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

Key Takeaways

the reason that the paypal story at least my version of it has so much failure in it is because like if we pretend that they're not superheroes for a minute if we bring them back down to earth if we tell the stories of like accidentally hot swapping hard drives and almost losing the company's entire source code right it makes it okay for many other people to to do the kinds of work that they do [Music] okay i'm super excited about this one today i'm interviewing jimmy sony he's the author of rome's last citizen a biography of cato a minded play a biography of cloud shannon and most recently he's the author of the founders the story of paypal and the entrepreneurs who shaped silicon valley so jimmy let's just jump into it so you know your previous book was about claude shannon and he comes up with information theory while he's working at bala abs this is a place that's you know famously um famously comfortable you know they have a monopoly from the government uh and then so the scientists they have time they have freedom they're not pressured by competition and on the other hand you have and obviously as you talk about six nobel prizes transistor laser unix c um on the other hand you have paypal they're constantly on the verge of going under incredible pressure uh you know long hours and this is also a place a place that produces a tremendous amount of innovation how do these different places promote innovation yeah it's a great it's a great question and it's it is interesting to think about just how different they are um [Music] you know it's a great question and actually it's like a it's a very big question because in some ways like the the right person to answer the bell labs question is probably john gurtner who did sort of the quintessential book on bell apps it's called the idea factory um i was looking at one person in that kind of stew right in that in that era and that was shannon um here's what i would say about shannon's innovations so shannon worked on information theory not because he was working at bell labs he actually was working at bell labs and was kind of tooling with information theory as a side hustle right uh like he didn't call it a side hustle because we didn't have that lingo but we have it now so it's a side hustle for him so he started doing it on the side which is to say it's quite possible that no matter where he worked he would have been working on information theory in the off hours the advantage of working at bell labs is is one he's around communication networks all the time too he's doing cryptography and cryptographic analysis so he's thinking a lot about that and then three sort of is around smart and intelligent people and like a lot maybe the the fourth thing is he has the bell systems technical journal where he can publish his findings originally and they're you know they have sort of like this they're a private sector organization that has a technical journal that gets distributed pretty widely throughout academia so that's but i suspect that if you were working i don't know wherever he would have actually been working on information theory on the side anyway because this was stuff he was just interested in broadly um that level of self like so think about what that means he's a self starter who's willing to do academic research just on the side and write papers about it just for kind of the sheer thrill of discovery the number of people that that's true of i think in society is very very small meaning he didn't think he was gonna i you can't ipo an academic paper right he's not gonna get rich right he's not he's kind of not seeking fame because even when he becomes famous he actually decides he's not gonna go on like the lecture circuit or go on late night tv or anything like that right so that the population of people who are like that is very very small right for a variety of reasons we don't have to get into it but just sort of self-evident that that number the number of people who would want to do that a small paypal is a different story profit motive is a big part of what makes places like that successful the internet boom is going on there's an entire generation of people who have built web companies right starting with like netscape who are ipo'ing and all of a sudden they're on the covers of magazines and they have huge amounts of wealth so it would be it would be dishonest to say that that's not part of the motivation there that there's that combined with this pressure of they close a very paypal closes a very big round of fundraising in march of 2000 just as the dot-com bubble starts to burst and so there's a kind of panic about surviving and about having to innovate your way to survival and and so i think that you know i'm not saying that like there aren't other claude shannon's out there i just think that they're smaller in number than than maybe a constellation of people who are brought together by forces and are forced to survive and are forced to build a startup and then like can learn innovation that way and i would the other thing i would say is i think the innovations are very different right so paypal's innovations are as i would i would argue are a sequence of of kind of micro developments and creations strung kind of end to end over the period of four years it helps to build the company and there's a lot of like we can get into that obviously and and shannon is writing you know a technical paper in 1948 and it's it's it's sets it sets certain principles and establishes the field of information theory so i'm not sure it's like an apples-to-apples comparison but i do like the idea of like thinking character logically and saying okay there are probably some shannons in the world but they're probably far outnumbered by the number of people who would want to create a startup and and have by the way i don't think there's anything wrong with that like more self-interested reasons right as opposed to public spirited reasons or academic reasons yeah interesting um so you know my interpretation of all your books is in all of them you're really writing about uh you know seniors just a group of people can get together and