Jimmy Soni - Peter Thiel, Elon Musk, and the Paypal Mafia

Jimmy Soni is the author of The Founders: The Story of Paypal and the Entrepreneurs Who Shaped Silicon Valley. https://amzn.to/30PqMV2 Watch on YouTube https://youtu.be/OEcOUgXvz7g. Listen on Apple Podcasts, https://podcasts.apple.com/us/podcast/24-jimmy-soni-peter-thiel-elon-musk-and-the-paypal-mafia/id1516093381?i=1000557773326 Spotify https://spoti.fi/3PXRlLu, or any other podcast platform. Episode website here https://www.dwarkeshpatel.com/p/jimmy-soni. Follow Jimmy on Twitter https://twitter.com/jimmyasoni. Follow me on Twitter https://twitter.com/dwarkesh_sp for updates on future episodes! Timestamps: (0:00:00) - Bell Labs vs PayPal (0:05:12) - Scenius in Ancient Rome and America's Founding (0:07:02) - Girard at PayPal (0:15:17) - Thiel almost shorts the Dot com bubble (0:19:49) - Does Zero to One contradict PayPal's story? (0:27:57) - Hilarious Russian hacker story (0:29:06) - Why is Thiel so good at spotting talent? (0:34:50) - Did PayPal make talent or discover it? (0:40:40) - Japanese mafia invests in PayPal?! (0:44:42) - Upcoming TV show on PayPal (0:48:11) - Musk in ancient Rome (0:52:12) - Why didn't Musk keep pursuing finance? (0:56:32) - Why didn't the mafia get back together? (1:00:06) - Jimmy's writing process This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.dwarkesh.com https://www.dwarkesh.com?utm_medium=podcast&utm_campaign=CTA_1

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

• 0:00Dwarkesh Patel?

  Okay, I'm super excited about this one. Today, I'm interviewing Jimmy Soni. He's the author of Rome's Last Citizen, A Biography of Cato, A Mind at Play, A Biography of Claude Shannon, and most recently, he's the author of The Founders, The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley. So Jimmy, let's just jump into it. So, you know, your previous book was about Claude Shannon, and he comes up with information theory while he's working at Bell Labs. This is a place that's famously comfortable. You know, they have a monopoly from the government. And then, so the scientists, they have time, they have freedom. They're not pressured by competition. And on the other hand, you have, and then obviously, as you talk about,

• 0:42Dwarkesh Patel?

  six Nobel Prizes, transistor, laser, Unix, C. On the other hand, you have PayPal. They're constantly on the verge of going under. Incredible pressure, you know, long hours. And this is also a place that produces tremendous amounts of innovation. How do these different places promote innovation?

• 1:04Speaker 01

  Yeah, it's a great question, and it is interesting to think about just how different they are.

• 1:11Speaker 01

  You know, it's a great question, and actually, it's a very big question because in some ways, like, the right person to answer the Bell Labs question is probably John Gertner, who did sort of the quintessential book on Bell Labs. It's called The Idea Factory. I was looking at one person in that kind of stew, right? In that era, and that was Shannon.

• 1:34Speaker 01

  Here's what I would say about Shannon's innovations. So Shannon worked on information theory not because he was working at Bell Labs. He actually was working at Bell Labs and was kind of tooling with information theory as a side hustle, right? Like, he didn't call it a side hustle because we didn't have that lingo, but we have it now. So it's a side hustle for him, so he started doing it on the side. Which is to say, it's quite possible that no matter where he worked, he would have been working on information theory in the off-hours. The advantage of working at Bell Labs is, one, he's around communication networks all the time. Two, he's doing cryptography and cryptographic analysis, so he's thinking a lot about that. And then, three, sort of is around smart and intelligent people. And like, the fourth thing is, he has the Bell Systems Technical Journal,

• 2:18Speaker 01

  where he can publish his findings originally. And they're, you know, they have sort of like this, they're a private sector organization that has a technical journal that gets distributed pretty widely throughout academia. So that's, but I suspect that if you were working, I don't know, wherever, he would have actually been working on information theory on the side anyway, because this was stuff he was just interested in broadly. That level of self, like, so think about what that means. He's a self-starter who's willing to do academic research just on the side and write papers about it just for kind of the sheer thrill of discovery. The number of people that that's true of, I think, in society is very, very small. Meaning, he didn't think he was gonna, you can't IPO an academic paper, right? He's not gonna get rich, right?

• 3:02Speaker 01

  He's not, he's kind of not seeking fame, because even when he becomes famous, he actually decides he's not gonna go on like the lecture circuit or go on late night TV or anything like that, right? So, that, the population of people who are like that is very, very small, right? For a variety of reasons. We don't have to get into it, but it's just sort of self-evident that that number, the number of people who would want to do that are small. PayPal's a different story. Profit motive is a big part of what makes places like that successful. The internet boom is going on. There's an entire generation of people who have built web companies, right? Starting with like Netscape, who are IPO-ing and all of a sudden they're on the covers of magazines and they have huge amounts of wealth. So, it would be, it would be dishonest to say that that's not part of the motivation there.

• 3:44Speaker 01

  That, there's that combined with this pressure of, they close a very, PayPal closes a very big round of fundraising in March of 2000, just as the dot-com bubble starts to burst. And so, there's a kind of panic about surviving and about having to innovate your way to survival. And, and so I think that, you know, I'm not saying that like, there aren't other Claude Shannon's out there. I just think that they're smaller in number than, than maybe a constellation of people who are brought together by forces and are forced to survive and are forced to build a startup and then like can learn innovation that way. And I would, the other thing I would say is, I think the innovations are very different, right? So, PayPal's innovations are, I would, I would argue, are a sequence of, of kind of

• 4:29Speaker 01

  micro developments and creations strung kind of end to end over the period of four years. It helps to build the company and there's a lot of, like, we can get into that, obviously. And, and Shannon is writing, you know, a, a technical paper in 1948 and it's, it's, it's sets, it sets certain principles and establishes the field of information theory. So, I'm not sure it's like an apples-to-apples comparison, but I do like the idea of like thinking characterologically and saying, okay, there are probably some Shannon's in the world, but they're probably... Far outnumbered by the number of people who would want to create a startup and have, by the way, I don't think there's anything wrong with that, like more self-interested reasons, right, as opposed to public spirited reasons or academic reasons.

• 5:10Dwarkesh Patel?

  Yeah, interesting. So, you know, my interpretation of all your books is, in all of them, you're really writing about, you know, seniors, just a group of people who can get together and boost each other's productivity. Now, you know, it's obvious with Bell Labs, when the cloud shenan, obvious with the founders and the PayPal mafia. And I, you know, I think it's even true of, you know, your book on Cato, right? So it's like 2,000 years later, can you imagine another era where we know all the prominent politicians are like household names, you know, Pompey, Crassus, Cato, Cicero, you know, Caesar? So, you know, like, this book is about political seniors. You know, I just like, I can't imagine like 2,000 years, we'll know who Nancy Pelosi or, you know, Mitch McConnell or Donald Trump

• 5:53Dwarkesh Patel?

  were, or maybe we might know who Donald Trump is in 2,000 years, but.

• 5:57Speaker 01

  Well, you know what, then another era would be the late, the late 1700s in the United States, right, Jefferson, Hamilton. They make, there are award-winning musicals being made about people who wore powdered wigs and tricornered hats, right? And so, if, if Lin-Manuel Miranda can make Hamilton a thing in 2022, and frankly, like, that era is just one of the most studied and discussed. It does strike me that that's, that's another seniors. There's a great book on that, actually, called Founding Brothers. There was one of my, like, kind of texts that made me think a lot about the founders, because it does describe, like, the relationships, like, for example, like, the relationships between Thomas Jefferson and John Adams is super interesting, right? They're like, competitive, and then they're friendly, and then they're not, and there's all kinds of

• 6:39Speaker 01

  drama there. The, the relationships just across the founding generation, I would think, is another seniors. But it's interesting, I never picked, I never, I didn't pick up on that common thread until you just pointed it out, which is like, always, it's always the way I like doing these, because I'm always like, learning new things. I didn't, I realized like, right, there's a seniors in all three of my books.

