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

1. 0:00 – 0:32

   Intro

   1. JSJimmy Soni0:00

      ... the reason that the PayPal story, at least my version of it, has so much failure in it is because, like, if we pretend that they're not superheroes for a minute, if we bring them back down to earth, if we tell the stories of like accidentally hot swapping hard drives and almost losing the company's entire source code, right? It makes it okay for many other people to, to do the kinds of work that they do.

2. 0:32 – 5:44

   Bell Labs vs PayPal

   1. JSJimmy Soni0:32

   2. DPDwarkesh Patel0:32

      (intro music plays) Okay. I'm super excited about this one. Today I'm interviewing Jimmy Soni. He's the author of Rome's Last Citizen: A Biography of Cato; uh, A Mind at Play: A Biography of Claude Shannon; and most recently, he's the author of The Founders: The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley. So Jimmy, let's just jump into it. So, you know, your previous book was about Claude Shannon, and he comes up with information theory while he's working at Bell Labs. This is a place that's, you know, famously, um, uh, f- famously comfortable. You know, they have a monopoly from the government. Uh, and then it- so th- the scientists there have time. They have freedom. They're not pressured by competition, and on the other hand, you have- and then obviously, as you talk about six Noble Prizes: transistor, laser, Unix/C. Um, on the other hand, you have PayPal. They're constantly on the verge of going under, incredible pressure, uh, you know, long hours, and this is also a praise- a place that produces, uh, tremendous amounts of innovation. How do these different places, uh, promote innovation?

   3. JSJimmy Soni1:37

      Yeah. It's a great, it's a great question, and it's- it is interesting to think about just how different they are. Um, y- you know, it's a, it's a great question, and actually it's like a- it's a very big question, because in some ways, like, the, the right person to answer the Bell Labs question is probably Jon Gertner who did sort of the quintessential book on Bell Labs. It's called The Idea Factory. Um, I was looking at one person in that kind of stew, right, in that, in that era, and that was Shannon. Um, here's what I would say about Shannon's innovations. So, Shannon worked on information theory not because he was working at Bell Labs. He actually was working at Bell Labs and was kind of tooling with information theory as a side hustle, right? Uh, like he didn't call it a side hustle because we didn't have that lingo, but we have it now. So it's a side hustle for him, so he started doing it on the side, which is to say it's quite possible that no matter where he worked, he would have been working on information theory in the off hours. The advantage of working at Bell Labs is, is one, he's around communication networks all the time. Two, he's doing cryptography and cryptographic analysis where he's thinking a lot about that. And then three, he sort of is around smart and intelligent people, and like the la- maybe the, the fourth thing is he has the Bell Systems Technical Journal where he can publish his findings originally, and they're, you know, they've sort of like this- they're a private sector organization that has a technical journal that gets distributed pretty widely throughout academia. So that's- but I suspect that if he were working, I don't know, wherever, he, he would've actually been working on information theory on the side anyway because this was stuff he was just interested in broadly. Um, that level of, of self... Like so, so think about what that means. He's a self-starter who's willing to do academic research just on the side and write papers about it just for kind of the sheer thrill of discovery. The number of people that that's true of I think in society is very, very small. Meaning he didn't think he was gonna I- you can't IPO an academic paper, right? He's not gonna get rich, right? He's not, he's kind of not seeking fame because even when he becomes famous, he actually decides he's not gonna go on like the lecture circuit or go on late night TV or anything like that, right? So that, the population of people who are like that, is very, very small, right? For a variety of reasons. We don't have to get into them. It's just sort of self-evident that that number, the number of people who would want to do that is small. PayPal is a different story. Profit motive is a big part of what makes places like that successful. The internet boom is going on. There's an entire generation of people who have built web companies, right, starting with like Netscape who are IPO-ing and all of a sudden they're on the covers of magazines, and they have huge amounts of wealth. So it would be, it would be dishonest to say that that's not part of the motivation there. There, there's that combined with this pressure of they close a very... PayPal closes a very big round of fundraising in March of 2000 just as the dot-com bubble starts to burst, and so there is a kind of panic about surviving and about having to innovate your way to survival. And, and so I think that, you know, I'm not saying that like there aren't other Claude Shannons out there. I just think that they're smaller in number than, than maybe a constellation of people who are brought together by forces and are forced to survive and are forced to build a startup and then like can learn innovation that way. And I would, the other thing I would say is I think the innovations are very different, right? So PayPal's innovations are, I, I would, I would argue, are a sequence of s- of kind of micro developments and creations strung kind of end to end over the period of four years that helps to build the company, and there's a lot of like ... we can get into that obviously. And, and Shannon is writing, you know, a, a technical paper in 1948 and it's, it's, it sets, it sets certain principles and establishes the field of information theory. So I'm not sure it's like an apples to apples comparison, but I do like the idea of like thinking character logically and saying, "Okay, there are probably some Shannons in the world, but they are probably far outnumbered by the number of people who would want to create a startup and, and have..." By the way, I don't think there's anything wrong with that, like more self-interested reasons, right, as opposed to public spirited reasons or academic reasons.

   4. DPDwarkesh Patel5:43

      Yeah,

3. 5:44 – 7:34

   Scenius in Ancient Rome and America's Founding

   1. DPDwarkesh Patel5:44

      interesting. Um, so, um, you know, my interpretation of all your books is in all of them you're really writing about, uh, you know, scenius, just a group of people who can get together-

   2. JSJimmy Soni5:52

      Hmm.

   3. DPDwarkesh Patel5:53

      ... and boost each other's, um, uh, productivity. Now, uh, you know, I, that's obvious with Bell Labs when Claude Shannon, obvious with, uh, the founders and the PayPal mafia. Um, and I, you know, I, I, I think it's even true of, uh, you know, your book on Cato, right? So it's like-

   4. JSJimmy Soni6:06

      Hmm.

   5. DPDwarkesh Patel6:06

      ... 2,000 years later c- can you imagine another era where we know all the prominent politicians are like household names, you know, Pompey, Crassus, Cato, Cicero, uh, uh, you know, Caesar? Uh, so, you know, like, th- this book is about political scenius. Um-

   6. JSJimmy Soni6:18

      Yeah.

   7. DPDwarkesh Patel6:19

      ... uh, you know, I, I, yeah, just like I, I can't imagine, like, 2,000 years we'll know who Nancy Pelosi or, you know-

   8. JSJimmy Soni6:24

      (laughs)

   9. DPDwarkesh Patel6:24

      ... Mitch McConnell or Donald Trump were, or maybe we, we, maybe we might know who Donald Trump is in 2,000 years. But, uh... (laughs)

   10. JSJimmy Soni6:30

       Well, you know, the another era-

   11. DPDwarkesh Patel6:30

       But so-

   12. JSJimmy Soni6:31

       ... would be the late, the last 1700s in the United States, right? Jefferson, Hami-

   13. DPDwarkesh Patel6:34

       Oh, yeah.

   14. JSJimmy Soni6:35

       ... when we make... There are, there are award-winning musicals being made about people who wore powdered wigs and tri-cornered hats, right? Uh, and so if, if Lin-Manuel Miranda can make Hamilton a thing in 2822, um, it... And, and frankly, like, that era is just one of the most studied and, and discussed. It does strike me that that's this, that's another scenius. There's a great book on that actually called Founding Brothers, uh, that was one of my like-

   15. DPDwarkesh Patel6:59

       Hmm.

   16. JSJimmy Soni6:59

       ... kinda texts that made me think a lot about the founders because it, it does describe, like, the relationships, like for example, like the relationships between Thomas Jefferson and John Adams is super interesting, right? They're like competitive, and then they're friendly, and then they're not, and there's all kinds of drama there. Um, the, the relationships, uh, just across the founding generation I would think is another scenius. But it's interesting, I never picked, I never... I didn't pick up on that common thread until you just pointed it out, which is like always fu- it's al- this is why I like doing these 'cause I'm always like learning new things. I didn't... I realized like, "Oh wait, there's a scenius in all three of my books."

   17. DPDwarkesh Patel7:32

       Yeah, yeah, yeah. Cool, cool. Um,

4. 7:34 – 15:49

   Girard at PayPal

   1. DPDwarkesh Patel7:34

      now, uh, you know, you know, I'm curious how, uh, Peter Thiel's ideas about Girard, what are, were influenced by his time at PayPal. So, you know, there's the obvious, uh, uh, you know, memetic competition between X.com and Confinity, which was, you know, what PayPal was originally. Um, and then X.com was, you know, Muck's company before they merged. So, um, I mean the, the, other than, like, what were the o- other Girardian elements to this story?

