Transcripts For CSPAN2 Jimmy Soni The Founders 20220809

Booktv. Org slash afterwards. My name is catherine boyle, and im a general general partner and andreessen horowitz. Im pleased to be here today to welcome author jimmy sony to discuss his new book the founders the story of paypal and the entrepreneurs who shape Silicon Valley and its especially wonderful to be here because i knew jimmy in my early 20s, and this book really takes place talking about a group of people who supporting each other and worked really hard together and have been lifelong Friends Meeting after College Meeting in their early 20s, so its very special for me as a former fellow journalist and writer to be interviewing him because because we shared that time together as well, but in the founders jimmy unpacks the long and difficult journey of paypal from a barely known startup to one of the Largest Tech Companies in the world and a household name and it he tells us the Unsung Heroes extreme competition. It and huge challenges faced by the company as it fought to implement cashless currency back when few dare to try. So well be covering a lot in the next hour and we encourage you to put the questions in the chat on youtube. Wed love to solicit some audience questions at the end. So well be getting to your questions later in the program. But for now welcome jimmy. Well, thank you gary. Thank you for for having me and i honestly like i couldnt i couldnt think of anyone better to do this with because weve known each other now for well over a decade and you know, itll make it more fun and we can tell embarrassing stories as well as stories about the founders. Oh, no, and whats great is you know . We first said you were to valley. So it was really sort of jumping into a subject matter that you hadnt necessarily addressed before you. You know, youre youre not someone on the west coast. Youre not a tech journalist. What made you want to tell the story of paypal . Yeah, its it was it was the cutest right . So i sort of freely admit that actually in the introduction. I kind of write that id like probably not the person who should be doing this id always sort of joke with my friends. It was like really like walter i should just hands project walter isaacson. Like this is a walter book. Um, my last book was about an engineer and mathematician named Claude Shannon and in the course of doing that book, which is called a mind of play. I looked at the place where he was we spent a big chunk of his professional life, which was bell laboratories and bell labs in the 20th century is is in today and then was renowned as this just incredible hub of innovation. They invent touch tone dialing they invent the laser they invent Satellite Technology Communications Networks and the transistor they win several nobel prizes. Its basically like the place to be innovative in the 20th century in the United States in technology and bell labs is an incredible. Thats not from the mind. One person its from a group of people. So i started thinking like what are other groups in American History where its been that fertile and that kind of rich and and livening and i actually i looked at other topics like i the one the roads not taken were Fairchild Semiconductor where you you famously have this group. Somebody had written the book. There was a book about xerox park that covered that kind of cluster as well. I think the book was called where the wizards stay up late, which was i always thought one of the best titles for a book about this and then then theres general magic and general magic like i got i was excited about it. But then this incredible documentary came out and it was sort of like no asking the answer like theyre gonna they own that its so good and everyone should see it. I paypal was a i stumble they sort of went forward in the history stumbled into it and i just started asking questions. I sort of assumed that because the personalities involved elon musk read hoffman the founders of Youtube Peter thiel max legend david sachs, and this is a like the avengers right . I assumed somebody had done this and then when no one had the other thing that i noticed is i asked even a few questions was that the stories were just fantastic like the Untold Stories were so good. And i knew there was potential there. And so thats thats how i came to it. But i most definitely came to it as an outsider, you know, because youre my friend i can like admit like i had called you with like the most basic questions right about like well, what is it was free money and like what, you know, its like terminology, but but i will say that the virtue of actually being an outsider. I found that the same thing applied in my last book and in this book if youre an outsider whos trying to decipher something in order to make an audience understand it you have to ask really basic questions and then build it back up in the writing so that the best the place i was most excited about that is, you know, everyone thinks they know what an ipo is right like an initial Public Offering listing on a stock exchange, but if you really like go you have to go back to basics to understand it to play it back to a reader. I knew like a lot of my readers were going to be in tech they were never going to take a Company Public. So what does it mean to take a Company Public stuff like that . The basic question asking actually i think is an asset not a liability for a lot of writers who go into spaces. Theyre not familiar with. Yeah. No and thats certainly the case and a lot of the reviews and just commentary about the book. It reads like historical book like its written by a historian. And of course historians are never part of the ecosystems that they dive into and so yeah in some ways, i think thats what its one of these books that you know, a lot of books now are written by journalists who are actively part of the ecosystem and of course being an outsider you can take that objective lens and sort of treat it more as a moment in history. I think the other thing its a really great thought the other the other piece of it is you can ask questions that someone who has the challenging task of reporting on these people every day, you can ask questions that theyre not allowed to ask right like if you were dated i dont i dont know i admire daily journalists who have to cover like tesla and spacex and a firm their task is so much harder than mine in a way right because i was always i was always the enjoyable conversation in the day not the antagonistic conversation that right. Im not holding their profitability statements to account. Im asking about 20 years ago, and so for example, you know a journalist is not gonna be able to come to max. They are taking me back to the university of illinois champaign urbana. Lets talk about college i could and he was more than open about it. So in some ways my task was much easier, but coming at it from an outsider i could else as an outsider. I could also just like kind of riff and you know, ask random questions that i think were relatively engaging totally totally. No, no, you start the book out and this is one of the things that i still think even after reading the book and after thinking about it for a career. I still dont have the answer to you. So i want to get your answer, you know people look at paypal. As one of these just megawatt like the talent coming out of paypal is extraordinary like it touches every aspect of Silicon Valley touches every venture firm, it touches multiple companies some of the most valuable companies in the world. And of course as you said you were looking at these pockets of innovation and pockets of talent and you actually i blanket on the word that you use but theres a word