In this episode Brady Forrest interviews MobileCoin's latest addition to the team, Chief Product Officer Bob Lee. Bob is the mastermind behind some of the most essential FinTech innovations in recent memory. He was on the original Google team that built the core library for Android, and was the CTO of Square, now known as Block, which expanded access to credit card transactions for untold millions of businesses around the world. He also built Cash App, and is now applying that same skill set to MobileCoin. Bob talks about the importance of creating access to mobile finance for unbanked people around the world, and dives into the core technology behind those innovations. Brady asks Bob about his vision for the future of digital payments. Bob shares a story about one of his first claims to fame: authoring a computer program to take down the Code Red Worm, one of the earliest and most prolific computer viruses on the internet.
Speaker 1 (00:17)
Hello and welcome back to Privacy is the new Celebrity, I'm Brady Forrest. Today on the show, I'm excited to welcome Bob Lee. Bob has recently joined Mobile Coin as chief product officer. Before that, he was the CTO of Square, now known as Block. Bob has a deep history of innovation in the financial technology space. He was the creator of Cash app, and he was also one of the core developers who helped create Android. Bob, really excited to have you here on our podcast, Privacy is the New Celebrity.
Speaker 2 (00:48)
Thanks for having me, Brady.
Speaker 1 (00:49)
Absolutely. So we've known each other a long time.
Speaker 2 (00:53)
That's right. Yeah. I think we met back in 2006 at Foo camp. Friends of O'Reilly was the first unconference.
Speaker 1 (01:00)
Yeah. Those are some fun times. And back then you were working on Android at Google.
Speaker 2 (01:07)
That's right. Yeah. I started at Google around 2004, and then I wanted to work on mobile from day one, but they made me work on AdWords for a little bit. But in 2006, we acquired Android Super early. I think it was like twelve people on the team or so. And I switched over and joined and ended up leading the core libraries team, which is basically all the lower level libraries that the apps are built on. So security, networking, Bluetooth, and other basic core libraries. And then. Yeah, and I left there and I worked there through the end of 2009. So through the first couple Android device launches, and then I went and joined up with Jack Dorsey at Square, where I became the first CTO there.
Speaker 1 (01:52)
Yeah. I remember going to the first Google I-O-S and getting like two or three phones. I think it was the G one, might have been the first Android phone. Pretty amazing.
Speaker 2 (02:02)
Yeah, for sure. We had the D one and then the Motorola Android and then the Nexus.
Speaker 1 (02:08)
So what made you take the leap going from Google, which was definitely like a safe public company, to going to Square, which at the time was a small startup.
Speaker 2 (02:20)
So at the time, I actually left Google to start my own company, which is I've always kind of had like an entrepreneurial passion, like passion about products. And then right around that time is when Jack reached out to me, he said, Crazy Bob, I tried to get work for my last startup, that was Twitter, and maybe I can get you to work for this one. And so met up with them. And like I said, I've been the core library lead for Android. I always had like a passion for hardware and like photography also. So I was trying to do stuff like trigger off camera flashes from my Android phone. So I was thinking about all the different ways to do that. One of the ways I thought about doing it was triggering the flash through the headset, Jack. And then when I went up and met with Jack and somebody was working on, and that was the card reader plugged into the headset. Jack. I immediately knew how it worked, and it was just such a great fit for me, just kind of the combination of engineering and design. Also, the other thing that really appealed to me is my mom at the time, she was a retired newspaper editor, and she had opened an antique shop.
Speaker 2 (03:17)
And I saw first hand the experiences she went through trying to sign up for and get credit card processing. They really charged tons of fees and made it really hard for her to turn a profit. So I saw an opportunity to address that not just for her, but for millions of other merchants.
Speaker 1 (03:34)
Can you talk for those who don't know, can you talk about how Jack got the idea for Square and what was kind of the thinking about it?
