PayPal

Ben and David return to technology acquisitions by examining a classic: eBay's 2002 purchase of PayPal. Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Items mentioned in the show: How the 'PayPal Mafia' redefined success in Silicon Valley - Tech Republic http://How%20the%20Instagram Will Be a $3 Billion Business This Year: Analyst http://fortune.com/2016/01/25/instagram-3-billion-business-this-year/President Obama and Bill Simmons: The GQ Interview http://www.gq.com/story/president-obama-bill-simmons-interview-gq-men-of-the-year"The Carve Out": Antifragile: Things That Gain from Disorder - http://www.amazon.com/Antifragile-Things-That-Disorder-Incerto-ebook/dp/B0083DJWGOThe Bill Simmons Podcast - Chris Sacca https://soundcloud.com/the-bill-simmons-podcast/ep-95-billionaire-investor-chris-sacca

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

• 0:00Speaker 00

  Yeah, in fact, there's Drake lyrics. "I got enemies, got a lot of enemies, got a lot of people trying to keep me from..." Yeah, I don't know the rest, but it's great.

• 0:25Speaker 00

  Welcome to episode 11 of Acquired, the show where we talk about technology acquisitions that actually went well. I'm Ben Gilbert.

• 0:33David Rosenthal?

  I'm David Rosenthal.

• 0:35Speaker 00

  And this is our show. Today, we are talking about eBay acquiring PayPal, an older acquisition, one that kind of set the tone for a lot of modern technology acquisitions, changed the valley forever, birthed the PayPal mafia, lots of great stuff to come. But first, wanted to remind you, if you have not yet and you like the show, would really appreciate a review on iTunes.

• 1:01David Rosenthal?

  Yeah, and as always, hit us up on Twitter, @Acquired, @AcquiredFM, or @Gilbert, or @DJRosin. We love feedback.

• 1:10Speaker 00

  We do. We do. We promise we'll listen and we'll try and make it better. We've heard rumors that audio, audio was a little quiet in the past, so working hard to make sure that we release that, you know, appropriate listening volume now.

• 1:24David Rosenthal?

  We're iterating.

• 1:24Speaker 00

  We are, we are. A little startup ourselves is cute. Also, I apologize for the last, like, month of no episode. We got some people saying, "Finally, a new episode." I had ACL surgery, but I'm a real human now and I'm fully off the oxycodone, so we're back in action.

• 1:42David Rosenthal?

  Should know Ben has been a real trooper here. You were, we were recording last time, you were what, like, five days post-surgery?

• 1:51Speaker 00

  Yeah, yeah, that was, I was barely post-oxycodone. But yeah, stay away from the narcotics, kids. That's my advice.

• 2:01Ben Gilbert?

  All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you prove that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 2:20David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature, or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this "shadow AI" running with no security review at all.

• 2:41Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.

• 3:03David Rosenthal?

  In half! Which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor, and Snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 3:21Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here, and literally hundreds of Acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V-A-N-T-A dot com slash acquired for $1,000 off, and just tell them that Ben and David sent you.

• 3:49David Rosenthal?

  All right.

• 3:50Ben Gilbert?

  Yeah, acquisition history and facts.

• 3:52David Rosenthal?

  Acquisition history and facts. Man, I am excited for this episode. There is so much to dive into and unpack here. So I will get through the acquisition history and facts quickly. But first, a quick note. We're going to focus this show on the first act of PayPal: the founding, the acquisition by eBay, and then...

• 4:17David Rosenthal?

  And then the first period of history thereafter. We may do a future show on the spin out that happened last year where PayPal was spun back out from eBay. But and and we could also do another show on PayPal as an acquirer.

• 4:31Speaker 00

  It's true. They themselves had done a few interesting ones, especially recently.

• 4:34David Rosenthal?

  So much, so much interesting stuff with this company.

• 4:37Speaker 00

  But there's definitely a whole episode for us to do just with.

• 4:40David Rosenthal?

  There's at least one more episode in the tank here. So with that, okay. So December 1998, Peter Thiel, Max Levchin, and Luke Nozick found a company that they call Confinity, and they decide to make an applications, a payment and cryptography service for Palm Pilots.

• 5:05Speaker 00

  Amazing. Like, the PayPal that we use today started to beam money back and forth between Palm Pilots.

• 5:14David Rosenthal?

  Quickly, they realized that that's a small market. And they, in 1999, they decide to switch over and start working on a money transfer service that they've come up with, and they call the product PayPal. Also in 1999, a guy named Elon Musk, you might have heard of him, he, fresh off of founding and selling Zip2, starts a company that he calls X.com as an online financial services and email payment company.

• 5:43Speaker 00

  Domains were cheap back then.

• 5:44David Rosenthal?

  Yeah, geez, X.com. March of 2000, a short while later, they decide to merge, apparently orchestrated by Michael Moritz at Sequoia, who was an investor in Confinity. Neither confirmed nor denied, but that's what the internet says. And Elon, from X.com, initially remains the CEO of the company. That quickly changes, and Peter Thiel comes back as CEO of the combined company. In October of 2000, Elon was still the CEO, and he makes the call, the PayPal product is doing so well, that they focus all the efforts of the combined company just on PayPal. And then in 2001, they rename the company as PayPal.

• 6:30Speaker 00

  Yeah, there's a classic case of Elon being Elon and doing what he does best, and that's focus.

• 6:34David Rosenthal?

  Yep, no more Palm Pilots.

• 6:38David Rosenthal?

  And then in February 2002 PayPal goes public. And it's actually, this is interesting to remember, and this is February 2002. This is after the crash, after the dot com crash. And this was the first consumer internet company to go public in 18 months. And it does pretty well. PayPal has at close on the day of the IPO has about a $1.2 billion market cap. And then very quickly thereafter, only a few months later in July of 2002, eBay announces that they're acquiring PayPal in an all-stock deal, depending on how you count, on how you account for the transaction, somewhere between $1.2, $1.5 billion,

• 7:21David Rosenthal?

  which was about a 20% premium to the stock's closing price the day before. So interesting, and we're going to dive far more deeply into this. But pretty quickly, the whole team leaves. Within, I believe the stat is within four years of the acquisition, over half of all PayPal employees have left. And interesting, and including all of the founders of both Confinity and X.com. And interestingly, they're, they're actually, the history of the PayPal, the president of PayPal within eBay has been a little bit of a,

• 8:03David Rosenthal?

