John Bull
To understand Musk's renewed obsession with X and focus on financial services, you REALLY need to understand the X/Confinity merger that became PayPal.
And, particularly, the Peter Thiel-led coup that kicked Musk out as CEO/Chief Strategist.
Here's how that happened. 1/🧵 #history #technology
Liz Ellis She/Her🌳
@garius Musk has 'in person magic'? That sweaty twat has some kind of charm and charisma beyond his bank balance? I don't believe it.
John Bull
@LizEllisPhD he is, by all accounts, an INCREDIBLY charismatic man in person (or at least was at the time) AS LONG AS he's talking about something he's passionate in.
He sells visions well to techies and to investors.
John Bull
With Elon out of the country, he can't work his in person magic. He insists over the phone that the financial superstore is the big win. All this is in service of that.
It doesn't work. Malloy, Moritz and Hurd side with Thiel and Levkin. Elon is out as CEO before he can fly back /21
John Bull
Over the phone, Thiel and Levkin reveal the PayPal V2 and financial issues to Malloy, Moritz and Hurd, who had no idea about them. They're sympathetic to Elon as founder and visionary, but horrified this was all done without board approval and at the mass-resignation letter. /20
John Bull
Thiel and Levkin are board members. The other four are Musk, Malloy (repping another major investor), Moritz and Hurd (Chair).
As Elon is in the air, Thiel asks Hurd to summon an emergency board meeting by phone. /19
John Bull
Thiel and others approach Elon and BEG him to abandon Paypal V2, and his strategy of trying to become a one-stop global financial service. Thiel points out they only have $65m left in the bank.
Musk refuses.
They have to go for "the grand prize" he insists. /17
John Bull
Thiel, Levchin, Botha and Sacks now cross the rubicon. They decide to coup Elon. They quietly gather the signatures of a lot of the Confinity loyalists on a mass-quit threat.
On 19th Sep 2000, as Elon is taking off for Europe on his honeymoon, they make their move. /18
John Bull
Meanwhile, Thiel finds out via X's financial wizard, Roelof Botha, that the financial superstore side stuff is WORSE than Musk has let on. X is offering credit on almost no identity checks.
Combined with the V2 fiasco, Thiel and others realise X is on the verge of failing. /16
John Bull
This obsession with X as a brand causes enormous concern as it CONTINUALLY goes down terribly with consumers.
Vivien Go on focus group testing:
"Again and again, the theme of 'Oh God, I wouldn't trust this website. It's an adult website' and 'I just wouldn't trust that" /15
John Bull
Elon also orders the killing off the PayPal brand. He orders paypal.com routed to x.com. Logos phased out. Decrees it should now be referred to as X-PayPal and described as part of the X family of financial services. He's not letting the dream go. /14
John Bull
Months of dev time, with X burning $12m a month, is lost to Musk's obsession with PayPal V2. A complete rework on Microsoft. It's BEYOND a bad plan. Microsoft servers and MSSQL CANNOT scale enough at the time. But Elon decrees it. He even decrees a launch with no rollback option. /13
John Bull
Thiel, and Levchin, are initially fine with this. Musk has promised to focus on email payments, and to improve PayPal first. Financial superstore a "future thing".
But over months Levchin realises that Elon has become obsessed with porting PayPal ENTIRELY to Microsoft not Linux. /12
John Bull
The firms merge. Harris and Thiel insist the new firm (X) focus on email payments, ideally on Confinity's PayPal platform.
Elon INSISTS financial superstore is the future. When Thiel and Harris fall out over strategy, Elon persuades Thiel to help coup Harris out. Elon is now CEO /11
John Bull
But Harris (X CEO) sees Confinity and X are BOTH in a death spiral. They are BLEEDING cash fighting. He speaks to Thiel. Thiel suggests a merger.
Musk fights this. But ahead of another funding round, Harris threatens to quit, spooking investors
Elon: "He held a gun to my head." /10
John Bull
The strength and focus that HAS gone on X's email payment processor has mostly been due to David Sacks, one of Elon's hires who he trusts and who spotted the huge potential.
He keeps Musk grounded with eyes on this while Elon is ALSO pushing into riskier financial service stuff. /9
John Bull
Need to skip A LOT here. But jump forward a bit and both X and Confinity ACCIDENTALLY create the same killer product as an offshoot of their main one:
The ability to exchange money via email.
Confinity pivot to this exclusively. X don't. Musk's goal is financial superstore. /8
John Bull
Meanwhile, over the road (literally), a startup called Confinity is making waves. It's funded by Peter Thiel, who is also its CEO, but is the brainchild of Ukrainian Max Levchin its CTO.
Backed by Nokia, Confinity is making a way to 'beam' money between PalmPilots by infrared. /7
John Bull
In early 2000, X hits the news for a vulnerability that allows money to be moved between accounts with just account details. This is fixed, but spooks investors.
Elon agrees with investor Mike Moritz from Sequoia to become CTO while Bill Harris (ex-Intuit) becomes CEO. /6
John Bull
Musk's obsession with speed and disdain for regulation means X developers love him, but causes worry with the financial expert side.
