indian-immigrants-un…

(16) McKinsey Global Institute (2018-09), Outperformers: High-growth emerging economies and the companies that propel them

40-page Executive Summary:

Full 168-page report:

(17) McKinsey Global Institute (2018-09), Outperformers: High-McKinsey Global Institute (2019-07), Asia’s future is now,
https://www.mckinsey.com/featured-insights/asia-pacific/asia… (20 page discussion paper)


I FA’d this post.

“Holy Freaking Moly! If you guys don’t buy this write up and hire this guy you have flat lost your minds!”



SUPERB post I.M. One of the very best I have read on this board and that is saying something. Impeccable detail and thoughtfulness.

Thank you for your effort to enlighten us as to Square’s leadership and in contrast to TTD’s Green who is a very different though a very high performing leader as well. Both are among the very best leaders among today’s top growth companies.

TTD is among my largest three positions, and I believe has enormous upside from here. I have weighted TTD far more than SQ in my portfolio at this point because I feel TTD has a more unique competitive position than SQ. That said, I am holding both of these companies among only 10-11 total positions which says much about my investment conviction towards both companies.

Fool on and thank you everyone on this board for creating the best investment board that I know. I value and cherish it every day.



Wow, I.M. What an incredible write-up. I’m amazed and awed.


Hi IM,

Wow, spectacular post!! I cannot imagine how long that took to write up, but it was worth every second. (Loved the footnotes!) You make me want to increase my Square position tomorrow :slight_smile:

Keep up the great work,



Hi IM,

Thats fantastic work… It is better than professional journalists or newsletters reports you see from almost any source… hats off to you…

BTW - I am curious, how long did it take you to complete this and if you have had this theme in mind or it evolved as you kept writing…

BTW - I am 100% with you on almost everything you wrote here… I am wary of overly promotional CEOs… I prefer to invest with Jack Dorsey and Toebe Lutke (SHOP) over Jeff Green (TTD) and Todd Mckinnon (OKTA)…

This doesnt mean I dont like CEO promoting their company and products, I just want to see them being reasonable and ascribe some intelligence to investors when they talk to investors… good examples of reasonable promotion are TWLO and ZS CEOs… they highlight their company’s great stuff, but they go out of way to make sure the expectations dont rise parabolic (e.g. Jay Chowdhary of ZS will always remind you that ZPA grows faster than ZIA but it will still be a long time before it catches up ZIA)…

I have been holding SQ, and recently increased as well (its ~10% of my holding now)… this has obviously pulled down my returns (relatively) over last six months but I beleive SQ has much longer to go…

once again, congrats on great write up… in fact a hall of fame write up


Hey I.M.,

Well done! Fantastic post. Your defense of Dorsey is world-class. I believe Dorsey is obviously an exceptional businessman and though I personally don’t like CEOs running two companies I realize this, in and of itself is a lightweight reason to full-on dismiss someone who has accomplished as much as Dorsey has.

As the author of post in question, “A Tale of Two Storytellers” I would like to respond with a level of detail and work ethic worthy of your post…

You say you distrust intuition, gut feelings, CEOs who lavishly praise their companies and point out that we should not trust CEOs who practice the “fascinating art of storytelling” (as I put it).

Yes, a healthy dose of skepticism is always appropriate - even with your own analysis.

I have mentioned this book before but it’s worth noting here again. Aswath Damodaran’s “Narrative and Numbers” includes the following description on its Amazon page…

How can a company that has never turned a profit have a multi-billion dollar valuation? Why do some start-ups attract large investments while others do not? Aswath Damodaran, finance professor and experienced investor, argues that the power of story drives corporate value, adding substance to numbers and persuading even cautious investors to take risks.


Damodaran who is a hard-working value investor, makes the case that despite all his models and spreadsheets, he can succumb to biases - and use his own numbers to believe anything he wants. So he’s recently begun to factor in narrative and how it influences valuation.

Because most valuations are intellectually defensible, and the future is unknowable, we are all essentially, at the end of the day, guessing how things will play out.

Misunderstanding the word Story
“Story” has sadly become synonymous with lying or telling a “tall tale.” For me - and I’m finishing a book on Story as we speak - it’s the exact opposite. A great story is authentic, clear and logical. When Scorsese writes and directs Goodfellas one senses that he knows the world, the characters and genuinely cares about what he’s saying. He captures the lure of living the gangster life but ultimately shows that it ends in death or ruin. There is a mathematical quality to a great story. Because A and B happen it means C. The story of all stocks is essentially because A and B WILL happen, it means enough profits to generate a rising stock price.

I never invest in companies that aren’t recc’d by analysts I admire. But to whittle down the 100s of stocks that cross my path, I also factor in narrative - and yes, factor in my gut feelings and intuition. It’s impossible not to.

