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The Founders: the Inside Story of Paypal
Jimmy Soni
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Compaq bought Musk's Zip2 for $307 million, giving him $21 million.
From Zip2 he learned "You start off with an idea, and that idea is mostly wrong. And then you adapt that idea and keep refining it and listen to criticism. Then keep reiterating on a loop that says 'Am I doing something useful for other people?' Because that's what a company is supposed to do.
Musk bought X.com domain name and poured most of his Zip2 money into new company that e wanted to become the centrepiece of online finance - insurance, banking, sharebroking, everything. Competitor right next door - Peter Thiel's Confinity. Both cos gave sign on bonuses and referral bonuses to new accounts - the $10 or $20 they handed out was way cheaper than trad banks customer acquisition cost (generally thought to be around $200 per).
Pierre Omidyar started AuctionWeb on his personal website, www.ebay.com named for his co, Echo Bay Technology Group.
Confinity were oblivious to eBay - seemed like a lot of flaky customers selling each other junk. Then an eBay seller asked permission to use the PayPal logo as a button on her auction page. Confinity team did a search on www.ebay.com for the term "PayPal" and were stunned when thousands of auction listings popped up. At that stage Confinity thought of itself as a PalmPilot add-on service; PayPal was just an afterthought demo program that no-one cared about.
PayPal inadvertently left itself wide open to fraud attacks. But that turned out to be a blessing, bc experience of dealing with all the fraud gave PP's an advantage in marketplace as every other co came under attack as well.
PP built an anti-fraud program called Igor - basically just decision trees going down up to 20 levels. Constructed from the millions of dollars of fraudulent transactions that co had suffered. Losing all that money turned out to be a necessary cost of acquiring the huge amount of data needed to build the predictive model.
Money is really just information, so we don't have to barterand so we can time-shift value in the form of loans and equity invetments etc.
Musk originally bought X.com as a whim. It then became an asset of the co which became PayPal. Musk bought it back again in 2017. If you go to the site you see a blank page with a small x.
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