for talent growing together and sort of supporting each other and you know, what was it about paypal and what have you learned about talent magnets and how this you know how this ecosystem function to be able to yield all of these incredible new companies and and kind of new results. Yeah, and the word was word. I didnt coin it. It was brian eno the music producer. He used the word senius like instead of genius. You have genius. Its like scene plus genius, but his word was senius and he was describing actually artistic clusters. So he was describing like that the era and period in place in which like rembrandt and kandinsky and others were were doing their work and hey what he it was funny when he writes about i i riff on it in the intro. He says when he was in art school, he learned that these were like solitary geniuses, you know revolutionaries, but but really when he started studying more he realized like there were our collectors and there were people underwriting the art and there were music, you know, they were like different venues and people and a whole cluster and an ecosystem that was supporting this particular gift. Right . So senius is interesting because it actually like leads you to think about this story not as like, you know, apple equal steve jobs facebook equals Mark Zuckerberg microsoft. Bill gates right with paypal you dont have that you have a lot of people you have at least 200 people in palo alto several hundred more in omaha when the Company Goes Public and you have some of the brightest lights in in modern technology and so for me what i was trying to do, you know, it was sort of what one ambition was. Just tell the story meaning what happened from 1998 to 2002 to create paypal. No one had really gone back and done a detailed look at that and and the hope what that was the sort of goal the hope was in doing that you might illuminate like, oh here are a few of the things that like actually made this this group that the made the group what it is later, right . So my story, you know is gonna disappoint some people because actually stops in late 2002, so i dont i dont really write about all the things. These people are more famous for today, but i do think there were some Common Threads in and things in the water in those early years that were really to me and hopefully youre striking to readers too. Totally. Totally now. You have some megawatt personalities in this book. Very famous people peter thiel elon musk read hoffman and yet you start the story and the story does in some ways revolve around max talk to us about like why you chose to start the story there and how you sort of realize that the story in many ways even that theres many personalities that hes one of the primary protagonists. Yeah, it was um, you know, authors are allowed like editorial curveballs. And that was one of the ones that i wanted to throw theres a few in the book, but thats one of them. So if you take a step back the paypal we know is the is the merger of two is created by the merger of two Companies One is called x. Com and that is elons company. Another is called at first called field link, then its called infinity creates a product called paypal that company is cofounded by peter thiel and max levchen. Its origins are and the reason chapter one kicks off with. Its origins are in cryptography actually in mobile encryption and mobile cryptography and mobile devices in college max. It developed a passion for like palm pilots and sharp wizards and casio pias. Like this is what were in the time machine now, right these low power devices, but he was trying to basically take these devices and and push them to their technical limit. Like how much could you make up on pilot do right. And that is what gives rise to the company that he pitches to peter thiel. Who is then an unknown investor . And he says i have this idea. Were gonna do mobile encryption libraries and people will be able to rent the libraries and ill get money and peters like, okay. Well you seem smart. So ill invest and well make a thing of it that company is called field link that starts in late 1998 chronologically. Elon doesnt start xcom until early 1999. So from the perspective of just accuracy max is sort of the kickoff bleed off hitter more personally. I found that because he was not a super well known figure there were so many things about his life and his personality that were so interesting like one of my one of my favorite writers has like this line. He says the best characters dont know that they are characters right . Like theyre they are intense and they come alive on the page, but if you but they dont know it theyre not selfconscious about it. Right and max is not household name famous and so in a way, theres not this persona like built up around him, right . And so every time i i ask a few more questions or talk to a few more people. I would discover that he had these like insane interests and like a real a kind of onceinageneration mind. Ill generation mind ill give you an example. In college as a way of if i remember correctly as a way of basically getting around a requirement to write a paper for a class. He decides that hes going to write a paper on a film and that film is course. I was seven samurai. He watches seven samurai once and writes the paper, but it kind of like gets into his head. He spends basically an entire summer. Just rewatching seven samurai over and over and over and over again, but as of as of our discussion right now, i believe his number is like hes watching a hundred and ten times one movie 110 times and this is like a three and a half hour black and white japanese movie, right . So were not were not like this isnt like an episodic. Its not like billions, right . And so i i just found that like to him that is perfectly normal to the rest of us. That is like, whoa. What are you seeing in seven samurai the rest of us dont see right and i found moment after moment like this he had a near photographic memory and he would Say Something and then i would find a piece of paper later that spoke to it. I felt like he was he was a character who didnt know he was a character and its like his life is the stuff of legend. You know, he he is 90 miles away from chernobyl when the reactor explodes. It curls tons of Radioactive Material into the sky. He is shipped on a pain away from this from the closest side of the disaster and on the way to the train a border guard with a Geiger Counter scans his foot and his foot sets off the Geiger Counter. So they think his foot is radioactive. And at one point theres some talk of whether you should have his foot amputated and i think this is mom or his grandmas like no no no take off his shoe and rescan the foot. They do the foot comes back clean. It turns out it was a rose thorn in his shoe that had set off the Geiger Counter chernobyl and the aftermath of snow will shape his life in powerful ways his family secures funding for a jewish Refugee Agency to come to the United States. He arrives as like i think a sophomore in high school. He learns english by watching different strokes, you know, and so i just found like these details that were so rich and candidly that werent picked over like he he is not wanted nor built a big, you know, gigantic illuminating public life for himself. I think hes still regards himself and others regard him as like an engineer. Near so when you have that as a writer, youve hit pay dirt you you have somebody who can watch the same movie a hundred times and is also has a photographic memory. Youre like, youre youre my young im kicking off with you. Yeah. Yeah. No and and you mentioned Something Else there too where he was in college and one of the things that i think if youre