  I don't want to say a hot seat, but some interesting figures have gone through there, including Scott Thompson. Do you remember him, Ben? This is the guy who left being the president of PayPal to become the CEO of Yahoo. And then it was very quickly revealed that he had completely fabricated his resume.

• 8:22Speaker 00

  His pre PayPal resume?

• 8:24David Rosenthal?

  Yeah, I believe it was that he, I believe, I could be wrong on this. It was that he said he had a computer science degree. And it turns out he didn't have a college degree at all. Yeah, it was a whole big controversy. And then ended up in Marissa Mayer afterwards coming to Yahoo.

• 8:43David Rosenthal?

  After him, David Marcus, who had actually come to PayPal from the acquisition of Zong, which was a payments company that he had founded, was the next president and he is now running Facebook's Facebook Messenger.

• 8:55Speaker 00

  Hmm.

• 8:56David Rosenthal?

  Interesting. So, yeah, and then PayPal remains part of eBay for 13 years, during which sees meteoric growth. And then in July of 2015, as mentioned, eBay, under shareholder pressure from Carl Icahn, spins off PayPal into, once again, a separate standalone publicly traded company. And when they do, PayPal is worth, at the time when it begins trading, about one and a half times the value of eBay. So it is significantly more valuable than all of eBay.

• 9:39David Rosenthal?

  And today PayPal has about a $46 billion market cap as a public company.

• 9:43Speaker 00

  And the question we're here to address today is, was it a good decision for eBay to pay that, call it $1.3 billion, to in-house PayPal, given where they are today?

• 9:54David Rosenthal?

  So much to unpack. Financially, no doubt.

• 9:58Speaker 00

  Yeah, I mean, should we, should we take this from a shareholder of eBay's perspective, where we assume that they end up with one PayPal share and one eBay share?

• 10:08David Rosenthal?

  Which is what happens at the spinoff, yeah.

• 10:10Speaker 00

  Yeah, yeah, that, that feels reasonable. I think we can talk a little bit about the actual impact that it had on eBay's core marketplace business, but it's, I think it'll be interesting to look at, how did it feed the marketplace business? And how did the PayPal business grow? And would the PayPal business have grown like we've seen it grow if eBay hadn't acquired it?

• 10:32David Rosenthal?

  Yep. Let's do it. Should we start it with acquisition category?

• 10:36Speaker 00

  Um, yeah, I think, I think there's like a few questions that I sort of want to get to before we categorize. I, um, there's a few interesting nuggets in here. The biggest one that I think is interesting is eBay transactions generated two thirds of PayPal's payment volume at the time of the transaction. So here's PayPal where they finally have found product market fit because people seem to be using it all the time for this eBay thing. And you know, they're not really succeeding in peer-to-peer payments. They're getting embedded on some websites, but that business is largely fed by the fact that eBay sellers are using it on other websites that they operate.

• 11:14David Rosenthal?

  Yep.

• 11:14Speaker 00

  eBay is effectively their, their entire market segment and their distribution to, to get to new markets. And, and so-

• 11:22David Rosenthal?

  What was the, uh, what was, Ben was mentioning to me a quote, uh, was it a Peter Thiel quote that, um, uh, that PayPal was essentially an app built on top of eBay?

• 11:34Speaker 00

  Uh-

• 11:35David Rosenthal?

  I don't, maybe I read that somewhere.

• 11:37Speaker 00

  Yeah, yeah, that-

• 11:38David Rosenthal?

  Anyway, I mean, that's essentially what it was.

• 11:40Speaker 00

  Yeah. And, you know, that's a precarious position for a company.

• 11:43David Rosenthal?

  Yeah.

• 11:44Speaker 00

  eBay was in-house, uh, building a very similar solution and they were partnering with Wells Fargo. I think it was called Billpoint. And, um, you know, in looking at kind of the, the way that eBay was facing decisions at this point was, okay, we, we love electronic payments in our platform. I think, uh, at the time of the PayPal acquisition, it was about a third, let's see, uh, 40% of eBay transactions. Um, and Meg Whitman, who was the CEO at the time, said that she hopes that figure will increase dramatically. And so eBay is highly incentivized to make these really fast electronic transactions occur. They've built Billpoint in-house. It's an interesting sort of business on its own, clearly, as, as PayPal was demonstrating. And-

• 12:30Speaker 00

  eBay faces this decision as, okay, one in four auctions on our platform are settled with eBay. They're pretty much entirely dependent on us.

• 12:40David Rosenthal?

  Settled with PayPal.

• 12:41Speaker 00

  Really, sorry, settled with PayPal. They're pretty much entirely dependent on us.

• 12:44David Rosenthal?

  Yeah.

• 12:44Speaker 00

  We could buy them. We could build this thing in-house, which they did, called Billpoint. We could cut them off. But that exposes them to risk of regulatory pressure. So there's this interesting dynamic going on there where it's like a game of chicken.

• 12:57David Rosenthal?

  Yep. Not to mention that this product that PayPal, that the PayPal team had built is really, really hard.

• 13:07Speaker 00

  Yeah. And among other things, like the way that they actually got classified as not a bank, but I think of money, money transfer service. There's a lot of regulatory things that they did that were really hard. But from a product perspective, making people feel safe, sending money over the internet when the internet is still this immature thing, and then actually backing it up with the fraud detection. I mean, there's, there's bodies buried all over the place in these PayPal-like services at the time that didn't succeed because they couldn't keep a lid on their fraud detection.

• 13:37David Rosenthal?

  Yep, absolutely. And interestingly, which we'll get more into later, you know, the core of PayPal's fraud detection technology became the inspiration for Palantir.

• 13:49Speaker 00

  Oh, interesting. I mean, I knew it was Peter Thiel, but it's, is that, is that like other people from?

• 13:55David Rosenthal?

  Yeah, some of the, some of the core engineers that worked on fraud detection at PayPal helped start Palantir with Peter Thiel. And a lot of that technology came from the fraud detection days of PayPal.

• 14:08Speaker 00

  Hmm. Interesting stuff.

• 14:10David Rosenthal?

  I mean, if you think about the, if you think about the types of jobs that machine learning is like uniquely qualified for, you know, fraud detection is like right up at the top.

