The Story of PayPal — Jimmy Soni
The Story of PayPal — Jimmy Soni
Elon Musk, Peter Thiel, and hundreds of the biggest names in Silicon Valley started at PayPal. Known as the “PayPal Mafia,” these free-thinking entrepreneurs created the blueprint for tech companies today. Author Jimmy Soni sits down with host Charles Mizrahi to discuss the untold story of PayPal’s founding and how it paved the way for companies like Tesla, Facebook, YouTube, and SpaceX.
- An Introduction to Jimmy Soni (00:00:00)
- Silicon Valley Has PayPal to Thank (00:01:38)
- PayPal’s Start (00:7:30)
- The Origins of Elon Musk (00:17:01)
- PayPal’s Unique Recruitment Process (00:27:33)
- Peter Thiel’s Management Style (00:30:13)
- Thiel’s Story (00:32:56)
- Why PayPal Founders Are Driven to Innovate (00:40:44)
- What We Can Learn (00:43:59)
Jimmy Soni is an award-winning author. He previously served as managing editor of HuffPost and was named in Forbes’ “30 Under 30” list. Soni has co-authored several books with Rob Goodman, winning the 2017 Neumann Prize for A Mind at Play. Their essays have been featured in Politico, HuffPost, and Business Insider. Soni’s recent solo book (below) tells the story of PayPal’s founding.
Before You Leave:
JIMMY SONI: Some of them have achieved this outsized wealth, but I never found that it was the thing that was the driver. Because in a funny way, if it was the driver, they would have lived very different lives after PayPal. After PayPal, a few of these folks had enough wealth where they could have moved to a beach and lived out their days. They continue to invest, support each other, find promising new people and then support them along the way.
CHARLES MIZRAHI: My guest today is Jimmy Soni. Jimmy is an award-winning author. His previous book, A Mind at Play: How Claude Shannon Invented the Information Age, has won numerous awards. His latest book is The Founders: The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley. Today, PayPal’s founders and earliest employees are considered the technology industry’s most powerful network. Since leaving PayPal. They have formed, funded and advised the leading companies of our era — including Tesla, Facebook, YouTube, Space X, Yelp, Palantir and LinkedIn, among many others.
CHARLES MIZRAHI: I recently sat down with Jimmy. We talked about how the seeds of so much of what shapes our world today were planted two decades ago at PayPal and changed our world forever.
CHARLES MIZRAHI: Jimmy, thanks so much for coming on the show. I greatly appreciate it.
JIMMY SONI: Well, thank you so much for having me and for taking time to read the book. It’s not a short read, so I appreciate you doing this.
CHARLES MIZRAHI: My pleasure, man. The name of the book, folks, is The Founders: The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley. Jimmy, is there a book anywhere close to this? You’re describing four years — I think it was 1998 to 2002. Is that right?
JIMMY SONI: Yeah. 1998 to 2002.
CHARLES MIZRAHI: This amazing group of people that have shaped our world over the past 20 years all came out of this PayPal environment. Is there anything like it?
JIMMY SONI: Yeah. There are other clusters. So, in fiction, the cluster I’ve heard referenced most often is the Avengers. Because you’ve got Elon Musk, Peter Thiel, Reed Hoffman, Max Levchin, David Sacks and the founders of YouTube and Yelp all in one company. So, outside of fiction, in Silicon Valley you have Fairchild Semiconductor, Xerox PARC and General Magic. Those are the famous clusters. On the East Coast, you have Bell Labs — which is a famous innovation cluster.
JIMMY SONI: But to my surprise, no one had really gone back. My market research for this book was going on Amazon and seeing if the book was available for purchase. And when I found that no one had done it … You know, you find things and they bother you. My theory of my books is always that there’s an empty space on a bookshelf and it bugs me that it’s empty and I have to fill it. But no one had really gone back.
JIMMY SONI: There have been books on Peter Thiel, Elon Musk and generally on Silicon Valley. Reid Hoffman has written his own books. But no one had gone back and really excavated 1998 and just this period. And the honest reason might be that someone writing about rockets and electric cars probably has easier material to work with, but that’s the later life. So, you’re going back and asking these people about some of the earliest things they did that are most certainly less interesting relative to space travel. But everyone’s got to do something, and that was what I decided to do.
CHARLES MIZRAHI: I just want to read something from your book that will frame our whole conversation. And I learned so much from this. You mention X.com and I do remember advertisements for that. I remember I had a bill payment service. I think it was CheckFree that I was using in the late 1980s. I’m jumping ahead. Let me not jump.
CHARLES MIZRAHI: Let me read something from your book that knocked me off my seat: “If you have used the internet at all in the last 20 years, you’ve touched a product, service or website connected to the creators of PayPal. The founders of several of our era’s defining firms — the creators of YouTube, Yelp, Tesla, Space X, LinkedIn and Palantir, among others — were early PayPal employees. Others occupy top posts at Google, Facebook and Silicon Valley’s leading venture capital firms.” Astounding.