boost each other's um uh productivity now uh you know that's obvious with bell labs when claude shannon obvious with the founders and the pfl mafia um and you know i i think it's even true of uh you know your book on cato right so it's like 2 000 years later can you imagine another era where we know all the prominent politicians are like household names you know pompey crassus cato cicero uh uh you know caesar and so you know like this book is about political seniors um you know i i i just like i can't imagine like 2000 years we'll know who nancy pelosi or you know mitch mcconnell or donald trump where or maybe we maybe we might know who donald trump is in two thousand years but uh you know what another would be the late the late 1700s in the united states right jefferson oh yeah we make there are there are award-winning musicals being made about people who wore powdered wigs and try cornered hats right uh and so if if lin-manuel miranda can make hamilton a thing in 2822 um it and and frankly like that era is just one of the most studied and discussed it does strike me that that's this that's another senior there's a great book on that actually called founding brothers uh there was one of my like kind of texts that made me think a lot about the founders because it does describe like the relationships like for example like the relationships between thomas jefferson and john adams is super interesting right they're like competitive and then they're friendly and then they're not and there's all kinds of drama there um the the relationships just across the founding generation i would think is another senior but it's interesting i never picked i never i didn't pick up on that common thread until you just pointed it out which is like always fun so it's so i like doing these because i'm always like learning new things i didn't i realized that right there's a seniors in all three of my books yeah yeah yeah cool cool um now uh you know you know i'm curious how uh peter thiel's ideas about gerard were influenced by his time at paypal so you know there's the obvious uh you know memetic competition between x.com and confinity which was you know what paypal was originally um and thenx.com was you know muscle company before they merged so um i mean other than like what were the other gerardian elements to this story yeah uh you know it's a great question it's a part it's sort of threaded throughout the book like in subtle ways and and what's really interesting is that in rereading it myself or like revising and editing it there were a number of like gerardian moments that came up right or like little moments of of mimesis and anti-mimesis um i have had long conversations with a friend luke burgess who wrote a book called wanting and we've we've sort of talked about this a lot right and like where are these moments true and not true and one of the things that i always tell i always tell lou because i'm like i think that the actual experience of doing paypal was not an experience of someone like peter as well versed as he is stepping back and being able to like sort of ask like what would gerrard do like wwgd right like i don't think that it works that way and the reason is i mean a he never told me that it worked that way and i interviewed him at great length about the paypal story but the other thing is like companies particularly paypal when they're built in this crucible it's really hard for theory to match up with reality or like or for your ideas about principles to match up with like the exigencies of the moment or like the thing you need to do and so i here's what here's one example i would offer as a case study what i just said but also in gerard post 911 the company is in a really difficult position they had been preparing to go public and had kind of run into some hiccups with the bankers that were going to help underwrite their public offering then 911 happens and the financial district you know is is in ruins and they have to end the economy's in shock the stock market shut down for you know however many days um and the and the company leadership needs to think about like what do we do now like how do you go public in a post-9 11 world what does even what does it even mean to file to go public and peter there's a great line that he played back to me again this was 20 years in hindsight he says maybe because no one else is going public paradoxically that's actually exactly the time that you should go public right because you're kind of like running against the herd right so like is is is there some faint echo or even maybe not a faint echo of gerard in there absolutely there is right so one has to believe that at some point of part of his mind one of the things about studying medic desire is the recognition that like memetic desire if you oppose it can actually lead to very valuable decisions right everyone zigs you decide to zag i'm like wow that's a really smart smart thing but here's what he added to his explanation of why they decided to go public after september 11th and what it meant number two reason is going public is a long process you have to file so many different rounds of paperwork to the sec you have to get so much buttoned up you have to do a road show you have to make sure that all these things that in a startup you can kind of like create a patchwork quilt of answers that's not allowed once you are like a regulated public company taking like public investor dollars right so he said that it takes because it takes a long time one of my theses was like if we apply even if it's after september 11th and even if we take some flack for doing that it's going to be six months to a year before we actually get to go public so given that it's a long road we should prepare now that's sort of reason too reason three and this is where it runs counter to the girardi and you know one of gerard's big thing is is like it like how emotion can kind of and and emotion could kind of screw up our decisions right like it sort of like obscures like clarity of thought and one of the things that he says is he's like you know he had said to me it's like i'm being honest like another reason that i insisted that we try to go public after 9 11 is i wanted to