Episode 11: PayPal
58:41 Share

Yeah, in fact, there was drake lyrics. I got enemies, got a lot of enemies, got a lot of people trying to keep me from. Yeah, I don't another rest, but it's great.

Busy you, busy you with the you who got. Easy you busy you with you see me down say welcome to episode eleven of acquired .

the show where we talk about technology acquisitions that actually went well.

i'm been govert.

I'm David and this is our show today. We are talking about ebay acquiring paypal, an older acquisition um one that kind of set the tone for a lot of a modern technology acquisition. Change the valley forever, birth the paypal mafia. Lots of great stuff to come. But first wanted to remind you if if you have not yet and you like the show, would really appreciate review on itunes now.

And I always hit us up on twitter, acquired a required FM or egg allibert, or at D. J. rose. We love feedback.

We do, we promise, will listen to try, make a Better. We've heard rumors that audio, audio was a little quiet in the past. So um working hard to to make sure that we at least that is appropriate listening volume.

Now we're iterating. We are we are a little start up ourselves as cute. Um also I apologize for the last like months of new episode. We ve got some people saying, finally a new episode, idc l surgery, but a real human now and fully off the oxycodone. So we're back in action.

Should know ben has been a real twitter here you we were recording last time you are what? Like five days post surgery? married?

Yeah yeah that was I was barely post xy coto de but yeah stayed from the architect kids. That's my advice.

okay? Listeners, now is a great time to tell you about long time a friend of the show service now.

yes, as you know, service now is the A I platform for business transformation, and they have some new news to share. Service now is introducing A I agents. So only the service now platform puts A I agents to work across every corner .

of your business. yeah. And as you know from listening to us all year, service now is pretty remarkable about embracing the latest AI developments and building them into products for their customers. AI agents are the next phase of this.

So what are A I agents? A I agents can think, learn, solve problems and make decisions autonomously. They work on behalf of your teams, elevating their productivity and potential. And while you get incredible productivity enhancements, you also get to stay in full control.

Yep, with service now, A I agent proactively solve chAllenges from I, T, H, R. Customer service software development. You name IT. These agents collaborate, they learn from each other, and they continuously improve handling the busy work across your business so that your teams can actually focus on what truly matters ultimately.

service. Now, an agenda I is the way to deploy AI across every corner of your enterprise. They boost productivity for employees and rich customer experiences and make work Better for everyone.

Yeah, so learn how you can put A I agents to work for your people by clicking the link in the shower notes or going to service now dot com ash, A I dash agents. In .

fact.

man, I am excited .

for this episode. De there is so much to dive into an unpack here um so I will get through the acquisition history in fact quickly but first a quick note um we're going na focus this show on the first act of paypal um the the founding um the acquisition by ebay and then um then the the first period of history there after we may do a future show on the spinal ah that happened last year a where paypal was spend back out from ebay but and and we could also do another show on paypal as a acquire sure themselves have .

done a few interesting ones.

especially recently so much, much interesting stuff with this company.

But there's definitely a whole episode for us to do.

There's at least one more episode in the tank are. So with that, okay. So december nineteen ninety eight, Peter tio, max levin and Lucy sic. Found a company that they call confining and they decided to make an applications, a payment and crypto phy service for palm pilots.

Amazing, like the paypal that we used today started to be money back and forth between palm pilots. Quickly they .

realized that that's a small market and they uh in one hundred and ninety nine ah they decide to switch over and start working on the money transfer service that y've come up with and they call the product paypal. Also in one thousand eight ninety nine guy named elon musk my department. Uh he uh, fresh off of founding and selling zip two starts, a company that he calls x that com as an online financial services and email payment company domain .

to achieve back then.

Yeah, she's eta com. March of two thousand. Uh, short while later, they decided to merge, apparently orchestrated by a Michael mertz koa who was an investor community neither confirmed nor denied but that's what the internet is.

Um and iron from extra com initially remains the CEO of the company that quickly changes. And Peter T O. Comes back as a CEO of the combining company in october of two thousand, elan was still the C.

E. O, and he makes the call. The paypal product is doing so well that they focus all the efforts of the combined company just on paypal. And then in two thousand one, they re named the company as paypal.

Yeah there is a classic case of elon being elon and doing what he does best and that's focus.

Yes no more pm pilots um and and then in february two thousand, two paypal goes public um and it's actually this is interesting remembers this is february two thousand two this is after the crash, uh after the the dcom crash and this was the first consumer internet company to go public in eighteen months. And and IT does pretty well. Paypal has a close on the day.

The IPO has about at one point two billion dollar market cap um and very quickly there, after only a few months later in july of two thousand two, ebay announces that they're acquiring paypal in an all stock deal depending on how you count on how you account for the transaction. Somewhere between one point two one point five billion dollars, which was about a twenty percent premium to the stock's closing Price the day before. So interesting and more we're going to die far more deeply into this.