JIMMY SONI: Yeah, it astounded me that all of this talent basically worked in one company during this very tight window, and then they all went on to do this other thing. So, the thesis of the book and the big question for me was: What was in the water? This is an even more elite group than Harvard or Rhodes Scholars. You don’t even get this level of the small number of people and the huge things they did once they left. So, I wanted to find out what happened there. Because what they did after is so well-covered. Someone had to go back and ask them what what happened in those years.
CHARLES MIZRAHI: Of the people who left, the smaller guys only made $2 billion to $3 billion of their personal net worth. And then you have on the other extreme Elon Musk in the hundreds of billions of dollars and everyone in between.
JIMMY SONI: Yeah. There’s another good example of an alum. There’s this website called Kiva.org. Kiva.org is a microlending website. It basically took this very abstract concept of microlending and brought it down to the masses. It mainstreamed it. The founder of that was an early PayPal employee. PayPal was a job that he took. He had a friend who was at Stanford. He got hired and brought a lot of the PayPal principles into the creation of Kiva.org.
JIMMY SONI: The woman who is the CEO of Ancestry.com … And Ancestry.com is a site a lot of people know. They know it’s advertising. Their mission is to collect the world’s genealogical records. She got hired at PayPal in these early years. The communications advisor to Arnold Schwarzenegger for when he was governor was a PayPal alum. If you’ve watched a YouTube video, the three co-founders of YouTube came out of this group.
JIMMY SONI: And what I discovered in going back and talking to them is that it wasn’t accidental. They learned things during this experience that they carried forward into all of those other experiences. So, I had this hypothesis which was maybe you all learned something here that you would carry forward. And it turned out the answer was yes.
CHARLES MIZRAHI: Yeah. And what I found amazing was you had such large personalities. First of all, the IQs were off the charts. You had the smartest of the smartest people all getting together. And we’ll discuss in a minute how Musk and Peter Thiel came together, and how Levchin came. This was the No. 1 or No. 2 guy to Peter Thiel — and his brilliance. They didn’t think they were doing anything amazing. It was like solving puzzles and problems. It was like fun. It was part of their day.
CHARLES MIZRAHI: What I found amazing was that they saw with PayPal an opportunity. They saw a change of the world happening with the internet like Jeff Bezos did. He saw the internet growing and said: “I’ve got to get on this bandwagon. I’ll do it with books.” When they saw the internet, they were able to connect finance and putting banks out of business — in the way we know them — all in one sweet spot. They said: “That’s the 20th century, we’re moving forward.”
JIMMY SONI: Yeah, I would take a step back and say PayPal is really the fusion of two companies. It’s Elon’s company, X.com, and Peter and Max’s company, Confinity. What you said about seeing the internet as this transformative force in finance is definitely true for Elon. So, Elon doesn’t want to just have this company satisfy payments between you and me — meaning, we go to lunch, I owe you $20 and I PayPal you $20. That was one small part of a very big vision he had. And that company was called X.com.
JIMMY SONI: And the idea was that the internet is going to change everything. It’s going to make it easier for you and I to do everything. So, why is it that my mortgage has to live in one place, my banking has to live in another and my index funds have to live somewhere else? Why can’t all of that come under one roof first, for a couple of important reasons?
JIMMY SONI: One, why should there be fees if I move money around? Two, why should it take so much time for wire transfers, waiting days and this and that? And three, all of your money being in those separate places also leaves holes open for fraud and theft. These databases are insecure in Elon’s description of them. So, his idea was consolidating all of that. Because what the internet has done is it’s made it possible to do that. That’s his vision. The Confinity vision — which is Peter Thiel and Max Levchin’s — is much, much narrower. And the idea there is you and I both have the hot device of the 1990s, the PalmPilot…
CHARLES MIZRAHI: By the way, I was a big PalmPilot guy. And when you needed to buy a stylus, Staples only sold them in three-packs. So, if you wanted one, you had to buy three. And I got so many packages still unopened, because I said let me buy a few. Those styluses and the infrared and all that … But go ahead. I’m sorry to interject.
JIMMY SONI: Confinity’s vision was to take these PalmPilot devices — these early PDAs — and use the infrared ports so that if you and I are at lunch and I owe you $20, we can stick the infrared ports next to each other and beam each other money. So, the two companies have actually very different visions, different goals, a whole different way they’re going to make money. They chance into becoming what PayPal is today — meaning that initial success for both companies comes in the form of emailing money.
JIMMY SONI: And so it was the case that the big, expansive, change-the-world-of-finance vision was Elon’s vision for half of the company. But it’s fair to say that for Confinity — for Max, Peter and their team — the initial vision was slightly narrower.
CHARLES MIZRAHI: They just wanted to get money from A to B using the internet. Email was the most efficient, and it made the most sense and everyone had an email account. I think you mentioned that there were only 5 million PalmPilots. So, you had to be in a restaurant with your friends who also had PalmPilots. Outside of Silicon Valley, I don’t know how often that was the case. It was a very closed system.
JIMMY SONI: It was a closed system. But it’s interesting, you and I can say that at a 20 year remove, from the comfort of where we are today. At the time, where they were, PalmPilots were all the rage.