beat wall street like wall street had written off the company it had been so dismissive of the company and like didn't understand the model because fintech wasn't an established space and so he said he even said to me he's like if i'm being honest the competitive thing was a part of it right but competition is is sort of not in keeping with gerard meaning he recognizes that it can happen but the whole point of studying this is to avoid it it's a welter of motives and and i don't think that there's anyone that could look at the story and say well every decision was like sort of perfectly conformed to gerardian expectation and insight but i i think of that i don't think of that as a deficit by the way i think that is a good thing and the way that i fact-checked each of those those things as well as i spoke to other people particularly on the competition with the investment banks thing like the number of times i heard like a negative word about like big banks uh but it was i was you know a dozen times before it was won and i had people say to me you know the biggest issue that we had there was because fintech was not an established like sector of the economy we didn't have a way to get these banks to understand what we were who we were what the business would be what its potential was right and so like language like network effects is kind of common for us and in 2022 but it was not common back then for business models um and so you just have this whole industry that needs to be educated and paypal ran into some real difficulty educating them which is why they were competitive like the way peter described in the book is he said it's like a silicon valley versus wall street thing the dynamic that was at play there that's a very long answer to your question i found moments of that gerardian intuition and and i'll if you permit me i can share the second big bucket where i found it 911 is a discrete example it's really specific the other big bucket and again i'm like way oversimplifying gerard right like he's actually like a huge thinker and i could i mean luke did write an entire book about him right and like his thought process but one of the things that it always leads me to think about is if if the entire world says x and you can even think why right like or you can think about the opposite of x right what if the opposite is true you can you can find real power in those moments right by being a contrarian right that's a it's like not a great word because it's so overused but one of the the things that i found most powerfully about peter in the paypal story is that he did that with people so the board would say roloff botha can't be your cfo i mean he's like 26 years old he's like fresh out of business school he's gonna get eaten that one person said literally the quote is he's gonna get eaten alive by wall street like how could you do that it's gonna make us he's not gonna survive peter listens to his board and says no and says roloff is brilliant he knows the business cold he's built the model that's determining a bunch of the actions that we're taking as a business and i believe that he will make an exceptional cfo and he is ultimately right reed hoffman a friend of peters from from their stanford days peter says to the board i'm going to appoint him as coo in january of 2000 very early in the business's life cycle the board the two board members are like wait your your ceo your ceo is supposed to be like a task master and like really keep people on point like be really aggressive and you know reid's like friendly and he's as one board member who's friendly he's a community guy that kind of thing and peter says no like one of the things that we lack as a business right now is the ability to have somebody who's going to be a diplomat but like a flexible diplomat who can interface with all these external bodies and he said we need that and you know sort of like titles being what they are like i'm gonna he's gonna be the person for that job and he's proven right i heard from the employees who are in those situations about peter's willingness to run into the teeth of what might be regarded as like best hiring practices or standard opinions and i do think that there is more than a faint echo of gerard in some of those moments um i also think it's hugely instructive like it really does make you think about hiring and who we counted and who we count out i think he had a ability to see potential in people and put them into places where they otherwise like other people may not may have missed that yeah yeah uh there's uh that's so interesting because there's definitely uh as you said so many medical elements to the timing that peter t was able to execute right like you talk about in the book how um he saw the dot-com uh bust coming and he was able to use the inflated um inflated valuations to raise a crc i think you said a week before the bus happened uh they closed their serious c and um and then conversely once the bus happened they were able to like hire all this great talent because like nobody in silicon valley or you know people weren't hiring as much as an uh in silicon valley i i think my favorite anecdote or one of my favorite anecdotes from the book is how uh teal like after they raise uh raise 100 million dollars he's like all right guys the market's gonna bust so why don't we transfer all this hundred million dollars into my hedge fund and i'll short the market and then uh and then the guy from sequoia on the board is like what the [ __ ] are you talking about yeah it's it's a funny moment and and i i mean you can't tell her without laughing and i sort of laugh even when i think about it when it was explained to me so there's sort of like two renditions of that story right one rendition is like the sinister like whatever no it wasn't that it was it was an enthusiastic and farsighted board member who saw a market collapse coming and saw a financial opportunity and the financial opportunity is you take the funding we just raised use it to short the market and we'll all get filthy rich you know and and like that'll be it'll be it's a sure thing and understandably the board pushes back and says well you can't you do that because the funding we