But um pretty quickly, the whole team leaves within, I believe, the status within four years of the acquisition, over half of all paypal employees have left um and interested in including all of the founders of both infinity and next 点 com。 Um and interestingly, they're actually the history of the paypal. The president of paypal within ebay has been A A little bit of I don't I don't want to say a hot seat, but some interesting figures have gone through there, including Scott thomson.

Do you remember him then? This is the guy who left being the president paypal to become the C. E. O of yahoo. And then IT was very quickly revealed that he had completely fabricated his resume.

his pre paypal resume yeah I believe .

IT was that he I believe I could be wrong and this was that he said he had a computer science degree and IT turns out he didn't have a college degree at all.

Um yeah, that was a whole big controversy in then ended up in the mar afterwards coming to ahoo um after him David Marcus, who had actually come to paypal from the acquisition of song, which was a payments company that he had founded, was the next president and he is now running facebook facebook messenger so yeah and then paypal remains part of ebay for thirteen years um during which sees meteoric growth and then in july of twenty fifteen has mentioned ebay under shareholder pressure from carl icon um spins off uh paypal into once again a separate stand on public literature company。 And when they do um paypal is worth at the time when IT begins trading about one and a half times a the value of ez. So IT is significantly more valuable than all of ebay. And today paypal has about a forty six billion seven market cap as a public company.

In the question we're here you would address today is, was that a good decision for ebay to pay that call at one point three billion dollars to in house paypal, given where they are today?

So much to unpack actually, no doubt.

Yeah I mean, we take this from a shareholder of eva's perspective where we assume that they end up with one paypal share and one ebay share.

which is what happens at the same yeah yeah.

that feels reasonable. I think we can talk a little bit about the actual impact that I had on ebay core marketta business. But um it's I think it'll interesting to look at how did IT feed to the marketplace business and how did the paypal business grow and would the paypal of business have grown like we seen IT grow if you they hadn't acquired IT.

let's do IT. So we started with acquisition category.

Yeah, I think I think there's like a few questions that I sort of want to get to before we categorized. There's A A few interesting no gets in here. The biggest one that I I think is interesting is ebay transactions generated two thirds of paypal es payment volume at the time of the transaction.

So here's paypal where they finally have found product market fit because people seem to be using at all the time for this ebay thing. And you know they're not really succeeding in in peer payments. They're getting in bedded on some websites, but that business is largely fed by the fact that ebay sellers are using IT on other websites that they Operate ebay effectively their their entire market segment and their distribution to to get to new markets.

And and so what was the ah what was bending was watching to me a quote was that a Peter teal quote that paper power was essentially an APP built on top of ebay.

I know maybe I read that .

somewhere yeah yeah .

maybe that's .

essentially what IT was yeah no that .

that's a precarious position for a company. Ebay was in house building a very similar solution and they were partners with wells fargo. I think he was called bill point.

And um you know in looking at kind of the um the way that ebay was facing decisions at this point was okay. We love electronic payments in our platform. I think at the time of the paypal acquisition, IT was about a third let's see uh, forty percent of ebay transactions.

Um and meg White men who was A C O. The time, said that he hopes that failure will increase dramatically. And so ebay highly incentivize to make these really fast electronic transactions occur. They built bill point in house.

It's an interesting sort of business on its own clearly as as paypal was demonstrating and ebay faces this decision as okay, one in four um uh auction on our platform are settled with ebay. They're pretty much entirely dependent on us with pal. Sorry, that with the paypal, they're pretty much entirely dependent on us.

Yes, we could buy them. We could build a single house, which they did call bill point. We could cut them off, but that exposes them to risk of regulatory pressure. So there's an interesting dynamic going on there where on the it's like a game of chicken.

like not to mention that this product, uh, the paypal that the papel team at build is really, really hard.

Yeah and and among other things, like the way that they actually got um classified as not a big but I think of money money transfer service. There's a lot of regulatory things that they did that we're really hard. But from a product perspective, making people feel safe sending money over the internet when the internet is to this image thing and then actually backing IT up with the fraud detection and there's bodies buried all over the place in these paypal like services at the time, they didn't succeed because they could not keep a little on their flood detection.

Yeah absolutely. And interestingly, which will get more into later, you know the core of paypal s flood detection technology became the the inspiration for palante er w interesting .

I don't me I knew is peer tiled but as as like other people from yeah .

some of the some of the core engineers that worked on for rad detection at paypal um help start pantier with Peter deal. And a lot of that technology came from um the frag detection days of a people. You think about the if you think about the types of jobs that machine learning is like uniquely qualified for, the fraud detection is like right up at the time.

Yeah I we let's move .

in the category and I think I think we can discuss pack them as we go go so i'll go first with category. Um you know I am gna say a business line here, but it's an accidental business line.

Um I would you know without knowing um without doing exactly what the ebay executives we're thinking at the time, I could imagine that they thought about this says a feature acquisition almost you know um we cash payments are a critical electronics payments are a critical part of our products and our marketplace. We've been trying to do this ourselves. These paypal guys are doing IT way Better. We should despite them and implemented them as as the feature on the site. And then over time, IT turned out that that was actually in and of itself away bigger and Better business than ebay itself.