• 14:19Speaker 00

  Yeah.

• 14:22David Rosenthal?

  Acquisition, should we, let's move into category and I think we can, I think we can discuss a lot of these themes and unpack them as we go.

• 14:27Speaker 00

  Cool.

• 14:29David Rosenthal?

  So I'll go first with category. You know, I, I'm gonna say business line here, but it's an accidental business line.

• 14:39David Rosenthal?

  I would, you know, without knowing, without knowing exactly what the eBay executives were thinking at the time, I could imagine that they thought about this as a feature acquisition almost, you know. We, gosh, payments are a critical, you know, electronic payments are a critical part of our product and our marketplace. We've been trying to do this ourselves. These PayPal guys are doing it way better. We should just buy them and implement them as, as the feature on the site. And then over time, it turned out that that was actually in and of itself a way bigger and better business than eBay itself.

• 15:14Speaker 00

  Yeah, it's interesting. I don't think eBay had tried to get into the peer-to-peer payment space. I mean, I, I think, yeah, it was, it was a very Apple thing to do. It was a very, we want to create the best user experience by making sure that we control all the key components of our product. And, you know, I think.

• 15:33David Rosenthal?

  Which is crazy to back up for a minute.

• 15:36David Rosenthal?

  At the time of the acquisition, you said about 40% of settlements on eBay were being done electronically.

• 15:44Speaker 00

  That's correct.

• 15:45David Rosenthal?

  So that means, that means 60% of eBay transactions were not settled electronically.

• 15:50Speaker 00

  Yeah. And, you know, I was trying to figure this out. Does that mean they're mailing checks around?

• 15:54David Rosenthal?

  I have no idea. That's crazy.

• 15:56Speaker 00

  Yeah. It's, it's easy to forget. I mean, is it what, 14 years ago, what the world was like, where you couldn't just transfer money everywhere?

• 16:04David Rosenthal?

  I was in high school. People were buying Beanie Babies.

• 16:07Speaker 00

  And I was selling Beanie Babies on eBay. I think I made about 550 bucks. I sold a Jerry Garcia bear for 350.

• 16:16David Rosenthal?

  Oh, man, I remember that one.

• 16:18Speaker 00

  Yeah. And like an inchworm or something for a hundred.

• 16:21Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team, and deploying them is no longer the hard part.

• 16:35David Rosenthal?

  Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 16:49Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower.

• 16:59David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent, visible and secure in one place.

• 17:16Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise: the workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 17:33David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually, and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 17:49Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 17:58David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you. I think we should take a step back and just do a little more stage setting here, which is, you know, it's hard for us to remember. I mean, we're... You know, I would argue fairly young. I like to think of myself as fairly young. But you know, these were the days. I mean, I was like a

• 18:26Speaker 00

  David, I haven't gotten a snap from you in a while.

• 18:28David Rosenthal?

  Ah, I love Snapchat though. You're just not on my, you're not on the top.

• 18:33Speaker 00

  Oh, yeah, that must be it.

• 18:36David Rosenthal?

  But I was in like, I was like a freshman sophomore in high school at this time. And these were the days like, you know, right before the bubble burst. When I remember my classmates trading internet stocks during breaks between between classes in high school, my freshman year. I remember them. I remember one of my buddies buying a whole bunch of Western Digital stock, which was a hard drive manufacturer.

• 19:01Speaker 00

  Best hard drives there are, just, you know, not using a lot of hard drives right now on my computers. I think you nailed it. I mean, I think ultimately it was a control play where there was risk that was going on by PayPal, you know, having a large part of their business depending on something they didn't control. And they wanted to bring that in-house. It was, you know, they saw it as an accelerant to their business to make it more reliable that you were going to get paid by transacting on eBay. They were clearly building it themselves and an opportunity to bring this in-house. You know, it was probably the right one and they took it. Now, what it turned into, I think, was a behemoth that they had, you know, was not in the cards at the time.

• 19:43Speaker 00

  And it'd be super interesting to, to look at, you know, what was in Meg Whitman's head and if they really thought that this could be something that they, they grew independently. Because I think there's been a lot of discussions since then, kind of like, you know, hindsight is 2020, that that was the vision the whole time was to grow this, this, you know, new, new internet business where we can just transfer money anywhere all the time. And, you know, I think it was the original vision for PayPal, but they very quickly realized like, wow, there's a very specific need for when people need to transfer money. And that, that very specific need is after auctions on eBay.

• 20:17David Rosenthal?

  Yep.

• 20:17Speaker 00

  So, you know, today it's going into something tremendously bigger and I don't think it's what they saw. So I think they thought they were acquiring a feature.

• 20:24David Rosenthal?

  I think that's likely true. And it's interesting too, you know, one of the sort of aphorisms in the, in the tech world is you can't build a big company, a really big company on the back of somebody else's platform.

• 20:38David Rosenthal?

  This is the example that both proves and breaks the rule, you know, like PayPal became a huge company, obviously, and did it on the back of the eBay platform, but ended up having to sell to eBay because they were so captive to that platform. You know, what, I guess this gets a little bit into the, you know, what would have happened otherwise, but, um, you know, how, could you imagine in those, those fragile early days, I mean, remember this was 13, it was 13 years between the acquisition and the spinoff, when, uh, all the vast majority of the, of the now value in PayPal was created. Could that have happened if during those early years, when it was so much dependent

• 21:23David Rosenthal?

  on eBay, it had been a separate company and eBay had had, you know, could have made changes to completely kneecap PayPal?

• 21:32David Rosenthal?

  I, I, well, I, I think we're definitely in the, we've moved on to the what would have happened otherwise. Yes, absolutely. Uh, officially.

• 21:41David Rosenthal?

  But it's interesting too, to think about this, I'm, I'm thinking about this question of, you know, building a big company on the back of somebody else's platform. And I think perhaps you could make an argument that, um, you can do it if you can essentially raid the platform, uh, get all the users from it and then move, migrate them to you, to your own platform. So like, I'm thinking about, you know, Pinterest grew really fast in the early days for a bunch of reasons, but one of them being that, um, I don't know if folks remember, you know, they, they really figured out viral Facebook, uh, user acquisition, you know, we were, I was getting messages all the time, emails from Facebook of, you know, my friend

• 22:24David Rosenthal?

