[Bootstrapped] Ep. 93 - The First 100 with Jimmy Soni, the Author of The Founders, The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley

My guest is Jimmy Soni, an American author, and former The Huffington Post managing editor. He is best known for A Mind at Play, his biography of Claude Shannon, and The Founders: The Story of Paypal and the Entrepreneurs Who Shaped Silicon Valley.

This is a masterclass episode on the skills, mentality, and stories of the greatest team ever built, The Paypal Mafia.

You will learn on this episode:
- Why it took Jimmy 6 years to write this amazing story
- What is Peter Thiel's exceptional skill that powered the growth of PayPal
-  How was he able to interview Elon Musk, Reid Hoffman, and Peter Thiel
-  How PayPal acquired the first 100 and went viral in a strategy that could have bankrupted the company
- The key ingredients common between Elon Musk, Reid Hoffman, Max Levchin, Peter Thiel, and David Sacks
- and much more ...

You can find Jimmy on:
https://www.linkedin.com/in/jimmysoni/
https://twitter.com/jimmyasoni

This is a must-read, and I would recommend purchasing the book. Here is a link:
https://jimmysoni.com/books/the-founders/
https://www.amazon.com/Founders-Paypal-Entrepreneurs-Shaped-Silicon/dp/1501197266

If you like our podcast, please don't forget to subscribe and support us on your favorite podcast players. We also would appreciate your feedback and rating to reach more people.

We recently launched our new newsletter, Principles Friday, where I share one principle that can help you in your life or business, one thought-provoking question, and one call to action toward that principle.

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It is Free and Short (2min).

Transcript

Let's do it. Broadcasting from around the world. You're listening to the first 100. A podcast on how founders acquired their first 100 paying customers. Here's your host, Hadi Rodwan. Good to have you on the show, Jimmy. How are you doing today? Thank you so much for having me. I really appreciate it. Thank you for stopping by. We've been trying to get that podcast recorded for a while, but here we are. I'm very excited. I was telling you off records that your book has inspired me because interestingly enough, it's one of the companies, PayPal, that has so many talent that came out of this company, which is unheard of. especially in the time back then. But before we dive into the story and more of the principles and the techniques they've used, I would like to introduce you first. My guest today is Jimmy Sonny. He's an American author and a speaker and former managing editor of the Huffington Post. He's best known for A Mind at Play and The Biography of Claude Shannon, and more importantly, The Founders, the story of PayPal and the entrepreneurs. who shaped Silicon Valley. I doubt anyone who doesn't read business news or books, business books hasn't come across the PayPal mafia. But for some context, they are the founders or entrepreneurs who founded PayPal. And they include Peter Thiel, Max Levitian, Reid Hoffman, Luke Nozick, and Elon Musk. Tell us, Jimmy, what inspired you to write about the story of PayPal and the entrepreneurs who shaped Silicon Valley? It's a great question and I appreciate you having me on and thank you for the very, very kind introduction. The best way I can describe it that I think will resonate with your audience is if you're an entrepreneur, one of the ways that you can come up with new ideas is you try to do something or you try to buy something or you try to find a service and you can't find it. And so then the sort of like a lot of people just don't find it and they move on. But then there are sort of this group of people, entrepreneurs. They can't find a service. They build it. And a lot of great companies have come out of that instinct. I don't think that's the default instinct. I don't think it's the only way great companies come about, but it is certainly one of the ways great companies come about. Well, if you apply that as an author, which I often do, one of the things that I try to do is if I look for a book about a subject, but I can't find it, then I kind of park it. And I'm like, huh, that's interesting. Like, why hasn't anybody done this book? Like, that's just crazy. Somebody should really do this because I wanted to buy it. Right? So there's a guarantee that at least one customer is going to buy it. It's going to be me. And over time, what happens is you start to sort of see, like, here are good ideas. Here are bad ideas. But basically, to answer your question, I looked for a book about the PayPal years. And I could not find one. These are some of the most. consequential entrepreneurs of our time. They continue to do amazing things. They built multiple, multi-billion dollar businesses. And it was just surprising to me that there wasn't a book about the company where they all worked together for like four and a half, five years in the 90s when none of them were successful, like most of them weren't successful. I couldn't understand why no one had done it. Like it was one of those, it was so curious. And then I started just scratching. I started doing like outreach to people, sort of reading everything that was available out there. When I had done sufficient research to recognize like there's an opportunity here and no one's done it, then I just had to go forward and try to write it. Makes a lot of sense. You've written that 2021, so it's recent, let's say, and all of these guys, you've interviewed them. And I believe one of the most challenging part is to reach out and collaborate your story. So tell us a little bit, go behind the scenes on What was the most challenging part and how did you get to meet these big entrepreneurs? You know, the book took six years and the reason it took six years is because it just takes a really long time. I mean, these are busy people, right? You think your Google calendar is busy, try being Elon Musk, right? Like try waking up and having multiple companies you're running that are as high stakes as what he's doing and then sort of see if you're busy. But that's why it took a long time. I'll sort of take a step back. Once I had the idea, I knew that in order for the book to be credible, I had to be able to interview these people. I could have written the book without interviewing people, but the books that do that, you can tell right away. You could tell someone's just had to like make something up or they don't have quotes from actual people who live to this event. Unless the history is like 100, 200 years old, then it doesn't matter. But for a book like this, where everyone is in their 40s, 50s, 60s, they're still around, they're still doing stuff. do the book with their cooperation. That doesn't mean it's with their blessing. It just means I like need them to talk to me. Nobody got to read the book before it came out and they'll mark it up or whatever. I wasn't gonna do that, but I did need them to participate. So I kind of had this like the operating thesis at the beginning of the project was very simple. I was like, well, if Peter Thiel and I could get to him, I had a friend who knew him, Ryan Holiday knew him and he had done. a project with him and I was like, okay, well, if Ryan can introduce me to him and I can get a meeting with him, then if he says yes, it will be easier for me to get everyone else to say yes, right? Because it's like kind of like a network. Like I can then go to the next person and say, oh