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

... 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.

(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?

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.