Yeah, it's interesting. I think they tried to get into the peer to appear payment space. I mean, I think yeah, I was there's a very apple thing to do is a very we want to create the best user experience by making sure that we control all the key components of our product. And you know I think which is crazy .

to back up for a minute. Um at the time of the acquisition, you said about forty percent of settlements on ebay were being done electronically. That's first total. So that means that means sixty percent of ebay transactions were not settle electronically.

Yeah, I know I trying to feel this as, I mean.

mAiling checks around, I have no idea.

It's crazy. Yeah, it's it's easy to forget amazing what fourteen years ago, what the world is like you can .

just was in high school, people were by mini babies.

And I was selling mini babies on ebay. I think I made about five hundred, five hundred fifty box. I saw a jerk sy, a bear for three hundred and fifty.

Oh, man, I remember that way.

yeah. And like an inch or something for one .

hundred is just I think we should take a step back to and just do a little more stage setting here, which is it's it's hard for us remember. And you know, I would argue fairly Young like to think of myself is fairly Young but these were the days, I mean, I was like.

David haven't got na snap for .

me in a while. I love snap out. You're just not on my you yeah.

that must be but .

I was in like, I was like a freshman sofa in high school this time. And these were the days like you to ride before the bubble burst. When I remember my classmates trading internet stacks during breaks between between classes in high school my freshman year, I remember remember one of my buddies buying a whole bunch of western digital stack, which is a hard drive.

best hard drives, or are just, you know, using a lot of hard drives right now. My computers, I think you nail that. I mean, I think ultimately IT was a control play where there was risk that was going on by paypal, know, having a large part of their business dependent on something that in control and they wanted to bring that in house.

IT was a they saw as an excEllent to their business to make IT more reliable that you were going to get paid by transacting on ebay. They were clearly building at themselves and an opportunity to bring this in house, probably the right one. And they took IT. Now what IT turned into, I think, was a behemoth that they had no was not in the cars at the time.

And to be super interesting to to look at what wasn't make women's head and if they really thought that this could be something that they grew independently because I think there's been a lot of discussion since then kind of like hindsight is twenty twenty that that was the vision the whole time was to grow this this you know, new, new internet business where we can just transfer money anywhere all the time. And I think that was the original vision for paypal. But they very quickly realized, like, wow, there's A A very specific need for when people need to transfer money. And that that very specific is after options on ebay, you so you know today it's going to do something treumann ously bigger and I don't think is what they saw. So I think they thought they were requiring a future.

I think that's likely true. Um and it's interesting to you know one of the sort of afro isms in in the tech world as you can build a big company, a really big company on the back of somebody else's platform. And this is the example that both proves and breaks the rule.

No became a huge company, obviously, and did IT on the back of the ebay platform but ended up having the cell to ebay because they were so captive a to that platform. You know what I guess this gets a little bit into the what what had happened otherwise. But um you know how could you imagine in those those fragile early days, I mean, remember this was thirteen IT was thirteen years between the acquisition and the spin off when a all the vast majority of of the now value in paypal was created. Could that have happened if during those early years when I was so much dependent on ebay, IT had been a separate company in ebay, had had you know could have made changes to .

completely nek a paper well.

I think we're definitely the week moved to the would have happened otherwise segment socially officially um but it's interesting too to think about this. I'm thinking about this question of you building a big company on the back of somebody else's platform. And I think perhaps you could make an argument that um you can do IT if you can essentially read the platform, get all the users from and then move, migrate them to you to your own platform.

So I am thinking about, you know entrusts grew really fast in the early days for a bunter reasons but one of them being that um of folks remember they really figured out viral facebook uh, user acquisition. I was getting messages all the time, emails from facebook. You know, my friend ben is just join penter's.

Do you want to join as well? And and and those user of pinchers was successful ly able to migrate those users over to their own ecosystem. And now think about paypal back in those early days when IT really was just ebay that was the primary use case. Um I don't think they were migrating anybody from using paypal to settle their ebay transactions to them doing pear to pear money exchange, which is the big business that paypal es built over time. Yeah but would they have been able to do that successfully had they not been part of ebay?

I don't know. Yeah, the companies have done that well, have been really sneaky about IT and have like succeeded and and flown out of being crushed like just in the neck of time. And you even see like a good thing was actually linked in right? They grew on the the back of stealing entire address book and not emAiling everyone. Yes, and and only costs them like one one hundred million dollars or something a few years later, when there was a joke into class action suit for doing that. And you know there are real and successful company because they they pick you back off that .

existing work or think about A B B their bunch articles out there. And A B B doesn't talk about IT that much. But definitely in the early days, they were auto posting the craig list and pulling a whole lot of both supply and demand out out a crazy list and onto their platform. But again, I think the key is you have to you have to kind of x treat the users and then and then keep them captive within your own ecosystem.

right? And I I was Young at the time, but I don't necessarily remember ever like paper. I only existed to me when I was again selling beni babies. And then boys go patches on ebay as my way of transacting on ebay IT never really seemed like the purpose of IT was to anything else. Yeah, yeah, yeah.

interesting. So had ebay not acquired paypal when I did pair was a public company. Um what would have happened to both companies you so maybe every year we've just been talking about perhaps would have been hard for no, ebay couldn't made life really hard for them. What about what about ebay? What you are talking earlier about what's the value that paypal brought to the ebay marketplace?