yeah, I've interviewed Peter. And then what was interesting was I even said, if Peter says no, I'll find another project. I'm not staking everything on this. It's sort of like if he doesn't want to do it, there's probably a good reason why it shouldn't be done. He's a really thoughtful guy. He reads a lot. You know, he's very literate. And so I was like, well, if he says yes, let's do it. And if he says no, then I have the hilarious story of that time. I pitched Peter Peel book idea, right? Like it was very binary. It was like he either says yes and I go or he says no. And it's like, yeah, that was a fun day. And so what I did was I had my friend introduce me and I kind of just did a soft pitch. I said, listen, Peter, I'm this author. I've done these other books. And I had always thought there was sort of a book in the PayPal years, but specifically 1998 to 2002. not kind of all the stuff that came after. Like it's like that's been well covered. And he just agreed to meet. Like that was it. And so I kind of had this meeting. I knew what I was doing. I'd written other books. So it wasn't like I was walking in completely cold or like completely a novice at this. And I brought a copy of my other book, you know, and that sort of proves your like bona fides. And I kind of made this pitch in person. I said, listen, there's all of this attention that's paid to what you all did from 2003 to like 2020. There's like 17 years of history that people are obsessed with. But to me, the most interesting thing is this first company that you built and was successful, which is PayPal. And I said, and also you attracted all these people who went on to do that same thing, building companies in technology. And I said, it just seems to me that there's like a bunch of tales, stories, lessons. There's a kind of interesting moment in history. And no one's done it like no one has gone back and so documented that period. He kind of like laughed at one point. He goes, you know, there was a time. He said, there's a time in my life where I wanted to write the book that you're describing, the book that you want. You just pitched to me is the book that I thought about doing at one point in my life. And he said, but I don't want to do it anymore. He's like, I got like, there's like other things I'm focused on. So you should go for it. And I'd be happy to help you from there. I was off to the races because I mean, I didn't ask him for much. Like I think one secret was I never really asked the busiest people for too much. I would go long stretches without ever being in touch with them because you don't want to be the person that's sort of annoying them in their inboxes. But I was judicious in the asks I made. So an example is I knew that Peter knew Reid Hoffman, who was the founder and former CEO of LinkedIn. He was an early PayPal employee. And I knew that Reid would have a very different perspective than Peter on the PayPal years, but it was going to be super valuable, especially because he's been involved in so many other companies since the PayPal years. And so... If I cold emailed read, there's like, you know, a 5% chance of getting or something, maybe 1%, maybe even lower. But if Peter sent a note to read, my chances went up from let's say five to 50 or five to 60 and maybe even higher. And so I asked Peter for that introduction, but there were plenty of people in that orbit where I didn't ask for an intro because I just didn't need it. I could do the digging, find email addresses. And I mean, honestly, honey, like much of my life for a year and a half, two years Googling and looking for email addresses, figuring out who knew who, judging whether I was better off trying to get a warm intro or just sending a cold email, following up, my spreadsheets are color coded like you wouldn't believe, right? And so I have these hundreds of names on this document. I would just work through it and every day I'd wake up and I'd say, okay, five more names, five more names, five more names, five more names. And I just kept going and going and going. And by the end I had like 300 interviews with different people. Some of those people I interviewed multiple times. But the idea was that I just needed that initial little thing. And if he said yes, I was going to everything else I knew I could like make somehow fight, cajole, persuade, convince, you know, I could sort of find my way to do it. But that was the initial kind of start of the project. I've never actually explained it in that much detail before, but hopefully it helps somebody. It's an amazing, you know, story and context to the book because I believe. you found the person who's the glue of all of this, which is Peter. And in the story at the beginning, Peter was the very important person out there. And what I like a lot, and this is a question more to you, is I would like to know what do you think is the reason there was so much concentration of talent in one company? I mean, if not all of them are billionaires, Reid Hoffman, Peter, Elon Musk, David Sacks, they're billionaires and they're coming out of one company. So Is there a relationship between this and Peter? There's definitely a connection between the level of talent at the company and Peter's central role in the company. And I would offer just a few observations about it. The first is just direct. He was responsible for hiring a number of the first, let's say, 20, 30 people, maybe even more that worked there. He was at least interviewing them. if not recruiting them directly. So for example, Reed Hoffman is a friend of Peter's from Stanford, Reed becomes a board member at one of the predecessor companies that becomes PayPal. Peter is the person who meets Max Levchin and gives him his first seed capital that he needs to start the company that becomes PayPal. Ken Howrey at one time was the COO of PayPal. He is a friend of Peter's who comes through a Stanford network. And they're all these like Stanford people who come through the company because of Peter. And so as a direct recruiter, he's just like hustling, doing his job in 98 and 99 to like find people to staff up this company. I think the more interesting insight is he has an exceptional and other people have written about this, but he has an exceptional radar for talent. So he's very, very good at finding people who are talented and then bringing them into his orbit in some way, shape or form. There's a book by Tyler Cowan. named called Talent that actually goes into this a little bit. It's a great book. It's well worth reading. But Peter is an identifier. Even Tyler at one point said something, I think, on a podcast. His his work as an economist, as a public official, he said, My job is to spot talent. And Peter's like a million times better than I, you know, something like that. Like, Peter's better than I am. And so I think Peter's an exceptional identifier of talent. I would say that there's this third interested to me, the most interesting is this third bucket, which is I interviewed a number of people who would say some version of the following. They're like, you know, if I had been in Peter's position, I wouldn't have hired me. There were people who, for example, there's one person who just got laid off and she was not feeling particularly brimming with self-confidence and she meets with Peter and Peter right away recognizes like, this person is very talented and very smart and whatever, some things happens, dot-com bubble bursting, they got laid off. He hires her and he gives her a lot of authority