What I learned from reading The Founders: The Story of Paypal and the Entrepreneurs Who Shaped Silicon Valley by Jimmy Soni.

And finally, to Venice, to whom this book is dedicated.

The idea for this project started when you were a one-year-old, and it was completed when you were 6.

The intervening 5 years have been among the happiest of my life, in large measure because you made them so.

You, too, indulged my stories about Max Levchin and Elon Musk, and you offered wisdom of your own kind in my moments of doubt about the project.

You are unlikely to remember most of what happened these last 5 years.

Authors of books like this should usually refrain from burdening readers with lessons.

The reader is smart enough to figure those out for themselves.

But there's a special, acknowledgments-only exception to that rule for author dads.

And I'm going to take advantage of it to offer you a message in a bottle for whenever you get around to reading these words.

Your life will be shaped by the things that you create and the people you make them with.

The story of PayPal isn't just people banding together to shape a product.

It's about how banding together shape the people themselves.

The founders and earliest employees of the company pushed and prodded and demanded better of 1 another.

I hope you find people like that too, and that you make things with them.

That sounds simple, but it's awfully hard.

I have a sequence of those people in my life, many of whom have been named in the previous pages.

You know them as Auntie Lauren, and Auntie Grace, and Uncle Justin, and so on.

They are the people who hold me to account.

Our friendship rests on productive discomfort, and we love each other enough to say what needs to be said.

In a funny way, I'm not sure I can play that role for you.

There are lessons I love you too much to teach you, so you'll need to go out and learn them for yourself.

As with all my advice, take it with a very hungry caterpillar-sized grain of salt.

If you crack this book open at all, sat with it this long, and made it this far, maybe it'll be just fine.

That is an excerpt from the book that I'm going to talk to you about today, which is The Founders, the story of PayPal and the entrepreneurs who shaped Silicon Valley, and it was written by Jimmy Sone.

And that dedication to his young daughter comes at the very end of this incredible, incredible book that I'm holding in my hand.

I was able to talk to Jimmy and he sent me an early copy of this book.

He's, if you're a long-time listener of the podcast, you'll recognize his name.

He wrote 1 of the best biographies I've ever read.

And so once this book arrived in the mail, it reorganized my plans for my entire week.

I've spent most of the last several days completely engrossed in the book.

And normally when I sit down to talk to you, I'm excited.

I do not think I'm going to be able to do justice to just how great this book is for entrepreneurs, for founders, for anybody trying to start a company and do something really, anybody trying to do something really difficult

is just jump right into it and we'll see how this goes.

So I'm gonna jump right into the introduction.

The very first word In the book is a quote from Elon Musk, and if you've read Ashley Vance's biography of Elon, you know this is his favorite word.

As he spoke about the internet's development and PayPal's origins, the story spilled out.

About his first internship at a Canadian bank, about building his first startup, then his second.

About what it felt like to be overthrown as CEO.

By the end of the afternoon, nearly 3 hours later, I suggested we pause.

We had only scheduled an hour together and though Musk had been generous with his time, I didn't want to wear out my welcome.

But even as he stood to show me out, he launched into another PayPal story.

47 years old, Musk spoke with the enthusiasm of someone older asked to relive his glory days.

I can't believe it's been 20 years, he said.

Not just the years that had passed, but how much PayPal's alumni had accomplished in them.

And then he goes into some of the influence that this PayPal mafia, the alumni network, has had.

So it says, both in the foreground and behind the scenes, PayPal's alumni have built, funded, or counseled nearly every Silicon Valley company of consequence for the last 2 decades.

For its admirers, PayPal's founders are a force to be emulated.

For its critics, the group represented everything wrong with big tech, putting historically unprecedented power into the hands of a small clutch of techno-utopian libertarians.

Indeed, it is hard to find a lukewarm opinion about PayPal's founders.

They are either heroes or heathens, depending on who offers the judgment.

And yet, despite all that, The PayPal days themselves are usually glossed over.

If the early years come up at all, they are typically granted a polite paragraph crediting PayPal for making the later, splashier achievements possible.

