The Incredible Story of The PayPal Mafia

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like all great origin stories the PayPal mafia is an origin story that deserves to be told and retold from social media to the auto and aerospace industries the impact of the PayPal mafia is amazing serving as a launch pad for six of its members to become billionaires and this story begins with Palm Pilots a Palm Pilot was a specific kind of a device called a personal digital assistant or a PDA you see before the smartphone era PDAs were cutting-edge handheld pcs with the ability to connect to the internet they were truly awesome for the time and they were getting popular by the late 1990s and it was in 1998 when Peter Thiel and Max Levchin decided to develop technology to allow person-to-person payments via the use of PDAs namely Palm Pilots back in those days sending money to someone was inconvenient compared to today you were limited to cash or writing a check and if you were far apart you had to send it through the mail over the years credit and debit card infrastructure expanded but they were only limited to merchants so with Thiel and levkin's idea people could be money from one another through an app on their Palm Pilots essentially creating a digital wallet Thiel graduated from Stanford and worked as a lawyer and was a former derivatives trader in New York before he moved back to San Francisco to start a hedge fund upon his return Thiel delivered a guest lecture at Stanford and that's where he met levkin an levkin he migrated from the Soviet Union to Chicago when he was 16 in 1991 he went on to the University of Illinois where he studied to become a computer scientist after college he founded an automated marketing software company called net Meridian which he ended up selling to Microsoft several weeks after they met Thiel and left Caen came up with the Palm Pilot person a person payment idea and founded the company called the field link which changed the conf inity shortly after Caan Finity being a fusion of the words and infinity and then meanwhile another entrepreneur in the name of Elon Musk had a similar plan but he wanted to create an entire online bank musk was a child prodigy from South Africa and he taught himself how to program computers at around age 10 to 12 in fact at the age of 12 he developed a video game called blastaar and he sold the code to that game for $500 which is around $1,300 today and by February 1999 at the age of 27 he sold his first startup called zip to to compact for 307 million dollars and he received 22 million for that deal and a month later musk and his friend and business partner Greg curry founded XCOM the first online bank musk quickly assembled this team that included harris Fricker who brought extensive knowledge of the banking industry but musk and figure had difficulties from the start since they both wanted to run the company differently just months into the company's founding vicar try to takeover by threatening to leave and start another company but musk wasn't having it so figure left and started his own company taking majority of the key engineers then musk aggressively hired more engineers as the company recovered the XCOM engineers worked rapidly for the next three months and the bank went online the night before Thanksgiving at a time which at one point must worked 40 hours straight to ensure things worked smoothly XCOM was an actual licensed bank with a partnership with Barclays the multinational investment bank an headquartered out of London and to kick off the bank XCOM gave $20 to people just for signing up and then gave $10 for referrals so XCOM the bank offered all the functionality of a normal bank but on top of that they were offering person a person payment services just like Khan Finity and within the first months of going live XCOM signed up over 200,000 people the company would prove to be a for middle component now back at Khan finiti the company was working hard creating their person-to-person payment service since they were initially targeting Palm Pilot users they created the online service that we are all familiar with as an afterthought and they named the service paypal with the paypal online service people could transfer money with or without a Palm Pilot the service was free and similar to X dot coms incentive confident gave people $10 just for registering and they also gave $10 for referring others to register and this would be a critical element down the road and at some point around early 2000 Thiel found out about X coms entry into the payment service and that got him very upset and that's when the competition really started to heat up despite offering limited services compared to XCOM the con finiti remained viable due to their marketing efforts and their penetration into the user base of ebay at this point eBay was around for about five years and they were growing tremendously by the year 2000 evei had over 10 million users exploding from just 2 million from the year before and they were hosting an average of 3 million options per day and eBay users were the perfect fit for the person person payment services offered by pinfinity and XCOM you see most eBay users didn't sell enough items to qualify for merchant accounts required to accept credit cards they were merely regular people selling things before a person a person payment services buyers had a mail checks or do money orders and this added about a week to the waiting period before the seller could receive the money and for the buyer to receive the item and when can finish the potential with eBay they'd shifted all of their marketing efforts into targeting eBay users their engineers developed an auction logo insertion tool which allowed eBay sellers to add an HTML PayPal logo to their auctions and help them earn the $10 referral bonus naturally once XCOM noticed con finiti targeting eBay they filed right behind them pushing their own HTML logo and this started a battle for growth on the auction site and then in May 1999 the battle became a battle royale when eBay acquired a credit card processing company called bill point so that they too can benefit from