to do the work that she's asked to do. And I heard this again and again that someone would be, you know, they'd be in some job that's like adjacent at another company. And Peter would just sort of spot talent, but they maybe had some failure along the way. Something happened and he would sort of give them the second chance that other people might not have given them. When he meets with Max Levchin the first time for breakfast, you know, Max today is a polished technology CEO who can be in front of conferences and audiences and communicate very persuasively. But at the time, like by multiple people that I spoke to, they said Max could not. Communicate. He wouldn't look you in the eye. He would look down at his shoes. Right. He was very smart, but he wasn't a good communicator. And Peter doesn't faze by that. He invests in him anyway. He gives him the first bridge loan that becomes seed capital for the company. And so I think there's this quality of his willingness to take a bet or on people that, you know, maybe don't outwardly project that they're going to be successful. And he does it again and again in the PayPal story. Let me give you another example. There's a gentleman that a lot of the tech world knows. His name is Roloff Botha. Roloff, both at today, is the head of Sequoia Capital, one of the world's largest, you know, venture capital firms. Roloff, at, during the PayPal days, he was an employee there. He rose to become CFO. It's not remarkable unless you know that he was CFO when he was like 25, 26 years old. I mean, he was a very, very young CFO. And he took the company public, which is like a big job. It's very, there's a million moving parts. There's the SEC, there's paper, there's investors, there's all sorts of things involved. Roloff was a part. responsible for stewarding that process. When Peter told the board that they wanted to appoint Roloff as CFO, there was a lot of resistance. And I had this board member actually say the following to me. He said, one of my biggest regrets from the PayPal years is that I did not support Peter's decision to name Roloff CFO, that I pushed back pretty hard because I didn't think that he was the right person for the job. He said his exact words to me were, I thought Wall Street was going to eat him alive, right? And it turns out that actually they were dealing with this sort of brilliant beyond brilliant person in Roelof who did effectively understand the business from the ground up. He built one of the key models, like the spreadsheet that helped you understand the business in a very granular way. And ergo, he could sort of understand how the business operated at a very fundamental level and that appointment of Roelof as CFO runs counter to much more seasoned people on the board who are like, you can't appoint a 26 year old. I guess that's not going to happen. Right. There are so many moments where something like that happens. And I think that I know this is a longer answer than you wanted, but it is one of the things about Peter's talent identification. It is not just looking at raw talent. It is looking at people who have kind of unexpected upside, right? That there's some reason that the world discounts them for some role they might play. And Peter says, no, here's how they could fit into our schema of our company. I've studied PayPal. I didn't study everything else that's gone on in Peter's life with Founders Fund and everything after. But my general impression is that this is a fairly constant feature of his life is that there are all of these people who I interviewed where even if it was unrelated to PayPal, I remember interviewing somebody and he said, yeah, you know, Peter like gave me money for a restaurant I was trying to start. Like, you know, it's like, like restaurants are notoriously bad businesses, like a very, very low margin, hard to get to work. And he's like, but Peter is just like, you know, all right, I'll support you. And like, you know, I'm happy to help. And there is this quality of unexpected bets of long shot bets. And there's a sort of second chances mentality to his talent spotting. And it was not by the way, one person or three. I mean, we're talking like many, many examples of this, where someone would say to me, I wouldn't have placed the bet that Peter placed on us. Yeah. This is one of the most amazing talents hiring and hiring. Right. Because as you said, in one of your interviews, A's hire A's, then B's hire C's, and then that's when things go into doom, when that B will take that down. And I think early on, it's very important that you always hire the A's because you have limited funds, you have limited resources, you have limited time. And if you get someone on your ship who's not the right person, everything falls apart. So I think that has been amazing that he was able to bring all of these together. One question that I had in mind for you is, what is maybe the most surprising thing that you've learned while researching and writing the founders? Anything that you did not expect but said, wow, this is not something I would have seen coming? I will just be flatly honest and say almost the entire book was an exercise in being surprised. And there's a few reasons for that. Let me preface my commentary by saying two thoughts. One is everyone thinks they know what... the PayPal mafia story is you probably know the mafia part, but you don't know the PayPal part, which is kind of the important part. It's how they met. It's how they had their first successes. It's where they kind of had an education and what it means to do technology entrepreneurship, right? So there were so much, so many new things I learned in the course of doing this that almost every day was some kind of surprise. But I would also say that like. I was also deliberate as an author in trying to go after surprises. Like if you just rewrite what other people have written, you're really not doing anything. You know, there's sort of like, what's the point then? You're kind of like you're not adding anything new. So I was like, wanted to hunt down new information. I'll give you one very big like one substantive surprise and one sort of silly surprise. Let's do the vegetables first so that we can get to the dessert. The substantive surprise, at least to me, is. Almost everybody listening is probably use PayPal. If you haven't used PayPal, you use Venmo, right? Which is owned by PayPal. It's great. It's a payment services company. It works exactly how you'd hope it would work. If you need something, you know, extra, they'll charge you a fee. What I learned in the course of doing this book is that PayPal, the payment services layer is really just a small part of the bigger operation. And PayPal's real success between the years of 2000 and 2002 was doing the thing that is notoriously difficult within fintech, which is fighting fraud. and rooting out bad actors who are using its platform to defraud others. And so I had this, so Max Levchin explained it to me. He said, you know, the payment layer, the payment is just a tip of a very big fraud fighting iceberg. And like what we got really good at was being able to use the data that we were receiving from users and use that to refine the system and refine our processes so that we could fight fraud better. And I think I described in the book, it's something like it was a fraud company masquerading as a payment company, right? So it's actually a fraud fighting company and a big data and analytics company, not a payment company, which is