not familiar with the paypal story everyone thinks oh, well Silicon Valley stanford. This must have all happen at stanford. And of course like the university that actually matters here is university of illinois champaign urbana, and so talk to me about that. Like, how did these cofounders meet there . What were they working on where they where they built like talk to me about how the university plays into it. Yeah, its one of the the things that im more than happy to as somebody grew up in illinois. I was more than happy to discover this and then to correct the record in this way. So stanford is a big part of the paypal story to be fair a lot of the the column the business heavy is come from stanford, you know reid hoffman as a stanford graduate david sax is a stanford graduate peter does two degrees at stanford keith or boy on and on. I mean you go down the roster. Its sort of look at that the engineering a lot of the engineering have for the company does come from the university of illinois, and its always kind of you know, i had luke no sick. Tell me like, im one of my first conversations with luke. He said he was very skeptical as where they all of this project, right . And he said if youre going to do this, just please dont write the university of illinois out of this history as everyone else has and so to kind of give context in 1995 a Company Called netscape goes but i think was 95 netscape goes public netscapes founder was himself at the university of illinois mark and recent the person who founded your firm and for an entire generation of that of engineers, like not just the university of illinois, but in a lot of places that is like the starting gun for the internet revolution, but at the university of illinois, its personal, right . I mean, they max and others who were there described me. They said that that mark was just a few years. We used to see him in the bar or like we would see him on the quad and like now hes on the cover of Time Magazine like if he can do it, so can we and so there was a very direct link the university of illinois has an amazing history of contributions to computing some of the worlds First Digital computers are made there. Some of the worlds early a social networks are born there. They had a lot of Defense Department funding throughout the 20th century, so they were able to like build big labs right the National Center for super competing applications is there its called the ncsa. And you have a ton of really talented engineers who go there the first two engineers that he hires come out of the university of illinois, the the cofounders of youtube to the cofounders of youtube come out of the university of illinois and you have all of these people who like are inspired by andreessens example and also have a places on campus where theyre building things building early prototypes building like primitive applications. So great example is luke no sick described this Amazing Technology called caffeine caffeine was the use of a day they put the office vending machine on the internet and you could pay using i think your mobile device right and this like obviously added time to the transaction because you could just easily go up like put a few coins in the slot, right, but you have like this excitement about putting the soda machine online right . Although luke knows also emphatic that in the midwest. Its pop not soda, so i should probably correct that because i pop not soda, but you have this enthusiasm about digitizing everything creating primitive prototypes and the students are doing this right and so you have a very Fertile Ground for a lot of engineers at university of illinois. Max legend meets luke. No, sick and Scott Bannister two people who become very influential he builds several failed as you describe. It failed companies, right and then as a very small exit with the last company that he built its enough money for him to come out west and begin the process of building. What becomes paypal and that is that is part of why i think of the university of illinois as this unheralded center for a lot of talent and it was a place that was like a Perfect Place to start this story because it was also hugely unexpected everyone expects a story about paypal or Silicon Valley to start on the west coast. Not in the midwest. Yeah. No, absolutely. So, you know later in the book we get to the story of elon which is a totally different trajectory, but one of the things that i think you talk about that, i didnt know anything about and i think we all think of elon as this, you know, eccentric character, but he had mentors and as mentor was was a man named dr. Peter nicholson talk to me about their relationship how he helped elon get a start and sort of what youve learned there. Yeah, it was. It dr. Nicholson was one of the best interviewees that i had throughout this project. And and ill offer a bit of background. So when elon moves from south africa to canada to attend the queens queens, university, ontario. Hes a hes a fresh arrival. He knows no one and so what he does is he he will read newspaper articles and contact interesting people that he finds in these articles and just sort of like find ways like connect with them. He reads an article about dr. Peter nicholson who at the time is an executive at the bank of nova scotia also known its a scotia bank, but dr. Nicholson has a background in computing and in Operations Research and in physics, hes a big scientific brain. In fact, thats when i first spoke to elon on battery. He said he looked at me because he was a giant brain just like super smart and and i just i love that for us a giant brain superstar. And so i i said, okay. Well, let me track track him down and dr. Nicholson has probably like the widest set of interests ive ever met ive ever seen another human being even today. Hes like his passions are like square dancing and like financial stuff and computers and the history of technology, but for for a young 19 year old, i think 19 year old elon musk. He is he is Peter Nicholson is one of elons only bosses ever. And what happens is elon contacts him and elon and his brother kimball go have lunch with dr. Nicholson and dr. Nicholson, basically ive one internship. Milan decides to take it and elon joins scotia bank as an intern and what happens is is hes joined a bank, but hes joined like the right part of the bank, which is this team run by this gigantic brain and the team is essentially like a little unit within the bank the reports directly to the ceo and the ceo has an interesting problem. He will toss it to dr. Nicholson and that team will get to work because its a small team dr. Nicholson and elon develop a very close relationship and a friendship and i theres still friends to this day right and he said to me so, you know, even then hes like first love was space. They would sit and trade math problems and math puzzles. They would talk about space exploration. They would talk about physics. They talked about whether elon should start a company go to grad school or join a company all the the quite basic problems that exist for the rest of us actually did exist for the for elon at one point his life and he had this mentor that was helping him think through them and one of the things that happens with dark nicholson is that he notices right away. Hes like this kids very precocious. So he gives him more challenging assignments more demanding assignments, and it was it was revealing to see that youve been then some of this big First Principles thinking that elon applies in places like automotive, engineering or Space Logistics were evident back then and dr. Nicholson, you know use hes a serious. Hes a serious person and he said hes like, you