Yeah, it's funny. I gave a little bit of a profile of sort
of what I saw inside eBay in my book The PayPal Wars, I talked
about their culture being really different, that Elon and Peter and Max levchin At
built a culture of execution, of working hard and working fast and trying things
out, listening to our customers and build it vents. Even at quite the
opposite, they had very bureaucratic culture, which was a surprise for dot com.
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Welcome. You are watching and listening to the Financial Survival Network of Carrie
Luttz. Hey, it's mid October. We made it so far without a
crash. How much longer that will go? Your guest is as good as
mine, but got really interesting guest here for you, Eric Jackson. He
is the author of a book PayPal Ores, and he was in the thick
of things when PayPal was becoming a major brand and Elon Musk and his partners
were fighting it out of Eric's great to have you on the show. So
you found yourself kind of an observer and a participant to history, but you
didn't really know it was history when that was happening until till much later.
That's right, Kerry, and thank you for having me today. Yeah,
it was incredible to be part of the creation of PayPal in those early years,
and to look at all the people I worked alongside, you know,
not just Elon Musk, but also Peter Tail and Max Lovechen and went on
to start a firm and he was the chairman of the Alp Reid Hoffman who
started linked In, David Sacks. Yeah, it's just the list goes on
and on and on. So it's really incredible to look back at it.
The founder's of YouTube as well, So just to be the middle of that
was amazing, and it worked with all those people was also amazing. But
yeah, you can never know that it was such a historical company right in
the middle of it. You just trying, you just try to do your
job and also build a business. I know it was an attorney and in
two thousand, I actually got called up by Donald Trump to handle some cases
far not knowing that one day the guy was going to be president. So
it's only when you connect the decks that connect the dots backward, as Steve
Jobs said, that you see the significance of it. Hey, so uh
in this place, this is before everybody made their billionings. Right. Elon
eventually, I'm going to skip to the end, had a falling out with
them, and he left. But he was smart. He didn't burn bridges
because they all became investors and they worked within on his successive enterprises SpaceX and
Tesla and Boring Company and Neurallink, and I don't know if you can probably
think of a couple others that I missed here. So that's you got these
really strong personalities and they're kind of bumping heads together, but they must have
bet a measure of respect on all parts for them to wind up investing together
and working together again. That's actinally right, carry And you're right that there
was some conflict, as there often is when you're trying to pursue anything worthwhile.
And Elon and just for contacts, Peter Tiil had started a company called
Confinity and it's that's a company they created his PayPal software and Elon, whose
office was just down the street. They were neighbors on University Avenue in Palo
Alto. His company was called X dot com. Now that name is going
to sound familiar to viewers, even if they don't remember the original. Yeah,
the original online bank that Elon informed, uh, they'll they'll think of
Twitter, and it was recently rebranded as ex Uh. So you can see
a pattern their spacexx dot com and now Twitter and and so Elon Elon had
a vision for the company. After the two companies merged and and uh it
ran into some conflict with with some other members of the team. And I'll
be happy to describe that to you. But the point in jamaking is that
even though that that happened, uh, there there was resolution and there also
was an understanding that, hey, we've got to all work together here.
So Elon, to his credit, after leaving the CEO role, stayed a
helpful active member of the board. And I know that Peter til when he
took over the CEO role, can alter with Elon a number of things,
especially around the exit strategy for the company. So they mended fences pretty quickly
and then insuing years. Yeah, you're right. I know founder Spond,
which is a VC firm associated with with Peel invested in SpaceX among other investments.
So you're right that collaboration, you know, continued and fences were mended
and people work together to this day. There's still good relationships, right,
So I find that interest thing. So Elon's vision was this was going to
be a global financial enterprise basically take over the whole banking sector and do things
more efficiently and effectively faster. All this because before Petticyle it was really difficult
to send money. You did have ach transfers I guess beginning, and you
had finwire and some private bank wires, but otherwise to send peer to peer,
for me to send ten bucks to you Eric was like enormously expensive and
inefficient. Yeah, people forget about that today, right, You've also got
Venmo and zell and other options. Now today it seems like it's so easy
and ubiquitous, you just pull out your phone and do it. But you
know, twenty plus years ago it actually was really quite hard. And with
the dawn of the Internet, at the down of the Web, I should
say, you started having online commerce, particularly for small businesses, all right
out of platforms like eBay. Well, that was great that they could do
the selling online, but then to actually handle the payment it was completely all
of live you buy to mail checks and money orders for things that were sold
on eBay and and eBay. While the hobbyist idea was very popular right at
beanie babies and pet dispensers, it was really small businesses getting on there and
selling their merchandise that made it take off. But that was a pain point.