sort of counterintuitive. And I didn't know that going in. I thought, oh, PayPal, that's cool. They figured out how to make money transfer work. I'm sure that's really hard. And even Elon said, you know, money transfers are actually the hard part. He actually was very animated about it. He was like, anybody can do database money transfer. He's like, you just move this cell to this cell. You know, he's sort of very sarcastic about it in a very funny way. The hard part is the moment you build a system that can move money, you will have people who want to take money and do bad things with that money. And that's what you're trying to fight. And that's really what the company became is this vehicle to defeat fraudsters on the internet. That's one substantive surprise. I'll tell you the silly surprise. This is just because, you know, why not? I was always looking for information. So I'm writing about some of the people who are, you know, some of the most powerful people in technology, but I'm writing about them when they're not all that powerful. You know, like they're sort of like, they're not household names. Like nobody knew who Elon Musk was. And so I would go back and I would read things about them from their college years because for many of these people, they joined the company right out of college. So I'd go back to the college newspapers, which are usually digitized. It's like fun fact, you can find out stuff like from these digitized college newspapers. And I would look up like last names and I would look up like clubs they might've been a part of or things. And in the course of like really painstaking research to look at the word Musk for 12 years of the Daily Pennsylvanian, which is the college newspaper from the University of Pennsylvania, where Elon earned his degree. I found out that Elon had actually run for student government. I took his student government platform and I put it in the book because at the same time that he ran for student government, Reed Hoffman and Peter Thiel had also run for student government. And what's really interesting is when you look at their platform side by side, and then you look at the people who they are today. You can tell they're kind of the same people. There's humor in Elon's platform. He's being a little sarcastic. You know, there's a seriousness of Peter's platform. You know, there's like a kind of more friendly quality to Reid's platform. It's like, they sort of, they are who they are. And I found it interesting because for as well known as he is, it was just some of fact, a surprising fact about Elon. And part of the reason it's surprising is because he does not win his student government race. Reid and Peter do. They get elected to student government. Elon does not. So what was interesting to me was like, hmm, what would have happened if he got elected? Like would the course of history have changed if somehow he became a member of student government? Obviously I'm sort of joking, but not by that much. And so that's like a surprising insight. And for people who read the book, you'll see what his student government campaign platform was. Thank you for sharing these interesting surprises. The show is about your first 100. I know it's been 25 years since you've started writing the era of the growth of paper. But if we go back, back then. Can you recall how they started acquiring customers? What was the early strategy, especially when we're talking about a platform that back then was new? Today, it's easy to understand what Fintech and money exchange and all of that, but back in the 90s was not that new. So what do you recall of their acquisition strategies? It's an interesting question. So there's like, one of the things to remember is that the payment transfer. That is like the third, fourth or fifth, depending on how you count it. It's like one of the many iterations of the early company. But I'm going to focus on that because that's how most people know the company. I don't know if it was the first hundred customers, but the place that PayPal takes off and if not its first hundred, certainly its first, you know, hundred thousand. Here's just some context for people listening. Back in 1999. If you bought something on eBay, the then still young auction site, the company had gone public, but it was still young. You had to figure out the payment yourself. So, Hottie, let's say like you're selling those headphones and I bid and I win and the auction closes. You and I would negotiate the payment after that. Am I going to pay you by check money order wire transfer? Am I going to send cash? Am I going to do a digital money transfer? And so it was kind of this interesting last mile problem, like last digital auction mile problem, where we've done the auction. You've sold me your headphones, but paying you is really cumbersome. Like I have to negotiate, figure out how do I trust you? How do I know who you are? You say you are. And like, I've then got to pay you and it's not going to be lightning fast. If I'm mailing you a check, then getting that check to you is going to take time. Then you have to cash it. And then I have to wait for you to ship the product. That's like adding a lot of. friction into that transaction, something that, by the way, today, like we take totally for granted, these transactions are done millions of times a second every day. So into that broken payment transaction system steps PayPal. And what happens is that all these eBay buyers and sellers are like, wow, this is a great service. I can type in Hottie's email, type in a dollar amount, press send, and the money is sent. This is amazing. What goose the growth at the beginning. is a viral growth mechanism that later became kind of world famous. And what happened is that new signups to PayPal would automatically receive $10 into their PayPal accounts. That's interesting, but it's not what made it go viral. What made it go viral is if I referred you, Hathi, to the payment platform and you signed up with your email address, you would get $10, and then I would get an additional $10 just for referring you. And so this led to explosive growth. Because what happens is they have a concentrated base of users in these eBay buyers and sellers who need the product. They actually like need the solution. And then with 10 and 20 dollar bonuses, you are increasing the margins on any given auction. And so, for example, let's say that your headphones were 20 dollars and just by getting you to use PayPal, like I would get an additional 10. I've just cut the cost of the headphones by 50 percent. Or conversely, if I'm the seller in that equation. I've increased my margins by 50%. Right. And so there's this interesting thing that happens that like basically PayPal ends up like improving margins or decreasing costs, depending on which side of the equation you're on. And it takes off like crazy. The other thing that's important to remember is at the time, and I would say even today, but this is true of multiple communities on the internet today. But the way it was described to me is, and actually described also at the time is eBay was this very like. tight-knit community, like all the eBay sellers would like trade tips, they'd trade secrets. They were all working together because if you think about what eBay is, think of those auctions as like a lot of small businesses just like concentrated in a tiny little virtual corner of the internet. And so you have all these small business owners who are like, huh, I figured out how to do this 