The group's subsequent successes are so legendary, and their controversy so conspicuous, that they steal the oxygen from the origin story.

And then these next 2 sentences I double underlined, I even jotted in the book, nailed it.

To skip PayPal's creation is to neglect the most interesting stuff about its founders.

It is to miss the defining experiences of their early professional lives.

1 that defined so much of what came later.

That's exactly what you and I try to do here if you if you're able to see the books that I highlight 70 80 90 percent of my highlights come in the first half of the book Maybe the first two-thirds of the book before they were rich and famous and successful It is always more interesting to learn about who they were like what versions of themselves Built the foundation that they're now current our future success lays upon I saw a tweet from another Things Antonio he read the book as well.

He's an author and he says something fantastic about he's like obviously highly recommended You can clearly see that.

I think you should buy the book right now.

This is a book that you're gonna reread, I'm gonna wind up doing a podcast on years down the line.

It's not only the personalities you get to

What was Reid Hoffman like when they were at this age?

But it's also just they're so Creative and there's just so many times I've done the book.

I'm like I That is in really really smart what they just did there It's so It was so complicated and complex what they had to achieve, and yet their response and the ideas they came up with, it's remarkable.

But what he said is, the book is full of improvisation and gumption, fear and arrogance.

It perfectly captures the drama of early-ish Silicon Valley and now big players when they were just hustlers trying to figure it out.

And so aside from Elon Musk nobody's already rich when this is happening.

He's like, overnight, my bank account went from having $5, 000 in it to having $21, 000, 005 in it.

But everybody else is living in little apartments.

Now you fast forward, they've built multiple, and they've not only built, but also invested in multiple multi-billion dollar companies.

A lot of these people have multiple billion dollar net worths, but in the book they didn't.

And so that line, these are the now quote unquote big players when they were just trying to figure it out And there's just another fantastic line that gives you an idea of what this book is about several PayPal alumni observed that they had spent the rest of their careers seeking a team of comparable intensity intellect and initiative And then he gives us a little bit about the prehistory to PayPal.

It says, the PayPal we know today resulted from the fusion of 2 companies.

Confinity was founded in 1998 by 2 unknowns, Max Levchin and Peter Thiel.

Fresh off his sale of his first startup, Elon Musk had founded X.com.

He still owns that domain to this day, actually.

So these started, the history of PayPal is they started out as competitors and then they eventually merged.

This is a contest that raised the competitive ire of both teams and ended in an emerger.

For the next several years, the company's survival was an open question.

They were sued, defrauded, copied, mocked from the outset.

From the outset, PayPal was a startup under siege.

Its founders took on multi-billion dollar financial firms, a critical press and skeptical public, hostile regulators, and even foreign fraudsters.

company survived the bursting of the dot-com bubble.

I think I have a line later on, but in case I don't, it really struck to me.

It's like, so you have the, they started the company before the internet bubble burst.

But they said something like 3 quarters, like 75% of their growth happened after, post-crash, which I thought was wild.

In the space of just 4 years, the company survived the bursting of

the dot-com bubble, 3 investigations from state attorney generals, and a copycat built by 1 of its own investors.

Many of its founders and early employees joined the company in their 20s.

Working at PayPal was their first taste of the professional world and that's why you hear them, when you hear them speak now or write, they talk about it,

It's like they purposely hired for inexperience.

They hired for, they prioritize intelligence and enthusiasm.

They were not trying to recruit heavily from banks or other financial institutions because they didn't want people to come in and say, oh this is how we did it there so this is how we should do it here.

That sounds counter, very counterintuitive.

But I would say it's extremely common in the history of entrepreneurship.

And he was talking about, listen, we're inventing a new way to mass produce cars.

If you're doing something new, you cannot go and recruit experts.

He says, let me quote from his autobiography.

And these are words he wrote over 100 years ago.

They are so wise and practical that they always know down to a dot.

That is why I never employ an expert in full bloom.