person-to-person transactions and it was third platform that users were on after all and in response to all this competition confited ek MUP with an idea that was both brilliant and risky they started a charity bot that was spider into eBay looking for certain types of auctions but before bidding the bot would let sellers know that its purchasing items for charity and if they won the item the seller would need to sign up for PayPal this bot was so important levkin himself took on the development and then for a period of time there was a spending war between Kahn finiti and XCOM while the aftermath of eBay's purchase of Bill Point was looming on the horizon but the battle was short-lived and the story goes conf in ities PayPal had the biggest following on eBay but they were running out of money quickly spending one hundred thousand dollars per day on awards for customers while XCOM was not as popular but they had plenty of available cash to spend on the same month eBay launched into the person-to-person payments service market with bill point Kahn finiti and XCOM decided to join forces and merged into one company on March 2000 under the name of XCOM the merger resulted in field becoming senior vice president of finance and levkin remained the chief technical officer and then bill Harris was brought on board to become CEO because he was a big name once the CEO of Intuit the company behind quicken and QuickBooks and then musk being the biggest shareholder became chairman of the company although the company took the name of XCOM they understandably retained the paypal service branding and then along with the sweeping changes in the leadership roles there were major changes in the structure of the entire company what used to be too nimble creative startups became one slowing bureaucratic company under the new CEO harris direction and this change would start a rapid whirlpool of dramatic events you see after the merger the new strategy was to target PayPal customers for signing up for X coms bank accounts but after two months they didn't make any progress with this strategy and the company was losing money fast and feel disagreed with Harris from the beginning and blamed them for the company's issues Harris wanted to start charging people who send money to others but Thea Lee opposed the idea because it went against PayPal sender friendly business model Thiel also got pissed off when he found out that Harris used 25 thousand dollars of the company's funds to make a political donation a short while later after securing 100 million dollars in financing Thiel resigned as executive vice president after Thiel's departure must heard the complaints from other executives about harris direction for the company determined to right the ship must called an emergency board meeting to house harris and to take control of the operations and the board members sided with Musk who became CEO of the new merged company musk then turned over his position as chairman to feel which was a move that would help mend the damage morale and amongst all the drama with XCOM eBay's bill point was positioning itself to be a formidable nemesis Zacks calm right off the bat eBay partnered with Wells Fargo giving them 35% of bill point in exchange for well Fargo's payment credibility and expertise additionally they agreed to provide back-end payment processing and customer service support eBay also made it easier for sellers to add the bill point logos on their auctions essentially making it harder for sellers to add the PayPal logos another tactic eBay pulled was creating a rule that third-party payment logos could be no larger than 88 pixels which shrank the PayPal logo to one-fourth of its size on top of that eBay had free listing days for all sellers that included Bill point as a payment option despite eBay's efforts X coms PayPal continued to grow but the company was dealing with issues besides eBay at the same time first the company was still losing a lot of money by June 2000 they had an unsustainable burn rate of 10 million dollars per month and growing another issue was that since PayPal's user base was growing so large XCOM had to upgrade to a new platform as the original website that levkin built was designed for up to two million accounts and the problem was with the new platform you see levkin and the con Finity engineers built PayPal on an Oracle platform and that is what they were familiar with musk and the XCOM engineers on the other hand built their site on a Windows NT platform musk decided that the new scalable version of PayPal would be built on the Windows and T platform and that really added tension with levkin and a lot of former con finiti engineers on top of those issues XCOM had to deal with major cases of fraud tech savvy criminals largely from the Russian and Nigerian mafias used PayPal to directly gain cash from stolen credit cards and this hurt XCOM since the victims were allowed to make the merchants liable for the unauthorized use of those cards one fraud ring alone cost XCOM 5.4 million dollars in a four month period in the year 2000 so musk as CEO was facing all of these issues on top of competing with the mighty eBay but his fate SEO was sealed from none other than differences over branding musk was adamant about phasing out the PayPal name and completely using XCOM as the face of the company it was rumored throughout the company that a big part of Musk's gravity towards the name was because he paid 1 million dollars for the rights to the XCOM domain when the time came that musk instructed to phase out the PayPal name from the company's website many employees were upset and it just so happened that must gave the instructions before he left for a vacation to the cine Olympics and while musk was on vacation David sacks an executive with the company refused to change the website further he and other executives threatened to resign to the board unless musk was removed from CEO an employee loyal to musk caught wind and try to reach him but it was too late and the board voted Moscow as CEO must try to speak to the board members to retain his position but at that point his focus was more on the success of the