The Exchanges

Q All right. And, and this company that you launched was, was this, was this the company that you called field link?

A The, the very original name was Fieldlink because the idea was you would have all these salespeople in the field and they would have secrets on their Palm Pilots and you would have to encrypt those secrets. That was the, uh, the encrypted field link. And then it was kind of an awful name, even by my unsophisticated measure. And so I decided I wanted to give it a new name. So I spent a lot of time thinking about it and came up with Confinity, which was confidence and infinity combined. And I was very proud of this. And then I pitched Peter and he was like, sure, whatever. Like we have bigger problems. We need to raise money. And then I told someone else and they were like, oh, like a long con, like, okay, you're going to sell me security software by company with a word con in it. That's terrible. And so we kind of knew from day zero that continuity wasn't going to last, but that was the placeholder name for a while.

AI assessment note: “The, the very original name was Fieldlink because the idea was”

Q you needed eBay, you need to keep them happy, but you also knew they didn't like you, and presumably you had to start thinking about diversifying your revenue streams, because you were so dependent on eBay, and, and you're a public company, and your share price would have tanked if eBay kicked you off. So what did you, I mean, what were you guys doing to prepare for that possibility?

A That was the great, uh, unspoken or maybe spoken in, in the PayPal halls concern. So we were diversifying very rapidly. We were going international. We were trying to figure out what PayPal offline looks like. So maybe you'd go into a Best Buy and you use PayPal to buy things from the shelves instead of from the virtual ones and signing up all these partners outside of eBay. And yet eBay itself was growing so quickly. All of our attempts to diversify away from the dependency on eBay volume are kind of futile. Like imagine you have a company that's just growing a hundred percent year on year and you're providing payments. You better find something grows even faster. And there wasn't a whole lot like that going on.

AI assessment note: “So we were diversifying very rapidly. We were going international.”

Q this because, because Jeremy Stoppelman, who went on to found Yelp, and we'll get, we'll get to that later. Jeremy's been on the show in the past. He was working with Elon, and to him, PayPal, you guys were like the enemy. It was a battle to the death. But the two companies merged in March of 2000. How did that marriage happen? Who, what do you remember about that?

A It's definitely, uh, a long and, uh, winding story. So the very short version is not only is x.com extremely concurrent to PayPal. It's also literally in the same exact building. We were three and four university suite two. They were suite one, which we did not know about. And we realized that our number one competitor was literally our next door neighbor. And it had this super charismatic guy, Elon Musk, running it. He'd already sold Zip Two, and so he was both successful and wealthy, and he had succeeded in pitching Sequoia Capital. And they came at payments a little bit after we did, but they had some really good ideas that we didn't have. So very quickly, we start just looking at each other and going, oh, that's a good idea. We'll copy that, and vice versa. And we were in the market just beating each other up as hard as we could, primarily by way of offering more aggressive incentives to eBay sellers and buyers to join. That's when the intensity really goes up in like late April, early May, 2000. And as this happens, Elon hires this guy, Bill Harris to run X. And he was one of these guys who could sort of see one plus one equals three. Obviously these companies need to merge instead of beating the crap out of each other in the market. And so he was kind of the primary force behind that merger.

AI assessment note: “Elon hires this guy, Bill Harris to run X... primary force behind that merger”

Q And I think by March of that year, Something like a million people were using PayPal. So how did it grow so quickly? I mean, this is not, this is not a time where there's social media marketing, right? Like, were you, were you advertising, or was it just people discovering it?

A Two things happened. So the eBay seller community, it was unbelievably self observing. So anyone able to sell things on eBay would constantly optimize for selling things more and faster. People are starting to make careers out of it. And so the second a seller would see it, On someone else's site, there's like, what is this PayPal button? Oh, you click on this and it asks for a credit card number, like amazing. And so that was a very important growth vector. And then Luke came up with the original viral marketing idea where he had said, hey, what if we gave every new user who signed up 20 bucks, but not just 20 bucks for signing up, but 20 bucks to the person who invited them. And so college students in particular were, I think, going on these absolute vendors of inviting their friends and getting us to give them 20 dollars. But the eBay growth was entirely natural, and it was really based on just sellers spotting other sellers using it.