Well, IT similarly, could paypal have made life hard for ebay? IT, could paypal have done something?

Where could we've started their own marketplace .

attached to pap? Wo yeah that I mean, that seems like almost seems far fetched. It's like it's such a such a different and large business. Um yeah I know I don't think papal had a whole lot of power over ebay other than if they went away.

Maybe people would have been kind of uncomfortable with the electronic platform that ebay was providing because IT wasn't as secure yet, but I bet ebay would have figure that out pretty quick yeah I mean, imagine I think this is a slim scenario. But you can imagine a scenario where. Paypal finds a different market besides ebay, the money transfer when they've grown into today, which you know people eventually to become very comfortable with.

But we're uncomfortable at the time. So they probably would have had to write out some tough times for a while if they had moved away from ebay. And ebay maybe doesn't figure that out and figure out the fraud detection.

And then people are uncomfortable transacting on ebay and they never get everyone on board to their own payment platform. And people don't like using ebay. I because they still have to use an analogue system and then someone comes along in builds IT all feels far fetch.

Actually, the more I talk about IT, it's like they would have figured that out actually before that paypal just never would have moved away. I mean, that was like that was the the cash cow that was there. There finally, they had found product market fit in in being effectively like of a vender, a supplier for a apply a vender for for ebay. So what would have happened to ebay? I can I can't imagine a scenario where ebay doesn't win here.

I think the only wealth, not the only, but one potentially negative picture you could paint for ebay here is, if you think about over the subsequent thirteen years, betwen, the acquisition and the spin off paypal grows so much that IT is call IT sixty, sixty five percent of the entire value of the company maybe have been seventy percent.

And and certainly all of the growth engine of the company, would ebay have been able to recruit and and attract and retain top quality talent. If I didn't have this, I didn't have this really sexy growth business attached to IT. You know what? Ebay of stagnated a lot earlier.

That's a great point. Yeah I mean, that I think that's predicated on the idea that like IT was IT could actually that status or that state could actually persist for many years, the state of them being separate businesses and both of them needing each other that symbolize a relationship.

IT seems hard. I mean, we're biased by history, what actually happened here, but IT does seem hard to imagine these two companies .

existing separately. Yeah.

until you get to the point where you are now where paypal is really a large viable business with with ebay only being minted.

Yeah I mean, in my opinion, if it's like here's here's what happens if ebay doesn't acquire paypal in july to october of two thousand and two, ebay acquires paypal for a different Price at a different time. I don't think to .

think whether that would be higher or lower.

Yeah.

could go either way. That's true. All right, listeners. Our next sponsor is a new friend of the show, huntress. Unrests is one of the fastest growing and most loved cyber security companies today. Its purpose built for small amid size businesses and provides enterprise grade security with the technology, services and expertise needed to protect you.

They offer a revolutionary approach to manage cyber security that isn't only about tech, it's about real people providing real defense around the clock.

So how does that work? Well, you probably really know this, but IT has become pretty trivial for an entry level hacker to buy access in data about compromised businesses. This means cyber criminal activity towards smaller.

medium businesses is at an all time high. So hunches created a full managed security platform for their customers to guard from these threats. This includes end point detection and response, identity threat detection, response security awareness training and a revolutionary security information and event management product that actually just got launched. Essentially, IT is the full sweet of great software that you need to secure your business, plus twenty four seven monitoring. Buying a elite team of human threat hunters in a security Operation center to stop attacks that really software only solutions could sometimes miss hundreds, is democratizing security, particularly cyber security, by taking security techniques that were historically only available to large enterprises and bringing them to businesses with as few as than one hundred or one thousand employees at Price points.

That makes sense for them. In fact, it's pretty wild. They're over a hundred and twenty five thousand businesses now using countries, and they rave about IT from the Hilton PS. They were voted by customers in the g two rankings as the industry leader in end point detection and response for the consecutive season and the industry leader in manage detection and response again this summer.

Yep, so if you want cutting edge cyber security solutions backed by a twenty four seventeen of experts who motor or investigate and respond to threats with precision, head on over to huntress dot com slash acquired or click the link in the show notes are huge thanks to huntress.

So we've to tech the ims. Yeah, yeah, I think .

that's interesting. SHE.

yeah, I got well, I really want na dive in. Hearing this is somewhat related to the acquisition, but I think we would just be remiss if we didn't really talk about, I mean, for me, this is the paypal mafia, you know, I mean, I think you could make a very valid argument. IT might even be hard to argue against a thesis that this single event, this acquisition of paypal by ebay, was the catalyst to create everything that we now know of as silicon valley and the technology started up. Ecosystem will unpack this, but just the the chain of events set in motion by this acquisition is really incredible.