Speaker 2 (03:42)
Yeah, for sure. Yeah. So actually, Jack Dorsey and co founded Square with Jim Mckelby. We're actually all three from St. Louis, one of the ways that I originally connected with them. And Jim McKelvey was a serial entrepreneur himself. Jack actually interned for Jim when Jack was in high school at his digital publishing business. And so Jack just recently left Twitter and then reconnected with Jim in deciding what he wanted to work on next. And in addition to his other efforts, Jim is also a glass blower. He taught glass blowing at WashU North University, and he also sells art pieces made out of glass. And he had lost these really beautiful glass faucets. And he actually at one point lost a sale because he couldn't take credit cards. And it got him thinking. It's like, well, I have this basically supercomputer in my pocket. Why can't I take credit card payments? And then that's how it started. So we didn't really know that much about it. The first thing that we had to do was sign up to take credit card payments ourselves. And we just learned firsthand, like, how arduous the process was back then.
Speaker 2 (04:54)
You used to have to get something called a merchant account, which is kind of like a special type of account that enables you to accept credit card payments. And it's just really arduous to go through. Initially, when we were building Square, we were going to follow that path and build on the existing systems. But when we tried to launch with that, it turned out that they were turning down 50% of the people who signed up. So we immediately realized that that wasn't going to work. And we had to take a step back and figure out what was going on. And what was going on was whenever you signed up for a merchant account, they were just kind of antiquated processes. They look at your bank account and see how much money you had in it. If you're a business, you're not going to have much money in it. They look, if you're like a brick and mortar business, but a lot of our merchants were individuals who didn't have a building or have an office, and they would do something like a credit check, too, which we eventually discovered was just a heavyweight way of confirming someone's identity.
Speaker 2 (05:54)
It's like, what are they really trying to defend against? They're trying to just verify someone's identity so that you can't steal money. And just because somebody has a bad credit, for example, doesn't mean that they're going to steal money. In fixing this, we took a bold move and worked with our acquirer and got them to agree to let us completely handle the onboarding and the approval process so long as we took on all the risk. So we were able to replace those insecurate processes with much more modern tooling and machine learning algorithms and whatnot and got to where we could approve over like 98% of merchants. And if you think about it, it's like after a couple of years, we had literally millions of merchants on the platform, which means we enabled millions of people to go into business who would have not otherwise been able to process credit cards and succeed in business.
Speaker 1 (06:44)
That's a huge gamble. Were you guys scared to take that risk?
Speaker 2 (06:49)
So scared. Same thing after with cash app, too. So the challenge is, like I said, what you're trying to defend against is you want to verify someone's identity, and that's so that if somebody signs up for your platform to accept credit cards and they have a bunch of stolen credit cards and they do a bunch of charges on those cards into a bank account and can get the money out, well, you want to be able to get the money back from them. And the challenge here is that you don't know in real time that a credit card is stolen until like, a chargeback comes in and chargebacks can take up to 90 days to come in. So it's always a bit of a risk. And it was constant learning process. It took a lot of resources. It was constant arms race, kind of keeping up with all the tricks that people would do.
Speaker 1 (07:42)
Used a couple of financial terms. Would you mind defining them? Acquire and charge back, amongst some others?
Speaker 2 (07:51)
Yeah. So an acquirer, if you're a merchant, you have your acquiring bank. So this is like, who's on the acquiring side of the credit card transaction? The way credit cards work is Visa and Mastercard. Those are just networks and they just pass the transaction information along. And on each side, on the merchant side, you have an emergent acquirer, like an acquiring bank. And on the customer side, you have an issuing bank. So whenever you do a credit card transaction, that transaction goes through, and it basically creates kind of a record between the acquiring bank and the issuing bank where they can settle up and the issuing bank can send the money to the merchant. So that's where that comes in a chargeback is when I'm sure you've maybe had a fraudulent charge on your credit card and you contested it with your card company. That's called a chargeback.
Speaker 1 (08:43)
Got it? Yeah. These are the types of things that can wipe out a small business if they end up taking on too many fraudulent charges. Absolutely. Getting a lot of chargebacks.
Speaker 2 (08:53)
Speaker 1 (08:54)
So what was it like being this insurgent player in the fintech space?