• 6:59Dwarkesh Patel?

  Yeah, yeah, yeah, cool, cool. Now, you know, I'm curious how Peter Thiel's ideas about Gerard were influenced by his time at PayPal. So, you know, there's the obvious, you know, memetic competition between X.com and Confinity, which was, you know, what PayPal was originally. And the X.com was, you know, Musk's company before they merged. So, I mean, other than, like, what were the other Gerardian elements to this story?

• 7:24Speaker 01

  Yeah, you know, it's a great question. It's a part, it's sort of threaded throughout the book, like in subtle ways. And, and what's really interesting is that in rereading it myself, or in like revising and editing it, there were a number of like Girardian moments that came up, right? Or like little moments of, of mimesis and antimimesis. I have had long conversations with a friend, Luke Burgess, who wrote a book called Wanting. And we've, we've sort of talked about this a lot, right? And like, where are these moments true and not true? And one of the things that I always tell, I always tell Luke is I'm like, I think that

• 8:05Speaker 01

  the actual experience of doing PayPal was not an experience of someone like Peter, as well versed as he is, stepping back and being able to like, sort of ask the like, what would Gerard do, like WWGD, right? Like, I don't think that it works that way. And the reason is, I mean, A, he never told me that it worked that way, and I interviewed him at great length about the PayPal story. But the other thing is like, companies, particularly PayPal, when they're built in this crucible, it's really hard for theory to match up with reality, or like, or for your ideas about principles to match up with like, the exigencies of the moment, or like the thing you need to do. And so I, here's what, here's one example I would offer, as a case study in what I just said, but also in Gerard.

• 8:50Speaker 01

  Post 9/11, the company is in a really difficult position. They had been preparing to go public and had kind of run into some hiccups with the bankers that were going to help underwrite their public offering. Then 9/11 happens, and the financial district, you know, is, is in ruins, and they have to, and the economy's in shock, the stock market's shut down for, you know, however many days. And the, and the company leadership needs to think about like, what do we do now? Like, how do you go public in a post 9/11 world? What does even, what does it even mean to file to go public? And Peter, there's a great line that he played back to me, and again, this was 20 years of hindsight, he says, Maybe because no one else is going public, paradoxically, that's actually exactly the

• 9:34Speaker 01

  time that you should go public, right? Because you're kind of like running against the herd, right? So like, is there some faint echo, or even maybe not a faint echo of Gerard in there? Absolutely, there it is, right? So one has to believe that at some point of part of his mind, one of the things about studying memetic desire is the recognition that like, memetic desire, if you oppose it, can actually lead to very valuable decisions, right? Everyone zigs, you decide to zag, and like, wow, that's a really smart, smart thing. But, here's what he added to his explanation of why they decided to go public after September 11th and what it meant. Number two reason is, going public is a long process. You have to file so many different rounds of paperwork to the SEC, you have to get so

• 10:18Speaker 01

  much buttoned up, you have to do a roadshow, you have to make sure that all these things that in a startup you can kind of like, create a patchwork quilt of answers, that's not allowed once you are like a regulated public company, taking like, public investor dollars, right? So, he said that it takes, because it takes a long time, one of my theses was like, if we apply, even if it's after September 11th, and even if we take some flak for doing that, it's gonna be six months to a year before we actually get to go public. So, given that it's a long road, we should prepare now. So that's sort of reason two. Reason three, and this is where it runs counter to the Gerardian, you know, one of Gerard's big thing is, is like, it like how emotion can kind of, and emotion can kind of screw up our decisions, right? Like it sort of like obscures like clarity of thought.

• 11:02Speaker 01

  And one of the things that he says is, he's like, you know, he had said to me, he's like, if I'm being honest, like another reason that I insisted that we try to go public after 9/11, is I wanted to beat Wall Street. Like, Wall Street had written off the company, it had been so dismissive of the company, and like, didn't understand the model because fintech wasn't an established space. And so, he said, he even said to me, he's like, if I'm being honest, the competitive thing was a part of it, right? But competition is, is sort of not in keeping with Gerard, meaning he recognizes that it can happen, but the whole point of studying this is to avoid it. It's a welter of motives and I don't think that there's anyone that could look at the story and say, "Well, every decision was like sort of perfectly conformed to Girardian expectation and insight."

• 11:44Speaker 01

  But I think of that, I don't think of that as a deficit, by the way. I think of that as a good thing. And the way that I fact-checked each of those things as well as I spoke to other people, particularly on the competition with the investment banks thing, like the number of times I heard like a negative word about like big banks. But it was, you know, a dozen times if it was one. And I had people say to me, "You know, the biggest issue that we had there was because fintech was not an established like sector of the economy, we didn't have a way to get these banks to understand what we were, who we were, what the business would be, what its potential was, right? And so like language like network effects is kind of common for us in 2022, but it was not common back then for business models.

• 12:27Speaker 01

  And so you just have this whole industry that needs to be educated and PayPal ran into some real difficulty educating them, which is why they were competitive. Like the way Peter described in the book is he said, "It's like a Silicon Valley versus Wall Street thing, the dynamic that was at play there." That's a very long answer to your question. I found moments of that Girardian intuition. And if you permit me, I can share the second big bucket where I found it. 9/11 is a discreet example. It's really specific. The other big bucket,

• 12:57Speaker 01

  and again, I'm like way oversimplifying Gerard, right? Like he's actually like a huge thinker and I could, I mean, Luke did write an entire book about him, right? And like his thought process. But one of the things that it always leads me to think about is if the entire world says X and you can even think Y, right? Like, or you can think about the opposite of X, like what if the opposite is true? You can, you can find real power in those moments, right? By being a contrarian, right? That's a, it's like not a great word because it's so overused. But one of the things that I found most powerfully about Peter in the PayPal story is that he did that with people. So the board would say, "Roll off both or can't be your CFO." I mean, he's like 26 years old. He's like fresh out of business school. He's going to get eaten. And one person said, literally the quote is,

• 13:42Speaker 01

  "He's going to get eaten alive by Wall Street." Like, "How could you do that? It's going to make us, he's not going to survive." Peter listens to his board and says, "No." And says, "Roll off is brilliant. He knows the business cold. He's built the model that's determining a bunch of the actions that we're taking as a business. And I believe that he will make an exceptional CFO." And he is ultimately right.

• 14:04Speaker 01

  Reid Hoffman, a friend of Peter's from their Stanford days. Peter says to the board, "I'm gonna appoint him as COO in January of 2000, very early in the business's lifecycle." The board, the two board members are like, "Wait, your COO is supposed to be like a taskmaster and like really keep people on point, like be really aggressive and, you know, Reid's like friendly." And he's, as one board member put it, "He's a friendly, he's a community guy," that kind of thing. And Peter says, "No, like, one of the things that we lack as a business right now is the ability to have somebody who's gonna be a diplomat, but like a flexible diplomat who can interface with all these external bodies." And he said, "We need that." And, you know, sort of like titles being what they are, like, I'm gonna, he's gonna be the person for that job." And he's proven right.

• 14:45Speaker 01

  I heard from the employees who were in those situations about Peter's willingness to run into the teeth of what might be regarded as like best hiring practices or standard opinions. And I do think that there is more than a faint echo of Gerard in some of those moments. I also think it's hugely instructive. Like, it really does make you think about hiring and who we count in and who we count out. I think he had a ability to see potential in people and put them into places where they otherwise, like, other people may not, may have missed that.

• 15:19Dwarkesh Patel?