raised has contracts and has amendments that say that it's for these specific purposes um so they pour cold water on the idea now the interesting thing is that the board members i spoke to about it one had this to say he said you know it's actually like he's like i often tell this story because i want people to appreciate that part of doing a startup in the way that this team did is like being somewhat disconnected from reality like you almost have to be disconnected from reality and offer ideas that are maybe a little outlandish in order to like push the limit of what is possible right so that was like one and then the other the other recollection was from was from john malloy who was a board member who said you know like peter was right like like the actual like logic may have been what it was the mechanics may have been what they were but actually the nasdaq lost like 78 of its value over the next like whatever 12 months and we would have made a lot of money if we had done that and it was actually correct um and so there's this now they tell it obviously like with the benefit of 20 years of hindsight and they tell it in a humorous way um i think other writers have have done characterizations that are more sinister i didn't find that element in it and when i asked peter about he basically you know it was like the last question in one of my interviews with him and i asked him i said well what did you think about this and he said he's like you suggest things when you're young like like basically sort of like you suggest things like you know it was like an idea and it didn't go anywhere and you know whatever um i find it to be a really interesting moment and and it's characteristic of that group of people in a particular way which is like the willingness to engage with even the idea that you would take a hundred million dollars and short the market i mean like i i think a certain tolerance for that is like required to do something like paypal yeah if i was on the board i'd be like no no the markets are efficient you totally can't do that but uh yeah he was he did i think you said they would have made more money by shorting the market than they did from the ebay acquisition um but yeah i mean i think the math is best that was a quote from john malloy i don't know i think he was being kind of directionally accurate but not hadn't like run an excel spreadsheet on it or anything right one suspects that uh you know given what given like what paypal's burn rate was from 1999 to 2002 if someone were to do the math like that might be true um because they spent i mean they spent i think in excess of 200 million dollars in the first four years of the business right despite raising a lot of money so it could be true but i didn't get into the level of the math for me it was much more about the this this idea that as a board member you know who is very thoughtful you would still bring to the table an idea that can seem crazy is is actually like a hallmark of of what kind of of silicon valley and of of this sort of startup environment um it's it's it's encouraging i think it's encouraging to those of us who who who have those sorts of thoughts yeah definitely okay so um i really realized you're the one after reading your book and i i i think at least um you know i could be being superficial about this but i think it seems like there's at least three ways in which um you know the lessons from zero to one contradict the history of paypal right so first there's like he's like okay don't compete like you know just do something totally original and it's like well you know payments e-payments that's like you're competing against x.com bill point a visa mastercard he um he says uh he says um oh yeah one of the most important things he said in the book is that you should always have a plan you should always have a vision this uh this whole thing about startups iterating and you know slowly pivoting to find their niche that's totally overrated it's like your original business of uh business idea of encrypting climate pilots didn't go anywhere your original business model of making money off the float didn't go anywhere like you were totally pivoting and to your credit right um and then the third thing is you know he talks about how these uh these startups are emphasizing uh growth statistics that uh that they're basically getting by burning vc money over the durability of uh the company so they'll you know they'll just like look at a number it's like didn't you guys have the world domination index that you were constantly looking at um so i could be totally missing like the deeper layer in which these lessons actually did apply to paypal and you could also say that well actually because of these uh because he learned this from paypal he changed his mind but so what is your reaction to these yeah it's interesting you know people have said that the books are pretty good companion books because a bunch of the stories for mine obviously like sort of illustrate some of the principles from zero to one and i would push back on a couple of the observations so with the competition one in particular so that cuts go in order the competition one in particular is important because i actually think of the competitive dynamic as an illustration of what peter was saying and as a as the kind of lesson that led him to write that now there's a gap between the paypal story and zero to one so zero to one isn't just based on paypal zero one's based on his experience as an investor broadly defined and teaching courses about startups at stanford so but let's take a step back on the competition one paypal starts as the union of two companies it's x.com which is elon musk's company and confinity which is peter thiel and max levchin luke nosick upan and russ simmons their company what's interesting is that the two companies find themselves in competition one of and this is in late 1999 and early 2000 and they are burning through money using bonuses as a way of referring users to trying to goose user growth and they're in an arms race with each other to give away money there's like a there's a gray line in the book it's like elon base cause we were going mental trying to kill each other right