  Ben has just joined Pinterest, you know, do you want to join as well? And, um, uh, and, and those users, Pinterest was successfully able to migrate those users over to their own ecosystem. And now I'm thinking about PayPal, back in those early days when it really was just eBay that was the primary use case. I don't think they were migrating anybody from using PayPal to settle their eBay transactions to then doing peer-to-peer money exchange, which is the big business that PayPal's built over time.

• 22:57Speaker 00

  Yeah.

• 22:58David Rosenthal?

  But would they have been able to do that successfully had they not been part of eBay? I don't know.

• 23:04Speaker 00

  Yeah, the companies that have done that well have been really sneaky about it and have succeeded and flown out of being crushed like just in the nick of time. I mean, you even see like, a good example is actually LinkedIn, right? They grew on the back of stealing your entire address book and emailing everyone.

• 23:21David Rosenthal?

  Yep.

• 23:21Speaker 00

  And it only cost them like, what, a hundred million dollars or something a few years later when there was a gigantic class action suit for doing that. And, you know, they're a real and successful company because they piggybacked off that existing network.

• 23:35David Rosenthal?

  Or think about Airbnb. You know, there are a bunch of articles out there and Airbnb doesn't talk about it that much, but definitely in the early days, you know, they were auto-posting to Craigslist and pulling a whole lot of both supply and demand out of Craigslist and onto their platform.

• 23:52Speaker 00

  Yep.

• 23:53David Rosenthal?

  But again, I think the key is you have to, you have to kind of exfiltrate the users and then, and then keep them captive within your own ecosystem.

• 24:00Speaker 00

  Right, and I, you know, I was young at the time, but I don't necessarily remember

• 24:06Speaker 00

  ever, like PayPal only existed to me when I was, again, selling Beanie Babies and then Boy Scout patches on eBay as my way of transacting on eBay. It never really seemed like the purpose of it was to...

• 24:18David Rosenthal?

  Anything else.

• 24:18Speaker 00

  Yeah.

• 24:19David Rosenthal?

  Yeah.

• 24:19Speaker 00

  Yeah.

• 24:21David Rosenthal?

  Interesting. So had eBay not acquired PayPal when it did? You know, PayPal was a public company.

• 24:32David Rosenthal?

  What would have happened to both companies? You know, so maybe, we've just been talking about PayPal. Perhaps would have been hard for the, you know, eBay could have made life really hard for them. What about, what about eBay?

• 24:46David Rosenthal?

  You were talking earlier about, what's the value that PayPal brought to the eBay marketplace?

• 24:51Speaker 00

  Mm-hmm. Well, similarly, could PayPal have made life hard for eBay? Could PayPal have done something where...

• 24:59David Rosenthal?

  Could they have started their own marketplace attached to PayPal?

• 25:03Speaker 00

  Oh, wow. Yeah, that, I mean, that seems like, it almost seems farfetched. It's like, it's such a, such a different and large business.

• 25:14David Rosenthal?

  Yeah.

• 25:17Speaker 00

  Yeah, I mean, I don't think PayPal had a whole lot of power over eBay, other than if they went away, maybe people would have been kind of uncomfortable with the electronic platform that eBay was providing because it wasn't as secure yet. But I bet eBay would have figured that out pretty quick.

• 25:38Speaker 00

  Yeah, I mean, imagine, you, you can, I, I think this is a slim scenario, but you can imagine a scenario where PayPal finds a different market besides eBay. The money transfer one that they've grown into today, which, you know, people eventually did become very comfortable with, but were uncomfortable at the time. So they probably would have had to ride out some tough times for a while if they had moved away from eBay. And eBay maybe doesn't figure it out and figure out the fraud detection. And then people are uncomfortable transacting on eBay and they never get everyone on boarded to their own payment platform. And people don't like using eBay because they still have to use an analog system.

• 26:20Speaker 00

  And then someone comes along and builds, it, it all feels farfetched, actually. The more I talk about it, it's like, they would have figured it out. Actually, before that PayPal just never would have moved away. I mean, that was like, that was the, the cash cow. That was their, their, finally, they had found product market fit in this, in being effectively like a, a vendor or a supplier for, yeah, probably a vendor for, uh, for eBay. So what would have happened to eBay? I can't, I can't imagine a scenario where eBay doesn't win here.

• 26:53David Rosenthal?

  I think the only, well, not the only, but one potentially negative picture you could paint for eBay here is, you know, if you think about over the subsequent 13 years between the acquisition and the spinoff, PayPal grows so much that it is, you know, call it 60, 65% of the entire value of the company, maybe even 70%.

• 27:16David Rosenthal?

  And certainly, all of the growth engine of the company, would eBay have been able to recruit and attract and retain top-quality talent if it didn't have this really sexy growth business attached to it? Would eBay have stagnated a lot earlier?

• 27:37Speaker 00

  That's a great point. Yeah. I mean, I think that's predicated on the idea that it could actually, that status or that state could actually persist for many years. The state of them being separate businesses and both of them needing each other, that symbiotic relationship.

• 27:56David Rosenthal?

  It seems hard. I mean, we're biased by history and what actually happened here, but it does seem hard to imagine these two companies existing separately.

• 28:05Speaker 00

  Yeah.

• 28:07David Rosenthal?

  Until you get to the point where you are now, where PayPal is really a large and viable business with eBay only being the minority of it.

• 28:14Speaker 00

  Yeah. I mean, in my opinion, if it's like, here's what happens. If eBay doesn't acquire PayPal in July to October of 2002, eBay acquires PayPal for a different price at a different time.

• 28:28David Rosenthal?

  Yep.

• 28:28Speaker 00

  I don't think that it's an inevitability.

• 28:30David Rosenthal?

  It's interesting to think whether that would be higher or lower.

• 28:33Speaker 00

  Yeah.

• 28:34David Rosenthal?

  It could go either way.

• 28:37Speaker 00

  That's true.

• 28:38Ben Gilbert?

  All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 28:51David Rosenthal?

  Yep. It's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 29:08Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 29:23David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Legora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 29:47Ben Gilbert?

  And they recently launched Legora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 30:06David Rosenthal?

  And Legora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Legora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 30:36Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at legora.com/acquired and just tell them that Ben and David sent you.

• 31:01David Rosenthal?

  All right, should we move on to tech themes?