  Yeah, yeah. There's, that's so interesting, because there's definitely, as you said, so many comedic elements to the timing that Peter Thiel was able to execute, right? Like, you talk about in the book how he saw the dot-com bust coming, and so he was able to use the inflated, inflated valuations to raise a CRC. I think you said, "A week before the bust happened, they closed their CRC." And, and then conversely, once the bust happened, they were able to like hire all this great talent, because like nobody in Silicon Valley, or, you know, people weren't hiring as much as in Silicon Valley. I, I think my favorite anecdote, or one of my favorite anecdotes from the book, is how Thiel, like, after they raised, raised a hundred million dollars, he's like, "All right, guys, the market's gonna bust, so why don't we transfer all of this hundred million dollars into my hedge fund, and I'll short the market?"

• 16:04Dwarkesh Patel?

  And then, and then the guy from Sequoia on the board is like, "What the fuck are you talking about?"

• 16:09Speaker 01

  Yeah, it's a funny moment and I mean, you can't tell it without laughing and I sort of laugh even when I think about it. It, when it was explained to me, so there's sort of like two renditions of that story, right? One rendition is like the sinister, like whatever. No, it wasn't that. It was, it was an enthusiastic and far sighted board member who saw a market collapse coming and saw a financial opportunity. And the financial opportunity is you take the funding we just raised, use it to short the market and we'll all get filthy rich, you know? And then like that'll be, it'll be, it's a sure thing. And understandably, the board pushes back and says, well, you can't, you do that because the funding we raised has contracts and has amendments that say that it's for these specific purposes. So they pour cold water on the idea.

• 16:54Speaker 01

  Now, the interesting thing is that the board members I spoke to about it, one had this to say, he said, you know, it's actually like, he's like, I often tell this story. Because I want people to appreciate that part of doing a startup in the way that this team did is like being somewhat disconnected from reality. Like you almost have to be disconnected from reality and offer ideas that are maybe a little outlandish in order to like push the limit of what is possible, right? So that was like one. And then the other, the other recollection was from, was from John Malloy, who was a board member who said, you know, like Peter was right.

• 17:30Speaker 01

  Like the actual like logic may have been what it was, the mechanics may have been what they were. But actually the NASDAQ lost like 78% of its value over the next like whatever 12 months. And we would have made a lot of money if we had done that and it was actually correct. And so there's this, now they tell it obviously like with the benefit of 20 years of hindsight and they tell it in a humorous way. I think other writers have done characterizations that are more sinister. I didn't find that element in it. And when I asked Peter about it, he basically, you know, it was like the last question in one of my interviews with him. And I asked him, I said, what did you think about this? And he said, he's like, yeah, you suggest things when you're young, like, like basically it was sort of like, you suggest things, like, you know, it was like an idea and it didn't go anywhere and you know, whatever.

• 18:12Speaker 01

  I find it to be a really interesting moment and it's characteristic of that group of people in a particular way, which is like the willingness to engage with even the idea that you would take a hundred million dollars and short the market. I mean, like, I, I think a certain tolerance for that is like required to do something like PayPal.

• 18:36Dwarkesh Patel?

  Yeah, if I was on the board, I'd be like, no, no, the markets are efficient. You totally can't do that. But yeah, I think you said they would have made more money by shorting the market than they did from the eBay acquisition.

• 18:48Dwarkesh Patel?

  But yeah.

• 18:48Speaker 01

  I think the math is imprecise. I mean, I think the math is imprecise. That was a quote from John Malloy. I don't think he was being I think he was being kind of directionally accurate, but not hadn't like run an Excel spreadsheet on it or anything. One suspects that, you know, given what, given like what PayPal's burn rate was from 1999 to 2002, if someone were to do the math, like that might be true because they spent, I mean, they spent, I think, in excess of $200 million in the first four years of the business, right? Despite raising a lot of money. So it could be true, but I didn't get into the level of the math. For me, it was much more about this, this idea that as a board member, you know, who is very thoughtful,

• 19:30Speaker 01

  you would still bring to the table an idea that can seem crazy is, is actually like a hallmark of, of what kind of of Silicon Valley and of this sort of startup environment. It's, it's, it's encouraging. I think it's encouraging to those of us who, who have those sorts of thoughts.

• 19:49Dwarkesh Patel?

  Yeah, definitely. Okay. So I rewrote my zero to one after reading your book and I, I think at least, you know, I could be being a superficial about this, but I think it seems like there's at least three ways in which, you know, the lessons from zero to one contradict the history of PayPal. Right? So first there's like, he's like, okay, don't compete, like, you know, just do something totally original. And it's like, well, you know, payments, e-payments, that's like you're competing against X.com, Billpoint, Visa, Mastercard. He, he says, he says, oh yeah, one of the most important things he said in the book is that you should always have a plan. You should always have a vision. This, this whole thing about startups iterating and, you know, slowly pivoting to find their niche.

• 20:28Dwarkesh Patel?

  That's totally overrated. It's like your original business of, business idea of encrypting pilots didn't go anywhere. Yours is original business model of making money off the float didn't go anywhere. Like you were totally pivoting and to your credit. Right? And then the third thing is, you know, he talks about how these, these startups are emphasized. ...growing statistics that that they're basically getting by burning VC money over the durability of the company. So they'll, you know, they'll just like, look at a number. It's like, didn't you guys have the world domination index that you were constantly looking at? So I could be totally missing like the deeper layer in which these lessons actually did apply to PayPal. And you could also say that, well, actually, because of these, because he learned this from PayPal, he changed his mind. But so what is your reaction to these?

• 21:11Speaker 01

  Yeah, it's interesting. You know, people have said that the books are pretty good companion books because a bunch of the stories from mine, obviously, like, sort of illustrates some of the principles from zero to one. And I would push back on a couple of the observations. So with the competition one in particular, so let's go in order. The competition one in particular is important because I actually think of the competitive dynamic as an illustration of what Peter was saying and as the as the kind of lesson that led him to write that. Now, there's a gap between the PayPal story and zero to one. So zero to one isn't just based on PayPal. Zero to one is based on his experience as an investor broadly defined and teaching courses about startups at Stanford. So but let's take a step back on the competition one. PayPal starts as the union of two companies. It's X.com, which is Elon Musk's company, and

• 21:55Speaker 01

  Confinity, which is Peter Thiel and Max Levchin, Luke Nosick, Yipan and Russ Simmons, their company. What's interesting is that the two companies find themselves in competition. One of, and this is in late 1999 and early 2000, and they are burning through money using bonuses as a way of referring users to try to goose user growth. And they're in an arms race with each other to give away money. There's like, there's a gray line in the book. It's like Elon Musk, because we were going mental trying to kill each other, right? And his other gray line is like, it was sort of a race to see who could run out of money the fastest, right? Here's the interesting thing. Peter is one of the loudest voices and earliest voices in identifying

• 22:38Speaker 01

  that that is a, that's a competition to the death, and that actually, it's really bad. Like, it's not good for us to be spending, trying to outspend each other into oblivion. He encourages and indeed pushes his board member, John Malloy, to consider the possibility of a merger. John Malloy is actually not all that hot on the idea of a merger between X.com and Confinity. But Peter says, no, you don't, like, this competition is ruinous. It's like, terrible to be competing at this level. We should try to merge. And Peter is one of the most vocal people against the competition between X.com and Confinity.

• 23:12Speaker 01

  And so that's like one place where like I actually think of of the PayPal story as a very clear illustration of his view of competition. Now, he's not the only one developing PayPal, right? There's a bunch of voices in the room, bunch of people who think they could win, maybe we could win. They have their reasons for it being for or against the merger. But on the competition piece, it's a it's a clear kind of example of this.

• 23:35Speaker 01

  Your, what was your second, your second little divergence?

• 23:39Dwarkesh Patel?

