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Inside PayPal (2010) (paulgraham.com)
178 points by prakhargurunani 5 months ago | hide | past | favorite | 49 comments

PayPal's Technical FAQ from Oct '99 (cobbled in response to a Slashdot post haha) demonstrates how ahead of the game they were: use of ECC (with tech advice from Stanford's Dan Boneh & Martin Hellman), privacy policy that prohibited sale of user data to 3rd party advertisers, generating cash via "the float" in a Merrill Lynch Money Market Fund, etc.


But I think it's probably the "synergy" with eBay that was the biggest surprise. I recall having a neighbor at that time who sold old movie posters. Rather than driving around the country to comic book conventions, he was able to do more in one month in online auctions than the past decades he had been collecting. That was the great awakening. PayPal went from "college kids requesting cash from parents" to trading rare sports memorabilia with instant clearing by March 2000.

>>> If you needed to integrate with an outside vendor, you picked up the phone yourself and called; you didn’t wait for a BD person to become available. You did (the first version of) mockups and wireframes yourself; you didn’t wait for a designer to become available. You wrote (the first draft of) site copy yourself; you didn’t wait for a content writer.

"You must unlearn what you have learned" ;)

The synergy with Ebay was definitely what drove the business. What's interesting is they we positioned to be Venmo, but dropped the ball and had to buy them. I suspect that failure was part of the motivation behind the Paypal/Ebay split, but looking at Ebay's current strategy, the synergy was still there, so maybe they threw the baby out with the bathwater.

> Rather than driving around the country to comic book conventions, he was able to do more in one month in online auctions than the past decades he had been collecting.

I personally try not to collect things, but for those who do, I wonder if this ruined the hobby because of instant gratification.

I do collect books. No, it didn't ruin the hobby and most collectors would agree. eBay allow me to search for books without having to travel to different countries, or whatever. I can buy books what it wouldn't be possible without eBay.

For people who doesn't collect, may look like that, because they may think that going into eBay could ruin the fun, because everything is easy to get now. It isn't. You need to learn tricks and also, how to win over other collectors who may see the same item that you did.

As a former collector, I can only disagree. The hunt was interesting, but looking at a computer and spending money just doesn’t do it for me. At the same time it made the fun parts of the hobby feel pointless which just killed all the joy.

I would assume it replaced it with the anticipation as the item makes its way to you?

From the FAQ: "What happens when you break your Palm™ organizer or 'accidentally' do a hard reset? Do you lose all your money?"

Now in the age of bitcoin this could have a very different answer. In any case, the FAQ is very interesting.

And now, eBay is moving to accept more payments outside of PayPal.

Reads the same as Netflix. Individuals empowered to make decisions and execute, at all levels of the organization.

With higher responsibility also comes the risk of exposing the company to situations that a more practised individual would know to avoid. It'd be interesting to hear about how these companies mitigate risk from their armies of ambitious underlings.

As the article mentioned, few other companies were hiring. The mentioned period was 2000-2002, which was during the carnage of the dot com crash. The economy was in a bad state. Maybe pushing hard to make the case for the start-up to exist in that environment was far riskier than any other mistakes they could have made along the way. Maybe you could say the same about start-ups today.

Keep your focus on the first thing which will kill you.

>> Maybe pushing hard to make the case for the start-up to exist in that environment was far riskier

Agreed 100%.

All of my friends who were bragging they were going to retire at 25 millionaires and then three months later were flat broke. They were so disenchanted with the startup scene, they all went to work for big corporations.

As I remember, nobody I knew wanted to work at a startup, let alone start a company in that environment. There was no money - VC or otherwise. You were left to bootstrap it yourself. If it had anything to do with the internet, you were toxic so even getting clients to support you was insanely hard.

The fact they came out of that crazy time and were able to prosper against all of those odds is really impressive.

There is something nagging at me - it is something deep. It is that there has to be a set of values, a set of cultural red lines that we do not cross.

Every branch of the military will happily tick pretty much all of those "do it now, don't let anything stop you" boxes.