• 31:04Ben Gilbert?

  Yeah, yeah, I think that's interesting.

• 31:06David Rosenthal?

  Yeah, I've got, well, I really want to dive in here. And this is somewhat related to the acquisition, but I think we would just be remiss if we didn't really talk about, I mean, For me, this is the PayPal mafia. You know, I mean, I think you could make a very valid argument. It might even be hard to argue against a thesis that this single event, this acquisition of PayPal by eBay, was the catalyst to create everything that we now know of as Silicon Valley and the technology startup ecosystem.

• 31:50David Rosenthal?

  We'll unpack this, but just the, the chain of events set in motion by this acquisition is really incredible. When you think about the people that were at PayPal, and there's, there's a great, there's a great article on the Tech Republic, we'll link to it in the show notes about, it's titled, I believe, "How the PayPal Mafia Redefined Success in Silicon Valley." And many of the, many of the founders of PayPal talk about how, you know, they were all these incredibly young, ambitious people and they've, they'd just been through this, you know, super difficult but exhilarating experience

• 32:34David Rosenthal?

  at PayPal where they had to figure out a whole bunch of stuff that had never been done before. Like we were saying, it was really hard. And then they made a bunch of money and then they showed up at eBay and it was like complete culture clash and they hated it there and they all left quickly. But they were all still really young and ambitious and wanted to prove themselves. And so like you just go down the list of companies. So I'm going to talk about just, I'm going to talk about two sets of companies here. The first are companies founded by PayPal alums. LinkedIn, Yammer, Yelp, YouTube, Palantir, SpaceX, Tesla. And then Reddit was not founded by YouTube alums, but was the CEO of Reddit for a while, Yishan Wong was a YouTube alum or a PayPal alum.

• 33:19David Rosenthal?

  And then, and then, so that's companies actually founded by this group of people. And then companies, other companies in Silicon Valley and related environs where PayPal mafia alumni were very early investors or advisors or instrumental in, in, in starting the company. Facebook. Uber, Airbnb, Square, Pinterest, Stripe, and it just goes on and on and on.

• 33:43Speaker 00

  Yeah.

• 33:44David Rosenthal?

  I mean, you're talking practically, practically every company, every major company that Silicon Valley has produced since that acquisition can trace its history either directly or indirectly to, to the PayPal mafia.

• 33:59Speaker 00

  Yeah, I mean, I made a joke to David before this show. I was reading up and I was like, huh, we, we could get a guest for this, but all the people that were there are so insanely rich that why would they ever bother to go on a podcast? And I think the funny thing is like, it's, it's not from, it's not from the money they made from PayPal.

• 34:18David Rosenthal?

  No.

• 34:19Speaker 00

  I mean, people got rich, like people got 100 millionaire rich, but, or at least like high tens.

• 34:25David Rosenthal?

  Well, but don't forget, there've been a lot of dilution at PayPal. I mean, they'd raised, I believe 180 million dollars. I think that includes the capital they'd raised in the IPO. There'd been a merger of companies. There are lots of founders. I mean, there's no way that individually, any of those people became hugely filthy rich after that acquisition.

• 34:44Speaker 00

  Yeah, it was, it was more about what a whole bunch of really smart people recognized and did after that and opportunities that they saw because of the way that they grew PayPal. I mean PayPal, actually, this is, this is a good segue into what I was thinking about. PayPal sort of invented a lot of the paradigms that we see in startups today.

• 35:03David Rosenthal?

  Absolutely.

• 35:04Speaker 00

  The, the first one, they, they were the first business to do the whole, if you invite a friend, you get free money thing. And it's, it's like sort of free money now. Like, oh, cool. If I invite a friend to Uber, I get $15 in my Uber account. Like PayPal literally gave you a dollar, a dollar, five dollar. They literally gave you money. It was like, if you, they would email their friends and like, congratulations, you have free dollars.

• 35:23David Rosenthal?

  They invented viral acquisition.

• 35:25Speaker 00

  Yeah.

• 35:26David Rosenthal?

  So yeah, I mean, and we were talking, I was just talking about the company founding and investing part. Let's talk now about the, the actual strategy, you know, tactics that are just now commonplace. You know, they basically invented growth hacking. So viral user acquisition, embeds. You could embed PayPal was one of the first, if not the first app that you could embed in other web apps. And, you know, think, and then think about, you know, a direct company outcome progeny of PayPal was YouTube. And how did YouTube succeed? You know, it was embeds.

• 35:59Speaker 00

  So funny. I have a good story here. I built a website for my buddy Nils. Nils, if you're out there listening, I'm gonna name you, where we were selling t-shirts. And I was a super early web developer and I didn't know a lot of the best ways to do an online storefront. And the way that we built out this t-shirt website was by generating a unique PayPal button for every SKU. And I just literally embedded the little PayPal form on every single t-shirt page that was a subdirectory on our site.

• 36:33David Rosenthal?

  That's awesome.

• 36:34Speaker 00

  And it worked. I mean, it just completely worked. And I didn't have a storefront. Like, we weren't using that for inventory management. It's fine, because we didn't sell that many t-shirts. But at the end of the day, like, we had a working website by a bunch of PayPal button embeds. And that's how a lot of little storefronts worked for a long time. And I think, you know, they, they obviously succeeded primarily because they were such a huge part of PayPal. But like, even after that, as they were growing their business off PayPal for a long time, I think that's what a lot of people did. We accept PayPal.

• 37:02David Rosenthal?

  Off eBay.

• 37:03Speaker 00

  Or yeah, sorry, off eBay.

• 37:04David Rosenthal?

  Yep.

• 37:05Speaker 00

  They're so one in the same to me now.

• 37:06David Rosenthal?

  I know. It's, it is hard to untangle them in your mind.

• 37:09Speaker 00

  I have one other thing, too. The

• 37:11David Rosenthal?

  Me too. Go ahead.

• 37:12Speaker 00

  All right. I'll take this one. The interesting thing about payments are something that we see in advertising today. A parallel I'm gonna make between the two. We've been talking a lot over the past 10 episodes about, you know, the rise of Facebook and Google as ad platforms and stealing a lot of the advertising spend away from non-social ads, so display ads. And understanding that brand advertising, in particular, and online advertising as a whole, is a winner-take-all type market, where you really need scale before you can rival the big guys now, because there's such excellent targeting, that you have to be

• 37:52Speaker 00

  able to choose any bucket that could be incredibly narrow, you know, tap dancing, you know, 24-year-olds in Washington named Ben. And, not named Ben, but that, that

• 38:02David Rosenthal?