If I ever, this is a crazy sentence that Henry Ford's about to tell us, if I ever wanted to kill opposition by unfair means, I would endow the opposition with experts.

They would have so much good advice that I could be sure that they would do little work.

And so I'm not sure if the founders of PayPal knew Henry Ford's words.

I do know, because Elon's talked about Henry Ford quite a bit while studying Henry Ford, reading about him.

I just don't know if he did it when he was this age.

So he says, its earliest hires included high school dropouts, ace chess players, and puzzle champions, often chosen because of their eccentricities and peculiarities, not in spite of them.

He says, talent is most likely to be found among nonconformist dissenters and rebels.

That is a great way to describe the early PayPal team.

This is Walter Isaacson writing in Benjamin Franklin's biography about Benjamin Franklin's family and how that influenced him.

And this is what he says the family produced dissenters and nonconformists who are willing to defy authority they were clever craftsmen and inventive blacksmiths with a love of learning avid readers and writers they had deep convictions And then this comes from the the biography of the founder of FedEx Fred Smith and it talks about Fred and then his His his executive team at the very beginning.

It says they were all mavericks non-conformist courageous and Crazy, let

the engineering office area included 2 banners.

It says The World Domination Index was the total count of PayPal's users that day.

The other was a banner bearing the words, Memento Mori, Latin for remember that you will die.

PayPal's oddball team was out to dominate the world or die trying.

And then I really like this observation by Elon here.

So it says, Musk would later correct an interviewer who offered that PayPal was a hard company to create.

The company wasn't hard to create at all, he said.

Rather, it was a hard company to keep alive.

And then Jimmy talks about, The author talks about the fact that he's interviewing a ton of employees, he worked on this book for 5 years, and there's just a line here.

It's funny that I underlined this at the very beginning, I'm still in the introduction, and now I've read the book's 400, the version of the copy I have, I don't know what it will be when it's released, it's 414 pages.

And this is a great way to think about this.

are really important to read and to really absorb.

It's because it talks about the true nature of business and this crazy endeavor that we choose to dedicate our lives to.

And it's not clean cut, it's not cookie cutter.

The people, it is a dangerous environment.

The way entrepreneurs represent themselves on like an interview is not the way they really are.

It's anybody who's like is gonna present their best version of themselves to the public, right?

But it says many remember that the company was as cutthroat as it was creative and it was unforgivingly intense When you read a book about the lives of somebody that accomplished a lot or the early story of uh, Like the early days of a company the extremes are on display And those can both be negative and positive.

This is a positive, like in the aftermath, because these people are being interviewed, you know, many years later, and this is what 1 of the early employees said, I felt like I was part of something grand.

And something that Jimmy does that's really smart, he compares it to other historical collections of talent.

I thought this was an interesting idea, and

I want to compare it to something I learned from this interview I watched a long time ago with Steve Jobs.

So he said, I began to wonder about other, so he's talking about, so First, let me give you some background before I jump into this.

He's talking about when he was doing all the research on the Claude Shannon biography, that you realize that where Claude was working at the time, at Bell Laboratories, you had this insane collection of talent.

And this insane collection of talent is extremely rare.

And so he's like, these are special, like when you have an example like that, you should study them and see what lessons you can learn from that.

So he says, I began to wonder about other bell-like constellations of talent, including tech companies like PayPal, General Magic, and Fairchild Semiconductor.

And so there's this British musician, his last name is Eno, and he winds up, Jimmy discovers that he had studied this previously and he was trying to figure it out from like an artistic perspective and he says as he looked at the into these revolutionaries including people like Picasso and Rembrandt he discovered them to be products of very fertile scenes involving lots and lots of people some of them artists some of them collectors some of them curators thinkers theorists all sorts of people who created a kind of ecology of talents.

So think of the word genius, but put SC on the front.

Senius, he said, is the intelligence of a whole, an operation or a group of people.

It is also a useful way, now Jimmy's talking about his takeaway from that, it's useful when you think about the PayPal story.

Properly understood as a narrative about the lives, intersections and intersections of several hundred individuals set at a moment in time when the consumer internet took shape.