But every branch of the military has in place very deep redlines (sometimes expressed as rules of engagement, sometimes as "honour") - because they know the horrors of crossing those lines, with a "get it done at any cost attitude".)

Most humans have that ability to get things done, they just tend to work for organisations that don't reward it. And so the onus is on management (as ever). Build a culture that rewards innovation - but has some set of values that accepts some lines cannot be crossed.

Yes there is danger in retreating from the edge of chaos - but then we all live in Ming China. That is a better problem than going too far over the eve of chaos.

it's hard, for companies as well as societies.

I agree with your first bit, without boundaries we will get a runaway system. But what does the reference to Ming China mean?

> Yes there is danger in retreating from the edge of chaos - but then we all live in Ming China. That is a better problem than going too far over the eve of chaos.

I wonder if OP isn't confusing Ming China with Qing China. The Ming dynasty had a period of exploration and then it stopped, but not because it closed itself off, just because it was becoming unstable.

Qing China is the one that famously closed itself off from the world.

The Ming dynasty (late 1300 - mid 1600 ish) started well but for very unclear and contentious reasons ended ship based trade (famously burning records and ships - including ones that may or may not - probably not - reached America). They did turn inwards - but that was fairly fine - China at 1400 was at the technological peak, life was pretty good for the average peasant, frankly it was about as good as it ever got before industrialisation.

Like the T-Shirt says, when you are this good, why try harder.

The most advanced civilisation on the planet simply sat back in 1400, and no-one could do anything about it because the place was one fairly unified political system.

(yes, wars rebellions etc, but one China - maybe broken at times but always seeing itself as one, not competing to beat the other part but competing to unify again.

Probably it's fair to say that China always fought itself, and Europe fought each other.

(There is also something about how China unified and grew in waves related to the latest horse invaders. A sort of unified and strong when the invaders attacked, weaker when the threat retreated. Once gunpowder was invented that process was effectively over - you could mow down horse archers happily all day. So again, China had no external threats so it could turn inwards. And take all of this as a massive over-simplification but it's interesting to realise the end of the horse invaders coincided with gunpowder and the turning inwards)

True, but as far as I know we don't have any official documents, mandates, about this turn inward.

While for Qing we have a ton of proof about this policy.

I'd definitely use Qing as the archetypal example of isolationism. Especially since Qing was the absolute peak of China in terms of territorial expansion, global influence, share of the world economy. Qing China in 1650 - 1700 truly had no rival.

Fair enough - to be honest I got all excited about the gunpowder timeline. Poor historian I would make.

The general point about living on the edge of chaos and it falling in either side still stands - although if you do fall, falling like the Ming / Qing is waaaay better :-)

As much as I respect the founders/alumni that came from PayPal, do any of them still use it?

Forced to use PayPal since 2004 as a small business owner, it was impossible to reach their customer support. They've also left me to fight with insurers when it came to fraudulent transactions.

Glad to hear they built a talented team, but as a customer...

Speaking as a payments industry insider, it's surprising to me, but PayPal payments represent a huge proportion of online payments, and they're on an uptick. I'm not sure why.

I mostly use PayPal when there's some kind of promotion that gives me an incentive, such as extra credit card rewards, or a cash back offer. I think a lot of people find it convenient to use PayPal for ecommerce because they don't have to get their credit card out, just enter their PayPal password.

> (PayPal is) on an uptick. I'm not sure why.

One thing PayPal does well is have all the features you 100% depend on, already running well. The UX is kind of terrible, but it's at least all there. As a PayPal purchaser, I can enforce a specific shipping address, or a specific source payment method, change it constantly at will, and the seller mostly can't mess it up (PayPal enforces it on my behalf). I can sign up for a subscription, cancel it, all from PayPal's side, and the seller literally can't control that experience or block me from doing that (PayPal enforces that on my behalf too). I can even dispute a transaction with one click (although I've never needed to, so I don't know what happens after that).

