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“So what can this thing do?” venture capitalist Peter Thiel asked from the passenger seat of the sleek, 627-horsepower McLaren F1.
“Watch this,” Elon Musk replied.
It was March 2000, one year after the 28-year-old Musk sold his first start-up for $22 million. He’d dropped $1 million of it on the silver sports car, then pumped most of the rest into a grandiose business scheme: X.com, an internet-based megabank that aimed to remake the global financial system.
But his plans had been blocked by Confinity, a company led by Thiel. The two were about to discuss a “shotgun marriage” merger to end their destructive competition. Musk, pulling rank, had offered Thiel a lift. “I didn’t really know how to drive the car,” he tells author Jimmy Soni in “The Founders: The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley” (Simon & Schuster), out now.
Musk gunned the McLaren’s gold-plated engine. The force was more than he could handle. The car spun out on the busy Silicon Valley road, hit an embankment, went airborne and smashed on the roadside. Glass shattered, tires burst and the vehicle’s suspension snapped.
The crash could have killed both men and also destroyed PayPal — the company that revolutionized e-commerce and gave rise to YouTube, LinkedIn, Yelp, Tesla and SpaceX — before it even began.
But miraculously, Thiel and Musk were unhurt. They dusted themselves off, stuck out their thumbs and hitchhiked off to change internet history.
In “The Founders,” Soni tells the story of PayPal from its beginnings as a simple bill-splitting app meant for the now-forgotten PalmPilot device adored by pre-smartphone Silicon Valley. The app was the brainchild of Max Levchin, a 24-year-old computer programmer who had befriended Thiel, then 32, through a series of what Levchin calls “ultra-nerd dates,” bookstore meetings where they spent hours one-upping each other with brain teasers and math problems.
When the financier and the engineer launched Confinity, the geek crowd swooned over Levchin’s PayPal app, which let PalmPilot users beam money to each other — if their devices were in the same room.
It was impressive tech for the time, but limited. Then Levchin added an afterthought bonus feature to PayPal’s website: email-based payments.
Buyers and sellers on eBay instantly latched on. Within six months of PayPal’s November 1999 launch, the company had more than a million users.
However, Musk’s deep-pocketed X.com was targeting eBay users, too, enticing them with hefty sign-on bonuses that Confinity struggled to match. “It was kind of a race to see who could run out of money the fastest,” Musk said.
After the car crash, in the spring of 2000, the exhausted combatants agreed to merge under the X.com banner. But the merger proved rocky. Musk, still aiming for his ultimate goal of world financial domination, saw PayPal as merely a means to that end.
As CEO of the blended company, Musk insisted on the primacy of the X.com brand — even though customers hated it, focus groups found. “Again and again, the theme of ‘Oh God, I wouldn’t trust this,’” recalled Vivien Go, a PayPal marketing exec. “‘It’s an adult website.’” No matter: Musk ordered PayPal to be rebranded as “X-PayPal.”
Then Musk decreed PayPal’s code to be scrapped in favor of a brand new codebase meshing with X.com’s architecture. That was a blow to Levchin, whose PayPal code was full of quirks bearing his fingerprints — lines known to all as “Max code.”
“This … is just destroying my will to live,” Levchin remembers thinking in despair.
“I did not fully appreciate the emotional element,” Musk later admitted.
The furious Levchin staged a coup. When Musk headed to Australia for a long-delayed honeymoon, Levchin mobilized Thiel and other allies on the X.com board of directors and ousted Musk from his CEO position.
“Sneaky backstabbing bastards,” Musk said in 2019 — humorously, Soni writes. “Too scared to stab me in the front.”
Musk retained his stake, profiting handsomely when PayPal went public in 2002. The capital he realized from the company’s billion-dollar IPO helped launch SpaceX.
Today, Thiel and Musk are on good terms, with Thiel even joking about the car crash that preceded their success.
“I’d achieved liftoff with Elon,” Thiel told the author, “but not in a rocket.”
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