#233 Elon Musk, Peter Thiel, Max Levchin (PayPal)

What I learned from reading The Founders: The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley by Jimmy Soni. ---- Get access to the World’s Most Valuable Notebook for Founders at Founders Notes.com ---- [0:50] Your life will be shaped by the things that you create and the people you make them with. [2:45] A Mind at Play: How Claude Shannon Invented the Information Age (Founders #95) [3:17] Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future (Founders #1 and #30) [4:48] It is hard to find a lukewarm opinion about PayPal's founders. [5:29] To skip PayPal's creation is to neglect the most interesting stuff about its founders. It is to miss the defining experiences of their early professional lives —one that defined so much of what came later. [6:39] There's just so many times I put down the book and I'm like, “That is really, really smart, what they just did there.” [6:59] It perfectly captures when they [Musk, Thiel, Sacks, Hoffman, Levchin, Rabois] were just hustlers trying to figure it out. [8:31] For the next several years, the company’s survival was an open question. They were sued, defrauded, copied, mocked— from the outset. PayPal was a startup under siege. Its founders took on multi-billion dollar financial firms, a critical press and skeptical public, hostile regulators, and even foreign fraudsters. [10:14] From Henry Ford’s autobiography: That is why I never employ an expert in full bloom. If ever I wanted to kill opposition by unfair means I would endow the opposition with experts. They would have so much good advice that I could be sure they would do little work. [11:11] Confessions of an Advertising Man by David Ogilvy (Founders #89) Benjamin Franklin: An American Life by Walter Isaacson (Founders #115) Overnight Success: Federal Express and Frederick Smith, Its Renegade Creator by Vance Trimble (Founders #151) [12:03] A wall in the engineering office had two banners. One was titled The World Domination Index. The World Domination Index was a total count of PayPal's users that day. The other was a banner bearing the words Memento Mori —Latin for remember that you will die. PayPal's oddball team was out to dominate the world, or die trying. [15:37] At PayPal disharmony produced discovery. [16:22] Steve Jobs The Lost Interview Notes [17:36] Properly understood PayPal story is a four year odyssey of near failure followed by near failure. [20:22] He showed early signs of his hallmark intensity. He wanted to be the best at everything he did. [21:08] Tribe Of Mentors: Short Life Advice from the Best in the World by Tim Ferriss [21:50] Knowledge Project: Marc Andreessen [23:01] What would Shimada do? I understand how this guy thinks. I've studied how he thinks. Now I'm presented with a difficult decision. I'm running it through my own calculus—but to enhance that is like, let me ask what would Shimada do in this situation? That is genius. [23:47] The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers by Ben Horowitz (Founders #41) [25:19] Zero to One: Notes on Startups, or How to Build the Future by Peter Thiel (Founders #31) [29:25] Everybody engaged in complicated work needs colleagues. Just the discipline of having to put your thoughts in order with somebody else is a very useful thing. —Charlie Munger [31:14] The Hitchhiker's Guide to the Galaxy by Douglas Adams [32:25] "Surely You're Joking, Mr. Feynman!": Adventures of a Curious Character and "What Do You Care What Other People Think?": Further Adventures of a Curious Characte by Richard Feynman [35:32] He walked into Musk's his bedroom. The room was literally filled with biographies about business luminaries and how they succeeded. Elon was prepping himself and studying to be a famous entrepreneur. [38:32] Musk had learned that startup success wasn't just about dreaming up the right ideas as much as discovering and then rapidly discarding the wrong ones. [39:04] Keep iterating on a loop that says, Am I doing something useful for other people? Because that is what a company is supposed to do. Too much precision in early plans, Musk believed, cut that iterative loop prematurely. [40:10] My mind is always on X, by default, even in my sleep. I am by nature, obsessive compulsive. What matters to me is winning and not in a small way. —Elon Musk [48:20] PayPal prioritized speed on everything over everything else except in one category —recruiting. They would rather staff slowly then compromise on quality. [48:47] Max would keep repeating “As hire As. Bs hire Cs. So the first B you hire takes the whole company down.” [50:52] Do Things That Don’t Scale by Paul Graham [52:31] Is there something that you're not working on that could be a more simple version of what you're currently doing? [55:30] Why is that crazy? Because three years later Elon Musk will make $180 million from this broken situation that he's currently finds himself in. [55:48] Return to the Little Kingdom: Steve Jobs and the Creation of Apple by Mike Mortiz (Founders #76) [57:48] Liftoff: Elon Musk and the Desperate Early Days That Launched SpaceX by Eric Berger (Founders #172) [59:02] There is no speed limit by Derek Sivers [1:03:51] Make your product as easy as email. [1:05:08] Insanely Simple: The Obsession That Drives Apple's Success by Ken Segall (Bonus episode in between #112 and #113) [1:10:19] In Levchin and Thiel, Musk found something he rarely encountered— competitors as driven to win as he was. [1:11:36] “I really liked this Elon guy”, Levchin remembered thinking. “He’s obviously completely crazy, but he's really, really smart. And I really like smart people.” [1:18:23] Oftentimes it's better to just pick a path and do it rather than vacilitate endlessly on the choice. —Elon Musk [1:18:40] Finding the Next Steve Jobs: How to Find, Keep, and Nurture Talent by Nolan Bushnell (Founders #36) [1:19:39] He was going to tame us young whippersnappers with these like seasoned financial executives or whatever. And we're like, uh, these are the same seasoned executives at these banks who can't do jack shit, who can't compete with us. This doesn't make sense. —Elon Musk [1:21:16] The founder may be bizarre and erratic, but this is a creative force and they should run the company. —Elon Musk [1:22:26] Mythical Man-Month, The: Essays on Software Engineering by Frederick Brooks [1:23:33] Company leaders set a cultural tone of impatience. [1:26:17] Every moment of friction for the customer was fat to be cut. [1:31:00] Give a good idea to a mediocre team, and they will screw it up. Give a mediocre idea to a great team, and they will either fix it or come up with something better. —Ed Catmull in Creativity, Inc.: Overcoming the Unseen Forces That Stand in the Way of True Inspiration (Founders #34) [1:31:35] Peter Thiel’s tendency to buck convey convention had nothing to do with math or political philosophy. It had to do with people. He didn't give a shit. He cared about smart people who worked hard. [1:37:25] PayPal was a company of extremely aggressive people with a real bias for action. [1:38:24] You can copy what I'm doing, but I'm only focused on this. While payments is just one part of your gigantic business. [1:40:32] PayPal began this effort as it had begun much else over the prior years with a little planning, quick action, and faith in itself to iterate its way to success. [1:47:25] Just because someone shoots five bullets at you and misses does not preclude the sixth one from killing you. [1:47:33] A great Steve Jobs story [1:51:23] Reid Hoffman forces himself to regularly ask others, "Who is the most eccentric or unorthodox person, you know, and how could I meet them?" [1:52:25] It is hard but fair. I live by those words. —Michael Jordan in his autobiography (Founders #213) [1:52:34] PayPal's earliest employees reserve their highest praise for those who tread the same stony road— founders across varied fields of endeavor. "Those that bring the big ideas into hard, unpredictable reality are the practitioners, the high-leverage ones, and I admire them almost without reservation," Max wrote "One key ingredient of being this kind of person is an almost irrational lack of fear of failure and irrational optimism. —Max Levchin ---- Get access to the World’s Most Valuable Notebook for Founders at Founders Notes.com ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast ---- Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work. Get access to Founders Notes here. ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Senra?

  And finally, to Venice, to whom this book is dedicated. The idea for this project started when you were a one-year-old, and it was completed when you were six. The intervening five years have been among the happiest of my life, in large measure because you made them so. You too indulged my stories about Max Levchin and Elon Musk, and you offered wisdom of your own kind in my moments of doubt about the project. You are unlikely to remember most of what happened these last five years. I will never forget them. Authors of books like this should usually refrain from burdening readers with lessons. The reader is smart enough to figure those out for themselves. But there's a special acknowledgements-only exception to that rule for author dads.

• 0:44David Senra?

  And I'm gonna take advantage of it to offer you a message in a bottle for whenever you get around to reading these words. Here goes. "Your life will be shaped by the things that you create and the people you make them with. We tend to sweat the former; we don't worry enough about the latter." The story of PayPal isn't just people banding together to shape a product. It's about how banding together shaped the people themselves. The founders and earliest employees of the company pushed and prodded and demanded better of one another. I hope you find people like that too, and that you make things with them. That sounds simple, but it's awfully hard. I've been fortunate.

• 1:26David Senra?

  I have a sequence of those people in my life, many of whom have been named in the previous pages. You know them as Auntie Lauren, and Annie Grace, and Uncle Justin, and so on. They are the people who hold me to account. We don't just enjoy one another's company. We make each other better. Our friendship rests on productive discomfort, and we love each other enough to say what needs to be said. In a funny way, I'm not sure I can play that role for you. There are lessons I love you too much to teach you, so you'll need to go out and learn them for yourself. Fellow travelers will help.

• 2:04David Senra?

  Books need editors. Lives do too. As with all my advice, take it with a very hungry caterpillar-sized grain of salt. Besides, I may not have to worry. If you crack this book open at all, sat with it this long, and made it this far, maybe you'll be just fine. That is an excerpt from the book that I'm going to talk about today, which is The Founders, the story of PayPal and the entrepreneurs who shaped Silicon Valley, and it was written by Jimmy Soni. And that dedication to his young daughter comes at the very end of this incredible, incredible book that I'm holding in my hand. I was able to talk to Jimmy, and he sent me an early copy of this book. If you're a long-time listener to the podcast, you'll recognize his name. He wrote one of the best biographies I've ever read. I think it's Founders number 93. It's the biography of Claude Shannon.

• 2:49David Senra?

  And so, once this book arrived in the mail, it reorganized my plans for my entire week. I've spent most of the last several days completely engrossed in the book. And normally, when I sit down to talk to you, I'm excited. Today, I'm a little nervous. I do not think I'm going to be able to do justice to just how great this book is for entrepreneurs, for founders, for anybody trying to start a company and do something really-- anybody trying to do something really difficult in their lives. So, all I can do is just jump right into it, and we'll see how this goes. So, I'm going to jump right into the introduction. The very first word in the book is a quote from Elon Musk. And if you've read Ashley Vance's biography of Elon, you know this is his favorite word. And it says, "Fuck. You're making me rummage around the attic," said Elon Musk. We sat in his living room, but the metaphor still fit. Musk was about to tell me the story of PayPal.

• 3:31David Senra?

  As he spoke about the internet's development and PayPal's origins, the story spilled out about his first internship at a Canadian bank, about building his first startup, then his second, about what it felt like to be overthrown as CEO. By the end of the afternoon, nearly three hours later, I suggested we pause. We had only scheduled an hour together, and though Musk had been generous with his time, I didn't want to wear out my welcome. But even as he stood to show me out, he launched into another PayPal story. Forty-seven years old, Musk spoke with the enthusiasm of someone older asked to relive his glory days. "I can't believe it's been 20 years," he said.

• 4:11David Senra?

  It was hard to believe, not just the years that had passed, but how much PayPal's alumni had accomplished in them.

• 4:20David Senra?

  And then he goes into some of the influence that this PayPal mafia, the alumni network, has had. So it says, "Both in the foreground and behind the scenes, PayPal's alumni have built, funded, or counseled nearly every Silicon Valley company of consequence for the last two decades. For its admirers, PayPal's founders are a force to be emulated. For its critics, the group represented everything wrong with Big Tech, putting historically unprecedented power into the hands of a small clutch of techno-utopian libertarians. Indeed, it is hard to find a lukewarm opinion about PayPal's founders. They are either heroes or heathens, depending on who offers the judgment. And yet, despite all that, the PayPal days themselves are usually glossed over. If the early years come up at all,

• 5:05David Senra?

  they are typically granted a polite paragraph crediting PayPal for making the latter splashier achievements possible. The group's subsequent successes are so legendary and their controversies so conspicuous that they steal the oxygen from the origin story." And then these next two sentences, I double underlined, I even jotted in the book, nailed it. "To skip PayPal's creation is to neglect the most interesting stuff about its founders. It is to miss the defining experiences of their early professional lives, one that defined so much of what came later." He just gets it. That's exactly what you and I try to do here. If you're able to see the books that I highlight,

• 5:50David Senra?

  70, 80, 90% of my highlights come in the first half of the book, maybe the first 2/3 of the book, before they were rich and famous and successful. It is always more interesting to learn about who they were, like what versions of themselves built the foundation that their now current or future success lays upon. I saw a tweet from another, his name's Antonio. He read the book as well, he's an author. And he says something fantastic about, he's like, obviously highly recommended. You can clearly see that, I think you should buy the book right now. This is a book that you're going to reread. I'm going to wind up doing podcasts on years down the line. There's just so much information here. It's not only the personalities you get to learn, like, what was Elon Musk like in his twenties? What was Peter Thiel like in his twenties? What was Reid Hoffman like when they were at this age?

• 6:35David Senra?

  But it's also just, they're so creative. And there's just so many times I put down the book, I'm like, that is really, really smart what they just did there. It's so, it was so complicated and complex what they had to achieve. And yet their response and the ideas they came up with, it's remarkable. But what he said is, "The book is full of improvisation and gumption, fear and arrogance. It perfectly captures the drama of earlyish Silicon Valley and now, big players, when they were just hustlers, trying to figure it out." And so, aside from Elon Musk, nobody's already rich when this is happening. Elon had just sold Zip2.

• 7:20David Senra?