  Um, let's see. Uh, it, oh, it was, um, you know, iteration. It like the the iteration versus having a strong initial vision.

• 23:47Speaker 01

  Yeah. So I I would say that, um, on this one, once PayPal establishes itself as a payment system, as a master merchant, between eBay buyers and eBay sellers and meaning, right? And just people who want to transact where they're able to underwrite these small dollar transactions. Once that fundamental business model is established, you know, it it Peter's actually pretty committed to that vision going forward, right? So you sort of, you have, and I think it'd be fair to say you have a period where they are figuring themselves out, right? Like figuring out what they're going to be when they grow up. That period of of call it like very late 1998 through to 1999,

• 24:30Speaker 01

  once that cement dries to some degree and they're like, well, and particularly Confinity, particularly Confinity is like, we're going to be an email payment system that is a credit card master merchant. And then use that and get and get the economics of the business right. Once that happens, like they actually have a pretty clear roadmap for how things are going to go. And the way I know that is that I was seeing Dex. So it was really neat to go back and look at the pitch decks as they evolved, right? The pitch deck as of late 1999 and 2000 is is pretty well like locked. Like it's not like they're using a payment system to pivot to something else. Like there's actually consistency for call it three quarters of the early years of the business. And I mean, like, look, I wish I could get get things that right and be that prescient all the time, right?

• 25:15Speaker 01

  The last piece on on burn rate and like startups using, call it like exaggerated or inflated growth metrics to to like kind of burn VC cash.

• 25:28Speaker 01

  There's a little bit of truth to that, I think, that like actually the criticism in Zero to One runs counter to the PayPal experience. Because PayPal did have to burn through a lot of money. The difference in PayPal's case, and the reason I don't think it's inconsistent, is there's burn rate that you could forecast based on bonus payments, right? So you sign up for PayPal, you get 10 bucks. Like, I can reasonably guess, like, at growth rates, like, in terms of what I'm gonna spend on that. What PayPal didn't anticipate and couldn't have anticipated knowing is the degree to which fraud would be the biggest, like, cost center for them. And so, the reason I mention that is because, had they known that, you know, and they, A, they probably wouldn't have gone into the business.

• 26:12Speaker 01

  I had multiple people who were at the founding say, like, if we had known how bad fraud was, it's quite possible we wouldn't have done this to begin with. And, but it makes me think that, like, actually, like, the plan, the plan in some ways was never to just, like, get a bunch of easy money and light it on fire, and then use those numbers to sell a bigger, a bigger vision. Very quickly, like, they encounter something that's lighting their funds on fire that they didn't anticipate, and they have to solve that problem, which becomes one of the company's signature achievements. So I'm not sure I would quite argue that it was just like, let's do the VC cash grab, light it all on fire, and then go out and sell. The other reason that it's not quite that way is because in 2000, in late 2000, and in 2001,

• 26:57Speaker 01

  when the company institutes fees and builds a business around this viral product, they are actually very thoughtfully, like, kinda creating a real enterprise. Meaning, like, originally, the idea was, like, we're gonna make money on the float. So we're just gonna have a bunch of money, and we'll, we'll get a few basis points on that because of interest, right? But in the year 2000, they start to build a fee structure for their users in a very careful way that would run against the criticism of, like, well, you're just, like, getting a bunch of user growth, and then that's it, right? No, the, the, the second half of that for PayPal was, we're gonna build a, an incremental plan to, essentially, take a free, to build a freemium model for our users so that we can bring revenue in.

• 27:40Speaker 01

  And then at some point, when they had run these elaborate spreadsheets, there was a point at which they hit profitability. So it was not quite a helter-skelter. I had to describe the part of it that was, which was, like, 1999, where they are figuring all of this stuff out.

• 27:56Dwarkesh Patel?

  Yeah, yeah. The fraud piece is so interesting. I mean, there's my favorite anecdote from the book, and this is like so good that I almost don't believe it. Or I mean, I do believe it, but it's like, if I saw it in a TV show, or that was like about a startup, like it was in like Silicon Valley, the TV show, I would be like, oh, come on, that's you're pushing it. It was the Russian hackers were committing fraud against PayPal. One of them emails Max Levchin, the CTO, and this guy have like an email exchange. And, you know, I can't do a Russian accent, but the guy is like, you know, I'm from a poor Russian family, but we can't feed my family. And, you know, I need to do this in order to feed my family. You go to fact America and who doesn't understand. And so, and then, you know, they implement captcha, and the guy like responds, fuck you.

• 28:39Speaker 01

  It was an epic cat and mouse game. And it was one of the things that I found most like interesting about it is you never picture a CTO of a company communicating with the people who are trying to defraud his company. Right? It's almost, it's almost, it's a stretch, but not much. I want to be like, your fraudsters are like sort of a part of your product team, like weirdly, you know, like unpaid members of your product team.

• 29:02Dwarkesh Patel?

  Yeah. Okay, so why was Peter Thiel so good at spotting talent?

• 29:11Dwarkesh Patel?

  And he has consistently been that way with his VC investments?

• 29:16Speaker 01

  Yeah, it's a great question. And if there's one thing I, that's in the book that emerges, but I don't have like a general theory of, right, like a grand unifying theory of, it's this talent spotting. I think it's, if I had to, if, let me, let me take a step back and sort of like, talk through some of the stories from the book. One thing that I think he's very good at is not holding, like, kind of a lack of social graces against people. So I will, I'll sort of share a story, right? I, there's this moment that I interviewed Reid Hoffman about. Reid is on, Reid is considering joining the board of Confinity, the company co-founded by

• 30:01Speaker 01

  Peter and Max. And Peter says, you know, my co-founder is Max, but you've never met him. You guys should probably go have breakfast. You can't join the board without Max agreeing to it. And they meet at Hobie's and Reid and Max are sitting down and the way that Reid Hoffman described this to me endearingly because he likes Max a lot, he said for 45 minutes, all I could think was like, look the fuck up because he was looking down at the ground while explaining what Confinity's products were and what the company was going to be. There was a time, today Max Levchin is as comfortable on a TechCrunch stage as he is, like, you know, with his companies. But there was a time when that wasn't true and when

• 30:44Speaker 01

  the best thing that he wanted, the thing he wanted most to do in the world was to write code and to build engineering products and to build, sorry, to build technological products and to be an engineer. It takes a certain level of the ability to kind of, sort of, let's say, suspend disbelief about somebody or to like, like, take a chance on somebody to say, you know, like, this CTO may not be able to look me in the eye when he talks to me, but he's brilliant and I want to support him with my money and then become CEO of his company. And so that willingness to like, look the other way on certain social graces is actually like a skill, right? So think about how many, like, how many McKinsey interview, how many McKinsey interviewees would be turned down if they weren't able to look their interviewers in the eye? But they might actually be the smartest people

• 31:29Speaker 01

  who are interviewing. Right now, they might not be the best person for that particular job, but how many times do we write people off because of the way they look, the way they talk, the way they sound, the color of their hair, the color of their clothes, some random quirk of personality or something in their brain? Like, we write people off. He, more than anyone in the story, I think, was, was actually, like, sort of was drawn to that, right? Was drawn to this kind of person that might be a misfit or at the margins and was like, no, you have real talent. You're going to be brought into this, into this fold. There were, a great example of this, there are high school dropouts on the roster at Confinity. And this is before dropping out became cool, right? Like, let's also establish, like, this is before the T L fellowship, it is before Mark Zuckerberg, the legend, all

• 32:13Speaker 01

  that stuff. Like, it's before all of these cultural cues that like, high school and college may not be the best fit for everyone. There were two people I interviewed who are high school dropouts and one of his literally is his literal reason was like, I just thought high school was stupid and I was gonna like make more money writing code and doing computer stuff and he leaves and he goes and does his thing. So I think there's a roster of people like that that might not find effectiveness in other parts of American life or American economic life, but where he sees real potential. That's one thing. The second thing is, you know, he is ridiculously smart himself. Like he is a kind of grand master chess player, very widely read, like very well educated. He has a high bar for people who he wants to hang out with, right?