10% faster or this little hack or this clever trick. And they were helping one another and trading all these secrets on these very, very active internet forums. one seller, multiple sellers at a certain point, start to say, you know, this PayPal thing is amazing. And then it just spreads like wildfire. And so that is where the initial, the true viral growth for the company at the beginning was its success on eBay fueled by free money. And I say that like I'm laughing when I say that because one of the lines that Ken Howrey, who was one of the early employees shared with me, is he said, you know, PayPal's viral growth mechanism was the biggest transfer of venture capital to college students in history. And he was joking, but here's what he meant. A lot of college students were just opening up fake accounts to collect the $10, right? So they were just like siphoning off these bonus amounts. And for the company, this was a real threat. They dealt with it later, but at the time, it was the best incentive to try to increase growth very, very rapidly. And I would say, remember that this is like the era of the tail end of the dot-com bubble. where ideas like this were not thought to be crazy. This was customer acquisition. And in fact, what the company did was it thought about it as customer acquisition because the way Elon described it, he said, well, banks give away toasters. They're giving away money just in the form of toasters. Like we just gave away money. Like we're doing the same thing. And there was some logic there that actually the cost of customer acquisition for PayPal was much lower than other financial institutions trying to get people to open checking or savings accounts. So there's a thesis now. Even the people who live this story will tell you, look, that's like, this is also really dangerous thinking, because when you exponentially increase costs, even if you exponentially increase customers, you're exponentially increasing costs at the same time. And so you have a real problem there on the cost curve. But that was a problem they were able to solve later. At the time, getting those first customers was about eBay and the bonus incentives. Do you feel that the timing and the location played a big role in that, meaning that if I were to create PayPal, somewhere outside, you know, Silicon Valley in another country. Would this strategy would have worked? Because essentially, as you said, it's a double-edged sword. You're acquiring customers and those customers might not have a real lifetime value. They just collecting the check. They're growing the top line of PayPal, essentially more customers, but they're not actually customers. Would you think that would have not worked somewhere else in the world? You mean, would it not have worked outside of the eBay context or would it not have worked eBay and where these founders were, the network around them, the VC world. I mean, remember this is 1998, 1999. So, yeah, it's an interesting question. I mean, I think there's many different ways to slice the question. I'll just take a stab at a couple of thoughts. Timing is definitely central to the company's success. So if the company had debuted its email money mechanism five months earlier or five months later, it's quite possible that the company wouldn't have been successful. Because by five months later, there are many other players who are trying to do emailing money and eBay's got its own efforts that it's taking to reconcile the payments at the end of auctions. And if it had been five months earlier, I don't know about that one. I mean, it's possible that it would have been successful. It's sort of hard to run the counterfactual. But what I would say is that timing mattered in the sense that. There was at the beginning of these companies, so just context for listeners, the PayPal you know is the merger of two companies. One company is x.com, it was founded by Elon. The other company is called Confinity. It was founded by Peter and Max. Confinity has a product called PayPal. x.com also has a digital money transfer service. Those two companies join forces and become one company in the middle of the story. So what I would say is when both companies, meaning x.com and Confinity were starting out, This was still the era of like, hey, everything.com is going to be successful. And, you know, you can have no profits and it doesn't matter, you know, and there is that sort of wishful thinking quality that precedes the dot com bubble bursting and the NASDAQ losing 86% of its value and all of that. These companies are founded just before the bubble bursts. So they have access to money. A good example. When the two companies merge, part of what happens right when they merge is there because of the merger in part, they're able to close a hundred million dollar round of financing. Now these days, like, I don't know, that's not hugely crazily, you know, headline newsworthy, like plenty of companies close big rounds at that time. A hundred million dollars was unheard of, you know, it was a crazy amount of money. They closed that just a week before the markets start to collapse in 2000. And so there's this very fortuitous thing of like, they have all this money and they can continue. They bought themselves enough runway to try to make the math work on the company. And so to answer your question, like, yes, I think that timing had something to do with it. And the environment did too. Venture capitalists, they were willing to place this bet. And it was a, it was a bet. It was a lot of uncertainty around it. And so you're not exactly like guaranteed the success, but VCs were willing to invest in everything from pet food startups, you know. to like anything goes on a napkin if it had a dot com attached. So PayPal, in that context, doesn't seem quite as crazy, but whatever. The other thing I would say is landing on eBay was itself a kind of good fortune that befell the company. So let me explain why. If you were starting eBay today, Hadi, you would figure out payments. You would just pull some off-the-shelf solution. Maybe you use Stripe. Maybe you use. Whatever, like you'd find it because it's out there. Some payment processor would be very available for you to just take and put in where you need to do payments. They're like, I don't even know how many companies do this today. Like every company does this today. Given that wasn't available in 1999. And so PayPal was a truly new thing. A seamless email money thing was new and. it had organic interest from eBay buyers and sellers. It wasn't that eBay headquarters or corporate were like, hey, we really like this PayPal thing. Let's call them up and pay them a licensing fee and we'll use their technology. No, it was just eBay buyers and sellers. It was me and you. I buy your headphones and I'm like, hey, have you heard of this thing called PayPal? And you're like, no, I haven't. And I'm like, here, use my signup link. You'll get 10 bucks, I'll get 10 bucks and then I'll pay you for the headphones. And so that organic growth was only possible because there was no... pre-existing infrastructure of FinTech that eBay could use to finish the last part of the auction. And so I think that's a part of like, you asked the question, like, could this have happened at any other time or in any other place? I think eBay's weakness would eventually have been fixed. And in 2023, there's just no way you would build a platform like eBay where money is changing hands and not use one of the tools that's already