AI assessment note: “Two things happened. So the eBay seller community, it was unbelievably self observing.”

Q But if there's no, uh, late fees, right, and you don't, it's just a straight, you know, four payments, what's the disincentive to, to just not pay on time?

A Well, for one, if you're delinquent, you can't transact again. If you are, what's in the industry is evocatively called a sloppy payer, which is someone who generally pays their bills, but Are almost never on time. The normal financial industry behaviors say, great, you're a fantastic revenue opportunity. You have the money. You just don't, don't care about being on time and we'll charge you a fee for that. And so instead of doing that, we basically said, look, we will go out of our way to remind you and remind you and remind you. We'll send you multiple notifications through multiple channels, through our app, through a text, through an email. And we'll also give you an opportunity to set up A fully automatic kind of a timed withdrawal from your bank, just so you're not late. And for vast majority of people, this is more than enough and they are on time. But if something happens and you're unable to make the next payment, that's fine. But that prevents you generally speaking from transacting again until you're current, or at least until we understand what's really going on.

AI assessment note: “if you're delinquent, you can't transact again”

Q Did you, did you ever want to kind of be a, a twenty-seven-year-old with some money and, you know, get a, an awesome car and get a great place to live and just kind of blow some cash? Did you, did you ever do any of that?

A Eh, I, I attempted a, Poor excuse for that. Right after, uh, she broke up with me. I always wanted to live in a loft. Somehow I was obsessed with this idea of extremely high ceilings. And so I, I got this loft, uh, south of market in San Francisco. And, um, I decided to learn how to DJ. Uh, I think I was trying to call myself DJ irate. I'll leave it to, to, to, to the reader to understand what that meant. But I took a bunch of lessons, got some equipment, and then Start inviting my nerdy PayPal friends to come to my loft and have dance parties. And, um, I had like two or three, and then the neighbors complained. And I was like, wow, this is, this is quite a different level of misery. Um, probably shouldn't be doing this. And then I decided this whole thing was kind of silly. And, uh, I, I stopped.

AI assessment note: “I, I attempted a, Poor excuse for that.”

Q And, and what was the, what was the kind of thing that made you happy that, that you thought I need to do?

A I didn't know. And most of, I spent kind of brainstorming completely random ideas, but the probably most important output of that time, I wrote this essay for myself titled hard, valuable fun, where I try to sort of explain What is it that drives me? Like, why do I do the things that I do in sort of this rigorous self-reflection process? And the very shorthand is, it has to be difficult. I'm an engineer at heart. I like solving puzzles. And if it's not hard, I just don't really value it enough. And going all the way back to PayPal, one time I was working, you know, very late at night. I was working on some project outside of PayPal at the PayPal office. I was still kind of had enough time to, to tinker. Peter walked in, and he asked me, what are you working on? And I sort of described whatever program I was trying to hack together. He said, that sounds really difficult. I said, yeah, it's really hard. But is it valuable? I said, how valuable? I don't know. I, it's just really fun. He said, well, hard is not always valuable. Valuable is typically hard, but the inference doesn't work the other direction all the time. And it sort of really stuck with me. Like, that is such an easy way of explaining why a lot of puzzles are kind of worthless. And so, It's still important for me to build these really solve really hard problems, but they have to be valuable sort of a, you know, nod t…

AI assessment note: “I wrote this essay for myself titled hard, valuable fun”

Q launched in 2014, I mean, did you have to bring in a lot of money? Uh, did you have to have a lot of cash on hand or, or was all, were all of these sort of the interest payments essentially paid by the, the retailers and, you know, and then in some cases the actual consumer, you guys never, a firm never had to pay any of those fees?