Speaker 2 (08:59)
It was a lot of fun. It was like a great learning experience, and it was interesting to come in with a fresh perspective and question assumptions that other people were making. It's like one that the idea that you had to have the first one with Square was the idea that you had to have a merchant account to accept credit card payments. And we innovated by showing that wasn't entirely necessary to work with the card networks to create, like a new type of entity. I think it's called a payment service processor, which is kind of like almost kind of an aggregator of merchants. Another example of that was when I created Cash App. Cash App was born out of my frustration with PayPal. It was a couple of things. One, I was accepting payments for a rental property that I had, and it took me two weeks to get my money out of PayPal. The other thing was another thing that I was frustrated with. Paypal was just a sign of process, too. I don't know if you guys remember, but you used to have to enter your bank account information, and I just never knew where my checkbook or checking account number was back then.
Speaker 2 (10:03)
And then you had to wait two days for verification deposits, and I would forget and it would all time out. So it's a really frustrating experience. So I created for that. And then also, it's like my kids were super young at the time, too, and I remember it was difficult to get a baby. So they did sign up for Square, and even if I could give them a card reader, so I just wanted to come up with a better experience for that. So I didn't have to stop at ATMs on the way home all the time. But one of the things the innovations that I made with Cash App, though, that was interesting was I wrote the first version myself. It was a side project. People weren't very bullish on peer to peer payments yet back then, in fact, the industry thought that customers didn't want peer to peer payments. But I had a theory that existing user experiences just weren't very good and that people would really want this product if the experience was good. So I wanted to have something up and running in two weeks. And I looked at our ACH system.
Speaker 2 (11:04)
So ACH is kind of the same Rails that your checks use, so it takes a couple of days. It's cheap, but it takes a couple of days, and it's not the most user friendly service, and it would just take a long time to integrate with that and make that work. And then I had this idea of I just know about this obscure type of credit card transaction called an unlike refund. And an unlike refund is normally when you execute a refund on the credit card network, it has an originating transaction associated with it. But there's this obscure version of it called Unlike refund that doesn't require the originating transaction. So I just thought to myself, I'm like, wait, it really just started as a hack. I was like, wait, why can't I just use this to send money through my debit card to my bank account? And people come up with a lot of reasons why I couldn't. It's like it wasn't legal. I'm like, well, the credit card networks make the rules and they can change them however they want or that they didn't know how to charge for it. And I rightly thought that they would come up with a way to charge us for it.
Speaker 2 (12:05)
And sure enough, I went to Visa, Mastercard and proposed this to them, told them that they'd be able to make some more money off these transactions and get access to the data that was going over the ACH networks. And they were super excited about it, and we were the first ones allowed to use that. So now those turned into full blown services now called Visa Direct and Mastercard Send. And it's used all over the place now to send money to people in real time. So, for example, I've even seen, like, ride sharing apps. If you're like a driver, you can get paid through this instead of through the traditional ACH method.
Speaker 1 (12:42)
Wow. Can you talk about the time that you demoed it for the credit card company?
Speaker 2 (12:47)
Yeah, I think we demoed it. And they were surprised to see that the money actually moved and that it actually worked.
Speaker 1 (12:54)
It's always the best kind of demo.
Speaker 2 (12:57)
Yeah. It's funny. It was such a simple idea, but a lot of times the best ideas aren't obvious until they are, and then they're very obvious.
Speaker 1 (13:06)
Yeah. These technologies you've created, especially when you factor in Android, have changed the lives of millions, tens of millions, hundreds of millions of people and their businesses. Can you share some of the stories that you've heard from some of them? They must share their personal experiences with you.
Speaker 2 (13:25)
For Android, it's like when I started on Android, it was a long time before the iPhone. And you got to think my phone at the time was a Motorola Razor. So I was just really passionate about enabling all these new use cases. I really wanted to be able to effectively email from my phone and use Google Maps and visual voicemail and all of that. I think that's one of the biggest things just imagine, remember when used to use MapQuest and print out directions and just made things really painful when you're traveling internationally and finding restaurants and all that. I think for me that's, like one of the most fulfilling results is this kind of opened up the world and Google Maps and all those types of apps.
Speaker 1 (14:20)
So what did you do after Square?