know, its quite clear even back then that theres a precacity about him that you just dont see in in many people, but it was one of my favorite interviews because he also he was thoughtful enough to to see how those Early Experiences may have shaped and and you know. Enabled some of elons later successes and one of the biggest ways is after a summer of working at a bank. Elon is very skeptical about Bank Leadership and innovation. I i was gonna say its funny to picture elon as an Investment Banking intern but everybody had that experience now now one of the things that like people probably dont know is that you know, paypal was too companies and they had some what different ambitions so talk to us about the difference between xcom and confinity and sort of how they merged. Yeah. So because we were on elon we can start with elon which is in early 1999. Elon is fresh off and exit. Hes created a Company Called zip2 hes sold it and hes thinking about what comes next. Based in part on the banking experience. He sees an opportunity in finance what he wants xcom to do is everything under the financial sun like xcom is going to be theyre gonna be your Mortgage Broker your stock broker. Theyre gonna do your Checking Accounts. Theyre gonna do transferring money if you want to wire transfer, youre gonna go to them if you want to take out a line of credit, youre gonna go to that is the word as you put it. Hes an xcom was supposed to be the Global Financial center, right . And this is but just context again 1999 dialup internet most of us like most of the people whove been using the internet arent using it for transactions people still nervous about entering credit cards in but even then milan says listen like we have this technology now that can help to upgrade bank mainframes and government mainframe which are generally written on pretty old code and cut out all the fees. Thats xcom a revolution in finance on the other side of the paypal ledger you have infinity and infinity is at the time. In mid 1999 focused on making a successful product out of palm pilot money beaming so when the latest iteration of the palm pilot came out in 1999, it had a little infrared port in the corner and i i just to understand it. I went back and i read palm pilot for dummies so that i could like really get into these devices and its really funny because even in palm pilot for dummies they say if you hold the infrared ports too far away. You cant that i still communicate if you hold them to close they cant communicate you have this like goldilocks distance to get it just right, but then they can communicate. Nobody had come up with a use case for these infrared ports there was you couldnt use it as a Remote Control you were supposed to do with it infinitys answer is that you and i would be at lunch and you know, you would need to send me 10 and we would take out our palm pilots and go through the excruciating process of being each other money and money being was gonna be a thing. So community who is focused on money beaming in the summer of 1999 that product in become like transmission over email and that is where paypal is born and that is also where the name paypal was born. Yeah. Yeah, no and talk to us about the name because thats one of the yeah. How they came up with the name and and sort of who liked it who didnt yeah, so, you know, theres like places in when youre writing books where you feel really surefooted and then theres places where you feel like youre totally at sea and so i was like an outsider to the world of code, right and so for me like like i read a lot of papers about mobile encryption just to understand it. I read the academic papers that max leptin was looking at theres a really great paper by this researcher named neil daswani, but even if i read those papers, like i wasnt really on, you know a solid ground or i could be on solid ground was with words. And so i wanted to find out like where did this name paypal come from . Luke . No, sick had shared with me that they recognize that like infinity which is like you too many syllables and has con at the beginning is not like the right name for Financial Services company. He went into his browser and typed in naming. Com and it pulled up the website for a Company Called master mcneil master mcneil was founded by sv master. And as we masters the firm they contract with to come up with the name paypal and whats the espys one of my favorite characters in the book just like i i like because shes a word person but also just because shes so thoughtful about naming so she has a whole long process that when she contracts with the company to create like a product or a service she goes through hundreds of names. She interviews the team members to understand like the history of the company and like some of her claims to fame. The trackpad thats on your laptop. She named the trackpad for apple. She named touchstone pictures. She named weston hotels. So shes got and i think you know whatever for fondest memories is naming paypal. Her finalists, you know just to show you right what history might have been. Were cachet momo emoney beam zapios. Zapio got it was on the list, but i was really fortunate as be had actually kept in her files the slides that advocated for paypal and i i had that information and included it in the book the sort of six or seven reasons why paypal was the best possible name for this company and theyre very specific. Again. This is not a asb has a view that a lot of companies will come up with names as what she calls like a purely creative process. Throw it up against a wall and see what sticks she says. No a name is actually a crucial business decision. And whats amazing but as we had a harvard mba and she had like a background in literature and so she had this like nice spot on the venn diagram. Were like words and business meet. With paypal, its memorable. Its friendly sounding and as you put it shes like your pal is more than your friend like your pal. Has your their arm around you right . Its a warmer relationship. Its a warmer definition and and warmer image in your mind. She says the the peas create plosives so you have to like stop the air in your throat, which leads you to like. Remember the name for a halfbeat longer. Theres some pretty decent Linguistics Research on this and you you have this change later, but you have the capital p and the lowercase l which create ascenders and you have the lowercase p and the lowercase y or sorry the lowercase wine lowercase p which create descenders thats like visually very symmetrical now the interesting thing and we never could find the origin is that at some point they capitalize the middle p and and she went under great. Im very grateful. She went into her files and she came back and said jimmy. The only thing i can find is this little note that i have that says chose paypal with a capital p and i dont know who she couldnt recall its origins, but thats where paypal was born. It was the work of sv master and her team at master mcneil really thinking through very diligently. Like, how are you gonna make this process of even like beaming money between palm pilots more inviting to people and certainly more inviting. A company that starts with the word con. Yeah. Yeah, very true and with so interesting is ive heard peter thiel many times talk about how the name of startups is so important to him as an investor and if you look at say paypals friendly even though its a you know, a financial a fintech business, but Something Like an uber does not have it has a menacing tone. It has a you know, its a name that means things and other languages that arent necessarily, you know equated with goodness. And so its you know in some ways. Its like its