  But Facebook could find those people.

• 38:04Speaker 00

  Right, right. And have a deep enough well. And so, so those are businesses that have a relatively high fixed cost and require massive scale to make the business actually work. Payments are sort of the same thing.

• 38:18David Rosenthal?

  Mm hmm.

• 38:18Speaker 00

  I mean PayPal really needed massive volume before they could have wide adoption. And they have an incredible flywheel where every person that has a PayPal account can be a sender or a receiver of money and becomes comfortable using the platform. So the first time they get someone to send or receive money once, they make everyone else's experience more valuable. So it's a scale platform where, you know, it has completely razor thin margins, right? On, on, um, payments and really large fixed costs, especially in those days where they were building data centers and they need huge volumes to make it work. And that's something that they saw with eBay and they, um, they did really well.

• 38:58David Rosenthal?

  And that, um, that belief, um, which may have been completely crazy and, and as we were talking about, perhaps wouldn't have worked had PayPal remained an independent company, but that belief that you can get to that scale to make that vision a reality.

• 39:16Speaker 00

  Yeah, you'd have to be insane.

• 39:17David Rosenthal?

  You'd have to be completely insane. Um, and, and you think about, um, the startups, again, that we were just rattling off a bunch of names, uh, in sort of the generations that followed PayPal. The ones that became really, really big are ones that made that same bet, you know, and, and, and won. Um, you know, Uber, right? Like, imagine before Uber, if you had painted a picture of a world where there are going to be enough drivers in cars that are members of your platform and enough users, consumers of transportation on your platform in a, any given geographical area, not just San Francisco,

• 39:58David Rosenthal?

  but like, you know, the middle of nowhere and, you know, some non-American, you know, and a country not in the U.S. that you could push a button and that driver would be right around the block and show up, you know, a minute later, you would have gotten laughed out of the room.

• 40:14Speaker 00

  Yeah.

• 40:16Speaker 00

  Yeah, and it's the same thing. I mean, you could imagine pre-users pitching PayPal. And it's like, well, it's the way for anybody to send anybody money. And someone says, what do you mean? They're like, well, when everyone has PayPal, like everyone would be super comfortable.

• 40:28David Rosenthal?

  It's a recursive argument.

• 40:29Speaker 00

  Yeah. And you know, it's the same recursive argument that lots of people like completely fail at, right? You hear this at every like first time startup event, right? Like someone who goes and the only world they imagine is the one where their service is pervasive. And they talk about like, why doesn't it just exist? You know, you could hear, I don't know if somebody ever pitched Uber, but like you could hear someone pitching Uber, you know, at 10 years ago at a startup weekend and they say, well, yeah, it's like, why doesn't it exist? Where anybody can just pick you up at any given time because you just see every single person has this in their car and can give each other a ride. And you're like, how on earth are you going to get there? And the magic of PayPal is they figured out how to get there.

• 41:09David Rosenthal?

  Well, and I think this is, this is a great segue into the other thing I wanted to talk about here about the PayPal mafia. That I think might, again, you could make an argument, might be the most impactful thing that they've contributed to the startup ecosystem. Even over and above all the other things we've talked about. There's a really, really great video on YouTube, of course, of Jim Getz, who's a partner at Sequoia, great, great venture capitalist, talking, speaking at the business school at Stanford, which has a fond place in my heart. And he's talking about what makes great companies that Sequoia would invest in. And he talks about the PayPal mafia and he says, you know,

• 41:53David Rosenthal?

  the one thing to him that really sets PayPal alumni apart from other people in the ecosystem is they learned at PayPal this ability, both willingness and ability to iterate really quickly with a product, to put a product out there that is.

• 42:15David Rosenthal?

  Very far from finished and iterate like mad on it based on true market feedback. And he says, you know, not BSing themselves about like what the actual signals from the market are. And that's how you can create a recursive, you know, platform, a recursive thesis like that, you know, is you can't start with like the end state. You gotta start with a very, very small idea and then work on it bit by bit by bit based on market feedback.

• 42:41Speaker 00

  Yeah. And God, that market feedback thing is, is so hard where every line of code that you write or every little piece of product thinking that you do that then gets solidified in any form, be it physical or a design or code. It's like a burden you carry.

• 43:00David Rosenthal?

  Yeah.

• 43:00Speaker 00

  From that point forward where the more you've created, the heavier it is and the less you feel agile to move away from it. And so.

• 43:10David Rosenthal?

  Yep.

• 43:11Speaker 00

  I just have tremendous respect for people at companies like this that can write something and put it out there and understand market signals quickly and within days say, that's actually not the thing and like rip half of it out and put a new piece in and say, that's not the thing either. And then like just keep repositioning because I think that, you know, we just get emotionally attached to what we make and people will get really emotionally attached to their vision. And if you, if you can just keep responding, it's a, it's a really incredible and really valuable skill.

• 43:41David Rosenthal?

  And I think that's the, the skill is, is holding both of those things to borrow a phrase from my wife. She loves this phrase, holding both of those things in your head at the same time. One is absolute dedication and commitment to a vision of the future that you see. You know, your recursive, these vision about the future. And two, an utter lack of bias or, or, um, uh, or, or, you know, predetermined thought on, on how you're going to get there.

• 44:11David Rosenthal?

  And be willing to take, you know, the random walk that that you need to take of product and product market fit discovery to get there. Yeah, that's a challenge. It is. All right, listeners, now is a great time to talk about one of our favorite companies, Statsig.

• 44:32Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 44:43David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 45:03Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 45:16David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started. Time to grade it? Yeah, I think we can grade it. So this is a really interesting one to grade because, you know, one of the themes that I think has been pretty pervasive throughout the show that we've done is that the best acquisitions that we've given the highest grades to have been ones where, you know, the acquirer follows the mantra of, you know, leave the team alone. It's all about the people. Let them do their thing, you know,

• 45:57David Rosenthal?

  don't, don't mess with the magic. You know, we heard that with Pixar, where it was the reverse. It was like Pixar coming in and And leaving the Disney people alone, you know, or getting, letting the Disney get back to feeling the creative magic, you know, with Instagram, um, with Bungie that Ed Fries was talking about. This is a total opposite. Like eBay comes in and really mucks around and everybody leaves.