It hurt everyone to have that lag in the convenience, the cost associated
with it, record keeping was worse. Disputes can arise, So hayfoul showing
up radically changed things for that market, but also had the potential to change
it in a lot of other markets too. And this was the vision that
Peter Thiel and Max Lepchin had when they started Infinity, which was better known
as PayPal, that they wanted to have a system that empowered people. That
was a big and very important thing for them. Carrie, I remember the
first week I got there Peter and I've known Peter from my days at Stanford.
He was kind of an alumni mentor at the time, and so he'd
started this company. I'd stayed in touch with him. I was working in
financial consulting. He told me, hey, why don't you come on board.
We're getting ready to scale up. We're doing adventure capital round. We
need you to start, and you should start really soon. So he actually
convinced me to tell my respected employer there was one hundred year old company at
sixty thousand employees worldwide, that I should jump ship and leave to come work
at this little startup. I didn't even know what my job would be.
I just knew that they were going places. So but well, I look
a lot smarter than I am when I just say that the company I left
was Arthur Anderson, and the company I went to, well, you know,
turned out to be a success. Yeah, And students of history that
might be younger than us, well, well, perhaps have come across the
name Arthur Anderson. It was a big six accounting firm at the time,
and it was taken down the Interron scandal just a couple of years after I
lapsed. So good good timing is everything, all right, But I'll mention
that that vision though that Peter and Max had for PayPal, it was empower
people. This was you know, after through the mid to late nineties,
you had currency contagions in much of the developed world. You'll remember that,
right, that this recurring problem. Yeah, of countries they've been manipulating their
exchange rates and their interest rates. You can't control both, you can only
do one and and and uh. They came under fire and frequently had to
defend their currencies, have a run on the currency. Uh. And as
a result, a lot of times these these countries would actually lock up the
deposits of their own citizens and bank accounts to keep keep pressure off the local
currency. And so they'd eventually get screwed, as you know, the common
man always does, because the you know, they'd unleash this hyperinflation and it
would destroy their savings that was sitting there untouchable. So it was a you
know, pretty pretty bleaks h environment. And Peter and Max realized, hey,
you know, something like PayPal that can empower people to move their money
and give them instant access could be a game changer around the world and also
give people a lot more freedom and control. There's a real vision of freedom
there that that was the origin for PayPal. Yeah, and now we've got
to hundreds of different apps, you know, peer to peer transfer, money
transfer in the full life, and we got to cryptocurrencies as well. Yeah.
Hey, so you knew all the parties, all the major players here.
And so even though the Elon left under maybe less than positive circumstances,
he made the decision to leave, he wasn't fired, was he. Well,
it was a it was a pretty uh pretty contentious uh uh, I
guess it pends who you asked, right, So the the things came to
a head because Elon Elon is very sure of himself. I think that's not
gonna be shocked. You mentioned you've got you're familiar with the Walter Isaacson book
on him, and and I'm sure those of your your listeners that have followed
his career know that he's pretty confident. So his vision was he wanted to
relaunch the PayPal platform, which was after the merger of the two companies,
relaunch it and brand it with the X brand. And like you said,
he wanted to have a financial platform there was kind of a one stop shot
that handled everything. This is not too different from his vision for Twitter that
he's in the process of implementing. And because of that though he had all
development frozen on PayPal, he wanted to recreate it, build it on a
different platform. I will go out all the details, but it's a Unix
versus Windows and T debate at the time, like which software do you have
it run on top of? And so the point was that he actually was
focused on this, this big overhaul and the time when the company was burning
ten million dollars a month. This was in two thousand, after the dot
com crash, it was harder and harder for startups to raise money. We
had to get our business plan working, but yet we were losing millions of
dollars every month due to fraud. We had people they weren't hacking PayPal,
they were just walking in through the front door and using it to to trick
people to send them money, or taking stolen credit cards that they got from
the black market uh and then redeeming catching him in and taking money out of
PayPal. So we had we had like a really significant broad loss, it's
like three hundred basis points UH to fraud. And then we also were losing
money on credit card piece because people were using credit cards to fund these payments.