um and and his other gray line is like it was sort of a race to see who could run out of money the fastest right um here's the interesting thing peter is one of the loudest voices and earliest voices in identifying that that is a that's a competition to the death and that actually that's really bad like it's not good for us to be spending trying to outspend each other into oblivion he encourages and indeed pushes his board member john molloy to consider the possibility of a merger john malloy is actually not all that hot on the idea of a merger uh between x.com and confinity but peter says no you don't like this competition is ruinous it's like terrible to be competing at this level we should try to merge and peter is one of the most vocal people against the competition between x.com and convinity and so that's like one place where like i actually think of of the paypal story as a very clear illustration of his view of competition now he's not the only one developing paypal right there's a bunch of voices in the room a bunch of people who think they could win maybe we could win they have their reasons for being for or against the merger but on the competition piece it's a it's a clear kind of example of this um your what what was your second your second little divergence um let's see uh oh it was um you know iteration like the the iteration versus having a strong initial vision yeah so i i would say that um on this one once paypal establishes itself as a payment system as a master merchant between ebay buyers and ebay sellers and meaning all right and uh just people who want to transact where they're able to underwrite these small dollar transactions once that fundamental business model is established you know peter's actually pretty committed to that vision going forward right so you sort of you have and i think it'd be fair to say you have a period where they are figuring themselves out right like figuring out what they're going to be when they grow up that period of call it like very late 1998 through to 1999 once that cement dries to some degree and they're like well and particularly infinity particularly infinity is like we're going to be an email payment system that is a credit card master merchant and then use that and again get the economics of the business right once that happens like they actually have a pretty clear roadmap for how things are going to go and the way i know that is that i was seeing decks so it was really neat to go back and look at the pitch decks as they evolved right the pitch deck as of late 1999 and 2000 is is pretty well like locked like it's not like they're using a payment system to pivot to something else like there's actually consistency for call it three quarters of the early years of the business and hey i mean like look i wish i could get get things that right and be that prescient all the time right um the last piece on on burn rate and like startups using call it like exaggerated or inflated growth metrics to to like kind of burn vc cash um there's a little bit of truth to that i think that like actually the criticism in zero to one runs counter to the paypal experience because paypal did have to burn through a lot of money the the difference in paypal's case and the reason i don't think it's inconsistent is there's burn rate that you could forecast based on bonus payments right so you sign up for paypal you get 10 bucks like i can reasonably guess like at growth rates like in terms of what i'm going to spend on that what paypal didn't anticipate and couldn't have anticipated knowing is the degree to which fraud would be the biggest like cost center for them and so the reason i mentioned that is because had they known that you know and they a they probably wouldn't have gone into the business i had multiple people who were at the founding say like if we had known how bad fraud was it's quite possible we wouldn't have done this to begin with um and and but it makes me think that like actually like the plan the plan in some ways was never to just like get a bunch of easy money and light it on fire and then use those numbers to sell a bigger a bigger vision very quickly like they encounter something that's lighting their funds on fire that they didn't anticipate and they have to solve that problem which becomes one of the company's signature achievements so i'm not sure i would quite argue that it was just like let's do the vc cash grab light it all on fire and then go out and sell the other reason that it's not quite that way is because in 2000 in late 2000 and in 2001 when the company institutes fees and builds a business around this viral product they are actually very thoughtfully like kind of creating a real enterprise meaning like originally the idea was like we're gonna make money on the float so we're gonna have a bunch of money and we'll we'll get a few basis points on that because of interest right but in the year 2000 they start to build a fee structure for their users in a very careful way that would run against the criticism of like well you're just like getting a bunch of user growth and then that's it right now the the second half of that for paypal was we're going to build a an incremental plan to essentially take a free to build a premium model for our users so that we can bring revenue in and then at some point when they had run these elaborate spreadsheets there was a point at which they had profitability so it was not quite as healthy skelter i had to describe the part of it that was which was like 1999 where they are figuring all of this stuff out yeah yeah the fraud piece is so interesting i mean the the there's my favorite editor from the book and this is like so good that i almost don't believe it or i mean i do believe it but it's like if i saw it in a tv show or that that was like about a startup like it was in like a silicon valley the tv show would be like oh come on that's you're pushing it it was um the russian hackers were committing fraud against uh against paypal one of them emails uh max lovechen the cto and this guy had like an email exchange and you know i can't do a russian accent but the guy is like you know i'm from i'm from a poor russian family but we can't feed