First Western, the banking partner, discover that accounts are being opened under fake names.
The finance peeps try (but fail) to coup Elon out. /5
John Bull
He describes x.com as "the coolest URL on the internet". X, he says, marks the spot for treasure. That's how people will see it he insists.
He invests $12.5m of his own cash into X and begins trying to build an 'online bank'. /4
John Bull
Having drummed up support, he founds a new company to take this forward. He immediately buys the x.com domain off Pittsburgh PowerComputer for 1.5 MILLION shares of A-Stock in his new company, X.
Advisors express concern over X as a brand. Elon loves it. /3
John Bull
In early 1999 Zip2, the newspaper online directory service Musk had co-founded, was sold to Compaq for $300m. Elon's share of this was about $20m.
Elon begins hitting up old connections from his time at ScotiaBank.
He says he wants to launch "A Financial Superstore" /2
John Bull
@Lorry British Sea-Side town gentlemen's club.
Lorry
Lorry
John Bull
@foresterr @CGM yup. I will admit I love a bit of creative verbing.
It's a fun way to stretch, but not break, the language.
foresterr
@CGM @garius English is a beautiful language in that you can verb any word if you really put your mind to it!
Colin Macleod
@garius Interesting thread, but .....
Since when did "coup" become a verb ??? 🤔
(Yes I know "couper" is a verb in French, but this thread appears to be in English)
#pedantic #grammar
John Bull
Anyway, hope that's useful context. None of what's going on is surprising if you lived through it or have studied it. You just have to get past the hagiography Silicon Valley creates around it's "great men"
If this was useful you can buy me a coffee here: ko-fi.com/garius /END
John Bull
I think it's a TERRIBLE idea. The world's moved on. He's doing the tech equivalent of drunk-DMing his highschool girlfriend to tell her she's still hot.
But you can see the origins now. He thinks this is the genius idea that got away. And that this time nobody can coup him. /24
John Bull
Hopefully you can see the roots of this whole X pivot thing now. Musk has decided that the way to save Twitter and regain his genius status is to fall back on his unrealised vision from 1999.
Build "the world's financial nexus" as he described it then. /23
John Bull
Musk is devastated and furious.
"Sneaky Backstabbing Bastards." He describes them as, but to his credit recognises he can't fight it and presents a public image it was a mutual decision.
Thiel becomes interim (and later permanent) CEO, orders the end of V2 and a focus on PayPal /22
John Bull
@LizEllisPhD nah, back then to investors it was as much:
"He SOUNDS like he knows what he's talking about, and his LAST company sold for $300m so..."
Liz Ellis She/Her🌳
@garius are you sure it's not just a case of folks thinking, 'he's rich, therefore he must be effective'? because he comes across as having all the charisma of my greasy old frying pan
Kyle Cordes
@garius Lots of people just can't let go of something that went poorly for them early in their career. Have seen it many times, this is a way where Musk is like other people... really bothers people who expect/demand their ‘hero' to be special in every way.
John Bull
@kylecordes both Musk's supporters and haters want him to be doing 4D chess.
Because we LIKE smart heroes/villians.
The reality is Musk is just grasping at ideas from his past that he still thinks are amazing, and is no longer surrounded by people who'll tell him he's wrong.
John Bull
@htpcnz Also hates people knowing when he's on a plane now.
HTPC NZ
@garius Musk learned his lesson from this saga and filled boards of his new companies with cronies and family to ensure he won't get ousted like this. Who says idiots can't learn.
John Bull
@jamieb he's absolutely critical to it's early days, no doubt.
But it gets skipped over that PayPal becomes PayPal DESPITE Musk, not because of him.
He profits from what it became, not what he was determined to make it into.
And if he'd not been couped, chances are PayPal would have been just another DotCom with a grand plan that failed when it stopped being able to raise funding.
Jamie :ivory_elephant:
@garius As a very casual observer, I’ve always seen the tale spun as Elon being the founder of PayPal, and that’s how he initially made his fortune. The whole Twitter saga has brought a lot to light!
John Bull
@Richard_ogilvie a good question! certainly a good deal for them.
They'd have been diluted into B Stock when the merger happened, but if they hung onto them they'd have made an absolute KILLING still when eBay bought PayPal.
Richard Ogilvie
@garius
Great thread - but what ever happened to the 1.5m shares in A stock for the Pittsburgh computer company? How much did they make?
John Bull
@Npars01 While Thiel and Musk dislike each other, they're also both massive narcissists and capable of separating "personal" from "business".
They recognise each other (or at least Thiel did at the time) as useful shitheads.
Within WEEKS of couping Musk out of X/PayPal, Thiel was one of Musk's main investors in SpaceX.
Nicole Parsons
What is extremely odd is how Musk continues to do business and politics with Thiel.
Thiel has demonstrated over and over his utter lack of trustworthiness in any capacity.
Thiel made Facebook into Russia's favorite anti-democracy disinformation vehicle & got Trump into the presidency.
Musk is rapidly converting Twitter into a vehicle for a Coup 2.0.
Larry Ellison, David Sacks, Thiel and Musk are still part of an ongoing seditious conspiracy. Together.
