“So what can this thing do?” Venture capitalist Peter Thiel has ordered the passenger seat of a stylish 627-horsepower McLaren F1 sedan.
Elon Musk replied, “Look at that.”
It was in March 2000, a year after Musk, 28, sold his first startup for $22 million. He spent $1 million of it on the silver sports car, and then funneled most of the rest into a grand business plan: X.com, a massive Internet-based bank that aims to reshape the global financial system.
But his plans are blocked by Confinity, a company Thiel runs. The two were on the verge of discussing a merger of “The Marriage of Venice” to end their destructive competition. Musk, who pulled up the ranks, offered Thiel the elevator. “I didn’t really know how to drive,” he tells author Jamie Sonny in “The Founders: The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley” (Simon & Schuster), now available.
Musk fired the gold-plated McLaren engine. The strength was more than he could bear. The car sped away on a busy Silicon Valley road, crashed into a bridge, flew away and crashed into the side of the road. Glass shards, tire blowouts, and suspension malfunctions.
The meltdown could have killed both men and also destroyed PayPal — the company that revolutionized e-commerce and spawned YouTube, LinkedIn, Yelp, Tesla and SpaceX — before it even started.
But miraculously, Thiel and Musk were unhurt. They have dusted themselves off, removed their thumbs, and gone to change the history of the Internet.
In “The Founders,” Sony tells the story of PayPal from its beginnings as a simple bill-sharing app for the now forgotten and beloved PalmPilot in Silicon Valley before the smartphone was used. The app was designed by Max Lifchen, a 24-year-old computer programmer who had befriended Thiel, then 32, through a series of meetings that Lifchen calls “vulgar dates.” With puzzles and math problems.
When the financier and engineer launched Confinity, the geeky crowd indulged Levchin’s PayPal app, which allowed PalmPilot users to transfer money to each other — if their devices were in the same room.
It was a great technology for its time, but limited. Then Levchin added a later bonus feature to the PayPal website: email payments.
Buyers and sellers on eBay are instantly hooked. Within six months of PayPal’s launch in November 1999, the company had more than one million users.
However, Musk’s deep pockets X.com has also been targeting eBay users, luring them with hefty login bonuses that Confinity has struggled to match. “It was kind of a race to see who could run out of money the fastest,” Musk said.
After the car accident, in the spring of 2000, the exhausted fighters agreed to merge under the X.com banner. But the integration process was difficult. Musk, still aiming for his ultimate goal of global financial dominance, saw PayPal as just a way to achieve that goal.
As CEO of the joint venture, Musk insisted on the priority of the X.com brand — even though customers hate it, focus groups have found. “Over and over again, the theme of ‘Oh my God, I wouldn’t trust that,’” Vivian Jo, PayPal’s chief marketing officer, recalls. “It’s an adult site. Regardless: Musk ordered PayPal to be renamed “X-PayPal.”
Subsequently, Musk decreed that the PayPal code would be dropped in favor of an entirely new code base aligned with the X.com architecture. It was a blow to Levchin, whose PayPal code was riddled with his fingerprint quirks – streaks known to everyone as the “Max code”.
“It … just destroys my will to live,” recalls Levchin thinking in despair.
“I didn’t fully appreciate the emotional component,” Musk later admitted.
An angry Levchin staged a coup. When Musk traveled to Australia for a much-anticipated honeymoon, he rallied Levchen Thiel and other allies to the X.com board of directors and ousted Musk as CEO.
“Sneaky, sneaky bastards,” Musk said in 2019 with humor. “I’m so afraid of stabbing myself in the forehead.”
Musk retained his stake, making generous profits from PayPal’s initial public offering in 2002. The capital he made from the company’s $1 billion IPO helped launch SpaceX.
Today, Thiel and Musk have good relations, and Thiel even jokes about the car accident that preceded their success.
“It did take off with Elon, but not in a rocket,” Thiel told the author.