Um when you think about the people that we're at paypal and there's there's a great um there's a great article on the tech republic willink to IT in the showing tes um about its titled believe how the paper al mafia a redefined success in silicon valley and many of many of the founders of of paypal talk about how they were all these incredibly Young, ambitious people and they've um they've just been through this super difficult but exhilarating ating experience at payout where they to figure out a whole bunch of stuff that had never been done before, like we're saying was really hard. And then they made a bunch of money and then they showed up at ebay. And IT was a complete culture clash and they hated IT there.

And they all left quickly, but they were all still really Young and ambitious and wanted to prove themselves. And so you just go down the list of company. So you talk about just and talk about two sets of companies here. The first are companies founded by paypal alums linked in yet yelp, youtube, pantier space, tesla and then redit was not founded by youtube alarms, but was the CEO of reddit for a while. You should long was a youtube a payer um and then and then so that companies actually founded by this group of people and then companies other companies in silicon valley and related in violence where paypal mafia and I were very early investors or advisors or instrumental in starting the company, facebook, uber, airbnb, square, penta stripe and this is good on and on and on yeah I think you're talking practically practically every company a every major company that silicon valley is produced since that acquisition countries its history, either directly or indirectly to to the paypal. Aloha, yeah, I mei made a joke today.

Before the show, I was reading up and I was like, huh? We we could get a guest for this. But all the people that were there are so insanely rich that why would they ever to go on a podcast? And I think the funny thing is like it's it's not from it's not from the money they meant from paypal. No, I mean, people got rich like people got hundred million rich, but or at least like high tens. But don't .

forget they're been a lot of delusion. The paypal, I mean, they're raised, I believe, a one hundred and eighty million dollars. I think that includes the capital that had raised in the IPO.

We've been a merger of companies. There are a lots of founders. There is no way that individually any of those people became hugely felt y rich after that accusation.

Sion, yeah. IT was IT was more about what a whole bunch of really smart people recognized did after that and opportunities that they saw because of the way that they grew. Papal me, paypal.

Actually, this is this a good cycle. And what I was thinking about, paypal sort of invented a lot of the paradigms that we see in startups today. So I I think the first one, they were the first business to do the whole if you invite a friend you get free money thing.

And it's it's like sort of free money now like a cool. If I invite friend of uber, I get fifteen dollars in my work count. Like people I literally gave you a dollar dollar or five thousand, they literally gave you money. He was like, if you, they would email their friends who like, congratulations, you have three dollars.

They invented viral acquisition. Yeah, yeah. So yeah. Mean, what I was talking about, the company founding in investing part, what's talking now about the the actual strategies, tactics that are just now common place? You know they basically invented growth hacking.

So viral user acquisition ah in beda, you could embed paypal was on the first, if not the first APP that you could in bed in other web apps. And you think and then think about a direct company outcome. Progeny of a paypal was youtube. And how do youtube succeed? You know he was in .

bad so funny. I ever get the story here. I built a website um for my body nails news here are they are listening um that the name you where we are selling t shirt and I was a super early web developer and I didn't know a lot of the best ways to do an online door front in the way that we built out this t shirt website was by generating a unique paypal button for every scheme.

And I just litter embedded the little paypal form on every single t shirt page that was a sub directory on our site. And IT worked, I mean, just completely worked. And I didn't have a store front.

And like we weren't using another inventory management, find weeden salomon t shirts. But at the end of the day, like we had a working website by a bunch of paypal button in bed. And that's how a lot of little storefront work for a long time.

And I think, you know, they obviously succeeded primarily because they were such a huge part of paper. But like even after that, as they were growing their business off paypal for a long time, I think that's what a lot of people did. We accept payout you or yes, off ebay, they're so one of .

the same thing I know is, is hard to untangle them.

And I have one of the thing too.

the all right.

i'll take this one. The interesting thing about payments are something that we see in advertising today, a parallel to make between the two. We've been talking a lot over the past ten episodes about know the rise of facebook and google alizad platforms and stealing a lot of the advertising spend away from um non social ads and so display ads and understanding that um brand advertising in particular and online advertising the whole as a winner take all tight market. Where you really need scale before you.

You can rival the big guys now because there's such excEllent targeting that you have to be able to choose any bucket that could be incredibly narrow. You know, tap dancing. No twenty four year olds in washington name ban and not name them, but that facebook people.

right.

right? And have a deep enough well. And so those are businesses that have a relatively high fix call and require massive scale to make the business actually work. Payments are sort of the same thing. I mean, paypal really needed massive volume before they could have wide adoption.

And they have an incredible fly well where every person that has a paypal account can be a center or a receiver of money and becomes comfortable using the platform. So the first time they get someone to send or receive money once they make everyone else is experience more valuable. So it's a scale platform where you IT has completely razor thin margins right on a payment and really large fixed costs, especially in those days when they are building data centers and they need huge volumes to make IT work. And that's something that they saw with ebay. And they they did really well.