• 32:56Speaker 01

  So if you sort of like are gonna even be in the group that's around him, you have to have a certain level of intelligence. Like it's just sort of, that's like table stakes. It's sort of obvious to say it, but it's actually really important. But talent and intelligence, there's like, there's a degree of overlap there, right? Like there's a, that spot on the Venn diagram, there's certainly some overlap. The last thing I would say is, um, you know, he, he had this ability that was played back to me by other people to forecast what someone could be, right? So to sort of like, like to actually like kind of like what you might call a crystal ball of their lives, right? Sort of like looking into a crystal ball and seeing what they could be and the kind of like outlining that for someone. There's a really good podcast that Max Levchin does where he describes this. This came way after PayPal.

• 33:41Speaker 01

  And he said that one of Peter's talents is this ability to like see what your future could be and then play it back to you and then help you get there, right? And he said he's done this over, and Max says he's done this over and over and over again. I saw that play out very powerfully because I would interview with people who felt like they weren't good enough to be at PayPal or maybe they weren't, didn't have the chops or whatever. And they would say, you know, Peter would sort of like outline the vision of what I could do and I totally bought it. I was like, I'm in, I can do that, right? And he gave people a lot of rope. All of that, I think is like, I, I think you're gonna have a hard time. And maybe Tyler Cowen's book on talent does this because there's a whole section in there about Peter.

• 34:21Speaker 01

  But I, I think of those features that I just described, like as actually very powerful things that are not specific to Peter Thiel. Like all of us could do more of that, right? Uh, we could become more intelligent, we could embrace misfits more and we could help the people who are around us like outline the biggest and best versions of their lives, right? Um, so I don't think it's just like this specific Peter Thiel thing. I think these are actually things that like all of us could probably do more of.

• 34:48Dwarkesh Patel?

  Yeah, interesting. And speaking of talent, did PayPal discover talent? Or did it make it? So I mean, obviously, the PayPal mafia, they go on to, you know, found LinkedIn, YouTube, Yelp, Tesla, SpaceX, maybe not Twitter.

• 35:05Dwarkesh Patel?

  And so, I mean, so is it just that Max and Peter were able to identify this group, these people who are going to end up doing great things? Or was, did the experience at PayPal make these the kind of people who could actually, you know, basically form a half of Silicon Valley?

• 35:25Speaker 01

  It's the great sort of nature nurture question, right? Like, was it, was it, were they, were they going to be the dream team? Or did, you know, did they become the dream team, right? Like, was it, was it Michael Jordan or Phil Jackson, right? Like, was it the triangle offense or not? And I think the only honest answer is both. It is the case that the talent that was drawn to work at PayPal, many of them were a cut above in whatever thing they were a cut above at, right? Whether it was the ability to see the product vision in the way that David Sacks could, or the ability to fight fraud, right? Or the ability to like, just write really great code and release products quickly. There's a certain kind of person that got through the door, right?

• 36:11Speaker 01

  That said, the experience of building a startup under duress and in the middle of a dot com bust, and kind of facing like, these kind of clash of the titans at the, at the executive level, and merging two companies, and having to deal with fraud and all the rest. It was like 25 years of experience compressed into four years. And it was like a graduate education times three for some of these people that you could not separate from the things they have done later. Sometimes that's in very direct ways, meaning, here's an example.

• 36:49Speaker 01

  Youtube's strategy of making itself ridiculously good at being embeddable in various sites has a direct tie to PayPal's strategy of making itself ridiculously good at being embeddable on various sites. Full stop. I heard story after story about how like Youtube as an early company would get users who were being frustrated by other platforms to complain if a Youtube player was shut down. PayPal did exactly the same thing, right? So there's sort of, there's no way to divorce the later successes from PayPal. There's another really obvious reason, which is they had a financial exit at the end, in the, in the

• 37:29Speaker 01

  early, in early and late 2002, you have a group of people who don't have like, you know, world historic sums of money, but they have enough money to provide seed capital to other startups, including Yelp and Youtube and Facebook and all the rest, on down the line, right? They have the ability to write a check without the discomfort that might come if like, from, if they had written that check in 1998, right? So that's kind of reason two. Reason three is that they had seen what it, what, somebody played this back on a podcast I was on, I think it was Max Lechon. Like, they had actually like delivered returns for investors, right? So it wasn't just the PayPal kind of group of people, but that actually that Sequoia and

• 38:12Speaker 01

  Blue Run, or what was known as like Nokia Ventures and John Malloy and like, you know, all these other groups that invested in them had actually gotten a healthy return. And like, that built a track record and a credibility so that they could go out and get venture backing. Not just backing from Peter Thiel or backing from Max Lechon, but backing from big investment, big venture capital firms that were going to look at these people and say, you've been down this road before, you sort of have a template, right? And then, and the last thing I would say, and this is crucially, crucially important, but is often missed in the retelling of the story. Because here's what people, here's how people think the narrative goes. They're like, the PayPal people made some money. Then they went off and took that money and turned it into more money and then turned more money into even more money, right? And it is not that tidy. Number one, because you're talking about several hundred people and not everybody had

• 38:57Speaker 01

  that experience. But number two, like part of what happened is that you have, you have a focus on product distribution at PayPal that is very serious and very rigorous. So one of the big lessons learned is it's not good enough to just make something. You have to actually figure out how people are going to find it, use it, and then part money, part ways with their money to pay you for it, right? Which is a very different challenge. And there's, there's a team member, David Sacks, who, this is the lesson that his kind of team takes away. And these people have gone on to very senior product roles in other companies. But it, take that experience away and, and what are you left with, right? Meaning, how would someone understand that in a fine-grained way in any other context?

• 39:40Speaker 01

  You can't read about it in a book necessarily, I mean, you could, but it's harder, right? Thinking rigorously about product distribution becomes a very big part and parcel, particularly of the people on the product team. So I, I think the answer has to be both. As unsatisfying as it is, it's not just that you can go out, pluck talent, bring them into your company, and, and later you will all go on to, you know, host Saturday Night Live and potentially own whatever, all of Twitter. It, it's actually, you, you have this group of talented people and they go through a shared experience together that's really intense. And just also, you know, cards on the table, it's the reason I wrote the book. Like, the book would actually be uninteresting if it were just like a random group of people who went through this experience.

• 40:23Speaker 01

  And it would be uninteresting if like, it was just like, oh, we just hired a team of five Michael Jordans and won 20 NBA championships in a row. Like, of course you did. Of, of course that happened, right? Like, it would be uninteresting if it were either or.

• 40:38Dwarkesh Patel?

  Yeah, yeah. That, that's so true. Uh, there's a really great talk that Max Levchin gave at a startup school, I think a few years after PayPal. And one of the things he mentions, um, is that they apparently got a multimillion dollar check from, uh, the Yakuza, the Japanese mafia. And I don't think that was in the book, but like, what was that about? What happened there?