• 46:24Speaker 00

  And I wonder if that's just characteristic of the time period. I mean, other, other acquisitions that we've like ripped apart have that characteristic too, from that time period where the, it's, it's all about integration. It's all about, great, we like your product. Now it's time to, you know, beat, move to the beat of our drum. And I think it's really only recently that companies have figured out that leave it alone thing.

• 46:43David Rosenthal?

  Yep. The, uh, the quote unquote Facebook style acquisition. There's another great quote from, uh, from David Sacks in the Tech Republic article, um, where he's talking about the, the first meeting that happened after the acquisition, the, you know, integration meeting and eBay team, you know, gets all the key people from PayPal together in a room and they book a three hour meeting and they show up with like 137 page PowerPoint deck. And the PayPal guys are like, A, we've never had a three hour meeting in our lives. B, what is PowerPoint? And at the end of it, uh, David Sacks says, man, we're gonna have to, if we stay here, we're gonna have to create a whole new department just to do PowerPoint, just so that we can communicate with these guys.

• 47:27Speaker 00

  Oh, man. Talk about a product that they needed and a team that was just completely incompatible with their culture.

• 47:33David Rosenthal?

  And so what's, what's interesting about grading this one is like breaks all the rules and yet creates huge, huge amount of value for eBay, eBay shareholders, for the entire, you know, Silicon Valley startup ecosystem as a whole. Um, you know, I, I think taking all of this into account, um, it's almost like, you know, I think I'm gonna net out at like a, uh, B plus for eBay on the acquisition, you know, like pretty great. I mean, created a huge billions and billions of dollars worth of shareholder value. But, you know, had they

• 48:15David Rosenthal?

  handled it differently, could they have realized much more value? Yes. But also if they'd done that, we all would be so much poorer for it, you know, because of the, the exodus that happened, because of the PayPal mafia, we have so much else in the ecosystem.

• 48:32Speaker 00

  Yeah. I mean, well, I look at it this way, like when we're talking about, so I see you. I appreciate those things. I hear you.

• 48:44David Rosenthal?

  I feel very appreciated right now.

• 48:46Speaker 00

  Yeah. Okay, let's look at this from the lens of eBay as a company, right? Like, was this good for eBay as a company to make this acquisition? Normally, I would try and frame this in terms of like, well, let's look at, you know, Apple acquiring Authentic and being able to do Touch ID sensors in this way that is additive to their existing product in a way that is of a much greater value than anything Authentic could do on their own, right? Like something where it's integrating into the product and creating, you know, synergies between the two products such that they can take their core product and make it, you know, a multiple of the acquisition better.

• 49:29Speaker 00

  In this case, like, I don't know that it added tremendously to eBay's marketplace. And actually, there's a point that Keith Rabois points out where they had visibility into eBay's growth and they predicted that eBay's growth was going to plateau and that they actually needed to make the sale because they were like, we don't have a different growth strategy yet and people are going to be concerned, we're a public company, people are going to be concerned about us if our...

• 49:55David Rosenthal?

  We're solely dependent on eBay.

• 49:57Speaker 00

  And their growth is plateauing. What we've seen, you know, eBay is a, indeed, a major, you know, a major company. From 2004, they were doing $3.2 billion in net revenue. Today, they're doing 17.9. Like, they've grown. They're doing great. But they aren't a mega behemoth and I don't think that their growth can be attributed to PayPal. However, we're looking at this through the lens of a person who owned PayPal or eBay stock at the time of the acquisition. Like, was it good for eBay as a corporation to do this? Holy crap, absolutely.

• 50:37David Rosenthal?

  Absolutely.

• 50:37Speaker 00

  eBay grew like a weed and grew to be larger than their existing business. So, you know, as a company, it was a killer bet because effectively, they acquired a product that gave them an entire second business line when their initial business line wasn't going to be the thing. This is an A+. Like, this is...

• 50:56David Rosenthal?

  Yeah, it's interesting. It's like, you know, if you were to... If our projection, let's assume it's correct, that eBay executives at the time weren't thinking about this as a business line, were thinking about it as a, you know, feature technology acquisition, then yeah, maybe my, you know, B plus rating would hold. But in terms of like, you know, this is the actual financial outcome.

• 51:22Speaker 00

  Right.

• 51:22David Rosenthal?

  Massive home run. Not to mention all the ancillary benefits to the whole ecosystem as we've been talking about.

• 51:29Speaker 00

  Yeah. Yeah. The eBay acquisition was generally good for the world, right? It's generally good for the United States in terms of GDP.

• 51:36David Rosenthal?

  What's good for General Motors is good for America.

• 51:38Speaker 00

  Ain't that the truth?

• 51:42David Rosenthal?

  Cruise acquisition coming in future episodes, perhaps.

• 51:47Speaker 00

  I hope so. Yeah. Yeah. I mean, I, I'm trying to think of other examples where, yeah, it's, it's almost like, like how we rated the Pixar. Well, no, because that actually did feed back into the, the Disney business to reinvigorate that and make it great again. What other examples can you think of, of a company that was flying high at the time, made an acquisition, and then it turned out that company's core product was like, you know, not going to be the thing for that company. And then they acquired like a mega giant.

• 52:20David Rosenthal?

  Yeah.

• 52:20Speaker 00

  A 2B mega giant that they, yeah. And they, they certainly propelled it there. I don't think eBay or I don't think PayPal would have done this on their own. I think that at some point, like we talked about, they were gonna get acquired.

• 52:32David Rosenthal?

  Yeah. It's interesting. I mean, gosh, maybe Instagram. I mean, Jerry's still out on that.

• 52:38Speaker 00

  Yeah. Although to check in on our previous numbers on that, they, I think yet another analyst report, I don't think we have hard numbers on this, but it's, it's predicted to do $3 billion in revenue this year. I just, I think, you know, on a billion dollar acquisition a couple of years later.

• 52:55David Rosenthal?

  Man.

• 52:56Speaker 00

  Not too shabby.

• 52:57David Rosenthal?

  That was a great buy.

• 53:00David Rosenthal?