company than his control he was worried that critical tasks that needed to be done would not happen but he talked to Thiel and left Ken who assured him that things would be taken care of at the end of the day must remain the highest shareholder and a lot of money riding on the success of the company whether he was CEO or not but from that point on musk was hands-off from the company which went on to face many challenges but the company adapted to every challenge it faced going from losing money to being highly profitable along with overcoming the issues with fraud and then in June 2001 the company changed its name to PayPal and the company raised sixty three million dollars when they went public in 2002 by that time 70% of all auctions on eBay were accepting PayPal and over one-fourth of the transactions were done through PayPal and it was at that point eBay made the offer to acquire PayPal that musk Thiel and the rest of the board couldn't refuse at a price of 1.5 billion dollars and it was that deal that served as a springboard moment that led to the making of six billionaires and many successful and revolutionary companies musk having the most stock in the company received two hundred and fifty million dollars from the deal 180 million after taxes he used the money to start a handful of revolutionary companies such as SpaceX the leader of commercial space which recently completed the development of the most powerful operational rocket in the world a company that has plans to develop the bfr the incredible launch vehicle that will allow humanity to colonize Mars along with plans to become a worldwide Internet service provider musk also founded Tesla a company that is bringing electric vehicles to the masses one model three at a time along with these companies must recently founded neural link that hopes to develop a neural lace must also founded the boring company which is an infrastructure and tunneling company that helps to take urban transportation into the third dimension helping out with traffic problems that are plaguing the cities in the United States and Beyond and today musk is worth around twenty one point three billion dollars and then he'll earn fifty five million dollars from the ebay deal being a financial and investment Wiz he used the money to start an investment management hedge fund called clarium capital and one of Thiel's key investment was being an early angel investor for Facebook along with his investments Thiel also founded Palantir technologies a software and services company which specializes in big data analytics a company that employs more than two thousand people today Thiel is worth around 2.5 billion dollars and then Reid Hoffman was the executive vice president by the time eBay purchased the company after leaving PayPal Hoffman went on to co-found at LinkedIn the world's largest professional networking site with over five hundred and sixty-two million users encompassing over 200 countries and territories worldwide and is the 34th most visited site in the world accounting for his stake in LinkedIn and other investments hoffman has a net worth of 3.3 billion dollars and then Luke Nosek was vice president of marketing and strategy at PayPal he and Thiel went on to start a SAN francisco-based venture capital firm called the founders fund he was actually the first institutional investor in Musk's SpaceX and today he's worth around 1.2 billion dollars there's Ken Howry who was PayPal's chief financial officer he went on to co-found the founders fund with no sick and Thiel and today he's worth around 1.5 billion and then on to Jeremy Stoppelman who was vice president of engineering at PayPal he went on to co-found the popular crowd-sourced review site Yelp with fellow PayPal employees Russell Simmons and Max levkin today Yelp has over 100 million unique visitors between its internet and mobile platforms finally there's jawed karim Chad Hurley and Steve Chen who all worked together at PayPal they went on to found a video sharing site called YouTube the second most popular site in the world behind Google where the world spends 1 billion hours every single day so when you see the news of SpaceX latest achievements in space when you see a Tesla gracing the highway or when you log into your LinkedIn account read a review of a local restaurant on Yelp and every video you watch right here on YouTube now you know that their origin stemmed from the incredible story of the PayPal mafia have for now I hope you enjoyed your journey if you did please leave a like and subscribe I am Neil scribe and I'll see you on the next journey [Music] hey guys you guys might have known about the PayPal mafia already but hopefully there were some details that you learn from this video my channel is connected to the PayPal mafia in two fundamental ways not only does my channel exist because of the work of Chad Hurley Steve Chen and jawed Karim who founded YouTube about 1/4 of all my content of my channel is based on Elon Musk's various companies so in a small way that PayPal mafia is the origin story of neo scribe I just think it's so cool that so many pioneers were once under one company of all my 91 videos so far I am most proud of this one this is my Gernika no I'm not comparing myself to the great Picasso I just feel this way because Guernica is so big measuring about three and a half meters tall and over seven and a half meters wide and it took around 35 straight days to complete and so this video was a culmination of two months of research little by little on my free time when I wasn't working on my regular videos I say this all the time but this video was truly an absolute blast to make anyways if you want to see more videos like this make sure to subscribe I don't have the time to do a video like this for each one but I plan to do so one every other month and at this point I would like to thank Tobias gabbar for pledging his support on patreon you are awesome and if you connect with my content and want to help support this channel you can check out my patreon page in the description you can pledge as little as $1 a month every bit helps thank you all so much and I'll see you next time you

