Square is chasing an aggressive goal to replace credit cards, and Larry Summers can offer them a short cut. Fast Company reports that the Harvard professor will join Square's board along with Sun Microsystems co-founder and prominent venture capitalist Vinod Khosla. "Square is at a key point in our trajectory," said Square's founder and CEO Jack Dorsey in announcing the addition of Summers to their board. "And we know Larry will contribute tremendous wisdom and expertise toward our continued success."
This announcement carries considerable clout for the young company, both in Silicon Valley and in Washington. In Silicon Valley, Summers has a very powerful potential ally in Cheryl Sandburg, Facebook's COO and Summers' former protege. Long before Mark Zuckerberg set foot on campus, the two worked together in the Harvard's department of economics, where Summers served as Sandburg's thesis advisor. Sandburg later worked under Summers at the World Bank and served as his chief-of-staff at the Treasury Department, a position she left to work as a vice president at Google. The direct connection she may offer between Square and Facebook is unclear--the hope for a future partnership is obvious--but her new proximity to the company further boosts Square's reputation as a big deal in the Valley.
For Dorsey, who also co-founded Twitter, to call out Summers' "wisdom and expertise" glazes over the real appeal of bringing the two-time Treasury Secretary and former director of the White House Economic Council and Chief Economic Advisor for President Obama. There are few people with deeper connections to the most powerful people on both coasts when it comes to business and technology. With the May launch of Google Wallet, Dorsey needs all the connections he can get.
In Washington, Larry not only offers a heavy Rolodex of government officials but also an intricate understanding of the regulatory bodies with which Square will soon reckon. Despite Visa being an investor, Square's dependence on credit cards is waning with recent updates to its mobile presence. A new mobile app called Card Case, announced around the same time as the Google Wallet launch, allows users to make payments without a physical card. Pascal-Emmanuel Gobry at Business Insider thinks this is a sure sign that Square is positioning itself to do away with the need for the intermediary credit card companies which will put it in direct control of financial industry regulators:
Square is in the financial services industry, one of the most regulated. The biggest problem for startups who want to make financial services better are regulatory barriers to entry…
When the credit card companies realize what Square is up to, they will call up their friends in Washington, stir up fear about Square's security, and try to crush it through regulation. It's what almost happened to PayPal when it was growing up. Back then, the guy who ran their government relations was a man named Keith Rabois, now Square's COO and one of Silicon Valley's top powerbrokers.
Summers is arguably the nation's best defense against over-regulation. (Just look at his role as chief architect of the deregulation of financial markets in the years before the financial crisis.) If Jack Dorsey wants to build the future of money, Larry Summers can draw the blueprints.
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Adam Clark Estes
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