  He has this funny line in the book, I'll get to later. He's like, "Overnight, my bank account went from having $5,000 in it to having $21,005,000 in it." But everybody else is living in little apartments. Now, you fast forward, you know, they've had, they've built multiple, they've not only built, but also invested in multiple, multi-billion dollar companies. A lot of these people have, you know, multiple billion dollar net worths. But in the book, they didn't. And so, that line, "These are the now, quote unquote, 'big players,' when they were just trying to figure it out." And there's just another fantastic line that gives you an idea of what this book's about. "Several PayPal alumni observed that they had spent the rest of their careers seeking a team of comparable intensity, intellect, and initiative."

• 8:05David Senra?

  And then he gives us a little bit about the pre-history to PayPal. And since the PayPal we know today resulted from the fusion of two companies. Confinity was founded in 1998 by two unknowns, Max Levchin and Peter Thiel. Fresh off his sale of his first startup, Elon Musk had founded X.com. He still owns that domain to this day, actually. A company that helped users email money. So these started, the history of PayPal, they started out as competitors and then they eventually merged. This was a contest that raised the competitive ire of both teams and ended in a merger. For the next several years, the company's survival was an open question. They were sued, defrauded, copied, mocked from the outset. From the outset PayPal was a startup under siege. Its founders took on multi-billion dollar financial firms, a critical press and skeptical

• 8:49David Senra?

  public, hostile regulators, and even foreign fraudsters. In the space, this is why I tell you the stories in this book is just wild. It's incredible. In the space of just four years, the company survived the bursting of the dot com bubble. I think I have a line later on, but in case I don't. It really struck to me, it's like, so you have, they started the company before the internet bubble burst, right? But they said something like three quarters, like 75% of their growth, happened after, post-crash, which I thought was wild. In the space of just four years, the company survived the bursting of the dot com bubble, three investigations from state attorney generals, and a copycat built by one of its own investors. Many of its founders and early employees joined the company in their twenties. Most were fresh out of college.

• 9:33David Senra?

  Working at PayPal was their first taste of the professional world, and that's why you hear them, when you hear them speak now or write, they talk about, and they talk about in the book as well, it's like, they purposely hired for inexperience. They hired for, they prioritized intelligence and enthusiasm. They were not trying to recruit heavily from banks or other financial institutions because they didn't want people to come in and say, oh, this is how we did it there, so this is how we should do it here. That sounds very counterintuitive. But I would say it's extremely common in the history of entrepreneurship. Henry Ford writes about this at length. And he was talking about, listen, we're inventing a new way to mass produce cars. If you're doing something new, you cannot go and recruit experts. He says, let me quote from his autobiography, and these are words he wrote over 100 years ago.

• 10:18David Senra?

  "That is the way with wise people. They are so wise and practical that they always know down to a dot just why something cannot be done. They always know the limitation. That is why I never employ an expert in full bloom." If I ever-- this is a crazy sentence that Henry Ford's about to tell us. "If I ever wanted to kill opposition by unfair means, I would endow the opposition with experts. They would have so much good advice that I could be sure that they would do little work." And so I'm not sure if the founders of PayPal knew Henry Ford's words. I do know, because Elon's talked about Henry Ford quite a bit while studying Henry Ford, reading about him. I just don't know if he did it when he was this age. So he says, "Its earliest hires included high school dropouts, aged chess players,

• 11:01David Senra?

  and puzzle champions, often chosen because of their eccentricities and peculiarities, not in spite of them." Again, another very common theme. I got three quotes for you. One is from David Ogilvy's writing. He says, "Talent is most likely to be found among nonconformists, dissenters, and rebels." That is a great way to describe the early PayPal team. This is Walter Isaacson writing in Benjamin Franklin's biography about Benjamin Franklin's family and how that influenced him. And this is what he says. "The family produced dissenters and nonconformists who were willing to defy authority. They were clever craftsmen and inventive blacksmiths with a love of learning, avid readers and writers. They had deep convictions."

• 11:45David Senra?

  And then this comes from the biography of the founder of FedEx, Fred Smith. And it talks about Fred and then his executive team. At the very beginning, it says, "They were all mavericks, nonconformists, courageous, and crazy." We see a small example of that here. It says, "A wall in the engineering office area included two banners. One was titled 'The World Domination Index.'"

• 12:11David Senra?

  There's an entire chapter named that. It says, "The World Domination Index was the total count of PayPal's users that day. The other was a banner bearing the words 'Memento Mori,' Latin for 'remember that you will die.' PayPal's oddball team was out to dominate the world or die trying." And then I really like this observation by Elon here. So it says Musk would later correct an interviewer who offered that PayPal was a hard company to create. "The company wasn't hard to create at all," he said. "Rather, it was a hard company to keep alive." And then Jimmy talks about, the author talks about the fact that, you know, he's interviewing a ton of employees. He worked on this book for five years. And there's just a line here, it's funny that I underline this at the very beginning, I'm still in the introduction, and now I have read, the book's 400, the version of

• 12:56David Senra?

  the copy I have, I don't know what it will be when it's released, is 414 pages. And this is a great way to think about this. And it's just so, these stories are really important to read and to really absorb is because it talks about the true nature of business and this crazy endeavor that we choose to dedicate our lives to. And it's not clean cut, it's not cookie cutter, it is a dangerous environment. The way entrepreneurs represent themselves in like an interview is not the way they really are. And that's natural, that's anybody who's like, is going to present their best version of themselves to the public, right? But it says, "Many remember that the company was as cutthroat as it was creative, and it was unforgivingly intense."

• 13:38David Senra?

  When you read a book about the lives of somebody that accomplished a lot, or the early story of, like the early days of a company, the extremes are on display. And those can both be negative and positive. This is a positive, like in the aftermath, because these people are being interviewed, you know, many years later, and this is what one of the early employees said. "I felt like I was part of something grand." And something that Jimmy does that's really smart, he compares it to other historical collections of talent. So let me go into that a little bit here, because I thought this was an interesting idea, and I want to compare it to something I learned from this interview I watched a long time ago with Steve Jobs. So he said, "I began to wonder about other," so he's talking about, so first, let me give you some background before I jump into this. He's talking about when he was doing all the research on the Claude Shannon biography, that you realize that where Claude was working at the time, at Bell Labators, you had this

• 14:23David Senra?

  insane collection of talent. And this insane collection of talent is just extremely rare. And so he's like, these are special, like, when you, when you, when you have an example like that, you should study them and see what lessons you can learn from that. So he says, "I begin to wonder about other bell-like constellations of talent, including tech companies like PayPal, General Magic, and Fairchild Semiconductor." And so there's this British musician, his last name is Eno, and he winds up, Jimmy discovers that he had studied this previously, and he was trying to figure it out from like an artistic perspective. And he says, "As he looked into these revolutionaries, including people like Picasso and Rembrandt, he discovered them to be products of very fertile scenes involving lots and lots of people, some of them artists, some of them collectors, some of them curators, thinkers, theorists, all sorts of people who created a kind of ecology of talents."

• 15:08David Senra?

  And so he calls this "senius." So think of the word genius, but put S.C. on the front. "Senius," he said, "is the intelligence of a whole, an operation, or a group of people." It is also a useful way, now Jimmy's talking about his takeaway from that, "It's a useful way to think about the PayPal story. Properly understood as a narrative about the lives, intersections, and intersections of several hundred individuals, set at a moment in time when the consumer internet took shape. Many of their achievements emerged from the productive friction of the group. At PayPal, disharmony produced discovery." And so that's going into just how many fights. And you remember, these are friends, and in many cases, they went to college together, they're friends of friends, like, that's how they started out hiring.

• 15:51David Senra?

  It's just like friends, and then we'd hire, "Okay, you got a friend, you got a friend like you? Okay, let's see if they got friends like them." And so I think, I think Peter later on says something, it's like, "We just started like expanding on these concentric circles," if I'm not mistaken, if he said that, "but this idea of like, we're gonna fight and argue and get in positions of discomfort to make sure that we're actually solving this problem or getting to the right answer." Steve Jobs made this observation a few years before PayPal was even, PayPal was even founded. I have notes on, it's called Steve Jobs, The Lost Interview. And according to this, I took those notes back in 2019. I want to read something for you. And this is Steve talking. I'll leave the note, I'll leave the link in the show notes, too. So it says, well, this is my note.

• 16:36David Senra?

  It says, "This is a metaphor for teams working on a product that they are passionate about." Okay, so here's Steve. "There was an 80-year-old man that lived on my street. One day, he showed me a dusty old rock tumbler. We took regular, old, ugly rocks and some liquid and powder and put them in the tumbler. He said to come back tomorrow. The next day, we opened the can. We took out these amazingly beautiful, polished rocks. The same common stones that had gone in, through rubbing against each other, creating a little friction, creating a little noise, had come out these beautiful, polished rocks. It is through a group of incredibly talented people bumping against each other, working together, they polish each other. They polish the ideas."

• 17:17David Senra?

  And so that idea, now looking back at what Steve's saying, with the benefit of having read this book, that line really sticks out. "It is through a group of incredibly talented people bumping against each other, working together, that they polish each other. They polish the ideas." And then there's another great line here, why I think this book is worthy of study. "Properly understood, PayPal's story is a four-year odyssey of near-failure followed by near-failure." So I want to go to Max Levchin. He's the CTO and co-founder of PayPal. He's going to be, he may be the most, if you consider that his work wind up solving, him and his team wind up solving the huge fraud issue that came very close to killing PayPal.

• 17:59David Senra?

  He might be one of, he might be the most important person in the story. But in his early life, he's, he's growing up in Soviet Russian, or Russia, rather, or the Soviet Union, whatever you want to call it. And he, they don't have a lot of money. He discovers computers and he just completely falls in love. And there's a, there's actually a lesson here. So he says, "The notion that you could tell a machine to do things in the future was this profound realization," he said. "From now on, I don't have to know everything to get stuff done. I can just start writing it down and it will happen on its own later." So he gets access to computer, he's severely limited on how much time he can spend on a computer. This is in the 1980s. I think we're around 1986 or somewhere in there. And so he has to start programming with pen and paper, or pencil and paper, rather. And this wind up, and he says this wind up being good.

• 18:40David Senra?

  So he says, "To preserve his precious computer time, he devised a system, writing code with a pencil and paper. This learning process left exacting standards." And so he's talking about, this is, obviously, I'd rather program on a computer, but I don't have that option, so I'm going to do it this way. I'll do whatever it takes. And here's his punchline. "This made me very tenacious. I never really had the option to take the easy way out." And then Max talks about the importance of his grandmother. She was a physicist. She was an extremely strong woman. And he learns from her, it's not acceptable to give up. So it says, "She was fortitude personified, a woman who triumphed in a male-dominated field. Her grit seemed to him almost supernatural.

• 19:20David Senra?

  I had this living example of someone who would never surrender under any circumstances." So they wind up having to flee because they're worried that his father's going to be disappeared by the KGB. And so they wind up immigrating to the United States. And there's two things here, that a gift can change a young person's life. So if we have the ability to play this role in other people's lives, we should do so. And that you should treat life as a quest, which was fantastic. Immigrating to the United States was risky, but for Levchin, who had just turned 16, it was the first step on an epic quest. The language and cultures were new, but one thing remained, Levchin's love for all things computers. And in America, he finally got to use one at his leisure.

• 20:00David Senra?

  It was a gift from a relative, and it did something his old machines didn't. It would connect to the internet. Levchin soon became consumed by the World Wide Web and found networks and forums full of kindred digital spirits. And then there's some people that remember what Max was like in high school, and we're going to see PayPal was an entire company full of people like this. He showed early signs of his hallmark intensity. He wanted to be the best at everything he did. So then Max makes it to MIT and I just want to pull out something because I always think it's interesting when like they're recommending, when other people recommend, "Okay, you've got to read this book, you've got to watch this movie, it had a huge effect on me." And he uses this movie that he's going to watch over 100 times as a metaphor

• 20:43David Senra?

  for startups. And so he says, "He became obsessed with Seven Samurai. I thought it was the best movie ever. I watched Seven Samurai at least 25 times during the course of one summer, and I've now watched it over 100 times." He calls it his sole source of management training. So I went to go look to see, I was Googling, I was like, "Okay, where can I find this movie?" It's on HBO Max right now. I started watching. I watched the first hour of it last night. And then I also found him describing, I think this is in, I think this is, yeah, this is in Tim Ferriss's book, A Tribe of Mentors. And so Max says, "I don't have a book to recommend but a movie. I've watched the classic Seven Samurai more than 100 times. I used to give copies, copies to young CEOs that I mentored. I love the movie, but I recommend it to new managers and CEOs especially because it's

• 21:28David Senra?

  fundamentally about leadership. It is a small band that risks everything to organize a ragtag group in a fight for its life." Does that sound familiar? "To me, this timeless story is a near-perfect metaphor for startups." And then he says really quickly, and if you think about this, what exactly what we're doing, I just listened to this fantastic interview with Marc Andreessen recently. Somebody brought it to my attention, Joseph, who's been a longtime subscriber and constantly sends me great information to use for the podcast. He's like, "Listen, listen to this interview, listen to the last 10 minutes of it. It sounds exactly what you're doing with founders." And it's, it's Marc talking about like, you know, Marc's famous for reading hundreds of, like, he's just read essentially every biography

• 22:10David Senra?

  that I've ever come across. And he talks about why he does this. And he's like, "You build mental models of these people." So like, I have a little version of the people I read about. And he's talking on his shoulder, some of those people he winds up knowing in person. And so he, when he's presented with this decision, he's like, "Okay, knowing what I know about this person's way of thinking, what would this person say in this situation? What decision would they make?" And then he said something that was fantastic. And he said, "Developing this base of knowledge is a way to stress test your ideas." And so if you think about what you and I are doing here is like, we're building up this gigantic base of knowledge about the history of entrepreneurship, and then we can stress test the ideas in our day-to-day lives, in our working professional lives about what we know against the history of entrepreneurship, right?

• 22:49David Senra?