Info

Channel: NeoScribe

Views: 1,254,295

Rating: 4.8030906 out of 5

Keywords: PAYPAL, THE PAYPAL MAFIA, PAYPAL MAFIA, ELON MUSK, PAYPAL HISTORY, ELON MUSK HISTORY, EBAY, EBAY HISTORY, PETER THIEL, PETER THIEL PAYPAL, ELON MUSK PETER THIEL, YOUTUBE HISTORY, TECHNOLOGY, DOCUMENTARY, MAX LEVCHIN, MAXLEVCHIN PAYPAL, PAYPAL ORIGINS, CONFINITY, X.COM, STORY OF PAYPAL

Id: nvQ4p82-D54

Channel Id: undefined

Length: 21min 7sec (1267 seconds)

Published: Sun Jun 24 2018

Reddit Comments

I fell victim to a scam Paypal was running circa 2009. According to unverified sources, Paypal was freezing accounts for "suspicious activity" to keep a particular dollar amount always tied up, distributed across various accounts. They would then use the extra funds to invest at a profit and release the hold on each account on a rotating basis to always have access to more capital than they would otherwise. The insignificant $5 I had sitting in that seldom-used account was released to me after about 2 weeks with no contact from Paypal throughout that time.

Anyone have any similar experiences or know of anything related? Will be able to watch this video in a few minutes and I hope that this isn't coincidentally my answer...

👍︎︎ 213 👤︎︎ u/LukariBRo 📅︎︎ Aug 21 2018 🗫︎ replies

To whoever made this video: the production is good, topic well researched and video is interesting. Unfortunately the narration is slightly weird and disjointed, with you stopping to take breaths or random pauses. I suspect there may be some element of audio cuts (midsentence) because there are sometimes tone changes that are simply odd. It's a great video but your narration could use more practice. I don't mean this to sound harsh, I liked the video and listened the whole way through

👍︎︎ 67 👤︎︎ u/A3A6 📅︎︎ Aug 21 2018 🗫︎ replies

They also always purposely give conversation rates that are not in sync with the rest of the foreign exchange market. There hasn't been a single transaction I've done via PP where I haven't been ripped off at least five dollars on exchange rates alone.