  Not without its challenges, though. I mean,

• 53:01Speaker 00

  No.

• 53:03David Rosenthal?

  It's interesting that we could do an episode at some point on Snapchat, on the failed acquisition of Snapchat.

• 53:10Speaker 00

  Yeah, we should do that.

• 53:11David Rosenthal?

  That would be, that would be a fun one.

• 53:13Speaker 00

  Yeah.

• 53:13David Rosenthal?

  And we could compare and contrast Instagram and Snapchat.

• 53:16Speaker 00

  We could. We could. But until then, you want to do the carve out?

• 53:20David Rosenthal?

  Oh, yeah, carve out. Let's do it.

• 53:22Speaker 00

  All right, sweet.

• 53:22David Rosenthal?

  You want to go first?

• 53:23Speaker 00

  I do. I do. So, uh, since we know you guys like listening to podcasts, I felt like I should pick a podcast. And this week was an incredible episode of the Bill Simmons podcast to follow up my, my recommendation to, to read The Ringer. He had Chris Sacca on.

• 53:41David Rosenthal?

  Oh, nice.

• 53:42Speaker 00

  And, oh.

• 53:43David Rosenthal?

  Worlds colliding.

• 53:44Speaker 00

  It was so great. Yeah, because Bill's just like killer journalist. I mean, like, he has a written interview with Obama. I think it was in GQ. That's just awesome. Like, like Bill can talk about sports. He can talk about politics. He can talk about technology. And him interviewing Chris Sacca is just spectacular. I think I was a few minutes in and I was just completely, completely roped in. They talk about everything from like, Chris's meetings with Kobe Bryant, where Kobe's investing in startups and like, Chris put him through the wringer, like, no, no pun intended. Like, Chris really like, was like, okay, cool, like, celebrity athlete who wants to get into investing. And like, there's so much interesting stuff revealed. Like, I didn't, I have to go do more research on this, but like Kobe actually doesn't sleep. Like Kobe, they reveal is like,

• 54:29Speaker 00

  a dude that I'm sure he maybe sleeps like a few hours or something, but like the way they describe it is like, the dude, you know, his, his, his day life. And then all night, he was staying up, reading and, and trying to like, learn and go through the exercises that of everything that Chris gave him. So there's this Kobe segment. They talk about the founding of Uber and like the jam sessions when they're sitting around and how all that fell into place. Talk about early days at Twitter, about bets that Chris made, about when Chris was dirt poor and then started day trading and made $4 million day trading stocks and then lost it all and then went into massive debt and then the whole, it's just like, it's an awesome episode. So I'll link it in the show notes, but the Bill Simmons podcast featuring Chris Sacca is excellent.

• 55:10David Rosenthal?

  Excellent. I'm gonna have to give that a listen.

• 55:12Speaker 00

  Yeah.

• 55:14David Rosenthal?

  So my carve out for the week, caveat that I'm only about a third of the way through it, but is a book that came out a couple of years ago that had been on my reading list, and I finally got around to, thanks to the magic of audiobooks, a book called Anti-Fragile by Nassim Taleb.

• 55:33Speaker 00

  I just finished The Black Swan.

• 55:36David Rosenthal?

  Oh, nice. So this is my first Nassim Taleb book, and I wanna, I wanna read the rest of them after this. It is excellent. What'd you think of The Black Swan?

• 55:45Speaker 00

  It was good. Like a lot of books like that, I felt like the first half covered it.

• 55:50David Rosenthal?

  Yeah.

• 55:51Speaker 00

  But like, really interesting. I highly recommend it also.

• 55:55David Rosenthal?

  Well, what's interesting, not having read The Black Swan yet, but a couple of things about Anti-Fragile. One, Nassim is like, he's like a baller. Like, he's hilarious. I mean, he's incredibly smart, but he writes like, he's also got like a giant ego and writes like, this is a guy who just like, does not give a crap about anything.

• 56:16Speaker 00

  His ego shows through quite a bit in Black Swan, too.

• 56:19David Rosenthal?

  Yeah. But what's interesting is he actually, so, so the whole thesis of Anti-Fragile is that there's this, you know, it reminded me a lot of Zero to One, and fittingly for this episode, a Peter Thiel idea about, you know, the idea of secrets, that there are these things about the world that are like fundamental laws that govern it, that just like people don't understand or realize. And so Nassim talks about this concept of anti-fragility, that like, we know about things that are fragile, and for millennia, people thought the opposite of fragile was robust. Things that, you know, are durable and not, don't break when exposed to stress. But it turns out, that's, that's just like a neutral thing. Like, the opposite of fragile is something that gets stronger when exposed

• 57:04David Rosenthal?

  to stress. And, and so like, an example would be the human body, to a certain extent. You know, you exercise, and you get stronger. Example, another example would be, would be also within, within biology, you know, the concept of vaccines, where being exposed to a small amount of, of a toxin, or a poison, or a virus, will then make you stronger against, against the virus. Anyway, and if you start looking at the world this way, there are all these examples of this.

• 57:39David Rosenthal?

  And then yet another example, bringing back to Nassim's ego, he says, actually, information is anti-fragile, if you think about it. And he's like, what's the best way to get your message heard by as many people as possible? You should tell everybody it's a secret. And then you should try and make it as controversial as possible, and you should try and get as many people as possible to hate on you, because then people are going to hear about it, and it's going to be really interesting, and people are going to want to read about it. And that's how you get disseminated. And if you want to make sure your information does not get disseminated, you want to be like, really agreeable, and tell everybody it's really important, and then nobody will read you.

• 58:19Speaker 00

  And it's so interesting, because it's probably a very uncommon thing, because we as humans, I think it's a defense mechanism, and it's something that we use to stay alive, but we don't like it when people don't like us. And we don't like it when, you know, people want to lash out against us. So we're very disincentivized to make enemies.

• 58:39David Rosenthal?

  And think about even like, your carve-out, well, the PayPal guys, and your carve-out, all these people, you know, Chris Sacca, Kobe Bryant, Phil Simmons, all the PayPal, you know, mafia, they were, not only did they not care when people didn't like them, they embraced it.

• 58:56Speaker 00

  All right, everyone, thanks for listening. If you get a chance, we'd love, love, love if you could rate us on iTunes. And have a great day.

• 59:05David Rosenthal?

  We'll see you next time.