CHARLES MIZRAHI: I had a PalmPilot and I also had a case and I had ACT! — which was a contact management software. I had all of my contacts on there. And later on, when you were able to make phone calls, it was so buggy. The PalmPilot was just so buggy. But I loved the idea of carrying everything with you in one place and being able to access it.
CHARLES MIZRAHI: And you’re right, 20 years later, for someone who is 30 years old, they have no idea what I’m talking about. But mailing a check, sometimes there were 14-day holds or 10-day holds. Did you get the check? Did you deposit the check? The check would bounce. There were so many things, it wasn’t anywhere near instantaneous.
CHARLES MIZRAHI: But I think the brilliance of these guys … I lived through this and I saw the same thing they saw. But they came up with solutions and I saw problems. I was living through this, and I remember using CheckFree in the late 1980s — which was automatically paying my bills through the bank. And I’ll tell you a quick story on that. My wife used to sit on our bed Indian style and have all of the bills out in front of her and writing checks each month. I said: “Honey, this has got to stop. This is ridiculous.” I found CheckFree in 1988 or 1989, and then we started paying everything automatically and I saw the power of that. But these guys took it to the next level.
JIMMY SONI: They definitely did. And it wasn’t easy. They fell in love with the PalmPilot technology — the money-beaming — and they had to be pushed by their board, by friends, by advisers and also by David Sacks, who joined the team. And his line about it is: “I wanted to put a bullet in the PalmPilot thing. I thought this was the future, but it wasn’t going to be the present. And what was going to work in the present was going to be emailing money.”
JIMMY SONI: And so it was not that they were foresighted. They just moved very rapidly. Once they discover that people are into emailing … It’s funny you identified the bugginess of the PalmPilots because I went back and I looked at PalmPilot for Dummies. Where am I going to find a PalmPilot today, in a museum?
CHARLES MIZRAHI: I have my old one. My son saved all of our old phones. It looks like it’s a museum. We have a shoebox of all of these old things. And we had the PalmPilot, and there was a Handspring also.
JIMMY SONI: The Handspring Visor, right?
CHARLES MIZRAHI: Yeah, my son had the Handspring Visor at 10 years old. We bought him that. It was a joke.
JIMMY SONI: That’s funny. So, I was reading this guide and it actually said that when the infrared ports debuted, they had this funny issue. If you held them too far apart, the beam didn’t travel. But if you held them too close, the beam didn’t work. So, you had to have this like Goldilocks sweet spot for the beaming and it was buggy as anything. And when I was looking around, the only real use case I found was this person who wrote this lengthy piece of code for how you could use the PalmPilots to play Battleship. Otherwise, nobody had really figured out what you were going to use this for.
JIMMY SONI: But [PayPal’s founders] did. They created mobile encrypted transactions. And we can laugh at it today, but that is what Venmo is — which, funny enough, is owned by PayPal. But the idea of mobile technology being the future? Both Max and Elon could see that coming. One of the reasons that Elon was excited about the name X.com — the way he explained it to me, because that name has been parodied in the aftermath of all this — he said: “Listen, if you’re on a device that’s an index card wide and you need to get to your entire financial life, X.com is only five buttons and you have to press.” As opposed to something like BankofAmerica.com. Your thumbs are going to get tired.
JIMMY SONI: His view — and he was right — was that people are going to be walking around with supercomputers in their pockets. Max’s view — which was also eventually proven right — was that people are going to be walking around with supercomputers in their pockets. The mobile part of these companies’ early history — or the mobile thinking — is probably just 10 or 20 years too early. But you’re spot on that they foresaw the future in that way. But the reality of the company became this much narrower thing, which was around emailing money.
CHARLES MIZRAHI: There’s one line in here about Elon Musk: “When he articulates something, he tends to find the kernel that will appeal to a broad mass intuitively.” And he’s taken that to Tesla.
JIMMY SONI: Yeah. It’s one of the interesting things that I discovered in the course of researching this book. We tend to think, particularly I think those of us who are not engineers, we sort of look at engineers and we’re like: “You have some special knowledge that I don’t have, you know something I don’t know.” In this case, that’s true. He knows a lot about physics and about rocket engineering that I don’t know. But what I found about him that was interesting is that his command of the language is really facile and elegant. He uses metaphors and imagery in a way that’s very compelling. Sometimes he does it for comedic effect. And we’ve all seen that play out on Twitter and elsewhere.
JIMMY SONI: But the interesting thing about him is the number of employees that I interviewed who said: “You know, the reason I joined the company is because of the vision that he painted about us taking on Goldman Sachs, or us taking on JPMorgan Morgan, or us taking on the Federal Reserve.” That imagery and ability to paint that story, I don’t think you can discount that. I don’t think we should underrate it because it is actually what allows you to recruit. It’s what allows you to raise money. And it is what gives people a vision of the future they can get excited about. He does all of those things today, and I think we’re too quick to say: “Oh, that’s just crazy.” That ability, that gift, is a real gift, and I think we should see it as such.
CHARLES MIZRAHI: You mentioned in the book that he has people calling him to work with him, and he has nothing. There’s no company, there is no product. There’s just an idea. But they meet with him and they’re just so overwhelmed with his ballsy attitude of: “Well, copy the website, make it look like Schwab, use a blue color.” That’s why they used blue color. His vision wasn’t one-foot hurdles, he wanted to create. He wanted to be bigger than Schwab and Goldman Sachs.