• 41:00Speaker 01

  Yeah. Yeah, it was, um, there was an entity that was attached to the Japanese like mafia, the Yakuza, and there was, there, it sort of, these stories have become conflated in the retelling, and there's a, there's a little nod to it in the book. Um, but, but basically what happens is there's this, there's a private company that's attached to the Japanese mafia. And the reason that Max and Peter have both told this story over and over again, it's not actually to illustrate their connections to the mob, because they don't have them. Um, the reason is because the money was, this is sort of funny, there, there was so much hype about Silicon Valley and so much interest in investing in like late 1999

• 41:43Speaker 01

  and early 2000, that the, one of the companies, and it might have been that one, basically like wanted to send them the money without any kind of like contracts, or they just like asked for the wire instructions and were like, we just want to give you the cash, right? Um, and, and it, it struck them, and it struck Peter in particular, as like basically an example of like the worst kind of, of memetic problem, right? Which is like, if everyone thinks every company in Silicon Valley is going to be successful, there is something wrong. Like, something's gone cuckoo if someone's saying to you, let me just, just give me the, give me your bank account number and your routing number, I just got to wire the money right now, we'll work the paperwork out later, right? Um, which is what was happening. And that money ended up being a little bit more ethically complicated because of its

• 42:25Speaker 01

  connections. But that, they used the story, if I recall it correctly, as an illustration of that, just how aggressive the environment was to get money to an American company, that basically its principal accomplishment at the time was like, building an email payments infrastructure and giving away bonus funding, right? Where it's like burn rate was ridiculous, but you have this company halfway across the world that's so excited, that's just going, and then they find out later, like it's got these unsavory ties. Um, you know, there were story after story like that, and it's actually a big part of Elon's experience as well. Like he, I described him, I said, how difficult was it to fundraise in early 2000? And he goes, it's really not that difficult, when, his line about it is like, when everyone's pounding on your door and trying to fire, fire hose you with cash, right?

• 43:09Speaker 01

  It's not exactly what I would call, he's like, it's not exactly what I would call like fundraising, right? If everyone's like basically trying to give you cash, which was their experience. In spite of that, and this is interesting, gets back to the first question you asked. In spite of that, Peter is pretty insistent during March of 2000 that they close their fundraising quickly. Because his view is like, this might be true now. Like, some random company might be trying to basically wire transfer us money without any strings attached and no contracts. But that will change as soon as the market starts to slide. And so it is actually like one of the things where people want to talk about the genius of this group. And I think there is some truth to that. There's also, you have to recognize that like, the closing of the fundraising in March of 2000 is a fortuitous event. It's a timing event, right?

• 43:54Speaker 01

  And even when I interviewed particularly, I would say like mid and junior level employees, they would talk about it as like a quasi-religious, like almost like a watershed, right? That they're like, okay, we managed to secure this round. And then just a little bit after, like, things completely take a dive. I, again, I tried to, I went for substance over like exploring Yakuza connections. I also like, did not want to like be calling up random phone numbers to ask who's affiliated with the Japanese mafia. Like, you know, I don't think that's a good look for somebody like me.

• 44:26Dwarkesh Patel?

  Yeah, it's, I hear that apparently there will be a TV show made of this book. And this would be a great, I don't know, a great, like, at least like five minute, five minute edition.

• 44:38Speaker 01

  I think so. I think it'd be fun.

• 44:40Dwarkesh Patel?

  Yeah. By the way, is that, is that happening, the TV show, or?

• 44:43Speaker 01

  Yeah, it's in the works. There's a producer named Mark Goffman who got his start on one of my favorite shows, which is West Wing. And recently did Umbrella Academy, and he was on, I think it's called Limitless, it was on CBS. And Mark is really great. And he and I have been in touch for, actually a long while about the project. I think what he recognizes in it is what I saw, which is, if you have a room of very, very smart people, and they face some very, very big challenges, and they don't entirely agree on how they're going to fix everything, that makes for a really interesting narrative. It makes for a really interesting and thought provoking. Back and forth and like contests of ideas and contests of ambition and ego and just like

• 45:25Speaker 01

  kind of what comes out of that is very energetic. He sensed that energy a few years back and it reached out to me. And he along with a few others have kind of like been championing this project. So I hope it goes somewhere, but you never know. Hollywood's always a little unpredictable in that way.

• 45:40Dwarkesh Patel?

  I really hope so because you know, one of the things that makes this story so incredible is, you know, it's kind of like watching an Avengers movie or superhero movie where you know that, you know that Spider-Man is gonna like win, right? Like they're not gonna like kill off Spider-Man. Like it's like Elon Musk is, come on, it's Elon Musk. Like they're not gonna, they're not gonna go bust. But then you're like, you know, you're like, oh, you're supposed to believe that this first fight where Spider-Man almost dies, that's the end. The second fight where Spider-Man almost dies, that's the end. And you know, you read this book and it's like, oh PayPal almost went bust here. You know, they lost their backups here and they almost went bust. Uh, you know, they were at the edge of their funding here. But it's like, oh, come on, it's Peter Thiel, it's Elon Musk. How could that happen?

• 46:15Speaker 01

  How could that happen? And you know, I, it's actually a really important point and no one has really brought that up. And I'm glad you did because it strikes me that like the problem with seeing them as invincible is that it actually makes other people think that they can't do these things even when they fail. And the reason that the PayPal story, at least my version of it, has so much failure in it is because like if we pretend that they're not superheroes for a minute, if we bring them back down to earth, if we tell the stories of like accidentally hot swapping hard drives and almost losing the company's entire source code, right? It makes

• 46:57Speaker 01

  it okay for many other people to, to do the kinds of work that they do and be okay with a little bit of some odds and ends and some wrong turns here and there, right? Like I had a friend who's a startup founder who basically said, said a version of like, it's really comforting to know that Elon and Peter and David experienced anxiety, right? Like to know that they were nervous actually makes me feel good, right? And he told me, he's like, your book is like therapy because if they, if they lived through this and lived to tell about it and were successful, like maybe there's hope for me. And I didn't intend to do that. That wasn't, the purpose of my book was just to tell the story, but I do think of it as actually really, really important.

• 47:43Dwarkesh Patel?

  Yeah, and there's a strong memetic element to the fact that you published the book in a very positive way. I mean, you have this really moving epilogue. I won't spoil it for, I won't spoil it for the people who might want to read the book. But, uh, yeah, like even like, you know, I'm 21 and I'm a programmer and I'm reading this book like, "Fuck yeah, I want to do this shit."

• 48:03Dwarkesh Patel?

  Which is like a totally memetic desire, right? But like, yeah, that's definitely one you want to, that's definitely one you want to spread.

• 48:08Speaker 01

  Right.

• 48:09Dwarkesh Patel?

  Yeah. Okay, so one question I've like always had when I'm reading this kind of stuff is, what does somebody like Elon Musk or Peter Thiel, what do they do in a pre-capitalist society? Like, you know, imagine the era of Cato. Like, are they going to conquer Gaul like Caesar? What if somebody is super competent and ambitious, but also really clever and intelligent? And doing those errors? And conversely, you can ask the question like, what does somebody like Napoleon and Churchill do when there's not a, you know, a war? That's, uh, there's not a total war going on? Or are they startup founders? Or do they just open up like a restaurant or something?

• 48:44Speaker 01

  Well, I, you know, here, let's go back to what we were talking about at the beginning, where if you were to look at the late 1700s era generation in the United States with the American Revolution, right? So you have Ben Franklin and Thomas Jefferson. And those I think are two really interesting figures to have this, to have in this context. I have a sneaking suspicion that, no, you know, Ben Franklin was an entrepreneur, right? So like his start was in printing and he was like a printer and did printing presses and made books and things. But was an entrepreneur and a kind of broadly scientifically interested. Jefferson too, had all these like, like random interests and random writings. He was, you know, he built and designed Monticello.

• 49:28Speaker 01

  Like the layout for the University of Virginia bears his, his signature. In addition to writing the Declaration of Independence and all these other things. So you have people who are polymaths, right? And I suspect that if they were alive today, do I think they would be involved in business and government, in government? Probably in some capacity. Do I think they would be entrepreneurs? Almost certainly, right? Um, and I, I think that some of the hallmarks of the, their ability to read widely, the ability to like just... Actually commit themselves to self-education, meaning like, I wonder what Ben Franklin would have been like if he had YouTube, you know? You gotta believe that like, the guy would have just wanted to learn everything, because

• 50:08Speaker 01

  he displays that quality in his books and in other writings and things he did, and just in the way he lived his life. You know, I don't want to get too

• 50:17Dwarkesh Patel?