A We certainly, we certainly did. So when we launched a product, you know, just the very, very first launch with one, 800. So the way the product was just from the cashflow perspective, as long as you're growing, it's a negative cashflow product. You approve a consumer. They get their flowers. You send money minus fees to 100 flowers. The consumer pays you back. First payment is due, let's say, 34 days from the transaction. So for those 34 days, you've already paid your retail partners. And you're waiting for consumers to come back and pay you. So at any given time you are waiting for money to come back and you need to continuously get more capital to grow the company.

AI assessment note: “We certainly, we certainly did. So when we launched a product”

Q Was your family at all religious? I mean, did you have any Jewish identity, or did they sort of stay away from it because it was, you could be persecuted in the Soviet Union if you practiced religion or Judaism, right?

A I definitely identified as Jewish, but had zero understanding of the religious identity or really the historic identity. So I knew nothing of Jewish holidays, but amusingly enough, one of the things that happened, so I, first of all, I guess I was in a Tracked program most of my life, so I would get into this math and science special track, and inevitably, because at least Soviet Jews were so obsessed with education, I would get to this new class, and it would be like half Jewish, and one time a teacher made a joke, and it was very much an anti-Semitic slur, and all of us kind of were a little stunned, because like normally it came from other kids, didn't come from teachers, but It also just happened all around us, so it wasn't, like, that huge of a deal. And then after class, some kind of a spontaneous movement began, where we're like, you know what, we shouldn't put up with this. Like, this, this isn't okay. And so we somehow talked ourselves into submitting a formal complaint to the school about antisemitism. Wow. At the time, which seems just completely misguided, because, like, maybe we'd still get kicked out of school. But I think both the school and the teacher were so shocked by all these Preteen, early teen Jewish kids getting worked up about being called, you know, the equivalent of, uh, you know, unprintable word in class, that they ultimately censured the teacher. A…

AI assessment note: “I definitely identified as Jewish, but had zero understanding of the religious identity”

Q Wow. All right, so you could integrate into the school system with your brother. You're a junior high school, basically, and was, was it hard for you when you got to school?

A So academically was not. I definitely had my fair share of you're not from around here type conversations. Uh, but I was fortunate in the sense that I went to a very normal inner city public high school in Chicago. It was something like 30% black, 30% Asian, 30% everything else, 10% people you didn't know exist there. I mean, just some sort of a Very, very, very integrated mix of anyone and everyone. And so this was not a, oh, wow, you're not from around here. It was more of a, oh, you're one more of these people who speaks with a funny accent and does math really well and plays clarinet. Okay, you know, we have three of you over there in the corner.

AI assessment note: “So academically was not. I definitely had my fair share of you're not from”

Q No, no shame there. Um, but you did, did have the, summon the courage to go talk to him. By the way, was it a packed lecture hall? Was it like hundreds of people?

A No, actually the, the reason I didn't sleep was because it was literally six people in a tiny little room. It was about as big as a broom closet. And I was like, my first reaction, I remember very vividly going like, oh my God, I can't walk out. I can't even sleep because the lecturer, this Peter guy will see me and probably mock me or something. So I just kind of sat there and listened. Uh, he had another person who came up to him afterwards and you could tell from the look on his face that he was not enjoying the conversation. He just looked absolutely miserable while he was Was being sort of interrogated slash talked at by some random person. And so I sort of decided that my, my move would be to free him from the grasp of this, uh, this person who was interrogating him. So I sort of came up and said, hi, Peter, I'm Max. I'm Luke's friend. And I think he probably didn't necessarily know which Luke I'm talking about, but he was like, oh, Max. Yes. Great. Great. I'm so sorry. I have to talk to this person. And so he just kind of abandoned the guy who was torturing him and started talking to me.

AI assessment note: “No, actually... it was literally six people in a tiny little room.”

Q Reed Hoffman, who's been on the show, was on the show a few years ago on Um, and if you want to hear a story, you should go back and check out that episode. He went on to, to found LinkedIn. Um, was he kind of just hanging out as a friend, or was he, did Peter, like, bring him on as an employee of, of this company?