John Bull
@tsaylor as per other replies:
- Memory (I'm older than I look! Been in webtech since I was 18 in 1998)
- Contemporary articles
- various books
I highly recommend The Founders by Jimmy Soni if the history of PayPal interests you.
Tim Saylor
@garius Great thread, thanks! Where did you get all this info from?
John Bull
@nebulos The Founders by Jimmy Soni for this particular subject.
nebulossify
@garius Great read! Thank you.
OOC, do you have any recommended reading for stuff like this? I love this corporate espionage stuff.
John Bull
@regis i've tried to avoid that and make it factual while interesting.
I'm not in the business of making stuff up.
Regis Freyd
@garius Thanks for sharing. It's super interesting.
I wasn't aware of this story, though the way you told it appears to be romanticized and the opinions expressed are not necessarily facts.
John Bull
@avirr @Globaltom I remember selling heat.com for about five grand to a UK magazine.
Globaltom
@garius Side question... who were Pittsburgh PowerComputer, and why/how did they own x.com ?
Avi Rappoport (avirr)
@Globaltom @garius When domain names went down to $35, a number of us bought the cool ones just for fun. It was a windfall of luck for some.
John Bull
@wsrphoto well there's no-one to coup him this time.
Scott Knowles
@garius So we have to watch this story all over with Twitter-X. Musk tries to create his financial services empire he has no clear idea what it is, and no way to know how to do it, but he'll sell it like he does. If Twitter-X is deep in debt and bleeding money, where will he find money for something that doesn't exist. All in one service apps are operating in Asian countries, but US isn't built for it and people may not accept it. So we wait for crash and burn ending. Popcorn?
John Bull
@dshan people really don't realise how FAST it was all moving back then. It was a crazy time to be in tech
Killa Koala
@garius Amazing that all this happened between Zip2 sale in early 1999 and Sep 2000. Wow.
John Bull
@Milouchkna yup
that biting transsexual nuisance
John Bull
@Geoff it wasn't scalable enough for what they were doing.
V2 was plagued with memory leak issues and more.
Geoff Winkless
@garius I'm not sure about this statement. By SQL Server 2000 MSSQL was a mature, strong, scalable product.
John Bull
@Geoff basically if Musk had been making the push in 2002ish it wouldn't have been as bad an idea. He was just pushing it too early, largely because X had already been a Microsoft house while Confinity was Linux.
John Bull
@Geoff i mean, there's no doubt platform partisanship played a part, but i'm also not gonna hindsight a thing that Levchin and co. spent a LOT of time in 2000 trying to do. With a considerable amount of platform testing.
You're welcome to argue the case with him though!
Geoff Winkless
@garius I'll accept that they might not have had the nous to scale it for what they needed, but that's not the same thing.
Robin Whitlock
@garius Entirely unsurprising. Just another example of Musk's utterly pathetic puerile petulant juvenility. The bloke's an absolute moron.
John Bull
@KevinMarks couldn't claim to know enough about it rn.
No doubt I'll get obsessed about the history of it at some point though. 😆
Kevin Marks
@garius can you do a history of Tesla too please
freediverx
@Louis_Renault @garius
They’re both fascists but this story is all about business and Elmo’s horrifically bad judgment.
John Bull
@freediverx @Louis_Renault yup. they're both absolute wrong 'uns. But that's also why they're good at functioning together while also occasionally backstabbing each other.
Thiel was one of SpaceX's backers almost immediately after couping Elon out of PayPal, for example.
Claude Rains
@garius Pretty interesting 🧵 filling in the details. I thought Thiel & Musk were tight TechBros with each other, but this outline actually makes pretty good sense. No Loyalty or Honor Amongst Thieves… They’re just in it for themselves. So, quit looking to them to save your climate-fried ass!
Boud
Even 𝕎ayland.social has now defederated from 𝕏.com:
Nerdenator
@garius at least we now know where Bender’s personality is derived from.
Francis Cook
@garius @LALegault working in banking and regulation this makes me weep.
John Bull
@LALegault Musk worked at Scotiabank briefly.
While there he came up with a 'genius' plan to buy up South American debt cheap then wait for the US to bail the country out and reap the profits.
He was shocked when the bank were like:
"ARE YOU MAD DO YOU KNOW THE LEVEL OF RISK IN THAT?!"
And decided to focus on being a tech bro instead.
LA Legault 🍉
@garius he had connections to ScotiaBank? Why does everything suddenly make sense now.
John Bull
@DrAlexandraK well yes, that's a given.
DrAlexandraK
he's an asshole.
hankg
JR
@hankg @garius Thiel's never getting back to "even".
And the fact that Thiel had to sit in the passenger seat while Elmo tried to kill both of them is some small consolation. It's like hearing that the caterer at a Trump event didn't get paid. Dogs, fleas, lying down ... that whole thing.
hankg
JR
@garius Excellent thread, but had the unintended side-effect of making me hate Thiel just a tiny bit less. I worked for 2(!) CEOs who wouldn't take the money sitting right in front of them because it would "interfere with The Big Play".
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