   2. JSJimmy Soni7:57

      Yeah. Uh, you know, th- it's a great question. It's a part... It's sort of threaded throughout the book, like in subtle ways. And, and what's really interesting is that in rereading it myself or in like revising and editing it, there were a number of like Girardian moments that came up, right? Or like little moments of, of mimesis and anti-mimesis. Um, I have had long conversations with a friend, Luke Burgis, who wrote a book called Wanting, and we've, we've sort of talked about this a lot, right? And like where are these moments true and not true? And one of the things that I always tell, I always tell Luke is I'm like, "I think that the actual experience of doing PayPal was not an experience of someone like Peter, as well-versed as he is, stepping back and being able to s- like sort of ask the, like, 'What would Girard do?' Like WWGD, right?" Like, I don't think that it works that way. And the reason is, I mean, A, he never told me that it worked that way, and I interviewed him at great length about the PayPal story. But the other thing is, like, companies, particularly PayPal, when they're built in this crucible, it's really hard for theory to match up with reality or like, or for your ideas about principles to match up with like the exigencies of the moment or like the thing you need to do. And so I... here's one, here's one example I would offer as a case study in what I just said, but also in Girard. Post 9/11, um, the company is in a really difficult position. They had been preparing to go public and had kinda run into some hiccups with the bankers that were gonna help underwrite their public offering. Then 9/11 happens, and the financial district, you know, is, is in ruins and they have to... And the, the economy's in sh- shock. The stock market's shut down for, you know, however many days. Um, and the c- and the company leadership needs to think about like, "What do we do now?" Like, "How do you go public in a post-9/11 world? What does it even, what does it even mean to file to go public?" And Peter i- i- there's a great line that he played back to me, again, this is with 20 years of hindsight. He says, "Maybe because no one else is going public, paradoxically that's actually exactly the time that you should go public," right? Because you g- you're kind of like running against the herd, right? So like is, is, is there some faint echo or even maybe not a faint echo of Girard in there? Absolutely there is, right? So one has to believe that at some point in part of his mind, one of the things about studying memetic desire is the recognition that like memetic desire, if you oppose it, can actually lead to very valuable decisions, right? Everyone zigs, you decide to zag, and like wow, that's a really smart, smart thing. But here's what he added to his explanation of why they decided to go public after September 11th and what it meant. Number two reason is going public is a long process. You have to file so many different rounds of paperwork to the SEC. You have to get so much buttoned up. You have to do a road show. You have to make sure that all these things that in a startup you can kinda like create a patchwork wi- quilt of answers, that's not allowed once you are like a regulated public company taking like public investor dollars, right? So he said that it takes a... Because it takes a long time, one of my theses was like if we apply even if it's after September 11th and even if we take some flak for doing that, it's gonna be six months to a year before we actually get to go public. So given that it's a long road, we should prepare now. So that's sort of reason two. Reason three, and this is where it runs counter to the Girardian... You know, one of Girard's big things is, is like, i- like how emotion can kind of... An, and emotion can kind of screw up our decisions, right? Like it sort of like obscures like clarity of thought.... and one of the things that he says is, he's like, "You know..." and he had said to me, he's like, "If I'm being honest, like, another reason that I w- insisted that we try to go public after 9/11 is I wanted to beat Wall Street." Like, Wall Street had written off the company. It had been so dismissive of the company, and like didn't understand the model because fintech wasn't an established space. And so, he, he said, he even said to me, he's like, "If I'm being honest, the competitive thing was a part of it," right? But competition is, is sort of not in keeping with Girard, meaning he recognizes that it can happen but the whole point of studying this is to avoid it. E- it's a welter of motives, and, and I don't think that there's anyone that could look at the story and say, "Well, every decision was, like, sort of perfectly conformed to Girardian expectation and, and insight," but I, I think of that... I don't think of that as a deficit, by the way. I think of that as a good thing, and the way that I fact checked each of those, those things as well is I spoke to other people, particularly on the competition with the investment banks thing. Like, the number of times I heard, like, a negative word about, like, big banks, uh, I mean it was, it was, you know, a dozen times if it was one. And I had people say to me, "You know, the biggest issue that we had there was, because fintech was not an established, like, sector of the economy, we didn't have a way to get these banks to understand what we were, who we were, what the business would be, what its potential was," right? And so, like, language like network effects is kind of common for us in, in 2022, but it was not common back then for business models, um, and so y- you just have this whole industry that needs to be educated, and PayPal ran into some real difficulty educating them, which is why they were competitive. Like the way Peter described it in the book is he said, "It's like a Silicon Valley versus Wall Street thing, the dynamic that was at play there." That's a very long answer to your question. I found moments of that Girardian intuition, and, and I'll, uh, if, if you permit me I can s- share the second big bucket where I found it. 9/11's a discrete example, it's really specific. The other big bucket... and again, I'm, like, way oversimplifying Girard, right? Like he's actually, like, a, a huge thinker and I could've... I mean I... Luc did write an entire book about him, right? And like his thought process. But one of the things that it, it always leads me to think about is if, if the entire world says X and you can even think Y, right? Like, or you can think about the opposite of X, like what if the opposite is true? You can, you can find real power in those moments, right? By being a contrarian, right? That's a g- it's like not a great word 'cause it's so overused but, uh, one of the m- the things that I found most powerfully about Peter in the PayPal story is that he did that with people. So the board would say, "Roelof Botha can't be your CFO. I mean he's like 26 years old. He's like fresh out of business school. He's gonna get eaten..." and one person said, literally the quote is, "He's gonna get eaten alive by Wall Street." Like, how could you do that? It's gonna make us... he's not gonna survive." Peter listens to his board and says, "No," and says, "Roelof is brilliant. He knows the business cold. He's built the model that's determining a bunch of the actions that we're taking as a business, and I believe that he will make an exceptional CFO." And he is ultimately right. Reid Hoffman, a friend of Peter's from, from their Stanford days. Peter says to the board, "I'm gonna appoint him as COO," in January of 2000, very early in the business's life cycle. The board, the two board members are like, "Wait, (laughs) you're, you're COO, your COO is supposed to be like a taskmaster and like really keep people on point and like be really aggressive and, you know, Reid's like friendly and he's..." uh, that's one board member, he's friendly, he's a community guy, that kind of thing. And Peter says, "No, like, one of the things that we lack as a business right now is the ability to have somebody who's gonna be a diplomat, but like a flexible diplomat who can interface with all these external bodies." And he said, "We need that." And, uh, you know, sort of like titles being what they are, like I'm gonna, he's gonna be the person for that job. And he's proven right. I heard from the employees who were in those situations about Peter's willingness to run into the teeth of what might be regarded as like best hiring practices or standard opinions, and I do think that there is more than a faint echo of Girard in some of those moments. Um, I also think it's hugely instructive. Like, it really does make you think about hiring and who we count in and who we count out. I think he had a ability to see potential in people and put them into places where they otherwise, like other

5. 15:49 – 20:21

   Thiel almost shorts the Dot com bubble

   1. JSJimmy Soni15:49

      people may not, may have missed that.

   2. DPDwarkesh Patel15:52

      Yeah, yeah. Uh, th- there, th- there's... uh, that's so interesting, 'cause there's definitely, uh, as you said, so many meta elements to the timing that Peter Thiel was able to execute, right? Like you talk about in the book how, um, he saw the dot-com, uh, bust coming and so he was able to use the inflated, um, inflated valuations to raise the Series C. I think you said a week before the bust happened, uh, they closed their Series C and, um, and then conversely b- once, once the bust happened they were able to like hire all this great talent because like nobody in Silicon Valley... or you know, people weren't hiring as much as, in uh, in Silicon Valley. I, I, I think my favorite anecdote or one of my favorite anecdotes from the book is how, uh, Thiel, like after they raise, uh, raise a hundred million dollars he's like, "All right guys, the market's gonna bust so why don't we transfer all... this hundred million dollars into my hedge fund and I'll short the market?" And then uh-

   3. JSJimmy Soni16:38

      (laughs)

   4. DPDwarkesh Patel16:38

      ... and then the guy from Sequoia on the board is like, "What the fuck are you talking about?"