interesting to see that that story may have carried on through a lot of the investors since many of the people in this book go on to be great outstanding us. He actually, you know in other settings, but also to me mentioned that he said, you know, we always thought paypal was friendlier the next calm and he said i believe like facebook was more genial than my space which felt a little bit more selfish uber sounds a Little Medicine relative to lift which has a sort of like, you know quality of sort of uplifting quality. I think of the you i i like the etymology of how things come to be and so for me understanding where the name came from was was interesting. I think its also interesting that in spite of all of the talent in this room at the time right some of the leading technologists of our day. They were so backwards on the other names, you know as we had to advocate for paypal the team did not warm to it initially you would people in the room saying this a terrible idea no ones gonna trust your money with a paypal years later actually even one year later but years later especially to a person they said, you know, we were we were she was right we were wrong like actually held it on the head. Yeah. No and its nice that elon did end up getting his ex with spacex. So everything comes full circle everything. Yes, and he owns he now owns the url again. He purchased it from paypal corporate some years ago. And and it was a its the end of one of the final scenes in the book is is him reacquiring the x. Com domain. It was restored to its its rightful owner. Yeah. Yeah. So one of the things that youve gotten so much praise for is the fact that you taught you you talk to so many people who worked at the company. It wasnt just talking to the famous names or the the people whove gone on to be very successful, but that you talk to many of the employees you were able to get troves of emails because you know, a lot of the people who worked at paypal were packrats talk to us about some of the lesserknown figures and how they impacted both your understanding of the story and also just the story itself. Yeah, its its a really good question. And im glad people have picked up on it. I had a view that the most interesting stuff in companies tends not to happen in the boardroom or in the csuite. You know, its its really in in the like kind of microcreations and ideas that happen among employees that youre going to get the richest like material and reflections and stories that are never told i also had had just personally at when i started at the of this story. You know, its easy to get seduced with the idea that its the the megawatt personalities like theyre really well known people that drove the Company Forward but time and again, what would happen is those people would play back to me and say oh you should really talk to david gausebec because he was responsible for helping to create the captcha or you should really talk to amy real clement because she basically like ran this product team. You should really talk to sky lee because shes the designer that made these things were so ive just hear names and then i would just do cold emails or you know, and and reach out and i kind of consciously wanted to tie all of these threads together because in some cases these people had never been spoken to about the paypal experience like no one it was so easy to reach out to people who are accustomed to press for someone whos never been contacted by by a writer, you know to be a little bit of a discomforting experience i can they can have their have their guard up. I tried to win trust it took years with some people i had to fill out questionnaires. Id be like do all sorts of things. I take red eye. Lights just to make schedules work, but but part of what happened is that i found a series of characters who like max i like novelistic, but they dont know that they are and that was the best and no one had actually really gone into their lives. I think the canonic one of the canonical examples for me. Its a gentleman whose name is sanjay. Barghava. Sanjay is not someone whos you know household name . Elon hires sanjay very early on at xcom and sanjay is a brilliant mind who has worked in Financial Services for a long time at that point. He had had a failed startup and joinsax. Com one of the signature contributions he makes is something that almost all of us listening and watching have used before if youve had to register your bank account with another institution, youve probably gone through the experience of like theyll have to send you like a little bit of change right . Theyll send you like three cents and 25 cents. And your code is zero three two, five that was invented by sanjay berghava at paypal and the reason was because he needed to the company needed to find a way to authenticate Bank Accounts if you say you own your bank account. How do i really know unless you can access it if i just have your Checking Account routing numbers anybody anybody with avoided check could do that . Sanjay figures out. What if we did whats called random deposit we send you two random numbers and you then can authenticate and verify that you are who you say you are. It was a breakthrough innovation. It helps the company shift its cost curve and dependency on credit cards and its something that even today is ubiquitous and i found him to just be the most amazing character. I had somebody say to me watching sanjay navigate the Financial System was watching a conduct was like watching a conductor conducted a symphony, right which is like the most amazing thing to say about the fight about what is like a stick the sterile this sterility of the financial so you dont often hear the word symphony attached to it. Yeah, but i found him to be uncommonly thoughtful and and to have had this breakthrough innovation. I went searching for those i want searching for the person who is closest to the action. Not the person whose name is in the paper, and i i, you know, you never know if these things are gonna work, but i will say that paypal story is packed to the brim with those kinds of people right . Its not an accident. Actually that all these people have gone on to do many Amazing Things in their index sort of post paypal life because person after person may be sorts of contributions and they were hugely consequential which actually why i write like you cant tell the story of paypals a story of one or two or even three people. Yeah. No, definitely. Yeah. Now one of the going back to the talent question, you know, theres theres so many people in this book who are just known in the valley is just being like the best judges of character of talent they can acquire talent very well. They recruit for their companies, you know, its one of the differentiators of a good ceo and a great ceo is just how great they are recruiting and one of the things that struck me or surprise me in the book is, you know, we dont talk about elon as a great recruiter, but a lot of the people in this book were recruited by elon, so id love to hear what was his approach to recruiting talent. Like is it was it surprising to you that that he was the one that was recruiting a lot of a lot of the great characters . Yeah, im glad you mentioned it because its one of the things thats been written out of the history. He has like a few of the others in the story, but putting the spotlight on him. He has an incredible eye for engineering talent product talent and business talent. And and it it he recruits. Any real clement he recruits sanjay barghava sandy. Blal roll off both the who today kind of be a run Sequoia Capital elon tries, not once but twice to bring him aboard and and roll off actually rejects him both times until