available. By the way, you could use PayPal. Like it's, you know, you can use this thing that's already out there that we're talking about right now. I would say that final thing on this is, this is more a comment about character. Today, tech is normal. Like if a friend goes to work at a tech company, or like a, it's like going to McKinsey or like Goldman Sachs, or like, ah, okay, like it's become ordinary to do this. And not ordinary, that's pejorative. It's become kind of like acceptable. Let's put it that way. If you went to your parents and you said, I'm graduating from college and I have an opportunity in Miami with a.com that works on X. your parents would not like they'd be like, OK, that's like a normal part of the economy. Many of the biggest companies and many of the wealthiest people in the world made their money in tech. That was. Not really the same ecosystem in 1999, so you have a number of people who are part of the company who join a startup that is nascent at a time when like Yahoo has gone public, eBay is a public company, there are established companies. I would just say there's more like. room for maneuvering, room for being a little bit devil may care. And so they could take the risk of getting strangers on the internet money, like just handing out money. And it was okay. And I would say the other reason it was okay is because none of these people like had, they weren't famous. Nobody, you know, nobody was like paying attention to them in the way they pay attention to them. Now, if one of them tried to do this today, the rest of the world would be like, have you lost your mind? You know, like your Elon Musk, you're Peter Thiel. You can't just give away money. That's crazy, you know? And so I think there's a way in which like your degree of risk taking or willingness to take risks naturally kind of goes down as you progress further in your career because all of these people were at the start of their career, they didn't know any better. I'll end with this because it's an interesting discussion. I had this person who I interviewed, his name is Russell Simmons. Russell Simmons later went on to co-found Yelp. He was employee four at PayPal, three or four depending on. who got off the plane first, it's still a subject to debate. But Ross Simmons said to me, he's like, you know, I just didn't know that I didn't know the stuff that we needed to do to make this successful. I had so much ignorance about payments and FinTech that I was like, kind of like, okay, like we'll figure it out, we'll figure it out. And if it doesn't work out, I'll find another job. He talked to me about building, I think it was some bank transfer thing. And he's like, I just like didn't know that this was a thing that like, We should have strong regulations and rules around. We just built it. And if it worked, it worked. And then we'd live to fight another day. So that quality is a different answer to your question, which is, at that time in these people's career, that kind of risk was something they could tolerate. I am not sure that is something they could get away with or do today, necessarily. But that's a kind of different answer to your question, which is, yeah, I think timing mattered a lot. Like, it mattered that these people were in an era of their career. where they can take these very, very big risks. Thank you for the answer. I have a hypothetical question based on your experience in writing this story and the opinions you've gathered. But let's assume there's a championship team made up of five people. And you take one out of them, and there's no way without that person they would become championship. If we were to look at PayPal and you had to take one person out of that PayPal mafia, who would you think would be the champion? had been the most instrumental in making paper successful. That's a really hard one. It's one of these questions that, unfortunately, there's no really good answer because, in fact, I think I wrote this in the opening of the book, which is if you remove any one of the people I interviewed, there are so many people I spoke to that played such a key role, and that role couldn't have been played by anybody else. And so you kind of remove like a link in a chain, and the chain falls apart. And so it's hard for me to even answer that question with any precision because there's so many people who made like big contributions, not small things like massive, crazy breakthrough inventions or processes or something they did was like a massive contribution to the success of the company. And I would say that that's like actually, by the way, I'm not trying to cop out of answering the question. Like, Yeah, it's just what I mean to say is like, it's actually part of what I hope the book does. It punctures this idea that we have about one person, one company, right? Zuckerberg, Metta, Gates, Microsoft. You know, it's like we sort of have these myths of the thing. And when you really go back and you look at the day to day, you need the person, the one founder, but PayPal is a constellation of people. And like, you really can't take the company's success and map it to one human. one person. That's it. That's the only person, you know, and I would say that's really like the challenge in telling this story is that if you take Elon out of the story, X.com doesn't happen. If you take Max out of the story, fraud fighting doesn't happen. If you take David out of the story, product and growth doesn't happen. If you take Peter out of the story, financing doesn't happen. If you take Amy Clement out of the story, the integration of the companies doesn't happen successfully. You know, it's like I could go on and on and just sort of find... individual contributions from people where I'm like, well, I can't remove them from the story. Let me backtrack just a bit and say, I think that there is a team that I would say, like, if you're going to ask me, like if I had to answer, that there's a team that helps to build the fraud fighting tools and techniques that emerge in 2000 and 2001. And this team included product people. and it included like fraud analysts and it included people who are on engineering, who are building tools to try to understand what was happening with fraud of the company. If not for that team, the company just runs out of money. Like there's no way around it, you know? It's like there's lots of other things that could go wrong and the company could survive those things. Running out of money is like fundamentally impossible for the company to come back from because there was just not as much money around by the time the dot com bubble starts bursting. Divorce the far-fighting component out of the story of this company. You don't have PayPal. It's just impossible. Like the math doesn't work. Now, and just to have people, their burn rate was eight figures per month at some point. Now the estimates vary on exactly how much it was and obviously it changes day to day. It's highly variable number. But like I had heard from credible people who are part of the company looking at the numbers that they were burning somewhere between eight and $12 million a month during the summer of 2000. And that runway, that $100 billion runway, gets really short when you look at that amount of money. So at one point, Roloff Botha explained to me, he's like, we had about six months. He's like, we had six months. And in six months, this thing was either going to work or it was going to fail. There was sort of not a lot of time to dither because we