I also have a Visa, MasterCard, Amex, Discover, and Simple, and Venmo. Some of these other credit card merchants or cash services have parts of these pieces half implemented. (There are 'fake/disposable' cc numbers and such that try to replicate the 'cancel anytime' thing. You can definitely call a credit card company to block future transactions from a specific company). But to my knowledge, no one else actually has the whole minimum-featureset-for-purchasing figured out and accessible with just clicks online. PayPal does. And they've had it, consistently, for almost a decade.


So, as a person who writes eCommerce stuff all the time, I get why folks in the industry is sick of it. (It's duplicate steps, we always have to do "real credit cards" merchant, and also a separate "PayPal" integration)

But as a purchaser, I always prefer the PayPal option, rather than handing over a Credit Card to their Stripe/Square/whatever merchant service -- especially for anything with recurring billing. I get why other folks prefer it as well.

I'm similar: simultaneously aware of the huge problems with PayPal and yet will always choose it for small transactions. Why? Probably mostly because of the address filling you mention. Having to type in my entire address, worry about whether it'll get screwed up or it will not support my country or whatever else is just too much trouble for microtransactions (<$10). And then, even while I'm aware of the problems with their fraud detection, it gives me comfort that they are erring on the side of shutting down vendors that look shady - even if that takes out a portion of real vendors or creates huge problems for them.

Don't forget about PayPal Shipping. That's a killer (hidden) feature that's super easy and gives me options how to ship (UPS, USPS, Fedex).

I'm a PayPal merchant. First of all, I'm sure the choice of a payment service depends a lot on the specific nature of your business. I run a completely analog business, selling a gadget that I make at home, to a relatively small niche of enthusiasts, strictly in the US.

I do look around once in a while, for what the alternatives are, but so far PayPal is the only service that lets me run my business from a passive web page. I don't even have my own URL. Every other service seems to have a tutorial showing me what code to install on my server, but frankly hosting and maintaining a server (at home or in the cloud) seems like it would add a dimension of complexity to my business that I don't want to deal with. I certainly don't want to be responsible for handling and storing my customers' credit card numbers and similar data.

I also think that the customer protections are beneficial, since they give people the confidence to buy from a relatively unknown seller.

On top of that, they have a deal with the USPS that lets me generate a first class shipping label, which isn't even available at the USPS website. What I save on postage more than covers the PayPal fee.

I sell on Tindie- non-US customers have big complaints about PayPal (Tindie's only option at the moment): the money currency conversion is a rip-off. Many in Europe have moved to TransferWise and Tindie seems to be working on it:


I also sell on eBay: they direct deposit into my bank. I have no idea what happens with international orders.

Musk has been openly and repeatedly critical of how PayPal blew it. Tbf, I use PayPal pretty regularly and it works just fine for me.

Sounds like a great place to work. I wonder about the "young people with extraordinary ability" however. Surely they would have also succeeded with "older people with extraordinary ability"? (ok they probably would cost them more..)

I suspect that only young people can be that ruthlessly data-driven. Us older people tend to have experience that we're attached to, and a certain psychological resistance to the idea that the stuff we've been doing for most of our career was actually a waste of time.

I would say it depends on the person. I personally assume that how I did things in the past is no longer the state of the art and I always look towards younger engineers or outside resources to figure out the new best way, informing my decision based on mistakes of the past.

And if the data says I'm wrong, I trust it. I have no belief that I've already found the best solution.

I don’t see how you can be a technologist in the long run without this attitude. Maybe this is the no true Scotsman fallacy, but one of the key aspects of technology is it will change right underneath you often. (Except SQL injection, apparently, the team keeps finding it at an alarming rate in modern apps).

It really depends on the person. I am in my late 30s and experience has taught me that there is a good chance the way I am working today will be obsolete tomorrow. As a manager I embrace this and encourage the people in my team to bring new ways of thinking and working. The kind of culture this creates encourages constant experimentation which ultimately leads to better results.

Older people with extraordinary abilities have, in traditional bureaucratic companies, learned that bullshitting and playing politics is the easiest way to succeed. When they internalize this way of working, there is no going back; it makes them lazy and cynical.

Somehow, it requires a certain amount of naivety to _actually_ try to solve a hard problem instead of pretending to do something and then write a 100 page bullshit report (or mostly copy an old report) on it.