  And so Max drew us an interesting parallel here because like, listen, I watched this movie 100 times and it's a perfect metaphor for startups. And the the main character, his, I think it's the last name Shimada. So he's like, what would Shimada do? So I've, I understand how this guy thinks. I've studied how he thinks. Now I'm presented with a difficult decision. I'm running it through my own calculus of like, well, what I would do. But to enhance that is like, let me ask, what would Shimada do in this situation? That is genius. So then we get to this chapter about Peter Thiel and the early days, like the prehistory of meeting up with Max. There's something that somebody says here that I've seen before as well. And so before this, I guess Peter had set up like a hedge fund. It's called Thiel Capital.

• 23:33David Senra?

  And he was interviewing somebody, he says, Howery, his name's Howery, I thought this is his last name, returned to his dorm and said to his girlfriend, Peter might be the smartest person I've met in my four years at Stanford. I think I might work for him for the rest of my life. It was very interesting because if you read Ben Horowitz's book, The Hard Thing About Hard Things, in that book, he meets, I'm pretty sure Marc Andreessen was like 22 at the time. But it says, after the interview, I phoned my brother and told him that I'd just interviewed with Marc Andreessen and I thought he might be the smartest person I'd ever met. So we see a very similar experience that Howery's having with Peter Thiel that Ben had with Marc. So they wind up, they're all together at Stanford. And I think this echoes what Jimmy and Eno was saying at the very beginning, like you

• 24:16David Senra?

  try to place yourself in these, like these physical locations around people that are really smart and into what you're into. And so they wind up meeting up. There's all these, these, these people that are, I mean, there's like 50 different characters in this book. And so four of them are meeting up and having a meal together and just sharing like all their thoughts and just bouncing ideas after each other. And so it's Peter Thiel and three other guys. And it says, the four met at a local fast casual chain. They refer to these gatherings as the billionaires breakfast club. The level of self-belief they have is amazing. We all believed that the others were going to build big things. Oh, and this is 1998, mind you. Over meals, they discuss the latest developments in technology, philosophy, education, startups, and their predictions for the future.

• 25:01David Senra?

  And so one of them is this guy named Luke Nosick, who winds up saying, hey, I want to start my own company. Peter, you're, you're interested in startup investing. Will you make an investment? They're going to work together for a long time. So it says, just about everything was wrong with it. So Luke has this idea for like a smart calendar app. And then the reason I'm pulling this out is because if you if you listen to Peter speak or you've read his book, he talks about over and over again, do not build. If you want to capture lasting value, you can't build undifferentiated commodity businesses. He puts a like a cheek, like a pithy maxim on this. He says, competition is for losers. Again, I think that's him being a way to hook that idea in your brain. And this this may be an influence where he learns from this. So he says, or he learned this. Just

• 25:42David Senra?

  about everything was wrong with this idea, Thiel later said. It was a saturated e-calender space that had like 200 companies that were competing for dominance. Thiel would later cite his smart calendar investment as a rich vein of learning, a failure whose lessons included minimizing competition that would pave the way for PayPal's success. And then I think this is also an example of the importance of just putting your ideas out there, even if really no one's listening or no one's showing up. Thiel's giving all these lectures. I think this is at Stanford. They're at Stanford. Yeah, it's in Stanford's engineering center. And Max just didn't know who Peter was. I think he was like a friend of a friend, maybe. And so Max just pops into this lecture. And again, this is what if Peter said, oh, you know what, I'm not gonna, you know, maybe I don't have any ideas.

• 26:27David Senra?

  Maybe I don't have, like, there's a level of self-belief you have to have to think that people want to hear what you have to say, right? So what if he never did this? Well, then there's no PayPal. And what if there's no PayPal? Like, there may be no the very, like, think about all the companies that came out of the wealth that was generated from this one company, you know? Tesla, SpaceX. Elon's gonna wind up being the largest shareholder because he's crazy. There's many examples of that in the book. And he comes out with $180 million once eBay buys it, or maybe after the IPO. I'm not sure exactly when he sold. But regardless, he comes out of this environment with $180 million that he immediately puts $100 million into SpaceX, 70 million into Tesla. Again, these things are just so important. So if you have something to say, you have ideas, like, just even if

• 27:10David Senra?

  no one's showing up. Max is coming, I'm not being clear here. Max is coming to a lecture that Peter's giving, and there's like Five people there, six, it's just not a lot of people. So it says, "Small crowd notwithstanding, Thiel's talk impressed Levchin." Wow, if I ever do anything in the financial world, Levchin taught, that's the dude I want to hang with. This is obviously not a computer scientist, but he is a nerd. After the lecture finished, Levchin hung around to try to bend Thiel's ear. So remember that tweet I was quoting from, it's like, listen, they were just young hustlers trying to figure it out. They wind up launching, their initial idea is to do PayPal, like not PayPal, Palm, an application for Palm Pilots at the time. This is really the prehistory of PayPal. I'm going to read it to you and then I'll explain it to you.

• 27:53David Senra?

  "The effort arguably represented PayPal's earliest iteration. The company now boasted an angel investor with a closet office." So that's Thiel. Remember, you know, this guy probably has, I don't know, 10 or 20 billion dollars, whatever it is now. He starts his company in a broom closet. Essentially, that's all that was available. A CTO without air conditioning, that's Max, and he's coming from Soviet. Actually, no, he was coming from MIT, sorry. Comes from MIT to California, and he's got this tiny little apartment without air conditioning. And a CEO with a 2,100 mile commute, this is this older guy named Powers, who is commuting on the weekends. So he's got a job, I think he's in Chicago, and he's got to fly in on Friday night, work, and then come back on the early morning Monday and go back to work.

• 28:38David Senra?

  And so again, this is the prehistory of PayPal. You've got a company with an angel investor working out of a broom closet. A CTO with an apartment, a tiny apartment and no air conditioning, and a part-time CEO that has to commute 2,100 miles. And then it talks about the important relationship that Max had, Max and Peter had together. And it says, "Founders have to have somebody they can actually trust. There are so many people who are good at being good to you when things are great. But when shit's not really working, who do you objectively talk to? Levchin and Thiel had each other. They burned so brightly and so differently. They are one of the best examples of a great partnership." And so the note I left myself on that page was Charlie said the same thing. And I think this is a really important point that they're picking up on the relationship between Peter and Max,

• 29:22David Senra?

  and what Charlie realized in his very long career. And Charlie said, "Everybody engaged in complicated work needs colleagues. Just the discipline of having to put your thoughts in order with somebody else is a very useful thing." So if you read the biography of Elon Musk, you know that something he did, what he would read the newspaper and he'd just cold call people that he thought were smart and interesting and try to get them to meet with him. He winds up meeting this guy that's executive at Nova, or excuse me, Scotia Bank. And I just want to give you a description, he winds up becoming a friend and mentor to Elon. And his name's Nicholson, and I'm just giving you a real quick, like, his impression of meeting Elon when Elon was 19 years old. So it says, "He was very, very bright. He was very curious.

• 30:07David Senra?

  And he was already a very, very big-picture thinker." And so it's through this internship that Nicholson gets Musk at the bank, where Musk just has this, like, "These people are morons. If I ever have to compete, like, I would not be worried about competing against bankers." He says, if they're, this is Elon looking back at this time, "If they're this bad at innovation, then any company that enters the financial space should not fear that the banks will crush them. Because the banks do not innovate," Musk said. And so there's a couple of highlights here that are just really interesting. It's Elon on not needing business school, on the importance of studying physics, on reading, and then the importance of asking the right questions. And so he's a dual major. He's studying physics and finance?

• 30:52David Senra?

  And so it says, "If he redid his studies, if he had to redo his studies, he admitted he might have ditched the business classes altogether." Musk's passion for physics predated college. "I had an existential crisis when I was 12 or 13," he later said. "And I was trying to figure out what does this all mean, meaning life? Why are we here? Is this all meaningless? In the midst of that crisis, Musk discovered a science fiction novel that offered hope. It was Douglas Adams, The Hitchhiker's Guide to the Galaxy." And so he talks about the stuff, like, this actually soothed him. This is interesting, because I've had this own realization. Like, I really feel, I'll tell you in a minute. He learns, so he's talking about what he's learning in the book. "He learns of an old species of hyper-intelligent beings who had constructed a computer called the Deep Thought to seek an answer to the ultimate question to life, the universe and

• 31:37David Senra?

  everything. The Hitchhiker's Guide to the Galaxy soothed Musk's existential worries by suggesting that framing the right questions was as important as divining the answer. A lot of times, Musk explained, the question is harder than the answer. And if you can properly phrase the question, then the answer is the easy part." And so it's interesting that he was soothed by reading this book. I really feel if you read a lot of biographies, you read, especially of people that have already died, my own experience, that's the same word I would use, it's weirdly soothing, that you see life is going to play out, death is undefeated, it's not something you can avoid, so let's get to it, let's have a quest, treat life as a grand adventure.

• 32:19David Senra?

  To Musk's physics, asked the right questions, he started to read the work of Dr. Richard Feynman. I've read like three of Feynman's books, including his autobiography, I'll probably throw that on the podcast at some point. The internships exposed Musk to the world of technology startups, and he found people who, like him, labored around the clock, relished video games, and would solve math puzzles for fun. And then it goes into the behavior we see of Musk, what Musk was like in his early 20s, moves out to California, starts his own company, this is Zip2. This is when he starts his, I just work, I wake up, I open my eyes, I work, I work until I fall asleep. He literally lived in the office, and he would shower at the YMCA. So I'm going to fast forward through some of this history, but it says Zip2 grew throughout late 1996 and 1997.

• 33:03David Senra?

  One's of being like a technology company that powers media companies, essentially. So they get investment from Knight Ridder, SoftBank, Hearst, Pulitzer Publishing, and other companies, and the New York Times, actually. Only two years into its existence, the company powered sections of 140 different newspapers. The growth came at a price, though. Musk clashed with his investors and fellow executives, who raised questions about his leadership. He was impatient and perpetually sleep deprived. He was prone to setting unreasonable deadlines, chewing out other executives and colleagues in the open, and retooling code written by other people without asking first. And so he knows he's running a company like a maniac. He says later on, he says, "Listen, this is the first time I ran everything. I didn't even play team sports, I never managed people."

• 33:47David Senra?

  His aggressiveness and all those traits, I think he still possesses to this day, but he says that he's better at dealing with other people. I'm going to fast forward so we can get to the PayPal. It all came to a conclusion early the following year. Zip2 sold to Compaq for $307 million in cash. For Musk, that purchase meant a $21 million payday. To this day, that moment astonishes him. "My bank account went from $5,000 to $21,500," he said. He was 27 years old.

• 34:17David Senra?

  And then you're going to see, he does something like when he starts X.com, he just throws a bunch of his own money into it. He doesn't even try to raise investments. We see this over and over again. He'll eventually raise money in the future. And I think in every endeavor, but this idea, and it's like, why would it like, his app is like, he's full risk on, like, why would you do that? And part of the reason is because he has this great insight about the internet. And so he says, "The business types treated the internet as a 20th century gold rush. Musk saw it differently. I thought it was something that would fundamentally change the world. It was like a nervous system for the world that could potentially make humanity somewhat of a super organism." So then he starts X.com, and here's some people that are working with him.

• 35:00David Senra?

  And really, I'm bringing this to your attention, like, this is the impressions they had of Elon in 1999. "He's one of the greatest salesmen I have ever met. He's like a Steve Jobs. When he articulates something, he tends to find the kernel that will appeal to a broad mass, a broad mass of people intuitively." And then we're still in 1999. An early employee goes to Elon's apartment. And this is what he says. He was very high energy, very much, "Let's go. Let's get something going and do something. Build something, let's achieve something." He walked into Musk's bedroom. The room was literally filled with books, biographies about business luminaries and how they succeeded.

• 35:43David Senra?

  "It kind of clicked to me that Elon was prepping himself and studying to be a famous entrepreneur." It's funny, because that's what my bedroom looks like now. I've long since run out of shelf space. So then Musk talks about fixing a mistake that he made with his first startup. And he's got a really important insight about marketing, that it's just one human communicating to another. Do not overcomplicate it. Musk had outsourced the renaming of Global Link, that is, one of Zip2's products, and regretted it. "I had deferred brand and marketing and whatever to people I thought were domain experts," Musk said. "And then discovered subsequently that you just have to use common sense, and that's actually a better guide." And then we see this risk on. Attitude that he continues, I mean, for the rest of his companies, right?

• 36:27David Senra?

  Musk rolled much of his Zip2 windfall into X.com, investing 12.5 million and purchasing the X.com domain with his personal funds. At the time, I thought, he's nuts. Honestly, he's nuts. Indeed, staking so much of one's net worth on a new startup was noteworthy, in large part because Musk didn't have to. And so they made the point, at this time when he's trying to raise money for X.com, or when he's investing his money for X.com, it was a very friendly environment to people raising money for internet companies. And if somebody that just had a successful exit of $300 million could raise money easily, he did not have to do this. What was interesting to me is the signal, I didn't even think about this, like this other effect that it could have, the signal it made to other people that he was trying

• 37:10David Senra?

  to recruit, because he's saying, listen, they're throwing around, everybody's throwing around money, it's very hard to recruit engineers, I need the best talent. And so it says, this wind up, the fact that he put so much of like his skin in the game, people would choose him if the two offers were equal, it's like, I'm going with the guy that actually put money behind it because he clearly believes in it. Musk's personal investment made for a winning recruitment pitch. I'd make a phone call for recruiting or whatever and say, oh, he's got 13 million of his own money in it. A high, this was a, this was an example of a high-profile founder betting his fortune on the company. So I want to, I want to stay here for a second, because this is Elon post Zip2, but pre PayPal, right? We're in the X.com, his mentor hooks him up with this guy, Fricker, who is also used

• 37:55David Senra?

  to running his own thing. So this guy's not going to last very long, but there's just a lot of valuable insights on these two pages. A bunch of double underline's and damn, that's good, little notes that I left on this. So it says, Elon was very good at pointing to the future, just as he is today, and saying, the objective is over there, and I know it's over there, so we should all go over there. Vision weighed as much as data. There's a reason why entrepreneurs who succeed in technology get paid as well as they do. It's because it's not a straight line. It's not a straight line between, I build the factory, and the widgets come out, and the widgets get sold. Musk had learned, this is one of the parts where I underlined twice, Musk had learned that startup success wasn't just about dreaming up the right ideas, as much as discovering

• 38:39David Senra?

  and then rapidly discarding the wrong ones. And so, listen to what Elon says here. This is extremely interesting perspective. You start off with an idea, and that idea is mostly wrong. And then you adapt that idea and keep refining it. And then you listen to criticism. And then you engage in a sort of recursive self-improvement. Keep iterating on a loop that says, this is so perfect. Keep iterating on a loop that says, am I doing something useful for other people? Because that is what a company is supposed to do. Too much precision in early plans, he believed. Cut that iterative loop prematurely.