   5. JSJimmy Soni16:42

      Yeah, it's, it's a funny moment and, and I, I mean you can't tell it without laughing and I sort of laugh even when I think about it. It... when it was explained to me... so there's sort of like two renditions of that story, right? One rendition is like the sinister, like whatever- no, it wasn't that. It was, it was an enthusiastic and far-sighted board member who saw a market collapse coming and saw financial opportunity and the financial opportunity is you take the funding we just raised, use it to short the market and we'll all get filthy rich! You know? And, and like that'll be, it'll be... it's, it's a sure thing! And understandably the board pushes back and says, "Well we can't let you do that, because the funding we raised like has contracts and has amendments that say that it's for these specific purposes." Um, so they, they poured cold water on the idea. Now the interesting thing is that the board members I spoke to about it, one had this to say. He said, "You know, it's actually like I o-" he's like, "I often tell this story because I want people to appreciate...... that part of doing a startup in the way that this team did is, like, being somewhat disconnected from reality. Like, you almost have to be disconnected from reality and offer ideas that are maybe f- a little outlandish in order to, like, push the limit of what is possible, right? So, that was, like, one. And then (laughs) the other, the other recollection was from, was from John Malloy, who was a board member, who said, "You know, like, Peter was right." (laughs) Like, like, like the, the actual, like, logic may have been what it wa- th- the, the mechanics may have been what they were, but actually the NASDAQ lost, like, 78% of its value over the next, like, whatever, 12 months, and we would have made a lot of money if we had done that, and it was actually correct. Um, and so there's this... Now, they tell it, obviously, like, with the benefit of 20 years of hindsight, and they tell it in a humorous way. Um, I think other writers have, have, have done characterizations that are more sinister. I didn't find that element in it. And when I asked Peter about it, he, he basically... You know, it was, like, the last question in one of my interviews with him and I asked him, I said, "Well, what'd you think about this?" And he said, he was like, "Uh, you suggest things when you're young." Like, like basically it was sort of like, you suggest things. Like, you know, it was like an idea and it didn't go anywhere and, you know, whatever. Um, I find it to be a really interesting moment and, and it's characteristic of that group of people in a particular way, which is like the willingness to engage with even the idea that you would take $100 million and short the market. I mean, like, uh, I, I think a certain tolerance for that is, like, required to do something like PayPal.

   6. DPDwarkesh Patel19:09

      Yeah. If I was on the board, I'd be like, "No, no, the markets are efficient. Uh, you totally can't do that." (laughs) But, um, yeah, he was, they, uh, I think you said they would've made more money by shorting the market than they did from the eBay acquisition. Um, uh, s- uh, but yeah. I guess they did have super leverage, but yeah.

   7. JSJimmy Soni19:22

      I think, I think the math, I think the math is imprecise. I mean, I think the math is imprecise because that was a quote from John Malloy. I don't think he was being-

   8. DPDwarkesh Patel19:29

      Oh, I see. Okay.

   9. JSJimmy Soni19:29

      ... I think he was being kind of directionally accurate, but not, hadn't, like, run an Excel spreadsheet on it or anything.

   10. DPDwarkesh Patel19:34

       I see. Right, right. (laughs)

   11. JSJimmy Soni19:34

       One suspects that, uh, you know, given what, given, like, what PayPal's burn rate was from 1999 to 2002, if someone were to do the math, like, that might be true, um, because they spent... I mean, they spent I think in excess of $200 million in the first four years of the business, right? Just by raising a lot of money. So, it could be true, but I didn't get into the level of the math. For me, it was much more about th- this, this idea that as a board member, you know, who is very thoughtful, you would still bring to the table an idea that can seem crazy, is, is actually, like, a hallmark of, of what kind of, of Silicon Valley and of, of this sort of startup environment. Um, it's, it's, it's encouraging. I think it's encouraging to those of us who, who, who have those

6. 20:21 – 28:29

   Does Zero to One contradict PayPal's story?

   1. JSJimmy Soni20:21

      sorts of thoughts.

   2. DPDwarkesh Patel20:23

      Yeah, definitely. Okay, so, um, I reread my Zero to One after reading your book.

   3. JSJimmy Soni20:27

      (laughs)

   4. DPDwarkesh Patel20:27

      And I, uh, f- uh, su- I think s- at least, um, uh, you're not gonna be being, uh, superficial about this, but I think it seems like there's at least three ways in which, um, you know, the, the lessons in Zero to One contradict the history of PayPal, right? So first, there's like, he's like, "Okay, d- don't compete. Like, you know, g- g- just do something totally original." And it's like, well, you know, payments, e-payments, that's like, you're competing against X.com, BillPoint, uh, Visa, MasterCard. He, um, he says, uh, y- he says, um... Oh yeah, y- one of the most important things he said in the book is that you should always have a plan, you should always have a vision. This, uh, this whole thing about startups iterating and, you know, slowly pivoting to find their niche, that's totally overrated. It's like, d- your original business of, uh, business idea of encrypting pile pilot, p- pilots didn't go anywhere. Your is- original business model of making money off the float didn't go anywhere. Like, you were totally pivoting, and to your credit, right? Um, and then the third thing is, you know, he talks about how these, uh, these startups are emphasizing, uh, growth statistics that, uh, that they're basically getting by burning VC money over the durability of, uh, the company. So they'll, you know, they'll just, like, look at a number. And it's like, well, didn't you guys have the World Domination Index that you were constantly looking at?

   5. JSJimmy Soni21:30

      (laughs)

   6. DPDwarkesh Patel21:30

      Um, so I, I could be totally missing, like, the deeper layer in which these lessons actually did apply to PayPal. And you could also say that, well, actually th- because of these, uh, because, uh, he learned this from PayPal, he changed his mind. But, uh, i- so, uh, what, what is your reaction to these?

   7. JSJimmy Soni21:44

      Yeah. It, it's interesting. You know, people have said that the books are, are pretty good companion books because a bunch of the stories from mine obviously, like, sort of illustrate some of the principles from Zero to One. And I would push back on a couple of the observations. So, with the competition one in particular, so like, let's go in order. The competition one in particular is important because I actually think of the competitive dynamic as an illustration of what Peter was saying and as a, as the kind of lesson that led him to write that. Now, there's a gap between the PayPal story and Zero to One. So, Zero to One isn't just based on PayPal. Zero to One is based on his experience as an investor broadly defined and teaching courses about startups at Stanford. So, but let's take a step back on the competition one. PayPal starts as the union of two companies. It's X.com, which is Elon Musk's company, and Confinity, which is Peter Thiel and Max Levchin, Luke Nosek, Yu Pang and Russ Simmons, their company. What's interesting is that the two companies find themselves in competition. One of... A- and this is in late 1999 and early 2000 and they are burning through money using bonuses as a way of referring users to try to goose user growth, and they're in an arms race with each other to give away money. There's like a, there's a great line in the book that's like, Elon basically says, "We were going mental trying to kill each other." Right? Um, and (laughs) and his other great line is like, "It was sort of a race to see who could run out of money the fastest," right? Um, here's the interesting thing. Peter is one of the loudest voices and earliest voices in identifying that that is a, that's a competition to the death, and that actually it's really bad. Like, it's not good for us to be spending, trying to outspend each other into oblivion. He encourages and indeed pushes his board member, John Malloy, to consider the possibility of a merger. John Malloy is actually not all that hot on the idea of a merger, uh, between X.com and Confinity. But Peter says, "No, you don't... Like, this competition is ruinous. It's, like, terrible to be competing at this level. We should try to merge." And Peter is one of the most vocal people against the competition between X.com and Confinity. And so that's, like, one place where, like, I actually think of, of the PayPal story as a very clear illustration of his view of competition. Now-... he's not the only one developing PayPal, right? There's a bunch of voices in the room, a bunch of people who think they could win, maybe we could win. They have their reasons for being for or against the merger. But on the competition piece, it's a, it's a clear kind of example of this. Um, your, what w- what was your second, your second little divergence?

   8. DPDwarkesh Patel24:12

      Um, let's see. Uh, oh, it was, um, you know, iteration. It, it, like-

   9. JSJimmy Soni24:16

      Yeah.

   10. DPDwarkesh Patel24:17

       ... i- i- the, the i- the iteration versus having a strong, uh, initial vision.