  He might spend some time on other video streaming websites.

• 50:21Speaker 01

  That's right, yeah, like, he'd watch

• 50:22Dwarkesh Patel?

  Ben Franklin.

• 50:23Speaker 01

  Right? And Vimeo, he'd be a Vimeo guy, not a YouTube guy, I don't know. But it seems to me that there are certain hallmarks of places that are very potent in society, where there's a lot of change happening, or a lot of possibility of affecting big numbers of people, attract smart and ambitious and energetic people. I think in the late 1700s, if you were smart and energetic and ambitious, you had some options available, but probably if you're in the United States in like, the colonial era, the hottest, you know, the hottest party in town is the American Revolution, right? And so you're gonna find your way to that. I, I think it's why the group that helped to create and build and nurture PayPal has

• 51:05Speaker 01

  gone on, not just to accomplishments in business, but they've done things in politics and in art, they've done things in film, they've done things in books and literature, they've done things in nonprofits, right? Even today, one of the companies that is trying to, like, you know, that has a bunch of PayPal alumni associated with it, is trying to reforest 3 billion acres of forest ecosystems. And so I, I think that some of these characteristics, it's the reason that there's real power in reading about history, right? Because it actually makes you realize, like, some of these things are operated at the level of character, and that's malleable. Like, we can improve, we can get better. And so then, like, what's cool is you can sort of think, play the game of like, I wonder,

• 51:48Speaker 01

  like, what so-and-so would be doing? I suspect that Ben Franklin today would probably make his way to like, Austin, Texas, or Miami, right? Like, I bet he'd be all in crypto. Like, this is a person who thought about everything from like firefighting to daylight savings time. You don't think he'd be totally down to have a long discussion about cryptocurrency? Of course he would.

• 52:11Dwarkesh Patel?

  Okay, so one question I had is, you know, once he got kicked out of PayPal because like Musk got kicked out of PayPal because he had this like super ambitious vision of redoing the banking industry and the brokerage services industry and then making them cheaper and faster. Why didn't he just be like, all right, if PayPal doesn't want to do it, I guess I'll just make a new company to do it. Why did he decide, our finance is over, I'm gonna do, I'm gonna make a pivot to Mars and electric vehicles?

• 52:36Speaker 01

  Yeah, it's a great, it's a great question. And I think there's a part of him that in my discussions with him, he is still, he speaks openly about kind of feeling like PayPal was a vision unfulfilled and that this is the sort of thing he would want to do at some point. I think the honest answer is that he became oversubscribed, right? And not oversubscribed, but he became, call it, the passions that he had in college around electrical energy, sustainable energy, and around space travel, re-engaged him post PayPal. And he went on to, you know, found SpaceX very quickly after his ousting at PayPal. And those are the businesses that, you know,

• 53:16Speaker 01

  obviously occupy his time today, among others. And so I think of it as a factor of like, kinda, I don't think that the passion has ever left, meaning in my discussions with him, he could still become very impassioned about the necessary improvements to financial services that he believes are overdue. But I think he has understandably like made advancements in other fields. And I feel like that's like, like, I'm not, I think he still thinks finance is stuck in the 1980s and the 1990s, like in terms of its infrastructures and its ecosystems. But I think the other things he's doing are places where he could uniquely make a mark. I'm not saying that he can't in the others, and maybe he can, but I think that it was a matter of like,

• 54:01Speaker 01

  timing and circumstance, meaning leaving X, what he called X.com became PayPal, leaving X.com gave, like, he was able to shift into like his Tesla and SpaceX years, right? And so that there was just a timing element there. And I did have a couple lines in there from other people, Reid Hoffman, who mentioned that at one point, like Elon was like, you know, we should get the band back together and there's still so much to do in financial services and there's so much that needs upgrading and all these fees are so stupid, right? And Reid Hoffman sort of like gently, you know, says like, oh, man, just let it go. Just like you have so much other stuff going on, you know? I think that if, so let's though, the more interesting thing to emphasize is,

• 54:46Speaker 01

  in each case, what he is doing is what is commonly known as like first principles thinking, right? And so the idea of like, if you were to go back to a first principles approach on finance, like, would you have to pay a wire transfer fee to me if we're just passing ones and zeros through a database? Right? If all we're doing is taking sort of one line on a spreadsheet and moving it to another line on a spreadsheet, and we can do that digitally now at almost no cost, why am I paying $25 for an inbound wire? Right? Like, those sorts of questions animate SpaceX just as well as they animated PayPal and X.com, right? Meaning, let's break things down to like, what does it actually cost to launch a rocket into space? Now, I think thinking about those questions is easier than doing something about them, right?

• 55:31Speaker 01

  And so in the original conception of X.com, the idea was to unite financial services. And the reason you want to unite financial services is it's better for consumers, it makes things faster, and it makes things cheaper. If my mortgage and my savings account and my brokerage account are all managed by the same place, I won't be paying hefty fees when I need to move money around, and there won't be a three-day delay before a deposit comes in, right? That's as true today as it ever was. And so I think, in each case, what he is really thinking about is let's begin from a place of first principles, and like, work backwards to what the best solution is for customers, right? It doesn't always work out perfectly, but I would argue that like, some of his criticisms are still true.

• 56:09Speaker 01

  I mean, I've paid a fee in my life that I would want back from my bank, and damn it, they, you know, someone should fix that. And so I think that's the reason. The reason, the short answer to your question is time and his attention shifted to other things, but then I think the longer answer is like, those problems still exist.

• 56:31Dwarkesh Patel?

  Yeah, yeah. You know, I'm glad you brought up the thing about the band getting back together, because that is actually one question I had, which was, you know, this is such an effective team. And as far as I can tell, the only people who actually teamed up as like, not as just investor and founder, but as founder and founder, the only people teamed up were the YouTube founders. And so I'm curious, like, why didn't these people say, oh, my gosh, PayPal, like, look at that huge success. Why don't we like, why don't we put this entire team together and do one thing together? Why didn't they go up and do their different things? Was it just that, you know, these people are just, they all needed to be the big guy, given how talented they were?

• 57:03Speaker 01

  No, I don't, I don't think it's that. I think, I think it's, so remember also, we're talking about a whole bunch of people, right? So PayPal, pre-IPO in Palo Alto is around like 200 people, give or take, and Omaha is several hundred people. So it's not like a dozen people, right? Meaning, there's actually a whole range of folks, and many of them have worked together on other things. So just Jerry Stoppmann and Russ Simmons, early PayPal, co-founded Yelp, right? Chad Hurley, Chawood Karim, right? Like, there's YouTube, there's like, all of these other entities. There are employees that are early at PayPal that go on to work at LinkedIn. There are PayPal employees that go on to work at SpaceX, Tesla. So they

• 57:46Speaker 01

  do end up working together, meaning the band isn't like a five, it's not the Beatles, it's like, it's like 100 Beatles, you know? It's like, it's like 500 people, right? Or whatever. And so it's hard to argue that like, they could bring it back together for one, you know, one, one reason. It's also the case that like, there are, there were people there who went on to build things that maybe other people wouldn't want to participate in, right? So like, a good example, right, is, or build things that couldn't scale. My favorite example is the person who left PayPal after a very short tenure and became a very prominent professional magician. And Daniel Chan was one of my favorite

• 58:28Speaker 01

  interviews, because he did magic on Zoom while I was interviewing him, right? And like, did tricks with me. But he's not building a venture-backed business to go make magic some like, big thing, right? His business is fundamentally about perfecting his craft and doing it very, very well.

• 58:45Speaker 01

  There's just ways in which like, would that blend with some of the things that Peter Keel's doing? Maybe, but I doubt it. And so I don't think of it, by the way, as like a bad thing that the team went off into all these other directions, because they're going off into all these other directions is the reason that we have YouTube and Yelp and LinkedIn and SpaceX and, you know, all of the rest. And so I'm kind of, in some ways, I'm like comforted that they didn't all like stay together and do the next venture or do the next venture. The other thing is, the venture they did together, financial services, is very specific and it's very difficult. And while some of them have done that again in the future, it's not the field that everybody wanted to participate in, right? So that's also really important is like intellectually, we have to remember that a lot of what you're doing, if you're building financial services, like you're

• 59:29Speaker 01

  interacting with regulatory bodies all the time, you're interacting with and battling big banks and Visa and Mastercard. And like, there's just a lot of people who that was just, that's a lot of noise. Like, that's a lot of drama. It's a lot of diplomacy. It's a lot of very sensitive interactions about people's money. And I think there was a bit of just burnout, right? Somebody could be called a PayPal PTSD. You know, people live their lives. Like, I think that, I think it would be, it would be hard for some of these people who have been CEOs to be subordinate to others. But I don't think that's the primary reason. I think it's just they went off and pursued their own kind of interests and passions.

• 1:00:06Dwarkesh Patel?

  Yeah, yeah. Okay, I want to be respectful of your time. So I'll ask you, I have one last question for you, which is, you know, you were the managing director at Huffington Post. And I'm sure that involved like being up to date, you know, minute to minute on, you know, like getting the featured articles out and, you know, managing social media. Like, you know, like, it is, it is a very, things are happening constantly. And then now you write, you're doing, you're writing these books that take five years to compose and publish. And you have this like Robert Caro like, research and writing process where, you know, you're reading everything and you're watching all the interviews. What was that transition like for you? And can you talk a little bit more about your writing process?

• 1:00:51Speaker 01

  Yeah, it's like, calling my process Robert Caro like is like the nicest thing anybody's ever said to me. Because he's, he's a beast. And he's like the OG of my field, you know, and like is the best. And everybody's kind of in his shadow because of the level of diligence that he brings. You know,

• 1:01:09Speaker 01

  I like books because books take a long time.

• 1:01:15Speaker 01

  They allow you to, I spent five and a half, six years on this PayPal project. That's a long time to devote to one project. I didn't do it full-time, but it's still a long time to devote to a project. And I like that. And the reason I like it is because every new discovery yielded some other discovery. And every new interview prompted some new insight. And I found details that were left kind of underexplored or unexplored for so long. And I got a lot of like joy out of the endurance of it, out of the like, let's like slog through this. And really go for broke and really try to interview as many people as I could.

• 1:01:58Speaker 01

  I admit like, like I, I think, you know, I left digital media a long, long, long time ago. And I'm sort of glad I did in, in for a variety of reasons. But the foremost of which is with books, you get the, you have the ability to patiently work your way through a topic for a very, very, very long time. And like in my dream, like I get to do what Robert Caro does, right? My dream is 10 years on a book, right? Where it's like, I like, it's like that, if the economics of that could work out, that's exactly what I would do. I would wake up every day and do homework for 10 years until I had a book because it's so exciting and thrilling to me. I think I'm just wired that way. My pro, you know, you asked about process, like I have, I have specific things I, I do.

• 1:02:39Speaker 01

  But, but broadly, the process is I treat this, I, I treat like all of these books as, as sort of with like a level of, of sort of, I think about Caro. And I often ask myself like, what would he do, right? Or what would like Stacy Schiff do, right? Or what would like, you know, Barbara Tuchman have done? Like, like it's like, I think about the people who I admire. And I think about how they would have approached a project like this. And that leads me to like seven days a week, watch every interview, contact everybody, try to do as much historical spade work as I can, right?

• 1:03:17Speaker 01

  I don't know why it works. It works for me. I think it's a personality thing too. Like it's sort of, you have to be willing to be bored a lot. Like you actually have to be willing to wake up and be bored a lot of the time. Because the, you know, it's only on like the 17th press release for X.com that you discover this little nugget about something, right? Or a little name that is different, right? I remember when I was looking at Elon's early company Zip2, I printed out like all the Zip2 press releases that I could find. And like I would read them end to end, like, kind of like, just like trying to understand how Zip2 evolved as a company. And then divine like, how might that have affected Elon's development? And there's this really great moment in one of the press releases that I ended up putting in the book.

• 1:04:00Speaker 01

  JavaScript debuts. This is like a big event in computer science. Like JavaScript is real now, right? And Dr. Lou Tucker, who is like the Director of Development or Research or something at JavaScript, like has a line in this press release. And I noticed that from the time the company launched to when, or the time Java launched to the time that Zip2 incorporated Java was very, very like, it was a short window, right? And it confirmed something that Elon had said, which is like, one of the things that he was proudest of with Zip2 was that it was always technologically trying to move very fast and stay ahead of the curve. And to me, it was like, he made that point. And I was like, okay, everyone says that. But then I saw the Java thing and I went and did the timeline on like when Java launched and when Zip2 included it.

• 1:04:44Speaker 01

  And I was like, oh, like there's real meat to that, to that statement. There's real substance there. I can imagine that for a lot of people listening, like reading 17 Zip2 press releases is like their idea of like torture, right? But for me, like having these big stacks of paper around my house that I'm like making my way through is actually like, it's so thrilling. You feel like you are like on an exciting adventure if you're me, right? I say that a lot. I'm like, this sounds ridiculous, but you really do feel that way. And so that's the cool part. The cool part is actually not interviewing, like, you know, interviewing them was fun and I learned a lot from my interviews with these people, but the more, the bigger thing was discovering these tiny discoveries about like how these

• 1:05:26Speaker 01

  things were, how these things fit together. An email from a user where they're really angry and I'm like, oh, this is, this is gold. Or like some customer service spreadsheet, right? Where you can see the number of customer service calls. I'm like, oh my God, I have the number of customer service calls. That's insane. I get a thrill out of that. Doing that is, I can't do it on Twitter. I can do it over years on a specific kind of project and I just love it. I mean, I love the heck out of it.

• 1:05:55Dwarkesh Patel?

  Yeah. And I, you know, I loved it too. I mean, like you said with the Java thing, you know, one of the things I really, really liked of the book was, you know, as a, as a computer nerd, it was just so fun to read, like, how were people thinking in the nineties about like a trade off between using Unix and Windows? And, you know, you did a great job of like covering, like, you know, these kinds of trade offs exist even today, right? People have big decisions about like, do we use this new technology or do we use one that has all these APIs built into it? And, you know, you go into like great detail on this and it was like such an interesting part of the book. Yeah. So, but anyways, so the book is The Founders, The Story of PayPal and The Entrepreneurs Who Shaped Silicon Valley. I highly, highly recommend it. It was, it's definitely been one of the best

• 1:06:38Dwarkesh Patel?

  books I've read, at least in a long while. So Jimmy, anything else you want to say? Anywhere else people can find you or?

• 1:06:45Speaker 01

  Well, no, thank you. Yeah. Thank you for taking the time to do these interviews and to, to work, you know, to like share some of these things that I think the challenge of the kind of work that I do is that sometimes you have to neglect by definition, like some of the engagement with an audience, right? Because I kind of like need to keep myself walled off in order to do historical work. And then you sort of emerge and like the world's totally changed or whatever. And so I appreciate when enthusiastic people read the book and reach out and like. Can engage on it and like what's also nice is you've read the other books in this space. And so you're a super informed reader, which makes these conversations and dialogues really fun.

• 1:07:28Speaker 01

  So I just appreciate all the time and energy that you take to do this because it's not easy, I know. And as an author, I'm like, I really, I appreciate the, the Robert Carol like approach to your interviews.

• 1:07:40Dwarkesh Patel?

  Well, it, it, it is extremely nice of you to say, given, given the rigor and your own preparation process. So that compliment means a lot to me. Thank you very much.