Speaker 2 (14:23)
After Square, I took a little time off. I've always been very much into art and photography since I was growing up, so I really like to combine engineering and art. And then I went back to, as I said before I originally left Google to start my own company. One thing I've always done is written down all my business ideas since about 2004. And at first I didn't really know why I was doing this, but it turned out that I have a list of literally hundreds, maybe more ideas, which you can only get to, like, one every five years. But the cool thing about this was I could keep track of which ideas I kept coming back to and was the most excited about. And then it enabled me to know that whatever idea I picked was the right one. And that enabled me to confidently say no to all the other ideas, rather than just laughing on to my latest idea. And the idea that I left Google to work on was location based social networking, because I really wanted to be able to connect with people more effectively nearby. And that space, it's still nation.
Speaker 2 (15:35)
I went back to that idea and yanked a star called Present, which did pretty well. We went to market as like, a women's only social network, actually, too, and enabled them. And this was right before the timing was perfectly right before the Women's March. So I got to know the founders. The Women's March really well and go to the first women's conference in Detroit. And it was working for me, too. And so it's an interesting time, and we were out of the day on International Women's Day. But in the end, social networks are hard. It was always a long shot, but I just learned a ton that served me really well since then. So after Present, I started angel investing and advising startups. So helping from everything from recruiting to engineering to design to product and to fundraising, all my lessons from Present really served me well there. That's actually how I discovered mobile Coin, actually, at the beginning of last year, invested in our last round, as you know. And then I started advising mobile Coin, and then advised the company through last year on engineering and product market Fit. And then that's what really got me excited and helped me decide to join and see you've now interacted with probably tens of.
Speaker 1 (16:50)
If not hundreds of startups. What do you think makes a startup like? How do they get to product market fit? How do you define that?
Speaker 2 (17:01)
That's a great question. So product market is obviously the right product in a good market. And as you know, most startups fail. And I think one of the main reasons for my experience is they focus too much on the product and not enough on the market. So I think it's really important to take a step back and focus on who your ideal customer is and then put yourself in their shoes, identify what their problem is. This is even a problem that they think we're solving. And then if it is, do you think they'll actually look for a solution to that problem? And then one of the biggest components where the people neglect is how does your solution stack up against other competitors in that space? And how will you cut through the noise and get in front of customers? So that's always the big challenge. People come up with ideas all the time, but it's really been able to execute and put your products out there in the market. That's when you really know that it works or not. That's what really puts it to the test. And a lot of times it's like you have a really considered competition.
Speaker 2 (18:06)
So for example, one of the things that I realized with Mobile Coin or helped the team understand last year was that a lot of startups in the crypto space are solutions in search of a problem. And we are not competing with other crypto apps, we're competing with other payment apps, and we need to make sure our experiences is good or better, and then Privacy is kind of like an added differentiator on top of that.
Speaker 1 (18:33)
And what do you think existing payment apps are missing that Mobile Coin fulfills that need.
Speaker 2 (18:40)
So I think the thing that really excited me about Mobile Coin realization that I had, well, first, I don't really think people are going to want to pay in a volatile asset, whether it's Bitcoin or Mobile Coin. Sure they can do that conversion in their head, but it's just not as good of a user experience as using the Fiat currency that they're used to. I was really excited last year when we kind of unlocked that ability, and that's one of the features that we have coming to Mobile Coin. It's the ability to pay what people call stablecoins, which is basically kind of like your Fiat currency, and that's going to enable experiences as good or better than existing other payment apps. The other thing that I realized was that solutions like PayPal, Venmo or Cash Out, they're all just facades over the traditional banking system. And in the case of Cash App and Venmo, they're US only, and they're tied to that proprietary payment system here, which is very specific to the US, and it's very challenging to take these things internationally. And the realization I had last year was it's like people talk about a lot about.
Speaker 2 (19:48)
They sometimes criticize web three versus web two, and they use these toy examples to illustrate how Web three solutions are more complicated than Web two solutions. And I just had this realization that do you know how complicated the credit card processing system is? Like I said earlier, you have Visa and Mastercard, which are just the network in the middle, and you just have layers of banks on each side acquiring banks and issuing banks. And you have processors and payment aggregators and Gateways and ISO, all these middlemen players that take fees along the way. The other thing I realized was that they charge, for example, and all those players take a cut and they delay you getting your money sometimes with the days as a business, and they can charge up to like, two to 3%. And it's like, why does that matter? Like, two to 3% matter? Well, it's like the average restaurant in the United States has a profit margin of 3%. So if we can lower those fees by two or 3%, we can literally double their profit margin. I also realized, as I said, it's like, from an architectural perspective, credit card payments are extremely complicated.