   11. JSJimmy Soni24:20

       Yeah. So I, I would say that, um, on this one, once PayPal establishes itself as a payment system, as a master merchant between eBay buyers and eBay sellers, and meaning, uh, and, uh, just people who wanna transact, where they're able to underwrite these small dollar transactions, once that fundamental business model is established, you know, it, it, Peter's actually pretty committed to that vision going forward, right? So you sort of, you have... and I think it'd be fair to say you have a period where they are figuring themselves out, right? Like, figuring out what they're gonna be when they grow up. That period of, of, call it, like, very late 1998 through to 1999, once that cement dries to some degree and they're like, "Well..." and particularly Confinity, particularly Confinity is like, "We're gonna be an email payment system that is a credit card master merchant." And then use that and get, and get the economics of the business right. Once that happens, like, they actually have a pretty clear roadmap for how things are gonna go. And the way I know that is that I was seeing decks. So s- it was really neat to go back and look at the pitch decks as they evolved, right? The pitch deck, as of late 1999 and 2000 is, is pretty well, like, locked. Like, it's not like they're using a payment system to pivot to something else. Like, there's actually consistency for, call it three quarters of the early years of the business. And I, I mean, like, look, I wish I could get, get things that right and be that prescient all the time, right? Um, the last piece on, on burn rate and like startups using call it like exaggerated or inflated growth metrics to, to like kind of burn VC cash. Um, i- there's a little bit of truth to that. I think that like actually the criticism in Zero to One runs counter to the PayPal experience because PayPal did have to burn through a lot of, uh, money. The, the, the difference in PayPal's case, and the reason I don't think it's inconsistent is there's burn rate that you could forecast based on bonus payments, right? So you sign up for PayPal, you get 10 bucks. Like, I can reasonably guess like at growth rates, like in terms of what I'm gonna spend on that. What PayPal didn't anticipate and couldn't have anticipated knowing is the degree to which fraud would be the biggest, like, cost center for them. And so the, the reason I mention that is because had they known that, uh, you know, and they A, they probably wouldn't have gone into the business. I had multiple people who were at the founding say like, "If we had known how bad fraud was, it's quite possible we wouldn't have done this to begin with." Um, and, and, but it makes me think that like actually, like the plan, the plan in some ways was never to just like get a bunch of easy money and light it on fire and then use those numbers to sell a bigger, a bigger vision. Very quickly, like they encounter something that's lighting their funds on fire that they didn't anticipate, and they have to solve that problem, which becomes one of the company's signature achievements. So I- I'm not sure I would quite argue that it was just like, let's do the VC cash grab, light it all on fire, and then go out and sell. The, the other reason that it's not quite that way is because in 2000, in late 2000 and in 2001, when the company institutes fees and builds a business around this viral product, they are actually very thoughtfully like kinda creating a real enterprise, meaning like originally the idea was like, we're gonna make money on the float, so we're just gonna have a bunch of money and we'll, we'll get a few basis points on that because of interest, right? But in the year 2000, they start to build a fee structure for their users in a very careful way that would run against the criticism of like, well, you're just like ge- getting a bunch of user growth and then that's it, right? No, the, the, the second half of that for PayPal was we're gonna build a, an incremental plan to essentially take a free, to build a freemium model for our users so that we can bring revenue in. And then at some point when they had run these elaborate spreadsheets, there was a point at which they hit profitability. So it was not quite as helter-skelter. I had to describe the part of it that was, which was like 1999 where they're figuring all of this stuff out.

7. 28:29 – 29:38

   Hilarious Russian hacker story

   1. JSJimmy Soni28:29

   2. DPDwarkesh Patel28:29

      Yeah, yeah. The fraud piece is so interesting. I mean, the, the, the, there's... My favorite anecdote from the book, and this is like so good that I almost don't believe it.

   3. JSJimmy Soni28:36

      (laughs)

   4. DPDwarkesh Patel28:36

      Or I mean, I do believe it, but it's like, if I saw it in a TV show or that, that was like about a startup, like it was in like, uh, Silicon Valley, the TV show, I would be like, "Oh, come on. That's, that's, you're pushing it." It was, um, the, the Russian hackers who were committing fraud against, uh, against PayPal. One of them emails, uh, the, Max Levchin, the CTO, and this guy have like an email exchange. And, you know, I can't do a Russian accent, but the guy is like, "You know, I'm from a r- uh, I'm from a poor Russian family, but, uh, we can't feed my family. And you know, I need to do this in order to feed my family. You, you're the fat American who doesn't understand the fa-" And so, and, and then, you know, they, uh, they implement CAPTCHA and the, the guy like responds, "Fuck you." Like (crosstalk) hacker.

   5. JSJimmy Soni29:12

      (laughs)

   6. DPDwarkesh Patel29:12

      (laughs)

   7. JSJimmy Soni29:12

      It was an epic cat and mouse game, and it was one of the things that I found most like interesting about it is you never picture a CTO of a company communicating with the people who are trying to defraud his company. Right? It's, it's almost, it's almost, it's not, it's a stretch, but not much of one to be like, your fraudsters are like sort of a part of your product team. Like weirdly (laughs) they're like unpaid members of your product team.

   8. DPDwarkesh Patel29:35

      Yeah. (laughs) Um,

8. 29:38 – 35:22

   Why is Thiel so good at spotting talent?

   1. DPDwarkesh Patel29:38

      okay. So why was Peter Thiel so good at spotting talent?

   2. JSJimmy Soni29:44

      Yeah.

   3. DPDwarkesh Patel29:44

      And h- he has consistently been that way with a, with his V- VC, uh, VC investments.

   4. JSJimmy Soni29:49

      Yeah. It's a great question. And if, if there's one thing I, i- that's in the book that emerges...... but I don't have like a general theory of, right? Like a grand unifying theory of. It's this talent spotting. Um, I think it's, I, if I had to, if, uh, let me, let me take a step back and sort of like talk through some of the stories from the book. Um, one, one thing that I think he's very good at is not holding like kinda a lack of social graces against people. Uh, so I will, I'll sort of share a story, right? I, there's this moment that I interviewed Reid Hoffman about. Reid is on, uh Reid is, is considering joining the board of Confinity, the company co-founded by Peter and Max. And Peter says, "You know, my co-founder is Max but you've never met him. You guys should probably go have breakfast. You can't join the board without Max agreeing to it." And they meet at Hobee's and Reid and Max are sitting down and the way that (laughs) Reid Hoffman described this to me, endearingly 'cause he likes Max a lot, he said, "For 45 minutes all I could think was like, look the fuck up," because he was looking (laughs) down at the ground while explaining what Confinity's products were and what the company was going to be. There was a time, he today, Max Levchin is as comfortable on a TechCrunch stage as he is, like, you know, with his, with ever- with his companies. Um, but there was a time when that wasn't true and when the best thing that he wanted, the thing he wanted most to do in the world was to write code and to build engineering products and to build, uh sorry, to build technological products and to be an engineer. It takes a certain level of, of the ability to kind of s- sort of, let's say suspend disbelief about somebody or to like, like take a chance on somebody to say, "You know, like, uh this CTO may not be able to look me in the eye when he talks to me but he's brilliant and I want to support him with my money and then become CEO of his company." And so, that willingness to like, look the other way on certain social graces is actually like a skill, right? So think about how many, like, how many McKinsey interview, how many McKinsey interviewees would be turned down if they weren't able to look their interviewers in the eye, but they might actually be the smartest people who are interviewing. Right now they might not be the best person for that particular job, but how many times do we write people off because of the way they look, the way they talk, the way they sound, the color of their hair, the color of their clothes? Some random quirk of personality or, or something in their brain? Like, we write people off. He, more than anyone in the story I think, was, was actually e- like, incr- like sort of was drawn to that, right? Was drawn to this kind of person that might be a misfit or at the margins and was like, "No, you have real talent. You're going to be brought into this, into this fold." Um, there were, a, a great example of this, there are high school dropouts on the roster at Confinity. And this is before dropping out became cool, right? Like let's, let's also establish, like this is before the Thiel Fellowship, it is before Mark Zuckerberg, the legend, all that stuff. Like, it's before all of these cultural cues that like high school and college may not be the best fit for everyone. There were two people I interviewed who were high school dropouts (laughs) and, and one of them is literally, is, his literal reason was like, "I just thought high school was stupid and I was gonna like make more money writing code and doing computer stuff." And he leaves, and he goes and does his thing. So I think there's a roster of people like that that might not find effectiveness in other parts of American life or American economic life, but where he sees real potential. That's one thing. The second thing is, you know, he is ridiculously smart himself. Like he is a, a kind of grand master chess player, very widely read, like very well-educated. He has a high bar for people who he wants to hang out with, right? So if you sort of, like are gonna even be in the group that's around him, you have to have a certain level of intelligence. Like it's just sort of, that's like table stakes. It's sort of obvious to say it but it's actually really important. But talent and intelligence, there's like, there's a degree of overlap there, right? Like, there's that spot on the Venn diagram, there's- there's certainly some overlap. The, the last thing I would say is, um, you know, he, he had this ability that was played back to me by other people to forecast what someone could be, right? So to sort of like, like to actually like kind of like what you might call a crystal ball their lives, right? Sort of like looking into a crystal ball and seeing what they could be, and then kinda like outlining that for someone. There's a really good i- podcast that Max Levchin does where he describes this. This came way after PayPal. And he said that one of Peter's talents is this ability to like see what your future could be and then play it back to you, and then help you get there, right? And he said he- he's done this over, and Max says he's done this over and over and over again. I saw that play out very powerfully because I would interview with people who felt like they weren't good enough to be at PayPal or maybe they weren't, didn't have the chops or whatever, and they would say, "You know, Peter would sort of like outline the vision of what I could do and I totally bought it." (laughs) I was like, "I'm in. I can do that," right? And he gave people a lot of rope. All of that I think is like, like I- I think you're gonna have a hard time and maybe Tyler Cowen's book on talent does this 'cause there's a whole section in there about Peter, but I, I think of those features that I just described like as actually very powerful things that are not specific to Peter Thiel. Like all of us could do more of that, right? Uh, we could become more intelligent, we could embrace misfits more, and we could help the people who are around us like outline the biggest and best versions of their lives, right? Um, so I don't, I don't think it's just like this specific Peter Thiel thing. I think these are actually things that like all of us could probably do more of.