I wouldn't want to work at a company with controversial business practices and "screw you we do what we want" attitude towards their customers, no matter what a great environment is inside.

Depends on what you want of course, but I want to extract peak performance from myself that's why it sounds good to me. (I do not however like working overtime.)

Worked there for 7 years - it's a fantastic place to work. It's all about relationships to get things done, but the people are generally fantastic and well-meaning.

The opportunity is the paydirt.

The experienced oldsters make up the sluice.

The youngsters represent the water.

Nobody worries much about the spillage if there's gold in the pan.


I found this glorification of PayPal a bit befuddling. I use their service myself often, but chiefly because the banking system in the USA is so hideously backwards (more so ten years ago). In Germany for example, if a private party would want to pay some other private or commercial party, they would use a bank-to-bank transfer, which completes in less than 24h. This system was used even before the WWW. I payed the office of a "Mitfahrergemeinschaft" (office of a ride sharing organisation) via phone in the early nineties (that's when I learned that nobody looks at the signature of the bank-transfer requests sent via snail mail unless there is a complaint).

So I'm not quite convinced that PayPal was all that innovative, but they did fill a void here.

Bank transfers are cheap, but as far as hideously backward goes...

a. Until recently, they took about a day to arrive, or over a weekend. Money sent on Friday would be on the target account by Monday. You can build an economy around that, but every online service that gives you instant processing will be in advantage. There is a lot of scenarios where quick processing of a payment is desirable.

b. Transactions abroad were ridiculously expensive and to some degree still are. I remember sending a payment to Lithuania from Czechia by bank transfer. The original quoted sum was about 30 dollars (in then-Lithuanian currency, Litas), and the fees added up to another 20 dollars. This problem was probably less common in Germany, a big market where you will find domestic providers of about anything, but people in smaller countries were getting ripped off at every foreign transaction. SEPA payment system is helping with that, but the fees have only gone down relatively recently, too. At least where I live.

Number 1 definitely. Focus is super important.

Second to this I’d put good hiring. I have seen companies that try to follow these models without rigorous recruiting or hiring processes. It results in a huge mess because management has these massive expectations but the people they hire just aren’t good enough. As a result, everyone gets demoralized

> you’d do your homework first and then come to the table with "35% of our [insert some key metric here] are caused by the lack of X functionality"

Tangential, how do you decide whether to collect a new metric? Use data-driven thinking? But how, you don't have data until you invest in building that collector.

1. Eat our own dogfood : Makes us more empathetic with our customers

2. Eat other food as well OR do not limit ourselves to our own dogfood : This can help greatly in shaping our products better and in providing seamless experience migrating customers from competitors to our product.

How did projects get staffed? Was that senior mgrs allocating staff to winner proposals? The article mentions "Most great innovations at PayPal were driven by one person who then conscripted others to support, adopt, implement the new idea.". I am wondering how "conscripted" worked. It also mentions "Vigorous debate, often via email: Almost every important issue had champions and critics. These were normally resolved not by official edict but by a vigorous debate that could be very intense." It looks like David Sacks was successful at shaping a product-driven culture there. Is the implication that innovation and project allocation was coming out of "product"?

I believe the #1 reason is just the accumulation of really smart people in a place like silicon valley, at the time of infancy of internet. That makes things click like nothing else.

It also helps they went to Stanford together.

Sure, and when smart people come together, great ideas are shared and rubbed together, which generates other great ideas. Plus, they have links to other interesting and smart people. So that collectively becomes a force.

Great entrepreneurs maximize their impact by identifying and working with people who have great talent. I wonder, then, how many people of average ability will simply never encounter any of these legendary founder types, because the founders create this bubble around them and don't waste any time trying to co-operate with the rest.

Sounds reminiscent of Google - where staff gravitate to the teams they want to work on - but "done right", ie: with accountability. On the other hand, I wonder if it produces some of the same problems - who takes responsibility for long term maintenance when everybody's a hero creating bold new things?

Is there a single scrap of evidence for the efficacy all these anecdotes? Where are the all the downsides?

Has PayPal managed to maintain this culture since then?

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