Speaker 2 (21:01)
Tens of thousands of banks and stuff, and all these very fragmented, different technologies in different countries. And with these new approaches to blockchain specifically, like how mobile coin is implemented. It's so elegant, and it's based on these kind of like, cryptographic advancements, like scientific advancements. It really reminds me of. I don't think it's an exaggeration. It reminds me of the invention of the transistor. The transistor is like a switch, basically, and it replaces the vacuum to which is obviously where the the magnitude bigger and just enabled CPUs and all the technology that we have today, it's very similar. We can replace all this existing banking infrastructure and all this complexity with these really simple, elegant solutions. So I'm very bullish that it's going to be mobile coin that helps do that. It's going to be something like this. So I'm really excited to be at the forefront of this. And like I said, it's like other payment solutions. There's facade over the existing payment solution. So I'm really excited about the fact that we're not just a facade, we're building the whole thing from the ground up in a better way.
Speaker 1 (22:10)
Well, we're excited to have you on the team, that's for sure. One of the things that we're trying to do is build digital cash. But a lot of folks would say that cash is still more private than any digital currency. What would be your response to that?
Speaker 2 (22:27)
That's a great point. I've always been really passionate about security and Privacy, and I always really love signal messenger. So that's one of the things that attracted me to mobile coin initially, too, was that kind of our initial designs and Moxie Marlinspike, we got a created signal and architect. A lot of it also helped architect mobile coin, and we are the only cryptocurrency that is up to signal standards of Privacy and security and performance. So that was really exciting. For me. And another thing I realized last year, too, and thinking about where the best uses of this technology are, was that why does Privacy really matter? It's like traditionally people think about you maybe don't want people to know they will see that you charge the therapist or something like that. But I think it goes much wider than that. There's this assumption that the government like having public blockchains because they can see all the transactions. But that also means like Russia, North Korea, and anyone criminals can see all your can see all your transactions, too. So I always think about like, Cambridge Analytica, look what they were able to do, mining, just Facebook likes.
Speaker 2 (23:43)
I think with all these kind of adversaries can do with all of our payments data. I also realized that people haven't really run into this problem yet. But imagine when we start paying in person with crypto, these blockchains, they look anonymous, but they can be de anonymized very easily, which means I can tell that you, Brady, are paying at this coffee shop, which means I know your location in real time, which is just kind of a scary proposition. So it seems very obvious to me and the governments are starting to understand this, that making everything public is not very secure, and it's much better to have everything encrypted and private and then just share data with the right people as needed.
Speaker 1 (24:28)
Of course, thinking about it in comparison to cash, how do you see digital currencies versus cash?
Speaker 2 (24:40)
That's really the cool thing about this. We are the closest to digital cash of any cryptocurrency out there. And it's like one of the things that appeals to me, too, is that we're noncustodial, for example. So that means you own the keys to your wallet and there's no service in the middle that can take your funds or anything like that. Whenever you perform a transaction over the mobile coin network, it's end to end and encrypted between me and whoever I'm paying. So it is as close to digital cash as you can get.
Speaker 1 (25:15)
Why does Privacy matter to you personally?
Speaker 2 (25:19)
To me personally, just historically, it's pretty clear that when governments have too much information, they can tend to abuse that privilege. Also, I think Privacy is a fundamental human right. To say it's, like, as much as free speech. To say that you don't need free speech is to say, like you have nothing to say. In just the same way to say that you don't need Privacy, it's to say you have nothing to hide.
Speaker 1 (25:50)
Yeah, we all have something to hide, or at least we should. When did you first realize that Privacy was important to you?
Speaker 2 (26:00)
Let me think about that. Like I said, I've just always been, like, really passionate about security. I remember, like, my first computer when I was a kid, my dad had a Candy 1000, which had two little disk drives. And even back then, viruses were rampant, and I just got really interested in that.