this third time when roll off is having a personal financial crisis and is like hey, can i come in turn for you . Right and he has this keen eye for the best people around. Heres the other thing that that makes him. I think a particularly effective recruiter is hes basically relentless and who was very very quickly until he closes somebody who is interested or somebody he wants so the to go back to the example sanjay. Sanjay was connected elon through email and he says, okay great when im next in the valley, hes living. Yeah, ill come down. Ill come and see you and elon says no. No, ill buy you a plane ticket. You have to come tonight. So he flies theyre supposed to have 10 minutes of dinner at some at a hamburger joint. They start at 8. They dont stop talking until four oclock in the morning and at four oclock in the morning elon looks at him and says, can you come in at seven and get your offer letter . Id like to make you an offer. So again, and again he would make offers on the spot. He could he could sense this this quality of somebody who is gonna be a good fit for his team, but just a good person to have on the team in general and i would say that one of the one of the things i hope that the book corrects is, you know, the Community Side of the team peter and max like get a lot of credit for the people they recruit. I dont think elons gotten equal credit for the folks he recruited but theres some of the people who make the place tick and frankly make it successful and so it was part of what i noticed was just his very keen eye for talent and i dont think its something thats written enough, you know, because theres so many like when youre hosting snl, thats probably like a dry subject right now. Thats one of the things that definitely came through in the paypal stories. Just how many people who just other part is he paint and inspiring portrait of what x. Com can be and that rec. And that also encourages these people to join to sign up. Absolutely. Yeah, so lets talk about fraud a huge portion of the paypal story. You devote a number of chapters of it in the book. Why does it matter . And then how did you approach the book . Yeah, so its its the its one of the many what i would think of is is i wouldnt say untold but lets sort of like undercooked stories, right thats been in the culture paypal is not the only Payment System on the block in 1999. There are many others. There are early cryptocurrencies. There are digital coins. There are mobile wallets. Theyre theyre digital banks. And so one of the things you have to ask yourself if youre writing this from that from coming as an outsider is well, why did they succeed where everyone else fails . One of the big reasons is that paypal was able to successfully defeat digital and online fraud at a time when digital and online fraud was like it was just starting and it was sort of the wild west there wasnt established case law on how you deal with these things. So what happens is you have a successful payments platform and paypal millions of people start to use the platform including bad actors. Some of these are Just Like College students who are like using paypal to get bonus you bonus incentives to get beer money thats like fraud you can manage but more sophisticated broadsters do come from, you know. From a broad from like exsoviet satellite states you have hacking groups that are based both in the United States and abroad that are using paypal you have theres a fraudster who created a website. That was paypal. Com p a y p a i because on your keyboard the i and l key are so close to each other. He created a copycat site that looked exactly the same and would duke users into giving away their personal Financial Information your fraud of all kinds. Yeah in 2000. Fraud is burning up. The companys balance sheet. They have 1. 60 Million Dollars in the bank and theyre burning through between some estimate type of between 11 and 13 Million Dollars a month. So roughly like five months of runway left. They have to figure out how to fix this. It isnt one fix. Its multiple fixes. It involves human beings who are fraud fighters many of whom are interviewed who are just most amazing characters, right . Theyre Like Star Wars figures. Theyre incredible. Its digital fixes paypal is where the captcha is invented. So all of you who are annoyed by like finding fire hydrants and stuff like you have them to thank its also working with Law Enforcement to educate us attorneys district attorneys and others about what what is online fraud even look like after 9 11 the government turns to paypal to help understand is their terrorist financing moving to these networks. All of this is the thing that in some ways like ought to have killed the company in the year 2000. It is also the thing that is their signature breakthrough like full stop. It is the reason that the Company Survive or others failed and one person who who ken miller whos one of the people on who is responsible for some of these technologies and some of the organizational ballast. He said to me hes like, you know fraudsters are kind of lazy. So as we got better at broadfighting they would just move to our competitors who werent as good and they would clean them out. And so we sort of had this like weird competitive advantage that came from just defeating the fraudsters. Yeah. Thats just incredible now one of the things i mean going back to just how much detail is in this book, you know it as a historian as someone who often is used to going back to libraries and this is a contemporary history. And so you have to sort of hunt down people who still have emails who still are willing to open up. I mean, i would just love to hear about your process. How are you able to get this level of detail and and and convince a lot of the you know, a lot of the characters in the book to share some of these, you know, really personal anecdotes and personal sort of spats that were happening in the company that may or may not look make people look look that favorable. You know, i i think theres a few answers to the to the question the the one thing that i benefited from is that the story is 20 years old, right . So paypal prop, you know goes public and to theres actually this years the 20th anniversary of the paypal ipo when two decades have passed like and all of these people are not involved in the daytoday creation of the company. Theyre a little bit more open about like war stories and and reminiscing right . I didnt have to push as hard to get answers to questions. In fact, one of the funny thing is how many of them made fun of me that i was even interested in this topic like they would give me grief for being interested in something to happen 20 years ago and i in my back my mind as a go if you spend all day thinking about the future, no wonder you think like im a curiosity for thinking about the past right that was part of it as i was on 20 years. Just like they were happy to chat and and but i would say that there were two other pieces that were really helpful one is that i did have the good fortune of having a number of people who shared emails. I dont know why they kept these notes and documents and board minutes and and various phone lists and things but they did and they said hey, this could be helpful to you and it was it gave the it gave me the ability to see not what someone remembered through the haze of time but what someone wrote just to the entire company at in the moment and so i hope like you get the immediacy of you know, salt and peppa being played across the the speaker as i hope people can see like jokes about napster and the mighty more from Power Rangers and and things that are these like relics from the 1990s because it was