A stock is a living story. Why do you think investing is so enjoyable - purely for the math? Sorry, but your passion for Dorsey belies your claim that you look elsewhere for a great story. When Square’s ER comes on, you bet your bottom bumcakes you’re enjoying a story.

The hero of the story is the CEO. It is the story of one person trying to lead others to do specific things that result in enough profits to raise the value of the stock price. This is a useful frame to consider. Trues heroes (in the old school sense) are bold, intelligent, active, honest and charismatic. Great stories are fueled by events carefully structured to reveal true character. For example, when Reed Hastings rolled out Qwikster - it was an absolute disaster, obviously not what he expected. So what did he do? He killed it, instantly, without ego or drama. He revealed himself to be mature enough to not only admit he made a mistake but to fix it, take the hit and move on.

Master storytellers tell authentic stories that are clear and simple to follow. Shysters tell complex stories that do not pass the smell test. For example, consider Ted Farnsworth, who led the farce that was MoviePass. He had been involved in a psychic hotline, energy drinks and his company, Helios & Mathison (whatever that is) was doing digital mapping to allegedly promote safer communities before it got into movie subscriptions. He brought in a guy who worked at Netflix and created the lame Redbox video distribution company to boost his iffy story. The two sold subscriptions to movie theaters that lost the company money - every time. The more they sold the more money they lost. But somehow it would turn profitable. And they shamefully claimed that they were honorable because they were not selling stock. They banked huge salaries. This was an awful story - inauthentic and illogical. And while some other Fools piled in, seeing this total lack of alignment between the CEO, company and service, kept me far away from it. A great story has a tight alignment between who the CEO is, what he does and why he’s doing it now.

Bernie Madoff’s story seemed authentic because he was a powerful man in the financial industry but it was inauthentic because the returns he generated were not mathematically possible. And if I recall correctly Kozlowski’s Tyco was filled with different business units and complex financial services products ripe for malfeasance as was Enron. Those are actually terrible stories.

An elite CEO must tell several stories:

  1. Who they are
  2. Why they built the company, what problems the product/service solves
  3. How they will generate and protect profits
  4. How they will grow the business

When this is done right, these stories inspire coworkers and partners, help develop better products, help spread the word and sell more products, clarify objectives and make it simpler for investors to evaluate possible outcomes. They don’t just whip people into a mindless frenzy of greed.

1-2) Who is Jeff Green and why did he build the company?

Rough sketch. 25 years ago, Green was an ad buyer for an ad agency in LA. He hated everything about the process of buying ads. So he created an “ad exchange” company that simplified the process and made it more transparent. Also, it leveraged the rising internet/digital tools to make it more convenient, simpler. He sold that company for between 50-75 million to Microsoft. He worked for Microsoft for a few years and later created the Trade Desk to continue his mission. He located the Trade Desk in Ventura County deliberately to avoid the groupthink that comes from being based in LA or Silicon Valley. His vision is to create not an American company, but a global company based in America. He has lived in Asia to get to know the Chinese market better and has opened offices around the world.

He is already wealthy. And never has to work again. But he seems to genuinely love advertising and do this because he cares about making the world a better place. He talks often about “winning hearts and minds” with effective ad campaigns that tie people closer to brands. Though advertising is often denounced as manipulative, Green is a true believer and thinks that the little ads on FB and GOOG are in-human, formulaic and he insists that those large companies are taking unfair advantage of all other companies by charging high fees and not really adding value to winning hearts and minds. P&G spends millions winning hearts and minds then FB/GOOG take obscene profits off that work cause they own the last mile. They didn’t really provide 30% of the value of the purchase.

Point being, he knows that countless marketers - who are spending 100s of billions around the world - feel they’re getting the short end of the stick. Google and Facebook have too much power and are incentivized to milk marketers for as much as they can get. They have even gotten into content creation. So the conflicts they have with clients are voluminous. TTD owns no content platforms and doesn’t sell any media. TTD is not conflicted. Since companies must share important data with TTD to use their software, trust is essential.

Green is an evangelist for a vision of the internet that is more transparent, open and gets the balance right between needs of consumer privacy and needs of marketers to deliver relevant ads. He believes all can win - marketers/buyers (who get higher ROI on ads), sellers (who sell more ads at higher prices cause ads more effective) consumers(who get fewer but more relevant ads) and even governments who get more tax dollars. It’s a downright inspiring vision - when capital flows effectively throughout the world more people work, fewer people fight, people live longer happier healthier lives. It’s a beautiful thing. Green is the absolute essence of both a Fool and a Rule Breaker.

3) How they will generate and protect profits?

