What's Next For Our Crazy Economy — With Square Co-Founder Jim McKelvey

Episode Summary

Executive Summary: Jim McKelvey discusses the Fed’s response to inflation and Ukraine-driven uncertainty, then pivots to his startup Invisibly and a vision for a people-first data economy built on micropayments, choice, and blocking unwanted content. He argues that markets are not the economy, that the Fed is politically neutral and data-driven, and that creators should be paid directly rather than via ad-driven platforms.

Main Topics: Fed policy, inflation, and rate hikes: McKelvey explains how the Federal Reserve is balancing full employment and price stability amid pandemic distortions, high inflation, and plans to raise rates. He says the Fed is responding to an unprecedented economic shutdown and recovery. Ukraine war and macroeconomic uncertainty: The conversation covers sanctions, commodity shocks, especially oil and gas, and broader market uncertainty caused by the war in Ukraine. McKelvey stresses the humanitarian crisis while noting the economic ripple effects. How the Fed makes decisions and uses forward guidance: McKelvey describes the Fed’s use of staff economists, regional reserve banks, and public communication as a policy tool. He says telegraphing policy moves has become a powerful lever for stabilizing markets. Square/Block, fintech stocks, and long-term investing: He reacts to the decline in fintech stocks, says he does not track market prices closely, and explains his risk-taking, long-term investment style. He frames Square and similar firms as strong businesses despite stock volatility. Invisibly and the micropayments model: McKelvey outlines Invisibly’s plan to replace ad-driven feeds with an invisible agent that enables tiny payments for content and attention, aiming to give users control and improve creator compensation. Critique of feed-based platforms and attention economics: He argues that platforms like Facebook monetize attention by feeding users content designed to maximize engagement, often against the user’s interests. He proposes menus instead of feeds and more explicit user choice. Risk, failure, and innovation philosophy: McKelvey reflects on his tolerance for uncertainty, saying innovation comes from people who keep going despite fear and repeated failure. He connects this mindset to Square’s origin and his current experiments.

Key Arguments: The Fed is facing an unprecedented post-pandemic economic situation and must balance inflation against recession risk using data, regional intelligence, and policy guidance. Ukraine introduces humanitarian tragedy and economic shocks through sanctions, energy prices, and market uncertainty, but the Fed’s neutrality and process remain intact. The stock market is not the economy; most people care more about wages, gas, food, and safety than about equity indices. Forward guidance is now a major policy tool because markets react to what the Fed says, not just what it does. Supply-chain disruptions are a major driver of current inflation and may take about a year to normalize. McKelvey is unconcerned with short-term stock moves because he is a long-term, high-risk investor who bets on ideas that may fail but occasionally pay off massively. Square succeeded because it solved a real problem McKelvey personally had, illustrating his thesis that novel products break normal business rules. Invisibly aims to create a system where people choose what they consume and are paid for attention through tiny, invisible transactions. Ad-based platforms distort incentives by rewarding outrage and extracting value from users and creators; McKelvey wants creators to receive most of the money they generate. Micropayments should not rely on blockchain because it is too slow, too expensive, and too carbon-intensive for trivial transactions.

Data Points: S&P 500 decline: around 10% down - Used to describe the market cooling from its earlier surge. Inflation target gap: way above target - McKelvey says inflation is significantly above the Fed’s objective. Supply-chain normalization timeline: probably for another year - He predicts disruptions, chip shortages, and part shortages will continue. Stock performance: Square: down 42% year to date - Host cites fintech stock selloff before asking McKelvey about it. Stock performance: Block/Square: down 34% year to date - Later cited again in discussion of fintech weakness. Stock performance: Affrm/Affirm: down 59% year to date - Used to illustrate broader fintech sector selloff. Round 1 return for Square: 1000 to 1 - McKelvey says early Square investors saw extraordinary returns if the company succeeded. Typical article earnings: about a quarter of a cent - He says a news article earns roughly this much for a publisher under current digital economics. Publisher revenue share: one out of every five cents - He claims platforms and ad machinery capture about 80% of media money. Micropayment example: 2 cents for 4 articles - He uses this as an example of how paying directly could double publisher revenue. Alternative example: $1 for 50 articles - Illustrates how tiny payments could still feel manageable to users. Fed structure: 12 regional offices - McKelvey clarifies his role is with one regional reserve bank, not the whole Fed. Working user base claim: more than 3 billion - Host references Facebook family of apps while discussing feed economics.

Pivotal Quotes: "the stock market is not the economy" — Jim McKelvey: He pushes back on equating market declines with real economic conditions. "We are becoming the products" — Jim McKelvey: He summarizes his critique of attention-based platform business models. "the work is not done by heroes. It's done by people who are equally terrified of the situations that they're in, but they don't quit" — Jim McKelvey: He explains his philosophy of risk, innovation, and persistence.

Implications: The interview points to a future where user choice, direct payment, and creator compensation replace ad-driven feeds. It also suggests the Fed will keep tightening despite volatility, and that real innovation requires tolerating failure and uncertainty.