JIMMY SONI: And one of the most amazing things in the story that’s never really been covered before is that in an early iteration of the company, almost the entire executive team quits. Between that period and when the product is launched is basically 15 or 16 weeks. So, within the space of 16 weeks or thereabouts, he manages to get Barclays Bank and a bank in the United States to sign up with X.com. They build a functional product. They hire a team — engineers, business strategists and others — and they get launched by Thanksgiving. This is after he loses an entire executive team. He still wills it into existence.
JIMMY SONI: So, this belief that a lot of his colleagues have in him comes from a very genuine place. They see it happen. He will say something and things will get executed. Sure, it’s frenzied and people are working around the clock and a lot of people are tired and sometimes frustrated. But when an ATM spits out money four months after he says: “We’re going to have debit cards,” these people have something to look to and say: “We can do this. We can actually take on Goldman Sachs, we can take on JP Morgan. It’s not going to be perfect, but we’re going to get there.”
CHARLES MIZRAHI: You relate how they go on Thanksgiving and go to the ATM. They’re all standing there and he puts in his X.com debit card and out comes money. And they all cheer. It’s amazing.
JIMMY SONI: One of my favorite photos in the book was shared with me by someone who worked there. His name is Sashu Kanuri, and he kept this photo forever. It’s Elon at the ATM smiling and he looks like a kid on Christmas morning. And he’s holding the cash and ATM card. And it’s easy for us to look at the photo and maybe laugh or smile. But if you take a step back and think about the fact that this 20-something decided in the summer of 2000 that he was going to build a company that had a relationship with the banks, so that they could do debit cards and get cash, and then weeks later it was done … I mean, that’s astounding.
CHARLES MIZRAHI: You know what I also found interesting? And I want to move off Musk because there is so much ink spilled on him, and I want to talk about the other guys. It’s like walking into the Hall of Fame. There are just so many great players there. When he comes up with the idea to make this happen, it was his force of will that makes it happen through all the adversities. And I think the fact that he’s willing to put up his own money … He doesn’t care about that, he has $21 million from a prior sale. He sleeps under the desks like everyone else in a sleeping bag. He improvises. He knows coding when coding is needed.
CHARLES MIZRAHI: But what fascinated me and what permeates throughout his whole life is he first works at a bank — which I had no idea about. He finds an arbitrage opportunity where he can make billions of dollars with the Brady bonds and the defaulting Latin American debt. He figures it out and goes to his superiors. It was the Royal Bank of…
JIMMY SONI: It was a Scotiabank, a bank in Nova Scotia.
CHARLES MIZRAHI: Right, a bank in Nova Scotia in Canada. He says: “Here it all is.” And they say: “Nah, we got burnt with too much of other things.” And that gives him [the realization that] big companies are slow and they won’t innovate.
JIMMY SONI: It’s interesting to me that, in so many ways, the Elon of today is the Elon of age 19. So, I had the really the good fortune of meeting his first and maybe his only ever boss, this gentleman named Peter Nicholson. And Dr. Nicholson is this big brain and really smart guy. And he meets this young kid named Elon Musk and hires him as an intern.
CHARLES MIZRAHI: And how did Elon get that job? Go ahead, you tell it.
JIMMY SONI: Yeah, he found a newspaper article about Dr. Nicholson and thought he was interesting. He pestered the reporter until he got his phone number, called him and basically talked his way into lunch with him in Canada. And Dr. Nicholson, by the way, had worked in politics and was a big-ish deal. But Elon doesn’t know anybody. He’s going to cold call until he gets it.
JIMMY SONI: So, he gets this meeting and talks his way into the gig. It was interesting talking to Dr. Nicholson, because they’ve stayed in touch — and Dr. Nicholson’s a great mentor and he has pride in what his mentee has done — but he’s not in Elon’s business every day. So, Dr. Nicholson had a bunch of great chats with me. And one of the things he said was: “You know, even at that age, you could tell this was somebody who was really precocious, but also really aggressive and wanted to get things done.”
JIMMY SONI: Meaning, when he came up with this proposal to basically try their luck at this arbitrage opportunity, he was really gung ho about it. He was like: “We have to do this.” And he was 19! He was an intern. And so, to me, it reveals so much about how his character today is the same, meaning when there’s a logical way to get to an end point, he wants to get there very quickly. And I think that’s an admirable quality. I’m sure it makes life hard for some of the people work for him, but he has a conviction that I don’t think you’ll find an American business.
CHARLES MIZRAHI: I had on the show Tim Higgins, who wrote the book Power Play. He’s a Wall Street Journal reporter who wrote about Elon Musk and Tesla. And I asked him: “How come the big auto manufacturers couldn’t come up with this? You know, they had the capacity and production.” And he goes: “Because they don’t innovate.” It’s a job killer.
CHARLES MIZRAHI: And Musk saw this as an opportunity that he could run around them. And in reading this book, you find out how he saw that from the beginning where banks were not innovative. You don’t need to come up with a new mousetrap. But when your competition is lumbering, attack and come up with something better and quicker.