needed to figure out how to bring the cost curve down. And if we didn't, it was over. And like, it's a startup. Investors know the risk they're taking, but it doesn't mean it hurts any less if the company has to go under. And so that. team that looked at those numbers, that designed the tools, that designed and developed the techniques, that is to me, in some ways, the beating heart of the company, because without them, there's no money to do anything else. I love the answer because essentially, it's not always the founders who are the centerpiece. They are important, of course, but there's brilliant people behind them that no one talks about unless someone digs into a story like you've done. So thank you for sharing this. But I mean, this amazing group. of brilliant individuals who came together to build this great enterprise PayPal. Peter Thiel I think said once that it's hard to build a startup, but it's harder to make it successful. And these people didn't strike lightning once, but several times. If you were to look at few ingredients or qualities that they possess that allows them to go back and rerun this playbook and build more important companies. What would those be if you were to collect few ingredients from different founders? What do you think are the main things that, you know, if someone is listening to this podcast can either go out and try to emulate so that they can become more successful? Hopefully. Yeah, I mean, we should just do a part two on this. Like it's such a I could have such a long answer to this. Right. And I'll try to condense it to some degree. I want to be careful about one thing I wrote in very deep detail and hopefully with some in a way that delights readers. I wrote about one company that succeeded between 1998 and 2002. The people who are part of that company are some of the sort of world's most famous people. There's certainly some history's most famous entrepreneurs. But I think it's really you have to be very careful in saying like here's the exact thing that they did that made them successful because part of what makes them successful is that they're learning from history. But they also know that like in technological entrepreneurship, part of what you're trying to do is you're trying to break history. You're sort of trying to say like, we're gonna do something completely different. With that disclaimer, I would say a few key ingredients that stood out to me. One is just relentless, insane hard work. I have to be honest with you, like I'm a pretty hard worker and I was blown away by the degree of hard work that was at the heart of the PayPal story. It is in some ways not fashionable today to talk about seven-day workweeks and all-nighters and the grind and all of this stuff. I know that there has been some considerable backlash to that over the last, let's say, five years. But if you are a small startup and you are competing against JP Morgan or you are competing against Visa or you are competing against MasterCard or you're competing against much, much better capitalized opponents who have regulatory capture. who have the government on their side, you're facing huge opposition. You really don't have many advantages. And one of the advantages that you have is that you can work on Saturday night. And a lot of those people who work those other places do not want to work on Saturday night. It's simple. Like you just have more hours. And I will tell you that PayPal became a place where it was common for a long period to work seven days a week and just keep going. And it was not the most fun place to work at many moments. It was. In fact, brutally hard, and it was especially hard for people with families and other commitments and all the things. But just as you can't take the fraud fighting away from the team and have the company be successful, you also can't take hard work away. It wasn't the kind of company that could have been built from nine to five. I would go up against anyone who says that. And part of the reason is because I know how close they came to failure. Right. It just required all of this hustle because you're also hustling against eBay. eBay didn't want PayPal to be successful for the first period of its life. Right. PayPal was this problem for eBay. And so eBay is doing everything it can to stop PayPal. So PayPal just has to be smarter and quicker, just so people don't think that this is abstract. Let me give you an example of how speed makes a difference. I, one of the things I did is I interviewed customer service agents who worked at the company because customer service agents have the best stories. Number one and number two, they're dealing with customers directly. They're not the CTO. They're talking to people who actually use the platform. I remember I interviewed this person. She was based in Omaha, Nebraska. That's where PayPal's customer service was. And she said to me, Jimmy, do you know the most amazing thing about working at this company? She said, if we like identified a problem and we called Palo Alto, meaning like called the headquarters of the company and we explained the problem, they said it was often the case that by the next morning, the fix was already implemented in the tech stack. They were like, it was already visible to us. And they would send us an email saying, hey, we heard you. Here's what we did. And here's what happened. Customers notice too. Customers notice that, wow, like if I complain about something on a message board. and it gets a lot of support, PayPal will just like read my message and then fix it. And they became ultra responsive. But you can't be ultra responsive if your response time starts during normal working hours the day after someone complains. There was a culture of just like aggressively wanting to cater to customers and aggressively wanting to respond to every one of these issues. There was somebody that described to me, they said, you know, sometimes when we would go in to pitch like something would happen and we would change the site for the pitch and it would all happen right away. So I would say one key constituent ingredient of the company success is just maniacal, obsessive hard work. And that starts at the top. David Sachs, Elon, Max, Peter, these people work all the time. It's one of these things that like people look at it and they're like, oh, like it must be so imbalanced. And like, no, you're just looking at the world the wrong way. They want to be successful in this way. They wanted this company to be successful and they were willing to do whatever it took to make it successful. But that requires a lot of long hours. So that's one. The second is I had this person, Max actually said this line. I think it's a line that's others have said it, but he said it in an interesting way that I put in the book. He said A's hire A's B's hire C's. So the first B you hire takes the whole company down. Now, I think he's like exaggerating for effect, but the principle is if you look at any one of the people who were in a given role at PayPal, now it wasn't perfect, no company's perfect, but you had a really interesting thing happen. Someone wrote about this on Quora too, by the way. So like somebody who worked at the company wrote about it on Quora. I think it was Keith Roy. And he said, you know, in every role, we had kind of like the ideal person for that role. It was like you had like the best person who could do a given job in the job. And that... is a testament to talent and to talent spotting and to really wanting to