• 39:20David Senra?

  And so, this is just one, the first example of dozens in the book where you have people within a company fighting with each other. And it says, "Some coworkers found the conflict confusing. This is between Musk and Fricker. Others were less surprised. Musk and Fricker had both run the show in prior roles. Power sharing wasn't a particular strength for either of them." And what's crazy about how tumultuous, and just how messy this whole process is. PayPal's messy, the stuff that happens before PayPal's messy. There's four co-founders of X.com. Three out of the four leave before the PayPal merger. And so, Fricker sends an email to Musk, and he's just like, you know, are you not like all in on this? And so, it says Musk responded but rejected Fricker's premise that he was asleep at the wheel.

• 40:04David Senra?

  And so, this gives you an insight into just how crazy he is. And this is Musk writing to Fricker. "I think you may misread me a little. My mind is always on X by default, even in my sleep. I am by nature obsessive-compulsive. What matters to me is winning, and not in a small way." And that line right there, "What matters to me is winning," is the name of this entire chapter. And something came to mind as I'm reading this book, and it really comes to mind when I'm reading. There's just not very many non-obsessed people that we talk about, right? They are by nature obsessive. But this idea is like, you misread me. "My mind is always on X by default, even in my sleep. I am by nature obsessive-compulsive, and what matters to me is winning." I had this highlight.

• 40:48David Senra?

  I saw on YouTube and it's about highly successful people are usually insane. And there was a quote in there I wrote down and really this quote popped in my mind because there's a bunch of people like this in this book. And it says, "You think the people who run things are just sitting at home smoking big cigars. That's not true. I know lots of people like that. They work all the time, all the time, from the second they wake up until the second they go to sleep. And they don't just casually work. These people who are running things, the vast majority of them, first, are self-made. And second, this is really the punchline, they are so bloody efficient and smart, you cannot believe it. And they work 80 hours."

• 41:29David Senra?

  Before I finish this other punchline that I thought was interesting in this little clip, that is something I cannot tell you how many times I put down this book and said, "Damn, that's smart. Damn, I can't believe they came up with this idea." This idea, they are so bloody, at the very top, right? So I had this idea, and I don't have a good way to explain to you, I think I've mentioned to you before, but I think on the macro level, this is the way I have it in my mind, and I gotta figure out how to explain it better. But like on the macro level, I think people vastly overestimate the level of competition. Most people are not thinking about starting companies, even the large percentage of people that do think about starting it never do. Then you have a smaller percentage that do start companies and you just don't have to worry about those people at all. And then the further down you get on the line, the more micro you get, then you vastly underestimate the competition.

• 42:13David Senra?

  And so when I hear this person saying, "They are so bloody efficient and smart, you cannot believe it," I think of like a Jeff Bezos pops to mind. Highly intelligent, highly driven, and highly ruthless, and fully committed, every hour of the day. Go back and read their biographies, go back and read the early history of their companies. They're not lollygagging, they're not taking days off, they're insane. And so it says, "The people who are running things, the vast majority of them, first are self-made, and second, they are so bloody efficient and smart, you cannot believe it. And they work 80 hours a week. There is a small number of insane people who will do nothing but work 80 hours a week, no matter where you put them. If you put them in the middle of a forest with an axe, all they would do is run around chopping trees." And so when I'm reading this old email by a late 20s, he's 27, 28 years old when he's

• 42:58David Senra?

  writing this email, and he's like, "I think about this in my sleep. All I care about is winning." I think it's just so hard to understand the variance between a person like that and like an average Joe or Jane. They're almost like a different species. I want to get to this really interesting because a large influence of what they were trying to like, at least on the PayPal, like the Peter Thiel and Max Levchin side, they were very interested in creating like their own currency, like their own, almost like this own version of like their own little sovereign nation. So their initial idea, which I'm going to skip over, there's a lot more detail, you got to obviously read the book. I mean, I can easily recommend this to anybody building a company. There's just too much valuable information here. In fact, you can pick this up for like 25 bucks, it's crazy. But the initial idea is that they're going to beam money using Palm Pilots.

• 43:43David Senra?

  Max is studying up on cryptography and that's like a huge part of the initial product of, at this point, the company's called Confinity. And so they go to a conference and it's interesting because Peter Thiel is convinced that the Bitcoin creator was actually at this conference. So it says, "In 1999, Levchin attended the International Financial Cryptography Association Conference hosted in Angola. The annual gathering drew the leading players in academic cryptography and digital currencies. To this day, Thiel, who attended the 2000 conference, harbors a theory that Satoshi Nakamoto, the mysterious founder of the cryptocurrency Bitcoin, was among the attendees. To the assemblage of financial crypto experts, Thiel and Levchin came off as arrogant, uninformed outsiders, unaware of the decade of wasted effort before their arrival on the scene."

• 44:28David Senra?

  And so what they're talking about is they're trying to raise money for their startup and it's unbelievably difficult because of what they're choosing to do. I'm going to finish this, but the reason I'm bringing this to attention is this reminder, it's supposed to be hard. It took Jeff Bezos 50 meetings to raise a million dollars. He talks about that in speeches over and over again. It's like, oh, it took 50 meetings just to raise a million dollars. The most common question at these meetings was, what is the internet? That's crazy to think of, that's a trillion dollar company now. It couldn't even, it took 50 meetings to raise a million dollars. Venture capitalists, too, were enthused. During what Thiel called "an excruciating process," the team presented over 100 times, with pitch after pitch falling flat.

• 45:11David Senra?

  As rejections piled up, the team grew desperate. And so many times, reality is stranger than fiction. This is such a coincidence. These two companies are going to wind up at different starting points and then wind up at the same emphasis, which is this idea, they wind up pivoting to, both companies, Confinity and X.com, the idea that you should email money. And they wind up being neighbors. Confinity and X.com occupied adjoining office suites in Palo Alto. It started as a mere coincidence. X.com and Confinity were neither competitors nor collaborators. Confinity pursued mobile money transfer and cryptography, while X.com went about building its financial services superstore. So you think about the way to describe what Elon's idea was, like the Amazon of financial services. Each company thought the other was misguided.

• 45:56David Senra?

  Despite divergent approaches to financial technology, the company CEOs shared an obsession getting noticed. Just as Musk courted media attention for X.com, Peter made generating headlines a top priority. In this environment, Peter sees a lot of excess. The lesson here is, this is a good question to ask yourself before spending company money. Will this improve our product and help us achieve our mission? As the internet boom began, startup excesses flooded the Bay Area. Expensive team retreats, parties, and limitless alcohol, and pricey billboards. None of it, Teal and Levchin thought, credibly advanced a given company's products or mission. They would not use the millions that they had raised for such excesses.

• 46:38David Senra?

  So then you talk about, okay, how the hell do you recruit very talented people? You're not going to pay them a lot. And so Levchin just has a lot of good advice. You have to find undiscovered talent and you have to give them something more than money. You cannot compete with the large companies on money. And so it says, "To win recruits over, the team crafted an edgy sales pitch." So Levchin is going to describe this. He says, "Engineers are very cynical people. They're trained to be, and they can afford to be, given the large number of companies that are trying to recruit them in Silicon Valley. Since engineers think any new idea is dumb, they will tend to think that your new idea is dumb." And they get paid a lot at Google. So he's describing this years after PayPal, okay? So he says, "Why would they stop doing that to do your dumb thing?" So the way, and this is where he's going to get to his advice.

• 47:23David Senra?

  "So the way to compete against the giants is not with money. Google will outbid you." They have an, oh, this is such an interesting way to think about Google at the time. "They have an oil derrick that spits out 30 billion a year. To win, you need to tell a story about cogs. At Google, you're a cog. Whereas with me, you're an instrumental piece of this great thing that we'll build together. Articulate the vision. Don't even try to compete on pay. Meet people's cash flow needs. Pay them so they can cover their rent and go out. It's not about cash. It is about breaking through the wall of cynicism. It is about making 1% of this new thing way more exciting than a couple hundred grand

• 48:07David Senra?

  and a cubicle at Google." And then this might be, this is one of the most important ideas in the entire book. Because PayPal, the early days of PayPal, I'm just going to call it PayPal, even though it's X and Confindy at the time, you know where this is going, okay? PayPal prioritized speed on everything, over everything else, except in one category, recruiting. They would rather staff slowly than compromise on quality. And what Levchin says here is fantastic, okay? So he says, "Levchin kept the bar for talent exceedingly high. Even if that came at the expense of speedy staffing." And this is what he says. "Max kept repeating, A players hire A players.

• 48:51David Senra?

  B players hire C players. So the first B player you hire takes the entire company down." And so they found a way to limit the chance that a B player is going to slip in there. Additionally, PayPal's leaders mandated that all prospects meet with every single member of the team. And then we get our first introduction to David Sacks. David Sacks winds up becoming a major, he's a huge character in this book. He's all over this book. Peter had, Peter had to overrule everybody else to bring him in because Sacks thought the idea was like, you're beaming Palm Pilots is so stupid. No one has Palm Pilots. You have, he's like, you have the product and you bury the product on your homepage.

• 49:33David Senra?

  He's like, the product is sending money through an email address. So it's not in full chronological order here. They're going back and forth, but I want to give you an idea, like the energy of the company would convince recruits to join and take a chance. And they're just on it 24/7. There is no, like, they're, like we said earlier, it's a small group of insane people. Sacks invited Lee to visit the office at 10:00 PM and given the hour, she expected to stop by and then move on, but a short meet and greet was not to be. It was a full-on interview, she recalled. They're interviewing people at 10:00 AM, at 10:00 PM, which I was not prepared for. By the time she left at 2:00 AM, she had spoken to nearly every employee. And then she winds up accepting because she says, I can't really put words on it because I go by my gut. But the energy there, I hadn't felt that before.

• 50:17David Senra?

  And I'm like, there's something here. There's another, this, this person's name is Denise. It says, she came to meet the team. I left the interview not being able to tell you anything exactly about the product or much else, other than that those, these are the people that I want to work with. They're clearly hyper competitive, they're clear, she's emphasizing these words, these are her emphasis, not mine. Clearly hyper competitive, clearly workaholics, clearly want to change the world. I was just like, wow, I found my people. So now they recruit another person that you're going to know who is. This is the future founder of LinkedIn, Reid Hoffman. And this is fantastic because this idea that, that Paul Graham has, has popularized that at the very beginning of a company, you need to do things that don't scale. And you learn information, value of information when you're doing that.

• 51:02David Senra?

  And he says, like, in his observation of all these great companies, they all did things that don't scale at the very beginning. And in this case, doing things that don't scale lead to a breakthrough. And so this is what Reid says. We're living in the heaven of Palm Pilots. And we would walk into every single restaurant and go to each table. So they'd go, they're in Palo Alto, they're like, this is, you know, the center of tech. If the highest percentage of people adopting this new device and they don't even have it, what are we doing here? So it says, "We're living in the heaven of Palm Pilots and we would walk into every single restaurant and then we'd go to each table and ask how many people have Palm Pilots." The answer was between zero and one per restaurant. And that means that your use case can only be used between zero and one times. You're hosed. It is over on this idea.

• 51:43David Senra?

  Levchin, so it talks about this idea of what happens if you need to complete a transaction, you forget your Palm Pilot. And so they stumbled on this idea, their main idea, by trying to fix a problem that for a product they're not even going to continue to build. Levchin proposed a workaround suggesting that PayPal's website could be set up to send money via a user's email address. And this is the crazy part. When emailing money, remember the entire foundation of their company. When emailing money was first suggested, few recognized it as a eureka moment. And then looking back, it seems weird too, because they're like, listen, the email money demo dramatically simplified this sequence, which is I'm one person trying to pay another. You can pull out the Palm Pilots, you use the infrared, and then sometimes it works, sometimes it doesn't. Oh, you don't have Palm Pilot, you can't do this.

• 52:28David Senra?

  It's like, well, everybody has an email address. So again, a way to think about this is, is there something that you're not working on that could be like a more simple version of what you're doing? The email demo, the email money demo dramatically simplified this sequence. Within weeks, Levchin had become an avid user of the afterthought product even as he remained committed to the vision of the original. And he looks back, he's like, "I didn't understand how stupid I was being at that point." He says, "That should have been a clue. I had become an avid user of an afterthought product, but I'm still committed to the vision of the original that I'm not really using." And then think about this, go back to that idea that we had learned, we had just learned from Elon, where he's like, "You need to keep yourself in this recursive loop of self-improvement." And the loop, this iterative loop, is just keep asking, "Am I doing something useful for other people?"

• 53:13David Senra?