Many of their achievements emerged from the productive friction of the group.

At PayPal, disharmony produced discovery." And so that's going into just how many fights.

And you remember these are friends and in many cases they

went to college together, or they're friends of friends.

That's how they started out hiring, it's just like friends, and then

we'd hire, okay, you got a friend like you?

So I think Peter later on said something, it's like We just started expanding on these concentric circles, if I'm not mistaken, if he said that.

But this idea of we're going to fight and argue and get in positions of discomfort to make sure that we're actually solving this problem or getting to the right answer.

Steve Jobs made this observation a few years before PayPal was even founded.

I have notes on, it's called Steve Jobs, The Lost Interview.

According to this, I took this note back in 2019.

my note, it says this is a metaphor for teams working on a product that they are passionate about.

There was an 80 year old man that lived on my street.

1 day he showed me a dusty old rock tumbler.

We took regular old ugly rocks and some liquid and powder and put them in the tumbler.

We took out these amazingly beautiful polished rocks.

The same common stones that had gone in, through rubbing against each other, creating a little friction, creating a little noise, had come out these beautiful, polished rocks.

It is through a group of incredibly talented people bumping against each other Working together they polish each other they polish the ideas and so that idea now looking back Now what Steve's saying with the benefit of having read this book, that line really sticks out.

It is through a group of incredibly talented people bumping against each other, working together, that they polish each other.

And then there's another great line here why I think this book is worthy of study.

Properly understood, PayPal's story is a four-year odyssey of near failure followed by near failure.

He's going to be, he may be the most, if you consider that his work wound up solving, him and his team wound up solving the huge fraud issue that came very close to killing PayPal.

He might be the most important person in the story.

But in his early life, he's growing up in Soviet Russia,

or the Soviet Union, whatever you want to call it, and they don't have a lot

He discovers computers and he just completely falls in love.

He says, the notion that you could tell a machine to

do things in the future was this profound realization, he said.

From now on, I don't have to know everything to get stuff done.

I can just start writing it down and it will happen on its own later.

He's severely limited on how much time he can stand on a computer.

I think we're on 1986 or somewhere in there.

He has to start programming with pen and paper or pencil and paper rather.

This wind up and he says this wind up being good.

He says, to preserve his precious computer time, he devised a system, writing code with a pencil and paper.

This learning process left exacting standards."

As he's talking about this, obviously I'd rather program on a computer but I don't have that option so I'm going

I'll do whatever it takes and here's his punchline.

I never really had the option to take the easy way out and then Max talks about the importance of his grandmother she was a physicist she's extremely strong woman and he learns from her like it's just not acceptable to give up so she was fortitude personified A woman who triumphed in a male-dominated field.

Her grit seemed to him almost supernatural.

I had this living example of someone who would never surrender under any circumstances." So they wind up having to flee because they're worried that his father's gonna be disappeared by the KGB.

And so they wind up immigrating to the United States and there's 2 things here that a gift can change a young person's life so if we have the ability to play this role in other people's lives we should do so and that you should treat life as a quest which was fantastic.

Immigrating to the United States was risky, but for Levchin, who had just turned 16, it was the first step on an epic quest.

The language and cultures were new, but 1 thing remained, Levchin's love for all things computers.

And in America, he finally got to use 1 at his leisure.

It was a gift from a relative and it did something his old machines didn't.

Leption soon became consumed by the World Wide Web and found networks and forums full of kindred digital spirits.

And then there's some people that remember what Max was like in high school.

And we're gonna see, PayPal was an entire company full of people like this.

He showed early signs of his hallmark intensity.

He wanted to be the best at everything he did.

I just want to pull out something because I always

think it's interesting when Like they're recommending when other people recommend Okay You got to read this book you got to watch this movie had a huge Effect on me and he uses this movie that he's gonna watch over a hundred times as a metaphor for startups And so He

I watched 7 Samurai at least 25 times during the course of 1 summer, and I've now watched it over 100 times.

He calls it his sole source of management training.

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#233 The Founders: The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley