The 37-year-old entrepreneur was speaking to an audience of 1,000 at the Board of Trade of Metropolitan Montreal.
"Failure is great," said Stone, who co-founded the microblogging site in 2006 with Jack Dorsey, Noah Glass and Evan Williams. "It's really scary, but it's totally worth it, because you can't succeed at these exponential levels until you dramatically fail."
One failure of his own: Starting a company that allowed people to send broadcasts to iPods. "We thought we were geniuses, and it turns out it was called podcasting and people were already doing it," Stone said, according to the Montreal Gazette.
Twitter's beginning was not auspicious.
"When we started it, nobody thought it was a very good idea," he said. "But we kept working on it."
An early sign that the naysayers might be wrong: When Stone attended Austin's South by Southwest in 2007.
"One person tweeted to tell a few people to meet him at a bar, and in the eight minutes it took him to walk to that bar, it had filled to capacity and there was a line out the door," he said.
The site now has some 500 million users.
He suggested entrepreneurs not fear madcap ideas to solve problems–in fact, entrepreneurs actively should look for the most off-the-wall solution and see if it works.
"I learned creativity is a renewable resource," Stone said, referring to his first job, which was as a graphic designer. "It's a wonderful way of thinking about challenges, because it turns work into play. It makes everything fun, and you can always take another crack at something."
He also advised businesses to own up publicly to their mistakes. (Twitter had to do this as recently as last week. When it was revealed that the user agreement allowed the company to store information from contact lists of iPhone users for 18 months, the site apologized and changed the agreement.) Not surprisingly, he suggested Twitter and social media are a great way to do this.
"I think vulnerability is essential," he said. "For so long, companies and brands thought they needed to seem bulletproof. I think when a brand uses Twitter, they're able to communicate when they make a mistake. I think when you do things like that you reveal you're open and honest and willing to change and admit to your mistakes. I think brands are using it to really build trust with consumers."
He also said no one should spend hours on Twitter at a time – that it "sounds unhealthy."
"I like the kind of engagement where you go to the website and you leave because you've found what you are looking for or you found something very interesting and you learned something," he said. "I think that's a much healthier engagement. Obviously, we want you to come frequently."
Stone said his goal for any of his projects is that they help improve the world, make money and have fun. He advocates socially conscious business.
"It just makes good business sense because consumers and good employees are attracted to products and companies that care about the world," said Stone, who is vegan. "If there's a $5-million marketing budget, maybe, you can spend $4 million bringing clean water to a region in India, and another million making a big deal about that."
He told the audience he was proud that Twitter hired a corporate social responsibility employee before it hired its first salesperson.
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