  Because that is the entire foundation of a company. And if you apply Elon's thought process to what Max is experiencing here, it's like, "Yeah, I'm doing something useful because I'm using it all the time. This email product's great and I'm not, I'm not using what I'm focused on." And to me, that's another really important point of studying the early days of their lives, because you see the mistakes and the struggles of smart-driven people. So back to the book, it says, "Another person who severely doubted the money beaming's viability was a recent hire who would play a pivotal role in the company's success, David Sacks. Thiel and Sacks had attended Stanford together. Sacks didn't pass the aura test." Remember this idea of where everybody has to meet them? So this is an early-- they don't name the person who said this. This is an early team member.

• 53:54David Senra?

  "The team objected in part to Sacks' total dismissal of the Palm Pilot product. It was a dumb idea. There were two problems, Sacks remembered. One is there's only 5 million Palm users, so unless you're with somebody who also had a Palm Pilot, the app is useless. And then there's the other problem. Even if you're with somebody who's got a Palm Pilot, what would you use it for? Nobody could really come up with anything other than splitting dinner tabs." And so I always think about what de Gaulle said, that when he was so weak, intransigence was his only weapon. And there's just example after example of Sacks being intransigent in this book. "In hiring David Sacks, Thiel pulled rank and overruled the team's objections. This was a rare move for Thiel, who believed Sacks a rare candidate. After all, few people would come into an interview guns blazing against their prospective

• 54:39David Senra?

  employer's flagship product. Thiel valued bracing honesty, and he trusted that Sacks would speak candidly." So it's another example. They're not running away. Go back to Steve Jobs' rock Tumblr story. He's like, "Don't run from disagreement. Run towards it." So while that's happening at PayPal or Confindy, or whatever you want to call it, we've got to go back to X.com. We're still in 1999, so they haven't linked up yet. This is the late summer of 99. This is crazy. We're about to read to you. So when I read to you first, I'm going to tell you why I think it's crazy. So in late summer of 1999, Elon Musk's X.com was a pale shadow of the digital finance behemoth he envisioned. X.com had no finished products and a hollowed-out team. The employee directory now contained a mere five names.

• 55:20David Senra?

  Missing were the company's founding president and COO, the CTO and VP of product development, the CFO, the principal architect, and the VP of corporate development. Why is that crazy? Because three years later, Elon Musk will make $180 million from this broken situation that he's currently finds himself in. So even though Musk has a large amount of his own money in the business, he decides to raise money. And so he winds up meeting with Michael Moritz at Sequoia Capital. Michael Moritz has a very interesting life story. He wrote that book that I did back in like founders, maybe 76 or something in there. It's The Little Kingdom. It's about Apple. It's like the first, he was at the time, I think he was a reporter for Time Magazine at that point in his career. I can't exactly remember. But he winds up writing that book.

• 56:05David Senra?

  It's like the first, it's like the first five or seven years. It's like a snapshot of the first five or seven years of the history of Apple, which is very fascinating. Winds up getting into venture, winds up becoming a billionaire. So it says, "Moritz cut an unconventional figure in Silicon Valley. He was an Oxford graduate with a Welsh accent. He was a former Time Magazine journalist with limited technical background. But his years of reporting honed his instinct for talent and ambition. In one famous deal, he secured a 25% stake in Yahoo for $1 million, back when Yahoo's founders were still working in a trailer." And so Moritz is going to invest in Elon. And he says something that's really interesting that Elon remembers. He says, "This is August 1999." And he says, "Moritz was like, dude, you should not have basically everything you own except

• 56:49David Senra?

  your house and your car in a company." Musk remembered. And then Moritz makes a good point. He's like, "If I knew what was about to happen, we might not have done it. Had Moritz and Sequoia known precisely what they were signing up for, he'd wondered if they had signed up for all, at all, rather. I think we waded into it perhaps the same way that Elon and then Peter and Max waded into it, with a level of ignorance." So now I always find it interesting to think about the traits they had back then that they still have now. There's just a memo leaked where Elon just, I think it was in SpaceX if I'm not mistaken. He was apoplectic on the use of acronyms. He wants simple language. So you see this at this point, they're hiring some older people and they call them gray hairs. I don't even think they're that old. It's just everybody else is in their early to mid 20s.

• 57:32David Senra?

  Another of the gray hairs who joined shortly after was Sandeep Lao. His interview with Musk was memorable. "I remember that I used the words 'change management'." And Musk said, "Stop using bullshit words." And then we see an example of Musk leaning from the front. I just read that book. It's on the first six years' history of SpaceX called Liftoff. It's also in the archive if you want to check it out. And we see that he, what they're about to say, what his employees at X.com are about to say about him here. They say the exact same thing, you know, decade and a half later, maybe like a decade later. And there's SpaceX, maybe less than that. So anyways, it says, "We slept under desks. Even Elon slept under his desk. He didn't pull himself away from that sort of thing. The engineers recall their CEO working elbow to elbow with them through knotty technical challenges. Most CEOs are not very transparent with their staff.

• 58:17David Senra?

  Elon was like, listen, we're in the trenches together. Let's do this. It was powerful to work with him because of that." And this is an interesting sentence. If you think about this business is going to be sold for $1.6 billion three years later. "We didn't even have an, I didn't have an office or a desk. I had a chair and a milk crate."

• 58:36David Senra?

  So there's several coups in the book. There's a coup at X.com. They're trying to get rid of Musk, which is not going to happen. There's a coup to get rid of the original CEO of PayPal when they joined together. Then there's another coup to get rid of Musk that's successful, and then Peter Thiel takes over. But this first coup just happened, or just attempted to happen. And really, I'm reading this section to you because one of my favorite ideas that I've ever read comes from Derek Sivers. And I'll leave a link in the show notes for the art. I've read the entire thing on past podcasts before. But it's this idea that there's no speed limit and that the standard pace is for chumps. And we'll see how fast they move here. "It was the summer of 1999 and X.com's banking heavyweights had tried to oust Musk as CEO, and then they fled.

• 59:21David Senra?

  The company, quote unquote, was essentially a mysterious URL, some loyal holdouts, Musk's dwindling capital, and an idea. Four months later," this is what I mean about there's no speed limit in life, right? You can go as fast as possible. It was wild to me. I just talked about this to somebody on the phone yesterday. Was that, because they have like several outlines in the book of like progress later on. PayPal goes from 1,000 paying customers to 10 million in less than two years. So it says, "Four years, or excuse me, four months later, that episode was ancient history." So all this happens in the next four months. "In the intervening period, X.com earned funding from a top-flight venture firm that Sequoia built a functional product, grew its engineering and management benches, and signed agreements with banks at home and abroad.

• 1:00:04David Senra?

  As ever, Musk wanted faster, more thoroughly dazzling results. There is no speed limit. The standard pace is for chumps." So there's a, there's a series of like disasters in the press for both companies and when they join together. And there's this weird thing that humans haven't figured out that especially in the age of the internet, if you dislike something, in many cases, talking about it can actually help it. It's like you should starve it of attention, right? You think of attention as the oxygen for that something. And so like a variation of this idea is the idea that it's the Streisand effect. It's like when you have an attempt to hide, remove, or censor information, it has the unintended consequence of increasing awareness of that information. And so you get all the negative press about this, this event that happened to X.com. And this is the result.

• 1:00:49David Senra?

  The extensive coverage, although it was negative, left X.com with more signups than before the negative headlines. And so in parallel, Elon and X.com are going to realize like it's, there's just so many regulatory barriers. He wanted literally, you sign in X.com and every single thing, your bank account's there, your investments are there, like it is your home for money. It is the Amazon of money, right? And then they wind up in the interim figuring out, hey, we can tie peoples, instead of having account numbers, we'll have, your account will be your email address and then you can send money that way. And he comes to a realization where Elon was like, this is, this didn't make sense because it would seem so stupid and trivial to me. And so he says, "It was trivial to do a money transfer. It's like super dumb. My kid has made one and he's 12.

• 1:01:34David Senra?

  He's saying it's just literally you have an SQL database and you're just moving it to another row in the database, right? He says, "They initially thought of it as a user acquisition engine, not as the end product." And so there's another early X.com employee, she's going to stay with PayPal for a while, her name is Amy Clement. She recalled that the X.com team thought that the person-to-person payment product is simply a user acquisition engine. It wasn't the core business. That was the, that was the online financial superstore. Indeed, Musk was frustrated that X.com's other products didn't generate the same excitement. "We would show people the hard part, the agglomeration of financial services," this is Musk speaking, "and nobody was interested. Then we'd show them the email payments, which was the easy part, and everybody was interested." And so what Musk was saying there about, "This is super frustrating, this was really

• 1:02:19David Senra?

  hard, I want to show it off, and yet you're interested in this thing that was super easy for me to do." There's a quote I keep on my phone, I always think about, and it says, "People pay you according to how valuable they find your work, not how hard you find it. Basic fact of life many don't understand."

• 1:02:35David Senra?

  And then there's also, like during this section, Musk picks up on another interesting insight. And really, what I thought about is like, oh, this is an interesting insight. Take something that already exists and marry it to a fast-growing technology, what they did. And this is why it was also confusing, and why is this so impactful? So he says, "It wasn't even that we invented money transfer. We just made it useful," Musk said. "Other companies had the idea of doing payments before Confinity or X.com. They just didn't do it right." And so, is it possible? Can you take something that already exists and then marry it to a fast-growing technology? A lot of people have email in the late 90s, but it's also growing rapidly. And you compare and contrast to their other ideas. It's like, whoa, there's 5,000 Palm Pilots. What are we doing here? Can't build a big business off that.

• 1:03:18David Senra?

  So at this point in the story, David Sacks is in control of the product at Confinity. And I'm going to compare this to something I learned about Steve Jobs, which is really interesting. "He soon discovered that the product manager was much about avoiding distractions as producing breakthroughs. As I took over product in the company, Sacks remembered, I kind of became like Dr. No, because I'd always have to say no to everyone's stupid ideas. It was really important that we not squander our precious engineering bandwidth on ideas that didn't make sense for the long-term strategy of the company." So that idea, that's a variation of obviously Steve Jobs' idea, that focuses saying no. Sacks became a zealot. He's got a really important idea here, is like, make your product as easy as emails. Fantastic. Sacks became a zealot for efficiency within Confinity and simplicity without.

• 1:04:00David Senra?

  A zealot for efficiency within the confines of the company and then simplicity without the company, so on the outside of the company. "When he saw, for instance, that the early iteration of the PayPal signup process..." So, I don't want to confuse you. PayPal was the product name before Confinity is the company. PayPal's the product name they came up with. Eventually, Confinity and X.com are going to merge. It's going to be called X.com, and the product will be called PayPal. Eventually, they're like, hey, the frickin' name of the company should be PayPal. Okay, so it says, "When he saw, for instance, that an early iteration of the PayPal signup process forced new users through seven webpages, he was horrified. On the office whiteboard, he outlined a new, single signup page form.

• 1:04:44David Senra?

  And after getting approval from Thiel and Levchin, Sacks marched all the engineers in and said, 'Build this.'" Sacks was like, "I do not understand why this is so complicated. It should be as easy as email." And then they start taking that saying and putting it on the company's walls. As easy as email graced the office walls. So I did a bonus episode on that book, insanely simple. The obsession that drives Apple's success. It's in the archive if you want to see it. And so there's a story in the book where these people are getting ready. They have all this demonstration ready. They're about to meet with Steve. They go through all this work. They're waiting for him to show up. He walks in and this is what happens. Mike was shocked when Steve Jobs walked into the room, ignored their work and walked right up to the whiteboard.

• 1:05:29David Senra?

  Here's the new application, he said. It's got one window. You drag your video into that window. Then you click the button that says burn. That's it. That's what we're going to make. And then he walked out the room. And so this is really interesting. The takeaway here is like you need to read emails from your customers. And so Steve Jobs is known for responding to email. Jeff Bezos was known for responding to email from customers. I say it's like a variation of what the founder of UPS realizes. Like you're getting filtered information for your executives and you get it unfiltered from your customers or your front, the people working your frontline. So that's why Jim Casey, the founder of UPS would always, whenever he saw a UPS truck, he'd pull over and he'd talk to the driver. He's like, because this guy's going to, he knows,

• 1:06:13David Senra?

  like he's the interaction with the customer. He's going to tell me to me straight as opposed to what I'm getting through my executives. And so they wind up realizing, hey, people are adapting our product in ways we didn't understand. And it was really important because eBay becomes the entire, like that's the platform they build their future success on. And so Sax recalled the precise moment the team discovered PayPal's use on eBay. An eBay user had emailed Confinity Customer Service seeking permission to use the PayPal logo on the auction page. She also wanted the team's help resizing the logo. The team wondered if the logo resizing ask was a one-off request or if there might be more people like her. Luke Nozick, Chad Hurley, Chad Hurley is going to be one of the founders of YouTube.

• 1:06:57David Senra?

  And David Sax huddled together and searched ebay.com for the term PayPal. Thousands of auction listings popped into view. It was one of these holy shit moments, Sax said.

• 1:07:13David Senra?

  And then there's just a bunch of like these great one lines, you know, because these people are just, the amount of lived experience they have is just incredible. And so this idea from, this one liner from Reid Hoffman, I thought was great to give you an idea of the story in the book. He says, "The cadence of learning at a startup, fucking intense, is an understatement." So there's a bunch of other companies that are flush with cash around this time, or in 99, 2000 era. And so they almost sell the company too early. And there's a bunch of examples like this. And so one of these companies had, I think they had IPO and they had a bunch of money. And this company I don't even know, it's called BeFree. It had just gone public a few months earlier and then soared like 700%. And so they're like, "Oh, let's buy your company." And they would have sold the company. Peter was, this is

• 1:07:56David Senra?

