In The New York Post, Eric Spitznagel tells the story of PayPal founder, Peter Thiel, with an interesting vignette on Thiel’s interactions with Tesla CEO Elon Musk, when the two were building PayPal. Spitznagel writes:
Thiel, who turns 54 next month, is one of the most cutthroat financiers of his generation. With a fortune of $4.3 billion, according to Forbes, he’s difficult to pigeonhole — having gone from hedge-fund trader to Silicon Valley entrepreneur to data-mining surveillance capitalist — and almost impossible to understand.
“He is self-created, a Silicon Valley Oz, who has, through networking and a capacity for storytelling, constructed an image so compelling that it has come to obscure the man behind it,” Chafkin writes.
Many of the people the author contacted for his book — millionaires with political power — “told me they were scared of him,” Chafkin writes. “He was that powerful, and he was that vindictive.”
Thiel is famously so vengeful that his name itself has become a verb. To “Peter Thiel” someone is to exact horrible retribution, like he did when he brought down gossip Web site Gawker Media in 2016. And as with almost every other takedown in his life, he did it without personally pulling the trigger.
The son of German immigrants, Thiel was born in Frankfurt and moved with his family to Cleveland, Ohio, when he was a baby. The Thiels moved frequently before settling in the San Francisco suburb Foster City. He was an outsider from the beginning, a fan of science fiction — he claimed he had memorized the entire “Lord of the Rings” trilogy — and an easy target for bullies, “even among people who considered themselves Thiel’s friends,” writes Chafkin.
One of his bullies, who helped plant “for sale” signs on the front lawn of Thiel’s home, told Chafkin that he “always thought [Thiel] might have a list of people he’s going to kill somewhere and that I’m on it.”
When Thiel enrolled at Stanford in 1985, he was disgusted by the hard-partying antics of his peers. “They drank; they smoked pot; they hooked up,” writes Chafkin. “Needless to say, Thiel did not partake in any of it. He didn’t really seem interested in making friends.”
Instead, he started the satirical publication The Stanford Review, which lampooned progressive causes with false reports on everything from a new course on black hairdos, implying that “Stanford had replaced the traditional Western Culture curriculum with discourses on kinky hair,” to a story on how “it was impossible to visit a men’s restroom (on campus) without witnessing a gay sex act.”
It was also where he first learned to become a “puppet master,” Chafkin writes.
When law student Keith Rabois, a frequent contributor to the Review (and, like Thiel at the time, still very much in the closet), decided in 1992 to hurl homophobic slurs at a professor’s cottage as an exercise in free speech, Thiel didn’t discourage it.
“Fa–ot!” Rabois shouted. “You are going to die of AIDS. You’re going to get what’s coming to you!”
Overall, Thiel felt that outrageous stunt was justified because conservatives [had become] “too conservative,” writes Chafkin. Just like mainstream liberals accepted communists, he felt conservatives shouldn’t be shy about associating with more extreme, far-right views.
After graduating from Stanford Law School in ’92, he worked at a law firm and as a derivatives trader in New York before launching PayPal in California in 1998. The idea was to create a space for financial transactions that couldn’t be regulated by the government. In other words, an anonymous foreign bank account, “which Thiel wanted to make available to all,” Chafkin writes.
“It was a real-world version of the wild arguments he’d published in his Stanford Review days,” Chafkin writes. “Forget bringing down morally bankrupt university administrators — PayPal had the potential to bring down governments.”
He brought many of his more outlandish Review scribes like Rabois with him. “I used to think it was a mistake, because what does a guy who worked on a weekly newspaper know about tech support?” said Martin Hellman, a Stanford professor who helped design PayPal’s encryption software. “But Peter was brilliant in hiring people who recognized him as the leader and would not fight with him.”
By January of 2000, PayPal was a hot commodity, with 9,000 new users joining every day. Finding new customers was “easier than catching a cold,” Thiel bragged to The Wall Street Journal. “And it’s spreading as fast as a virus.”
In February of 2000, Elon Musk called Thiel, proposing a fifty-fifty merger. He was worried that PayPal would end up being acquired by a company like Yahoo, and X.com, Musk’s online bank, would be pushed out of the market.
“Together, Musk argued, they would have a better shot of surviving,” Chafkin writes. “And they would have an easier time dealing with federal regulators if and when the government got around to cracking down on the new digital payment technologies.”
Thiel agreed but tensions between the two visionaries ran high from the start. Musk insisted on switching servers, putting PayPal on a Microsoft platform. He also wanted to change the name to “PayPal by X.com,” eventually phasing out the PayPal name altogether.
But Thiel found a way to oust Musk without getting his hands dirty.
Even though Musk got to be CEO after the merger, most of Thiel’s deputies — Stanford alum and Review writers like Paul Marti, Max Levchin and David Sacks — filled the executive ranks. “X’s former executives were marginalized, and Musk was surrounded by a team that was more loyal to Thiel than to him,” writes Chafkin. He had, in effect, “laid a sort of trap for Musk.”
In May 2000, Thiel resigned from the company, claiming in an e-mail to employees that he was “exhausted” and that he considered himself “more of a visionary and less of a manager.” When Musk disappeared for his honeymoon in Australia that fall, several Thiel loyalists — like PayPal co-founder Max Levchin and Vice President of Finance Roelof Botha — issued an ultimatum to Mike Moritz, one of the company’s biggest investors. Either the board fired Musk and installed Thiel as the new CEO, or they would walk.
PayPal “wouldn’t have a chance of survival if Levchin, the company’s most talented engineer, walked out with half the business development team,” writes Chafkin.
Without any direct involvement from Thiel, their demands were met before Musk had returned from his honeymoon. Not only did Thiel seize total control without lifting a finger, he also convinced almost all of Musk’s most ardent defenders to stay with the company.
One former X staffer, who declined to give his name, met with Thiel to scold him for what happened, but after listening to the new CEO discuss his vision for PayPal, he left “with a lot of respect for him. It was a formative experience.”
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