A He was a board member of ours, and he was running this company called, um, Social Net, I think it was called, and it was failing. I actually remember visiting Reed at his company, and it was like one of these Like, stark kind of a visual. Like, I, I'd already failed four times, so I was perfectly comfortable with failing companies, but I'd never seen a large-scale failing company. And I walked into his office, and it was dark. It was middle of the day, and it was just like, no people there at all, lots of desks. And I was like, wow, this is so depressing. And that's when Peter sort of said, look, you should join our board, and maybe you should join our company. And so eventually Reed, of course, joined PayPal as a full-time employee, but at the time he was a board member, and so he was mostly hanging out with us and brainstorming.

AI assessment note: “He was a board member of ours... eventually Reed, of course, joined PayPal”

Q Hmm. Okay, so I've read that as a kid, uh, in Ukraine, you were, you were already getting into computers, right? Like you were already learning about, about programming, right?

A Yeah, uh, it looks like a whole collection of really lucky coincidences. So as my mom joined this food science research institute, the state gave her an order to learn how to program, and she wrote me into it and basically said, look, you know, I'm not really sure I understand how this stuff works. Help me out. And so that was my first kind of rabbit hole into programming. And within a few months, I was a better programmer than my mom and then better programmer than her colleagues. And I was just gorging myself on all the knowledge that I could get from bootleg translations of various computer science books. And so by the time I got to the US, I was completely hooked on the idea of writing software. And I, I knew that I wanted to be a software engineer. I knew I wanted to go somewhere, sort of beg, borrow, and steal, get my way to a keyboard in the monitor.

AI assessment note: “And so that was my first kind of rabbit hole into programming.”

Q But one of the biggest challenges you guys faced at the beginning once you launched was fraud, right? I mean, there was, I mean, the company was like losing millions of dollars a month from fraudsters, um, who were, who were trying to figure out how to outwit the system.

A Yeah, we started noticing kind of all these maybe illegitimate transactions, maybe people kind of buying things from themselves And then taking the money out of the system. And then we'd realize that, oh, the credit card they use was actually not theirs. It was stolen. And then it just hit very, very hard. Sometime in April of 2000, we saw just this enormous attacks primarily from my former homeland, uh, or the general region, like all those were the Eastern block countries, basically realizing that this is a very loosely secured financial system. And at the time, the sort of idea of securing Private information, things like payment credentials and what's now called PII, personal identifiable information, was really in its infancy. And so by mid June, I think I was starting to sort of become aware of the fact that we're probably losing tens of millions of dollars to these fraudulent activities per quarter.

AI assessment note: “we're probably losing tens of millions of dollars to these fraudulent activities per quarter”

Q Wow. So what, what was the next step? I mean, with a 300,000 dollar investment, did he say go and raise the other 200? Did he say go start working on this? What, what, what did he say go hire somebody? What did he, what did you do?

A I think he originally thought that I kind of had a plan and he would just sort of write me a 300,000 dollar check and then off you go. And he did say like, look, you need to go line up the rest of the money because this isn't going to be enough. You just told me you need at least a half a million dollars. And so I sort of immediately owned up to the fact that this is my first and only successful fundraise. And so I probably could use some advice on how to do it. I said, okay, well I'll, maybe I'll help you out. And he had this guy that worked for him in Teal Capital Management Kind of his, his second in command named Kenny, Ken Howery. Uh, and you know, Kenny will help you. Kenny's very good at fundraising. He helped me. And so Kenny got to work and made me a pitch deck. And then I went into pitch some randomly selected venture capitalists and they were all one by one telling me how this will never work. It's a stupid idea. And it was just like rejection upon rejection. So at some point I went back to Peter and said, all right, something's not working. Like you bought this and Kenny helped me with the deck and But it's just not landing with anyone. What do I do? And so he said, fine, I'll help you. And so he started coming with me on these venture capital pitches.

AI assessment note: “he did say like, look, you need to go line up the rest of the money”

Q were still there. Um, and October of 2000, Elon Musk becomes the CEO. By the end of that calendar year, uh, the board ousted him. They fired him. Uh, what do you remember about that? I mean, he, it was, this was not a personal thing, or maybe it was, but it was, from what I understand, it was really just a fundamental difference in how to operate the company.