my family and you know i need to do this in order to feed my family you you're a fat american who doesn't understand and so yeah and and then you know they implement captcha and the guy like responds [ __ ] you like it was an epic cat and mouse game and it was one of the things that i found most like interesting about it is you never picture a cto of a company communicating with the people who are trying to defraud his company right it's almost it's almost it's not it's a stretch but not much you want to be like your fraudsters are like sort of a part of your product team like weird like they're like unpaid members of your product team yeah um okay so why was peter thiel so good at spotting talent and he has consistently been that way with with his vc uh ubc investments yeah it's a great question and if if there's one thing i it that's in the book that emerges but i don't have like a general theory of right like a grand unifying theory of it's this talent spotting um i think it's i if i had to if let me let me take a step back and sort of like talk through some of the stories from the book um what one thing that i think he's very good at is not holding like kind of a lack of social graces against people uh so i will i'll sort of share a story right i there's this moment that i interviewed reid hoffman about reid is on rita's is considering be joining the board of confinity the company co-founded by peter and max and peter says you know my co-founders max but you've never met him you guys should probably go have breakfast you can't join the board without max agreeing to it and they meet at hobies and reed and max are sitting down and the way that reed hoffman described this to me endearingly because he likes mac a lot he said for 45 minutes all i could think was like look the [ __ ] up because he was looking down at the ground while explaining what confinity's products were and what the company was going to be there was a time he today max lupton is as comfortable on a tech crunch stage as he is like you know with his with everett with his companies um but there was a time when that wasn't true and when the best thing that he wanted the thing he wanted most to do in the world was to write code and to build engineering products and to build uh sorry to build technological products and to be an engineer it takes a certain level of the ability to kind of sort of let's say suspend disbelief about somebody or to like like take a chance on somebody to say you know like this cto may not be able to look me in the eye when he talks to me but he's brilliant and i want to support him with my money and then become ceo of his company and so that willingness to like look the other way on certain social graces is actually like a skill right so think about how many like how many mckinsey interview how many mckinsey interviewees would be turned down if they weren't able to look their interviewers in the eye but they might actually be the smartest people who are interviewing right now they might not be the best person for that particular job but how many times do we write people off because of the way they look the way they talk the way they sound the color of their hair the color of their clothes some a random quirk of personality or or something in their brain like we write people off he more than anyone in the story i think was was actually like incredible was drawn to that right was drawn to this kind of person that might be a misfit or at the margins and was like now you have real talent you're going to be brought into this into this fold um there were a great example this there are high school dropouts on the roster at confinity and this is before dropping out became cool right let's let's also establish like this is before the teal fellowship it is before mark zuckerberg the legend all that stuff like it's before all of these cultural cues that like high school and college may not be the best fit for everyone there were two people i interviewed who are high school dropouts and one of them is literally is his literal reason was like i just thought high school was stupid and i was gonna like make more money writing code and doing computer stuff and he leaves and he goes and does his thing so i think there's a roster of people like that that might not find effectiveness in other parts of american life or american economic life but where he sees real potential that's one thing the second thing is you know he is ridiculously smart himself like he is a kind of grandmaster chess player very widely read like very well educated he has a high bar for people who he wants to hang out with right so if you sort of like are going to even be in the group that's around him you have to have a certain level of intelligence like it's just sort of that's like table stakes it's sort of obvious to say it but it's actually really important but talent and intelligence there's like there's a degree of overlap there right like there's that spot on the venn diagram there's certainly some overlap the last thing i would say is um you know he he had this ability that was played back to me by other people to forecast what someone could be right so to sort of like like to actually kind of like what you might call a crystal ball their lives right sort of looking into a crystal ball and seeing what they could be and they're kind of like outlining that for someone there's a really good podcast that max lepton does where he describes this this it came way after paypal and he said that one of peter's talents is this ability to like see what your future could be and then play it back to you and then help you get there right and he said he's done this over and max says he's done this over and over and over again i saw that play out very powerfully because i would interview with people who felt like they weren't good enough to be at paypal or maybe they weren't didn't have the chops or whatever and they would say you know peter would sort of like outline the vision of what i could do and i totally bought it i was like i'm in i can do that right and he gave people a lot of rope all of that i think is like i i think you're gonna have a hard time and maybe tyler cowan's book on talent does this