Stripe Cofounder Patrick Collison on Innovation, Human Agency, and the Government’s Systemic Compulsion to Spend

After Charles Koch accepted the Milton Friedman Prize for Advancing Liberty in May, Stripe CEO Patrick Collison joined Ryan Bourne, the R. Evan Scharf Chair for the Public Understanding of Economics at Cato, for a wide-ranging conversation about the social role of businesses, the inexorable rise of government spending, and why America is still a beacon of hope for people around the world.

In addition to Stripe, which Collison cofounded with his brother in 2010, he also runs the biomedical research nonprofit firm Arc Institute, publishes books through Stripe Press, and provides funding for scientific research through Fast Grants. What follows is a lightly edited transcript of Bourne’s interview with Collison at the Friedman dinner.

Ryan Bourne: Most people in this audience have interacted with Stripe without probably realizing it. What’s your elevator pitch for what Stripe does and what your mission is?

Patrick Collison: Stripe makes money programmable. Software is eating the world, in the words of Mark Andreessen—we have all these websites, applications, programs, etc., that are trying to do something involving the economy, to move money, and Stripe is the thing behind the scenes that enables them to do that. We describe our mission as being to increase the GDP [gross domestic product] of the internet. And normally people look at us kind of funny when we say that, but maybe this is a room where you all understand or at least empathize with the moral import of GDP. And when we pursued Stripe, we decided to build this, in part, because we’re such big fans of entrepreneurship and platforms that enable bottom-up innovation and access. I’m a big fan of free markets, and Milton Friedman has long been an inspiration for me—I just wanted to say that here since I can’t normally say it, because I live in San Francisco.

Bourne: Milton Friedman famously said business’s social responsibility is to increase its profits. At Cato, profit is not a dirty word. We see it as a key indicator that drives social value creation. But I think it’s fair to say that both you and Charles Koch invest substantial amounts of your time, energy, and capital into the broader cause of human flourishing and human progress—in your case, through Fast Grants, the Arc Institute, and many other ventures. Why is that mission so important to you?

Collison: I think people sometimes misunderstand the Friedman remark about the imperative of profit, at least in the corporate context. You really have to think about the long run and the nth-order effects of anything you do. I bring that up because I think in a company context, it’s very easy to be much too profit-focused and short-run-oriented in a blinkered way. Stripe publishes books, and it’s not the most profitable thing that we do, and I don’t know that next year it will maximally increase our revenues or our margins. But as we think about the society that we think should exist, or that we think can be most prosperous on a 50-year time horizon, we think it is actually a good thing to do and is fully consistent with the conception of human agency and liberty that Friedman stood for.

Charles Koch often mentions Michael Polanyi, an amazing thinker, but there’s also his brother, Karl Polanyi. Part of what I take from Karl is that markets and our companies and all these things are embedded in a larger society, and it’s very important that we take seriously the characteristics of that larger embedding. If we actually take the idea of human agency seriously, we can’t just shrug our shoulders and expect somebody else to go cure these diseases. We can’t just shrug our shoulders and expect the government to automatically do it. We have to. We have to act ourselves and contribute where we can.

Bourne: We, as libertarians, obviously think that freedom is crucial to progress. Freedom, not just in terms of the institutions of a free society—the rule of law, private property, market prices, freedom of association and exchange—but also just the right to have a go, to experiment, to try things. We regard those as indispensable engines of both prosperity and that kind of frontier innovation that you’re part of. How much progress do you think we’re leaving on the table because of government regulation?

Collison: I think the answer is almost inevitably, a lot. In the United States, the Code of Federal Regulations has grown by a factor of 10 since 1950. I think there’s just a fundamental structural problem with regulation, with governance, where we get to measure the ills and the harms, and we see often very conspicuously when things go wrong, but when the person doesn’t start a business, or doesn’t expand their business, or finds it too costly to provide some product or service or to further some pursuit, you don’t get the same feedback in the system. Something that Charles often points out is that increases in government spending are ecumenical, and federal spending tends to increase monotonically and largely uniformly under both Republican and Democratic governments. So, in some sense, I think it’s the wrong response to just be mad at one party or the other. Clearly there’s some underlying dynamic here where there’s just sort of a systemic compulsion to spend more. And I think there’s something analogous with regulation.