They generate profits by helping clients buy ad space - transparently bidding for the slots they want. They make it easier to buy media and keep messaging consistent on ALL media - podcasts, tv, spotify, Amazon Fire, etc., etc around the world. As they innovate and iterate - and work with clients and figure out from data what’s working best, their competitive advantage should only strengthen.

4) How they will grow the business?

They will grow the business by getting more clients, around the world to use their software - and by partnering with the big boys - which he believes will eventually include pretty much everyone, Google, Facebook even Netflix. He often touts the 1T$ in annual global ad spending to suggest that the growth potential is massive. I know Dreamer has questioned this number, but few doubt there’s plenty of room for TTD to grow meaningfully from their current 12B valuation. The company is the 800-lb gorilla of programmatic advertising and with streaming and connected TVs this industry has a massive tail wind at its back.

These are excellent stories: authentic, logical, relatively simple, clear and yes even inspired. Marketing is an emotional business. It literally deals with stirring people’s emotions. So Green’s ability to tell his and TTD’s story is extremely relevant to the people who are most likely to buy ad space. He is one of them. He knows them. And they trust him.

I know some will continue to rain down mockery on my alleged simplicity, but I believe that when you are trying to win over CEOs of large companies, and government leaders in China and elsewhere it actually matters if they like and respect you or not. Green IS charming, likable and seems to be a profoundly decent man. He radiates authenticity. How do you quantify that?

Watch Green in action for yourselves…

Here is a video of Green speaking a month ago at a conference in Germany. Note the size of the crowd and judge for yourself his authenticity, clarity, command of his subject matter. Note how he responds to the question about his wealth by the knucklehead host and ask yourself after watching this - if you were buying ad space, would you want to work with this guy? I would.

Jeff Green: The Future of Media (Keynote) | OMR Festival 2019 - Hamburg, Germany

Here he is discussing his company’s entrance into China… Note his affection for the Chinese people and knowledge of the market. And note the boldness of his move to attack this market:

Jeff Green announces The Trade Desk’s new global programmatic offering in China

Here is Green speaking at another conference. Note though this is two years earlier, how consistent his stories are - of who he is, where they’ve been, why they do what they do - and note the affection and respect this host too has for him:

LUMA’s Digital Marketing Summit '17: Jeff Green, The Trade Desk

Now, get a load of this - this is just Green and CTO Dave Pickles (who is still with the company) sitting down with a visiting marketing professor. Not sure when it was taped. But notice Green’s enthusiasm, lack of ego, and again how consistent his story is. This is just some professor visiting TTD HQ. There’s very little in it for Green to do this - to me, this shows exceptional character and genuine passion to talk to the students who will watch this video.

Interview with marketing professor

And lastly, here’s a video explaining how programmatic advertising works…

How the programmatic auction works

There are many other videos on TTD channel - of other execs and ads, etc. - and all are relentlessly on point, all telling the same stories.

So, as Green often talks about, Programmatic ad companies have failed many times before and the whole space was reviled. A great story is told by the right person in the right way at the right time. Green checks all those boxes. And that, among other things, is a key reason TTD hasn’t just survived, but is now being mentioned with Google and Facebook.

The bottom line is that Narrative is a legit tool to use to help wrap your head around a company, study its leader and explore potential outcomes. And watching stories is a major reason each and ever single one you Fools is here.

The CEO is by far the most important person in any investment. They are the hero of the story.

TTD is my biggest investment of all time, by far, and I’m 100% convinced that the intangibles, the things you can’t quantify - leadership, narrative, character, vision - things I FEEL in my gut - will buy my family a vacation home one day. I am up over 120% so far and will never apologize for trusting my gut on it and loving the truly fascinating art of story.

But I am very grateful to you I.M. because my “intuitive” style is, still, fraught with the possibility of magical thinking and countless kinds of buffoonery. But I think when a guy like Green comes along, it’s as close to set-it-and-forget it as it is when you fly on United and trust that the pilot must know what he’s doing, no need to study hydraulics, engines, windspeed, etc.

Fool On,

Broadway Dan


I never invest in companies that aren’t recc’d by analysts I admire. But to whittle down the 100s of stocks that cross my path, I also factor in narrative - and yes, factor in my gut feelings and intuition. It’s impossible not to.

As Malcolm Gladwell posited in his book Blink, intuitive judgment is developed by experience, training, and knowledge. He also calls in “thin slicing”. Basically your subconscious is making a good decision even if you cannot exactly articulate why you have done so.


This book was on the same topic, but is not as famous:


Long SQ
Explorer Supernaut
You can see all my holdings here: https://discussion.fool.com/profile/TMFJebbo/info.aspx


Broadway and IM… just brilliant and what makes this board so special. Heavy book reader myself but nothing beats these two best posts today. Thank you.
Best Bran.