So we had to we had to turn the business model around. Instead,
we were stuck, uh trying to recreate the wheel. And that was
a big part of the debate that led to UH to Elon leaving. And
but again I want to emphasize he played a productive role after he left.
So Peter took over UH and decided to keep the PayPal name, which a
lot of us, myself included thought made sense time because it had some brand
power, some brand cachet already and Uh Elon h Elon state a member of
the board and then amusingly, years later, bought that extra dot com domain
from eBay. This is after eBay acquired PayPal. They own owned PayPal for
about a decade decade and a half before spending them off as a separate company
again. So that domain, that x dot com domain eventually wound found its
way back to Elon and Uh he's uh dusted off as old playboker and he's
seemingly on the road implemented or try to implement his new model. They were
you pittypal when eBay acquired it. I was, I was, and it
was it was a big It was a big shock in a way because they
had talked with us a couple of times about by the company, but it
never worked out. So I think most of us had already written off that
it would happen. But PayPal at that point had gone public. Uh.
PayPal actually the first I po after nine to eleven for dot com. That
was a pretty significant thing. That was back in February of two, and
it was it was trading, but the market was weak or pretty soft in
time, and it was we just we increasingly had a couple of different pressures
on our company. So first of all, we had a high dependence on
eBay. We had about sixty seventy percent of our payment volume was coming from
sellers on their platform. And eBay wasn't that fought of PayPal. They had
an in house tool called bill Point that they had not launched wells Fargo,
and they tried to preference them, but it was just an inferior product.
So people of the market are chosen PayPal, but that's a bit precarious,
even though there's some mutual dependency there. And then second thing, we had
regulators coming after U Slept and Ride Carrie. It was amazing and maybe it's
not that surprising because we've seen some of this play out with crypto in recent
years, just kind of shoot first, asked questions later for a lot of
regulators, and they're not necessarily concerned about the welfare of the people. They're
more concerned about doing their job. PayPal was novel tech, like you mentioned,
people didn't really know what to make of it. So instead of working
with the company to make sure that state guards were taken and people's money was
safe, which it was, a lot of the regulators said we, oh,
we don't know what you are, so we're just going to come after
and get you. And for example, the state of Louisiana, of all
places, said PayPal seasoned desist notice and it was just ridiculous because they didn't
know what our classification was or is it a bank, is it a money
transmission service? Uh? So you know they sent us a cease and desist
letter. Well we we had uh we shared that information with all of our
customers from Louisiana, telling them that that they were about to be cut off
from their valuable PayPal account. But if they thought that was a bad decision,
here's the phone number of the regulator. So the next day and they're
switchboard melted down and they they recanted, they decided to work something out with
us. So that was but that was it. That that one turned out
well for the company. But we had a lot of other pressure on us
as well, so that that's what drove us to be uh to be acquired
and accept the offer from eBay. Yeah. Then even they just could never
figure out what to do with PayPal. Yeah, it's funny. I gave
a little bit of a profile of of sort of what I saw inside eBay
in my book The PayPal Wars. I talked about their culture being really different
that Elon and Peter and Max Levchin had built a culture of of execution,
of working hard and working fast and trying things out, listening to our customers
and building things. Even at quite the opposite, they had a very bureaucratic
culture, which was a surprise for dot com but uh, Elli, yeah,
yeah they were. They were reorguing every year, so people didn't know
like who their next boss was going to be. They want to you know,
you had an incentive it inside to attach yourself to as many projects as
possible to be visible. It made things very bureaucratic, lots of meetings,
lots of live decks instead of doing a you know, a numerical analysis on
a spreadsheet to make your case and a few bullet points. It's kind of
the way we did things at PayPal, you know, hash things out in
a week or two with eBay as always, you know, in less,
in less round of discussions. So I could tell from the culture early on
that it was gonna be pretty different. And as a result, a lot
of the good uh, A lot of folks at PayPal, like myself left
in the ear or two following the merger. And interestingly though, because PayPal
had a better culture, a lot of eBay's people came over to PayPal,
the ones that were a little bit more you know, brighter and more ambitious.