   5. DPDwarkesh Patel35:21

      Yeah, interesting.

9. 35:22 – 41:12

   Did PayPal make talent or discover it?

   1. DPDwarkesh Patel35:22

      Um, and speaking of talent, did PayPal discover talent or did it make it? So I mean obviously the PayPal mafia, they go on to, um, you know, uh, uh l- found LinkedIn, YouTube, Yelp, um, uh, Tesla, SpaceX, maybe now Twitter. Uh ...

   2. JSJimmy Soni35:37

      (laughs)

   3. DPDwarkesh Patel35:37

      (laughs) And uh, so, uh, well I mean, wh- wh- so is it just that Max and, um, Peter were able to identify this gr- these, uh, th- these people who were gonna end up doing great things? Or what is, did the experience at PayPal make these the kind of people who could actually, uh, you know, basically form a- a- half of Silicon Valley?

   4. JSJimmy Soni35:58

      ... it's, it's the great sort of nature-nurture question, right? Like-

   5. DPDwarkesh Patel36:01

      Mm-hmm.

   6. JSJimmy Soni36:02

      ... was it, was it, were they, were they going to be the dream team or did, you know, did they become the dream team, right? Like was it, was it Michael Jordan or Phil Jackson, right? Like was it the triangle offense or not? Um, and I think the only honest answer is both. It is the case that the talent that was drawn to work at PayPal, w- uh, many of them were a cut above in whatever thing they were a cut above at, right? Whether it was the ability to see the product vision in the way that David Sacks could, or the ability to fight fraud, right? Or the ability to, like just write really great code and release products quickly. There's a certain kind of person that got through the door, right? Um, that said, the experience of building a startup under duress and in the middle of a dot-com bust and kinda facing like these kinda clash of the titans at the, at the executive level and merging two companies and having to deal with fraud and all the rest, it was like 25 years in experience (laughs) compressed into four years. And it, it was like a graduate education times three for some of these people, um, that you could not separate from the things they have done later. Sometimes that's in very direct ways, meaning, here's an example. YouTube's strategy of making itself ridiculously good at being embeddable in various sites has a direct tie to PayPal's strategy of making itself ridiculously good at being embeddable on various sites. Full stop, I heard s- uh, i- story after story about how like YouTube as an early company would get users who were being frustrated by other platforms to complain if a YouTube player was shut down. PayPal did exactly the same thing, right? So, so there's sort of, there's no way to divorce the later successes from PayPal. There's another really obvious reason, which is they had a financial exit at the end in the, in the early, in early and late 2002, you have a group of people who don't have like, you know, world historic sums of money, but they have enough money to provide seed capital to other startups, including Yelp and YouTube and Facebook and, and all the rest on down the line, right? They have the ability to write a check without the discomfort that might come if like from w- if they had written that check in 1998, right? So that's kind of reason two. Reason three is that they had seen what it, what, uh, somebody played this back on a podcast I was on, I think it was Max Levchin, like they had actually like delivered returns for investors, right? So it wasn't just the PayPal kinda group of people, but that actually that Sequoia and Blue Run, uh, or what was known as like Nokia Ventures and John Malloy and like, you know, all these other groups that invested in them had actually gotten a healthy return. And like that built a track record and a credibility so that they could go out and get venture backing. Not just backing from Peter Thiel or backing from Max Levchin, but backing from big investment, you know, big venture capital firms that were going to look at these people and say, "You've been down this road before. You sort of have a template," right? Um, and, and then, and the, the last thing I would say, and this is crucially, crucially important but it's often missed in the retelling of this story, because here's what people, here's how people think the narrative goes. They're like, "The PayPal people made some money. Then they went off and took that money and turned it into more money and then turned more money into even more money," right? And it is not that tidy, number one, because you're talking about several hundred people and not everybody had that experience. But number two, like part of what happened is that you have, you have a focus on product distribution at PayPal that is very serious and very rigorous. So one of the big lessons learned is it's not good enough to just make something. You have to actually figure out how people are going to find it, use it, and then part mon- part ways with their money to pay you for it, right? Which is a very different challenge. And there's, there's a team member, David Sacks, who this is the lesson that his kinda team takes away, and these people have gone on to very senior product roles in other companies. But, uh, i- take that experience away, and, and what are you left with, right? Meaning, how would someone understand that in a fine-grain way in any other context? You can't read about it in a book necessarily. I mean, you could, but it's harder, right? Thinking rigorously about product distribution becomes a very big part and parcel, particularly of the people on the product team. So I, I think the answer has to be both. As unsatisfying as it is, it's not just that you can go out, pluck talent, bring them into your company, and, and later you will all go on to, you know, host Saturday Night Live and potentially own whatever, all of Twitter. It, it's actually you, you have this group of talented people, and they go through a shared experience together that's really intense. And just also, you know, cards on the table, it's the reason I wrote the book. Like, the book would actually be uninteresting if it were just like a random group of people who went through this experience. And it would be uninteresting if like it was just like, "Oh, we just hired a team of five Michael Jordans and won 20 NBA Championships in a row." Like, of course you didn't. (laughs) Like, of c- of course that happened, right? Like, it would be uninteresting if it were either/or.

   7. DPDwarkesh Patel41:11

      Yeah, yeah.

10. 41:12 – 45:14

    Japanese mafia invests in PayPal?!

    1. DPDwarkesh Patel41:12

       (laughs) Th- th- th- that's so true. Uh, there's a really great talk that Max Levchin gave at a startup school I think a few years after PayPal, and one of the things he mentions, um, is that they apparently got m- a multimillion dollar check from, uh, uh, the Yakuza, the Japanese Mafia-

    2. JSJimmy Soni41:27

       (laughs)

    3. DPDwarkesh Patel41:27

       ... and I don't think that was in the book, but, uh, w- like, wh- what was that about? (laughs) What happened there?

    4. JSJimmy Soni41:33

       Yeah. Yeah, it was, um, there was an entity that was attached to the Japanese like Mafia, the Yakuza, and there was, there, there, it sort of, these stories have become conflated in the retelling. And, uh, there's a, there's a little nod to it in the book. Um, but, but basically what happens is there's this, there's a, a private company that's attached to the Japanese Mafia. And the reason that Max and Peter have both told this story over and over again, it's not actually to illustrate their connections to the mob, because they don't have them. Um, the reason is because the money...... was (laughs) this is so funny. There- there was so much hype about Silicon Valley and so much interest in investing in, like, late 1999 and early 2000 that the, one of the companies, and it might have been that one, basically, like, wanted to send them the money without any kind of like contracts or any- they just ac- asked for the wire instructions and were like, "We just wanna give you the cash," right? Um, and, um, and it- and it struck them, and it struck Peter in particular as, like, basically an example of, like, the worst kind of, of memetic problem, right? Which is like if everyone thinks every company in Silicon Valley is gonna be successful, there is something wrong. Like, something's gone cuckoo if someone's saying to you, "Let me just, just give me the, give me your bank account number and your routing number. I just gotta wire the money right now. We'll work the paperwork out later, all right?" Um, which is what was happening, and that money ended up being a little more ethically complicated because of its connections. But that, they used the story, if I recall it correctly as an illustration of that, just how aggressive the environment was to get money to an American company that basically its principal accomplishment at the time was like building an email payments infrastructure and giving away bonus funding, right? Where it's like burn rate was ridiculous, but you have this company halfway across the world that's so excited that it's just gonna ... and then they find out later, like, it's got these unsavory ties. Um, you know, there were story after story like that, and it's actually a big part of Elon's experience as well. Like, he, I described to him, I said, "How difficult was it to fundraise in early 2000?" He goes, "It's really not that difficult when ..." his line about is like, "When everyone's pounding on your door and trying to fire ho- fire hose you with cash," right? "It's not exactly what I would call it." He's like, "It's not exactly what I would call it, fundraising, right? If everyone's like basically trying to give you cash," which was their experience. In spite of that, and this is interesting, gets back to the first question you asked, in spite of that, Peter is pretty insistent during March of 2000 that they close their fundraising quickly, um, because his view is like, "This might be true now." Like, some random company might be trying to basically wire transfer us money without any strings attached and no contracts, but that will change as soon as the market starts its slide. And so it is actually like one of the things where people wanna talk about the genius of this group, and I think there is some truth to that. There's also, you have to recognize that like the closing of the fundraising in March of 2000 is a fortuitous event. It's a timing event, right? Um, and even when I interviewed, particularly like with say like mid and junior level employees, they would talk about it as like a quasi-religious, like almost like a watershed, right? That they're like, "Okay, w- we managed to secure this round," and then just a little bit after, like, things completely take a dive. Uh, I, again, uh, I tried to ... I, I went for substance over, uh, like exploring Yakuza connections. I also like did not wanna like be calling up random phone numbers to ask who's affiliated with the Japanese mafia, like, you know, I don't think that's a good look for somebody like me. (laughs)

