the

The Incredible Story of The PayPal Mafia

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

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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