So they had decent talent come in for a while there. But over
time, yeah, PayPal just grew and became bigger than the eBay and they
had to spend the company off again. Yeah, they just never seemed to
do what they were doing. Was it now they could again they go back
to have their own payment system and actually seems to work better. I still
think PayPal is probably better, but you know, interesting, so everything old
is new again, Carrie, I feel like we're in the nineteen seventies.
So yeah, why not go back to the late nineties on eBay? Why
not? And now you look where Musk is, all right, you look
where the others are. Basically they're still working together. You know, does
this all surprise you? No? No, In fact, I think with
hindsight it makes a lot of sense. But even at the time, there
was there was a strong bond for all of us. I call my book
the PayPal Wars for a reason. It was really hard to get this company
started. It was tumultuous, and like any experience, it's a share experience
for people. There's the bonds. You learn to trust each other's judgment.
You can appreciate, you know, going through the ups and downs. We
had a culture that really encouraged people to innovate, take risks, but also
you know, be accountable if you make a mistake, just gowing up to
it and you know, move on. That kind of culture, I think
as well as just the really good people that got recruited. I mean,
you know, think about people like Peter t Elon, Musk and read Open
who started LinkedIn, Max Louchon who started to affirm. All these people,
you know, they've been successful because they are real visionary leaders, and that's
that's evident to people that you know, are looking for a place to work.
So a talent attracts a talent, and so I think that was another
ingredient as to why this PayPal maffia as people like to call it as formed.
So one of the things Isaacson says in his book about Muss, he's
similar to Steve Jobs and his lack of delicacy or diplomacy and dealing with people
they just see, he sees bad cold, he just says that sucks and
do better. But he gets people to do better than they ever believed that
they could. He gets more of them than they ever believed they had to
put out. I think that's a reasonable description. Elon was very, very
demanding, not necessarily in a bad way, because that that is part of
what the company needed, and he wanted the company to move faster and really
overcome some of the hiccups that they came around from, you know, merging
two companies together. So that that kind of you know, it is it
is a little ruthless, I guess you could you could say that, but
I mean the flip side of it is, you know, that's that's who
he is. That's how he's gotten to where he's gotten, and nobody should
have any expectations of the contrary at this point. But you can see it
even early in his career, even back in those pay Pal days, a
lot of those attributes were already there, and you know, for good reason.
I think it's served him well in the years since. Yeah, So
if you want to, if you want to make an omelet, you've got
to break some etings. And he's not afraid to, that's for sure.
All Right. Well, hey, it's been a fascinating discussion here. I
guess we find PayPal PayPal wars wherever find books used to be sold, Yes,
and it's now Amazon. Yeah, Amazon and Barnes and Noble their website
Books the Million. You can go to PayPal wars dot com to learn more
and find links to all the retailers. Excellent, and that link is in
the show notes to this interview on Financial Survival Network dot com. When you're
there, sign up for your free newsletter. Got questioned or Eric or myself?
You're getting a real insider's perspective. A lot of people say they were
on the inside. Ict really was before Elon Musk was Elon Musk. I
mean, I know somebody owns a Hedge fund, well known household word.
We're probably twenty thirty billion now and I always refer to and say I knew
him before he made his first billion. And that's certainly the case for you.
Eric, I'm I'm gonna I'm gonna borrow that, Carrie, thank you.
Yeah, all right, they just give attribution. It's okay to borrow
all leads to attribute it. But no, just kidding, But hey,
you knew Elon before he made his first billion, before he made his first
ten billion, before he made his first one hundred billion, right, so
that's something. And you haven't forgotten them either. That's the one takeaway I
get from people who know Elon from the early days. You don't forget that
Sky, absolutely not. He and also Peter Peter Thal are memorable and have
done a lot for a lot for the country. All Right, On that
note, Hey, questions comments for Eric myself kl at Carrie Let's dot com
and get you an answer. Eric got a pleasure, Thanks so much for
coming on. Thank you, carry thanks for listening to Carrie Letz's Financial Survival
Network. Your solution to day's trying times For the latest, go to Financial
Survivalnetwork dot com. Financial Survival Network now more than ever