because there's a whole section in there about peter but i think of those features that i just described like as actually very powerful things that are not specific to peter thiel like all of us could do more of that right we could become more intelligent we could embrace misfits more and we could help the people who are around us like outline the biggest and best versions of their lives right um so i don't think it's just like this specific peter thiel thing i think these are actually things that like all of us could probably do more of yeah interesting um and speaking of talent did paypal discover talent or did it make it so i mean obviously the paypal mafia they go on to um you know found linkedin youtube yelp um uh tesla spacex maybe not twitter uh and uh so uh well i mean so is it just that max and um peter were able to identify this group these uh these people were going to end up doing great things or was did the experience that paypal make these kind of people who could actually uh you know basically form a half of silicon valley it's it's the great sort of nature nurture question right like was it was it were they were they going to be the dream team or did you know did they become the dream team right like was it was it michael jordan or phil jackson right like was it the triangle offense or not um and i think the only honest answer is both it is the case that the talent that was drawn to work at paypal many of them were cut above in whatever thing they were cut above at right whether it was the ability to see the product vision and the way that david sacks could or the ability to fight fraud right or the ability to like just write really great code and release products quickly there's a certain kind of person that got through the door right that said the experience of building a startup under duress and in the middle of a dot-com bust and kind of facing like these kind of clash of the titans at the at the executive level and merging two companies and having to deal with broad and all the rest it was like 25 years of experience compressed into four years and it was like a graduate education times three for some of these people that you could not separate from the things they have done later sometimes that's in very direct ways meaning here's an example youtube's strategy of making itself ridiculously good at being embeddable in various sites has a direct tie to paypal's strategy of making itself ridiculously good and being embeddable on various sites full stop i heard uh story after story about how like youtube as an early company would get users who were being frustrated by other platforms to complain if a youtube player was shut down paypal did exactly the same thing right so there's sort of there's no way to divorce the later successes from paypal there's another really obvious reason which is they had a financial exit at the end in the in the early in early and late 2002 you have a group of people who don't have like you know world historic sums of money but they have enough money to provide seed capital to other startups including yelp and youtube and facebook and all the right on down the line right they have the ability to write a check without the discomfort that might come with like from if they'd written that check in 1998 right so that's kind of reason to reason three is that they had seen what it what somebody played this back on a podcast i was on i think was max levchin like they had actually like delivered returns for investors right so it wasn't just the paypal kind of group of people but that actually that sequoia and blue run what was known as like nokia ventures and john malloy and like you know all these other groups that invested in them had actually gotten a healthy return and like that built a track record and a credibility so that they could go out and get venture backing not just backing from peter thiel or backing for max election but backing from big investment big venture capital firms that we're going to look at these people say you've been down this road before you sort of have a template right um and then the last thing i would say and this is crucially crucially important but it's often missed in the retelling of this story because here's what people here's how people think the narrative goes they're like the paypal people made some money then they went off and took that money and turned it into more money and then turned more money into even more money right and it is not that tidy number one because you're talking about several hundred people and not everybody had that experience but number two like part of what happened is that you have you have a focus on product distribution at paypal that is very serious and very rigorous so one of the big lessons learned is it's not good enough to just make something you have to actually figure out how people are going to find it use it and then part part ways with their money to pay you for it right which is a very different challenge and there's there's a team member david sacks who this is the lesson that his kind of team takes away and these people have gone on to very senior product roles in other companies but it take that experience away and and what are you left with right meaning how would someone understand that in a fine-grained way in any other context you can't read about it in a book necessarily i mean you could but it's harder right thinking rigorously about product distribution becomes a very big part and parcel particularly of the people on the product team so i i think the answer has to be both as unsatisfying as it is it's not just that you can go out pluck talent bring them into your company and and later you will all go on to you know host saturday night live and potentially own whatever all of twitter it's actually you you have this group of talented people and they go through a shared experience together that's really intense and just also you know cards on the table it's the reason i wrote the book like the book would actually be uninteresting if it were just like a random group of people who went through this experience and it would be uninteresting if like it was just like oh we just hired a team of five michael jordans and won 20 nba championships in a row like of course you did of course that happened right like it would be uninteresting if it were either or yeah yeah that's so true uh there's a really great talk that max lupton gave at a startup school i think a few years after paypal and one of the things he mentions um is that they apparently got a multi-million dollar check from uh the yakuza the japanese mafia and i don't think that was in the book but like what was that about what happened yeah it was um there was an entity that was attached to the japanese like mafia the yakuza and there was there it sort of these stories have become conflated in the retelling and uh there's a there's a little nod to it in the book um but but basically what happens is there's this there's a private company that's attached to the japanese mafia and the reason that max and peter have both told this story over and over again it's not actually to illustrate their connections to the mob because they don't have them um the reason is because the money was this is sort of funny there were there was so much hype about silicon valley and so much interest in investing in like late 1999 and early 2000 that the one of the companies and it might have been that one basically like wanted to send them the money without any kind of like contracts and they just asked for the wire instructions and we're like we just want to give you the cash right um and and it struck them and it struck peter in particular as like basically an example of like the worst kind of of mimetic problem right which is like if everyone thinks every company in silicon valley is going to be successful there is something wrong like something's gone cuckoo if someone's saying to you let me just just give me the give me your bank account number and your routing number i got wire the money right now we'll work the paperwork out later right um which is what was happening and that money ended up being a little bit more ethically complicated because of its connections but that they used the story if i recall correctly as an illustration of that just how aggressive the environment was to get money to an american company that basically its principal accomplishment at the time was like building an email payments infrastructure and giving away bonus funding right where it's like burn rate was ridiculous but you have this company halfway across the world that's so excited that's just gonna and then they find out later like it's got these unsavory ties um you know there were story after story like that and it's actually a big part of elon's experience as well like he i described him i said how difficult was it to fundraise in early 2000 he goes is really not that difficult when he's lying about is like when everyone's pounding on your door and trying to fire fire josie with cash right it's not exactly what i would call he's like it's not exactly what i would call like fundraising right if everyone's like basically trying to give you cash which was their experience in spite of that and this is interesting gets back to the first question you asked in spite of that peter is pretty insistent during march of 2000 that they close their fundraising quickly um because his view is like this might be true now like some random company might be trying to basically wire transfer us money without any strings attached and no contracts but that will change as soon as the market starts to slide and so it is actually like one of the things where people want to talk about the genius of this group and i think there is some truth to that there's also you have to recognize that like the closing of the fundraising in march of 2000 is a fortuitous event it's a timing event right um and even when i interviewed particularly i would say like mid and junior level employees they would talk about it as like a quasi-religious like almost like a watershed right that they're like okay we managed to secure this round and then just a little bit after like things completely take a dive i i again i i tried to i went for substance over like exploring yakuza connections i also like did not want to like be calling up random phone numbers to ask who's affiliated with the japanese mafia like you know i don't think that's a good look for somebody like me yeah it's it's um i hear that apparently there will be a tv show made of this book and this would be a great i don't know a great like at least like five minute uh five-minute edition uh i think yeah by the way is that is that happening the tv show or yeah it's in the works there's um an and a producer named mark goffman who got his start on one of my favorite shows which is west wing and recently did umbrella academy uh and he was on i think it's called limitless it was on cbs uh and mark is really great and he and i have been touched for actually a long while about the project i think what he recognizes in it is what i saw which is if you have a room of very very smart people and they face some very very big challenges and they don't entirely agree on how they're gonna fix everything that makes for a really interesting narrative it makes for really interesting and thought-provoking back and forth and like contests of ideas and contests of ambition and ego and just like kind of what comes out of that is very energetic he sensed that energy a few years back and had reached out to me um and and he along with a few others have kind of like been championing this project so i hope it goes yeah but you never know hollywood's always a little unpredictable in that way i really hope so because you know one of the things that makes the story so incredible um is you know it's kind of like watching an avengers movie or superhero movie where you know that you know that spider-man's gonna like win right like they're not gonna like kill off spider-man like it's like elon musk is come on it's elon musk like they're not gonna they're not gonna go bust but then you're like you know you're like oh you're supposed to believe that this first fight where spider-man almost dies that's the end the second fight for sparta man who almost dies that's the end and you know you read this book and it's like oh people almost went bust here you know they lost th