  Confinity, this is before, it's PayPal. Peter said, "Hey, you can have the company, just give me $100 million." And they said, "No." And then another great one liner, they're talking about how they hate, they abhor bureaucracies. And so Musk makes an observation about Peter. So it says, "Peter's even less tolerant of bullshit than I am," the famously administrative adverse Musk remarked. "My bullshit tolerance is low, but Peter's is like zero." And so there's a whole thing in the book where Peter's like, "I don't want to be CEO." He did it like reluctantly. Then they go public, he's like, "I really don't want to be a public CEO company." He kept trying to get out of this thing that he was in. He just like, he does not want to do this. He was much more interested in markets and money than managing people. He's like, "I don't want any of this." And I think about what the founder of the Four Seasons said, like, "It's good to know

• 1:08:41David Senra?

  who you are as a person and when following natural drift," because he says, "What we really want to do is usually what we do best." So then we got to the part of the story where they've both, both teams independently have arrived at the same product. And so now they're going to have to compete head to head, which is going to lead to their eventual merger. So it says, "As Musk followed the Confinity team's machinations, he began to respect the team's ingenuity. I thought, well, these guys are pretty damn smart. He concluded that X.com would have to do everything it could to win on eBay. To Musk defeating Confinity on eBay would likely incapacitate it elsewhere."

• 1:09:15David Senra?

  Thus began one of the more ferocious and unusual battles in internet history. X.com and Confinity launched a weeks-long war to win customers on eBay. It was, and they're talking about, so this is widely known, but in case you don't happen to know it, they're, they're, both companies are paying signup bonuses. So you get $10 to sign up, and then if you try to send money to somebody else, they get $10 to sign, to sign up as well. And these, these numbers, $10 is what it, it changes over time. Sometimes it's 20, sometimes it's five, but 10 is the one I think they got the most growth out of. So it says, "Thus began one of the most ferocious and unusual battles in internet history. X.com and Confinity launched a week-long war to win customers on eBay. It was kind of a race to see who could run out of money the fastest," Musk said.

• 1:09:59David Senra?

  And then we see the extremists. Somebody had a birthday, so it says, "Confinity team brought out a cake with the words 'Die X.com' written in frosting. Musk sent a memorable X.com-wide email with an innocuous subject, a friendly note about our competitors. The message body contained a single line: 'Kill them dead, die, die, die.'" In Levchin and Thiel, Musk found something he rarely encountered: competitors as driven to win as he was. And then Peter reflects about this point where they're competing. "It was incredibly exciting and incredibly scary." And then we get into more of Peter's perspective on this. Earlier than many of his colleagues, Thiel saw X.com as an existential threat. "Peter likes to confront things. He likes to know if he's wrong.

• 1:10:44David Senra?

  He's actively looking on how things could break. How could things fail?" Constantly. "Much more so and much more proactively than a lot of entrepreneurs that I know. Peter was determined that X.com could simply spend Confinity out of existence. Peter was good to recognize that they were a real threat. And Peter did not like to lose. 'Show me a good loser,' he once said, 'and I'll show you a loser.'" So they eventually arrive at the conclusion. And keep in mind, I'm skipping over massive parts. There is so much detail. Think about this. The book is 414 pages long. It only covers four-year history. The entire PayPal adventure lasts just four years. So there's a ton of detail in the book. This is interesting, though.

• 1:11:29David Senra?

  They realize they have to merge and the differing opinions. So it says, "Levchin grew to respect Musk." "I really like this Elon guy," Levchin remembered thinking. "He's obviously completely crazy, but he's really, really smart, and I really like smart people." Mike Moritz says, "This is fantastic. It's going to be a merger for the ages." Elon, though, "Elon Musk saw the acquisition as a surrender in a winnable war." And then a few pages later, this is just wild. And how did this wind up working out is the question here. "Anyone looking at the merger could have been forgiven for forecasting doom. X.com founders Elon Musk was opposed to it. Confinity's lead investor was skeptical of it.

• 1:12:13David Senra?

  Confinity's CTO Max Levchin had called it off once before. And X.com CEO Bill Harris had put himself permanently on the outs with Musk in order to make the merger happen." So then from here, they have this two-year sprint to solve all the problems, to make sure that the company can survive. It's an echo back to what Elon said, that the company was easy to start, almost impossible to keep alive. I'm just going to give you a list of some problems that they have that just must be solved. "More users meant more complaints. The companies faced additional scrutiny from government regulators. The Federal Trade Commission and the US Secret Service grew concerned over illegal transactions. The two companies had distinct user bases and distinct websites, and they had built their services on different development platforms, one on Microsoft and one on Linux. Basic questions like what to call the company's core product remain unanswered.

• 1:12:58David Senra?

  The merger also hadn't solved a fundamental problem: the new entity's combined burn rate. The joint company was on track to spend almost $25 million that quarter alone." And it's a funny quote from Reid Hoffman here. "If we were standing on the roof of our building throwing wads of hundred-dollar bills over the side, we would have been spending money less quickly." Musk remembered the myriad crises colliding at the point of merger. If the fraud thing is not solved, we're gonna die. If customer service is not solved, we're gonna die. If we don't have a revenue model, if our business consists of only costs and no revenue, we were gonna die. And so then Peter also realizes, listen, we're in a huge bubble. And he's young. He's 32 years old when he's saying this stuff.

• 1:13:43David Senra?

  And so he talks, he's like, "We gotta raise money right now." And he says, "Peter wanted to close commitments quickly. A rising from his belief that the US economy sat on the brink. I give the credit to Peter. He made the macro call. He said, 'We have to close on this because the end is near.' I wouldn't call raising money," and he talks about like how you have a sign of a bubble. "I wouldn't cause it," I don't know if this isn't Peter saying, this is another investor. "I wouldn't call raising money when it's like, 'Okay, of all the various people trying to smash down the door and give us money, who should we accept?'" Oh, this is, I'm sorry, this is Elon talking about, say, about this time. "I wouldn't call raising money when it was like, 'Okay, of all the various people trying to smash the door down and give us money, who should we accept?'" Musk recalled. "We were getting firehosed with cash. Peter remembered being cornered seemingly everywhere he went.

• 1:14:25David Senra?

  The crazy nature of it all confirmed Peter's suspicions about the market. I remember thinking to myself that it felt like things couldn't get much crazier and that we had to close the money quickly because the window might not last forever. Peter kicked everyone's asses to get that funding round done," David Sacks remembered. Musk, too, anticipated impending downturn. And he talks about all the crappy companies at the time. He says, "People need to do their homework and not blindly buy into companies that aren't well put together. There's a lot of Potemkin villages out there built on flimsy foundations and many will fall." That is from a speech that Musk gave in mid-1999.

• 1:15:00David Senra?

  Must said, and for young people who've never really seen a serious recession, anyone who's studied history knows that they happen and that a downturn is a rough experience. The timing was auspicious, just days after the close of the round, US public markets entered a downward slide that would ultimately wipe out 2.5 trillion in market cap and sour the mood on technology stocks. And then this is crazy. I think I feel like everything I'm saying, like starting every section, so this is crazy because it is. This is how important that one decision proved to be, to act with urgency, to think, okay, there's a huge change, we got to get this money in now, because there's a bunch of competitors that didn't have, weren't able to do that.

• 1:15:41David Senra?

  Back then, there were five to seven other online money-moving services that just got starved of oxygen over time. They all died out by the fall, so they didn't have the money and there goes not even half, almost all your competition. If we hadn't raised that $100 million round, there would be no PayPal, there would be no SpaceX, no LinkedIn, and no Tesla. There's a fantastic story about their customer service issues. It goes on quite a bit in the book. I want to give you the punchline here, though. So they go from a backlog of, there's one guy in customer service and he grabs David Sacks. He's like, "We have 100,000 unread customer service emails." And David's like, "You know, you could have told me this before you got to 100,000."

• 1:16:25David Senra?

  And so they go from a backlog of 100,000 customer complaints to zero in a matter of months. And they put an employee in charge of this with the last name of Anderson, and she just has a fantastic idea. So her original idea is they want to staff a call center to do customer service, to go through the complaints faster. Her original idea is, okay, she's from the Midwest, she's like, "I can go to Omaha and I can teach my extended family to do customer service from home." This is like the year 2000. And then, so she trains them, then they hire their friends, and then they go out and they just keep recruiting people. And so they go, and that's a very simple idea, a very smart idea, on how they go from a backlog of 100,000 customer complaints to down to zero. And then later on, this winds up being extremely important because later on, eBay has their

• 1:17:10David Senra?

  own like payment service that they are trying to prioritize, and one of the complaints from eBay power sellers is that PayPal's customer service is just so much better. And another crazy thing is like you can have an idea and then 20 years later. So they staffed this call center in Omaha and it says, to this day PayPal remains one of the region's largest employers. So an idea comes from just one employee saying, hey, how can we solve this problem? Let me think on my toes. And 20 years later, you know, you're providing employment for a large swath of people. And this is the takeaway. Years later, Anderson reflected on her scrappy approach to solving customer service for the company. I never stopped and thought, will this work? That question was completely foreign in those years. It was what can we do and how fast can we do it? And then this is an interesting idea.

• 1:17:54David Senra?

  Elon believes that you have to tolerate failures as a side effect of iteration. It says, I remember once Elon saying one thing, which was like, if you can't tell me the four ways you fucked something up before you got it right, you probably weren't the right person who worked on it. Musk echoed this sentiment. If there were two paths where we had to choose one thing or another, and one wasn't obviously better than the other, then rather than spend a lot of time trying to figure out which one was slightly better, we would just pick one and do it. And sometimes we'd be wrong, but oftentimes it's better to just pick a path and do it rather than facilitate endlessly on the choice. And then I think this book is a perfect illustration of the founder of Atari, Steve

• 1:18:37David Senra?

  Jobs' mentor, a guy who hired a 19-year-old Steve Jobs, was this guy named Nolan Bushnell. He wrote a book called Finding the Next Steve Jobs, which I read and it's also in the archive. He has this idea that sounds counterintuitive to other people that are not entrepreneurs. And he says, listen, only the arrogant are self-confident enough to push their creative ideas on others. And he said, Steve believed that he was always right and he was willing to push harder and longer than other people who might have had equally good ideas, but who caved under pressure. And so we see an example of that. Of the four executives at the top, Levchin, Musk, Thiel, and himself, Harris would say with a laugh, this guy was forced out, he was a CEO for like a couple of months, Harris

• 1:19:17David Senra?

  would say with a laugh, four guys and not a single one of us had an ego that would fit in a large gymnasium.

• 1:19:26David Senra?

  And one thing is, they disagreed on is that he wanted to bring in like these older people, you know, to, people with experience. And this is what, this is Elon on the value of being a young whippersnapper, which I thought was funny. He was, so Elon's saying, "He was gonna tame us young whippersnappers," that's his words, "with these like seasoned financial executives or whatever." And we're like, "Uh, these are the same seasoned executives at these banks who can't do jack shit, who can't compete with us?" Doesn't make sense, Musk said. He believed that whippersnappers like Peter, who's, who's lost troubled Musk, because Musk, again, a lot of stories I have to omit, Peter's not getting along with this Harris guy, and Musk isn't either. And so Peter leaves. He's eventually gonna come back, but he leaves. So he says Musk believed that whippersnappers like Peter, who's lost

• 1:20:11David Senra?

  troubled Musk, stood the best chance of innovating and winning. And so in Peter's absence, Musk gets to know David Sacks. And they had a lot of similarities. They were both immigrants from South America, or South, South America, from South Africa, and this is the important part, they both brought an intensity and energy to their work. And so they're gonna kick this Harris guy out, and this is another coup, and they're gonna put Elon in there. And really, the lesson here is you gotta live and die by the founder. Right or wrong, this episode centered, cemented the team's allergy to executive experience. This belief would emerge as a startup truism later, but at the time, the team since defied received wisdom. Standard operating procedure at the time saw boards installing a seasoned CEO to steer dot coms once they found their footing.

• 1:20:55David Senra?

  X.com's leaders took Bill Harris's rocky tenure as evidence that such supervision was not only necessary, unnecessary, but counterproductive. We saw what had happened at Apple when they brought in the Pepsi, the Pepsi executive, David Sacks said. We saw what happened in Netscape when they bought in Jim Barksdale. And then Musk makes just this a fantastic observation of why you have to live and die, die by the founder. And he says, "The founder may be bizarre and erratic, but this is a creative force and they should run the company. If someone's the creative force or one of the creative forces behind the company, at least they understand which direction to go in. Maybe they don't run the ship perfectly. The ship may be a little erratic and morale may be mixed. And some parts of the ship aren't working as well, but it's going in the right direction."

• 1:21:39David Senra?

  And so he says, he compares this to Steve Jobs as well. He says, "Musk admired Steve Jobs and had studied the period of his departure from Apple. The ship was sailing really well," Musk observed in the interim years between Jobs' departure and return. "Sailing really well, towards the reef." In May 2000, just shy of his 29th birthday, Elon Musk retook the title of CEO. So the idea that Musk and Sacks have at this time is like, "We need to reorganize it back into small teams of smart people." They changed towards semi-independent teams, which would lead to more rapid iterations. Both Musk and Sacks had observed an irksome startup paradox. "As a startup grows in size, it began to accomplish less work of substance."

• 1:22:24David Senra?

  They were far from the first to identify this paradox. In 1975, Dr. Frederick Brooks explored this conundrum in his software engineering bible, "The Mythical Man Month." So we're going to quote from this book now. "When schedule slippage is recognized, the natural and traditional response is to add manpower. Like dousing a fire with gasoline, this makes matters worse, much worse. More fire requires more gasoline and thus begins a regenerative cycle which ends in disaster. More programmers assigned to a given project," Brooks explained, "multiplied the number of communication channels." This is a really interesting idea. So they multiplied the number of communication channels. "The time spent talking, whether keeping the team members up to speed or building interpersonal relationships, was time not spent coding. Two heads, in other words, were not necessarily better than one."

• 1:23:08David Senra?