    5. DPDwarkesh Patel45:00

       Yeah. It- it's- it's, um, uh, I- I- I hear that apparently there will be a TV show made of this book, and this would be a great, I don't know, a great like at least like five-minute, uh, five-minute edition. Uh, by the way, by the way I think so. I think it'll be fun.

11. 45:14 – 48:43

    Upcoming TV show on PayPal

    1. DPDwarkesh Patel45:14

       Yeah. By the way, so is that, is that happening, the TV show, or?

    2. JSJimmy Soni45:16

       Yeah, it's in the works. There's, um, an- an- a producer named Mark Goffman who got his start on one of my favorite shows, which is West Wing, and recently did Umbrella Academy, uh, and he was on, I think it's called Limitless. It was on CBS. Uh, and Mark is really great, and he and I have been in touch for, uh, actually a long while about the project. I think what he recognizes in it is what I saw, which is if you have a room of very, very smart people and they face some very, very big challenges and they don't entirely agree on how they're gonna fix everything, that makes for really interesting narrative. It makes for really interesting and thought-provoking back and forth and like contests of ideas and contests of ambition and ego and just like kinda what comes out of that is very energetic. He sensed that energy a few years back and then reached out to me, um, and- and he along with, uh, a few others have kind of like been championing this project. So I hope it goes somewhere Yeah, yeah, yeah. ... 'cause you never know. Hollywood's always a little unpredictable in that way.

    3. DPDwarkesh Patel46:13

       I- I really hope so because, you know, one of the things that makes this story so incredible, um, is, you know, it's kind of like watching an Avengers movie or a superhero movie where you know that

    4. NANarrator46:22

       (laughs)

    5. DPDwarkesh Patel46:22

       ... you know that Spider-Man's gonna, like, win, right? Like, they're not gonna, like, kill off Spider-Man.

    6. JSJimmy Soni46:26

       Right. Right.

    7. DPDwarkesh Patel46:26

       Like it's like Elon Musk is ... C- come on, it's Elon Musk. Like they're not gonna-

    8. JSJimmy Soni46:28

       Right.

    9. DPDwarkesh Patel46:28

       ... they're not gonna go bust. But then you're like, you know, you're like, oh, you're supposed to believe that this first fight where Spider-Man almost dies, that's the end. The second fight where Spider-Man almost dies, that's the end. And, you know, you- you read his book and it's like, oh, PayPal almost went bust here, you know, they lost their backups here.

    10. JSJimmy Soni46:40

        (laughs)

    11. DPDwarkesh Patel46:40

        And they almost went bust.

    12. JSJimmy Soni46:41

        That's right.

    13. DPDwarkesh Patel46:42

        Uh, you know, uh, uh, that they were at the edge of their funding here. Uh, but it's like, oh, come on, i- i- it's Peter Thiel, it's Elon Musk.

    14. JSJimmy Soni46:47

        Right.

    15. DPDwarkesh Patel46:47

        How could- how could that happen? (laughs)

    16. JSJimmy Soni46:48

        How could that happen? And, you know, I- I- it's actually a really important point and no one has really brought that up, and I'm glad you did because it strikes me that like the- the problem with seeing them as invincible is that it actually makes other people think that they can't do these things even when they fail. And the reason that the PayPal story, at least my version of it, has so much failure in it, is because, like, if we pretend that they're not superheroes for a minute, if we bring them back down to Earth, if we tell the stories of like accidentally hot swapping hard drives and almost losing the company's entire source code, right? It makes it okay for many other people to- to do the kinds of work that they do and be okay with a little bit of- some odds and ends and some wrong turns here and there, right? Like I had a friend who's a startup founder who basically said so- said a version of like, "It's really comforting to know that Elon and Peter and David experienced anxiety," right? (laughs) Like, like, "To know that they were nervous actually makes me feel good," right? And he told me, he's like, "Your book is like therapy because it's- if they, if they lived through this and lived to tell about it and were successful, like maybe there's hope for me." Um, and I didn't intend to do that. That wasn't... The purpose of my book was just to tell the story, but I do think of it as actually really, really important.

    17. DPDwarkesh Patel48:16

        Yeah. And there's a strong mimetic element to, uh, the fact that you published the book, uh, in a very positive way. I mean, you have this really moving epilogue.

    18. JSJimmy Soni48:23

        Mm-hmm.

    19. DPDwarkesh Patel48:24

        Um, I won't spoil it for, uh, I won't spoil it for the people who might wanna read the book, but, uh, yeah. It, like, even like, you know, I'm 21 and I'm a programmer and I'm reading this book like, "Fuck yeah, I wanna do this shit."

    20. JSJimmy Soni48:35

        (laughs)

    21. DPDwarkesh Patel48:35

        Uh, is, which is like a totally memetic, the desire, right? But it like, yeah, that's definitely one you wanna, that's definitely one you wanna spread.

    22. JSJimmy Soni48:41

        Right.

    23. DPDwarkesh Patel48:42

        Yeah.

12. 48:43 – 52:44

    Musk in ancient Rome

    1. DPDwarkesh Patel48:43

       Um, okay. So, but one question I've like, always had, uh, when I'm reading this kind of stuff is, what does somebody like Elon Musk or Peter, Peter Thiel, what do they do in a pre-capitalist society? Like for, you know, imagine the era of Cato. Like, what, what, are they gonna conquer all like Caesar? What if somebody's super competent and ambitious, um, but also really clever and intelligent, uh, and, uh, do in those eras? And conversely, you can ask the question like, what does somebody like Napoleon and Churchill do when there's not a, you know, a war that's, uh, there's not a total war going on?

    2. JSJimmy Soni49:12

       Hm.

    3. DPDwarkesh Patel49:12

       Are, are they startup founders or do they just open up like a, a restaurant or something?

    4. JSJimmy Soni49:17

       Well, I, you know, here, let's go back to what we were talking about at the beginning where if you were to look at the late, late 1700s era generation in the United States with the American Revolution, right? So, you have Ben Franklin and Thomas Jefferson. And those, I think, are two really interesting figures to have this, to have in the context, in this context. I have a sneaking suspicion that though, and no, and you know, Ben Franklin was an entrepreneur, right? So, like his start was in printing and he was like a, a printer and did printing presses and made books and things. Um, but was an entrepreneur and a kind of broadly scientifically interested. Jefferson too had all these like, uh, like random interests and random writings. He was, you know, he built and designed Monticello, like the layout for the University of Virginia bears his, his signature, in addition to writing the Declaration of Independence and, and all these other things. So, you have people who are polymaths, right? And I suspect that if they were alive today, do I think they would be involved in business in government, uh, in government? Probably in some capacity. Do I think they would be entrepreneurs? Almost certainly. Right? Um, and I, I, I think that some of the hallmarks of the, their ability to read widely, the ability to like, just actually commit themselves to self-education, meaning like, I wonder what Frank- Ben Franklin would've been like if he had YouTube, you know? (laughs) Like, you gotta believe that like, the guy would've just wanted to learn everything 'cause he displays that quality in, in his books and, and in other writings and things he did and just in the way he lived his life. Um, you know, I don't wanna get too practical-

    5. DPDwarkesh Patel50:50

       He might spend some time on other video streaming, uh, he might spend some time on other video streaming websites too.