all what i was seeing when i was reading these notes and documents. Last thing is the virtue of having phone lists is that i could diligently try to contact several hundred people over the course of five and a half years. And so what i would do is add a little color coding system and i would just try everyone respectfully, but i would try everyone a couple of times and i i kind of just made my way through i mean there were people i interviewed who at the company for two weeks. There was somebody i interviewed the company who was there for three months and and there were other people who were there for the entirety of the period they were that the company was from 1998 2002. I interviewed Board Members a lot of this was just shoe leather. It was the belief that maybe if you send it a cold email someone will respond and i had enough of those people respond and very eager to talk and share memories. So i think part of it was work and part of it was luck and timing i also think you know, i i was like living as you know all too well because as all we would talk about i was like living in the 1990s for five and a half years. I wouldnt read any news. Sort of really tried to stay there and then i woke up and like dr. Dre is doing the super bowl in the 1990s are cool again. And so i was like, oh, this is great. You everyone just caught up to where i was which yes, everybody becomes full circle. Yeah. So before we hop into to audience q a i want to end and i hope youre okay ending here because its such a moving part of the book in some ways. I dont want to make you tell the story, but i do want you to tell the story because its so moving and so impactful, you know, you end the the book with basically in a prison and maybe you can tell us a little bit about how you how you found this this these people the story and and how it ends this way, yeah, its the most surprising thing to me in looking back at it even so i struggled with how to end this book as as katie knows like this was like the thing that kept me up at night because you know you you could sort of float into the paypal mafia motif. Which is the name given to a handful of these people in 2007. It was a cut Fortune Magazine cover story. It was called the paypal mafia and their famously like dressed up in mafioso. Regalia, but it felt like that had been done to death, you know, like it sort of like a kind of way. It was trope. It was something that was there and it was fine. Everyone had seen it then i started looking abroad and i was like, okay where else can i find and it turned out a broad actually the term meant Something Different and heres what it meant when the company coco has a success in kenya. Its founders right explicitly about wanting to now after their success build the paypal mafia of east africa right in canada. It was work brain in europe. It was monzo in india. It was flipkart. Theres actually tons of references to the flipkart mafia. So i had that i was like, okay, that could be interesting. Like, how do you how from what seed group could emerge this sort of ecosystem of technology . Then i learned that a young man named chris wilson who was a friend of mine had studied and thought about the paypal mafia while he was incarcerated for murder one in the Patuxent Institution in jessup, maryland. And i knew chris because id kind of been just as a friend helping him on the book that he had written. I had no idea about his interest in the paypal mafia and it went way beyond what i thought i thought okay, maybe knew a little bit about them, but he had actually taught effectively the book. I was writing. He taught the paypal story in prison in a series of entrepreneurial workshops. He and his cellmate Steven Edwards managed to get a copy of that 2017 Fortune Magazine article. They became captivated by it. They became captivated by the stories of max and elon and peter and reed and what they started to do is any business publication that came into the prison they would find articles about this group and then assemble a packet and they would photocopy the packet and teach entrepreneurial workshops inside this maximum security facility. And i this just blew my mind and at first i thought okay, maybe this is too hot. Maybe this is like just no when i interviewed both of them at great length. I realize that they took all of these lessons earnings from this story and astonishingly both of them, you know managed to earn their freedom today. They both run businesses. In fact stevens a software entrepreneur. Hes working civic tech. His technology is helping cities like do logistics for covid19. Testing and chris wilson, you know, his book debuted on trevor noah, and hes a globetrotting artist and he lives in he said built real estate businesses and now builds it has a very successful. Hes a very successful artist and hes doing all kinds of other things they found inspiration in this it was the the place where theyre thoughts about it. Frankly went way beyond even where i had thought about it, like what they drew from the story in prison was interesting to me and so, you know, i had hoped it would be interesting to readers. Yeah. Its just a remarkable story and shows just the you know, we always talk about the the impact of the paypal mafia on technology, but really on on kind of normal peoples lives too is really really story. So i want to turn to audience questions. We have one. Oh are any of the founders still involved in any way in the company . You know, i cant speak to whether theyre shareholders of of the company, but none of the original founders are involved operationally with with paypal. You know, paypal is a very Different Company now than it than it was in its much bigger right in some ways. Its achieved the scale that its founders had hoped. Its actually its actually funny that the question leads into another thought which is the afterlife of the company is they in 2002. They go public required by ebay in 2015. They go public again and and today paypal as many times larger than than ebay the place where first found success but so far as i know none of them are not i can say with some confidence. None of them are actively involved at all with the company itself, whether theyre shareholders or not. I i cant speak to that. It didnt come up in conversation. I think that in the same way that they kind of gave me some grief for being interested paypal is a distant part of their past max left in my first conversation with him. Is he started off in a not great way for an author whos like looking to spend time with him and get to know him. He was like, i dont want to be just the person who created paypal like 15 years ago. That cant be my legacy. So i think in a way its like this this thing theyve all that they all credit was so much but they are all so all trying to escape in in some in some way make sense all of us want to forget who we were involved. So its that point in life. So in factual that yeah, so another question are the founders friendly each other now, you know, i i so it depends on how you define founders and how you define friendly. No, i mean all seriousness so far as i know theres not, you know, i found that everyone was actually somewhat still in loose touch with each other. Theyve done a few reunions. And actually let me add one little thing on this my definition of founders in this book is broader than just like named cofounders on some investment document right . So with people look at the book cover, theyll see faces and names theyve never seen they look at the back cover. They might see people theyve never heard of i wanted to expand the definition of founders to include anybody. Thats at this like very intense period of founding a company and that might