  Sacks decided to build small, self-contained units. Sacks and Musk believed small units freed innovators from the entanglements of bureaucracy. And then this is fantastic. We see the future founder of Yelp talk about the early culture that is emerging here. "In the view of X.com's leaders, growing organizations often make a crucial mistake. Employee happiness becomes a bigger concern than output."

• 1:23:33David Senra?

  To avoid this, company leaders set a cultural tone of impatience. So I recently had coffee with a founder and investor who listens to the podcast, this guy named Seth. And he said something about this founder that he knows. And when he said, I was like, hold on, I gotta write that down. Sorry, I'm stealing that line. And he says, the founder is intolerant of, completely intolerant of slowness. Be intolerant of slowness. I thought that was fantastic. So it says, the company's leaders set a cultural tone of impatience. They may, and they would make decisions by fiat when necessary. It was not an open democracy of ideas, we called Jeremy Stoplman. Company leaders set a cultural tone of impatience. Be intolerant of slowness.

• 1:24:18David Senra?

  And so I have notes in my book, in this book. I was like, I might buy another copy and literally just highlight and underline just the tactics. And the solutions that they come up with to some problems. Like, the story is fascinating. The narrative that Jimmy builds is fantastic. Getting to know the people when they were younger is fantastic. There's like dual, there's so many reasons to read the book. And one of them is just becomes like, you're going to see, okay, they have a problem. This is a unique solution they come up with. And it's just like, understanding not, you're not copying the what. You're understanding the how behind it, right? And so, one of the problems they have is they're getting killed because like they're transferring money. But if you're doing it on credit cards, they're paying percentages coming and going.

• 1:25:01David Senra?

  And so it was like, okay, well, if we're getting killed in transaction costs, how can we find a solution? And so one of them is like, well, let's see if we can encourage them to keep balances in their PayPal account. And then we can just transfer from internally, which costs nothing. If enough customers kept money on their accounts, the team realized that the company could transfer dollars between users at no cost. The internal transaction costs, like a milliscent, Musk explained. It's basically zero, and that is why you want to maintain balances. This process also produced some counterintuitive insights. For example, Musk insisted that the company continue distributing debit cards and even checks. If you're forced in order to conduct your life to move money out of PayPal, right? So it's like, I have money in PayPal, I sold on eBay, but now I gotta pay a bill. I don't have a check on this account, so I'll move it out. He's like, I don't want you guys to do that.

• 1:25:46David Senra?

  So it says, if you're forced in order to conduct your life to move money out of PayPal, he observed, you move money out of PayPal. So if you have, but if you have to write checks, so if you have to write checks and PayPal won't let you write checks from your PayPal account, you're going to move money to your checking account. And then he says, "Commenting on the modern PayPal's lack of checks," this made me laugh. "Musk became impassioned about the subject anew. So give them the goddamn checks. Sweet baby Jesus, what is wrong with you people?" Another great one-liner, important insight for you. David Sacks has brought something to their attention when they're building up this product. And he said, "Every moment of friction for the customer was fat to be cut." So there's this huge internal fight about Musk wanted to rewrite the entire PayPal product. He wanted it written from Linux into Microsoft.

• 1:26:31David Senra?

  There's also some other issues with company direction. He's a very young CEO at the time. And so they, there's another coup and they're going to wind up kicking him out. It says, "So began the clandestine effort to cut Musk, the co-founder and CEO and biggest individual shareholder, out of the company." And so this winds up happening, they wind up being successful. This is where Peter's going to come and be the CEO up until they sell it to eBay. And then he'll leave, everybody else leaves. But during this whole time, really what's remarkable is Musk's response to this. And so he gets an email from some supporters, internal supporters. And this is his response, "Thanks, folks. The whole thing is making me so sad that words fail me. I have given every last ounce of effort, almost all my cash from Zip2,

• 1:27:14David Senra?

  and my marriage is on the rocks, and yet I stand accused of bad deeds, to which I have not even been given the opportunity to respond." And I think the key takeaway here is just the way Elon, like, just, I'm really impressed the way Elon responded. So it says, "Musk didn't even seek retribution. Jeremy Stopman was an early Musk recruit, and he reached out to Elon in the immediate aftermath to ask if he and others should show their support by threatening to resign in Mask. Musk instructed him to stand down. Even Musk's long-serving allies within the company were thrown off by his moderation. Musk's position was born of realism. While I didn't agree with their conclusion, Musk said, I understood why they took the action they did. Peter and Max and David and the other guys are smart people, with generally good motivations. And they did what they thought was right for the right reasons,

• 1:27:59David Senra?

  except the reasons weren't valid, in my opinion." Musk referenced the biblical story of judgment of Solomon, where they're both saying, "Who's the mother of the baby?" And they say, okay, they can't agree. So the king says, okay, split the baby in half, which then leads the first woman to immediately relinquish her claim for the sake of the child's life. And then that means, this is a story in the Bible, which, and then the king says, you know, give the first woman the living child, and by no means kill him, because she is obviously the mother. And so Musk says, I view the company at least partly my baby. His voice tinged with emotion. If I attack the company and the people there, it's like I would be attacking my baby. I don't want to do that.

• 1:28:41David Senra?

  And then Jimmy talks about, you know, revisiting this difficult time many years later. There's another smart move by them here. They just, they let the past stay there, is the note I left myself. A few chose to remain mom because of genuine misgivings about how they asked to take place. Still others simply believe that long buried hatchet should remain so. Very smart. Leave the past where it is. And then two decades later, Musk could muster a bit of grudgingly respect for the revolt. It was a well-executed coup, he said, smiling. It's slightly complimentary that they can only do it when I'm not there. So they did it when he was, he was on like a joint honeymoon and fundraising trip. And they planned the meeting for when his plane took off. And then there's a memorable line in the book of the biography, but written by Ashley

• 1:29:26David Senra?

  Vance on Elon, talks about his level of pain tolerance that this guy had. It was in terms of like in 2008, both SpaceX and Tesla were near bankruptcy. And so this is an example of that. We see this even when he was younger. Founding a payment service startup amid the dot com bust represented a spring of hope and the winter of despair. Few experienced those fluctuations more viscerally than Elon Musk. From 1999 to 2002, Musk netted a fortune from the sale of his first startup, launched another successful internet company, minted a second fortune when the company went public, and launched a third venture. During those same years, he fought off one mutiny against him, nearly perished in a car crash, was ousted as the CEO of the company he co-founded, almost died again due to a

• 1:30:09David Senra?

  combination of malaria and meningitis, and lost an infant son to sudden infant death syndrome. And this is all in three years. He decided, once he was ousted at PayPal, he wasted no time. He already knew what he was going to do. And he says, "The new ventures for Musk began briskly. There was no time to lick wounds or nurse grievances. Just months after the coup, Mark Wooler took Musk out for drinks. I asked him what he was going to do next, and he said, 'I'm going to colonize Mars.'" This is in 2002, mind you. "I'm going to colonize Mars. My mission in life is to make mankind a multi-planetary civilization." And I'm like, "Dude, you're bananas." So now Peter's in charge. Peter's main thing, again, he's not optimizing for experience.

• 1:30:52David Senra?

  He would bet that's, he would just wanted to hire really smart people, and he'd bet that they'd figure it out. We saw Ed Catmull, founder of Pixar, said the same thing. He's like, "You can give a mediocre idea to a smart team, and they'll throw it away and figure out something new." So it says, "Peter was both an example and a proponent of putting talented neophytes in charge. Early on, Peter appointed Reid Hoffman as CEO, cutting against his board members' advice. He installed Sacks as VP of Strategy despite concerns about Sacks' congeniality. He promoted a fresh-out-of-business-school Roloff Botha to CFO and put a young attorney named Rebecca Eisenberg as the first legal chair on the IPO. Later, talk of Peter's contrarianism would focus on his decision in markets and politics.

• 1:31:34David Senra?

  But during the PayPal years, his tendency to buck convention had nothing to do with math or political philosophy. It had to do with people. He didn't give a shit. He cared about smart people who worked hard." So there's an entire chapter called Igor. It is about Max and his team solving the, they were losing tens of, like a $10 million a month or something like that, just on fraud. And if they could not solve this problem, it's over for them. And so there's, again, I says, there's more detail in the book, but really, I want, there's just like two, three paragraphs here. And I wrote, "Fascinating. What business are we actually in?"

• 1:32:18David Senra?

  And the whole time, I'm thinking I'm reading a book on a payment company. He's like, "No, that's not the business that we're in. That's not the innovation that PayPal achieved in Max's perspective."

• 1:32:28David Senra?

  And so he says, "With these evolutions PayPal effectively reinvented itself as one of the first big data security companies. PayPal is actually, more or less, a commodity business," Levchin observed. "It sounds very cool and innovative, making money on the internet, or, excuse me, moving money on the internet, but the credit card interfaces have existed for 20 years. All we really did was put a very pretty web front on it and let people use their email address instead of their accounting number. But beneath the service," Levchin said, "PayPal's core innovation sparkled." So what business are we actually in? What is the value that we're adding? So this is Max talking now. "This submerged part of PayPal is the massive and very, very numerically-driven risk management system, which allows us to instantaneously tell when you're moving money to someone

• 1:33:12David Senra?

  else with a very high degree of certainty whether the money you're moving is yours or whether you got it illegally and you might be on the hook later. Or we might be on the hook later to help authorities investigate or retrieve the money. Even PayPal's millions of dollars in bad transactions." This is now the author wrapping up the main point here, which is very fascinating. "Even PayPal's millions of dollars in bad transactions could be justified for the extensive data set that they generated. Losing a lot of money to fraud was a necessary byproduct in gathering the data needed to understand the problem and build good predictive models." So I think Max's point is, anybody can move money, but can you move money and not be

• 1:33:56David Senra?

  beset by fraud where it puts you out of business? We solved that problem and other companies did not. And so another massive problem that they had to tangle with over and over again is platform risk. Now you have problems with fraud, you have a problem with customer service, you have a problem with growth, you have a problem internally, but now you've got a problem from eBay itself. And this is something that founders to this day still have to deal with, this risk when you're building upon somebody else's platform. It says, "Once the PayPal team dove into the buy it now button mechanics, they started to panic." So eBay, before, you know, there was no, the crazy thing is...

• 1:34:31David Senra?

  Years before this eBay existed, there was no way to, they didn't have a payment system at all. And in fact, at the very, very beginning, they trusted that if you use their auction system and you sold something, Pierre, the founder, he had this belief that people were genuinely good. So he's just like, I'll trust you to just mail in like my percentage of transactions. So he'd get a bunch of stuff in the mail of like, with like 25 cents or, you know, dollar in it or whatever the case is. And then eventually, obviously PayPal realized it's like, hey, your customers, like, why would you want to send checks? Like if you're an eBay power seller, like I don't want to wait for a check. Just like, then I have to deal, I have to wait for the check. I have to go deposit, I have to do all this other stuff. You just pay me with PayPal, it's like 10x better than a check. And so eventually eBay realizes their mistake.

• 1:35:15David Senra?

  They're like, oh, so they have Billpoint, they have all these other systems. But people are still electively, their customers are still electively choosing to check out with PayPal. Cause they thought the product was better and the customer service is better. So then they stopped going for, they had a thing where it's just like, okay, you can do an auction. But what if you just want to say, I just want to buy this, I don't want to bid on it. So when they released Buy It Now, they made their own eBay payments the default setting. And so this is the story I'm about to tell you. But once the PayPal team dove into the Buy It Now button, mechanics started to panic. In traditional auction, an eBay bidder would place a bid, receive an email if they want, and then choose a payment system. Because auction buyers left eBay mid-auction, PayPal had a chance to warm itself into the payment process. A winning bidder could go from their email account to PayPal in order to pay a seller,

• 1:35:58David Senra?

  thus completing the auction process without ever returning to eBay.com. Buy It Now radically reconfigured this dynamic. If a buyer pressed the Buy It Now button, an eBay payments form would appear, allowing the buyer to complete the payment directly on eBay.com, thus knocking out PayPal, right? And so this is about their reaction to this platform risk. This change sent Peter and David Sacks into fits of anger. David and Peter would get totally hysterical and say things like, they can't do this, how dare they? And we're like, it's their platform, they can do whatever damn well they want. So then it talks about the relationships. They start building. Reid Hoffman is put with the task of building a relationship on a back channel through eBay.

• 1:36:41David Senra?

  This is what I mean about they're just so bloody efficient and smart that you just cannot believe it. There's just tons of examples of these. Really, like, apart from the story, I would read it just to understand how they solve their problems. I just think it's amazing. So they start having this back channel. They essentially begin building a relationship. From eBay's perspective, they're kind of annoying. They don't want PayPal. They come to hate PayPal, but they have a grudgingly respect. They grudgingly respect them. It says, this guy that's building a relationship on eBay's side with Hoffman on PayPal's side, Chestnut came to respect PayPal's team's aggressive growth efforts. They are definitely default aggressive. They were very highly entrepreneurial, very aggressive. You've got to admire that.

• 1:37:23David Senra?

  eBay CEO Meg Whitman said, PayPal was a company of extremely aggressive people with a real bias for action, she concluded. A company of extremely aggressive people with a bias for action. Now, the only thing that saved them is the fact that they were a company focused on one thing, going against a company focused on many. So eBay puts out this new Buy It Now with their own Billpoint, but the product sucks and their execution is terrible. So it says, despite Buy It Now, the free promotion and other growth efforts, eBay's Billpoint gained only a marginal share of payments on the platform in late 2000 and early 2001. As Billpoint wound down its promotions, they were doing the same thing.

• 1:38:06David Senra?