    6. JSJimmy Soni50:54

       That's right. Yeah. Like he watches his videos, right?

    7. DPDwarkesh Patel50:55

       (laughs) Ben Franklin.

    8. JSJimmy Soni50:57

       Uh, and Vimeo. He'd be a Vimeo guy, not a YouTube guy. I don't know. Um, but it seems to me that there are certain hallmarks of, uh, places that are very potent in society where there's a lot of change happening or a lot of possibility of affecting big numbers of people, attract smart and ambitious and energetic people. I think in the late 1700s if you were smart and energetic and ambitious, you had some options available, but probably if you're in the United States in like, the colonial era, the, the hottest, you know, the, the hottest party in town is the American Revolution, right? (laughs) And so you're gonna find your way to that. Um, I, I think it's why the group that helped to create and build and nurture PayPal has gone on not just to accomplishments in business, but they've done things in politics and in, in art. They've done things in film, they've done things in books and literature. Uh, they've done things in nonprofits, right? Um, e- even today, one of the, the companies, uh, that is trying to like, you know, that, that has a bunch of PayPal alumni associated with it is trying to re- reforest three billion acres of forest ecosystems. And so I, I think that some of these characteristics, it's the reason that there's real power in reading about history, right? Because it actually makes you realize like some of these things are operated at the level of character and that's malleable. Like we can improve, we can get better. And so then like what's cool is you can sort of think, play the game of like, I wonder like what so-and-so would be doing. Um, I suspect that it, that Ben Franklin today would probably make his way to like Austin, Texas or Miami, right? Like I bet he'd be all in crypto. Like this is a person who thought about everything from like firefighting to daylight savings time. You don't think he'd be totally down to have a long discussion about cryptocurrency? Of course he would. (laughs)

13. 52:44 – 57:04

    Why didn't Musk keep pursuing finance?

    1. JSJimmy Soni52:44

    2. DPDwarkesh Patel52:44

       Uh, oh, okay. So one question I had is, you know, once he got kicked out of PayPal because, uh, like M- Musk got kicked out of PayPal because he had this like super ambitious vision of redoing the banking industry and the brokerage, uh, services industry and then making them cheaper and faster. Um, why didn't he just be like, "All right, if PayPal doesn't wanna do it, I guess I'll just make a new company to do it"? Why, why did he decide all right, PayPal, finance is over. I'm gonna do, I'm gonna make a pivot to Mars and electric vehicles.

    3. JSJimmy Soni53:09

       Yeah. It's a great, it's a great question and I think there's a part of him that, in, in my discussions with him, he is still, he speaks openly about kind of feeling like PayPal was a vision unfulfilled and that this is the sort of thing he would want to do at some point. Um, I think the honest answer is that he became oversubscribed, right? Or not oversubscribed, but he became, call it the, the passions that he had in college around electrical energy, uh, sustainable energy and around space travel reengaged him post PayPal. And he went on to, you know, found SpaceX very quickly after his ousting at PayPal. And those are the businesses that, you know, obviously occupy his time today among others. And so I, I think of it as a, as a, as a factor of like kinda, I don't think that the passion has ever left, meaning in my discussions with him, he could still become very impassioned about the necessary improvements to financial services that he believes are overdue. But I think he has understandably like made advancements in other fields and I feel like that's like, like I, I, I'm not...I think he still thinks finance is stuck in the 1980s and the 1990s, like in terms of its infrastructures and its ecosystems. But I think the other things he's doing are places where he could uniquely make a mark. I'm not saying that he can't in the others, and, like, maybe he can, but I think that it was a matter of, like, timing and circumstance, meaning leaving X-, what he would, what he called X.com became PayPal, leaving X.com gave, like, he was able to shift into, like, his Tesla and SpaceX years, right? Um, and so there, there was just a timing element there. And, and I, I, I did have a couple of lines in there from other people, Reid Hoffman who mentioned that at one point, like, Elon was like, "You know, we should get the band back together and there's still so much to do in financial services, and there's so much that needs upgrading, and all these fees are so stupid." Right? And, and, and Reid Hoffman sort of, like, gently, you know, says, like, "Oh, man. Just let it go." Just like, "You have so much other stuff going on," (laughs) you know? Um, I, I, I, I think that if, so, so let's, though, the more, the more interesting thing to, to emphasize is, in each case, what he is doing is what is kind of commonly known as, like, first principles thinking, right? And so the idea of, like, if you were to go back to a first principles approach on finance, like, would you have to pay a wire transfer fee to me if we're just passing ones and zeros through a database, right? If all we're doing is taking sort of ones, one line on a spreadsheet and moving it to another line on a spreadsheet, and we can do that digitally now at almost no cost, why am I paying $25 for an inbound wire, right? Like, those sorts of questions animate SpaceX just as well as they animated PayPal and X.com, right? Meaning, let's break things down to, like, what does it actually cost to launch a rocket into space? Now, I think thinking about those questions is easier than doing something about them, right? And so in the original conception of X.com, the idea was to unite financial services, and the reason you wanna unite financial services is it's better for consumers, it makes things faster, and it makes things cheaper. If my mortgage and my savings account and my brokerage account are all managed by the same place, I won't be paying hefty fees when I need to move money around, and there won't be a three-day delay before a deposit comes in, right? That's as true today as it ever was, and so I think in each case what he is really thinking about is, "Let's begin from a place of first principles and, like, work backwards to what the best solution is for customers," right? It doesn't always work out perfectly, but I would argue that, like, some of his criticisms are still true. I mean, I've paid a fee in my life that I would want back from my bank, and damn it, they shou- you know, someone should fix that. Um, and so I, I, I, I think that's the reason. The reason, the, the, the short answer to your question is time and his attention shifted to other things, but then I, I think the longer answer is, like, those problems still exist.

14. 57:04 – 1:00:38

    Why didn't the mafia get back together?

    1. JSJimmy Soni57:04

    2. DPDwarkesh Patel57:04

       Yeah, yeah. Um, I, you know, I'm glad you brought up the thing about the band getting back together because that is actually one question I had, which was, you know, this is such an effective team, and as far as I can tell, the only people who actually, like, teamed up and as, like, not, not as just investor and founder, but as in founder and founder, the only people who teamed up were the YouTube founders. Um, and so I, I'm curious, like, why didn't these people say, "Oh my gosh, PayPal, like, look, look at that huge success. Why don't we, like, why do, why don't we put this entire team together and do one thing together?" Why did they go off and do their different things? Was it just that, you know, these people are just, th- they all needed to be the big guy given how talented they were?

    3. JSJimmy Soni57:36

       No, I don't, I don't think it's that. I think, um, I think it's, so remember also we're talking about a whole bunch of people, right? So PayPal pre-IPO in Palo Alto is around, like, 200 people give or take, and Omaha is several hundred people. So it's not like a dozen people, right? Meaning there's actually a whole range of folks, and many of them have worked together on other things. So Jus- uh, Jerry Stumpman and Russ Simmons, early PayPal, co-found Yelp, right? Chad Hurley, Jawed Karim, right? Like, there's YouTube, there's, like, all of these other entities. There are employees that are early at PayPal that go on to work at LinkedIn. There, there are PayPal employees that go on to work at SpaceX, Tesla. So they do end up working together, meaning that the band isn't like a five, it's not The Beatles. It's like, it's like a hundred Beatles, you know? It's like a h- it's like 500 people, right? Or whatever. And so it's hard to argue that, like, they could bring it back together for one s- you know, one, one reason. Um, it's also the case that, like, there are, there were people there who went on to build things that maybe other people wouldn't want to participate in, right? So, like, a good example, right? Is, or, or build things that couldn't scale. My favorite example is the person who left PayPal after a very short tenure and became a, a very prominent professional magician. Yeah, uh, and Daniel Chan was one of my favorite interviews because he did magic on Zoom while I was interviewing him, right? And, like, did tricks with me. But he's not building a venture-backed business to go make magic some, like, big thing, right? H- his business is fundamentally about perfecting his craft and, and doing it very, very well. Um, it was just ways in which, like, would, would that blend with some of the things that I, you know, that, that Peter Thiel's doing? Maybe, but I doubt it. And, and so I don't think of it, by the way, as, like, a bad thing that the team went off into all these other directions because their going off into all these other directions is the reason that we have YouTube and Yelp and LinkedIn and SpaceX and, you know, all of the rest. And so I'm, I'm kind of, in some ways, I'm, like, comforted that they didn't all, like, stay together and do the next venture and do the next venture. Um, the other thing is th- the venture they did together, financial services, is very specific and it's very difficult. And while some of them have done that again in the future, it's not the field that everybody wanted to participate in, right? Uh, so that's also really important is, like, intellectually, we have to remember that a lot of what you're doing if you're building financial services, like, you're interacting with regulatory bodies all the time. You're interacting with and battling big banks and Visa and Mastercard. And, like, there's just a lot of people who that, that was just, uh, it's a lot of noise. Like, that's a lot of, of drama, it's a lot of diplomacy, it's a lot of very sensitive interactions about people's money. And I think there was some, a bit of just burnout, right? Somebo- he called it PayPal PTSD. Um-... you know, people live their lives. Like I, I think that, uh, I think it would be ... it would be hard for some of these people who have been CEOs to be subordinate to others. But I don't think that's the primary reason. I think it's just they went off and pursued their own, kind of, interests and passions.