Speaker 1 (26:22)
Yeah. You took down a virus. I think you should share that real quick.
Speaker 2 (26:26)
That's right, yeah. Actually, in like, the year 2000, it was one of the first widespread Internet worms. It was called the Code Red worm. And Microsoft in Windows 2000 had enabled the web server iOS by default. Everybody's Windows 2000 computer had the web server enabled, and it had a remote coding exploit. People are basically able to run code malicious code on your machine remotely. And somebody made a worm that would infect your computer, and then it would just randomly Ping IP addresses, and it just took over the entire Internet. And for weeks, nobody knew how to fix it or what you could do. I thought about creating, like an antiwarm, but the original worm wasn't really doing anything too malicious except for just spreading. So having another worm that would chase it around would basically just make things worse by just creating more traffic. And I came up with the idea of I created a server that pretended to be a vulnerable Is server, and it sat there kind of like a honeypot. And whenever a computer would try to infect it, it would turn the attack around on the other computer and notify the owner of that computer that they were infected.
Speaker 2 (27:38)
So this is great. Did not create more traffic. And also. But the challenge is, takes forever because each computer is just randomly selecting IPS. So I solved that problem. I open source the server, and I've got tens of thousands of people to run it. So people are getting basically notified every couple of minutes whenever their server was infected. And then that was my first trip to San Francisco. Put me on Tech TV. The screen shares.
Speaker 1 (28:00)
Yeah. We'll include a clip in the show Notes.
Speaker 2 (28:03)
Speaker 1 (28:04)
So what's a Privacy technology that does not exist right now, but should exist?
Speaker 2 (28:11)
That's a good question. I think we're building it. Yeah.
Speaker 1 (28:16)
I hope that's what we're doing. I think so, yeah.
Speaker 2 (28:20)
Personally, I'm really excited about I think payments are just the start, but there's so much innovation happening in this space right now with zero knowledge proof. And we're definitely going to stay at the forefront of that innovation. And it's going to enable all sorts of things in the future. For example, smart contracts and private Dy and things along those lines.
Speaker 1 (28:38)
What do you think the future of digital payments look like?
Speaker 2 (28:44)
Yeah, we're definitely building it. But here's where I think the future of digital payments go. We're very fortunate to have the tools that we have here in the United States. But one of the reasons that I'm working at Mobile Coin is, like I said, we are building the entire thing from the ground up. And there's a lot of places in this world that don't have the luxury of our banking infrastructure. And as they move forward, should they copy our model of banking infrastructure or should they adopt something that's clearly better kind of blockchain based technologies? I'm excited to be part of that. And also I think one of the cool things about cash app was we were able to serve the underbanked and the unbanked people in the United States. People are excited from the banking systems either because they have bad credit or because the fees were too high. And I think we have a huge opportunity to do that here at mobile coin. That really excites me in the rest of the world and really looking forward to serving them 1.7 billion unbanked people around the world.
Speaker 1 (29:38)
Wow. Yeah. It's so easy to forget that. And it's exciting to think about being a part of the great leapfrogging that will happen for a lot of countries around the world as they build out their banking infrastructure.
Speaker 2 (29:53)
Yes, absolutely. I mean, think about all the people around the world that they can't accept payments. It's hard for them to run a business. They can't get loans, they can't just go to an ATM. All the stuff that we take for granted. I think once they have that, their lives and their economies will be able to take off along with ours. Rising tide let's sell ships.
Speaker 1 (30:16)
Let'S leave it there for now. Our guest today has been Bob Lee, former CTO of square, the creator of cash app and now chief product officer at mobile Coin. Bob, it's been so great to sit down and speak with you for our podcast. Thanks so much for coming on the show.
Speaker 2 (30:33)
Thank you, Brady. I really appreciate it. Great to talk with you.
Speaker 1 (30:36)
That's all for today. You've been listening to Privacy as a new celebrity, please subscribe wherever you listen to podcasts and check out mobilepoingradio.com for the full archive of podcast episodes. That's also where you can listen to our radio show. I'm Brady Forrest. Our producer is Sam Anderson and our theme music was composed by David westball. And remember, Privacy is a choice. We've deserve.