JIMMY SONI: And he even says: “When you start out, your idea is going to be mostly wrong and you engage in recursive self-improvement.” So, he says: “Even when you do a startup, you’re mostly wrong at the beginning.” And you just refine the idea until you do something that is productive and creates value for other people. Because that is what a company is supposed to do.
JIMMY SONI: To my mind, this is linked. There’s a conviction about the future, but there’s also this sense that you’re going to start out and fail a lot. And that is as a piece of this, too. It’s not just that you see the vision, it’s that you have a capacity to endure what are going to be multiple failures along the way. And I think part of what I hope the book does is illustrate that in terms that are more than just clichés — meaning people will actually see the failures that they face along the way, whether that’s operational, financial or personnel-wise.
JIMMY SONI: But it’s a very real thing to have to constantly fix, tweak and move very, very quickly — all while the dollars in the bank account are running down. Because you’re not a company that has consistent revenue coming in, you are just trying to build a new thing from scratch.
CHARLES MIZRAHI: You have a burn rate. You have enough money for five months. If this gets done in six, we’re out of business.
JIMMY SONI: Yep, that’s right. And he feels that really keenly. He had that success with Zip2, when he sells it and makes some money. But it’s not the case where he decides he’s going to sit on a beach. He takes most of that fortune and invests it in his next venture. And so, I think there’s a risk taking part of this that’s also part of it. And I would say the qualities I just described about Musk — not to make this all about Elon — fits the bill for plenty of these people, meaning there’s an appetite for moving very quickly. There’s a rapid rate of learning, and there’s a willingness to take risks that you wouldn’t take in ordinary business. But then to adjust as reality hits you in the face.
CHARLES MIZRAHI: Let’s go back to the beginning. It’s 1998. The process for getting amazing people, they’re really high barriers to entry, you just can’t work and apply there. Walk us through that, because right off the bat, they’re starting with a subset of a subset of brilliant people — who all have the same drive and motivation with different talents. But there’s a lot of commonality among them.
JIMMY SONI: Yeah, it’s an interesting thing to look back at the recruiting. Because I went in and I thought: “Oh, OK, they are these people who are so exalted, successful and smart. Surely, they had their pick of the top talent in Silicon Valley.” And it turned out to be actually the opposite. So, when Confinity — which is Peter and Max’s company — is recruiting, they’re competing against Google, Yahoo, Netscape and like the “big players” of the internet. So, in a funny way, they’re actually at a huge disadvantage. They end up having to recruit people who they know through friend networks or through contacts or people they went to college with — not because that made for the best team, but because it was the only people they could actually hire and recruit.
JIMMY SONI: They were these people they knew and were old friends. That has the virtue of self-selecting for a group of really smart, really talented people. And then they add some additional hurdles. One of the things that they do early in the interview process is they throw these really esoteric puzzles at them. So, you’ve got two ropes and each one burns for an hour. How do you use that to calculate 45 minutes? Which ends of the rope do you light and in what order do you light them? There are things like that — which was so natural to them. I wouldn’t get excited about solving a puzzle like that. It might stretch my capacities.
JIMMY SONI: But that was a part of the place. Puzzle solving was a big thing in the room. I found four years of the weekly newsletter for the company. Every week there was a puzzle and the only thing you earned was bragging rights. I flipped from one issue of the newsletter to the other, and the names of the people who got the problem right were listed. I was like: “Hey, this person got it right.” And you’d see the same names over and over again. These people are clearly waiting for the next puzzle. But it was a part of the play. That kind of problem solving — where problem is something you do because you want to do it — was actually a part of the culture.
CHARLES MIZRAHI: Right. So, what I got out of this was Peter Thiel’s amazing managerial skills and brilliance —which really attracts people to him. He knows how to put all the pieces in place.
JIMMY SONI: Yeah, it’s one of the things that I think we miss about him, because it’s easy to miss. I interviewed a lot of people who had Peter as their boss. And what I heard over and over again, almost like an eerily similar way, to the point where I had to say: “Are you guys all reading from the same song sheet? What is this?” And what they would say to me is: “He’s not the manager who’s going to be talking to you every day and making you feel great. But what he is exceptionally good at is finding incredibly talented people that maybe the rest of the world disregarded for some reason, and then giving them so much rope but setting very high expectations for what they could do. And he’s making them believe that they could do it.”
JIMMY SONI: So, there was a person — his name Roelof Botha. Today, Roelof Botha is the head of Sequoia Capital — one of the biggest venture capital firms in the world. He’s a big deal in Silicon Valley and widely respected and admired. When he joins the team of PayPal, he’s 25. He’s a part-time employee, then becomes a full-time employee. And by age 26, Peter has named him CFO. And Peter’s Board of PayPal says: “You can’t have a 26-year-old CFO. We’re going to take the company public.”
JIMMY SONI: And the way John Malloy — who’s the board member — put it to me, he said: “Wall Street’s going to eat this kid alive. You don’t take a company public with a 26-year-old CFO.” Peter pushes back and says: “No, Roelof is brilliant. He understands the business goals. He’s built the Excel model that basically drives the business. We have to go public. He’s the person we’re taking and doing this.” And John Malloy said that one of his only regrets from the PayPal years is that he did not have more faith that Peter was right about that decision.