  It was like, oh, pay you to open an account, basically copying what PayPal's growth strategy was. As they wound down its promotions, Billpoint's progress stalled and then reversed. PayPal's numerous counter-offensives helped it stave off Billpoint's encroachments, and the two sides now continued to fight for ground. So again, you can copy what I'm doing, but I'm only focused on this and you're focused on, it's one part of your gigantic business. We know how that's usually, that the fight is usually going to end. So they're continuing to fight and... PayPal does it as another strategy, and I don't know if myself is here. PayPal uses everything to their advantage. And so now they're like, okay, you're putting defaults on your website in response to what

• 1:38:51David Senra?

  we were doing and other payment processors are doing. This is clearly anti-trust. And why are they saying this? Because at the time this is taking place in history, Microsoft is getting whacked. And so they're like, and other technology companies are scared. So it says, "The Department of Justice and 20 state attorney generals had sued Microsoft for anti-competitive monopolistic behaviors." So it says, "The government threatened to break up Microsoft up. The case sent a chill through the spine of technology leaders everywhere, including at eBay. PayPal leaders fomented their fears. Keith Raboy was tasked by Peter Thiel to build an anti-trust paper trail against eBay. PayPal also built a political action committee to send contributions to members of Congress,

• 1:39:32David Senra?

  then encourage those members to write notes to the Federal Trade Commission concerning eBay's monopoly power. The company also enlisted an outside counsel to issue a scathing note to eBay's headquarters. eBay is abusing its market power over the online marketplace to distort and eliminate competition for payment services in direct contradiction to..." See, "United States versus Microsoft Corporation," and they list, obviously, the case numbers and all that stuff. And it's just, at this point, I'm, you know, 80% done with the book, and I'm just like, "I would not want to compete with these guys." You can clearly see from eBay, it's just like, "Okay, just name your price. Just, I want to buy you just to shut you up." So this is the world domination chapter I mentioned earlier.

• 1:40:17David Senra?

  This is when they start to expand. They had a world domination index, like I mentioned earlier. It's like, how many PayPal users do they have? But then they start to expand globally. And really, I'm just reading this quick paragraph to you, because this is their MO. This is their modus operandi. "The team chose to use its international expansion to pursue two major goals: growth and fundraising. It began this effort as it had begun much else over the prior years, with little planning, quick action, and faith in itself to iterate its way to success."

• 1:40:44David Senra?

  So they eventually are going to file for their IPO. This is after the bubble's popped. People are like, the press's reaction is like, this is stupid. Don't buy this IPO. It's completely negative. I think today, what PayPal's like $300 billion company, something like that. But really, the reason I'm reading this section is because everything they do is like this. Nothing is as it appears. They are masters at misdirection and just concealing what their actual intentions are. And so they're in the quiet period right before the IPO or they're about to be. And they're like, okay, eBay hates us. eBay can come out and really like torpedo our IPO. They don't want us IPO because that means we're more likely to stick around, right? And so it's like, how do we stop them from talking shit about us essentially? And so they come up with some machination. We're going public and all these people are going to call eBay, Reid Hoffman explained.

• 1:41:29David Senra?

  And eBay is going to say, oh, we think PayPal is a house of cards. We're going to drive them off our platform as soon as possible. Public investors, Reid noted, had a reputation for risk aversion. If eBay poisoned the well with those investors, PayPal's stock issue could fail. With the quiet period hovering, PayPal could say little to defend itself publicly. So Hoffman came up with another way of muzzling eBay. And this is what he said. If eBay is in negotiations to buy us, if they say anything to the public market, it's breaking fiduciary responsibility, he realized. PayPal would then enter another round of acquisition negotiations with eBay to silence it. And they've had many failed talks up until this point. And again, so I'm going to, from eBay's perspective, like, okay, these guys are back.

• 1:42:12David Senra?

  They're, you know, we have a chance to buy them again. PayPal's not, they're not going to, that's not their goal here. Their stated goal is you shut up until this IPO happens. Hoffman approached eBay with the offer. So they said, okay, you can buy us for a billion dollars. I think they would have taken a billion, by the way. It says, and I think Reid says that. The eBay team came back with counteroffers, but Hoffman stirred firm. Hoffman said, I have a mandate to sell the company for a billion dollars. I'm not trying to negotiate. And of course, every day of quote unquote, not trying to negotiate, bought PayPal an additional day of eBay silence as its IPO marched to a close. These guys are just so bloody efficient and smart, you cannot believe it.

• 1:42:56David Senra?

  eBay recognized that an acquisition of PayPal before the IPO might prove wise financially, and came back with a final offer of 850 million. "If what you're telling me is that your last offer is 850 million," Hoffman said, "I can take it to the board. But just to be really clear, I have a mandate to sell the company for a billion dollars. If you gave me a billion-dollar offer, you would own the company." eBay CEO Meg Whitman grew frustrated at PayPal's unwillingness to yield. "I think she thought we were going to take the 850 million," Reid said. "She didn't realize that my principal goal was to keep them quiet and not to sell the company." So the IPO winds up working out. They wind up raising a bunch of money.

• 1:43:40David Senra?

  I think the valuation was somewhere like, uh, final settled like 1.2, 1.4 billion, something, somewhere in there. And I just want to read this to you because up until this point, we're, you know, almost 400 pages into the book. It's just struggle after struggle. We're going to die, we're going to die, we're going to die over and over again. And there's a guy named John Kotanek, who's an employee at PayPal. And I want to read, there's a bunch of reflections on this day, but I thought his was the best. "It's just a feeling of relief and satisfaction post-IPO." And so it says, "John remembered gazing across the crowd in the parking lot," because everybody gathered as a company, "and seeing the parts that produced the whole. We weren't a big company still," he said. "And you know, there's a couple hundred people standing out there at most. And you could look at the people and you could say, 'I know what that guy did to get us to this moment. I know what that woman did to get us to this moment.

• 1:44:22David Senra?

  I know what he and she and her and him did to get us here. And I was just so proud of everybody.'" The festivities had PayPal's, uh, PayPal quirks though. Uh, "With a celebration mixing with competition. The employee's most vivid memory of the day was Peter playing 10 simultaneous games of speed chess in the parking lot. Each game concluded, included a cash bet. A large crowd huddled as Peter played each board and moved to the next in rapid succession. During one stretch, Peter won nine out of 10 games. Peter doesn't drink much, and we made him do a keg stand that day. And after that, he was half drunk, and he still beat nine out of 10 people. It's crazy.

• 1:45:03David Senra?

  David Sacks earned lifelong bragging rights for being the only player to beat Peter during the simultaneous chess match. When Peter lost, he was pissed. I just remember him clear, getting up and clearly being screw-faced. He was livid." So competitive to the very end.

• 1:45:21David Senra?

  This is more about the financial outcome for Elon and his default of being full risk on. Far and away, the biggest personal windfall went to Elon Musk. Musk was historically the company's biggest individual shareholder and had acquired even more equity as time went on. Musk owned more PayPal stock than even institutional backers like Nokia Ventures and Sequoia Capital.

• 1:45:43David Senra?

  And then this is again, just another genius, counterintuitive strategy that they had. The guerrilla marketing is just amazing. So this is post-IPO. Another round of acquisition costs with eBay have, talks with eBay, rather, has fallen out. And so eBay is having this gigantic company conference, right? Inviting all the sellers on their platforms to come and have this giant conference and the CEO is going to talk and everything else. And it's called eBay Live. And so PayPal is like, all right, well, how do we remind eBay how important we are to them? And it says, "The marketing team had procured thousands of T-shirts featuring the PayPal logo on the front and the phrase 'New World Currency' on the back. They distributed them at the event with an incentive.

• 1:46:28David Senra?

  Those seen sporting the shirts at eBay Live would be eligible to win $250 cash prize. The goal was to remind eBay senior leadership that PayPal was inextricably tied to its seller community. Even eBay's most vocal cheerleaders would wear PayPal swag. As eBay Live opened its doors, PayPal logos were everywhere, with attendees wearing the shirts in hopes of winning free cash. eBay took notice. As Meg Whitman took to the conference stage for her keynote, she was greeted by thousands, a staggering number of PayPal T-shirts." And so why is this so important? Why are they playing these games?

• 1:47:11David Senra?

  And this is a great way to think about risk. "We were completely dependent on our enemy. Few on the PayPal team saw that risk dissipating without a deal between the two companies." Reid Hoffman had a pithy means of describing the challenge. "Just because someone shoots five bullets at you and misses does not preclude the sixth one from killing you," Keith Rabois said. And in the footnotes of this section, they're talking about this guy that's hired by eBay. And he tells a story, a great Steve Jobs story that I've never heard. And so I'm a sucker for these. I'm gonna read this to you. I think this is around 1999. So it says, "Steve Jobs had been hunting for a CFO of Pixar and reached out to Jordan, who agreed to meet Jobs for breakfast.

• 1:47:53David Senra?

  "I show up in my suit jacket," Jordan recalled, "and Jobs walks in in torn clothes 20 minutes late. Jobs only had two interview questions for Jordan. Question one: You went to Stanford Business School in the late 80s, and then you're in the center of the company creation universe in the most exciting time in the world, and you became a fucking management consultant? Question two: How could you work at Disney for eight years? Those guys are fucking bozos."

• 1:48:23David Senra?

  What a job interview. Jordan saw the questions for what they were, a Steve Jobs stress test. "I'll cop to the first one," Jordan said. "It took me 10 years to find my way back here, but I'm back here and I'm here to stay." On the question of Disney, he pushed back hard. "You're wrong on Disney," he said. Then he explained, because this guy's running, I shouldn't clear, he's running Disney's retail stores. Then he explained that Disney's stores had higher consumer ratings than Disney theme parks. Jobs seemed satisfied and pitched Jordan on Pixar. Jordan demurred. He had just been a CFO and he was looking for something different. Jobs proposed he join Apple instead. "I have this new vision for Apple Store," Jobs said, and proceeded to outline a reimagined shopping experience from the root up. Jordan thought Steve Jobs was delusional and politely declined the offer.

• 1:49:08David Senra?

  "Of course," Jordan said of Jobs' retail concept, "he nailed it."

• 1:49:14David Senra?

  And so all these people on PayPal were giving interviews. They had reunions and everything else throughout the years. And one of the early employees, Brandon Spikes, said something that's really important. It's like, why the stories that you and I discuss on this podcast, like, why these books and these stories are just so important to spread, because they inspire people to do things with their lives and their work. "A lot of these people I sat next to in Cube, writing codes and building systems, and they went off to create some of the greatest companies that exist today. Getting back together with all these folks and hearing the stories was just so inspiring." Spikes felt moved to raise funds and to launch his own company.

• 1:49:52David Senra?

  And then they reflect back on the fact that their inexperience was an asset. Says the idea that our motley crew of misfits could come together to build something out of nothing was really incredible. They also came to see inexperience as an asset. The best employees had little or no prior background building internet products. Had the company built its fraud process traditionally, they would have hired people who've been building logistic regression models for banks for 20 years but never innovated, and then fraud losses would have swallowed up the company. Levchin added an unexpected qualification for PayPal's employees that he felt contributed to the company's success and the later achievement of its alumni. Many of its earliest employees simply hated being employees. The very best employee at any job, at any level of responsibility, is the person who

• 1:50:35David Senra?

  generally believes that this is their last job working for someone. The next thing they'll do, they'll start on their own. And then they talk about the difficulty of, now 20 years removed from this situation, they're no longer the people sleeping in the office, they're no longer the people with the empty bank accounts. They've built companies that are massively successful, so what do you do? And I think what they're telling us here is like advice for us, like if you can give back to the next generation, do whatever you can. The founders, especially in their capacity as investors, have had to find ways of working around this challenge. So saying you get to a certain level of comfort, it's really hard to put everything on the line again and then appreciate the person who is putting it on the line. To that end, Levchin takes regular meetings with smaller student organizations at various colleges that he visits.

• 1:51:16David Senra?

  Peter is known for taking sit downs well outside of his immediate orbit, including the occasional high school student who reaches out with a compelling note. Reid Hoffman forces himself to regularly ask others, "Who is the most eccentric or unorthodox person you know, and how could I meet them? They might be crazy, or they might be a genius." He's searching for the less-than-perfectly-polished founder who resembles his once-less-than-perfectly-polished colleagues. A group that turned a hot mess into one of the world's largest public companies.

• 1:51:49David Senra?

  And then this is a great quote from Elon reflecting on his time. "We were really very focused on building the best product we could. We were incredibly obsessive about how do we evoke something that is really going to have the best possible customer experience," Musk said. "That is far more effective selling..." That building that product, I mean fantastic product. "That was a far more effective selling tool than having a giant sales force." And then Peter talks about the valuable lesson that the people at PayPal learned. And he says, "They learned the best lesson, that it's hard, but doable." And Michael Jordan, his autobiography, said the same thing. He says, "It's hard, but fair. I live by those words."

• 1:52:31David Senra?

  And then I'll close here with Max on Founders. "PayPal's earliest employees reserve the highest praise for those who tread the same stony road, founders, across varied fields of endeavor. Those that bring the big ideas into hard, unpredictable reality are the practitioners, the high leverage ones, and I admire them almost without reservation," Max wrote. "One key ingredient of being this kind of person is an almost irrational lack of fear of failure and irrational optimism. They manage to not get caught up in all the little details while being remarkably aware of the really important ones." And that is where I'll leave it. I can unequivocally highly recommend reading this book.

• 1:53:15David Senra?

  Every single entrepreneur, every single founder, every single person attempting to do something difficult in their lives will draw lessons from the book that you can use in the future. If you want to support the podcast and get the book at the same time, you can buy the book using the link that's in the show notes on your podcast player. If you want to buy a friend or coworker a gift subscription to Founders, that link is also in the show notes and you can also get that at founderspodcast.com. This is number... I actually don't know when this is coming out because I cannot release it until after the book is released. So that's an unknown number of books down, 1,000 to go. And I'll talk to you again soon.