A Yeah. Um, yeah, I, I remember plenty since I was very intimately involved. Uh, it's fairly hard to unpack, I think, to the sort of uninitiated, I guess. On the one hand, there's all these raging emotions, and you hate each other, and And then you merge, and it's a fifty-fifty merger, which means just no one knows who won. And that's, by the way, sort of the root of all complexity at paypalx.com story is that because we sort of settled on this, well, there's not really a senior partner. Equity's just split evenly. There was no sense of, well, who gets to pack up and go home, basically. And so as this sort of thing unfolded and unfolded and unfolded, the emotions ran very high, and people were meeting clandestinely in coffee shops. But it was certainly not personal. In fact, one of the sort of most telling things about Elon is that after the board coup essentially left him without the CEO job, uh, he wanted to meet one-on-one and sort of, he and I met at the parking lot of, of PayPal. And he sort of sat on the curb. I didn't doubt the validity of what just transpired, but I, I felt incredibly sad for him, and all he said, like, why did you do this? I said, you know, I, it just seemed like the correct thing to do for the company, and I'm really sorry the way it all went down. I said, I understand, but I don't understand. And, uh, then we didn't speak for a few years, except for, f…

AI assessment note: “it was certainly not personal. In fact, one of the sort of most telling things”

Q Um, meantime, this incubator was also a place where you could come up with your own new idea. Um, and, and the idea that you eventually land on was a company called Slide. For people who don't remember what it was, can you just briefly describe what Slide did?

A Uh, it did a lot of things. And therein lies this problem. Uh, the very original idea was, uh, This realization that I had that content online will start to become more like TV, where you do nothing and just content washes over you. And this is before YouTube. So this idea of video on demand on your desktop just wasn't a thing yet. And video, by the way, was very, very expensive to stream and to post and to encode. And so I thought, all right, so video isn't a thing yet, and maybe it won't be a thing for a while, but What's the closest thing to a video that people could interact with at the same way they, they interact with TV, where you get news and you get content and you get beautiful images and maybe ultimately get advertising and that's how you monetize it. And so I come up with this idea of a kind of an application that sits on your desktop in a corner, like sort of a tape that just scrolls images of things and goods and advertisements and stories and news, and you get to configure it. And It was inspired in a way by a much earlier company that died in the dot-com crash called the Pointcast.

AI assessment note: “an application that sits on your desktop in a corner, like sort of a tape”

Q Um, I mean, it's, it's interesting, because I, I would imagine that you, you were able to attract really great engineers and, and a great team because of your reputation, but what was, what were the problems that had, had, had begun to, to unfold?

A Probably the most important learning from, from the problems is that, this is going back all the way to PayPal, but PayPal was this unbelievably combative, um, Kind of a truth-seeking, by any means necessary, almost, culture. And when I left, I thought to myself, you know, next time around, I wonder if we have to fight so much. Like, maybe it's better if we had a little bit more love all around. So as I was building Slide, I over-indexed on this idea of, hey, we really have to have just a lot more collegiality, and that works really well if you are doing great as a company. But inevitably, every company goes through ups and downs, and sometimes downs take a long time, and, you know, you go through the pit of despair for a while. And in that moment is when all the veneer is stripped, you know, sort of all the superficial, you know, such a nice guy, and, you know, I, gosh, I just really enjoy spending my time with you, goes away because you start to ask yourself, whose fault is it, and why are we not doing well? And the professional emotion, if you will, you need at that time Is respect for your partner's abilities. You don't actually need to feel like that person is an amazingly nice guy. The key thing is I know you will be in your foxhole holding your position sort of almost like a military level intensity. And as slides start unraveling a little bit here and there, I noticed t…

AI assessment note: “I noticed that there are all these people who are extremely loving towards one another”

Q I'm curious, having gone from running PayPal, which was about, you know, financial transactions to a really sort of much more consumer-facing Site that was more about fun, right? Did you enjoy it? Did you You know, did you find your passion for it?