JIMMY SONI: But I saw that decision repeat itself over and over again. The board says: “You can’t name Reid Hoffman COO. He’s not the kind of guy who’s going to be a taskmaster. He’s really friendly.” And Peter says: “No, I need a COO who’s a diplomat right now because we’re starting to interface with all these people.” Rebecca Eisenberg is an attorney. She’s just lost her job. He brings her in. He makes her first chair on the IPO. And she says: “I can’t believe Peter gave me this kind of faith.”
JIMMY SONI: Even people that were hired by Elon Musk, Peter empowers them to go do some of the best work of their careers. And I think the book will capture the stories, but I’m not sure I have any grand theory for why he’s good at this. I think one of his talents in this story for this period is identifying people and saying: “Go. I trust you and you’re going to do the right thing.”
CHARLES MIZRAHI: Early on in the book — I think about the time he starts his hedge fund, Caulfield Capital — Ken Howery, a Stanford senior from Texas, goes over and chats briefly with him. And I love the way you put this: “The two met for dinner at a steakhouse in Palo Alto to talk things over. Several hours into the dinner, Howery was impressed not just by Thiel’s depth of knowledge, but also by his range. Howery returned to his dorm and said to his girlfriend: ‘Peter might be the smartest person I’ve met in my four years at Stanford. I think I might work for him for the rest of my life.'” That’s absolutely amazing that you meet someone that smart that just knocks you off your chair. And you say: “I want to work for this guy. This guy’s brilliant.”
JIMMY SONI: And they’ve been, as far as I know, working together ever since he had that reflection as a college senior. And so, Ken Howery is highly involved at PayPal. He is highly involved and one of the first real leaders at Founders Fund, which is one of the venture capital firms that emerges from this group. And he has been involved intimately in this orbit ever since. So, his prediction proved true not for five years, but for 20 years.
JIMMY SONI: The other thing that I found in this story — which people may miss about him but that people within Silicon Valley know pretty well — is that once he has taken one bet on you, whether or not that bet works out, Peter will go to bat for the person that he’s invested in time and time again. So, Peter is some of the earliest money in all of the companies we’ve talked about from the beginning, meaning all those companies that have emerged from this particular seed group at PayPal, Peter — or one of Peter’s friends or affiliates — are often some of the earliest investors. And Peter is one of the biggest champions for these people later.
JIMMY SONI: I heard all these stories that somebody would tell me, like they would have some idea for a restaurant, and Peter had supported something they’d done before. And Peter was like: “Great, I’ll invest, whatever happens.” Restaurants are famously money-losing businesses, right? He goes to bat for people again and again in their careers, once you have passed a certain threshold where you’re in his orbit. I don’t think that this side of him has been well covered in the past.
JIMMY SONI: I didn’t know one way or the other. I didn’t have an opinion. All I heard were things that were played back to me over the course of hundreds of interviews of people where they said: “Boy, he placed a bet on me that I would not have placed on myself.” And that’s actually the most remarkable thing. Even Max Levchin, in later interviews, said: “You know, one of the things that Peter did was he made me believe I could be a CTO, that I could actually do this. He gave me enough confidence to get through one more night of coding, or two more weeks of difficulty.” I think that’s the essence of leadership.
CHARLES MIZRAHI: Where did he get his first money? He started his hedge fund, Thiel Capital. And it was a couple of hundred thousand dollars. Was I reading that right? It wasn’t too much.
JIMMY SONI: My understanding of it … I went only a little bit into the early history of Thiel Capital, which is the first hedge fund that he started. So, Peter’s story is that he’s a huge success academically at Stanford. He goes to Stanford Law School and is a huge success academically there. And once you do well at Stanford, the next natural step is you get an appellate court clerkship. He goes and does that. And then, you’re headed to the Supreme Court clerkship pool. And that’s the high watermark of what you can do as a law student.
JIMMY SONI: He doesn’t get the Supreme Court clerkship. And he has to decide then. As he put it to me and has put it in other places, he had a quarter-life crisis. He had to figure out what to do with his life. I think, fortunately for him and for many of the people in this story, he ends up going back out west to become a technology investor. And in his first investments, he’s not anybody that people know. We say his name today, but we have to remember this is 1996, 1997 and 1998. He’s just a guy named Peter who has left the law, spent some time at a hedge fund and is investing money that he raises from friends and family.
JIMMY SONI: He starts to do some startup investing. And it’s in that era — the height of the dot com boom — that a lot of people are investing in startups. Peter is one of many. But even within that group, he makes investments. One of his first investments is a $100,000 bridge loan to a young kid named Max Levchin, who has graduated from the University of Illinois Champaign-Urbana. And that company that he invests in is the company that becomes PayPal. So, I can’t tell you how much assets under management he had, but I can tell you about one of the bets he placed in this moment that proved to be hugely successful later. And Peter ends up becoming the CEO of that company.