Great post, IM, but just one counterpoint that I need to make regarding Square’s opportunity in India. Why you mention Burma is a mystery to me although at least you’ve been there so good for you!

There are many problems dealing with India which is tending towards the side of protectionism, as identified in this report from the USTR.:


It’s a long read, but I believe that the salient points regarding Square are detailed on page 260.

“India has recently promulgated a number of data localization requirements that would serve as significant barriers to digital trade between the United States and India. These requirements raise costs for suppliers of data-intensive services by forcing the construction of unnecessary, redundant data centers and prevent local firms from taking advantage of the best global services available.
In October 2018, the Reserve Bank of India (RBI) implemented a requirement that all payment service
suppliers store all information related to electronic payments by Indian citizens on servers located in India.
RBI announced this rule in April without advance notice and without input from stakeholders. Requiring local storage of all payment information raises costs for payment service suppliers, and disadvantages foreign firms, which are more likely to be dependent on globally distributed data storage and information security systems. Furthermore, an only-in-India data storage requirement will hamper the ability of service
suppliers to detect fraud and ensure the security of their networks.
In July 2018, the Indian government published a draft Personal Data Protection Bill. If passed into law, the bill would impose onerous burdens on firms, especially foreign firms, that process personal information.
Most concerning is a data localization requirement: firms would be required to store a copy of all personal information related to Indian persons on a server located in India, and an as-yet-undefined category of “critical” personal information could not be transferred out of India under any circumstances. These data localization provisions would damage the digital economy without supporting privacy. Additionally, the bill would authorize immense fines and criminal penalties in response to data breaches.”

So basically this is a very risky proposition for Square.

If anyone can enlighten me why they would be exempt from all these rules and the seemingly random changes forthwith then please educate me.

Cheers, PB.


Data localization laws are not unique to India. Also, if it becomes law it would affect SQ competitors in India too.



Thank you all for the kudos here and off-board and thanks for the book recommendations (BwyDan & TMFJebbo)!

Yes it was a lot of work but the most frustrating thing was a two hour power outage just as I was in the middle of reviewing and editing my draft. By the time the power came back on it was midnight, I was too tired and did not review or edit the “Indian-Burmese Expansion” and what followed.

Agree that most analysts don’t know the companies well. The only reports I trust are from Credit Suisse. However, they will stop coverage if their lead analyst leaves, as happened with Square and PayPal.

Briefly, here is how I work. I have an outline of a possible post in my head weeks or months before posting. I make files with sub-files on all the stocks I own or consider as potential purchase. I read a lot, collect all pertinent information for each stock and often take mental or physical notes over the course of weeks or months. The reference list has existed for at least two months, just the sequence was adjusted as I typed up the report. I can’t give a time frame. I rarely have the time to write it all in one sitting.

Thanks for your eloquent response and tooting the horn for Jeff Green. No, I am not passionate about Jack Dorsey, I just felt facts went by the wayside, Square’s growth is still higher than that of TTD-at least this last quarter, and Jack was often unfairly treated by the media and here on the boards (I’ve got this hangup about fairness).

Yes, professor Damodaran is a gem. I used to read him regularly when my port was more conservatively invested, now I still do so sporadically. Can’t beat the clarity of his thoughts and prose.

Since I did not review and edit the last sections of my post, let me clarify why I think Dorsey may contemplate expanding Square services also to Burma:

  1. To keep up the high Square growth rate, Square will have to further expand internationally and Asia is the future.

  2. From my studying Dorsey & Square, I believe Jack does nothing without specific purpose.

  3. Jack Dorsey went to India and Burma, two Asian countries with the fastest growing percent increase in GDP per capita, over 7% and 8.9%, respectively.

  4. After his 10-day silent meditation in a monastery near Mandalay where he was cut-off from the world and could not travel, he tweeted that ”we" visited Yangon, Mandalay, and Bagan. This strongly suggests that he and his entourage traveled through Burma and checked out the lay of the land.

  5. It was obvious when I visited Burma, that the Burmese disliked and distrusted the Chinese. Burma shares a long border with China and when I visited, there were border problems and accusations the Chinese had something to do with the disappearance of young Burmese women (they practiced female infanticide for decades resulting in a shortage of young women) and the continual flare-ups of insurgencies and counter-insurgencies. If these anti-Chinese sentiments still exists today, US-headquartered Square would have a better chance than any of the Chinese FinTechs.

Since Dorsey is also CEO of Twitter with an Indian subsidiary, Twitter Communications India Private LTD, Exhibit 21.1 of the last TWTR 10k, he and his staff would definitely be aware of current or planned Indian regulations. As Texmex points out, competitors would likewise be affected.

I. M.


Thanks IM.

Also Broadway Dan… excellent write up on TTD and Jeff Green.

Less Analysis, More Hagiography.