A The honest answer is I loved the team that I built, but we had some pretty serious challenges throughout. There were multiple sort of realizations on my part that the culture wasn't going the way I wanted to. One point I had to ask a couple of people to leave because I thought they were just creating what is now called toxicity in the team, blowing the company up from within. And throughout the whole thing, I felt like a fraud. Like I never played video games growing up. I was not really into photography. I was not a photo sharer. And so this idea of building entertainment products was this sort of mask I took on. And, uh, in, in some ways I was using my own product in real life. I was putting sort of a happy face sticker on max left.

AI assessment note: “throughout the whole thing, I felt like a fraud.”

Q gonna do, um, and from what I understand, cause the first time this happened, you really, it was, it was a rough period, I mean, personally, cause you were lost, you didn't really know what, what to do. Um, did you go back into a slump? I mean, this time it was different, you're married, you have a kid, I think you had at least one kid at that point.

A Uh, we, we had the second one just as I was leaving Google. So this is the same wonderful Nelly and now plus two kids and, uh, a puppy. And my primary thought at the time was, hey, last time I ended up almost losing everything. So I am definitely going to go start some company or do something to keep my brain occupied. Otherwise I run the risk of being told to, uh, move out again. And so I was actually very, very keen on finding something interesting. And in fact, I was like literally talking to people to start brainstorming maybe the day after I walked out of Mountain View for the last time. But I, I also decided I would take longer figuring out what I want to do because throughout Slide for sure, and even throughout Google, Nelly would tell me, I know you're going to start a company. Next time around, just sit back and ask yourself what would make you happy? What, what is the thing that you're really meant to do?

AI assessment note: “I am definitely going to go start some company or do something to keep my brain occupied.”

Q but even as a student at Stanford, he was, um, he was a bit of a lightning rod. What, why did you trust him? Because, you know, it could have gone really badly, and he could have, you had no experience dealing with cap venture capital investments. Like, you didn't probably know how to structure the terms or your equity. What, what was it about him that connected with you?

A I think the sort of the pragmatic answer, I had, Absolutely nothing to lose. There was nothing to take from me. And so in terms of risk reward, it was sort of like the worst that can possibly happen is I I'll go from nothing to nothing. So there's, there's just very little downside. The thing about Peter that I think most people who don't know him just can't fully relate to. He has this amazing ability to see What you are great at, and he gets so excited on your behalf to be your best self, as the kids will call it these days, that you can't just not get infected. You become this ball of energy because this guy, Peter Thiel, you barely met, is just so excited about how talented you are in this one area, and you will change the world, and And he wants to be a part of it, and he wants to be an investor in it, he wants to be a partner, a new friend, and he's clearly genuine in it, and kind of go like, I didn't even know I am that good, and this guy is telling me he can see it, and he's doing it with his entire body, he's that excited. And I was still knee-deep in my various imposter complexes at the time. I was this immigrant kid, I wasn't quite sure if I dropped my accent fully, and I was supposed to be a PhD in computer science, but I just got a bachelor's and ran away, and And he was just so genuinely excited to build this thing and to help me build it. And, uh, I think that it…

AI assessment note: “I had, Absolutely nothing to lose. There was nothing to take from me.”

Q Who's heard of MTI? The Montana Technical Institute.

A I think my, my counselor may not have heard that one either, but, um, she basically said, like, you've never taken an ACT, you've never taken an SAT. You're as fresh of the boat as they come, just like, you know, get your bearings and then you'll, you know, you'll, you'll, you'll get to the right university. And so I, I was quite discouraged. Uh, but fortunately I met this great guy named Eric, who is still one of my very closest friends. And I said, all right, I'm, I really want to go do computer stuff. Where do I go? And he said, you know, the, the brightest kids from this school get into University of Illinois at Urbana-Champaign. And that's where I'm going to try to get into. You know, if you want, I'll, I'll show you how to get the paperwork. And that's how I ended up at U of I.

AI assessment note: “I think my, my counselor may not have heard that one either”