15. 1:00:38 – 1:08:21

    Jimmy's writing process

    1. JSJimmy Soni1:00:39

    2. DPDwarkesh Patel1:00:39

       Yeah. Yeah. Okay. I want to be respes- respect for your time. So I'll ask you ... Uh, I have one last question for you which is, um, you were the managing, uh, director at Huffington Post, um, uh, and I, uh, I'm sure that involved, like, being up to date, you know, minute to minute on, you know, like, getting the featured articles out and, uh, you know, managing social media. It was like, you know, y- y- ... Like, it is, it is a very ... things are happening constantly. And then now you write, uh, you're doing, you're writing these books that take five years to compose and publish, and you have this like Robert Caro, like, research-

    3. JSJimmy Soni1:01:14

       Mm-hmm.

    4. DPDwarkesh Patel1:01:14

       ... uh, and writing process where, you know, you're reading everything and, uh, you're w- watching all the interviews. What was that transition like for you? And can you talk a little bit more about your writing process?

    5. JSJimmy Soni1:01:24

       Yeah. It's like call- calling my process Robert Caro-like is, like, the nicest thing anybody's ever said to me, um, 'cause he's, he's a beast, and he's like the OG of my field, you know, and like is the best. And everybody's kind of in his shadow 'cause of the level of diligence that he brings. Um, you know, I, I like books because books take a long time. They allow you to ... I spent five and a half, six years on this PayPal project. That's a long time to devote to one project. Um, I didn't do it full-time, but it's still a long time to devote to a project, and I like that. And the reason I like it is because every new discovery yielded some other discovery. And every new interview prompted some new insight. And I found details that were left kind of underexplored or unexplored for so long. And I got a lot of, like, joy out of the endurance of it, out of the like, "Let's, like, slog through this and really go for broke and really try to interview as many people as I could." I admit, like, like, I, I, I think ... You know, I left digital media a long, long, long time ago, and I'm sort of glad I did in, in ... for a variety of reasons. But the, the foremost of which is with books, you get the, you have the ability to, to patiently work your way through a topic for a very, very, very long time. And like, in my dream, like I get to do what Robert Caro does, right? My dream is 10 years on a book, right? Where it's like I, like, it's like that ... If the economics of that could work out, that's exactly what I would do. I would wake up every day and do homework for 10 years until I had a book because it's so exciting and thrilling to me. I think I'm just wired that way. Um, my pro- ... You know, you asked about process. Like, I, I have, I have specific things I, I, I do, but, but broadly the process is, I treat this, I, I treat, like, all of these books as, as, sort of, with like a level of, of, sort of ... I think about Caro, and I often ask myself, like, "What would he do?" Right? Or, "What would, like, Stacy Schiff do?" Right? Or what would like, you know, Barbara Tuchman have done? Like, like, it's like, I think about the people who I admire, and I think about how they would have approached a project like this. And that leads me to, like, seven days a week, watch every interview, contact everybody-

    6. DPDwarkesh Patel1:03:45

       (laughs)

    7. JSJimmy Soni1:03:45

       ... try to do as much historical spadework as I can, right? Um, I don't know why it works. It works for me. I think it's a personality thing too. Like, it, it, sort of ... You have to be willing to be bored a lot. Like, you actually have to be willing to wake up and be bored a lot of the time because the, the ... You know, it's only on like the 17th press release for X.com that you discover this little nugget about something, right? Or a little name that is different, right? I remember when I was looking at, um, Elon's early company, Zip2, I printed out, like, all the Zip2 press releases that I could find, and like I would read them end to end. Like, kind of like, just like trying to understand how Zip2 evolved as a company and then divine, like, how might that have affected Elon's development? And there's this really great moment in one of the press releases that I ended up putting in the book. JavaScript debuts. This is like a big event in computer science. Like, JavaScript is real now, right? And Dr. Lou Tucker, who was like the director of development or research or something at JavaScript, like, has a line in this press release. And, and I noticed that from the time the company launched to when ... Or, the time Java launched to the time that Zip2 incorporated Java was very, very ... Like, it was a short window, right? And it, and it confirmed something that Elon had said which is like, one of the things that he was proudest of with Zip2 was that, it was always technologically trying to move very fast and stay ahead of the curve. And, it ... To me it was like, he made that point, and I was like, "Okay, everyone says that." But then I saw the Java thing, and I went and did the timeline on like when Java launched and when Zip2 included it, and I was like, "Oh, like, there's real meat to that, to that statement. There's real substance there." I can imagine that for a lot of people listening, like, reading 17 Zip2 press releases is like their idea of like torture, right? But for me, like having these big stacks of paper around my house that I'm like making my way through is actually, like, it's so thrilling. You feel like you are, like, on an exciting adventure, if you're me, right? (laughs) Right? I say it out loud, I'm like, "This sounds ridiculous," but you really do feel that way. And so that's the cool part. The cool part is actually not interviewing like, you know, the interview ... I- Interviewing them was fun, and I learned a lot from my interviews with these people, but the, the, the more, the, the bigger thing was discovering these tiny discoveries about like how these things were, how these things fit together. An email from a user where they're really angry and I'm like, "Oh, this is, this is gold." Or like some customer service spreadsheet, right, where you can see the number of customer service calls, and I'm like, "Oh my God! I have the number of customer service calls. That's insane!" I get a thrill out of that. Doing that is ... I can't do it on Twitter. I can do it over years on a specific kind of project, and I just love it. I mean, I, I love the heck out of it.

    8. DPDwarkesh Patel1:06:28

       Yeah. Uh, uh, you know, I loved it too. I mean, uh, l- like you said with the Java thing. Um, you know, one of the things I really, really liked of the book was, you know, a- a- as a, as a computer nerd, it, it was just so fun to read like, how were people thinking in the '90s about like the trade-off between using Unix and Windows? And, you know, you did a great job of like covering ... Like, 'cause, you know, these kinds of trade-offs exist even today, right? People have-

    9. JSJimmy Soni1:06:48

       Yeah.

    10. DPDwarkesh Patel1:06:48

        ... made decisions about like, do we use this new technology or do we use one that has all these APIs built into it? Um, and y- y- ... You know, you, you go into like great detail on this, and it, it was like such an interesting part of the book. Um, yeah. So, but, uh, anyways, so the, the book is The Founders: Uh, The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley. I highly, highly recommend it. It was, i- it's definitely been l- l- ... One, one of the best books I've o- read, um, at least in a long while. So, um, uh, Jimmy, a- a- any- anything else you wanna say? Anywhere else people can find you? Or a- and last notes?

    11. JSJimmy Soni1:07:19

        Well, no, I just, thank you. Yeah, thank you for taking the time to do these interviews and to, to wor- you know, to like share some of these things that ... I, I think the challenge of the kind of work that I do is that sometimes you neg- you have to neglect by definition, like, some of the engagement with an audience, right? Because I kind of like need to just keep myself walled off in order to do historical work, and then you sort of emerge and like the world's totally changed or whatever. Uh, and so I appreciate when enthusiastic people read the book and reach out and like can engage on it. And like what's also nice is you've read the other books in this space, and so you're a super informed reader which makes these conversations and dialogues really fun. So I just appreciate all the time and energy that you take to do this 'cause it's not easy, I know. And as an author, I'm like, I, I re- I appreciate the, the Robert Caro-like approach to your interviews.

    12. DPDwarkesh Patel1:08:13

        Well, i- i- it is extremely nice of you to say given, gi- given the rigor in your own pr- preparation process though. That, that compliment means a lot to me. Thank you very much.

Episode duration: 1:08:21