And that that belief, which may been completely crazy as we were talking about, perhaps wouldn't have work, had paper, remain independent company. But they believe that you can get to that scale to make that visionary alive, you would have to be completely insane. And and you think about um the startups again, that we were just rattling off a bunch of names and sort of the generations that followed, they are the ones that became really, really big, are ones that made that same bet. And one you know uber right like imagine before uber, if you had painted a picture of a world where they're gonna enough drivers in cars that are members of your platform and enough users, consumers of transportation on your platform in any given geographical area, not just some Francisco, but like, you know the DDL nowhere and you know some non country not in the us, that you could push a button and that driver would be right around the block and show up. You know, a minute later you would got to left out of the room.

Yeah yeah and and that's the same thing. I mean, you can imagine pre users pitching paypal l and it's like, well, it's the way for anybody to send anybody money and someone is, what do you mean like when everyone is paypal, everyone be super .

comfortable sive argument yeah.

And you know it's the same recourse of argument that lots of people that completely fail out, right? You hear this that at every like first time started event, right? Like someone who goes. And the only world they imagine is the one where their service is pervasive.

And they talk about like, why doesn't IT just exist? You could hear, I don't know somebody ever itched uber, but like, you could hear someone peaching uber at ten years ago to start up weekend. And I say, well, yet it's like, why doesn't exist where anybody can just pick you up at any given time? Because you just see every single person has this in their car and can give each other ride you like how on earth or are you going to get there? And the magic of paypal is they figured .

out how to get there when I think this is this is a great sag into the other thing I wanted to talk about here about the paypal mafia that I think my again, you can make an argument might be the most important thing that we've contributed to the startup system um even over above all the other things we've talked about.

There is a really, really great video on youtube course jim gets who's a partner to call a great great venture capitalist talking uh speaking at at the business school stanford um which is has a fun place in my heart and he he's talking about what makes great companies that's quite what invest in and he talks about the palm pi and he says the one thing to him that really sets paypal um I apart from other people in eco system is they learned a paypal disability the willing both willingness and ability a to iteration really quickly with a product to put a product out there that is very far from finished and iterate like mad on IT based on true market feedback and needs says no and not be asking themselves about like what the actual signals from the market are. And that's how you can create a recursive. You platform a recursive. This is like that, you know, is you can't start with like the end. You gotta start with a very, very small idea and then work on a bit by bit by bit based on market feedback.

yeah. And got that market feedback thing is so hard where every line of code that you write, or every little piece of product inking that you do, that then get solidified in any form, be at physical or design or code. It's like a burden you Carry a from that point forward where the more you've created the heavy IT is in, the less you feel a gile to move away from IT. And so yes, I just have tremendous respect for people accompanies like this that can write something and put IT out there and understand Marks, signals quickly and within days say that's actually not the thing and like rip f of that out and put a new piece and say that's not the thing either and then like just keep repositioning because I think that, you know, we just get emotionally attached to what we make and people will get really emotionally attached to their vision. And if you if you can just keep responding, it's it's a really incredible and really valuable skill.

And I think that's the the skill is is holding both of those things. To borrow phrase from my wife, he loves this phrase, holding both of those things in your head at the same time. One is absolute dedication and commitment to a vision of the future that you see you you're recursive these vision about the future and to an utter lack of bias or or uh or or predetermined thought on on how you're .

going to get there .

and be willing to take you know the random walk ah that a that you need to take IT of of product and product .

market fit discovery to get yeah that's chAllenge .

IT is time .

to greet IT.

Yeah I think we can greet IT. So this is a really interesting one a to grade because you one of the themes that I think has been pretty perversions throughout the show that we've done is that the best acquisitions that we've given, the highest grades to have been, ones where you that the acquire follows the monta, leave the team alone. All about the people.

Let them do their thing. You know, don't mess with the magic. Um you know we heard that with pigs are where I was. The reverse IT was like pigs are coming in and and leaving the disney people all you know are getting letting the disney get back to feeling the creative magic, you know, with instagram bungee that that freeze was talking about. This is a total opposite, like ebay comes in and really Marks around and everybody leaves and and .

I wonder if that just characteristic of the time period. I mean, other other acquisitions that we've like ripped apart. I have that characteristic two from that time period where it's all about an integration and it's all about great.

We like your product. Now it's time to beat. Move to the beat of our drum. And I think it's really only recently that companies have figured out .

that leave me alone in the quote, facebook position. There's another great quote from from David sex in the tech republic article um where he's talking about the first meeting that happened after the acquisition that the integration meeting and ebay team you know gets all the key people from paypal es together in a room.

I book three hour meeting and they show up with like a one hundred and thirty seven page powerpoint deck and the payback guys are like we've never had a three hour meeting in our lives. Be, what is powerpoint? no. And at the end of IT, David sacks says, man, we're going to have to if we stay here, we're going to have to create a whole new department just to do powerful point, just so that we can communicate with these guys.