not be like legally the definition of founders, but i do actually i would defend that that editorial choice pretty because these people went through this very bruising very difficult experience together and poor blood sweat and tears into the Company David sachs, you know, some people credit david sachs like as one of the people who really refined the product vision hes not glia cofounder, but it people would put him in that group. I found that that there were certain friendships that i think matured and and developed more different, you know differently than others. You know, theyre always bonded. These people are always tied to this experience and they have invested in work with one another. So russ simmons and Jeremy Stoppelman built yelp together the three cofounders of youtube obviously Work Together to build youtube a number of people at a firm max Legends Company our alumni from paypal, you know, there were people who joined elon at tesla and spacex. So i think it depends on on which friendships youre talking about. But for the most part what i had heard was like largely positive relationships and certainly very strong professional ties across this group. Yeah, no certainly on the on the investment side. Theres sort of just if you tried to map all of the investments going from from peter thiel to elon to roll off investing in a number of his former, you know former colleagues. Just the map would just be completely overridden so whatever, you know if there was any sort of nonfriendliness, theres certainly right. Us in all of their own projects and working together on those things so thats a very and i will say i think i think the rivalry that you know people might be interested in the most or i think its been made into something that it isnt is theres some fiction about elon and peter, you know, not not liking each other and i dont know the truth of it and i never asked either about it, but i can tell you that the day that i interviewed elon his dinner gets that night was peter teal and so like if you dont like somebody im not sure like giving me of your pick of the litter of who you could ever for dinner like i i think someone needs to blow up this this idea that they dont get along their coinvested with each other elon is inside peters book zero to one and again like you dont have people over for dinner or if you dont get along with them, so yeah, i just ill have one little other colonel on this which is these people operate in rare air intellectually and so, you know, theres a kind of i think fellow feeling that emerges from having done paypal together, but more than that. Its a set of of interest and passions about technology in the future and science and engineering and math that go deep and i dont you know, i cant speak to their contemporary friendships, but i can tell you that i saw a lot of positive interactions across the group. No, and we might have already answered this but someone just asked did you did you speak with peter thiel for the book . So maybe your impressions there . Yes several several times. He was actually a really great. He was great interlocutor and helped me think about the ideas in the book. Um, you know, hes hes not an anecdote person. We would we would talk about ideas about technology about Team Building about you know, he had a great a lot lengthy meditation about what it was like to hire reed hoffman who is his friend like what happens when your friend becomes your subordinate in a company, so it was things like that, but we had multiple chats about this. Hes one of the early hes basically the sort of you know employee too. Hes the ceo of the companies the ceo and it goes public and i so i had multiple interactions of them for the book. Yeah, so i i know we only have a few minutes left. You know, my last question. Why did you what did you personally learn about Silicon Valley, you know, theres a lot of misconceptions i think for outsiders is Silicon Valley of how the ecosystem works of all these crazy people. Thinking about the future. What did you learn about how the system works and how the ecosystem works and what surprised you most about it. Yeah, its a great question. And i think its one of those that like i think in five years. Ill have like a better answer potentially, but ill offer to the jump to mind for me one is Silicon Valley is unusually tolerant of people who are on the fringes or misfits in other parts of society, right . There is a high degree of openness to people who might not communicate with perfect english who might not dress like in a way that would be acceptable like with a mckinsey and company job right who have ideas, you know about everything from life extension to you know, a space travel that is embraced that level of unorthodox thinking is embraced in this place, and i found it. I know that its theres some ideas about that, but i found it very vividly in my discussions with these people when those topics would come up all the time as you know in a perfectly normal if you are talking about the weather right like we would be talking about how we can live to be a hundred and fifty right like it was it was par for the course. I dont know that there are other places in American Life that embrace that kind of like just just truly like heterodox thinking i i found it really encouraging i was like well good like someone should be storing the pot on some of these thats great. The second thing. I i found was, you know as a writer. And you know this from your time in in journalism when you can find the perfect word for a paragraph or like a perfect closing sentence or like something snaps together. Its like its a thrill. Its a complete thrill. Its not a thrill that a lot of nonwriters understand because writing is often just homework for other people right and like you and i chose lives that were like, we basically decided to do homework for years and years and years. Writing code has a lot in common with writing that meaning i found in some of the people or engineers that same satisfaction when the one thing fit into the other thing and then it all worked that thrill is real and its easy to miss it when you press a button on your phone and something works or when you type in addressing a google maps and it works like exactly like its supposed to its very easy to miss the like months of labor and satisfaction and joy that actually underneath those those things right like we have this really distant relationship. These arent hot rods right like our phones are pretty sleek and the after really sleep in the buttons look really good. Someone had to do all of that and i found that in speaking to the engineers. There was a real pride of craft that i that i and a real joy about when something fit right into place and the only way i knew i get to new to describe it was just that like writers have the same they have the same joy. Yeah. Yeah. I think that makes it makes a ton of sense we often. A small state dichotomy that youre either a math person a coder an engineer or youre a reader and a writer and a literary hound and its like actually some theres a lot more synergies than we actually think there are i kick off the book with a quote from ada lovelace for exactly that reason because some of her meditations im like what you know, the earliest computing have a literary quality and i i found that in the people that i interviewed. Yeah well with that, thank you so much jimmy for for joining the conversation again. The new book is the founders. We also like to thank our audience for for watching and participating live and if youd like to watch more programs or support the commonwealth clubs efforts and making inperson virtual programming, please visit commonwealthclub. Com org