CHARLES MIZRAHI: He raised money from friends and family to launch a hedge fund in 1996. So, it could be a lot of money. And it focused on global macroeconomic strategy and currency investing. Two years later, he looks at his firm and then he goes on. So, it can’t be a lot of money that he has.
JIMMY SONI: No. He basically launched a hedge fund, but the funds would have been small because he wasn’t anybody that people looked at and said: “Oh, there’s your next Warren Buffett.” This is a person who left the New York hedge fund and law world and moved back out west.
CHARLES MIZRAHI: He had no credit as a West Coast guy. He worked at Credit Suisse and leaves. He goes west. He doesn’t have any kind of credit in terms of success in Silicon Valley. He didn’t work for Gordon Moore or anyone.
JIMMY SONI: I think there’s this one thing that he has, that people will often miss. You have to remember, he’s sitting with Max Levchin when Max is 21 or 22. Max has a really difficult time at that moment in his life with looking people in the eye when he’s talking to them. So, I had this discussion with Reid Hoffman, and Reid said that for the first 45 minutes of meeting Max Levchin, all he would do is look at his shoes. And he just kept saying in his own head: “Look up, look up! Why don’t you look up at me?”
JIMMY SONI: Peter meets Max and they bond over math. They bond over a certain competitiveness about math. And I think Peter recognizes that this is somebody who’s really talented. With Ken Howery, one of the things Peter said to me is: “Ken has the ability to be the smartest person in a room, but nobody thinks he’s the smartest person in the room.” Which is a really good quality because he can get along with anyone, but no one looks at him and is intimidated by him — which is really a superpower.
JIMMY SONI: With Luke Nosek —- who’s another key figure — Peter had said to me: “Luke’s a visionary.” And Max Levchin had this line about how Luke is one of these people that can walk around, and he sees $1 bills on the ground, but they’re only visible to him. And so, Peter has this ability to actually get at: What is the thing? What is your thing that’s your superpower.” And then, more importantly, for a few of the folks, what they played back to me is that he would make them believe in that superpower. So, yes, he has a hedge fund and is investing. But there are a lot of people who are investing in startups at the time. I think the difference is that he has a nose for talent that is a cut above where some of his peers were.
CHARLES MIZRAHI: Yeah. I think it’s great stuff. I never saw any of this before, and you give such a phenomenal dimension to all of these people in this. And before we go, I just want to touch on one thing. This drive that they have, it’s not a money drive, obviously. Because they make a lot of money. What is it? Do they really believe that they’re going to change the world every time they do something?
JIMMY SONI: So, remember my book is about 200-plus people. I think I would be speaking out of school if I said it was one thing. I think for each person that I wrote about it, it’s a different drive or motivation. I think for someone like Elon, there’s a vision about what technology can accomplish and what you can do with technology that he sees very clearly in his mind. And then, the point is to affect that vision — getting to Mars and making electric vehicles great, cool and increasing their production. So, there’s that sort of thing.
JIMMY SONI: I think for someone like Max, he says to me and in other places: “I just like building companies. I’m just a guy who likes to build companies, and I’ll keep doing that as long as I can.” For David Sacks, he came into this story out of McKinsey, and he really got right away that the point is building useful products for people. The whole point of this is that people have to be able to use this thing. So, we’ve got to ditch this PalmPilot thing — which has a ceiling of 5 million users — and go to the email thing. For Reid Hoffman, I think he had always wanted to become a public intellectual. And technology — and the discussion around technology — become a place where he could really move the world. He could change the world in that way.
JIMMY SONI: So, there’s no denying that some of these people have achieved this outsized wealth. But I never found that it was the thing that was the driver. Because in a funny way, if it was the driver, they would have lived very different lives after PayPal. Because after PayPal, a few of these folks had enough wealth where they could have moved to a beach and lived out their days. They continue to invest, support each other, find promising new people and then support them along the way. So, I think that the motivation differs from person to person. It’s really hard for me to say: “Here’s the motivation.”
JIMMY SONI: For Ken Howery — he’s a great example. Ken’s actually an Eagle Scout. He was the only Eagle Scout I interviewed. He has a really deep conviction about public service. So, he was named an ambassador in the last administration. He wants to give back, and he does. So, the motivations are different, but they share some of the qualities that you and I just talked about: desire to learn, a certain competitiveness and I would also say humor. My interview with these people are pretty laugh-out-loud funny.
CHARLES MIZRAHI: You’ve had the fortune of spending — what was it, four or five years to put this book together?
JIMMY SONI: Yeah, it was a five and a half hour, maybe a little longer. I’m kind of embarrassed that out loud, to be honest with you.
CHARLES MIZRAHI: You had the privilege of going to school on hundreds very successful people. What did you take away from all this? How did it affect your life?
JIMMY SONI: Yeah, it’s a great question. I think one way that it affected me is that I broadened the kind of reading I do. I found that the people that I was meeting with were able to quote the Bible, then could quote some Czech thinker, then could reference a movie from film noir in the 20th century and then reference something from the encyclopedia. I’ve never in my life felt like a B student talking to students. And so, it forced me to say to myself: “Am I reading widely enough? Am I absorbing enough information that’s outside of the things that I’m totally obsessed with?”