How, man, I talk about the product that they needed in a team that was just completely incomparable with our culture.

And so what's interesting about grading this one is like breaks all the rules and yet creates huge, huge amount of value for ebay. Ebay shareholders for the entire silicon valley. Started beaker system as a whole.

Um you know I think taking all of this into account, um it's almost like, you know I think i'm gonna net out at like b plus for ebay on the acquisition. You know like pretty great, i'm created a huge billion billions of dollars with shareholder value. But you know, had they handled IT differently, could they have realized much more value? yes. But also if they've done that, we all would be so much poor for IT. You know because of the the accidents that happen, because of the paypal mafia, we have so much Ellen, an ecosystem .

yeah I mean, why I look at this way, like when we're talking about so I see you I appreciate those things. I hear you ah I feel very .

appreciate IT right now.

Yeah okay, let's look at this from the the lens of ebay as a company, right? Like was this good for ebay as a company to make this acquisition? Normally I would try to frame this in terms of, like, well, let's look at you know apple acquiring authentic and being able to do touch I D sensors in this way that is additive to their existing product in a way that is a of a much greater value than anything authentick could do on their own right, like something where it's integrating into the product and creating syn ne gies between the two products such that they can take their core products and make IT, you know multiple of the acquisition Better in this case.

Like I don't know that he added tremendously to eba y's marketplace. And actually there's a point that um key throw ball points out where they had visibility into um ebay is growth and they predicted that eb's growth was gona play toe and that they actually needed needed to make the sale because they were like we don't have a different growth strategy yet and people are going to be concerned. I were a public company. People are going to be concerned about .

us us if our soly dependent .

on ebay and and their growth is play time. What we've seen you ebay, ebay is a indeed a major company from two thousand and four. They were doing um three point two billion dollars in that revenue today.

They're doing seventeen point nine like that. They've grown they're are they're doing great, but they aren't a mega behemoth. And I don't think that their growth can be attributed to paypal.

However, we're looking at this through the lens of a person who owned paypal or a ebay stock at the time of the acquisition. Was IT good for ebay as a corporation to do this? Holy crap, absolutely, absolutely. ebay. Ebay grew like a weed, and I didn't grew to be larger than they're existing business. So you know, as a company, IT was a killer bet because effectively, they acquired a product that gave them an entire second business line when their initial business wasn't gna be the thing this this is a plus like this is yeah .

it's interest. It's like, you know if you are the if our projection let's assume it's correct that ebay executives at the time weren't thinking about this as a business line. We're thinking about IT as a new feature technology acquisition. Then yeah maybe may might you be plus rating would hold. But in terms of lake, this is the actual financial outcome, massive hole run, not to mention all the entire benefits, the whole ecosystem as .

we've been talking about. Yeah yeah. The ebay acquisition was generally good for the world. It's generally for the united states in terms of GDP.

It's good for general motors.

is good for america. And that the truth.

Cruise acquisition coming in the future episodes .

and perhaps I hope so. Yeah yeah I mean, I am trying to think of other examples where yeah it's almost like like how we were the the pigs are well, no, because I actually did feedback into the the the disney business to refigure that make a great again.

What other examples can you think of of a company that was flying height, the time made an acquisition, and then I turned out that companies product was like, you know, not gonna be the thing for that company. And then they acquired like a Maggie giant yeah to b meggie. I am that they yeah and they certainly pell IT there. I don't think, eh, I don't think people, I would have done this on their own. I think that at some point, like we talked about.

they were gonna get acquired. Yeah but it's interested. I mean h maybe instagram, I mean jury still out on that.

Yeah although to check in on our previous numbers on that, I think yet another analyst report and I think we have harder numbers on this, but it's predicted to do three billion dollars in revenue this year. I just a thing you on a billion dollar acquisition couple years later to shame .

that was a great boy. yeah. Now with that, its chAllenges though, I mean, you know no interesting that a we can do an episode at some point on snapp chat, on the failed acquisition of snaps chat.

We should do that.

That would be a fun one. And we could compare, contrast, instagram, snapp chat.

could. But until then.

you want to do the car about, oh yeah, car.

Let's do IT you go first? I do I do so a since we know you guys like listen to podcast, I felt like I should pick a podcast and this week was an incredible episode of the bill simmons podcast to follow up my um my recommendation to to read the ringer he had Chris cca on oh is colliding IT was so great yeah because IT builds just like killer journalist I mean, like he has a written in interview with obama.

I think he was in gq that's just awesome like like bill can talk about sports, you can talk about politics, they can talk about technology. And him interviewing Chris' a is just spectacular. I think I was a few minutes in and I was just completely, completely error in IT.

They they talk about everything from like Chris meetings with kobe, brian or kobe investing in startups and like Chris put him through the the ringer like, no, no intended. Like Chris really like IT was like, okay, cool. Like celebrity athlete who wants to get to do investing and like there is so much interesting stuff for a you like I I have to go do more research on this, but like, kobe actually doesn't sleep.