Herbert Kaufman wrote this book, Are Government Organizations Immortal? He does a comprehensive empirical assessment and finds remarkably few instances of government organizations that have been sunset, and that’s at the organization level, not the individual regulation level. I think one of the central challenges that we face as liberal societies is, what does a reasonable equilibrium look like that doesn’t fly off in some unsustainable way on either the regulatory or the fiscal side? I’m not a political scientist, but it seems like an open problem.

Bourne: Let’s shift gears a bit. I’m British. You’re Irish. We’re both here in the United States. For all of the regulatory problems you just highlighted, this country has amazing strengths, and it’s fair to say it’s motoring ahead of Europe in many respects. You operate across many countries. How do you explain this? Is it to do with public policy? Is it entrepreneurial culture? Is there something just unique about Silicon Valley? What explains this big divergence we see?

Collison: Well, first, America is so good. I don’t know if you guys always appreciate that enough. I’ve noticed in my almost 20 years here that you guys are not always uniformly positive on the place. America is the best country in the world, and I mean that seriously. There are lots of other countries with lots of great attributes, but the confluence of circumstances that has been painstakingly created here in America in a hair’s breadth under a quarter of a millennium is just astonishing, and a beacon for people like me growing up in rural Ireland.

I think the world’s most ambitious people want to come here. I think the world’s innovators want to come here. The world’s scientists want to come here. And while yes, in many domains, the United States is overregulated, it’s typically much worse elsewhere. AI is happening here. The energy revolution is happening here. And the provision of credit outside the banking sector is actually an underappreciated contributor. Here in the United States, 80 percent of commercial lending happens outside of the banking sector. In most of the rest of the OECD [Organisation for Economic Co-operation and Development] that’s closer to 20 percent, so there’s a huge divergence. And it takes money to do new things. Stripe would not exist without the US’s dynamic venture capital sector, so I just have a lot of appreciation and admiration for those who risk their capital by funding these ventures.

Bourne: I want to bring us back full circle to the social role of business. Later in Milton Friedman’s life, he gave a speech at Cato in which he described what he saw as the suicidal impulse of the business community. He said that too often, businesses are willing to go along to get along by endorsing or not speaking out against public policies that are against their interests. He referenced public education and protectionism, but he also talked about Silicon Valley firms in the 1990s that were jumping in on the Microsoft case and urging the Federal Trade Commission to take action. In the past few years, I think it’s fair to say we’ve seen Silicon Valley types more willing to get involved in politics and more willing to defend their interests, in many respects. Why do you think that phenomenon is occurring now?

Collison: I think wokeism was a big contributor. Politics largely exists outside the home, but problems arise once it encroaches inside the home. There’s the Pericles line, “You might not be interested in politics, but politics is interested in you.” And I think as politics and DC became interested in a lot of what was happening in Silicon Valley, it started to have kind of larger societal import—or at least it was perceived to.

I think there’s something to the fracturing of the neoliberal consensus that prevailed in the ’90s, and obviously we’re seeing a lot more ideological heterogeneity than prevailed back then. But again, in that Friedman piece, at least as I interpret it, I think he was arguing against businesses being active in the political domain in a shortsightedly self-serving fashion, but not against their participation in the public domain at all.

And actually, the Pericles line about government being interested in you—I was curious about that line so I looked into it, and as far as I can tell, he didn’t say it. It’s just one of those things that takes off on Reddit or Goodreads or something. But he did say in one of his funeral orations, and this is from memory, so I apologize if I butcher it: “Though we love the beautiful, we’re not extravagant. And even though we love things of the mind, we’re not soft. And here [in Athens] individuals are not only concerned with their private affairs, but also concerned with affairs of the state.”

That’s one of the peculiarities about Athens. The person who does not participate in politics is not somebody who minds his own business, but someone who has no business being here. Pericles really judged people who did not participate in the larger policy around them. He thought this was very important for sustaining the liberties and the freedoms and the culture that he saw himself and his citizens benefiting from. That seems right to me.