JIMMY SONI: A good example is that Max Levchin is obsessed with Akira Kurosawa’s Seven Samurai. He has seen Seven Samurai over 100 times. It’s one of the great films of the 20th century. I confess I never watched it until I started this project. But because of his love of film, I started to make like I made a list. I was like: “OK, I really need to watch these movies.” Citizen Kane and all these major films. I found a level of broad mindedness that surprised me. People tend to think of Silicon Valley as this narrow place. It actually like the people at the top anyway and some of the people I interviewed were pulling cultural references from all over. So, that was one thing.
JIMMY SONI: The second thing I would say is we have a tendency sometimes to look at competitiveness as a negative thing. Competitiveness can bring out your best. And so I started to reframe it in my mind. I met people who were competitive, but they weren’t viciously competitive. They were just competitive and they wanted to do their best. I have a young daughter and now I want her to win. And I want to make it OK for her to win. I want her to have a little bit of that chutzpah, drive and the sense that victory is OK if you can do it fairly and in an honest way and be a good sport about it. It’s OK to want to be the best right. And so, I support her when she says that because I saw that in in Max and these guys. So, that was the second thing.
JIMMY SONI: And then the third thing, I would say, is the thing that made this story work is that all the people we just talked about are so different. We talk about these people and they share some traits, but you wouldn’t have picked this team. They are sort of like the Avengers. You wouldn’t have constructed this team, because you wouldn’t have known. I am more thoughtful about people in my life who are very different from me in inviting them to call me an idiot and to say: “Here’s what you got wrong.” Because that is what I saw in this story.
JIMMY SONI: It actually took not just a Max, but a Peter and Max. It took an Elon and a Reid Hoffman. And it took the 200 other folks who were around them — all of whom had very different personalities and politics. They were so different. I’ve started to think about making sure the people in my life are not just carbon copies of me. Now I’m so glad that these friends are so different than I am because they can call me on my stuff when I get it wrong.
CHARLES MIZRAHI: It’s funny you mention that, because I was thinking of it as a symphony. Each one played a different instrument, but together they worked amazingly well.
JIMMY SONI: Yeah. It wasn’t always harmonious, but it worked very well.
CHARLES MIZRAHI: No, it wasn’t. And you do bring that up. But to have the passion to work … You talk about PayPal on Thanksgiving in 1999, where Musk calls up everyone: “You better get in here. We need you now. It’s Thanksgiving, but I don’t really care. We need a backup. We need this. He’s been working here for since 5 a.m. He’s tired, get someone else to cover.” The way everyone moved together, it was like a wave. We could sit here and try to dissect this forever. But there were so many different things. And I think even if you asked the players here, everyone would give you a different take on it.
JIMMY SONI: And they definitely did. Part of the challenge of the book is … You can imagine the devil’s choice decisions I had to make in deciding what to keep and what to cut. The amount I wrote is three times the size of the book you hold in your hand. So, I cut out basically two books worth of material to have this be something that didn’t feel like it was going to be a better doorstop than a beach read.
CHARLES MIZRAHI: You interview these people for two hours. How do you only take 50 words? I would never want to do that.
JIMMY SONI: Welcome to my last half decade of challenges.
CHARLES MIZRAHI: Wow. Great. OK, folks, the name of the book is The Founders: The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley by Jimmy Soni. And I highly recommend it even if you’re not into tech, just if you’re into being an entrepreneur or a business person. In reading this, I got lessons here of how to be a better businessman and how to deal with people.
CHARLES MIZRAHI: I picked the same thing as you did. There is talent out there, and if it’s like me, I’m hiring just carbon copies of me. Hire people who are not me, because they’re going to fill the holes in what my weaknesses are. I know what my strengths are, so I’m not going to go to people with the same strengths as I am. I going to get people who fill those holes and plug in where I’m terrible at.
CHARLES MIZRAHI: It’s just a really fascinating book with really amazing insight. I wish you a lot of success, Jimmy. And by the way, your writing style is really quick and breezy. So, even though the book is 400 or so pages, it flies. I almost missed my train stop this morning coming here. You just keep reading. It’s really well done.
JIMMY SONI: Well, thank you so much, and I appreciate you taking time to talk about it this level of depth, particularly for somebody who runs a business. It’s useful to hear that it’s resonating with you because I want it to be useful for people. I want to tell an accurate story. But I do think that there are lessons that these people have in their heads that if you ask them to write a book, they might not be able to articulate it. And the fact that I was able to get it out of them, I’m glad that it’s resonating.
CHARLES MIZRAHI: Really great, man. Lots of success to you. Jimmy, thanks so much for coming on the show. I greatly appreciate it.
JIMMY SONI: Well, thank you so much for having me.
CHARLES MIZRAHI: Thanks for listening to this episode of The Charles Mizrahi Show. If you’re a new listener, welcome! If you’ve been listening for a while, we’re glad to have you back. Either way, we’d love to know what you think of the show. Please leave a review if you listen on Apple Podcasts. Reviews make it easier for others to find the show. You can also see the video of the interview on The Charles Mizrahi Show channel on YouTube.
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