Like kobe, the reveal is like, I do that. I'm sure you may be sleep like a few hours or something, but like the way that described IT as, like, the dude is his daylife. And then all night he was staying up reading and and trying to like, learn and go through the exercises, that of everything that Chris gave him. So this kobe segment, they talk about the founding of uber and like the jam sessions when they are sitting around and how all that fell into place. Talk about early days at twitter about bets that Chris is made about when Chris was dirt poor and then started dae trading and made four million dollars the day trading stocks and then lost IT all they went the massive dead the all it's just like it's an awesome episode so i'll look at the show notes but the bill simmons podcast features Chris sacca excEllent.

excEllent. I'm going have to give that a listen yeah um so my car out for the week uh cava that i'm only about a third of the way through IT is a book came out a couple years ago that had been on my reading list and I finally got around to thanks to the magic of audio books, uh but called the anti fragile by the seem to leave. I just finish black one oh nice.

So this is my first in the team to lead book, and I want, I want to read the rest of them after this. A IT is excEllent. What do you think the black one is good?

Like a lot of books like that, I felt like the first half covered IT you. But like, really interesting, highly recommended.

Also what was interesting not having read the blacks one yet but um couple of things about entire fragile one. The seam is like he's like a waller. He's hot larian. I think he's incredibly smart but he writes like he's also got like a giant ego and raise like this is a guy who just like does not give a crap .

about anything ah ah but what's .

interesting is he actually so so the whole there's sis of anti fragile is that there's this IT reminded me a lot of zero to one a fitting me for this episode of Peter T L. Idea about the idea of secrets um that there are these things about the world that are like fundamental laws that govern IT that just like people don't understand to realize.

And so the team talks about this concept of entire fragile li that like we know about things, they're fragile. And for millennia, people thought the opposite of fragile was robust um things that you know are are durable and not don't break when exposed to stress. But IT turns out that that's just like a neutral thing.

Like the opposite of fragile is something that gets stronger when exposed to stress and and so like an example would be the human body to a certain extent you exercise and you get stronger um example another example would be a would be also within within biology. You know the concept of vaccine ines were being exposed to a small amount of of a taxi or a poison or a virus um well then make you stronger against against the virus anyway. And if you started looking at the world this way, there are all these examples of this um and and and and yet another example bringing back to uh the themes ego he says actually information is anti fragile.

If you think about IT he's like what's the best way to um to get your message heard by as many people as possible? You should tell everybody is a secret and then you should try and make IT as controversial as possible. And you should try and get as many people as possible to hate on you because then people are going to hear about IT and it's going be really interesting and people going to want to read about IT. And that's how you get the cement. And if you want to make information does not get disseminated, you want to be like really agreeable and and tell everybody is really important and then nobody will radio .

and is so interesting. That is probably a very uncommon thing because we as humans, I think it's a defense mechanism and it's something that we used to stay alive. But we don't like IT when people don't like us and exact we don't like that when, you know people won a lash out against us. So we are very distantly vied to make enemies .

and and think about even like your car, about what the paypal guys and your car about all these people, you know, Chris kobe, brian sims, all the fave of mafia, they were, not only did they not care when people didn't like them.

they embraced IT. We want to think our long time friend of the show, vantine, the leading trust management platform, venta, of course, automates your security reviews and compliance efforts. So frameworks like soc two I saw twenty seven o one gdpr and hip a compliance and modeling ing van to takes care of these otherwise incredibly time and resort straining efforts for your organization and makes them fast and simple.

Yeah, fanta is the perfect example of the quote that we talk about all the time here and acquired jeff basis, this idea that the company should only focus on what actually makes your beer taste Better. I E spend your time and resources only on what's actually gonna, move the needle for your product and your customers and outsource everything else that doesn't. Every company needs compliance and trust with their vendors and customers. IT plays a major role in enabling revenue because customers and partners demand IT, but yet IT add zero flavor to your actual product that IT takes .

here of all of IT for you, no where spread sheet, no fragment to tools, no media reviews to cobble together your security and compliance requirements. IT is one single software pain of glass that connects to all of your services via and eliminate countless hours of work for your organization. There are now AI capabilities to make this even more powerful, and they even integrate with over three hundred extraordinary two plus. They let customers build private integrations with their internal systems and .

perhaps most importantly, your security reviews are now real time instead of static, so you can monitor and share with your customers and partners to give them added confidence.

So whether you are start up or a large enterprise and your company is ready to automate compliance and streamline security reviews like fanta, seven thousand customers around the globe, and go back to making your beer taste Better, head on over to vent a outcomes lush required and just tell them that then in David sent you and thanks to friend of the show, Christina anta, CEO all acquire listeners, get a thousand dollars of free credit vta com slash acquired .

everyone um thanks for listening um if you get a chance d love, love, love. If you could let us on itunes and have a .

great day see the next time you. Easy you, easy you with a you who got the true.