like continue to raise the bar at a company for who you bring in. That is a constituent ingredient of success. It also requires leaders to be okay hiring people who are much smarter than them, much more talented than them. I actually, now that I said that a lot, I remembered I had this moment when I think it was an interview that Max gave or I was an interview that I was doing with him. And he said, he said, you know, the best employee is generally the person who is frustrated by working and they want this job, the job they're applying for with you to be their last job ever and then they're going to go do a startup because they just don't like working for other people. He said, but that person is actually really great to hire because they're very entrepreneurial and they'll sort of push the boundaries of what you think they can do and then they'll be off. They don't want to stay with you that long. They're not there forever. And I think there's a lot of wisdom in that, that there are these very talented people who also have this quality of not really fitting in a traditional company environment just for the sake of getting to three because three is a good number. I would say the third thing is, and you can't really reverse engineer this, but pressure is really powerful. Pressure, when you face cost pressure, when you face financial pressure, it makes you move more quickly. The company had this fortuitous thing happen. The dot com bubble fortuitous, not fortuitous positive. It was actually sort of like fortuitous negative. The dot com bubble starts to burst in March of 2000. The NASDAQ slides from basically March to December of 2000 continues to go down. I mean, lose like this is the bloodletting. We went from an era where if you had a dot com on your company name, you could do no wrong. And then all of a sudden, one year later, dot coms were like the worst investment. And people were like, this is terrible, you know, because the company was stood up before the bubble burst, but had to survive the bubble bursting. There was considerable financial pressure for them to get things right, to fix things, to fix fraud. And pressure in any domain of your life, why is it that like you get all the work done when the deadline is due, right? Or like, why is it that like there are a lot of things like there's sort of like aphorisms about pressure. But I think the reason is because like pressure can be profoundly generative and motivating. And like this company was under massive pressure, they would either figure out fraud and figure out the financial model or they failed. There was no middle road, you weren't going to stumble along. It was either failure, or you figure it out. And I don't know how a company would reverse engineer that kind of pressure. I think most startups face it because you raise a little bit of capital and you're usually up against people have a lot more capital. But being in a down economy actually forced this company to like get very, very sharp about the things it needed to do. And by the way, that included big leadership changes that I write about. It included ousting two CEOs. It includes all these moments that are very dramatic and have very high stakes, but that pressure is important. So I would say those three things. But you and I could probably go on for another hour about that. Absolutely. Thank you for sharing this. If you had the superpower today to be transported back to meet one of the founders back then and to be the mentee, who would you shadow and why? Just one person. That is a great question. I'm going to give an answer that people don't expect. It's a board member. Actually, there's this guy, John Malloy, who's on the board. He was a little older than this team. He had seen more of life and business than this team. And he was a very, very good mentor to Max and to Peter and all these other people. He's not somebody who chases the limelight. He's not trying to be famous, but he is integral to the success of the company. Just describing him in other interviews, I'm like, he's like Obi-Wan Kenobi, you know, super important. That's the person that at the time, who was 1999. I wouldn't want to be mentored by any of these people because they're still figuring it out for themselves. But John, at the board level, being a little bit more seasoned and a little older. He was somebody that provided a lot of wisdom and he would have been somebody that if you were lucky enough to be mentored by him, it was a great gift. Thank you for sharing this unexpected as well as surprise. What's next for Jimmy? Are you writing something new? Yeah, I am. I'm working on a couple of projects. The one that's most relevant to your audience is that I'm doing a book on Steve Jobs. There's a lot that I've learned already. I've only a few months in, but... there's a lot I've learned about him that challenges the conventional wisdom about jobs. You know, he's not, he's obviously not alive. He passed away, cancer, but there's so much to learn from him still. I just always had that in the back of my head. I was like, you know, I just got the sense that somebody who was at the marriage of like design, humanities, technology, engineering, that he just has a lot of stuff to teach us. And there is a period of his life that has been a little underexplored. So I'm exploring that. We look forward for that. Very exciting, especially with the principles that come out from all of these big names. I've started a newsletter called Principles Friday because I love to learn principles from known people because you could use them in your day to day. If you were to choose one principle you learned from the founders and you use it today, what would that be? Oh, another great question. I'll give the one that comes straight to mind for me, which is unrelenting hard work is the difference maker. There's just no way around it. I think that in an era of quiet quitting, it's really useful to have examples of the opposite, which is PayPal and which is the people who made the company successful. They worked incredibly hard to make the company successful. And I think trying to have success without hard work, it is rare that it works. I mean, now I mean, it's just like unrelenting. hard work is the principle that I took from my experience interviewing these people and that I think they still do to this day. I mean, Elon is not stopping, keeps going and he works harder than I think many would argue works harder than almost anybody in his companies to make his company successful. In fact, when I interviewed engineers at PayPal, that was one of the things they said they admired about him. Thank you very much for stopping by, Jimmy. How can people reach you? I'm on Twitter, just at Jimmy A. Sony. My website is jimysony.com and I love to hear from readers, and I love to just interact with people, also a speaker, so I speak around the world about my books and other topics. So feel free to reach out. Thank you very much. We'll put all of this in the show notes. The Founder's Story of PayPal is an amazing book. It's a must read. I urge everyone who's listening to buy a copy because there's so many things that we never covered in this book. It's a 300, 400 page book, so there's so many nuggets there that you could use. Thank you again, Jimmy, for stopping by and have a great day. Well, thank you, Hadi. This was a lot of fun. Thank you so much for listening to the first 100. We hope it inspired you in your journey. 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